Chalk another successful bailout deal up for those excellent negotiators, Paulson and Bush.

Citigroup graciously allowed the government to give it an injection of $2.6 billion in cash by buying 254 million newly issued shares of Citibank common stock, which is currently trading at just over $5 per share, for the bargain price of  only $10.61 per share!!!!  WOW! They're only paying TWICE the price that it would cost to buy the shares on the open market! What a bargain!  We may NEVER see another President, Treasury secretary or Fed chairman with bargaining skills of that caliber!

In exchange for Citi's generosity in negotiating such a great price for their stock, our government is going to guarantee $306 BILLION dollars worth of risky loans, at least 20% of which, or about $61 BILLION dollars' worth, are expected to fail.  We, the taxpayers, are just on the hook for any losses by Citigroup for the next 10 YEARS.  But don't worry; the government is only liable for 90% of the losses; CITI will still be on the hook for the other 10%.  Well, sort of.

I like this little passage in the agreement:  "Federal Reserve funds remaining pool of assets with a non-recourse loan"

The way I read that is to mean that the Fed will loan Citi the money to pay its 10% of the losses.  The Fed will have no recourse if Citi decides not to pay it back. I really like that.  Great negotiating skill on Paulson's part. I'm surprised he didn't give them the keys to the White House while he was at it.

In another grand triumph of hard bargaining on our behalf, the FED gets to buy $20 BILLION in NON-VOTING Citi preferred stock.  Yay!  And, if Citi decides to, it can convert the preferred stock  into common stock later, presumably at the same $10.61 per share.  

Due to the method of calculating the risk involved in the $306 BILLION dollar government guarantee, Citi makes an immediate windfall of $16 BILLION dollars. And just in time for Christmas bonuses!  One caveat:  Paulson has to OK the bonuses as "reasonable" before they are paid.  Since he made about $100 million per year during his tenure at Goldman Sachs, I just can't see him deciding that bonuses of $10 or $20 million each would be unreasonable.

Oh, yeah.  Citi gets a "blank check", too, in the form of unlimited access to the Fed's discount window.  To quote the press release:

"In addition to its extensive access to existing liquidity sources, Citi

has been provided expanded access to both the Federal Reserve's Primary

Dealer Credit Facility and the discount window, resulting in strong

additional liquidity resources should they be needed. Citi also has

access to the yet-unused Federal Reserve's Commercial Paper Funding

Facility and intends to issue debt under the FDIC's Temporary Liquidity

Guarantee Program."

Then there's the TARP.  To quote the press release:

The program significantly strengthens Citi's key capital ratios by

generating approximately $40 billion of capital benefits as follows:

• $20 billion from the TARP investment.

• $3.5 billion, the portion of the $7 billion of preferred stock fee recognized for capital purposes.

• $16 billion of capital benefits resulting from the asset guarantee.

Gee, it looks like this may end up costing us over $100 BILLION dollars. Since Citi is notorious for under-reporting risk, some outside analysts have mentioned that the real risk on those bad loans may be as much as 40%; Citi's bailout could easily top $200 billion before it's over. Makes the $25 billion for the Big Three bailout look kind of puny in comparison. 

Did I mention that Bank of America is next in line for a handout?  I can just see them out there, hat in hand, saying "Please, sir, can you spare a few hundred billion?"

No, not one of the Big Three. Not Tesla, either, although I

think it might be a great investment when it issues its IPO, which

has been delayed due to the recession.

Mr. Buffett invested $250 million dollars in a little company

called BYD, a Chinese auto maker.  It was a battery maker until it figured out that its battery technology was vastly superior to anything that the current auto industry was using. http://www.byd.com/news/newsmore.asp?id=50&show=media

Its 2010 model will be an all-electric model which can travel

nearly 300 miles on a charge, will charge enough to travel 150

miles in just 10 minutes, and has a top end of about 100 miles per

hour. It is expected to sell for less than $20,000 in China. One

neat thing: as opposed to the expected battery life of three years

or 36,000 miles for the Volt, the BYD 3e boasts a battery life of

over 400,000 miles.

http://www.byd.com/tech/F3etech.asp?show=t1&color=a

But that's next year. They are currently going into

production, THIS MONTH, with a plug-in gas/electric hybrid similar

to the Volt, but with approximately twice the range, at 100

miles, which will be able to charge enough to travel about 50 miles

in just 10 minutes, as opposed to the Volt's 8 hour charge time. It

will also plug into any standard outlet, making it convenient for

commuters.  The backup gas engine will be a 1.8 liter four-cylinder.  Its introduction into the company's line-up is expected to increase sales substantially.

http://www.huliq.com/3169/71973/byd-auto-sets-production-and-sales-plans-2009

http://www.huliq.com/3169/73057/byd-debut-new-models-guangzhou-show

Unlike GM, which only plans to produce 10,000 of the Volts at

a net loss of about $960 million dollars, BYD plans to mass-produce both

the 3e all-electric and hybrid models at a high profit margin. It

expects to double its total auto sales to 400,000 next year, with the hybrid

leading the way, and the 3e is expected to become a popular

offering with sales of at least 100,000 in 2010. The company plans

to begin selling the 3e hybrid models in Europe in 2010 and the

3e all-electric should be in showrooms in China in 2010, and Europe

in 2011. The company has no plans to bring either model to the U.S.

Here's an article from the New York Times about this little battery company that could.  And did.

http://www.nytimes.com/2008/08/01/business/worldbusiness/01factory.html?scp=1&sq=barboza%20byd&st=cse

My question for Ford and GM:  If a third-rate Chinese battery company can make a viable electric car, and a commercially viable consumer-friendly plug-in hybrid, why can't the two biggest car companies in the most technologically advanced country in the world make something equally amazing? Or at least a cheap knock-off that is nearly as good?

http://www.wsav.com/midatlantic/sav/news.apx.-content-articles-SAV-2008-11-14-0044.html

A grand jury has subpoenaed Saxby Chambliss to testify concerning allegations that he has used his office as Senator to discourage the families of the victims of the Imperial Sugar Cane fire from filing wrongful death lawsuits.  This is clearly an issue that, if true, would be an illegal abuse of power by a senior member of government.  By refusing to testify to the Grand Jury and attempting to quash the subpoena, he is effectively using the same rationale that the Bush Administration has used for the past 8 years in order to avoid any legal liability for their actions.  While he will almost certainly win re-election despite this emerging scandal, I don't think those tactics are going to work in the future.  There should be severe penalties for elected officials who abuse their offices then avoid any repercussions by simply refusing to comply with subpoenas and other requests to testify, citing that they are Senators, Congressmen or other "high-ranking" appointed officials and therefore are above the law.  Contrary to the views of some of our leadership over the past few years, this isn't a police state or a dictatorship, where the rulers are above the law. In a lawful republic, NOBODY should be above the law.

There was a time when $700 billion was real money.  But it's just 10% of the current size of the bailout.

http://money.cnn.com/2008/11/26/news/economy/where_bailout_stands/index.htm

And, if you think $7 trillion is a staggering number, we're nowhere

near done.  Bank of America is standing at the door with its tin cup

out.  So are the Big Three.  And the airline industry.  And cities and

states across the country.  And the DOT.  And the list goes on and on.

We just bailed out Citigroup to the tune of about $350 BILLION bucks. Why stop at $25 billion for the automakers? As much as we're throwing at the big banks, why not give them a few hundred billion?  After all, they represent real jobs for millions of real middle-class people, not a few thousand rich bankers.

The problem comes when you ask "Where is all that money coming from?".

It's simple.  They're making it the REALLY old-fashioned way:  THEY'RE PRINTING IT.  That, and selling U.S. Governement Treasury Bonds by the hundreds of billions. Problem solved.  :)  What's the worst that could happen?

Try national bankruptcy, or an inflationary death spiral until our money isn't worth the paper it's printed on.

After all, when you subtract Social Security from the Federal budget, the Federal government only receives a little over $1.6 trillion dollars per year in  taxes.  And the Department of Defense spends about $600 billion of that, then the two wars cost $180 billion or so per year, the VA takes another $97 billion, Homeland Security costs $58.2 billion, the various intelligence services cost at least $15 billion (actual amount is classified), military pensions are yet another "discretionary" expense that the DOD doesn't keep on its books, then there are close to a hundred other small military-related programs that have been unceremoniously dumped into "Discretionary spending" instead of the DOD budget.  That just leaves about $500 billion to pay for all the rest of our "discretionary" expenses, everything from roads to schools, from the justice system to the Center for Disease Control, everything from health care to government employees' pensions.  All of that stuff costs over a trillion, the same as our military. How do they manage it? By taking the Social Security surplus and dumping hundreds of billions in U.S. treasury bills into it.  But the SS tax surplus is going to disappear soon as the Baby Boom retires, at the same time that the first of those 3-year notes that the Fed is issuing starts to mature.

Hmm...since there is no possible way for the government to actually pay

for any of that $7 trillion and counting in new debt, how does it plan

to keep from drowning in this sea of debt?  I would rather believe that

the moon is made of cheese than to trust Paulson to be telling the

truth when he says that the government is going to remove all that new

money from the money supply "once the economy recovers".  Try never.

There is just no way to keep that much newly printed money from causing

an inflationary spiral. We're in for some rough sailing ahead; we may

see prices go through the roof in a couple of years, if we're not

careful.

If you're thinking that sounds impossible, remember that in 1919, one dollar would buy 12 German marks.  By 1923, it would buy 14 BILLION marks.  The Germans were burning wheelbarrow loads of money just to keep warm during the winter.  That was one of the big problems that led to the rise of Hitler.  And that isn't the only time; the Romans, Chinese, French, etc. have learned the same lesson over and over again, hundreds of times throughout history.  They all think that this time it will work; all the others just weren't as smart as they are.  Guess what?  They were EXACTLY as smart as all of the other governments who thought they could print their way out of a real economic jam.  And each had the same ultimate result:  Runaway inflation.

I've heard a lot of mindless chatter from both sides of the issue.  The truth is like a game of chess:  both simpler and more complicated than either side of the issue would care to admit. 

Let's forget about our religious beliefs for a while.  The evidence shows that the earth is about 4.5 billion years old.  It has endured warming trends much more pronounced than the current one several times in its long history.  A few hundred million years ago, long before us humans had even arrived, one such trend apparently killed almost every living being on the surface of the earth. The entire surface of the earth became a lifeless desert. Luckily, the oceans didn't boil away, or we wouldn't be here today. Likewise, it endured an ice age in which the entire earth was covered in thousands of feet of ice for hundreds of millions of years.  We aren't anywhere near either of those extremes right now. 

We like to think of ourselves as all-powerful, but natural events can change the climate far more than our species can.  An eruption of a single megavolcano or an asteroid strike can do far more to change the environment in an instant than the entire human race has done in the past 10,000 years.  Climate change is a given, as is the extinction of species of animals who can't compete effectively or survive changes to their environment.  Our planet was constantly changing before the human race began, and will continue changing whether we as a species survive or not.  It survived the extinction of the dinosaurs, and it can survive without lions, tigers, or even us humans, if we are stupid enough to kill ourselves off as a species.  Reality bites.  Nature is a cruel mistress.

But that doesn't let us off the hook entirely.  While we probably haven't doomed the planet by our pollution, it has had some effects.  For the past several million years, there has been a cycle of an ice age which lasts about 100,000 years, then a short warming period lasting a few thousand years, then another ice age.  We may either be prolonging the current warming period, or shortening it.  We just don't have enough real information to know which.  There do seem to be some triggers which stop the earth from becoming a lifeless hothouse like Venus, the victim of a runaway greenhouse effect, or Mars, which is at the other extreme, its atmosphere gone and its oceans frozen underground.  Our deep oceans, the ozone layer in the atmosphere and the trade winds seem to shift the balance back in the other direction whenever the earth gets too hot or too cold.  Whether we opt for a greener future or not, our descendants won't inherit a planet that looks like the Earth of today, but the human race has always been able to adapt and survive.  In the human race's 3 million years, it has endured literally dozens of ice ages before, and those were without the technology we have today.

We do have some really valid reasons to "go green" that will affect us and our children, not some generation so far in the future that it's past our comprehension, though. Let's look at the facts.  The U.S., Russia and Saudi Arabia were all producing about 8-10 million barrels of oil per day 30 years ago.  Our own production has declined by over half.  Russia's has declined a little, but its government claims that its supplies will begin running out by 2020.  S.A., on the other hand, claims to have enough oil to step up their production to 20 million barrels per day, and keep that level up for the next 200 years.  Something tells me that they're lying through their teeth.  If they really had that much oil, they wouldn't be spending tens of billions of dollars buying speicalized equipment to get the last drop out of declining oil fields.  They wouldn't have had to use oil from storage to step up production last spring. They would be setting up new oil fields instead of trying to get the last few barrels out of their three top producing fields.  They wouldn't be attempting to wean their economy off of the oil riches and investing heavily in so many other industries.  In other words, the world is running out of oil.  That fact alone will solve a lot of the pollution problem, but it is also likely to turn us into a third-rate country if we remain addicted to foreign oil.  We saw the devastating effects of a temporary upturn in the price of gasoline this past year.  People had to decide whether to buy gas or pay their bills, whether to buy gas or groceries, to buy gas or save for those big Christmas presents.  Gas won, people couldn't afford to buy gas and pay for their houses, buy new cars or buy anything from a hamburger to a washing machine, and the entire economy toppled into a deep recession.  Just imagine what would happen if that huge jump in energy prices had become permanent.  It is imperative to our security, and even our survival as a nation, that we secure our own energy supplies, something cheap, renewable and domestic.

Let's tell the truth here.  We need FAIR trade, not necessarily just "Free" trade.  We don't really want to force our blue-collar work force to try to compete directly with foreign workers who work for 50 cents per hour, and our businesses to have to compete with foreign factories and warehouses with no health, safety regulations or environmental regulations, do we?  That's the "Free" trade that we have been subjected to for decades, which has forced many of our manufacturing industries to move abroad or close, and has forced our work force to work harder for less pay and benefits. 

If we force our work force to compete directly with the people in countries without a minimum wage or even the basics of employee rights, we are going to strengthen the foreign comptetition at our own expense.  We need fair trade, not just free trade.  It is in our best interests to have an educated, healthy and well-paid work force, so we do need to regulate foreign trade to level the playing field.  That isn't to say that we need to "buy American" even if the American companies provide a really crappy product for ten times the price that a foreign competitor charges. 

FAIR trade would just require that any foreign company that imports items into the U.S. pays its workers at least the U.S. minimum wage, maintains at least minimum safety standards in its factories, and pays import taxes equal to the amount that the domestic competitors would have to pay in U.S. income taxes. 

U.S. companies and workers are among the best in the world, when they are given a level playing field.  But the field has been rigged against them for decades, and that must change if we want for our industries to regain their leadership positions in the world markets.  If our industries prosper, our population prospers, and our country as a whole prospers.  If our government rigs the trade policies against our workers, our industries will fail, our economy will fail, and our country as a whole will falter.

We need to remember that a U.S. worker pays income taxes, social security taxes,  sales taxes, property taxes, "vice" taxes on their beer and cigarettes, taxes on their car tag, fuel taxes, etc., all of which combined total about 40% of his or her income.  Most of the 60% of their income that they can spend is used for rent, food, etc.; their own communities benefit when they spend the money they have earned; every U.S. worker's income is spent in ways that help to keep our own economy strong. 

On the other hand, when we buy foreign products, the foreign workers contribute nothing to our government and economy. They don't pay any U.S. taxes; most of them don't even buy any American made products. In fact, many of our trade partners have so many regulations in place that it is practically impossible for our own companies to compete in their markets. The foreign manufacturers who sell us their goods don't have to worry about paying U.S. taxes or maintaining a safe work environment.  They don't have to abide by the rules that our own manufacturers do.  If we want to keep our own economy strong, we don't need to stop foreign trade, we just need to insure that it is fair, that foreign companies which trade with us can't send us poisoned toys made by 15 year olds who are working 15 hours for $2, based in countries which don't allow us to sell them our products, pay no taxes and don't have to abide by U.S. safety standards.

After the votes are counted, NASA decided to just throw out the results and name it Tranquility???

When NASA held a popular vote to name the space station node, they didn't expect hundreds of thousands of write-in votes to name it Colbert.

I can sort of understand their opinion that their decision to allow write-in votes was dumb; they had no idea that there was any possibility that the people would actually vote for a cool name instead of one of the sorry excuses for a name that they officially let people vote for.

But they didn't even take the lame Serenity, which sounded more like a funeral home than a piece of a space station, that would have won if people hadn't written in their own choices, in the mistaken belief that their opinions acutally counted.

Instead, they completely dismissed the popular vote and named it 'Tranquility", which was even worse than any of the other lame names that those marketing geniuses could come up with.

\

If they were naming a graveyard, Tranquility might not be half bad.  If you're planning to build something which serves a function other than storing dead bodies, it's just not that great of a name.

It's almost as bad as Chevy marketing the Nova in Latin America a while back.  Unfortunately, their marketing geniuses never bothered  to realize that it translated to "No Go".  Which may have been pushing truth in advertising a little too far.

You would think that NASA would have the common sense to realize that if you allow people to vote on something, they will be royally ticked off if you just arrogantly show them that your opinion is something like "Well, we took your vote into consideration, but decided that the crummy excuse for a name that some bigwig here likes is going to be plastered on it, and you can all go jump in the lake".

That's OUR taxpayer dollars hard at work.

And we thought the bank executives were a bunch of arrogant SOBs who didn't have a clue.

The good news:  The number of people collecting unemployment insurance benefits is dropping.

The bad news:  The reason for the decline is that their  unemployment benefits ran out.  The people are still unemployed.  Now, they don't have any income to pay their bills or put food on the table.

The good news:  The economy only contracted by 1% this last quarter, less than economists had forecast.

The bad news:  The reason the decline was less than expected is because, while consumer spending declined even more than expected, and our industries continued to cut both inventories and jobs, our federal, state and local governments and the health care industry all went on a spending spree.

The good news:  Official U3 Unemployment is still under 10%, barely rising to  9.7% this month.

The bad news: Real U6 Unemployment has already reached 16.8% and it's still climbing.

Source:  The U.S. Bureau of Labor Statistics, Labor Underutilization page: http://www.bls.gov/news.release/empsit.t12.htm

U6 unemployment has been rising a lot faster than the official U3 rate.  Why is the 2nd number so much higher than the first, and rising so much faster?  And why should we care about U6 anyway?  Well, during the Great Depression, and for decades afterward, the way they calculated unemployment was simple:  If you were over 14 and didn't have a full-time job or go to school full-time, you were unemployed.  Over 90% of the people who were considered to be unemployed then are still counted as unemployed in the U6 today. However, the current way of counting the official U3 unemployment rate has put in few exemptions to make the numbers look better.  Here are just a few examples of people who are officially NOT unemployed according to the U3:

1.  After you lost your job as a corporate accountant, you found that there were over 100 applications for the one job opening posted in the paper, which was for a fast-food cook, so you haven't applied for a job in the last month.

2.  You had to take a part-time job flipping burgers 20 hours a week at $7.25 per hour, to try to survive, after you were laid off from a $50K per year corporate job.

3. You are attending school part-time to try to get the skills to re-enter the job market after the only company in the industry you were working at went under.

4.  You are under the age of 18 and aren't in school.

5.  Your unemployment benefits ran out, but you still haven't gotten another job.

6.  After you lost your house, even though you're still looking for a job, you no longer have a valid address.

7.  You were unable to actively look for a job due to sickness in the family.

I could list literally thousands of other situations in which the unemployed aren't counted, but you get the picture. When the economy's good, there aren't many people in situations like the above.  However, when things start going bad, real unemployment increases pretty fast.  That's when the U3 keeps the gov't from having to admit just how bad the economy really is.

Even more bad news:  The percent of the population who participate in the work force has declined by 3.2% between December, 2007 and May, 2009.  That means that nearly 6 million people who would ordinarily work just decided not to participate in the work force at all. They aren't even counted in the U6 numbers, because they aren't looking for a job. This means that working moms who lost their jobs have just become housewives, people have been forced to take early retirements, people who lost their jobs are living off their savings until the market improves, etc.; if they were all counted among the unemployed, as well as all of the other people who no longer count, we just hit 20% unemployment.  And another 358,000 dropped out of the work force just this month.  Remember that, even though they aren't counted, nearly all of the people who aren't counted will be returning to the work force once they think that jobs are available.

Since the official unemployment rate includes less than half of the people who need a job, even if businesses did resume hiring, there would be a lot of suffering in the job market for a long time to come.  But we aren't likely to see businesses putting out a lot of  "help wanted" signs anytime soon.  Other than the government and health care, every segment of the economy is still shrinking.  Official unemployment may hit 12%, and real unemployment may hit 25% before this sinking ship finally hits the bottom.

The problem is simple: The 47% are Romney's most loyal supporters. Let's look at them in detail.

The elderly and disabled: 61.6 million, about 21% of the population. These are Romney's most loyal suppporters. However, even my mother, who is in her mid-80s and depends on her social security and VA checks to live, thought twice about voting for Romney after those remarks. Speaking of the VA, a lot of those disabled people who pay no taxes are veterans, another core republican constituency.

The unemployed: The U6 unemployment rate is now 15%. In 2000 it was 7%. Unfortunately for Romney, most of these people are steadfast republicans who blame Obama for the fact that they lost their jobs, their homes, and their ability to pay taxes.

The working poor:  7.2% of the population. The problem is that the poorly educated, working poor are also consistently republican voters. They consistently vote against their own economic self-interests due to opposition to democratic positions on abortion, gay rights, and other social issues.  While they don't pay income taxes as such, they often pay as much as 30% to 40% of their income in total taxes, depending on the state, in the form of state taxes, sales taxes, user fees, tag and title fees, personal property taxes, etc.

Then there is the half of 1% of the population who are in the top 1% of wage earners who pay no income taxes due to the intricacies of the tax law.

The religious leaders: These are less than 1% of the population but they have a huge voice in the elections. Preachers, priests, missionaries, nuns, etc. pay no taxes due to non-profit status and vows of poverty but they make their opinions known to the 41% of us who attend church every Sunday, according to Gallup polls, and they are almost universally republican, primarily due to the Democratic stand on abortion. .Assuming that the 41% who attend church on any given sunday aren't always the same 41%, it's probably a safe bet that something on the order of 75% of the population will hear their opinions over the course of the election cycle.

Finally, according to the CATO institute, a republican think tank, 4.1% of the population are on welfare. However, even this group isn't in the democrats' corner, as the poorest 5% of the population don't vote very often.

And that leads to the underlying problem: While Romney can rely on winning the vast majority of the "47%"'s vote, it's the other 53%, who pay all the taxes, that will vote for Obama. The well-educated professionals who pay most of the income taxes, the middle-class females, and most of the other high-earning groups are more likely to vote democratic.

The republican party has forgotten who their core constituency is. If they want to win elections, they need to quit vilifying the very people who keep voting them into office.