Live Blogging The Bald on the Tarp….
Let us begin.
10:32am: Mark Haines is blowing a gasket. The address hasn’t even begun and a sudden vomitious belch of class warfare spews forth from his mouth including these tidbits:
“Bush has an MBA from Harvard. What’s that thing worth?”
“Can we drop these Goldman Sachs yo-yos and get someone else? Like Bank of America?”
10:36am: Paulson is a total come-down after that little bit.
10:40am: It is interesting that now that Paulson looks like he might be on the way out as Obama enters stage left, the regulator should be limited (once more) in its scope. “In my view government support must either be explicit or non-existent.” Sounds like a strange spin on “children should be seen, but not heard.”
10:45am: “In Washington [the deployment of TARP funds] is a land speed record from announcing a program to getting funding out of the door.” (Is that really worth bragging about? It’s like programmers evaluating their work by comparing lines of code written).
10:48am: Paulson gets no argument whatsoever from me that the market needs time to “fully absorb” the increasingly miasmaic lay of the land after the maze of regulatory programs has been thrown over it.
10:51am: Paulson: TARP not effective anymore. The consumer credit, student loans, auto loans have frozen up, and need to be thawed though the repurchase of their securitized instruments. WOW!
10:56am: The TARP funds should be redirected to consumer credit, and maintained as an emergency fund to support these systems. i.e. that crap we fed you about buying asset backed mortgage securities, that dog won’t hunt. “We are humbled by our own failings.” i.e.: The Department Of The Treasury regrets the error.
10:59am: That sucking sound you hear is Hank’s career after striking four tethered mines.
11:03am: See, Mr. Obama? I’m a team player! I can help! You need me! Really!
Q&A Time! After the jump! Hurray!
Bailout Bill
I’m sure there is someone less deserving of Treasury assistance than the likes of MBIA. There are, after all, still some felons out there that could use a couple extra million. Still, since everyone else is slurping at the bailout well, might as well throw in insurers. Right?
MBIA, the largest U.S. bond insurer, and its No. 2 rival, Ambac Financial Group, met with regulators earlier this week to push for a way to tap into the federal government’s bailout plan.
New York Insurance Superintendent Eric Dinallo, the main regulator for MBIA, and Wisconsin insurance commissioner Sean Dilweg, Ambac’s primary regulator, convened in New York to discuss the matter with the firms.
Both companies have seen business grind to a near halt after large losses on mortgage debt guarantees, and subsequent rating cuts.
Watch out MBIA shorts.
U.S. Treasury mulls insurer aid program-sources [Reuters]
- Temporary Increase In Coal Excise Tax: Funding of Black Lung Disability Trust Fund
- Tax Credit for Carbon Dioxide Sequestration
- New Qualified Plug-in Electric Drive Motor Vehicles
- Exclusion From Heavy Truck Tax for Idling Reduction Units and Advanced Insulation
- Transportation Fringe Benefit to Bicycle Commuters
- Extension of the Economic Development Credit for American Samoa
- Extension of Mine Rescue Team Training Credit
- Seven Year Cost Recovery Period For Motorsports Racing Track Facility
- Tax Incentives for Investment in the District of Columbia
- Permanent Authority for Undercover Operations
Does anyone else think it overly dramatic to have scheduled the second Bailout Bill vote for “sundown?” Or is it just that the people running copy at CNN.com are morons?
As if that were not enough:
The legislation also includes a “Mental Health Parity” provision, which would require health insurance companies to cover mental illness at parity with physical illness.
They are kidding, right? No.
I weep for the future.
Obama, McCain, Biden all to vote on bailout bill [CNN.com]
Decent commentary on the bailout is hard to come by. Certainly most “financial press” fails to fit the bill. It is a pleasant surprise, then, to see Posner describe the issues with something like clarity and aplomb.
A complicating factor was that the value of those securities was and is very difficult to determine, because each security represents a share in pieces of many different mortgages. The bank that owns the security cannot readily determine the value of all those different mortgages, since it has no direct relationship with the mortgagor, having sold the mortgage to the entity that issued the mortgage-backed securities.
[...]
If the Treasury pays the actual value (if anyone can determine what that is) of the securities, it will not be injecting new capital into the banking industry, but merely swapping one form of capital for another. If the Treasury pays more than the securities are worth, then it is contributing capital to the industry all right, but it is also enriching the owners and managers of the banks, which creates the familiar moral hazard problem as well as upsetting people by rewarding careless management practices. The more it overpays, the most costly the bailout plan to the taxpayer.
There is a rather serious issue here that has gotten only the smallest bit of attention. How difficult are mortgage backed securities to value? And, given that they are difficult or impossible to value, is it a coincidence that the Treasury seems to be using this opacity to funnel some extra cash.
The $700+ Billion Bailout [The Becker Posner Blog via Broken Symmetry]
We expected Bush to go crazy nuts and talk on and on and on. Boy were we surprised.
9:40:11 AM ohbabyitsbess: bushie in the house
9:41:15 AM ohbabyitsbess: “we have a big problem” [pause for smirk]
9:41:20 AM ohbabyitsbess: “we have a problem that needs to be solved” [pause for smirk]
9:40:30 AM ohbabyitsbess: god, do you not love how he always sounds like he’s doing stand up?
9:40:35 AM ohbabyitsbess: “There is no disagreement that something substantial must be done.” thank you captain obvious. that was unclear (except to bill o’reilly)
9:40:43 AM ohbabyitsbess: “we’re workin’ hard” [pause to internally add: "or hardly workin', oh yeah"]
9:40:53 AM ohbabyitbess: “we will rise to the occasion”
9:40:57 AM equityprivate: Opinions are like assholes.
At this point the address has ended.. yes… ended. Over.
9:41:11 AM ohbabyitsbess: what the fuck was the point of that
9:41:20 AM ohbabyitsbess: “we’ll rise to the occasion”
9:41:24 AM ohbabyitsbess: thank you and good night
9:41:38 AM equityprivate: Not very pretty. Someone told him about the Sausage and Laws joke.
9:41:50 AM equityprivate: Way too busy to talk for more than a few minutes, you know.
9:41:57 AM ohbabyitsbess: why is cnbc making a big deal of how he didn’t blame anyone?
9:42:02 AM ohbabyitsbess: the person to blame is mccain
9:42:03 AM equityprivate: CNBC, they are totally flabbergasted.
9:42:06 AM ohbabyitsbess: obvi he’s not going to do that
9:42:10 AM equityprivate: They are amazed its over.
9:42:19 AM equityprivate: They need a commercial to catch their breath.
We’ve had a cautious eye on Clusterstock since our old friend John Carney went over there to do “mature work.” (It better pay better, because where’s the fun in that?) Seems voyeuristic of us though, doesn’t it? Spying on our old friend’s new digs? That’s why we only read Henry Blodget’s pieces. (We kid, we kid).
Yesterday, Blodget penned a mostly insightful piece on Warren Buffett’s bailout take. Blodget points out:
Warren Buffett, meanwhile, thinks the appropriate price would be the “market value,” which he believes is below the price at which the banks are currently carrying their trash:
[If] they do [the bailout] right, I think they’ll make a lot of money…. They shouldn’t buy these debt instruments at what the institutions paid. They shouldn’t buy them at what they’re carrying, what the carrying value is, necessarily. They should buy them at the kind of prices that are available in the market. People who are buying these instruments in the market are expecting to make 15 to 20 percent on those instruments. If the government makes anything over its cost of borrowing, this deal will come out with a profit. And I would bet it will come out with a profit, actually…
Jump for more.
Oh yeah.
Chart after The Jump.
Paulson and The Beard are facing the panel. What glee!
11:30: Lots of hammering away on the issue of mortgage foreclosure assistance. If the issue was bad lending, the argument goes, why aren’t we doing more for foreclosure assistance?
What other plans did the Treasury consider before adopting the plan that is before the congressmen and congresswomen now? (This should be good).
Paulson: Oh, the market, baby, the market is the answer. Except when it isn’t. When you “have to buy mortgages or securities way above fair value” (emphasis mine).
Bernanke: “As you know I am a student of financial crisis and financial history.” Indeed!
The situation we have now is unique and new. It’s not about failing institutions. Our amazing financial innovation is so amazingly complex, we can’t handle it like those simpletons, the Japanese.
Q. What banks would be eligible to participate?
All of them. (Ahem).
Nationalizing healthcare or healthcare insurance is pretty much off the table at this point no matter who gets elected. Wall Street put the brakes on that very quickly by removing any prospect of getting it funded. Who says you have to spend money on lots of expensive lobbyists to kill social programs. You just need to create an environment which mandates your bigger, more urgent social program.
How to trade the bailout? Go long healthcare.
