Geithner: Government is the Answer to Solve Financial Crisis
The treasury secretary made his debut on Sunday morning talk shows to say that he is very optimistic about his plan to have a private-public partnership buy up "toxic assets."

AP

Sunday, March 29, 2009
Treasury Secretary Timothy Geithner defended his approach to fixing the country's economic mess Sunday, saying "the market will not solve this" while disclosing a bailout fund for battered banks has $135 billion left and might need more.

Geithner used his first Sunday talk show appearances to promote President Barack Obama's massive government spending plan to ease credit, help borrowers and inject billions of dollars into the financial sector. Long kept behind the scenes, the treasury secretary has emerged as the administration's champion of a plan that fueled an uptick in Wall Street markets.

"We came through a period where people borrowed too much and we let our financial system take on much too much risk," Geithner said. "And the consequences of those choices, made over years, were a huge boom. And that boom, the air is now coming out of that and that's causing enormous damage."

Obama and his administration last week announced a program to help banks free themselves of so-called "toxic assets." These investments have tied up capital and kept them from resuming more normal lending to consumers and businesses.

The plan calls for the administration to partner with private investors, the Federal Reserve and the Federal Deposit Insurance Corp. to buy as much as $1 trillion in toxic assets from banks. Like the president himself, Geithner cautioned against immediate expectations.

"It's very important for people to understand that, you know, it took us a long time to get into this mess. It's going to take us a while to get out of this," he said. "Progress is not going to be even. It's not going to be steady."

Geithner said Washington alone was equipped to salvage an economy that has seen jobs lost and credit shrink.

"The market will not solve this. And the great risk for us is we do too little, not that we do too much," he said.

Geithner has faced a rough start to his time at treasury. Unpaid taxes cost him votes during his Senate confirmation, and lax oversight for embattled American International Group Inc.'s bonuses drew Republican calls for his resignation. Wall Street scoffed when he outlined early details of the administration's financial plan, placing him on the bench early.

Obama's financial team, however, turned to Geithner in recent days to bolster its case for the economy. The former head of the Federal Reserve Bank in New York, Geithner confidently brushed off Republican criticism that too much spending would send the economy into out-of-control inflation.

"Will never happen. Because we have a strong, independent Fed, with a clear authority from the Congress to keep inflation low at -- stable at low levels going forward," he said.
He also dismissed his critics, citing the nation's anger and frustration with the economy.

"And I knew we were going to face really tough choices," he said. "We were going to have to do things that are going to be deeply unpopular, hard to understand. We're not going to get it perfect everywhere. ... This job, it comes with a lot of heat by definition and there's nothing surprising in that."

Despite that frustration, Obama would not rule out a second round of bailouts. In its budget request to Congress last month, the administration included a placeholder for an additional $750 billion in bailout funds. Many lawmakers said there was little chance more money will be approved, given the political environment.

Geithner said the bailout plan -- he said about $135 billion remains to help banks stay afloat -- helped every American, not just the financial firms.

"I would not spend a penny on helping a bank for the purpose of helping a bank," said Geithner, taking care with words that can move the markets. "Everything we're doing is for the people that depend on this financial system. Every time we provide assistance to the financial institutions, it's only because we need them to do a better job of getting credit to help reduce the risk of a deeper recession."

Geithner appeared on ABC's "This Week" and NBC's "Meet the Press."

THIS IS ENTIRELY FRUSTRATING.  I HATE NOTHING MORE THAN GOVERNMENT OFFICIALS TELLING PEOPLE THAT THERE IS NOTHING THAT THEY CAN DO AND THAT THE GOVERNMENT IS OUR ONLY HOPE FOR A FINANCIAL FIX.  I CAN'T BELIEVE THAT AN INSTITUTION WHICH EFFECTIVELY RUINED FANNIE MAE/FREDDIE MAC, THE POST OFFICE, AMTRAK, AND SOCIAL SECURITY THINKS IT HAS ANY BUSINESS GUIDING (INTERFERING WITH) THE FREE MARKET OF A CAPITALIST ECONOMY!  I HAVE NO FORMAL FINANCIAL BACKGROUND, SO I WILL REFER TO THE WEEKLY MARKET COMMENT FROM HUSSMAN FUNDS, WHICH I READ RELIGIOUSLY.  READ ON FOR A REAL PROFESSIONAL OPINION ON THE FINANCIAL CRISIS...

March 23, 2009
Fed and Treasury - Putting off Hard Choices with Easy Money (and Probable Chaos)

John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy

Brief remark - from early reports regarding the toxic assets plan, it appears that the Treasury envisions allowing private investors to bid for toxic mortgage securities, but only to put up about 7% of the purchase price, with the TARP matching that amount - the remainder being "non-recourse" financing from the Fed and FDIC. This essentially implies that the government would grant bidders a put option against 86% of whatever price is bid. This is not only an invitation for rampant moral hazard, as it would allow the financing of largely speculative and inefficently priced bids with the public bearing the cost of losses, but of much greater concern, it is a likely recipe for the insolvency of the Federal Deposit Insurance Corporation, and represents a major end-run around Congress by unelected bureaucrats.

Last week, the Federal Reserve announced its intention to purchase a trillion dollars worth of Treasury debt by creating the little pieces of paper in your pocket that have “Federal Reserve Note” inscribed at the top. In effect, the Fed intends to monetize the Treasury debt in an amount that exceeds the entire pre-2008 monetary base of the United States.

Apparently, the Fed believes that absorbing part of the massively expanding government debt and maybe lowering long-term rates by a fraction of a percentage point will increase the capacity and incentive of the markets to purchase risky and toxic debt. Bernanke evidently believes that the choice between a default-free investment and one that is entirely open to principal loss comes down to a few basis points in interest. Even now, the expansion of federal spending as a fraction of GDP has clear inflationary implications looking a few years out, so any expectation that long-term Treasury yields will fall in response to the Fed's buying must be coupled with the belief that investors will ignore those inflation risks.

There is no doubt that the Fed also intends for the extra trillion in base money to end up as bank reserves. But think about what this move implies in equilibrium. The largest purchasers of U.S. Treasury bonds at present are foreign central banks. So what the Fed is really doing is printing enough money to crater the exchange value of the U.S. dollar, while leaving foreigners with a trillion dollars of savings that they would otherwise have invested in Treasury bonds, which they will now use, not to buy our lousy, toxic assets, but to acquire our productive assets, and at a steep discount thanks to the currency depreciation. So yes, the extra trillion in dollar bills will ultimately end up as bank reserves (and currency in circulation), but only by encouraging Beijing to go on a shopping spree to acquire a claim on our future production. Ultimately, funding the bailout of lousy assets comes at the cost of debasing our currency and selling our good assets to foreigners.

Make no mistake - we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns' bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans.

Though I believe that the consequences (via credit default swaps and the like) are overstated of letting bondholders take a haircut, and will ultimately be no worse than having the public take the losses, the fact is that we don't even need the bonds of major financial institutions to go into default. What we do need to do is offer those bondholders a choice:

1) The U.S. government takes receivership of the financial institution, changes the management, wipes out the stockholders and a chunk of the bondholders claims entirely, continues the operation of the institution in receivership, eventually reissues the company to private ownership, and leaves the bondholders with the residual. This is not “nationalization,” but receivership – a form of “pre-packaged bankruptcy” that protects the customers and allows the institution to continue to operate, followed by re-privatization. As I've previously noted, this would fully protect all of the customers and depositors at no probable expense to the public. Alternatively;

2) The bondholders voluntarily agree to move a portion of their claims lower down in the capital structure, swapping debt for equity (preferred or common), allowing the bank to have a larger cushion of Tier-1 capital, avoiding insolvency, and hopefully allowing the bank to recover by its own bootstraps, preferably assisted by debt restructuring on the borrower side (via property appreciation rights and the like). Similar debt/equity swaps would be an appropriate strategy toward failing U.S. automakers as well.

No confidence

This week, the Treasury is expected to take another shot at announcing a toxic assets plan, which regardless of short-term market response, is likely to be met with a terrific vote of no-confidence.

Why? Because the only point in buying up a toxic mortgage security is if you can restructure it, which requires that you buy up every tranche having a claim to the underlying mortgages. These mortgage securities are a lot like a stack of sponges. If you pour water down, the top tranches absorb it first, and then the next, and so on. Banks don't want to let go of the better pieces (the tranches that pay out first), and nobody wants to buy the bottom ones because there's simply no point unless you can restructure the mortgage obligations so that there's a probable return of capital.

As I've said before, the U.S. currently has a private debt to GDP ratio of about 3.5, which is nearly double the historical norm, at a time when the underlying collateral is being marked down easily by 20-30%. That implies total collateral losses of 70-100% of GDP; a figure that includes not only mortgage debt in the banking system, but consumer credit, corporate debt and so on. The holders are not just banks, but insurance companies, pension funds, foreign lenders, and others. Even so, there is no way to prevent huge, ongoing losses, because the cash flows off of these assets are not sufficient to service the debt. The only question is whether the bondholders appropriately bear those losses, or whether the public bears them inappropriately. A continued policy of protecting all of these bondholders would eventually require U.S. citizens to be put on the hook for something on the order of $10-14 trillion. We are nowhere near the end of this process.

We simply cannot make these bad investments whole unless we are willing to hand the next 10-20 years of U.S. private savings over to the bondholders who financed reckless lending. Those bondholders should, and ultimately must, take a portion of these losses, and debt obligations will have to be restructured. Wall Street has become a bunch of Tooter Turtles crying “Help, Mr. Wizard!” because it got so used to Greenspan bailing everybody out. But that constant attempt to avoid inevitable private market losses is what allowed this problem to become so noxious. It will continue to do so until we collectively scream loud enough for Congress to say on our behalf, “Enough.”

The sideshow about bonuses at AIG simply underscores how little these bailouts have altered the fundamental behavior of people throwing around other people's money with nothing at risk themselves. The bondholders of poorly run financial companies should lose because they deserve to lose. The American public does not.

Speaking of “other people's money” and conflicts of interest, the first step toward better public policy is to bar the unelected bureaucrats conducting these bailouts from any future employment by companies that benefit from their actions. Call me cynical.

Nev. to get $32M in stimulus for energy projects

Posted: March 26, 2009 03:54 PM PDT

Updated: March 26, 2009 03:54 PM PDT 
 
LAS VEGAS (AP) -- Nevada is in line to get nearly $32 million in federal stimulus funds for use on energy conservation projects.

The Obama administration released the details of the funding Thursday. The state energy office received the largest grant, $9.6 million. Other grants include $7.7 million for Clark County, $5.5
million to Las Vegas and $2.1 million for Reno.

The White House says money is to be used on energy-saving projects such as upgrades to homes and businesses, transportation programs that conserve energy or renewable energy installations on government buildings.

The money comes on top of a $72 million for weatherization and energy projects in Nevada.

Click here for more on the Department of Energy stimulus.

(Copyright 2009 by The Associated Press. All Rights Reserved.)

I DO HAVE TO GIVE THIS ADMINISTRATION CREDIT FOR PERSUING A GREEN ENERGY AGENDA.  FOR SO LONG WE HAVE TALKED ABOUT OUR DEPENDENCE ON OIL.  EVERYONE KNOWS THAT OIL STORES ARE LIMITED AND WE AS A GLOBAL COMMUNITY ARE SUCKING IT DOWN AT AN ALARMING PACE.  IF THERE ARE COST EFFECTIVE ENERGY ALTERNATIVES THAT DON'T CAUSE AS MUCH POLLUTION AND DAMAGE TO THE EARTH, THEY SHOUDD BE THE RESPONSIBLE AND NATURAL CHOICE.  I HOPE THAT THESE FUNDS HAVE SOME SORT OF DIRECTION ATTACHED TO THEM!  IT SEEMS AN OXYMORON THAT LAS VEGAS, WITH ITS GLARING NEON SHEEN, SHOULD TAKE THE BULK OF STIMULUS MONEY.  YES, I AM AWARE THAT THE NEON IS A TOOL USED TO ATTRACT TOURISTS TO VEGAS, AND THAT THE TOURISM DOLLARS GENERATED HELP KEEP OUR STATE AFLOAT.  WHAT IS THAT SAYING,
"YOU CAN'T MAKE AN OMLET WITHOUT BREAKING A FEW EGGS".  AGAIN, HATS OFF TO THE BRILLIANT MINDS WHO ARE ACTUALLY CAPABLE OF FINDING AN ENERGY SOLUTION; I HOPE THIS FUNDING GETS TO YOU!

Made in Nevada program plans public marketplace

Nevada Appeal News Service

Made in Nevada, the program that spotlights products made in the Silver State, is planning its first marketplace open to the public.

As many as 40 of the 110 members of the Made in Nevada program are expected to display and sell their merchandise during the event at the Nevada State Library and Archives atrium in Carson City.

The event will run from 10 a.m. to 7 p.m. on May 13.

Made in Nevada is a program of the Nevada Commission on Economic Development.

Lynette Castillo, a business development specialist with the commission, said response from participating companies has been strong. About a dozen companies signed up for the marketplace within the first days after it was announced.

Participants will range from Centered Films, a Reno company that’s produced a film about the natural beauty of Reno and Lake Tahoe, to Tahoe Ridge Winery of Genoa.

Similar events in the past were designed to educate members of the Nevada Legislature about products produced in the state. Those events weren’t open to the public.

Castillo said the organizers of the marketplace are lining up sponsors, including service-related companies who otherwise wouldn’t be able to join the product-oriented lineup of Made in Nevada companies.

She said the Made in Nevada program has seen solid membership growth in recent months as participants look for cost-effective marketing solutions.

Some smaller companies, Castillo said, are particularly drawn to the Web presence of Made in Nevada — a presence they would be hard-pressed to create on their own.

THE WORLD FAMOUS MUSTANG BROTHEL PROUDLY SUPPORTS THE AMBITION AND SPIRIT OF NEVADA BASED BUSINESSES.  IT IS EXCITING TO SEE A FORUM EMERGING THAT ALLOWS LOCALS TO KNOWINGLY PURCHASE LOCALLY MADE PRODUCTS.  I AM SEEING MORE AND MORE RETAIL CENTERS (PERTICULARLY FOOD) TO SET UP A LOCALLY GROWN OR MADE SECTION.  EVEN THE SPARKS HOMETOWN FARMER'S MARKET ENCOURAGES LOCAL VENDORS.  NEVADANS HAVE GREAT POTENTIAL AND IDEAS.  KEEP UP THE HARD WORK!

Nevada lawmakers seek to rein in tax incentives
BY ANJEANETTE DAMON • March 23, 2009

  In nearly two decades at the Legislature, Assemblyman Bernie Anderson, D-Sparks, said there have been a few bills he now wishes he hadn't supported.

But there's one vote he so regrets that he recently issued a public apology to his constituents.

This session, Anderson said he hopes he can help make up for his earlier support of legislation that allows local governments to use sales tax revenue to help private developers build retail projects aimed at drawing tourists to the region.

"If growth is supposed to pay for growth, how long can they keep diverting business taxes away?" Anderson asked. "Where's the nexus to the community?

"This is clearly, clearly an example of one bill where I deserve to give an apology to my constituents."

Anderson is among a cadre of Democratic lawmakers who, driven by a historic state budget shortfall and angry labor unions, are seeking to rein in local governments' ability to use sales tax revenue as an economic development incentive.

At the center of a growing debate over the state's myriad business tax incentives are Sales Tax Anticipated Revenue (STAR) bonds, used to build Cabela's in Reno and the Legends at Sparks Marina.

The program allows cities to dedicate 75 percent of the sales tax revenue generated by a project to pay off bonds sold for the construction. While Reno and Sparks have been the first to use the incentive, other projects seeking STAR bonds are springing up around the state.

Democratic lawmakers argue the tax breaks drain necessary revenue from education and other government services and question whether cities have been using the tool as the Legislature originally intended when it created the bonds in 2003.

About a third of the state's revenue comes from sales tax, while local governments rely more heavily on property tax.

Proponents argue that STAR bonds have been used successfully to draw developments that will become their own economic engines, ultimately strengthening the community's tax base, not draining it.

"Well, 25 percent of a $1 billion project is better than 100 percent of nothing," said Sparks Assistant City Manager Randy Mellinger, who helped craft the STAR bonds legislation six years ago.

Without STAR bonds, Mellinger said Sparks wouldn't be on the road to transforming a vacant and contaminated piece of land into a $1 billion retail-entertainment project that will pull tourists off Interstate 80 and benefit residents.

Assemblywoman Debbie Smith, D-Sparks, the original sponsor of Assembly Bill 422 to restrict the use of STAR bonds, said it isn't her intent to eliminate the tool. She's deeply troubled by how Sparks has used STAR bonds to finance the Legends project.

She was angered that Sparks allowed Target to close an existing store, from which the state received 100 percent of sales tax revenue to open a new one in the STAR bonds district. Government now gets 25 percent of the sales tax revenue from the store for the next 20 years.

Smith questions whether the project will perform the way the developer promised when it sought the tax break, noting state law does nothing to require the city to track the project's performance, particularly the requirement that the project makes more than half its revenue from tourists.

"That's the whole point, to make sure it's not taking business away from existing business," she said. "They aren't prepared to demonstrate that's happening."

She wants to make sure local schools get a full share of the sales tax from a STAR bonds project, not 25 percent. And she wants to strengthen prevailing wage requirements in the law and ensure the developer is using local contractors and subcontractors to do the work.

With at least five other projects in the pipeline, Smith wants to ensure the two already on the books are doing what's been intended.

"If it's not working here, why do any more of it in the future?" she asked.

Mellinger said that lawmakers appear to be more interested in shifting blame rather than addressing deeper problems with the state's tax structure.

"When you have a bad economy and you're ranked 49th in the country in school spending, they start saying, 'Well, it can't be our fault we aren't spending enough on schools, it must be these projects,'" Mellinger said.

State Sen. Randolph Townsend, R-Reno, one of the original proponents of STAR bonds legislation, echoed the sentiment.

"We have systemic problems, big problems," he said. "If (Democrats) want to start looking under every stone, they'll get a minimal amount of money but could do a lot of damage."

Proponents of STAR bonds argue that it is too early for lawmakers to make that decision based solely on Cabela's and Legends.

"They're judging projects before they're done," Mellinger said.

Brian Bonnenfant, a project manager at the Nevada Small Business Development Center who has performed economic impact studies on both projects, said Cabela's is keeping up with sales tax projections made during the planning phase.

He said he doesn't have enough data from the Legends project yet to say whether Sparks is collecting enough to keep up with its bond payments. But during the past year, Washoe County has seen a 41 percent increase in sales tax collections from the sporting goods sector.

Those figures prove Scheels and Cabela's "are not cannibalizing the other sporting good establishments," Bonnenfant said.

"It means they are adding to that base we already had," he said.

Bonnenfant said STAR bonds are an important economic development tool. But he agreed that lawmakers should carefully consider the tax revenue they pull from public schools.

"I don't like to see the schools being on the short end of that stick," he said, adding Nevada's poor education rankings are a disincentive for businesses to relocate to the state. "We need to provide incentives to businesses without taking funding from schools."

$1 billion project is better than 100 percent of nothing," said Sparks Assistant City Manager Randy Mellinger, who helped craft the STAR bonds legislation six years ago.
 
Without STAR bonds, Mellinger said Sparks wouldn't be on the road to transforming a vacant and contaminated piece of land into a $1 billion retail-entertainment project that will pull tourists off Interstate 80 and benefit residents.

Assemblywoman Debbie Smith, D-Sparks, the original sponsor of Assembly Bill 422 to restrict the use of STAR bonds, said it isn't her intent to eliminate the tool. She's deeply troubled by how Sparks has used STAR bonds to finance the Legends project.

She was angered that Sparks allowed Target to close an existing store, from which the state received 100 percent of sales tax revenue to open a new one in the STAR bonds district. Government now gets 25 percent of the sales tax revenue from the store for the next 20 years.

Smith questions whether the project will perform the way the developer promised when it sought the tax break, noting state law does nothing to require the city to track the project's performance, particularly the requirement that the project makes more than half its revenue from tourists.

"Thwat's the whole point, to make sure it's not taking business away from existing business," she said. "They aren't prepared to demonstrate that's happening."

She wants to make sure local schools get a full share of the sales tax from a STAR bonds project, not 25 percent. And she wants to strengthen prevailing wage requirements in the law and ensure the developer is using local contractors and subcontractors to do the work.

With at least five other projects in the pipeline, Smith wants to ensure the two already on the books are doing what's been intended.

"If it's not working here, why do any more of it in the future?" she asked.

Mellinger said that lawmakers appear to be more interested in shifting blame rather than addressing deeper problems with the state's tax structure.

"When you have a bad economy and you're ranked 49th in the country in school spending, they start saying, 'Well, it can't be our fault we aren't spending enough on schools, it must be these projects,'" Mellinger said.

State Sen. Randolph Townsend, R-Reno, one of the original proponents of STAR bonds legislation, echoed the sentiment.

"We have systemic problems, big problems," he said. "If (Democrats) want to start looking under every stone, they'll get a minimal amount of money but could do a lot of damage."

Proponents of STAR bonds argue that it is too early for lawmakers to make that decision based solely on Cabela's and Legends.

"They're judging projects before they're done," Mellinger said.

Brian Bonnenfant, a project manager at the Nevada Small Business Development Center who has performed economic impact studies on both projects, said Cabela's is keeping up with sales tax projections made during the planning phase.

He said he doesn't have enough data from the Legends project yet to say whether Sparks is collecting enough to keep up with its bond payments. But during the past year, Washoe County has seen a 41 percent increase in sales tax collections from the sporting goods sector.

Those figures prove Scheels and Cabela's "are not cannibalizing the other sporting good establishments," Bonnenfant said.

"It means they are adding to that base we already had," he said.

Bonnenfant said STAR bonds are an important economic development tool. But he agreed that lawmakers should carefully consider the tax revenue they pull from public schools.

"I don't like to see the schools being on the short end of that stick," he said, adding Nevada's poor education rankings are a disincentive for businesses to relocate to the state. "We need to provide incentives to businesses without taking funding from schools."

WHAT A CAN OF WORMS!  I AGREE THAT IT WAS INAPPROPRIATE FOR BUSINESSES THAT WERE PERVIOUSLY ESTABLISHED IN RENO/SPARKS TO USE THE STAR BONDS AS A MEANS OF TRADING-UP THEIR PROPERTY AND SKIP THE RESPONSIBILITY OF TAXES.  NOT ONLY DOES IT REDUCE THE TAX BASE FOR OUR LOCAL GOVERNMENT TO WORK WITH, BUT IT ALSO LEFT ABANDONED RETAIL SPACE IN A NOW DECLINING AREA.  ON THE OTHER HAND, I THINK THAT USING TAX INCENTIVES TO ATTRACT NEW BUSINESSES TO THE RENO/SPARKS MARKET IS A GREAT TACTIC.  WE NEED NEW GROWTH.  NOT ONLY DOES IT GENERATE REVENUE FROM LOCALS AND TOURISTS ALIKE, IT ALSO CREATES NEW JOBS.  THE LAST TIME I CHECKED, NO ONE WAS COMPLAINING ABOUT THE NEW JOBS THAT THESE PROJECTS HAD CREATED!  IT SEEMS LIKE THE CURRENT ECONOMIC CRISIS HAS MADE THE GOVERNMENT A LITTLE "TAX HAPPY".  YOU CAN ONLY TAX A PRODUCTIVE COMPANY (OR INDIVIDUAL) SO HARD BEFORE THEY CEASE TO BE PROFITABLE.  MAYBE THE ANSWER FOR OUR LOCAL GOVERNMENT, AND OUR NATION, IS TO SPEND LESS.  IT IS A SAD DAY WHEN PEOPLE ACCEPT THAT THE FIRST THING TO GET CUT IS PUBLIC EDUCATION.  THERE ARE MILLIONS OF GOVERNMENT DOLLARS SPENT ON FAR LESS IMPORTANT THINGS.  I'M SURE A CREATIVE MIND COULD FIND A WAY TO REDUCE TAXES AND STILL IMPROVE THE EDUCATIONAL SYSTEM.  IT JUST TAKES THE RIGHT PRIORITIES.

Lance Armstrong
BALTANAS, Spain —  Lance Armstrong fractured his collarbone Monday in a crash during the Vuelta of Castilla and Leon race, disrupting the seven-time Tour de France champion's comeback.

Armstrong said he would fly to the United States and meet with medical experts to decide whether he needs surgery, leaving in question his participation in the Tour de France in July.

"We'll go from there," he said. "I think for the Tour it's a very big problem."

Armstrong was knocked off his bike during a pileup in the first stage of the race and was taken to a hospital by ambulance. The American, who crashed about 20 kilometers (12.5 miles) from the stage's finish, was grimacing and trying to hold his right arm as he entered the ambulance.

"The collarbone is broken and I have a little bit of road-rash abrasions," Armstrong said as he left Valladolid University Hospital. "I've never had this happen before, it's pretty painful. I feel really miserable."

Click here for photos.

X-rays confirmed that Armstrong fractured his right collarbone.

Astana team leader Johan Bruyneel said on his Twitter feed that there were no complications in the break, and suggested that Armstrong could be back riding soon.

"Clean collarbone fracture," Bruyneel said. "Should be fast recovery."

Armstrong is scheduled to compete in the Giro d'Italia from May 9-May 30. He is also preparing for the Tour de France from July 4-26.

After falling off his bike, Armstrong sat in the grass beside the road with his right shoulder slumping and his wrist resting on his right thigh. When help arrived, he motioned toward his right shoulder.

Armstrong eventually walked to the ambulance and climbed into the back.

After initially being taken to the Rio Carrion hospital in Palencia, Armstrong was taken to the hospital in Valladolid.

The 37-year-old Armstrong is making a comeback to cycling and is riding with the Astana team as he prepares for another possible shot at a Tour de France title. He had not raced in Spain for five years.

After a three-year retirement, Armstrong started his comeback at the Tour Down Under in Australia in January, where he finished 29th overall, 49 seconds behind winner Allan Davis of Australia. He then finished seventh in the Tour of California in February.

The mainly flat first stage of the Castilla and Leon covered 176 kilometers (109 miles) from Paredes de Nava to Baltanas. It was won by Joaquin Sobrino Martinez of Burgos Monumental in 4 hours, 31 minutes, 53 seconds after a sprint finish. He was followed by David Vitoria of Rock Racing and Jose Joaquin Rojas of Caisse d'Epargne.

THE WORLD FAMOUS MUSTANG BROTHEL WISHES LANCE A SPEEDY RECOVERY.  HE IS AN INSPIRATION AND SYMBOL OF STRANGTH TO MANY, MANY PEOPLE.  I AM CONTINUALLY IMPRESSED WITH BOTH HIS PHYSICAL AND PHILANTHROPIC DRIVE.  IF YOU HAVEN'T READ "ITS NOT ABOUT THE BIKE"; DO SO.  NOT ONLY IS IT A GLIMPSE INTO HIS PERSONAL BATTLE WITH CANCER, BUT YOU ALSO LEARN QUITE A BIT ABOUT BICYCLE RACING.  IT IS A VERY GRUELING SPORT!  WE ARE HOPEFUL THAT THE FRACTURED COLLARBONE DOES NOT IMPEDE HIS PARTICIPATION IN THE TOUR DE FRANCE (OR TOUR DE LANCE AS MOST CALL IT).