Obama gave a pretty decent press conference tonight. He talked about the economy and the stimulus, and had some good answers. He mentioned both Japan's Lost Decade (which is what we're headed for, only much worse.) He also claimed that 90% of the jobs the stimulus would create would be private sector jobs, which seems a little specious to me, but 4 million jobs would only just now equal what we've lost plus whatever the job losses for February will be.
Also, who was the idiot who asked him about A-Rod's steroid use? I mean really. What the hell does that have to do with ANYTHING right now?
If all printers were determined not to print anything till they were sure it would offend nobody, there would be very little printed. -- Benjamin Franklin
Monday, February 9, 2009
Bad Bank Bonanza Buried
I'm not a government economist, but I could have told you six months ago "bad bank" was a busted idea. Any price that the government pays to buy toxic crap from banks is either going to A) ensure the banks go under because the price is too low or B) a complete waste of taxpayer money because these toxic assets will continue to decrease in value until they are worthless, because nobody's going to buy them back from the government because...they are worthless.
The real problem is not that the government isn't smart enough to figure out what the magic price is where A doesn't happen and B doesn't happen. It's the simple friggin' fact that this magic price does not exist.
There are plenty of prices where B will happen, i.e. anything near or above the market value of fecal matter sandwiches and urine flavored lemonade. There are plenty of prices where A will happen, i.e. any price that a market investor would say "I'm not paying that much for your fecal matter feast here, bucko."
In fact, I'll argue that any price good enough to prevent A from happening is automatically going to cause B to happen. Ergo, there's no solution to the bad bank problem: Any price the government pays banks for toxic crap that doesn't cause them to go bankrupt is automatically going to be a massive loss to the taxpayer due to the definition of the problem itself. Nobody is willing to buy these things in the open market. If nobody's willing to buy them, then these toxic derivatives are by definition worthless.
Now, I came up with this in about ten minutes. Luckily, the Obama guys have much smarter dudes who came to the same conclusion at some point in the last couple days.
The real problem is not that the government isn't smart enough to figure out what the magic price is where A doesn't happen and B doesn't happen. It's the simple friggin' fact that this magic price does not exist.
There are plenty of prices where B will happen, i.e. anything near or above the market value of fecal matter sandwiches and urine flavored lemonade. There are plenty of prices where A will happen, i.e. any price that a market investor would say "I'm not paying that much for your fecal matter feast here, bucko."
In fact, I'll argue that any price good enough to prevent A from happening is automatically going to cause B to happen. Ergo, there's no solution to the bad bank problem: Any price the government pays banks for toxic crap that doesn't cause them to go bankrupt is automatically going to be a massive loss to the taxpayer due to the definition of the problem itself. Nobody is willing to buy these things in the open market. If nobody's willing to buy them, then these toxic derivatives are by definition worthless.
Now, I came up with this in about ten minutes. Luckily, the Obama guys have much smarter dudes who came to the same conclusion at some point in the last couple days.
The Obama administration’s wide-ranging plan to stabilize the financial system no longer includes creating a "bad bank" but will still contain measures to buy up toxic assets from financial institutions, according to a source familiar with the plan.Bad bank wasn't viable six months ago, it's not viable now, and it's far too late for it to ever be viable. What replaces it? I expect some nice, happy-sounding legerdemain involving Fannie and Freddie, scrapping mark-to-market accounting, and maybe a mortgage czar or something craptastic like that.In addition, funding for the bank-rescue plan is unlikely to exceed the $350 billion currently available under the TARP, this source said.
“They have to have enough to calm the markets, but there might not be as many details as previously thought,” he said.
A Treasury Department source said the plan was essentially complete with only minor “tweaks” being applied. The plan will be presented to members of Congress this evening, according to sources.
Not any real solution, but the banks will love it.
Right up until they collapse.
Zandar's Thought Of The Day
Who will be the first to honestly and meaningfully suggest Obama should solve the twin problems of Afghanistan and unemployment with a military draft, thereby putting himself in direct running with Dubya as the worst President ever?
Will they be lefty hawks pushing the ultimate government service, right-wing neo-cons saying he has to prove he's tough and that unemployment empowers the terrorists or something, or very serious centrists saying it's a both simple and elegant solution?
It's arguably the worst single thing Obama could do as President, meaning that somebody with a press pulpit is going to suggest it as a "workable, intelligent idea" and suggest it very, very soon.
If you find a press story or major blogger post on it, let me know.
Will they be lefty hawks pushing the ultimate government service, right-wing neo-cons saying he has to prove he's tough and that unemployment empowers the terrorists or something, or very serious centrists saying it's a both simple and elegant solution?
It's arguably the worst single thing Obama could do as President, meaning that somebody with a press pulpit is going to suggest it as a "workable, intelligent idea" and suggest it very, very soon.
If you find a press story or major blogger post on it, let me know.
Through One Hoop
The stimulus bill has gotten through one filibuster tonight to end debate, and faces another one tomorrow before the vote. Three Republicans jumped the line: Arlen Specter, Olympia Snowe, and Susan Collins. Teddy Kennedy also showed up for the vote to make it 61-36.
The U.S. Senate lined up to advance the $827 billion economic stimulus legislation backed by the White House on Monday, clearing the threat of a Republican filibuster.We'll see what Obama's presser tonight brings.While Senate Majority Leader Harry Reid vowed to deliver a bill to President Barack Obama's desk within days, key lawmakers braced for a difficult round of further negotiations aimed at producing a final House-Senate compromise.
"There is no reason we can't do this by the end of the week," said Reid. He said he was prepared to hold the Senate in session into the Presidents Day holiday weekend if necessary, and cautioned Republicans not to try and delay final progress.
The Cassandra Factor
Here's a CNBC interview with Nouriel Roubini and fellow economist Nassim Taleb. Watch the whole thing, it's about ten minutes, and note how goddamn scary these guys are.
Here are two well-informed economists who have basically called every bullet point on the impending financial disaster checklist calmly and rationally discussing the end of the American economy while the meatbag in the studio is asking these guys for f'ckin stock picks. Seriously.
Watch the whole thing. Taleb is not quite as gloomy as Roubini is and is learning towards a nasty recession until 2010, but Roubini is outright saying he believes there's a good chance America is heading for a multi-year depression that could last a decade.
Roubini has been right so far. I don't know how many times I can say this. He's called this thing right since 2004, every step of the way, from the housing bubble to the housing collapse, the subprime crisis, the brokerage fallout, the collapse of Fannie and Freddie, the failure of TARP and now he's saying Geithner's plan to fix the banks are useless.
He offers his own plan, which is excellent. Nobody will listen to him.
Cassandra all over again.
Here are two well-informed economists who have basically called every bullet point on the impending financial disaster checklist calmly and rationally discussing the end of the American economy while the meatbag in the studio is asking these guys for f'ckin stock picks. Seriously.
Watch the whole thing. Taleb is not quite as gloomy as Roubini is and is learning towards a nasty recession until 2010, but Roubini is outright saying he believes there's a good chance America is heading for a multi-year depression that could last a decade.
Roubini has been right so far. I don't know how many times I can say this. He's called this thing right since 2004, every step of the way, from the housing bubble to the housing collapse, the subprime crisis, the brokerage fallout, the collapse of Fannie and Freddie, the failure of TARP and now he's saying Geithner's plan to fix the banks are useless.
He offers his own plan, which is excellent. Nobody will listen to him.
Cassandra all over again.
Target: The Village Idiots
Hey look, Team Obama has figured out the Village is gunning for them and helping the GOP, so they're actually calling the Village on it as Greg Sargent points out.
Case in point: White House press secretary Robert Gibbs, on the presidential plane today, directly targeted cable news as out of touch with America when asked about polling on the stim package. From the White House transcript:Now, before you go "Well wait a minute, the press corps can make Obama look really bad if they want to" keep in mind they're already making Obama look bad. And hey, let's not forget who really runs the GOP anyway.I think it’s illuminating because it may not necessarily be where cable television is on all of this. But, you know, we’re sort of used to that. We lost on cable television virtually every day last year. So, you know, there’s a conventional wisdom to what’s going on in America via Washington, and there’s the reality of what’s happening in America.
That’s not all. In response to another question about Obama’s scheduled rally today in Elkhart, Indiana, Gibbs directly attacked the White House press corps. “We’ll get to measure whose questions were better over the course of the day — the voters of Elkhart or the reporters of Washington,” Gibbs says.
There’s still more. According to the pool report, senior Obama adviser David Axelrod ran with this ball on the campaign plane, too, saying that the new Gallup poll proves how out of touch Beltway insiders are.
“If I had listened to the conversation in Washington during the campaign for president, I would have jumped off a building about a year and a half ago,” Axelrod said.
One Prediction To Save For Later
Going to start marking articles like these that are still declaring everything's going to be fine, and that we're overreacting to a "market downturn."
PRESIDENT Obama, writing in The Washington Post, said, "By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression." But how would we know if and when this crisis is really more "deep and dire" than others?2.6 million jobs lost in 5 months is just a hiccup, folks. We can't possibly continue to lose jobs at that rate for much longer!Many may believe we're in the worst recession since the Great Depression, if only because politicians and the press keep repeating that claim. But we need to compare some facts to discern whether this recession is (or will be) "worse" in some sense than those of 1973-75 or 1981-82.
New tag: Future Stupidity. I'll be checking on posts like this down the road.
Methinks It's Not Working
The GOP "destroy the country to get political power" plan on the stimulus isn't working as well as the GOP thought.
A new Gallup poll shows that President Obama is continuing to enjoy high approval in handling the economic stimulus debate -- and his brand is solidly beating the Congressional Republicans, too.Obama 67%, GOP 31% on the stimulus. Looks like the plan to shower the airwaves with bullshit is backfiring critically on the GOP.The numbers: Obama has a 67% approval and only 25% disapproval on how he's handled the stimulus bill, compared to Congressional Republicans' 31% approval and very high 58% disapproval. Congressional Democrats aren't as popular as Obama himself -- explaining the GOP's efforts to tie the bill to Nancy Pelosi, instead of Obama -- but they're still in the black at 48%-42%.
In addition, a 51% majority of independents say it is critically important to pass a stimulus bill, 27% say it is moderately important, and only 17% say it's not important. The numbers among the Republican base, as we might expect, are wildly different: Only 29% say it is critically important, 37% say it's important but not critically so, and 31% say it's not important.
Maybe we've got a chance on this after all. Obama's on the road in Elkhart, Indiana today (the county has 15.3% unemployment officially, throw in the underemployed and those out of benefits and the number is well north of 25%) ahead of the Senate vote, and his prime-time presser tonight. Now's the time to capitalize.
The Bell Tolls For The Automakers
News out of Washington this morning that the Obama administration is telling GM and Chrysler's creditors that the American taxpayer needs to be first in line to be paid back...or they'll force both firms into bankruptcy to do so.
General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.It annoys me greatly that while the government can take a hardball approach to the carmakers, they refuse to do the same for banks.U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
“They are negotiating to see if they can reach an agreement,” said Workman, a bankruptcy lawyer based in Washington. “If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us’” to be first in line for repayment.
GM shares traded in Germany rose 2.5 percent to the equivalent of $2.91 as of 12:07 p.m. in Frankfurt. Ford Motor Co., the second-largest U.S. carmaker, advanced 0.5 percent to $1.95. Ford has declined government bailout funds so far.
Why not get our TARP money back?
Oh that's right. The banks are insolvent.
The Village On Display
With more and more progressive bloggers coming around to the conclusion that the GOP is invested in the long term failure of the stimulus and the economy itself, naturally I expected to see the same evidence on the Village Papers like Monday's front page of the WaPo, to instead form a piece glorifying the Republican obstructionism "insurgency".
Three months after their Election Day drubbing, Republican leaders see glimmers of rebirth in the party's liberation from an unpopular president, its selection of its first African American chairman and, most of all, its stand against a stimulus package that they are increasingly confident will provide little economic jolt but will pay off politically for those who oppose it.The Party Of No sounds like a great idea: no ideas, no hope, no stimulus jobs, no end to the economic death spiral, no chance of escaping the black hole.After giving the package zero votes in the House, and 0with their counterparts in the Senate likely to provide in a crucial procedural vote today only the handful of votes needed to avoid a filibuster, Republicans are relishing the opportunity to make a big statement. Rep. Pete Sessions (R-Tex.) suggested last week that the party is learning from the disruptive tactics of the Taliban, and the GOP these days does have the bravado of an insurgent band that has pulled together after a big defeat to carry off a quick, if not particularly damaging, raid on the powers that be.
"We're so far ahead of where we thought we'd be at this time," said Rep. Paul D. Ryan (R-Wis.), one of several younger congressmen seeking to lead the party's renewal. "It's not a sign that we're back to where we need to be, but it's a sign that we're beginning to find our voice. We're standing on our core principles, and the core principle that suffered the most in recent years was fiscal conservatism and economic liberty. That was the tallest pole in our tent, and we took an ax to it, but now we're building it back."
The second-ranking House Republican, Rep. Eric Cantor (Va.), put it more bluntly. "What transpired . . . and will give us a shot in the arm going forward is that we are standing up on principle and just saying no," he said.
It's a testament to just how stupid the Village is they honestly believe that the GOP voting against millions of new stimulus jobs in the worst economy in generations will somehow make them popular with the masses.
If the Village is right, we deserve the consequences. They're not. The Village message is clear: the GOP is always in charge. Obama can't win if he plays their game. He has to play his own game and take it to the people.
StupidiNews!
- Nissan is cutting 20,000 jobs as it suffers its first yearly loss ever.
- Former Iranian President and reformer Mohammed Khatami will run against Iran's hardliners.
- The recession is affecting the nation's container ports and longshoremen workers.
- London has its own bank image problems as Royal Bank of Scotland plans to pay out a billion pounds in bonuses.
- A startup search engine is matching digital TV converter box coupons with people who still need them.