CAN’T MAKE IT UP: AIG, BAILED OUT BY AMERICA, MAY SUE AMERICA —
In a story that seems almost too audacious to believe, insurance
company AIG, which only just finished paying back its $182 billion
taxpayer rescue, is reportedly considering joining a lawsuit against the
U.S. government over the terms of that rescue, by far the most
controversial and publicly derided of the Wall Street bailout era. The
possible legal action comes as AIG is also running a splashy national ad
campaign saying “Thank you, America,” for saving the company from total
collapse. A federal judge in New York in November tossed out the
lawsuit AIG is considering joining, noting that AIG had two options in
2008: Agree to terms of the bailout or go into bankruptcy. It chose the
bailout. But the lawsuit continues on a separate track in federal court
in Washington and in a federal appeals court.
Former AIG CEO Maurice “Hank” Greenberg initially filed the shareholder suit. There is a corporate governance argument to be made that the AIG board has a fiduciary duty to shareholders to consider joining the lawsuit, as the NYT notes in the story below. But there is an even larger PR argument to be made that doing so would be potentially more damaging to the company’s reputation and share price than failing to take part in any settlement of the Greenberg lawsuit. Greenberg is represented in the suit by prominent attorney David Boies, who famously handled Al Gore’s failed effort to continue a recount in Florida in the 2000 presidential election that eventually went to George W. Bush.
LAWSUIT DETAILS — According to the A1 story broken by NYT’s Ben Protess and Michael J. de la Merced, AIG’s board “will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for ‘public use, without just compensation.’
“… [S]uch a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street. Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people … noted that without the bailout, AIG shareholders would have fared far worse in bankruptcy … ‘The AIG board of directors takes its fiduciary duties and business judgment responsibilities seriously,’ said a spokesman, Jon Diat.” http://nyti.ms/10aIGvb
DIAT declined further comment.
SIMPSON AND BOWLES TRY AGAIN — Campaign to Fix the Debt’s Erskine Bowles is holding a presser this afternoon alongside several business executives at the Nasdaq in NYC to renew his group’s call for a grand bargain in Washington to reduce the $16 trillion national debt. Thus far Bowles and his debt reduction partner Alan Simpson’s efforts, even with heavy assistance from prominent CEOs, have failed to push through such an agreement as part of any recent fiscal fights. The debt ceiling debacle of 2011 didn’t produce a mega deal, nor did the just completed fiscal cliff fight. Now Simpson and Bowles are trying again as Washington approaches the triple fiscal fiasco of the debt ceiling, sequester and possible government shutdown.
But will things be any different this time? Why do the event? Campaign to Fix the Debt’s Jon Romano emails MM: “CEO/private sector participation in the Campaign to Fix the Debt to restore the nation's fiscal health is increasing — because those who help drive the economy understand what is at stake. Nasdaq has invited us to educate and engage their members, which include some of the nation's most innovative and creative entrepreneurs.”
HOT READ: GOLDMAN MANAGES AROUND TRADING RULES — Bloomberg’s Max Abelson in a story that popped at midnight: “Sitting onstage in Washington’s Ronald Reagan Building in July, Lloyd C. Blankfein said Goldman Sachs Group … had stopped using its own money to make bets on the bank’s behalf. … That may come as a surprise to people working in a secretive Goldman Sachs group called Multi-Strategy Investing, or MSI. It wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies … according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit … has no clients, the people said.
“The team’s survival shows how Goldman Sachs has worked around regulations curbing proprietary bets at banks. … The law doesn’t bar longer-term wagers. … Michael DuVally, a Goldman Sachs spokesman, said in an email that MSI engages in long-term investing and lending. A 2011 proposal for implementing the Volcker rule uses a 60-day cutoff to classify short-term trades. ‘We have made changes to the strategies this business historically has employed to bring them into compliance with our current understanding of the Volcker rule,’ said DuVally. … ‘If the final rule requires additional changes, we’ll make them.’” http://bloom.bg/WGE2xi
THIS MORNING ON POLITICO PRO FINANCE — Kate Davidson and Jon Prior on the “robo-signing” settlement … MJ Lee on how Rep. Greg Walden is not amused by the $1 trillion coin idea … Jon Prior on how BofA’s sale of its servicing rights could help get borrowers into HARP more quickly … To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com.
GOOD TUESDAY MORNING — RIP Richard Ben Cramer, author of “What It Takes,” the sprawling and definitive book on the nature of the modern presidential campaign. http://bit.ly/13cTIid
Send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.
DRIVING THE DAY — Should be an interesting day of reaction in D.C. to word that AIG may sue the federal government … NFIB small business survey out at 7:30 a.m. EST, expected to dip slightly to 87.2 from 87.5 after November’s huge drop … Consumer credit at 3 p.m. EST expected to rise $10.5 billion … Bowles-Simpson event at Nasdaq begins at 1:30 p.m.
** A message from POWERJOBS: Attention Employers: Get 50% off online job postings on POWERJOBS.com as a special launch promotion. POWERJOBS.com is now live, featuring more than 1,400 Washington-area jobs from the region’s top companies. Make sure YOUR company is front and center. Use the code “WELCOME” at sales.powerjobs.com for your 50% off offer. POWERJOBS.com, Empowering Today’s Top Talent. **
IN DEFENSE OF BASEL — NYT’s Andrew Ross Sorkin on the Basel committee move: “While there is no question that the original rules would do a better job preventing the next 100-year flood in the banking system, their quick adoption most likely would have created their own drag on the economy because bank lending would most likely have been curtailed. … In truth, the reason that regulators ultimately chose to relax the rules was simple practicality: many banks in Europe and some in the United States would have never been able to meet the requirements without significantly reducing the amount of credit they were to extend to Main Street over the next two years. … That's the other side of the regulatory coin that Main Street often forgets about. At the time that the original rules were written in 2010, the consensus among economists was that the global economy would be in much better shape today.” http://nyti.ms/VHuKo3
COMING THURSDAY: QRM RULE? — Per Compass Point Trading’s Isaac Boltansky: “[T]he most meaningful event of the week is the CFPB’s expected release of its Qualified Mortgage (QM) rule. The CFPB will hold a field hearing in Baltimore on Thursday and we have been told to expect the release of the QM rule to coincide with this hearing. … The QM rule is unequivocally the most important mortgage-related rule still not public. The QM rule will define the metrics for assessing a borrower’s ability to repay a loan, which in turn establishes the parameters of a mortgage lender’s legal liability stemming from underwriting.”
LEW PICK COMING SOON — M.M. and others have reported for some time that White House Chief of Staff Jack Lew was a near lock for Treasury Secretary. Bloomberg’s Hans Nichols now reports Lew could get the call “as soon as this week.” More Nichols: “Selecting Lew to replace Timothy F. Geithner would also require Obama to install a new chief of staff, the first step in a White House staff shuffle for his second term. Many of the president’s senior aides may be taking new roles as the president recasts his team. …While Obama hasn’t made a final decision to pick Lew, his staff has been instructed to prepare for his nomination … Among the leading candidates to replace Lew as Obama’s chief of staff are Denis McDonough, currently a deputy national security adviser, and Ron Klain, who had served as Vice President Joe Biden’s chief of staff.” http://bloom.bg/VOUhbA
ISSA, CUMMINGS WANT FORECLOSURE SETTLEMENT EXPLANATION — House Oversight and Government Reform Committee Chairman Darrell Issa and ranking member Elijah Cummings sent a letter to Fed and OCC requesting a briefing on the new settlement agreement. Letter: http://bit.ly/Wpn9Xh
CUMMINGS SLAMMED THE SETTLEMENT in a statement: “I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed.”
SETTLEMENT DETAILS — WSJ’s Shayndi Raice, Nick Timiraos and Dan Fitzpatrick on Page A1: “Major banks agreed to pay $20 billion to settle mortgage-related legal disputes, in Wall Street's latest bid to put alleged abuses of the home-lending process in the rearview mirror. Bank of America will pay $3.6 billion to Fannie Mae as well as repurchase certain mortgage loans made from 2000 through 2008 for $6.75 billion. …
“The deals come as near-record-low interest rates are feeding a new upturn in the U.S. housing market. That recovery, and expectations that banks finally will surmount the legal challenges that have dogged them since the financial crisis in 2008, have sent bank shares surging to recent highs. … Reducing banks' legal uncertainty could ultimately clear the way for a wave of new loans.” http://on.wsj.com/USBej3
DEBT CEILING FLY-AROUND –
ALTMAN: GOOD JOB ON DEFICIT SO FAR! — Roger Altman writes in the FT: “The last-second deal to avoid America’s fiscal cliff has been criticised by budget experts, the business community and the press. … Critics are transfixed by the bitter negotiations, however, and are missing the big picture. It may be happening in stages, but the U.S. is making real progress towards reducing deficits and stabilising its debt. Indeed, according to the Committee for a Responsible Federal Budget … the federal debt to gross domestic product ratio … will be stable at about 73 percent for the next decade. That is because annual deficits are now on track to be halved and, therefore, the debt level will not continue to grow faster than the economy. Yes, this ratio is still too high, but stabilising it will be a crucial achievement.” http://on.ft.com/Vzt7qd
FIRESTONE: DON’T TRIVIALIZE THE DEBT CEILING — NYT’s David Firestone in an editorial blog post: “Back in the summer of 2011, the first time Republicans threatened not to raise the debt ceiling and forced a downgrade of the nation’s credit rating, many in the party minimized the possible consequences of their actions. … That was nonsense then, and it’s still nonsense as we enter into yet another debt-limit fight. Busting through the limit would indeed constitute default, since the government would be unable to pay its bills.
“Credit markets don’t care which bills are in arrears. By refusing to pay its basic obligations, Washington would undermine the trust that makes lenders willing to buy government bonds. It’s not even clear that the president has the constitutional authority to pick and choose which creditors to pay and which to stiff.” http://nyti.ms/TYLNA0
KRUGMAN: MINT THE COIN — Paul Krugman in a blog post: “Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. … Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all. … So if the 14th Amendment solution — simply declaring that the debt ceiling is unconstitutional — isn’t workable, go with the coin.” http://nyti.ms/UF2lgp
SALMON: THERE WILL BE NO COIN — Reuters’s Felix Salmon: “Let’s be clear about this: no one’s going to mint a $1 trillion platinum coin. Nor is anybody going to mint a million $1 million platinum coins. But it would probably be stupid for anybody in the government to say that they’re not going to do it. … Everybody who’s ever been in charge of any country’s finances knows that the concept of a debt ceiling is profoundly stupid, self-defeating, and generally idiotic. … It’s important to recognize just how damaging the platinum coin move would be, all the same.
“It would effectively mark the demise of the three-branch system of government, by allowing the executive branch to simply steamroller the rights and privileges of the legislative branch. Yes, the legislature is behaving like a bunch of utter morons if they think that driving the U.S. government into default is a good idea. But it’s their right to behave like a bunch of utter morons. If the executive branch failed to respect that right, it would effectively be defying the exact same authority by which the president himself governs.” http://reut.rs/Wrk34Z
ALSO FOR YOUR RADAR –
NEW DODD-FRANK BOOK — Per release from the Mercatus Center at George Mason University: “[Today], the Mercatus Center at GMU is putting out a new book entitled: ‘Dodd-Frank: What it Does and Why it’s Flawed.’ Hester Peirce of Mercatus and her co-authors look at the law’s applauded objectives and argue that in fact, much of what will be implemented, could very well set the groundwork for the next crisis; poorly designed consumer protections will actually pass more costs on to consumers and give them fewer financial options. And perhaps worst of all, Dodd-Frank gives greater regulatory oversight to the same regulators that haven’t managed to adequately handle their current list of market monitoring responsibilities.”
PELL INSTITUTE LAUDS TRAVELERS PROGRAM — Per release: “Amid budget negotiations that could impact education funding across the country, The Pell Institute for the Study of Opportunity in Higher Education … released an in-depth report on The Travelers Companies Inc.’s signature education program, Travelers EDGE … praising it as a leading corporate college access and professional development program to help underrepresented students succeed. The program could serve as a national model for other companies to follow.” Report: http://bit.ly/WuIfn2
DISNEY EYES LAYOFFS — Reuters’s Ronald Grover: “Walt Disney Co. started an internal cost-cutting review several weeks ago that may include layoffs at its studio and other units, three people with knowledge of the effort told Reuters, in an early sign that big companies may not be finished tightening their belts. Disney … is exploring cutbacks in jobs it no longer needs because of improvements in technology, one of the people said. It is also looking at redundant operations that could be eliminated following a string of major acquisitions. …
“After years of repeated and sometimes severe cost cutting in the wake of the financial crisis, by last summer it looked as though Corporate America had trimmed all the fat and was back on the path of profits through operating growth. But news Disney is weighing cuts — on the heels of Eli Lilly and Co.'s warning last week that cost controls would drive earnings this year — could herald yet another wave of retrenchment.” http://reut.rs/RDaLX2
** A message from POWERJOBS: POWERJOBS.com is NOW LIVE and offering employers a special launch promotion of 50% off online job postings. POWERJOBS.com is a jobs site designed specifically for the influential industries that make up the Washington market. Brought to you by names you trust — POLITICO, WTOP and ABC7 — POWERJOBS.com features top jobs from top companies. Get your jobs in front of Washington's top talent with POWERJOBS. Use the code “WELCOME” at sales.powerjobs.com for your special 50% off offer. POWERJOBS.com, Empowering Today’s Top Talent. **
Former AIG CEO Maurice “Hank” Greenberg initially filed the shareholder suit. There is a corporate governance argument to be made that the AIG board has a fiduciary duty to shareholders to consider joining the lawsuit, as the NYT notes in the story below. But there is an even larger PR argument to be made that doing so would be potentially more damaging to the company’s reputation and share price than failing to take part in any settlement of the Greenberg lawsuit. Greenberg is represented in the suit by prominent attorney David Boies, who famously handled Al Gore’s failed effort to continue a recount in Florida in the 2000 presidential election that eventually went to George W. Bush.
LAWSUIT DETAILS — According to the A1 story broken by NYT’s Ben Protess and Michael J. de la Merced, AIG’s board “will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal's high interest rates and the funneling of billions to the insurer's Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for ‘public use, without just compensation.’
“… [S]uch a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street. Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people … noted that without the bailout, AIG shareholders would have fared far worse in bankruptcy … ‘The AIG board of directors takes its fiduciary duties and business judgment responsibilities seriously,’ said a spokesman, Jon Diat.” http://nyti.ms/10aIGvb
DIAT declined further comment.
SIMPSON AND BOWLES TRY AGAIN — Campaign to Fix the Debt’s Erskine Bowles is holding a presser this afternoon alongside several business executives at the Nasdaq in NYC to renew his group’s call for a grand bargain in Washington to reduce the $16 trillion national debt. Thus far Bowles and his debt reduction partner Alan Simpson’s efforts, even with heavy assistance from prominent CEOs, have failed to push through such an agreement as part of any recent fiscal fights. The debt ceiling debacle of 2011 didn’t produce a mega deal, nor did the just completed fiscal cliff fight. Now Simpson and Bowles are trying again as Washington approaches the triple fiscal fiasco of the debt ceiling, sequester and possible government shutdown.
But will things be any different this time? Why do the event? Campaign to Fix the Debt’s Jon Romano emails MM: “CEO/private sector participation in the Campaign to Fix the Debt to restore the nation's fiscal health is increasing — because those who help drive the economy understand what is at stake. Nasdaq has invited us to educate and engage their members, which include some of the nation's most innovative and creative entrepreneurs.”
HOT READ: GOLDMAN MANAGES AROUND TRADING RULES — Bloomberg’s Max Abelson in a story that popped at midnight: “Sitting onstage in Washington’s Ronald Reagan Building in July, Lloyd C. Blankfein said Goldman Sachs Group … had stopped using its own money to make bets on the bank’s behalf. … That may come as a surprise to people working in a secretive Goldman Sachs group called Multi-Strategy Investing, or MSI. It wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies … according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit … has no clients, the people said.
“The team’s survival shows how Goldman Sachs has worked around regulations curbing proprietary bets at banks. … The law doesn’t bar longer-term wagers. … Michael DuVally, a Goldman Sachs spokesman, said in an email that MSI engages in long-term investing and lending. A 2011 proposal for implementing the Volcker rule uses a 60-day cutoff to classify short-term trades. ‘We have made changes to the strategies this business historically has employed to bring them into compliance with our current understanding of the Volcker rule,’ said DuVally. … ‘If the final rule requires additional changes, we’ll make them.’” http://bloom.bg/WGE2xi
THIS MORNING ON POLITICO PRO FINANCE — Kate Davidson and Jon Prior on the “robo-signing” settlement … MJ Lee on how Rep. Greg Walden is not amused by the $1 trillion coin idea … Jon Prior on how BofA’s sale of its servicing rights could help get borrowers into HARP more quickly … To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com.
GOOD TUESDAY MORNING — RIP Richard Ben Cramer, author of “What It Takes,” the sprawling and definitive book on the nature of the modern presidential campaign. http://bit.ly/13cTIid
Send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.
DRIVING THE DAY — Should be an interesting day of reaction in D.C. to word that AIG may sue the federal government … NFIB small business survey out at 7:30 a.m. EST, expected to dip slightly to 87.2 from 87.5 after November’s huge drop … Consumer credit at 3 p.m. EST expected to rise $10.5 billion … Bowles-Simpson event at Nasdaq begins at 1:30 p.m.
** A message from POWERJOBS: Attention Employers: Get 50% off online job postings on POWERJOBS.com as a special launch promotion. POWERJOBS.com is now live, featuring more than 1,400 Washington-area jobs from the region’s top companies. Make sure YOUR company is front and center. Use the code “WELCOME” at sales.powerjobs.com for your 50% off offer. POWERJOBS.com, Empowering Today’s Top Talent. **
IN DEFENSE OF BASEL — NYT’s Andrew Ross Sorkin on the Basel committee move: “While there is no question that the original rules would do a better job preventing the next 100-year flood in the banking system, their quick adoption most likely would have created their own drag on the economy because bank lending would most likely have been curtailed. … In truth, the reason that regulators ultimately chose to relax the rules was simple practicality: many banks in Europe and some in the United States would have never been able to meet the requirements without significantly reducing the amount of credit they were to extend to Main Street over the next two years. … That's the other side of the regulatory coin that Main Street often forgets about. At the time that the original rules were written in 2010, the consensus among economists was that the global economy would be in much better shape today.” http://nyti.ms/VHuKo3
COMING THURSDAY: QRM RULE? — Per Compass Point Trading’s Isaac Boltansky: “[T]he most meaningful event of the week is the CFPB’s expected release of its Qualified Mortgage (QM) rule. The CFPB will hold a field hearing in Baltimore on Thursday and we have been told to expect the release of the QM rule to coincide with this hearing. … The QM rule is unequivocally the most important mortgage-related rule still not public. The QM rule will define the metrics for assessing a borrower’s ability to repay a loan, which in turn establishes the parameters of a mortgage lender’s legal liability stemming from underwriting.”
LEW PICK COMING SOON — M.M. and others have reported for some time that White House Chief of Staff Jack Lew was a near lock for Treasury Secretary. Bloomberg’s Hans Nichols now reports Lew could get the call “as soon as this week.” More Nichols: “Selecting Lew to replace Timothy F. Geithner would also require Obama to install a new chief of staff, the first step in a White House staff shuffle for his second term. Many of the president’s senior aides may be taking new roles as the president recasts his team. …While Obama hasn’t made a final decision to pick Lew, his staff has been instructed to prepare for his nomination … Among the leading candidates to replace Lew as Obama’s chief of staff are Denis McDonough, currently a deputy national security adviser, and Ron Klain, who had served as Vice President Joe Biden’s chief of staff.” http://bloom.bg/VOUhbA
ISSA, CUMMINGS WANT FORECLOSURE SETTLEMENT EXPLANATION — House Oversight and Government Reform Committee Chairman Darrell Issa and ranking member Elijah Cummings sent a letter to Fed and OCC requesting a briefing on the new settlement agreement. Letter: http://bit.ly/Wpn9Xh
CUMMINGS SLAMMED THE SETTLEMENT in a statement: “I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed.”
SETTLEMENT DETAILS — WSJ’s Shayndi Raice, Nick Timiraos and Dan Fitzpatrick on Page A1: “Major banks agreed to pay $20 billion to settle mortgage-related legal disputes, in Wall Street's latest bid to put alleged abuses of the home-lending process in the rearview mirror. Bank of America will pay $3.6 billion to Fannie Mae as well as repurchase certain mortgage loans made from 2000 through 2008 for $6.75 billion. …
“The deals come as near-record-low interest rates are feeding a new upturn in the U.S. housing market. That recovery, and expectations that banks finally will surmount the legal challenges that have dogged them since the financial crisis in 2008, have sent bank shares surging to recent highs. … Reducing banks' legal uncertainty could ultimately clear the way for a wave of new loans.” http://on.wsj.com/USBej3
DEBT CEILING FLY-AROUND –
ALTMAN: GOOD JOB ON DEFICIT SO FAR! — Roger Altman writes in the FT: “The last-second deal to avoid America’s fiscal cliff has been criticised by budget experts, the business community and the press. … Critics are transfixed by the bitter negotiations, however, and are missing the big picture. It may be happening in stages, but the U.S. is making real progress towards reducing deficits and stabilising its debt. Indeed, according to the Committee for a Responsible Federal Budget … the federal debt to gross domestic product ratio … will be stable at about 73 percent for the next decade. That is because annual deficits are now on track to be halved and, therefore, the debt level will not continue to grow faster than the economy. Yes, this ratio is still too high, but stabilising it will be a crucial achievement.” http://on.ft.com/Vzt7qd
FIRESTONE: DON’T TRIVIALIZE THE DEBT CEILING — NYT’s David Firestone in an editorial blog post: “Back in the summer of 2011, the first time Republicans threatened not to raise the debt ceiling and forced a downgrade of the nation’s credit rating, many in the party minimized the possible consequences of their actions. … That was nonsense then, and it’s still nonsense as we enter into yet another debt-limit fight. Busting through the limit would indeed constitute default, since the government would be unable to pay its bills.
“Credit markets don’t care which bills are in arrears. By refusing to pay its basic obligations, Washington would undermine the trust that makes lenders willing to buy government bonds. It’s not even clear that the president has the constitutional authority to pick and choose which creditors to pay and which to stiff.” http://nyti.ms/TYLNA0
KRUGMAN: MINT THE COIN — Paul Krugman in a blog post: “Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. … Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all. … So if the 14th Amendment solution — simply declaring that the debt ceiling is unconstitutional — isn’t workable, go with the coin.” http://nyti.ms/UF2lgp
SALMON: THERE WILL BE NO COIN — Reuters’s Felix Salmon: “Let’s be clear about this: no one’s going to mint a $1 trillion platinum coin. Nor is anybody going to mint a million $1 million platinum coins. But it would probably be stupid for anybody in the government to say that they’re not going to do it. … Everybody who’s ever been in charge of any country’s finances knows that the concept of a debt ceiling is profoundly stupid, self-defeating, and generally idiotic. … It’s important to recognize just how damaging the platinum coin move would be, all the same.
“It would effectively mark the demise of the three-branch system of government, by allowing the executive branch to simply steamroller the rights and privileges of the legislative branch. Yes, the legislature is behaving like a bunch of utter morons if they think that driving the U.S. government into default is a good idea. But it’s their right to behave like a bunch of utter morons. If the executive branch failed to respect that right, it would effectively be defying the exact same authority by which the president himself governs.” http://reut.rs/Wrk34Z
ALSO FOR YOUR RADAR –
NEW DODD-FRANK BOOK — Per release from the Mercatus Center at George Mason University: “[Today], the Mercatus Center at GMU is putting out a new book entitled: ‘Dodd-Frank: What it Does and Why it’s Flawed.’ Hester Peirce of Mercatus and her co-authors look at the law’s applauded objectives and argue that in fact, much of what will be implemented, could very well set the groundwork for the next crisis; poorly designed consumer protections will actually pass more costs on to consumers and give them fewer financial options. And perhaps worst of all, Dodd-Frank gives greater regulatory oversight to the same regulators that haven’t managed to adequately handle their current list of market monitoring responsibilities.”
PELL INSTITUTE LAUDS TRAVELERS PROGRAM — Per release: “Amid budget negotiations that could impact education funding across the country, The Pell Institute for the Study of Opportunity in Higher Education … released an in-depth report on The Travelers Companies Inc.’s signature education program, Travelers EDGE … praising it as a leading corporate college access and professional development program to help underrepresented students succeed. The program could serve as a national model for other companies to follow.” Report: http://bit.ly/WuIfn2
DISNEY EYES LAYOFFS — Reuters’s Ronald Grover: “Walt Disney Co. started an internal cost-cutting review several weeks ago that may include layoffs at its studio and other units, three people with knowledge of the effort told Reuters, in an early sign that big companies may not be finished tightening their belts. Disney … is exploring cutbacks in jobs it no longer needs because of improvements in technology, one of the people said. It is also looking at redundant operations that could be eliminated following a string of major acquisitions. …
“After years of repeated and sometimes severe cost cutting in the wake of the financial crisis, by last summer it looked as though Corporate America had trimmed all the fat and was back on the path of profits through operating growth. But news Disney is weighing cuts — on the heels of Eli Lilly and Co.'s warning last week that cost controls would drive earnings this year — could herald yet another wave of retrenchment.” http://reut.rs/RDaLX2
** A message from POWERJOBS: POWERJOBS.com is NOW LIVE and offering employers a special launch promotion of 50% off online job postings. POWERJOBS.com is a jobs site designed specifically for the influential industries that make up the Washington market. Brought to you by names you trust — POLITICO, WTOP and ABC7 — POWERJOBS.com features top jobs from top companies. Get your jobs in front of Washington's top talent with POWERJOBS. Use the code “WELCOME” at sales.powerjobs.com for your special 50% off offer. POWERJOBS.com, Empowering Today’s Top Talent. **
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