Ron Amundson’s Political Blog

The Tax Foundation – Educating Taxpayers Since 1937

A most interesting data set…. http://www.taxfoundation.org/files/ftsbs-20060316.pdf

Federal Spending in each state per dollar of federal taxes in 2004. I then took the data and overlayed it on a map of the US, with red being states that had the highest federal funding per federal tax dollar and blue being the least, and green being states in the middle.

Federal Funding per dollar of federal taxes by state in 2004

Its not quite the federal funding flow graph I blogged about but it is interesting for sure. I still think it fascinating data to look at, especially in light of the legislators from states recieving the greatest amount of federal funds per taxes paid and the proposed auto bailout.

AIG Faces $10 Billion in Losses on Bad Bets – WSJ.com

I’m reminded of Ross Perot and the term “giant sucking sound” which in todays case is TARP. Considering the hoops the automakers are going to have to jump through, and the creation of a car czar, it makes me think we really need a TARP czar. Not a guy to hand out the money, but a bunch of guys to get into the day to day operations of each and every bank/ins co/whatever could be made to look like an bank that recieved TARP funds. Sweden nationalized their banking system during their recession, and it worked amazingly well… This throw money at the problem with no accountability otoh, is just putting more dirt in front of the giant bank vacuum cleaner.

As I expect the car czar to have no automotive nor marketing background, it would make sense to have a banking czar without a bean counter background. Granted this is sarcasm, otoh, seeing that Merkel (scientist without a lifelong politics background) is doing fairly well in Germany it may well be an outside set of eyes lacking specific arena experience may truely be the best way to go. It sure would serve to strike fear in the hearts of those who took on TARP funds, which no doubt would cause some serious short term blips stock market wise, but in the mid and long term might be better… certainly better than the brazeness of AIG and the loss of money left and right as it spirals into the AIG and others blackhole.

At a bear minimum, significant political pressure and public outrage needs to be exercised against those who recieved TARP funding. It was not supposed to work from the get go, evidence shows it is not working, and long term wise, more and more folks are seeing it to be counterproductive. In fairness though, it did work a bit, it prevented massive bank runs, and bought a few months time, and thus while a spendy lesson, did accomplish some good. Yet, we are not seeing banks and insurances companies winding down, breaking up into profitable parts, etc… just more of the same, albeit they are hoarding cash. It may well take another Lehman Bros type failure to force deleveraging and forward progress.

If indeed the EU makes the bold move of nullyfying the CDS market, while painful, it just might be the needed first major step on the way to recovery. It would force deleveraging and breakups of banks and insurance companies into profitable and non-profitable parts. And in fairness some parts of AIG are rumored to be doing pretty well. Its how the freemarket has worked for ages… we no longer have massive and too big to fail buggy whip manufacturers, we do have a number of small scale manufacturers who do happen to make buggy whips though. If an entity is too big to fail, they are too big to exist.

AFP: Laid-off workers furious as bank pulls Chicago plant’s credit.

Federal law mandates that workers get paid for unused vacation time and are either given 60 days notice of a mass layoff or paid for that time.

But company officials said they could not make those payments because the bank was “basically controlling all expenditures at this point… and was not allowing it,” said United Electrical union representative Leah Fried.

“There’s a whole other level of shamefulness given the bailout (of financial institutions) and that Bank of America didn’t extend credit as they were supposed to,” Fried told AFP.

This is a sad deal indeed, makes me almost wonder if BoA will add insult to injury by snagging the payroll taxes due as well. That could leave some poor employee on the hook for them personally. Of course its likely they will file bankruptcy, and a judge will force the hand of BoA anyhow, or at least hopefully that will be the case.

Sadly, this type of situation is likely to repeat many times over the upcoming months, as banks continue to play fast and loose with the TARP funds. Hopefully govt will take a Biblical approach, and clawback the TARP funds, followed by throwing execs in prison left and right, but I sort of doubt that will happen. Banks should have been allowed to fail, others would have stepped up to the plate once asset valuations were made known in bankruptcy, but alas, thats water over the dam at this time. Things will likely continue to spiral downhill, and the point of no return is fast approaching, or perhaps it has already passed, only time will tell.

The good thing is, folks are getting to see real valuations, and real trust. The days of Citi doing well, and Paulson saying things are working have long passed. In a little while, there will be so little trust in institutions, companies and employees will start utilizing historical practices, and TARP funds or not, the US will rebuild based upon a real economy, and real value commerce. Its whats truely needed for long term productivity and sustainability. The only question is how long it will take to get there.