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Taps for Tarp By: Charles Payne

|Includes: BB, GOOG, HPQ, MSFT, ORCL, Texas Instruments Inc. (TXN)
It all came together in a rather bizarre manner yesterday. The Senate passed the small bank loan program that is doomed to land on the scrapheap of poorly conceived and executed bailouts during the Great Recession. Of course, that being the case, we have to talk about the Mother of them all, and I mean that in more ways than one. The Congressional Oversight Panel released a report on TARP yesterday that has come the closest to officially calling the program a failure. Sure, it saved the banks, but who gives a damn when the current economy seems like the worst case scenario anyway.

There are so many things wrong with the TARP program, including the way it was sold (bait & switch), applied (autos and other industries), and way the money became a piggybank for the Administration. The COP report says fallout from the bailout of rich Wall Street banks includes a "stigma" for all government bailouts. I don't know where the stigma is, we passed another yesterday, and have three or more in the quiver ready to launch as soon as a public relations campaign can be crafted to make those opposed look like Beelzebub.

Since President Bush signed on the dotted line on October 3, 2008, things have gotten progressively worse. I know it's commonly sold as having calmed the nation but in my mind, it was akin to yelling fire in a crowded theater that was on fire but not engulfing the nation. The Dow closed at 10,325 the day TARP was signed into law, the next day it closed at 9,955. By October 24, 2008, the Dow was languishing at 8,378, and November 20, 2008 at 7,552. This isn't a calming effect!

The COP report singled out these facts:

  • 11.0 million mortgages underwater since then
  • 7.1 million foreclosure notices (including record foreclosures last month)
  • -28% home prices have plunged since TARP came into being
  • -30% college and retirement investments
Other ways of measuring just how great TARP has been includes:

  • Unemployment Oct. 2008 6.6%, Oct. 2009 10.1%, and now 9.6%
  • Consumer credit is down $79.8 billion since then
While the government has chased away shadow banking and attempted to pick up the slack, it's clear it's not enough to turn spiraling consumer credit around.
 
We had Stephen Steinour, CEO of Huntington Bancshares (NASDAQ:HBAN), on "Varney & Co." yesterday and he pointed out that most of the banks that are eligible for funds in the next small business loan scheme don't do SBA loans. He was too polite and smart ("we are a regulated business") to say the newest spending plan was a bailout, but it's clear it will not have a positive impact on the economy now, if ever. I guess at this point the numbers have become so magnified that $30.0 billion seems like a drop in the bucket.

Plus, we bailed out the big banks, so why not the small ones, too. I wonder when that stigma is going to apply to everyone, because for many in charge of the purse strings there is no shame in their game. I wish there was a stigma, but for now power and ideology means much more.

By the way, an update on the other massive spending boondoggle, stimulus, is beyond the pale. The Los Angeles City Controller says an audit reveals just 54 jobs were created in two agencies that received a combined $111.0 million in ARRA money. Department of Transportation got $40.8 million and thus far has created 9 new gigs, although it's expected to zoom to 26 jobs by the time the dust settles and the ink dries. The Department of Public Works received $70.6 million and created 45 jobs, although when it's all said and done it's expected to generate 238 jobs. It's time to unleash the forces of the free market and put away the government checkbook.

Today's Session

Technology stocks are coming to the rescue, in fact two names seen mostly as lumbering giants, posted impressive earnings results after the bell. Another is a Texas Hold'em-sized bet.

Oracle (NYSE:ORCL) saw its revenue climb 48% to $7.5 billion, with non-GAAP earnings of $0.42 per share. Profits were driven by the Sun Micro unit and strong overall software demand. The company plans on $4.0 billion in research and development outlays this year on top of all the acquisitions. Operating margin slipped to 25.6% from 34.4%, but the stock was higher in aftermarket activity.

Texas Instruments (NYSE:TXN) has announced a $7.4 billion share buyback to go with an existing $1.3 billion program. In addition, the company is increasing its dividend a penny to $0.13 per share.

Research in Motion (RIMM) spent this summer watching its stock come unhinged as the earnings consensus decreased rapidly and there were a couple of brokerage downgrades. So, what does the company do? Last night it posted financial results that saw revenue up 31% to $4.62 billion. Earnings of $796.7 million or $1.46 per share came in well above consensus of $1.35 per share. The company shipped a record 12.1 million devices during the quarter, and its subscriber base crossed 50,000,000. Guidance for the current quarter sees revenue in a range of $5.30 billion to $5.55 billion and earnings per share of $1.62 to $1.70. Gross margins are expected at 42%.

I know the iPhone is hot, but I'm not sure why Blackberry has become the Rodney Dangerfield of smart phones. Both have lost market share, but Steve Job's company has lost more. Along that line of thinking, why doesn't Google (NASDAQ:GOOG) get props for all of the market share it's taking?
 
 
 
Speaking of hype, people are still doing boring things like texting with their smart phones although other uses are gaining.