Reid "Unable To Come Up With Counteroffer... Apart On Some Pretty Big Issues", Hands Over Negotiations To BidenSubmitted by Tyler Durden on 12/30/2012 15:20 -0400
The second update of the day is here, and this one is far less jovial and optimistic than that coming from the seemingly quite cluless Lindsey Graham:
- REID SAYS HAVE BEEN UNABLE TO COME UP WITH COUNTEROFFER
- REID SAYS `WE'RE APART ON SOME PRETTY BIG ISSUES'
- REID SAYS `I WISH THEM WELL' REGARDING MCCONNELL-BIDEN TALKS
- MCCONNELL SAYS HE CALLED BIDEN TO TRY TO `JUMP START' TALKS
Nothing like the fate of the nation in the hands of Joe Biden, who may or may not still be laughing.
At the end of October, as the Tristate Area was being flooded by Hurricane Sandy, one after another Wall Street firm tried to position Sandy virtually as a non-event, with total damage "forecasts" by such "reputable" firms as Goldman Sachs and Bank of America forecasting a total bill between $10 and $20 billion (as anything above that and the Q3 damage to GDP would be far more substantial than their recently bullish forecasts had accounted for, and would also imply a substantial spillover effect into Q1 2013), the same as various insurance companies who had other far more obvious reasons to undershoot on the total damages. We said the opposite, and based on historic damage forecasts, predicted the damage would likely be between $50 and $100 billion. Once again the sellside consensus was wrong and a fringe blog was accurate, as the CBO has just released the Obama administration's full aid request. Bottom line: $60.4 billion, or roughly what one year of what the ultimate tax hike compromise will bring into the government's treasury. Furthermore, if fully funded by debt today, this amount would send the US (which has a $57 billion debt buffer as of this moment) over the debt ceiling immediately.
Nine months after the very same quartet of republicans, headed by John Boehner, sent a letter to Bernanke protesting the launch of QE2, this time the GOP has waited until a mere 24 hours before the actual announcement with an identical, if preemptive, message, namely: don't print, or stated differently, "we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people." And while the political undertone of the letter is all too obvious: i.e. prevent any additional Obama-benefiting stimulus in the economy through the only conduit Obama has left, courtesy of Fiscal stimulus being snarled for good due to the republican majority in the House, Boehner et al bring up a valid point, which is that the Fed policy now accentuates market uncertainty and promotes trade wars: precisely the topics discussed in an earlier article today. As stated by Boehner: "Our long-term growth depends on restoring confidence and certainty in our fiscal, regulatory, and trade policies -- and not on government’s willingness to engage in additional stimulative measures. When asset prices increase due to anticipated Federal Reserve policy rather than economic fundamentals, it increases the potential for speculative action and erodes confidence in the economic outlook, making it more difficult to generate sustainable growth." Regardless of its actual merit, one thing is without doubt: QE3, and the Fed, just become once again critically politicized, and as such, even more market uncertainty is imminent. All that said, the theatrical optics of this action are quite glaring.
The European equity market remained volatile during the session, with some stability seen in French banks in early trade after Societe Generale's CEO rejected yesterday's market talk that the co. is in trouble, and as the French/German 10-year government bond yield spread retraced all of its widening yesterday. However, as the session progressed, apprehension revisited on the back of market talk that BNP Paribas may incur a loss of further USD 713mln on Greece, together with a three-month hike seen in the ECB's overnight deposit facility yesterday, which highlighted banks reluctance to lend. This resulted in a renewed sell-off in French and Italian bank shares, and financials became the worst performing sector in Europe. In other news, the Eurozone 10-year government bond yield spreads narrowed helped by a PBOC adviser saying that China is willing to keep buying European debt, together with market talk of the ECB buying in the Italian and Spanish government bonds. Elsewhere, CHF weakened across the board in early trade on the back of market talk of the SNB conducting currency swaps in the market. Also, USD/JPY recovered somewhat, after an earlier approach towards its all time low of 76.24, however there was no official confirmation of a BoJ intervention. Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims and trade balance, together with housing and trade balance figures from Canada. In fixed income, 5-year TIPS refunding announcement, allied with USD 16bln 30-year Note auction are also scheduled for later in the session.
A complete summary of what is happening (or not, as the case may be) in the third and final act of the debt talks tragicomedy courtesy of Reuters.
5 weeks ahead of the day when the debt ceiling "extend and pretend" plan ends, talks have broken down, and in order to hike Congressional Nielsen ratings, this time seemingly terminally. From Reuters: "U.S. Deficit-reduction talks led by Vice President Joe Biden have reached an "impasse," House of Representatives Majority Leader Eric Cantor said on Thursday, adding that he will not participate in the meeting of the bipartisan group that had been scheduled for later in the day. Cantor, a Republican, said the group has identified trillions of dollars in spending cuts, but had been unable to resolve a disagreement over tax increases Democrats sought. A Senate Democratic aide said the two sides "need to continue talking", and were continuing to talk. But an aide to Senator Jon Kyl, a Republican member of the Biden group, declined to comment on whether the senator would attend Thursday's scheduled meeting."
On a variety of Senatorial hearing, Jon Kyl was a very vocal opponent of the Fed and the secrecy embedded in the system. Which is why we were pretty amused, if not surprised, by his recent vote against the Vitter amendment. Here is his explanation. We hope you buy it more than us. We also hope you enjoy this the next time Mr. Kyl theatrically crucifies Bernanke for daring to operate blatantly on behalf of bankers, but at least without a shade of hypocrisy. "The second amendment was offered by Senator David Vitter and largely tracked the original version of the amendment that Senator Sanders had offered. It would have permitted the GAO to probe the Fed's monetary deliberations, and it was rejected on a lopsided vote of 37 to 62. I voted against it. In addition to the concern noted above about injecting political considerations into monetary policy decision-making, I am concerned that a GAO audit of the Fed's open market operations could end up costing taxpayers billions by giving investors a road map to the Fed's trading strategies and the securities it intends to buy. Armed with information about the securities the Fed intends to buy (that is, information gleaned from an audit), investors could acquire the securities and then sell them to the Fed at a premium."
The one main benefit to the financial reform effort so far is that it helps further do away with the false paradigms of "left" or "right" and "Democrat" or "Republican" - fewer and fewer people are falling for those lies anymore. Try to get an ideological conservative to explain why Republicans love spending and so eagerly give welfare to banks. Try to get your local liberal to explain why it was a good idea to make backroom deals with abhorrent corporations and drill, baby, drill. Heck, even try to get a Tea Partier to explain choosing bailout-lover Sarah Palin to keynote their convention, especially when that movement once had at least some pre-astroturf roots in protesting government giveaways. - Dylan Ratigan
Senator Kyl Joins Kay Hagan In Encouraging Fed Opacity, Ironically Warns On Dangers Of Ongoing MonetizationSubmitted by Tyler Durden on 10/20/2009 11:24 -0400
"Finally, I would observe that Congress provided the Federal Reserve with a great deal of independence in order to ensure that control over the nation's money supply is not influenced by short-term political or partisan pressures - pressures that could otherwise result in the temptation to use the government's money-creating authority to finance government expenditures (including budget deficits). Such "monetizing" of the debt - that is, financing deficits or paying off the national debt by printing more money - would lead to rampant inflation. I, therefore, support the independence that has been carved out for the Fed in matters of monetary policy to protect against that kind of abuse." Senator Jon Kyl