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Small Business Bailout Considered By Obama Admin.

2009-07-10T22:24:25Z

The Obama administration is developing an initiative to take money from the $700 billion program for the banking system and make it available to millions of small businesses, which officials say are essential to any economic recovery because they employ so many people, according to sources familiar with the plan.

Geithner: Stimulus Working, Derivatives Blindsided Government

2009-07-10T20:36:14Z

WASHINGTON — Despite persistently high unemployment, Treasury Secretary Timothy Geithner said Friday the Obama administration's economic stimulus plan is on the "expected path."

"There's been substantial improvements in arresting what was the worst recession globally we've seen in generations," Geithner told lawmakers Friday.

Geithner's remarks came amid waning public support for President Barack Obama's economic policies. Republican critics say the rising unemployment rate is proof that the $787 billion stimulus has not helped reverse the effects of the recession.

"I was just wondering, where do you think your plan went wrong?" asked Rep. Bill Posey, R-Fla.

About 2 million jobs have been lost since Congress passed Obama's stimulus package in February. Unemployment now stands at 9.5 percent, the highest in 26 years. Some Obama allies have been calling for Congress to pass a second stimulus package.

Geithner said the rate of decline in the economy has slowed, consumer confidence has improved, the financial system is healing, and concern about a financial meltdown has receded.

"Those are critically important signs of initial progress," Geithner said.

Geithner said joblessness is an inescapable element of a recession and that unemployment continues to rise even as an economy begins to improve. Without the stimulus, he said, more jobs would be lost.

Rep. Michael Rogers, R-Ala., challenged Geithner's assertion that business and consumer confidence was improving.

"People are scared to death," he said.

Geithner countered that the recession was a long time in the making and that recovery will take time as well.

"We do not yet have an economy that's growing again," he said, "and I think it is likely it will take a while to grow out of."

Geithner's defense, before a joint hearing of the House financial services and agriculture committees, came in the midst of his call for greater government control over the generally unregulated but complex derivatives market, which he said contributed to the financial crisis.

"Establishing a comprehensive framework of oversight is crucial," Geithner said in his opening remarks to a joint hearing by the House agriculture and financial services committees.

Despite apprehension among Republicans, the effort to add government restrictions to these more freewheeling financial instruments has support within the Democratic-controlled Congress.

Indeed, Financial Services Committee Chairman Barney Frank is planning derivatives provisions that that are even stricter than what the administration is proposing.

Derivatives are financial instruments whose value derives from something else, such as a mortgage-backed security or a commodity like oil. The allure of the over-the-counter derivative, as opposed to those swapped on exchanges, is that it can be individually negotiated and tailored to meet the specific needs of the buyer.

Under the administration's plan, so-called standardized derivative contracts would be traded on regulated exchanges or trading platforms. Dealers would be regulated, and participants would have to meet capital requirements to prevent over-leveraging. Banks and other parties would still be allowed to enter into customized contracts outside regulated exchanges, under the Obama plan, but the transactions would have to meet more reporting requirements.

Frank, in an interview with MSNBC after the hearing, said he would further limit the ability of businesses to enter into individualized derivative contracts.

"We will specifically be requiring that in almost every case derivatives go on an exchange ... or a clearinghouse, that there not be these individualized deals," he said. "And if people are going to make individualized deals, they're going to have to have a lot more capital behind it. "

Frank also said he would call for a ban on so-called naked credit default swaps, a type of derivative where buyers have no risk of exposure.

Some Democrats have called for fewer customized derivatives contracts and a few have urged that some derivatives, such as credit default swaps, be banned.

The administration's proposal, part of a broader overhaul package, has opposition from much of the financial industry, which says it would raise costs and squash innovation. The industry insists any legislation be flexible enough to permit businesses to tailor contracts to meet their specific needs and not standardize all derivative contracts.

Lawmakers have also questioned Obama's proposal to give more power to the Federal Reserve.

On Friday, 17 members of the House Financial Services Committee, including three Democrats, sent Obama a letter asking him not to expand the Fed's authority until it is known whether Fed Chairman Ben Bernanke pressured Bank of America Corp. to acquire Merrill Lynch.

Federal Stimulus Website Redesign Could Cost Up To $18 Million

2009-07-10T19:40:06Z

The idea was transparency. If the Obama administration was spending $797 billion as stimulus money to jump-start the economy, end the recession and bring down the unemployment rate, U.S. taxpayers had a right to know where the money was going.

World Economy: 11 Places Worse Off Than The U.S.

2009-07-10T17:17:44Z

When times are tough, one thing that tends to raise the spirits is knowing that somebody else has it worse. And as wretched as the U.S. economy seems, it's not as bad as in other regions.

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'Twintern': Meet The 22-Year-Old Intern Who Tweets For Pizza Hut

2009-07-10T16:40:48Z

Most people measure the workday in hours, but for a new crop of employees--interns in charge of their companies' Twitter feeds--the day is measured in tweets. "I try to get in at least 10 posts a day," says Alexa Robinson, 22, who started work as Pizza Hut's first official "twintern" in June. Robinson spends much of the day on the free microblogging service Twitter sending out messages about special promotions, responding to customer complaints, and trolling Twitter for mentions of Pizza Hut.

GM Pulls Gay-Themed Ads From YouTube

2009-07-10T16:33:40Z

Apparently, the powerful General Motors company has the luxury of limiting the demographic groups to which they must appeal, because after posting several gay-themed Camaro advertisements to YouTube, said advertisements have now been pulled. (It seems that these spots might have also been some sort of Transformers: Revenge Of The Fallen tie-in, which would probably make sense to me if I'd seen the movie, which I haven't because of repeated warnings that it will turn my brain to paste.)

From 365 Gay:

General Motors has ordered all videos created for their Chevrolet "Gay Day at the Movies" promotion be removed from You Tube. The videos, which featured amateur footage of two "go go boys" washing a Camaro, were deemed inappropriate by GM.

"The video was not appropriate and not in good taste," said GM spokesman Dave Barthmuss. The videos were seen as a bad representation for the company by GM executives said Barthmuss.

Also widely seen as giving General Motors a "bad representation": the cars manufactured by General Motors.

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Morgan Stanley, Goldman Sachs Plan To Rebrand Failure As Success

2009-07-10T15:53:29Z

I have wonderful news to report to everyone! Apparently I have woken up today in a parallel universe, where the sun is shining and the birds are singing and my coffee tastes like malted orgasm. There's something called a "Dylan Ratigan" on my teevee, asking shouty sports pundit Stephen A. Smith about auto bailouts, so it's not like EVERYTHING makes perfect sense, but here's the real good news! Apparently, the financial collapse in the derivatives market never happened! EVERYTHING OLD IS NEW AGAIN AND WILL SUCK AGAIN, YAY!

From this bizarro universe's Bloomberg:

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody's Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.

Ahh, apparently this parallel universe's version of Choire Sicha is just as critical of these geniuses as he is in the real one. This is blockquoted for maximum sarcasm:

HOW COULD THIS IDEA FAIL? How could anyone not want to put their money in this? This is so dizzying, it's like it is 2003 outside, and everything is new and shiny again.

You know what is going to be neat? Seeing which ratings agency bites first at giving this turd sandwich a AAA rating! All of us in this parallel universe plan on running around the streets with our pants off that day, because there are no consequences for failure, ever, apparently.

UPDATE, from my exasperated father, who writes:

It will be interesting to see who buys this shit but we may never know. Some people never learn. BUT! If you offer it at a price and a rate, somebody can be found to speculate on anything, and if you sell it to somebody connected or to someone who is "too big to fail"...well we have already proven that we can handle the "moral hazard" argument. Here we go again. Look at the names associated with all this. And the one you have to wonder about the most is the rating's agency, Moody's. They must feel like they are invisible and bullet-proof because they certainly have escaped real scrutiny in all of this that has just passed. And! They are paid by the issuers to give them a rating on this shit. Not much independence there!

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EFCA Opponent Runs Ad Suggesting Unions Gag Employees With Duct Tape

2009-07-10T15:48:25Z

A top union is demanding that an Arkansas TV station yank a new ad being run by the "Dr. Evil" of pro-business lobbyists that depicts workers as mobbed up goons to turn Senator Blanche Lincoln against the Employee Free Choice Act, labor's top priority.

Goldman Spy Case: Bank Frets Over 'Doomsday Machine' Trading Codes

2009-07-10T15:45:01Z

July 9 (Bloomberg) -- Never let it be said that the Justice Department can't move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.

AIG Bonuses: Consulting With Obama Administration On Plans To Pay Out Millions Of Dollars

2009-07-10T15:17:42Z

NEW YORK — American International Group Inc. is consulting with the federal government about its plans to pay millions of dollars in retention incentives and bonuses, a person familiar with the situation said.

AIG is working with the Obama administration's compensation czar, Kenneth R. Feinberg, to ensure the government and the insurer are on the same page before it pays out remaining bonuses due to employees tied to 2008 contracts, according to the person, who requested anonymity because of the sensitive nature of the talks.

New York-based AIG faced intense public and Congressional criticism in March when it paid out hundreds of millions of dollars in retention bonuses to employees months after receiving a bailout from the government.

The latest round of bonus payments has brought fresh anger from some on Capitol Hill.

"The reason that company collapsed and needed to be bailed out was because of the recklessness and irresponsibility of their top management" who took bonuses, said Independent Sen. Bernie Sanders of Vermont. "At a time when millions of Americans are losing their jobs and seeing declines in their incomes, I think it is an outrage that anyone on the AIG leadership team is receiving (even) 5 cents in bonuses."

Some of the bonuses AIG is planning to pay out were promised to employees in 2008, before the government stepped in to ensure AIG would not collapse. Additional retention payments were awarded in an effort to keep executives from leaving the company after the government's initial bailout.

In September, the government provided AIG with an $85 billion rescue package amid the mushrooming credit crisis. In return, the government took about an 80 percent stake in the New York-based insurance giant. Since then, the government has provided additional rounds of support. AIG's available loan package now totals $182.5 billion, though it has not tapped all of the funds.

The latest round of bonus payments will include about $235 million for employees at AIG's financial products unit, according to a Wall Street Journal report. AIG's near collapse was not due to its traditional insurance operations, but instead risky derivatives contracts written by the financial products division. AIG is in the processing of winding down that unit.

AIG is also scheduled to pay out another portion of a much smaller set of bonuses to 40 high-ranking AIG executives. The 40 executives were awarded about a combined $9 million in bonuses for 2008. The insurer paid out half of the bonuses in March and is supposed to pay out the remainder in two installments, the first of which is scheduled for next week.

AIG is among the companies whose pay practices the government now oversees. But while AIG is discussing the outstanding bonuses with Feinberg, he cannot ultimately veto the upcoming payments.

Feinberg does have the power to reject pay plans he deems excessive at companies that benefited from large infusions from the government's $700 billion bank bailout fund. However, those powers only begin with pay packages for 2009 and can't be retroactively applied to 2008 compensation.

Feinberg also now has authority to review compensation for the top 100 salaried employees at those firms.

While not commenting specifically on the AIG bonus discussions, a Treasury Department administration official said Feinberg will help to ensure companies balance the need to retain talent, reward performance and protect taxpayers' investments.

"That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans," the official said. "We are not going to provide a running commentary on that process, but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."

Hundreds of financial firms received money as part of the government's $700 billion program. Many of the largest banks have been repaying those funds quickly, in part, to enable avoiding scrutiny and restrictions on how they pay top executives.

AIG has been selling assets to raise cash in an effort to repay the government loans. It is also planning to spin off three of its major insurance subsidiaries into separate companies to raise capital necessary to pay back the government.

_____

AP Economics Writer Martin Crutsinger and AP Business Writer Marcy Gordon in Washington contributed to this report.

Madoff Mail: Website Solicits Angry Letters For Bernie

2009-07-10T15:03:46Z

A new website wants you to tell Bernie Madoff exactly how you feel. The e-newsletter Thrillist today pointed to "Madoff Mail," a kind of web experiment that's asking for user-submitted letters, cards and posters that will be sent to Madoff in prison.

Every six months, Madoff Mail will deliver what presumably will be a boatload of angry missives to Bernie's prison address. The Madoff Mail website says that they'll also be hosting a gallery show of some of the better submissions in late 2009.

There are already some rather creative takes -- think Madoff as The Fonz and Madoff as Mini-Me. One handwritten note reads:

"Dear Bernie, Honestly, that was pretty damn impressive. If only the global financial system hadn't collapsed. Tough break..."

Visit the Madoff Mail website here.

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William White: Canadian Economist Warned Of Coming Crisis, And Was Ignored

2009-07-10T14:38:52Z

William White predicted the approaching financial crisis years before 2007's subprime meltdown. But central bankers preferred to listen to his great rival Alan Greenspan instead, with devastating consequences for the global economy.

Warren Buffett's Recession Investment Tips (VIDEO)

2009-07-10T14:01:09Z

In an interview this week with Good Morning America Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, said that Americans had been on "a binge" prior to the recession. The Oracle of Omaha also gave some broad, but characteristically wise, advice for investing in this new era.

For one, Buffett said, debt can be a killer:

"The U.S. public as a whole has gotten into problems from leverage, financial institutions have gotten into problems through leverage," he said. "A long, long time ago a friend said to me about leverage, 'If you're smart you don't need it, and if you're dumb, you got no business using it.'"

For more of Warren Buffett's investment tips, WATCH:

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Government Giving The Go Ahead On Stimulus Money For Renewables

2009-07-10T13:48:02Z

The Treasury and the Energy Department today unveiled long-awaited new rules under which the government will pay up to 30 percent of the cost of renewable energy projects.

Goldman Sachs Poised To Earn Record Profits

2009-07-10T13:34:53Z

July 10 (Bloomberg) -- Goldman Sachs Group Inc. is poised to report the largest profit since it set earnings records in 2007, marking the return of a business model that was the envy of Wall Street before the financial crisis devastated competitors and spurred a government bailout.