A new report on Social Security and Medicare says they will begin paying out more than they take in in taxes sooner than expected. Social Security could be depleted by 2037.

2037 is ages from now. I think we should leave social security alone. I certainly don't want to pay more in social security taxes for reduced benefits, which is one suggestion made by the report:

Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 1.6 percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two. Ensuring that the system remains solvent on a sustainable basis beyond the next 75 years would require larger changes because increasing longevity will result in people receiving benefits for ever longer periods of retirement.

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AP reported:

Government exams of the nation's biggest banks have helped lift a cloud of uncertainty that has hung over the economy. . . . "The publication of the stress tests simply cleared the air of uncertainty," said Allen Sinai, chief global economist at Decision Economics. "The results were not scary at all."

Happy to hear it. If that is the case, why in blazes do we need the Geithner Plan? It should be scrapped immediately and all government assistance, from TARP to government guarantees of bank debt should be scrapped as soon as possible, if not immediately.

Speaking for me only

"Ignore everything the Justice Department's antitrust lawyers said and did during the Bush administration" is the message Christine Varney, head of the Justice Department’s antitrust division, will be sending to judges and businesses in speeches this week at the Center for American Progress and the Chamber of Commerce. In a reversal of Bush administration policy, Varney plans to enforce the antitrust laws.

In the speeches, Ms. Varney is expected to explicitly warn judges and litigants in antitrust lawsuits not involving the government to ignore the Bush administration’s policies, which were formally outlined in a report by the Justice Department last year. The report applied legal standards that made it difficult to bring new cases involving monopoly and predatory practices. ... During the Bush administration, the Justice Department did not file a single case against a dominant firm for violating the antimonopoly law.

"Warning" judges in a speech not to follow a repudiated policy is an interesting way to advance a legal position. [More ...]

Apologies for the long silence but I've been taking in all the confusing and confusing, bad-news-is-good-news framing of the leaks regarding the results of the stress tests.

Bank of America, Wells Fargo and GMAC LLC all need need more capital.

MetLife, however, does not need more capital.[More...]

No matter how pointless it is to speculate about President Obama's choice to fill Justice Souter's Supreme Court seat, Court observers will continue to place their bets until the president reveals his decision. They make assumptions about the characteristics Obama will find attractive in a Supreme Court candidate and they speculate about the strength of the connections Obama formed during his Chicago years. None of it helps us know what's really in Obama's head.

Maybe (let's hope) he'll pick one of the highly qualified women who are certain to appear on his short list, but maybe factors like gender balance and Chicago loyalty will ultimately be overcome by personal impressions that Obama will keep to himself. Maybe Obama will hand the robe to Harold Koh, the Yale Law School Dean who was an assistant secretary of state in the Clinton administration and who now serves the Obama administration as a legal adviser to the State Department. But Obama would have to fight charges that Koh is too liberal, and he may prefer a consensus nominee who will easily hold the votes of Senate Democrats while drawing the support of some Republicans.

So many factors, so many names, so much uncertainty. It's all just a pointless guessing game. Let's play. [more ...]

It's unfortunate that the Obama administration was unable (and apparently unmotivated) to win Senate approval of a proposal to allow bankruptcy courts to modify the terms of mortgage notes.

In recent weeks, major banks and bank trade associations worked closely with Senate Republicans to stop the measure. Twelve Democrats joined all the Republicans in voting against it.

Relief for troubled financial institutions: no problem. Relief for financially troubled homeowners: can't do it. Way to go, Dems.

Soon we'll learn whether the financial industry has enough Senate clout to kill another bill favored by the Obama administration (and about which the administration has been more vocal). The bill, passed yesterday by the House and popular with just about everyone who carries a credit card, would limit credit card interest rates and fees while "requiring banks to apply consumers’ payments to balances with the highest interest rates first." [more ...]

A last minute plan fell apart and Chrysler will file for bankruptcy. President Obama says it's probably a wise move.

Chrysler will file for Chapter 11 bankruptcy protection in New York, giving Chrysler time to galvanize a partnership with the Italian car maker Fiat Group SpA. The government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said senior administration officials speaking on condition of anonymity. The government will also help appoint a new board of directors.

The deals give Chrysler "a new lease on life," President Barack Obama said. "This is not a sign of weakness," he said. "I have eery confidence that Chrysler will emerge from this process stronger and more competitive."

Some good news for Chrysler owners (including Jeep owners like me) and dealers: "Chrysler would still sell cars and the government would back its auto warranties." I'm taking mine in tomorrow for its 3,000 mile checkup.

Economy shrank by 6.1% in 1st Quarter:

The U.S. economy contracted at a surprisingly sharp 6.1 percent rate in the first quarter as exports and business inventories plummeted. The drop in gross domestic product, reported by the Commerce Department on Wednesday, was much steeper than the 4.9 percent annual rate expected by economists and followed a 6.3 percent decline in the fourth quarter. GDP, which measures total goods and services output within U.S. borders, has now dropped for three straight quarters for the first time since 1974-1975.

Via Atrios, we will own GM:

The U.S. Treasury would own at least a 50 percent stake in General Motors under a plan the company released today to avoid bankruptcy. The strategy would essentially formalize the government's control over one of the icons of corporate America. . . . Under the outlines announced yesterday, the federal government would take an equity stake of at least 50 percent, the United Auto Workers would take as much as 39 percent, the company's bondholders would get 10 percent and the existing shareholders 1 percent.

Think of it as a massive jobs program. Now, how about Citi?

Speaking for me only

Krugman:

Still, you might argue that we have a free-market economy, and it’s up to the private sector to decide how much its employees are worth. But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a “welfare.”

But we need those Masters of The Universe, Krugman! Get with the program!

Speaking for me only

NYTimes Editorial:

If they are credible, the stress tests will finally provide the information the government needs to deal forcefully with the banking mess — assuming the White House also has the will to do what is needed. . . . If the capital shortfalls are severe, . . . it is all but certain that private capital will not be forthcoming. The government should act quickly to plug the holes. . . . The administration should . . . recapitalize the banks. And it should take temporary control if that infusion results in a majority stake.

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NYTimes:

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

Here's the interesting part:

The Treasury has an agreement in principle with the United Automobile Workers union . . . Moreover, Fiat of Italy would finalize its alliance with Chrysler while the company is under bankruptcy protection. The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt.

(Emphasis supplied.) More . . .