Michael Haltman

Reprinted from The Political and Financial Markets Commentator at http://politicsandfinance.blogspot.com

Friday, December 5, 2008

Global Blast Of Liquidity: What Does It All Mean?

The Rate Cut Merry-Go-Round Just Keeps On Spinning

In a throwback to an earlier time, the Bank of England cut its key lending rate 100bp. to 2.0%, the lowest level since 1939. If they were to cut it to below 2.0%, it would be the first and only time since the Bank of England came into existence in 1694. In a similar move, the EU cut its key lending rate 75 bp. to 2.50%.

These cuts are just more of an indication that the growing and spreading global recession is showing no signs of abating despite the massive infusions of capital around the world. Inflation, the term that has historically brought fear and quick action not only to our fiscal watchdogs but to those around the world as well, is obviously nowhere in sight, with deflation closer to the real story.

These massive and unprecedentedly aggressive easing moves, together with the flavor of the day action taken by the Fed and Treasury to try and stem the escalating tide of economic destruction, makes one think that what we see as a very bad situation, might be just that much worse.

The newest trial balloon is an unconfirmed story that the Treasury and Fannie and Freddie will enter into a program the net result of which is to bring mortgage rates for new home purchases down to about 4.5%. Good news for prospective buyers of homes, but what about current homeowners seeking to refinance high interest loans (which is where most of the mortgage problems are) as well the unknown effect a move like this would have on the secondary fixed income markets. Just another in a long line of wait and see situations.

The Big Three Go To Washington

You can bet that in some way, shape or form Detroit will get some amount of money sent their way (terms and conditions attached), but not before the congressmen and senators get to play that famous Washington game,

"Who Can Ask The Most Irrelevant and Asinine Question?"

From listening today, the winning question is one that was not hard to predict would be asked beforehand, but which still makes you wonder about what it is that is that rolls around inside the heads of some of our elected officials. You have an industry on the brink of failure, a failure which has the potential to bring an economy that is already extremely weak to its' knees, and the important questions asked were:

"You drove to Washington to show us you were serious, but who drove. Did you have a chauffeur? How are you getting home? Are you driving? Are you flying?"

For the love of Pete, can someone tell me how this makes any difference in terms of anything what so ever? Will the answer to this question somehow give some insight as to whether or not to vote for money to the big three? Or is it simply just one more example of a politician trying to get that gotcha answer to put in the trophy case? Let's get serious.

The Employment Numbers On Friday
Expectations are that the non-farm payroll numbers are going to show an extremely large decline, and that the unemployment rate is going to show a large increase when released at 8:30 this morning. Some thinking goes that if it comes in at those estimates or better, the equity markets could take off. The one thing that I know is that I don't have any idea and neither does anyone else. It's all just educated guesswork.

If you haen't been getting your feed or email updates of the stories that have been written the last week, here are some of the titles:

Visit today at http://politicsandfinance.blogspot.com to subscribe (free of course) and read some of these stories.

In addition, click on the icons on the right side bar and take a look at the commercial mortgage training DVD program, as well as the commercial mortgage training tools manual that was authored by one of our partners.

If you don't subscribe for free to The Political and Financial markets Commentator by either email or through a feed, these are the stories that you missed this week. Imagine what you missed the week before:

This blog has appeared in the online version of various newspapers as well as Reuters.

To subscribe, visit http://politicsandfinance.blogspot.com, and leave any feedback or questions that you have.

Mike Haltman

Neel Kashkari Hammered On The Hill

Neel Kashkari, www.unhostels.org
Originally uploaded by neelkashkari

Neel Kashkari Pays Paulson's Price

Serving as a proxy for Henry Paulson, Treasury Secretary, Neel Kashkari, whose title is interim assistant secretary of Treasury for financial stability faced the House Oversight and Government Reform Committee's domestic policy subcommittee on Friday.

He was there to explain the shift in policy away from purchasing toxic assets from financial institutions, to actually injecting money into those institutions while the assets remain. Further, there is some vague talk from Paulson about direct help to consumers, aka the people on Main Street.

Many of the members of the committee wasted little time lambasting Kashkari and his boss on the deployment of funds, using the opportunity in the spotlight to question things that they should have been questioning before. The questioning, on a bi-partisan basis took more of the form of congressional pontification stressing the fact that the Congress had been duped. Perhaps they should take more of an oversight position instead of signing the checks and going by the wing and a prayer system of hoping that the $700 billion would be deployed the way that they hoped that it would.

Watching these events really makes you wonder who is in charge of the asylum, if anyone. We are the most powerful country on earth, and it seems as if we are being led by a bunch of amateurs all operating under their own agendas, not ours. The next political pawns are the auto companies, who, as I talked about last week have made their own beds, but can not be allowed to fail for the greater good. These leaders will hopefully recognize that and keep us out of another great depression with the unemployment and social upheaval that would occur.

Some Of The Gems Blasted At Kashkari

• "I guess you get a taste for how Mel Gibson felt in the last scene of "Braveheart" : Rep. Brian Bilbray
• Regarding the passion of Paulson and Kashkari for helping homeowners, Rep. Dennis Kucinich asked: "He is. Where? What country?" and he accused them of suggesting that "We're just skipping along our way." and in response to a statement Kashkari made "Boy y'know, that statement you just made, you will hear about for the rest of your career."
• Rep. Elijah Cummings said is response to an answer that "Life is short, and I don't have time to hear ring around the rosie answers." and one of the more played barbs of "Is Kashkari a chump?" and finally "You're on TV. You're the man. I don't know how much we're paying you, but you're our employee..."

There were more but it is really irrelevant. It's like a combination of the Three Stooges and Titanic and hard to watch.

The TARP Vs. Other Government Spending Programs

How Does The Current Size Of The TARP Compare With Other Government Projects Over Time?

Through out the history of our Republic, the government has undertaken many large projects, programs and actions for the good of the people. In today's dollars, how do they compare in size with the TARP? In adjusted dollars, only two are more costly.

• The Hoover Dam: 1930-1935 Cost: $45 MM Todays Dollars : $782 MM
• The Panama Canal: 1904-1914 Cost: $375 MM Todays Dollars: $7.9 B
• Gulf War 1: 1990-1991 Cost: $ 61 B Todays Dollars: $ 98 B
• Marshall Plan: 1948-1951 Cost: $12.7 B Todays Dollars: $ 115.3 B
• Louisiana Purchase: 1803 Cost: $ 15 MM Todays Dollars: $ 217 B
• Moon Race: 1958-1969 Cost: $36.4 B Todays Dollars: $237 B
• S&L Crisis: 1986-1995 Cost: $153 B Todays Dollars: $ 256 B
• Korean War: 1950-1953 Cost: $ 54 B Todays Dollars: $ 454 B
• New Deal: 1933-1943 Cost: $ 32 B Todays Dollars: $ 500 B
• Gulf War 2 and war on terror: 2003-? Cost: $551 B Todays Dollars: $ 597 B
• Vietnam War: 1964-1972 Cost: $111 B Todays Dollars: $ 698 B
• NASA: 1958-2008 Cost: $ 416.7 B Todays Dollars: $ 851.2 B
• WW II: 1941-1945 Cost: $ 288 B Todays Dollars: $ 3.6 T

MM: Millions, B: Billions, T: Trillions