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Administration Plans to Strengthen Anti-Trust Rules (NYT) But will Obama stand up to the biggest trust of them all, the banks? Probably not. According to the article, the new head of anti-trust will take aim at “agriculture, energy, health care, technology and telecommunications companies.” Not that she could get at the banks if she wanted to. While other parts of the administration have paid lip service to the problem of having banks that are “too-big-to-fail,” each is doing its part to strengthen their grip on the market. FDIC Chairwoman Bair has arranged favorable transactions that favor major banks (WaMu to Chase) and provided debt guarantees and higher deposit insurance limits that allow them to suck up billions of dollars of capital at virtually zero cost; Bernanke has provided emergency financing for deals that have made banks bigger (e.g. Merrill to BofA) and has provided free capital at every turn (the AIG pass-through bailout, for example, or the alphabet soup of lending facilities that benefit large banks more than anyone else); and Tim Geithner and his predecessor have of course provided hundreds of billions of bailout cash and debt guarantees.
Treasury Yields Soar on Poor Demand (Free Republic) OA has spoken about the Fed being “trapped.” As the economy supposedly returns to “normal,” demand for Treasurys is replaced by demand for other assets–like stocks–that offer higher expected returns. But moving out of Treasurys will cause interest rates to rise. Given our level of indebtedness, higher interest rates will drive a new wave of de-leveraging.
Trade Deficit Widens for First Time in Eight Months (Bloomberg) Exports declined more than imports and the deficit increased $1.5 billion vs. the prior month. A wider deficit is a drag on GDP, which = Consumption + Gross Investment + Government Spending + (Exports – Imports).
Russia Stockpiles Diamonds, Awaiting Return of Demand (NYT) “’We have to tell people that diamonds are valuable,’ [said an adviser to the President of Russia’s state-owned diamond company]. ‘We are trying to maintain the price, just as De Beers did, as all diamond producing countries do. But what we are doing is selling an illusion,’ meaning a product with no utility and a price that depends on the continued sense of scarcity where there is none.
Who Will Controll the New York Times (Fortune) The article says David Geffen approached a major shareholder about buying its block of shares. The offer was rejected. But the same shareholder also approached Google, which considered the idea seriously before demurring.
Postal Service: Worker Stole $20,000 in Stamps for Mortgage (CNN) Sounds like the worker tried to fence them on eBay. Yesterday the FT reported that “in-house fraud” cases have surged this year.
Was it a Sucker’s Rally (WSJ) A good op-ed that notes “you can have a jobless recovery, but you can’t have a profitless one.”
Credit Insurance Hampers GM Restructuring (FT) With the help of credit default swaps it’s likely that some GM bondholders are actually net short: their holdings of GM bonds are more than offset by CDS that pay off if their bonds default. This means they have an incentive to force a bankruptcy. The bonds would lose value, but profits on CDS would more than offset that…
New Signs that Madoff’s Family Knew (Daily Beast) “Within 90 days of Bernie Madoff’s confession, friends and family withdrew $735 million, investigators have found.”
SNL on the stress tests….