News that Moves: "Buy America" Bill, US Treas.Yields Up, Andrew Hughes "Bad Bank", Bad News

White House reviewing "Buy American" measure, according to White House spokesman Robert Gibbs - Reuters
Reuters reports that the Obama administration is still mulling its position on 'Buy American' steel provisions approved this week by the House of Representatives and that have caused concern among trading partners, a White House spokesman said on Friday. "The administration is reviewing those provisions as part of the recovery plan, and that review is continuing," White House spokesman Robert Gibbs told reporters.

RCM Comment: I just can't believe this story! I guess history is simply bound to repeat itself. This same sort of protectionist legislation occurred during the great depression and was a DISASTER. Protectionism never helps the economy, but is, of course, wonderful if you are pandering for votes. I am told by my friends who are ardent Obama supporters that he is smart and has surrounded himself with smart people. Well, here is a simple IQ test. Let's see if they get this right. I genuinely hope they do and I will be the first to applaud using this blog.

Treasuries Drop as Record Sale Draws Higher-Than-Forecast Yield
Jan. 29 (Bloomberg) -- Treasuries plunged as the government sold a record $30 billion of five-year notes at a higher yield than forecast, indicating weak demand.
The auction, which caps a week when the Treasury raised $78 billion in notes and bonds, may signal investors will have trouble absorbing the as-much-as $2.5 trillion in debt the U.S. is likely to issue this year to pay for a $1 trillion budget deficit and programs to spur the economy. The Federal Reserve’s failure to provide a timetable for possible purchases of Treasuries yesterday also weighed on prices.

RCM Comment: This story goes hand in hand with the story about the German debt auction failure. Expect to see more of these issuance problems as the tsunami of supply hits the market this year. And remember, Gold prices rise as yields rise.

"Bad Bank", Bad News
Another miserable failure in the making
by Andrew Hughes

...The emphasis on getting credit flowing again for car loans, consumer credit and mortgages ony serves to aggravate the basic problem that these pundits seem to be ignoring; Consumers are flat broke and over indebted as it is, they don't need more credit; they need more jobs. The Banks don't need any more free money; they need to be put in to bankruptcy to purge the system of the junk on which they have based their business model. The reason the banks refuse to lend is that they are holding on to the money to cover their accelerating losses. As each company fails, as each debtor loses their job the dominoes are falling faster and are obliterating the banking sector.

In case you wanted to know why the financials continue to implode...More Andrew Hughes:

The most recent report from the Comptroller of the Currency seems to have gone unnoticed in Washington and the press. If banks are not lending because of increased capital requirements in the face of Credit Default Swaps, other derivatives and loan defaults then the report goes a long way in describing exactly why:

Credit Exposure to Capital ratio. Amounts in $Trillions

Bank Assets Derivatives Derivatives Credit Exposure to Capital Ratio
J.P. Morgan Chase $1.8 $87.6 400.2
Citi $1.2 $35.6 259.5
Bank Of America $1.4 $38.7 177.6
HSBC $.18 $4.1 664.2