Archive for May 27th, 2009

Belling Geithner’s cat

Wednesday, May 27th, 2009

Perhaps it is better to not think you know what is coming.  Everyone who has had even a 1st year economics course knows you can’t monetize debt and not have consequences.  

The FDIC is out of money.  The banks (other than the “too big to fail” money center banks) are really pissed.  Geither has used the money they’ve been paying into FDIC for 50 years to bail out American Express and Goldman Sachs, who never paid a penny into the FDIC.  The FDIC wants to surcharge all of the country’s banks to build the fund back up.  The banks (via the ABA) are actively opposed to that plan.   Geithner’s plan B is to let the FDIC borrow $100 billion from the US treasury to keep destroying the banks he designates as the next target.  

Geithner has been threatening banks with seizure if they don’t cooperate with him.   Ben Bernanke does not run the Federal Reserve, the Board does.    The regional banks are controlled by their member banks.   People who run banks are smart and they are probably the only ones that have the power to “bell the cat”.

Tim Geithner has convinced current Fed Chairman Ben Bernanke to buy up  debt that Geithner needs to sell to finance the explosion of spending needed to fund the Geithner $700 billion fund to destroy all businesses.    If the Federal Reserve wasn’t cooperating, Secretary Geithner would have to sell US Treasury Bills (less than a year), Notes (1-10 years), and Bonds (10-30 years) .  For the government to acquire more power without the consent of the taxpayers, they have to borrow money from somewhere else.

In an unguarded moment (translation: no teleprompter), President Obama told the host on C-SPAN that the government is out of money.   [The dimwit host had reversed debt and deficit in his question, but at least he got a useful answer]. 

Well, we’ve reached the point that Geithner is losing control of the Bernie Madoff like game he has been playing.   People are not showing up to buy the instruments.  Bond Rating agencies are sending signals they may need to  downgrade US treasuries. 

Coercing the bond holders at Chrysler to surrender their “first in line” status in favor of the UAW will destroy the Bond market if this is allowed to stand.   Those bonds are held by folks like Pension Funds and Insurance companies that are holding annuity money.   If one person can wave his hand and make 400 years of commercial law “go away”, the entire system is doomed.   They cannot let his action stand.   It has turned into “it’s us or them”.   (Obama+Geithern vs capitalism).  Only one is going to survive.

This week’s competitive bid auctions are finding lenders wanting a higher interest rate from the US Treasury.    China seems to be looking to B razil as a place to start sending its investment money.  The market interventions of the past 8 months by the world’s central banks has been to try to force interest rates down to zero, because there is a huge consequence to interest rate swaps and LIBOR based credit facilities if the interest rates go up. 

All it’s going to take is one big event – like the government in Pakistan falling, Iran and Israel exchanging weapons fire, or South and North Korea turning into a hot war, and all bets are off.  The GM bankruptcy itself may be enough to start the chain reaction (since we’ve known it’s been coming for 6 months, proabably most people have already taken evasive action wtih GM).  The U.S. dollar has also been declining over the past few weeks – so be cautious about interpreting the stock market going up as meaning anything.    The two forces cancel out each other (for those people whose assets are not in U.S. dollars)

I wish I had a magic bag of pixie dust to spread around and make this all go away. 

Here is the [Bloomberg Story] today that provoked this rant.

[New York Times] is raising the alarm, too.

Judge Judy to join Supreme Court?

Wednesday, May 27th, 2009

Back in the early days of The People’s Court, Judge Wopner handled each case the way judges are supposed to work.

  • Read the complaint in chambers and identify the issue to be decided
  • Consult the relevant laws and relevant case law
  • Start the case
    • Make sure the plaintiff is sticking to the information in the complaint
    • See if the defendant will stipulate any of the facts in the complaint
    • ask probing questions where the answer could be relevant to the decision but wasn’t mentioned in the complaint
    • ask for documentation to support the assertions in the case or to defend against the charges
    • ask if there are any witnesses with relevant evidence (preferably one without a personal interest in the outcome)
    • If it’s he said/she said, ask a few questions to test for honesty and reliability
  • Make the decision
    • Review the law and case law again if the answer isn’t obvious
    • If there is some issue of fact still remaining, return to the room and ask that specific question
    • write down the ruling stating the legal basis of the ruling
  • Announce the decision
    • explain the relevant law and the decision
    • Ask the parties if they understand the decision  – but not open the discussion to start rearguing the case
  • Talk to Doug Lleyelyn  (that’s just for TV and the entertainment value)

Judge Judy and later “Judge” shows have increasingly strayed from the way the law is supposed to work.   Rather than dealing with the law, the judge would probe for people’s feelings and emotions, and ask irrelevant questions for their entertainment value.   The “decision” would only be “You Win”, and no reference all to the law – just the judge’s feelings about what was fair or based on judgement over which person they didn’t like.

President Obama’s Supreme Court nominee appears to belong to the Judge Judy school of legal decision making.