Posted tagged ‘Treasury’

Ministry of Plenty 100% Sure It Will Control Inflation

December 7, 2010

Bernanke Is 100% Sure

From ZeroHedge.com:

I don’t know about you, but I’m not 100% sure about anything. The older I get, the less sure I am about everything. I question things that I was sure were true when I was 25 years old. I’m not sure I’ll wake up in the morning. I’m not sure I’ll survive my commute to work. That is why I was flabbergasted last night as I watched Scott Pelley interview Ben Bernanke on 60 Minutes.

As a side note, boy this show has gone downhill. In the old days of real journalism, Mike Wallace would have scorched Ben Bernanke, pointing out his phenomenal ability to be wrong or clueless on every financial issue the country has faced in the last 10 years. Today, Pelley underhands softball questions to Bernanke and never challenges him. It was a pathetic display of journalism.

Below is the dialogue that made me almost fall off my chair:

Pelley: Is keeping inflation in check less of a priority for the Federal Reserve now?
Bernanke: No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.
Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.

The hubris in this statement is breathtaking. The U.S. economy is a complex interaction of thousands of variables and is intertwined with the policies and actions of hundreds of other countries throughout the world. No one has a handle on the worldwide economy and no model can predict anything with any amount of accuracy. And still, this pompous professor from Princeton who has never worked a day in his life in the real world is 100% SURE that HE knows what will happen and when it will happen. I’m sure his track record of predictions and analysis will give you comfort in this statement:

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – 7/1/2005

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.” – 2/15/2006

March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,”

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

continued..

CIT Files Bankruptcy

November 1, 2009

mushroom_cloudThis has been a long time coming. CIT became a bank-holding company in December 2008 in order to qualify for a bailout from the Treasury taxpayers.  And what about the $2.3 billion of bailout money CIT received? You weren’t really expecting to ever see that again, were you?

Asian markets are in a tailspin after this announcement. I expect tomorrow will be another blood bath on Wall Street. 

This filing is significant not only because it is the fifth largest US bankruptcy ever, but also because CIT was a major source of financing for small and mid-size businesses. The pain from this collapse is going to spread all up and down Main Street.

Nov. 1 (Bloomberg) — CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy to cut $10 billion in debt after the credit crunch dried up its funding and a U.S. bailout and debt exchange offer failed.

CIT listed $71 billion in assets and $64.9 billion in debt in a Chapter 11 filing in U.S. Bankruptcy Court in Manhattan. The U.S. Treasury Department said the government probably won’t recover much, if any, of the $2.3 billion in taxpayer money that went to CIT.

The bankruptcy “will allow CIT to continue to provide funding to our small business and middle-market customers,” said Chief Executive Officer Jeffrey Peek in a statement.

CIT, which filed the fifth-largest bankruptcy by assets, said it plans to exit quickly due to support from bondholders, who voted in favor of a so-called prepackaged plan. None of CIT’s operating subsidiaries, including Utah-based CIT Bank, were included in the filing, and operations will proceed as normal, CIT said in a statement.

CIT has $1 billion from investor Carl Icahn to fund operations while it reorganizes. The credit line, to be drawn on until Dec. 31, will be a so-called debtor-in-possession loan. It also expanded its $3 billion credit facility by another $4.5 billion on Oct. 28.

Continue reading

The Great Recession is Over!

October 29, 2009

celebrationThird quarter GDP is up 3.5%!

The media and the federal government today are reporting the Great Recession is over(maybe, sort of).

Never mind that the bulk of that growth came from Cash for Clunkers (which cost taxpayers $24,000 per vehicle). Never mind that the numbers of jobs “saved or created” by Obama’s stimulus was overstated by the White House. The recession is over!

More house buying credits for everyone! Even four-year olds! Go for it – the IRS doesn’t require you to prove you actually bought a house (shhhh).

And hey, while we’re at it – how about “free” health insurance for everybody! Read all about it here – only 1990 pages long!

So come on, people – let’s celebrate! The good times are rolling again!

Debtor’s Revolt!

September 9, 2009

I am free, no matter what rules surround me.  If I find them tolerable, I tolerate them; if I find them too obnoxious, I break them.  I am free because I know that I alone am morally responsible for everything I do. 

~Robert A. Heinlein, The Moon is a Harsh Mistress

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Human history begins with man’s act of disobedience which is at the very same time the beginning of his freedom and development of his reason. 

~Erich Fromm, Psychoanalysis and Religion

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As long as the world shall last there will be wrongs, and if no man objected and no man rebelled, those wrongs would last forever. 

~Clarence Darrow

Uh-Oh. China Growing More Wary of US Dollar, Buying Gold

September 7, 2009

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As reported at Telegraph.co.uk:

China alarmed by US money printing
The US Federal Reserve’s policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”.

“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.

China’s reserves are more than – $2 trillion, the world’s largest.

“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.

Continue reading…

In other troubling news, Bloomberg reports that the “UN Says New Currency Is Needed to Fix Broken ‘Confidence Game’

Sept. 7 (Bloomberg) — The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability.

Update: Bloomberg just reported that Gold futures climed to $1000 an ounce for the first time in more than six months.

Time may be running out even faster than anyone anticipated.

Profit From TARP? Not So Much

September 7, 2009

Reporter Matt Taibbi sees through the smoke and mirrors surrounding the supposed “profit” taxpayers have made from the Treasury’s TARP program.

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It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.

This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

…it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era

Read the rest…

Bailout Tracker Update

September 7, 2009

pile-o-moneySo how much has the government’s intervention in the financial crisis costing us? According to CNN’s Bailout Tracker, the total amount committed to date is $11 Trillion, with $2.8 Trillion invested so far.

The list of recipients includes AIG, auto suppliers, automotive financing, Bear Stearns, Citigroup, Fannie Mae, Freddie Mac, Bank of America and numerous programs run by the Fed, Treasury and the federal government itself. The total cost to the FDIC alone is $35.5 Billion. See all the gory details here.