The fear mongering is beyond the pale at this point... I'm not sure if I'm listening to the replay of that famous radio coverage of the Hindenburg every day when Senate Majority Leader Harry Reid opens his mouth. But, he along with Secretary Geithner have been reckless to the point of sounding like they are rooting for calamity if the debt ceiling isn't raised.
"Every function in government could cease"
"Much worse than the Depression"
"It would take years to get back credit worthiness"
Of course, like President Obama, Senator Reid didn't always think not raising the debt ceiling would be the end of the world, in fact he once felt the opposite.
This fear-mongering takes me back to late September 2009 when politicians were running around with their heads chopped off and Hank Paulson saw a shot to save his buddies on Wall Street. TARP was proposed as a way to take bad assets off the books so money would circulate through the economy. I'm not sure that was ever the true intent. I think it was bait and switch all the way, and the American public knew it was bait and switch, too. The only weapon that could work was to crush the stock market and spook lawmakers, if not the average American, into doling out billions of dollars to banks supposedly too big to fail.
The vote came up in the House on September 29, and failed 205 to 228. The Dow Jones Industrial Average began the day at 11,139 but finished 10,365. Frightened by the reaction and claims there were no other choices, the Senate passed TARP 74 to 25, and then the House passed it 263 to 171. President Bush signed TARP into law on October 3 with the understanding he would spend half the dough and President-elect Obama would get the other half. Here's what nobody talks about after that first 700 point drubbing: the market still collapsed. On October 3, the DJIA was at 10,483 and closed at 10,325.
By October 10, the index landed at 8,451, or down 2,032 points from the day the gift to Wall Street was passed.
On January 15, 2009, a bill in the Senate to block the second tranche of TARP from going to the Obama Administration failed 42 to 52. Six Republicans, including Jon Kyl, number two republican in the Senate, voted to allow the Administration access to the $350.0 billion. On the other hand, eight Democrats voted against handing over the money even after Barack Obama pushed hard with personal phone calls and numerous promises. Moreover, Larry Summers wrote a letter to the Senate promising the Administration would take specific care to make sure the money was spent responsibly and with more transparency than the Bush Administration.
The money became, and continues to be, President Obama's piggybank. You could easily argue Bush paid bankers and Obama paid unions, and the American taxpayers paid the bill.
One person that didn't take the bait was Sen. Jim DeMint (R-SC) whose observations included:
"Americans intuitively know that what we're doing here is wrong."
"All of us know that we have to pay back, our children, our grandchildren, for generations to come, with a lower standard of living and incredibly high taxes and a devalued currency."
I'm going to ask Sen. DeMint today when he is my guest on the Fox Business Network about the fear-mongering and true stakes beyond a short-term decline in the stock market if this prime moment in history is allowed to slip by without tough decisions.
Before looking at what's going to impact today's session I have to point out that close yesterday was impressive. Maybe not the stuff that makes headlines, but the market overcame a session riddled by rumors (Spain PM quitting, European bank closers) and dark clouds (see comments above) to attract some buyers. Those buyers were not dumb money in my mind. One fundamental issue for the market is can it rally without the banks, and if banks are sucking wind what does that mean for the economy as a whole? Isn't it interesting that many bank stocks are now at levels last seen during the banking crisis yet the broader market is significantly higher?
Maybe we don't have to save individual banks or allow them to hold taxpayers hostage, after all. This morning, Goldman Sachs (NYSE:GS) missed consensus, and Bank of America (NYSE:BAC) posted a loss of $9.1 billion ($8.5 billion related to settlement). But, IBM (NYSE:IBM) posted a fantastic earnings result as did numerous other companies in a variety of industries. The real message of earnings thus far (last week 79% of companies beat consensus) is global exposure. But, even companies with tentacles that make them fortunes around the globe are still worried about domestic policies. Steve Wynn went off on President Obama's policies and the detrimental impact on American businesses and economy.
Here are some of his comments:
* And I'm saying it bluntly that this administration is the greatest wet blanket to business and progress and job creation in my lifetime. And I can prove it and I could spend the next three hours giving you examples of all of us in this marketplace that are frightened to death about all the new regulations, our health care costs escalate. Regulations coming from left and right. A President that seems, you know -- that keeps using that word redistribution.
* Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they're frightened of this administration. And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. You bet. And until we change the tempo and the conversation from Washington, it's not going to change.
* And those of us who have business opportunities and the capital to do it, are going to sit in fear of the President. And you know, a lot of people don't want to say that. They say oh, God, don't be attacking Obama. Well, this is Obama's deal. And it's Obama that's responsible for this fear in America.
* The guy keeps making speeches about redistribution, and maybe's ought to do something to businesses that don't invest, they're holding too much money. You know, we haven't heard that kind of money except from pure socialists.
* Everybody is afraid of the government. And there's no need -- there's no need, you know, soft pedaling it. It's the truth. It is the truth. And that's true of Democratic businessmen, and Republican businessmen, and I am a Democratic businessman and I support Harry Reid, I support Democrats and Republicans, and I'm telling you that the business community in this country is frightened to death of the weird political philosophy of the President of the United States. And until he's gone, everybody is going to be sitting on their thumbs.
Futures look good and got better after housing starts data came in better than expected.