TARPs are rarely transparent.

Where did all the TARP money go? Well the answer it seems, is that nobody is entirely sure.

Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don't have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it's essentially worthless.

I'm not surprised.

For those of you still onside with government health care, especially single payer, wake up!

TARP - It's who you know

CIT Financial, financier to a large number of small to medium businesses, is on the brink of collapse, despite having received TARP funds during the recent round of bank bailouts.

July 13 (Bloomberg) -- CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.

A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.

CIT executives spoke with regulators during the past two days, according to a person familiar with the talks, after its bonds and shares tumbled on concern that the Federal Deposit Insurance Corp. won’t allow the lender into its bond-guarantee program created last year to unfreeze debt markets. CIT may default as soon as April, when a $2.1 billion credit line matures, according to Fitch Ratings.

CIT is not small. If it were to fail, it would represent the biggest bank collapse since Washington Mutual last year.

The FDIC is concerned that standing behind CIT debt would put taxpayer money at risk because the company’s credit quality is worsening, people familiar with the regulator’s thinking, who declined to be identified because the talks are private, said last week. Since Nov. 25 the FDIC has backed $274 billion in bond sales under its Temporary Liquidity Guarantee Program, designed to give creditworthy borrowers access to funds after debt markets seized up following the failure of Lehman Brothers Holdings Inc.

The federal agency, run by Chairman Sheila Bair, is in discussions with CIT about how the lender can strengthen its financial position to get approval, including raising capital, said one of the people. CIT’s measures to improve its credit quality, such as by transferring assets to its bank, have been insufficient, the person said.

The TARP bailouts were poorly thought out, and poorly executed. The poor execution continues. Even though TARP was a bad idea, it is done. The money is set aside to bail out failing banks. Perhaps CIT does not meet the federal means tests. It doesn't matter. This is not about CIT. CIT could fail catastrophically for all it matters to me, if they made bad banking decisions. Remember, recessions are a necessity - they weed out inefficient companies and undesirable business practices - they should be allowed to happen. CIT may have made some terrible decisions and should be allowed to fail. Or maybe they made good decisions. Again it doesn't matter because it's not about CIT.

It's about the 760 manufacturing clients and 300,000 retailers. That's a lot of jobs. That's a lot of GDP dollars. Unless you want to put all of that at risk, wouldn't this be a bank worth taking a second look at rescuing? If rescue is required, and now the law of the land (TARP), then who more worthy than a bank that is the lender of choice to so many employers? What about those lost jobs, or missed payrolls? And what of the ripple effect caused by allowing it to fail?

If you aren't trying to deliberately shoot the economy in the foot, doesn't it seem counter-productive to create a TARP fund and then not use it in this case? Unless of course, rescuing the economy is not your goal - damaging it is. Or perhaps the real goal is to line the pockets of friends of the victorious. Maybe it's just who you know. Friends of the President get free taxpayer bailout money. If you aren't on that list then too bad for you.

I'm anti-bailout. But TARP is a done deal. Since those funds are already allocated for bank rescues, since that's a sunk cost at this point, it begs the question - if not this type of situation, what exactly are they saving those funds for anyway?

Pent up demand for conservative products

It's only been 8 months since the 2008 electoral massacre that the GOP suffered. In that time, Republicans have gone through a bewildering range of incidents - the Limbaugh versus Powell chronicles, the Sanford drama, the RINOs versus the base in-fighting, the relief of the Arlen Specter defecting, the spectacle of Coleman versus Franken and it's preposterous conclusion, the Meghan McCain versus anything conservative side show, and now the Palin resignation conundrum.


You'd figure that the GOP is approaching the point of being irretrievably lost. You'd be wrong. The President's over-ambitious agenda, which has it's own lessons for conservatives*, and is ineffectual foreign policy have left him easily within striking distance. Nancy Pelosi, Chris Dodd, Barney Frank and Harry Reid have all left themselves open for a lot of criticism. And while they may not all be on the bubble individually, they've certainly tarnished the Democrat brand overall.


Both sides have damage to repair. Meanwhile there's a pent up demand for all things conservative, since the ability to do much at all, either in Washington or in the media, is clearly severely limited. What are conservatives to do? Where do we go to find solace or conservative sustenance? There are servings of red meat available from sources like Limbaugh, Beck, Hannity, Coulter, Malkin et. al. But that doesn't satisfy every need. Conservatives are in a position of relative powerlessness in a time when the country needs a steady rudder. It has led to Tea Parties - conservatives borrowing a page from history and a technique from 60's liberals - mass protests.


But other outlets are needed and there are some obvious choices and they aren't as hard as you'd think. For starters try voting with your wallet. As much as it pains me to say it about an American company, consider boycott GM until it's been fully re-privatized. Any bank that has the burden of TARP funds over it's head (i.e. federal ownership) is a bank that you can consider not banking with. Of course everyone should consider boycotting socialist gas from Hugo Chavez' Citgo. And why would any conservative, unless they are monitoring liberal propaganda should avoid reading the New York Times, and not watch MSNBC.

But it goes further than that. Proactively send your money where conservative values are not betrayed, or at least treated equally. Watch Fox News. Go further just avoiding MSNBC - they're owned by NBC which is owned by GE. These companies are directly or indirectly supporting the destruction f your country. Look where your money is being spent. Do you watch NBC at all? Do you but GE light bulbs?

Protests are one thing, but the truism 'follow the money' is never more true than in an economic downturn or even a recovery. Put your dollars where they don't betray your beliefs. Yes it requires some effort, but it's something you can do in your every day life that ultimately helps or does not betray your principles. Rahm Emmanuel was right - every 'crisis' is an opportunity. In this sense, conservatives have a lot more power than they realize that they simply aren't using.

And don't let the guilt of putting people out of work discourage you. Sure, you put people out of work at Citgo. But the demand doesn't go away - it moves. Those jobs will be needed elsewhere - either with competitors or upstarts who are taking up the slack in demand.

The same holds true for candidates. Contribute and work for conservative candidates. Do not do so for those who aren't really holding true to your ideals, unless it comes down to lining up against a Democrat. Obama has proven a RINO is better than a socialist. Even if it's a matter of degrees*, just try to live your beliefs.

*The lesson to learn is that the ONLY way to succeed is in incremental success. Anything more will result in a serious backlash and is less likely to be permanent. Progress works best in incremental doses. Time is the only solution. Look at the creeping liberalism that has infected America versus Obama trying to get the grand slam all at once. The creeping version is tolerated because each change is relatively small. But when the change is ominous, opposition coalesces against it.

Obama's Divide & Conquer Strategy Paying Off

It all ties together. President Obama may be a relative leadership neophyte. He may be making some really bad decisions for the country. He may be weakening the country and amassing an insurmountable mountain of national debt. Perhaps he has no clue what he's doing. He may be the worst man for the job. Yet one thing he is not, is politically foolish. He's been Machiavellian in his approach to everything. While appearing gregarious and in touch with the common man, in his leadership style he has been ruthless. What I've noticed is that he's been very effective in the divide and conquer strategy espoused by Machiavelli and going back to ancient Rome.



According to Wikipedia,

In politics and sociology, divide and ...conquer is a combination of political, military and economic strategy of gaining and maintaining power by breaking up larger concentrations of power into chunks that individually have less power than the one implementing the strategy. In reality, it often refers to a strategy where small power groups are prevented from linking up and becoming more powerful, since it is difficult to break up existing power structures.

In modern times ...use of this technique is meant to empower the sovereign to control subjects, populations, or factions of different interests, who collectively might be able to oppose his rule.

Seems like an effective tool, no doubt. The Democrats have the class warfare issue as part of their standard playbook. But the usefulness comes in it's effective application, and Obama, while not perfect, has honed it into a science and is applying it liberally (pun intended) to his operation of the White House. He's used it in his dealings with corporations, with Republicans and even with the Democrats. By doing so, he is attempting to set himself up as an unstoppable force.

In the automotive industry, the President isolated the bond holders and pressured them to fall in line. David Frum explains the scenario;

Something bad and dangerous is happening in Barack Obama's America.

The powers that the Obama administration claimed in order to arrest the financial crisis and mitigate the recession are being used and abused in ways that are undermining the legal and financial stability of the United States. Investors: You are warned.

The first warning was the attempt to snatch Chrysler's assets away from their rightful owners to pay off administration friends and supporters.

...

The bondholders squawked. Well -- not all the bondholders. Bondholders who had previously taken government bailouts for themselves, via the Troubled Asset Relief Program (TARP), kept quiet. That's bad enough. It means that these major lenders were breaching their fiduciary duty to their shareholders in order to placate their new masters in Washington.

But what happened to the non-TARP bondholders was even worse. When they squawked, the administration tried to muscle them. Lawyers for the bondholders contend that senior representatives of the Obama administration threatened them. Michael Barone, the ultra-knowledgeable (and normally unflappable) editor of the Almanac of American Politics called it "gangster government."

The Obama administration denies it threatened anyone. And yet over the past week, one by one, formerly protesting bondholders have abruptly gone silent. Last week, the non-TARP group represented bondholders holding $1-billion in Chrysler bonds. By the end of this week, the group had shrunk to represent only $300-million in bonds. As one commenter observed: that shrinkage suggests that the threats were real.

The division was initially between TARP and non-TARP bondholders, but like dominoes, the non-TARP bondholders fell one-by-one. The divided companies were easier to conquer.

In the health care industry,Rich Lowry points out that the industry knuckled under to Obama. They did this by promising to find $2 trillion in cuts to costs. Their motivation? To placate the President and hopefully stave off getting steamrolled by the administration when it tries to impose it's own brand of Health Care reform (or as conservatives view it, one of his many power grabs). Each company is out looking to save it's own skin, it's own profits, and therefore the industry's only effective cohesive response was surrender. President Obama, by releasing his intent in dribs and drabs he has created a climate of fear, and an environment which ensures it's every-man-for-himself. As a result of this knuckling under, the President has free reign now to do whatever he wants because the companies are starting from a position of weakness. They are divided and will be less able to throw up a collective roadblock to any of his plans.

That the GOP after the election was a house divided is no surprise. The Democrats would have been foolish NOT to take advantage of that, and they did take advantage of it. The swipes at Rush Limbaugh were contrived for the sole purpose of further dividing a house divided. Or at least at maintaining the division between moderate Republicans and conservative Republicans, and the division between Republicans and the American people. By keeping the GOP divided and in disarray, they can less ably mount effective opposition to the administration's radical agenda. Divided, they are easy to conquer.

With the Democrats the administration's divide and conquer is especially troubling. If the administration is trying to sew division within it's own ranks, or divide the caucus into fragments that it can then play against each other to leverage to further it's own agenda, that's truly frightening. But is that happening? Perhaps.

The Democrats are split on the terror interrogation probes into the Bush administration. Nancy Pelosi, a powerful figure has suddenly, somewhat mysteriously, been caught in the crossfire on the issue. There is a hint of fragmentation around the national debt as it relates to new Obama created costs. This Democratic dissent amounts to a PR bonus for Democrats too. They can put forth that their party is a big tent and has vigorous internal debate while the GOP is still the party of 'No'. As long as at the end of the day, enough Democrat factions fall into line (which seems to be no problem so far), the concentration of power can continue.

The concentration of power in the hands of one man is something the framers of the Constitution thought abhorrent. The Constitution was built to prevent that very thing. Yet in ancient Rome, despite a Senate, Julius Caesar managed to become a one man emperor. Obama seems to be attempting the same thing.

Industry needs to coalesce around some key issues. The GOP needs to do the same. But Americans cannot wait for that to happen nor depend on it. This is why the Tea Parties are so important. In Obama's eyes, and the eyes of the radical agenda-driven left, Tea Parties need to be discredited or the opposition to his agenda will mount, and it will do so in a unified way. But for any effective opposition to a destabilizing of American values, the Tea Parties must grow in strength and size and visibility. Without a untied stand against the divide and conquer strategy, the far left agenda will take step after step closer to becoming an irreversible reality.

As David Frum said - you are warned.

Chrysler couldn't Dodge bankruptcy

It's interesting that Obama was once again trying work both sides of the aisle, and in multiple ways. In the issue of a Chrysler bailout, Obama was looking for the car company to make drastic changes in order to avoid bankruptcy. That included concessions from the auto workers - one of his solid constituencies. He's trying to come across as the saviour of the common man but he's demanding they reduce their income to save the company. Not that that's a bad thing, but he's not championing them the way they he's claiming to when he brags about his tax cuts for Americans. He's pushing people into a lower tax bracket but taxing them less.

In a similar vein, he's pushing a green agenda including changes to the automotive industry - something that shouldn't be foisted on the car companies while they are in their possible death throes. He's throwing the drowning man a lead life preserver.

And in the third and most interesting instance of working both sides of the aisle is how he's treating the creditors of Chrysler. The financial institution bailouts on one hand, is subjecting creditors to stress tests. He's accused them of mismanagement and greed. Yet he's said that the institutions are necessary for America's financial health. In the case of Chrysler, they had to declare bankruptcy because the lenders would not bend on getting back such a low return on their lending - they were holding out for a smaller loss. The creditors weren't banks - they were steel companies, parts suppliers, and other manufacturers and suppliers related to automotive manufacturing. Are these companies being greedy or just trying to keep their own heads above water? The latter.

So why push them to bail out a failed company when it just moves the pain from one pile to another? Because it looks like the President is trying to help the little guy - auto workers. People probably assume the creditors are banks. Nobody likes the banks much right now. So he helps the UAW and earns some modest respect from those who opposed TARP (I doubt it). He's playing both sides of the aisle politically. Except the truth is that he's really only helping the most visible little guy. Who is going to clamor for a rescue of Flex-N-Gate Corporation? Nobody in significant numbers.

Chrysler couldn't hack it. Too bad. Dodge made some cool NASCAR cars. The company will emerge out the other end with Fiat ownership. The jobs will be there, but in a nostalgic way, a little piece of Americana will get dropped along the way. Let's hope GM fares a little better.

And on the plus side, perhaps this frees up resources that could be more efficiently used elsewhere in the economy. If you're feeling like this is too much of a travesty, I urge you to check out this.

The real reason Democrats win

Some might eye this as a bit cynical, but the representative republic that is the United States of America has a corruption problem with it's voting system. It's not ACORN, though they represent a problem with the system. The real reason Democrats win, is because of the money.

From the Washington Post:

On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.

This from the Yahoo/AP:

WASHINGTON (AP) -- Taxpayers are increasingly exposed to losses and the government is more vulnerable to fraud under Obama administration initiatives that have created a federal bank bailout program of "unprecedented scope," a government report finds.

In a 250-page quarterly report to Congress, the rescue program's special inspector general concludes that a private-public partnership designed to rid financial institutions of their "toxic assets" is tilted in favor of private investors and creates "potential unfairness to the taxpayer."

And this from CQ Politics:

Rep. Jane Harman , the California Democrat with a longtime involvement in intelligence issues, was overheard on an NSA wiretap telling a suspected Israeli agent that she would lobby the Justice Department reduce espionage-related charges against two officials of the American Israeli Public Affairs Committee, the most
powerful pro-Israel organization in Washington.

Harman was recorded saying she would "waddle into" the AIPAC case "if you think it'll make a difference," according to two former senior national security officials familiar with the NSA transcript.

...

In exchange for Harman's help, the sources said, the suspected Israeli agent pledged to help lobby Nancy Pelosi , D-Calif., then-House minority leader, to appoint Harman chair of the Intelligence Committee after the 2006 elections, which the Democrats were heavily favored to win.

And from CBS:

Spring in Washington is "earmark season" - a busy time for Congressman John Murtha.

"That's my business," Murtha said. "I've been in it for 35 years."

As head of a powerful Defense committee, Murtha controls hundreds of millions of taxpayer dollars, reports CBS News investigative correspondent Sharyl Attkisson. And he's not shy about directing money to those who give generously to his election campaigns.

CBS News has learned that this month, Murtha is steering new earmarks toward 10 companies that recently donated to his campaign. Murtha wants $8 million for Argon ST, a defense contractor whose CEO gave Murtha the maximum allowed by law - $2,400 by an individual. He's directing a $5 million earmark toward Advanced Acoustic Concepts, which also gave the max - $5,000 for a political action committee - to his campaign. In all, 10 recent Murtha donors are slated to receive $31 million in Murtha earmarks for 2010.

Taxpayer watchdogs may not like how it looks, but it's not against the law unless donations were required in order to receive the earmarks. Looking for evidence of wrongdoing, the FBI has recently raided offices of two other companies linked to Murtha.

...

Murtha wouldn't comment for our report. He did recently tell a home state newspaper that he's only trying to bring home the bacon.

[Hat tip for all links: Drudge]

So while ACORN is a problem, the real issue here is that Democrats know how to game the system. They get the big donors. They obviously play the behind the scenes game a little too well. It's corrupt, but it wins.

The problem for Republicans is that they still have the stench of complacent corruption on them. But in the current climate, absent a real grassroots change, it seems to be the way to stack the deck in favor of your side and it's stacked against the GOP. The choice for the GOP is to play the game to get the money to get the message out and win, while succumbing to corruption OR cleaning house and trying to win on principle from the ground up.

The path of least resistance is to join in on the cheat. That's the path politicians are prone to take. But if the Tea Parties continue to build momentum they may become the path of least resistance because it's cheaper to win on popularity than on back room deals.

The real reason Democrats win, is not the way that is good for the country. Maybe it's the Chicago way, but it's not the American Way. This may be the year of crossroads for the GOP. Let us hope they choose wisely.

Bailout FI's owe back taxes

And the stupidity continues to compound itself. Yahoo is reporting today that 13 companies receiving TARP money owe a combined total of $220 million in back taxes.

Outrageous!

But save your anger. Or more appropriately, direct it in the right direction - these companies, while apparently bereft of common sense, in the real world would be cut loose to sink or swim on their own. Thanks to bailouts they can continue to behave foolishly and in fact are rewarded for it.

The real culprits here are the politicians and bureaucrats from Paulson, and Bush to Obama, Geithner, Pelosi and Reid who have been barrelling forward with bailouts and legislation without taking the time to even read their own plans and doing due diligence on their own decisions.

Government is not meant to run at high speed because you run the risk of making stupid, stupid, stupid decisions. It's meant to be a deliberative body. It's especially true of the Senate, Mr. Reid...

The lack of oversight and the lack of transparency and the lack of planning at the governmental is (or should be) criminal. Hang the rich? No, imprison the politicians (no inciting riots here). These people have no business being in charge of business, or of the government. Not unless they start acting like responsible officials instead of a bunch of reactionary, partisan unthinking hacks.

ARG!!!!!

Okay rant over - breathe.

What if THIS is right?

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. He also runs the blog Carpe Diem. Yesterday, and again today he posted stories from Bloomberg and NPR's Marketplace about something called the Baltic Dry Index.

What is that you ask?

Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make itsuch a good leading indicator. One, the index looks at raw materials, so it captures activity at the very beginning of the production process. Two, it looks at ocean shipping, so it reveals what's happening to international trade -- the critical driver of global growth. And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose.

What does it mean? Well, when the graph looks like this;



it certainly would look like a recovery is on the way. Or under way. The price of shipping dry goods has been rising since early January. Meaning more dry goods are being shipped so shippers can charge more. It also means that ocean shipping is up, which means international trade is rising. And since credit is required for shipping, clearly credit, at least somewhere, is loosening. All good news.

So an economic leading indicator is on the upturn. Does it mean the economy in the US is on the path to recovery? And does it mean Obama's plan is working? And more importantly does it mean the perception that his plan is working will change?

First question - Is the economy in the US is on the path to recovery?

Firstly, the indicator is a global indicator. So just because the indicator is on a serious uptick, does not mean that the recovery includes any specific economic region (i.e. the United States). For example, in a story reported in Bloomberg today, China's auto sales have risen 25% in February. It's not dry goods, but it shows that their economy is on a different footing right now than America's. So the Baltic Dry Index has the possibility of being good news for the US economy (given it's portion of world trade, some of that uptick has to impact the US economy), but it is not a guarantor of an uptick in the economy.

Secondly the indicator is a leading indicator. Just how leading is not clear. We're talking about raw materials which means production should follow and then purchases. So the impact may yet be several months away - 2, 3, 15 who can say for sure?

Finally, production does not equate to consumption. Just because suppliers have access to credit and can produce more does not mean that consumers have access to credit and can buy more. More employment is perhaps an outcome, but given the availability of credit for consumers, gun-shy banks, and the panic over depression causing savings to rise, the BDI may be less of a predictor than it has in the past.

So it's certainly a good omen that the BDI has risen. But it does not guarantee anything. On the other hand, many have indicated that steep recessions tend to be shorter recessions, so maybe the recovery has started already. Anyone who knows the real answer to that, let me know - I'd love to get some stock tips from you.

Second question - does it mean Obama's plan is working?

By his own words, "Americans know that our economic recovery will take years -- not months. "


The Baltic Dry Index started it's upturn before Obama was sworn in as President (in early January). So if they inherited a problem, perhaps they've also inherited a recovery thanks to Bush and Paulson's TARP package, or thanks more likely to the market itself. There is no way that anything President Obama has done since January 20th would cause the BDI to climb as it has to this point in March. Absolutely no way. The BDI does not respond to charm. It responds to economic activity. And if anything, until recently the President has been talking down the economy. So the BDI has risen in spite of President Obama and the mega-debt he's loading on America, not because of it.

Another point about the Obama recovery scramble, is that if all that money for government projects starts to kick in at the same time the real recovery starts to kick in then hyper-inflation becomes a real possibility. Clearly that would not indicate a successful plan, but an over-reaction to a recession. A deep recession.

Third question - Will the perception that Obama's plan is not working change?

This question is for conservatives, the most important question. The title of this post is "What if this is right?" This question comes down to politics. If the economy starts to recover, regardless of the reason, the President will get, and accept the credit. It would spell several years of doom for conservatism if that were to happen.

Conservatives need to stop falling for the Carville distraction and start pointing out that the recovery plan for Obama is months and months from having an impact, if it even does at all. There's the talking point. That way if a recovery comes before any money starts to flow out of President Obama's ever-full pockets, he gets no credit. Start to hammer that drum now. It's a potential double win for conservatives.

If the recovery does kick in before Obama's mega billions, the right has ammunition to ask the Congress and the President to repeal the billions that have been planned for later in 2009 and 2010. Especially in light of the Health Care funding that is going to get jammed through.

What other impacts might there be? Regardless of conservative efforts, any recovery will be trumpeted as an Obama success, and the MSM will do that to the maximum possible impact they can. The President may be emboldened to try to pile other socialist ideas onto the national agenda. The Democrats may pick up house and senate seats in 2010. Unless of course all of the green stuff, the tax stuff and the the anti-productivity stuff Obama is working on stifles the recovery as it begins to kick in.

These are indeed interesting times. Watch the BDI, but remember to keep your eye on the President. And start the talking up of a recovery that is pre-stimulus. Anything that defers credit where it's not due, is a good thing.