Hank Paulson spoke on the TARP today: which will no longer buy troubled assets, at least not structured mortgage assets. Instead the monies will be used to take stakes in banks at bad prices and support the securitization of consumer debt. FT Alphaville is brutal: the TARP is now the TERP, or else the Moral Hazard Generation Scheme. Paulson's responses to questions from the press were weak and unsatifying. The Fed, OCC, FDIC, and OTS released a joint statement saying they "expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers, and other creditworthy borrowers." It's hard to parse a directive from government ordering banks to lend without any experience of how nationalized businesses are run -- and indeed, the US government is making it up as it goes along. All the justification for the original passage of the TARP has been invalidated now; what is left is exactly the situation we had before it was passed. $700bn to be divvied out at Treasury's discretion, with no consistency, transparency, or predictibility.
Unemployment in the UK is at its 11-year high. Mervyn King warned output will fall in Q3 and Q4, and said the UK recession will be deeper and longer than expected -- there is a risk inflation will drop well below the 2% target.
Best Buy has warned on profits, saying it is seeing "rapid, seismic changes in consumer behavior". ING reported its first ever losses, writing down EUR1.51bn; Natixis lost EUR250mn in securities trading; Unicredit reported Q3 profits down 54% and has announced a EUR6.6bn capital raise. Macy's is cutting back its planned capex. Hypo Real state has warned.
A VC calls for "bustups not bailouts" and laments the old American tradition of breaking up companies that have gotten too big -- instead there are calls for government subsidies and further consolidation. Nancy Pelosi is shilling for Detroit. Megan McArdle at the Atlantic says bailing out GM offers society no net benefit. Bill Ackman thinks GM should be restructured through bankruptcy, not propped up by taxpayer dollars.
Naked Capitalism says the revised AIG bailout looks like "special dealing on behalf of Goldman," and other banks who will be made whole on CDOs covered by CDS they bought from the insurer. Unsurprisingly, large stakeholders in AIG want the government to reduce the size of its stake in AIG. Shameful; the only justification for the government not taking all of AIG over was for accounting rules. Any fiction that current shareholders or executives should have any rights or negotiating power should be eliminated, and the shareholders should be grateful their stakes are worth anything at all.
AmEx is the next hog waiting to feed at the trough, as, one day after becoming a bank holding company, it appears to expect $3.5bn in federal money.
Brad Setser says the Chinese infrastructure spending plan may not stand in the way of continued purchases of Treasuries. KNZN takes a look at worldwide fiscal implications of the Chinese plan.
The EU Transport Secretary has approved the takeover of Alitalia, clearing the way for its continued existence.
Ultimi Barbarorum writes that hedge funds no longer game the market -- they are the market. Even Nobel laureate Myrhon Scholes' firm has halted redemptions because of losses.
Speculation runs that there may be a popular uprising in Zimbabwe, after the Zimbabwean dollar has crashed to an all-time low of Z$28.4 quadrillion to $1 in response the SADC's shameful failure this weekend. Neither checks nor credit cards are being accepted throughout the country, and the cash withdrawal limits in place to help limit inflation are in fact encouraging starvation. Most of the region is shocked by the SADC recommendations. Water shortages amid the cholera epidemic have forced Parliament to adjourn.
Russia has raised interest rates to 12% to try to preserve the Ruble's value without spending too much of its remaining forex reserves. The constitutional changes announced last week in the Kaliningrad speech will go to the Duma, where they are expected to pass expeditiously.
The Washington Post reports the Director of National Intelligence and CIA Director expect to be replaced early in Obama's administration, thanks to pressure from Congressional Democrats critical of the officials' support of torture and surveillance. The WSJ reported the opposite story yesterday. The Washington Post reports closing Guantanamo is a priority for the president-elect.
Mexico may be forced to halt oil exports in the next few years, as Pemex production falls drastically. This is the first in what may be a string of production dropoffs for national oil companies who lack the technical expertise to exploit their resources fully. It is estimated that Venezuela, for example, could be able to pump a million barrels per day more if the facilities were properly maintained.
Mxolise Ncube writes on the danger that fighting in the DRC will escalate into a regional war, after allegations Angola and Zimbabwe have deployed troops in support of Joseph Kabila's government.
President Bashir has unilaterally declared a ceasefire in Darfur, in what may be a bid for him to evade charges at the ICC, which is considering prosecuting him.
Registan links to two paper from the Small Wars Journal on counterinsurgency tactics. Very interesting reads for anyone interested in how the wars in Iraq and Afghanistan are now being fought.
Masoud Barzani, the president of Iraqi Kurdistan, writes in the WSJ defending his region as a model for the rest of Iraq.
North Korea will cut off border corssings with South Korea in response to pressure over Pyongyang's nuclear program.
Today is six months since the Sichuan earthquake.
Jiang Gaoming writes at China Dialogue on emissions reduction in rural China -- through reliance on traditional biomass energy sources.
The Supreme Court has ruled that the Navy can continue using sonar in exercises despite the risks to endangered Right whales, who can become disoriented and crash into boats because of the sonar.