TARP Becomes Obama's Slush Fund
Don't call it Stimulus One -- it's really Stimulus Three.
The US Treasury auctions $21 billion 10-Year notes today, as the daily chart favors higher yields. Risk aversion should be strong enough to trump supply as long as the auction holds daily and weekly pivots at 3.415 and 3.446. If these supports hold, the yield should return to its 200-day simple moving average at 3.322. Tomorrow Treasury sells $13 billion in 30-Year bonds.
Comex Gold traded as low as $1125 on Tuesday, but is back above my quarterly pivot at $1135 this morning. The parabolic bubble has popped, but gold can rebound to its daily and weekly pivots at $1158 and $1179. A weekly close below $1135 indicates risk to lower supports at $1107 to $1094. (Charts courtesy of Thomson/Reuters.)
Nymex Crude Oil traded as low as $72.43 on Tuesday and has rebounded somewhat this morning. My daily pivot is $73.18 with the 50-day simple moving average as resistance at 76.55. The downside remains my annual pivot is $68.81.
The euro traded as low as 1.4672 this morning and rebounded to my quarterly pivot at 1.4787. The euro is below the 50-day simple moving average at 1.4874. My weekly resistance is 1.5027.
The Dow traded as low as 10,250 on Tuesday, but stays negative with a close below its 21-day simple moving average at 10,358. Today's pivot is 10,268 with my weekly pivot at 10,442 and down trend resistance at 10,550.
Redirecting TARP Is Yet Another Mistake
President Bush gave us the TARP. President Obama endorsed it and expanded it to 400 additional recipients since his inauguration.
Bush gave us Stimulus One, which was supposed to create 500,000 jobs by the end of 2008. Obama gave us Stimulus Two, which was supposed to save or create millions of jobs, but the jobless rate continued higher. Now President Obama wants to convert TARP to Stimulus Three.
With the TARP balance at $255 billion, Obama proposes new spending for highways, bridges, and other infrastructure projects, which I thought was the goal of the $788 billion in Stimulus Two.
Obama wants deeper tax breaks for small businesses, and tax incentives for homeowners to make their homes more energy efficient. Small businesses need access to capital, and need to be confident that other Administration plans not be firm breakers. Homeowners are more concerned about keeping their homes, not saving energy.
TARP Should Be Used to Help the Banking System
Banks are being asked to prepay $45 billion in annual assessments for 2010 though 2012 by year-end to replenish the Deposit Insurance Fund, which is in arrears by $16.6 billion. By the time 2010 begins, the DIF may pre-spend half of this $45 billion. I question whether or not 552 problem banks will bother making their payments.
Because of this dire condition, banks have further tightened lending standards for consumers and small business. To fix this problem the Treasury should transfer the $255 billion remaining in TARP into the Deposit Insurance Fund. Then the FDIC should tell member banks to hold onto the $45 billion and use it to help homeowners avoid foreclosures and to lend to small businesses. Helping small businesses will create jobs.
Without a major inflow there's no way that the Deposit Insurance Fund can return to 1.15% of insured deposits, which it's required by law to do by the end of June 2013.
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