Mark Byron

The Beltway Bazzar

The House finally passed a debt-ceiling lifter this afternoon, only to see it shot down in the Senate this evening. The "Boehner Bill" squeaked through 218-210, with no Democratic crossovers, but was tabled 59-41 in the Senate; that effectively kills the bill, but not completely, since the Senate's counter-offer will likely be offered as an amendment to the House bill in order to keep the constitutional mandate that money bills start in the House. Tabling the bill allows it to be used as a host for the Democratic symbiote.

I'm not sure what to make of the six Republicans voting for tabling the bill; the "RINO Sisters" voting against tabling, but Tea Partiers Paul and Lee voted for tabling. There might be a bit of both ends against the middle there.

What we have now is some good old-fashion haggling. With the exception of having an insistance on voting out a balanced budget amendment, the main differences between the two plans is the amount of smoke and mirrors on the cuts; the Reid plan is more back-loaded and has a few more questionable gizmos.

The middle ground seems to be for the consevatives to give on the BBA, for the Democrats to accept more front-loaded cuts and call it good. Conservatives won't like it, but the path forward in early August seems more center-left than center-right, since we've maxed out at where a center-right coaltion can get.

By the way; the world doesn't end on August 3 if nothing is done. As I noted in the last post, Uncle Sam has a few marketable securities of its own that it could sell in a pinch, not to mention some trust funds that could be raided. Grandma's SS check won't bounce, unless the administration really wants to chew the political scenery.

The 3-month T-bill has creeped up a tad today, up to a truly loan-sharky 0.09% from 0.06% when we looked in earlier in the week. That's my benchmark to see if the smart money is panicing; they aren't, at least not enough to loose sleep over.

Apples and Oranges

Here's a semi-cute story that shows more than a bit of financial illiteracy; Apple has more cash on hand that the US government does. The reason that that is a illiterate statement is that you're comparing the Fed's checking account to Apples checking and short-term savings account.

That's because the first line on a big-company's balance sheet is typically cash and marketable securities; companies often keep only what they need in the very short term in checking and keep the rainy-day money in T-bills, CDs and other short-term investments. Even there, you have to include 12 billion in cash, 16 billion in short-term investments and 48 billion in long term investments to get to the stated 76 billion for Apple. Conversely, the Treasury's checking account has a mere 74 billion, but that's six times what Apple has in its checking accounts.

If we used that same standard with Uncle Sam, all the TARP investments would count towards their account, as would the stock in "Government Motors" and Chrysler. Sadly, they'd have Apple easily beat if you used the same metrics. Making the government a stockholder in a company leads to some odd conflicts of interest, which is why that's been done sparingly over the years.

Outside of those oddities, Uncle Sam doesn't do much saving; if it does run a surplus for a stretch, it will issue less new T-bills than otherwise. Thus, today's Apple piece is comparing apples and lemons.

 

Edifier du Jour: Galatians 1:6-7(NIV)

⁶ I am astonished that you are so quickly deserting the one who called you to live in the grace of Christ and are turning to a different gospel— ⁷ which is really no gospel at all.

There's a God-sized spot in people's souls which often gets replaced by ET or Gaia. I didn't stick around long, but I channel surfed into an "ancient aliens" show on the History Channel; this one was more myth than history. If there is no God/gods in modern science, they have to find a physical-only way to translate the angels and deities into something non-supernatural; Grays-ex-machina becoms the default answer.

However, those aliens are lousy gods, at best playing the Deist version of seeing the planet and let the experiment run (everyone together "They are watching us, watching us, from a distance";-). Being a galactic lab rat isn't encouraging.

Being a child of God, forgiven, is encouraging.

Covering Washington's Assets

It's going to be interesting to see what does and doesn't get done in Washington in the next few days. The House had passed a Republican "Cut, Cap, and Balance" budget plan that is DOA in the Senate. Meanwhile, the House leadership is trying to get a debt-ceiling raising plan passed, but it appears that we have a classic both-ends-against-the-middle fight.

Democrats want less cuts and at least some tax increases. Tea Partiers want more cuts and no tax increases. In between is speaker Boehner, trying to patch together a majority; it seems that enough conservatives don't want to line up their asses for him.

How much government do we want? How do we raise the money to pay for it? That's the questions that are unspoken behind this debate.

If we can't borrow any more money, we either have, in general, raise taxes and/or cut spending. Since the president can't raise taxes on his own, what's left is to cut spending, essentially going cold-turkey to a balanced budget.

Or, the third option is to ignore the debt ceiling and borrow more money anyway. That idea has been batted around as of late; a kindly reading of the 14th Amendment would allow the government to bust the ceiling in order to honor existing government obligations. It would then be up to the Supreme Court to play referee, something it is loathe to do in a President-Congress food fight.

At the end of the day, Revenues+Borrowing+Asset Sales=Expenses. How much government do we want and how do we pay for it? For now, the financial markets aren't too jittery, with the 3-month T-bill still down at 0.07%. If they were truly scared of default, would they be all but giving Uncle Sam free use of their money?

That being said, pray for the folks who might get laid off next month if that cold-turkey balanced budget comes to pass. Folks on the right tend to look down our nose as government employees, but the vast majority are everyday folks doing a honest day's work. The "nonessential" workers are needed, but can take a bit of a vacation without chaos descending over the realm; they'll be getting the short end of the stick if we stay status-quo without a bill.

We've seen states have this happen without a meltdown. Things will go on.

I don't have a good answer for the problem. However, even if the problem isn't solved, life will go on and the country will manage. Wall Street is yet to throw a hissy fit over things, so they might be better than the chattering classes make it out to be.

 

Football Fast and Furious

The NFL is doing free-agent speed dating this week, trying to cram what normally takes months into a week due to the lockout freezing all player movement.

One interesting trade has Donovan McNabb heading to Minnesota; if you throw out McNabb's sojourn to DC last year, the deal reminds me of another iconic Eagle QB that did a Philly-to-Metrodome run- Randall Cunningham. McNabb is cast as the regent running the realm until the young prince is ready to rule-

Before the reporting of the deal, Christian Ponder, the quarterback drafted by the Vikings with the 12th overall pick in April, tweeted: "Excited to have McNabb join. Will learn a lot from a Pro Bowler. But that doesn't mean I'm not still fighting to start week 1!"

I'm still getting used to people tweeting their replies to breaking news; it has the feel of one of those sci-fi near-future stories where they throw in future tech as an afterthought part of future life. Not only that, but Christian Ponder could be a good title for a God blog.

The oddest story to me is seeing Matt Hasselbeck getting run out of Seattle, landing with the Titans as Jake Locker's regent. Meanwhile, the Seahawks are poised to sign Tavaris Jackson; that is not an upgrade, and only makes sense if (a) the wage difference tipped the scales and/or (b) the Seattle crowd didn't like having a conservative QB around.

Moody's Off-key Blues

One of the bullet points in the coverage of the debt ceiling "crisis" is that the credit agencies are warning of a rating drop, potentially taking the US out of its standard position as the benchmark "risk free rate." However, the big ratings agencies like Moody's and Standard and Poors generally make changes after the market has moved an issuer's interest rates up, being more the Master of the Obvious rather than a prophet.

That isn't happening yet. Looking at the bond page at Bloomberg (the dude has bad policies but good financial info; that's why he can self finance a NYC campaign), the three-month T-bill is at 0.06%. Not 6%, 0.06%. Not a lot of room to include much if any default risk; at that interest rate, you'd be better off putting it in a mattress if things were nearly as dire as the headlines read.

The "smart money" isn't getting out of Dodge yet. That's not to say that things might not get messy in the next few weeks, but there seems to be more talk about a financial meltdown than any evidence of fear of one. If Wall Street were as jittery as the talking heads make them out to be, we'd at least see a 0.6% T-bill rather than a 0.06% one.

 

What's Good for [Fill in my Company] is Good for America

Here's an interesting Politico piece on the politics behind a natural-gas-as-vehicle-fuel bill; oil man turned natural gas advocate T Boone Pickens is backing the bill and the libertarian Kochs, also oil men themselves, are against it. The bill would subsidize natural gas engines and putting NG pumps at gas stations.

Both sides have merit. The pro-NG side can point to the energy-independence side of the argument, for the more home-grown natural gas we use, the less we give to OPEC and their assortment of freedom-hostile governments. That argument has been used by the drill-baby-drill chorus for making more domestic oil, albeit without its hand out for big-ticket subsidies.

The Koch's free-market oriented allies are generally against subsides; government subsidies are often rather inefficient and should especially be avoided when we're in the middle of trying to rein in a nasty deficit. However, the insinuation is that the Koch's interest is self-serving in that an increase in the use of natural gas cuts into the use of oil; thus, oil barons without a natural gas component to their energy business will be against helping out natural gas; making a substitute good cheaper or subsidizing the complements to that substitute hurt your product.

There is a bit of glee in that Politico piece, as the left-leaning denizens there want to cast doubts on both sides' intentions, especially the folks that vote against the bill that get Koch donations. There is a solid free-market argument against such subsidies, and the deficit hawk side of things argue for caution in pulling out Uncle Sam's credit card when it's squeezing up against its credit limit. Dynamist principle is more likely at play, rather than than a few bucks from a conservative benefacto.

One of the ongoing fights within the GOP is a right-populist faction that wants to weed out influence-buying and an establishment faction who wants to keep that influence. However, you can have those Tea Party populists swayed by folks who have a vested influence in shooting down a bill. One of the more noxious parts of the Abramoff era was their sending money from existing casino-owners to theocon groups campaigning against more casinos; the groups getting the money were working on a moral compulsion to rein in gamble while the givers were amorally maximizing future profits.

Rusty Inge? Try WD-40

Here's a trooper for you. Brandon Inge has been struggling this year, hitting well under .200. The Tigers traded for KC third baseman Wilson Betemit. Betemit doesn't have a better mitt than Inge, but he is hitting .281 for the Royals, and as a switch-hitter, won't need to be platooned. That gives the Tigers three switch-hitting regulars along with Guillen and Martinez; it also gives the Tigers an all-Latin infield.

Interestingly, Inge accepted a demotion to Detroit's AAA farm club in Toledo rather than be released and allowed to find a job with another team. This isn't a rehab assignment, where an injured player can play his way back into game shape without being "sent to the minors"; this is a full-blown demotion. However, he lives and has his family in Detroit and can make a long commute down to Toledo; in addition, not too many teams want to sign a third baseman with a .177 batting average.

I wouldn't be surprised if they make Inge a player-coach at Toledo. He's under contract through next year and is 34. Catchers make good manager material, and he's played catcher as well as third base; he even played some center field a few years back when they were short there. It might be time for him to transition into coaching.

Scenes From a Summer Afternoon

A few observations from an errand-run this afternoon

• Bumper sticker on minivan-"Be nice to your children-They'll get to pick your nursing home." With parents within shouting distance of that status, that rings a chord.
• Vanity Plate-"ZUGZUG." If you've seen Caveman, you'll get it; if you haven't, I don't want to encourage your delequency. I'm not sure I want to meet the guy who paid good money to Aunt Jennifer for that one.
• A biker funeral. As I drove past our main funeral home, there were about a dozen mototcycles in the parking lot; that's not normally funeral transportation, but the guy may well have been a biker and would have wanted to be sent off with such an escort.

Marshalling Your Contacts

Here's an interesting irony given that Jim Tressel got forced out of his Ohio State coaching job earlier this year for lying about improper player perks. Tressel got his OSU gig courtesy of a great run in the 90s at Youngstown State, taking them to the I-AA title game six times and winning four.

The first three of those trips were against Marshall, headed up by Jim Donnan; Donnan parlayed his good fortune at Marshall into a gig at Georgia (somehow I don't recall him at UGA). He's now accused of helping run a Ponzi scheme by his creditors.

The federal court documents, filed Thursday and Friday, are part of a larger bankruptcy case involving West Virginia-based company GLC Ltd.

Formed in March 2004, GLC Enterprises, as it was known then, attracted investments from several high-profile figures from the world of sport. Among them are former University of Oklahoma and Dallas Cowboys coach Barry Switzer; Virginia Tech football coach Frank Beamer; Texas State football coach Dennis Franchione; and Texas Tech football coach Tommy Tuberville.

Here's a copy of the complaint. There's echoes of Bernie Madoff scamming the folks he knew in New York Jewish circles or the Mainse brothers using their 100 Huntley Street connections to bring Canadian Pentecostals into another Ponzi scheme; Donnan seems to have used his football connection to bring a who's-who of college football coaching into the mix. He's yet to be charged with a crime, but the SEC and FBI might well be interested in what comes out in Donnan's bankruptcy filing. 

This seems a lot bigger than fibbing about free tattoos, but it is a sad state of affairs that the two top coaches in college football's "second division" of two decades ago are now getting disgraced within months of each other.

 

Dog Days

I haven't had much of a muse as of late, but feel the need to get back into blog mode.

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The big political fight is over the debt ceiling, but the rhetoric is that of mining, as conservatives are guarding against cave-ins. Wouldn't that be a cave-out if we were increasing the ceiling rather that having it collapse on us?

One thing is for sure, the senior senator from the Bluegrass will have a primary in 2014 and a nasty one at that. However, the son of a Mitch might be closer to the truth that we'd like, since the conservative dream of having Obama be forced to balance the budget next month in order to not bust the debt ceiling ain't likely to happen.

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One thing that the Obama team might try is to sell bonds at a premium. 30-year T-bonds are yielding 4.18% at present. If they offered them at 5%, they'd sell for 114% of par, or $1139 per $1000 of face value. Thus, they could bring in an extra $139 for every 1000 they refinanced; that could be a sneaky but legal trick to add to the cash flow without adding to the face value of the debt.

Would that be legal? It might pass muster with Anthony Kennedy.

Would Geitner stoop that low? He might need a good chiropractor afterwards, but I wouldn't put it pass him.

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When will we stop the all-Casey-all-the-time? Life goes on even when you can't get the "right" result. The irony to me is that the person who was leading the hang-her-high chorus is named Grace and was very lacking in grace.