According to Reuters, Rep. Barney Frank said he plans legislation to restrict the Federal Reserve’s emergency lending powers and subject the central bank to a “complete audit” in October 2009.

Frank said he has been working with Paul on compromise language. “He agrees that we don’t want to have the audit appear as if it is influencing monetary policy because that would be inflationary” . A video of his remarks was posted on YouTube here .

Frank said the audit and emergency lending provisions would be incorporated in broader legislation to revamp U.S. financial regulation that would likely pass the House in October. By seeking a compromise with Paul, Frank thinks he can strengthen the broader legislation’s chance at passage.

We’ll see if this actually gets done. Hopefully these “compromises” will not strip the bill of its teeth. We MUST have a REAL Fed Audit, not some pie-in-the-sky publicity stunt to make the ignorant think something is being done.

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Reuters has a piece about “Insider trading and investor sentiment signaling a market top“. Is it a self-fulfilling prophesy?  Tech investors’ blood run cold on the possibility that the tech market is a reflated March 2000 bubble:

Charles Biderman at TrimTabs told Bloomberg in this video that insider selling indicates the market has topped.

As TrimTabs writes, “If the economy is starting to recover, then why are insiders buying so few shares?” That seems to be a question investors may want to consider. Perhaps it is a “done deal” that the market will decline —-but for how long and how far?

Here’s New York commercial real estate investor Harrison LeFrak predicting a 2010 crisis in the $1.7T CRE debt that is on the books of regional banks (ht TPC):

Todd Harrison, CEO of Minyanville.com, thinks the best risk-reward trade-off favors shorting the market…

Below is a chart as of the 25th from bostonwealth.net.  It shows that over 90% of stocks on the NYSE are trading above their 200 day moving average -  a level not seen since around 1986.  My father used to tell a story (probably one of his tall “tails”) about puppies who drank so much buttermilk that when one fell off the porch – it burst.  How much more can these puppies be pumped?

NYSE-200

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We have extracted information from US Government-provided per capita health care expenditure data for 2004.

1987 Per Capita (in dollars)
Age Group Total Total Private Total Public
Total $1,796 $1,088 $709
0-18 $868 $653 $216
19-44 $1,223 $878 $344
45-54 $1,781 $1,307 $474
55-64 $2,636 $1,939 $697
65-74 $3,998 $1,559 $2,439
75-84 $5,984 $2,109 $3,876
85+ $10,562 $4,194 $6,368
0-18 $868 $653 $216
19-64 $1,521 $1,104 $417
65+ $5,282 $1,996 $3,286
2004 Per Capita (in dollars)
Age Group Total Total Private Total Public
Total $5,276 $2,921 $2,355
0-18 $2,650 $1,558 $1,092
19-44 $3,370 $2,269 $1,100
45-54 $5,210 $3,760 $1,451
55-64 $7,787 $5,371 $2,415
65-74 $10,778 $3,851 $6,927
75-84 $16,389 $5,066 $11,323
85+ $25,691 $8,304 $17,387
0-18 $2,650 $1,558 $1,092
19-64 $4,511 $3,117 $1,395
65+ $14,797 $4,888 $9,909
’04 / ’87 Growth
Age Group Total Total Private Total Public
Total 2.9 2.7 3.3
0-18 3.1 2.4 5.1
19-44 2.8 2.6 3.2
45-54 2.9 2.9 3.1
55-64 3.0 2.8 3.5
65-74 2.7 2.5 2.8
75-84 2.7 2.4 2.9
85+ 2.4 2.0 2.7
0-18 3.1 2.4 5.1
19-64 3.0 2.8 3.3
65+ 2.8 2.4 3.0

It is true that total spending by the government should be expected to rise faster than total spending by private providers as the well meaning, but inefficient government undertakes providing health care to groups of people who were not previously being provided for.  However, these data are per capita, that is spending per individual.  Again it is true that the government will take on the poorest, with the least healthy lifestyles and so forth, so that as these groups are added to the public burden, we should expect a somewhat faster growth rate for public spending than for private.  But the government’s performance is nowhere near the performance of private business. As the bottom growth rate table (between 1987 and 2004) shows, per-individual spending by the government on all groups grew by a factor of 3.3X, while spending per-individual by private insurance providers grew by 2.7X.  This means the government’s spending per individual grew at a 22.2% faster rate than private spending over the period.

For example, the government has set out to provide health care to poor children. Total spending on the age 0 to 18  group by the government has grown from about $15B in 1987 to about $85B in 2004.  Government spending on this group rose from about 25% of the total public and private spending to 41% during this time.  So how efficient was this spending?  Well… per individual  it grew faster than even spending on old people – by a factor of 5.1X (compared to the growth factor for private spending on kids of 2.4X).  Thus, the government’s own data show that government-run health care will not slow the rise in health care spending — total spending on health care will grow much faster if we let the government run it.

In What will the economic recovery build upon?, the Economic Populist has posted a very thorough piece with charts showing why we don’t have a real recovery – just data clouded by expiring government programs.  Many of the programs, like Cash for clunkers and the $8000 for first time home buyers, will soon represent more debts which are past due.  Well worth the read.

In a related piece over at Commodity Bull Market, the parallels between what the markets, the FED and the president said in 1930 and what has recently been said is provided.  The similarities are scary.

Bernanke and Geithner both argue that the FED should be free from congressional audit review.  While this “freedom” is in effect, the FED is truly free to do whatever its owners, the banks, tell it to do.  Minyanville has a great piece that argues that “the Federal Reserve has been responsible for every financial crisis in the United States since 1913″:

“The facts prove beyond a shadow of a doubt that the Federal Reserve has failed in every one of its mandates: Inflation has destroyed the value of the dollar. Interest rates and employment have been violently erratic. The Fed has been manipulated by politicians, showing a complete lack of independence. And only two of the fourteen Chairmen have been truly independent and competent — Paul Volcker and William McChesney Martin. The incompetence and arrogance of the other Chairmen have brought the country to its knees.

The final chapter is about to be written.

Our fiat currency system has proved to be a wretched failure. Within the next five years, a final crisis will bring an end to this diabolical experiment in hubris. Man is not smarter than the free markets. The US dollar is a piece of paper. It only has value because people have trust that the government issuing the paper is financially stable with rational fiscal policies.

This doesn’t describe the United States of today. When the next crisis causes the dollar to collapse and uncontrollable inflation to result, abolition of the Federal Reserve will become feasible. Average Americans have been victims of the boom and bust caused by the Federal Reserve policies. The sole beneficiaries have been bankers, politicians, the military industrial complex, and the super-rich elite.

Geithner is interviewed below by Digg.com and WSJ (ht zerohedge). If you can stomach listening to this guy, you can hear our banker-owned treasury secretary assert that auditing the FED would be “problematic for the country”.  It’s not problematic for the country – it’s problematic for the FED and its co-conspirators…   Geithner offers this argument for FED independence as if Bernanke and his co-conspirators are benevolent gods who smile down on America with only good intentions, infallible actions and limitless love for their ignorant, dependent people. What a crock and what a bunch of crooks!

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The FED has lost (so far) in the Bloomberg suit to force it to reveal details about firms who received FED support during the financial crisis.  Will the FED appeal? We doubt it.  Too much negative publicity and little chance of winning.  However, will they stall until after Helicopter Ben is reappointed? -it’s likely…

Bloomberg said in the suit that U.S. taxpayers need to know the terms of Fed lending because the public became an “involuntary investor” in the nation’s banks as the financial crisis deepened and the government began shoring up companies with capital injections and loans. Citigroup Inc. and American International Group Inc. are among those who have said they accepted Fed loans.  “When an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens don’t have the right to know,” said Matthew Winkler, the editor-in-chief of Bloomberg News. “We’re gratified the court is defending the public’s right to know what is being done in the public interest.”

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Here’s a simple set of rules that remind us about how to trade market announcements:

Cheat sheet: reacting to data and market releases

weak data =  Fed ease, stocks rally

consensus data =  lower volatility, stocks rally

strong data =  economy strengthening, stocks rally

bank loses $4bln = bad news out of the way, stocks rally

oil spikes =  great for energy companies, stocks rally

oil drops =  great for the consumer, stocks rally

dollar plunges =  great for multinationals, stocks rally

dollar spikes =  lowers inflation, stocks rally

inflation spikes =  will inflate all assets, stocks rally

inflation drops =  improves earnings quality, stocks rally

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