Infinite Jeff

Martin Wolf writes in today’s Financial Times:

The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.

Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.

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Economics & Finance, Politics banks, geithner, lemon socialism, nationalization, TARP

Just when you thought it was safe to have faith in your government:

Public-Private Investment Fund: One aspect of a full arsenal approach is the need to provide greater means for financial institutions to cleanse their balance sheets of what are often referred to as “legacy” assets. Many proposals designed to achieve this are complicated both by their sole reliance on public purchasing and the difficulties in pricing assets. Working together in partnership with the FDIC and the Federal Reserve, the Treasury Department will initiate a Public-Private Investment Fund that takes a new approach.

Public-Private Capital: This new program will be designed with a public-private financing component, which could involve putting public or private capital side-by-side and using public financing to leverage private capital on an initial scale of up to $500 billion, with the potential to expand up to $1 trillion.

Private Sector Pricing of Assets: Because the new program is designed to bring private sector equity contributions to make large-scale asset purchases, it not only minimizes public capital and maximizes private capital: it allows private sector buyers to determine the price for current troubled and previously illiquid assets.

I’m sorry, but … what?  Private sector buyers are already allowed to determine the price of troubled/illiquid assets — it’s just that the price they are willing to pay is well south of the price banks are willing to accept.  So is the “public” component intended simply to provide liquidity to potential buyers, à la TALF, or is it really meant to influence bid prices?

Say the “side-by-side” government financing takes the form of a non-recourse loan, or a senior limited partnership interest with a fixed return.  (“We are exploring a range of different structures for this program,” announced Geithner at 11:29 am, setting off a wave of panic selling.)  Say the private sector holders of the equity or residual interest only have to put up a fraction of the purchase price, limiting their downside exposure, while keeping unlimited upside.  Will this encourage buyers to raise their bids?  Presumably, we’re talking about private equity types here, never ones to leave money on the table, but suppose — just suppose — the government stop-loss is enough to close the gap between the bid and ask prices.  What an accomplishment:  the government insures the private sector buyers against risk of loss, the buyers generously offer to share their subsidy with the banks that sell the troubled/illiquid assets, and the taxpayer (oh, yeah … her) gets an upside participation in nothing at all.

What’s more likely, of course, is that the government financing/subsidy won’t result in bids high enough to persuade many banks to sell, because to sell would be to realize huge embedded losses, and to realize such losses would be to face insolvency.  Which brings us back, after a long detour through Public-Private Neverland, to the actual centerpiece of the Financial Stability Plan, the nuke in its “arsenal” of financial resources, carefully camouflaged behind a screen of incoherent prose:

Capital Assistance Program: While banks will be encouraged to access private markets to raise any additional capital needed to establish this buffer, a financial institution that has undergone a comprehensive “stress test” will have access to a Treasury provided “capital buffer” to help absorb losses and serve as a bridge to receiving increased private capital. While most banks have strong capital positions, the Financial Stability Trust will provide a capital buffer that will operate as a form of “contingent equity” to ensure firms the capital strength to preserve or increase lending in a worse than expected economic downturn. Firms will receive a preferred security investment from Treasury in convertible securities that they can convert into common equity if needed to preserve lending in a worse-than-expected economic environment. This convertible preferred security will carry a dividend to be specified later and a conversion price set at a modest discount from the prevailing level of the institution’s stock price as of February 9, 2009. Banking institutions with consolidated assets below $100 billion will also be eligible to obtain capital from the CAP after a supervisory review.

Hmmm, let’s see … preferred security … converts into common equity … discounted conversion price … why, they must be talking about voting shares!  The “n” word!  Why don’t they just come out and say it?

Doesn’t matter.  Treasury’s half-assed proposal has so undermined hopes for a shareholder bailout that the market now sees no alternative to nationalization.  This (I submit) is why the big banks’ share prices dropped like they did today.  At the close:

Citigroup — 22.8% of reported book value
Bank of America — 20.0% of reported book value
JP Morgan Chase — 68.1% of reported book value

Economics & Finance, Politics banks, geithner, lemon socialism, nationalization, TARP

From yesterday’s executive order on interrogations:

From this day forward, unless the Attorney General with appropriate consultation provides further guidance, officers, employees, and other agents of the United States Government may, in conducting interrogations, act in reliance upon Army Field Manual 2-22.3, but may not, in conducting interrogations, rely upon any interpretation of the law governing interrogation — including interpretations of Federal criminal laws, the Convention Against Torture, Common Article 3, Army Field Manual 2-22.3, and its predecessor document, Army Field Manual 34-52 — issued by the Department of Justice between September 11, 2001, and January 20, 2009.

With a stroke of the pen (and a whole lotta commas), Obama knocks down the Federalist Society’s entire pseudo-scholarly edifice, and fixes the beginning and end of the 2,688-day Lawless Interregnum.

Law, Politics bush, lawyers, obama, torture, war crimes

Law, Politics bush, inauguration, obama, war crimes

As for our common defense, we reject as false the choice between our safety and our ideals.

Our founding fathers faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations.

Those ideals still light the world, and we will not give them up for expedience’s sake.

And so, to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and we are ready to lead once more.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with the sturdy alliances and enduring convictions.

They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use. Our security emanates from the justness of our cause; the force of our example; the tempering qualities of humility and restraint.

Law, Politics inauguration, obama, torture

On Tuesday, the world will be watching as America celebrates a rite that goes to the heart of our greatness as a nation. For the forty-third time, we will execute the peaceful transfer of power from one President to the next.

That’s nice, I suppose.

But I was really, really hoping for war crimes trials.

zzz

Law, Politics inauguration, obama, transition, war crimes

Bush leaves us, finally, with a riddle:

The battles waged by our troops are part of a broader struggle between two dramatically different systems. Under one, a small band of fanatics demands total obedience to an oppressive ideology, condemns women to subservience, and marks unbelievers for murder. The other system is based on the conviction that freedom is the universal gift of Almighty God and that liberty and justice light the path to peace.

Hmmm.

Okay, I give up.

zzz

Politics bush, ideology

In this morning’s Washington Post, Daoud Kuttab describes how the Israeli airstrikes in Gaza have succeeded in rescuing Hamas from the political wilderness:

The lack of international support since the 2006 elections, followed by this rebuff to Gaza’s only Arab neighbor, Egypt, compounded the deterioration of Hamas’s internal support. By November, the survey showed, only 16.6 percent of Palestinians supported Hamas, compared with nearly 40 percent favoring Fatah. The decline in support for Hamas has been steady: A year earlier, the same pollster showed that Hamas’s support was at 19.7 percent; in August 2007, it was at 21.6 percent; in March 2007, it was at 25.2 percent; and in September 2006, backing for the Islamists stood at 29.7 percent.

While it is not apparent how this violent confrontation will end, it is abundantly clear that the Islamic Hamas movement has been brought back from near political defeat while moderate Arab leaders have been forced to back away from their support for any reconciliation with Israel.

That’s why, as the six-month cease-fire with Israel came to an end, Hamas calculated — it seems correctly — that it had nothing to gain by continuing the truce; if it had, its credentials as a resistance movement would have been no different from those of Mahmoud Abbas’s Fatah. Unable to secure an open border and an end to the Israeli siege, while refusing to share or give up power to Abbas, Hamas could have had no route to renewed public favor.

For different reasons, Hamas and Israel both gave up on the cease-fire, preferring instead to climb over corpses to reach their political goals. One side wants to resuscitate its public support by appearing to be a heroic resister, while the other, on the eve of elections, wants to show toughness to a public unhappy with the nuisance of the Qassam rockets.

The disproportionate and heavy-handed Israeli attacks on Gaza have been a bonanza for Hamas. The movement has renewed its standing in the Arab world, secured international favor further afield and succeeded in scuttling indirect Israeli-Syrian talks and direct Palestinian-Israeli negotiations. It has also greatly embarrassed Israel’s strongest Arab neighbors, Egypt and Jordan.

As cynical political calculations go, all of this is almost disappointingly obvious.  The formerly ascendant parties, Hamas and Kadima, lose ground to their legacy rivals (Fatah and Likud, respectively).  The cease-fire’s end and the approaching elections coincide, providing a campaign opportunity for both sides.  Hamas offers a casus belli with rockets.  Israel’s governing coalition returns the favor with a massive aerial bombardment, hoping to prove that Kadima’s Livni and Labor’s Barak can be just as mindlessly barbaric as Likud’s Netanyahu.  Meanwhile, the collectively punished residents of Gaza rally around Hamas.

Hamas seems clearly the winner here, with things looking not so good for Kadima.  I’m predicting a stalemate on the ground in Gaza followed by a narrow victory at the polls  for Likud.

Politics gaza, hamas, israel, kadima, likud, terrorism, war crimes

“Letter from 2012 in Obama’s America” (abridged version), published October 22 by Focus on the Family Action, a Christianist lobbying group affiliated with James Dobson’s Focus on the Family organization.  Happy birthday, Jesus.

October 22, 2012

Dear friends,

The 2008 election was closer than anybody expected, but Barack Obama still won. Many Christians voted for Obama – younger evangelicals actually provided him with the needed margin to defeat John McCain – but they didn’t think he would really follow through on the far-Left policies that had marked his career. They were wrong.

On January 20, 2009, President Obama’s inauguration went smoothly, and he spoke eloquently of reaching out to Republicans who would work with him. Even in the next month, when Justices Ruth Bader Ginsburg and John Paul Stevens announced they would step down from the Supreme Court, nobody was very surprised – Ginsburg was already 75 years-old and in ill health, and Stevens was 88. President Obama nominated two far-Left, American Civil Liberties Union-oriented judges, and the Democratic Senate confirmed them quickly. They are brilliant, articulate and in their early 40s, so they can expect to stay on the court for 30 or 40 years. But things seemed the same because the court retained its 4-4 split between liberals and conservatives, with Justice Anthony Kennedy as the swing vote.

The decisive changes on the Supreme Court started in June, when Justice Kennedy resigned – he was 72 and had grown weary of the unrelenting responsibility. His replacement – another young liberal Obama appointment – gave a 5-4 majority to justices who were eager to create laws from the bench. The four conservative justices who remained – John Roberts, Antonin Scalia, Clarence Thomas and Samuel Alito – were suddenly in the minority.

Then in August 2009, two months after Kennedy resigned, Justice Scalia unexpectedly announced his resignation due to health reasons and by October 2009 another Obama appointment took his oath and joined the court. Finally the far-Left had the highest prize: complete control of the Supreme Court. And they set about quickly to expedite cases by which they would enact the entire agenda of the far Left in American politics – everything they had hoped for and more took just a few key decisions.

The most far-reaching transformation of American society came from the Supreme Court’s stunning affirmation, in early 2010, that homosexual “marriage” was a “constitutional” right that had to be respected by all 50 states because laws barring same-sex “marriage” violated the Equal Protection clause of the U.S. Constitution. Suddenly, homosexual “marriage” was the law of the land in all 50 states, and no state legislature, no state Supreme Court, no state Constitutional amendment, not even Congress, had any power to change it. The Supreme Court had ruled, and the discussion was over. President Obama repeated his declaration that he personally was against same-sex “marriage”, but he told the nation there was nothing he could do.

After the jump:  men & boys, TV porn, inner-city crime, Muslim terror, Russian empire, the Fairness Doctrine, euthanasia and more.

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Nothing, Politics christianists, obama, obamalypse, supreme court

From a July high of $4.11, today the average price of regular gasoline at U.S. filling stations is $1.66 a gallon.  Goodbye, energy conservation.  Adios, alternatives and hybrids.  See you after the recession.

The chart shows nominal (i.e., unadjusted for inflation) weekly average U.S. retail gasoline prices since 1993 — now at their lowest level since February 2004.

Source:  Energy Information Administration

Economics & Finance, Politics energy conservation, gasoline, recession