SUCH A DEAL

Well, the sun came out for Greece today.  I'm not sure as to all the details but what the Euros apparently agreed to was a package of over 100 Billion Euros with the private sector contributing approximately 1/3 of the amount in the form of extended maturities of existing debt, swaps of debt for thirty  year obligations and the sbility of Greece to but back it's debt at a discount.  On top of all of that there will be Euroland guarantees on top of the new private debt thereby insuring that the European taxpayer will bear the full burden of this momentus deal.

When one says "private sector," the immediate thought is banks and other financial institutions which is fine if that is where the debt resides because as we have repeatedly discussed governments can always beat up on banks to "do the right thing.".  It's a bit more sticky, however, if the holders are really  private like hedge fund or vulture funds.  If that is the case one is immediately faced with the Obama General Motors solution; tear up existing law and threaten the holders to go along.  Worked here--could work there.  If you are really clever, you can try to determine at whaat price those holders obtained the debt and then permit the Greeks in any buy-back to guarantee a profit,  Problem there is these boys are not going to be happy getting just  85 for something they own at 83, but hey, it's burden sharing isn't it?  Should be fun to see what happens.

Of course throughout this exercise there was probably never a thought given to any realistic assumption of the Greeks being able to manage their finances so that even this deal will work out in the end.  Not the issue.  To the greatest extent possible they saved the banks (always the goal) and will probably strong-arm the rating agencies into not declaring this to be a default allowing M. Trichet to toddle off into the sunset with his Gaelic pride and sense of rightousness intact.  Bravo, guys, always knew you had it in you.  And now with this triumph behind them they can begin to worry about Portugal and Spain, assuming that a couple of governments don't fall before they can really get to the down and dirty. I don't know whether this thing has to be ratified by the individual legislatures which might be a tad awkward in a place like Germany, and I'm hardly an expert in European politics.  A good buddy has just told be Frau Merkel is certainly toast at this point; I'm not in a position to agree or disagree but once the full extent of the national burdens a understood, a lot can change.  I don't think it's over, as the Yogi-man said, 'til it's over.  I must admit, however, I'm surprised they got this much accomplished in this time frame.  Oh well...

Meanwhile, on this side of the pond things are beginning to look grim.  The Gang of Six's outline has, as expected, a lor of holes in it and questions attached.  The Leader reiterated that he's willing to take a short-term extention but added he wants higher taxes.  Non-starter.  The House proposal is going no where.  Discussion has begun on a short-term extention coupled with spending cuts and the requirement that the marking-up of a new tax code and specific deficite reduction measures begin immediately.  The Leader doesn't like that.  No point in speculating, we just might as well wait to see what happens, and that's exactly what I'm going to do.


I must admit I took some heat for my comments about The Suit yesterday but while bloody, I am unbowed.  He doesn't know what he's talking about but at the same time he has the unmitigated gall to lecture the world has to the joys of Dodd/Frank and it's improvement to the system when it was he, who for five years headed the most important regulatory body around, the N.Y. Fed, and apparently was clueless as to the risks that swirled around him.  I mean, DUH!  And now he finds religion when it is apparent to anybody with half a brain that as a result of this hair brained piece of legislation there is probably more risk in the system through institutions that will be designated TBTF ( go for it bro' I gocha back!) and certainly no less?   From the two clowns that brought you Fanny Mae and Freddie Mac: a piece of legislation whose rules, after one year are still to be written because nobody knows how to write them and $250 billion in losses and still counting.  Damn, we're just like Europe.  At least those guys can do it over a decent lunch.