LAR: Rescinding $108 billion from IMF necessary, tough love
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March 12, 2012 Even if Congress rescinds $108 billion from the IMF, there would still be about $314 billion in the Fund's war chest for brand new commitments. We are hearing that unemployment is at 8.3 percent. But there is more to it... a lot more to it. Obama's 2013 budget would increase the tax credit for electric cars, like the Chevy Volt, Nissan Leaf, Tesla Roadster and Fiskar Karma from $7,500 to $10,000 per vehicle. "Are banks simply marking all sovereign credit default swaps at par, and not paying off cash to other dealers?" Rescinding $108 billion from IMF necessary, tough love By Bill Wilson  Legislation in both the U.S. House of Representatives and Senate will rescind an additional $108 billion that was extended to the International Monetary Fund by the Pelosi-Reid Congress in 2009. This is necessary to save taxpayer funds from being used to bail out bankrupt socialist states in Europe that refuse to get their houses in order — and the banks that foolishly lent them the money to begin with. World financial elites have asserted that doing so would have negative consequences. On March 7, the Washington Post breathlessly reported that the legislation "could restrict the IMF's finances at a time when agency officials say they need a substantial boost to protect the world economy." To be clear, the legislation will leave $56 billion of U.S. quota money at the IMF, so the question becomes whether the IMF without the additional $108 billion will have enough cash on hand to meet its existing obligations in Europe and elsewhere. On that count, according to the IMF's Dec. 2011 balance sheet, it has $829 billion of total resources, $257 billionof which is committed, $143 billion actively lent, and an additional $422 billion available for lending at the moment. That means even if taxpayers' $108 billion were rescinded, that would leave about $314 billion in the Fund's war chest for brand new commitments. In other words, the Fund would still have more than enough to meet its current $257 billion of obligations, and several hundred billion more should the need arise. Whether the IMF would prefer to expand its current resources so it might be capable of bailing out all of Europe is in part a political question. Congressional Republicans in 2010 pledged to "prevent Washington from forcing responsible taxpayers to subsidize irresponsible behavior by ending bailouts permanently," something the American people emphatically oppose. But it is also a question both of feasibility and practicality. Get full story here. The Truth Behind Unemployment Statistics Video by Frank McCaffrey  Get permalink here.  The buzz on electric carsBy Rick Manning I was recently asked why I don't like electric cars. So, let me be clear, I love the concept of an electric car. What I don't like is the concept that the government is subsidizing the development and purchase of electric cars at the expense of the taxpayers and their competitors. I hate that Obama's 2013 budget would increase the tax credit for electric cars, like the Chevy Volt, Nissan Leaf, Tesla Roadster and Fiskar Karma from $7,500 to $10,000 per vehicle. What's more, this taxpayer subsidy would be an instant credit just like a manufacturer rebate. Not shocking considering the U.S. government still owns more of the struggling Volt's manufacturer, General Motors, than anyone else. In the Ayn Rand classic Atlas Shrugged, there are two steel magnates – Hank Reardon and Orrin Boyle. Reardon develops a new, lighter weight, stronger steel known as Reardon Metal, and Boyle uses the government to deny the introduction of the metal into the marketplace. Boyle, the consummate D.C. corporate crony socialist, pulls all of his strings in a failed attempt to break Reardon. In today's world, Boyle would not only get favorable environmental, labor and location subsidies, he would be in the front of the line for a Department of Energy "loan" and the president would be announcing "instant rebate tax credits" to make his steel more competitive with the value offered by his competitors. What I don't like about the electric car boondoggle is that these are not entrepreneurs testing their wits to solve very hard problems, risking their time and fortune to create a better vehicle. No, instead they are risk averse investors who are willing to spend taxpayers money to develop a product, making their fortunes by slicing off portions of the government propped up venture to sell to other risk averse investors. Get full story here.  ALG Editor's Note: In the following featured commentary from Zerohedge.com, despite reports of just $3.2 billion of net credit default swap exposure (CDS) on Greece's default, a single bank in Austria is now reporting as much as $1.3 billion of exposure, raising questions about whether banks were hiding their exposure prior to the default:  As First Greek CDS 'Anstalt' Appears, A Question Emerges: Did Banks Not Square Off Margins? The irony is not lost on us that Bloomberg is reporting that KA Finanz, an Austrian bad-bank supported by the Austrian government, faces as much as a €1 billion need for funding to cover its exposures to Greek CDS (coughcreditanstaltcough). In a statement this morning, which we noted in a tweet, the bank noted "activation of the CDS with an assumed loss ratio of about 80% would mean an additional provisioning charge of EUR 423.6 million". KA Finanz's total amount of Greek CDS exposure is around EUR1bn. What is shocking and should be of great concern is that we have been led to believe that very little net cash will change hands on the basis of the $3.2bn net aggregate market exposure. This was based on the now false premise that variation margin was maintained and transferred throughout the process (as we note below from recent IMF filings). What appears to have happened is that dealer to dealer variation margin has been, let's say, less rigorous as perhaps all collateral was netted up across all exposures (or simply ignored on the basis of government backstops). The far bigger question then is: are banks simply marking ALL sovereign CDS at par, and not paying off cash to other dealers? Remember it only takes one counterparty in the chain to turn net into gross and quality collateral seems tied up a little right now at the ECB (or with margin calls). Get full story here. |
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