Bloomberg has a great article on the tough spot Bernanke finds himself all of a sudden with long-term rates shooting up.  I was hoping for another 200B in purchase commitments this week, but they have a good point this is unlikely, because….

The Fed probably won’t make any adjustments to the size of the Treasury purchase program before its next policy meeting on June 23-24, in part to avoid reinforcing perceptions policy is reacting to swings in yields, according to Jim Bianco, president of Chicago-based Bianco Research LLC.

“The Fed wants to operate in predictable ways,” Bianco said. “They are also trying to not just look arbitrary, which makes people think ‘I can’t ever go to the bathroom because there could be a press release that the Fed changed the buybacks.’ That’s been a real concern: ‘Wow, I just went to the bathroom and lost $2 million dollars.’”

So why can’t the Fed simply fine tune the current program, purchasing only long-term debt with what remains of the 300 billion they’ve already announced?

Actually, they may be doing just that.  Wednesday’s scheduled purchase is for maturity dates of 2019-26.  Look for that one to be big (10-20B).

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.

Bloomberg doesn’t suck

March 15, 2009

I had Bloomberg for a while last year and their coverage was decidedly more analytical and less cheerleaderish than CNBC’s.

I mentioned this last Tuesday over lunch, but forgot to blog it, but was reminded when I read it at TPM.