White House

Following a flood of demands for the head of Tim Geithner on a silver platter, the head of America's one-ply paper issuance and tax evasion department, has just told the White House he is doing the wrong thing (of course) and not going anywhere. "Treasury Secretary Timothy F. Geithner, a central figure in the U.S. government’s bailouts of Wall Street banks and efforts to raise the debt limit, told President Barack Obama that he intends to remain in his job, according to a Treasury Department spokeswoman. “Secretary Geithner has let the president know that he plans to stay on in his position at Treasury,” Jenni LeCompte, assistant secretary for public affairs, said in a statement today in Washington. “He looks forward to the important work ahead on the challenges facing our great country.” Translation: goodbye foreseeable future. The only good thing is when the house of cards collapses (pretty soon at the going rate) Tiny Tim will be at the very top, and serve as the focal point of all accrued (if somewhat sharp, stainless steely and quite stabby) public "admiration."

McGraw-Hill: meet Chicago-style negotiations. And there, in one sentence, is all that is broken with this country. The reason for the beyond ridiculous horse trade, according to CNN: S&P analysis of U.S. revenue, deficit picture was questioned. Presumably S&P ignored to add the $10 quintillion dollars that were saved by America not declaring war on Tatooine and its most infamous Hutt resident: Larry Summers. Indeed, again according to CNN, S&P acknowledged some errors in its analysis. Isn't it amazing what being threatened with having your NRSRO license can do for motivation to double check your work, eh you pathetic sellouts? Who would have thought that last week's farce debt ceiling would continue and develop into a national pastime. Below, for the sake of S&P's non-existent conscience and incompetence, are their own guidelines for what constitutes an AAA-rated credit. Readers can decide if the US is one. In other news, in USSAAA, government downgrade rating agency.

To who expected an imminent departure by the one most incompetent man (after Larry Summers) and tax evading man in the current economic administration (that would be Tim Geithner) of course, we have bad news. He ain't going anywhere. In other words, the foreseeable future will be foreseeable for a long time. Politico's Ben Hill reports: "Treasury Secretary Tim Geithner is under intense pressure to remain at his post through President Obama’s re-election campaign next year but still may head out the door if a confirmable replacement can be found. The White House has made it clear it does not want to lose Geithner, the president’s chief economic advisor and trusted crisis consigliere. But the Treasury secretary has said he wants to return to New York this fall where his son is entering his last year of high school. He had hoped to leave after the debt ceiling drama ended and before bruising battles over tax, entitlement and housing reform resume in earnest this fall." Sorry to disappoint Tim. Which also means that Timmy will be at his rightful place when this whole house of cards finally implodes: at the very top. Lastly, it most certainly means that those who bought MF Global's bond issuance yesterday won't have to worry about springing rates for a long, long time if ever, because something tells us the one thing that could send this country formally over the edge is another former Goldman Sachs Treasury secretary.

Hot off the presses, here is the White House's very own "debt deal" fact sheet, which is apparently a "win for the economy and budget discipline." Which is great since we already know it is a win for the GOP and the Democrats. In other words, the only thing better than a Win-Win, is a Win-Win-Win... in which the only loser, of course, is America. We caution readers on high blood pressure medication, on blood thinners, those on dialysis, and those prone to incontinence or murderous acts of rage to please skip this post.

President Obama this Tuesday stated his case for increased taxes on “the rich” as part of his solution to balance the deficit. “Keep in mind,” he assured the American people, “that under a balanced approach, the 98% of Americans who make under $250,000 would see no tax increases at all.” I have a very basic question that I am not sure anyone has pressed Mr. Obama to answer: Where did this figure of 250k, north of which one is considered by him to be among “the rich” even come from? Its very roundness tells me that it was the result not of a detailed actuarial analysis but rather some sort of arbitrary caprice that only those completely isolated from any private sector experience can conjure up. I almost get the feeling it was something as off-hand as: “Hey 250k sounds right to me. Nice number. So whattya think?” Sure write it in there.

The latest headlines as they flash by:

• Carney Says Obama Would Consider ‘Couple of Days’ Extension
• Says short-term deal would give time to finish debate.
• Carney Says Treasury Could Give Update ‘This Weekend’ on Plans

It is unclear what a few day extension would achieve, aside from a rating adowngrade but it is enough to get the headline scanning robots ramping higher again.

The latest meaningless headlines from White House spokesman Jay Carney:

• CARNEY SAYS NO REASON TO REPEAT DEBT DEBATE LATER THIS YEAR Except for retaining Obama's job of course
• CARNEY SAYS AMERICAN PEOPLE WANT COMPROMISE ON DEBT LIMIT Preferably the democrat compromise which saves a few quadrillion by not launching war on Mars?
• And sure enough there it is: CARNEY SAYS REID PROPOSAL REPRESENTS COMPROMISE 
• CARNEY SAYS SENATE WILL REJECT BOEHNER DEBT PROPOSAL
• CARNEY SAYS TREASURY WILL EXPLAIN HOW IT WILL MANAGE FINANCES
• CARNEY SAYS BOEHNER PLAN VOTE WILL NOT LEAD TO COMPROMISE
• CARNEY SAYS CONGRESS `CONTROLS OUR FATE' ON DEBT LIMIT
• CARNEY SAYS ONGOING DEBATE HAS HAD NEGATIVE IMPACT ON ECONOMY
• CARNEY SAYS `NO QUESTION' BOEHNER PROPOSAL IS `POLITICAL ACT'

Bottom line: algos now using every appearance of the word "compromise" in a headline as buying trigger.

Contrary to calculations performed by Barclays and other analysts (including Stone McCarthy first presented on Zero Hedge), which speculated that the Treasury would have enough cash to last it through August 15th due to an increase in tax receipt, the White House's press secretary Jay Carney said that the Treasury will be "running on fumes" if the debt ceiling is not raised by August 2, naturally adding the traditional doomsday phrase that it is a "crisis situation." He had also added previously that tax revenues are not coming at an accelerated pace and that the cash will not last longer than Tim Geithner's original forecast of August 2. As the chart below shows the Treasury had $75 billion in cash as of last night, and will raise another $55 billion in net cash over upon settlement of this week's auctions. In other words, Geithner now predicts that the pro forma cash of $130 billion will last the US just one week. Well, at least we can see what the source of all the problems is.

Update: we have just gotten word that there will be a GOP conference call at 4:30 pm on the debt limit. Apparently the GOP is dead set on the 8pm Asian open and disregarding the much more important FX open.

It may be time to panic... at least on a "transitory" basis. After Boehner essentially said earlier that there are still no details what the "two-tier" plan noted yesterday would look like, we now are 5 hour away to FX open. And judging by the comments of White House Chief of Staff, it is almost as if the administration would like to see a selloff. Per Reuters: "White House Chief of Staff Bill Daley said on Sunday there will be a few stressful days ahead for financial markets but that a U.S. debt deal will ultimately be reached. "In the end, we may have a few stressful days coming up -- stressful for the markets of the world and the American people," he said on the CBS program "Face the Nation. Daley quickly added that he is confident a deal will be reached to raise the debt ceiling. We are confident he is right. We are also confident that if it takes a 200 point plunge in the S&P to achieve that target, well, so be it.

A week after Barack Obama stormed away from Republican negotiations on the debt ceiling, it is now Boehner's turn. Per Obama's live speech which is currently ongoing, John Boehner has broken away discussions with the president. Obama's response is to demand a meeting with Bohner, Pelosi and McConnell at 11 am tomorrow to explain to the president how it is possible that America will be in non-selective default in as little as ten days: "I want them here tomorrow at 11am...we have run out of time." Readers can watch the live webcast here.

From $4 trillion to $2 trillion to $1.5 trillion (soon $0 trillion of course, but that is another story). The latest gimmick to bounce the market is the completely unfounded rumor that the White House has said both side agree on $1.5 trillion in deficit cuts and an additional $200 billion can be agreed upon soon. Stocks surge, bonds tank...because, you know, this is good for America's credit standing according to Moodys. We give this rally a few minutes before Boehner comes out and denies everything. To all those who just bought the 30 Year, condolences... at least for the next few minutes.

Prior to the reception, Thigpen will be attending a special policy briefing with senior White House and Administration officials on topics including housing, immigration reform, innovation, energy, and job creation.

Last week David Stockman was on Tom Keene, making the usual media rounds (sometimes we marvel at his patience and endurance), as one of the few voices of fiscal prudence available to TV producers who seek to hold a balanced debate on the topic of US insolvency. Today, Reagan's budget director was again on Bloomberg TV explaining the reality of the situation to Matt Miller for the nth time (by now even a 2 year old will understand the cul-de-sac facing the US), although presenting a new spin on the situation, namely that we have gotten to a point where both parties are implicitly pushing for a US default, while though their inability to reach a political compromise, blaming each other for this inevitable outcome. "The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well...That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."

Remember all those stories about bin Laden posing an armed threat and hiding behind a woman leaving the SEALs no other choice but to shoot him? Turns out they were not quite correct. Politico reports: "The White House backed away Monday evening from key details in its narrative about the raid that killed Osama bin Laden, including claims by senior U.S. officials that the Al Qaeda leader had a weapon and may have fired it during a gun battle with U.S. forces.
Officials also retreated from claims that one of bin Laden’s wives was killed in the raid and that bin Laden was using her as a human shield before she was shot by U.S. forces...During a background, off-camera briefing for television reporters later Monday, a senior White House official said bin Laden was not armed when he was killed, apparently by the U.S. raid team." At this point one wonders, as noted yesterday, just how much of the official story spun by the administration will continue to unravel.

And for the most unsurprising news of the day, Reuters reports that the White House has admitted it knew about the S&P rating action on Friday. Which means that all the key bond buyers (or sellers are the case may be, Pimco), knew at roughly the same time what the key market catalyst on Monday would be (we can't wait to get a declassified glimpse of Larry Meyer's phone log over the weekend one day in the future). Which also means that today's action was a strawman in which the big boys merely waited for an opportunity to buy bonds are lower prices, which the ongoing European collapse merely facilitated. Most importantly, it is now all too clear why over the weekend, Tim Geithner's face, instead of being hard at work at finalizing his tax filing, would grace each and every TV screen. Advance damage control, TurboTax style.