TARP Reduced
Stocks and bonds went sideways today – nothing much to talk about.
The Dollar strengthened slightly today – the bias is important – strengthening.
Gold, oil and gasoline all fell in price today. Oil was significant because it fell below its sideways trading range, so is settling into more recent lows.
In the news today….
Bank of International Settlement (BIS) – warned that the low US interest rates could lure banks into taking risks again, and we could end up in the same position we were in last October. This is a warning from a respected international bank. They are saying that prolonged low interest rates cause banks to take risks that they would not normally take, AND there is nothing changed from the last time it happened.
UK Government – is threatening a tax on banks in the UK. This includes US banks there. They want to tax these banks for the trouble and money they caused the UK government over the past year. And, they are talking about hundreds of billions of pounds in tax. This should be a real fight to watch. As Americans we don’t really understand the influence that UK banks have on the UK Government. We DO understand what influence US banks have on the US government.
Kuwait – came to the rescue of Citibank at the beginning of our economic troubles. They invested $3B into Citibank. They have now sold their position for $4.1B – a nice profit of $1.1B. This is capitalism at work. And, this is no different from the investments that Warren Buffett made in Goldman Sachs, etc.
Goldman Sachs would have failed – without the TARP money injected into them. This according to Secretary Geithner. He is responding to statements by Goldman Sachs that they didn’t need the money, and were forced to take it by Paulson. I consider this a bunch of smoke and mirrors. Geithner is saying that ALL banks would have failed, and Goldman Sachs would have been brought down with them all – if they all failed. I personally doubt they would have all failed. For sure, Lehman Bros and Merrill Lynch would have failed, but in a bankruptcy setting, they would have been snapped up cheaply by another institution. Geithner is fighting for his job, as he has received a lot of criticism lately for being to “cosy” with US banks – especially Goldman Sachs.
Tonight’s Dinner Conversation…….
Geithner has said that his estimate that the US taxpayer would have to pay $341B of the TARP money – in other words, that money would have been lost forever – is now too high. He is reducing that number by $200B. Coincidentally, that $200B is about the same amount of TARP money that the big banks are paying back to the Treasury.
The Administration wants to take that $200B and use it to create jobs. This sounds like another Stimulus Package to me – does it to you?
Here are the questions for you to debate:
- Is it legal for the administration to take the $200B paid back TARP and use it to create jobs?
- Where is Congress in this debate?
- Does that mean the taxpayer will actually pay the entire $341B bill – and this is the government moving money from one pocket to another pocket?
- Do you trust the government to create “lasting” jobs – not just state and local government jobs that last a few months, like the Stimulus money did.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,390 (up 1 points)
10 Year Treasury Bond – 3.45% (down 0.04%)
Euro – $1.4821
Gold – $1159 (down $10)
Oil – $74.00 (down $1.47)
Gasoline – $1.94 (down $0.03)
