Mother's Day was wonderful. We visited Number Two Son and the wife reveled in a passel of grandkids. Stayed longer than expected, hence the slippage. Apologies.
Well, as predicted, The Leader and the mob pounded the secured lenders involved in Chrysler into submission and the quickey bankruptcy can move forward apace. The TARP banks involved had already folded like a bunch of cheap suits as chronicled in a wonderful front page story last week on good ol' Jimmy Lee at J.P.Morgan who talked tough and carried a limp noodle when it came to backing it up. The pundits on both political spectrums have been having a field day with the secured guys, one set wailing about the trampling of the 5th. amendment while the other has been proclaiming the brilliance of The Leader and his team in doing the "right thing" in the face of heartless opposition. Don't know why such a big deal is being made of all this. The secured guys for the most part, were bottom feeders who owed the stuff at a considerable discount hoping to make a quick killing. That being said, the law was on their side and the "willingly" agreed to relinquish their claims not being prepared to stand up to the political and financial pressure but knowing that their downside was certainly way less than 100 cents on the buck. Sometimes you win, sometimes...In any case, the GM situation is considerably different and it is here we shall see if anyone has the guts to stand up to The Leader.
The fall-out, however, may well well be the mother of all unintended consequences. The price of finance just went up for everybody and the financing normally available in bankruptcies may well disappear. Ask yourself: would you be dumb enough to provide debtor in possession financing to an entity that possibly could have a politically connected class of creditors...i.e. unions? Count me out. The landscape could change. I also look forward to watching the UAW bargaining with themselves in the future with taxpayer's money in the balance. This is a sorry scene but for blog writers, a gold mine. I think I'll be around for a while.
Also last week was the Treasury's $16 billion 10 yeqr auction. It wasn't a disaster but it was close. Yield shot up to 4.3% on tepid demand. For those of you who don't know how this works, there is in place a group of financial institutions know as "Primary Dealers." At one time they numbered around 40; today they are fewer than half that number. To be in this club you have to bid on Treasury auctions, assuring the "success" of the issuance by the Treasury. The price at which you bid is very much dependent on the demand you have from the market into which you resell the issue. If things go as they are supposed to go, you are guaranteed a profit, but if you miscalculate demand...well, lets just say you're wearing Treasury paper for a while and if this situations persists you may well sell it at a loss. Predictably, the dollar was hit but not as hard as some thought would happen. Nevertheless, the predicted future is coming into focus. The Fed keeps pumping money out short term and medium to long term rates continue to rise on fears of the future inflation that is all but a certainty. On top of all this, the CBO revamped its budget deficit numbers upward (they are still underestimated) and commodity prices continued in their rise. As The Yogi Man used to say about left field in the Big Ball Park in October, "It gets late early out there." But with yield curve, the banks should make a bundle short term--the big banks that is with big trading operations--and it was a beautiful Mothers Day. What, me worry?
And speaking of banks, Our Hero has been all over the place--including another unfortunate little skit on SNL--preaching the gospel of regulation, redistribution and redemption, in language so flowing that it is nearly impossible to understand what the hell he is really saying. He's still flogging the idea of his public/private partnership although one would think that any rational human being witnessing the treatment of the private sector in the car business would run like hell in the opposite direction. We shall see. He also wants a systemic risk regulator: I thought we had one in the Congress of the United States as Per Freddie and Fanny...who by the by, just announced that they had lost another gazillion dollars and need another $8 billion or so of new taxpayer money. Those regulator-things sure do work. He was speaking to the itsy-bitsy bankers' association today and promised that he was going to take money from the big guys and give it to them. Huzzahs all-around. Boy sure know how to wow a crowd.
Finally, a political comment. I watched The Leader this morning accepting the pledge of the Congressional leadership to have the reform of health care settled before the August recess. Joy unbounded. At the end as he was about to head North, Nancy Pelosi planted a kiss on his Southernmost feature in a manner unseen even in a town famous for such drooling acts. Now it is well-known that Nancy has gotten both of hers in a wringer over these "torture briefings" and Rahm's buddy Stenny has expressed the view that maybe their should be some hearings on what Nancy didn't hear and why, but this?! Is Nancy long for the Speaker's Office? Jeeze, she may have to fly commercial.
A follow-up tomorrow
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