The Treasury has now revealed its plans on how to buy up 'bad assets'.

The Treasury believes, or at least claims to believe, that some 'asset' held by banks can not be sold off because there is no market for them. That is of course wrong. There is a market for any asset as long as it has a reasonable price. The banks simply want more money for these assets then anyone is willing to pay for them.

The Treasury further argues that keeping those assets within these banks currently impairs the general credit markets. I find that a dubious claim as a. money supply and credit is still expanding and b. over-indebted households have no reason to take on more debt.

So from my point of view the Treasury is presenting a wrong view of the real problems. I like others believe that the banks are simply insolvent, i.e. they have more debt than fairly valued assets and the Treasury's real plan is to make them whole at the cost of the taxpayers.

Three plans are presented today but only the first one seems to be really determined.

The first one is the "Public-Private Investment Program for Legacy Loans"

Let's just take the sample from the Treasury site for this:

Cont. reading: The Geithner Plans

Krugman really hates the 'new Paulson plan'.

Pimco wants to be one of the 'investors' in 'bad assets' under Geithner's plan. They already own lots of 'bad assets' so artificially lifting their prices with taxpayer money will let them show great artificial profits which in turn will deliver big bonuses to their management.

Cohen likes Obama's Iran approach and says U.S. relations with Israel must change.

Strategy of tension? 
A car bomb was found next to a mall in Haifa, Israel. Some in the Palestinian Authority (i.e. Dahlan) say its from Hezbollah and Iran!

Exporting Democracy: The U.S. plans to appoint a Prime Minister in Afghanistan to get around Karzai.

Puppets: The Spanish Defense Minister wants Spanish troops out of Kosovo. The U.S. says no so the troops will stay.

Slobodan Milosevic's intelligence chief was a CIA agent. Lenin has more on this.

Please add your links of the day in the comments.

A LA Times propaganda piece about the 'success' of the killing campaign waged by the U.S. in the tribal areas of Pakistan includes this line:

The offensive has been aided by technological advances and an expansion of the CIA's Predator fleet. The drones take off and land at military airstrips in Pakistan, but are operated by CIA pilots in the United States. Some of the pilots — who also pull the triggers on missiles — are contractors hired by the agency, former officials said.

Government officials like soldiers, policemen or even CIA agents have certain immunities when are ordered to kill someone. Civilian contractors do not have these nor should they have them. Civilians pulling the trigger to kill in a non defensive situation are committing first degree murders.

Where is the federal prosecutor going after these?

Dead babies, mothers weeping on their children's graves, a gun aimed at a child and bombed-out mosques – these are a few examples of the images Israel Defense Forces soldiers design these days to print on shirts they order to mark the end of training, or of field duty.
Dead Palestinian babies and bombed mosques – IDF fashion 2009

"Rules of Engagement: Open fire also upon rescue," was handwritten in Hebrew on a sheet of paper found in one of the Palestinian homes the Israel Defense Forces took over during Operation Cast Lead.
…
The other side of the "Situational Assessment" sheet shows that it was written on a letter sent to the troops by a child. "To the Golani soldiers, good luck in the war," the letter reads in the hand of a young child. In the middle of the page there is a drawing of an armed soldier. "Love, the S. family."
IDF soldiers ordered to shoot at Gaza rescuers, note says

"At first the specified action was to go into a house. We were supposed to go in with an armored personnel carrier called an Achzarit [literally, Cruel] to burst through the lower door, to start shooting inside and then … I call this murder … in effect, we were supposed to go up floor by floor, and any person we identified – we were supposed to shoot."
'Shooting and crying'

Cont. reading: Zionism

We reviewed the new Geithner plan, which we fairly called the The New ‘Paulson Plan, six days ago:

A complicate scheme which will give the investment banks lots of fees, allows overpayment for toxic assets and transfers the risk of the overpayment to the general public. What’s not to like with that.

Last year the Paulson plan to heal the banks balance sheets was to buy up toxic assets for too high prices and later Geithner planed similar schemes. Both planed to use treasury money for this and the general scrutiny about these programs prevented their implementation. But now the Fed will be abused to implement this.

Everybody was busy with outrage over AIG bonuses at that time and the plan did not get any real scrutiny. It took until today and a New York Times piece on it for others to look at it.

Yves Smith:

[The plan] appears to be consistent with (low) expectations: a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for crappy paper.

Calculated Risk:

With almost no skin in the game, these investors can pay a higher than market price for the toxic assets (since there is little downside risk). This amounts to a direct subsidy from the taxpayers to the banks.

Krugman:

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

…

This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.

More Krugman:

It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September.
…
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.

The bold parts are the biggest problem here:

Cont. reading: Scrutiny Starts For The ‘New Paulson Plan’

Obama addressed the Iranian people and government in a recorded Novruz greating. While this was a change of tone compared to Bush's axis of evil, it was still quite aggressive in my view.

The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right — but it comes with real responsibilities, and that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization.

Who is the U.S. to teach anyone about the "terror of arms"? And why do this speech in concert with Israel?

In his answer ayatollah Khamenei responded that a change in tone is not enough to change relations:

"They congratulate Iranians on the New Year but at the same time they accuse Iran of supporting terrorism and seeking nuclear arms," Ayatollah Seyyed Ali Khamenei said on Saturday addressing masses of people in the holy city of Mashhad on the occasion of Nowruz (the Iranian New Year).

"They tell us to come and sit at the negotiating table. Under the slogan of change, they say let's mend the ties. Where is the change? Clarify this for us."

He added several demands:

"Have you released the frozen assets of the Iranian nation? Have you lifted sanctions against us? Have you stopped spreading allegations against us?"

His offer:

"You change. We will change too," the Leader concluded, adding that the US change of policy must be 'genuine'.

Not very diplomatic, but considering the viewpoint of the Iranians after 30 years of hostilities from the U.S., that may be understandable.

A lot will now depend on Obama's next steps. There has been no hint yet what those may be.

It is interesting to see the headlines of the news items that reported Khamenei's response.

Cont. reading: Genuine Change?

The Fed announced this week that it will buy up to $1.250,000 million in treasuries, mortgage backed agency debt (Freddie and Fannie) and other papers. This a week after the Chinese Prime Minister voiced concerns about the value of the $2,000+ million in U.S. assets China holds.

China is especially concerned about agency debt since the U.S. took Freddie and Fannie into receivership but did not formally guarantee their debt. China is also concerned about the value of long term treasuries which would sink if interest rates in the U.S. would increase.

While the last point may be of no immediate concern, with the all the money the U.S. will have to print now eventually the long term interest will rise sharply and treasuries will thereby lose in value.

For some time China is selling agency debt and long term treasuries and instead buying short term treasuries. But the large amounts China has of those unwanted assets can not be sold without some big buyer. So the Fed stepped in and will now buy what China wants to sell.

Of course there are additional reasons for the Fed to buy 'assets' with freshly printed dollars. The U.S. will run $1,000,000+ million deficits per year for the foreseeable future. It has to issue treasuries for that. China may buy a few of those but it seems it would rather like to buy other assets like raw materials or debt and companies denominated in other currencies. The Fed will therefore have to buy the treasuries the U.S. government issues and will have to print additional dollars to finance the purchase.

Cont. reading: Some Wankish Wanking On Quantitative Easing

Today's headlines:

• Bonus-Tax Plan Heads to Senate as House Approves 90% Levy Amid AIG Outcry
• A.I.G. Sues U.S. for Return of $306 Million in Tax Payments
• Anti-AIG demonstrations draw small, animated crowds
• Countrywide sues AIG unit over its failure to cover loan losses
• AIG Sues Countrywide for Misrepresenting Mortgages

Funny in its own way, especially the last two.

And a nice distraction from the new TALF program launched today with which the Fed will lend out money to hedge funds and shadow banks while taking about anything, including used photocopiers and cars, as collateral. The funds will use this scheme to get rid of their toxic 'assets' and the taxpayer will have to eat the losses.

Stolen from anna missed

populist
by anna missed
2009, oil on photo copy
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Check anna missed‘s site for more paintings and pictures.

Yesterday Israel arrested ten Palestinian political leaders in the West Bank:

Among those detained were four Hamas lawmakers, a university professor and a former Hamas deputy prime minister.

They are taking hostage to press Hamas for the release of a prisoner of war, Gilad Shalit, Hamas is holding in Gaza. The weekend negotiations about Shalit’s release failed. While Israel agreed to release some of the several thousand of Palestinians it holds without any judicial process in exchange for the release of Shalit, it insisted on deporting those into some foreign country. Hamas could of course not agree with that.

So now Israel increases the pressure by taking more non-militant civilians hostages and a further blockade of the 1.5 million people in Gaza.

Worse is to come. The incoming Netanjahu/Avigor Lieberman government is at the extreme right of the political spectrum. Netanjahu selected as national security adviser Uzi Arad, a former(?) Israeli spy who is currently not allowed to enter the United States for spying against it. Recently Netanjahu snubbed Hillary Clinton when he insisted on Arad’s presence in a meeting with her.

Next to being a spy Arad is also a fascist. I am exaggerating? No. Via War in Context a video of an interview a settler friendly TV station did with him.

Uzi Arad on the two-state solution:

Cont. reading: Uzi Arad: “We want to relieve ourselves of the burden of the Palestinian populations – not territories.”

Back in October I asked you for visible signs of the economic slump. For me the first sign were five ships (picture) up-laid in a usually empty part of the Hamburg harbor.

Here is a newer picture of another harbor part with another five pretty new and good ships up-laid because of general lack of trade and load.

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In total I recently counted eighteen up-laid ships in Hamburg alone and I may have missed some. Now Lloyd's List reports:

Just over 11% or 434 ships in the global containership fleet are currently unemployed.

The latest Alphaliner statistics showed that an additional 31 ships have been placed in lay-up since March 2.

To mothball those ships has help to put freight-rates measured in the Baltic Dry Index back up to 2,400. The index had slumped from a very profitable 12,000 level last May to a ruinous 800 in October. But the ships still sailing now are still unlikely to make any money. More of them will have to be placed in lay-up.

In the German version of the Financial Times shipowner Claus Peter Offen, who has more than 130 container ships in his fleet, expects that by the end of 2011, 25% of the world's container-ships fleet will swim idle. Another big German shipowner was reported to have rented a whole fjord in Norway to park his unused ships.

This table I dug up shows that the 25% level would be worse than the idle numbers during the Great Depression.

Up-laid trade-ship tonnage of the most important shipping countries 1930-34
 (midyear numbers, BRT=Gross Register Tonnage)

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Idle world tonnage:

• 1930:  8.0%
• 1931: 15.3%
• 1932: 20.4%
• 1933: 17.3%
• 1934: 11.7%

Today's number of 11% is already higher than 1930's midyear 8%.

C.P. Offen estimates 25% by 2011 because he expects a similar trade slump as during the Great Depression but additionally accounts for the high number of new ships which are still on order books or being build right now. They will further clog the freight markets. The current world fleet is also in average unusually young and only few of these ships will get scarped soon.

So I welcome you to The Greater Depression^TM, which it will be at least for shipowners, seamen and harbor workers.

My question again:

What are signs of the downturn you see in your area? How have they changed in the last months? Are things getting worse or better?

The Independent tries to give an answer to What is going on in Madagascar?.

A young, rich and now popular mayor just kicked an older, richer and now unpopular President out of his office. The background is corruption and sell-outs to foreign conglomerates. Madagascar is beautiful and the elite is chronically corrupt with 70% of the people living on less than $2 per day.

So just another post-colonial African play one might think.

But there is something curious about the names of the main characters involved in this drama. Consider:

• Ravalomanana, Marc: elected President who now quit after protests and a mutiny
• Rajoelina, Andry: former DJ and mayor who led the protests
• Ratsiraka, Didier: former President and probably the man behind Rajoelina
• Ramorosan, Hyppolite: Vice-Admiral and now heading a somewhat ruling military board
• Rasolofomahandry, Edmond: army chief kicked out by a mutiny of young officers
• Ranaivoniarivo, Mamy: Vice-Admiral and defense minister kicked out by the mutiny
• Ndriarijaona, Andre: Colonel, new army chief

I suspect that either the Independent did get the last person's name wrong, or that the writer of this plot still has a special role in mind for him. Maybe as the new President where he then would really stick out?

Paul Kedrosky has some Fun with AIG Bonuses. He lists some recipient groups of bonuses at AIG and this one sticks out:

Eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million.

Unfortunately I wasn't one of those eleven. If I were I now would probaqbly invest that "retention" bonus in buying call options on pitchfork producers.

Then again there may be better opportunities. As I pointed out this whole AIG bonuses drama is only a diversion that keeps the public away from talking about the multi-trillion looting scheme these guys are planing to implement with TALF 2.0. Maybe I should invest in that?

On the 9th the New York Times reported the the U.S. Halted Some Raids in Afghanistan:

The commander of a secretive branch of America’s Special Operations forces last month ordered a halt to most commando missions in Afghanistan, reflecting a growing concern that civilian deaths caused by American firepower are jeopardizing broader goals there.

The halt, which lasted about two weeks, came after a series of nighttime raids by Special Operations troops in recent months killed women and children, and after months of mounting outrage in Afghanistan about civilians killed in air and ground strikes.
…
Military officials said the halt was ordered in part to allow American commanders time to impose new safeguards intended to reduce the risk of civilian deaths.

If so, the new safeguards do not work. These troops are again out to kill:

Cont. reading: Killer Commandos In Afghanistan

On February 21 I wrote about the U.S. Defense Energy Support Center solicitation for fuel in Afghanistan. That center is the sole supplier of fuel for all U.S. forces. The numbers in that solicitation were:

• 67,320,000 U.S. Gallons – Turbine Fuel, Aviation
• 12,240,000 U.S. Gallons – Fuel Oil, Diesel
•  
  1,440,000 U.S. Gallons – Gasoline, Automotive, Unleaded

The total was 80 million gallons or 220,000 gallons per day. I pointed out that this number fitted to a Stratfor estimate from November 2008 as the yearly demand for U.S. and NATO forces in Afghanistan.

The solicitation has now been modified and the required numbers changed:

• 100,776,000 U.S. Gallons – Turbine Fuel, Aviation
•  
  11,883,000 U.S. Gallons – Fuel Oil, Diesel
•   
  1,438,000 U.S. Gallons – Gasoline, Automotive, Unleaded

Diesel numbers have been lowered a bit and gasoline number stay about constant so no additional requirements for operating ground troops is assumed. But the anticipated need for aviation fuel has now increased by 50%.

I can think of two possible changes that require these higher numbers:

Cont. reading: More Aviation Fuel For Afghanistan

Just read this piece on how badly foreclosure of rental property can effect U.S. renters. Most of the renter's problems described therein would be legally impossible in Germany.

The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

…
The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis.

…
[B]y law, Hoffman said, the receiver is not liable for security deposits from renters who signed leases before the receivership went into effect.

In Germany the security deposits are on a savings bank book and in escrow of the bank. The owner can only access the deposit when he can prove a legal claim against the renter.

[I]n Arizona and at least 30 other states, there is no legal requirement to notify tenants that the property is going through foreclosure

Cont. reading: Renting Or Owning – Hen And Egg

AIG is practically blackmailing the U.S. government to pay out undeserved bonuses and unnecessary retention money. This while still not saying who the $170 billion the taxpayer gave it has been going to. Yes, they revealed some numbers yesterday but those were a. already known and b. make up only some 60% of the total. Where is the rest?

The hapless or nefarious (you decide) bailout of the big banks and bondholders may finally start to create some movement against it.

What's really driving this forward — and what makes it such a dangerous moment for the White House — is the jarring image of the administration's impotence.

This will make it very difficult to get any new stimulus or bailout program through Congress even if it would makes sense and may be needed.

Luckily for the administration the public, while watching the AIG show, misses the real robbery.

Cont. reading: A New ‘Paulson Plan’

News & views … another open thread

"There is absolutely no truth to the rumors of liquidity problems."
…
"Bear Stearns's balance sheet, liquidity and capital remain strong."
Alan Schwartz, CEO, Bear Stearns, March 10, 2008

March 16, 2008: Bear Stearn Forced To Sell For $2 Per Share,

"Our capital and liquidity positions have never been stronger."
Dick Fuld, CEO, Lehman Brothers, September 10, 2008

September 15, 2008: Lehman bankrupt as crisis engulfs Wall Street

"Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States"
Barack Obama, CEO, United States of America, March 15, 2009

Summer 2009: The US government defaults on its debt

… investors better run away.

On March 6 AFP reported on U.S. reactions to the British announcement that it would talk to Hizbullah:

The United States said Friday it "is not ready" to follow its ally Britain in opening low-level contact with the political wing of Lebanon's Hezbollah, called a terrorist group by Washington.

Gordon Duguid, a State Department spokesman, told reporters that President Barack Obama's administration, which has promised to reach out to US foes, had been consulted by Britain before the announcement Friday.

…
However, the United States seemed interested in the results of the British contacts with Hezbollah when Duguid said "we will watch how that proceeds."

Then yesterday we get this:

A senior US official said Thursday he was unhappy with a British decision to open low-level contact with Hezbollah and suggested London only indirectly informed the new administration ahead of time.
…

Cont. reading: Dennis Ross Launches His Campaign