Risk Rap

Rapping About a World at Risk

Conference Call with Hank

National Federation of Independent Business (NFIB) members had an opportunity to participate in a conference call with Secretary of the Treasury Henry Paulson. Mr. Paulson was keen to solicit the support of NFIB members for the passage of the Emergency Economic Stabilization Act, (EESA).

NFIB members are small business owners who are generally very conservative, free market advocates who vigorously support tax relief, oppose regulatory oversight and large governmental spending programs. NFIB member firms are the entrepreneurs, shopkeepers, service providers and small business risk takers who populate the small stores and office space on Main Street USA.

Small business owners are a politically vocal and influential constituency whose support proponents need to gain passage of EESA. Last night EESA passed the Senate. It will now return to the House of Representatives for a vote. Secretary Paulson asked NFIB members to contact congressmen, senators and media to urge support of EESA passage.

Key points raised were as follows:

FDIC deposit insurance limit was raised to $250,000

EESA Bill included riders with tax cuts and other rebate incentives

EESA has a recoupment provision “put” that allows Treasury to sell assets back to banks at a previously agreed upon price

Failure of EESA will curtail community bank lending activity to small businesses

Large businesses and municipalities dependent on credit markets for short term funding will scale back purchases with small businesses

Current Treasury tools are not sufficient to deal with problem

EESA funding (Federal Budget program cuts) will need to be addressed in next budget cycle

Regulatory frameworks of financial services industry need to be streamlined, strengthened and reformed

Mark to Market of toxic bank assets will help to temporarily address bank solvency and capitalization ratios

Music Video: Blondie, Hangin on the Telephone

Risk: bank solvency, credit, interest rates, recession

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October 2, 2008 Posted by | credit crisis, EESA, Paulson, pop, TARP, Treasury | , , , , , , | Leave a comment

Too Big to Fail

Mini Me is Big Time

Last weeks Senate Hearings on the credit market crisis and the role of the Fed in the bailout of Bear Stearns produced some dramatic headlines, noteworthy quotes and an opportunity for politicians, regulators and big swinging bankers to come together to shed some much needed transparency on the situation.

People are confused, uncertain and fearful. How can the boom go bust so quickly and how can the American economic colossus be brought to its knees in such a pedestrian fashion? The talk on Main Street is big banks vs. sub prime mortgage holders and the political calculus of which class of debtors in default pose the greatest threat to the economic prosperity and political stability of the nation.

The emerging economic environment will reify a new political landscape that can potentially broaden the divisions of a divided nation. The to big to fail rationalization of opening the Federal coffers to bailout failing capitalist enterprises is perceived by many taxpayers as the rich and powerful taking care of the rich and powerful by robbing the poor to pay the rich.

To paraphrase Senator Dodd, “we can’t be perceived as if we are privatizing profit and socializing risk.” It is dangerous to arbitrage the nations economic and political default probabilities. Who is too big to fail? That will be a question that the voters should have some say on come November but the discourse thus far has been confined to Senate chambers and the hard to locate CSPAN channel. It has yet to come to the fore in any meaningful way in the campaigns of the political candidates running for office in this year’s election.

Give the Fed high marks for acting. Give some of the Senators credit for understanding that the actions of the Fed help both large institutional banking interests and the little guy concerned about the reset rate on his ARM.

Shame on the politicians that are trying to make hay by sowing divisions among interest groups for political gain.

Risk: Political, Banking, Class, Market

You Tube Video: Peter Gabriel, Big Time

April 10, 2008 Posted by | Bear Stearns, credit crisis, pop | , , , , , , , , , , | Leave a comment