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The Biz Roundup February 7

Our plan to plan out a plan is still being planned.

Treasury Secretary Timothy Geithner’s revamp of the $700 billion financial-sector bailout is likely to rely on a broad range of tools, from injecting additional capital into banks and helping homeowners avoid foreclosure to expanding the roles of the Federal Reserve, Fannie Mae, Freddie Mac and the Federal Deposit Insurance Corp., according to people familiar with the matter. . . .

According to Democratic officials, Mr. Geithner also sough to assuage concerns that the revamp would not require aid recipients to lend the funds, one of the central criticisms of the rescue’s implementation thus far. “Institutions that get assistance will have to participate in loan modifications and meet other standards that we set,” he told the lawmakers. “Public assistance is a privilege not a right.”

(“Bailout to Expand Fed, FDIC Roles,” Wall Street Journal, Feburary 7) And the bad bank idea is out on the street. Listen, if you have an idea called “bad” anything — “bad” bank, “bad” bailout, “bad” movie — it’s probably a bad idea. Just a guess.

Just in case you haven’t been panicked enough by a theater full of journalists yelling “FIRE!”, some boobs are talking about what would happen if what hasn’t happened or is likely to happen actually happens.

. . . as the government’s costs to bail out the economy and the financial system mount, S&P and Moody’s in the last month have had to address the unthinkable: whether America might warrant a debt downgrade.

Chances are, the marketplace would make that judgment before S&P and Moody’s would. It would be evident in surging interest rates on Treasury bonds, if investors judged that they should be paid significantly more to compensate for greater risks entailed in lending to the U.S.

At the end of last year, no one cared to question America’s AAA rating. Yields on Treasury securities were at generational or all-time lows — a function of the extraordinary level of fear in financial markets amid the global credit meltdown.

Many investors didn’t care what government bonds paid; they just wanted absolute safety of principal, and that’s what Treasury issues offered. So money poured in.

This year, the market’s mind-set has shifted notably. Yields on longer-term Treasury bonds have jumped. In part, that suggests a lessening of fear, which is good news. But it also reflects investors’ growing concern about the Treasury’s need to borrow as much as $2 trillion this year to finance the rescue of the economy and financial system.

(“Gauging Uncle Sam’s credit risk,” Los Angeles Times, February 7) Three things: investors still are after absolute safety of principle and this will likely continue for 12 to 18 more months. Two: China, the world’s biggest buyer of Treasuries, has an entire economy that depends on warehousing treasury notes well into the infinite future. Third: the government can always print money. Stop worrying.

It’s when they start using words like “absurd” and “nonsense” that you know the boom is going to fall the next day.

Bank of America Corp. chief executive Ken Lewis fired back Friday against speculation that his company could be nationalized by the government, dismissing such talk as “a bunch of malicious rumors.”

Lewis also said the Charlotte bank will not need more government money. “Categorically, I can say no,” he said. He added the bank will work to repay the $45 billion it’s received in government capital “as soon as humanly possible,” which he said could be as early as three years from now.

(“Ken Lewis: Nationalization is ‘just absurd’,” Charlotte Observer, February 7) Have you ever seen the movie “Alien”? You remember that scene where they cut into the monster larva and the acid burns through floor after floor? That’s Merrill Lynch burning a hole through BoA’s books.

Now it’s Sharp with a $328 billion dollar loss. (“Sharp expects FY 08 operating loss of 30 bil. yen, 1st since 1953,” Kyodo News, February 7)

Looks like Kindle might be starting a fire? (“Kindle sparks excitement for e-books,” CNN Money/Fortune, February 7)

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