Commentaries

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from Rolfe Winkler:

Splitting hairs on the Bernanke vote

In the Bernanke confirmation vote this afternoon, seven senators wanted to be seen opposing Bernanke but didn't actually want to stop his confirmation. In other words, they wanted a campaign talking point, not an actual fight.

Simple maneuver: As with most business in the Senate, Bernanke's confirmation only required 51 votes. But before getting to the final vote, the Senate must first vote to cut off debate. Cloture, it's called.

Seven senators, including six Democrats, voted aye on cloture and then flipped to nay on the motion to confirm:

Six Dems: Barbara Boxer (Calif.), Al Franken (Minn.), Tom Harkin (Iowa), Kaufman (Del.), Sheldon Whitehouse (R.I.), and Byron Dorgan (N.D.)

from Rolfe Winkler:

Geithner’s faulty apologia

Tim Geithner's appearance in front of Congress today was another embarrassment, perhaps more for the people's representatives than the Treasury Secretary. Still, Geithner offered a clumsy defense for paying out 100¢ on the dollar to AIG's counterparties, which included more than Goldman Sachs.

What they lacked in knowledge and nuance, Congress made up for in volume and OUTRAGE. The worst moment I saw was the utterly bogus comparison by Rep. Stephen Lynch between AIG's payout to Goldman (100¢ on the dollar!) and the bailout offer for Bear Stearns shareholders (only $2 per share). 100 is a bigger number than 2, you see.

from Rolfe Winkler:

Morning Links 1-27

Note: Apologies for no links yesterday. Busy day writing columns!

SEC to vote on new money fund rules (Johnson, WSJ) Unfortunately, the SEC won't do away with $1 NAVs, price fluctuations will be published on a 60 day lag. So investors will continue to treat money funds as cash equivalents, even though they aren't, and the systemic risk they pose won't really go away.

Fed weighs interest on reserves as new benchmark (Lanman, Bloomberg) This will be a key interest rate to watch whether or not the Fed makes it the benchmark. The expansion of the Fed's balance sheet over the past year+ has stuffed banks full of excess reserves, reserves that banks will lend out if the economy -- and loan demand -- picks up. The Fed needs to keep those excess reserves sequestered in order to prevent inflation. To do so, it may have to pay higher rates. For a fuller explanation see this previous column.

from Rolfe Winkler:

Hayek vs. Keynes Rap Anthem

Two economic giants in a freestyle face-off. An instant classic... (ht Rej)

from Rolfe Winkler:

Why not Baby Banks?

The President is right to target firm size if he wants to insure no financial firm can cause a system failure. Yet despite clear evidence that banks are already too big, Obama's proposal won't cut them down. It would only limit future growth by acquisition.

Specifics are being worked out, but what is clear is that Paul Volcker’s “size” proposal will limit future growth by acquisition only. It won’t force existing firms to shrink nor limit their ability to grow organically.

from Rolfe Winkler:

Existing home sales plunge

When it looked like the First Time Homebuyer Tax Credit was going to expire, folks rushed to buy. The result was merely to pull forward demand, similar to the dynamic that played out with Cash4Clunkers.

From Reuters' Stephen Culp:

ruz55h

Here's the report from the National Association of Realtors. They try to put a positive spin on the plunge by noting that prices rose. First American CoreLogic reported last week, however, that prices are again heading down.

The $1.2 billion fraud alleged at Russia’s largest bank

Photo

Tucked away on page 4 of the Moscow Times today there is a remarkable article which made me wonder whether I wasn’t hallucinating.

The report states matter-of-factly that several branch managers are being investigated for defrauding $1.2 billion from Sberbank, Russia’s largest bank. That’s according to comments made by Sberbank’s regional manager for Moscow. The Moscow Times translated the article from Thursday’s edition of the Russian newspaper Vedomosti, where it appears on page 7.

from Rolfe Winkler:

Morning Links 1-22

Geithner has reservations on US banks (Wutkowski/Eder, Reuters) More evidence that Geithner is a goner. Will Volcker replace him? Sheila Bair could be a dark horse. She has lots of Democratic fans on the Hill despite being appointed by a Republican. In any case, Geithner was on PBS last night defending the plan.

A closer look at the Volcker rule (Felix) Capitol Hill may not be taking Obama's rule very seriously. They think it was just a way to spin the news cycle away from the fact that healthcare will fail now that the Dems have lost their 60th vote in the Senate. Moreover, they don't think Obama's actually going to wage the fight against Wall Street that he claims he's ready for.

from Rolfe Winkler:

The Ascent of Volcker

So, wow, the Obama administration has reacted very quickly -- perhaps too quickly -- post the Massachusetts Senate election. After proposing a tax on bank liabilities, Obama is taking an even tougher line, adopting recommendations from Paul Volcker that banks be limited in their size and scope.

Before getting to specifics, it's worth noting how Geithner and Summers appear to have lost favor. In the preamble to the proposal, Obama mentions neither of them. And when he announced the plan he did so with Volcker and Bill Donaldson standing behind him...Geithner and Summers were off to the side. Could the duo be headed for the exit?

from Rolfe Winkler:

Buffett lets public down…again

The public has always seen in Warren Buffett a different kind of capitalist, an honest observer providing sound financial advice regardless of his personal interests. But is he?

When it comes to his own holdings Buffett seems to use a carefully cultivated reputation for financial rectitude to feather his own nest.

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