Heroes and Goats

First off, major props to US Airways pilot Capt. Chesley B. Sullenberger III, who pulled off the 6 sigma move of ditching his aircraft in the Hudson yesterday with no casualties. I believe this is the first time a wide body commercial aircraft has executed a water landing with no casualties. It was about 12 degrees in NYC yesterday, with 40 degree water temperatures, by the way. Hats off to you Captain Sullenberger.

Unfortunately, there are other topics to address, and while I briefly contemplated putting them in a separate post, that would have just bumped Capt. Sully down the page, so I’ll hit them here.

1) This BofA bailout is absurd. I mean, truly ridiculous. Remember how crazy the original idea of buying troubled assets from the financial institutions was? Well, we’ve taken that idea, and crappified it to the Nth degree: now we, the taxpayers, don’t even get any potential upside from backstopping these troubled assets. Instead, we guarantee the banks (Citi, and now BofA) against losses, and they keep the upside. I mean – what more can I say? Way to go Hank Paulson.

2) California will be delaying income tax refunds because, well, they’re broke! but don’t worry I’m sure things will get better because:

3) We, the taxpayers, have given Chrysler a $1.5B low interest loan so that, get this – they can loan the money out at LOWER interest! As we saw with GMAC, I guess they’ll make up for it in volume.

4) I’ve saved the best for last. Surprisingly, not much was made of this report from the Congressional Budget Office on the status of the TARP results (from the government’s investment perspective) so far. Let me give you the key points:

“This is the first of CBO’s statutory reports on the TARP’s transactions. Through December 31, 2008, those transactions totaled $247 billion…CBO estimates that the subsidy cost of those transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion.”

For those of you who can’t do the math, or translate this to layman’s terms: They are saying that the government is already down $64B on a $247B investment, or roughly 26%. This is especially shocking since most of the funds weren’t even disbursed until mid December. Down 26% in about a month – great work – sounds like a good investment to me!

The report provides fascinating details, like that they expect a loss of $21B on the $40B AIG bailout, and a loss of $3B on the $5B GMAC bailout. They also expect losses of $3B on the other $4B of loans to the other auto companies. That’s losses of 75% on funds that were disbursed less than three weeks ago. Please, let’s not let anyone use the terms “loan” or “investment” again – these number CLEARLY show that these are BAILOUTS.

At the risk of sounding like Karl Denninger, I’m really starting to feel like we, the people of the United States of America, are being raped by Hank Paulson. And it doesn’t feel good.


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