As the Congressional hearing, to apportion blame for the farce that Obamacare has already become, gathers steam the overwhelming theme from the four witnesses is "it's not our fault," and as much as the Congressmen dive deeply into the process, the more it is clear that the left hand had no idea what the right hand was doing in yet another government-funded SNAFU. The entire discussion can be summed up by CGI's comments that "our portion of the application worked as designed." Indeed, all of the contractors point the finger back at the government's Centers for Medicare and Medicaid as responsible for "end to end testing," and ultimately the #fail.
Public corruption, based on all the evidence, appears rampant. And the ranks of those convicted in office have swelled to absolutely unacceptable levels. State Senators as well as State Assemblymen; elected officials as well as party leaders; city council members as well as town mayors; Democrats as well as Republicans.
- Preet Bharara, U.S. Attorney for the Southern District of New York
It’s no surprise that New York is exceedingly corrupt. It’s a huge city, with a ton of wealth and massive income inequality. That’s basically the primary breeding ground for wide-scale corruption. However, it also comes as no surprise that the situation has gotten a lot worse in recent years. After all, NYC is the headquarters of some of the largest financial institutions in the world. As such, some of the worst actors in the recent financial collapse call the city home. The whole world watched as these criminals and shysters not only evaded criminal charges, but were also rewarded trillions of dollars of public support for their efforts. The example was set. Crime pays, and now the entire city seems to be following their lead.
JPMorgan Chase has had a bad year. Not only has the bank just reported its first quarterly loss in more than a decade; it has also agreed to a tentative deal to pay $4 billion to settle claims that it misled the government-sponsored mortgage agencies Fannie Mae and Freddie Mac about the quality of billions of dollars of low-grade mortgages that it sold to them. Other big legal and regulatory costs loom. JPMorgan will bounce back, of course, but its travails have reopened the debate about what to do with banks that are “too big to fail.” We now have a global plan, of sorts, supplemented by various home-grown solutions in the US, the UK, and France, with the possibility of a European plan that would also differ from the others. In testimony to the UK Parliament, Volcker gently observed that “Internationalizing some of the basic regulations [would make] a level playing field. It is obviously not ideal that the US has the Volcker rule and [the UK has] Vickers…” He was surely right, but “too big to fail” is another area in which the initial post-crisis enthusiasm for global solutions has failed. The unfortunate result is an uneven playing field, with incentives for banks to relocate operations, whether geographically or in terms of legal entities. That is not the outcome that the G-20 – or anyone else – sought back in 2009.
Forget about the headlines, the most concerning statement from the entire circus of Jack Lew's hearing was his comment that the world counts on the US to be responsible. It seems that boat sailed a long time ago. The following succinctly summarizes the key aspects of his testimony and the Q&A. As a reminder, Lew noted "Obama did negotiate," denied the chance of "prioritization," and warned that other nations appear ready (and somewhat excited) for the US to falter.
Nearly exactly five years after Hank Paulson appeared before Congress dangling a 3 page term sheet ultimatum warning it was his way or the apocalypse, it is time for the sequel. Since we all love the smell of a good Mutually Assured Destruction spectacle in the morning. Which is why we can't wait for Treasury Secretary Jack Lew's presentation before the Senate Finance Committee discussing the Debt Limit, in which he will rain fire and brimstone on anyone who suggests that the Treasury can enter the X-Date without a debt ceiling deal in place, and will most certainly seek to crucify anyone who points out the logical, namely that payments can be prioritized and interest expense is a fraction the revenue the Treasury brings in, and that the end of the world would be nigh should the US actually be forced to live within its means.
As reported previously, the latest meme surrounding the D.C. impasse is that Obama is suddenly willing to compromise on a short-term, supposedly six-week funding and debt ceiling extension, on the verge of his latest talks with republicans at the White House scheduled for this morning, as previously floated by the GOP. Throw some additional headlines such as "Ryan steps up to shape a deal" (in line with what we predicted yesterday) and "The ice breaks; fiscal talks set", by The Hill, and "GOP quietly backing away from Obamacare" from Politico, and one can see why futures are in breakneck soaring mode this morning, driven as usual by the two main JPY cross (USD and AUD), the first of which is less than 100 pips now away from being Stolpered out. So will a compromise deal finally emerge 7 days ahead of the first X-Date, or will a last minute snag once again derail the (non)-negotiations? We will know quite soon.
It is seriously 1999 all over again here in the Silicon Valley. There's the revival of Kozmo (OK, that's in New York, but still.......), the comic run-up of TWTRQ yesterday, and now, right across the street from where I am sitting, there is Draper University.
- Mounting Wall Street fears of US default (FT)
- This is what the US government does when it is "shut down" - CIA ramping up covert training program for moderate Syrian rebels (WaPo)
- SEC Weighs Overhaul of Exchanges’ Self-Regulatory System (WSJ) - just let Goldman and JPM do all the policing; not like anyone cares anymore
- Reid Sets Tone for Democrats in Shutdown Fight (WSJ)
- No Movement in Shutdown Standoff (WSJ)
- Shutdown will not slow Fed nomination, says Obama (FT)
- Syrian Regime Chokes Off Food to Town That Was Gassed (WSJ)
- Tesla Says Car Fire Began in Battery (AP)
- China Services Index Increases in Sign of Sustained Rebound (BBG) or sustained data manipulation
- JPMorgan eyes $4bn ‘pay for peace’ deal (FT)
- Prosecutors Pursue Big SAC Settlement (WSJ) - in the US if you are rich enough, no crime is bad enough
- Cruz's Defiant Stand Is Also a Lonely One (WSJ); Texas senator speaks for more than 14 hours (FT)
- Iran Applies Brakes to U.S. Mideast Plans (WSJ)
- Americans in Poll Doubt Economy Rebound in Defiance of Forecasts (BBG)
- Big Banks Cut Basel III Shortfall by $112 Billion at End of 2012 (BBG) - the equivalent of 10 bridges to the Kalahari desert
- Obama’s Jabs at Russia on Syria Shows Diplomacy Tensions (BBG)
- ICAP Staff Face Criminal Charges Tied to Libor (WSJ)
- Alibaba Is Said to Shift Target for I.P.O. to U.S. From Hong Kong (NYT)
- Home gold rush is over (Reuters)
- Conoco in landmark Alaska drone flight (FT)
With bonds and stocks rallying (and the USD dropping) notably in the last few days, one could be forgiven for believing the Taper is off but Goldman's baseline forecast remains for a $10bn reduction in asset purchases - probably all in Treasuries - and $15bn is possible (though recently mixed labor data may choke that a little) and a strengthening of forward-guidance. As they note, the current redction in uncertainty (or rise in complacency some might say) has the potential to offset the tightening in financial conditions, barring another major outbreak of DC strife in the run up to the debt ceiling in late October/early November. However, what is most notable is Goldman's expectation that the Fed will start walking-back its unemployment-rate threshold as it has been clearly shown not to be a good catch-all indicator of broad economic and labor market performance. So it's data-dependent - but the data is unreliable at best and false at worst.
"Not only was it a civil war, an effort by a people who had for years been seeking their liberation from any colonial influence whatsoever, but also we found that the Vietnamese whom we had enthusiastically molded after our own image were hard put to take up the fight against the threat we were supposedly saving them from. We found most people didn't even know the difference between communism and democracy. They only wanted to work in rice paddies without helicopters strafing them and bombs with napalm burning their villages and tearing their country apart. They wanted everything to do with the war, particularly with this foreign presence of the United States of America, to leave them alone in peace..."
"What's more fun than a Barrel of Monkeys? Nothing!" What could be better than assembling a long chain of tangled monkeys, each reliant on those either side of it for purchase, with just the one person holding onto a single monkey's arm at the top end of the chain, responsible for all those monkeys dangling from his fingers. Of course, with great power comes great responsibility; and that lone hand at the top of the chain of monkeys has to be careful - any slight mistake and the monkeys will tumble, and that, we are afraid, is the end of your turn. You don't get to go again because you screwed it up and the monkeys came crashing down. On May 22nd of this year, Ben Bernanke's game of Barrel of Monkeys was in full swing. It had been his turn for several years, and he looked as though he'd be picking up monkeys for a long time to come. The chain of monkeys hanging from his hand was so long that he had no real idea where it ended... indeed, "
If the Fed really thinks that the rest of the world will have to "adjust to us" as it insists on draining global liquidity come what may, it may have a very rude surprise, yet again." One false move and all the monkeys may end up in a heap on the floor.
More on this morning's unexpected joint Israel-US missile test launch. From Bloomberg:
- Israel missile defense organization, U.S. missile defense agency completed successful flight test of new version of the “sparrow target missile” today, Israeli Defense Ministry says in e-mailed statement.
- Arrow weapon system’s radar successfully detected, tracked target; all elements performed according to configuration
- Main contractor of arrow weapon system is MLM of IAI, in conjunction with Boeing, according to statement
- ISRAEL DEFENSE MINISTER SAYS MISSILE TEST WAS SUCCESSFUL
- ISRAEL'S YA'ALON SAYS NEW DEFENSE TECHNOLOGIES MUST BE TESTED
The conclusions I have come to are somewhat threatening in the short term, but even more disconcerting in the intermediate term, as the developing image is exposing a crystal clear picture of the ominous resource wars looming directly ahead. Equally dismaying, are the "honorable distinguished gentlemen" presiding over this Middle East mayhem, which are showing themselves to be either grossly incompetent cretins or dangerous duplicitous megalomaniacs
Moments ago, Syria relented to the main gating condition that would prevent an all out escalation, and as Russia urged it to, has permitted an inspection of last Wednesday's alleged chemical weapons attack by UN inspectors. The WSJ reports that "Syria would allow United Nations inspectors currently present in Damascus immediate access to areas around the capital where the opposition accused the regime of using chemical weapons against fighters and civilians five days ago. A presenter on Syrian state television reading a statement attributed to an unnamed official at the Syrian Ministry of Foreign Affairs said the agreement was reached after a meeting between Foreign Minister Walid al-Moallem and Angela Kane, the U.N. disarmament chief, who arrived in Damascus on Saturday." Of course, since demand for said inspection was just a strawman as the last time the UN inspected a "certain" chemical weapons attack by Assad it found "rebels may have used sarin" instead, and the US was absolutely certain Syria would not relent to an inspection thus allowing a full scale military attack, the US is now downplaying compliance with this key demand, by saying it is too little too late.