Thursday, September 25, 2008
Let's define some terms
We, the people will have a stake in assets that will regain most, if not all, if not even more, of their value over the long term.
It must be done, and the Democrats seem to be doing what they can to rectify the most egregious aspects -- sins of commission as well as omission -- of the president's original plan.
But, all credit that is securitized, and that's most credit, is at stake. Unless you don't want to be able to get a car loan, or a boat loan, or a credit card or store account, you need to swallow hard and let the suits do what they gotta do.
John McCain is a chicken.
I'm being kind in my choice of words. The old-timey term for Ice-T and Eames, my cats, is bouncing around in my head.
He is needed to "help fix the economy." Bullshit. He and the rest of the trickle-down, free-market-worshiping drones are the ones broke the financial system and they're the ones responsible for the threat to the economy.
Among other things, McCain also is out of touch, stubborn, quick to anger, detached from modern reality and bright but not actually very smart.
Barack Obama is slick as all get-out.
And I mean that as a compliment.
Yesterday, at his afternoon press conference, he said the debate should go on without calling McCain a chicken, he kept his cool, and his stature, and he uttered the very best kind of zinger, a true one, in saying that a president needs to be able to do more than one thing at a time.
One wonders how he's going to handle two wars at once. Perhaps postpone the war in Afghanistan while we clean up the mess in Iraq? (Perhaps he just needs to reinvent the Blackberry again, so he can keep his schedule less cluttered.)
The 3AM phone call: "Hello. This is Ol' Grampy McCain. You've reached the Office of the President. All our neurons are currently busy. Your war is important to us. Please stay on the line and your war will be handled in the order in which it was received."
As the bumper sticker above my desk reads, "Someone less dumb for President."
"Your war is important to us. Please stay on the line and your war will be handled in the order in which it was received."
Hoo hoo hoot!
At least this will give Obama an oportunity to take a gander at the place and see what he might want to renovate.
One question, what happens if McCain puts his ass on the line and the Republicans don't vote for it and it fails? You know when the role calls start and the and the Democrats see the Republicans voting no, their not going to go ahead and stick their neck out on this. I don't think John can deliver.
I assume he'll ask for a do-over, with no touch-backs.
Red State, McCain's campaign may be managed by a Rove protege, but it appears to be run by a group of schizophrenic orangutans who have gone off their meds. He is already being mocked in the press - shoot, he didn't even reach the end of the day yesterday and Letterman was making fun of him - and Congressional Democrats and Republicans are screaming "Stay Away!". I think he figured he could look Presidential, but all he does is look weak and silly. I'm still trying to figure out what "suspending his campaign" means in light of the fact that his ads are still up and running, his offices are still open around the country, and his surrogates are all over the TV criticizing Obama for not suspending his campaign. Does this mean McCain wants the election pushed back for as many days as he "suspended" his campaign?
Credit markets cheer bailout deal, but faintly
By MADLEN READ
NEW YORK (AP) — The credit markets heard some upbeat news about the government's rescue plan Thursday, when lawmakers reported they were closer to an agreement on the deal. But in a market that has been stymied by a lack of confidence, it was still hard to trust that the government bailout would become a reality — and get the lending business back to health.
Lending has fallen to a dangerously slow pace amid the credit crisis that is now more than a year old. Without lending, people can't buy homes and businesses flounder. Although the government's bailout plan is aimed at getting the nations' banks back to a position where they can lend again, no one is sure yet how long that will take — and when the trust that the world's investors lost is going to return.
There are growing signs of how little faith there is in the lending business. Treasury bill yields remained at dramatically low rates Thursday because people are in search of the safest investments possible, short-term U.S. government debt; other markets, including stocks and commodities, have been torn by volatility in reaction to the dramatic slowdown in lending. Another sign: borrowers, among them the state of Tennessee and heavy equipment maker Caterpillar Inc., are paying higher rates to get access to money.
"Credit is the oxygen that this economy needs in order to operate. If you deprive an economy of credit, you get a slow death," said economist Bernard Baumohl, executive director of The Economic Outlook Group.
Congressional Republicans and Democrats reported that they agree in principle on the bailout — news that the markets have been waiting to hear since first word of Treasury Secretary Henry Paulson's $700 billion plan on Friday.
But questions remain: How much of the government's money is it really going to take to clean up banks' balance sheets? Will relieving banks truly boost the slumping housing market? And how long will it take for any real impact to be felt?
"The economy's still in a lot of pain," said Jim Wilcox, professor of financial institutions at the University of California, Berkeley's Haas Business School. A bailout "will hasten the day of recovery," he said, but "it's not a panacea."
There is growing evidence that borrowing, which already been difficult for some time, is getting increasingly tough.
Marty Regalia, the U.S. Chamber of Commerce's chief economist, said during a conference call Thursday the group's mid-size member companies are finding it harder to get credit. One problem companies have been contending with is a lack of demand for short-term corporate debt known as commercial paper. Commercial paper rates were up again on Thursday.
The credit markets are where borrowers go to find loans for the short term, medium term and long term. Because so many market players, like banks, are now afraid to lend — or unable to do so, because they have little capital to work with — high borrowing costs are slamming individuals, businesses and municipalities.
On Thursday, a Tennessee official said the state is paying double its normal rate for short-term borrowing, while a Connecticut official said that higher interest costs are contributing to a $1.3 billion deficit projected for the end of the 2012 fiscal year.
Earlier this week, the machinery maker Caterpillar Inc. was able to issue $1.3 billion in long-term debt to raise money, but it had to pay the highest rates in decades, according to analysts.
Anxiety about the security of money market mutual funds is also keeping individuals and businesses on edge. Money market funds used to be considered safe places to stash cash, but no longer, after the Reserve Primary Fund "broke the buck" last week. When a fund breaks the buck, it means its assets no longer cover each dollar invested in it.
Goodyear Tire & Rubber Co., for one, said Thursday it had to draw $600 million from its credit lines because it was unable to access cash, more than half of which is invested the Reserve Primary Fund.
And General Motors Corp. CEO Rick Wagoner said Thursday that the automaker exercised a $3.5 billion credit line last week as a defensive move to preserve liquidity in case the credit markets remain tight.
There are several thermometers of fear in the credit markets. One is the 3-month T-bill, and another is the London Interbank Offered Rate, a bank-to-bank lending rate known as LIBOR, which more than half of adjustable-rate mortgages are tied to.
For 1-month dollar loans, LIBOR jumped to 3.71 percent Thursday from 3.43 percent Wednesday, while the 3-month dollar LIBOR rate soared to 3.77 percent from 3.21 percent.
The 3-month Treasury bill yield rose modestly to 0.72 percent after Thursday's news on the bailout. That yield is up from 0.49 percent late Wednesday, and up significantly from last week's trough of about zero when panic was at a peak, but it is still well below where it was a month ago, 1.73 percent. The lower the yield on a T-bill, the more desperation there is in the market; investors are willing to take a return of practically nothing in return for preserving their principal.
Perhaps the most telling when it comes to gauging banks' willingness to lend is the "TED spread," or the difference between the 3-month T-bill and LIBOR. This is because LIBOR rates measure how risky banks believe it is to lend to other banks, while T-bills are considered virtually risk-free.
The "TED spread" narrowed some after the news that the bank bailout would get passed, but it remains at around 3 percent, its highest levels since October 1982, according to Los Angeles-based Global Financial Data. And the swap trade that shows what the markets are betting LIBOR will be on Friday was up late Thursday, said Howard Simons, strategist with Bianco Research in Chicago
LIBOR may be inflated right now because of the massive amounts of money that central banks are lending to commercial banks directly, Simons said. He also said the lack of borrowing and lending going on between commercial banks might be due to "window dressing" — getting books in order ahead of the quarter's end.
The market sometimes "reverses on a tick," Simons said, but "it's best to declare victory when it's in the rear-view mirror."
Longer-term Treasury issues were mixed by Thursday afternoon, as some investors took advantage of the stock market's rally Thursday; the Dow Jones industrial average rose about 250 points.
The 2-year note fell 1 2/32 to 99 27/32 and yielded 2.16 percent, up from 1.96 percent late Wednesday.
The benchmark 10-year Treasury note slipped 9/32 to 101 8/32, and its yield was at 3.84 percent, up from 3.81 percent. And the 30-year Treasury bond rose 10/32 to 101 25/32, and its yield dipped to 4.39 percent from 4.42 percent.
Some investors are worried that the Treasury's bailout plan could boost inflation. The fixed returns from bonds with long durations lose value over time if inflation rises.
AP Business Writers Christopher Rugaber in Washington, Tom Krisher in Detroit, and Bree J. Fowler in New York contributed to this report.
Roll on sunshine, Wall Street is still in front of you.