President Obama has nothing to gain by negotiating with Republicans in Congress in order to raise the debt ceiling. The Department of Treasury doesn’t need Congressional approval to issue more debt and it will be a long time before Treasury actually needs to exceed the debt ceiling.

The analyses I’ve read on the topic are nothing if not variable, but they all assume at some level an agreement by all parties on the basic necessity of raising the debt ceiling and the general wisdom of reducing the deficit. The President knows what needs to be done, the Congress knows and so does the electorate. Based on this shared understanding, it follows that those who act in the spirit of compromise will be rewarded and those who act to obstruct
progress will be punished.

Never mind the compelling absence of evidence that any such shared understanding exists; that’s just not how things work.

The President, and this President in particular, is not answerable to Congress. The President is answerable to history, to the voting public, to our allies, to business interests including bond markets and in relatively rare cases to a 2/3 majority in the Senate. When the executive branch and the legislative branch can’t work out their differences the Supreme Court acts as referree. If Congress failed to raise the debt ceiling, history would not be kind to a President who on their advice failed to honor our debts. The bond markets would not be kind, our allies would not be kind and consequentially neither would the voting public. But a President who stood up to a hostile, inexperienced Congress and continued to honor our debts would win support from all sides. There will have been sufficient turmoil and pain following Congressional failure to raise the debt ceiling that everyone on earth will understand who the heroes and villains are.

If Congress failed to raise the debt ceiling, the President could stand up to Congress on Constitutional grounds, in which case he could count on a fairly corporatist Supreme Court to eventually rule in his favor. He could stand up to Congress on National Security grounds, in which case he might even be able to secretly issue fresh debt. He could stand up to Congress on technical grounds for a very long time without provoking a Constitutional crisis or raising the debt ceiling simply by draining the Treasurys out of trust funds and replacing them with other assets. And if he had to break the law, as President, in order to stand up to Congress, then he could break the law on moral grounds, secure in the knowledge that if he is impeached, the Senate doesn’t have enough votes to convict.

What would the electorate think of a President who defies Congress on any or all of those grounds? The Democrats would rally behind him, the Republicans would still oppose him and the independents would admire him for acting independently.

Now alternatively he can compromise to avoid a direct conflict but what’s in it for him? He could give away everything his constituents like and it still wouldn’t be enough to balance the budget. By compromising he snatches defeat from the jaws of victory. Democrats will hate him. Republicans will (rightly) say that they won. Without any drama to overcome through courageous and decisive action, independents will conclude that he’s a weak leader who stands for nothing.

Politics is not about forethought, compromise and the public good. Politics is about personalities and political narratives and the balance of power. This narrative has yet to be written, but in the politics of the debt ceiling, President Obama has all the power and his opponents in Congress have none.

Article courtesy of Dealbreaker

$$$ Dominique Strauss-Kahn told the New York hotel maid, “Don’t you know who I am! Don’t you know who I am?” while pinning her down during the alleged sexual assault, law enforcement sources close to the investigation told FoxNews.com…“Please stop. I need my job, I can’t lose my job, don’t do this. I will lose my job. Please, please stop! Please stop!” she told Strauss-Kahn, according to law enforcement sources. Strauss-Kahn allegedly responded: “No, baby. Don’t worry, you’re not going to lose your job. Please, baby, don’t worry,” Strauss-Kahn responded, according to investigators. (Fox)

$$$ Belgium’s Debt Outlook Revised to Negative by Fitch on Political Stalemate (Bloomberg)

$$$ ‘Fear Gauge‘ Tops 20 for First Time in Two Months (WSJ)

$$$ How An Inquiry Of Goldman Might Play Out (Dealbook)

$$$ LinkedIn site has security vulnerabilities-expert (Reuters via Easy Street/Heidi Moore)

$$$ David Stockman: “The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they’re saying we want the U.S. government to default. Because there isn’t enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can’t touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well.” (YouTube)

$$$ AIG Underwriters Signal Deal May Price at Close to $30 (CNBC)

$$$ Walker: US Worse Off Financially Than Euro Nations (CNBC)

$$$ Greece to start selling domestic assets to ease debts (BBC)

$$$ More banks targeted in US probe (FT)

$$$ Carlyle Returns Record $6.4 Billion in First Quarter on Strong Dealmaking (Bloomberg)

$$$ Former Fed Monetary Chief Madigan Hired by Barclays Capital (Bloomberg)

$$$ Steven Cohen wants a five-year-old stock manipulation lawsuit filed by Canadian insurer Fairfax Financial Holdings to go away. (Reuters/Unstructured Finance)

$$$ Hintz Says Smith Barney Is ‘Checkmated’ by Krawcheck, McCann (Bloomberg)

$$$ China’s Buffett plays the long game (FT)

$$$ Senate Banking chair Tim Johnson discusses hedge funds [AR]

$$$ IBM passes Microsoft’s market cap after 15 years (Reuters)

$$$ Lady Gaga Breaks Amazon (MarketBeat)

$$$ Barack Obama’s car, nicknamed ‘the beast‘, gets stuck (BBC)

Article courtesy of Dealbreaker

Most French People ‘Think DSK Was Set Up’ (Sky News)
The survey, taken before the 62-year-old’s first court appearance on Monday, showed that 57% of respondents believe the Socialist presidential hopeful has been set up.

Lagarde May Stake Claim as First Female IMF Chief (Bloomberg)
A lawyer who became the first female chairman of Chicago- based firm Baker & McKenzie LLP, Lagarde was appointed as finance minister by French President Nicolas Sarkozy in 2007, just before the onset of the financial crisis. Lagarde’s negotiating abilities helped clinch agreement on the euro area’s sovereign bailout fund announced in the early hours of May 10 last year, according to a person who was there…A fluent speaker of English, Lagarde attended a year of high school as an exchange student at Holton Arms, a private girls’ school in Bethesda, Maryland. An avid swimmer, young Christine was selected for the French national synchronized swim team when she was 15 and competed internationally for two years.

J.P. Morgan, Fund Investors Rebut Meredith Whitney (MarketBeat)
J.P. Morgan Asset Management chucked a note over the transom in response to Meredith Whitney’s latest hate letter to the muni market.Their take is that Ms. Whitney makes some points they sort of agree with, but that she seriously overstates the default risk.

Levin sees ‘real hope’ of fresh Goldman probe (FT)
The senator said Goldman’s payment of $550m to settle fraud allegations from the Securities and Exchange Commission in connection with the marketing of one structured debt product did not preclude other allegations. He said Goldman executives misled his committee but suggested they might have stopped short of lies with “wiggle words”. “They obviously spent a lot of time parsing words,” he said, adding he was “not going to judge whether they committed perjury”. He said even large settlements were not satisfactory without admissions of guilt.

Goldman Sachs Back at No. 1 (Deal Journal)
According to figures from Dealogic, Goldman popped to the No. 1 spot for the first time this year in the league tables, the closely watched listing of M&A advisers ranked by the value of deals on which they advise. J.P. Morgan had held the crown for global deal advisers since Jan. 18.

Arnold Schwarzenegger’s two sons born days apart (CNN)
A son fathered by Arnold Schwarzenegger with his housekeeper was born less than a week after Maria Shriver gave birth to another Schwarzenegger son, according to birth records obtained Wednesday by CNN.

SEC probes electronic platform failures (FT)
The Securities and Exchange Commission is investigating computer system failures at electronic marketplaces including Nasdaq to determine whether internal controls are sufficient, according to people familiar with the matter. The investigation is being handled by the enforcement division’s market abuse unit and is part of a broader regulatory review of stock exchanges following last year’s “flash crash”, recent hacking attempts and trading glitches

Perella Weinberg to Fork Over $11.5 Million in Dreier Fraud (Deal Journal)
Under the deal, [Chapter 11 trustee Sheila M.] Gowan will drop a lawsuit in which she sought the return of $24.1 million in payments she says Perella Weinberg and an affiliated fund received on the approximately $60 million they spent on the promissory notes that Dreier was hawking to investors such as themselves.

Smith Barney Deal Still On (WSJ)
In its first-quarter report, Morgan Stanley posted a $655 million pretax loss related to the Mitsubishi joint venture. After reports surfaced about the loss, Mitsubishi agreed to convert $7.8 billion in preferred stock for 385 million shares of the company. That conversion boosted Morgan Stanley’s Tier 1 ratio and presumably will give it added capital for the planned buyout of Citigroup’s stake in the Smith Barney venture. Morgan Stanley can begin buying that stake next year under its agreement with Citi. Mr. Gorman said reports of Morgan Stanley asking Citi to alter the terms of that deal weren’t true.

Nominations Submitted for the SEC (WSJ)
The White House on Wednesday submitted to the Senate a pair of nominees for the Securities and Exchange Commission, requesting a second term for Democrat Luis Aguilar and naming former SEC staffer Dan Gallagher Jr. for a Republican seat that is due to become vacant in June…The SEC is an independent federal agency with five commissioners.

LinkedIn prices IPO at $45 a share (MarketWatch)
LinkedIn had raised its IPO pricing range earlier this week to between $42 and $45 a share, from $32 to $35 a share — thanks to strong demand. The public offering is expected to raise roughly $217 million for the company.

Yen falls as Japan enters recession (FT)
Gross domestic product fell by an annualised 3.7 per cent in the first three months, after a revised fall of 3 per cent in last quarter of 2010. Analysts had expected the economy to contract by just 1.9 per cent. A further contraction is expected in the second quarter before the economy rebounds as reconstruction spending kicks in, although the Japanese economy has suffered more than a decade of low growth and weak consumer spending.

Obama imposes sanctions on Syrian leader, 6 aides (WaPo)
The Obama administration ramped up the pressure on Syrian President Bashar al-Assad on Wednesday with economic sanctions that targeted his personal finances and linked him explicitly to human rights abuses in his government’s brutal, two-month-old crackdown on demonstrators. The sanctions, which named six other top Syrian officials, represented a significant escalation in the administration’s public criticism of the Assad regime, marking the first time the ruler was penalized for the ongoing clashes that have left more than 900 people dead and thousands in prison.

Zombie Apocalypse? The CDC Describes How To Be Prepared (HuffPo)
The U.S. government wants to make sure that in the event of a zombie invasion, you know what to do. That’s right. The Centers for Disease Control and Prevention shocked us all with their post on how to prepare for the zombie apocalypse. The CDC post, “Preparedness 101: Zombie Apocalypse,” came out Monday and has been gaining media traction since — the link has been down for much of the day, presumingly due to over-traffic.

Article courtesy of Dealbreaker

Article courtesy of Dealbreaker

Buffett Extols Berkshire’s CEO Candidates, Faults Sokol’s Trades (Bloomberg)
“There is no real chance the next CEO comes from outside of Berkshire,” the 80-year-old billionaire said yesterday at a press conference in Omaha, Nebraska, site of the company’s annual meeting. “If you picked the worst of the candidates we have, that person would be very, very good.”…Sokol’s stock deals, which Buffett called “inexplicable” considering his wealth, depleted Berkshire’s list of possible CEOs. Berkshire said in February that it had four candidates, without identifying them. “The leading candidate right now, I would lay a lot of money on him being straight as an arrow,” Buffett said at the April 30 meeting.

Buffett: Failure To Raise Debt Ceiling Is Asinine (Reuters)
Warren Buffett said he expects the Congress to raise the nation’s debt ceiling before it expires in mid-May, and said it would be that body’s “most asinine act” ever if it failed.

The Berkshire Hathaway Annual Meeting (Deal Journal)
A question about what Berkshire is doing to protect against the fall of the dollar. Buffett in the past has bet against the U.S. dollar, but said he’s lately been inactive in foreign exchange markets. “There’s no question the purchasing power of the U.S. dollar will decline over time. The only question is at what rate, Buffett said. But other currencies will decline too, and he said he doesn’t have strong feelings about which ones will decline faster or slower. Buffett ends by saying he’d rather be in the U.S. right now than any other place or any other time in history.

Osama Bin Laden Killed in Pakistan, Obama Says (Bloomberg)
Al-Qaeda leader Osama bin Laden was killed in Pakistan yesterday in a firefight with a team of U.S. operatives who raided the compound where he had been hiding, President Barack Obama said. “On nights like this one we can say to those families who have lost loved ones to al-Qaeda’s terror: Justice has been done,” Obama said in a late-night televised address from the White House.

Bin Laden Was Found At Luxurious Pakistan Compound (Reuters)
Few windows of the three-story home faced the outside of the compound, and a terrace had a seven-foot (2.1 meter) privacy wall, officials said. “It is also noteworthy that the property is valued at approximately $1 million but has no telephone or Internet service connected to it,” an administration official said. “The brothers had no explainable source of wealth.”

Buffett, Charlie Munger’s Share Thoughts On Trump (Reuters)
The biggest laughs of the day came from a question on Trump’s prospects for the White House. “Obviously, I think he’s a jerk,” Berkshire’s Vice Chairman Charlie Munger said, with Buffett adding in a more diplomatic way that he did not expect Trump to win the presidency.

Trump Says He’s Decided ‘In My Mind’ To Pursue Presidency (Bloomberg)
“In my mind, I have already decided,” Trump, 64, said in a telephone interview yesterday. “I am going to announce. But I can’t do anything until the show ends.”

Abu Dhabi, Hedge Funds to Back Glencore IPO (Reuters)
The listing, which could be London’s biggest ever, will be aided by strong support from cornerstones, who could buy nearly 30 percent of the shares sold — or some $3.6 billion worth, if the listing raises its maximum target of $12.1 billion.

Facebook Numbers Feed IPO Outlet (WSJ)
Lou Kerner…pegged Facebook’s profit margin—in earnings before interest, taxes, depreciation and amortization—at about 50%. He said Ebitda should be $1.95 billion this year, and he estimated the company’s value in the public market would be $112.9 billion.

Greece Suggests EU/IMF Repayment Extension (Reuters)
In an interview with French daily Liberation published a day ahead of an inspection visit by the lenders, Papaconstantinou became the first Greek official to float the idea of a further easing of conditions on the 110 billion rescue.

Seth Meyers’ White House Correspondent’s Dinner Speech (TRB)

After Roasting, Trump Responds In Character (NYT)
“Seth Meyers has no talent,” Mr. Trump said in an interview on Sunday. “He fell totally flat. In fact, I thought Seth’s delivery was so bad that he hurt himself.”

Article courtesy of Dealbreaker

Article courtesy of Dealbreaker

Bernanke’s Code: A Guide To The Fed Chairman’s First Q&A (WSJ)
Balance sheet: Look for Mr. Bernanke to affirm that QE2 will end in the summer, as planned. Any deviation from that position would be major news. Listen for what Mr. Bernanke says about the future size of the balance sheet. In this new world of Fed policy, how many securities the central bank holds is the primary signal of how much support it is providing the economy; the Fed has injected more than $2 trillion into the economy since the financial crisis. It is considered unlikely, but if Mr. Bernanke hints the Fed may stop reinvesting the proceeds from its mortgage holdings, it will be seen as the first step toward actual monetary tightening. If Mr. Bernanke drops such a hint, expect the dollar to rally.

Fed’s ‘Extended Period’ May End In May 2011, Economists Say (Bloomberg)
Thirty-three of 44 economists surveyed said the central bank will remove the two-word phrase from its post-meeting statement in 2011, with 18 betting it will move by September. The Fed may wait until 2012 to announce sales of mortgage or Treasury securities it bought to reduce borrowing costs, with 26 respondents expecting a plan next year, according to the survey, conducted from April 20 to April 25.

Hedge Fund Pot Farmer Pleads Guilty (TB)
Tara A. Bryson, executive of Ridgefield-based New Stream Capital has plead guilty to drug possession charges. She was sentenced to one year in jail, which was suspended, and a year of probation. Bryson copped a last minute plea deal with the State of Connecticut. In return she had felony charges of conspiracy to cultivate a pot farm reduced to a misdemeanor–possession of a controlled substance under four ounces and possession of drug paraphernalia. Bryson’s arrest report shows Connecticut State police found over 203 marijuana plants in her million dollar Newtown home so the charges being subbed out from cultivation of marijuana to only possession less than four ounces appears to be a lucky break.

Banks Warn Obama On Soaring Debt (FT)
“Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the US Treasury and overall financial markets in uncharted territory and could trigger another catastrophic financial crisis,” said Matthew Zames, a JPMorgan executive, in a letter to Tim Geithner, the Treasury secretary, this week.

Robot Stock Picker Beats Human Managers After Japan Quake (Bloomberg)
Six computer programs, making all the investment decisions for T&D Asset Management’s Kabu-Robo Fund, generated returns of 1.9 percent in March. The average actively traded fund that invests in Japan lost 6.9 percent during the month, according to Tokyo-based Rating and Investment Information Inc. The benchmark Nikkei 225 (NKY) Stock Average dropped 8.2 percent in the period. “People tend to go with the herd when there’s a panic,” said Kazuhiro Kunisada, chief executive officer of Trade Science Corp., which designed the programs for T&D’s Kabu-Robo Fund. “Robots just follow the rules.”

NYPD Admits It Provided Diddy With A Police Escort (NYP)
The NYPD admitted today that it provided Sean “Diddy” Combs with a police escort following a concert last week, a decision slammed by Mayor Bloomberg. “The bottom line is the police department should treat everybody exactly the same. If you don’t get a police escort, P. Diddy shouldn’t,” Bloomberg said.

Does Corporate America Kowtow To China? (Reuters)
“I don’t blame the Chinese, they’re just pursuing their national interest,” said Patrick Mulloy, a member of the Congressional U.S.-China Economic and Security Review Commission. “I blame us for not realizing what’s happening to us and for doing nothing about it.”

White House Distributes Copies Of Obama’s Birth Certificate (BW)
Today’s release was made because “the president believes it was becoming a distraction,” White House communications director Dan Pfeiffer said.

S&P’s Japan Outlook Goes Negative (WSJ)
In a statement Wednesday, the credit-rating firm said it estimated reconstruction costs owing to the quake and subsequent tsunami and nuclear disaster at ¥20 trillion to ¥50 trillion ($245 billion to $613 billion), with a central forecast of ¥30 trillion.

PIMCO Says Greece Needs To Restructure Its Debt (Reuters)
“So far none of the solutions for the Greek debt crisis have worked. And a lot of people – including me – don’t believe that they will work in the future,” Mohamed El-Erian, chief executive of PIMCO, wrote. Greece will need “a preferably voluntary and orderly restructuring” to relieve itself of its debt burden, the PIMCO CEO said.

I handed over £6.2m to gigolo out of love for him: Heiress tells how conman turned blackmailer (Daily Mail)
Married mother of three Ms Klatten, who is said to be worth more than £6 billion through holdings in car giants BMW and chemical firm Altana, fell for conman Helg Sgarbi, 46, after meeting him in a luxury hotel. The Swiss born former investment banker had told her he was a ‘special adviser for the Swiss government’ and fed her a string of lies, winning her over and within weeks they had become lovers. He wooed her with his charm but it later emerged that it was all part of an elaborate plot hatched by mystical faith healer Ernani Barretta, 63, whose trial began in Pescara today.

Article courtesy of Dealbreaker

UBS Attracts Highest Inflows Since 2007 as Profit Tops Estimates (Bloomberg)
UBS rose as much as 6.1 percent in Swiss trading, the biggest gain since July, after wealth management and retail clients added a net 16.7 billion francs ($19 billion), more than double the estimate of analysts surveyed by Bloomberg. Net income was 1.81 billion francs, topping the 1.69 billion-franc forecast of analysts…“The main thing is they’re having inflows again, and that’s good,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets. “The investment bank will remain a construction site for UBS for a while.”

Qaddafi’s Money Man in Vienna Loses Funds With London Friends (Bloomberg)
As Muammar Qaddafi’s forces strafed crowds of protesters in Tripoli with automatic gunfire on Feb. 21, the dictator’s money manager fled the city in a car to the airport to escape the violence. With phone lines and Internet connections down, Mustafa Zarti, vice chairman of Libya’s $65 billion sovereign-wealth fund, couldn’t buy an airline ticket in advance. As mobs of travelers at the airport jostled for seats on packed flights, Zarti scored a spot in business class on Austrian Airlines and flew to Vienna, Bloomberg Markets magazine reports in its June issue. “It was catastrophic that day,” Zarti says. “I’m very sad for Libya.”

Boehner opens door to cutting U.S. oil tax breaks (Reuters)
“It’s certainly something we should be looking at,” Boehner said in an ABC News interview. “We’re in a time when the federal government’s short on revenues. They ought to be paying their fair share.” “Everybody wants to go after the oil companies and frankly, they’ve got some part of this to blame,” he said.

Biggest Banks Beating Estimates Can’t Hide 13% Drop in Revenue (Bloomberg)
“Loans still make up half of bank revenues and loan growth is negative,” Brian Foran and Glenn Schorr, analysts at Nomura Holdings Inc. in New York, wrote in an April 14 note. “We have spent the last few weeks on the road visiting investors. The overwhelming feedback on banks has been ‘Why bother?’”

NY Jurors Can’t See Graphics Again In Insider Case (BusinessWeek)
The jurors at the trial of Raj Rajaratnam began working at midday Monday after a federal judge in Manhattan described the law they must follow. They ended four hours later and will resume Tuesday. They asked to see defense exhibits they didn’t know they already had in binders and graphs prosecutors showed during closings but they can’t see again because they’re not exhibits.

NYSE Merger Plan Tunes Out Big Board Rules (Dealbook)
Without so much as having a brief meeting or discussion with Nasdaq and ICE on their bid — which offered over 13 percent more than Deutsche Börse’s bid — the board of NYSE Euronext declared the offer “clearly not in the best interests of our shareholders.” How could the board determine that without even having a conversation?

HSBC to close retail operations in Russia (FT)
“It’s a difficult market in Russia. You can’t just come in and say, ‘I’m HSBC’, ” said an executive at a rival Russian bank.

Fight Heats Up For Lehman Remains (WSJ)
A three-way battle over the remnants of Lehman Brothers Holdings Inc. is coming to a head, as the defunct investment bank’s estate fights with big-name hedge funds like Paulson & Co and Lehman’s former archrival Goldman Sachs. over how to divvy up $61 billion in assets.

If Greece Acts Quickly, Crisis Could Be Averted (CNBC)
”The longer Greece waits before, the more the plan will cost…and the greater the odds of a haircut for bondholders,” Carl Weinberg explained.

Madoff Said Picower May Have Suspected Fraud, Henriques Writes (Bloomberg)
Madoff, serving a 150-year term for the largest Ponzi scheme in history, said in a prison interview that Picower could have figured out the fraud at Bernard L. Madoff Investment Securities LLC, according to the book. Picower invested $620 million and withdrew $7.8 billion before Madoff confessed to his brother and two sons in December 2008. Henriques asked Madoff who knew of the fraud. “Picower was the only one that might have,” Madoff said. “I mean how could he not?”

Human Cannonball Dies After Safety Net Fails (Sky News)
The accident happened during a show put on by Scott May’s Daredevil Stunt Show at the Kent County Showground in Detling at about 3.30pm on Monday.
The 23-year-old man was flown by air ambulance to Maidstone Hospital, but later died from his injuries.

Article courtesy of Dealbreaker

This is the worst time in decades to try to reduce the deficit. Unemployment is immorally high, growth remains anemic, private deleveraging shows no signs of abatement, infrastructure is rapidly deteriorating and the prospect of a stagflationary double-dip recession is all too imminent. Yet the drum beat for deficit reduction is deafening, with everyone from Standard & Poor’s to the Committee for Economic Development to the AFL-CIO keeping time, and the rest of the world joining in, marching for a cure to our ailing fiscal health. But if Dr. Dominique Strauss-Kahn prescribes it, and Dr. Zhou Xiaohuan concurs, then it’s snake oil. Don’t drink it.

To be fair, the cacophony of voices calling for deficit reduction is just that, a cacophony. Each special interest has its own rationale for deficit reduction, political, economic and otherwise, and each one places a different level of emphasis on the goal, with a different timeline, different priorities and tactics for achieving it. The AFL-CIO tepidly supports deficit reduction lite, at the bottom of a list of concerns trumped ultimately by the continuance of its own tenuous relevance. The Chinese are focused on their own political stability, now threatened by commodity inflation and their own rudderless domestic economy. The IMF needs contributor nations to appear credible if it has any hope of enforcing its agreements with debtor nations. The Tea Party misunderstands the inchoate backlash that bought them power as a mandate for Objectivism. President Obama is fighting for his political life. Standard & Poor’s, as near as I can fathom, is simply conducting a marketing exercise. But any attention paid to deficit reduction is wasted. Deficit reduction is not a legitimate strategy, period. It is merely one of the pleasant side-effects of a more balanced national economy.

Of all the various approaches floated to address our deficit, the one that seems most likely to succeed is the high-sounding “shared sacrifice.” Shared sacrifice is bullshit. It’s nationalist bullshit meant to distract pensioners from the exiguity of their pensions. It’s statist bullshit to bully the fortunate among us into silence. Shared sacrifice is what we must do when our homes are under attack by a foreign enemy. Otherwise anyone selling you shared sacrifice is picking your pocket.

The nice thing about using leverage is that when things go your way they go your way bigger. Uncle Sam has used a nice amount of leverage and at least has the sense to recognize (for the most part) that he should continue to do so. But there’s more than one kind of leverage.

At home, literally trillions of dollars are languishing on corporate balance sheets right now for a dearth of good investment opportunities. That would be crazy were it not for the stunning lack of leadership that characterizes our public sector. It’s fundamental: Who wants to invest in a country that can’t get its political act together? Chew on this: Spain is ahead of the United States in alternative energy. How is that possible? Among other advantages we have a more flexible economy, better immigration policy, a better educated and more productive labor pool on our side. Good leaders would find some way to encourage better utilization of all those factors. Or at least to stop discouraging their utilization. They may not even have to write any new legislation; they could start by conducting a better, more intelligible dialogue. Good leaders would signal something to the marketplace other than their willingness to squeeze the yield out of Treasurys at any cost. I’m not breaking any new ground when I say that private dollars invested domestically create jobs, which stimulates consumption, which improves profits. Income tax, sales tax and corporate taxes follow proportionately.

The story abroad is no different. Rather than living up to the ideal of American exceptionalism, we lean ever further toward repeating Queen Victoria’s British empire, sucking commodities out of our colonies as they grow progressively more dissatisfied with the burden of our friendship. It doesn’t end well. And like any pseudo-imperial power, we are too slow to recognize how badly we’re hurting ourselves. The core failure common to our China trade, our wars and our energy policy is that we are shipping boatloads of money overseas to people who don’t even want it. We should be recirculating that capital at home. The “how” is the same here. Our trade deficits, like our budget deficits, are only a symptom of the failure of leadership to encourage domestic investment.

Take care of the economy and the deficit will take care of itself.

Article courtesy of Dealbreaker

Rajaratnam Jurors Hear Chiesi’s AMD Discussion as Testimony Ends (Bloomberg)
Prosecutors’ brief rebuttal of Rajaratnam’s weeklong defense included playing a recording of a phone call between Rajaratnam and former New Castle Funds LLC analyst Danielle Chiesi. During the Sept. 30, 2008, call, Chiesi asked Rajaratnam if he had bought 1 million shares of Advanced Micro Devices Inc. (AMD), calling the purchase “a very bold move unless you know what we know.”

Bernanke May Sustain Stimulus To Avoid ‘Cold Turkey’ End To Aid (Bloomberg)
The Fed chief’s top two lieutenants said this month the economy and inflation are too weak to warrant the start of a monetary-policy reversal. Investors and economists including David Kelly at JPMorgan Funds see that as a signal the Fed will keep its balance sheet at current levels by replacing about $17 billion a month in maturing mortgage debt with Treasuries.

Obama Embarks on Tour to Sell Debt Plan, Not Dwell on S&P Report (Bloomberg)
Obama is scheduled to spend three days traveling through states crucial to his 2012 re-election campaign to publicize his plan to reduce cumulative deficits by $4 trillion over 12 years.

Japan Ministers Confident in US Debt After S&P Move (Reuters)
“The United States is tackling fiscal issues in various ways, so I still think U.S. Treasurys are basically an attractive product for us,” Finance Minister Yoshihiko Noda told reporters after a cabinet meeting.

Ukraine’s Richest Man Buys UK’s Most Expensive Flat (FT)
Rinat Akhmetov, Ukraine’s richest man, has bought the UK’s most expensive flat at the One Hyde Park residential development in London’s Knightsbridge, for £136.6 million.

PIMCO is back in the market buying Treasuries (PMM)
Allegedly.

Goldman Sachs Spins Away From Success (Dealbook)
Sorkin: “Having studied Goldman’s statements closely, it appears the firm decided to take a Clintonian approach to parsing its words. Notice that Goldman and Mr. Blankfein always qualify their denials of the firm’s short bets by saying they weren’t “massive” or “large” or “consistent.” Such descriptions may be accurate. What’s large, or even massive, may be in the eye of the beholder.”

Credit-Focused Hedge Fund Shrinks As Returns Fall (FT)
GLG Partners is preparing to close one of its largest funds to new investors, amid growing concerns about the ability of supersize hedge fund portfolios to deliver strong returns. The London hedge fund’s market neutral fund will shut when it grows beyond $1 billion, expected to be in the next few weeks. At such a size the credit-focused fund would still be only a third as large as its pre-crisis peak, when it ran more than $3 billion in investor capital.

BNY Mellon Profit Climbs 12% as Market Rally Increases Assets (Bloomberg)
The bank reported a 12 percent increase in first-quarter earnings as a rising stock market lifted assets and the fees for overseeing them. Net income climbed to $625 million, or 50 cents a share, from $559 million, or 46 cents, a year earlier. Analysts had expected the New York-based company to earn 56 cents a share, according to the average of 13 estimates in a Bloomberg survey.

Citi Struggles To Return To Growth (WSJ)
Having recovered from a near-collapse that forced it into the arms of the U.S. government, the New York banking giant has yet to show its overseas growth strategy can produce consistent profit. The challenge now before the bank: Pare its legacy holdings of toxic debt and expand its business abroad, while avoiding market blow-ups that can happen in fast-growing, emerging economies.

Citigroup Settling With JR (NYP)
The bank had been ordered in October to pay almost $12 million in damages to Hagman and charities chosen by him after losing a Financial Industry Regulatory Authority arbitration ruling. A Los Angeles judge dismissed that decision on Feb. 9, leading to Hagman’s appeal.
“Mr. Hagman is very pleased that the matter is settled,” Aidikoff said.

FAA Suspends Controller For Watching Movie On Duty (AP)
The controller was watching a movie on a DVD player early Sunday morning while on duty at a regional radar center in Oberlin, Ohio, near Cleveland that handles high-altitude air traffic, the FAA said in a statement. The controller’s microphone was inadvertently activated, transmitting the audio of the movie – the 2007 crime thriller “Cleaner,” starring Samuel L. Jackson – for more than three minutes to all the planes in the airspace that the controller was supposed to be monitoring, the agency said.

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