Tuesday, September 21, 2010
Saturday, February 13, 2010
Bill Bonner on Det and Defaulting
Moody’s warned that the US would lose its triple-A rating if it continues borrowing money at the present rate. Our old friend Marc Faber was on TV this week explaining what the consequences would ultimately be: the US will default on its debt, he said.
Mr. Geithner did not even bother with the idea of default. It was beyond his imaginative powers. As to losing the three As, he said that would “never” happen. Which is what set us to thinking about the quality of US leadership. Of course, the US will lose its bond rating…and will default. There is no question about it. No nation has ever existed, except for present company…whose histories have yet to be completed…that didn’t default, renege, collapse, go bankrupt, disappear, disintegrate, capitulate, or otherwise fall over and die. The only questions are when and how.
Thursday, March 26, 2009
Wednesday, March 25, 2009
Monday, March 23, 2009
Geithner Plan
The Treasury Department unveiled its long-awaited plan to remove many of the troubled assets from banks' books Monday, representing one of the biggest efforts by the U.S. government so far aimed at tackling the ongoing financial crisis.Under the new so-called "Public-Private Investment Program," taxpayer funds will be used to seed partnerships with private investors that will buy up toxic assets backed by mortgages and other loans.
The goal is to buy up at least $500 billion of existing assets and loans, such as subprime mortgages that are now in danger of default.
Treasury said the program could potentially expand to $1 trillion over time, but that the hope is that it would not only help cleanse the balance sheets of many of the nation's largest banks, which continue to suffer billions of dollars in losses, but help get credit flowing again.
Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.
The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.
The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.
Tuesday, March 3, 2009
Tim Geithner Worries about Budget Deficits
U.S. Treasury Secretary Timothy Geithner said Tuesday it is imperative for the government to reduce over time the debt that is piling up as a result of the government's response to recession and financial market turmoil...The plan envisions reducing the annual federal deficit to $533 billion by 2013. Mr. Geithner said that would cut in half the $1.3 trillion portion of the deficit for 2009 that he said the administration has "inherited," or budgetary factors that were in place as a result of decisions made during the previous administration.
The Obama administration estimates that the total deficit for 2009 is $1.75 trillion, taking into account the cost of economic stimulus legislation signed by the president last month...
"Failure to reduce deficits to this level would result in higher interest rates as government borrowing crowds out private investment, leading to slower growth and lower living standards for Americans," he said.
My thoughts: Honesty from the White House? Did not expect that. I think it is reasonable to lay $1.3 trillion of the FY2009 budget deficit on Bush. When the finally surpasses the $2 trillion mark will they sing the same tune? The FY 2010 budget is about $3.9 trillion amost a full trillion more than the current budget. This does not sound like a budget made by people concerned about the deficit.
Thursday, February 12, 2009
Laughing at Morons
Administration officials were greeted with sarcasm and laughter Monday night when they briefed lawmakers and congressional staff on Treasury Secretary Tim Geithner's new financial-sector bailout project, according to people who were in the room.
The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets -- which they referred to as "legacy assets" -- but wouldn't be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn't provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hopes he can persuade the private sector to purchase a portion of them.
Tuesday, February 10, 2009
Bailout Timeline
Treasury Secretary Tim Geithner defended his financial stabilization plan Tuesday, telling senators it is "fundamentally different" than the one pursued by his predecessor, Henry Paulson...Treasury has $320 billion available under the Paulson-era Troubled Asset Relief Program, though Tuesday's plan earmarked more than half of that for lending and housing programs.
"I think this is going to be a substantial problem for the nation that will require substantial resources," Geithner said Tuesday afternoon in response to a question from the committee's ranking member, Sen. Richard Shelby, R-Ala. "We will move to use existing resources as efficiently as possible."
The Dow is Not Happy
The Dow Jones industrial average (INDU) lost 382 points, or 4.6%, closing at its lowest point since Nov. 20, the date considered by many experts to have been the low of the bear market. The Dow had lost as much as 422 points in the afternoon...The TARP announcement "was a huge disappointment," said Stephen Stanley, chief economist at RBS Greenwich Capital. "There's been an incredible buildup for weeks and then they release a plan that has little in the way of details."
Stocks slipped leading into Geithner's late-morning speech and accelerated after he finished outlining the plan. He's providing more details this afternoon in a congressional hearing.
read the CNN storyMonday, January 19, 2009
Treasury Nominee Timothy Geithner and Taxes
Members of the Senate Finance Committee met Tuesday with treasury secretary nominee Tim Geithner over concerns involving his personal taxes and the immigration status of a former housekeeper, transition officials said.
Later, the housekeeper, who is married to a U.S. citizen, was granted a green card, transition officials said.
The second concern involves Geithner's taxes while he worked for the International Monetary Fund (IMF). According to a statement released by the committee, Geithner failed to pay self-employment taxes while the IMF paid him from 2001 to 2004.