GMAC Wants Some Government Cheese!

Donnez-moi du brie, Sammy. Oh la la!

The Wall Street Journal reports that GMAC, the lender co-owned by General Motors and private equity group Cerberus Capital Management, has been pushing the Federal Reserve to allow the finance company to become a bank holding company. Now you’re probably thinking: “Why the fuck am I even reading this? And what’s up with the picture of brie? Hambric’s Curve has gone round the bend.” First of all, screw you. My mental state is ‘Phasers Set to Stun, Dano’, and, um. Uh. Oh yea. The reason they want to transmogrify into a bank holding company is so that can have access to chunk of Uncle Sam’s $700 billion cheese. That’s right, they want some bailout welfare.  At this time, it is not known if they also requested a dozen cases of Cristal champagne to wash it all down.

There are several ways this can be interpreted, but I’m just going to go ahead and look at it as equivalent to the mythical welfare queen popping out babies to get more government handouts. GMAC wants to become the latest form of welfare queen! Only this isn’t a myth and the cheese ain’t cheap. To wit, GMAC would join such venerable institutions as Goldman Sachs and Morgan Stanley who have taken the step of changing stripes and subjecting themselves to deeper regulatory probing in exchange for money (in the form of a goodish size slice of $700 billion).

On the one hand, the higher regulatory oversight would add a degree of consumer confidence with respect to the institution, down the road any way, and provide additional financial support to the needy in these lean times. On the other hand, they probably have a lot of subprime debt (what the ‘pros’ would term “financial STDs”) that they want to pass on to our Uncle Sam in exchange for some $$$ and end up making him all itchy down there.

‘Trickle-Up’ Economics – A Policy Whose Time Has Come? (Yeah, like 20 years ago.)

Couple of swells

Continuing my spittle-filled rant about the US economy, I’m going to change gears in this post and approach the subject not from the side of what’s wrong, but rather what can be done to make things right.

In a previous post, I noted that the US economy is driven by middle class consumption, so policy makers that push supply-side economic policies to de-hobotize our economy seem very hopeful, at best, that they can motivate the middle by giving to the top.  What is the fucking goal here? Motivate the middle class through envy to work harder for a few extra scraps to be tossed their way?  I mean, sure that shit hasn’t worked since, what, 1982, but hey, that’s no reason to stop trying! Right? Guys?

Supply-side economics seems predicated on the quaint notion that eventually the drippings will drizzle down the chins of America’s swellegant set to sate the thirst and fuel the consumption of the nation’s remaining 95%.  Meanwhile, as we wait and the temperature falls, don’t be surprised to hear:  “Jeeves! I’ve a discomforting chill in the marrow. I say, throw another hobo on the fire, there’s a good man.”  That is, unless you are the hobo.

Seems a quicker path would be to directly pass a goodish chunk of The Splurge funds directly to the remaining 95% and let them have a go at it (consuming that is.)  And by directly, I mean the provision of cash, not just the reduction of taxes.    Quite frankly, the recent economic nightmare the lower and middle class is living these days will leave most hesitant to shove cash out the door when the bank account is running low and the bills piling high.

Not only is America’s economic engine fueled by middle-class consumption, it is also dependent on small businesses to employ the bulk of its citizens – not on the Cokes, GMs and Goldman Sachs of the world. Those two facts alone bolster the argument that the key to America’s economic recovery, its pace and depth, resides with the middle class. Specifically, the middle class must have two key resources (money and confidence) if America is going to pull itself (sooner rather than later) out of this deep-ass economic hole it has dug for itself.  At the moment, we seem to be unkindly short of both but stuffed to the gills with debt and uncertainty.  (Ruh roh!)  Any plan that is to work must provide us the former two will riding us of the latter two.  To put forth anything less would be un-American (or very elitist).  Where do you stand?

Before you answer, just note that October’s consumer confidence reading dropped to a record low of 38.0 from September’s revised reading of 61.4.  Expectations were for a reading of 51.5.  Discuss .

Bloomberg columnits John F. Wasik recently posted an opinion piece on ‘trickle up’ economics that address the role of small businesses in the context of the presidential election.  Defs worth a read.

Hey! America! That “Bailout”? Not For You! HA HA HA!!!!

How many figures am I holding up, America?

Well, average Americans (which excludes you, Joe the Plumber), I have some good news and some bad news. The good news? The chance of you getting more credit that will only drive you further in debt has been substantially reduced. Whew!  That was close!  The bad news? That doesn’t include the additional $700 billion you now owe since its been given to a small group of financial industry swells, which doesn’t include you, obvs. Yeah, you can’t win. Say it.

Some guy at the New York Times has let the cat out of the bag. All that jawboning about using Treasury funds to unstick the stuck credit markets in order to help the average American get more in debt is turning out to be little more than b.s. I’m just floored that people still buy the whole notion of trickle down economics – give the rich a lot of money and eventually some of that juice will dribble down their chins and file your glass with a quenching liquid.  Or they’ll just boot you in the head and put you out of their misery.

NYT.com’s Joe Nocera found a way to access the tape of an employee conference call held by JPMorgan and discovered the bank plans to use the $25 billion it pulled down from Treasury to fund acquisitions or some such shit.  Increased consumer loans did not appear to be a significant part of its plan, and by “not significant” I mean not at all, or so Joe the Reporter would have his readers believe.  An this is despite the bank’s recent acquisition of Washington Mutual.  By way of “damning words,” Joe attributes the following quote to the verbose JPMorgan executive:

We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.

So yeah, consider yourself lucky that you dodged that bullet!  No more debt for you, America, because the credit spigots will not be open all that much to spew forth the liquidity that drives your economy.  I mean, no debt except the $250 billion already out the door (10% of which went to JPMorgan) and the remaining $450 billion to be distributed among a few swellegants.

But hey, look at the bright side, at least you won’t have some material possession staring you in the face, reminding you of your recent $700 billion credit binge.  I mean, after all, that’s what you voted for, right America?

The Consumer Needs an Equity Infusion. Stat!

Despite all the talk comparing our current economic situation to the Great Depression, the FT.com’s Krishna Guha hits a bit closer to home when he writes that the US is likely to plunge “…into what many experts believe will be its worst recession since 1982.”  Today, this comparison carries more weight psychologically because more people can relate to 1982 than they can to 1932.

The impact of the current credit market collapse on the banking and finance industries has been unexpectedly wide-spread and deep-rooted, no doubt, presenting our leaders with the opportunity to transfer more than $700 billion from the public coffers to the private sector.  I say “more than” because there has yet to be a government program with an estimated cost in the “B” billions that has not just come in over budget, but in some cases astronomically so.  But that’s a different discussion.  The one point that has not been totally absent but nonetheless rather down-played from the high-minded talks about how best to spend US Treasury funds is the supreme importance of the consumer in all of this.  You and me (and Joe the Plumber, if he ever gets his shit together and buys that damn business.  In today’s economy, he defs has the upper hand in negotiations with respect to an in-going valuation.)

The US economy is driven by consumer consumption.  How much of that $700 billion+ is being ear-marked for the consumer’s pocket?  Not enough, apparently, in light of falling consumer confidence coupled with rising unemployment that has reduced the consumer’s propensity to spend.  As reported in Guha’s article, the unemployment rate is expected by some to jump from its 6.1% level to somewhere north of 8%.  “Oh shi!#.”  In other words, people are thinking more about how to pay their bills and make sure there is enough cash set aside in the much ignored Emergency Fund.  So despite the credible stories of tighter consumer credit lending standards (have the banks done too little too late?), I’m also curious about the metrics out there on the rate of consumer demand for such products.  My logic tells me that the tighter lending standards were accompanied (if not preceded) by reduced demand for consumer loans in the face of rising uncertainty.

So if the credit markets do “thaw” and the lending spigots reopen, it is the institutional side of the market that will be back in play, but the consumer side is likely to take longer to come back to life.  More important than the the consumer’s access to credit is the state of the consumer’s balance sheet, which is in pretty bad shape following the substantial decline in its equity account.  In other words, the level of liabilities relative to equity has shot up because of the decline in value of real estate values (the major piece of equity on the balance sheet).  That’s not good, to be technical about it.

For example, before the economy swan-dived into the shitter, let’s say I owed $400,000 on my mortgage (my liabilities), but the market value of the my house (my equity) was $650,000 and my stock portfolio was valued at another $250,000 so I was feeling rather flush.  I might have even considered taking out $100K in equity to buy stuff (Hello MacBook Pro!).  But now, I still owe $400 large, but the market value of the property has declined to $450,000 and my equity portfolio is now worth a $1.49, so now I’m feeling like I just lost a shitload of money and not really in the mood to spend (It’s a Dell, Doooode).  In order to boost my confidence and get me back to spending, I’m gonna need my liabilities to decline, my equity to increase or some combination of the two.  And in all honesty, at this point, I’d prefer that increase to be more liquid (like stocks) than not (property value).  [This last point is for another post on the volitility of the equity markets – any gain in stocks’ value will be quickly followed by people looking to cash out, (sell) which will then push down equity values.  What a fucking see saw.]

Hobo Soup, monsieur?

Neocon’s Explanation for the Great Hobotization of America: Jimmy Carter and the Blacks, of course!

Made in China

In what is sure to turn into one of America’s greatest “D’Oh!” moments, the neocon men and women now claim to have the answer to America’s latest economic problem. And really, what are the chances that this explanation will be anywhere near as fucked up, or even more so, than the ones used to justify the adoption of the more onerous bits of the Patriot Act and the launching of a war against Iraq in response to Al Quaeda’s attack against America. I mean, yeah, it could be, but then, maybe not. Let’s see.

Well, the latest explanation for this mess is the CRA – the Community Reinvestment Act of 1977, which
–
“Wait. What? 19fucking77!?”
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which was “intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations,” as stated on Huffington Post.

So what happened is that all these libruls and ‘teh Blacks’ decided to wait for America’s mortgage industry to advance its financial engineering capabilities to facilitate the development of a wide-ranging derivatives market serving the origination and tranching of sub-prime debt, with the help of those librul institutions Fannie Mae and Freddie Mac. F’ing devious bastards. I mean, it would be one thing if naked greed run amok had anything, anything at all to do with this mess, but come on! It just doesn’t! And the sooner you libruls admit it, the sooner you’ll be on the road to bending over, grabbing your ankles recovery.

Really! You people and your “facts!”
Just as the neocon bastards were getting up to speed on their journey to economic transcendence, HuffPo reports that some librul by the name of Yellen, who also happens to be President and CEO of the Federal Reserve Bank of San Francisco, (San Francisco, people!) pointed out some info foreign to the neocon policy of creating one’s own reality: Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.

What really burns, chucks salt in the wound, if you will, is this Michael Barr “Law Professor” guy at the University of Michigan (read: elitist), who also happens to be a specialist in banking and finance law. Before going any further, I already know this “Professor” is so steeped in the real reality that he is not even capable of creating the type of alternate reality required to be a neocon in good standing, but let’s just play their game anyway.

Professor Barr thinks it would be “‘odd’ if a 30-year old law suddenly caused an explosion in bad sub prime loans from 2002-2007… Sub prime mortgages made mostly by brokers and lenders and securitized by investments banks — institutions not covered by CRA.” Whatever, egghead!

The New New Hambric’s Curve

Hambric’s Curve has found a new home more in line with America’s new Hobo lifestyle, as visually characterized in the accompanying photo of blueness and clouds. Get it? Blue? Clouds? Teh sadz?

Long story short, I’ve converted from the self-hosted version of WordPress to the free, WordPress-hosted version of the site. The obvious benefits of this move are (1) I don’t have to keep hitting the Gym of the Internet to bulk up my geek muscles to take care of the behind-the-curtain necessities of running a site; and (2), this shit’s free. FREE!!! WHOOOOOO!!!

So now all I have to do is convince Hank Paulson to Buy My Shitpile and I’ll be swimming in it like Tony Bennett!

Apparently, those were not balls in his pants…

‘Merica’s favorite Ol Philthy Bastard (TM) has decided to take his ball(s) and go home ’cause the Democrats are being mean or something. So he’s jumping off of the SS McCain. Leavin’ his dawg all high ‘n dry. He’s bouncin. In a parting shot, this guy I know swears he heard Ol Philthy (TM) shout “screw you, you bunch of whiny bitters!” as he was getting into his car with those ladies from the Robert Palmer video “Addicted to Love.” True story. ‘

Yea, yea, whatever. The question now is who can McCain find to advise him on this whole ‘e-kon-o-me’ thing on such short notice? I mean, I’ve got an idea of what it takes and if the pay is right, I’m in. If not, might I suggest he have his people put in a call to someone formerly at Freddie or Fannie? Just a thought.

Update: I know this is a repost (from that PAID version of H.’s Curve, but given the recent degree of ass-hattery on display in and around the U.S. Capital, I just thought you ought to know just how remarkably ordinary is their behavior. I mean, really, Pelosi talks shit about them and their leader and all of a sudden, they can’t find the stones to rise above and do what they thought right for the country just moments before. The fuck?!