Tuesday, March 30, 2010

Pennsylvania State Capital Misses Loan Payment

As regular readers know, we've been fascinated by the comings and goings in Harrisburg, PA - Pennsylvania's capital city. Harrisburg has withheld payment on a loan obligation to Covanta for a waste-to-energy incinerator financing that Covanta provided (Covanta being a large waste-to-energy operator and thus a partner to municipalities all over the US).

Today, Harrisburg announced that for the third time this year, on Thursday April 1, 2010, it will not meet its legal obligation to Covanta (sadly, not an April Fool's joke). Covanta, chaired by Sam "Gravedancer" Zell, has not yet put Harrisburg into default and is considering its options. Bloomberg article below [emphasis added]:
Harrisburg, Pennsylvania, to Miss Incinerator Loan Payment
2010-03-30 20:17:19.538 GMT

By Dunstan McNichol
March 30 (Bloomberg) -- Harrisburg, Pennsylvania, the capital of the sixth-most-populous U.S. state, will miss an April 1 loan payment to Covanta Holding Corp., said Michael Casey, the city's interim business manager.
Harrisburg faces $68 million in debt service payments this year connected to a trash-to-energy incinerator that Fairfield, New Jersey-based Covanta operates. The payments on the $282 million in incinerator debt are about four times what the city of about 47,000 raises through property taxes, according to its budget.
The city is scheduled to pay Covanta $637,500 April 1. The payment is the fifth installment on a $20.7 million Covanta advance the city guaranteed in 2008 on behalf of the incinerator's manager, the Harrisburg Authority. Covanta runs 64 waste-to-energy facilities in the U.S. and abroad, according to its 2009 annual report.
"We have the cash, but we do not plan to pay them on the first of April," Casey said in a phone interview today. [TILB - Sam Zell is getting Angry!] "They are working with us on a forbearance program for the rest of the year," meaning a plan to give the city some leeway on debt payments, he said.
Casey said the city is talking with the authority, Dauphin County, a guarantor of some of the bonds, and Hamilton, Bermuda- based Assured Guaranty Municipal Corp., their insurer [TILB - Wilbur Ross is getting Angry!], on a plan to restructure the debt while the city draws up a recovery strategy.

Asset Sales

That plan will include selling unspecified city assets, raising the county's trash-dumping fees at the incinerator and refinancing a portion of a $34 million working capital loan that is scheduled to be paid in full in December, Casey said. Mayor Linda Thompson isn't considering a bankruptcy filing, he said.
"And frankly, we see no need of it, the way things are going," he said.
Covanta is cooperating with the city and is awaiting its recovery measures, Jim Klecko, regional vice president for Covanta, said in a telephone interview today from his office in Lancaster, Pennsylvania.
"They have given us a real good feeling that they don't expect to go into bankruptcy," he said.[TILB - "a real good feeling"? How about the cash they are withholding from you??]
In addition to the debt service, the city owes another $12 million in payments on eight series of bonds and notes of its own, according to budget documents.
Thompson didn't return messages seeking comment today.

Missed Payments

Covanta, whose chairman is Tribune Co. owner Sam Zell, reported annual revenue of $1.55 billion in 2009.
The city has missed two payments on the incinerator debt this year. [TILB - oops!]
On March 1 the authority tapped debt service reserves to cover $2 million in payments due on its Series 1998A and 2003 Series A, B and C bonds after Harrisburg failed to honor its guarantee, according to March 8 notices to bondholders. A $425,000 payment, for which there is no such reserve, is due May 1, according to a schedule prepared for the City Council by Cincinnati-based Management Partners Inc., which was hired by Pennsylvania to develop a recovery plan for the city.
Dauphin County, where Harrisburg is located, has sued the city seeking $15 million, including reimbursement of $8.9 million in incinerator swap and debt service payments it has made on the city's behalf since last year, according to the county's legal complaint. [TILB - We love the county vs. city dynamics]
City Controller Dan Miller, who has advocated seeking Chapter 9 municipal bankruptcy protection instead of selling assets, said he doesn't think the city has enough cash to make the Covanta payment along with $4 million in city bond payments and a $1 million payroll that are also due April 1.
"I think we're going to have trouble making those payments, let alone the $600,000 to Covanta," he said in a telephone interview from his office in Harrisburg today.
Harrisburg's credit rating was slashed to five levels below investment grade in February by Moody's Investors Service. [TILB - If you cut five levels at once, it implies you weren't paying attention. These don't arise out of left field.]

For Related News and Information:
For Pennsylvania Municipal Issuer data: SMUN PA .
To see U.S. state finances at a glance: MIFA .
Pennsylvania 2020 G.O. bond: 70914plc DES .

--Editors: Mark Tannenbaum, Walid el-Gabry

To contact the reporter on this story:
Dunstan McNichol in Trenton, New Jersey, at +1-609-394-0737 or dmcnichol@bloomberg.net.

To contact the editor responsible for this story:
Mark Tannenbaum at +1-212-617-1962 or
mtannen@bloomberg.net.

Thursday, March 25, 2010

Paul Ryan Dismantles The Health Care "Reform" Legislation On The Congressional Floor

Wisconsin Representative Paul Ryan is quickly establishing a reputation in the republican community as an impassioned, logical, freedom loving voice of reason. A throwback republican of sorts. While certainly not our ideal politician, he's closer to the kind of republican that makes TILB still have hope for the GOP.

Here he blasts several of the most popular health care myths on the floor of the House of Representatives. He shows how it does nothing remotely close to reducing the debt, he rails against the legacy of leverage that we leave to the next generation to shoulder, and he lambasts the idea of government rationing health care rather than individuals making private decisions with their care providers and insurers.

Sadly, nobody listens; nobody cares.

Sunday, March 21, 2010

Ron Paul On The "Health Care" Frankenstein Passage

We lost a chunk of freedom tonight as we continue the process of putting enough weight on our own shoulders that we collapse under its mass.

I can't bring myself to talk about this health care travesty. It's just so sad, immoral and unsustainable. To quote Congressman Ron Paul when asked what it will take to repeal the health care bill, "the bankruptcy of this country will repeal it... It will end, it will end badly and it will hurt the people that many [other] people are very seriously trying to help with medical care... Every country in the world today is on the verge of bankruptcy..."

Anyway, I'll let Congressman Ron Paul tell you about this debacle:

Friday, March 19, 2010

Liberty Quote Of The Day: Jens O. Parsson

Jens Parsson discusses how the persistent debasement of money kills society in his 1974 book "Dying of Money: Lessons of the Great German and American Inflations". The below quote is reminiscent of Murray Rothbard's description of the early "fun" portions of an inflation as a "heady wine" (click here for Rothbard's in-depth essay on German hyper inflation).

In any case, Parsson makes the point that monetary inflation always ends in a trail of tears, because it is addictive and requires an increasing volume of inflated money in order to keep the party going. As soon as the spigot is turned off, pain comes, so the spigot is never turned off. In fact, it is provides a constantly accelerating flow and ultimately either tragically deluges society in an out of control hyperinflation or, if discipline is somehow re-instituted, ends in a painful deflationary liquidation. Read on for Parsson's quote:
"Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and an ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation."
- Jens O. Parsson, Dying of Money: Lessons of the Great German and American Inflations (1974)

[HT: LB]

Thursday, March 18, 2010

Germany Tells Greece To Go IMF Themselves

That headline wrote itself. This NY Times article took a somewhat more modest tack, although the body of the article made the point clearly. All emphasis added and commentary in brackets is from TILB.

As a quick aside, TILB views this as very positive for German Bunds:
March 18, 2010
Germany Backtracks on Europe Rescue for Greece
By MATTHEW SALTMARSH
The New York Times

The burden for resolving Greece’s financial crisis appeared to shift Thursday toward the International Monetary Fund as Germany distanced itself from supporting bilateral or European aid to the heavily indebted country.

Citing legal hurdles, a government official in Berlin said Thursday that Germany believed that any external financial support to Athens, if needed, would best be provided by the I.M.F.

“In the case that the Greeks get into really serious problems, we would support an I.M.F. solution,” said the official, who was not authorized to speak publicly on the matter.

Amid the uncertainty, the euro slipped against the dollar and was quoted at $1.3621 in New York afternoon trading, down from $1.3741 early in the session. European stocks also wilted. The Athens Stocks Exchange General Index ended 3.3 percent lower.

Germany is the euro area’s largest economy, so Berlin’s view on a bailout or other form of debt workout is pivotal.

European governments, including those of France and Germany, had previously signaled that any rescue of Greece, which has been punished by financial markets as a result of its surging deficit, would best be provided from within the euro area.

Berlin initially appeared reluctant to call on the I.M.F., preferring to resolve the matter within the currency bloc — even though some financial officials, like J├╝rgen Stark, a member of the executive board of the European Central Bank, had signaled their preference for an outside solution.

Since the euro’s inception in 1999, no member has sought support from the I.M.F., which nevertheless helped to bail out a number of East European economies at the height of the recent crisis.

An official from one of Germany’s euro-area partners said Greece might not be able to borrow enough money from the I.M.F. to fund its requirements, given that any loan would probably be limited to a multiple of the modest quota that Athens holds in the Washington-based institution.

Berlin’s about-face on aid to Greece has left some of its European partners scratching their heads about Germany’s intentions.

Daniel Gros, director of the Center for European Policy Studies in Brussels, said the change of heart had been prompted by two factors.

“The first is that this is for the domestic audience,” he said, referring to sentiment among many Germans that Greece should not be bailed out with their money.

“The second is that the strategy the Germans had in mind didn’t work,” Mr. Gros said. “The idea was that the mere political offer of support would be enough” to bolster investor confidence in Greek bonds.

...

The Greek government has been pushing for more clarity on what its European neighbors will do in the hope of bringing down its borrowing costs, which have risen as Greece’s debt troubles have become more acute. The yield on Greece’s benchmark 10-year bonds rose Thursday to 6.265 percent — a spread, or differential, of 3.14 percentage points over comparable German bonds, the European benchmark for safety.

While Berlin believes that Athens can live with the level of interest it is paying on its bonds — and that is not on the verge of a default — the Greek government thinks it should not have to pay so much to borrow, now that it has agreed to measures that are designed to cut its budget deficit to 8.7 percent of gross domestic product.

“The more the Greeks push for something concrete, the more they run into this brick wall,” Mr. Gros added.

Greece, meanwhile, has sought to leave its options open, while expressing frustration at the lack of a solid proposal from its E.U. partners.

Speaking to reporters after meeting E.U. lawmakers in Brussels, Prime Minister George A. Papandreou warned that the government would be hampered in its attempts to enact deficit cuts if the country is unable borrow money more cheaply. [TILB - hilarious. Greece basically threatens to sandbag their austerity "efforts" if they don't get a more equitable borrowing rate.]

An offer of E.U. aid “would be enough to tell the markets: hands off, no speculation, let this country do what it’s doing, let it in peace to be able to move ahead,” he said. [TILB: he must have accidentally left out the word "temporarily".]

If Athens relies on financing from the markets at high interest rates, “that undermines the actual measures that you are taking,” Mr. Papandreou said. “That money then goes to the interest of those who are loaning to you rather than the implementation of a program.” [TILB: ah, such is the nature of borrowing beyond your means.]

...

Speaking in Washington, Caroline Atkinson, the I.M.F.’s director of external relations, said Thursday that the fund had not yet been approached by Athens.

“We expect the euro-zone countries to want to and to plan to resolve this question by themselves,” she said. She added that the I.M.F. was ready to respond to a request from Greece for a loan.

...

On Monday, Jean-Claude Juncker of Luxembourg, who chairs the meetings of euro zone finance ministers, said that a European framework would be created to coordinate bilateral loans, if required, involving all 16 euro-zone members. He added, however, that the final decisions on any package would be made by E.U. heads of government.

As a reason for Germany’s apparent change of position, the German official pointed to Article 125 of the European Union’s governing treaty, which states that the European Union or individual members should not be liable for or assume the commitments of governments.

...

Still, the drip feeding of announcements from Berlin has left some politicians in Europe cold.

“I find what has happened, or rather what has not happened over the past few days and weeks, incomprehensible,” said Guy Verhofstadt, the former Belgian prime minister and the current president of the Liberal Democratic bloc in the European Parliament. “It is incomprehensible because it is precisely a European response that is the quickest and least costly solution.” [TILB: Least costly to whom, exactly? Certainly not to Germany.]

Officials in the German Finance Ministry also appeared to be unaware of their government’s shift in stance. Financial officials in other euro-zone countries were similarly baffled.

“The signals that one gets out of Germany have varied considerably,” said an official from another euro-area country, who was not permitted to speak publicly. “I fail to see what their line is.”

The official said the assumption among euro-area finance ministries is that Greece might require about €25 billion, or $34 billion, to cover near-term liabilities. Athens needs to borrow €53 billion in financial markets this year and must refinance around €20 billion of debt in April and May — at interest rates likely to be high.

The official added that Greece would probably be able to borrow between $12 billion and $14 billion from the I.M.F., assuming the same model used in recent rescues. For example, in 2009 the fund loaned Romania €13 billion, which was about 1,100 percent of that country’s quota at the fund. Greece holds just 0.38 percent of the fund’s quota, which is expressed as 823 million of the fund’s own unit of currency — Special Drawing Rights — each worth $1.53. [TILB: $14 billion ain't gonna be enough, long-term]

The official said other multilateral lenders like the World Bank or the European Investment Bank would not be in a position to lend Greece €10 billion or more. That would mean that the European Union — and Germany — might have to support Greece in any event, perhaps alongside the I.M.F.

He also said that legal impediments to E.U. support did not appear to be insurmountable, although some euro members might need to change national rules.

“We know how we could do it,” he said.

Still, Mrs. Merkel’s change of line will be welcomed by some. Mr. Stark of the E.C.B. told a German newspaper this month that joint financing “could become very expensive, would create false incentives and burden countries with solid finances.” During an interview last month, Otmar Issing, a former top official of the German and European central banks, warned that the Union could not “impose the kind of sanctions that would be needed, and it would make Brussels too unpopular.” “A better way,” he said, “is for Greece to approach the I.M.F. It is the only institution that can impose strict enough conditions.”

Matthew Saltmarsh reported from Paris and Stephen Castle from Brussels.
[HT: LB]

I Heart(ed) Obama

I miss Mad Magazine - was great to be a kid.

This is perfect. People loved him when he said he wasn't a socialist. His popularity has waned as that's turned out to be untrue.



{HT: Max Headroom]

Wednesday, March 17, 2010

Even MORE Ebullio! Here's Their Website And The Top News Is Not Their Blow-up

Just when you'd think the Ebullio story can't get better, you find out they have a super-transparent WEBSITE!!

As long time TILB friend Hatch says, "Ebullio should change the logo from the matador dodging the bull to the matador being gored by the bull." Indeed.

Anyway, on the News and Events part of their website, the second most recent article is a Bloomberg article about blowing up (fair enough, that's at least honest and transparent) and then the most recent article is a press release announcing “with great pleasure” the promotion of one of their traders.

You cannot make this shit up: http://www.ebullio.co.uk/newsevents.html

More Ebullio News: Manager Originally Reported -1.1% Loss In January, Updates That Estimate To -70%

Wow. This just gets better and better. When we told you Ebullio's manager was crazy, we didn't appreciate how right we were. Check out this Bloomberg article with some quotes from a phone interview Mr. Lars Steffensen provided to the authors. All the service providers are running like rats from a sinking ship. This will make for an awesome spectacle.

A-f'ing-mazing.
Ebullio Commodity Hedge Fund Says January Loss Was 70% Not 1.1%
2010-03-16 18:20:22.592 GMT

By Chanyaporn Chanjaroen and Tom Cahill
March 16 (Bloomberg) -- Ebullio Capital Management LLP said its commodity hedge fund fell almost 70 percent in January, not the 1.1 percent decline originally reported to investors, letters to investors show.

The 1.1 percent drop was announced in the January notice and changed to 69.65 percent in the February report, the documents show. The fund, based in Southend-on-Sea, England, fell another 86 percent last month, taking its plunge in the first two months to 96 percent. The biggest losses were in copper, nickel and tin, according to the February letter.

"The moment we knew the actual January loss, we brought that up to our investors immediately," Lars Steffensen, the founder of the company, said today by phone. He declined to comment on the size of the discrepancy.

The LMEX index of six industrial metals fell 8.2 percent in January, the steepest drop since the end of 2008, before rebounding 6 percent last month. Commodity hedge funds returned on average almost 1 percent last month and lost 2.2 percent during the first two months of this year, according to Chicago- based Hedge Fund Research Inc.

"Extraordinary circumstances" forced Ebullio "to liquidate and/or cancel parts of the physical book and liquidate some long-held speculative positions, mainly in LME non-ferrous metals," Steffensen wrote in the February report, referring to the London Metal Exchange.

Gains in oil, wheat, gold and sugar last month were "drowned out by the hugely negative impact made by copper, nickel and tin," according to the report.
Assets Under Management

Ebullio made 29 percent last year and 92 percent in 2008, according to the reports to investors. The fund’s assets under management shrank to $1.47 million last month, from $42.3 million in November.

"We took the hit," Steffensen said by phone earlier today. "I’ve always bounced back."

The fund is waiving its 2 percent management fee for 2010.

Kinetic Partners LLP, the fund’s auditor, didn’t immediately return a call to its London office seeking comment.

GlobeOp Financial Services is the fund’s administrator, according to the investor letters.

"Estimates are generally developed by fund managers based on their own estimate of profit and loss," GlobeOp Financial Services said in an e-mailed statement today. "There is generally no involvement of the administrator in the development of these estimates."

Steffensen, 42, worked for companies including Gerald Metals Inc. and Next Energy Inc. before setting up Ebullio. The fund also invests in energy, precious metals and agriculture.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.

For Related News and Information:
Top commodity stories: CTOP
Top worldwide stories: TOP
To read about commodities hedge funds: TNI HEDGE CMD Top shipping stories: TOP SHIP Technical gauges: BTST
--Editors: Stuart Wallace, John Deane
To contact the reporters on this story:
Chanyaporn Chanjaroen in London at 44-20-7073-3544 or cchanjroen@bloomberg.net or; Tom Cahill in London at +44 207 673 2052 or tcahill@bloomberg.net.
To contact the editor responsible for this story:
Stuart Wallace at +44-20-7673-2388 or swallace6@bloomberg.net

Ebullio Capital Management Loses 95% In Two Months - Then Acts Like It's No Big Deal

Wow. We really don't know where to begin. TILB received an email from someone saying a manager lost 86.25% in the month of February. When TILB opened the attachment (see below), we noticed that, in fact, the manager had lost 95% in the first two months of 2010. For those of you familiar with the perils of negative compounding, the difference between losing 85% and losing 95% is an additional 67% of losses. So, we scrolled down and, wala, the manager - Lars Steffensen - actually lost 70% in January as well.

But that's not the worst of it.

His February monthly commentary basically brushes over the fact he's down 96%, as if it's just another couple of bad months! He’s literally insane. He talks about how helpful his hedges were, albeit a little too far out of the money, but that they were "money well spent," yada yada yada.

Dude! You just had a month of -70% followed by a month of -85%. In fact, in February, you actually lost more than 100% of the entire fund on metals positions alone.

He even goes on to give a fucking monthly commentary on the macro picture. Who cares what you think, dude? You’re not even talking about the fact you’ve lost 19 out of every 20 cents in 60 days. Look at this:
Since our getting long against conviction play early January 2010, we have been doing some thinking and come to the conclusion that the Japan scenario has at least been tried and tested in the real, civilized world, whereas the hyperinflation (discounting Weimar Germany and various kleptocratic African quasi States) has not.
Dude, you were down 95%. Why are you giving market commentary? What world do you live in?

After searching further back into my email box, I found this old hedge fund industry rag news snip-it on Ebullio from fall 2009:
Opalesque Exclusive: Ebullio plays hard in the commodity markets as it now owns most of the tin traded on LME - fund up 24% YTD
Thursday, October 15, 2009

By Benedicte Gravrand, Opalesque London:
We heard last week that an investor had been buying around 90% of the tin traded on the London Metal Exchange (LME), in the form of physical stocks and contracts.

Since early summer, the dominant position has caused the tin market on the LME to become "disorderly" and distorted prices, Reuters reported.

Rumors abounded but nobody knew for sure who the mystery buyer was. Then the revelation came: it was......................
TILB cannot believe they didn't lose every investor they had. Amazing. Let us know what you think.

Ebullio Capital Management February 2010 Monthly Update

Tuesday, March 16, 2010

Mike Leach Does Not Take Mediocrity Quietly

Former Texas Tech Red Raiders head football coach, Mike Leach, is far and away TILB's favorite coach in sports. I'm not saying that as a joke. The guy is a football genius and is wired to destroy opponents. That's the point of football and he does it brilliantly. Many people don't like him because he uses his players like pawns, but the man wins football games. Period. Actually, not "period." He does it with substantially inferior player talent and financial support. And he forces a much higher level of academic rigor onto his team than most. He is, in short, an offensive savant (read this great article on Mike Leach by Michael Lewis - author of Lair's Poker, The Blind Side, Moneyball and a few other best sellers)

So, I love Mike Leach. The below video shows Leach letting his team know what he thinks about their 8-4 record following a lackluster win over bottom-dweller Baylor (they ultimately finish 9-4). The man stands for excellence. By the way, this is fairly tame compared to some classic Earl Weaver or Bobby Knight videos. I suspect if Bill Parcells locker room speeches were widely available, they'd have a similar tone to them.



{HT: TD]

Tuesday, March 09, 2010

The Borg - I Mean Obama Administration - Intend To Pay Homeowners To Sell Their Houses

"Have you made a horrible decision and find your mortgage 70% underwater? Please let us give you $1500 of Chinese, I mean tax payer money as a reward! And we'll strong arm banks to let you out unscathed in the process. Congratulations on your hard won earnout."

Ah, the Borg, resistance is futile.

I am so happy they have not given up on their command and control efforts to manipulate our economy from their proverbial perch high up in the moral tower that is White House. What these puppeteers don't realize is the problem has little to do with insolvent homeowners not wanting to sell their homes via short sale and has everything to do with banks wanting to get paid back the money the lent (crazy, I know!).

The NY Times wrote about this on Sunday March 7th. Love the headline. All emphasis added [and TILB comments in brackets].
March 7, 2010
Program Will Pay Homeowners to Sell at a Loss
By DAVID STREITFELD
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year. [TILB - ah, the political truth...]

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed. [TILB: I'm sure banks will sign up left and right to fore go their rights]

...

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure. [TILB - The guy is SEVENTY PERCENT UNDERWATER; unless he wants to keep paying for his mortgage, he should have absolutely no say in this matter! What world do I live in? What is this, Russia? HOW IS THIS EVEN A QUESTION?]

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.” [TILB - Why does a guy that probably put close to no money down get a $1500 windfall but the lender gets ZERO?! Note, the $1000 goes to the servicer(s) of the loan(s), not the lender(s). This is crazy.]

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure. [TILB - Dear David Streitfeld c/o The New York Times: Use your brain. If the lender thought they'd get more back doing a short sale, they already have the ability to pull the trigger. This has zero impact on that reality.]

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes. [TILB - This must be heaven, because everyone wins! The lender, the borrower and the community! How exciting!]

...

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it. [TILB - Right. This should work. Let's see, we're going to pay a real estate agent to come up with a price. No matter what price he/she comes up with, the bank would be FORCED to sell at that price. I bet they'll err to the high side (stop laughing at me, it hurts my feelings).]

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.” [TILB: This is the reason short sales are less common than one might expect. Second lien holders can obstruct the process. But that is okay, that is their contractual right. They are owed money by the borrower and he/she is trying to shirk, generally, 100% of his obligation to them. I might hold up the process too if someone were trying to stiff me and then ask me for a favor.]

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. [TILB: This is servicing] J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.” [TILB: Boom. Principled.]

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.” [TILB - the market at work.]

Sunday, March 07, 2010

First Citizens BancShares, Inc. (Ticker: FCNCA): Investment Write-up

What follows is an investment write-up I recently put together for an investment club I'm a member of. I've made some slight tweaks since the original posting on 2/2/10. For those of you that have followed TILB, you probably know that I have something of a problem with the FDIC and the way it handles assisted transactions. I decided to do some research and figure out how to exploit the opportunity so that I could at least recoup my share of the economic devestation the FDIC wreaks upon our society. There are other good banks available as well.

As a disclaimer: 1) I may not ever make another disclaimer again but you should assume the factset of this disclaimer is always true; 2) I own shares in First Citizens BancShares so consider me very biased; 3) Do your own work. If you buy or sell this based on some random write-up you found on the internet, you are taking very real, independent risk. You absolutely should not rely on my work or views to be accurate or current; 4) I may increase, decrease or entirely exit my stake in this business (or any other investment opportunity) at anytime I want without informing anyone; 5) Please recognize this is a bank being recommended in the middle of an ongoing credit contraction, so use a double dollop of caution.

-----------------------------------------------------------------

First Citizens Bancshares, Inc. - $172/share - Groundhog Day 2010 - Ticker FCNCA/B
Over the past few months, I've been migrating my portfolio from some of the juicier stuff offered twelve to eighteen months ago into conservative, stable investments that offer long-term double digit return potential albeit perhaps at the expense of not being short-term multi-baggers.

First Citizens BancShares is a family-controlled Raleigh, North Carolina based bank holding company (BHC) that just acquired its third loss-share via an FDIC assisted transaction. It trades for 1.1x stated book, though I suspect book will accrete faster than normal over the next few years implying today's purchase price is really at or slightly below book. I've been an owner since this fall and it seems more clear to me now than ever that this conservatively managed bank is exceedingly well positioned to expand its deposit franchise both organically and via acquisition (the latter method being self evident, at this point). I believe downside is fairly limited.

The BHC refers to itself as "BancShares" and is a holding company that operates two primary brands: First-Citizens Bank & Trust (FCB) as well as IronStone Bank a federally chartered thrift ("IronStone" - a solid sounding name if there ever was one - not simply iron, not simply stone, but ironstone). In any case, BancShares is a well positioned BHC with a long track record - it's more important brand, FCB, was founded in 1898.

The FCB arm has been the acquirer in each of the three FDIC assisted transactions - Temecula Valley Bank, CA on 7/17/09, Venture Bank, WA on 9/11/09 and First Regional Bank, CA on 1/19/10. I believe most FDIC assisted transaction are low risk and most offer attractive upside.

By my tally, only two banks have participated in more than three FDIC assisted transactions since the onset of the crisis, both of which are privately controlled banks based in Minnesota (each getting four deals). Not only has FCB acquired three failed banks, it has done so in an incredibly risk-averse manner. It has acquired $4.54 billion of assets (before acquisition accounting fair value markdowns) but did so with loss-sharing agreements with the FDIC covering 88% of those acquired assets, significantly limiting BancShare's downside. This compares to less than 80% coverage for the typical loss-share backed transaction.

Along with those $4.54 billion in assets, BancShares acquired $4.1 billion of deposits and deepened its footprint in two geographies that it was already involved with: Southern California and Washington's Puget Sound counties. Both face obvious cyclical headwinds but have long-term secular tailwinds. Also, each is likely to be an ongoing epicenter of bank failure, leading to incremental opportunity for FCB. [As a brief aside, I think the Pacific Northwest is going to be the Georgia of 2010]

The acquisition of $4.5 billion of assets and $4.1 billion of deposits compares to its June 30, 2009 balance sheet of $17.3 billion of assets and $14.4 billion of deposits. This means BancShares added around 25% to each assets and deposits during the past seven months (June 30th is used because it's the last balance sheet that predates any of the three transactions). This was all accomplished without raising any new capital or taking on much in the way of incremental risk.

To show you the limit of what can happen, the FDIC assisted East West Bank of Pasadena, CA in acquiring United Commercial Bank in November 2009. East West had $12.5 billion of assets and about $10.5 billion of deposits beforehand and added $10.2 billion of assets and $7.5 billion of deposits (with $7.7 billion of loss-sharing). East West Bank thus added 82% and 71% to assets and deposits, respectively. That implies that from the perspective of the FDIC, BancShares has ample flexibility to continue acquiring.

BancShares has not paid a deposit premium for any of the acquired failed institutions.

Capitalization: 8.76 million A shares and 1.68 million B shares with identical economic value, but class B holding 16 votes per share. The overwhelming majority of equity is tangible equity.

Family Controlled: The Holding family controls and runs FCB. They and their family and trusts continue to own well in excess of BancShares votes. They pay themselves fairly - only three employees received over $1 million in total compensation during 2008, none received over $2 million. Two of those employees, Lewis Holding (Chairman & CEO $1.9 million) and James Hyler Jr. (Vice Chairman and COO $1.1 million) retired in early 2009 after 40 and 25 years of service, respectively. Frank Holding Jr. ($0.6 million and 25 years of service) was named Chairman and CEO. His father is the Executive Vice Chairman and has 40 years of service ($1.9 million). Neither retiring executive received any sort of unusual retirement benefits. With a $1.8 billion market cap and insiders owning more than half of it, it's fairly clear that they make money when we do: through building and distributing value to shareholders. No golden parachutes exist.

The company has not issued new shares in many years.

Well Capitalized: If the fact that in the past seven months the FDIC has allowed BancShares to make three acquisitions - including one last week - doesn't provide a hint that BancShares is well capitalized, then nothing will.

BancShares refused TARP money and is considered well capitalized by virtually every objective standard. The company ended 2008 with 13.2% Tier 1 capital ratio, 15.5% total risk based capital ratio and 9.9% leverage capital ratio. According to a recent 8-K, 2009 ended with 13.3%, 15.6% and 9.5%. The FCB subsidiary was 12.7%, 15.1% and 8.7%. Each of these is well in excess of the minimum requirement to be considered well-capitalized (6%, 10% and 5%). While all details haven't yet been released by BancShares about the most recent acquisition (First Regional Bank on 1/29/10), I expect it will not meaningfully negatively impact either BancShares' overall or FCB's specific capitalization scores. BancShares also has a TCE ratio in excess of 8% (calculated before the most recent transaction).

BancShares continues to increase allowances for losses faster than chargeoffs are coming through, despite the fact that both metrics have begun moderating on a quarter over quarter basis, creating some hope that the worst is behind BancShares. The conservative reserving and modest trend improvement both provide hope for reserve release at some point in the future.

Statements like the following one, from a recent 10-Q, provide a qualitative reflection on management's conservative approach [emphasis added]:
"Financial institutions frequently focus their strategic and operating emphasis on maximizing profitability and measure their relative success by reference to profitability measures such as return on average assets or return on average shareholders' equity. Historically, we have placed primary emphasis upon asset quality, balance sheet liquidity and capital conservation, even when those priorities may be detrimental to short-term profitability."

Operating Performance: Over the past fifteen years, BancShares has earned approximately a 10% ROE. That average has been pulled down somewhat by the last several years as the bank was around an 11.5% ROE business for many years through 2000. BancShares earned $11.08 in CY09 vs. $8.73 in CY08, however $6.12 of 2009 was due to acquisition gains from the two 2009 transactions. Book value is approximately $150 per share (tangible book value is about $140 per share).

Chargeoffs in 2009 on non-loss-share assets was 0.56% vs. 0.40% in 2008, though it declined modestly in Q409 at 0.50% vs. 0.62% in Q408. Provisions grew to $77 million vs. $66 million in 2008.

PPOP in 2009 was around $154 million off from $205 million in 2008. Much of this decline is to be expected because as BancShares takes over more troubled assets and new banks, it increases its cost structure. Initially, however, it does not proportionally increase its interest income due to the fact that a large portion of those acquired assets are non-earning assets until they are worked out and the cash is redeployed into earning assets. PPOP in the fourth quarter was somewhat higher than the 2009 annualized rate at $48 million (or $192 million annualized). I expect that over time, it will continue to grow.

Recurring profitability, over time, will expand substantially as the $4.5 billion of assets acquired is redeployed without new equity needing to be raised. More accurately, the fair value of the assets acquired is closer to $3.5-4.0 billion (we don't yet have that detail for First Regional Bank), so the redeployment opportunity is probably more like $3.5-4 billion. In essence, BancShares has increased its loan portfolio and deposit franchise without needing to raise fresh equity. In fact, the growth has come without any meaningful change in BancShares risk metrics because each transaction has been immediately and substantially accretive to book value (described below in the Assisted Transaction section). As such, incremental spread will accrete undiluted to owners. This will improve returns to equity substantially. Over time, I'd expect an incremental $40-50 million of annual income (and growing) from these acquisitions.

I estimate that BancShares could earn in excess of $25 per share on a normalized basis in three years as assets grow from $21 billion and equity grows to over $2 billion. Upside optionality exists in the form of further assisted transactions, faster deployment of excess capital, sustainably higher NIM, and better than expected charge-off experience which releases reserves back to owners.

Steep Yield Curve: While my assumptions do not project substantial NIM spread percentage expansion, it is clearly quite possible. The yield curve is approximately as steep as it has ever been and the lending environment remains very favorable to lenders. This combination amounts to a great environment for banks to operate in, at least for new business. Legacy business obviously remains a challenge for most players as they deal with the less attractive book of assets from the several years leading up to the crisis. As older loans mature and cash is redeployed in a more attractive lending environment, it seems reasonable to expect that this roll leads to average profitability growing over time, even if the size of the asset base stayed the same. I expect that assets will continue to grow as BancShares continues to deploy some of its excess capital and it hunts for additional transactions.

Integration Risk: As with most banks that are larger than $10 billion of assets, BancShares has some history with acquisition and integration. Since 1990, but excluding the three recent assisted transaction, BancShares has acquired nine companies. It wisely stopped buying banks in 2003 as quality and price both degraded. Rather than acquire overpriced banks during the past ten years, BancShares has focused on organic growth of FCB and it has developed its IronStone brand growing it from its founding in 1997 to a $2.1 billion thrift today. I believe the BancShares management team will comfortably manage the integration of the FDIC assisted transactions.

How Does An Assisted Transaction Work: When an FDIC-insured depository institution fails, the FDIC typically conducts an auction to find the highest bidder (actually, to find the "least costly" solution). Some people bid for the entire bank including all assets and liabilities while others bid on pieces. The FDIC seeks to minimize losses to its Deposit Insurance Fund (DIF). This is the normal process.

Historically bidders want to avoid buying bad assets for two reasons: 1) they require management, so there's a personnel cost; and 2) they tie up capital that could otherwise be productively deployed in performing assets. However, during the ongoing crisis, the FDIC was finding that so many bidders were excluding such a large number of assets from their bids that the FDIC began promoting an option to buyers called a "loss-share" agreement where the FDIC covers 80% of losses up to a pre-determined threshold and then 95% of losses beyond that threshold.

In practice this works approximately as follows: the FDIC sets a loss threshold for bidding purposes. This is the threshold where the loss-share triggers from 80% to 95%. For example, on a $100 million asset bank, if we expect losses to the portfolio of $35 million and the loss threshold for bidding purposes is set at $20 million, then the FDIC will absorb losses calculated as 80% x $20 + 95% x ($35 - $20) = $30.25 million (we'll round to $30). Further, because capital is tied up in these troubled loans and resources must be focused on working out those loans, the bidder needs to charge their bid for those carrying costs. Those might be $11 million. As such, the bidder will take the banks pre-existing reserves as its "equity" (call it $10 million for this example), subtract $35 million of losses and $11 million of carrying costs, then add back the FDIC's loss share of $30 million for a total bid of negative $6 million (+$10 of beginning equity - $35 - $11 + $30 = -$6 million). If we were to win the bid, the FDIC would cut us a check for $6 million to take over the bank (and loss-sharing reimbursements would come over time as realized).

All of this is fine, but it still leaves the newly acquired bank with zero equity. A financial buyer (which these days comes in the form of a blind pool) might have to overcapitalize the bank with fresh capital, but a strategic buyer can take its existing capital and apply it to the newly acquired bank. In any case, for BancShares we could assume they'd need to contribute/tie-up $10 million of capital to acquire this hypothetical bank which would make it well capitalized. In essence, they buy this bank at 1.0x book with book being the newly contributed or assigned capital.

This is attractive for a variety of reasons. Importantly, the carry cost asset (the $11 million in our example) is based on a number of assumptions about how long it will take to liquidate bad assets, what the opportunity cost of that capital is, the resources needed to manage those assets, discount rate, etc. The bidder will generally be conservative in this assessment. In the extreme case, if the buyer were to liquidate all of the bad assets for zero, the book value would immediately increase by $6 million (60%) as we'd lose $5 million on the bad assets after the loss-share but we'd accrue the $11 million carry cost asset in its entirety.

This extreme scenario will never happen because the FDIC is both your partner in the assets, your source of future attractive deals, and a key regulator. As such, you would never completely screw them. However, you can see that even if the loss-share portfolio performs extremely poorly, it may actually be a positive event for BancShares. The result is that it is highly likely that the acquisition will end up being at less than book value and that the bank will be overcapitalized and capable of making attractive loans in a lending-friendly environment.

Actual Assisted Transactions:
Temecula Valley Bank - On July 17, 2009, FCB acquired Temecula Valley Bank (TVB) from the FDIC in an assisted transaction. TVB operated eleven branches in Southern California (San Diego and Temecula Valley east of SD). Prior to being shut down, TVB had $1.38 billion of assets and $0.97 billion of deposits (this excludes $304 million of brokered deposits the FCB refused). FCB purchased the $1.4 billion of assets at a $135 million discount. Day one, FCB wrote down the carrying value of the loan portion of TVB's asset portfolio from $1.21 billion to $0.86 billion and its REO from $66 million to $58 million. The bulk of the remaining assets were cash or cash-like, readily marked investment securities and a small amount of "other" assets.

No cash was paid by either FCB or the FDIC at closing. In essence, this was a zero bid. Losses are 100% FCB's on the first $193 million, then split 80/20 FDIC/FCB until losses meet $464 million and then are 95% absorbed by the FDIC thereafter (i.e., the loss threshold set by the FDIC was at $464 million). The term of the loss-share on residential assets is ten years, whereas non-resi real estate is five years with respect to loss-sharing and eight years with respect to loss recoveries. FCB recorded a $103 million loss-share receivable at the time of acquisition and in the first two and a half months identified $32 million in net losses to submit to the FDIC.

In summary, when the net assets of TVB were adjusted upward for the $103 million loss-share offset by the marking of the existing assets an liabilities, FCB records a $58 million "gain" which is effectively $58 million of equity that FCB can use to support the $856 million of loan assets that FCB acquired. FCB likely needed to use another $30 million of its capital to support those assets.

Venture Bank - On September 11, 2009, FCB acquired Venture Bank (VB) from the FDIC in an assisted transaction. VB was located in Seattle/Olympia Washington and operated eighteen branches. Prior to being shut down, Venture Bank had $0.85 billion of assets and $0.71 billion of deposits that FCB inherited (as well as $57 million of other liabilities). FCB purchased the $0.85 billion of assets at a $110 million discount. Day one, FCB wrote down the carrying value of VB's loan book from $650 million to $456 million and its REO from $52 million to $43 million. The bulk of the remaining assets were cash and cash-like investments, investment securities that are easily marked, a small amount of "other" assets.

The FDIC paid to FCB $19.4 million of cash at closing (a "negative" bid). The loss-share was tighter on VB as well. All losses are shared 80/20 FDIC/FCB until losses meet $235 million and then are 95% absorbed by the FDIC thereafter (i.e., the loss threshold set by the FDIC was at $464 million). The term of the loss-share on residential assets is ten years, whereas non-resi real estate is five years with respect to loss-sharing and eight years with respect to loss recoveries. FCB recorded a $139 million loss-share receivable at the time of acquisition and in the first nineteen days identified $8 million in net losses to submit to the FDIC.

In summary, when the net assets of VB were adjusted upward for the $139 million loss-share and the $19 million in cash from the FDIC, FCB records a $46 million "gain" which is effectively $46 million of equity that FCB can use to support the $456 million of loan assets that FCB acquired, meaning that very little to no new capital is required for FCB to take on VB. Further, the faster FCB can put losses to the FDIC, the faster it frees up its capital and resources for productive redeployment.

First Regional Bank - On January 29, 2010 FCB acquired First Regional Bank (FRB) from the FDIC in an assisted transaction. BancShares has not released in-depth detail on the FRB acquisition yet. The basics are that FRB was located in Los Angeles, CA and operated thirteen locations. Prior to being shut down, First Regional had $2.17 billion of assets and $1.87 billion of deposits that FCB inherited. $2.0 billion of the assets were acquired with loss-sharing. Regionally, this fits in with FCB's Temecula Valley Bank acquisition, giving them ample opportunity to continue an in-fill branch strategy or to acquire other contiguous bank footprints.

Return Opportunity: I'm sure nobody follows my write-ups particularly closely, but those that re-read them will notice I am not a fan of valuation targets. However, recognizing most VIC members want something tangible, I'll note the following.

Over the past 15 years, FCNCA has generally traded at a price to book of between 1.1x and 1.9x, creating a valuation arbitrage between the capital BancShares is deploying in FDIC assisted transactions and the market valuation multiple it receives on its book.

Given our acquisition price is at or near book value, it is difficult for me to imagine that over an extended period of time, our shareholder returns lag the returns on equity that BancShares generates. If the bank did no further transactions and were simply to generate 10% ROEs for the next five years, our return would be about 60%. Further, if the P/B were to expand from 1.1x to 1.5x, that would add an incremental 36% to the return. Combined, it seems reasonable that our total return over the next five years will be around 100% or a 15% annualized return. I believe this is achievable with low downside risk and substantial upside optionality from things like the attractive lending environment that prevails, improved scale leading to cost efficiency, "winner" banks receiving premium valuations and potential future attractive acquisitions.

Risks:
Integration: while I believe this is very manageable, it is of course a real risk. It is mitigated from a portfolio standpoint by the loss-shares with the FDIC. This means that the primary integration risk is around the "distraction" element of integration.

Underperformance: BancShares generated below average economic returns during the six years leading up to the crisis. While the conservatism which led to those below average returns during the boom has allowed them to be aggressive when others were licking their wounds, it is clearly possible that below average returns persist.

Macro: Everyday leads to further de-risking of the "macro" as some amount of legacy loans mature or amortize and new, more attractively underwritten loans replace them. However, clearly the macro risk remains heightened for all banks. One further mitigant is that given BancShare's relatively strong balance sheet, the macro "risk" also is "opportunity" for the survivor/winner banks as marketshare becomes available and assisted transactions become increasingly juicy.

-----------------------------------------------------------------
Post Script:
FCB pioked up yet another (its 4th) assisted transaction this weekend when four more banks failed. Two were not acquired by anyone and two were acquired by strategic buyers.

Fortunately, FCB was one of the strategic buyer, acquiring Sun American Bank in Boca Raton, FL (with 12 branches scattered across Boca, Palm Beach and Miami-Dade/Broward)

Link to FCB's press release on the acquisition.

This deal is FCB's fourth FDIC assisted transaction in the past eight months and second this year.

As of Dec. 31, 2009, Sun American Bank reported total assets of $536 million, loans of $424 million and total deposits of $443 million.

The FDIC and First-Citizens Bank & Trust Company entered into a loss-share transaction on $433.0 million of Sun American Bank's assets.

Also, we still haven't had much detail released on the First Regional Bank acquisition. A few sprinkles were covered in the recently filed 10-K, but nothing worth mentioning.

-----------------------------------------------------------------

Let me know what you think and remember, invest at your own peril. I probably know nothing about investing, so you probably should ignore me.

Tuesday, March 02, 2010

Senator Jim Bunning Folds

Well, I guess he got what he wanted. He managed to get the Senate to sacrifice its "black liquor" subsidy to pay for the unemployment extension. At least he had principles, even if the fireworks didn't fully manifest. It feels somewhat anti-climactic (though perhaps not to holders of Boise warrants - you know who you are).

I'll always remember Bunning as "that guy that held up the Senate at gun point...and retired his seat creating an opportunity for Ron Paul's son Rand Paul to be elected to the U.S. Senate." Ah, you remember him, don't you? You know, That Guy? Oh, yeah, That Guy.

From this WSJ article:
WASHINGTON—The Senate Tuesday reached a deal to lift Sen. Jim Bunning's blockade of a bill to extend unemployment benefits, following new moves by Mr. Bunning's fellow Republicans to distance themselves from his tactics.

The agreement allowed Mr. Bunning (R., Ky.), who had complained that the $10 billion bill was not paid for, to offer an amendment that would fund the legislation by rescinding a tax credit for a paper manufacturing byproduct.

His amendment was expected to fail later Tuesday night. After that vote, Mr. Bunning was set to lift his objection to the underlying bill, which was expected to pass.

Mr. Bunning argued that the unemployment bill violated congressional rules requiring new initiatives to be paid for. Democrats said the extension was emergency legislation, exempting it from those rules. The public relations battle appeared to be playing out in the Democrats' favor as more than 100,000 jobless workers saw their unemployment benefits dry up this week.

Democrats also agreed to allow Mr. Bunning to offer two amendments on Wednesday to a longer-term extension of unemployment benefits and other programs. Both amendments are expected to propose ways of paying for that larger measure.

After the deal was reached, Mr. Bunning reiterated his argument that federal spending was out of control.

"If we cannot pay for a bill that all 100 senators support, how can we tell the American people with a straight face that we will ever pay for anything?" he said. "That is what senators say they want, and that is what the American people want."

Democrats said Mr. Bunning had been offered the same deal last week but refused to take it. "The real question in this debate is who we are as a nation," said Sen. Richard Durbin (D., Ill.). "Do we care about these people, these breadwinners who are down on their luck?"

Mr. Durbin objected to Mr. Bunning's proposal to pay for the bill by rescinding a tax credit for "black liquor," a paper manufacturing byproduct, saying this revenue source was already set aside for another measure.

Mr. Bunning had held up the unemployment-benefits extension by objecting to Democrats' "unanimous consent" request to advance the legislation, a routine procedure that requires all senators to go along.

Monday, March 01, 2010

Jim Bunting Gives The Finger To...Well, To Everyone

...and we here at TILB fucking love it.

Before reading the below article, I didn't know jack about Jim Bunting save for one thing: he is retiring and his resignation has paved the way for the very real possibility that Ron Paul's son Rand Paul is elected to the U.S. Senate as Bunning's replacement.

That fact alone makes Bunning a hero in our eyes: even accidentally paving the way for potentially putting a Paul in the Senate is deserving of hero's praise.

But now we've learned one additional piecce of information about Senator Jim Bunning: he is single handedly holding up the extension (yet again!) of socialized unemployment and healthcare benefits. Workers already have had them extended from 26 weeks of state provided benefits to 26 weeks of state benefits plus 73 weeks from the Federal government! WTF!

Now without this extension, everyone is getting cut off once their current tier of benefits expires. While obviously it sucks tremendously for needy unemployed people, it is principled. All Bunting is saying is, (paraphrasing) "we need to cut an equal amount from somewhere else in the budget. I'm not going to be responsible for increasing the deficit any further given we already can't pay for what we have."

It's literally 99 to 1 in the Senate but it takes unanimity to extend an existing law without going through the traditional legislative process of actually passing a new law. As The Great Jim Bunning said on the Senate floor:
"If we can't find $10 billion to pay for something that we all support, we will never pay for anything on the floor of the U.S. Senate."
Amen Saint Bunning. Amen.

Oh, and because he's retiring and is basically untouchable as a result, he's literally flouting his opposition, including flicking off the media. Further, he actually told the Honorable Gentleman from Oregon, "Tough shit" when Senator Jeff Merkley criticized Bunning's stance.

I don't want to know anything else about the guy. Don't ruin this image of perfection.

I'm sure learning additional information would sully him in my eyes. But for now, he's perfect. On the one hand, he's going Mantan Moreland on them and putting his dick in the Senate's proverbial mashed potatoes while providing space for Rand Paul on the other.

Genius.


Stay strong, Jim. Stay strong.

Here's the Yahoo! article.

[HT: TD]