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They Did What?
According to a number of news stories the Build America Bond program is
dead. It is possible that some last minute deal will be made for BABs,
but time is running out and there does not appear to be sufficient
support. This from a Reuters story:
Congressional Republicans will block any inclusion of Build America Bonds.
“We have a very firm line on BABs -- we are not going to allow them to be included," a congressional Republican aide said.
I wrote a few articles over the past few months on BABs. My
articles always trashed the program. It is just a subsidy that hides
weakness. I hate things that go in that direction.
I did all that writing because I was absolutely convinced that BABs
would be extended. There were dozens of lobbyists all over this. Wall
Street’s white spats crowd spent big bucks to get this kicked down the
road. Big states like California, New York, Texas and Illinois were
pushing their legislators hard.
It wasn’t the political muscle that lead me to believe that BABs would
be extended. I saw it as a critical component in municipal finance. If
it was eliminated I thought we could quickly evolve into a crisis with
certain states debt. I was by no means alone in that observation. This
comment from the rag for the muni market, The Bond Buyer:
If the
Build America Bond program expires at the end of this year, long-term
tax-exempt bonds could lose their latest pillar of support.
Parts of me want to be proved right about the significance of this
development. I am one of those who thinks there is too much debt
creation at the governmental level. Well, it just got more difficult for
munis to borrow. By itself, that will curb debt creation.
There is another part of me that is saying “gulp”. By definition,
you do not see a black swan in advance. I did not see this at all. I
don’t count, but the market does. If you follow markets you now have to
have a screen for muni pricing. As this sorts out over the next 60 to 90
days the muni market might drive the global markets.
I’m thinking to myself, “How could they have blundered on this?”
They extend the Bush cuts for everyone. They tack on another 120b of
deficit spending with a cut in SS taxes. And they throw in another year
of unemployment checks. They threw the sink at the economy at the sake
of the deficit. But they failed to pass BABs? Knuckle heads. If there is
a hiccup that takes a big state out of the market for a spell it will
trump the economic benefits of all the new deficit spending. It might do
it a few times over.
Links to my prior posts on BABs:
Here, here and here
»
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County Courthouses will burn.
Maybe we can turn them into kangaroo petting zoos.
The GOP wants to blackmail the states. My guess...they'll want to dilute realestate laws and other State powers in return for continued funding of the party. Could be a good old fashioned realignment of central vs. state powers going on.
Bruce...BE QUITE!
Now they are going to add them back, therefore keeping the ponziconomy going...you guys keep giving the answers away to the quiz and we are really screwed!
BRUCE / Have you read or seen this ARTICLE this morning on Reuters. It's worth being aware of...
http://blogs.reuters.com/james-pethokoukis/2010/12/07/secret-gop-plan-push-states-to-declare-bankruptcy-and-smash-unions/
Thanks for posting this article by "Jimmy P". It fleshes out Bruce's article nicely.
The author is a regular on Kudlow's show (yes, I do watch it as there are some folks who appear as guests that I like), and he seems to be level-headed. I don't always see things his way but he appears to be thoughtful instead of just a policy wonk.
Fucking crisis addict with more power always the cure.
Right now I see these GOP statements as political posturing. They're greasing the machine with threats in order to execute a larger agenda.
Could it be as simple as the new power player (republicans) punishing those who supported the old one (democrats)?
Of course, payback's a bitch
In my municipality, BABs were just a form of under-the-covers graft for politically-connected commercial developers. Good f'in riddance.
Muni bond yields are, what? half what they were 10 years ago? Nobody bitched about it then. States are just manufacturing a crisis because they don't like price discovery.
too funny for words..babs is bad, where's my babs??
debt extension with no possiblity to pay off is folly or criminal, take your pick.
If the gop congress can starting cutting gov debt programs who here on ZH has the guts to say wrong..well seems like a few do and they deserve our contempt.
This just isn't that big a deal--states and municipalities will just go back to borrowing with tax exempt interest, which is only marginally more costly than BAB financing is (was). If this is part of a Republican plot to reduce leverage at the state and local level, it won't work.
I was looking for this comment. I agree with you. As long as traditional munis remain tax-exempt, the federal government is subsidizing state & municipal borrowing...same as it ever was.
However, BABs opened up muni credit to a much wider investor base (lower tax bracket and more importantly tax-sheltered investors). Allowing the program to expire will divert issuance back to the traditional market, and since this is means a smaller (although still large) investor base, I think you'll see more push back on muni rates going forward.
and tehn we can haz Greece?
Wouldn't this have the effect of centralizing power at the Federal level?
What I mean is, if states are forced to cut back, won't the Federal government have to step in with expansion of state programs to cover for the loss of state programs?
In which case, doesn't this benefit those who are powerful at the federal level, which is to say, those that are most powerful of all?
The fact that this further concentrates power makes it more likely to happen, in my opinion.
The costs of economic ruin resulting from the financial swindling and militarism are being passed down to the states and municipalities.
They will be increasing their regressive taxation, and doubtless will become even more dependent on Fed "loans" and "emergency assistance" from Homeland Security.
A sorry mess.
There is another option besides continuation at the federal level of discontinued programs.
Termination.
I thought it was more about herding those subsidized muni debts over into private usury (after their first-ones-nearly-freebies have them all twitchy and strung-out like your avatar) on behalf of the GOP's owners (yeah like slaves, bitchez).
"the South will rise again" is not an idle chant, it is believed. Lets see what the gentlemen from South Carolina and Georgia do with this threat to their rice bowls. They are none to short of bank failures, fat government programs, and a populace hurting from taxes....they need their muni bonds sold.
YEEEEE HAW Bitchez!
We're not an apologetic crowd down here.
Just as the IMF & EU desire that European states lose what remains of the fiscal sovereignty, US federal authorities desire that states lose theirs. Amazing that this is being pushed by what passes for conservatism. I am sure Palin would echo Merkel in that states just need to develop more sustaining exports... Meanwhile it's all faith based governance and federally sponsored state enterprise, private & public since it is now all the same.
Is anyone else tired of this kind of financial terrorism? Attention misguided policymakers - continue to subsidize our borrowing binge or we'll blow up the mortgage market/European banking system/S&P 500/the planet! Shameful.
Bruce, I find this hard to swallow. With the Republican wins in so many states, I can't believe that the brothers would let their kin die on the vine or hang from a lamp-post.
Then again, I have never seen so many who are willing to throw their childern off the cliff for the benefit of their friends.
Many of the republican wins in those states were people toeing the tea party line of making the government live within its means. The republicans currently in Washington aren't comitted to that line of thinking and may well be giving the limited government segment of the party what they asked for and forcing them to 'put up or shut up'.
I really don't want my children and grandchildren paying for a continuation of Progressive/Marxist policies as evident in CA, Il and NY, and I would hope that the rest of you see not only the moral hazard of this but recognize the inherent danger to this country in policies meant to ultimately destroy this once great nation.
like ive said many times before. they tendency many have in the usa to equate everything bad that has happened to them economically with liberals, socialism, and proggressives...is truly pathetic. pitiful. most of this stuff is being done by staunch republicans who just love eating up all they can with their greedy little paws. and then they call it free market, good for business, pro-american. they wave the flag a little bit and act macho and talk some war talk and before you know you have wet your pants and think. omg...these people are great....its those liberals....its the fking progressives. THEY are destroying the country. no sir. its wall street. financial-industrial-military complex. very simple. nothing liberal about it really.
barkingbill,
You'll enjoy this--
http://www.rollingstone.com/politics/news/12697/64796
Taibbi’s Takedown of ‘Vampire Squid’ Goldman Sachs From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression — and they're about to do it againWe really need to stop thinking about this all in terms of countries--is the USA socialist?, capitialist? blah, blah, blah...It doesn't matter much any more.
There is a New World Order at work. Multi-national investment banks that can starve people in poor countries by manipulating food price, profit from fraudulent securitization in others, etc...They make money globally and are not accountable to any government nor do they have any allegience to any country.
Dems and Reps refuse(d) to regulate and keep caged the vampire squid so it is out feeding on everything it can grab with its' many slimy tentacles.
Yesterday, I spent a very frightening hour with a trader who works for an oil and gas producer.
What's coming in 2011 in terms of energy prices will f()ck any economic recovery. And you can bet the vampire squid will make it worse.
Got long under ware?
Got wood?
Got solar panels?
Got geo-thermal?
close Barking,
but it -is- BOTH.
The greed of the Left is "$ocial engineering"...
on the Right it's "financial engineering"
Funny since what is killing the budget process in CA is a direct result of government by referendum. CA is no more Marxist than Wall Street is Capitalism.
You really believe that the meddling into the private sector in California, whether it be from the capital or from government by referendum does not have any of it's roots in a maxist/socialist/collectivist soil?
There's a reason business in leaving California. It's not because of their pro-capitalist ways.
Oh, the humanity. You got junked by a Socialist, EJ.
Tell me where is there capitalism in America? The dynamics of funding are more acute in CA simply because the dynamics of debt rather than asset accumulation are more concentrated there, (read Greek like in public finance and Portuguese like in private). Makes the poison of state sponsored enterprise harder to conceal since everyone is at the trough. A simple reflection of greater macro dynamics. Hence the reason we are seeing these play out in the largest states first. DUH. Like Texas & California are both equally "Marxist". roflmao
Hey DUDE go back to smoking the green with your professor , he can keep feeding you this junk,
WTH maybe some of this waste at local level needs cutting . When EPA decides to change arsenic levels limit from 50 parts per billion (ppb) down to 10 PPB then a city close by to me has to shut down their wells , and buy surface water from the biggest city in the state at much more cost and maintenance. Because without any proof they (EPA) think its safer this way ! Or my little city likes to waste monies on pet projects that few ever notice and even fewer benefit from but some city father wants , but this city leader wants it. There is a lot of waste and alot of unfunded mandates that need to be squeezed out of municipalities i am and have lived this for many years i have seen the waste so to tell us that it ain't so is like telling a defense contractor that there's no waste at the defense department lol
I would say there is capitalism everywhere in america. Ultimately, we have made another trial run at capitalism. I concede that in pure textbook form, we have not made a trial run... but, practically speaking, the inevitable conclusion of representative democracy and mixed capitalism (government involvement rendering any capitalistic system, "mixed", by definition) is the farcism presently entrenched. Maybe in some neat petri dish or computer simulation some pure form of capitalism works, but not in the real world. We just teeter totter between capitalism and command/socialist economies in a drunken, haphazardly performed dance.
To answer more specifically, the wealth gap should be a glaring example of what type of system we have. On paper, in a capitalist society, in a market with perfect competition, all profits are conceptually normalized. In a real world capitalist society, in any market, competition seeks to ensure profits are entrenched and perpetual by any means necessary, especially the capture of regulatory bodies. Survival of the fittest necessarily creates inefficient monopolies...
In short, you've presented us with a chicken or the egg question... is the rise of government solely a function inherent within government or is it a necessary derivative of the rise of prominent private actors who create and utilize the expansion of the government to their financial gain? Does capitalism exist in perpetuity or is it, like virtually everything else, just a description of a particular point on the timeline? Can we really classify our present situation as being socialist if it is in fact the creation of capitalists? If so, are the two schools, in the end, polar opposites (presuming that neither can actually exist for very long in "pure" form)?
Bullshit exists in america... we can leave an actual description of our present economy to the historians.
Yes, clearly ballot referendums are the problem in CA.
You do realize you are a douchebag, don't you?
Heck, more revenue collection & disbursement has been preallocated in CA than has been through "mandatory" spending at the federal level. Pop your head out of your ass fucktard. Wake up! At least your were strong enough to actually comment this time on a post that wasn't rooted in confirmation bias. One day you may actually discover that growth requires the consideration of opinion that fails to match your closely held beliefs. Until then I suggest a trip back to the Yahoo msg boards for some seasoning.
MK,
The YAHOO BOARDS?
NO, NO, Please, anything but that.
The problem is that we let the parasites vote.
Yep. The masses on referendum, mostly sponsored and advocated my the money, and corporate parasites through broader exertions upon the governing process. Regardless, it's all premised upon parasitic symbiosis that only works as long as the host can sustain the parasite. What we are bearing witness to is the dawning reality that the host can no longer sustain the parasites, hence the drive for "what's in it for me" being played out with the urgency of preservation rather than enhancement of self regardless of how that self is perceived. It is now, when the rubber is hitting the road we see where the real juice lies by observing what is being protected by the coercive power of state/mega enterprise, and yes, the hearding of the masses.
Funny how the dynamics of Proposition 13 are working once more as property values drop dramatically while the ability of the state to make up for it via increased taxation & transfer payments from the macro to the micro level are reaching their systemic limit. Just like Ireland & the rest of the EMU situation in this respect. No small wonder so many are discussing the impact of falling RRE/CRE values on local/regional/state economic activity and the ability of public/private enterprise to sustain the ponzi....
+!
what are you trying to say? You make no sense, your sentence has an incomplete prepositional phrase.
The article above does not make any sense. It starts off by saying it hates the BAB program. Then near the end, it says you are a knucklehead for not extending it. Listen, reality will re-assert itself at some point. The GOP has been firm in saying that they will force the states to cut back their spending and fulfill their legal obligations of balancing their budgets. It this "brings down the economy", then it would have happened anyway. You cannot spend debt into infinity with no consequences.
Getting cold feet as the enormity dawns on him...
Or a case of SMBD (something must be done!)
Too bad that "it would have happened anyway" logic didn't apply in the late 90s when GreedSpawn was hyperventilating about regulating derivatives.
While states certainly should be more fiscally responsible, it's difficult to do that when some asshole national banks destroy the economy and wipe out your tax base because they can't or won't do risk management and the Feds stripped your states of any right to enforce predatory lending laws while "the decider" was on the beat.
What I think Bruce was getting at is that he, and many others, expected BABs to get passed. When they don't, that difference between expectation and reality will close a gap (as it did yesterday in 10y, for openers).
Your middle paragraph is still not an argument for rolling existing debt into much bigger debt. There is never a logical argument for that.
There is if, f.ex:
You are betting that interest rates will rise, therefore you (and your bank) wants to roll all the debt into the longest bonds they can sell.
You know you are going to default anyway; going default on one big chunk of debt in one go provides more leverage for a settlement than trying to placate 20+ different creditors.
Both conditions prevail in todays market, imo.
Only if you die before it all comes due.
Seriously, pay now or pay (likely more dearly) later. De-leveraging has to and will happen. The bigger black swan is how that will eventually play out if the can is kicked further and further down the road.
Would you rather have a full-blown but out in the open crisis now or wake up one day to find that the government has suddenly taken care of the problem, Paulie Walnuts style, at your expense: http://www.zerohedge.com/article/tim-and-ben-one-one ???
Yeah Tony?...about that thing. It's all taken care of...
Another one bites the dust.
And another ones gone, and another ones gone...
etc.
As the first poster said, this is the controlled demolition derby, a race to the bottom where the winner is just the least destroyed.
What a sad and ugly game.
ORI
http://aadivaahan.wordpress.com
They're alcoholics. Don't give debt-issuance-addicted municipal borrowers another drink.
Cut off their credit now and make it pay-as-you-go from now on. No more deficit financing, no more endless rolling over of never-to-be-fully-repaid debt.
To call for an extension of any of this "stimulus" - including BABs - is insane. Instead, you let them go under and rebuild something better.
If you don't, the next crisis will only be even bigger.