http://www.cato-at-liberty.org/…

My misadventures in state government led me to coin a phrase for what has become the economic growth model of choice for a lot of governors: “Press Release Economics.” It comes in many shapes and sizes, but it basically boils down to the orchestrated PEZ-dispensing of taxpayer money on short-term “economic growth” schemes for crass political gain.

The most common form is probably the targeted tax break and/or corporate welfare grant/loan to incite a company to relocate within a state’s borders. Politicians love these taxpayer-financed giveaways because they come complete with lots of visible media coverage: press releases, newspaper articles, radio and television reports, and best of all…the photo op. Ah yes, that priceless picture of the governor all dressed up with a hard hat, ceremonial spade in hand, and a big toothy grin.

One would be hard pressed to find justification for these political endeavors in the economic literature, but then again the little Potemkins who run state “economic development” bureaucracies don’t have time to be bothered with trivialities when there are “jobs to create.”

Today I read that Gov. John Corzine has come up with a $150 million package to help the New Jersey economy. The concoction includes two peculiar items: money for banks to get them to lend and a $3,000 check to small businesses for each employee they hire and employ for a year. “Create a job and we will send you a $3,000 check,” Gov. Corzine says.

With regard to the first one, the New York Times reports:

James Silkensen, president of the New Jersey League of Community Bankers, said he had not heard complaints from his members about needing more cash. “Our members are telling us that they’ve got money to lend,” Mr. Silkensen said. “They aren’t going to change their underwriting standards. I can’t say every bank has sufficient funds to lend. But most I have talked to are lending, though they’re being careful.”

With regard to the second one, it’s pure press release economics. Why not $4,000 an employee? Or $5,000? Why just “small” businesses? Do “large” businesses contribute nothing to the New Jersey economy? How will this initiative be enforced? How much will it cost taxpayers for New Jersey bureaucrats to make sure each and every new hire was employed not less than 365 days? How many of the $3,000 check employees would have been hired anyhow? How many jobs will be lost because of the tax burden needed to pay for this scheme and others?

Here’s a better idea, Governor: propose serious tax and spending cuts. New Jersey’s general fund is up 40% from just five years ago, which amounts to a $1,000 per New Jersery citizen spending increase. At the same time, New Jersey’s business tax climate was recently found to be the worst of the fifty states.

Why would we expect Corzine to act any different than Hank Paulson?

Economic Grief

http://www.reuters.com/…

The New York Times, quoting unnamed government officials, said Treasury was considering taking ownership stakes in many U.S. banks. A Treasury spokesperson could not be reached for comment on the story.

Sure… why not. These people like Barney Frank and Charles Schumer have no problems pushing the government closer and closer to some Nazi / fascist / Soviet communist amalgamation. The police state of the right and the economic totalitarianism of the left. Either these guys are so blinded by their position of power they don’t see this lockstep toward Amero-fascism or they are Manchurian candidates.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTfNzYM.5Wfk&refer=home

Iceland’s government seized control of Kaupthing Bank hf, the nation’s biggest bank, completing the takeover of a banking industry that has collapsed under the weight of its foreign debt.

Iceland is guaranteeing Kaupthing’s domestic deposits and taking control of banks in an attempt to provide a “functioning domestic banking system,” the country’s Financial Supervisory Authority said in a statement on its Web site today.

The banks are saddled with about $61 billion of debt, 12 times the size of the economy, according to data compiled by Bloomberg.

Twelve times? Sounds huge but I’ve nothing to compare it to.

http://www.bloomberg.com/…

American International Group Inc., the insurer taken over by the government, may access $37.8 billion from the Federal Reserve Bank of New York, in addition to the $85 billion loan that helped it stave off bankruptcy.

AIG can swap as much as $37.8 billion of its “investment- grade, fixed-income securities” for cash to “replenish liquidity” at the New York-based insurer, the Fed said late yesterday in a statement. AIG spokesman Nicholas Ashooh said the assets were held mainly in U.S. life insurance subsidiaries and declined to say how much of the new program has been used.

“You’re in for a dime, you’re in for a dollar on this one,” said David Havens, a credit analyst at UBS AG. “The core problem is liquidity as opposed to solvency, though as the businesses deteriorate and adverse economic conditions take hold, solvency will also become more of an issue.”

The problem is liquidity as opposed to solvency? Sounds familiar. Sorry gentlemen but not having the liquidity to pay for one’s debts is insolvency:

A business may be cash flow insolvent but balance sheet solvent if it holds illiquid assets, particularly against short term debt. Conversely, a business can have negative net assets showing on their balance sheet but still be cash flow solvent if ongoing revenue is able to meet debt obligations, and thus avoid default – for instance, if it holds long term debt.

http://www.marketwatch.com/…

The U.S. Federal Reserve is reportedly looking at getting into unsecured lending, an extreme step that could allow it to directly purchase commercial paper, according to a report in the Financial Times. The report said the Fed had never done so in its history, but doing so could allow it to participate in the frozen inter-bank money market and the contracting commercial paper market. The Fed doesn’t believe it has the legal mandate to make unsecured loans, so it would need the Treasury to guarantee any losses. The Fed had said in a statement on Monday that “the Federal Reserve and the Treasury Department are consulting with market participants on ways to provide additional support for term unsecured funding markets.”

This charade is sad at times. They are grasping at straws… either because they think they have to or because they don’t know any better. Unfortunately for us their mistakes are our hard times.

firstdraft.pdf

http://money.cnn.com/…

Among the provisions of the draft bill:

• The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use.

• Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, the bill would limit golden parachutes to executives at companies that participate; they will not be able to deduct the salary they pay to executives above $500,000.

• An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.

• Treasury is allowed the option to take ownership stakes in participating companies under certain circumstances.

• Treasury may establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.

I’m going to look through it tonight. See what they have snuck in. Some at DailyPaul.com have taken chunks of the bill to scan it quicker.

UPDATE from LewRockwell.com/blog:

New debt limit: $11,315,000,000,000.

That’s $38,000 per capita.

Update: Michael Hall writes:

Section 128 changes effective date from Oct 1 2011 to Oct 1 2008 for this section of current law:

SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(2)(A)) is amended–
(1) in clause (i), by striking `the ratio of 3 per centum’ and inserting `a ratio of not greater than 3 percent (and which may be zero)’; and

(2) in clause (ii), by striking `and not less than 8 per centum,’ and inserting `(and which may be zero),’.

TITLE 12 > CHAPTER 3 > SUBCHAPTER XIV > § 461
Amendment of Subsections (b) and (c)
Pub. L. 109–351, title II, §§ 201–203, Oct. 13, 2006, §§ 201–203, 120 Stat. 1968, provided that, effective Oct. 1, 2011, this section is amended— (1) in subsection (b)(2)(A), by striking “the ratio of 3 per centum” and inserting “a ratio of not greater than 3 percent (and which may be zero)” in clause (i) and by striking “and not less than 8 per centum,” and inserting “(and which may be zero),” in clause (ii); (2) in subsection (b)

This will allow banks to hold zero reserves if the fed says so.