Tonight's post will more of a philosophical thought post than a market bearing report. It is all related.
Passengers on a Ship
I am not going to get into the passage of the Health Care bill. Long time readers probably know that I am of course against government expansion into just about anything so you can figure my position out. I think what is meaningful about the bill was how it was done and in an environment where the bill was not wanted by the majority of the US population.
Now I understand that sometimes a national need may be unpopular and the US Congress may have to take steps to pass laws that will not be well received. I do not think Health Care reform makes the grade. Neither did TARP money handed out to banks.
What I want to focus on is the lack of effective checks on the government as of late. At this point Congress is passing monster bills that will have far reaching consequence with limited support of the people. The FED and the Treasury have broken all the rules governing their behavior and make stuff up as they go along. While nothing is perfect, it does seem this new chapter of those in control doing just about whatever they want is becoming more and more commonplace and more bold as time goes on.
Health Care Bill
A while back the election in Massachusetts of Scott Brown was seen a the final nail in the health care coffin. Added to this was the revelations about side deals (Louisiana, Nebraska) and outright bribes for votes. Faced with electoral defeat and large volumes of anti-health care bill input things stopped.
And then the supporters of the bill passed it anyway.
I think plenty of people were caught sleeping on this one and many are going to feel that they were not given a chance to really oppose this. Why the hurry to get this thing done? I think it comes down to a few things:
-Mass exodus of several democrats allowed those leaving in November (various reasons) to vote without fear of losing re-election
-Speed kept organised protest from being able to form
-Seems to be some strange push to get the tax collection end of this thing up and running as soon as possible. Funding crisis anyone?
Again, I am focused on how this bill was passed, not the particulars of the merits of the bill. At least there was a House vote instead of the threatened "deem and pass" option so that was something.
Of course now passed there is NO way to repeal the bill so I would save those with that in mind the time and energy in even trying. A court may well find it to be unconstitutional, but that is another long shot.
The tax revenues that are collected to fund the program will be spent long before the roll out of the program even happens in a few years time. At that point some other taxation elevation will come on board. Mark my words, whatever money is collected will be gone before the plan is off and running.
NY FED Bank
Along the same lines we now have concrete information (it was well known but it helps to have the paper proof) that the NY FED, under Tim Geithner, accepted all kinds of garbage loans as posting collateral, minimally from Lehman, but of course in no way did it end there. A story at Huffington Post today:
NY FED Warehousing Junk Loans on It's Books: Examiner's Report
As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn't sell in the market, according to a report from court-appointed examiner Anton R. Valukas.
The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a "warehouse" for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.
Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.
Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.
"The Fed legally is forbidden from taking such assets. There's a legal requirement that the Fed's assets be investment grade," Rep. Alan Grayson (D-Fla.) told HuffPost. Grayson, who is the cosponsor of the Grayson-Paul Audit the Fed measure that passed the House, said the Lehman scandal shows precisely why such an audit is needed.
"The net result of this is we know the Fed knowingly bought assets for more than they were worth -- substantially more than they were worth -- and actually created a market for garbage that Lehman was more than happy to push on the Fed because they regarded the public as the suckers of last resort," said Grayson.
Open breaking of the laws and charters set out for the FED and the recourse is.......crickets. Some crappy audit bill that has zero chance of ever being passed. If this was some little deal then who cares but it involves the central bank of the world's largest economy. It seems here that the FED bankers can and will do whatever they want as they see fit and there is no way to do much about it.
Along the same lines I had to chuckle when I read the following story:
Moody's Warns Of Upcoming Bank Downgrades If Dodd Bill Passes, BofA, Citi And Wells At Greatest Risk
Key point of the story, Moody's take:
To the extent that such resolution authority were enacted into law, and to the further extent that we found it to be credible and likely to be used, we would need to reevaluate our systemic support assumptions that currently provide lift to the deposit and debt ratings for a number of U.S. banking companies.
If the Banks are really going to be left on their own then we downgrade the whole sector.
Of course the Banking Reform Bill will not include any such thing.
Wrapping it up I am becoming more concerned as elected officials and unelected person's in power positions continue to do whatever they want regardless of the will or common welfare of the nation. Yes elections can make changes, but how much? How much damage can be sustained by a rogue set of policy makers before an election cycle?
Soon the US government will be in control of:
-support of favored companies
On top of this the banking classes seem to have control of the arms of government.
Maybe all this was right in front of me and I did not notice, or maybe the grab job has accelerated as of late. In any case it is clear to me that the behavior right now of policy makers is getting bolder and more aggressive. I have not been impressed with the results thus far. Maybe it will get better.
Have a good night.