konane's Blog

"Today, the SEC charged giant investment bank Goldman Sachs with more than $1 billion worth of securities fraud for its dealings in the subprime mortgage market.

Ironically, at the same time the SEC is seeking justice for Goldman’s alleged victims, President Obama and Senate Banking Committee Chairman Chris Dodd (D-Conn.) are pushing a bill would reward the firm with potentially billions of dollars by instituting a so-called “resolution authority” that would, in practice, be a permanent bailout fund.

Supporters of Dodd’s bill maintain that it does not create bailouts because the failing firm’s shareholders would be wiped out and its managers would be fired. But what they don’t say is that the money from the $50 billion resolution fund would be used to frequently give creditors of this firm a better deal than they would have in bankruptcy.

Recall that during the financial implosion of late 2008, Goldman was not bailed out directly by taxpayers, but instead received tax dollars as a creditor of AIG. Goldman received $12.9 billion in the “backdoor bailout” of AIG because of the credit default swaps it owned that AIG had insured. Goldman and other of AIG’s counterparties were paid by the government 100 cents on the dollar in this bailout, whereas creditors in bankruptcy court often get less than 50 cents on the dollar.

So as American Enterprise Institute scholar and Financial Crisis Inquiry Commission member Peter Wallison puts it: “That act—paying off the creditors when the government takes over a failing firm—is a bailout. It doesn’t matter that the management lose their jobs, or that the shareholders get nothing. When the creditors are aware that they will get a better deal with the failure of a large company than they will get with a small one that goes the ordinary route to bankruptcy, that is a bailout.”

To top it off, the fees for the Dodd bill’s resolution fund that would pay off a failing firm’s creditors would come not just from banks but from a broad array of Main Street businesses. Stable life, auto and home insurance companies would have to pay into this fund to subsidize the failure of the next high-roller, and the fees they pay would likely be passed on in the premiums their policy holders pay. And the bill’s definition of  “nonbank financial company” is so broad that it could cover manufacturers only tangentially involved in extending credit, such as those that lease equipment to their customers. This would raise prices and cost Main Street jobs.

All in all, the Goldman indictment should serve as a wakeup call to those who want to ram a bill through Congress without looking at who both its victims and beneficiaries would ultimately be."

http://www.openmarket.org/2010/04/16/obama-dodd-financial-bill-would-futher-enrich-goldman-sachs/

I always appreciate Powerline's sober analysis behind headlines and Clinton's grandstanding.

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Source Powerlinebog.com 

"The fifteenth anniversary of Timothy McVeigh's Oklahoma City bombing has just passed, and the Democrats are seizing every opportunity to wring political advantage out of that sorrowful event. Bill Clinton appeared at a symposium on the bombing sponsored by a left-wing think tank and linked the mad bomber to today's opponents of the Democrats' radical agenda.

Just before the symposium, in an interview with the New York Times, Clinton elaborated on the theme:

"There can be real consequences when what you say animates people who do things you would never do," Mr. Clinton said in an interview, saying that Timothy McVeigh, who carried out the Oklahoma City bombing, and those who assisted him, "were profoundly alienated, disconnected people who bought into this militant antigovernment line." ...

Mr. Clinton pointed to remarks like those made Thursday by Representative Michele Bachmann, the Minnesota Republican, who when speaking at a Tea Party rally in Washington characterized the Obama administration and Democratic Congress as "the gangster government."

"They are not gangsters," Mr. Clinton said. "They were elected. They are not doing anything they were not elected to do."

As hockey fans like to say, that's debatable. It's worth noting, though, that the first person to use the phrase "gangster government" in reference to the Obama administration was not Congresswoman Bachmann, but the most sober of political commentators, Michael Barone. As we noted here, the context was the Chrysler bailout; specifically, the Obama administration's bullying bondholders into giving up their legal rights through threats of federal reprisal. (Nice business you've got here; shame if anything were to happen to it.) That was, as Barone wrote, "an episode of Gangster Government." Sadly, there have been others.

Byron York reminds us that Clinton has been down this path before, in most dishonorable fashion. The Oklahoma City bombing was providential for Clinton. It occurred at the low ebb of his Presidency, just the day after Clinton pathetically told reporters that "the president is still relevant here." When the bombing occurred, Clinton and his aides immediately saw political potential. Pollster Dick Morris went to work, and, as Morris has written, just eight days after the Oklahoma City bombing he gave Clinton a strategy for a political comeback. Here was Morris' agenda for the meeting:

AFTERMATH OF OKLAHOMA CITY BOMBING

A. Temporary gain: boost in ratings -- here today, gone tomorrow

B. More permanent gain: Improvements in character/personality attributes -- remedies weakness, incompetence, ineffectiveness found in recent poll

C. Permanent possible gain: sets up Extremist Issue vs. Republicans

Morris acknowledged one problem: the Republicans were not, in fact, extremists. But that was an obstacle that could be overcome:

Morris told Clinton that "direct accusations" of extremism wouldn't work because the Republicans were not, in fact, extremists. Rather, Morris recommended what he called the "ricochet theory." Clinton would "stimulate national concern over extremism and terror," and then, "when issue is at top of national agenda, suspicion naturally gravitates to Republicans."

It worked:

It was a political strategy crafted while rescue and recovery efforts were still underway in Oklahoma City. And it worked better than Clinton or Morris could have predicted. In the months after the bombing, Clinton regained the upper hand over Republicans, eventually winning battles over issues far removed from the attack. The next year, 1996, he went on to re-election.

Clinton knows how false and dishonorable his charges are. But they worked for him, and he is helping Barack Obama set the stage for a similar political comeback in the event that some violent event might occur; or, perhaps, in the absence of any such event. So far, all of the violence associated with Tea Party or townhall events has been perpetrated by union thugs employed by the Democratic Party, but that hasn't stopped the Democrats from claiming that it is the Republicans who are somehow violence-prone.

Glenn Reynolds draws the proper conclusion--a notably strong condemnation from an observer as balanced and good-humored as Glenn:

[T]his statement serves as a useful reminder to those who have come to think of Clinton as some sort of cuddly, not-so-bad figure. He was a demagogue who would say whatever he thought might work when he was President, and he still is."

http://www.powerlineblog.com/archives/2010/04/026096.php

"The image Microsoft doesn't want you to see: Too tired to stay awake, the Chinese workers earning just 34p an hour

By Liz Hull and Lee Sorrell
Last updated at 12:29 AM on 18th April 2010

Source Dailymail.co.uk

"Showing Chinese sweatshop workers slumped over their desks with exhaustion, it is an image that Microsoft won't want the world to see.

Employed for gruelling 15-hour shifts, in appalling conditions and 86f heat, many fall asleep on their stations during their meagre ten-minute breaks.

For as little as 34p an hour, the men and women work six or seven days a week, making computer mice and web cams for the American multinational computer company. ......"

".......Microsoft is not the only company to outsource manufacturing to KYE, but it accounts for about 30 per cent of the factory's work, the NLC said. Companies such as Hewlett-Packard, Samsung, Foxconn, Acer, Logitech and Asus also use KYE Systems......

http://www.dailymail.co.uk/news/article-1266643/Microsofts-Chinese-workforce-tired-stay-awake.html

Aww, poor thing!    

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The survey of Nevada voters commissioned by the Review-Journal shows Reid getting 37 percent of the vote compared with 47 percent for Republican Sue Lowden, who would win if the election were today, while the slate of third-party and nonpartisan candidates would get slim to no backing. ............"

http://www.lvrj.com/news/poll--reid-loses-full-ballot-test-91015514.html

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"US Senate climate bill to be unveiled April 26 15 Apr 2010 22:04:19 GMT
Source: Reuters
Source Reuters AlertNet
* Backers hope for Senate vote in June or July

* Measure could affect states' climate control activities (Adds reaction from American Petroleum Institute)

By Richard Cowan

"WASHINGTON, April 15 (Reuters) - A long-awaited compromise bill to reduce U.S. emissions of carbon dioxide and other gases blamed for global warming will be unveiled by a group of senators on April 26, sources said on Thursday.

The legislative language to be sketched out in 11 days, according to government and environmental sources, is being drafted by Democratic Senator John Kerry, Republican Senator Lindsey Graham and independent Senator Joseph Lieberman.

Backers of the environmental bill hope the unveiling will pave the way for the full Senate to debate and pass a measure in June or July if the compromise attracts enough support from a group of moderate Republicans and Democrats.

Republican Senator Judd Gregg told Reuters he was "committed to getting something that addresses our energy needs in a constructive and comprehensive way." He added he did not know yet whether he would support the bill being developed.

President Barack Obama has made climate change one of his top priorities and took steps recently to show Republicans he was serious, including expanding federal aid for building nuclear power facilities and allowing more domestic offshore oil drilling -- initiatives to be included in the Senate compromise.

The White House is also eager to show the rest of the world the United States is ready to take a leadership role on global warming, including to help kick-start stalled international efforts to tackle the problem.

Despite vocal climate change skeptics in the United States, leading scientific groups have been hoping the United States, the biggest emitter of greenhouse gases after China, would take action.

The National Oceanic and Atmospheric Administration reported on Thursday the world's combined land and ocean surface temperatures in March were the hottest on record.

Once the senators formally sketch out their bill, Senate Democratic Leader Harry Reid will decide the next steps in a year crowded with competing legislative priorities and congressional elections in November.

The bill could face stiff opposition from lawmakers in states with economies heavily dependent on oil and coal.

Lou Hayden, a policy expert at the American Petroleum Institute, said his group would not support the bill unless it went through an economic analysis by the Energy Information Administration, an independent arm of the Energy Department.

The bill is already slated to be analyzed by the U.S. Environmental Protection Agency and the Congressional Budget Office, which could take more than a month.

BILL MIGHT END STATE/REGIONAL CARBON TRADE PROGRAMS

Kerry, Lieberman and Graham have been working for months on a global warming compromise significantly different from a measure passed last year by the House of Representatives and a bill approved by the Senate Environment and Public Works Committee. It also takes many elements from those bills.

Like the House-passed bill and Obama administration policy, it would set a target of 17 percent reductions in smokestack emissions of carbon dioxide by 2020, from 2005 levels.

Point Carbon, an energy markets consulting service, estimated the anticipated Senate bill would result in U.S. gasoline prices rising an average of 27 cents a gallon from 2013 to 2020. The bill is expected to contain a fee on motor fuels.

On Wednesday, a Senate source told Reuters the legislation would prohibit the Environmental Protection Agency from regulating carbon dioxide emissions. It would also end state and regional carbon-trading programs, such as the one several Northeastern states participate in, to be replaced by a national carbon reduction policy. [N14150360]

The Regional Greenhouse Gas Initiative, with 10 participating states from Vermont to Maryland, has raised over $582 million for state efficiency and climate programs, said Environment Northeast, a Boston research group.

Peter Shattuck, a carbon markets policy analyst there, said shutting the program could create concerns among the states over lost revenues.

A group of nine senators, mostly from Midwestern manufacturing states, urged Kerry, Graham and Lieberman in a letter on Thursday to take into account jobs in their states.

"Without such a plan, we are concerned that the legislation will ultimately be unsuccessful," Ohio Democratic Senator Sherrod Brown and others wrote. (Additional reporting by Timothy Gardner in Washington and Ros Krasny in Boston; Editing by Peter Cooney)" 

http://www.alertnet.org/thenews/newsdesk/N15202117.htm

 Submitted by Tyler Durden on 04/15/2010 13:41 -0500
Source Zero Hedge

"Submitted by Dylan Ratigan

"Lately I have been using the phrase "Corporate Communism" on my television show. I think it is an especially fitting term when discussing the current landscape in both our banking and health care systems.

As Americans, I believe we reject communism because it historically has allowed a tiny group of people to consolidate complete control over national resources (including people), in the process stifling competition, freedom and choice. It leaves its citizens stagnating under the perpetual broken systems with no natural motivation to innovate, improve services or reduce costs.

Lack of choice, lazy, unresponsive customer service, a culture of exploitation and a small powerbase formed by cronyism and nepotism are the hallmarks of a communist system that steals from its citizenry and a major reason why America spent half a century fighting a Cold War with the U.S.S.R.

And yet today we find ourselves as a country in two distinctly different categories: those who are forced to compete tooth and nail each day to provide value to society in return for income for ourselves and our families and those who would instead use our lawmaking apparatus to help themselves to our tax money and/or to protect themselves from true competition.

If you allow weak, outdated players to take control of the government and change the rules so they are protected from the natural competition and reward systems that have created so many innovations in our country, you not only steal from the citizens on behalf of the least worthy but you also doom them by trapping the capital that would be used to generate new innovation and, most tangibly in our current situation, jobs.

We are losing the opportunity cost of all the great ideas that should be coming from the proper deployment of that 23.7 trillion in capital. Everything from innovation in medical delivery systems to accessible space travel, free energy to the driverless car; all of these things may never come to bear because those powerful individuals who have failed, been passed over by technological advancements, innovation and flat-out smarts, have commandeered our government to unfairly sustain their wealth and power.

Unfortunately, they use our wealth and laws not only to benefit their outdated, failed companies, but also spend a small pittance of their ill-gotten gains lobbying and favor-trading with politicians so the government will continue to protect them from competition and their well-deserved failure.

The massive spike in unemployment, the utter destruction of retirement wealth, the collapse in the value of our homes, the worst recession since the Great Depression have all resulted directly from the abdication of proper government.

Even with all that -- the only changes that have been made, have been made to prop up and hide the massive flaws on behalf of those who perpetuated them. Still utterly nothing has been done to disclose the flaws in this system, improve it or rebuild it. Only true rules-based capitalism ensures constant adaptation and implementation of the latest and best practices for a given business, as those businesses that don't adapt fail, and those who deploy the latest innovations to their customers benefit, prosper.

The concept of communism is rightly reviled in this country for the simple reason that it is blind to human nature, allowing a small group of individuals near-total control, while sticking everyone else with the same crappy systems -- and the bill. America spent countless lives and half a century fighting against this system of government. So why are we standing for it now?"

http://www.zerohedge.com/article/guest-post-cost-corporate-communism-0

http://www.miamiherald.com/2010/04/13/1578148/estefans-new-collaboration-hits.html

Submitted by Tyler Durden on 04/12/2010 22:14 -0500

Source Zero Hedge

"And all the pundits thought that the IMF would be on the hook for just €10 billion... The IMF has just announced that it is expanding its New Arrangement to Borrow (NAB) multilateral facility from its existing $50 billion by a whopping $500 billion (SDR333.5 billion), to $550 billion. The current lending participant group of 26 entities will be increased by 13 new members all of whom will contribute token amount of capital to the NAB. The one country most on the hook in the new and revised NAB - the United States of America, will provide over $105 billion in total commitments, or 20% of the total facility. The US is currently on the hook for just $10 billion, meaning its participation in global bail outs just increased by $95 billion. And the bulk of these bailouts will certainly be located across the Atlantic. What is most troublesome is the massive expansion of the NAR. If the IMF believes that over half a trillion in short-term funding is needed imminently, is all hell about to break loose.

Never one to present a realistic picture Dominique (or is that Mrs, Pisani?) Strauss-Khan said: "The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the Fund’s efforts in crisis prevention and resolution, as an essential back-stop to the Fund’s quota resources. This will help ensure that the Fund has access to adequate resources to help members that are vulnerable to financial crises."

If memory serves us right, the Fund's current resources give it acces to about a third of a trillion, so as of today the IMF has recourse funding to just under a trillion. Something big must be coming.

Some more details on the NAB from the just released PR:

The NAB is a standing set of credit arrangements under which participants commit resources to IMF lending when these are needed to supplement quota resources. The expanded NAB will become operational when it receives formal acceptances from the required proportion of current and potential participants, which will require legislative backing in some cases.¹ 

“The expansion of the NAB will make an important contribution to global financial stability, but it is not a substitute for a general increase in the Fund’s quota resources. The Fund is, and shall remain, a quota-based institution. It is important now that member countries rapidly take the necessary steps to make the increased resources available,” Mr. Strauss-Kahn underscored.

Background

The NAB is a credit arrangement between the IMF and a group of members and institutions to provide supplementary resources to the IMF when these are needed to forestall or cope with an impairment of the international monetary system. The NAB is supplementary to quota resources, which are made up of the quota subscriptions each country pays upon joining the Fund, broadly based on its relative size in the world economy. IMF members’ quotas currently total SDR 217.4 billion (about US$330 billion). Like quota allocations, the NAB is reviewed on a regular basis.

The recent unprecedented shock confronting the global economy has led to a sharp increase in the demand for IMF financing. To ensure that the IMF continues to have sufficient resources to meet demand, leaders of the G-20 agreed in April 2009 that immediate financing from members of US$250 billion would subsequently be folded into an expanded and more flexible NAB, increased by up to $500 billion. This call was endorsed by the IMFC. The G-20 leaders reaffirmed their commitment on September 25, 2009 to a tripling of the resources available to the IMF, from a pre-crisis level of about US$250 billion. At its meeting in October 2009, the IMFC welcomed the expected agreement to expand and enhance the NAB. Pending the entering into force of the expanded NAB, member countries have pledged more than $300 billion in immediate bilateral financing should the Fund require additional resources for lending.

We have a few questions:

1) Just where will central banks suddenly find access to over three hundred billion in SDRs (which is what this facility is based on)? Also, we are curious just how this SDR expansion will impact dollar levels. As the dollar is the primary component in the SDR basket (17%), banks will have to sell more dollars than other currencies on a pro rata basis to increase their SDR holdings. What will happen to the DXY when $85 billion new dollars flood the market via assorted CBs but mostly the FRBNY?

2) Who came up with the expansion factor? Why is Japan's allocation increasing by 18.7x, that of the US by 10.4x, while that of the Bundesbank only by 7.2x? We thought the IMF is more of a eurocentric bailout facility? Why does it fall upon the US taxpayers to disproprtionately bailout Greece?

3) What is the joke with having Greece join the group of new participants? The IMF sure has a sick sense of humor.

4) Curious how this comes the day before Greece is supposed to auction off some ultra-short term debt. If this facility is enacted, watch for socereign credit curves to hit 60 degrees, with near-term risk disappearing, once again courtesy of Joe Sixpack. We hope you pay your taxes by the April 15 deadline.

5) Funny money will galore. At this point nobody will allow anyone or anything to fail.

Here is the full table of old and existing contributors. Congrats US - you are once again leading the charge in the world bailout.

http://www.zerohedge.com/article/imf-prepares-global-cataclysm-expands-backup-rescue-facility-half-trillion-contribution-glob

I'm not surprised.

________

http://www.drudgereport.com/

Appears from Truesee's blog post attempt to discredit has already begun. If they're no threat then why not simply ignore them, pretend they don't exist?

https://www.lotterypost.com/blogentry/39717/viewcomments

___________________

"Tax week is here and I hope that many of you will join me in Washington for the culmination of our Online Tax Revolt. If you can't get to Washington there will certainly be a number of tea party tax protests across the nation. If for no other reason than to annoy a liberal, you ought to make plans to attend one of these rallies

Now if you do attend a tea party rally, be on your best behavior. There may be people there with disruption in mind. Have you heard of this latest website/movement called "Crash the Tea Party"? A lot of you have emailed me about it, so I know it has some of you enraged. The website claims to represent "a nationwide network of Democrats, Republicans and Independents who are all sick and tired of the loose affiliation of racists, homophobes and morons; who constitute the fake grassroots movement, which calls itself 'the Tea Party.'"

Here is the stated purpose of these Tea Party Crashers ... "To dismantle and demolish the Tea Party by any non-violent means necessary." Their tactic? Infiltrate the tea parties and exaggerate their "least-appealing qualities." For example, they will misspell signs to make tea parties look unintelligent or they will do TV interviews claiming extreme views, or shout things during rallies that the media could construe as racist or homophobic.

Look for the ObamaMedia to ignore this effort. Let some people infiltrate a Code Pink demonstration though and it would make front page news."

http://boortz.com/nealz_nuze/2010/04/tea-party-crashers.html

Posted by Karl Denninger in Federal Reserve at 13:57

"Did The Fed Just (Surreptitiously) Bail Out Europe?

Source The Market Ticker

"No, not just Greece - all of Europe.  Without Congressional authorization or notice, of course.

Hattip to a nice emailer....

Or if you prefer it on a one-year time scale...

That nice little vertical line is a gain of $421.8 billion dollars of outstanding loans and leases in one week's time.

WHERE THE HELL DID THAT MONEY GO AND WHAT COLLATERAL WAS TAKEN AGAINST A FOUR HUNDRED BILLION DOLLAR INCREASE IN OUTSTANDING LOANS?

You won't find anything like that in the records - because it's never happened before.  That's beyond unprecedented, it's ridiculous, and assuming it's also accurate, someone has some 'splaining to do on what clearly appears to be some sort of back-door game being run.

Update: It has been suggested that this may be related to the FASB changes and securitized loans coming back on the balance sheet.  If so, where's the alleged memorandum items on the other side and the footnote on FRED?  The latter is missing, but the necessary data on FRED to confirm that is not yet updated.

Nonetheless, if this is the case, it's still bad (just not catastrophic) as this will directly hit capital ratios.  Or, put another way, where's the additional capital that "should" be there to support what is now on balance sheet and was previously off (never mind that it was crooked as hell to have it off in the first place!)"

http://market-ticker.org/archives/2186-Did-The-Fed-Just-Surreptitiously-Bail-Out-Europe.html

http://www.drudgereport.com/flashes.htm

“In the technical sense, in the economic definition, he is not a socialist,” the Texas Republican said to a smattering of applause at the Southern Republican Leadership Conference.

“He’s a corporatist,” Paul quickly added, meaning the president takes “care of corporations and corporations take over and run the country.........”

http://blogs.wsj.com/washwire/2010/04/10/ron-paul-barack-obama-is-not-a-socialist/?mod=rss_WSJBlog