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Ben & O

Bruce Krasting's picture





 

Okay, so Ben said nothing. Not surprising. He spoke about that "range of options" that he think he has. Jon Hilsenrath over at the Journal told us about them last night.


Dropping the ¼% rate on reserves is just stupid in my opinion. Bernanke may believe that if he puts a gun to head of the banks that they will magically start lending like mad. The gun, in this case, would be that the $2t of reserves the banks are sitting on would all of a sudden go from a small plus to a minus. The theory being that banks will find assets and make new loans. Wrong. The real problem today is that there are not enough qualified borrowers, not a shortage or the cost of credit.


What Bernanke wants the banks to do is make bad loans. Loans to borrowers who have little or no equity. Bernanke would just love to see the banks do a $50B syndicated corporate buyout loan loan. He’d like to see one of those every month. He wants money so cheap and so easy that is causes a spec bid in real estate. No money down. 1% re-set mortgages. He wants junk bonds issuers to sell boatloads of paper.

That’s not going to happen. If this is what we get, Ben should be fired. A plan to force banks to re-liquefy the country would be an exact repeat of all the mistakes that have been made over the past twenty years. If this is the choice, short the banks.
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The “Twist” is a dumb option to consider in the fall of 2011. The ten year is at 2% and Ben thinks he can move the needle if he pushes it to 1.75%? Just when in history did a flat yield curve coincide with a positive economic environment? If Ben does the Twist, short all the financials.

If we were facing a steep yield curve I would (reluctantly) agree that supporting longer rates would be a viable option. That is not what we are facing, therefore the twist is no cure. It will just cause distortions and generate big profits for the primary dealers.

Which leaves TALK. Talk could take two forms. The Chairman could say:

From now on the Fed will keep the monetary gas pedal stuck on the floor until core inflation rise above 5% on a trailing basis.

Or:

The Fed will pursue every monetary option at its disposal until such time as the unemployment rate falls below 6%. The Fed will ignore the inflationary consequences and will no longer maintain any upper band for core inflation.

Well, if Ben does any of that, he is a short-timer. 250 million adults will rise up against this policy. Buy all the gold you can if this is the result.

Which gets us nicely to what O is going to say tonight. I maintain that there are some connections to the two speeches.
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We are going to get an infrastructure bank. The new bank will be initially funded with $100 billion. The $100 large will come from a special tax on corporate America. This is a deal from our boy Jeff Immelt. The tax will actually be a Tax Holiday for corporate America. The US multinationals are sitting on $2+T offshore. This money is subject to tax at 35%. It has already been taxed (foreign) at 10+%, so to bring it back home would trigger a liability of 500-600 bil. The $100b is 20 cents on the dollar for the multinationals. Two problems solved. We get a bank, corporate America gets an extra 500b.

If this were to happen there would be 200 big-shot CEO’s who would be smoking Cuban cigars and drinking expensive French brandy. Overnight mega bucks for that crowd.
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Obama is going to ask for an additional year on the 2% break on worker's FICA taxes. The question is, does he ask for an expansion? I think he will. There is a chance for him to increase the break to 4%. This would put an extra $1,000 in the average two-income family.

He might go even further. He might create a savings for employers of an additional 2%. There would be strings on the companies and how the money could be used (jobs).


Republicans can’t disagree with these recommendations. It is what they advocate. Lower taxes on workers and employers and jobs will follow.

But the deficit for 2102 blows up. The “Baseline” assumption is that the FICA tax break is reversed in 2012. If it is extended and expanded by an additional 1% for workers and 2% for employers it translates into a cost of $325 billion. We would go over $2 trillion on the deficit as a result.
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There has been far to much talk about some type of mortgage deal for there to be no action tonight. The leaks suggest that Fannie, Freddie and FHA will somehow facilitate a mega refi.

I think this is a theoretical option. It is very complex to execute this type of plan. There are consequences to investors and savers. (I’m not sure anyone gives a damn about them.) There would be new (interest rate, not credit) risks at the mortgage agencies. The head of the FHFA has said that will not happen. This risk could, in principal, be absorbed by the Fed.

If there is a discussion tonight about a ReFi from Heaven there will be 55 million borrowers wondering if they just won the lotto. This is a check list to see if you might get lucky:

-If you have a mortgage that either started or was refinanced after June of 2008 you win. 95% of those mortgages are with the Agencies.

-Pre 08 the odds of a deal fall to 70-30 against you. Good luck!

-You have to be current on payments. (It’s okay if you slipped up a little)

-If you have a second lien or a HELOC you may be in luck. These loans will be cut by 70-80%. The balance will be rolled into the new mortgage.

-You can be underwater to do the deal!! But you have to be working..


If you are on this list you will get a new 4% mortgage at no cost to you.

I admit that this is fantasyland. But I see very few options that would benefit homeowners and boost consumption. We shall see in a matter of hours.

Should the topic of mortgages come up tonight there will be one man who is smiling more than any other in the land. That would be Ben Bernanke. The mega refi would also be his QE#3 and #4 rolled into one.

.

 


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Wed, 09/14/2011 - 03:06 | Link to Comment chinawholesaler
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Fri, 09/09/2011 - 03:15 | Link to Comment chindit13
chindit13's picture

Yes, anyone believing that dropping the 1/4% payment on reserves will spur lending is blowing smoke.  What they are arguing, if this is to be believed, is that banks risk adjusted yields are greater than zero but less than 1/4%.  In fact, it is a combination of the risk adjusted rate (perceived) as being less than zero, and banks' balance sheets being unable to support the new assets and stay within BIS demands that is holding up lending.

 

Fri, 09/09/2011 - 02:38 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Rugby World Cup is on...GO THE ALL BLACKS!!!!!!!!!!!!!!!!!!!

Thu, 09/08/2011 - 22:42 | Link to Comment Yes_Questions
Yes_Questions's picture

BuBuBuBuBennie and the jettsssssss!

 

Hey kids, shake it loose together
The spotlight's hitting something
That's been known to change the weather
We'll kill the fatted calf tonight
So stick around
You're gonna hear electric music
Solid walls of sound

Thu, 09/08/2011 - 22:19 | Link to Comment Problem Is
Problem Is's picture

O & Ben?
Obama Bin Lyin' & The Bernank?

More like Freebie and the Bean...

"distortions and generate big profits for the primary dealers."

The primary dealers are the share holders of the FRBNY... They are in effect The Bernank's boss...

Of course "Cue Ball" Ben is going to make policy moves that "generate big profits for the primary dealers."

That is what The Bernank's job IS...

The Useful Idiot Barry Soetoro will simply read that message to you from the Teleprompter...

Thu, 09/08/2011 - 21:40 | Link to Comment Mediocritas
Mediocritas's picture

About 6 months back I stumbled on the writings of a guy named Leigh Harkness. He has a very different perspective on the economic situation we're in and I think he's got it right. Here's an overview:

http://www.buoyanteconomies.com/DebtIncome.htm

So basically, everything Bernanke and Obama are doing is WRONG. They are failing to address the source of the problem because they don't understand the source of the problem.

It's like a person trying and trying endlessly to start the engine of a car with serious mechanical problems. Every now and then it kicks for a bit, splutters improperly for a while then conks out again. Instead of popping the hood and trying to figure out what's wrong with the engine, they just keep on trying to start it and pumping the accelerator.

Obama's big jobs drive is a complete waste of time. First of all, he's full of shit when he says it won't expand the deficit. Even if this were true, it would mean that dollars given to one program have to be subtracted from another. So the people getting jobs due to new allocation are offset by the people losing jobs from subtraction elsewhere. This helps how exactly?

Furthermore, Federal juice is like the starter motor trying to start the buggered engine. Without finding the actual fault in the engine, as soon as the ignition stops, the engine stops again. Stimulus can only work if the private sector is happy to take up activity and run with it once the initial period of stimulus (ignition) is over. Will this happen? NO! As always, any useful component will simply bleed directly overseas to China or India where conditions are cheaper. 

Stimulus to create any kind of portable job will simply result in an expanded deficit and more jobs for China. That's probably why Obama focused so heavily on the kinds of jobs that will stay local for a little while (local construction) but when it comes to explaining how things will stay local and stay active following an initial surge, he has nothing to say. Neither does Bernanke.

Let's cut to the chase. The philosophy that has dominated OECD and CB thinking for about 50 years now IS WRONG! Freely floating exchange rates combined with no limits to credit extension have resulted in Western economies bleeding out core economic activity to nations that don't follow that formula (particularly China). For a while, everyone went along with it because they got sucked into thinking vaporware jobs could honestly replace organic jobs. It's game over now.

If Bernanke and Obama are actually serious about helping America, they need to admit the terrible errors made and get a whole lot more economically aggressive. Bernanke is too set in his ways to change and Obama is one of the weakest presidents in history, so I expect nothing.

Reminder, go read Leigh: http://www.buoyanteconomies.com/DebtIncome.htm

Fri, 09/09/2011 - 03:34 | Link to Comment chindit13
chindit13's picture

Interesting read. Still mulling it over.  Perhaps Tyler will borrow it and run it on ZH for comment.

Fri, 09/09/2011 - 13:18 | Link to Comment Mediocritas
Mediocritas's picture

Leigh's a nice guy. Be a bit scared of throwing him to the ZH wolves like that!

Fri, 09/09/2011 - 15:11 | Link to Comment boiltherich
boiltherich's picture

And to expand on the car analogy, as anyone who has ever cranked and cranked an unresponsive motor knows, when you crank such an engine you can and probably will do irreparable harm to components that were not even the original problem.  You can flatten the cam, bend the valves, stretch the timing chain/belt, foul the plugs, break the rings and score the cylinder walls, the list is pretty extensive. 

In the end even if you get the thing running again on some of the cylinders it has no real power and it's life has been considerably shortened. 

In our case we have two cars (America and the EZ) that will not start, and it is not just the engines that are failing, it is the transmissions, the tires are flat, there is no washer fluid, the paint is faded, and the upholstery smells of urine, mildew, and wet dog, that has rolled in something dead.  And the right turn blinker is stuck in the on position just to annoy everyone that cares.   (edit:  And then some of you insist on buying a new gun rack anyway of course because at least that will be the one thing that works.)

Thu, 09/08/2011 - 21:32 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

"That is not what we are facing, therefore the twist is no cure. It will just cause distortions and generate big profits for the primary dealers."

 

Um. Yeah. That's the idea.  People get so confused about the purpose behind these things.  I guess it all starts if you believe the Fed gives a rat's hairy puckered asshole about either of its late-night-talk-show-monologue-joke "twin mandates."  Fucking A.  

Fri, 09/09/2011 - 00:39 | Link to Comment DeadFred
DeadFred's picture

A wee bit more colorful than I would have put it but 100% spot on correct.

Thu, 09/08/2011 - 21:32 | Link to Comment pain_and_soros
pain_and_soros's picture

Bruce

these aren't solutions, they are simply desperate measures to either kick the can down the road or somehow keep people strung out on hopium, counting on that addiction to somehow "fix" things...

how long is it going to take for enough people to see through this charade & demand real soultions that inspire real confidence and/or rush into gold to protect their wealth?

Obviously the polticians & central bankers are still in disbelief that the global financial system is totally FUBAR, but surely the common folk must be slowly cluing in to that sad fact...

until they do, I think the banksters/politicos will have free reign to continue wreak havoc with the economy & the middle class

 

Thu, 09/08/2011 - 21:21 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Well, I'm not impressed. But i was partially right about the things in the speech.

There is $10b for an infrastructure bank. That's a Joke. It has to be at least $100b to make a dent. There was no discussion of a tax holiday for multinationals to fund the IB.

I did see Immelt smirking on the side. I still think a sweet heart deal on untaxed foreign profits is coming.

Of the 447 to be spent fully 230 will be reductions in FICA taxes. This is nice. People will have more money in their pocket. It comes to about $25 a week. This money will go right to Wall-Mart. Then it will go to China. Not one job will come from this.

O mentioned a mortgage ReFi. He said it could save $2000 a year for the lucky folks who qualified. But he gave no details at all on how this would work. There was a budget put out where the 447 would go. There is no expense item for any mortgage plan. Need to see details to understand this.

bk

Thu, 09/08/2011 - 21:43 | Link to Comment rawsienna
rawsienna's picture

Refi plan only for agency borrowers who have been current on mortgage for at least 1 year. Cost will be zero to government (as per recent CBO paper) but would transfer wealth from bondholders (who experienced an unexpected windfall from the inability of people with mtgs to exercise the refi option) to borrowers.  GSE portfolios would actually shrink due to paydowns and no reinvestment and the market would absorb the duration risk.  Keep in mind that holders of agency MBS have benefitted from the lack of refi response (due to decline in home prices combined with tighter lending standards) withouit ANY of the credit risk (which rests with the govt/taxpayers). Also, they will not loosen standards or reduce fees for any NEW risk.  

Thu, 09/08/2011 - 21:43 | Link to Comment rawsienna
rawsienna's picture

Refi plan only for agency borrowers who have been current on mortgage for at least 1 year. Cost will be zero to government (as per recent CBO paper) but would transfer wealth from bondholders (who experienced an unexpected windfall from the inability of people with mtgs to exercise the refi option) to borrowers.  GSE portfolios would actually shrink due to paydowns and no reinvestment and the market would absorb the duration risk.  Keep in mind that holders of agency MBS have benefitted from the lack of refi response (due to decline in home prices combined with tighter lending standards) withouit ANY of the credit risk (which rests with the govt/taxpayers). Also, they will not loosen standards or reduce fees for any NEW risk.  

Thu, 09/08/2011 - 21:18 | Link to Comment walküre
walküre's picture

Bernanke may believe that if he puts a gun to head of the banks that they will magically start lending like mad. The gun, in this case, would be that the $2t of reserves the banks are sitting on would all of a sudden go from a small plus to a minus. The theory being that banks will find assets and make new loans. Wrong. The real problem today is that there are not enough qualified borrowers, not a shortage or the cost of credit.

Bruce,

Consider this. The borrowers are just as qualified or unqualified as the lenders! Who will be the judge of that? A bunch of crooks deciding whether or not they can lend to a bunch of slobs. Tragic but true! There is no moral high ground anymore. The line has been crossed when the fraud by the banks was exposed.

The only difference between the people and businesses who need the money and the banks which have the money are 8" walls and wire.

Plenty people I know trying to get loans for their businesses big and small from commercial lenders and fail to qualify.

Business seeking loans of $250,000 to $10,000,000 and very viable, equitable proposals that would bring their business forward and create jobs for Americans. Many of them being discouraged by the banks and they run to private lenders and investors. That search is harder and harder.

Something has GOT TO FUCKING GIVE. The banks made well up until 2007, between 2007 and 2010 and they're going to be made well again in 2011. What does that accomplish?

You wonder why business is booming in China and India? Because raising capital to fund businesses there is like stealing candy from kids. There, that's why.

American enterprises have a better quality of labor, have a better infrastructure and a better location to bring goods and services to the American market and beyond. Why is that not being addressed, why are we accepting that our banks engage in Chindia and support those industries?

If OBAMA was a real President, he would address that and put an end to it. He's got a Czar for just about everything else but not for that what really matters.

President Obama, establish a Czar, Overlord or Duke whatever.. to PUT AMERICAN JOBS AND AMERICAN IMPORTS FIRST!

Thu, 09/08/2011 - 20:40 | Link to Comment FlyPaper
FlyPaper's picture

This is not an economic speech - its political.  When you start (a week earlier) calling the opposition "unpatriotic" if you don't agree with my [failed] policies its because he fully expects them to be rejected.   The ploy may be to pin-the-problem-on-the-other-guys.

What is frustrating is that he's far more interested in political bullshit than actually solving the problem(s) that are facing the US.  We don't have a lot of time to F-around with this; Rome burns, and POTUS trots out the same pig with a different color lipstick hoping to fool the judges at the county fair.

This is serious shit, we need serious policy that takes the cooperation of both parties.  Apparently not going to happen under Big O's watch.

===

That said, since the banks aren't lending, why not let yields rise for savers?  That's one way to create income for those on fixed income; which theoretically is the equivalent of the payroll tax cut (puts more money in people's hands).   Given the low level of lending to business, and the failure of the lowest all-time-rates mortgage to bring refinancing out of the woods, the impact to borrowers in aggregate *could* be minimal (further study would be needed).  We have seen from Japan that when you are at these low rates it has minimal impact on borrowing; so who says the axiom is true that lower rates are beneficial for the economy when they are this low?

 

Thu, 09/08/2011 - 20:56 | Link to Comment Mercury
Mercury's picture

Obama doesn't care about reviving the housing market or letting the market clear or...anything else to do with any market.  He wants to redistribute wealth. Period.  He may not make any mortgage or housing announcements tonight but he's pressing on in the background very aggressively in this area. 

The strategy isn't so much about pressuring banks to make loans to "underserved" communities as it is pressuring counties, cities and towns into fullfilling racial residency quotas.  If your county has a lesser percentage of minority residents than the US population at large does, it's because of of racism and HUD will see to it that the appropriate homes are built and marketed to the appropriate people at appropriate terms until the problem is fixed.  Westchester county is first and it will then "serve as a model for building strong, inclusive sustainable communities in suburban areas across the entire United States." (HUD's Ron Sims)

http://www.lohud.com/article/20110716/NEWS02/107160340/Astorino-HUD-goes-too-far-enforcing-Westchester-desegregation-deal

and

http://araceagainsttime.blogspot.com/2010/07/westchester-county-update-r...

- - - - -

You just know the Obama boys put Bernanke in that Love Boat captain outfit.

 

 

Fri, 09/09/2011 - 22:06 | Link to Comment FeralSerf
FeralSerf's picture

It is about redistribution of wealth, but it isn't redistribution to the low income, minorities.  It is redistribution to some of the weathiest people in the country.  The financial "services" industry  is the beneficiary.

Thu, 09/08/2011 - 20:21 | Link to Comment anony
Thu, 09/08/2011 - 19:57 | Link to Comment Seasmoke
Seasmoke's picture

didnt hear anything about mortgages......did i miss it ????

Thu, 09/08/2011 - 20:58 | Link to Comment Bruce Krasting
Bruce Krasting's picture

You missed it. He said something about this. he said that it would result in people with a 2000 anual savings.

But he gave absolutely no details at all. We will have to wait what this means.

Fri, 09/09/2011 - 14:45 | Link to Comment boiltherich
boiltherich's picture

$2,000 in annual savings?  Not hard to figure out what that has to be, because it amounts to 166 per month, it has to be interest on your original principal.  Of the four costs of a mortgage, PITI, 2000 is about 5 times what I paid for insurance, so even if the government paid all my insurance that would not amount to 2k a year.  Taxes?  Is he offering to pay 166 bucks a month worth of our property tax?  Doubt it, anyway my property tax is 1300 a year so as with insurance that is not 2k a year savings.  And what kind of principal reduction would amount to a monthly savings?  Any principal reduction plan would be a one time thing, in order to get a monthly savings that one can honestly predict at 2k per year one has to set some kind of time line.  And while 2k a year saving that involved principal reduction might save a house for a few it is not going to help someone as underwater as I am, not to mention people with larger negative equity than I have which is most up side down mortgage holders. 

Even with an interest reduction amounting to 166 per month on my house payments I am not interested because with such a refi deal I would still be about 50% of the loan value in negative equity.  So, if there is a tangible component to the "jobs" proposal that addresses residential real estate as far as I am concerned it is already a fat FAIL!

Thu, 09/08/2011 - 19:55 | Link to Comment Corn1945
Corn1945's picture

I believe you were correct about the re-financings and infrastructure bank. However, there is no corporate tax repatriation to fund it all.

The bottom line is we are going to see dramatically higher deficits and much higher gold prices as a result.

Thu, 09/08/2011 - 19:22 | Link to Comment chump666
chump666's picture

But the US is broke!!!  Hahahahah, what a joke.  S&P getting ready for another downgrade

Thu, 09/08/2011 - 18:51 | Link to Comment RagnarDanneskjold
RagnarDanneskjold's picture

$2+ trillion repatriation? Long dollar bitches!

Thu, 09/08/2011 - 18:56 | Link to Comment FeralSerf
FeralSerf's picture

@BK:

"If we were facing a steep yield curve I would (reluctantly) agree that supporting longer rates would be a viable option. That is not what we are facing, therefore the twist is no cure."

I don't know how you can say that the current yield curve is not steep right now!  It appears to me that the 30 year UST rate (3.31%) is infinitely times higher than the one year (0.00%) and even worse than that (can you get worse than that???) if you go even shorter into negative territory (-0.005%).

http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

Thu, 09/08/2011 - 18:37 | Link to Comment the grateful un...
the grateful unemployed's picture

From now on the Fed will keep the monetary gas pedal stuck on the floor until core inflation rise above 5% on a trailing basis.

and henceforth interest rates will rise one in a one logarithmic unit lag from CPI. Hence CPI at 5%, interest rates at 2.5% (buy TIPS bitchez to play the spread)

Or: The Fed will pursue every monetary option at its disposal until such time as the unemployment rate falls below 6%. The Fed will ignore the inflationary consequences and will no longer maintain any upper band for core inflation.

The Fed has many responsibilities, most of them self conflicting. Employment was never a big priority, they will throw jobs under the bus.

If you are on this list you will get a new 4% mortgage at no cost to you.

I have heard this solution proposed once before, but it simply means a bigger Fed balance sheet? and a bigger balance sheet is more interest rate exposure? the GSE's were turned into a toxic waste dump by the financial industry, now we'll toss in some plutonium too? You suggestion that this would be QE3 and 4 begs the question, what would the markets think about this? Would this bring back the consumer discretionary equities? (that group of addicts needs the hopium most). So I agree, they'll do it, we all be having dinner at PF Changs this weekend! Just tell me when, because I want to cover my shorts.

 

 

Thu, 09/08/2011 - 21:35 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Neither of the phony twin mandates are of any concern to the Fed Governors.  A joke.  

Thu, 09/08/2011 - 21:23 | Link to Comment walküre
walküre's picture

Why still 4%

The banks get the money at 0% and charge 4% because they're banks?

Why not give the money at 0% or to be fair, at 0.5% to the people and the businesses?

HELLO!!!! OBAMA!!!! THIS IS 2011!!!! WE DON'T NEED THE FREAKIN' MIDDLE MEN AT THE BANKS!!!

Thu, 09/08/2011 - 18:34 | Link to Comment Smu the Wonderhorse
Smu the Wonderhorse's picture

Bruce, I would be very interested to hear your thoughts on what massive re-fi's and/or operation Twist would do to mortgage REITs like Annaly and American Capital that own boatloads of agency mortgages.  I expect it would be bad for them, no?  Would they lose the spread that they make on borrowing short-term and buying long-term mortgages?

Thu, 09/08/2011 - 19:53 | Link to Comment Bruce Krasting
Bruce Krasting's picture

You heard him. He wants a refi deal. There was absolutely no details given.

Any refi hurts mbs holders. This would accelerate the refi's so it will be bad for those who hold the paper.

But by how much? and how much of this already in the "print"?

Have to wait for details on what O described.

Thu, 09/08/2011 - 18:30 | Link to Comment disabledvet
disabledvet's picture

They're grasping at straws. It's a full court press against NO2 and the best that can be argued once the policy is lost is "the wind is blowing." Who elected Immelt anyways? The guy has never made a public airing of his views and therefore cannot be believed let alone trusted.

Thu, 09/08/2011 - 18:29 | Link to Comment granolageek
granolageek's picture

Bruce, the no creditworthy borrowers thing is simply untrue. I live in back country New Hampshire. Every little town of about 1,000 people has one to three stores and gas stations.

They are all on COD terms, even people who have been net 30 for decades. This applies to Vermont too.

Granted, these stores used trade credit, not bank. But the wholesalers could give credit because they had bank lines. They don't anymore.

Actual small business, the kind that would love to clear $200k/year. has been cut off by the banks.

Thu, 09/08/2011 - 18:11 | Link to Comment anynonmous
anynonmous's picture

They've been leaking since the Vineyard, his numbers are in the tank and campaign 2012 is well underway. Pundits on the MSM have been saying don't expect much.

My guess is he has a knock it out of the park proposal right into or out of left field that will not only box in Boner and Mitch but generate real excitement amongst the financial literati.  Of course in the end it will be watered down and still cost the taxpayers hundreds of billions but tonight is Christmas eve. (and we know he doesn't like coal)

Thu, 09/08/2011 - 18:06 | Link to Comment kaiserhoff
kaiserhoff's picture

When exactly, did we become the Soviet States of Amerika?

This is the old Kremlinology game of watching the speech.., only to see who is seated closest to the dictator of the month.

Thu, 09/08/2011 - 17:59 | Link to Comment XitSam
XitSam's picture

It will just cause distortions and generate big profits for the primary dealers.

This is probably his goal.

An Infrastructure Bank is just another word for stimulus program.

Thu, 09/08/2011 - 17:52 | Link to Comment Quinvarius
Quinvarius's picture

I don't think 4% is low enough to accomplish anything.  Banks are getting .5 and they are still going under.  4% will only wet people's appetites and they will demand lower rates once they see it is possible.

Thu, 09/08/2011 - 17:41 | Link to Comment dcb
dcb's picture

so my question is: if President Obama gives a speech on national televesion and nobody hears it, does it mean anything?

 

alternative meaning:

Is anyone actually going to listen to the guy. I expect the right wingers so they can come up with attack material, and I expect the left spin mongers, but at this point no sane person can believe a thing he says.

"I was against the war in Iraq, until I was for it I was against raising the debt ceiling, until I was for it. I was for the public option, until I was against it. I was for financial reform, until I was against tyhe best parts of it. I was for closing Gitmo, until I was against it. I was for the middle class, until I appointed Geithner and Bernanke"

Thu, 09/08/2011 - 20:15 | Link to Comment anony
anony's picture

Those with a vested interest in his re-election or who are of the mentality that he may be completely ineffective EEO hire, but at least he's ours, and not yours, will watch. And even if they don't 44% still "Approve" (another way of saying "no republican will get our votes) of his idiocy.

You forget that over half this country does not work for a living, just like all the politicians.

Thu, 09/08/2011 - 17:40 | Link to Comment Big Ben
Big Ben's picture

Operation Twist could raise short term interest rates in addition to lowering long term ones. If it raises short term rates above the 0.25% rate that the Fed pays for excess reserves, then banks might be tempted to use their excess reserves to purchase short term government bonds. The only reason that we haven't seen huge inflation from QE1 and 2 is that the money that the Fed printed has remained at the Fed in the form of excess reserves. Operation Twist might release those excess reserves into the general economy. (Or not. Perhaps the Fed would just raise the interest rates on excess reserves.)

I think the Fed feels the need to do something, even if they know it isn't going to do any good. Kind of like the British firing anti-aircraft guns at German bombers at night during the blitz. They knew that the chances of actually hitting a bomber were nil, but it was good for morale.

I think Bernanke is just trying to come up with a plan which looks like easing and accomodation but which does minimal damage to the currency. Actually the Fed should be raising rates at this point in order to force the politicians to start reducing the deficit. But the Fed was created by politicians to serve politicians and so that will never happen.

Thu, 09/08/2011 - 17:36 | Link to Comment mikmid
mikmid's picture

I wonder if I take out a loan on my house this afternoon if I can get in on this refi. I'll borrow against the house and buy gold. Ya, that's the ticket. Me and Emelt smokin' stogies.

Thu, 09/08/2011 - 17:28 | Link to Comment Corn1945
Corn1945's picture

Now that I think about it more, the tax repatriation thing is also a loser. Can you imagine how his liberal base will react to giving a huge tax break to corporations? He will get booted out of office in a heartbeat.

You are ignoring all of the political shortfalls here.

Thu, 09/08/2011 - 19:17 | Link to Comment FeralSerf
FeralSerf's picture

He doesn't have much of a liberal base left since it became patently clear that he is owned lock, stock and barrel by The Obscenely Rich White Guys.

Thu, 09/08/2011 - 21:40 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Absolutely true.  The Janitorial President.   He should be ashamed of himself. 

"Cleanup on aisle 5, boy, and make it snappy."  

Thu, 09/08/2011 - 17:56 | Link to Comment krispkritter
krispkritter's picture

He'll do/say what the hand up his ass tells him to...

Thu, 09/08/2011 - 17:26 | Link to Comment VeritasEtAequitas
VeritasEtAequitas's picture

Wondering if I should watch Fight Club or Obummer's speach tonight... any suggestions?

Thu, 09/08/2011 - 17:27 | Link to Comment Sequitur
Sequitur's picture

Fight club. It has chicks and cursing.

Thu, 09/08/2011 - 18:17 | Link to Comment boiltherich
boiltherich's picture

I rented Blitz, that Jason Statham can't make a bad movie.  But even if I had to do housework (UGH!) I would not have the teleprompter on my TV, I have not even watched the evening news for 3 years (or as I like to call it "The Obama Show").  If I want to see idiot sycophants kiss his ass I can find his campaign speeches on You Tube, but I would not waste the electricity it takes to hear him talk.

As to what Bernanke does why do we need to debate it?  He will do what is good for the banks and TWOU (Those Who Own Us) and we will have a standard of living by the end of the year that looks more like Mexico of 1975 that America in the 21st century.  Where I live food is up now over 50% in 18 months.  I let a kid go in front of me in line at Slaveway about an hour ago because he had just a peach, when the clerk rang it up it was $1.37 for one stinking peach, he did not have that much on him so I just had her ring it with my stuff and I paid for the stupid thing for him, but tell me, is this not September when produce is ripe and getting shipped all over the country?  Is it safe to assume that this winter when we buy a can of peaches they will like $4?  Or more?  And $9 for a package of three thin cut pork chops?  Who is stupid enough to pay that? 

I was doing some math in my head thinking about dollar denominated debt and the incomes that are going to have to pay for them.  I calculate that it will take a 10 for 1 devaluation before it even becomes mathematically possible, and will have to start soon because with the incomes we now have we cannot even service the debts we have and pay for living expenses.    I was sort of enjoying the market wrap on Bloomberg today with one talking head floor lizard at the NYSE saying all is well and that with P/E's at their current level the market is oversold and has room for an easy 13% rise.  Then they had another guy that said not so fast, we are on the edge of a recession and when have we ever had a recession without falling earnings?  And if the E in P/E falls there is no justification for the market to go up.  Quite a little battle till they asked the second guy how bad did he think the recession would be, and the guy said he thought it could be a depression.  So you see, those that should know and speak truth to power only rarely even admit we could have another recession when by most citizen's standards we have been in a depression for almost 4 years already. 

You cannot fix a problem you will not even admit exists.

 

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