All Your TARPS Belong To Us!

Had a long day yesterday. Got into work around 6:45am, worked the day, then had to entertain visiting scientists from Germany over dinner until 8pm. Rushed home to watch the New England Patriots get blown away in the first half, come all the way back to force overtime, and lose on the first possession in OT. Went to bed around 1am and got up this morning at 5am. Rough stuff. But it is Friday!

Blatant Appeal for Page Views
As you know, I write this site for my own personal fulfillment and the hope that I can offer you, the readers, something of value and entertainment. I have NO ADS and no tip jar. I get "paid" by your comments and the fact that I appreciate your readership. I would like to ask you for one thing now.

There is an economic directory that is tracking blogs devoted to finance. The site can be seen here:
http://www.gongol.com/lists/bizeconsites/

Economic Disconnect resides currently at the 105th spot. I want to crack the top 100 so I can say "My blog is in the top 100 economic blogs". It is a point of pride. So what can YOU do?

Well, obviously visit my site! What would help is if you can recruit around 5 people to visit a couple times a week to push my numbers up. I can break the top 100! Woo Hoo! Thanks for any help.

Gold Getting Plenty of Buzz
Full disclosure: I am a fan of the yellow metal. That said, Gold has been getting quite a buzz as of late, and I am not sure if that is good or bad! The December COMEX delivery issue is even making the rounds in somewhat more mainstream news sources. I read a piece tonight that is very sensational in that the writer sees the G20 meeting this weekend as a plot to revalue the world currencies, get this, based on some kind of gold peg:
http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996

Now I think this is both nuts and out in left field, but it does make good reading! Gold to $5,000 an ounce? $10,000 an ounce? Wild stuff.

Stock Market So Fake It's A Waste of Time
The banana republic show that is the US stock market was on full display this week. Wild intraday swings, reversals, last hour sell offs, and ripper days to the upside all happened this week. So what is the story?

I have a simple explanation. Nobody has a clue about what to do so market participants have given themselves over to purely technical mumbo jumbo. Terms like "retest of lows", "head and shoulders", "oversold", and the like are all chart related with no fundamental grounding. When the markets hit a point X, they buy and at point Y they sell. Everyone is in the same trades, and thus the crazy moves up and down.

I also have ZERO doubt that the FED/Treasury (the Feasury) has been out this week buying stocks on the open market at key times. In the future we will see just how much they were buying. In the meantime, there is no reason to get into this market except for a trade. There is no value in stocks. The coming recession will kill estimates, and this has not been reflected at this time by prices. I may mention market action, but the markets moves themselves are no decoupled from anything that could shine a light on things, so it is kind of a waste of time. My 2 cents!

All Your TARPS Belong To Us!
I keep going back and forth in my head as to whether Hank Paulson knowingly prodded players in non banking companies to try and become some kind of bank, or if the companies themselves took the initiative to get in under the TARP. I am not sure as yet, but I think it would be a good question to ask the Treasury Chrome Dome (remember Destro from G.I. Joe anyone?)

A compilation of headlines from Yahoo Finance this evening:
Reuters
Hartford Financial soars on plan to join TARPFriday November 14, 5:18 pm ET
By Jonathan Stempel
Note: A stock rallies because it is in so much trouble it needs government financing and will jump through loops to get it! Sounds like a winner to me.

It is not just companies getting into the act, check this whopper out:

TARP CityPosted by David Gaffen
Meena Thiruvengadam reports:

Three of America’s largest cities have asked the U.S. Treasury for billions of dollars to shore up pension systems, cover short-term borrowing needs and boost infrastructure spending.
In a letter to Treasury Secretary Henry Paulson Friday, the mayors of Philadelphia, Phoenix and Atlanta asked for the creation of a $50 billion fund to spur infrastructure investments as well as for loans to cover unfunded pension liabilities and to address cash flow crunches amidst tight credit markets.
“Cities will disproportionately bear the brunt of the dislocations caused by the credit crisis and a contracting economy unless the federal government steps in to assist us,” the mayors wrote.

And now we arrive right where anyone with half a brain figured we would. The gloves are off. It's nasty time. If the Feasury is going to pump cash all out, there will be fistfights for the loot. Banks cry "systemic risk; give us cash!"; US automakers cry "systemic unemployment; give us cash!"; Sinking insurance companies cry "What does systemic mean?; give us cash!"; and now bankrupt cities all over the country cry "systemic risk to government employee cash cows; give us cash!". It is now a free for all with nobody wanting to be left out of the goodie bag.

Of course we are on the clock waiting for the great state of California to come out and basically take whatever is left of the TARP funds for itself. The day is fast approaching where California will play "Way to big to fail" card and secure a ton of cash. Mark my words.

So where does this leave us? TARP was a failure, and it is also too small to deal with all these requests. Early 2009 will see a plan drawn up that will simply be astonishing in its recklessness and size. Paul Krugman, the money crammer himself, is calling for a 600 Billion dollar stimulus plan. Why stop there Paul? I mean why not go to the mattresses to save the economy?

It is my thinking that a shiny new plan will be unveiled, and the range I am looking for will be at the 2-3 Trillion dollar mark. I did not type that wrong. 2-3 TRILLION dollars will be created to fund all the worlds needs by the US Feasury by March 2009 at the latest.

How can this be done? I have no idea, but then I thought you could not just give out 700 Billion though the TARP without serious repercussions. As there have been none, I think the bold factor just got amped up a few levels. A force will act until it is acted upon, so the physics lesson tells us, and thus I think the US will blow out as much cash as possible until they are stopped by an external event. Foreign debt holders saying "No More" or some other calamity is the only way to stop this runaway train named the city of bailouts. (reference song; "I'm the train they call the city of New Orleans. I'll be gone 500 miles before the day is done.")

Is this not wildly inflationary? Glad you asked! I must say that the whole deflation thing has a strong basis (see Mish Shedlock) for that call. I am gradually moving towards the hyperinflation/dollar mega devaluation thesis at this point. There is nothing else that can happen in my mind. For a great take on about where I stand, you have to read this iTulip piece by Eric Janszen:
http://www.itulip.com/forums/showthread.php?p=60311#post60311

Take home point:

"The deflationistas apparently think what comes after post-bubble deflation is more deflation, as occurred in the early 1930s in the US but nowhere else ever since. It has not occurred to the deflationists why no similar period of deflation has ever occurred since the 1930s, or when they do confront the question they explain that the debt is really, really, really big debt this time, bigger than the Fed. Or that differences between the kind of money that the Fed prints versus the kind of money that the endogenous credit markets create when money is loaned into being by businesses and consumers means the Fed cannot impact the latter.
As we explain that in The truth about deflation, the reason no deflation spiral has occurred in any nation since the one instance in the US in the 1930s is because since then no nation has chosen to remain on the gold standard through a debt deflation. Needless to say, the US is not on a gold standard today."

I am a huge Mish fan, but this piece is so well written and well thought out that i think it makes the best argument. Leave your comments about what you think.

Friday Night Entertainment
It is that time!

Comic Relief
When I saw his video, I could not stop laughing. This thing is a work of art that should be leading the nightly news across America, instant classic:


Book Passage
"They are mine," he said softly, "They belong to me. The Red Bull gathered them for me, one at a time, and I bade him drive each into the sea. What better place could there be to keep unicorns, and what other cage could hold them? For the Bull keeps guard over them, awake or asleep, and he daunted their hearts long ago. Now they live in the Sea, and every tide still carries them within an easy step of the land, but they dare not take that step, they dare not come out of the water. They are afraid of the Red Bull."
-From "The Last Unicorn" by Peter S. Beagle

Music For the Masses
An excellent film was "Quicksilver" starring Kevin Bacon. A great song from the soundtrack was "Quicksilver Lightning" sung by Roger Daltry (who was in several Highlander episodes so he rules!):


I have no idea in the universe why I have had this song stuck in my head all day, but take a listen to Culture Club and "Karma Chameleon":


Another song I had stuck in my head today was "Jet City Woman" by Queensryche. have at it:


Have a good night.

We Are Getting Scammed

I used my own version of the TARP this weekend. On Saturday I raked leaves for over 5 hours onto a TARP and dragged the pile into the woods. I repeated this process many times. Where is my leaf removal bailout anyway?

Mars Phoenix Lander Goes Quiet
After what can only be described as a wildly successful mission, the Mars Phoenix Lander has gone silent. The coming Martian winter has cut down the Sun light level to a point at which the lander can no longer function. There were too many observations to list, but this was an exciting thing.

Sadly, in a coming era of cutbacks and bailouts I do not imagine space programs to live much longer. What a shame. We can keep GM open against all reasonable business sense, we can pass stimulus checks out until we are blue in the face but we cannot fund space exploration or develop cutting edge technology. Whatever. You can see a bunch of Phoenix content here:
http://phoenix.lpl.arizona.edu/

AIG Making Fools of the Treasury and FED (Not Like That's Hard)
I have to say that the news already out on Monday has my vomit meter pegged at redline. This week should be a good one!

So AIG, the troubled giant insurer, asked for and received a new bailout deal. I will not bore you with the details, the new money amounts and the benefits to AIG are plain criminal. What I would point your attention to is instead the open and blatant way that AIG management is pushing the Treasury/FED around. For a broken down on the verge of bankruptcy firm, these guys sure are comfortable in their position.

From the site Clusterstock:
AIG: We're Already Planning To Screw The Taxpayers More
Joe Weisenthal | Nov 10, 08 5:33 PM
"This morning AIG (AIG) confirmed it had secured a sweetened bailout deal from the government, scrapping the original, high-interest bridge loan. But AIG isn't done! It's already scheming to come up with a more shareholder-friendly plan. We were incredulous when we heard that on this morning's conference call, but a check of the transcript confirms that that's a goal.
The setup is that John Levin of Levin Capital asked if there were any way to restructure the new deal, so as to give AIG more upside if the securities they're transferring to the government improve markedly in value. The response:

Edward M. Liddy - Chairman and Chief Executive Officer
Yes, John right now, the deal is... what the deal is, not fixed in concrete forever (emphasis added). As you can see the movement we made from the first transaction to the second one, is a rather quantum improvement. We'll continue to do everything we can to put AIG in the best possible position. What these two arrangements do is they stop the cash out flows for the most part.
John Levin - Levin Capital
I agree with you and congratulate you on that. (!)

There you have it. For all to hear, CEO Edward Liddy and investor John Levin are already high fiving each other on how they might stick it to taxpayers even more, wresting more cash for shareholders. As long as equity holders are left hanging around, it's inevitable that they'll keep trying. More reason they should have been wiped out long ago."

If you have the time, a read of the conference call reveals even more brutal schemes by AIG management to make sure the government has zero upside potential if they get turned around, but still carry all of the risks if AIG goes down. Sick stuff.

We Are Getting Scammed
Folks, we the taxpayers are getting scammed. The end of the financial universe that was feared has made government reactive and panicky. Our congress had no idea what they are doing and are relying on a FED/Treasury that has no idea what they are doing. We are told one thing, only for that to change sometimes within the same day. We are told some dollar amount is needed for this company or that company, and then that dollar amount is doubled or tripled up in the space of one month. We were told transparency and taxpayer protection were going to be featured structures of the bailouts, yet one has to sue just to get basic information on where all this money is going. We were told only "systemic risk" candidates were to be considered but then we find out that "systemic risk" can mean just about anything.

Some headlines to get the general feel of the day:
Bloomberg: Fed Defies Transparency Aim in Refusal to Disclose
Bloomberg: Fannie Says $100 Billion Pledge From Treasury May Not Be Enough
washington post: A Quiet Windfall For U.S. Banks; With Attention on Bailout Debate, Treasury Made Change to Tax Policy
Bloomberg: GM Plunges as Deutsche Says It May Become Worthless (Bailout Still Will Happen)

Fannie Mae will now need MORE cash. Remember when the government was going to make a profit on this thing? HAHAHA. AIG needs more cash and gets better concessions from the government to boot. HAHAHA. FED will not disclose any action it does because, wait for it..., to tell the markets who is getting what might cause, wait for it..., a "systemic risk"!!! Awesome job boys, that is a classic. The FED and Treasury having learned their lesson about going through the US Congress rewrite a tax law to give banks doing mergers almost unlimited tax relief. I mean, why debate and vote when you can just do?

The FED and the Treasury are out of control. They must be stopped, immediately. The newly elected president Obama needs to come out today and tell these jokers to cut it out. Better still he should make it clear that the game is up come January when he is sworn in.

There has been a mad rush by politicians to be seen as "doing something" for the economy. What they have done is enabled a mass looting of the treasury by Bernanke and Paulson and they have given up any ability to influence the situation. Now is the time to do one thing: NOTHING. No more money for AIG. No more money for GM and the like. No more stimulus checks. NO MORE. Just stop. Start the new year with a broad based economic panel that can think through the next 5 minutes.

Obama has a chance here to win over the libertarians like myself. If Obama can change the behavior of the Treasury and FED, if he can have guys like Paul Volcker in on the action, if he can revoke the silly TARP powers then I will fight for the guy. His message was one of "hope". Well, here's hoping he can do what is needed at this juncture.

We have been told a bunch of things by the FED/Treasury and so far none of them have been true. We are being ripped off and nobody seems motivated to do anything about it. The only silver lining I can see is that it seems clear the FED/Treasury will bankrupt the US, and the ensuing revolution will surely be most unkind to the architechs of the collapse. Makes me sick to think it, but it seems to me as of late a secession movement may be in order. Leave New York and Washington DC to themselves and start all over again. Everyone can choose sides. Is there really any other way to cleanse the corruption and poor leadership? Probably not.

Have a good night.

Getting Stimulus Under a TARP

It seems like all the leaves decided that yesterday was THE DAY to all fall down. I have an all day appointment with the rake and leaf blower tomorrow. I am so excited and I cannot wait to get started!

Must Read Note
The wonderful site Housing Panic was one of the first real voices that tried to warn us all about the coming home bubble bust. The author named Keith did a great job and was an inspiration for me to start my own site. Housing Panic has decided to move on from the "all housing all the time" theme and who could blame him? Keith has a new site titled aptly "Soot and Ashes" which carries a ton of economic info as well as social commentary and political type stuff. While I cannot advise on the site for social/political stuff the economic content is still top notch and the new site is available on the blogroll. If anyone has a really great site that they visit every day, leave the name in the comments as I want to add 2-3 more sites to the roll.

GM's Fate Now in the Hands of the Congress; You Always Wanted to Own an Auto Maker, Yes?
Today GM came out with what can only be termed a bomb of an earnings statement. They basically lost 2 times more than the company market cap. And no, do not ask me how that is possible, I have no idea! The leaders of GM at least were fair and honest about their future prospects, which I can paraphrase here:

"If we do not get a government bailout by the end of January, we are done. Can you let that happen? Do you feel lucky? Punks!?"

That about sums it up. Management has damaged the firm so badly that they are not even pretending they can go on without being backed by the government. Sad times indeed.

Instead of A needed debate about IF GM should be saved, it seems most are already planning out HOW they will be saved. It is my strongest wish that the new president Obama will have good advisers and instead of running around like chickens without heads throwing money at everything, they take a minute or two to think.

We can get cars, GM is not unique in that field. The workers they employ are screwed. No way around that. The screwing can commence immediately, or be delayed 1,2 maybe 5 years. Pensions (as discussed last night), medical costs, and inflated wages are too much for the auto maker to overcome, and thus will not. Add in all the financing problems they have (GMAC made mortgages? Oh man) and GM cannot survive.

So do you want to own a car manufacturer? No? Too bad. Soon we will get the old "What is good for GM is good for America" line. Too bad BANKRUPTCY is the best case for both GM and the US. GM will get it's bailout, and it will be a long and never ending one. Look at GM's (or Ford's) operation and no one time cash injection will work. We are about to be subjected to an open ended money operation (Iraq anyone?) with no "exit" strategy. I really cannot say anything else about this as I will puke.

Getting Stimulus Under a TARP
I do appreciate the resolve of our government. After sending out stimulus checks a while back that had no effect on anything, they have decided that "This time it's different" and are ready to go at it again. Following the advice of Krugman et al (it has been so useful thus far) the new plan is the old plan: send out checks of $300-$600 so you look like you have a clue about what to do. I cannot wrap my head around this logic: Tax cuts = BAD; Stimulus Checks where you get your own money back = GOOD. Maybe they will send out a brochure with the explanation.

We have a TARP to buy bad assets, buy homes, pay Wall Street Bonuses, and give cash to insolvent banks. We have Fannie and Freddie buying every mortgage under the sun. We have the FED expanding it's balance sheet by 150% to make cash loans to banks. We are going to have a stimulus check sent out. We are going to give GM and Ford lifelong money infusions. We are guaranteeing everything under the sun.

And what is the driving force for all this?
-Unemployment has gone from 5.5% to 6.5% in a year
-Consumer spending has gone down by 3.1% annualized
-The stock markets are off around 25-35% from the highs
-Bank closures, while elevated, are nowhere near the last banking collapse number
-GDP may have contracted 0.3-1%

I mean faced with those kind of Depression Era stats, it is easy to see why all the panic is flying around!

Maybe I am missing something, I fully admit I am not an expert, but the current state of things does not seem so dire, so desperate that the powers that be need pull out all the stops and bail out the universe. Seriously, if all this is done now, what happens if unemployment goes to 10% What if GDP goes negative 2%-3%? Is there anything they could do?

Maybe that is why there is this mad rush. The economy is so fragile that even a slight hiccup can be terminal. You may want to ask yourself if our economy is that easily broken, how long until that happens?

Friday Night Entertainment
It is Friday, and here at Economic Disconnect we believe in getting excited over raking leaves, I mean over the weekend!

Book Passage

"I don't like you very much, Tom, as you have probably realized, but up to now you haven't had to give much of a rip how I felt. But I'm out of your filing cabinet now, Tom. Have you got it? I'm not just a record you can lock up at three in the afternoon. Have you got it?" My voice was rising into a scream. "HAVE YOU GOT THAT, TOM? HAVE YOU INTERNALIZED THAT PARTICULAR FACT OF LIFE?"
"Yes, Charlie," he said with a deadly voice. ""I have it."

"No you don't, Tom. But you will. Before the day's over, we are going to understand all about the difference between people and pieces of paper in a file, and the difference between doing your job and getting jobbed. What do you think of that, Tommy, my man?"

-From the short story "Rage" by Stephen King, as Richard Bachman.

Film Clip
Found a YouTube clip of another great "Highlander" series fight. This one is between Duncan McCloud and his hated enemy Xavier St. Cloud, played by musician Roland Gift:


Music, Sweet Music
I love classic rock, but some of the older stuff can be, how shall I say it, in need of a little speeding up. Take the Buddy Holly song "Crying". For the film "La Bamba" a new mix was made and it is just right:


Hey, 1 Billion Elvis fans cannot be wrong! Take a listen to the cover of "My Way":


How about a bit of Golden Earring and "Radar Love":


Have a good night.

We Had a "Market Crash" Party but Nobody Showed Up!

As if the wild turns of the financial world were not painful enough, when I was lifting the top section of the new coffee table out of the box my right shoulder made a bad sound and really hurt last night! I have full range of motion, but the shoulder is very sore. This whole getting older thing is starting to be a real drag.

Treasury To Stake Insurers at the Texas Hold Em Tournament
Last night I asked if we could go even one day without a new bailout plan, and today it seems to be answered. While this move falls under the TARP, there was never a discussion about plowing cash into insurance firms, so this counts as a new plan to me!

Mr. Paulson now sees the "systemic risk" posed by all kinds of insurance companies the world over and has decided that direct cash injections are just the thing. Maybe they could even lend it out to banks overnight! Then Paulson could say "While the banks are not lending to each other in this credit crunch, the insurers stand ready to fill the void! HOO RA!"

Now reasonable people thinking clearly may wonder why it seems a good idea to push money into the insurers right now. With CDS blowups, currency meltdowns, and various other calamities making forecasting losses by the insurers impossible, the Treasury thinks putting money into the game blindly is a good idea. Hard to argue with that logic.

The Treasury has now become in fact a deep pocketed poker player stake holder. Taxpayer money is being given to many firms to keep playing is the World Series of Poker Tournament. I can attest that there is nothing like playing No Limit Texas Hold Em with the house's money. You have this great feeling of aggression because you have nothing to lose. I think this is all going to end up good, don't you?

We Had a "Market Crash" Party but Nobody Showed Up!
I got up this morning at 5am, got some coffee, fed the dog, and sat on the couch. I turned on the TV to the local news for the weather report. I then flipped to CNBC to check the futures, and holy moly! DOW futures at 5:15am were "lock limit" down 550 points! I was sure my tired eyes had not seen the right numbers, but the shrill sounds coming from the CNBC host made me confident they were correct.

In the car I checked a few radio stations, and things were looking pretty bad. As bad as that Friday from a few weeks back at least. On the way to work I was wondering if this was the big one. Lots of blogs were calling for the end of the world. People on TV seemed scared. Everything looked like an Icelandic moment for the US. The pressure was on, and I waited for the market open.

And then nothing happened. Do not get me wrong, the DOW shed over 500 points at the open, but a huge spike up came right behind it. There was no panic. There was no capitulation. There was never any danger of the markets being shut down or "circuit breakers" being tripped. It was just another in a long line of down days. Nothing more, nothing less.

So what happened? The same thing that always happens in bear markets. I have seen this phenomena during the Tech bust, so I remember it well. What happened is that too many people are so conditioned to buy "at the bottom" that buy orders were cascading into the system almost non stop. It can be termed "panic buying" and what that means is that more people are worried about missing "the bottom" than they are of missing their last chance to sell. On cue at about 11am all the rage was the "successful test" of the lows. I saw many calls of a reinforced "W" triple bottom or other such nonsense.

Today was no bottom. The bottom comes when nobody even asks what the averages did. The bottom comes when after a week of solid gains, people want to sell the next Monday because they think the market cannot hold the gains. A bottom comes when ALL the dirty laundry is on the table and any not scared away are all that is left to rebuild. Today was not that day. Today was yet another large scale entry by institutions, mutual funds, and others chasing their losses down. As the title of the Led Zeppelin song says, "The Song Remains the Same".

The same pattern is now at work across the US financial system. Instead of opening the books and figuring out which banks are finished and which can go on the FED/Treasury buys them time with taxpayer money. Instead of a market wash out we see many trying to play the next bailout or interest rate cut for a leg up. The entire system is doggy paddling in the middle of the ocean and wasting both every one's time and all of our money.

Until after the elections and probably not until early 2009, I think the "Song Remains the Same". I would prefer we get to the root of this mess. Faster Please!

Friday Night Entertainment
No comments for anything in particular, so I guess it is all my choice!

Book Passage

"The Kurgan liked modern cities. They were seething with violence, always ready to explode. He liked the fever of the streets, especially in New York. Everything was close to the surface. If you stopped to listen, you could hear the city screaming, in a thousand different ways, through a thousand separate mouths. You could feel the tension in the air. You could sense it was ready to snap. There was always a climate of despair hanging over the false gaiety. Drunks had sudden insights into the deeper layers of the city, and tried to warn others, but people took no notice. People thought they had control. Then, occasionally, something happened-like a series of decapitations-which showed them they did not, and the normal quiet panic moved into the hysteria zone."

from the novel "The Highlander" by Garry Kilworth

Film Clip
A true modern comedy classic was the film "Old School". If you have not seen this film, you simply must! Too many laughs to even count, but here is a scene which should show why drinking too much at a wild party usually ends up bad:


Music for the Masses
I broke down and bought an Ipod. In the process of transferring my music to the computer, it was nice to come across tunes I had not heard in a long time. I had a Bette Midler album and I was like "What the heck??" The album is from the soundtrack to the film titled "The Rose" which was a loosely based Janis Joplin biopic. I then remembered the title track named "The Rose" and listened to it. I can say the song really hit me hard. Rarely will you hear a song that can elicit such emotion as this one. If this song does not truly move you you must be dead, or British. Enjoy "The Rose":


Ok, now enough sappy stuff! Never let it be said that Economic Disconnect is heartless!

When KISS reunited and came out with anew album in 1998, I figured it would suck. Luckily one of may favorite KISS tunes came from that album. Take the great song "Psycho Circus" out for a spin (complete with 3-D video to boot!):


For one of the sickest opening riffs of all time, get excited with Jimi Hendrix and "Voodoo Chile":


Have a good night.

John McCain's Open Invitation to Default

Wow, you know things are bad when the debates between George Bush and John Kerry in 2004 had more substance and were more entertaining than last nights stinker! Strange times indeed.

Paulson Pick for TARP Head as Good as the rest of His Decisions
Let's play a game. Suppose you had an imploding economy that is saddled with so much debt it is going to be near impossible to bailout. Imagine that an economic slowdown that threatens to morph into something more sinister is at hand. Try to envision how complicated the TARP will be to implement. Got all that? Now who would you put in charge of this plan? Who would inspire confidence that this will work out?

It does not matter who you picked. Hank Paulson has hand selected Neel Kashkari for the job. Besides having a name that lends itself to funny word play (Cash n Carry?) this guy is all of 35 years old!

You read that right. 35 years old. Now understand I am not an age discriminator, but I am 32 myself. The last real recession in 1991 I was in High School and so was Mr. Kashhari (or he was just entering college). During the tech bust I had been at my first professional job for just 2 years. Mr. Kashkari obviously must be super talented. I am sure he is very smart (well as smart as the folks that brought this mess anyway). It just seems to me a little more experience may have been prudent. While Paulson plans to nominate a permanent position holder, this selection seems very strange. Not exactly confidence inspiring.

John McCain's Open Invitation to Default
The only fireworks from last nights snoozer of a debate came right at the open when John McCain stated his plan to fix the economy. His idea will "fix" things alright!

McCain said that he would order his Secretary of the Treasury to buy up bad mortgages and then issue new ones to troubled home occupants. The new mortgages would reflect the new lower home value of course. And the taxpayer would eat the difference. Great stuff indeed. And McCain is the Republican nominee!

Let us take at look at this for a moment.
-Mortgage is for $200k, occupant unable (unwilling?) to pay
-Buy mortgage for $200k, issue new mortgage for $150k at low rate
-Transfer loss of $50k to taxpayer

Sounds great, Yes? Well there is a few problems. For arguments sake we will leave out the whole securitization thing as this calls into question whether pooled mortgages can actually be spliced back this way. Do you see any problems? Never mind the whole transfer to taxpayer the losses thing, that is old news and we are moving on. What happens when this occupants neighbor gets wind of this deal? If the next door resident is in the same position, he now has a major incentive to default on his own mortgage to get the better deal. It just makes business sense.

The logic is iron clad. You are underwater on your mortgage. The next door neighbor stopped paying his for 6 months and got a sweet heart deal out of it. You are paying for your neighbor's bad decision through higher taxes and a weaker dollar (eventually; current dollar rally is fake) and you are paying your mortgage as well. It just makes business sense to take 6 months off, save the cash and wait for the new deal to come in.

McCain's proposal is an open invitation to default on a mortgage. Besides being totally unfair (we are over that as well) the idea itself would cause a cascade of deadbeats looking for a better deal. While I am a fan of do overs, this one would be expensive beyond all reckoning.

That McCain thought it was a good idea is bad. That his advisers thought putting this out there was smart is bad. That as a country we are at a spot where burdening the whole to save a few is the most wanted solution makes me very uneasy.

Wake up folks. This is dangerous stuff being thrown around that will impede your progress for years to come. While McCain's idea is ridiculous, I have yet to hear anything from Mr. Obama that resembles a coherent plan. In the film "Brewster's Millions" the great Richard Pryor ran for Mayor of New York in an effort to spend a ton of money. He wanted people to vote for "None of the Above" instead of any of the candidates. A brilliant idea for this election as there is simply no choice worth selecting.

Try to remember as we hurtle towards socialism on a grand scale:
Socialism breeds decay and lack of effort. With no incentive to try, as there is no way to get anywhere, people just give up and accept whatever they are given. While this may seem nice in a pinch, it sucks hardcore as a national goal. If you think people do not care now and that most folks are lacking in drive, just you wait.

Have a good night.