Obama’s Budget Proposal – $10 Trillion In New Debt- European Leaders Express Disbelief

President Obama will address the Nation in an hour. Using his best salemanship he will attempt to convince a skeptical country that his almost 4 Trillion Dollar Budget is the right thing for America. That an increase in the Nations Debt, by $10 Trillion Dollars, if the Congressional Budget Office’s projections are correct, over the next 10 years, are just what the doctor ordered. (Just how large might the debt be if the CBO projections are overly optomistic. Optomistic like the President’s promise to cut the deficit in half, a promise that lasted less than a week).

During this last election cycle the Main Stream Media was quick to point out Candidate Obama’s popularity in Europe. A popularity that has waned significantly since he assumed office. President Obama’s spending proposals have met with disbelief in Europe. The sheer size and duration of the proposed programs dwarf any previous spending proposals, at any time, any place, in the history of the world.   

What do European leaders have to say about Obama’s proposed spending plans?

Obama and Europe are having their first spat, over money

Reporting from Paris — Barack Obama may have captivated the European imagination with his unexpected rise to the presidency and a softer-than-Bush foreign policy, but his political magnetism is showing its limits just two months into the job, as many European leaders balk at his call to match his administration’s attempt to spend its way out of recession.

With finance ministers from the leading industrial and developing nations — members of the Group of 20 — preparing to address the global economic crisis at a summit this weekend in London, signs are emerging that the United States and Europe have different ideas about what constitutes the best tonic.

President Obama on Wednesday again urged other countries to boost public spending as he is doing, in hope of encouraging demand that will get their economies rolling.

But many European leaders say they have stimulated their economies enough. What the world needs now, they say, are tougher, globally enforced regulations on financial markets to avoid a repeat of the mistakes that led to the current troubles.

This week, they pushed back against Obama’s plan.

“We are not ready to increase the packages we have established for the current situation,” said Jean-Claude Juncker, prime minister and finance minister of Luxembourg and head of a European economic commission that met Tuesday in Brussels.

“The Americans should be more modest about giving lessons, because the crisis comes from them,” Patrick Devedjian, France’s minister for recovery, said in a TV interview.

The tough talk has added to the sense of cooling between Europeans and the politician they greeted with almost rapturous affection during his visit to the continent last year. “Disagreement between Obama and the Europeans over the recovery,” the respected French daily Le Figaro proclaimed on its front page Wednesday.

The divisions over economic stimulation represent a role reversal from the conventional U.S. and European positions. Europe is known for being comfortable with using government to try to fix economic problems. The Reagan revolution left Americans skeptical of that approach.

http://www.latimes.com/news/nationworld/world/la-fg-europe-stimulus12-2009mar12,0,5114236.story
European Central Bank head Jean-Claude Trichet warned, “The deficits of today weaken the economy, and our spending today will weigh on our children and on our grandchildren.”
http://afp.google.com/article/ALeqM5iMy_NnhDtgFsdgXvdbUW4d7qyLiQ

National Public Radio, that notorius left wing organization that supports Obama’s every move, reports:

EU Pledges  No New Stimulus Funds

EU leaders steered far clear of any big new government spending plans to fight the global economic slowdown. Struggling to balance mounting debt and joblessness, the 27-nation bloc has steadily refused to consider new stimulus. The plan put forth Friday reflects the EU’s difference of opinion with President Barack Obama’s new U.S. administration over how best to resolve the economic crisis and may make for tough negotiations at an April 2 summit of the Group of 20 rich and developing nations.

EU leaders resisted calls for increasing economic stimulus efforts at the G-20.

http://www.npr.org/templates/story/story.php?storyId=101314206

[That is right, the leaders of 27 European Nations, all with a great deal more expereince than Obama, question the advisability of additional stimulus spending, never mind spending amounts never before dreamed of – Obama’s proposed budget will increase the US deficit 400% in it’s first year] 

 

 The EuropeanVoice.com

Reports that Mirek Topolánek, the Czech prime minister, is one of several EU leaders who are sceptical about economic recovery packages.

France and Germany resist calls from U.S. for more spending:

Putting aside months of tension over how to deal with the global financial crisis, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France joined forces Thursday to reject calls by the United States that Europe spend more to overcome the recession. Unity between France and Germany is considered crucial if Europe is to make major decisions, but their new rapport could sharpen divisions between Europe and the United States over how to tackle the financial crisis…. 

http://article.wn.com/view/2009/03/12/France_and_Germany_resist_calls_from_US_for_more_aid/

REUTERS reports that the run-up to this weeks G-20  gathering has been dominated by disagreements over what the summit’s priorities should be, and the degree to which countries should ramp up stimulus spending. Washington is urging the biggest industrialized countries to spend 2 percent of their gross domestic product to boost demand and pull the global economy out of its tailspin, but France and Germany have rejected U.S. calls for fresh spending.  The G20 represents more than 80 percent of the global economy, comprising the Group of Seven industrial nations — all of which are in or near recession — and key emerging markets such as Russia, China, India and Brazil.

“We consider that in Europe we have already invested a lot for the recovery, and that the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself,” French President Nicolas Sarkozy told a news conference in Berlin on Thursday with German Chancellor Angela Merkel, rebuffing U.S. calls to spend more.

Russia will also oppose proposals for G20 members to set a mandatory minimum fiscal stimulus level at 2 percent of GDP and cut interest rates, a Russian delegation source told reporters on Thursday.

http://news.yahoo.com/s/nm/20090313/wl_nm/us_g20;_ylt=AlWrTTbFhnsXa1WZ_UwB.qas0NUE;_ylu=X3oDMTFia2Izb2htBHBvcwM0NARzZWMDYWNjb3JkaW9uX3dvcmxkBHNsawNnMjBzcGxpdG92ZXI

Paris rejects ‘Obama-style’ stimulus program

Prime Minister François Fillon on Monday rejected demands that the French government seek to stimulate consumer spending through Government spending. “It would be irresponsible to chose another policy, which would increase our country’s indebtedness without having more infrastructure and increased competitiveness in the end,” Fillon said in a speech in Lyon. http://www.iht.com/articles/2009/02/02/business/frecon.php

The Obama Budget proposal will but the Nations debt at 4% of GDP (Gross National Product). Members of the EU pledge to keep their Nation’s debt at 3% of GDP. ( http://www.mfcr.cz/cps/rde/xbcr/mfcr/EU_Indicators_SustainableDevp.pdf  at page 11). Obama’s proposed spending plan exceeds that “pledge” by 33% or 1/3, thus under the Obama proposal, the US would not qualify for EU membership. http://afp.google.com/article/ALeqM5iMy_NnhDtgFsdgXvdbUW4d7qyLiQ

All political rhetoric aside, all the promises of “investment in the future” put to rest, if the heads of the G-20, the Government Leaders who oversee 80% of the World’s economic activity caution about the continued deficit spending – why the rush down this very dangerous path? Political opportunism? Poltical payback? Political power?

The economic and financial markets are in crisis. Prudent and cautious action is called for. When the socially liberal governments of Europe warn on the dangers of deficit spending and refuse to join the headlong rush proposed by the Obama Administration, one should pause and reflect.

The wrong decisions, the wrong policies or poor execution of correct policies can create irrecoverable losses. Contrary to the recent  claims of the Polticians, hasty actions which prove to be flawed are, in fact, much harder to correct than deliberate and well though out responses.  

The immedaite history of our multiple “Bailout” and “Stimulus” plan fiascos simply reinforce this truth.     

This is not a matter of Party Politics. It is not a matter of Capitalism versus Socialism. The Socialist leaning Governments of Europe are the warning against this spending. The reckless spending proposed in this budget plan is one of historic proportions, one that cannot be supported no matter what ideology is brought to bear. This spending is a matter of bad business, bad math and bad economics. This level of spending, left unchecked, may create obstacles that not even Capitalism can overcome.  

Contact your Representatives in Washinghton – Tell your Senator & Representative to Vote NO on the 4 Trillion Dollar Budget!    http://www.usa.gov/Contact.shtml

Obama On 60 Minutes – Government Spending – Only Limited By What US Can Borrow From Foreign Countries

Obama’s 60 Minutes Interview a Laugh Fest

By Mark Impomeni AOL News

President Barack Obama’s interview on 60 Minutes last night was characterized by the president’s bizarre behavior while discussing the trials and travails of the U.S. economy. The president routinely interrupted himself with chuckling and outright laughter while discussing the current state of the economy and the effects that the downturn have had on Wall Street.

The president’s demeanor in discussing the economy was so noticeably inappropriate that interviewer Steve Kroft confronted him about it, asking if Obama was, “punch drunk.” (13:34) Obama explained his jokes at the economy’s troubles as, “a little gallows humor to get you through the day.”

According to the transcript, there were laughs and chuckles from Obama on subjects ranging from whether or not Treasury Secretary Tim Geithner should resign, to an additional bailout for the U.S. auto industry, to the idea of fixing the banking system without taxpayer money. In all, CBS notes that the president laughed or chuckled thirteen different times during the interview. Some were innocent, such as when the president joked about the size of the swing set his daughters have on the White House grounds. But the others may be viewed as evidence of an inappropriately cavalier attitude in the midst of what President Obama calls, “the worst financial crisis since the Great Depression.”

When he wasn’t laughing, President Obama did make some news in his interview. He said that he has not had any discussions about replacing Geithner at the Treasury Department, saying he would not accept Geithner’s resignation if it was offered to him. Obama also admitted that he has not given Geithner, “as much help as he needs;” a reference to the lack of appointees in under-secretary positions at Treasury. Obama also indicated that he does not believe that the bill passed by the House last week to tax the bonuses of AIG executives is constitutional.

[Watch the President’s Body language during the Geitner discussion – As Obama denies discussions about Geitner being fired, he says “no” while shaking his head “yes”]

The president also seemed to indicate that he sees no concrete limit to the amount of money the United States can borrow to finance his agenda. Asked directly if there was a limit to the amount of money the U.S. can spend, Obama said, “The- the limit is our ability to- finance- these expenditures through borrowing.” Obama explained that as long as foreign countries are willing to buy U.S. Treasury securities, the amount of the debt was secondary. He did allow, however, that growing U.S. deficits could cause foreign investors to shy away from buying U.S. debt, which would put a damper on spending. [But not a word on the harm to American’s futures when the bills come due – just a focus on more spending and where we can borrow the money – there is something fundamentally wrong here] 

President Obama had some harsh criticism for former Vice President Dick Cheney in reaction to Cheney’s recent comments that Obama’s decision to close the Guantanamo Bay terrorist detention center was making the country less safe. “How many– how many terrorists have actually been brought to justice under the philosophy that is being promoted by Vice President Cheney,” he asked. “It hasn’t made us safer. What it has been is a great advertisement for anti-American sentiment.” Obama was non-committal, however, when pressed on how the detainees at Guantanamo should be handled. “I think we’re going to have to figure out a mechanism to make sure that they not released and do us harm. But– do so in a way that is consistent with both our traditions, sense of due process, international law,” is as far as he would go.

President Obama is a very likable person, and his personal popularity poll numbers bear that out. But support for the policies he is advancing is not nearly as high as his personal approval. Some will view this interview performance and see a confident man at ease with himself and the course he is pursuing. But others will wonder just what the president thought was so funny about dealing with a crisis that has cost millions of people their jobs and thoroughly eroded the American public’s confidence in the economy. [This writer wonders if Obama didn’t have a little “toke” before the interview started]. 

Read the Original Article and see the full 60 Minutes interview here:

http://news.aol.com/political-machine/2009/03/23/obamas-60-minutes-interview-a-laugh-fest/

Participate in a McAuley’s World Poll Here: https://mcauleysworld.wordpress.com/2009/03/24/obama-on-60-minutes-you-vote-see-the-video-was-obama-high-or-punch-drunk/

Obama On 60 Minutes – Was The President “Stoned” – Watch, Read & Vote!

US NEWS & WORLD REPORT

Bonnie Erbe

President Obama, your inexperience is showing once again. One of the most common mistakes made by inexperienced politicians is inappropriate use of humor. Take, for example, joking about the depressed economy. If you’re a two-term state senator, maybe you can be excused for joking about a weak economy or laughing about it. When you’re president of the United States, it’s inexcusable. Yet, President Obama made that exact mistake earlier this week in an interview on CBS’s 60 Minutes. Interviewer Steve Kroft called him on it:

Kroft: “You’re sitting here. And you’re–you are laughing. You are laughing about some of these problems. Are people going to look at this and say, ‘I mean, he’s sitting there just making jokes about money –‘ How do you deal with–I mean, wh–explain.”Obama: “Well–Kroft: “–the mood and your laughter.”Obama: “Yeah, I mean, there’s got to be –“Kroft: “Are you punch drunk?”Obama: “No, no. There’s gotta be a little gallows humor to get you through the day. You know, sometimes my team–talks about the fact that if–if you had said to us a year ago that–the least of my problems would be Iraq, which is still a pretty serious problem–I don’t think anybody would have believed it. But–but we’ve got a lot on our plate. And–a lot of difficult decisions that we’re going to have to make.”

And therefore, having a lot on one’s plate excuses that person from laughing about people being out of work? If you’re busy, it’s OK to joke about the economy being in a freefall and the ineffectiveness of the president’s stimulus package thus far? I don’t think so.

Inappropriate laughter is not the only mistake the president made during the 60 Minutes interview. He also hyperbolized, yet again, about the recession. He said he believes the United States could undergo a further implosion of the financial system if Citigroup or AIG have more problems, which in turn could launch,

“an even more destructive recession and potentially depression.”

Such talk from the leader of the free world is immature if not downright stupid. Hasn’t he learned by now that his words have more impact since he took over the White House? A U.S. president’s words move markets up and down, with even more impact than those of the Federal Reserve chairman. A seasoned politician chooses his/her words cautiously, recognizing their impact. For a guy who “gets” it, President Obama doesn’t “get” that part of being president yet.

http://www.usnews.com/blogs/erbe/2009/3/24/obamas-punch-drunk-performance-on-60-minutes-displays-his-inexperience-.html#read_more

Obama’s 60 Minutes Interview a Laugh Fest – AOL News

By Mark Impomeni
President Barack Obama’s interview on 60 Minutes last night was characterized by the president’s bizarre behavior while discussing the trials and travails of the U.S. economy. The president routinely interrupted himself with chuckling and outright laughter while discussing the current state of the economy and the effects that the downturn have had on Wall Street.
 

The president’s demeanor in discussing the economy was so noticeably inappropriate that interviewer Steve Kroft confronted him about it, asking if Obama was, “punch drunk.”

Read Mark Impomeni’s Article and see the whole interview here: http://news.aol.com/political-machine/2009/03/23/obamas-60-minutes-interview-a-laugh-fest/

Obama’s Toxic Asset Plan – Taxpayers Left With The Risk – PIMCO CIO States $5 Trillion needed

Treasury’s latest plan faces pitfalls

Government seeks private partners, but taxpayers bear the risks

By John W. Schoen
Senior producer
msnbc.com
After months of speculation and false starts, the Treasury Monday announced a new plan to deal with the so-called “toxic assets” that have been weighing down the financial sector and clogging global credit markets. 

The announcement by Treasury Secretary Tim Geithner was greeted by a big rally on Wall Street but leaves unresolved some major hurdles that have plagued the rescue plan since October, when the Bush administration first floated the idea to deal with the troubled assets. And the new plan leaves unanswered the biggest question echoing from Wall Street to Main Street: Will it work?

With private investors still loath to step up and buy mortgage-backed securities and related assets, the latest Treasury plan shifts much of the risk to taxpayers. By partnering with the government, a few big investment funds will have a chance to profit off the toxic assets, sharing any proceeds with the government. But if the investments don’t pay off, taxpayers will bear most of the risk. [Who decides who gets to participate and have a shot at making a profit? Will politicians be rewarding their political cronies again?]

 

“There is no doubt the government is taking risks,” Geithner told reporters. “You can’t solve a financial crisis without the government taking risks.”

 

In addition to the risk of taxpayer losses, there is also the risk that the government could set such a low price on the toxic assets that it could actually worsen the credit crunch.

The new plan will draw on up to $100 billion in funds already approved by Congress under the  Troubled Asset Relief Program, as well as additional funding from the Federal Reserve. The government will match private investment dollar-for-dollar, and the Federal Deposit Insurance Corp. will put up significant backing, up to $6 for every $1 invested, in exchange for a fee.

[The Government will provide 70% to 90% funding of the “toxic asset” purchases] 

The FDIC funding will be in the form of “non-recourse” loans, meaning private investors will be allowed to walk away from their investment if it goes bad, leaving the government with the failed investment and any losses on the loan.

[This isn’t a “partnership” in a “partnership” all parties share in the “profit or loss” – generated from the relationship. This is simply a giveaway of Taxpayer Dollars under the disguise of “partnership”] 

After months of preliminary discussions with potential investors, the Treasury is now moving quickly; private firms have to apply by April 10, and the government will respond by May 1. Some of the nation’s biggest money management firms, including PIMCO and BlackRock, are considered likely candidates. The Treasury is expected to limit the list to a half-dozen firms at most. [Who deicdes who gets to participate? Blackrock or Blackrock Financial is a Hegde Fund or Holding Company. http://en.wikipedia.org/wiki/BlackRock, Black Rock was involved with “no credit score” no “FICO” Mortgage Loans in California. http://www.blackrockloan.com/ . http://www1.blackrock.com/. PIMCO is a Bond Fund – http://www.pimco.com/Default.htm, http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=PZ&date=20090320&id=9715984 ]

What’s the ‘market’ price?
At the height of the housing boom, investors couldn’t get enough of the mortgage-backed bonds Wall Street was churning out by the boatload because these investments offered a good return for what seemed like little risk. [The Plan returns to the “source” of the problem and rewards the same actors].

But when it became apparent that sloppy mortgage lenders had doled out hundreds of billions of dollars to people who couldn’t pay it back, no one wanted to touch investments backed by mortgages. With no way to sell them, banks are now stuck with trillions of dollars worth of assets they can’t properly value. That’s clogging up the global flow of credit.

http://www.msnbc.msn.com/id/29839898/page/2/

Though roughly 90 percent of mortgage holders are still making payments, investments backed by mortgages are selling for only 30 to 60 cents on the dollar. The reason is that — with unemployment rising and home prices falling — no one knows which mortgages will be the next to default. So banks have been forced to write down the value of these investments and take huge losses to cover the write-downs.

 

The Treasury is hoping that by jump-starting the private market with a massive shot of government investment and lending, prices of these assets will stabilize and banks can either sell them off or assign them a more realistic value on their books. [Why would this happen – the asssets are being purchased with Government funding, the Government funding 70% to 90% of the pruchase. The Plan will simply create two classes of investment vehilces – Risky, Government backed Mortgage based securities and risky Mortgage backed securities not backed by taxpayer dollars. To imply both groups wil be treated equally in the market place is ridiculous. Fundamental change to the Government Programs that created the “bogus bad mortgages” is what is required if one wants to restore confidence in “mortgage backed securities”. This proposal not only leaves the risk with the Taxpayer – it is a solution akin to blowing smoke away from a fire, it will give you a better look at the fire but won’t put the fire out]

 

The plan still faces a major hurdle that’s dogged rescue efforts since the Treasury first unveiled a plan to buy mortgage-backed bonds last October. If banks in the deepest trouble need to raise cash by unloading their troubled assets on the cheap, much the way they’re dumping foreclosed houses at distressed prices, that “market” price for one set of bad loans could force other banks to take bigger write-downs on their holdings. [So the Congress and the Treasury can send more Taxpayer Money to the Financial Institutions – What a scheme] 

Banks may also have second thoughts about selling their “toxic” investments at any price, because bankers believe that most of these assets won’t be toxic forever. Since most mortgage holders will eventually make their payments, many of these investments should recover much of their lost value once the housing market and economy stabilize. If the Treasury purchase program sets a market price that’s too low, banks could decide to sit on these investments for years — producing the opposite effect the Treasury is trying to achieve. [Payments through the Mortgage Rescue Plan – Isn’t it time to pause and let all of these programs catch up with each other, instead of pursuing this shot-gun approach that requires throwing Trillions of Taxpayer Dollars at every issue simultaneously] 

The Treasury’s buyback plan also could be affected by a proposal now working its way through Congress that would change the so-called “mark to market” accounting rules that force banks to take big losses on investments that may some day recover much of their lost value. [This writer is not advocating the elimination of Mark to Market – but if Mark to Market is about to be changed – wouldn’t it be prudent to wait before Trillions of additional Taxpayer dollars are expended on what maybe an unnecessary fix?]  

With Congress in an uproar over bonuses paid to executives at bailout-recipient AIG, some potential private investors also have been reluctant to sign on for fear that the rules may change after the game has begun. The Treasury is trying minimizing that risk by promising firms that participate in the purchase plan they won’t be subject to executive compensation caps added to the original TARP plan.

But some on Wall Street fear Congress may yet enact rules that undercut the appeal of partnering with the government.

“The dark cloud on the horizon is this congressional hysteria against pay and redesigning the terms of a contract after they’ve been written,” said Steve Bartlett, CEO of the Financial Services Roundtable, an industry lobbying group. “I think Wall Street is just sort of justifiably holding back because of that.”

[Consider the effect of “cram downs” on asset value – How do you value a mortgage if the mortgage price is subject to a bank “cram down” without definitive guidelines]   

As anger in Congress has risen, the odds have fallen on the possibility of additional bailout funding. But key portions of the Treasury’s plan don’t require congressional approval. That’s because the program draws much of its funding from the independent Federal Reserve and from the FDIC, which can draw on its own assets. [The whole program subverts the Constitutional Separation of Powers and prevents regualtion of the actions by Congress – so the same “guards” who were on duty when this mess started are in now charge and they get to choose who participates – Isn’t this a sure formula of disaster for Taxpayers]

 

 Despite the unimaginably large pile of money being funneled into the financial system, some of those involved in the plan say that — even if it works — it’s only a down payment on the eventual solution.   

“Its fair to be optimistic; that’s the way Americans should be leaning,” said Bill Gross, chief investment officer at PIMCO, one of the nation’s largest bond funds. “But the hole here is a $5 trillion-plus whole in terms of assets and capital destruction.  I think we’ve only gone about half of the way and the will be additional programs to come.”

[How much of the $5 Trillion will be funnelled to PIMCO Clients?]

WOW – at least $5 Trillion in additional Government spending – $5 Trillion in additional Tax Dollars. When will it stop.

Treasury’s latest “Toxc Asset” plan – The Return Of The Bush Plan – Taxpayers Take The Risk – Hedge Funds Take The Profits: By MSNBC

Treasury’s latest plan faces pitfalls

Government seeks private partners, but taxpayers bear the risks

By John W. Schoen
Senior producer
msnbc.com
After months of speculation and false starts, the Treasury Monday announced a new plan to deal with the so-called “toxic assets” that have been weighing down the financial sector and clogging global credit markets.

The announcement by Treasury Secretary Tim Geithner was greeted by a big rally on Wall Street but leaves unresolved some major hurdles that have plagued the rescue plan since October, when the Bush administration first floated the idea to deal with the troubled assets. And the new plan leaves unanswered the biggest question echoing from Wall Street to Main Street: Will it work?

With private investors still loath to step up and buy mortgage-backed securities and related assets, the latest Treasury plan shifts much of the risk to taxpayers. By partnering with the government, a few big investment funds will have a chance to profit off the toxic assets, sharing any proceeds with the government. But if the investments don’t pay off, taxpayers will bear most of the risk. [Who decides who gets to participate and have a shot at making a profit? Will politicians be rewarding their political cronies again?]

“There is no doubt the government is taking risks,” Geithner told reporters. “You can’t solve a financial crisis without the government taking risks.”

In addition to the risk of taxpayer losses, there is also the risk that the government could set such a low price on the toxic assets that it could actually worsen the credit crunch.

The new plan will draw on up to $100 billion in funds already approved by Congress under the  Troubled Asset Relief Program, as well as additional funding from the Federal Reserve. The government will match private investment dollar-for-dollar, and the Federal Deposit Insurance Corp. will put up significant backing, up to $6 for every $1 invested, in exchange for a fee.

[The Government will provide 70% to 90% funding of the “toxic asset” purchases] 

The FDIC funding will be in the form of “non-recourse” loans, meaning private investors will be allowed to walk away from their investment if it goes bad, leaving the government with the failed investment and any losses on the loan.

[This isn’t a “partnership” in a “partnership” all parties share in the “profit or loss” – generated from the relationship. This is simply a giveaway of Taxpayer Dollars under the disguise of “partnership”] 

After months of preliminary discussions with potential investors, the Treasury is now moving quickly; private firms have to apply by April 10, and the government will respond by May 1. Some of the nation’s biggest money management firms, including PIMCO and BlackRock, are considered likely candidates. The Treasury is expected to limit the list to a half-dozen firms at most. [Who deicdes who gets to participate? Blackrock or Blackrock Financial is a Hegde Fund or Holding Company. http://en.wikipedia.org/wiki/BlackRock, Black Rock was involved with “no credit score” no “FICO” Mortgage Loans in California. http://www.blackrockloan.com/ . http://www1.blackrock.com/. PIMCO is a Bond Fund – http://www.pimco.com/Default.htm, http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=PZ&date=20090320&id=9715984 ]

What’s the ‘market’ price?
At the height of the housing boom, investors couldn’t get enough of the mortgage-backed bonds Wall Street was churning out by the boatload because these investments offered a good return for what seemed like little risk. [The Plan returns to the “source” of the problem and rewards the same actors].

But when it became apparent that sloppy mortgage lenders had doled out hundreds of billions of dollars to people who couldn’t pay it back, no one wanted to touch investments backed by mortgages. With no way to sell them, banks are now stuck with trillions of dollars worth of assets they can’t properly value. That’s clogging up the global flow of credit.

WOW – at least $5 Trillion in additional Government spending – $5 Trillion in additional Tax Dollars. When will it stop.

http://www.msnbc.msn.com/id/29839898/page/2/

Though roughly 90 percent of mortgage holders are still making payments, investments backed by mortgages are selling for only 30 to 60 cents on the dollar. The reason is that — with unemployment rising and home prices falling — no one knows which mortgages will be the next to default. So banks have been forced to write down the value of these investments and take huge losses to cover the write-downs.

The Treasury is hoping that by jump-starting the private market with a massive shot of government investment and lending, prices of these assets will stabilize and banks can either sell them off or assign them a more realistic value on their books. [Why would this happen – the asssets are being purchased with Government funding, the Government funding 70% to 90% of the pruchase. The Plan will simply create two classes of investment vehilces – Risky, Government backed Mortgage based securities and risky Mortgage backed securities not backed by taxpayer dollars. To imply both groups wil be treated equally in the market place is ridiculous. Fundamental change to the Government Programs that created the “bogus bad mortgages” is what is required if one wants to restore confidence in “mortgage backed securities”. This proposal not only leaves the risk with the Taxpayer – it is a solution akin to blowing smoke away from a fire, it will give you a better look at the fire but won’t put the fire out]

The plan still faces a major hurdle that’s dogged rescue efforts since the Treasury first unveiled a plan to buy mortgage-backed bonds last October. If banks in the deepest trouble need to raise cash by unloading their troubled assets on the cheap, much the way they’re dumping foreclosed houses at distressed prices, that “market” price for one set of bad loans could force other banks to take bigger write-downs on their holdings. [So the Congress and the Treasury can send more Taxpayer Money to the Financial Institutions – What a scheme] 

Banks may also have second thoughts about selling their “toxic” investments at any price, because bankers believe that most of these assets won’t be toxic forever. Since most mortgage holders will eventually make their payments, many of these investments should recover much of their lost value once the housing market and economy stabilize. If the Treasury purchase program sets a market price that’s too low, banks could decide to sit on these investments for years — producing the opposite effect the Treasury is trying to achieve. [Payments through the Mortgage Rescue Plan – Isn’t it time to pause and let all of these programs catch up with each other, instead of pursuing this shot-gun approach that requires throwing Trillions of Taxpayer Dollars at every issue simultaneously] 

The Treasury’s buyback plan also could be affected by a proposal now working its way through Congress that would change the so-called “mark to market” accounting rules that force banks to take big losses on investments that may some day recover much of their lost value.

With Congress in an uproar over bonuses paid to executives at bailout-recipient AIG, some potential private investors also have been reluctant to sign on for fear that the rules may change after the game has begun. The Treasury is trying minimizing that risk by promising firms that participate in the purchase plan they won’t be subject to executive compensation caps added to the original TARP plan.

But some on Wall Street fear Congress may yet enact rules that undercut the appeal of partnering with the government.

“The dark cloud on the horizon is this congressional hysteria against pay and redesigning the terms of a contract after they’ve been written,” said Steve Bartlett, CEO of the Financial Services Roundtable, an industry lobbying group. “I think Wall Street is just sort of justifiably holding back because of that.”

As anger in Congress has risen, the odds have fallen on the possibility of additional bailout funding. But key portions of the Treasury’s plan don’t require congressional approval. That’s because the program draws much of its funding from the independent Federal Reserve and from the FDIC, which can draw on its own assets. [The whole program subverts the Constitutional Separation of Powers and prevents regualtion of the actions by Congress – so the same “guards” who were on duty when this mess started are in now charge and they get to choose who participates – Isn’t this a sure formula of disaster for Taxpayers]

 

 Despite the unimaginably large pile of money being funneled into the financial system, some of those involved in the plan say that — even if it works — it’s only a down payment on the eventual solution.   

“Its fair to be optimistic; that’s the way Americans should be leaning,” said Bill Gross, chief investment officer at PIMCO, one of the nation’s largest bond funds. “But the hole here is a $5 trillion-plus whole in terms of assets and capital destruction.  I think we’ve only gone about half of the way and the will be additional programs to come.”

[How much of the $5 Trillion goes to PIMCO Clients at Taxpayer Risk?] 

 

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