OMG! Obama and the Treasury Pay Off the Visa with the MasterCard

Saturday, January 30, 2010 , , , , , 1 Comments


Already? That was quick!

Reuters:

President Barack Obama will propose making a popular stimulus bond program permanent and expanding its use in the budget plan he presents on Monday, a U.S. Treasury Department official said on Saturday.

He will also seek to lower the level of the rebate the U.S. government pays to issuers on taxable Build America Bonds to 28 percent, the official said. The bonds, created by economic stimulus legislation last year, currently give issuers a subsidy equal to 35 percent of their interest costs.

The bonds "were successful in helping to repair a severely damaged municipal finance market, making much needed credit available at lower borrowing costs for infrastructure projects that create jobs," Treasury Secretary Timothy Geithner said in a statement provided by the official.

"By making Build America Bonds a permanent and expanded financing tool for state and local governments, we're investing in our country's long term economic growth in a cost-effective way," Geithner said.

At the end of 2009, the $2.7 trillion municipal bond market was at a standstill, a victim of the credit crunch. State and local governments rushed to issue the bonds, which were designated for infrastructure, mere months after the American Recovery and Reinvestment Act was signed into law.

By the end of 2009, issuers had sold more than $60 billion and analysts estimate more than $100 billion BABs could be sold this year.

In Obama's proposal, the bonds will be expanded to refinance some debt, to cover short-term governmental operating costs and to finance non-profit hospitals and universities.

The expanded permanent program would begin January 1, 2011, the official said, coming on-line just when the stimulus expires. The stimulus did not cap the amount of BABs that could be sold, but set an end date for issuing the debt.


I am incredibly entertained by the term "revenue neutral" as stated by Aaron Klein, deputy assistant secretary in the Treasury's Office of Economic Policy. Revenue neutral to whom? The "investors" (who bought these?!) who are getting stiffed on their promised interest payments? Hahahaha, they should have known better than to expect OMG Dividends!

They can call it a "level of rebate" but it's really just the interest on the Visa that they're charging to the MasterCard.

Seriously, who bought these??

If you look a little deeper, BABs is a three dollar whore who looked good under the piss yellow light of the alley in an uncertain market. The ratings agencies (all you have to do is slap "Full Faith and Credit of the United States" even though we've got a few dings on the old credit score) were all over it, calling these repackaged muni bonds (who would buy muni bonds as muni bonds?) AAA. My AAAss.

Didn't we fall for that before?

Municipalities are broke. Now they can defer this for another year or two if Obama can keep this up (and yay Bernanke he can!) but that doesn't alter the fact that they are broke.

But you have banks like Regions (RF) trying to loan shark municipalities that are technically insolvent into taking the candy. It's no wonder they're having "loan trouble". Ever seen maggots clean off a carcass? Like that.




Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

1 comments:

Anonymous said...

"The bonds "were successful in helping to repair a severely damaged municipal finance market, making much needed credit available at lower borrowing costs for infrastructure projects that create jobs," Treasury Secretary Timothy Geithner said in a statement provided by the official."

Funny, my Vanguard ultra conservative, tax free, short term muni-bond money market account was chugging along quite nicely for quite a little while. Then, the horrors, according to Mr. Geithner, the market needed government help (my thought - oh shit). I guess that's what explains the .7% annual yield I've been experiencing as of late -please, Mr. Geithner... no more help. I'm begging you. With friends like this, who needs enemies.

Jeff