Terrorists wanted

May 20, 2009

What an enterprising little town:

Earlier this month, Hardin’s town council voted unanimously to offer the US government a deal: Send Hardin the detainees that most foreign countries and other cities the US are afraid to take.

So they don’t want them in Lousisana.  Fine.  Someone else will, for the right price.  It’s the free-market thing to do.

But then you have Harry Reid running scared

Commit to the LORD whatever you do, and your plans will succeed.

Proverbs 16:3

From one of the many covers of Rumsfeld’s intelligence updates slide (4/03).  I guess if that’s how one goes about making decisions it’s easy to see how we ended up here.

I am at once sickened by how long we were under control of religious fanatic loons, and so proud to live in a country where strong institutions did not allow us to drift away from reason and progress for much longer.

Cheap warrants

May 20, 2009

I’ve argued that we all benefited from the bubble (before it popped).  I thought Taibbi’s piece on Wall Street’s power grab was pure conspiracy-monguering.  I’ve even been skeptical of Krugman and HuffPo bloggers’ accusation that Geithner and Obama are in the banks’ pocket.

But now I’m very concerned:  Banks are buying back their warrants???

We lent them money, with great risk, and as a condition we got warrants to buy X amount of shares at some price.  These contracts have long multi-year terms, so the government can choose to exercise them after the institutions are back in shape, and their stock worth a lot more.  At least that WAS the bargain.

Now some banks are starting to buy back their warrants, which the contract specifies is allowed at ‘fair market value’, but apparently they are getting sweetheart deals.

As a taxpayer I support a bailout, but if we are to take on risk, we must participate on the reward as well.

This doesn’t just erode trust on the administration:  Having nothing to show in the way of a return after this mess will make it that much harder to get public opinion behind another costly intervention if needed.

UPDATE 5/20: Barry Ritholtz is now on top of this.  I really hope it gets traction.  Today I will call my congresswoman.

UPDATE 5/22: Bloomberg picked up the story! They’re using prof. Wilson’s model to calculate we would be fleeced out of 10 billion by the top 20 TARP recipients alone.

I recently argued that the Chinese have no choice but to keep buying our treasuries.  My friend Aakarsh pointed out they could buy raw materials.  I agreed, but wondered just how much of their 1T in dollar reserves they could possibly convert into ore, beans and oil.

Well it’s happening.  And here’s a rough indication of their pace:

Without this stockpiling of strategic commodities, China’s trade balance likely would have risen in the first quarter instead of falling $51.8 billion to $62.51 billion, he said.

That means about $60 billion per quarter, $240 billion yearly, of which some part is NOT in dollars.  So at this clip, they appear to be using $150 to $200 billion a year of their dollar reserves for materials instead of treasuries.

The question is, how long can they maintain this clip?  It’s not just a question of how much of it they can actually use, but also a matter of how quickly commodity prices bounce back to a point where this strategy is not nearly as attractive.

h/t TBP