Update on New Hampshire HCR 6 - Jeffersonian Principles

Hi Jesse,

Went to Concord today to observe the testimony before the committee regarding the resolution HCR 6.

Quite impressive number of people, at least 60, which I'm told is above average.

The bill's sponsor said as a result of his work, he's aware of six other states moving ahead with similar resolutions designed to send a message to DC on limiting federal government.

Montana may vote this week. The bill's sponsor and co-sponsor are getting much publicity and calls from constituents.

About six state reps testified in favor of adoption. Another half dozen citizens spoke. Some were quite eloquent, they brought up the economic mess, the Federal Reserve, and their own understanding of our history and Constitution.

We will be following the bill's progress and hope they recommend it to the NH Legislature which may be as soon as later next week.

I'll keep you updated---

Bill

SP Futures Hourly Chart

The Congress will be voting on the stimulus package tonight. We think the market has this baked in. The action today *could* have been a front-running of this news, but it had all the look and feel of a simple short squeeze. The specs were getting short ahead of what looks to be a bad Non-Farm Payrolls number tomorrow.

Gross Says Government Stimulus Must Be in Trillions

We watched the interviews at PIMCO on Bloomberg TV.

He may be sincere but there should be little doubt that Bill Gross was 'talking his book.'

Maybe Obama will spike the Jobs Numbers tomorrow to shake loose the money tree. He is a fool if he doesn't because it will not take much to put out a horrific number, especially after the years of pollyanna sand-bagging that had built up under Bush II.


Bloomberg
U.S. Must Spend to Avoid Mini Depression, Bill Gross Says
By Kathleen Hays and Dakin Campbell

Feb. 5 (Bloomberg) -- Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. may slump into a “mini depression” unless policy makers spend trillions of dollars to spur growth.

“This economy needs support from the government, a check from the government in the trillions,” Gross said today in a Bloomberg Television interview from Pimco’s headquarters in Newport Beach, California. “There is a potential catastrophe if the U.S. government continues to focus on billions of dollars.”

Gross manages the $132 billion Total Return Fund, the world’s biggest bond fund. The fund gained 4.8 percent last year and has outperformed 99 percent of its peers over the past five years, according to data compiled by Bloomberg. The average government and corporate bond fund lost 8 percent in 2008, Bloomberg data show.

Pimco is a unit of Munich-based Allianz SE, Europe’s largest insurer.

The Jobs Number for January Could be Quite Bad, Much Worse than Expected

The non-seasonally adjusted number could come in around -3,400,000 jobs.

Luckily for the BLS January is the worst month for actuals, and therefore has the largest seasonality factor.

The 'imaginary jobs' number will not be a significant factor, since January is also the month in which they adjust out many of the imaginary jobs they added in the last six months that are obviously non-existent.

Our standard projections show the headline number coming in about -650,000+ which is pretty severe, but it could be much higher depending on how they apply the seasonality, or lower depending on how much they choose to adjust the prior months and 'smooth the decline.' An outside number could be -900,000.

So, all in all, there may be a large downward adjustment to December which may help to absorb some of the single month impact, but the consenses loss of 540,000 jobs looks optimistic.

Let's see what happens. We are prepared for the worst. We have some confidence that even 'the reformers' will gild the lily a bit to 'inspire confidence.' All statists fudge the numbers because the individual and the truth are servants of the state and the 'greater good.'

Deutsche Bank Posts First Loss Since WW II

Breitbart
Deutsche Bank posts first loss since WWII, rejects state aid
Feb 5 09:12 AM

Germany's biggest lender, Deutsche Bank, on Thursday posted its first annual loss since World War II after a terrible fourth quarter but said it would survive the global meltdown without state aid.

Chairman Josef Ackermann said the bank did not require government assistance and would pull out of the financial crisis on its own.

Deutsche Bank reported a net loss of 3.9 billion euros (5.0 billion dollars) for 2008 after a massive loss of 4.8 billion euros in the fourth quarter alone. For 2007, Deutsche Bank have posted a record profit of 6.5 billion euros....

Ackermann added that he saw no "dramatic" risks in the bank's accounts.

In a statement earlier, he said "operating conditions in the (fourth) quarter were completely unprecedented and exposed some weaknesses in our business model.

He acknowledged being "very disappointed" at the quarterly figures but said that "since the trust and support of our shareholders is critical for us, we recommend a dividend for the year 2008 of 50 cents per share."

...Ackermann said he remained committed to the bank's business model, which is focused on investment banking, a once lucrative field in which Deutsche Bank is one of the global leaders.

The sector has suffered sustained turmoil since mid-2007 when the US subprime or higher risk home loan market collapsed, undercutting the derivative investment instruments which had been linked to it by the banks...

For the full year 2008, Deutsche Bank revised the total value of its assets lower by 7.0 billion euros, more than three times the 2007 write-downs of 2.3 billion euros.

In the fourth quarter alone, asset write-downs amounted to 5.3 billion euros.

New Hampshire HCR 6 Status - Hearing in Committee Tomorrow

HCR6 Session Year 2009

Bill Text Title: Affirming States' Rights based on Jeffersonian principles.

G-Status: HOUSE
House Status: IN COMMITTEE
Senate Status:

Next/Last Comm: HOUSE STATE-FEDERAL RELATIONS AND VETERANS AFFAIRS
Next/Last Hearing: 02/05/2009 at 01:00 PM LOB 203

New Hampshire HCR 6 Text

SP Futures Hourly Chart at 2:45 PM

Cisco and Visa after the bell.

January Non-Farm Payrolls on Friday.

Goldman Sachs Would Like to Pay Back Their TARP Money ASAP

Apparently this new rule about caps on executive pay was a motivation to choose other venues.

There are plenty of other feedbags from the Fed for a newly christened commercial bank, and the Fed is more tolerant of highly paid management.


Bloomberg
Goldman Sachs Would Like to Pay Back TARP Money, Viniar Says
By Christine Harper

Feb. 4 (Bloomberg) -- Goldman Sachs Group Inc., which took $10 billion from the U.S. Treasury in October, would like to pay back the money from the so-called Troubled Asset Relief Program, or TARP, said David Viniar, the firm’s chief financial officer.

“It would send a very good signal” if the firm could repay the money, he said. The firm would only do so if it got “the blessing” of the Treasury and Federal Reserve, he said at a Credit Suisse conference in Naples, Florida today.

Under current rules, Goldman and other firms that received money under TARP are required to raise common or preferred equity to replace the government funds, Viniar said. The company will consider raising money “if the markets are good,” he said.

The government investment “is not really restricting the way we do business,” Viniar said.

Goldman will also be “very cautious” about considering any acquisitions because there’s a longer record of unsuccessful deals in the financial services industry than successful ones, Viniar said. He said the firm is likely to maintain its current business of focusing on corporate and institutional clients rather than entering the retail business.

“I would not pick up the Wall Street Journal every morning looking for the big Goldman Sachs acquisition because I think you will be disappointed,” he said. “We don’t really like or know the retail business and I don’t expect that to change too much.”

A Modest Proposal from Joe Stiglitz

"..."The government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice."

Joseph Stiglitz, the Nobel Prize-winning economist

This is the procedure, that is what we do with insolvent banks. That is what the FDIC is for.

We don't prop up the bad banks. The regulators help them become solvent through a resolution and restructuring of their bad debt, and then either sell them, sell their assets independently, or allow them to re-emerge as good banks once they are solvent

This is precisely what Le Café Américain has had on the menu for the banks over the past seven months, with some detail behind it, including systemic reforms.

We do not burden an entire national economy, we do not cripple an entire banking industry including many regional banks who have done no wrong, in propping up a few insolvent institutions who arrived at that state through outrageous bad management.

There is widespread suspicion that this exercise is designed to protect a handful of large money center banks from realizing their losses - JPM, C, Morgan Stanley, B of A, and Goldman Sachs.

Let the system work. Do not continue to privatize the gains and subsidize the losses.

And then let the criminal and civil investigations of the major actors in this modern tragedy begin, if we ever wish to 'restore confidence' in Wall Street in the public and the rest of the world.

Markopolos Delivers Multiple Bombshells in Congressional Testimony

"Government has coddled, accepted, and ignored white collar crime for too long.

It is time the nation woke up and realized that it's not the armed robbers or drug dealers who cause the most economic harm, it's the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most.

They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives."

Harry Markopolos in Congressional Testimony

Henry Markopolos, the Madoff Ponzi scheme whistleblower, is delivering bombshell testimony with few punches pulled before the US Congress this morning.

Among other things:

- There were 14 'feeder funds' operating with Madoff to channel investor to him. Only two have been publicly revealed. There are twelve more. Markopolos is going to be speaking with French and Swiss authorities to reveal others who have not yet acknowledged their role, and their losses.

- There are undisclosed investors in the Madoff scheme among prominent Europeans, and even royalty.

- Markopolos feared for his life because of the involvement of the Russian mob and South American drug cartels involved with Madoff, and because of the stonewall treatment his repeated and detailed disclosures received at the SEC.

- The SEC is overstaffed with young attorneys who do not understand the business they are regulating. They need to hire older hands with direct financial markets experience and accounting backgrounds and incent them.

- The SEC does not wish to pursue 'the big cases.' They prefer to act on small cases.

- The SEC has done little as compared to the State Attorneys General.

- The SEC has a problem described by others as 'deep capture' wherein the regulators look to jobs in their industry after a few years in the agency. Their management protects industry insiders from investigation.

- Madoff did not act alone. There were enablers who were willfully blind, and there were those who were directly involved with him in his deception.

- The SEC does not even have access to Bloomberg terminals or read the WSJ or Barrons

- The new head of the SEC, Mary Shapiro, needs to clean house with 'a wide broom' among the management of her new organization

- Markopolos was offered a job to head up a new super-agency several times by the Congressmen, only half in jest, but he demurred because of family commitments. Too bad because we have a hunch he'd soon be known on Wall Street as the "flagellum Dei" (Latin: "Scourge of God"),

Bad Bank Proposal is Bad Policy and a Symptom of Serious Problems in Obama Administration

Yves Smith nails this one.

Bringing in seasoned professionals has the upside of enabling quick action.

The significant downside is that you bring in old problems, old approaches, old conflict of interest, and old thinking.

As we have said previously, the challenge to Obama and his insiders will be one of leadership, to set coherent policy directives that will bring direction to the old hands consistent with a new reform government.

So far the Obama Administration is not succeeding. We have heard of conflicts of opinion between the old guard, Geithner and Summers, and the new circle under the president. This in part was the cause for the delay in announcing the bad bank this week.

The Obama Administration is still in the 100 day honeymoon period, but the constant stream of old guard appointments, and those with specific questionable personal tax payment records and performance in the Clinton Administration is grooming it for failure. They are spending precious political capital and goodwill senselessly.

We need them to succeed. Badly. They did not create this crisis, but it is their task to find a solution and prevent it from worsening.

But we ought not to kid ourselves or be quiet when they commit the kinds of gaffes which have characterized their first few weeks in office.

"The Obama Administration is as obviously and fully hostage to the interests of the financial services industry as the Bush crowd was.

We have no new thinking, no willingness to take measures that are completely defensible (in fact not doing them takes some creative positioning) like wiping out shareholders at obviously dud banks (Citi is top of the list), forcing bondholder haircuts and/or equity swaps, replacing management, writing off and/or restructuring bad loans, and deciding whether and how to reorganize and restructure the company.

Instead, the banks are now getting the AIG treatment: every demand is being met, no tough questions asked, no probing of the accounts (or more important, the accounting)."

Bad Bank Assets Proposal: Even Worse than You Thought - Naked Capitalism