Wachovia and Citigroup: Backdoor Bailout?

I own a small business, so I understand finance – to a point. I will fully admit I don’t completely understand the nuances of big banks, Wall Street, and high finance. With that said, I invite anyone out there to set me straight.

Wachovia is being bought by Citigroup. With the purchase comes some $312 billion in bad loans, but Citigroup is only on the hook for $42 billion. Buy a bank for pennies on the dollar and only responsible for 13% of the crappy loans. Not a bad deal.

Hmm, I wonder who’s ponying up the rest of the cash. Here’s an excerpt from an FDIC press release:

The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.

Now, it’s my understanding that the FDIC is funded by deposit insurance funds, but that will surely only go so far. Can the FDIC take on that much bad debt? Sounds like it can’t. Here’s an excerpt from a Reuters article from about a month ago:

“I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses,” Chairman Sheila Bair said in an interview with the paper.

With a rise in the number of troubled banks, the FDIC’s Deposit Insurance Fund used to repay insured deposits at failed banks has been drained. In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.

WTF? “…a $45.2 billion fund?” We’re talking about them taking on $270 billion! I realize they’re talking about raising rates to cover it long term (and “not to cover losses”, if you believe that), but will the Fed ultimately fund this bailout buyout?

Sounds fishy, all the way around. Is this where we’re headed? The gub’mint buying up Wall Street through other banks? I mean, I’m powerless to stop it, obviously, but what does this mean in the long run?

Again, I understand enough about all this to be dangerous, but would love to know more…

Bail out on the bailout: Now what?

As you probably know by now, the House narrowly rejected the $700 billion financial bailout plan. Will this drive us into another Depression? Would the bill have only delayed the inevitable in addition to saddling taxpayers with the weight of nearly one trillion dollars in debt? I don’t know what the answer is, but my stepdaughter would’ve been pissed if we’d have stuck her with the bill. She hates it when we make her pay us back for a candy bar.

Here’s another thing I’ve been thinking about: it seems that Congressional opinions are all over the place on this one. There are Republicans both for and against the bill. Same thing on the other side of the aisle. What on earth are dyed-in-the-wool party members going to do now without their “unified” party to tell them what to think? Are we on the cusp of true, society-wide bipartisanship? Is it no longer about (comparatively speaking) trivial, single-issue items dealing with the Bill of Rights? If this “Depression” talk is real, the issues of gun rights, abortion, and the right to privacy pale in comparison to the possibility that we’ll all soon find ourselves living in barns and standing in bread lines.

Are we finally going to put down our Red and Blue gloves, forget our petty differences, and look towards the future?

Revolution: Change you can *really* believe in…

In the comments section of another post, I’ve been having a conversation with a woman about our collective ire over the whole bailout mess. She puts my thoughts into words better than I ever could, and, given she has more life experience than I, does it with a touch more clout. I wanted to bring her voice up from the comment level to a top level post. Hope you enjoy her insight. Her name is Shirley, and trust me, she’s a fighter. Says she,

I’m an old lady. I raised my family. I’m retired. I’m a true republican in some sense and a true democrat in others and until now I didn’t even know it. All my life, I’ve voted for who I thought would make the best leader, not by any party line.

We bitched back and forth a bit about the bailout, Wall Street, the apathy of Washington. Ultimately, the conversation turned to how we really feel. I’m including some of our comments here, hers will be indicated by the quote marks. Please try to take the anarchist revolution remarks in stride. I think I can speak for both of us that we love the country, and we hate to see it in such dire straits; we’re just at wits end thinking about it, and the word “revolution” is starting to have a nice ring to it.

In her first post, she said:

The gov’t needs to forget a bailout. The market will fix itself, eventually. But the wealthy, power-mongers that got this country into this mess need to be broken – especially financially. Let them get in line for the dole. Let them live on the other side of the street. No bailout, no more money, no FED(my parents were against it when it started and I see no reason to argue their logic now). Small government, people helping each other, better education, and less “I want to be rich so I’ll do it by not paying my employees squat so I can keep the profits” business management.

I questioned whether all the talk of “bailout or Depression” was real or just bureaucratic ballyhoo, and she responded:

You know, Anthony, I think it’s a little fear-mongering and a little truth. If some of the biggest financial corp.’s are allowed to crash and burn, so to speak, then yes, I think we will have another Depression. However, I also think that on the other end, the country will be better for it. The American Dream is a fantastic thing, but that dream has changed in my life time. It used to be own a home, have money in the bank, be able to live comfortably without having to pinch pennies. Now, at least in my view, the American Dream has little to do with living a comfortable life and everything to do with being Bill Gates. And the fact of the matter is that people have long voted with that concept in mind. Reality is that nary a percent of us will ever have Bill Gates wealth and we shouldn’t believe we will.

The only thing I see this bailout doing is acting as a stop gap measure. The whole mess is going to crash and burn and then we’ll have an unqualified Depression with the lead weight of a trillion dollars around all of our necks. Oh, wait, excuse me, around 95% of American necks. The rich will still be rich and still won’t care about Americans. Like Bill Gates, billions to Africa, a few million here. Disgusting.

I agreed, and responded, “If you want to know how I really feel about it, I’m starting to lean towards the idea that we need some kind of upending anarchistic event to reset the system, something that wakes us ALL up, and this bailout is 180 degrees in the opposite direction from that. A “Depression” would heap powerful suck, but maybe it would level the playing field a little and (after a time) bring us back to the American Dream you once knew. Seems we had to suck it up in the original Depression, ration and conserve during WW II, and things outright flourished in the 50’s.

If the government is going to engage in socialism, then they need to give it to the people that really need it, not the corporate scum that squandered away all that they had. Give the $700 billion to us. Now THAT would be a stimulus check. Let Wall Street burn.”

She agreed with me on that last point, “…let Wall Street burn”. We talked a bit about the bailout proposal; she went out and read it between comments. I’m including her final comments in their entirety. I think we should all read them and think about them a little…maybe tomorrow as we’re filling up for gas or going to the ATM.

I read through the bill, and it has a provision for payback [to taxpayers], though to be honest in all the congressional-speak I can’t actually say it’s actually beneficial to most tax payers (see CNN for a pdf of the bill).

Honestly, it’s more section 135 that really bothers me. If I read it correctly, and I’m pretty sure I did, it says the Fed Secretary can’t be held legally accountable for anything. Excuse me? Paulson is the first head that should be chopped off. He, the Fed, and all the other left overs of money/power bastards (Rothschilds, Rockefeller, etc. etc.) that screwed the US in the teens, twenties, and so on should be offed. Damn right they should pay the price, end of conversation.

As to an anarchist uprising, well Anthony, I don’t know that you are far off. It’s going to take the People rising up in the streets to change this crapshoot. I’m a little old to take up a war, but by god, I might look for some amphetamines to help me out in an endeavor like this, to take back this country.

Speaking of civil unrest, according to the Army Times (the official ‘paper’ of the US Army) and entire active-duty batallion is being recalled from Iraq and redeployed here, in the states, in order to be on hand for possible terrorist activity and civil unrest. What? Now when can you remember an active battle group of soldiers being recalled to the states during war time?

One final thought: it’s clear to me that  – despite Obama’s clear message of change – the only real change can come from us. I’m hoping that a simple vote in November is enough to do the trick, but if not, we might need to take matters in our own hands. Shirley’s ready, and so am I. Are you?

Operation Bailout: Before you shake your finger at the Right…

Well, the bailout’s going to a vote, and will probably be passed; it seems to have bipartisan support, and every economist out there seems to think that something must be done. Even would-be VP Sarah Palin says “inaction is not an option”.

With that in mind, and with the impending Election of the Century, the finger pointing (and finger shaking) is going to be fast and furious. I’m going to predict now that the Obama campaign will use this bailout to illustrate the ineptitude of the Bush administration and then promptly tie McCain to Bush. It’s been his M.O., and has been largely effective. You know how Democrats hate the capitalist pigs on Wall Street.

Anyway, I had a comment on one of my other posts that sent me to another blog where I read an eye-opening post about how we got into this situation in the first place. I haven’t done all the research yet, but it seems that it all started with the Carter administration and the Community Reinvestment Act, a bit of business enacted to help low-income folks get their own houses. In 1995, Clinton apparently made some changes that made it even easier for mortgage companies to give loans. Then, the following, from The Thought Refuse:

In 2003, President Bush proposed an overhaul of the regulatory standards governed by the CRA that would increase oversite of Freddie Mac and Fannie Mae.  Democrats opposed the bill arguing the two institutions “are not facing any kind of financial crisis.”

Yikes. Sounds like Bushco tried to stop the fire that they didn’t start.

Penn Jillette said that, even though he disagrees with everything Bush has ever done, he does not believe that Bush is an evil person. He’s not doing his business with malicious intent. I tend to agree with Mr. Jillette on this point. To that end, we should look at the aforementioned issues through that lens. I don’t think that Carter and Clinton set the mortgage wheels in motion to reap the benefits of Wall Street. Carter’s Magnum Opus was Habitat for Humanity, for Heavan’s sake; I think he and George Bailey are soulmates…life imitating art…all that. And Clinton? Not evil. You can argue for or against  the steadfastness of his policies, but he’s not evil.

So brain up people. Before you point or shake a finger, make sure you’ve done your homework.

–Ant.

Presidential Debate Drinking Games

Remember the drinking game “Hi Bob”? It’s the game where everybody fills up with their beverage of choice and plops down in front of an episode of The Bob Newhart Show (the old one, not the one with Larry, Darryl, and Darryl). Every time someone on the show says “Hi Bob”, everyone playing the game shouts “Hi Bob!” and takes a drink. Trust me, this happens often enough for everyone in the room to have a real good time during an average episode. The Bob Newhart Show marathons have been known to cause a spike in alcohol sales to the point of creating temporary shortages in some areas, particularly Wisconsin.

Anyhoo, I was tag surfing the other night and found a great blog that’s soliciting us all for rules to a drinking game centered around the presidential and vice-presidential debates. The VP game is under construction, and the Presidential game is finished and – how shall we say – for experienced drinkers only.

Bottoms up!

Who’d push your button?

The wife and I are finally watching the series Six Feet Under, and in addition to being a bang-up show, it really gets the gears going on the subject of your mortality and, more importantly, who you leave behind. In the final episode of the second season, Nate informs a dying man that he can dictate who pushes the button at the crematory to “do the deed”. [cue The Doors, Light My Fire]

The idea brings up so many questions for me. Would I want to specify who fires up the oven? Would it matter? Could I really lay something like that on my wife, my friend, or my parents? Would you want someone in particular to light your fire? Would you be up to the task of pushing someone’s button?

Morbid thoughts, indeed, but it seemed to take the “I bought a funeral plot today and I’d like you to be my pallbearer” thing to a whole new level.

Palin Ain’t Ready.

If John McCain is elected president, and he (God forbid) dies while in office, Sarah Palin will be the President. Please take a couple of minutes and watch this video, take 10 seconds to think about it, and if you’re a McCain supporter, please comment about how you can possibly be OK with that idea. I don’t care about Couric here, I’m not a fan, so spare me any comments about how I’m propping up a darling of the liberal media. Tell me if you really think this person can lead the nation.

I mean, really, I’d rather see the McCain/Quayle ticket than this nonsense. McCain/Squarepants. Anything.

I said it in another post, and I’ll say it again here. If Obama wins, I’m OK with Biden stepping in. Even if you disagree with his politics, you have to agree that he has enough going on upstairs to handle the job, certainly more than the average hockey Mom.

–Ant.

iPhone app

I just found a free iPhone app to post to the blog. This is a test post, dontcha know. If the picture posts, that’ll be wicked cool.

It’s a snap of the dog. No, she’s not dead.

Obama will rattle cages. Bank on it.

Disclaimer: everything I’m about to type is based on the premise that the presidential candidates are telling the truth, or are at least sincere in what they say. If you want to tell me I’m an idiot for believing anything a politician says, go ahead, but at this point, we can’t afford to bicker over the sincerity of the elected. We have the Internet, so we can check facts, but let’s get beyond the pedestrian jokes of lying politicians. This November’s going to be real important, people. I hate the two party system about as much as I hate the Electoral College, but short of some sort of bloody Third Party Revolt, we’re stuck with it. So do your homework and vote your conscience.

I just watched the presidential debates, and I’m now officially in Obama’s corner, and I have a reason. But first, I’m going to attempt to provide here a complete list of my personal pros and cons of both candidates. I’ve been on the fence for a while, leaning as far towards Obama as I typically lean left, but the debates showed me tonight who’s ready for the job in January. The issues below are in no particular order, and limited to those I think are important now. Oh, sure, I have my ideas on the 2nd, 4th, and 9th Amendments, among others, as well as online poker and eminent domain and other such Libertarian causes, but I don’t think they matter right now. We’ve got bigger fish to fry. I’ll try to keep my thoughts to a minimum.

Obama

Pros

• Anti-lobbyists. ‘Nuff said.
• Right on the war. We need to get out of Iraq. Soon. Everybody’s talking about how much money we’re spending on our buddies on Wall Street, but we’re not talking about the price of the war like we used to. Furthermore, he seems to be committed to ramping up the pursuit of bin Laden, a task that has been overshadowed by the police action over there in Persia.
• Seems to have a pretty good handle on foreign policy. He seems open-minded to actually talking to people. Given the damage done to our reputation over the last 8 years, we need the world to see that we’re still reasonable. Also, it doesn’t hurt that Biden’s the chair of the Foreign Relations Committee. I’m told they don’t give that job to just anybody.
• Speaking of running mates, politics aside, I think Biden could step in if someone were to pull a James Earl Ray on Obama.
• If his economic plan is sound and true, I like the sound of tax cuts for 95% of America. If you make over $250K, I’m sorry. Time to suck it up and sell the Hummer. That said, I do wonder if his plan holds up in the face of a $1 trillion Wall Street bailout AND the rising cost of a war that we’ll be in for at least another couple of years.
• Is he really a candidate of change? If he is, I want to bear his child. I’m sick of the way things are in DC now, and I hope (no pun intended) that he can and will bring about the change he proposes.

Cons

• He’s all about alternative fuel, but nuclear power is not listed on his website. Strange. It doesn’t get more alternative than nuclear, kid.
• I’m concerned about his plans for small-business taxes. Is this because I’m tainted by the tax-and-spend, nail-companies-to-the-wall stereotype of Democrats? Factcheck.org says that McCain’s claim that Obama will raise taxes for small businesses isn’t true. I don’t know. We’ll see. I’m skeptical. Yeah, yeah, I’m wavering from my faith in political sincerity here, but this is the Democratic Party we’re talking about.
• We need to figure out to make sure we all have healthcare, the idea of a socialized and/or federalized healthcare system just scares the hell out of me. I think P.J. O’Rourke said, “You think healthcare costs a lot now? Just wait until it’s free”.
• If he is planning on shaking things up in DC to the extent he says, he’s likely going to run into a brick wall and get nothing done. Real change? Yeah, well, the only thing that changes when you bang into that brick wall is the shape of your skull.

McCain

Pros

• Pro nuclear power. I’m still not sure why Dems and tree huggers alike are anti-nuke. They think nothing of driving to the coffee shop with their petroleum-based laptops that suck coal-based electricity much like a Robert Earl Keen fan siphons a Tokemaster bong. Nuclear’s clean, baby. Let’s split some atoms.
• Good stance on foreign policy, although I’m concerned he may be a little aloof and quick to attack if provoked with the least bit of sabre-rattling. I’m not saying he’s a hot-head, but he is a big Beach Boys fan. Just sayin’.
• With the last point in mind, he has good military experience. These days, that could prove to be wicked important.
• Probably good for small businesses, tax wise.
• I like his $5000 credit for healthcare idea. Don’t know how he proposes to pay for it, but I like it a lot better than “socialized” medicine.

Cons

• Everyone on his staff seems to be a lobbyist. That can’t be good.
• He seems more than a little ambiguous about the war. I’m hearing a lot of “we need to be there until the job’s done to make America secure.” For the love of all that’s holy, will someone tell me what that means? I don’t think he has any plans to pull out anytime soon. In light of the Wall Street business, what’s that going to cost us?
• Sarah Palin. This really is the biggest thing for me, I think. Does anyone honestly believe that she’s ready to lead should McCain meet an untimely death? Oh, wait, he’s aged 72 years, and the average male lifespan in this great nation is 74 years. I guess if he died during office it wouldn’t be too terribly untimely after all. But seriously, convince me she’s got what it takes. Really. Talk me into it. I want real answers, not rhetoric peppered with “confidence” and “readiness” and “she won’t blink”. And for the love of Pete, seeing Russia from your house does not Foreign Policy make, nor does a whirlwind overseas photo op.
• He represents more of the same. He is the status quo. There’s no doubt about it, from where I stand. The “Maverick” talk is just a bunch of political rhetoric. Bush has really screwed things up, and McCain has voted with Bushco “90% of the time”. Do the math.

Well, it’s late, so I’ll sum up. I’m backing Obama because I believe that he will rattle some cages, in more ways than one, for good or for ill. Maybe he won’t get anything done, maybe he will, but it seems to me that he represents everything that our government fears. Maybe he’s the first step in obliterating the status quo that is so deeply rooted in our government.

I can’t quite put my finger on it, but as good as McCain did in this debate, I kept getting the feeling that he was sticking to the same old script we’ve heard before, or at least keeping it within reach. Obama, for what it’s worth, comes across as though he really wants to see things change for the American people. Maybe it’s all sunshine and unicorns, but maybe not. Indeed, I hope that it’s not.

Yeah, it’s time for a change, and Obama’s the one to bring it.

Thanks for your time and consideration. Did I forget something? Disagree with me? Time to light me up in the comments. If I’m wrong, convince me. Make me a believer.

–Ant.

Help from McCain?

OK, I have to chime in here on McCain’s assertion that he needs to be in Washington to fix the economy. Really? I thought he didn’t know anything about the economy, or at least that he knows more about the military than the economy. Come on, John, let the bean counters in the banking committee figure it out, and debate with Obama tonight.

Now, with this in mind, is he ready to lead us out of this crisis? I’m not saying Obama is, but is McCain?

EDIT: I heard today that he will likely fly to Mississippi for the debate. Attaboy, Sen. McCain.