Stimulus, Shimulus,It's the Biggest Tax Cut Ever...

Paul Krugman

"You commie, homo-loving sons of guns. I did not expect this," - Sean Penn

This morning robocalls will be going out to Republicans from the Democratic Congressional Committee, telling them that the largest tax cut in American history, $282 billion, was passed by the Obama administration without any help from the Republican Party. The major difference is that these cuts are aimed at middle and working class families, not the top down tax cuts that were favored during the past 8 years. It seems to be taking the wind out of the sails blown by Republican complaints...

There are 22 Republican governors who, in theory, are opposed to any help from the stimulus package, and may not take part of the monies. California's governor said that he would gladly take their rejected shares... Louisiana's Bobby Jindahl may be backing himself into a corner by saying that he doesn't want the part that will extend unemployment benefits. He has one of the poorest states with close to 10% current unemployment, and he is going to reject the one part that will have direct benefit to those unemployed. It is pure political posturing on his part, he is seen as the best candidate for President in 2012 at this point, but this gamble may well blow up in his face in support for him in Louisiana...

In hosting a governor's conference breakfast at the White House this morning, Obamawent off script and responded: "I think there are some very legitimate concerns on the part of some about the sustainability of expanding unemployment insurance. What hasn't been noted is that that is $7 billion of a $787 billion program. And it's not even the majority of the expansion of unemployment insurance," Obama said. The president added, "If we agree on 90 percent of this stuff, and we're spending all our time on television arguing about 1, 2, 3 percent of the spending in this thing, and somehow it's being characterized in broad brush as 'wasteful spending,' that starts sounding more like politics. And that's what right now we don't have time to do."

Obama went on to say, "I will always be open to honest disagreements, and I think that there are some legitimate concerns that can be raised on a whole host of these issues. You're responsible at the state level. If the federal government gives you something now, and then two years later it's gone, and people are looking to you and starting to blame you, I don't want to put you in that position. You need to think about how this money's going to be spent wisely.

"What I don't want us to do, though, is just get caught up in the same old stuff.... There's going to be ample time for campaigns down the road. Right now, we've got to make sure we're standing up for the American people and putting them back to work."

The NY Times reports that: "The Obama administration will begin taking a hard look at the financial condition of the country’s 20 biggest banks this week to judge whether they could hold up even if the downturn worsens further than policy makers already expect.

These reviews of the banks’ books, known as “stress tests,” are heightening a dilemma for Obama aides about how candid they should be about the health of banks like Citigroup and Bank of America. The tests are expected to take several weeks."

And the Financial Times has further analysis: "The lack of clarity in the US Treasury’s plan to deal with the financial system is hardly unexpected. The administration is just one-month-old, and the specifics of this crisis, like many of its antecedents, are unique. As the plan becomes more specific, we can hope that the administration will be able to educate the public, including the supposed friends of free enterprise, that any plan for dealing with the banks must include the failure of those that are truly and deeply insolvent.

In getting to this next stage, there are lessons from past crises, of which there have been no shortage over the last several decades. The good part of the current plan is that the US government will inspect the banks (which of course should have been earlier; we are, after all, spending more on bank supervision than at any time in world history). But the plan is not specific on how government supervisors, or stress testers, will evaluate the portfolio of banks.

However, there is near unanimous consent among informed observers that a number of banks, including a number of very large banks, are clearly insolvent. Resolving large banks is especially difficult, and President Obama made a fair point when he said that other countries, such as Sweden, were able to deal with their banking crises by government takeovers and reprivatisation in part because of the small number of banks and their country, not to mention the greater degree of political consensus in their society."

New Investment Definitions

These terms have been redefined to fit current circumstances:

CEO - Chief Embezzlement Officer.

CFO - Corporate Fraud Officer.

BULL MARKET - A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET - A six to eighteen month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex!

VALUE INVESTING - The art of buying low and selling lower.

P/E RATIO - The percentage of investors wetting their pants as the market keeps crashing.

BROKER - What my broker has made me.

(S&P) STANDARD & POOR - Your life in a nutshell.

STOCK ANALYST - Idiot who just downgraded your stock.

STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.

MARKET CORRECTION - The day after you buy stocks.

CASH FLOW - The movement your money makes as it disappears down the Toilet.

INSTITUTIONAL INVESTOR - Past year investor who's now locked up in a Nuthouse.

MOMENTUM INVESTING - The fine art of buying high and selling low.

'BUY, BUY' - A flight attendant making market recommendations as you step off the plane.

FINANCIAL PLANNER - A guy who actually remembers his wallet when he runs to the 7-Eleven for toilet paper and cigarettes.

CALL OPTION - Something people used to do with a telephone in ancient times before e-mail.

YA HOO - What you yell after selling all you owned to some poor sucker for $240 per share.

WINDOWS - What you jump out of when you're the sucker that bought Yahoo for $240 per share.

PROFIT - Religious guy who talks to God.

And so it goes.