Obama not 'likely' to push repeal of Bush tax cuts

[Gan]

Obama adviser Bill Daley says Obama will "more likely than not" postpone a tax increase for the rich until 2011, when the Bush tax cuts expire, rather than pushing to repeal them now.

He made the comment on "Meet the Press," and it's a suggestion that Obama will tailor his initiatives to avoid burdening the struggling economy — even at the cost of a widening deficit.

http://www.politico.com/blogs/bensmith/1108/Obama_not_likely_to_push_repeal_of_Bush_tax_cuts.h tml

__________________________________________________ _____

Interesting.

How exactly would repealing the Bush tax cuts now 'burden' the struggling economy? I thought only the wealthy 5% of Americans would feel the repeal, and even then they can afford it; according to the pre-election discussions.

So Bush set the tax cuts up to expire in 2011. Basically Obama will not seek a renewal.

Who thinks this is a wise track and who thinks its going back on a campaign promise?

[Parkbandit]

It's a wise track and it's going back on a campaign promise.

[Kembal]

It's both, though I don't think anyone complains if a politican decides not to repeal a tax cut.

I imagine the capital gains tax will stay at 15 percent until 2011 then also.

He's doing the right moves. Problem is, he's not the President until Jan. 20, and Bush doesn't seem to be doing anything.

[Parkbandit]

It's both, though I don't think anyone complains if a politican decides not to repeal a tax cut.

I imagine the capital gains tax will stay at 15 percent until 2011 then also.

He's doing the right moves. Problem is, he's not the President until Jan. 20, and Bush doesn't seem to be doing anything.

No one is going to complain? His crazed liberal base will.

And have you not been watching the news in the past 2-3 months? Can you honestly say Bush isn't doing anything? Over 1.2 TRILLION in bailouts is now considered nothing?

Stop being stupid... that mean and evil Bush is almost out of office. HOPE AND CHANGE IS ON THE WAY!!!

YAH CHANGE!

[Stanley Burrell]

I think Obama should hijack Bush's wiretapping program and collect another pointless data analysis record in the middle of a top secret underground filing cabinet ... in order to the tax rich people who have supported this war and/or abomination of drunken-sailor-spending towards it. Until our debt is paid in full. That way we can all sit pow-wow when we must all have to sacrifice some freedoms; and subsequently, we can all feel, undoubtedly, American. It will close the the social divide and bring us together as a people, once again.

[Gan]

I think Obama should hijack Bush's wiretapping program and collect another pointless data analysis record in the middle of a top secret underground filing cabinet ... in order to the tax rich people who have supported this war and/or abomination of drunken-sailor-spending towards it. Until our debt is paid in full. That way we can all sit pow-wow when we must all have to sacrifice some freedoms; and subsequently, we can all feel, undoubtedly, American. It will close the the social divide and bring us together as a people, once again.

So you want Obama to tax most of Congress?

[crb]

So far, Obama has been doing right and has my approval. I even agree with his cabinet appointments.

HOWEVER - he should have fucking been saying stuff in the 2 or 3 weeks since the election. We've had one significant up day in the market since the election until Friday, when he announced things. IF he had come out right after the election and said what he is saying now, we'd have been spared much pain, and Citi, for one, might not be in the situation it is now.

[Keller]

Wait, I thought this was all the result of the M2M rules?

[crb]

It is.

M2M turns fear into fact by forcing companies, companies with positive cash flow, who could afford to take a long term approach and wait until a security matures to value it, to value a security based on current market prices, which are driven by fear.

Obama was a big source of the fear, M2M helped it manifest.

Did you know Lehman Brothers had positive cash flow when they went bankrupt? Ponder that, how could a profitable company go bankrupt? It is ridiculous.

What if when you bought a house you had to assure the bank of it's value. What if, when the value dropped, you had to make up the difference to the bank? So say you bought a house for $200k, it dropped 20% in value down to $160k. What if that forced you to make a $40k payment to the bank, nevermind the fact that you were paying your mortgage monthly, that you were employed, that you could afford it to keep the house and wait for prices to rebound sometime in the 30 year term of the mortgage, what if you had to make that $40k payment or lose your home and go bankrupt?

That is what has happened to so many of our financial companies thanks to M2M accounting. They could afford the payments, they were making money, but because the value of a security (one they never planned to sell in the short term anyways) dropped on paper they had to come up with more capital or go under.

The EU and Britain are changing M2M accounting, Obama's people have been making noises about it, all your idols are chatting about it, when you going to come around? The people who aren't chatting about it are Chris Cox, who needs to be fired, and George Bush. You siding with them on this issue?

[Keller]

There are two different issues here:

(1) Is M2M a worthwhile accounting method going forward?

and

(2) Is M2M to blame, in part, for the current economic panic?

You adequately answered (2).

But you forgot to mention that I bought that house using $2000 and a $198,000 note. And I've got about 10,000 more houses using the same capitalization.

Going forward, I think the change will produce more financially stable firms with more stable capital structures.

[Jorddyn]

Did you know Lehman Brothers had positive cash flow when they went bankrupt? Ponder that, how could a profitable company go bankrupt? It is ridiculous.

Positive cash flow in no sense of the word means profitable. If I sell everything I own (except my house) for $100, I'll have positive cash flow. I'll also be an idiot and sleeping on the floor, but I'll have positive cash flow!


What if when you bought a house you had to assure the bank of it's value. What if, when the value dropped, you had to make up the difference to the bank? So say you bought a house for $200k, it dropped 20% in value down to $160k. What if that forced you to make a $40k payment to the bank, nevermind the fact that you were paying your mortgage monthly, that you were employed, that you could afford it to keep the house and wait for prices to rebound sometime in the 30 year term of the mortgage, what if you had to make that $40k payment or lose your home and go bankrupt?

Except that's not at all how this works. It's more like you take out a 200k loan to buy a house, turn around and sell that house for $160k and buy a different house worth $160k. Even that is a poor analogy, but it's much closer than yours.



That is what has happened to so many of our financial companies thanks to M2M accounting. They could afford the payments, they were making money, but because the value of a security (one they never planned to sell in the short term anyways) dropped on paper they had to come up with more capital or go under.

If I give a company billions of dollars in loans, you can bet I'm concerned with the current value of their inventory (in this case, stock), not what it might be worth when they sell it (especially given market volatility), not what they think it should be worth, and not what they paid for it. I work for a meat processing company and we have to LCM our inventory for our borrowing base. It just makes sense, because by not using mark to market, you would effectively be transferring the risk of the loss on securities to the lenders, and would create even more chaos in the financial sector.

[BigWorm]

So far, Obama has been doing right and has my approval. I even agree with his cabinet appointments.

HOWEVER - he should have fucking been saying stuff in the 2 or 3 weeks since the election. We've had one significant up day in the market since the election until Friday, when he announced things. IF he had come out right after the election and said what he is saying now, we'd have been spared much pain, and Citi, for one, might not be in the situation it is now.

The market damn near always goes down big time after a presidential election. All of money from McCain and Obama's record breaking fund raising needed to be spent before election day, which greatly increased spending leading up to that day. Now that the election is over, very little political campaign funds are being spent. This is a well-known and studied phenomenon sometimes called the presidential election year business cycle.

Links:
http://findarticles.com/p/articles/mi_qa5313/is_/ai_n21301275
http://www.deloitte.com/dtt/article/0,1002,sid%253D15288%2526cid%253D59800,00.html
http://books.google.com/books?id=8sSV161Z36oC&pg=PA262&dq=presidential+election+year+business+cycle&ei=ud0qSYi2GYysNtGe2IoM

[Kembal]

No one is going to complain? His crazed liberal base will.

And have you not been watching the news in the past 2-3 months? Can you honestly say Bush isn't doing anything? Over 1.2 TRILLION in bailouts is now considered nothing?

Stop being stupid... that mean and evil Bush is almost out of office. HOPE AND CHANGE IS ON THE WAY!!!

YAH CHANGE!

Give me a break. Financial system bailouts, while currently necessary in (some) cases, do not do anything to stimulate an economy. They just stop catastrophe.

And I haven't seen any complaints from major liberal commentators regarding the change to the tax cuts yet.

[Kembal]

So far, Obama has been doing right and has my approval. I even agree with his cabinet appointments.

HOWEVER - he should have fucking been saying stuff in the 2 or 3 weeks since the election. We've had one significant up day in the market since the election until Friday, when he announced things. IF he had come out right after the election and said what he is saying now, we'd have been spared much pain, and Citi, for one, might not be in the situation it is now.

And if he had done that, he would've been criticized harshly for trying to be the "acting" president while Bush was still in office.

[crb]

Positive cash flow in no sense of the word means profitable. If I sell everything I own (except my house) for $100, I'll have positive cash flow. I'll also be an idiot and sleeping on the floor, but I'll have positive cash flow!



Except that's not at all how this works. It's more like you take out a 200k loan to buy a house, turn around and sell that house for $160k and buy a different house worth $160k. Even that is a poor analogy, but it's much closer than yours.



If I give a company billions of dollars in loans, you can bet I'm concerned with the current value of their inventory (in this case, stock), not what it might be worth when they sell it (especially given market volatility), not what they think it should be worth, and not what they paid for it. I work for a meat processing company and we have to LCM our inventory for our borrowing base. It just makes sense, because by not using mark to market, you would effectively be transferring the risk of the loss on securities to the lenders, and would create even more chaos in the financial sector.
Actually no..

1. I said Lehman had both positive cash flow, and was profitable, not because I thought the two meant the same thing, but because Lehman in fact had both positive cash flow and profits. They were making money. M2M accounting created a need for capital to balance their balance sheet, they couldn't get it, so they failed. Without M2M accounting they could have kept those securities indefinitely to no ill effect.

And my example is pretty close. I wonder how many of you will be calling Obama a genius when his administration suspends or changes M2M accounting? I get the feeling with some of you how you feel about an idea rests on who is presenting it.

It is hard to truly do a consumer example because the banks are providing credit, and consumers generally take credit, they don't provide it. But the point is, M2M accounting forces banks to value assets based on spot market prices, subject to daily volatility and huge swings, that can create both downward and upward spirals that feed themselves. It affects both directions strongly.

Supposing you have a certain leverage ratio in mind to run the bank at. If the value of your securities keeps going up (on paper, in the short term) that gives you freedom to take on more leverage, creating demand for more securities, causing your securities to go up in value, creating more demand, in a cycle. Then critical mass is reached, the bubble gets too big, it pops, house values start to decline, then your security value shrinks, causing you to be overleveraged, causing you to have to see things into weak demand, causing prices to drop, causing you to be even more overleveraged, causing you to sell at firesale prices, causing prices to drop, etc you go under. But then since you went under and sold all your shit at firesale prices, the "market" price of all this shit is now really low, artificially low (as it was artifically high before) and this will hurt even conservative banks who were not highly leveraged in the first place.

It amplifies the boom/bust cycle to a ridiculous and dangerous level.

I have no problem with having companies disclose the current value of things that they own, but to have them account for all the wide and volatile swings is dangerous. Let M2M use a 1 year rolling average if you want to use it.

[crb]

And if he had done that, he would've been criticized harshly for trying to be the "acting" president while Bush was still in office.
Maybe, but he is doing it now and Bush is still in office. So if that was his excuse, what has changed?

[Methais]

http://www.freakingnews.com/pictures/37000/Perception-Demotivational-Poster--37483.jpg

[Jorddyn]

Actually no..

1. I said Lehman had both positive cash flow, and was profitable, not because I thought the two meant the same thing, but because Lehman in fact had both positive cash flow and profits. They were making money. M2M accounting created a need for capital to balance their balance sheet, they couldn't get it, so they failed. Without M2M accounting they could have kept those securities indefinitely to no ill effect.


They could have kept worthless/near worthless securities propping up their balance sheet. But what happens when they need cash, and have to sell said securities? And were they profitable only when you ignore the loss on those securities? I would suspect so.



And my example is pretty close.


No, it isn't.


I wonder how many of you will be calling Obama a genius when his administration suspends or changes M2M accounting?

Only if he comes up with a better plan. This one is ridiculous at best, misleading and dangerous at worst.




I get the feeling with some of you how you feel about an idea rests on who is presenting it.

I certainly take into account who is presenting. Have Stephen Hawkings and Steve-O present something, and I'll certainly value the former more.



It is hard to truly do a consumer example because the banks are providing credit, and consumers generally take credit, they don't provide it.

The problem has to do with how much credit the banks can get.



It amplifies the boom/bust cycle to a ridiculous and dangerous level.


You know, this whole bust could have been avoided if all companies would just report positive earnings, regardless of what they really earned. GAAP financials and SEC filings truly contributed to the most current bust, and we really should look into doing away with them.



Let M2M use a 1 year rolling average if you want to use it.

That's certainly an improvement from the 3 year rolling average you mentioned last time you proposed this ridiculous thing.

You realize that if you used a 1 year rolling average, you would have AIG on the balance sheet at around $30 (currently worth $1.65), Citi at $20+ (currently worth $5.62)? That Bear Stearns and Lehman brothers would still show value? How is that realistic OR useful?

[Kembal]

Maybe, but he is doing it now and Bush is still in office. So if that was his excuse, what has changed?

Bush has apparently decided not to act on any stimulus proposals, and Paulson isn't going to ask for them.

[Kembal]

Actually no..

1. I said Lehman had both positive cash flow, and was profitable, not because I thought the two meant the same thing, but because Lehman in fact had both positive cash flow and profits. They were making money. M2M accounting created a need for capital to balance their balance sheet, they couldn't get it, so they failed. Without M2M accounting they could have kept those securities indefinitely to no ill effect.

And my example is pretty close. I wonder how many of you will be calling Obama a genius when his administration suspends or changes M2M accounting? I get the feeling with some of you how you feel about an idea rests on who is presenting it.

It is hard to truly do a consumer example because the banks are providing credit, and consumers generally take credit, they don't provide it. But the point is, M2M accounting forces banks to value assets based on spot market prices, subject to daily volatility and huge swings, that can create both downward and upward spirals that feed themselves. It affects both directions strongly.

Supposing you have a certain leverage ratio in mind to run the bank at. If the value of your securities keeps going up (on paper, in the short term) that gives you freedom to take on more leverage, creating demand for more securities, causing your securities to go up in value, creating more demand, in a cycle. Then critical mass is reached, the bubble gets too big, it pops, house values start to decline, then your security value shrinks, causing you to be overleveraged, causing you to have to see things into weak demand, causing prices to drop, causing you to be even more overleveraged, causing you to sell at firesale prices, causing prices to drop, etc you go under. But then since you went under and sold all your shit at firesale prices, the "market" price of all this shit is now really low, artificially low (as it was artifically high before) and this will hurt even conservative banks who were not highly leveraged in the first place.

It amplifies the boom/bust cycle to a ridiculous and dangerous level.

I have no problem with having companies disclose the current value of things that they own, but to have them account for all the wide and volatile swings is dangerous. Let M2M use a 1 year rolling average if you want to use it.

<sigh>

Theoretically, any bank can fail even if it's profitable or has positive cash flow due to the reserve requirement. It's pretty much a problem specific to banks. They do teach this in microeconomics, you know.

The point would be for banks to not take on so much leverage.

[Gan]

<sigh>

Theoretically, any bank can fail even if it's profitable or has positive cash flow due to the reserve requirement. It's pretty much a problem specific to banks. They do teach this in microeconomics, you know.

The point would be for banks to not take on so much leverage.

Thats actually a macroeconomics subject. Macro II to be exact.

[Kembal]

Thats actually a macroeconomics subject. Macro II to be exact.

Hmm. It gets hard to remember which incomprehensible professor taught which subject these days. But in either case, I learned it in the intro course.

[crb]

They could have kept worthless/near worthless securities propping up their balance sheet. But what happens when they need cash, and have to sell said securities? And were they profitable only when you ignore the loss on those securities? I would suspect so.



No, it isn't.



Only if he comes up with a better plan. This one is ridiculous at best, misleading and dangerous at worst.




I certainly take into account who is presenting. Have Stephen Hawkings and Steve-O present something, and I'll certainly value the former more.




The problem has to do with how much credit the banks can get.



You know, this whole bust could have been avoided if all companies would just report positive earnings, regardless of what they really earned. GAAP financials and SEC filings truly contributed to the most current bust, and we really should look into doing away with them.




That's certainly an improvement from the 3 year rolling average you mentioned last time you proposed this ridiculous thing.

You realize that if you used a 1 year rolling average, you would have AIG on the balance sheet at around $30 (currently worth $1.65), Citi at $20+ (currently worth $5.62)? That Bear Stearns and Lehman brothers would still show value? How is that realistic OR useful?
Since when have I proposed a plan? I identified how M2M accounting has contributed to this problem. Do you dispute that?

All your ridiculous hyperbole aside (oh, its better than knowing nothing) and pulling that ridiculous analogy of comparing a securitized mortgage product that is held and not sold, and is not planned to be sold, to a stock price that is the result of selling, all your bullshit aside. M2M accounting is a relatively new thing, things were fine before it, things will be fine after it, only during it have things been bad... hrm.

The euros are dropping it, the TARP ordered the SEC to study the issue and restated their authority to drop it, and Obama's people have been talking about it.

Suppose water was a traded commodity, suppose it was really rainy so no one was buying water, the market value was $0 because no one would buy it. Is it right to value the water on your balance sheet at $0? I'm not asking you if it should be sold at $0, I'm saying that, if you are not planning to sell it, should the fair value of that water on your balance sheet be $0? OR, should not not ASSume that it is going to rain every day for the rest of time and instead realize that the value will change and increase because it will stop raining tommorow and so you should just hold it?

Mark to market causes permanent damage to companies based on temporary volatility. That is why it is a problem, and that is why the majority of people in positions of power out there are calling for it to stop.

[crb]

ps

http://money.cnn.com/2008/11/21/news/fair.value.compromise.fortune/index.htm?postversion=2008112109http://money.cnn.com/2008/11/21/news/fair.value.com

[Jorddyn]

Since when have I proposed a plan? I identified how M2M accounting has contributed to this problem. Do you dispute that?

Mark to Market has "contributed" the this problem just as much as the other items I've identified - GAAP accounting, the SEC. It only makes sense that volatile assets are handled at their current market value. I've also explained at how and why a rolling average is just as ridiculous, why securities should be kept on the books at their current value, and how non-financial companies are held to the same standards because it is the only thing that makes sense.



Suppose water was a traded commodity, suppose it was really rainy so no one was buying water, the market value was $0 because no one would buy it. Is it right to value the water on your balance sheet at $0? I'm not asking you if it should be sold at $0, I'm saying that, if you are not planning to sell it, should the fair value of that water on your balance sheet be $0? OR, should not not ASSume that it is going to rain every day for the rest of time and instead realize that the value will change and increase because it will stop raining tommorow and so you should just hold it?


If stocks, commodities, inventories, loans, and money fell from the sky from time to time, your analogy might hold water.


Mark to market causes permanent damage to companies based on temporary volatility. That is why it is a problem, and that is why the majority of people in positions of power out there are calling for it to stop.

Financial companies know the covenants they're held to before they ever purchase their first stock or make their first loan. They get the rewards of the leveraging in good times, and the risk of leveraging in bad times. I'd also like to see where you learned the opinions of the "majority of people in positions of power".

[Jorddyn]

ps

http://money.cnn.com/2008/11/21/news/fair.value.compromise.fortune/index.htm?postversion=2008112109http://money.cnn.com/2008/11/21/news/fair.value.com



Markdowns that are judged to be derived from other, temporary factors - such a lack of liquidity in a given market, for instance - would be counted in another account. That line, called "other comprehensive income," or OCI, currently resides on the balance sheet but would move to a more visible place on the income statement under the PricewaterhouseCoopers proposal.

Allowing companies and their accountants the power to value securities at whatever they believe the market might do in the future instead of a concrete number (current value of the stock) is dangerous. It could lead to fudging of numbers (see also: Enron) and different companies could come to different assumptions, meaning that you couldn't easily compare financials from two different companies.

[Parkbandit]

Which one in your avatar is you again? I vote for the first one on the left.

[Gan]

Hmm. It gets hard to remember which incomprehensible professor taught which subject these days. But in either case, I learned it in the intro course.

I suppose it depends on the course text and professor. I remember more of my Macro II class than I do my Macro I class probably because of the time difference and the fact that I took Macro I as a freshman, so there's lots of courses in between that and my latter upper level courses taken.

[crb]

Allowing companies and their accountants the power to value securities at whatever they believe the market might do in the future instead of a concrete number (current value of the stock) is dangerous. It could lead to fudging of numbers (see also: Enron) and different companies could come to different assumptions, meaning that you couldn't easily compare financials from two different companies.
because what happened to Enron was so worse than what has happened in the last 12 months?

As is typical, Enron lead to a kneejerk reaction, and now we have shit like this happening.

Perhaps a middle ground?

[Jorddyn]

because what happened to Enron was so worse than what has happened in the last 12 months?

To the people who lost everything, yes it was.



As is typical, Enron lead to a kneejerk reaction, and now we have shit like this happening.

Enron begat SOX, not M2M. I don't even want to get into that discussion.


Perhaps a middle ground?

I'm afraid I don't see a middle ground anywhere between "Use this solid number that's publically available" and "Tell us what you think the number will be someday in the future". One is concrete, one is open to entirely too much speculation.