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Senate to Start Tax Debate as Early as Friday

Schwarzman is Short America (CNBC via The New York Times) Perhaps that is overstating the case. A bit. But Steve Schwarzman doesn't see much to be optimistic about in terms of domestic growth: "'The United States is going through a difficult time politically, and having other types of issues that everybody in this group knows about,' Mr. Schwarzman told the conference, adding, 'The political calculus of the last two years hasn’t resulted in a winning calculus.'" There is an upside: "At least half the world is doing really well." Sadly, not our half.

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The Mad Dash out of Bonds (New York Times) "Prices on Treasury bonds fell sharply on Wednesday, continuing a sell-off that was ignited by the extension of the Bush tax cuts.

Equity markets on Wall Street looked to close slightly higher.

Financial markets have interpreted the tax cut deal, which was announced on Monday and must be approved by Congress, as contributing to economic growth over the next couple of years but also increasing the federal deficit and raising borrowing costs. Yields on the 10-year benchmark bond rose 19 basis points to 3.318 percent early Wednesday afternoon before retreating to 3.259 percent, after the Treasury Department reported the results of its sale $21 billion in 10-year notes. Wednesday’s sale attracted almost three times as many buyers than bonds sold, a ratio characterized as fairly typical."

The Insider Trading Investigation Critiqued: (Propublica) Jesse Eisinger deconstructs the scandal. For example, the reaction in the financial services community: "In fact, plenty of folks on Wall Street are happy about the investigation. A scant few — the ones with clean consciences — like the idea that the world of special access to favorable tips is being cleaned up. But others are pleased for a different reason: They realize the investigation is a sideshow."

Where's the Rally? (CNBC) CNBC's Jeff Cox on the predicted—and future?—rally: "Even though investors seem to have gotten everything they've wanted over the past month or so—political changes, Fed help and tax relief—the markets are still full of jitters." Also," In addition to providing potential buying opportunities, the moves out of gold also could represent a sector rotation in which fund managers trying to window dress are looking for cheap stocks and other assets. Financials, which trailed this year's nearly 10 percent stock rally, were leading the Standard & Poor's 500 in Wednesday's seesaw trading. A search for value could be a major trend as the year closes."

U.S. Treasury to Sell 20 Percent of AIG Stake (Reuters) "The Treasury plans to sell about one-fifth of insurer AIG through a stock offering in the first half of 2011, an important test of the government's ability to profitably exit one of its most controversial bailouts. American International Group Inc and the Treasury would both sell stock in the offering, which could total $10 billion to $15 billion, sources familiar with the matter said. That would place it among the largest secondary share offerings in history.The news sent AIG's shares down 3.5 percent to $42.40 as investors feared dilution, but the shares were still trading well above the approximately $30 level that taxpayers need to make a profit on the bailout."

Senate to Start Tax Debate as Early as Friday (Wall Street Journal) "Senate Majority Leader Harry Reid said he hoped to start Senate debate by Friday on a bill to extend tax cuts across the board for two years. Mr. Reid, a Nevada Democrat, spoke to reporters after a closed-door meeting with lawmakers from his party to discuss a proposed tax-cut extension bill. He said the package could come to the House floor "in the next day or two." Sen. Jon Kyl (R., Ariz.) said earlier he hoped the drafting of the bill could be completed by late Wednesday. Mr. Reid said he had discussed with Democrats a list of ways the legislation could be made better but declined to offer details. Some Democrats have said that Republican-favored provisions in the proposal, reached after negotiations between the White House and Republicans, were too generous to the wealthy."