credit markets

Call the Pope because hell is freezing over:

Senators John McCain and Maria Cantwell are joining forces to reinstate the Depression-era Glass-Steagal [sic] Act of 1933, which separated commercial banking from Wall Street investment banking. According to Newsweek, the two plan to announce the bipartisan McCain-Cantwell bill on Wednesday morning.

The Glass-Steagall law was repealed in 1999, allowing for commercial and investment banking to combine. Bloomberg notes that its repeal has sparked debate as to whether it "helped spawn reckless lending practices and financial speculation that led to the meltdown of credit markets last year and the $700 billion U.S. bailout of troubled banks."

There is something here that really has me scratching my head. Glass-Steagall was repealed by the Gramm-Leach-Bliley Act  in 1999 and proudly signed into law by then-President Bill Clinton. The main author of that bill was Phil Gramm, who also served as the top economic adviser to the McCain/Palin campaign. So Gramm was good enough to advise McCain on economic issues, yet McCain now wants to repeal Gramm’s keystone legislation?

I love the idea of us getting back to real regulation in the banking sector but I really question the motives of McCain on this issue.

Looks like the well is dry for GM and Chrysler:

The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.

The Obama administration, however, has decided not to require the automakers to immediately repay government loan money they previously received, since that would force both companies into Chapter 11 bankruptcy.

I really want to hear some explanations on these decisions. We could be looking at the end of a major American era, one that is responsible for America’s position as a global leader today. It’s also not going to help the job numbers in the foreseeable future.

Still, I can’t stop and wonder how much of the auto problems are still the side effect of the much larger illness of frozen credit markets. If that’s the case, then why have we dumped so much more money into the banks and seen no cure yet?

It also makes me wonder about the decision for the administration to force Rick Wagner out as CEO of GM. There appears to be a major double standard here. We force out the CEO of GM, yet our tax dollars go to bonuses of bank execs that helped put GM, Chrysler and the whole nation in this mess. I got a feeling a bunch of Democrats on the hill will be asking the same questions today.

And we have a new definition of dumb ass – Oscar Goodman:

Sin City's mayor wants President Barack Obama to apologize for saying companies shouldn't visit Las Vegas on the taxpayer's dime.

Oscar Goodman spoke after a regular scheduled meeting with tourism officials where he expressed concern that federal lawmakers might be discouraging travel to the city.

"What's a better place, as I say, than for them to come here," Goodman told KLAS-TV. "And to change their mind and to go someplace else and to cancel _ and at the suggestion of the president of the United States _ that's outrageous."

Obama made the remarks Monday during a town hall meeting in Elkhart, Ind., where the president traveled to muster public support for economic stimulus legislation.

{[}]amp;quot;You can't get corporate jets, you can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer's dime," Obama said.

Um it appears as if Obama was talking in the sense of going to Vegas for a nice little vacation and do some gambling. Goodman can have his tax dollars go for that, but I don’t want mine to. That’s what Goodman is suggesting – that bailout money be used for these luxurious vacations instead of opening the credit markets. Maybe someone should ask the mayor why he hates America so much that he wants to see our financial institutions fail.

Geez.

The U.S. government has agreed to guarantee over $300 billion of Citigroup's troubled assets -- loans and securities backed by residential and commercial real estate and other such assets -- with conditions attached. These conditions are being hammered out.

In addition, the U.S. Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program (TARP) in exchange for preferred shares with an 8 percent dividend. Citigroup will comply with enhanced executive compensation restrictions and implement the Federal Deposit Insurance Corp's mortgage modification program. This is on top of the $25 billion that the government gave Citi in October.

But how dare the automakers even think about asking for $25 billion. Why in the world would we bail out all those blue collar workers, when these white collar workers need a life line?

Paul Krugman isn’t thrilled about this bailout either, even though it was necessary:

Mark Thoma has the rundown of informed reactions. A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.