The noose tightens

“You never want a serious crisis to go to waste — and what I mean by that is an opportunity to do things that you didn’t think you could do before.”--Rahm Emanuel

Today, governments around the world are taking power back from free markets, particularly financial markets, under the pretext that they have failed. In fact, the markets were hobbled by a combination of anti-market regulations and the lack of enforcement of regulations that leveled the competitive playing fields. In the US, the power grab is spreading to banking, autos, energy, and health care. Here is a brief chronology of recent developments around the world in this epic power struggle:

The Black Hole of fiscal responsibility

I'll withhold the niceties: anybody that thinks government is a good custodian of your current and future tax dollars is a moron.

Congress needs Google to find out where stimulus money went

On February 14, with the passage of the American Recovery and Reinvestment Act, Congress shoveled $787 billion of stimulus money out the door. Now they're using Google to find out where it went.
During the stimulus debate, the bill's supporters stressed that it included strong oversight safeguards. But audits and reports are months, if not years, away. Oversight will be after the fact; right now, with the money actually beginning to flow, members of Congress have little or no idea where it is going. What, for example, is the Department of Housing and Urban Development doing with the $1.5 billion Congress approved for a new program called the Homeless Prevention Fund? Lawmakers don't know.

Read the whole thing.


"No man's life, liberty or property are safe while the legislature is in session."--Judge Gideon Tucker 1866

Congress and NASCAR

Here's a great idea. Every member of Congress should wear a one piece uniform emblazoned with the icons of their corporate sponsors:

There's that saying...

Oh you know the one, something about pictures and what they're worth in words...

Budget deficit: past, present and future (source: Wapo)



This one has words and pictures. That doubles its value!

The Dodd Amendment

I do believe that the Obama administration and his congressional enablers finally have a plan in place to remove the last vestiges of faith in the federal government any of us may still harbor exempt their campaign contributors from having to take unsavory responsibility for their bad business decisions:

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. The provision, now called “the Dodd Amendment” by the Obama Administration provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax.

He was for the bonuses before he was against them. John Kerry would appreciate that. Also, it's pretty rich that they want to "tax" these bonuses. As the tax laws already stand the federal government will get about 35% of the gross amount. And depending on what state the recipients live in, they'll be lucky to see 55% of the gross amount after the local governments are through.

AIG's earmarks

The latest outrage washing across the political landscape is over AIG's decision to honor a commitment to pay out $165 million in bonuses to certain employees. Obama has said that he will "pursue every single legal avenue to block" the payout.

At issue are retention bonuses for employees of AIG's financial-products division, whose credit default swaps brought AIG to the brink of collapse. The government controls AIG through an 80% equity stake and as a major lender and doesn't have legal authority to freeze payments on its own. The U.S. has committed $173.3 billion to AIG, including $70 billion from Treasury's rescue fund.

The mortgage plan is revealed

U.S. Sets Rules for Mortgage Modifications, 2% Mortgages

March 4 (Bloomberg) -- The Obama administration set loan modification guidelines for its $75 billion homeowner rescue plan, agreeing to pay lenders for altering troubled mortgages while reducing borrowers’ interest rates to as low as 2 percent.

2 percent? sign me up! Sadly, I do not think I'll qualify, as I am current in my mortgage payments and have chosen to not live beyond my means. However I am troubled by all of this government intervention in the mortgage market. Though I don't think that's the kind of "troubled mortgage" candidate they're looking for.

Geithner to fight himself; Obama channels Jim Cramer

Everytime I see Treasury Sec Geithner's mug on TV, this is how I envision him:


Geithner: Obama to fight international tax dodgers

WASHINGTON (AP) - President Barack Obama's Treasury secretary says the administration will unveil a series of rules and measures in the coming months to limit the ability of international companies to avoid U.S. taxes.

U.S. Bailout, Stimulus Pledges Total $11.6 Trillion

All information culled from Bloomberg:

The following table details how the U.S. government has pledged more than $11.6 trillion on behalf of American taxpayers over the past 19 months, according to data compiled by Bloomberg.

Changes from the previous table, published Feb. 9, include a $787 billion economic stimulus package. The Federal Reserve has new lending commitments totaling $1.8 trillion. It expanded the Term Asset-Backed Lending Facility, or TALF, by $800 billion to $1 trillion and announced a $1 trillion Public-Private Investment Fund to buy troubled assets from banks.

MBA, CFA, BFD

"MBA, CFA, BFD."

I once had a boss that used that phrase anytime some greenhorn equity salesman would try to impress him with their spit-shined education credentials. I always got a kick out of that, especially since he was a CFA chartholder himself, and several of my colleagues had either an MBA, a CFA or both. He was a cynical man

It is done

It looks like both houses of Congress have agreed to the 1,000+ page, $787,000,000,000 "stimulus" package that is going to save our country from the abyss.

Before you accuse our elected officials of vigorously scratching the itch to spend our children's money, remember, it could have been worse:

The nonpartisan Congressional Budget Office said the stimulus package will cost $787 billion, rather than $789 billion lawmakers estimated earlier this week.

That is what passes as fiscal responsibility on Capitol Hill.

And this, from San Francisco's favorite carpetbagging daughter:

“The jobs the American people care about most -- their own -- will be dramatically safer the day that President Obama signs this plan into law,” said House Speaker Nancy Pelosi, a California Democrat.

The United States of Insolvency

This chart caught my eye over the weekend (from the Economist):

The biggest force behind the bond-market shock is the onslaught of new issuance as the government seeks to finance the gaping budget deficit, Fed liquidity programmes, mortgage purchases and bank bail-outs. Yields moved still higher this week partly on the Treasury’s

The time warp is stuck on continuous play

Trivia time! Guess the year of the following headline:

Fannie Mae to Loosen Rules for Home-Loan Refinancing

a) 1989
b) 1999
c) 2009

If you guessed "C" give yourself a prize!

From the article:

Feb. 5 (Bloomberg) -- Fannie Mae, the mortgage-finance company under government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Government front running

This is what happens when government front runs the private sector:

The notion of too big to fail

The following bubble chart compares the current market capitalization of our nation's biggest banks to what they were in the second quarter of 2007:

The chart is a little fuzzy, but the blue bubble represents Q2'07 and the green bubble represents Q1'09 YTD. The giant bubble with the tiny inset bubble that looks like the earth against the sun is Citigroup.