1) Fed mistreats bond-holders in Chrysler deal in favor of unions. How likely is it that bond holders will want to offer up any additional capital for companies in bed with the Fed?
2) Stress tests say banks need $75 billion, and their going to have to raise it on the private market. Robert Gibbs, White House Press Secretary:
For those institutions needing more capital, “everyone involved will be looking for banks to raise this through either private means or the selling of some assets that they have or that they control,” Gibbs added.Side note: GMAC is one of the banks that needs money.
3) Treasury Auction of bonds yesterday draws fewer buyers than expected. Yield on bonds jump to move the treasury bonds. This indicates a potential problem for future borrowing by the Fed to finance deficit spending.
So, the Obama administration is tipping the scales against capital holders in companies where it has a stake, driving capital away. Then it says that companies need capital and they're going to raise it privately. And finally, the government bailing out companies that can't raise their own capital is, in turn, having trouble raising capital itself; precipitating the need to raise interest rates just to borrow.
Anyone want to help me connect these dots?