Mar 24, 2009
Are You Smarter Than a Fifth Grader?
Congressional Edition
From Politico reprinted in its entirety for non-subscribers:
Rep. cries foul over Nets naming rights
"Maybe they should just call it TARP Arena.
Rep. Bill Pascrell Jr. (D-N.J.), wary of taxpayer anger over the AIG bonuses, wants the New Jersey Nets to reconsider selling naming rights to the British bank Barclays for an NBA arena being built in Brooklyn.
Barclays received $8.5 billion in bailout funds from the Treasury Department, and Pascrell believes the $400 million it cost to have the naming rights for the soon-to-be Brooklyn Nets arena should be used, say, for lending to consumers instead. Pascrell was quick to make an exception for the new Citi ballpark the New York Mets are building, because that ball yard was already well under construction under the Citi name before the bailout money was approved.
“I believe that any further payments of taxpayer money, whether through TARP or the Federal Reserve System, be conditioned on the cancellation of any stadium or arena naming-rights agreements that may be in place,” Pascrell said.
It’s worth noting, of course, that Pascrell represents a lot of New Jersey Nets fans quite unhappy about losing their NBA team to Brooklyn."
Actually, Congressman, Barclays did NOT receive any "bailout" funds from the Treasury Department. Nor have they accepted any bailout money from the government of the UK, where they happen to be domiciled. To their credit, they have steadfastly resisted taking money that comes with governmental strings attached; and with each passing day and every congressional comment like yours, the wisdom of their strategy becomes more clear.
True, Barclays received $8.5 billion from AIG, presumably as collateral against or settlement of AIG's contractual obligations under trading arrangements. But to suggest that this is the same as a bailout is just wrong. To further imply that any organization that does business with a recipient of bailout funds is thereby subject to mindless Congressional meddling is either stupid or frightening, depending on how serious you are.
Oh, and Congressman, pretty much all "payments of taxpayer money" are made "through the Federal Reserve System." In fact, when you give a one-dollar tip to the guy who shines your shoes in the Congressional cloak-room, you're using what we in this country call a "Federal Reserve Note". It's actually printed on the top of the dollar bill in capital letters to help you remember.
Perhaps you'd like to regulate what he does with that too?
Rep. cries foul over Nets naming rights
"Maybe they should just call it TARP Arena.
Rep. Bill Pascrell Jr. (D-N.J.), wary of taxpayer anger over the AIG bonuses, wants the New Jersey Nets to reconsider selling naming rights to the British bank Barclays for an NBA arena being built in Brooklyn.
Barclays received $8.5 billion in bailout funds from the Treasury Department, and Pascrell believes the $400 million it cost to have the naming rights for the soon-to-be Brooklyn Nets arena should be used, say, for lending to consumers instead. Pascrell was quick to make an exception for the new Citi ballpark the New York Mets are building, because that ball yard was already well under construction under the Citi name before the bailout money was approved.
“I believe that any further payments of taxpayer money, whether through TARP or the Federal Reserve System, be conditioned on the cancellation of any stadium or arena naming-rights agreements that may be in place,” Pascrell said.
It’s worth noting, of course, that Pascrell represents a lot of New Jersey Nets fans quite unhappy about losing their NBA team to Brooklyn."
Actually, Congressman, Barclays did NOT receive any "bailout" funds from the Treasury Department. Nor have they accepted any bailout money from the government of the UK, where they happen to be domiciled. To their credit, they have steadfastly resisted taking money that comes with governmental strings attached; and with each passing day and every congressional comment like yours, the wisdom of their strategy becomes more clear.
True, Barclays received $8.5 billion from AIG, presumably as collateral against or settlement of AIG's contractual obligations under trading arrangements. But to suggest that this is the same as a bailout is just wrong. To further imply that any organization that does business with a recipient of bailout funds is thereby subject to mindless Congressional meddling is either stupid or frightening, depending on how serious you are.
Oh, and Congressman, pretty much all "payments of taxpayer money" are made "through the Federal Reserve System." In fact, when you give a one-dollar tip to the guy who shines your shoes in the Congressional cloak-room, you're using what we in this country call a "Federal Reserve Note". It's actually printed on the top of the dollar bill in capital letters to help you remember.
Perhaps you'd like to regulate what he does with that too?
Mar 23, 2009
The Beginning of Wisdom...
"The beginning of wisdom is to call things by their right names" according to the Chinese proverb.
The chart above (click the chart to enlarge) shows the relative frequency of Google searches for "Troubled Assets" vs. "Toxic Assets" over the past 12 months. As the Treasury introduces "TARP 2.0" today, the change in the vernacular reflects a shift from a market view (or hope, really) that the problem was a temporary impairment of "troubled" assets to the acknowledgment that many of the assets at the center of the financial storm are permanently impaired or "toxic". If this view is widely shared, it may actually speed the recovery process as buyers and seller converge on valuation for the assets.
Contrarians may find a bullish signal in this verbal shift.
If you want to update this chart, click here and enter the search terms "troubled assets" and "toxic assets" separated by a comma.
Mar 20, 2009
H.R. 1586
The Law of Unintended Consequences
Well, they did it.
The US House of Representatives, apparently vying for the title of "The World's Greatest Retributive Body" passed HR 1586 - "To impose an additional tax on bonuses received from certain TARP recipients". HR 1586 was designed specifically for the purpose of taxing the bonuses of several dozen employees of AIG, the giant insurance company at the epicenter of the financial crisis.
Look, I'm no fan of AIG. AIG's reckless underwriting of credit default swaps has required a $170 billion injection of government aid to post collateral with counter-parties and extinguish obligations. And I will be surprised if AIG doesn't require more aid before this crisis is over.
So I am as infuriated as any other taxpayer to read that AIG planned to pay out $165 million in bonuses, including bonuses to employees who worked in their Financial Products group, where the credit default swaps were written.
But the speed with which the House has wielded its most powerful weapon -- As Chief Justice John Marshall put it, "The power to tax is the power to destroy" -- is a truly frightening precedent. By levying a confiscatory 90% tax on bonuses paid by firms who have received aid under the Troubled Asset Relief Program, the House has undermined the compensation model of our leading financial institutions, not just AIG. More to the point, it will create a financial hardship for many employees whose banks may not have needed TARP funds, but were persuaded by former Treasury Secretary Hank Paulson to accept them in an act of industry solidarity designed to stabilize the crisis late last year. It will also create financial hardship for many employees who had absolutely nothing to do with mortgage securities, credit default swaps or crazy leverage ratios and who probably earned their bonus. For some, it may mean selling their houses into an inventory-clogged market. For all, it will surely mean a reduction in both their saving and spending, just exactly what we don't need in the current economy.
It was bad enough last month when Deputy Sheriff Barney Fife... I mean House Financial Services Committee Chairman Barney Frank... was chiding Northern Trust for honoring its commitment to sponsor a PGA event in Los Angeles. But HR 1586 is a breathtaking act of power, passion and political pandering that should give pause to any believer in liberal democracy. Look hard enough and you will find federal aid, if only in the form of freedom from federal tax, in almost every nook and cranny of our modern society. Will lesser forms of federal aid be used as a pretext for the House to follow its new precedent of hastily drafted confiscatory taxes to coerce private behavior?
Fortunately, the administration has expressed reservations about the House bill and the public outrage has encouraged some AIG employees to forfeit their bonuses, so cooler heads may yet prevail and this hastily drafted legislation may be rejected or modified.
If you'd like to see how your representative voted, click here.
The US House of Representatives, apparently vying for the title of "The World's Greatest Retributive Body" passed HR 1586 - "To impose an additional tax on bonuses received from certain TARP recipients". HR 1586 was designed specifically for the purpose of taxing the bonuses of several dozen employees of AIG, the giant insurance company at the epicenter of the financial crisis.
Look, I'm no fan of AIG. AIG's reckless underwriting of credit default swaps has required a $170 billion injection of government aid to post collateral with counter-parties and extinguish obligations. And I will be surprised if AIG doesn't require more aid before this crisis is over.
So I am as infuriated as any other taxpayer to read that AIG planned to pay out $165 million in bonuses, including bonuses to employees who worked in their Financial Products group, where the credit default swaps were written.
But the speed with which the House has wielded its most powerful weapon -- As Chief Justice John Marshall put it, "The power to tax is the power to destroy" -- is a truly frightening precedent. By levying a confiscatory 90% tax on bonuses paid by firms who have received aid under the Troubled Asset Relief Program, the House has undermined the compensation model of our leading financial institutions, not just AIG. More to the point, it will create a financial hardship for many employees whose banks may not have needed TARP funds, but were persuaded by former Treasury Secretary Hank Paulson to accept them in an act of industry solidarity designed to stabilize the crisis late last year. It will also create financial hardship for many employees who had absolutely nothing to do with mortgage securities, credit default swaps or crazy leverage ratios and who probably earned their bonus. For some, it may mean selling their houses into an inventory-clogged market. For all, it will surely mean a reduction in both their saving and spending, just exactly what we don't need in the current economy.
It was bad enough last month when Deputy Sheriff Barney Fife... I mean House Financial Services Committee Chairman Barney Frank... was chiding Northern Trust for honoring its commitment to sponsor a PGA event in Los Angeles. But HR 1586 is a breathtaking act of power, passion and political pandering that should give pause to any believer in liberal democracy. Look hard enough and you will find federal aid, if only in the form of freedom from federal tax, in almost every nook and cranny of our modern society. Will lesser forms of federal aid be used as a pretext for the House to follow its new precedent of hastily drafted confiscatory taxes to coerce private behavior?
Fortunately, the administration has expressed reservations about the House bill and the public outrage has encouraged some AIG employees to forfeit their bonuses, so cooler heads may yet prevail and this hastily drafted legislation may be rejected or modified.
If you'd like to see how your representative voted, click here.
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