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Ben & O
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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we are in a depression - have no doubt about it. Not your father's cyclical recession. It is masked by overwhelming government/central bank efforts. Obama's proposals tonight were not enough, just more of the same. He is owned lock, stock and barrel by the banks.
I may need TWO bags of microwaveable popcorn for this (if true, which I would normally doubt, but in this crazy environment, anything is possible).
TRICHET RESIGNED
Link?
http://www.ftd.de/
In the middle of the common currency crisis, ECB head Trichet steps down. (Abtritt .. tritt ab) and Eurogroup-head Juncker could be the replacement.
Sorry, it's not an immediate resignation. He was scheduled to leave anyhow.
"Bernanke may believe that if he puts a gun to head of the banks that they will magically start lending like mad."
The problem is he might actually succeed
A tax holiday for the super rich!!! What a wonderful idea for them. Here's hoping that this is the straw that breaks the camels back and the other 99.9% of the country goes French...revolution style bitchez!!!
Maxine Waters will go postal. If that term even applies seeing they will shut down
Going postal 21st century style means going out of business firesale.
Maxine Waters going postal means Maxine can run up an $8 Billion deficit every day of the week...
Without even breaking a sweat...
Here's hoping that this is the straw that breaks the camels back and the other 99.9% of the country goes French...revolution style bitchez!!!
Most of the 99.9% you refer to won't even tune in to get the details - hell, they don't even know he's going to address jobs. And the ones who do actually stumble upon the Prez on the tube tonight - if he does actually put the tax holiday on the table - they won't "get" it anyway. The understanding out there of what's gone down and what is going to go down - is abysmal.
Disobey.
the real problem today is that there are not enough qualified borrowers, not a shortage or the cost of credit...
yes...the serfs have been wrung like a wet towel...good luck "stimulating" the economy with another $300 billion of "stimulus"
Excerpt(s) from "The Big Short":
"In Bakersfield, CA., a Mexican strawberry picker with an income of $14,000/yr and no English was lent every penny he needed to buy a house for $724,000."
"By May 2007, however, there was a growing dispute between Howie Hubler and Morgan Stanley. Amazingly, it had nothing to do with the wisdom of owning $16 Billion in complex securities whose value ultimately turned on the ability of a Las Vegas stripper with five investment properties, or a Mexican strawberry picker with a single $750,000 home, to make rapidly rising interest payments."
"'Who takes out a home loan and doesn't make the first payment?' asked Danny Moses, putting the matter one way. 'Who the fsck lends money to people who can't make the first payment?' asked Eisman, putting it another."
part of gambit is to allow disposable income for homeowners in the red and not as function of refi to flow out into the economy. this is perversily akin to banks not foreclosing on squaters not paying mortgages in order to allow said squaters to use oppurtunity cost monies to survive ie all of this artificially alleviates the inevitable jump in unemployment claims while goosing GDP and other bogus data points while delaying the full disclosure of financial sector's true books and their toxic assets.
nice game of chicken they're playing on our collective dimes.
there's a few options that would help; 1. restore the rule of law. 2. bring back capitalism. just sayin'
Where the hell have you been?
Ask yourself that disabledvet.
This is old news.
No I mean "where has careless whisper been?" haven't heard from that source in far too long. i think in the brevity the comment came out wrong. i'll be more ellipitical in the future.
Do not sign a new home loan... as your existing loan is probably 'broken' due to illegal title transfer. As such, you should file for a quiet title. Check the title owner transfers and if they have not been properly filed to the city clerk within the legal timeline, they technically do not own your home. This is where you can get your home debt free due to possibly illegal financial activity by the banksters/investors. If you foolishly sign a new home loan, you give these banks/investors a 'reset' and they then get 'out of jail' free and clear and own you all over again.
There is far more, yet a good lawyer who works for you, not the banks, is what you may need to find. WARNING: Many lawyers work for the bank’s interest and not yours, so be VERY careful!
Good advice, more detail please. How does one file for "quiet title" and how much does it cost on average per title?
Either find a lawyer you can trust. (One that stays bought, like an honest politician) or do the research on your own. Every state is different. There are three or four basic "theories of title" but each state has details that can hang either you or the bank.
I don't think the infrastructure bank is a given. Republicans should realize that is a backdoor way to fund his re-election campaign. The money will go straight to unions who will donate it back to Obama.
Wall Street Hyenas Are Obama Bin Lyin's Real Funders...
The infrastructure bank is just a Wall Street fraud scheme so the infrastructure funding can be looted, leveraged and siphoned off (e.g. see which hedge funds were made whole on the Solyndra fraud at taxpayer expense)...
Very little will ever trickle down to an actual infrastructure project...
This is the reason the first Obummer "stimulus" failed miserably... It was all pork and looting...
An infrastructure bank is like putting pedophiles in charge of a preschool...
Imagine what a CLUSTERFUDGE that program will be...it will make cash for clunckers look well run.
If they drop that 1/4 percent, the banks will buy gold.
Boy won't the fed love THAT reaction. Yuck, yuck, yuck.
Who thinks banks aren't catching on to the value of "no counterparty risk"?
No counter-party risk!
Make that No Central Bank Counter-Party Risk after the Swiss screwjob.
Dont think gold is a lawful asset for banks anymore. Could be wrong, but it's probably considered more in the way of a commodity and hence too risky. Be nice though if it were so.
BTW BK, dropping the 25bp rate on excess reserves wont chase the banks into the lending channel. They're not lending b/c they dont want to (for several reasons), not b/c they're getting rich 25bps at a time.
Bernanke is boxed in, and it's about time.
Any wholly owned broker/dealer related operation (as in ML opposite BAC for example) can own gold outright, essentially thereby the bank having exposure to the same, and indeed subsequent to changes in Discount Window policies contemporaneous with the Last Lehman Event, the funding for which can be achieved by the bank and downstreamed to said broker/affiliate.
Further, many of the large US money center banls are LBMA member/dealers and are thus in fact (or have operating subsidiaries) engaged in the ownership of bullion and associated materials/derivatives.
Yes, they can own it, whether directly or so indirectly for all intents and purposes it's on the balance sheet and thus at exposure.
Also remember, in Frank-Dodd was a mere tow or three sentence exclusion of Gold and SIlver Trading by/for banks from any and all commodities, derivative, etc., etc., etc., regulations.
Take a guess why?
So they can continue in the PM business as normal.
Same olde same olde reform.