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To: geode00 who wrote (190834)	3/15/2009 8:16:48 PM
From: Bank Holding Company	Read Replies (1) \| Respond to of 306849

> "There are contracts," Summers said. "The government cannot just abrogate contracts." << Treasury is a law unto themselves. Someone should introduce Summers to Photoshop.

To: geode00 who wrote (190834)	3/15/2009 9:30:21 PM
From: ChanceIs	Read Replies (3) \| Respond to of 306849

"There are contracts," Summers said. "The government cannot just abrogate contracts." Hmmmmm. I didn't see that in the article, but if you have a source, I would appreciate seeing it. What I did see in the same vein was this: "We can't just violate legal obligations, I understand that," the Massachusetts Democrat (Barney Frank) said. Permit me to offer some investment advice. The government will attempt to do whatever it wants to do with a contract. It may not get away with it. But it can and has wrecked firms in its attempts to do so. There is no telling what contracts or when the government will attempt to abrogate. Just because Barney Frank made this comment today, doesn't mean that with sufficient pressure the government might not overturn the contracts. In arguing to support this, alas I must once more drag out that smoldering corpse of my very unfortunate Calpine investment. Calpine and others had signed some $40 million in power supply contracts with California. California subsequently decided that they were being overcharged to the tune of some $9 billion because of "manipulation." FERC told them that a contract was a contract and tough darts. The 9th Federal Circuit did not agree on appeal, and the legal battles raged on. There were some interesting arguments, and they went to the Supreme Court seven years after the contracts were written. Needless to say, when it came time to roll over bank debt, the lenders weren't too anxious to reup - at least not at the same rates with the income stream from the California contracts under question. Allegheny fought to enforce its contracts under the original terms, and won but at extreme cost, and defaulted every Friday afternoon in 2004 for about three months - the loan covenants were violated because of the litigation and were lifted on a week by week basis. In December of 2004, the California Congressional delegation attempted at 2:00 AM one night, to insert language into that version of the energy bill which would have abrogated the contracts. What California couldn't get done in the courts, it almost succeeded in accomplishing through legislative chicanery. Calpine also had a lot of debt to roll over. It fell into the arms of the hedge funds (loan sharks), and eventually filed BK. Congress is dangerous, and contracts mean nothing under our beautiful capital dome. You know ..... like cramming down mortgages. I loath cynics, but I have learned with great financial pain that Congress will do what is in its members' short term interests, and ethics, consequences and contracts be damned.