Running On Empty

Actually, we’re running beyond empty now. The United States can’t legally borrow any more money until Congress acts to raise the debt ceiling.

US government hits debt ceiling, lighting 11-week fuse

Treasury Secretary Timothy Geithner informed Congress on Monday that the United States has reached its legal debt limit, setting off a ticking time bomb that could explode in less than three months if lawmakers can’t bridge differences and allow more government borrowing.

In hitting the $14.3 trillion debt ceiling – the limit on how much the government can borrow – the Obama administration on Monday began temporarily halting payments to the retirement and federal pension accounts of federal workers and started borrowing from those funds, to be restored later.

Geithner sent a letter to Senate Majority Leader Harry Reid, D-Nev., warning that the government can move money around for about 11 weeks but if a new debt ceiling isn’t agreed to by Aug. 2, the U.S. government could effectively default on its obligations to its creditors. He warned of “catastrophic economic consequences for citizens” unless Congress raises the debt ceiling.

An increase of about $2 trillion is expected, enough to get the issue past the 2012 elections before Congress would have to lift it again.

Republicans who control the House of Representatives vow to link raising the debt ceiling to cuts in government spending of at least equal measure. In a combative statement Monday, House Speaker John Boehner, R-Ohio, upped the ante.

“As I have said numerous times, there will be no debt limit increase without serious budget reforms and significant spending cuts, cuts that are greater than any increase in the debt limit.” Boehner has called previously for $2 trillion in spending cuts as part of any deal to raise the debt ceiling.

See also:
US hits $14 trillion debt limit
US Hits Debt Ceiling, But Treasury Market Rules Out Default For Now
Deja Vu, But No Disaster: U.S. Government Hits Debt Ceiling
U.S. Hits Debt Limit, Sky Doesn’t Fall
U.S. hit debt limit today
Treasury Tapping Federal Retirement Accounts to Stave Off Default
Turbo Tim Raids Pension Plans
With Debt Limit Maxed Out, Lawmakers Hold Firm On Remedy
Rep. Jordan: U.S. won’t default if debt ceiling isn’t raised
U.S. National Debt Clock

Well, we hit the debt ceiling and, despite all the Democrat Chicken Little hysteria, the Sun didn’t explode, the seas didn’t boil, and the markets didn’t plunge thousands of points. Go figure.

/all I can say is that the Republicans had better stand firm and hold their ground this time and hold out for concrete, verifiable spending cuts that at least equal the amount of any debt limit increase

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Enemy Of The Economy

Elizabeth Warren has never held a private sector job, never worked in the financial industry, and she hates banks, with a passion. So, what’s Obama’s brilliant idea? Let’s put her in charge of the new Bureau of Consumer Financial Protection bureaucracy! There’s only one problem, that position requires Senate confirmation and Warren is so toxic that even top Democrats know that there’s no way she would ever be confirmed. So, does that stop Obama, have Constitutional requirements ever stopped Obama? Hell no! Obama just ignored the Senate confirmation requirement and appointed her as his newest “czarina”.

Obama names Warren to new post

President Obama on Friday formally tapped Harvard Law Prof. Elizabeth Warren as a “special adviser” tasked with setting up a new consumer watchdog agency, sidestepping a thorny Senate confirmation battle and drawing the ire of Republicans.

Ms. Warren, who had been serving as head of the investigative board that oversees the $700 billion Wall Street bailout, is a hero to many progressives but is viewed coolly by financial firms turned off by her harsh rhetoric surrounding their role in the recession.

That’s likely one of the reasons Mr. Obama opted not to name Ms. Warren director of the Consumer Financial Protection Bureau as that position would require Senate confirmation — something that even Democrats, including Sen. Banking Committee Chairman Christopher Dodd, have said may not be possible. Instead, she will take the lead in establishing the new regulator, serving as a special adviser to Treasury Sec. Timothy Geithner and a special assistant to Mr. Obama.

See also:
Warren takes post; liberals cheer
Hurdles for Warren in Agency Launch
Warren is named bureau adviser
Obama taps Elizabeth Warren to launch Consumer Financial Protection Bureau
Barack Obama taps Elizabeth Warren for consumer watchdog job
What has Wall Street got against Elizabeth Warren?
Obama names consumer advocate Warren to new post
Obama makes it offical: taps Elizabeth Warren as financial consumer czar
Elizabeth Warren
Elizabeth Warren

Oh boy, just what this economy needs, a brand new gigantic government bureaucracy, created by someone with zero private sector experience, that will generate reams of onerous new government regulations. Is it any wonder why the United States has such an unfriendly business climate?

/somewhere in Germany, the Board of Deutsche Bank is smiling

Setting Records

Deficit grew by $181 billion in July

Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).

Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July.

Falling tax receipts and increased spending on bailouts for auto companies and the financial sector and for the economic stimulus package added to the deficit, according to CBO.

Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for banks, Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.

Geithner Asks Congress to Increase Federal Debt Limit

U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is “critically important” that they act in the next two months.

Mr. Geithner, in a letter to U.S. lawmakers, said that the Treasury projects that the current debt limit could be reached as early mid-October. Increasing the limit is important to instilling confidence in global investors, Mr. Geithner said.

The Treasury didn’t request a specific increase in the letter.

“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Mr. Geithner said in a letter to lawmakers.

Mr. Geithner said the that it is “clearly a moment in our history” that requires support from both Democrats and Republicans for the increase.

“Congress has never failed to raise the debt limit when necessary,” Mr. Geithner said.

See also:
July U.S. Budget Deficit Grows by $181 Billion, Receipts Tumble
CBO: July saw federal deficits grow by $181 billion
Federal deficit continued to grow last month
U.S. Deficit Grew by $181 billion
Lawmakers Urged to Raise Nation’s Debt Limit
Debt, Debt And More Debt
Geithner asking Congress: Increase the Debt Limit
U.S. National Debt Clock

At a certain point, the interest payments on the debt alone will become so large that they will overwhelm the Federal budget and make it literally impossible for us to pay off the debt, immediately turning the United States into a third world country. We’re broke and the current levels of debt and spending are unsustainable. The obvious solution would be to stop digging the hole and start cutting spending.

But reality doesn’t seem to apply to Obama and the Democrats. If George Bush spent reclessly, they can spend three times as recklessly! Trillions more for nationalized health care? No problem! How about a second stimulus, a few extra Gulfstream G5s . . .?

/and when the Chinese abrubtly stop buying our debt?

First Comes The Trial Balloon . . .

How many times did we hear this claptrap during the campaign?

And you believed him? Well, guess what?

Geithner, Summers hedge on tax hikes

Wavering on an emphatic promise he made in the spring, top White House economic adviser Lawrence H. Summers would not rule out middle-class tax increases Sunday as a way for the Obama administration to pay for a sweeping health care plan.

The statement, which was echoed by Treasury Secretary Timothy F. Geithner on Sunday’s talk shows, pries open a door to the kinds of broad tax increases that Mr. Obama opposed in his campaign and that he and his advisers have ruled out since taking office in January.

In March, Mr. Summers told CNBC emphatically, “Let’s be very clear. … There are no, no tax increases this year. There are no, no tax increases next year.”

On Sunday, however, Mr. Summers, the director of the National Economic Council, was much more circumspect, saying that circumstances change and options cannot be ruled out.

“There is a lot, though, there is a lot that can happen over time,” Mr. Summers said when pressed on CBS’ “Face the Nation” about whether the Obama administration would raise taxes on the middle class to cover the massive planned expansion of federal health care coverage and the ballooning federal deficits.

“It’s never a good idea to absolutely rule things out no matter what,” Mr. Summers said, elaborating by saying the administration would not act in ways that would be funded “primarily” by the middle class.

“But what the president has been completely clear on is that he is not going to pursue any of his priorities – not health care, not energy, nothing – in ways that are primarily burdening middle-class families,” he said.

Mr. Geithner spoke similarly, declining to rule out broadly based tax increases, when pressed during an interview that aired Sunday. ABC’s George Stephanopoulos invited Mr. Geithner five times to rule out raising taxes to pay for health care reform and/or to close the budget deficit – and he never did.

“Again, we’re not at the point yet where we’re going to make a judgment about what it’s going to take,” Mr. Geithner said on ABC’s “This Week.”

When asked about tax increases, “you’re not ruling it out, you can’t rule it out,” Mr. Geithner responded: “I think that what the country needs to do is understand we’re going to have to do what it takes. We’re going to do what’s necessary.”

See also:
Econ chief Timothy Geithner won’t rule out middle class tax increases
CQ Transcript: Economic Council’s Summers on CBS’s ‘Face the Nation’
On their way to summer vacation..
Will Barack Obama tax middle classes? U.S. finance chiefs flag tough measures to tackle growing budget deficit
2 Obama officials: No guarantee taxes won’t go up
Geithner, Summers Sent To The Corner Over Tax Bungle
AP ENTERPRISE: Federal tax revenues plummeting
Tax Receipts Fall Off Cliff; Worst Drop Since Depression

Of course today, they’re furiously spinning away, trying to reel the trial balloon back in, like it wasn’t floated on purpose.

No middle-class tax increases, White House insists

Despite warnings from President Obama’s top economic advisers that new taxes for middle-income Americans cannot be ruled out, the White House insisted today that the president’s “commitment” to a campaign pledge to avert new taxes for those earning less than $250,000 a year holds firm.

Both Treasury Secretary Timothy F. Geithner and chief economic adviser Lawrence Summers had suggested during appearances on the Sunday morning news talk shows that tax increases could not be ruled out for Americans earning less than the threshold that the president has set.

But White House Press Secretary Robert Gibbs adamantly and repeatedly insisted today that the president remains committed to his pledge — though he was unable to explain why Geithner and Summers had strayed from the administration’s line.

“The president’s clear commitment is not to raise taxes on those making less than $250,000 a year,” Gibbs told reporters pressing for an explanation about apparent discrepancies in the White House’s message.

Gibbs added, “I hope you’ll take my reiteration of this clear commitment . . . in the clearest terms possible, that he is not raising taxes on those who make less than $250,000 a year.”

The president, arguing that the healthcare overhaul he is seeking will not only benefit the public but also help control runaway government spending, has said that he will support tax increases to support his plan only for the wealthiest Americans, those earning more than $250,000.

Right. One thing that cannot happen by accident in Washington, is both top administration economic officials going on the major Sunday talk shows, on the same day, delivering the same message, that middle class taxes increases are on the table, without express marching orders from the White House to deliver it. Gimme a break, how dumb do they think we are?

/the numbers just don’t add up, tax revenue collection is plummeting and the rich don’t have close to enough money to pay for all of Obama’s reckless deficit spending, the money has to come from somewhere

It Wasn’t Supposed To Be A Comedy Tour

Tim Geithner took his show on the road to try and convince the Chinese that their U.S. investments were safe and to grovel to China to keep buying our debt. The Chinese thought it was funny and rightfully so, they’re good at math.

Chinese Students Laugh At Tim Geithner

Poor Tim Geithner. He already comes off as kind of nervous and insecure when talking in public, but at least in the US, the only people who ever bother him are crazed Code Pink activists.

But in China, representing the country as chief bond salesman, the man named to People’s 50 most beautiful people list was openly mocked.

Telegraph: In his first official visit to China since becoming Treasury Secretary, Mr Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis. Speaking at Peking University, Mr Geithner said: “Chinese assets are very safe.” The comment provoked loud laughter from the audience of students.

Geithner insists Chinese dollar assets are safe

In his first official visit to China since becoming Treasury Secretary, Mr Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis. Speaking at Peking University, Mr Geithner said: “Chinese assets are very safe.”

The comment provoked loud laughter from the audience of students. There are growing fears over the size and sustainability of the US budget deficit, which is set to rise to almost 13pc of GDP this year as the world’s biggest economy fights off recession. The US is reliant on China to buy many of the government bonds it is planning to issue but Beijing’s policymakers have expressed concern about the strength of the dollar and the value of their investments.

See also:
UPDATE 3-Geithner tells China its dollar assets are safe
Laughing at us in China
China May Scoff At Us But This Is No Laughing Matter
You’d Better Sit Down, I’ve Got Some Bad News

/we’re going to need a bigger clown car

This Had Better Work

My Plan for Bad Bank Assets

Today, we are announcing another critical piece of our plan to increase the flow of credit and expand liquidity. Our new Public-Private Investment Program will set up funds to provide a market for the legacy loans and securities that currently burden the financial system.

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.

Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.

The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.

This program to address legacy loans and securities is part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. The Public-Private Investment Program is better for the taxpayer than having the government alone directly purchase the assets from banks that are still operating and assume a larger share of the losses. Our approach shares risk with the private sector, efficiently leverages taxpayer dollars, and deploys private-sector competition to determine market prices for currently illiquid assets. Simply hoping for banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience.

See also:
Geithner Banks on Private Cash
White House Defends Plan for Toxic Assets
Treasury’s toxic asset plan could cost $1 trillion
Treasury expected to unveil new entity to help buy toxic assets
A Plan To Purge Banks’ Toxic Assets
AIG fallout could trip up toxic-asset sales
Banker fury over tax ‘witch-hunt’
Pandit’s Memo to Citigroup Employees
Bank CEOs Push Back on Legislation That Would Tax Bonuses
Citigroup, Bank of America, JPMorgan criticize proposals to tax bonuses
Citi CEO says bonus tax could hurt financial firms
Citi’s Pandit warns of ‘setback’ if bonus tax passes
U.S. Department of the Treasury
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation

Gee, now they want the help of private equity? That might be a tough sell after last week’s shameful, sordid infantile tantrum, where everyone in the government from Obama to Barney Frank was hypocritically kicking “greedy” Wall Street executives in the groin and passing retroactive laws to take away money they’ve already legally earned. Why should they cooperate when Washington can turn on them on a whim and change the rules at the drop of a hat?

In any case, I hope the Public-Private Investment Program works. It’s a vital step on the path out of this recession.

/keep your fingers crossed and stay tuned

The World Has Taken A Turn For The Surreal

‘Angst’-Ridden Hillary Clinton Found Answers in the Beatles

“As I went through my angst period and struggled with the challenges of living in the real world, the more existential message struck home,” Clinton told FOX News’ James Rosen in an exclusive and wide-ranging interview.

. . .

Though moved especially by what Rosen called the “world-weary, drug-fueled existentialism of their later work,” the Secretary of State says she has always approved of the British Invasion.

“Well, like so many Beatles fans, it depends both on mood and stage of life. I have to confess … that the hand-clapping mode was what I first was captured by. ‘I Want to Hold Your Hand’ was an anthem, as you might imagine.”

Clinton named “Hey Jude” as her favorite Beatles song, praising its Biblical tone and seriousness — but she might have trouble heeding some of its “existential” lessons.

Hey, I’m a Beatles fan too, but “hand clapping” doesn’t readily come to mind when I think of I Want to Hold Your Hand , screaming yes, hand clapping no. Hey Jude has a Biblical tone? Wasn’t it written for Julian Lennon?

Originally titled “Hey Jules,” This song was written by McCartney during Lennon’s divorce to help comfort his son, Julian Lennon.

FNC has video of this interview but I can’t find it posted yet. It’s a nice break from Hillary’s grovelling to China.

Clinton urges China to sustain U.S. economic support

Her plea was a reminder of the shifting balance of power between the longtime Western superpower and the Asian giant that finances its consumer and government spending with $1.9 trillion in foreign currency reserves.

“We are in the same boat,” she said. “Thankfully, we are rowing in the same direction, toward landfall.”

In an interview with Yang Lin of Shanghai-based Dragon TV, Clinton said the Chinese understand that the United States “has to take some drastic measures” with the stimulus package to restore American spending, which in turn will help revive Chinese exports.

By continuing to buy U.S. Treasury bonds, “the Chinese are recognizing our interconnections,” she said. She said that the purchases were a “very smart decision” because the bonds are safe and stable.

During her presidential campaign, Clinton had argued that reliance on Chinese bond purchases was making the U.S. dangerously dependent. She said China’s position as America’s “banker” was eroding the United States’ leverage with Beijing.

Well, I’m reassured, aren’t you?

/assume the brace position for Obama’s “major economic speech”, the unveiling of his tax the rich/business budget this coming week, and Geithner’s threat to release details of his AWOL bank bailout plan, I’m sure the Markets will be pleasantly pleased as punch