Remember the Cantwell-McCain amendment restoring Glass-Steagall whose submission for debate in the U.S. Senate in conjunction with that body's deliberations of the FinReg bill caused such a stir as to precipitate May 6th's flash crash?
Well, one does wonder if Democratic party votes needed to pass the President's proposal for extending Bush tax cuts will require Congressional debate of legislation reimposing Glass-Steagall.
The present precariousness of the trans-Atlantic financial system certainly is well known among some circles in the U.S. Congress. Likewise, disdain toward the Federal Reserve and its role in shepherding the greatest credit bubble in history, as well as in currently attempting to sustain this bubble via hyperinflationary bailout, seems likely to find an even friendlier Glass-Steagall sympathy in the next (113th) Congress than exists right now during the final days of the 112th Congress.
And so all wonderment about the President's sudden bi-partisan turn evaporates in certainty that, the man has every reason to believe he is shooting at jellyfish in a barrel. Yet is he?
Certainly the President prior to last month's election could have rammed through Congress the tax arrangement he claims to have desired. The fact stands, however, he did not venture to do so. Thus, it is possible that, the intention always has been that taxes increase.
The need to demonstrate that, the so-called lender of last resort is credible requires such a thing. Indeed, we have been seeing this play out in the Eurozone throughout 2010. How can the U.S. escape this?
So, we will see if the President succeeds in slipping through the 112th Congress this dose of profligacy serving to maintain the gross imbalance built up over the past several decades. This whole deal is politics at its finest! Better suspect, too, nothing more than posturing serving to further widen the partisan divide will come of it.
The choice here really comes down to Glass-Steagall being immediately restored, or there rather being a detrimental tax increase (meaning effort to extend the Bush tax cuts will fail, and this that the lender of last resort might bolster its credibility). Neither of these outcomes likely will be well-received, yet a tax increase in the current environment offers at least a sliver of hope that, issues precipitating from spreading systemic insolvency can be dealt with in a manner appeasing "the market."
One can safely suppose that, Mr. Market is rather aware nothing good is in store for stocks.
Would interest in those issues leading the market higher — stocks trading at new 52-week highs — contract so precipitously with the market so very, very near its post-March '09 highs if fundamental conditions supporting advancing prices truly were improving, as so many are wont to claim?
Were stocks, indeed, being accumulated, then leadership would be broadening, as well as better sustaining its numbers during any pullback like today's. Rather leadership is both contracting and fading much too fast.
Should the market have in store one final burst higher before completing the advance of the past week and a half, look for leadership to contract further still. Thus, such underlying weakness as continues to this day paves the way for the market's anticipated collapse. Even the initial wave lower could prove a stunning blow, as well as unfold before year end...
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