Morning Mix

1. From the NYT:

Banks in Need of Even More Bailout Money
By EDMUND L. ANDREWS and ERIC DASH
"Even some of the bailout program’s harshest critics acknowledge that things most likely would be even worse without it."

DoctoRx here: With the Dems back in charge in DC, the Times is once again the Establishment paper. It just cannot resist defending the flawed and horribly unpopular bailout. So what if "some" of the critics give the bailout a cheer or two?

The point of view here is that the banks were treated with kid gloves. All stakeholders in these institutions should have taken the first, second and third hits: stockholders wiped out; bondholders wiped out or with mandatory conversion to stock in a recapitalization; etc. Only then should taxpayers have stepped in. The effect on preventing Armageddon would have been the same.

2. More on Geithner, the tax cheat. If this were a Republican administration, the Times probably would have led with this story (see my posts of last night). Here's more interesting stuff on Tim, from Wikipedia:

"Geithner was born in Brooklyn, New York.[2] His father, Peter F. Geithner, is the director of the Asia program at the Ford Foundation in New York. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance programs in Indonesia being developed by Ann Dunham-Soetoro, mother of President-elect Barack Obama, and they met in person at least once."

We wondered why Mr. Obama would have stuck with this loser, once the scale and repetitiveness of his serial tax transgressions was known. Now we know.

3. Yves Smith at Naked Capitalism has two great posts today. The title of the first one says it all: "Asia-Europe Shipping Rates Drop to Zero."

4. Her other post, which is long, important and "right-on", relates to the theme laid out here over and over, and that Mish has written about persuasively and extensively. This includes the point that the emphasis on banks to lend more is just plain wrong. Too much borrowing and lending got us here. In the old days, banks were plain vanilla depository institutions that did not lend more than their capital. The global economy is teetering similarly to the 1930s for a similar reason: too much bad lending. We should reject Japan's solution, which was more and more debt on the governmental level. In what is now looking like a resource-rich world, you can be sure, as the Austrian economists, Adam Smith and others pointed out, that the invisible hand of the marketplace will let people maximimze their economic and other relevant well-being by producing and trading as they see fit. It is only a wounded Establishment wedded to the idea of "growth" that feels a need to resuscitate a broken debt-based system.

5. The Commerce Dept. has reported miserable retail sales for December 2008 and has revised downward its earlier estimate of November sales.

6. Treasuries are rallying hard on the above news and in sympathy stock futures are marginally higher. How long "they" can keep the stock market from breaking down in the face of unrelentingly horrible economic news as detailed in points 3 and 5 above, an insolvent Citigroup flailing about, the news that Mr. Obama supports a serial tax cheat to head Treasury, incompetence at the Fed, etc. is an interesting question.

SUMMARY

We have seen better times!

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