Geithner: GOP debt talk is 'theater'

[scandal 951]

I think this game of chicken could make for an interesting trading strategy. Aggressively go short in the Treasury market in June just as all this political 'theater' starts to get everyone's attention - e.g. an ultrashort treasury ETF like TBT. Hold for about a month. By late June to mid July, the bond market will start getting very antsy when Congress still hasn't passed a new ceiling and the first unpayable treasury coupons are about to come due (Geithner estimated early Aug for that). As Treasuries start falling, the Ultrashort position should do very nicely. By late July, when the bond traders are at their antsiest about whether a bill will actually get passed, flip the position and go bullish (e.g.UBT)

to profit from the rally arising from the GOP giving in on the game of chicken at the last possible moment around Aug 1.

NOTE: This is NOT investment advice. If you do this, don't blame me. If I can think of it, I guarantee you every bond trader on the street has already thought of it and played it backwards, forwards and sideways by now.

Geithner: GOP debt talk is 'theater'

POLITICO

Treasury Secretary Timothy Geithner is confident that the debt ceiling will be raised. The GOP opposition, he said, is just "political theater."

A deal will be struck by the summer, Geithner predicted, speaking at a breakfast hosted by POLITICO on Wednesday.

"I think we have a very good chance of doing that, and on the basis of what I've seen in these negotiations, I think you're seeing a fair amount of pragmatism, openness, recognition that that's the right thing to do," Geithner said.

The deal would likely include targets for deficit reduction with a statutory cap on the national debt and enforcement triggers as part of a package that would amount to a "substantial down-payment so people can see and feel the reforms are going to happen," Geithner said.

He called the expected House vote next week not to raise the $14.29 trillion debt limit a political stunt, explaining that behind the scenes talks were progressing towards a deal that would cut spending by at least $1 trillion in return for an increase in the borrowing limit to prevent a default by the U.S. government.

"Some people are pretending not to understand," the consequences of debt default, Geithner said. "Or they think there is leverage for them in threatening a default. It's not a credible negotiating strategy, and it is not going to happen."

In response to repeated questions about whether the administration was planning a contingency plan in the event the limit is not raised by August, Geithner said no such plans were needed. "The United States will never default," he said.

In a wide-ranging interview with POLITICO's Mike Allen, Geithner said the administration's comprehensive tax reform plan had been delayed by the current budget debate but would likely emerge by summer or fall.

Geithner lauded the success of the TARP program following the repayment of government loans this week by Chrysler and Treasury's sale of shares in insurance giant AIG. The federal government could ultimately turn a profit on AIG and the entire price tag for TARP is likely to come in below $20 billion, far from the trillions of dollars once feared by critics of the rescue program.

However, Geithner acknowledged that the economy is still sluggish and job growth remains weak, likely complicating President Barack Obama's reelection efforts.

"It's very hard for average Americans to understand that it could have been much worse than it was," he said, adding that the housing market would probably take at least another couple of years to recover from the excesses of the credit bubble that ended in disaster in 2008.

The Treasury secretary, who has emerged as one of Obama's top advisors, said in many ways the 2008 shock was worse than the events that presaged the Great Depression. And he said it was "unlikely" that the nation would see such an event ever again.

He said the events of 2008 were so traumatic that he has not yet watched "Too Big to Fail," the HBO film based on the book by New York Times reporter Andrew Ross Sorkin, which debuted Monday. Hollywood sex symbol Billy Crudup plays the treasury secretary in the film.

On other topics, Geithner, a former IMF official, said he wasn't in a position to comment on whether the fund has a hostile climate towards women, as was alleged in a recent New York Times story following the arrest of former IMF head Dominique Strauss-Kahn on assault charges.

Geithner strongly defended Elizabeth Warren, a special advisor to the administration who is setting up the Consumer Financial Protection Bureau.

Warren, Geithner said, has been unfairly attacked by Republicans on Capitol Hill, including at a testy hearing of on Tuesday.

[Vi-Jay 218]

NOTE: This is NOT investment advice. If you do this, don't blame me. If I can think of it, I guarantee you every bond trader on the street has already thought of it and played it backwards, forwards and sideways by now.

Yes.

Probably best to remain very nimble.

(I will read the article now)

Edited May 26, 2011 by Vi-Jay

[^_^ 5,021]

[Vi-Jay 218]

Treasury Secretary Timothy Geithner is confident that the debt ceiling will be raised. The GOP opposition, he said, is just "political theater."

Of course it is but, the strategy worked during the Clinton years so why not try it again.

but, NY26 certainly sent a message and the GOP better heed the warning. Sooner better than later.

I think we have a very good chance of doing that, and on the basis of what I've seen in these negotiations, I think you're seeing a fair amount of pragmatism, openness, recognition that that's the right thing to do," Geithner said.

Reid was very shrewd to let the Ryan plan come up. Brilliant.

The deal would likely include targets for deficit reduction with a statutory cap on the national debt and enforcement triggers as part of a package that would amount to a "substantial down-payment so people can see and feel the reforms are going to happen," Geithner said.

Does this eliminate automatic triggers like Tax cuts or the 600+ billion dollar military spending bill (House passed today)?

In response to repeated questions about whether the administration was planning a contingency plan in the event the limit is not raised by August, Geithner said no such plans were needed. "The United States will never default," he said.

Sometimes he stupid. Stupid stupid.

Geithner lauded the success of the TARP program following the repayment of government loans this week by Chrysler and Treasury's sale of shares in insurance giant AIG. The federal government could ultimately turn a profit on AIG and the entire price tag for TARP is likely to come in below $20 billion, far from the trillions of dollars once feared by critics of the rescue program.

Bush = TARP! Gotta give the man props when he deserves it. but I'm still tired of getting Fcked by the banks.

However, Geithner acknowledged that the economy is still sluggish and job growth remains weak, likely complicating President Barack Obama's reelection efforts.

"It's very hard for average Americans to understand that it could have been much worse than it was," he said, adding that the housing market would probably take at least another couple of years to recover from the excesses of the credit bubble that ended in disaster in 2008.

They shouldn't let him talk too much. The housing market is still in decline and the decline is building momentum.

Edited May 26, 2011 by Vi-Jay

[Pinocchio Liberal 268]

Hmmm, Hey Scabal I mean Scandal, I never pegged you for liking squirrlie little tax cheats.

[Zero Sum 305]

[scandal 951]

Hmmm, Hey Scabal I mean Scandal, I never pegged you for liking squirrlie little tax cheats.

Marc'ie poo :star: we love you!

[scandal 951]

I love how VJ can have 57 Anthony Weiner threads, but none on the Republicans walking out of the talks to raise the Debt Ceiling, despite the fact that they wrung trillions in spending cuts out of the deal. They won, but that's not good enough for Cantor and Kyl. They need the whole country to go down in flames to really be satisfied.

http://www.nytimes.com/2011/06/24/opinion/24fri1.html

Editorial

Their Temper Tantrum

Published: June 23, 2011

Congressional Republicans, who played a major role in piling up the government’s unsustainable debt in the first place, have thrown a tantrum and walked out of the debt limit talks. This bit of grandstanding has brought the nation closer to the financial crisis that Republicans have been threatening for weeks. But, at least now, their real goals are in sharp focus.

The two Republicans in the talks, Representative Eric Cantor, the House majority leader, and Senator Jon Kyl, the minority whip, had no intention of actually negotiating. Negotiations require listening to those on the other side and giving them something they want in exchange for some of your goals.

It has been obvious all along that cutting government services alone is not a solution to either the budget deficit or the mounting national debt. The Democrats, at least, acknowledged that reality at the bargaining table by saying that along with the cuts the Republicans cherish, there would have to be increases in revenue — an end to unnecessary tax loopholes for corporations or the rich.

Those demands were modest — too modest — and Vice President Joseph Biden Jr., who is leading the talks, said they were making progress. But any compromise at all proved too much for the Republicans.

Mr. Cantor said that because he and the House would not support a tax increase, he was walking out of the talks until President Obama “resolved” the tax issue himself with House Speaker John Boehner. In other words, Mr. Cantor and Mr. Kyl preferred striking a Tea Party pose to the hard work of reaching a deal.

The negotiators say they have essentially agreed on about $2 trillion in spending cuts over the next 10 years, which could be acceptable if they are phased in gradually and exempt the nation’s most vulnerable. But Democrats in the talks say that in exchange for agreeing to those cuts, they asked for some balancing increases in revenues. Their proposals were not to raise tax rates, but rather to end credits like those for oil and gas companies. One Democratic negotiator, Representative Chris Van Hollen of Maryland, said they also want to curb tax deductions for the very rich.

It was inevitable that Mr. Obama, Mr. Boehner and Senate leaders would have to write the final chapter of these talks, and Republicans were at least correct in asking for a more public role from the president, who has shied away from leadership here. Mr. Boehner has, so far, limited his opposition to tax rate increases, and he may prove more willing to accept reality and the need for revenue than Mr. Cantor.

But at least 11 hard-line Senate Republicans have already said they will oppose any deal that does not include a balanced-budget amendment — a nonstarter for Democrats — and Mitch McConnell, the Senate Republican leader, said this week that all revenue increases are the same as raising taxes and are unacceptable.

The deadline for raising the debt limit or facing a default is Aug. 2. Republicans cannot walk away from their responsibility to pay the bills and keep the economy out of further crisis.

[Vi-Jay 218]

You said Weiner.

Seriously,I thought about posting it but, I like to give the GOP benefit of the doubt (sometimes) annnnd, You posted it so see? It's all fixxored now.

[Mr. Big Dog 10,747]

I love how VJ can have 57 Anthony Weiner threads, but none on the Republicans walking out of the talks to raise the Debt Ceiling, despite the fact that they wrung trillions in spending cuts out of the deal. They won, but that's not good enough for Cantor and Kyl. They need the whole country to go down in flames to really be satisfied.

The negotiators say they have essentially agreed on about $2 trillion in spending cuts over the next 10 years, which could be acceptable if they are phased in gradually and exempt the nation’s most vulnerable. But Democrats in the talks say that in exchange for agreeing to those cuts, they asked for some balancing increases in revenues. Their proposals were not to raise tax rates, but rather to end credits like those for oil and gas companies. One Democratic negotiator, Representative Chris Van Hollen of Maryland, said they also want to curb tax deductions for the very rich.

http://www.nytimes.com/2011/06/24/opinion/24fri1.html

Help me out here: We were talking about reducing the deficit and addressing the debt. If you get a deal on cuts and enrich that with some additional cuts in the form of eliminating tax spending, then that would bring the deficit down more and faster. Cantor and Kyl taking their ball and going home shows pretty clearly that this isn't really about the deficit - we knew that all along since they happily racked up that deficit in years past but it's coming ever more into focus now. The balanced deal sought by the adults would bring us closer to closing the deficit than what the kids were ready to agree to. What's up with that?

[mawilson 2,133]

this isn't really about the deficit - we knew that all along since they happily racked up that deficit in years past but it's coming ever more into focus now.

The magic number is 100 percent of GDP. GWB with all his deficits never crossed that line.

[Mr. Big Dog 10,747]

The magic number is 100 percent of GDP. GWB with all his deficits never crossed that line.

No, he didn't. But he and those supposed deficit hawks put the budget on the trajectory it's on. This has been going on since The Gipper. Starve the beast is what it's all about.

[scandal 951]

The magic number is 100 percent of GDP. GWB with all his deficits never crossed that line.

Why? What's special about 100% in this context? I agree it's a lot of debt, but why isn't 97% the magic number? Or 106%?

Japan is way over your magic number, in fact over 200%.

I would think in a country with prospects for strong future GDP growth (e.g. BRIC countries) you could tolerate more overall debt than in mature slow-growth economies. BTW, the US has been over 100% during WWII. Crossing that number does not bring the walls tumbling down.

[mawilson 2,133]

Why? What's special about 100% in this context? I agree it's a lot of debt, but why isn't 97% the magic number? Or 106%?

Japan is way over your magic number, in fact over 200%.

Most of Japan's debt is internally owned by Japanese pensioners (about 85 percent if memory serves.)

Unless our government devise a means of forcing people to invest their IRAs and 401(k)

in US Treasuries, I don't see how we can sustain Japanese debt levels.

[_Simpson_ 250]

When is it going to get to the point where we deal with the mess we have gotten ourselves into???