The Economy, stupid

[southsider2k5]

Canada's banking system seems ok

 

Should we really give all regulation power and funding to one quasi-governmental entity, though?

 

I fully believe they are much more capable of making better decesions and being more isolated from the outside influences of the business sectors than the current governmental structure we have now.

[Balta1701]

I fully believe they are much more capable of making better decesions and being more isolated from the outside influences of the business sectors than the current governmental structure we have now.

How do you rate the response of Helicopter Ben to the last year? How do you rate the response of Mr. Bubble and Helicopter Ben as the problem was growing? It sure seems to me like they willingly turned a blind eye and denied vehemently that anything was wrong until it blew up in their faces, and then he's responded by flailing around as wildly as possible.

[Balta1701]

I'd just like to say, this is entirely the fault of Obama being negative in his speeches, and Obama's being too negative just to get his agenda passed. Things aren't really that bad.

The U.S. economy contracted more sharply than initially estimated in the fourth quarter, government data showed on Friday, as exports plunged and consumers cut spending by the most in over 28 years amid a severe recession.

 

The Commerce Department said gross domestic product, which measures the total output of goods and services within U.S. borders, fell at an annual rate of 6.2 percent in the October-December quarter, the deepest slide since the first quarter of 1982. The government last month estimated the drop in fourth-quarter GDP at 3.8 percent.

 

The weaker GDP estimate reflected downward revisions to inventories and exports by the department.

[Cknolls]

So my boss was just telling me how he called his bank and wanted to refinance because the interest rate is so low now. He has 6.5%, so like many people he's thinking he can drop off a percentage point or something. He says they called him back and said for a fee of $150 or something like that they will just drop the interest rate down to 5.25%, no adjustments to his balance or the terms of the loan or anything. Has anyone else ever heard of this? That's the first I've heard of it. Because if so, I'm calling my bank ASAP and paying whatever they ask me to pay. That would save me like 300 a month on my mortgage.

 

Also, does the bank lose money doing this? I'm thinking the bank ordinarily just makes off with extra cash in that case since they don't have to give the 1.25% back to the feds, and when they drop the rate they just make whatever they'd normally make before the Fed cuts the rates. Am I wrong?

 

 

I am with you. that sounds too good to be true.

[Cknolls]

What happens if the richest 5% of the population start shedding assets in 2010 before tax cuts expire? What does that do to Obama's budget forecast for revenues in 2011? Where does he make up for the lost revenue?

 

 

[kapkomet]

What happens if the richest 5% of the population start shedding assets in 2010 before tax cuts expire? What does that do to Obama's budget forecast for revenues in 2011? Where does he make up for the lost revenue?

I'm already hearing a lot of people I know that are heads of businesses that are doing exactly this. They either have to make $400K + to say even or make less then $250K, so they will make less on purpose.

 

I've heard this personally from at least 5 different small business owners that I know.

 

[Balta1701]

I'm already hearing a lot of people I know that are heads of businesses that are doing exactly this. They either have to make $400K + to say even or make less then $250K, so they will make less on purpose.

 

I've heard this personally from at least 5 different small business owners that I know.

Am I completely wrong on this or isn't the tax code or at least the upper tax part of it supposed to be structured such that only the parts over $250k see the higher tax rate?

[Cknolls]

If Obama wanted to show real transparency and leadership, he would change, entirely, how budgets are constructed. Erase baseline spending, and you can have real change in the budget process and consequently, the deficit. If he were to change this one aspect of gov't. I would actually consider voting for him in 2012.

[NorthSideSox72]

Am I completely wrong on this or isn't the tax code or at least the upper tax part of it supposed to be structured such that only the parts over $250k see the higher tax rate?

That is correct to my knowledge. The increase is on actual money, so the new rate only applies to the dollars above $250k.

 

What Kap might be getting at though, is that above $250k (or wherever the line is), certain OTHER taxes increase, involving investments and what not. So even though your income tax will not negativize income direction, the total effect could theoretically end up that way.

 

[StrangeSox]

That is correct to my knowledge. The increase is on actual money, so the new rate only applies to the dollars above $250k.

 

What Kap might be getting at though, is that above $250k (or wherever the line is), certain OTHER taxes increase, involving investments and what not. So even though your income tax will not negativize income direction, the total effect could theoretically end up that way.

 

There's also the whole Atlas Shrugged idea where they just get pissed off at getting taxed more for producing more and say "f*** it." Rand seems somewhat popular among business owners. Of course, Rand wrote that book when the top marginal rate was 91%, not 39%.

 

Edited February 27, 2009 by StrangeSox

[kapkomet]

There's also the whole Atlas Shrugged idea where they just get pissed off at getting taxed more for producing more and say "f*** it." Rand seems somewhat popular among business owners. Of course, Rand wrote that book when the top marginal rate was 91%, not 39%.

I think there's going to be a pretty big backlash...

 

And I like Nancy "Botox" Pelosi and how cruel it was to wait until 2011 to revoke the tax cuts. She is a grade a magnitude stupid b**** of epic proportions. And before this is deemed sexist, so is Harry Reid.

 

[StrangeSox]

Obama's administration is also proposing limiting charitable deductions and changing the way itemized deductions are structured.

http://www.washingtontimes.com/news/2009/f...itical-friends/

 

Democrats and Republicans poured cold water on President Obama's budget plan to cut down on wealthy taxpayers' charitable giving tax deductions, the second of his ambitious cost-savings plans to earn lawmakers' scorn, and underscoring the legislative minefield he is entering.

 

By reaching so broadly with his $4 trillion 2010 budget plan, and the giant deficits it will incur, Mr. Obama put his hard-won election mandate on the line, saying if lawmakers want to do big things - from boosting education and clean energy technology to overhauling health care - they will have to find ways to pay for it.

 

From his plan to cut payments to farmers, which both parties all but ruled out this week, to his goal of a complex cap-and-trade system to control greenhouse gas emissions, lawmakers predicted Mr. Obama will have to survive challenges from political friends and foes alike.

 

"I work for the American people, and I'm determined to bring the change that the people voted for last November.And that means cutting what we don't need to pay for what we do," Mr. Obama said in announcing his budget.

 

Democrats pronounced the budget a good start and praised the president for undoing some of the budget gimmicks of the George W. Bush years. But they joined Republicans in worrying about long-term deficits, which increase from 2014 on through 2019, the end of Mr. Obama's budget projections.

 

"I think [Mr. Obama] himself has acknowledged that we've got to do more about the debt build-up that will occur over the following years. And so I think that becomes one of our significant ongoing challenges," said Sen. Kent Conrad, North Dakota Democrat and chairman of the Budget Committee.

 

He and members of both parties also fretted over the farm payment reductions, which Mr. Obama is counting on to save $9.8 billion over 10 years - part of the $2 trillion in savings Mr. Obama says he's identified.

 

Still, the charitable giving deduction reduction, which would limit deductions for couples making $250,000 or individuals making $200,000, provoked the most heat Thursday. Mr. Obama is counting on that provision to raise $179.8 billion over 10 years.

 

"Some of the reforms and offsets contained or referenced in the budget, such as the limitation on itemized deductions, raise concerns and will require more study as we determine the best policies for getting America back on track," said Finance Committee Chairman Max Baucus, Montana Democrat.

 

Roberton Williams, senior fellow at the Tax Policy Center, said it's impossible to calculate the exact effects of all the tax changes, but said the overall result is clear - less philanthropic giving.

 

This will lead people to give less to charities if they behave the way they've behaved in the past," he said. "We've already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving."

 

Asked about that, Office of Management and Budget Director Peter Orszag said Mr. Obama took care of that by giving charities government money to make up part of the difference.

 

ASTRID RIECKEN/THE WASHINGTON TIMES Rep. Paul D. Ryan, Wisconsin Republican, describes “the good, the bad and the ugly” of President Obama's 2010 budget plan Thursday on Capitol Hill.

 

"Contained in the recovery act, there's $100 million to support nonprofits and charities as we get through this period of economic difficulty," he said.

 

He disputed that giving would drop, and said an economic recovery will help charities, too.

 

Many of Mr. Obama's proposals broke down chiefly along party lines, meaning they have a good chance of passage with both the House and Senate controlled by his party.

 

Republicans lined up in opposition, praising Mr. Obama for some cost-cutting in Medicare but arguing he turns around and spends those savings on more government programs.

 

"I mean, basically, what's happening here is we're taking four steps back in the deficit fight, and then we're only taking two steps forward," said Sen. Judd Gregg, New Hampshire Republican.

 

Democrats cheered his plan to return the upper two tax brackets to the levels they were before Mr. Bush's tax cuts and Mr. Obama's plans to boost Pell Grants for low-income students to attend college. Republicans said the tax increases will hurt small businesses the most, killing job-creation, and protested making Pell Grants a new entitlement program, meaning Congress could no longer control yearly spending for it.

 

Mr. Obama's goal of tackling greenhouse gas emissions may be tougher still. He is counting on raising $645.7 billion over 10 years by auctioning off carbon-emitting permits to polluters, and has given until 2012 before the program has to be up and running.

 

But cap-and-trade schemes have proved messy in places they've been tried, such as Europe, and Mr. Obama has left the details of the plan to be written by Congress, where Republicans may join with Democrats from industrial states to hamper his goal of an 80 percent reduction in emissions by 2050.

 

Another proposal, permanently indexing the alternative minimum tax for inflation so it doesn't apply to middle-income earners, is popular with both parties - but so costly that Congress struggles each year to find money to do it.

 

Mr. Orszag told reporters they understand the challenge, but believe lawmakers will realize there's no choice.

 

"I think you're raising a fundamental question, which is we're on an unsustainable fiscal course. There's not a single line in the budget that won't have someone who cares about it very strongly. And yet, if we allowed all of those lines to persist and grow over time, we would wind up with a fiscal crisis," he said.

 

"We recognize that it is difficult to turn direction, to shift direction in the federal budget, but that's absolutely what we need to do."

 

http://www.nytimes.com/2009/02/26/us/politics/26budget.html

 

This administration is moving more and more in the direction I rolled my eyes at when Republicans kept whining during the campaign. Soaking the rich in taxes is not going to fix this mess, and reducing incentives to give to charity only compounds it.

Edited February 27, 2009 by StrangeSox

[kapkomet]

Obama's administration is also proposing limiting charitable deductions and changing the way itemized deductions are structured.

http://www.washingtontimes.com/news/2009/f...itical-friends/

 

 

 

http://www.nytimes.com/2009/02/26/us/politics/26budget.html

 

This administration is moving more and more in the direction I rolled my eyes at when Republicans kept whining during the campaign. Soaking the rich in taxes is not going to fix this mess, and reducing incentives to give to charity only compounds it.

Honestly, what did you expect? They are doing what they said they would do. It amazes me that people who voted for him thought he'd govern "from the center". That's bulls*** and people are now starting to see that.

 

[Balta1701]

http://www.nytimes.com/2009/02/26/us/politics/26budget.html

 

This administration is moving more and more in the direction I rolled my eyes at when Republicans kept whining during the campaign. Soaking the rich in taxes is not going to fix this mess, and reducing incentives to give to charity only compounds it.

Of course, if the estate tax goes back up, then you're trading off one method of supporting charities with the tax code for another, because the estate tax cut/elimination was a big hit on charity donations as well.

[Balta1701]

On a different topic, I'm not sure what to say about it except the losses on these CDO's are staggering.

But now, at long last, one shard of reality has just emerged to piece this gloom. In recent weeks, bankers at places such as JPMorgan Chase and Wachovia have been quietly sifting data trying to ascertain what has happened to those swathes of troubled CDO of ABS.

 

The conclusions are stunning. From late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS.)

 

Out of that pile, around $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.

 

The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.

 

I dare say this might be an extreme case. The subprime loans extended in 2006 and 2007 have suffered particularly high default rates and the CDOs that have already been liquidated are presumably the very worst of the pack.

 

Even so, I would hazard a guess that this is easily the worst outcome for any assets that have ever carried a “triple A” stamp. No wonder so many investors are now so utterly cynical about anything that bankers or rating agencies might say these days.

A triple a rating, and a 95% loss rate.

[mr_genius]

On a different topic, I'm not sure what to say about it except the losses on these CDO's are staggering.

A triple a rating, and a 95% loss rate.

 

just dish out more bailouts. $15 trillion worth.

 

done and done. everything fixed

[Cknolls]

Honestly, what did you expect? They are doing what they said they would do. It amazes me that people who voted for him thought he'd govern "from the center". That's bulls*** and people are now starting to see that.

 

 

 

 

 

 

 

[kapkomet]

On a different topic, I'm not sure what to say about it except the losses on these CDO's are staggering.

A triple a rating, and a 95% loss rate.

I personally blame the rating companies more then any other on this mess, however, they were all in it together.

 

Hell, I should right a damn book about "what happened" since no one seems to have pieced it together yet. It's not THAT freaking hard to understand. It's different, of course, to know what to do about it.

 

[mr_genius]

DOW down a whole lot already today.

 

lowest since 1997

 

 

Edited March 2, 2009 by mr_genius

[mr_genius]

oh i like this financial quote from FOX financial news

 

"Will the US government end up losing the 186 billion investment in AIG?"

 

lol. that money is gone. stupid question. they lost 61 billion last quarter alone.

[NorthSideSox72]

oh i like this financial quote from FOX financial news

 

"Will the US government end up losing the 186 billion investment in AIG?"

 

lol. that money is gone. stupid question. they lost 61 billion last quarter alone.

So here is something to think about. Let's say that AIG manages to use the federal funds to actually crawl out of the hole in their investment unit. Even if they can do that, the problem is, I am not sure AIG can survive as an insurance company. The whole idea of insurance includes that you trust the insurer, to be able to cover you in a loss. Does anyone in their right mind trust AIG anymore?

 

I'll say it. I think that AIG needs to be broken up, clients sold or auctioned off to other insurers, and let the financial arm go the failed bank route. I think AIG needs to go away.

 

[Balta1701]

oh i like this financial quote from FOX financial news

 

"Will the US government end up losing the 186 billion investment in AIG?"

 

lol. that money is gone. stupid question. they lost 61 billion last quarter alone.

LOL. That money is nothing more than additional bailout money. Honestly, it's probably been just about as effective as the first $350 million from the Congressionally financed bailout.

 

And regarding today...

 

WHEEEEEEEEEEEEEEEEEEEEEEE!

[StrangeSox]

It's fun losing 3.5% every day for two weeks straight (or at least it seems like that).

[NorthSideSox72]

It's fun losing 3.5% every day for two weeks straight (or at least it seems like that).

We had actually run back up a bit more recently than that. Then sprinted back down.

 

Ugh. Assets evaporating.

 

[Cknolls]

Shhhhhhh.... You hear that? I think 660 is trying to sneak up on us...... It may be a weigh station to 450-500 level....... Right back where we started from...1995...what a good year....my first year on the exchange floor.. what comes around goes around...