Pretend and Just Forget the Extend

Plenty of news out there. I thought the year end was supposed to be quiet? First real snow storm here today and it was so much fun shoveling and clearing the roof ledges.

People Ask Me Why I am Dizzy, and I tell Them It's Because I Cannot Stop Spinning Around
I love it when you get two items that are about the very same thing yet are polar opposites. Consider:
BofA Prices $460M CMBS Issue
HousingWire recounts BAC's sale of CMBS (only the years 2nd!) with no government support. At $460 million, not too bad. And it's in Florida which is amazing.

or try

Deal That Was Supposed To Mark Renaissance Of New York Commercial Real Estate Market Collapses
Zero Hedge covers the failure of a major New York Commercial deal.

So which way is up? Who really cares. I know CMBS cannot be good right now, I can see with my own eyes all the empty commercial property up here, but as it does not matter anymore to anyone so flip a coin.

More on the Jobs Numbers
Now that TARP will be redeployed (forever?) as a jobs program cash cow, try and remember how much all the incentive programs cost. Cash for Clunkers was a terrible waste, and the home buyer tax credit is another loser. Ilargi, of The Automatic Earth, pens this thought on the jobs spending thus far and going forward:

If we would look at more realistic job numbers, we see for example that the Economic Policy Institute puts the total number of under- and unemployed, marginally attached and involuntary part-time workers at 26.9 million. If we follow John Williams' SGS data, which include even more workers the government prefers not to count, we see that 22% of the non-institutionalized working-age population, some 33.9 million people, cannot find a job, or at least not a satisfactory one.

And, to take this one step further, if we assume that $700 billion of the original stimulus plan was intended for job creation, and the goal was 3.5 million jobs, we may also assume that it takes $200,000 to create one job. So in Obama's idea to use TARP funds for the purpose now, it would take $70 billion to make 350,000 jobs, and $150 billion to make 750,000. Creating satisfactory jobs for everybody on John Williams’ SGS list would cost $6.78 trillion.

I actually wish Ilargi had not thrown out that $6.8 Trillion number as I think Paul Krugman will argue that kind of spending is just what we need.

If You Lie Down with Dogs You Get Fleas as Well as Hair All Over Your Black Clothing
The very first question Ben Bernanke, Tim Geithner, or any official that matters should be made to answer in no uncertain terms is why the same kind of reckless lending and speculative behavior is happening again while they watch. What do I mean? Housing Doom has the goods:
Flippers Going Wild Again
Check it out.

More on Mortgage Rate Suppression
An anonymous commenter noted that Calculated Risk had another item up tonight about mortgage rates. CR adjusts his position slightly here:
Expected Mortgage Rates
CR moves from a firm "minor" effect of 30-35bps to a target range of 30-50 bps as of now.

I covered this in detail here.

My own call is for a move up in the 100-200bps range minimum. This assumes of course that the FED actually stops buying MBS in the spring. This also assumes the MBS suppliers/buyers really take such a stop seriously. They may well know that any trouble will be supported by renewed FED MBS buying so the move up may not materialize. I meant in a real world scenario, which clearly we are not in.

Pretend and Just Forget the Extend
While almost everything I covered so far can appear under this banner, I split things up because I like to do that.

I will now present the easiest financial call of all time:
Administration extends $700B bailout until Oct.
TARP will never die! Available money has a way of staying available in Washington, so this should be no surprise.

Just as a quick recap, here is the Wiki entry for TARP and it's initial mandate:

TARP allows the United States Department of the Treasury to purchase or insure up to $700 billion of "troubled" assets. "Troubled assets" are defined as "(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress."[1]

In short, this allows the Treasury to purchase illiquid, difficult-to-value assets from banks and other financial institutions. The targeted assets can be collateralized debt obligations, which were sold in a booming market until 2007 when they were hit by widespread foreclosures on the underlying loans. TARP is intended to improve the liquidity of these assets by purchasing them using secondary market mechanisms, thus allowing participating institutions to stabilize their balance sheets and avoid further losses.

Of course TARP became an AIG crutch, an automaker bailout fund, and well whatever else anyone felt like. Here is the free roll:

On December 19, 2008, President Bush used his executive authority to declare that TARP funds may be spent on any program he personally deems necessary to avert the financial crisis. This has allowed President Bush to extend the use of TARP funds to support the auto industry, a move supported by the United Auto Workers.

And by "He" i really do not think the president had much input on what or how TARP would be used. He was too dumb for that, remember?

Just like in The Usual Suspects, we need an all star line up for the best of pretend. In no particular order:
-Pretend banks are solvent
-Pretend home prices do not need to fall another 30% (in most areas) to become affordable
-Pretend jobs are not really needed in this new economy
-Pretend you can create said unneeded jobs anyway
-Pretend support will be withdrawn "in a timely manner" so that you can...
-..Pretend the US is not behaving like a third world banana republic as it relates to spending
-Pretend commercial real estate is no big deal
-Pretend that Dubai is no big deal
-Pretend that Greece/Spain/Ukraine are just like Iceland; not meaningful
-Pretend California is meeting budgets without US Federal support via "other" mechanisms

I could go on, and you should add to this in the comments.

Have a good night.

Something is Broken

Sorry all, but another late day will keep a real post from appearing. I do have a few ideas to roll out though.

Something is Broken
I have been trying to wrap my mind around what I have been feeling over the past week regarding where things stand in the financial world. Surely the picture is very muddled right now, but I have a sense that an inflection point is close at hand.

In short I think the games being played right now are finally going so far as to put in mortal danger the whole notion of "confidence in the system".

What do I mean by this? Consider:

The Many Angles of Dubai
Thus far the blowup of Dubai has been relegated to a non event. Many think that the U.A.E will simply backstop any losses and nothing will come of it. Maybe that is correct. But my mind turned back to November 28th, 2007 and another case of the UAE getting involved:

US stocks rebound on UAE's Citigroup investment
US stock markets rebounded strongly overnight after banking giant Citigroup said it would gain a $US7.5 billion ($8.6 billion) injection from a United Arab Emirates investment fund.

The Dow Jones Industrial Average ended up a hefty 215.57 points or 1.69 per cent at a preliminary close of 12,959.01. The key index had slumped by 237 points a day earlier.

The technology-laden Nasdaq composite won back a notable 39.81 points or 1.57 per cent to 2580.80 and the Standard & Poor's 500 broad-market index jumped 21.07 points or 1.50 per cent to a preliminary finish of 1428.29.

"Financial stocks are leading today's comeback attempt after news that Citigroup will receive a $US7.5 billion cash infusion from Abu Dhabi," said Al Goldman, a chief market strategist at AG Edwards.

Needless to say the investment in C has not worked well so far.

Now of course there are various ways these things get spread, warrants, special stocks, etc and all that. The main point is that all of the "backstop" cash has been in play for a LONG time already. Is there really no end?

My other point concerns last Friday's jobs number, and you are going to have to don a tin foil hat for a minute while I speculate with no supporting evidence, just thinking out loud:
The jobs number runs counter to Trimtabs estimates of job losses and also flies in the face of tax collection data. There may be some kind of reason for this.

I would submit the following thought experiment; What if it came out that the jobs number was purposely manipulated? By this I mean really fudged, totally made up. We are all well aware how items like the jobs number and inflation estimates are cooked, but that is structural cooking and it is accepted as such. I mean down right fabrication.

I know, I am crazy. No such thing could ever happen and all that. The same officials that could never do such a thing have as of right now already done the following:
Via Jesse;

They Were Making it as They Went Along- And Still Are
"Mr Kashkari admitted that he plucked “a number out of the air” when deciding with Mr Paulson how much funding to request from Congress for the Tarp."

A telling memoir of the financial crisis by neo-mountain man Neel Kashkari, soon to be maven of what he hath wrought at bond insiders firm Pimco. Where did the $700 Billion Paulson Plan come from? Neel simply made it up.

They not only did not know then, as should have been painfully obvious to anyone who looked at the ten page request for $700 billion or else, but they also do not know now. When you do not have the facts to support your case, employ fear, uncertainty and doubt (aka FUD factor).

So the biggest bailout in history was just a wild guess based upon some number less than a Trillion, which would have been politically unacceptable? This is just unreal.

What about the FED making new rules up at will with no checks on their actions?
Hat tip Edwardo and from Naked Capitalism:
No Need for New TARP: FED Land Grab in Miller Amendment
At a time where the FED is under scrutiny and there is some real noise about rolling back their powers, the FED steps right up and does whatever they hell they want in plain sight. I do not think they believe there is any chance their powers will be rolled back.

Plenty of talk about even more money for jobs (it worked so well the last few times) programs and other stimulus, but the vast majority of any money will be gobbled up by bankrupt states in an effort to keep government workers (fastest job growth sector in the US) on the payrolls (Via Mish):
Coming Collapse of Municipal Bonds; States, Cities Dig Deeper Holes
Amazing stat of the day from the article:

New Jersey Perspective
New Jersey has $36.5 billion of gross tax-supported debt.
California has $75.2 billion of gross tax-supported debt.
New Jersey has a population of 8,682,661.
California has a population of 36,756,666.
Let's do the math.
New Jersey has 23.6% of the population of California and 48.5% of the tax supported debt.

Clearly sustainable.

With an economic recovery on tap for 2010 (didn't you hear, maybe 4% plus growth!) bond buyers sure want to be compensated for future inflation and robust GDP growth:
$29 Billion 1 Month Bill Prices at... 0.000%
Another hopelessly oversubscribed bond sale with no return.

That is only for 1 month you say? Ok, looking further out on the curve:
$40 Billion 3 Year Auction Closes At 1.223% High Yield, 50.40% Allotted At High
Wow, 1.2% over 3 years in the midst of a V shaped rebound. Sounds like a great play!

All of the snippets I covered tonight are related in some way. Something is broken here and I think something has to give.

Have a good night.

Out of Time

I got home late and had some errands to do, so nothing form me this evening except a public service announcement.

Important Public Service Announcement
Keep this in mind during swine flu season (slight harsh language alert!!):

see more Lol Celebs

Have a good night.

Weekend Bonus

It is cold here today and raining thick heavy drops that are going to change to snow. Of course this means I am in a great mood as long time readers know my longstanding hatred of the wintertime. We did get our Christmas tree today and that at least is a bit of fun. I tinkered with the blogroll to better refelct my daily reads. Please check them out.

Do They Ring a Bell?
My only serious thought for tonight concerns the current accepted thinking on the markets. They say they never "ring a bell" at the bottom, but should some things come to pass Friday will be looked upon as a close approximation of a bell being rung!

From what I can gather, here are the new rules going forward. These are all going to be very crowded trades in short order and it seems everyone just knows these things are coming. Sometimes the herd is right, other times.....
-Stronger Dollar (not many giving ranges, but I would throw out "stronger" has to be 10-20% higher from here)
-Lower Gold and Silver (maybe not $0, but at least 50% off from here)
-FED Raising Rates (unreal I know, but a spring rate hike is all the talk yet again)
-Higher mortgage rates will not hurt the housing recovery (head scratcher here, huh?)
-Job Creation Sustained into 2010 (Ok if you say so)
-Stock market which was pumped up on a weaker dollar goes up on a stronger dollar, well, because it will.

So you have been warned. Positions should be easy to figure out. Have at it.

Movie Posters
I have seen quite a few good films as of late and now I have the "Film Bug" where I am thinking of movies quite a bit. I am going to post a bunch of movie posters this evening, hope you enjoy.

Recent Hall of Fame Films
Some new classics, so if you have not seen them, you should!








Other Posters
A collection of posters of various films.

















Have a good night.

Punched in the Nose

I have dinner plans tonight so there will not be the usual Friday Night festivities. If the comments are sufficiently morose about this, I may make it up with a Saturday Night Fever of Fun post tomorrow!

Punched in the Nose
I am pressed for time but I did not want anyone to think I was ducking a post on a day when there was data and market action that goes counter to some of my calls!

First off the unemployment number. I was shocked this morning to see a -11,000 print! Even the lowest estimate I saw came in at about -100,000 so this was a 10X better than expected showing. I could parse the numbers and show that these numbers have some issues (they do) but when you get punched in the nose you don't complain it is unfair, you take the shot and move on.

This number was startling and stocks took off at first. Then the idea that easy money may be ending sooner than expected made the indices close about flat. That is interesting in and of itself, is it not? If jobs are being created (good thing) then accomodative policies can be withdrawn (shows strength in economy?) but this is bad for the market. Tells you all you need to know about equities.

Gold and silver were bloodied as well, taking a good sized hit. As Mark of The Illusion of Prosperity has pointed out as of late, the eye popping volume in GLD and SLV meant there was some major maneuvering going on. Not exactly the buy and hold crowd at work. Of course these are proxies for the metals and they have lives of their own.

With the gold and silver trades so heavy right now one can expect increased volatility in Au/Ag prices. Of course metal miner investors understand wild volatility, but I fear this may creep into the metal prices themselves and this will have an even more pronounced effect on miners.

Bottom Line:
It seems a bit fishy to me that a 10X better jobs print would post on the SAME EXACT day as the "jobs forum" at the White House. Add to this a monster dollar rally right after Ben Bernanke was grilled in his confirmation hearing, and you have a suspicious situation.

That said, the macro picture has not changed. I think I would need to see 3 or more jobs adding reports in a row to sway me into thinking firms are really hiring (something outside of education/government/health care growth for example). Also a number of economic reports show a clear slowing once again in the real economy. This will make the current talk of rate hikes and ending of stimulus look dumb.

Still, one day wonders occur and there was plenty of technical damage done today. The next few weeks will be a great time to figure out how you want to be positioned into the new year.

In close, try to remember to duck when someone is swinging for your nose!

Have a good night.

How Much is the FED Suppressing Mortgage Rates?

It is always great after Thanksgiving to have Thursday night football every week. Not really an interesting game tonight, but at least it is an NFL game.

Where Does Too Big to Fail (TBTF) End?
A long time ago I gave up the ghost (not Gawainsghost!) on any discussion of moral hazard and all the ramifications, seen and unseen, of overextended government actions. Luckily a bizarre circumstance has surfaced that brings those idea back to the front burner and perhaps now will get another look.

You all know the story; there are quite few firms of various sorts that are too large and too interconnected to be allowed to fail or the entire Milky Way Galaxy will suddenly fall apart. Due to this cataclysmic possibility governments the world over have stepped up to make open ended commitments to these kinds of firms regardless of how badly they performed. Not exactly a good bedtime story.

Forget for one moment how TBTF is applied, at times this can mean an insurer like AIG, and other times it can mean a automotive finance arm like GMAC. The rules are amorphous and we are too stupid to understand these things anyway.

Instead I want you to think about the following example and see that the mess that we have been dragged into will never have any bounds.

This morning I caught the following story:
RBS Board Threatens To Quit Over Bonus Limits
The story details threats by the board of RBS to quit unless they can offload about 3 Billion in bonuses. Later in the day it seems the UK's Gordon Brown (Mr. Gold Sale) said "too bad so sad" to the board:
UK Prime Minister Gordon Brown Tells RBS To Shove It
but we will have to wait and see what happens.

Remember last week a similar story was written about AIG. Bank of America is repaying TARP in large part to become removed from pay restrictions. Goldman Sachs has a powerpoint presentation ready to show why their guys are getting paid more than ever this holiday season.

So now my question is this:

If a firm is TBTF, how much leverage can the employees of said firm employ to enrich themselves via bonuses/bigger paychecks/outright theft?

And here is where hasty moves and a lack of thinking bites you. If all of AIG's employees stuck together and demanded they all make 3 million a year (do they already?) or they will all walk and AIG will fail, what can the FED/Treasury/Government do? Let them walk? Pay them? Who knows. The point is we should not be in a position where my writing this ridiculous example is anything more than comedy. Instead it is a serious item for discussion. Please weigh in.

How Much is the FED Suppressing Mortgage Rates?
In a tale that goes back quite a while and holds some personal interest for me there was some grumblings today regarding just how much FED purchases of MBS has suppressed mortgage rates over the past year. Some history;

On September 22 this year I penned a missive titled "Corrupted Data Sets". In the post I took aim at claims by Calculated Risk that FED MBS buys were a "minor" effect on rates as absurd. This was the start of my move away from CR analysis, but allow that dates story to fill you in:

Corrupted Data Sets
I have been reading Calculated Risk for over 4 years now. The quality of the site is unmatched and the insight offered is top notch. As of late I have noticed something of a change over there (maybe you have too?) where the author has been ignoring key aspects of government policy and looking only at data as if the data itself exists in a vacuum. Now I am not going to pick on CR here, I really cannot fault his logic in the post in question, but I can argue that the omission of serious factors colors the data.

So what am I talking about? From September 17th CR writes:
The Impact on Mortgage Rates of the FED Buying MBS
There are some charts worth a look. His summary:

I think the impact on mortgage rates from the Treasury purchases is minor. This suggests to me that mortgage rates will rise by about 35 bps, relative to the Ten Year yield, when the Fed stops buying MBS.

How is that for a whopper? "I spent 1.3 Trillion on MBS and all I got was a 35bps rate reduction" does not quite fit on a T-shirt!

There is more in the relevant section of that article.

Later on October 29 I returned to this same item again in a post titled "Distortion of Economic Information" which is very similar to the last title! I wonder why? (Sorry for the long repost section, but very relevant):

The Distortion: Through the purchase of the worst of mortgage assets, the FED had hoped to reignite lending. Instead they were inundated with sellers looking to offload MBS, and the banks never returned to the market. The FED used all the tolls available to maintain all time low rates for mortgages even though the real rate is much, much higher.

Results: Even in the face of this kind of effort, the results have been weak at best. Sales are still poor and only yet another program, the home buyer tax credit, was able to generate much interest. Underwater homedebtors are doing the smart thing and giving up, not rolling into a low rate mortgage set up for 50 years on a home they are under water on.

Future Issues of Distortion: There are many, so a list is in order.
-The FED's 1.5 (or whatever) Trillion dollar MBS purchase program has been credited by many bloggers I respect dearly (Calculated Risk among them) with lowering mortgage rates about .30 bps. So if the FED helped rate is say 4%, with out the program mortgage rates, by their thinking would be 4.3%. I reject this outright as insane. If true then two things are also true:
-the use of this money was an poor waste of taxpayer funds and increases risk for the FED exponentially
-there was no real gain; .3% will not make one iota of difference in the long run. Not one bit of difference. At all. They clearly have lost it.
With banks charging 30% annually for credit cards, I have no idea what a Citi mortgage may cost. I think it may be a hair over 4% though. What this boils down to is that the FED will be hard pressed to exit this program.

If mortgage rates moved up from the federal sweet deal of 4-6%, up to banking world rates of 7-9% (low end IMO) this will wipe out 20-30% of a homes price right off the top. Whether you think home prices are rising or not, they are not rising enough to cover that spread should rates return to anything near normal. This is a key point.

That is a lot of things to scan through, but I wanted the proper context for tonight's post.

While scanning around today I stopped over at Calculated Risk because I had seen a WSJ piece which covered this very topic. I was a bit relieved to see CR covering it as well. Here is CR's take:

FED's Sack: MBS Purchases Lowered Mortgage Rates by 100bps
From the WSJ Real Time Economics: The Fed’s Market’s Guy Eyes Asset Sales and Rate Increases (ht Paul)

'Brian Sack, who runs the markets group of the Federal Reserve Bank of New York, spoke to the Money Marketeers of New York University ...

Mr. Sack’s group estimates that the Fed’s purchases of $300 billion in long-term Treasury securities earlier this year helped to push yields on 10-year Treasury notes down by about half a percentage point. ... Purchases of mortgage backed securities, he says, pushed those rates down by a full percentage point.'

This is significantly higher than my estimate of 35 to 50 bps and suggest mortgage rates might rise sharply next spring (the MBS purchase program is scheduled to conclude by the end of the first quarter of 2010).

Update: Apparently Sack's might have been referring to the decline from the peak of the panic (not clear from the brief excerpt). Of course the purchases started in January - months after the peak of the panic - and that isn't what people are interested in.

A bit of a qualifier at the end, but I was glad to see another take on this topic.

Another view of the same speech takes into consideration both MBS buys and Treasury buys which mess with spreads many ways. From Mortgage Insider:

Big Mortgage Rate Jump Coming in Spring?
Sack’s group estimates the Fed’s $300 billion in Treasury purchases helped push down rates on those securities by half a percentage point and its purchasing of mortgage-backed securities (it will eventually buy $1.25 trillion) is pushing down rates on those securities by a full percentage point.

If he is correct, then when the Fed stops buying MBS on March 31 it is possible that the jump in mortgage rates will be higher than the 25 to 50 basis-point increase some economists have predicted (there are 100 basis points in one percent). Of course, knowing this the Fed may once again extend its purchases of MBS, keeping rates artificially low.

He also argued that the Fed’s buying of Treasury securities could be pushing up prices of risky assets. Here’s more from the Journal’s Real Time Economics blog:

'It works like this: As the Fed drives down yields on Treasury bonds and mortgage backed securities, investors bid up the prices of other assets, like corporate bonds and equities. (Sacks) goes on to say the Fed may some day need to raise short-term interest rates “further than would otherwise be the case” to offset the potentially powerful portfolio balance effects of these holdings. (Plain English Translation: If the Fed’s fast-growing balance sheet creates a lot of froth in the markets, the Fed might need to raise interest rates aggressively.) An alternative would be to dump the holdings. He doesn’t advocate either approach, but lays out the arguments for them.'

Back in Finance 101 in business school, I was taught that the present value of a security is calculated by dividing anticipated income by a certain interest rate — we could say a risk-free rate plus a risk premium. Well, if the government is lowering the risk-free portion then we can expect people to be overvaluing the security — in this case I mean the risky asset he is talking about such as the stock of a company. (Please excuse my oversimplification of the PV formula.)

Another view.

I stand firm that the following policy experiments on mortgages have caused a severe distortion in mortgage rates against what those rates would be in a real market:
-FED MBS buys
-FED Treasury buys
-FNM/FRE stuffed to gills with mortgages over last 6 months
-FHA about to bust after taking up the slack
-US government bought over 90% of all mortgages last 3-4 months

If anyone thinks after all of the above a BAC mortgage in 6 months after all these things wind down (in a dream world) will be only 35-50 or even a 100bps higher than now you are as off as can be and are no longer making judgement on reality, but applying half measures using false inputs and pretending they are real. You are party to extend and pretend by doing this.

Economic Disconnect does not pretend.

If you need yet another example of the kind of fantasy land we currently live in, take this great find by the blog Housing Doom which shows how far things are going with no oversight or debate:
Another Treasury Bailout to Assist First Time Homebuyers
Tonight's MUST READ and I strongly encourage you to read the whole thing, but I will excerpt the most relevant hook:

"We didn’t have anyone purchasing the bonds at a competitive rate so now the U.S. Treasury has agreed to purchase them," said Patricia Braynon, director of the housing finance agency for Florida’s Miami Dade County. "It will generate an artificial market."

This madness has to end and anyone not willing to confront reality is playing the same games as the FED/Treasury. Who wants to play with them?

Have a good night.

Wednesday Out Takes

I think I may be having a blogger issue (non posting of comments, is post showing up?) so I am going to do a smallish post tonight. The news is more of the same with a few nuggets so not much earth shattering to share. Do me a favor and leave a comment on the post so I can tell things are working OK. Just leave something short like "Test Comment" if you do not want to write something longer.

Ben Bernanke Confirmation Vote Tomorrow
I have not written much about the up coming Ben Bernanke new term confirmation vote scheduled for tomorrow because I figured it was a lock. I of course do not support his renewed term. His actions speak for themselves and one who was so clueless as to what form the crisis would take on cannot also be lauded without end for a response to said crisis. Besides, lowering interest rates to 0 and making government backstops of all forms is hardly singular thinking, Wall Street could have set FED policy over the past 2 years. Maybe they did.

I am even more frustrated because any replacement candidate will likely be a Greenspan/Bernanke clone and nothing will have been accomplished.

Best line on this issue comes from Yves Smith of Naked Capitalism:

"This notion of Bernanke being “critical” further suggests that Wall Street believes or knows he has and will manipulate markets on their behalf. Of course, Bernanke did so in an explicit way with the $1 trillion Treasury/Agency market intervention that started in March and is tailing off now. And of course, there has been the raft of special facilities, but those are supposedly being wound down now. Has there been even more, as some have charged, than what has been made public?"

I still think this is a done deal, but you never know. If for some reason Bernanke is not confirmed or it is delayed then expect a huge temper tantrum from the markets to the tune of a 3% down day. Remember when TARP failed the first time?

The End of TARP; The Beginning of Plenty of Other Things
There was news today that Bank of America was planning on repaying TARP funds. Add to this the slow trickle back of a bulk of the emergency cash from banks and TARP almost seems a memory. Of course this says nothing about the ultra cheap money the banks are still getting from the FED and a myriad of other payouts/bailouts/backstops but lest leave that alone for a moment.

Why the TARP payback rush? Read the fine print. The TARP is a vehicle for the Treasury to use as they decide it is needed. I do not recall a time frame on that money, just an amount. What does this mean?It means there could be up to 700 Billion that needs a home without a new vote by the Congress! What a deal! Well I can think of plenty of things TARP will now be deployed for:
-FDIC
-FHA
-State Municipal Bonds
-Commercial Real Estate
Now I could be wrong, but I think in front door out the back door is the plan here. Chime in if you see it another way.

Have a good night.