Posted by Kendall Harmon

All eyes were fixed Wednesday on Spain, as the country’s borrowing costs showed no signs of slowing their climb amid nervousness about the health of the banking sector and the possibility of the crisis spreading to other euro countries.

Europe’s economic stagnation and continuing financial turmoil in the euro zone have weighed on confidence, the European Commission said Wednesday. The commission’s indicator of business sentiment in the 17-nation euro zone fell in May to 90.6 from April’s revised 92.9. The decline, it said, “was driven by falling confidence in all business sectors, especially in industry and retail trade.”

Jonathan Loynes, an economist in London with Capital Economics, noted that the sentiment data showed “acute weakness across the peripheral economies,” but that the Dutch, French and Germans were also less optimistic. He described it as “overall, an unambiguously weak picture which only looks likely to get worse as the debt crisis continues,” and predicted that euro zone gross domestic product would decline by 1 percent this year, with 2013 “likely to be much worse.”

Read it all. Also, if you want a single picture to keep an eye on, it is the Spanish German 10 year spread which you may see there (yes, that is correct, it is at all all time high).

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerForeign RelationsPolitics in General* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010Spain

0 Comments
Posted May 30, 2012 at 6:10 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Here’s a breakdown of the numbers. The report, citing White House budget office figures, estimated $46 billion of costs under the Troubled Asset Relief Program to support struggling homeowners. It showed $2 billion of overall gains on the Treasury’s investments in various bailed-out companies, such as American International Group Inc. (AIG), some of which are held outside of TARP. Other Treasury programs to buy mortgage-backed securities and to guarantee money-market funds would produce $26 billion of gains, the report said.

Add up those categories, and the projected net cost so far is $18 billion. On top of that, there’s the current net cost of the government-sponsored housing financiers Fannie Mae and Freddie Mac, which the Treasury pegged at $151 billion. So how did Treasury project a potential gain overall?

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe Banking System/SectorThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in General* TheologyEthics / Moral Theology

0 Comments
Posted April 20, 2012 at 7:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The crisis of the euro zone has finally hit the potholed road of real politics, with the Greeks now openly questioning whether their commitment to Europe and its single currency still matters more to them than control over their own future and economic well-being.

During the two-year financial crisis, the wealthier countries of northern Europe, led by Germany, have insisted that their heavily indebted brethren in the south radically cut spending in return for emergency loans. They have stuck to that prescription even though austerity has undermined growth and increased unemployment in Greece, Spain, Portugal and now Italy, betting that people in those countries will swallow the harsh medicine because their only alternative is to default and possibly leave the euro zone altogether.

The turmoil in the government of Prime Minister George A. Papandreou means that Greece is about to call that bet. Many Greek politicians appear to be calculating, at this late stage, that they have more to lose by sticking to Germany’s terms than by risking a messy default, and even going it alone with their old currency, the drachma, outside the euro zone.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankG20 Stock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerForeign RelationsPolitics in General* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010FranceGermanyGreece

0 Comments
Posted November 2, 2011 at 5:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

After a weekend of tense meetings among world finance officials here, euro-zone leaders were weighing options to maximize the size of their bailout fund by borrowing against it. The move could provide trillions of dollars of firepower to rescue governments and banks—-but only if all 17 euro-zone legislatures approve a two-month-old agreement to broaden the bailout fund.

Highly public opposition from Germany, the largest and most powerful euro-zone economy, could block the plan.

Policy makers are "focused on their own internal restraints, so that we don't have the outcome that we need," Antonio Borges, head of the International Monetary Fund's Europe department, said Sunday. While key players were understandably acting in self-interest, he said, it was generating "disastrous" collective results.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankG20 The Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerForeign RelationsPolitics in General* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010Germany

0 Comments
Posted September 25, 2011 at 2:32 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The reserve powers would be well advised to pull out all the stops to save Europe and its banking system. Together they hold $10 trillion in foreign bonds. If they agreed to rotate just 4pc of these holdings ($400bn) into Spanish, Italian, and Belgian debt over the next two years, they could offer a soothing balm. None has yet risen to the challenge. It is `sauve qui peut', with no evidence of G20 leadership in sight.

Once again, the US has had to take charge. The multi-trillion package now taking shape for Euroland was largely concocted in Washington, in cahoots with the European Commission, and is being imposed on Germany by the full force of American diplomacy.

It is an ugly and twisted set of proposals, devised to accomodate Berlin's refusal to accept fiscal union, Eurobonds, and an EU treasury. But at least it is big.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankG20 The Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerForeign RelationsPolitics in General* International News & CommentaryEngland / UK--IrelandEurope--European Sovereign Debt Crisis of 2010GermanyGreeceItalySpain

1 Comments
Posted September 25, 2011 at 2:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It is apparent not only that US banks have lost confidence in their European counterparts and have started shutting them out of inter-bank funding markets, but also that US officials are busy making matters worse by seeking to shift blame for America’s dire domestic performance on to influences from this side of the Atlantic. “Seventy-five per cent of the dark things happening in the world economy are because of the eurozone,” one of Geithner’s team said at Marseille....

Markets are convinced of several things: that Greece is politically incapable of meeting the austerity demands imposed by the EU and the IMF, and is now locked into a spiral in which its debt position can only become worse as its economy deteriorates; that a default on Greek sovereign debt is therefore inevitable sooner rather than later, and will impose losses on European banks, including the likes of Société Générale and Crédit Agricole of France, which may in turn need to be bailed out by their governments; and that the eviction of a bankrupt and incorrigibly irresponsible eurozone member is not only a technical possibility but an economic necessity if the single currency is to survive at all.

Read it all.

Filed under: * Culture-WatchGlobalizationHistory* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in General* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010FranceGermanyGreece

2 Comments
Posted September 19, 2011 at 9:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Should America embark on such fiscal contraction at a time when economic growth has already slipped to stall speed, and debt deleveraging continues with a vengeance, I would like to flee to Mars for safety.

Yes, there is such a concept as an “expansionary fiscal contraction”, as in Ireland (1980s), Denmark (1990s), arguably Canada (1990s), and the UK after both 1932 and 1993, but in every successful case this was accompanied by monetary loosening. That card has already been played this time.

Should America instead opt to evade these fiscal cuts by actually defaulting on debts accumulated by self-indulgent baby boomers, I would also like to flee Mars because such an outcome might be even worse.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

10 Comments
Posted July 27, 2011 at 12:43 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In February, President Obama submitted his budget. The CBO reported that it would steeply boost the national debt.

In April, the president released a revised deficit-reduction plan so short on detail that the CBO deemed it too vague to evaluate.

Also in April, the Senate unanimously rejected the president's February budget. Since then, the Democratic leadership in the Senate and the White House have put forward no clear budget approach....

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetMedicareSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

0 Comments
Posted July 19, 2011 at 5:32 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

From 2001-07, he argues, the dollar underwent a long, steady decline against the euro, tacitly encouraged by U.S. monetary authorities. In response to the dollar's decline, investors diverted capital into inflation hedges, notably real estate, leading to the subprime bubble. By mid-2007, the real-estate bubble had burst. In response, the Fed reduced short-term interest rates rapidly, which lowered the dollar further. The subprime crisis was severe, but with looser money, the economy appeared to stabilize in the second quarter of 2008.

Then, in summer 2008, the Fed committed what Mr. Mundell calls one of the worst mistakes in its history: In the middle of the subprime crunch—exacerbated by mark-to-market accounting rules that forced financial companies to cover short-term losses—the central bank paused in lowering the federal funds rate. In response, the dollar soared 30% against the euro in a matter of weeks. Dollar scarcity broke the economy's back, causing a serious economic contraction and crippling financial crisis.

In March 2009, the Fed woke up and enacted QE1, lowering the dollar against the euro, and signs of recovery soon appeared. But in November 2009, QE1 ended and the dollar soared against the euro once again, pushing the U.S. economy back toward recession.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy Geithner* International News & CommentaryEurope

1 Comments
Posted May 23, 2011 at 8:06 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A group of the largest US banks and fund managers stepped up the pressure on Congress and the Obama administration to reach a deal to increase the country’s debt limit, saying that even a short default could be devastating for the financial markets and economy.

The warning over the debt limit is the strongest yet to come from Wall Street, highlighting growing nervousness among investors about the US political system’s ability to forge a consensus on fiscal policy.

The most pressing budgetary issue confronting Congress and the Obama administration is the need to raise the US debt ceiling, which stands at $14,300 billion.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

3 Comments
Posted April 27, 2011 at 7:25 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

I wonder if Mr. Obama is at all embarrassed by the 2012 budget. Like his previous two budgets, this one breaks all those “Morning in America” campaign promises of a “new” Washington.

The 2012 budget also is a repudiation of the findings of his very own bipartisan deficit commission.

The Bowles-Simpson commission had plenty of sensible recommendations, like cutting funds for the Corporation of Public Broadcasting, eliminating the Office of Safe and Drug-Free Schools and raising the qualifying age for Social Security.

But you’ll find precious little of this in the 2012 budget. At the White House, political sense apparently matters a lot more than common sense.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsCurrency MarketsTaxesThe U.S. GovernmentBudgetSocial SecurityThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesSenate* International News & CommentaryAmerica/U.S.A.

5 Comments
Posted February 15, 2011 at 11:22 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

US Treasury Secretary Timothy Geithner has told Davos delegates rapid, drastic spending cuts are "not the responsible way" to cut national budget deficits.

He also said the US was more confident now there was a sustainable expansion, but said it was not a boom.

Mr Geithner said "education, innovation, and investment" were the way forward for the US economy.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

3 Comments
Posted January 29, 2011 at 9:12 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The longer people stay out of work, the more trouble they have finding new work.

That is a fact of life that much of Europe, with its underclass of permanently idle workers, knows all too well. But it is a lesson that the United States seems to be just learning.

This country has some of the highest levels of long-term unemployment — out of work longer than six months — it has ever recorded. Meanwhile, job growth has been, and looks to remain, disappointingly slow, indicating that those out of work for a while are likely to remain so for the foreseeable future. Even if the government report on Friday shows the expected improvement in hiring by business, it will not be enough to make a real dent in those totals.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeLabor/Labor Unions/Labor MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryAmerica/U.S.A.

25 Comments
Posted December 2, 2010 at 4:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Anyone wondering what President Obama will face when he arrives in South Korea on Wednesday for a global financial summit meeting need look no further than an announcement by China’s leading state-endorsed rating agency, which downgraded the United States’ credit rating on Tuesday — and provocatively questioned American leadership of the global economy.

The agency cited the Federal Reserve’s decision to pump more money into the United States economy and warned of Washington’s “deteriorating debt repayment capability” and “the serious defects in the United States economic development and management model,” which it predicted would lead to “fundamentally lowering the national solvency.”

In the rest of the world, the United States is still the gold standard of credit risks, and the Chinese downgrade is not expected to have much real impact. But the sharply worded attack from the country that is buying billions of dollars in American debt each month was just the latest rhetorical assault on the United States, as officials from China to Germany to Brazil suggest that Washington’s addiction to debt has greatly diminished its credibility.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyG20 The Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy Geithner* International News & CommentaryAsiaChinaEurope

0 Comments
Posted November 10, 2010 at 6:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

China kept up a drumbeat of criticism of U.S. easy money policies on Tuesday, warning two days before a G20 world economic summit that Washington could destabilize the global economy and inflate asset bubbles.

Nearly a week after the Federal Reserve announced it was going pump as much as $600 billion into the economy, world leaders continue to bash the plan, saying it will flood global markets with cash without doing much for the U.S. recovery.

President Barack Obama acknowledged in Jakarta that the Group of 20 rich and developing nations "still have a lot of work to do" to ensure balanced global growth.

Read it all.

Filed under: * Economics, PoliticsEconomyG20 The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerForeign RelationsPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChinaEuropeGermany

0 Comments
Posted November 10, 2010 at 6:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

U.S. Treasury Secretary Timothy F. Geithner refrained from pushing for current-account targets while China softened its stance on the Federal Reserve’s quantitative easing days before a summit of the Group of 20.

The Fed’s move to buy $600 billion of Treasuries could contribute “tremendously” to global growth, Vice Finance Minister Wang Jun said after Asia-Pacific Economic Cooperation forum finance chiefs met in Kyoto, Japan, Nov. 6. At the same gathering, Geithner said current-account deficits or surpluses aren’t “something that is amenable to limits or targets.”

Policy makers from Asia to South America have warned that the Fed’s decision to pump liquidity into the U.S. will depress the dollar and spark flows of capital to emerging markets that threaten asset-price bubbles. China’s Vice Foreign Minister Cui Tiankai said Nov. 5 the U.S. step may hurt global confidence, while rejecting state-planning style targets for trade deficits.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsCurrency MarketsG20 The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerForeign RelationsPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChina

0 Comments
Posted November 7, 2010 at 2:48 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The uncertainty over the legal status of foreclosed homes in the nation could further depress home prices and delay the recovery of the housing market, the Obama administration said on Wednesday.

The warning came at the first Congressional hearing since the magnitude of the problem gained wide attention. Distressed properties make up one quarter of all home sales.

Revelations about paperwork shortcuts and so-called robo-signed affidavits, as well as the likelihood of protracted legal battles by homeowners and inquiries by state and federal officials, will hinder foreclosure proceedings and discourage prospective buyers, a Treasury Department official said.

“Together, these two factors may exert downward pressure on overall housing prices both in the short and long run,” said the official, Phyllis R. Caldwell, chief of the homeownership preservation office at the Treasury.

Read it all.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted October 28, 2010 at 9:11 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Pundits are restless, an election looms – so this week, President Barack Obama is proposing yet another round of special favors, aimed at improving the economy. Prominent columnist Paul Krugman wants the plans to be “bold” and to involve huge amounts of money. Here’s a contrasting view: government should stop declaring recovery plans, bold or otherwise.

Maybe the constant announcing of new plans – especially plans backed by borrowing or tax cuts – is, itself, an impediment to economic growth.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted September 8, 2010 at 6:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Obama administration and the Federal Reserve want to fix the United States economy by spending more money. But while that approach might work for Europe, it is risky for the US. The nation would be better off embracing traditional American values like self-reliance and small government.

There's no question about it: The 20th century was America's era. The United States rose rapidly from virtually nothing to become the most politically powerful and economically strongest country in the world. But the financial crisis and subsequent recession have now raised doubts about its future. Are we currently witnessing the beginning of the end of the American era?

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.EuropeGermany

2 Comments
Posted September 4, 2010 at 1:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It increasingly seems as if the policy makers attending like physicians to the American economy are peering into their medical kits and coming up empty, their arsenal of pharmaceuticals largely exhausted and the few that remain deemed too experimental or laden with risky side effects. The patient — who started in critical care — was showing signs of improvement in the convalescent ward earlier this year, but has since deteriorated. The doctors cannot agree on a diagnosis, let alone administer an antidote with confidence.

This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

6 Comments
Posted August 29, 2010 at 7:11 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

"The economy is going to limp along for the next few months," said Gus Faucher, an economist at Moody's Analytics. There's even a one in three chance it could slip back into recession, he said.

Many temporary factors that boosted the economy earlier this year are fading. Companies built up their inventories after cutting them sharply in the recession to match slower sales. The increase provided a boost to manufacturers, but now many companies' stockpiles are in line with sales and don't need to grow as much. In addition, the impact of the government's $862 billion fiscal stimulus program is lessening. That leaves the private sector to pick up the slack. But businesses are cutting back on their spending on machines, computers and software, according to a government report earlier this week. And the housing sector is slumping again after a popular home buyer's tax credit expired in April.

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsHousing/Real Estate MarketLabor/Labor Unions/Labor MarketPersonal FinanceStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

6 Comments
Posted August 27, 2010 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

We don’t have alternative universe laboratories to run control bailout experiments, but we can imagine the alternative outcomes if different actions were taken.

So let’s do just that. Imagine a nation in the midst of an economic crisis, circa September-December 2008. Only this time, there are key differences: 1) A President who understood Capitalism requires insolvent firms to suffer failure (as opposed to a lame duck running out the clock); 2) A Treasury Secretary who was not a former Goldman Sachs CEO, with a misguided sympathy for Wall Street firms at risk of failure (as opposed to overseeing the greatest wealth transfer in human history); 3) A Federal Reserve Chairman who understood the limits of the Federal Reserve (versus a massive expansion of its power and balance sheet).

In my counter factual, the bailouts did not occur. Instead of the Japanese model, the US government went the Swedish route of banking crises: They stepped in with temporary nationalizations, prepackaged bankruptcies, and financial reorganizations; banks write down all of their bad debt, they sell off the paper. Int he end, the goal is to spin out clean, well financed, toxic-asset-free banks into the public markets.

Read it all.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

34 Comments
Posted August 18, 2010 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

From the FT's Alphaville blog:

So the US Treasury’s centrepiece mortgage modification programme — Hamp — is something of a failure. That much we knew already.

But Laurie Goodman over at Amherst Securities brings up another point.

The programme actually has a lower success rate than other modification programmes — even those that involve a similar amount of payment reduction.

Read it all.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe 2009 Obama Administration Housing Amelioration PlanThe U.S. GovernmentTreasury Secretary Timothy Geithner

2 Comments
Posted August 12, 2010 at 12:28 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Read it all. Yves Smith (of the Naked Capitalism blog) speaks for me when she quips: "The worst is he might actually believe his PR"--KSH.



Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

1 Comments
Posted August 4, 2010 at 9:32 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

...there is skepticism over the president’s commitment to reducing the huge and dangerous budget deficits which America now faces. A strong step toward deficit reduction next year — like undertaking the difficult task of trying to fix Social Security — would earn deeper credibility with business and with all Americans.

Another problem is that the administration’s rhetoric — which too often employs inflammatory words like “reckless” — has the effect of tarring all of business with the same brush. The White House might better distinguish between Wall Street, Big Oil and health insurers, which have all incurred public wrath, and the majority of businesses, which haven’t.

The tension between President Obama and the business community is hurting both sides and may hamper economic recovery. Closing that divide requires the business community to mute its criticism, and the administration to make personnel and policy adjustments. Neither should be hard.

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

9 Comments
Posted July 19, 2010 at 9:06 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A new Time poll reveals just how hard the task is: Two-thirds of respondents say they oppose a second government stimulus package. And 53% say the country would have been better off without the first one.

The result is a White House pulled in three directions at once as it tries to repair the economy — and ensure that Obama and the Democrats can survive a rising tide of public anger. First, the Obama team is improvising ways to pass piecemeal spending items through a Congress where stimulus has become a toxic word. At the same time, the White House is signaling its concern about that budget deficit that has Tea Partyers raging — both through token gestures, like a White House contest that lets the public vote on cost-cutting ideas submitted by federal employees (the winner gets to meet Obama and see his or her idea go in the President's next budget), and through Obama's support for the work of a bipartisan deficit commission. And finally, the White House is trying to explain to angry liberals that it's doing everything possible to keep the economy moving and fight Republican resistance to new spending.

It's a delicate balancing act, on a par with Obama's effort to pass health care reform without appearing to get too involved in the details. And just as it did in the health care battle, the future of Obama's presidency — as well as the fate of the American economy — may hang on the outcome.

Read it all.

Filed under: * Culture-WatchHistoryPsychology* Economics, PoliticsEconomyHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaState Government

0 Comments
Posted July 17, 2010 at 12:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds.

By using its balance sheet to protect an investment bank against failure, the Fed took on the most credit risk in its 96- year history and increased the chance that Americans would be on the hook for billions of dollars as the central bank began insuring Wall Street firms against collapse. The Fed’s secrecy spurred legislation that will require government audits of the Fed bailouts and force the central bank to reveal recipients of emergency credit.

“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.

Read it all.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsThe Banking System/SectorThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy Geithner

13 Comments
Posted July 1, 2010 at 7:58 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

To believe Christopher Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee, the end of government bailouts is near. In truth, the financial-overhaul legislation now before Congress would do little to arrest the bailouts already in progress.

When the U.S. government rescued American International Group Inc. in 2008, it reasoned that a disorderly failure of the financial-services giant would lead to an economic catastrophe. What the Treasury and Federal Reserve said they needed was a way to wind down systemically important institutions without sending them into bankruptcy courts, to keep the companies from triggering defaults on their obligations that would cascade throughout the broader financial system.

Congressional leaders say their final bill will deliver the resolution authority regulators have been seeking. “It will end bailouts, ensuring that failing firms can be shut down without relying on taxpayer bailouts or threatening the stability of our economy,” Dodd said June 10 at the House-Senate conference committee where the differences between the two chambers’ bills are being negotiated.

It wouldn’t end AIG’s rescue, though. The reason AIG hasn’t failed is that the Fed and the Treasury continue to stand behind it. There’s no sign this will change anytime soon. Nor would the legislation force the government to do otherwise.

Read the whole thing.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeStock MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralSenate

2 Comments
Posted June 18, 2010 at 9:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States suggested Europe's debt crisis would have minimal impact on global growth, but China took a more pessimistic view, warning it would impact demand for its exports and other regions would suffer too....

"The euro zone problems haven't been cleaned up yet," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. "And even though the global economy is definitely showing more signs of recovery than it did 6 months ago, worry continues that the euro zone's woes will put a brake on this growth."

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChinaEurope

0 Comments
Posted May 25, 2010 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

“We have not relented on our principles,” Mr. [Jean-Claude] Trichet told Der Spiegel, the German newsmagazine, according to a transcript on the bank’s Web site. “Price stability is our primary mandate and compass.”

And in an interview broadcast on Sunday, the U.S. Treasury secretary, Timothy F. Geithner, signaled his confidence that Europe would resolve its debt crisis and that the American economy would withstand its impact. “Europe has the capacity to manage through this,” Mr. Geithner told Bloomberg Television. “And I think they will.”

As investors absorb the details — and the potential weaknesses — of the $1 trillion European rescue plan, Mr. Geithner seemed to be trying to draw a sharp, if implicit, contrast to remarks last week from another senior economic adviser to President Barack Obama, Paul A. Volcker. Mr. Volcker, a former Federal Reserve chairman, startled some investors when he spoke of a possible “disintegration” of the euro zone — a striking shift from his expressions of confidence of only two months earlier.

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in General* International News & CommentaryEuropeGermanyGreecePortugalSpain

3 Comments
Posted May 16, 2010 at 4:40 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.

“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCredit MarketsThe U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted March 22, 2010 at 8:58 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency. If, as things appear now, Lehman was allowed by the Fed’s inaction to remain in business, when the Fed should have insisted on a wind-down (and the failed Barclay’s said this was not infeasible: even an orderly bankruptcy would have been preferrable, as Harvey Miller, who handled the Lehman BK filing has made clear; a good bank/bad bank structure, with a Fed backstop of the bad bank, would have been an option if the Fed’s justification for inaction was systemic risk), the NY Fed at a minimum helped perpetuate a fraud on investors and counterparties.

This pattern further suggests the Fed, which by its charter is tasked to promote the safety and soundness of the banking system, instead, via its collusion with Lehman management, operated to protect particular actors to the detriment of the public at large.

Read it all.

Filed under: * Economics, PoliticsEconomyStock MarketThe Banking System/SectorThe U.S. GovernmentTreasury Secretary Timothy Geithner

1 Comments
Posted March 14, 2010 at 3:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

I understand that positioning for the next election, partisan politics and lobbying money are a deadly combination to any possible reform. But its so obvious to me watching these folks push and shove good ideas away that they: 1) are utterly clueless how all of this (credit crisis, recession, housing bust) happened; b) have absolutely no idea how to fix any of it; iii) are primarily concerned with getting re-elected.

--Barry Ritholtz

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyCorporations/Corporate LifeStock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerEnergy, Natural ResourcesPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

4 Comments
Posted February 2, 2010 at 2:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

1) Immediately vest the FDIC (or other regulator that has a strict consumer-protection mandate) with the authority to take receivership / conservatorship of distressed bank and non-bank financial institutions, including bank holding companies, in the event of insolvency....

2) Require a significant portion of the capital of bank and non-bank financial institutions to be in the form of convertible debt (contingent capital).

Read it all.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyCorporations/Corporate LifeCredit MarketsStock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted January 27, 2010 at 8:31 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

AIG and the Federal Reserve Bank of New York have become targets of an investigation into whether the overseer had instructed the troubled insurer not to disclose certain key information to the public.

Neil Barofsky, special inspector general for the $700 billion bailout, is set to tell the House Oversight Committee on Wednesday that he has initiated an investigation into whether the New York Fed instructed AIG (AIG, Fortune 500) not to disclose more than a dozen controversial counterparty transactions to the Securities and Exchange Commission.

Read the whole article.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyConsumer/consumer spendingStock MarketThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in General

1 Comments
Posted January 26, 2010 at 5:55 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Washington spent months nursing the financial system back to health after the 2008 economic crisis, stabilizing then reviving battered markets and ultimately restoring trillions of dollars in investor losses. Wall Street's political fortunes have not fared as well.

Now, an aggressive stance against the bankers, financiers and even government officials popularly blamed for causing the crisis is gaining political momentum, and there are signs it is eroding the very financial stability the government championed.

Read it all.

Filed under: * Economics, PoliticsEconomyStock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted January 24, 2010 at 5:37 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Scott Brown has a lot to answer for. His stunning Senate victory for the Republicans in Massachusetts sent the White House into a spin. President Obama promptly decided on the populist gesture of targeting Wall Street with vague proposals to outlaw banks’ risky activities and limit their size. Though seemingly hastily wheeled out, the ideas were first floated a few months ago by Paul Volcker, former chairman of the Federal Reserve Board, a man widely regarded as the best US central banker of the modern era. As a result they have some credibility, though they are far from being a panacea.

Many believe the banks have brought this on their own heads. The return of big bonuses so soon after a crisis of their own making, for which ordinary people will be paying for years, showed crass insensitivity and greed. America’s banks rushed to pay off their obligations to taxpayers under the Tarp (troubled asset relief programme) precisely so that they could get back on the bonus gravy train. The behaviour of the banks, however, is no excuse for flawed policy. Nobody yet knows the detail of Mr Obama’s plans, probably not even the president. But from what we know so far, they suffer from two serious shortcomings.

The first is that they would not have stopped the current crisis....

Read the whole thing.

Filed under: * Culture-WatchGlobalizationLaw & Legal Issues* Economics, PoliticsEconomyCorporations/Corporate LifeStock MarketThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate* International News & CommentaryEngland / UK

1 Comments
Posted January 24, 2010 at 8:07 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

According to e-mails released this month, AIG was asked to limit what the public knew about the Maiden Lane transactions. The payments have been called a “backdoor bailout” by lawmakers because banks, including Goldman Sachs Group Inc. and Societe Generale SA, were reimbursed at 100 cents on the dollar for mortgage-linked securities that had declined in value.

“This has been terribly mishandled,” said James D. Cox, a professor of corporate and securities law at Duke University School of Law. “There’s this pattern that emerges that the New York Fed, for a variety of reasons including not causing nervousness about who was an AIG counterparty, covered up its rather heavy-handed approach to the bailout.”

Absolutely sickening--read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy Geithner

0 Comments
Posted January 22, 2010 at 5:41 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

A professor at Columbia University, Mr. Stiglitz uses his experience teaching to give the lay reader a lucid account of how overleveraged banks, a shoddy mortgage industry, predatory lending and unregulated trading contributed to the meltdown, and how, in his opinion, ill-conceived rescue efforts may have halted the freefall but have failed to grapple with more fundamental problems.

He is eloquent on how the American economy was sustained before the crisis by “a debt-financed consumption binge supported by a housing bubble” and impassioned in describing what he sees as the government’s failure to make substantial reforms to the economic system: though “excesses of leverage will be curbed,” he writes, “the too-big-to-fail banks will be allowed to continue much as before, over-the-counter derivatives that cost taxpayers so much will continue almost unabated, and finance executives will continue to receive outsized bonuses.” In each case, he writes, “something cosmetic will be done, but it will fall far short of what is needed.”

Read it all.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted January 19, 2010 at 12:18 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Geithner defended the fee against criticism from some bank officials, who say it is about politics and not economics. Those critics note that some institutions that paid back Troubled Asset Relief Program money — or never took any — will be taxed along with other banks.

"We're doing what is fair, and what is just, and what is economically sensible and what we have a legal obligation to do, which is to make sure that we hold the American people harmless from the cost of the financial crisis and that we collect back from the financial industry that benefited from the financial rescue the ultimate costs of what it took to solve this crisis," Geithner says. "That's the sensible, fair thing to do."

Geithner says the program was designed to apply to the largest financial institutions that benefited the most from the rescue.

Read or listen to it all.

Filed under: * Economics, PoliticsEconomyStock MarketTaxesThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted January 15, 2010 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Sen. Bob Corker (R-Tenn.) — a member of the Senate Banking Committee — sent a letter to Treasury Secretary Tim Geithner Monday with a list of questions regarding what the Republican called a "blank check" to Fannie Mae and Freddie Mac.

In the letter, Corker criticized the Treasury's removal of a cap on credit available to the two government-backed firms that were in at the nexus of the mortgage crisis.

“On Dec. 24, 2009, the United States Department of the Treasury announced amendments to the Preferred Stock Purchase Agreements it has with the government-sponsored enterprises Fannie Mae and Freddie Mac. Those amendments removed the $200 billion per enterprise cap ($400 billion total) and, in effect, wrote a blank check for the amount of 'credit' that will be made available to the two mortgage giants,” the letter reads.

Read it all.


Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralSenate

4 Comments
Posted January 12, 2010 at 8:52 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That’s largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets.

For all the panic last year, asset values never quite reached the lows that marked other bear-market bottoms, and now the rally has made several markets look pricey again. In the American housing market, where the crisis started, homes are priced at around fair value on the basis of rental yields, but they are overvalued by almost 30% in Britain and by 50% in Australia, Hong Kong and Spain.

Stockmarkets are still shy of their record peaks in most countries. The American market is around 25% below the level it reached in 2007. But it is still nearly 50% overvalued on the best long-term measure, which adjusts profits to allow for the economic cycle, and is on a par with two of the four great valuation peaks in the 20th century, in 1901 and 1966.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyStock MarketThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in General

0 Comments
Posted January 10, 2010 at 2:05 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

Read it all.


Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyCorporations/Corporate LifeThe Banking System/SectorThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in General* TheologyEthics / Moral Theology

0 Comments
Posted January 8, 2010 at 7:11 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Happy New Year, readers, but before we get on with the debates of 2010, there's still some ugly 2009 business to report: To wit, the Treasury's Christmas Eve taxpayer massacre lifting the $400 billion cap on potential losses for Fannie Mae and Freddie Mac as well as the limits on what the failed companies can borrow.

The Treasury is hoping no one notices, and no wonder. Taxpayers are continuing to buy senior preferred stock in the two firms to cover their growing losses—a combined $111 billion so far. When Treasury first bailed them out in September 2008, Congress put a $200 billion limit ($100 billion each) on federal assistance. Last year, the Treasury raised the potential commitment to $400 billion. Now the limit on taxpayer exposure is, well, who knows?

The firms have made clear that they may only be able to pay the preferred dividends they owe taxpayers by borrowing still more money . . . from taxpayers. Said Fannie Mae in its most recent quarterly report: "We expect that, for the foreseeable future, the earnings of the company, if any, will not be sufficient to pay the dividends on the senior preferred stock. As a result, future dividend payments will be effectively funded from equity drawn from the Treasury."

The loss cap is being lifted because the government has directed both companies to pursue money-losing strategies by modifying mortgages to prevent foreclosures.

Read it all and there is more from John Huffman here.


Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeHousing/Real Estate MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetTreasury Secretary Timothy Geithner

4 Comments
Posted January 5, 2010 at 12:14 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Unfortunately, growth caused by an inventory bounce is a one-shot affair unless underlying sources of demand, such as consumer spending and long-term investment, pick up.

Which brings us to the still grim fundamentals of the economic situation.

During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.

What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.

Can exports come to the rescue? For a while, a falling U.S. trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.

Read it all.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted January 5, 2010 at 5:25 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Geithner said some of the signs that confidence is returning in the fourth quarter include consumers spending more, businesses investing again, stronger exports and a more stable housing market.

"These things all help — they all make a big difference," Geithner said. "But we were in a very deep hole, and it's going to take a long time to repair the damage done to confidence."

Geithner said it's important that the administration continue to work with Congress to pass financial reform legislation that can "prevent the next crisis" and build a "more stable financial system."

"But right now, the real risk we face is that banks are not lending enough and not going to provide the capital businesses need to grow for the economy to strengthen going forward," he said.

Read or listen to it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

3 Comments
Posted December 23, 2009 at 8:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Major procedural reforms will be needed as well. One essential step is the implementation of "pay-as-you-go" rules, which require that all increases in spending or tax cuts be financed by savings elsewhere in the budget. The statutory creation of a "fiscal future commission"—modeled on the Defense Base Closure and Realignment Commission, a federal body whose recommendations are subject to an up-or-down vote in Congress—could represent a major breakthrough. It might even be time to reconsider passing a balanced-budget amendment to the US Constitution, a provision that exists in nearly all US states and is now being pursued in a somewhat analogous form by the European Union. Whatever the specific policy approach, the underlying objective should be to create a system that will achieve a balanced budget over the course of the economic cycle.

A responsible fiscal policy would permit the Federal Reserve to run a relatively easy monetary policy, which would hold down interest rates and prevent overvaluation of the dollar. If the Obama administration is looking for a historical model, it should aim to replicate the Clinton-Greenspan policy of the late 1990s (a mix of budget surpluses and low interest rates) rather than the Reagan-Volcker policy of the early 1980s (a mix of large deficits and high interest rates).

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted December 17, 2009 at 12:27 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Treasury Secretary Timothy Geithner said any tax on financial transactions would have to be designed to ensure taxpayers don’t ultimately bear the burden, criteria he said no current plan meets.

“I have not seen the version of that that I think works,” Geithner said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Otherwise people would have done this a long time ago.”

Read it all.

Filed under: * Economics, PoliticsEconomyLabor/Labor Unions/Labor MarketTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetTreasury Secretary Timothy Geithner

3 Comments
Posted December 4, 2009 at 4:12 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In an interview on the FOX Business Network, Geithner said the U.S. government stands to profit from many of the rescue deals made to big banks a year ago at the height of the financial crisis.

Later in the interview, Geithner told Liz Claman he does not support a tax on stock trades.

On a transaction tax proposal that has been kicked around in Congress as a way to generate much-needed revenue, Geithner said, “I don't think that specific thing is the way to go.”

Asked about the recent decline in the value of the dollar against other global currencies, Geithner declined to point to a specific value at which point the Treasury Department might grow concerned.

Read it all and the full video of the interview is there.

Filed under: * Economics, PoliticsEconomyStock MarketTaxesThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy Geithner

0 Comments
Posted December 3, 2009 at 7:52 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The animus towards the Fed is striking, considering that its unprecedented market interventions almost certainly averted a financial meltdown last year and a far more severe recession. But many congressmen care less about the disaster avoided than the injustice of bailed-out bankers taking home record bonuses as unemployment keeps rising. The Fed is now guilty by association, seen as too close to banks, too quick to bail them out and too generous and secretive when it does so. The Fed’s structure supplies fodder for this critique. The compromise that led to its creation in 1913 split responsibility for monetary policy between politically-appointed governors in Washington, dc, and the presidents of 12 regional banks, whose boards are appointed in part by private bankers.

Read it all.

Filed under: * Culture-WatchLaw & Legal Issues* Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesSenate

1 Comments
Posted November 29, 2009 at 4:28 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For the investor (the person who risks the capital to create real live self-sustaining jobs), every investment, whether it results in a profit or not, would be taxed two more times.

What is near certainty is that this bill will succeed at driving traders to international markets that are escaping the stilted centralized economy that DeFazio and Perlmutter feel the need to champion.

It's a given that this misguided vengeance against Wall Street is comfort food for populist legislators, but "Wall Street" isn't stocked exclusively with revolting would-be criminals. It is made up of retirees, small-business owners, entrepreneurs and parents who invest in their kids' college funds. At last count, nearly 50 percent of Americans are, on some level, invested in the stock market.

If one was a hopeless skeptic, he might believe these legislators were trying to undermine private sector growth by re-appropriating wealth in such a ham-handed way. Even reliable liberal Sen.Chuck Schumer said that a Wall Street transaction tax had the potential to "harm economic recovery efforts by deterring capital investment."

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyStock MarketTaxesThe U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

2 Comments
Posted November 27, 2009 at 12:28 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The White House is lukewarm about proposals by congressional Democrats to introduce broad legislation to create jobs, instead favoring targeted measures that would be less likely to inflate the deficit, administration officials said.

There is as yet no agreement within the White House or in Congress on how to try to curb the U.S. jobless rate. But the differences in opinion suggest that rifts could emerge among Democrats as they wrestle with how to beat back the highest unemployment rate in a generation.

The jobless rate, which hit 10.2% in October, has continued to climb despite the implementation of a $787 billion stimulus package in February.

The subheader for the article is: White House Is Unenthusiastic on Legislation That Would Raise Government Debt. To which I respond--good for them. Read it all.

Filed under: * Economics, PoliticsEconomyLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

0 Comments
Posted November 23, 2009 at 6:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

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Watch it all--those of us in parish ministry need to be sensitive to these dynamics and to seek to allow these sentiments to be channeled in constructive and creative ways--KSH.

Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner* International News & CommentaryAmerica/U.S.A.

2 Comments
Posted November 20, 2009 at 7:21 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

House Speaker Nancy Pelosi on Thursday played down the possibility of using a stock trade tax to fund jobs legislation, saying it should only be done in conjunction with other countries.

"It would have to be an international rule," Pelosi (D-Calif.) said at her weekly news conference. She said that she did not want to see trading action move to other countries to avoid such a tax.

She noted, "Other nations have proposed this, and we have been the ones who resisted." But global consensus would be difficult, if not impossible, to reach by Dec. 18, when House leaders want to finish their job-creation bill.

Read it all.

Filed under: * Economics, PoliticsEconomyLabor/Labor Unions/Labor MarketStock MarketTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

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Posted November 19, 2009 at 4:10 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In the department of bad ideas that won't go away, Exhibit A is a global tax on financial transactions. British Prime Minister Gordon Brown mooted the tax last weekend before the G-20 finance ministers in St. Andrews, Scotland, where he was promptly rebuffed by Treasury Secretary Timothy Geithner. "That's not something we're prepared to support," Mr. Geithner said.

But it's easy to see why high-tax countries such as France and Germany relish the idea. Tax competition is a bête noire for the Western European countries whose governments eat up close to half of their economies. The U.K. is back in that club after the post-financial-panic recession lopped 6% off its GDP. Scrambling for revenue—and unwilling to hamstring London markets alone—Mr. Brown is suddenly promoting global tax coordination.

Read it all. I didnt like this editorial because the argument isn't nearly strong enough. The two key points are not made

(1) it will actually NOT raise Government revenues net net so it doesnt do what its advocates say it will (Overall it will actually LOSE tax revenue).
(2) it will have Massive collateral damage that its proponents never talk about.

It is amazing to me that (2) is hardly ever discussed--KSH
.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyStock MarketTaxesThe U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy Geithner* International News & CommentaryAmerica/U.S.A.England / UK

3 Comments
Posted November 13, 2009 at 7:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The fiscal 2009 budget deficit, triple that of 2008, was 10 percent of GDP. Lawrence Lindsey says probable policies will produce deficits of 7 percent of GDP for a decade. Ronald Reagan's worst deficit was 6 percent of GDP and for only one year.

Lindsey -- a former member of the Federal Reserve board of governors and director of George W. Bush's National Economic Council (2001-02) -- says Americans' net worth has dropped at least $13 trillion since the recession began in December 2007. What is to be done?

Americans could suddenly begin saving substantially more, but this would deepen and prolong the recession. Alternatively, America could reflate the value of its assets by printing money. Lindsey says it is already doing that -- printing bonds promiscuously and lending money to banks at negligible rates, money that banks can use to buy the bonds. This sharply increases the money supply, which sets the stage either for inflation -- too much money chasing too few goods -- or for recovery-snuffing higher interest rates to try to prevent inflation. Or for something like Japan's lost decade -- banks pouring money into government bonds rather than the real economy.

America, says Lindsey, will not be Weimar Germany, where hyperinflation caused people to rush to stores with satchels of rapidly depreciating currency. But, he adds, no country has successfully behaved the way the United States is behaving.

Read it all (emphasis mine).

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChinaIndia

1 Comments
Posted November 12, 2009 at 5:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Prime Minister Gordon Brown is pedaling smartly back on his proposal for a financial transactions tax or 'Tobin Tax' after his surprise presentation, delivered at a Group of 20 finance meeting in Scotland, was met with a chorus of criticism over the weekend.

It is believed that Brown's handling of the issue provoked renewed dispute with the Treasury. Chancellor Alistair Darling is said to be frustrated by the prime minister’s promotion of a plan he already knew would be publicly shot down by the US.

The American rejection of the proposal - "A day-by-day financial transactions tax is not something we are prepared to support," said US Treasury Secretary Tim Geithner (above, with Alistair Darling) - was followed by rejections from Canada, Russia, the International Monetary Fund and the European Central Bank.

Read it all.

Filed under: * Economics, PoliticsEconomyG20 Finance and CB Ministers, Saint Andrews, Scotland, November 2009Stock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in General* International News & CommentaryEngland / UK

2 Comments
Posted November 9, 2009 at 7:23 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States and Britain voiced disagreement Saturday over a proposal that would impose a new tax on financial transactions to support future bank rescues.

Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability.

But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions.

What a disappointment Gorden Brown is turning out to be. This is a very bad idea that he has come out behind, and his timing could not be worse. Fortunately, even the Russian finance minister spoke against it. In any event, read it all--KSH.



Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyG20 Finance and CB Ministers, Saint Andrews, Scotland, November 2009Stock MarketTaxesThe U.S. GovernmentTreasury Secretary Timothy Geithner

2 Comments
Posted November 7, 2009 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Take the time to watch it all and take special note of who the key characters are.

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyCredit MarketsStock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in General

7 Comments
Posted November 2, 2009 at 8:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Small-business owners are more concerned about the administration’s emerging $1 trillion healthcare plan, which will drive up their costs, and with the new taxes that are aimed squarely at the income groups into which owners of small firms generally fall. So they won’t expand or hire.

Which is why the White House is so unhappy. The only indicator that matters to the president is jobs, jobs, jobs, about which he quizzes his staff every day. That’s another way of saying votes, votes, votes. The latest polls show that the portion of Americans approving Obama’s handling of the economy has dropped from 58% to 50% in the past six months, approval of his handling of the deficit is down from 49% to 40% and that 67% believe it is “not possible” that his healthcare plan will not add to the deficit. Nevertheless, the president remains personally popular. He would like to keep it that way and is considering a programme that would give tax credits to employers who add to their workforces.

Consumers are the third unhappy group, completing the gloomy business-political-consumer troika.

Read it all.

Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyCorporations/Corporate LifeLabor/Labor Unions/Labor MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.

2 Comments
Posted November 1, 2009 at 1:32 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

For the past eight years, the dollar has increasingly become less revered. Its value has been volatile. As the rest of the world saw the United States struggling with a failing war and soaring budget deficits, many who had large dollar holdings began to reduce those reserves (or increase them less than they otherwise would have). All this put downward pressure on the dollar. And thus began the first signs of a vicious circle. The strength of the dollar is becoming riskier and riskier. The growing U.S. deficit and the ballooning of the Federal Reserve’s balance sheets leave many worried that in their wake will come inflation, undermining the long-term attractiveness of the U.S. currency.

In this article, I try to explain why the dollar is in trouble, but ask—should we care? What are the consequences?

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

23 Comments
Posted October 29, 2009 at 12:17 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Yet the urgent problem now isn't TBTF [too big to fail], or even banker bonuses. These are distractions. The urgent problem is the giant riverboat gamble that Washington can save the economy by doing what comes naturally—spending money carelessly, creating massive new entitlements without funding them, dishing out cheap credit to politically favored sectors, telling business people where and how to invest.

Mr. Feinberg is an apt symbol indeed, for this gamble is built on the conceit that Washington can hector the recipients, whether auto companies, banks or homeowners, into behaving in ways that are "responsible." So far, however, human nature is proving a disappointment: Take the outbreak of tax fraud related to the government's emergency home-buyer's credit.

Nor is the larger gamble looking so good either. Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we're there.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted October 28, 2009 at 12:40 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Unfortunately, even if things are improving — and I prefer V for victory to W for worry — the fundamental cause of recent financial problems remains unaddressed. Low interest rates fuelled unsustainable debt. Those low rates were the result of China’s need to make money from the pile of dollars it earns from its exports. It did this by buying Treasury IOUs, keeping their price up and their rates down. China’s exports, in turn, were fuelled by its undervalued currency. That policy remains unchanged. So do trade imbalances. Which means the dollar probably has further to fall if imports to America are to become more expensive, and exports of American products more competitive.

There is no indication that the administration finds a dollar decline undesirable, if it is gradual, despite Geithner’s strong-dollar statement. It is the possibility of a dollar collapse that worries some at the White House. The same fear among investors has triggered a flight to gold. Such a development would force up interest rates, aborting the recovery. Obama has no desire to face the electorate in 2012 with high inflation and interest rates soaring, a real possibility if he adds to the downward pressure on the dollar by increasing the red ink already pouring over the nation’s ledgers, as frightened congressional Democrats are demanding.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChina

0 Comments
Posted October 11, 2009 at 6:45 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The dollar fell to a 14-month low against other currencies Thursday, intensifying a trend that the Obama administration has publicly suggested it opposes -- but which it appears prepared to tolerate quietly.

Many of America's trading partners, however, are pushing the other way. In Asia, traders said central banks in South Korea, Taiwan, the Philippines, Thailand, Indonesia and Hong Kong again intervened to slow the dollar's fall against their currencies.

Asian officials fear that the dollar's fall could crimp their export-driven economies. "The [Thai] baht has appreciated a little too rapidly compared with our fundamentals," said Suchada Kirakul, assistant governor of the Bank of Thailand.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted October 9, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Measured in euros (a more stable ruler than the ever-weakening dollar), U.S. real per capita GDP is down 25% since 2000, while Germany's is up 4% and tops ours.

The solution is a strong U.S. jobs and wealth program. It has to include stable money, a flatter, more competitive tax structure, spending restraint, and common-sense bank regulation so small business lending can restart. Treasury has to rapidly lengthen the maturity of the national debt and take steps to protect the Fed from market losses on its long-term debt holdings.

Instead, Washington's current economic program pushes capital away by weakening the dollar, threatening higher tax rates, borrowing short (the Fed's near trillion-dollar overnight debt, Treasury's mounds of bill and note issuance) to lend long (mortgages, student loans, entitlements), doubling down on government subsidies, and rechanneling bank loans to governments and big businesses instead of the small business job-growth engine.

Read it carefully and read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted October 8, 2009 at 9:01 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

First, consumer indebtedness is still too high relative to income expectations and credit availability, particularly in the US and the UK. This inconsistency will hold back any sustainable bounce in the most important component of aggregate demand.

Second, some banks’ balance sheets are still too geared for the comfort of regulators or their own managers. This will inhibit them from lending to the real economy at a time when certain sectors (such as commercial real estate, but also residential housing) still require significant refinancing, and when consumers need time to work down their excessive debt loads.

Third, unemployment has risen well beyond expectations, and is likely to prove unusually protracted. It will take years for US unemployment to return to its natural rate, even after the natural rate shifted upwards. This will dampen the recovery of consumption and investment, stress social contracts that assume flexible labour markets, and endanger political support for essential structural reforms.

Finally, public debt has grown so rapidly as to spark concerns about future debt dynamics....

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyCorporations/Corporate LifeHousing/Real Estate MarketLabor/Labor Unions/Labor MarketStock MarketThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted October 1, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

One year after the demise of Lehman Brothers Holdings Inc. paralyzed the financial system, “mega-banks,” as Fine’s group calls them, are as interconnected and inscrutable as ever. The Obama administration’s plan for a regulatory overhaul wouldn’t force them to shrink or simplify their structure.

“We could have another Lehman Monday,” Niall Ferguson, author of the 2008 book “The Ascent of Money” and a professor of history at Harvard University in Cambridge, Massachusetts, said in an interview. “The system is essentially unchanged, except that post-Lehman, the survivors have ‘too big to fail’ tattooed on their chests.”

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted September 12, 2009 at 1:28 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Barack Obama is committing the same mistakes made by policymakers during the Great Depression, according to a new study endorsed by Nobel laureate James Buchanan.

His policies even have the potential to consign the US to a similar fate as Argentina, which suffered a painful and humiliating slide from first to Third World status last century, the paper says.

There are "troubling similarities" between the US President's actions since taking office and those which in the 1930s sent the US and much of the world spiralling into the worst economic collapse in recorded history, says the new pamphlet, published by the Institute of Economic Affairs.

In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House's plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run. They say that by employing deficit spending and increased state intervention President Obama will ultimately hamper the long-term growth potential of the US economy and may risk delaying full economic recovery by several years.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

8 Comments
Posted September 7, 2009 at 10:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

"The dominant public policy imperative motivating reform is to address the moral hazard risk created by what we did, what we had to do in the crisis to save the economy," Treasury Secretary Timothy F. Geithner said in an interview.

The worry for consumers is that the bailouts skewed the financial industry in favor of the big and powerful. Fresh data from the FDIC show that big banks have the ability to borrow more cheaply than their peers because creditors assume these large companies are not at risk of failing. That imbalance could eventually squeeze out smaller competitors. Already, consumers are seeing fewer choices and higher prices for financial services, some senior government officials warn.

Those mergers were largely the government's making. Regulators pushed failing mortgage lenders and Wall Street firms into the arms of even bigger banks and handed out billions of dollars to ensure that the deals would go through. They say they reluctantly arranged the marriages. Their aim was to dull the shock caused by collapses and prevent confidence in the U.S. financial system from crumbling.

Officials waived long-standing regulations to make the deals work. J.P. Morgan Chase, Bank of America and Wells Fargo were each allowed to hold more than 10 percent of the nation's deposits despite a rule barring such a practice. In several metropolitan regions, these banks were permitted to take market share beyond what the Department of Justice's antitrust guidelines typically allow, Federal Reserve documents show.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

23 Comments
Posted August 29, 2009 at 8:28 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.

To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out.

An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money....

Read it all.

Filed under: * Economics, PoliticsEconomyTaxesThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

6 Comments
Posted August 19, 2009 at 9:09 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.

A Treasury spokeswoman declined to comment on the letter.

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentThe National DeficitTreasury Secretary Timothy Geithner

22 Comments
Posted August 8, 2009 at 1:04 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In concrete terms, the difference between the situation that the Obama advisers predicted and the one that has come to pass is about 2.5 million jobs. It’s as if every worker in the city of Los Angeles received an unexpected layoff notice.

Read it carefully and read it all.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketLabor/Labor Unions/Labor MarketPersonal FinanceThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

21 Comments
Posted July 2, 2009 at 8:52 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

He discusses the Obama administration's fiscal policy, the U.S. government's debt and proposed changes to the financial regulatory system.

I happened to catch this yesterday morning. Note especially the concern about the mounting national debt and the mention of the historical parallels with the 1930's (he sees significant discontinuities there). Watch it all (a little over 10 1/2 minutes).

Filed under: * Culture-WatchHistory* Economics, PoliticsEconomyCredit MarketsThe U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted July 2, 2009 at 6:48 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Watch it all.

(Some biographical information on Bill Cohan may be found here).

The most important section begins at 4:12 and thereafter. He places the real core blame at the culture of Wall Street currently and the compensation system where the top traders do not have their own skin in the game.

Filed under: * Economics, PoliticsEconomyStock MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted June 18, 2009 at 12:30 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Not since the second world war have so many governments borrowed so much so quickly or, collectively, been so heavily in hock. And today’s debt surge, unlike the wartime one, will not be temporary. Even after the recession ends few rich countries will be running budgets tight enough to stop their debt from rising further. Worse, today’s borrowing binge is taking place just before a slow-motion budget-bust caused by the pension and health-care costs of a greying population. By 2050 a third of the rich world’s population will be over 60. The demographic bill is likely to be ten times bigger than the fiscal cost of the financial crisis.

Will they default, inflate or manage their way out?

This alarming trajectory puts policymakers in an increasingly tricky bind. In the short term government borrowing is an essential antidote to the slump. Without bank bail-outs the financial crash would have been even more of a catastrophe. Without stimulus the global recession would be deeper and longer—and it is a prolonged downturn that does the greatest damage to public finances. But in the long run today’s fiscal laxity is unsustainable. Governments’ thirst for funds will eventually crowd out private investment and reduce economic growth. More alarming, the scale of the coming indebtedness might ultimately induce governments to default or to cut the real cost of their debt through high inflation.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

4 Comments
Posted June 14, 2009 at 4:10 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Despite a slow start, the program could soon expand broadly. Next week, the Fed will add commercial real estate mortgages — a vast market — to the list of loans it will buy. Eventually, officials say, the TALF program could provide as much as $1 trillion in financing.

Fed officials say they, too, are uncomfortable with their new role and hope to end it as soon as credit markets return to normal. When R.V. manufacturers recently sought a meeting, senior Fed staff members refused to see them in person and instead heard their pleas in a conference call.

The central bank is increasingly having to make politically sensitive choices. For example, it is weighing whether loans to people who buy speedboats and snowmobiles are as worthy of help as those to people who buy cars. And it is being besieged by arguments from R.V. manufacturers and strip-mall developers that they play a crucial role in the economy and also deserve help.

Many of the decisions could have political repercussions. On Feb. 9, President Obama traveled to Elkhart, Ind., a Republican stronghold that Democrats hope to convert to their column. Elkhart is also home to much of the R.V. industry, which has been battered by the recession.

Count me among the deeply uncomfortable. Speedboats? This is nuts. Read it all--KSH.

Filed under: * Economics, PoliticsEconomyThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentFederal ReserveThe National DeficitTreasury Secretary Timothy Geithner

2 Comments
Posted June 13, 2009 at 4:04 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

President Obama was getting his daily economic briefing one recent morning when a fly distracted him. The president swatted and missed, just as the pest buzzed near the shoes of Lawrence H. Summers, the chief White House economic adviser. “Couldn’t you aim a little higher?” deadpanned Christina D. Romer, the chairwoman of the Council of Economic Advisers.

Mrs. Romer was joking, she said in an interview, adding, “There are only a few times that I felt like smacking Larry.” Yet few laughed in the president’s presence.

If the Oval Office incident was meant as a lighthearted moment, it also exposed the underlying tensions that have gripped Mr. Obama’s economic advisers as they have struggled with the gravest financial crisis since the Depression, according to several dozen interviews with administration officials and others familiar with the internal debates.

Read it all.

Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentFederal ReserveTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

7 Comments
Posted June 8, 2009 at 11:04 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?

Not a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis. Both Mr. Fuld and Alan Schwartz, the chief executive of Bear Stearns at the end, in their Congressional testimony blamed the proverbial once-in-a-century financial tsunami. Do they or any of their peers really think this is true?

There may be a way to find out. There is much talk nowadays coming from top bankers — Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorganChase, John Mack of Morgan Stanley and even Ken Lewis of Bank of America — about seeing how quickly they can repay to the Treasury the TARP money Mr. Paulson forced on them. One precondition of their being allowed to repay the funds should be a requirement that each gives a public deposition and explains, under oath, what truly happened and why.

This piece was given an astonishing full page on yesterday's New York Times op-ed page. Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted June 8, 2009 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the United States needed to develop a plan to restore fiscal balance, even as the government builds huge budget deficits as it tries to spend its way out of the worst economic crisis since the Great Depression.

In remarks to the House Budget Committee, Mr. Bernanke said that the government must address the immediate problems of a crippling recession that has erased trillions of dollars in household wealth, hobbled investment portfolios and raised unemployment to its highest levels in a generation. Still, he said, the government needs to think about putting its fiscal house back in order.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” he said.

Read it all.

Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentBudgetFederal ReserveThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

8 Comments
Posted June 4, 2009 at 12:10 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Such government micromanagement of the economy is everywhere. The Post recently reported that Richard Wagoner, the former CEO of General Motors who was removed by the government, remains on GM's payroll "because senior Treasury officials have yet to decide whether he should get the $20 million severance package that the company had promised him." His 2009 compensation -- $1 -- is payable Dec. 31. The $20 million promised to him includes contractual awards, deferred compensation and pension benefits accrued over 32 years with the company. Promise-keeping, including honoring contracts, is the default position of a lawful society. But suddenly, many citizens' legal claims are merely starting points for negotiations with an overbearing government.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

10 Comments
Posted June 2, 2009 at 4:16 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.”

Read it carefully and read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAsiaChina

6 Comments
Posted June 2, 2009 at 7:19 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Two weeks ago, the U.S. Treasury released additional details (link opens .pdf) about the homeowner bailout, or in Washington-speak the "Making Home Affordable" program. Part of those details included some new ways for homeowners to avoid foreclosure. I thought the far more fascinating part, however, was the so-called "Home Price Decline Protection Incentives" (HPDP). It's the most interesting part of the homeowner bailout that you probably haven't heard about. I have been fascinated with the HPDP since the bailout was announced in February, and now we finally have some detail to dig into.


For some strange reason, virtually no one is talking about the HPDP. I haven't seen a single article on it. Here's how the new fact sheet describes it:

This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.


All of the initiatives within the homeowner bailout have attempted to stabilize the housing market. But this is the only one that provides a sort of insurance to investors if home prices continue to decline. In February I remarked that it seemed like the housing bailout included everything but the kitchen sink. I was wrong: this is the kitchen sink.

Read it all.

Filed under: * Economics, PoliticsEconomyHousing/Real Estate MarketThe 2009 Obama Administration Housing Amelioration PlanThe U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted May 31, 2009 at 3:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession.

Treasury yields leapt again yesterday at the long end, with the 10-year note climbing above 3.7%, its highest close since November. Treasury yields had stayed low, and the dollar had remained strong, as long as investors were looking for the safest financial port amid the post-September panic. But as risk aversion subsides, and investors return to corporate bonds and other assets, investors are now calculating the risks of renewed dollar inflation.

They have cause to be worried, given Washington's astonishing bet on fiscal and monetary reflation. The Obama Administration's epic spending spree means the Treasury will have to float trillions of dollars in new debt in the next two or three years alone....

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted May 29, 2009 at 12:02 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

[BARRY] RITHOLTZ: Most of Wall Street is furious at what happened. Most of Wall Street aren't involved in mortgage securitization or derivatives or any of the other bad assets that have been blowing up. The average guy -- you know Wall Street is a meritocracy, eat what you kill, as much as you can earn in profits you get to take as a bonus -- and I know a lot of guys, everywhere from Merrill Lynch to Bear Stearns to Lehman, that actually were really profitable. But because this one division was run by rogue pirate traders and reckless derivatives salesmen, they wiped up the entire bonus pool for the entire firm, and then some, all the while engaging in really reckless behavior.

[Kai] Ryssdal: Do you figure we're stuck now as a bailout nation? We're going to be subsidizing banks and car companies and insurance companies for some time to come.

RITHOLTZ: You know we've already seen the trucking industry make hints they want stuff. And we've seen the homebuilders who are key players in this, who just overbuilt everything. They've been asking for a bailout. That's the slippery slope. Once you reward people for their worst behavior, for speculative, irresponsible investing and punish the prudent and the people who are careful with that money. Everybody seems to think it's a free for all. Hey, you've got yours. How do I get mine?

Ryssdal: What's the alternative to these bailouts? I mean should we have just done nothing?

RITHOLTZ: What you do is what the FDIC does when a bank is found to be insolvent. Look what happened with Washington Mutual....

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted May 28, 2009 at 12:52 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

It has been widely reported that Treasury Secretary Hank Paulson and Fed chief Ben Bernanke summoned the CEOs of America's nine largest financial institutions to a meeting on October 13, 2008, at which they were told that their banks would be required to accept TARP money and give the federal government an ownership interest in their institutions, whether they wanted to do so or not. We have it on good authority that some of the bankers, at least, were told that they would not be allowed to leave the room until they signed documents that were presented to them at that meeting.

These chilling reports have now been confirmed by Treasury documents that were obtained by Judicial Watch through a FOIA request. These were Paulson and Bernanke's "talking points" for the meeting....

Read it all.

Filed under: * Economics, PoliticsEconomyThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentBudgetTreasury Secretary Timothy Geithner

11 Comments
Posted May 14, 2009 at 5:31 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The California state treasurer called Wednesday on U.S. Treasury Secretary Timothy Geithner to extend debt guarantees through the Troubled Asset Relief Program to financially strapped states and local governments facing declining revenues.

Read it all.

Filed under: * Economics, PoliticsEconomyThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackageThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralState Government

17 Comments
Posted May 14, 2009 at 12:07 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.

This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable. A system where the dollar was the major global currency allowed us to prolong reckless borrowing.

Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.

Read it all.

Filed under: * Culture-WatchGlobalization* Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentBudgetThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama* International News & CommentaryAmerica/U.S.A.AsiaChina

2 Comments
Posted May 14, 2009 at 6:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation's biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining.

In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits.

The overall reaction to the stress tests, announced Thursday, has been generally positive. But the haggling between the government and the banks shows the sometimes-tense nature of the negotiations that occurred before the final results were made public.

I remain uncomfortable with it all. Read the whole article--KSH.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

2 Comments
Posted May 9, 2009 at 2:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

At one bank in Alabama, the problem is a construction bust. At two in Ohio, the trouble is real estate. And in San Francisco, at Wells Fargo, the worry is credit cards — a staggering 26 percent of that bank’s card loans, federal regulators have concluded, might go bad if the economy takes a turn for the worse.

The stress tests released by the Obama administration Thursday painted a broad montage of the troubles in the nation’s banking industry and, for the first time, drew a stark dividing line through the new landscape of American finance.

On one side are institutions like JPMorgan Chase and Goldman Sachs, which regulators deemed stronger than their peers — perhaps strong enough to repay billions of bailout dollars and wriggle free of government control.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted May 8, 2009 at 8:20 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The relatively modest size of the hole discovered by regulators carrying out the tests, which were based on an "adverse" economic scenario, led to both applause from investors who believe the worst is over and skepticism among those who think the examination wasn't rigorous enough.

"The fears of nationalization or of failure have more or less disappeared, and now what we're getting is details of how banks are going to fill in their capital deficiencies," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago.

The doubters believe the banks will need much more of a capital cushion than stipulated by the regulators, as the U.S. jobless rate soars and the housing market and economy takes time to pull out of a funk, driving up credit losses.

"I'm a skeptic. I don't see this as a genuine audit. They have been playing the marketing game strongly lately," said Robert Andres, president of Andres Capital Management in Philadelphia.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

2 Comments
Posted May 8, 2009 at 6:19 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

6 The administration seems to bounce back and forth between emphasizing building a strong capital base and helping BHC[Bank Holding Company]'s get rid of toxic assets. I think the capital cushion is more important.
7 $34 B more for Bank of America is a big number.
8 I continue to be confused about why the administration is so confident they will not need to ask Congress for more TARP money, especially if they intend to use a lot of cash to prevent GM from liquidating.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted May 8, 2009 at 5:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The habit of assessing a president's accomplishments after his first 100 days in office goes back to the first administration of Franklin D. Roosevelt. In his first 100 days, Roosevelt laid the foundations for the New Deal. It's an impossible standard to meet, says former Federal Reserve vice chairman Alan Blinder.

"I often say that Roosevelt cursed future presidents with the 100 days concept. ... It's just too short," Blinder says.

In normal times, new presidents can't hope to match Roosevelt's accomplishments. In that regard, Obama has an advantage. These aren't normal times. In fact, they're the most challenging economic times since the Great Depression. So challenging, says Douglas Holtz-Eakin, John McCain's former top economic adviser, that Obama began to influence economic policy even before he was inaugurated.

"This is the longest first hundred days, at least in my lifetime," Holtz-Eakin says. "President Obama actually became the leader right after his election."

Read it all.

Filed under: * Economics, PoliticsEconomyThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

1 Comments
Posted April 27, 2009 at 9:07 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The U.S. Treasury and financial regulators are clashing with each other over how to disclose results from the stress tests of 19 U.S. banks, with some officials concerned at potential damage to weaker institutions.

With a May 4 deadline approaching, there is no set plan for how much information to release, how to categorize the results or who should make the announcements, people familiar with the matter said. While the Office of the Comptroller of the Currency and other regulators want few details about the assessments to be publicized, the Treasury is pushing for broader disclosure.

The disarray highlights what threatens to be a lose-lose situation for Treasury Secretary Timothy Geithner: If all the banks pass, the tests’ credibility will be questioned, and if some banks get failing grades and are forced to accept more government capital and oversight, they may be punished by investors and customers.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted April 19, 2009 at 6:05 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

As a Peruvian educated by British and American teachers, I learned never to embark on a major task without first "doing the math." No more of that Latino "happy go lucky, trust your gut and say three Hail Marys" approach to life.

Without measurement, my teachers advised, I wouldn't be able to identify and disentangle the very reality before my eyes. By doing the math, I would see order and coherence, the way things were organized; invisible relationships would come into view, and right behind order would come meaning, followed by confidence. Thanks to my Anglo-Saxon education, I learned the lesson: You cannot manage what you have not previously measured.

So imagine how I have felt watching my role models go to war over weapons of mass destruction that they never actually assessed, or now, watching them wage a losing war against derivatives....

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

8 Comments
Posted April 13, 2009 at 9:34 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

During World War I, Americans were exhorted to buy Liberty Bonds to help their soldiers on the front.

Now, it seems, they will be asked to come to the aid of their banks — with the added inducement of possibly making some money for themselves.

As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted April 9, 2009 at 7:30 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

The pricing of the toxic assets of the banks is in line with the pricing of other risky assets. There is no evidence that prices of credit instruments are now reflecting fire sales or distress selling. The evidence, if anything, suggests that the prices are actually on the high side. This means that the liquidity rationale of the Keynesians has no basis in fact.

The findings are sure to be contested in the literature, as most research is. In the end, they will prove robust. They will hold up.

The debate on bank bailouts is broader than economics. It goes to a question of justice. Should one group, taxpayers, be forced to pay for the mistakes of another group, bankers? It goes to a question of freedom versus socialism and fascism. Should banks operate in a profit and loss system and bear the losses that they incur, or should they not, in which case the financial system becomes more socialist and fascist? Even before addressing these questions, if the Keynesian policy does not do what it is claimed, then in economic terms the Keynesian case falls.

The government and FED claim that the financial system lacks liquidity. They say that there is a market pricing defect or failure. This, they say, is why the bad loans (toxic assets) held by the banks are worth more than the prices that they are fetching in the market. These prices, they claim, are fire sale prices. The remedy, they call for and implement, is for the Treasury and FED to supply the banks with liquidity, i.e., bail them out. Thus, the government and the FED are directing trillions of taxpayer dollars to shore up weak banks by buying their bad loans rather than overseeing a judicial-like process of re-organizing the banks and cleaning out these loans in established bankruptcy-like procedures.

The Austrian position is that the financial system does not lack liquidity. The bad loans were overpriced to begin with, largely because the FED and government engineered a speculative bubble. The bubble burst. The loans were repriced in the market. The loans are now worth what they are bringing in the market. Thus, the government has no liquidity justification for bailing out the banks. The government’s economic rationale has no merit. Many banks are insolvent. On the economic merits, they should be allowed to fail, not bailed out.

This may seem arcane but it really does matter. Read it all--KSH.

Filed under: * Economics, PoliticsEconomyCredit MarketsHousing/Real Estate MarketThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

5 Comments
Posted April 7, 2009 at 5:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Mr. Obama is betting that the totality of economic policies his team and the Federal Reserve have put in place will act, like radiation therapy, to halt the spread and reduce the size of the cancerous tumors eating away at our financial system — and stimulate enough new growth and optimism so that Phase II will be small enough to get past Congress and the public.

As Treasury Secretary Timothy Geithner told ABC News, “If we get to that point” — where more funds are needed — “we’ll go to the Congress and make the strongest case possible and help them understand why this will be cheaper over the long run to move aggressively.”

Have no doubt, Phase II is coming. At best, it will require hundreds of billions of dollars more, at worst more than a trillion, to deal with more bad loans and toxic assets weakening the economy — problems that Phase I can’t fully absorb. Because unemployment is still rising — ensuring that the initial spate of mortgage defaults, which came from loans to people who could never repay, will be followed by another spate of defaults from those who could repay but now can’t because the deteriorating economy has stripped them of their jobs, their businesses or their credit lines.

Read it all.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetFederal ReserveThe National DeficitTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

3 Comments
Posted April 6, 2009 at 5:00 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Listen to it all from NPR. Note especially what he says about the so-called "Geithner plan" to rescue the banks. At some point it is going to dawn on more people that significant questions need to be asked about this plan and whether it is the right approach, since so many thoughtful industry participants and observers do not think so. But maybe that is just yours truly, since I am worried about the plan--KSH

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

2 Comments
Posted April 4, 2009 at 2:16 pm [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

In September 2005, Timothy Geithner made one of his most visible moves as a supervisor of the U.S. banking system. He summoned the nation's top financial firms and their regulators to streamline an antiquated system that threatened Wall Street's boom.

Billions of dollars worth of financial instruments known as credit derivatives were being traded daily, as banks and investors worldwide tried to protect against losses on increasingly complex and risky financial bets. But the buying and selling of these exotic instruments was stuck in a pencil-and-paper era. Geithner, then head of the Federal Reserve Bank of New York, pressed 14 major financial firms to build an electronic network that would cut backlogs and make the market easier to monitor.

Geithner's summit, held at the New York Fed's fortress-like headquarters near Wall Street, was a success. By fall 2006, the new system had all but eliminated the logjam, helping derivatives trade more efficiently. One financial industry newsletter honored Geithner as part of a "Dream Team" for his leadership of the effort.

Read it all.

Filed under: * Economics, PoliticsEconomyThe U.S. GovernmentTreasury Secretary Timothy Geithner

0 Comments
Posted April 3, 2009 at 7:00 am [Printer Friendly] [Print w/ comments]

Posted by Kendall Harmon

Check it out.

Filed under: * Economics, PoliticsEconomyThe 2009 Obama Administration Bank Bailout PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The U.S. GovernmentTreasury Secretary Timothy Geithner

2 Comments
Posted April 1, 2009 at 7:46 am [Printer Friendly] [Print w/ comments]




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