Weekend Economists Escapist Weekend March 20-22, 2009

Well, last weekend we viewed the world of finance through the prism of early Nazi Germany, via that intensely dark Broadway hit "Cabaret", winner of 6 Tonys, and its film counterpart, which won 10 Oscars.

In light of events, that was TOO prescient. We were in a "technical" dictatorship for 8 years (but nobody told us until recently) of the kind only a Bush or a Hitler could love. Now we are in the Weimar Republic of America, where paychecks will come with their own wheelbarrows, assuming anyone still has a job by next week...do you suspect TPTB of trying to repeat history? I do. God only knows WHY anyone would want to return to Naziism. Unless he was the dictator, in the words of our ex-(in all ways but the most significant) pResident.

So, for something COMPLETELY different, and to celebrate my new signature line, I propose we go to that great escapist novel and film "The Princess Bride". Although there is no music associated with it, "Princess Bride" has memorable quotes galore! Extra points if your post includes an appropriate citation from either the book or the film, although they are fairly closely correlated. Repeats (within moderation) are allowed.

It's spring in Michigan. At least, the crocus have been popping up all week, and most ponds are completely thawed, so the swans, ducks and geese are more comfortable. Haven't seen a dandelion yet, but the ground is rather frozen still....and pothole season has been open for a month now!

So, post your discoveries, no matter which hole in the ground you found them in. Plant seeds, watch and record the migrating birds, and look out for the first mosquito of the season! And the RUSs, of course! And skunks, don't forget to report any skunk-sightings.

March 20, 2009, Alexandria, Va. -- The National Credit Union Administration Board today placed U.S. Central Federal Credit Union, Lenexa, Kansas, and Western Corporate (WesCorp) Federal Credit Union, San Dimas, California, into conservatorship to stabilize the corporate credit union system and resolve balance sheet issues. These actions are the latest NCUA efforts to assist the corporate credit union network under the Corporate Stabilization Plan.

The two corporate credit unions were placed into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the Agency’s ability to take appropriate mitigating actions that may be necessary. Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp, and members are free to make deposits and access funds.

The Federal Credit Union Act authorizes the NCUA Board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, preserve member assets and protect the NCUSIF.

More: http://www.ncua.gov/news/press_releases/2009/MR09-0320.htm
________________________________________________________

The amount of money involved here is a very small amount compared to the Wall Street Citi/AIG bailouts. But, to be fair I'll post it. Even though the attention paid to this action seems to me to be along the lines of "THEY'RE DOING IT TOO! LOOK!!!!" as screamed on CNBC just now.

Ted Turner knew that about Ricola.

Ooops! Spoke too soon---

Calamitous day sees banks, credit unions seized

Three banks, two corporate credit unions taken over by regulators in evening
By John Letzing, MarketWatch

SAN FRANCISCO (MarketWatch) -- The pace of the ongoing credit crisis quickened significantly Friday when regulators seized three banks and placed two large corporate credit unions into conservatorship, citing a need to "stabilize the corporate credit union system."

Banks in Colorado, Georgia and Kansas were closed by regulators, bringing the number of bank failures this year to 20, while the National Credit Union Administration Board seized corporate credit unions in California and Kansas that have a combined $57 billion in assets. Corporate credit unions are chartered to act as a sort of clearinghouse for the credit unions that serve consumers.

The Federal Deposit Insurance Corporation said that Stockbridge, Ga.-based FirstCity Bank was closed by regulators, adding that it will mail checks to FirstCity's insured depositors Monday morning.
The failed bank's direct deposits from the federal government such as Social Security and veterans
' payments will be transferred to SunTrust Banks Inc., the FDIC said. FirstCity had $297 million in assets and $278 million in deposits as of March 18, the FDIC reported. It also had roughly $778,000 in deposits that exceeded the federal deposit-insurance limit of $250,000.

FirstCity becomes the eighth Georgia-based bank to fail since the economy began sliding into crisis last August, according to FDIC data. The last Georgia bank to fail was Freedom Bank of Georgia on March 6, the regulator said. It estimated the cost of FirstCity's failure to the deposit insurance fund as roughly $100 million.

The FDIC also said Colorado Springs-based Colorado National Bank was closed, and Texas-based Herring Bank will assume all of the failed bank's deposits.

Colorado National had $123.5 million in assets as of Dec. 31, and $82.7 million in deposits, the FDIC said. It estimated the cost of Colorado National's failure to the deposit insurance fund as roughly $9 million.

Paola, Kan.-based Teambank also was closed by regulators, the FDIC said, while Missouri-based Great Southern Bank will assume its deposits.

Teambank had $669.8 million in assets as of Dec. 31, and $492.8 million in deposits, the FDIC said. It estimated the cost of Teambank's failure to the deposit insurance fund as roughly $98 million.
Meanwhile the National Credit Union Administration said Lenexa, Kan.-based U.S. Central Federal Credit Union and San Dimas, Calif.-based Western Corporate were placed into conservatorship "to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund."

U.S. Central has roughly $34 billion in assets and WesCorp has $23 billion in assets, the NCUA said.
The NCUA said that service continues uninterrupted at both large corporate credit unions, and members are free to continue making deposits and accessing funds.

"Credit unions that serve consumers remain very strong, with net worth exceeding 10 percent of assets, healthy growth in assets, membership, and loan portfolios despite the difficult economy," according to the regulator.

check out originalpckelly's thread
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5298511

http://www.portfolio.com/views/blogs/market-movers/2009/03/20/save-the-credit-unions?tid=true

The good news is that the two largest corporate credit unions -- cesspits of toxic waste which loaded up on mortgage-backed securities for no good reason and in violation of their raison d'etre -- have been "conserved" (taken over) by the NCUA, the credit-union equivalent of the FDIC, which has finally woken up to the fact that the current management at these shops is utterly incompetent and can't be trusted.

The bad news is that the NCUA is still committed to the disastrous decision it made back in January, to whack 56 basis points off the net worth of every federal credit union in the country, as well as reducing those credit unions' return on assets by 62 basis points, in an attempt to bail out these selfsame untrustworthy corporates.

NCUA believes that the actions to conserve the two corporates, in tandem with established plans to enhance liquidity and generally stabilize the corporate network, represent the most cost effective and prudent alternative available to the credit union industry.

Today's decision is proof, if proof were needed (and frankly it wasn't) that the old plans -- which essentially involve member-owned and well-run retail credit unions being forced to bail out a bunch of sharks and gamblers -- were not only misguided but also woefully insufficient. I'm particularly mindful here of the small community development credit unions like the one I live next door to and sit on the board of, LES People's.

We were always extremely assiduous in our loan underwriting, our asset quality is very high despite the fact that our membership has very low credit ratings, and our operating income has never been higher. Yet this proposal from the NCUA would force us to expend extremely precious and hard-fought-for capital in order to bail out the wastrels at the likes of WesCorp. At a stroke, it manages to redistribute capital from the people who really need it -- the poor members of local-community credit unions -- to faceless financial institutions which were lying to their regulator about their solvency all along.

Here are the facts about community development credit unions (CDCUs), and how they'll be affected by the proposed bailout:

Last year, CDCUs nationally posted approximately $12.75 million in net income. Assuming all factors remain equal, a mandatory investment of 62 basis points translates into $28 million and would represent a net loss for CDCUs of $15.3 million in 2009, wiping out the modest gains made this year. The fallout from the economic downturn, coupled with the lack of capital, will result in a rapid reduction in community wealth, and for CDCUs, a crippling loss in earnings. We fear these challenges could permanently shutter dozens of CDCUs nationally.

Remember that all things are not going to remain equal: banks in general are suffering from rising delinquencies, and credit unions are no different. But after they've carefully built up capital cushions to protect themselves from exactly such an eventuality, it's unconscionable for their regulator to then turn around and remove that capital cushion just when they need it, saying that a bunch of speculators with more money than sense managed to gamble it away in the RMBS markets.

The big question in Washington these days is simple: "How can we get banks lending again?". Any sensible answer to that question must involve credit unions, which have proved themselves to be extremely responsible lenders. We should be bolstering their capital right now, rather than confiscating it.

Now that the NCUA has woken up and realized that the corporate credit unions are beyond redemption, its board must rescind its extremely harmful decision to ask the real, consumer-facing credit unions to bail them out. At the very least, come up with some way of recapitalizing the small but vital credit unions which will be worst hit by this misguided policy. It's a nasty world out there, but they can be a hugely important force for good. If only you'll let them.

BOSTON (Reuters) - Hundreds of people in the United States are under investigation for financial scams, many involving Ponzi schemes, a U.S. regulator said on Friday, calling the phenomenon "rampant Ponzimonium."

While none are as mammoth as disgraced financier Bernard Madoff's $65 billion fraud, multimillion-dollar "mini Madoffs" are proliferating from New York to Hawaii, the head of the Commodity Futures Trading Commission said.

So far this year, the agency has uncovered 19 Ponzi schemes, which depend on an influx of new capital instead of investment profits to pay existing investors.

(snip)

"Because of the economy, people are seeking redemptions more than they ever have and that's making a lot of these scams go belly up," Bart Chilton, commissioner of the Washington-based Commodity Futures Trading Commission, said in a telephone interview.

http://www.nytimes.com/reuters/2009/03/20/business/business-us-usa-fraud.html

Instead they follow the pattern of a con played in the Old West...

It ran like this, a flamboyantly dressed stranger would come into town and very conspicuously place a very full envelope into the Hotel Vault for 'safekeeping'... Implying it was stuffed with cash.

The stranger would then take advantage of the generosity of the locals drinking, gambling and whatnot on a tab. Insinuating that they would be paid for their services from the money, but, it was inconvenient to get the money just then, because the money was in the hotel vault.

This would continue for awhile until the stranger (as Mark Twain would say) started to smell like three-day-old fish.

Late one night the stranger would sneak off... When the villagers discovered he'd gone they would rush to the Hotel Safe to see if he'd left the money. What they found in the envelope was typically cut up newspapers sometimes sandwiched between a couple of low denomination bills.

THIS is what we are dealing with...

run by future convicts

Seems appropriate. ;)

Bank Closing Information - March 20, 2009
These links contain useful information for the customers and vendors of these closed banks.

Teambank, N.A., Paola, KS
Colorado National Bank, Colorado Springs, CO
FirstCity Bank, Stockbridge, GA


http://www.fdic.gov

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5298754

Darn... I keep forgetting!

Thank you for playing!

But, somehow they do it anyway.

they are making up for last weekend.

Good Friday evening to all!

Come on in, the water's fine.

Thanks for the weekend thread, hope your feeling better from that nasty cold.

Which is more than the Economy is!

The Grandson: What?

Grandpa: The eel doesn't get her. I'm explaining to to because you look nervous.

The Grandson: I wasn't nervous. Maybe I was a little bit "concerned" but that's not the same thing.

http://news.yahoo.com/s/nm/20090320/bs_nm/us_citi_4

Citigroup CFO to run troubled bank unit

By Jonathan Stempel

NEW YORK (Reuters) – Citigroup Inc, in a significant management shake-up, named Gary Crittenden to run a unit housing underperforming and toxic assets the bank wants to get rid of, and tapped Edward Kelly to replace him as chief financial officer.

Crittenden on Friday was named chairman of Citi Holdings and will work with its interim chief executive, Michael Corbat, to sell or wind down $850 billion in assets. The unit is separate from Citicorp, whose $1.1 trillion of assets include businesses Citigroup wants to keep, such as retail and investment banking, transaction services, and Citi Private Bank.

The appointments are "the first good news we've had in a long time from Citigroup," said Michael Holland, a money manager at Holland & Co in New York. "Crittenden has earned the confidence of the financial community, and Kelly is considered a very solid, competent citizen. It is a welcome relief."

Crittenden joined Citigroup as CFO in March 2007 after holding the same position at American Express Co, Monsanto Co and Sears Roebuck & Co.

Kelly, known as Ned, was head of global banking, including Citi Private Bank, and joined in February 2008 from private equity firm Carlyle Group. Before that, he was chief executive of Mercantile Bankshares Corp, a Baltimore lender now owned by PNC Financial Services Group Inc.

Citigroup Chief Executive Vikram Pandit is trying to restore the third-largest U.S. bank to health after $37.5 billion in losses over the last five quarters.

The bank has taken $45 billion of taxpayer money to bolster capital, and the government is sharing in losses on $300.8 billion of troubled assets, which are housed in Citi Holdings. The government is expected to soon become Citigroup's largest investor with a possible 36 percent stake.

... said Anton Schutz, a portfolio manager at Mendon Capital Advisors in Rochester, New York. "Gary can look terrific if he makes assets disappear quickly at good prices, and Ned has an important role in repairing the balance sheet and working with the government, which has become increasingly dangerous for banks."

SPLIT

Pandit split Citigroup in two in January, formally marking the demise of the financial supermarket model that Sanford "Sandy" Weill used to create and build Citigroup in the late 1990s and early this decade.

"Citi Holdings is essentially a marketing operation to get rid of problem assets," said Bert Ely, an independent banking consultant in Alexandria, Virginia. "It falls on Crittenden to get top dollar for the assets they're getting rid of, and that's not easy in this market."

Among the Citi Holdings businesses are the Smith Barney brokerage, which is merging into a joint venture with Morgan Stanley's brokerage; the CitiFinancial and CitiMortgage finance operations; the Primerica insurance unit; and the Nikko Cordial unit in Japan.

While Citigroup treats Citicorp and Citi Holdings as separate operations, both are included in overall results. Pandit last week said Citigroup made money in January and February, surprising analysts.

Ely said Crittenden, who is in his mid-50s, could use Citi Holdings as a springboard. "It positions him for bigger things, whether at Citigroup or somewhere else," he said. "If he does it well, then the headhunters will be banging on his door."

In morning trading, Citigroup shares were up 12 cents at $2.72 on the New York Stock Exchange. They traded above $50 as recently as July 2007.


SO CITIGROUP SET UP ITS OWN BAD BANK--HOW DO YOU LIKE THEM APPLES, OZY?

Grandpa: Are you kidding? Fencing, fighting, torture, revenge, giants, monsters, chases, escapes, true love, miracles...

The Grandson: Doesn't sound too bad. I'll try to stay awake.

Grandpa: Oh, well, thank you very much, very nice of you. Your vote of confidence is overwhelming.

They really do have a different view up on Wall St.

http://www.huffingtonpost.com/2009/03/17/citigroup-dividend-paymen_n_176027.html

Contrary to popular perception, Citigroup is continuing to make dividend payments.

The bank, which received $45 billion in bailout funds last year, announced several weeks ago that it would stop paying dividends to preferred and common shareholders as part of a larger deal with the US government. Yet, the funds continue to flow, the Huffington Post has learned.

Dividend payments are not chump change: the bank paid a total of $7.4 billion in dividend payments in 2008, according to its 10-k filing. Bloomberg data lists dozens of outstanding preferred shares that are still paying dividends, including, for example, the $1.1 billion Citigroup XVII Series E, which paid out a 6.35% dividend as recently as Monday.

A spokesman for Citigroup said the bank would continue to make the dividend payments until its deal with the US government was complete. The agreement, which, in addition to cutting out dividends, includes the US government taking a 36% stake in the bank, must first be approved by shareholders. That could take "a couple of weeks," the Citi spokesman said.

Adding to the taxpayers' burden, even after Citi stops paying out dividends to preferred shareholders, it will continue to shell out 11% interest to the government of Abu Dhabi. This is because the emirate, which invested $7.5 billion in the bank in 2007, owns a hybrid stock-bond instrument that pays out a dividend until it converts, in phases, beginning in March 2010.

This 11% dividend totals "several hundreds of thousands of dollars" a quarter, according to Rachel Ziemba, a senior analyst at RGE Monitor. "Having to make these payouts underscore some of the challenges Citigroup will face moving forward, and why it is still likely to need additional capital," she said.

"The name of the game is conserving capital not wasting it," added James Barth, a senior fellow at the Milken Institute and a former chief economist of the Office of Thrift Supervision under President Reagan. "Every dollar counts when an insitution is troubled like Citi, especially when it is taxpayer money."

Here is an example of one of Citi's preferred shares that continue to pay a dividend: SEE LINK FOR PRINTOUTS

PROBABLY INVOLVES A HELICOPTER, TOO

http://news.yahoo.com/s/nm/20090320/bs_nm/us_usa_fed_2

WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke on Friday said the Fed's buying of longer-dated U.S. Treasuries would "taper off" when the economy no longer needed help, allowing the Fed to cease its emergency support.

"The time will come when the economy will be growing, the housing market will be recovering, that support will no longer be needed. And we will of course at that point taper off that support," Bernanke told community bankers in Phoenix, Arizona.

The U.S. central bank on Wednesday surprised investors with plans to buy up to $300 billion of longer-term U.S. Treasury securities and an additional $850 billion of agency mortgage debt to ease a deepening U.S. recession. It also confirmed it would hold interest rates near zero for "an extended period".

"We are very much aware that we don't want to be in the credit markets forever. We need to help them now, but we want to have an exit strategy, and allow those markets to recover and become again fully private sector," Bernanke said in response to an audience question after delivering a speech.

It was the first time the Fed had bought longer-dated Treasuries since the 1960s. The news sent yields sharply lower, while on the foreign exchange markets it inflicted the biggest decline in the dollar in 25 years.(REMEMBER WHAT HAPPENED IN THE 60'S, BOYS AND GIRLS? DOLLAR DEVALUED, INFLATION,6 DAY WAR, OIL SHOCKS AND AFTER 20 YEARS OF THAT, PAUL VOLCKER AND 21% PRIME INTEREST RATE)

Bernanke said the Fed had decided to expand its aid for the mortgage sector and buy Treasury securities to "support the housing market, the broader economy."

Economists said the Fed was effectively printing money by buying debt issued by the U.S. government, and then recycling all proceeds from this investment back to the Treasury.

In terms of policy, it is equivalent to the quantitative easing strategies employed by Japan during the 1990s to end deflation and a decade of miserable economic performance.

Quantitative easing was needed, with rates already at zero and deflation a genuine threat, Federal Reserve Bank of St Louis President James Bullard said in a presentation at a policy workshop at the Bank of France in Paris.

"Moving to quantitative approaches to policy is feasible and is going on right now," Bullard told the workshop, according to his presentation on the St Louis Fed website.

He also emphasized the risks of deflation, citing the experience of Japan, where widespread declining prices following the collapse of a property and stock market bubble made the economic downturn much worse.

"Deflation is a real possibility in the current environment important near-term goal for monetary policy is to prevent this outcome," said Bullard, who is not a voting member of the Fed's policy-setting committee this year.

http://www.dailyreckoning.com/bernanke-fires-up-the-printing-presses/

What do we know? Maybe Ben Bernanke will be able to do what no central banker has ever done before: put in just the right amount of inflation…not too much, not too little. In the past, they tended to overdo it. There are not many examples. France, England and America in the 18th century. Practically no examples we know of in the 19th century (they’d learned their lesson!). And in the 20th century – only marginal countries…or countries with nothing left to lose…engaged in ‘quantitative easing.’ Germany did it in the 1920s, because her war reparations burden was greater than she could sustain. Argentina did it in the 1980s, because it owed too much money to too many foreigners. And Zimbabwe did it in 2003-2009, for reasons of its own.

There are not many examples because the consequences of over-doing it are so horrible, central bankers have generally not done it at all. Quantitative easing was always a possibility…but it was always a last resort…like blowing up the powder and spiking the guns; it was something you did when you knew you’d lost the battle already.

But here is the world’s biggest economy and its oldest (arguably) and most successful government…doing something that used to be done only by desperadoes…

What does it mean? Where does it lead?

We don’t know. But we don’t think we want to go there.

Investors didn’t seem to want to go there either. They sold off stocks and bought gold.

Gold shot up on Wednesday, after the Fed announcement. Then, it just kept going…adding another $70 yesterday. We wondered why the price hadn’t already hit $1,000. It looks like it soon will…this morning it is back over $960 an ounce.

Meanwhile, oil rose above $50, the dollar took a big drop and the Dow finished down 85 points. The greenback slipped to $1.36 per euro.

As to the stock market, whether this is a pause in the rally…or a reversal, caused by the Fed announcement…we don’t know. Our guess is that it’s just a pause. The rebound is still unfinished business. Besides, investors aren’t running scared like they were a few weeks ago. Sentiment seems more relaxed. “We’ll muddle through this somehow,” investors tell themselves.

And the news appears more positive…at least, if you stand on your head and look up it.

Jobless benefits, for example. They’re getting paid out to a record number of recipients. But not as many as economists had expected.

The leading indicators are down 0.4% in February – but not as much as expected.

And consumers are spending less money – but not as much less as expected.

And, of course, there’s the money flowing from Washington. The auto suppliers just got $5 billion. Obama’s budget will probably reach $2 trillion in deficit this year. And this extra $1.2 trillion from the Fed is not exactly small change. And that’s in addition to the $11.7 trillion the feds have already ponied up in their fight against a free market. Investors are going to look at this flood of cash from the Fed and figure that it has to go somewhere. Some of it is bound to go into the stock market.

Now, we turn to our friends in Baltimore to see what the have in store for us…

“The larger story,” opines Rob Parenteau, lending a The 5 Min. Forecast a hand today, “can be found in the deleveraging effort of households, which accelerated in the fourth quarter of 2008.

“We have never seen such a sustained buildup of credit flows to the U.S. household sector like the one that began in the late ’90s. Nor has the U.S. economy experienced such a reversal of household credit flows since the Great Depression.

“Policymakers, investors and entrepreneurs need to grasp this essential piece of the puzzle:



.........

“Will it work?” was the question put to our little band of analysts this morning.

“It depends on what you mean by ‘work’,” was the answer....

http://www.opednews.com/articles/The-Geithner-Summers-Berna-by-George-Washington-090318-30.html



Paul Krugman wrote a couple of weeks ago:

Top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as “toxic waste,” are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away.

Thus, in a recent interview Tim Geithner, the Treasury secretary, tried to make a distinction between the “basic inherent economic value” of troubled assets and the “artificially depressed value” that those assets command right now. In recent transactions, even AAA-rated mortgage-backed securities have sold for less than 40 cents on the dollar, but Mr. Geithner seems to think they’re worth much, much more.
And the government’s job, he declared, is to “provide the financing to help get those markets working,” pushing the price of toxic waste up to where it ought to be.

What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions....
The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly ....

Today, Edward Harrison's must-read post explains why the Geithner-Summers-Bernanke plan to prop up asset prices cannot succeed (if you don't read the whole post, at least read the following excerpts):

The U.S. government's efforts point in four directions:

1. Increase asset prices. If the assets on the balance sheets of banks are falling, then why not buy them at higher prices and stop the bloodletting? This is the purpose of the TALF, Obama's mortgage relief program and the original purpose of the TARP.

2. Increase asset prices. If assets on the balance sheet are falling, why not eliminate the accounting rules that are making them fall? Get rid of marking-to-market. This is the purpose of the newly prosed FASB accounting rule change.

3. Increase asset prices. If asset prices on the balance sheet are falling, why not reduce interest rates so that the debt payments which are crushing debtors ability to finance those assets are reduced? This is why short-term interest rates are near zero.

4. Increase asset prices. If asset prices on the balance sheet are falling, why not create Public-Private partnerships to buy up those assets at prices which reflect their longer-term value? This is what Geithner's Capital Assistance Program is designed to do.

So I lied, there is only one direction the government is headed: increase asset prices (or, at least keep them from falling). Read White House Economic Advisor Larry Summers' recent prepared remarks to see what I mean. (Summers on How to Deal With a ‘Rarer Kind of Recession’ - WSJ) ....

These plans are not going to work
As aggressive as this campaign by the U.S. government is, it will have limited effectiveness because the extent of the writedowns of assets already on the books is going to be too massive. ...

The U.S. banking system is effectively insolvent

So, it should be pretty clear that we have some serious losses still left to work through in the financial sector. I reckon the U.S. banking system is effectively insolvent. This is what Nouriel Roubini means when he says there will be $3.6 trillion in writedowns before this is all over. This means that banks do not have adequate capital to absorb the likely losses facing them later this year.

To date we have addressed this problem by throwing more money at it -- bailing out the banks and attempting to prevent asset prices from falling. I predict this solution will lead to another panic if continued indefinitely. (Remember, between now and the summer or fall, the unemployment rate could reach 9-10%, while home prices would still be falling and default rates rising.) American citizens would realize the system is insolvent and would cease to trust that a reasonable solution was in the offing.

Confidence in America's banking system is already lacking, especially in the large banks and large regional banks. This confidence can only be restored if banks are adequately capitalized now and in the future. Were we to suffer another round of major writedowns and capital injections into major institutions, I expect all confidence would be lost and bank runs would begin in earnest. This must be avoided at all costs.

Given the lack of capital the banking system now has and the likely level of writedowns, many institutions are fundamentally insolvent. They must, therefore, be liquidated or nationalized BEFORE confidence in the system is lost and bank runs occur.

Buying up assets at inflated prices, halting mark-to-market, and reducing interest rates to zero will not reduce the problem assets on bank balance sheets enough to avoid further massive writedowns.

Conclusion

In sum, most available evidence suggests bank writedowns will be massive -- perhaps larger than the present capital base of the U.S. banking system. While, present measures of recapitalizing and bailing out faltering institutions and buying up toxic assets may prove adequate to prevent further writedowns and capital erosion, I would rather err on the side of caution.

Caution dictates an aggressive response -- one which should include nationalization or liquidation of a significant number of banking institutions. Anything less is wishful thinking, the consequences of which could be very dire indeed.

Of course, whether or not the banks should be liquidated (the free market solution) or nationalized (the government intervention approach) is subject to debate. But regardless, it should now be obvious that the Geithner-Summers-Bernanke plan to prop up asset prices is not only crazily expensive, but it will never succeed.



Author's Website: www.WashingtonsBlog.com

Fezzik: I just want you to feel you're doing well. I hate for people to die embarrassed.

Record of bets on Geithner's departure by June 9th.

Guest Post: It's the writedowns, stupid

http://www.nakedcapitalism.com/2009/03/guest-post-its-writedowns-stupid.html

http://www.opednews.com/articles/Saving-Jackpot-Capitalism-by-Martha-Rose-Crow-090316-46.html


Regular return on investments is for the little people. The greedy elite and elite investor groups must have more. They must save their private, un- or under regulated way of making secret kings’ ransoms.

Shadow Financial Entities.

They stay out of the light as much as they can because they don’t want the world to know how Big and Powerful they really are and they don’t want the public to know how ruthless they are to make high returns on investments for their elite masters... Wikipedia explains what a market maker is: A market maker is a firm that quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the bid/offer spread, or turn.

This arena of secret capitalism is the world of the ‘Big Players’: hedge funds, private equity, market makers, real estate investment trusts and other esoteric and exotic investment clubs. It is a ‘private’ wealth-making world so it is not under public eye and government scrutiny like ‘public’ companies are. Investors are more ‘partners’ than stockholders. All investment ventures are limited partnerships so if the venture fails, the investors lose but the financial entity remains in business. Only the elite and elite investor groups can be members. Again, this economic game is not for the regular investor.

As manufacturing companies become more like financial players, real financial players such as private-equity funds, hedge funds and real estate investment trusts (REITs) have become significant short-term owners of manufacturing and services companies - acquiring, restructuring and disposing of these companie as liquid assets regardless of actual productivity and profitability. Over the past decade private-equity funds have mobilized trillions of dollars for the acquisition of companies in virtually every industrial and service sector, leading The Economist to declare: "Today, the private-equity industry has moved from the fringe to the centre of the capitalist action.”

Workers in virtually all sectors face the threat of rapidly changing ownership and the imposition of restructuring plans and short-term targets that are based on a financial market logic that places no value in real production, productivity or jobs. In just the first eight weeks of 2006, hedge funds and private-equity funds made over 4,000 deals involving the acquisition and disposal of US$473 billion in assets. Among the ‘assets’ exchanged were manufacturing and service operations employing hundreds of thousands of workers. SEE LINK AT ARTICLE

Ironic, if Bernie Madoff had invested all his clients’ money (minus management fees) and lost it all, he would never have gotten into any legal trouble. Hedge funds and private equities work the same way. They make money whether their investments make money. First, they get ‘management’ fees, then they get 20-30% of the profits and the investors get the rest.

In this world of dark predator capitalism, the money institutions of the elite are protected by other elite in government. These institutions have traditionally given the uber investors a 16-20% investment return. They are holy cows and holy cash cows that politicians hate to touch because most high politicians are invested in them whether directly and/or indirectly.

Politicians are under pressure by government investment groups (pension funds, ‘rainy’ day funds, so forth) to ‘do something’ to save their portfolios. There are over 82,000 of these groups and when they combine their assets together, they are a powerful investment force. To learn more about government as investor, see www.cafr1.com

Rich politicians are behind the reason why this shadow capitalism gets special tax treatment. They pay a capital gains tax instead of the normal tax percentage that investors of transparent investments pay. There have been attempts to change this special tax treatment of Jackpot Capitalism, but it hasn’t changed so far and probably won’t be changed unless enough people understand what is going on and pressure their rich politicians to change the laws.

Almost every member of Congress and the Senate is at least a millionaire. A few are billionaires. They protect their financial ass-ets over the assets of the people they are supposed to serve.

To keep and grow wealth can be a hassle. Banks are FDIC insured for $100,000 so if you put more than a $100,000 in a bank account and the bank fails, you lose it all but that $100,000 and you usually get that back after many years.

This means that all investments are risky: stocks, property, retail, bonds, so forth.

Having a large amount of money is a hassle in other ways. If you trade it for gold, you can always be robbed. If you stuff it in mattresses and the walls of your house and the house burns down, the money burns with it.

Since the wealthy can’t safely save all their money in banks, plus they’d get a dull return of 1-3% and every investment is a risk, whether low or high, they invest in their own Jackpot Capitalism Clubs, specially designed for clients like them

The media has been covering the Bernie Madoff spectacle but never dug deeper into what kind of business he ran. Corporations themselves, the major media has no reason to expose market makers or the other members of the Jackpot Club.

The predator pirates who run these private, elite financial entities are called in the business world, ‘Masters of the Universe’. Google it and find out how many entries there and how ruthless the players are. They leave devastation and ruin in their wake but usually laugh all the way to the bank with the extraordinary profits they make.

Although the corporate-owned media blames the borrowers instead of the architects of the sub-prime crisis, many people are now starting to blame ‘Big Business’ or the multinational corporations and the banking sector for this Greater Depression. What people don’t know is that private equity firms are more wealthy and powerful than the top ten multimationals:

Despite their extensive control over manufacturing and service companies globally, these investment funds are not recognized as multinationals by the UN Conference on Trade and Development (UNCTAD). If they were, "they would easily displace the top 10 corporations" on UNCTAD's top 100 non-financial multinationals, the IUF's Peter Rossman and Gerard Greenfield write, adding:


"General Electric, ranked first in UNCTAD's list, controls less foreign assets and employs fewer workers overseas than either Blackstone, Carlyle Group, or Texas Pacific Group ."

Further, employment figures are also incomplete in national data, since statistical agencies still have no category for the relatively new financial institutions. "Up to one-fifth of non-public sector workers in the United Kingdom, for example, are now employed in companies controlled by private-equity funds," Rossman and Greenfield report. click here

Private equity and private investment firms borrow a lot of money from banks for their money-making, neo capitalism schemes.

When credit was easy and interest was low, many banks gave these shadow financial entities big loans with little collateral. The banks collected fees to process the loans so they were making money two ways. Three ways if they became a partner in a limited partnership.

Money poured out of banks to bankroll this new mutant form of capitalism. For example, a private equity firm raising $1 billion from elite investors as ‘collateral’ could go out and borrow $8 or 9 billion for their new ‘venture’. This is the stuff the media is not telling us because no agent for capitalism in the capitalist world wants to shed any spotlight on shadow financialization.

Saving the Jackpot.

Financialization is a relatively new term used to discuss the emergence of a new form of capitalism in which financial leverage and exotic instruments tends to override capital (equity) and in which financial markets dominate over the traditional industrial economy.
click here

Jackpot Capitalism – Financialization – is the way the elite and elite investor groups make the high returns on capital and if they should fall, private equity investors like Nancy Pelosi would be forced to invest in lower yield investments. But the banks are in trouble. They loaned the Captains of Financialization untold billions and if they fall, so will shadow financialization.

Since the beginning of the world, the socially-dominant elite have always tried to make great fortunes so they could have greater power over everyone else. Like Balzac said, “Behind every great fortune is a great crime.” For capital firms to make high returns on ‘investments’, they have to be ruthless in their pursuit for profit: They must have cheaper labor (modern slavery), cheaper materials and natural resources (cause of many wars), agreeable governments (western foreign policies ruling the world) and higher prices for higher profits.

When politicians continue to protect the financial sector over the needs of their constituents, they are protecting their portfolios for transparent investments and opaque investments. This means that the banks must be raised up from the dead by throwing money at them.

If the banks go down, so does the elite’s Private Pinocchio Profit ‘Play Lands’. It will be the end of Jackpot Capitalism as they know it because the financialized shadow sector they benefit so handsomely will go down with the banks as well. Then there will be public scrutiny and they know it.

Of course, someone will devise a new ‘creative’ way or calculus ‘formula’ to squeeze high returns for the elite but only if we continue to let them get away with it.

Only we can stop this new kind of secret, violent capitalism that is pillaging the world. Only we can stop it from ‘morphing’ it into something else. Otherwise the private shadow investment entities will remain, ‘Same leopard, different spots’.

For more information, I recommend:

SEE ARTICLE FOR LINKS

http://www.opednews.com/articles/Terrorism-By-Another-Name-by-George-Washington-090318-978.html


AIG's CEO, Edward Libby, admitted today that credit default swaps brought down the company:

Mistakes were made at AIG, and on a scale that few could have imagined possible. The most egregious of those began in 1987, when the company strayed from its core insurance competencies to launch a credit-default-swaps portfolio, which eventually became subject to massive collateral calls that created a liquidity crisis for AIG.

But instead of letting AIG go quietly into the dark night, Liddy is trying to blackmail America and the world by using a threat. As Salon notes:

specifically referring to the the buildup of a $2.7 trillion portfolio of credit default swaps and other derivative products. About $1 trillion worth of that portfolio has been "wound down," said Liddy, but AIG is still on the hook for an unthinkable $1.6 trillion worth of liabilities.

"There is still risk that that could blow up," said Liddy, and it was clear from his expression that the prospect was not a rhetorical exercise.

Liddy didn't need to further connect the dots. If AIG F.P.'s outstanding portfolio of derivative products "blows up" -- the cascade could likely bring down AIG's counterparties. Which would inevitably require the expenditure of further government trillions to prevent a systemic crash.

When will people start demanding that the government rescind AIG's credit default swaps? The government has that power. Indeed, the same arguments which have been made for the government's authority to cancel AIG's bonus contracts can be used to cancel AIG's CDS contracts. In order to receive any more bailout money (and to have to give back money they already received), AIG's counterparties need to cancel their CDS contracts. And for foreign CDS counterparties, the government could simply say "we will not loan your central banks any more money unless you cancel the CDS contracts".

This is a national emergency. Instead of doing something dumb like seizing gold, the government can do something productive and force a rescission of all of AIG's outstanding CDS contracts or - at the very least - give the counterparties a haircut and cram the CDS contract's dollar values down to a very small amount.

I've hired you to help me start a war. That's a prestigious line of work with a long and glorious tradition.

How frighteningly appropriate.

IS HIS OWN WORDS--A PROGRESS REPORT AND ANALYSIS

http://www.businessinsider.com/henry-blodget-cuomo-discovers-all-kinds-of-outrageous-aig-bonus-facts-2009-3

ANGIE BOLSTERS COUMO'S ARGUMENTS

http://www.creditslips.org/creditslips/2009/03/is-aig-insolvent.html

Duh, Hedge Funds Bought AIG Credit Default Swaps Too

http://www.nakedcapitalism.com/2009/03/duh-hedge-funds-bought-aig-credit.html

http://www.interfluidity.com/posts/1237369273.shtml

and further discussion: HR 1586: Not a good tax clawback

http://interfluidity.powerblogs.com/posts/1237526266.shtml

http://www.opednews.com/articles/Was-the-Bailout-Itself-a-S-by-Paul-Craig-Roberts-090319-674.html

...The US government breaks its contracts with US citizens on a daily basis, but AIG’s bonus contracts are sacrosanct. The Social Security contract was broken when the government decided to tax 85% of the benefits. It was broken again when the Clinton administration rigged the inflation measure in order to beat retirees out of their cost-of-living adjustments. To have any real Medicare coverage, a person has to give up part of his Social Security check to pay Medicare Part B premium and then take out a private supplemental policy. The true cost of Medicare to beneficiaries is about $6,000 annually in premiums, plus deductibles and the Medicare tax if the person is still earning.

Treasury Secretary Geithner, the fox in charge of the hen house, has resolved the problem for us. He is going to withhold $165 million (the amount of the AIG bonuses) from the next taxpayer payment to AIG of $30,000 million. If someone handed you $30,000 dollars, would you mind if they held back $165?

PR flaks have rechristened the bonus payments “retention payments” necessary if AIG is to retain crucial employees. This lie was shot down by New York Attorney General Andrew Cuomo, who informed the House Committee on Financial Services that the payments went to members of AIG’s Financial Products subsidiary, “the unit of AIG that was principally responsible for the firm’s meltdown.” As for retention, Cuomo pointed out that ”numerous individuals who received large ‘retention’ bonuses are no longer at the firm”

Eliot Spitzer, the former New York Governor who was set-up in a sex scandal to prevent him investigating Wall Street’s financial gangsterism, pointed out on March 17 that the real scandal is the billions of taxpayer dollars paid to the counter-parties of AIG’s financial deals. These payments, Spitzer writes,

http://www.slate.com/id/2213942/

are “a way to hide an enormous second round of cash to the same group that had received TARP money already.”

Goldman Sachs, for example, had already received a taxpayer cash infusion of $25 billion and was sitting on more than $100 billion in cash when the Wall Street firm received another $13 billion via the AIG bailout.

Moreover, in my opinion, most of the billions of dollars in AIG counter-party payments were unnecessary. They represent gravy paid to firms that had made risk-free bets, the non-payment of which constituted no threat to financial solvency.

Spitzer identifies a conflict of interest that could possibly be criminal self-dealing. According to reports, the AIG bailout decision involved Bush Treasury Secretary Henry Paulson, formerly of Goldman Sachs, Goldman Sachs CEO Lloyd Blankfein, Fed Chairman Ben Bernanke, and Timothy Geithner, former New York Federal Reserve president and currently Secretary of the Treasury. No doubt the incestuous relationships are the reason the original bailout deal had no oversight or transparency.

The Bush/Obama bailouts require serious investigation. Were these bailouts necessary, or were they a scam, like “weapons of mass destruction,” used to advance a private agenda behind a wall of fear? Recently I heard Harvard Law professor Elizabeth Warren, a member of a congressional bailout oversight panel, say on NPR that the US has far too many banks. Out of the financial crisis, she said, should come consolidation with the financial sector consisting of a few mega-banks. Was the whole point of the bailout to supply taxpayer money for a program of financial concentration?



Author's Bio: Paul Craig Roberts, a former Assistant Secretary of the US Treasury and former associate editor of the Wall Street Journal, has held numerous academic appointments. He has been reporting shocking cases of prosecutorial abuse for two decades. A new edition of his book, The Tyranny of Good Intentions, co-authored with Lawrence Stratton, a documented account of how Americans lost the protection of law, was published by Random House in March, 2008.

It took me half a lifetime to invent it. I'm sure you've discovered my deep and abiding interest in pain. Presently I'm writing the definitive work on the subject, so I want you to be totally honest with me on how the machine makes you feel. This being our first try, I'll use the lowest setting.

Count Rugen activates the water powered torture machine. Wesley writhes in great pain

Count Rugen: calmly " As you know, the concept of the suction pump is centuries old. Really that's all this is except that instead of sucking water, I'm sucking life. I've just sucked one year of your life away. I might one day go as high as five, but I really don't know what that would do to you. So, let's just start with what we have. What did this do to you? Tell me. And remember, this is for posterity so be honest. How do you feel?"

"Water powered torture device, eh? I like that. Scooter, get on that right away."

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031702939.html

You might think that having anted up $173 billion of our own money, we taxpayers would have some leverage at AIG, now that we own 80 percent of the shares. You might think that when chief executive Edward Liddy, a holdover appointee of Hank Paulson's, told Treasury Secretary Tim Geithner that he had just mailed $165 million of our money as bonuses to the geniuses at the firm's financial products unit -- who probably did more on a per-banker basis to destroy global capitalism than any other kindred group -- that Geithner, upon hearing this news, would have responded, "Liddy, you're fired."

But Geithner's indulgence of bankers' indulgences is fast becoming the Obama administration's Achilles' heel. The AIG debacle is the latest in a series of bewildering Geithner decisions that threaten to undermine the administration's efforts to restart the economy. So long as it's Be Kind to Bankers Week at Treasury -- and we've had eight straight such weeks since the president was inaugurated -- American banking, and the economy it is supposed to serve, will remain paralyzed. The Geithner plan to restart the banks provides huge taxpayer subsidies to hedge funds, investment banks and private equity companies to buy the banks' toxic assets without really having to assume the risk. That's right -- the same Wall Street wizards who got us into this mess, using the same securitization techniques that built mountains of debt within a shadow financial system that remains unregulated, are the saviors whom Geithner has anointed to extricate us -- with our capital, not theirs -- from the mess that they created.

A more plausible solution would be for the government to assume control of those banks that are insolvent, as it routinely does when banks go under. It could then install new management, wipe out the shareholders, take the devalued assets off the banks' books, restart lending and restore the banks to private control at a modest profit for the taxpayers. There may be reasons that Geithner's plan makes more sense than this one, but if they exist, Geithner has failed to explain them.

It's certainly not because Americans are dead set against bank nationalization: A Newsweek poll this month found that 56 percent of respondents supported it. Hell, Alan Greenspan supports it. But Geithner seems unable to imagine a banking system not run by its current leaders or owned by its current shareholders or engaged in the same arcane securitization practices that led to its collapse. An administration that is busily creating alternatives to our health-care system and our energy policies is being dragged down by a Treasury secretary who cannot conceive of an alternative to our catastrophic system of banking....

3 videos

3/19/09 Hedge Funds and the Global Economic Meltdown (Part 1)
Short selling hedge funds lit the spark that led to the global economic meltdown. Now they want to help craft the laws Congress will pass to fix our broken regulatory system. That's insane.
http://www.youtube.com/watch?v=xUKSU1qahgE

Hedge Funds and the Global Economic Meltdown (Part 2)
http://www.youtube.com/watch?v=NcjssQSthNU

Hedge Funds and the Global Economic Meltdown (Part 3)
http://www.youtube.com/watch?v=Q48eSoTNByQ


Edit: who is behind the naked short selling of Bear Stearns and Lehman? Probably GE too. If we could figure out who the hedge funds are working for, we would find where all our taxmoney is being transferred to.

Global: Bubbles, Bailouts and Stimulus Plans

http://globalvoicesonline.org/2009/03/18/global-bubbles-bailouts-and-stimulus-plans/

Mother Jones
http://www.motherjones.com/politics/2009/03/geithner-aide-fought-ceo-pay-reform


On Wednesday afternoon, as President Barack Obama was leaving the White House for a town hall meeting in California, he spoke for 15 minutes to reporters about the AIG controversy. Responding to the rising rage over the $165 million or so in bonuses paid to executives at the bailed-out insurance firm, Obama noted that he was quickly developing policies to prevent future AIG-like catastrophes. And he slammed Wall Street's culture of "excess greed, excess compensation, excess risk taking." To demonstrate that he's committed to battling such greed, the president cited his work in the Senate to rein in executive compensation. Noting that he and Rep. Barney Frank (D-Mass.) had each introduced legislation on this front in 2007, Obama declared that "there were some people who attacked us, saying government has no business doing that."

One of Obama's opponents at that time was Mark Patterson, a lobbyist then for Goldman Sachs, the investment banking firm, which opposed the Frank-Obama initiative. Yet Patterson is now chief of staff to Treasury Secretary Timothy Geithner, the embattled point man in the Obama administration's endeavor to undo the notorious AIG bonuses. That is, a Washington influence-peddler who worked against Obama's effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.

In 2007, Frank, the chairman of the House financial services committee, introduced H.R. 1257, the Shareholder Vote on Executive Compensation Act. The bill required public companies to allow shareholders to hold nonbinding votes on executive compensation plans. The measure—dubbed "say on pay"—was a modest step, though only one of the few attempts then to address exorbitant salaries. It did not limit pay for corporate managers; the legislation would merely permit shareholders to express their displeasure with compensation packages. Corporations would be free to ignore the outcomes of these symbolic votes. Still, the banking industry opposed the bill. And Goldman Sachs, for which Patterson was a registered lobbyist from September 2005 to April 2008, was no fan of "say on pay." Sachs' chief executive, Lloyd Blankfein, who took home at least $70 million in 2007, has argued that shareholders are "less sophisticated and have less understanding" of compensation issues than corporate board members.

According to lobbying disclosure forms (PDF), Patterson was one of four Goldman Sachs lobbyists registered to work on HR 1257. How the group tried to influence congressional action on the bill is not revealed in the documents, but given Goldman Sachs' opposition to this reform, Patterson and the others were surely not trying to help the measure pass. (In January, a Treasury official confirmed to the Associated Press that Patterson's lobbying portfolio included this compensation measure.)

Despite industry opposition, the House approved Frank's bill on a 269-to-134 vote on April 20, 2007. That same day, Obama introduced a version of the legislation in the Senate. The bill, which initially attracted only five cosponsors, was referred to the Senate banking committee. Weeks later, Obama sent a letter to Sen. Chris Dodd (D-Conn.), the chair of that committee, asking him to hold a hearing on the proposed law. Obama wrote:

I believe public discussion and debate over executive compensation packages would force corporate boards to think twice before signing over millions of dollars to CEOs. Certainly, many CEOs are ably steering their firms and deserve their paychecks. But the rate at which executive pay has grown, as compared to stagnating wages among American workers, is rightfully frustrating shareholders and employees alike, especially given the lackluster performance of many of the companies paying these high salaries.

Dodd, then running against Obama in the Democratic presidential primaries, apparently was not convinced. He held no hearings on the bill, and the measure met a quiet death in his committee. (Whatever Patterson had done, he could claim a success.) But on the campaign trail last year, Obama repeatedly touted the legislation to show he was serious about corporate reform. At an Indiana press conference in April 2008, he said of the measure, "This isn't just about expressing outrage. It's about changing a system where bad behavior is rewarded—so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves."

As vice president for government relations at Goldman Sachs, Patterson, who had previously been policy director for Sen. Tom Daschle, handled a wide assortment of financial, banking, patent, energy, and insurance issues. He worked on tribal gaming matters. And he was registered to lobby on credit default swaps and carbon trading. Because of his lobbying activities, Patterson did not meet the tight ethics rules Obama adopted to slow down Washington's ever-spinning revolving door. His appointment—which was not subject to Senate confirmation—was questioned by White House reporters and criticized by government reform outfits. But the Obama administration granted Patterson a waiver, and the ex-Goldman Sachs lobbyist was able to join Treasury. (Goldman Sachs has been one of the biggest beneficiaries of the federal rescue of AIG; the fallen insurance firm, which has received $170 billion in funds from the Federal Reserve, has used that money to pay Goldman Sachs $6.8 billion.)

A spokesperson for Goldman Sachs would not provide any details regarding Patterson's lobbying. And the Treasury Department and the White House each declined to comment on Patterson's past lobbying for Goldman Sachs or his present work for Geithner.

On Wednesday, while recounting his and Frank's attempts to enact "say on pay" legislation, Obama pointed to their measures as examples of "smart regulations" that enhance "oversight, transparency, accountability." And he remarked, "All we're trying to say is you've got to be accountable to somebody. And it's that measure of accountability that I think is part of what has made America strong, and we have to get back to those kinds of values." But Geithner's right-hand man was not long ago paid well to undermine those values. How Patterson has gone from serving Goldman Sachs to serving the Obama administration is a tale that could use some more transparency.

UPDATE: After this story was posted, a Treasury Department spokesman issued a comment: "Mark Patterson is in full compliance with the administration’s strict ethics policy, and has recused himself from discussions on this and all other issues he worked on during his time in the private sector." Does this mean that Geithner's chief of staff cannot be involved in conversations and decisions regarding corporate compensation issues, including the AIG bonuses? If so, wouldn't that place Geithner at a disadvantage as he tries to handle such matters? We've asked Treasury for a response to these questions.

:D

Man in black: No good. I've known too many Spaniards.

http://www.democracynow.org/2009/3/19/the_great_american_stickup_veteran_journalist

“Perp Walks Instead of Bonuses”: Veteran Journalist Robert Scheer on AIG Bonuses, the “Backdoor Bailout” and Why Obama Should Fire Geithner, Summers


about 35 minutes long.

The Grandson:"Okay."

Some occasional ramblings from an American in Kiev. Week ending March 21.

Lately, the general consensus seems to be that Eastern Europe and Ukraine are on the bleeding edge, literally, of the global economic meltdown. A lot of nasty things are going to go down here, it's being said. Of course, like elsewhere, you have to dig for this information. Because if the truth came out, this part of the world would go off the cliff a whole lot sooner, and drag with it a lot of other places too. In other words, what occurs here first may soon come to an economy near you.

So, just what is going on here? Some of this weeks news...

Boy, 12, dies of cancer because Bank wouldn't give money back.

***
Oleksiy Holub, 12, had a facial tumor. He lived in Donetsk. To put him in a foreign clinic, his mom started pooling resources immediately. She borrowed from every friend, relative and coworker she could.


Oleksiy's aunt had Hr. 32,000 (approximately $4,000) on deposit at Pryvatbank. She wanted to use her savings to save Oleksiy.


Prvyatbank wouldn’t let her.

They wouldn't let her withdraw the money, citing a freeze on cash withdrawals ordered by the National Bank of Ukraine.

http://tap-the-talent.blogspot.com/2009/03/boy-12-dies-of-cancer-as-bank-wouldnt.html
***

Next up, Bankers beg for customers...

***
Serhiy Naumov, chairman of Ukrsibbank: In fact, we’re all in the same boat. We’re doing everything possible to stabilize the hryvnia (Ukraine currency) situation. We’re also asking you to...finally bring the money to the banks, make our economy work.

Bring the money to the banks? Only to have the banks refuse to give the money back when you need it?

Hasn’t the government poured billions of hryvnias into troubled banks without demanding equity stakes from them?

Isn't it true that the banks then used the stimulus money to bet against the hryvnia, with a little help from the National Bank?

http://tap-the-talent.blogspot.com/2009/03/bankers-beg-for-customers.html

***
Next up, this ominous notice on the Rodovid Bank website. The same Rodivid Bank mentioned in a NY Times article a few weeks back.

***
Dear Customers of Rodovid Bank!

With the aim to support the clients of the bank as well as to stabilize it's work, the National Bank of Ukraine with it's decree has introduced temporary administration to the bank.

According to the decree, a 6 month (16 March 2009 - 15 September 2009) ban of funding obligations to creditors has been introduced.

Rodovid Bank expresses it's apologies for the temporary inconveniences and assures that in the nearest time a number of measures to normalize the activities of the bank will be implied by the temporary administration.


http://www.rodovidbank.com/eng/main.php
***

And some additional icing on this already putrid cake...

Before you read too much into this, it's probably likely there are dozens of suits like this in the courts already. Many likely won't make it to a judge. Or maybe they will. Who knows? Cross posted from Thursdays SMW.

VAB Bank, Ukraine, accused of running a Ponzi scheme, assisted by Citibank, and Bank of New York Mellon. Who would have thought....

***
KIEV, UKRAINE -- A major Ukrainian bank has been sued in Federal Court in New York, under the Racketeer Influenced and Corrupt Organization Act of 1970 ("RICO"), for allegedly operating a gigantic Ponzi scheme in Ukraine and allegedly transferring the money to two New York banks, Citibank, N.A. and The Bank of New York Mellon. Both Citibank and The Bank of New York Mellon are also named as defendants in the action. 



The lawsuit which was commenced in the United States District Court, Southern District of New York, accuses All-Ukrainian Joint Stock Bank a/k/a/ Vseukrainsky Aksionerny Bank ("VAB") of using fraud and deception to induce the plaintiff and others, to deposit money with the bank pursuant to a so-called deposit agreement in which VAB promised depositors a high rate of interest on money deposited with the bank and the right to terminate the agreement early and to receive their money back on short notice. 



The complaint alleges that the representations by VAB contained in the deposit agreement were allegedly false and fraudulent in that the promised high interest rate and the right of early termination of the agreement were merely devices to induce the plaintiff, and others, to in the aggregate, deposit millions, if not billions of dollars, with VAB and that various portions of the money which were deposited with VAB have allegedly been transferred to accounts maintained by VAB at Citibank and The Bank of New York Mellon; were allegedly used to pay earlier depositors, as part of the Ponzi scheme, and were otherwise allegedly misappropriated. Citibank and The Bank of New York Mellon are alleged to have aided and abetted VAB's fraudulent scheme and to have violated, as correspondent banks to VAB, their obligations under the Patriot Act. 



The lawsuit seeks to recover, among other things, compensatory and punitive damages from VAB, Citibank and The Bank of New York Mellon. The plaintiff in the action is being represented by New York attorney Anna Val (877) 871-4412.

http://www.pressrelease365.com/pr/financial/news/banking-practices-federal-court-new-york-rico-3280.htm
***

Nothing mentioned in the following is meant to make you feel better. There is a lot of pain being felt everywhere. But being on the cutting edge of the current economic meltdown, what occurs here may soon come to an economy near you.

Have a good weekend !!

The MSM usually just glosses over the financial mess occurring in other countries, if it says anything at all.

http://www.ft.com/cms/s/0/1aa161c2-14ae-11de-8cd1-0000779fd2ac.html


The Federal Reserve’s bold action this week to boost the US economy with large-scale purchases of government debt created on Thursday fresh headaches for the European Central Bank, which is eschewing such steps in favour of fighting the economic crisis via eurozone banks.

The Fed’s surprise move sent the euro sharply higher; on a trade-weighted basis. Europe’s common currency ended on Thursday at its highest this year. With the Swiss National Bank intervening this week to weaken the Swiss franc, the ECB is in danger of appearing to be standing idle as eurozone exporters suffer and deflationary risks build in the 16-country region.

At the same time, the Fed’s move will increase the pressure on the ECB to defend more aggressively its strategy for combating the economic crisis, which centres on pumping unlimited liquidity into the eurozone banking system and deliberately allowing overnight interest rates to fall well below its official policy rate.“The ECB is definitely under enormous pressure right now because pretty much every big central bank is starting to engage in traditional ‘quantitative easing’ – it has become the orthodoxy,” said Marco Annunziata, chief economist at Unicredit.

Erik Nielsen, European economist at Goldman Sachs, argued that at its regular press conference this month, the ECB “should have torn up its usual statement and said ‘look we’re in a very different situation. This is what we’re doing’.”In fact, Jean-Claude Trichet, ECB president, had stepped up the Frankfurt institution’s communication efforts ahead of the Fed decision. In a speech in Paris late on Tuesday he stressed that the eurozone financial landscape was very different to that in the US, with banks taking a more important role than capital markets. That justified the ECB’s policy of “enhanced credit support” in which it is providing banks with as much liquidity as they demand, and has pledged to keep doing so until at least next year.

At the same time, the ECB has allowed the interest rate it pays on its “deposit facility”, used by banks to park funds overnight, to become a benchmark for market rates.

While the main policy rate has been cut to 1.5 per cent – the lowest ever –the deposit facility rate stands at just 0.5 per cent.

Mr Trichet argued that “enhanced credit support” was bringing tangible successes, with some eurozone interest rates, particularly for longer maturities, falling below those in the US.

“The ECB is right that the eurozone consumer can borrow for house purchases at interest rates that are substantially lower than in the US,” said Julian Callow, economist at Barclays Capital.

A crucial assumption behind the ECB’s “enhanced credit support” is that the banking system is still functioning reasonably well in passing on credit to the economy. ECB policymakers are optimistic that improvements are feeding through, helped by government action that have stabilised the eurozone banking system.

Not all economists are convinced, however, and many believe that the ECB will yet be forced to follow the US Fed and Bank of England in embarking on outright asset purchases.

Mr Trichet confirmed on Tuesday that “further measures” were being assessed. “That statement in itself – saying that they are looking at the possibility of implementing other measures – means that there must be some view that there are other solutions,” said Jacques Cailloux, European economist at Royal Bank of Scotland.

The risks of deflation that would be posed by further euro appreciation, “increases the odds that the ECB will embark in some kind of purchase programme even soon than we had anticipated”.

MAN IN BLACK

They were both poisoned. I spent the last few years building up an immunity to iocane powder.

It's a little known fact that iocane is the medieval form of the word ibogaine, the dangerous hallucinogen that brought down Edmund Muskie's vice-presidential ambitions in 1972.

http://www.ft.com/cms/s/0/9a8dfa20-14d7-11de-8cd1-0000779fd2ac.html

Bank of America was directly involved in markdowns that contributed to Merrill Lynch’s $15.3bn loss in the last quarter of 2008, its final reporting period before the Wall Street bank was acquired by BofA, sources familiar with the matter say.

Mounting losses at Merrill during December almost derailed the acquisition. Ken Lewis, BofA’s chief executive, threatened to walk away from the deal unless the US government provided $20bn in extra capital. The deal closed on January 1 after federal officials pledged their support.

People familiar with the matter said BofA had dispatched Neil Cotty, its chief accounting officer, during the fourth quarter to work with Merrill’s finance team. They said Mr Cotty played an active role in preparing accounts, wielding influence with Merrill executives who were set to report to him and other BofA officials after the deal closed.

With Mr Cotty’s involvement in December, the people familiar with the matter said, Merrill took a fourth-quarter writedown of $1.9bn in leveraged loans and a $2.9bn reserve against an exposure to derivatives linked to asset-backed securities.

Mr Cotty also gave his blessing to a $1bn writedown of credit default swaps involving investment grade companies. The markdown of a position on the “high vol 4” index transformed a gain of $100m into a loss of $900m, said a source familiar with the matter.

In a statement issued by BofA, Mr Cotty said: “While BofA had access to Merrill’s financial information in the fourth quarter and had input into many accounting policy and valuation issues, Merrill management was responsible for these decisions regarding the marks and other valuations.”

Ultimately, Nelson Chai, Merrill’s chief financial officer, did not sign Merrill’s annual report – called a 10-K – issued in February. Mr Cotty signed the report.

BofA said: “Nelson Chai, until the middle of January, was planning on signing the 10-K, but upon his resignation, Mr Cotty was asked to sign the document.”

In January, BofA disclosed Mr Lewis had asked the government in mid-December for help to close the deal. This led to shareholder lawsuits accusing him of withholding information before the December 5 shareholder vote to approve the purchase. The writedowns involving Mr Cotty took place towards the end of December.

BofA said Merrill’s losses were in line with expectations until “the second week of December” and subsequently “were driven by mark-to-market adjustments”.


HOW ABOUT COTTY FOR SECRETARY OF THE TREASURY? CLEAN OUT THE GOLDMAN SACHS HORDE AND GET SOME HONEST PEOPLE IN THERE.

http://www.ft.com/cms/s/0/cd0dd46c-1283-11de-b816-0000779fd2ac.html

Ireland is planning to introduce tough legislation to clamp down on crony capitalism and excess bank lending in the wake of the property bubble that has hammered its leading banks, Brian Lenihan, finance minister, told the Financial Times on Monday night.

The measures will include a ban on cross-directorships and on chief executives becoming chairmen, as well as the creation of a central bank commission to incorporate the regulation of banking, to replace the present autonomous regulator.

“There is a problem in all small countries with too many incestuous relationships,” Mr Lenihan said. “We have decided to establish a central bank commission which will have comprehensive regulatory as well as monitoring powers, and will have the power to direct restrictions on lending.”

He said he would submit a memorandum to the Irish cabinet next week on the measures, and advertise for a bank regulator in the near future.

The planned Irish move is a response to the damaging scandal that hit Anglo Irish Bank, when it was revealed in December that Sean FitzPatrick, a long-time chief executive who moved to become chairman in 2005, had hidden €87m (£80m, $112m) of personal loans from the bank’s auditors by temporarily transferring the amounts to an Irish building society just before the year-end. Mr FitzPatrick resigned along with other board members.

The bank was nationalised in January and is now the subject of investigations by the director of corporate enforcement, the regulator and the Irish central bank. With bad loan losses set to increase across the industry, Mr Lenihan was keen to reject any suggestion that deposits in Irish banks are not safe, insisting that “we have Frankfurt behind us rather than the Bank of England, which makes them super-safe”.

Membership of the eurozone “has the great benefit of ensuring the stability of the monetary, financial and banking system”, he said. “But the price is the higher exchange rate against sterling. The damage is coming through the real economy.”

Mr Lenihan, who was appointed finance minister last year to succeed Brian Cowen when he became prime minister, said the Irish economy had “fallen off a cliff” because of the “classic property bubble”, with growth dropping from 6 per cent in 2007 to minus 1 per cent last year, and a forecast minus 6.5 per cent in 2009.

NOT JUST SMALL COUNTRIES, MR. LENIHAN. HEY, HOW ABOUT USING AN H1-B ON THIS MAN?

http://www.ft.com/cms/s/0/fa2fea66-1481-11de-8cd1-0000779fd2ac.html

By Ben Hall and Esther Bintliff in Paris

Published: March 19 2009 13:49 | Last updated: March 19 2009 23:53

French trade unions vowed to escalate opposition to President Nicolas Sarkozy after mobilising as many as 3m people in strikes and protests against his economic policy and reforms.



The communist CGT union, France’s biggest, said up to 3m had taken to the streets in more than 200 marches across the country, whereas the police said 1.2m.

On either measure, the turnout was about a quarter higher than the last nationwide demonstrations on January 29, an indication of intensifying public discontent with Mr Sarkozy’s handling of the economic crisis.

Bernard Thibault, the CGT leader, said there would be more protests if the government were to refuse to implement a further economic stimulus package, a halt to public sector reforms and action to stop companies from shedding jobs.

“It should come as no surprise if the climate gets tougher,” he said.

The one-day stoppage caused moderate disruption to rail, air and local transport and to public services, especially schools. But the scale of the demonstrations – between 85,000 and 350,000 marchers in Paris – will intensify the pressure on the government.

Mass protests seven weeks ago spurred Mr Sarkozy to announce an extra €2.6bn ($3.5bn, £2.4bn) in welfare payments and tax cuts for low-income families, judged insufficient by the unions.

But François Fillon, prime minister, ruled out a new stimulus package. He said France had already “doubled the public deficit for this year”.

“We can’t go beyond that,” he said. “All the French must understand that faced with a crisis this serious, we must rally together not fight among ourselves.”

Demonstrators in Paris vowed to maintain the protest. “We are all marching for the same thing: job security and for the protection of public services,” said Marc Amiaud, an information technology worker. “We hope the government will help us. But if it doesn’t, we will march again and again.” There was also a perceived injustice of the government’s bank bail-outs compared with a lack of measures to help workers.

“Why are they helping the rich, the shareholders, before the ordinary people?” asked Alain Richard, a retired pharmaceutical company employee. “They are giving so little to us. What about the people who are losing their jobs?”

The strike caused the cancellation of 40 per cent of high-speed train services and a third of flights at Paris’s Orly airport.

I always think everything could be a trap -- Which is why I'm still alive.

http://krugman.blogs.nytimes.com/2009/03/21/despair-over-financial-policy/#respond

The Geithner plan has now been leaked in detail.
http://www.nytimes.com/2009/03/21/business/21bank.html?_r=1&hp

It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

http://krugman.blogs.nytimes.com/2009/03/03/zombie-financial-ideas/

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard.

This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.

What an awful mess.

Get used to disappointment.

I have to go do some real work. Keep on posting!

(Disclaimer: Some facts changed to protect the innocent.)

I was sitting with some associates of mine in the break area of a large financial institution a few days ago...

A clerk walked by carrying a HUGE bag of shredded paper toward the restroom area of the Lounge. One of the people sitting near us chimed in just loud enough to hear and totally deadpan, "Now, I suppose they're going to try flushing the toxic things."

:rofl:

Sometimes I love people.

Almost forgot again.

http://www.opednews.com/articles/Restoring-Our-Financial-So-by-Nikki-Alexander-090316-859.html

Lengthy historical development of US market economy and where to go from here.

Dread Pirate Roberts: < climbing cliff >

Look, I don't mean to be rude, but this is not as
easy as it looks, so I'd appreciate it if you
wouldn't distract me.



What ARE we going to do? Or perhaps the question should be what CAN we do, if anything?

I don't usually get into a really depressed and panicky funk, especially with a glorious sunny week-end glittering outside my window, but I'm not hearing much in the way of good news the past few days. The stock market keeps going up, which I know is not a good sign at all. More jobs are lost. More imaginary money is going into the hands of people who don't need it, didn't earn it, and don't deserve it. It's my money and your money and what are we going to do about it?

So in a way I'm a little scared, and I'm thinking the French are marching and they have a cultural history of taking only so much shit from the aristos and then lopping their heads off, humanely or otherwise. Our oh-so-hoped-for-government-of-change is turning out to be not so much (as I observed months ago). No one seems to be offering any substantive alternatives and no one seems to be addressing the root problems. There's outrage and counter-outrage, but the money keeps going down the rathole. At what point do we say enough's enough? When some AIG executive shows up at our front door and says "Hand over the keys. I own this place now, because I want it and I can have it"?



Inigo: Is there not any way you'll trust me?

Dread Pirate Roberts:

Nothing comes to mind.


Tansy Gold

Waiting for the other shoe to drop.

Well, I think the next shoe to drop will be AIG itself. I think it's gone past Dead Man Walking, right into Dead. Death is a process that gains momentum: the wrong move at the beginning can make a bad situation irreversible.

And I think that's exactly what has happened. Several bad moves, in fact. Geithner is fooling himself and Obama only. the rest of the world has no illusions.

Citbank, on the other hand, has reorganized itself and isolated all the toxic waste in a junk shop for second-hand bargain hunters. They will survive, I suspect. Too bad, but maybe they've learned something.

Now Goldman Sachs--they are looking at serious prosecutions. Their hands are so dirty, that MacBeth, rather than the Princess Bride, would be the appropriate cultural reference. Thing is, not only does nobody pay taxes any more, nobody gets prosecuted, either. But maybe in this case we can make an exception? Of course, having bought the presidency for Obama, they have an ace up the sleeve.

And then there are the schmucks, sitting on their hands in denial, believing that Timmy boy will pull their haggis out of the fire. Burn, baby, burn!

WESTLEY (roaring right back, bigger) DEATH FIRST!!

Miracle Max:Hoo hoo hoo! Look who knows so much, heh? Well, it
just so happens that your friend here is only mostly
dead. There's a big difference between mostly dead
and all dead. Please, open his mouth. Now, mostly
dead is slightly alive. Now, all dead...well, with
all dead, there's usually only one thing you can do.

Inigo: What's that?

Miracle Max:Go through his clothes and look for loose change.





Ah, if only AIG really were all dead. There might be some substantial loose change in their pockets. . . . . .

:rofl:

BF is going to be gone this evening. I think I might have to :popcorn: and slip TPB into the ol' VCR. It's been a while since I've watched it all the way through. An interesting commentary on our times, dontcha think?


Miracle Max:Enough! Wait, wait. I make him better, Humperdinck
suffers?

Inigo: Humiliations galore.




There may not be much money in revenge but there is some satisfaction.



Tansy Gold

We see the future but no one believes us. You're right, it's frustrating, depressing and scary. And even on DU, these threads (and the SMW) are the only places that I can post these thoughts without being attacked by numerous fact-free, ad hominum posts.

:hug:

To even suggest that Obama is screwing the pooch on this one, invites attacks like I've never seen on DU before.

a Bunch of Don Quixotes, IMO.

Refer them to SMW and WE for facts and references. It shuts them up fast.

The heads exploding from the blasphemy would sound like the 1812 Overture. Constructive criticism is not to be tolerated.

The chimp had his 20%. I guess we have ours, also.

on page 4...

some may have already known this:

Geithner's "father, Peter F. Geithner, is the director of the Asia program at the Ford Foundation in New York. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance programs in Indonesia being developed by Ann Dunham-Soetoro, President Barack Obama's mother, and they met in person at least once."

http://en.wikipedia.org/wiki/Timothy_F._Geithner#Early_life_and_education

Guess if this is ever made into a disaster movie, I mean, a documentary, Richard E. Grant might
play the role of 'Timmeh'.



http://www.richard-e-grant.com/Gallery/categories.php?cat_id=62

guess it's the forehead

k&r the Weekend Economists

He's not going anywhere anytime soon.

Okay... Where do I stand with the Current Administration?

1. 'Single Payer' Healthcare is off-the-table.
2. Private Banks or Bust philosophy.
3. We're still in Iraq.
4. Timmeh and Summers are tight with the Prez.
5. Indian Lobbyists have more sway on H1-Bs than American Citizens.
6. Goldman Sachs is golden.
7. 'Pay for Performance' is the way.

Okay, I'm done. I have nothing in common with these people. Before someone replies with the stock 'He said all of this during the election.'
No, most of it is exactly the opposite of what was said during the elections and on top of that neither Obama nor Hillary were my first choice, but, since the primaries where I live aren't until the bitter end... I'm effectively disenfranchised in the primary process. Would McCain have been worse? Sure. But, at this point it's pure speculation.

:eyes:

I'm so done.

For a little while, anyway.

I don't know what to say or think anymore. Here I was hoping that we wouldn't have to do the revolution thing, that it wouldn't come to famine and bloodshed after all, that the infrastructure would not come down to rubble. That popular grassroots movement had defeated the shadow puppetmasters.

What a way to start Spring.

And the election fraud, and the corporate fraud, and regulatory malfeasance, and any prosecution of BushCo, and...

Lord, when you add it all up, the glass isn't only empty, it's in deficit!

How much worse would a McCain -Palin - Gramm administration be.

Or would it fall apart much more conclusively and lead to French-style revolution in which serious retribution and massive redistribution of wealth results?

Myself, I'm a bit squeamish about blood-letting and destroying perfectly good infrastructure. I pefer filling the prisons with people who have earned a spot by means of crimes against society.

Until it's certified by the coroner:

"As coroner, I must aver, I've thoroughly examined her.
And she's not only merely dead, she's really most sincerely dead."

Haven't done any posts today. We're sitting around anxiously to see if my nephew gets his new job. It's a goody.

He was expecting an answer by Friday, but it may take another week or two. We do know that he's one of two finalists for the job.

Due to a confidentiality agreement (that they told him about after he told us), and the general public doesn't know about the job opening, that's all I can say.

But, I'll give y'all a hint. It has to do with flowers.

I just checked another website, after I posted. More tomorrow after it's released publicly.

Still, all is not lost yet. Things have turned over faster and faster lately.

My nephew.

http://www.saucemagazine.com/a/816


From a St Louis blog.

http://52ndcity.blogspot.com/2009/03/jimmy-griffin-guns-n-roses.html


The guy who got the job.

http://www.heretodaygonetohell.com/news/shownews.php?newsid=2002

I thought we'd be celebrating today. His parents (BIL-SIL) live next door.

Very sorry. :/

I was watching a ridiculous 'Jobs Town Hall' on CNBC last night. (Disclaimer: I enjoy watching Suze Orman's show)

Not only did they incessantly insult and degrade any kind of actual labor, the jobs they were claiming people just didn't want because "we peons think we're too good for..." couldn't support a pet rock.

I laughed a bitter laugh when they mentioned Dish Network as one of their showcase employers. HAHAHAHA! (Oops, there I go again. :blush: )

Anyway, the whole thing was a joke.

Did you know Engineers only built bridges? After that they're only employable by the Govt... (Didn't mention that this is due to National Security concerns making off-shoring technical jobs in Defense unpalatable. -for now- Diana F. will drag them over with H1-bs someday.)

If you've got the stomach for it here's some links:

http://www.cnbc.com/id/29758909/

http://www.cnbc.com/id/29761734/site/14081545

I figure this condescending show was payback for Jon Stewart's treatment of them recently.

"Am I going mad, or did the word "think" escape your lips? You were not hired for your brains, you hippopotamic land mass." -- Vizzini

A CHARMING visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: “President Obama may not realize it yet, but his Katrina moment has arrived.”

Six weeks ago I wrote in this space that the country’s surge of populist rage could devour the president’s best-laid plans, including the essential Act II of the bank rescue, if he didn’t get in front of it. The occasion then was the Tom Daschle firestorm. The White House seemed utterly blindsided by the public’s revulsion at the moneyed insiders’ culture illuminated by Daschle’s post-Senate career. Yet last week’s events suggest that the administration learned nothing from that brush with disaster.

Otherwise it never would have used Lawrence Summers, the chief economic adviser, as a messenger just as the A.I.G. rage was reaching a full boil last weekend. Summers is so tone-deaf that he makes Geithner seem like Bobby Kennedy.

Bob Schieffer of CBS asked Summers the simple question that has haunted the American public since the bailouts began last fall: “Do you know, Dr. Summers, what the banks have done with all of this money that has been funneled to them through these bailouts?” What followed was a monologue of evasion that, translated into English, amounted to: Not really, but you little folk needn’t worry about it.

Yet even as Summers spoke, A.I.G. was belatedly confirming what he would not.

(more)http://www.nytimes.com/2009/03/22/opinion/22rich.html?_r=1&_...

"His ship was attacked by the Dread Pirate Roberts, who never left captives alive. When Buttercup got the news that Westley was murdered --

THE KID(perking up a little)-- murdered by pirates is good --



"She went into her room and shut the door. And for days, she neither slept nor ate."

BUTTERCUP (no emotion at all in her voice) "I will never love again."

(disclaimer: I haven't read any more of Rich's column than has been printed here in WEE)

Relative to the discussion upthread about certain people who never come to SMW/WEE to post, someof them are attacking Rich for comparing the current situation under Obama to what happened to Bush during/for Katrina. the idea of comparing anything Obama has done to the horror of Katrina is, well, inconceivable to them.

The Katrina context for boooosh's polictical downfall involved not only the man's arrogant aristo attitude but elements of race as well. Poor black people simply do not count, unless they count as 3/5 of a person as slaves. Slavery no longer being allowed, black folks as people aren't allowed either.

But there is also, to my way of thinking, a much wider context of the suffering the entire world is experiencing under Obama. And it's this wider context that makes the Katrina comparison apt.

As horrible as Katrina was, and I'm not going to even hint that it wasn't, it was isolated and easily propagandized. Donation jars were put in stores and restaurants, people were able to volunteer in a various ways, whether it was giving blood or taking in a refugee family or whatever.

What Obama has is not news coverage of bodies floating in flooded streets; he has his own people going on television and making a situation that affects all of us even worse. They are lying to us just as much as Brownie and the others lied to us about Katrina. Furthermore, as with boooosh and Katrina, WE ALL KNOW IT'S A LIE.

And it's a lie because, as our own dear Hugin posts, so many of the promises that drew votes to Obama have gone down the memory hole. The essence, or perhaps the quintessence, of the Obama campaign was change. Within days of the election he had announced his first cabinet choices, including Geithner at Treasury, and *I* for one knew this was not a good choice. I didn't know any more aout Tim Geithner than what was made known publicly at the time. I still knew this was a bad choice. Geither and Summers and Rubin were from the same mold as the old. There was no change. There would be no change.

Grandson: Mom, can't you tell him I'm sick?

Mother: You're sick? That's why he's here.

Grandson: He'll pinch my cheek. I hate that.

Mother: Maybe he won't.



Tansy Gold, who couldn't find her VHS version of TPB because she forgot she gave it to her daughter years ago. . . . .

for those who come to WEE but don't post (aka lurkers)


Rich refers to a comment made in a letter to the editor from a woman in Cupertino, CA. The comparison to Katrina is not his. He uses it, but he did not make it. The implication, however, is that there are people out there, people who are willing to sign their names to LTTEs, who believe in the comparison. They are seeing their own lives swept away by the floodwaters that could have been held back if the administration had acted appropriately and in time.


Tansy Gold

As in an awakening moment, when the rose colored glasses come off, and there's this realization that something is really screwed up here.

Hmmm.

To the Editor:

President Obama may not realize it yet, but his Katrina moment has arrived.

This is a defining moment for his presidency, and how he responds will determine the trajectory of his term. He needs to deal with the excesses within the financial industry with the same toughness and conviction that President Ronald Reagan brought to bear during the air traffic controllers’ strike. To date, he is sorely wanting.

We are not interested in the level of outrage the administration is feeling, but in the effectiveness of its response. So far, it has come across as hapless and completely ineffectual. This Obama voter would like to be spared the speeches and the posturing on the Sunday morning shows — action is what is needed.

Paulette Altmaier
Cupertino, Calif., March 17, 2009



"I.T.Y.S."

You keep using that word -- I do not think it means what you think it means. --Inigo Montoya

Westley was the stereotype -- but not the archetype -- hero, right down to the blond, blue-eyed good looks. Clean-cut, as so many of our mothers would have said.

Inigo, the Spaniard, the dark "other," is the unsung hero, the much more three-dimensional. he could have gone either way, hero or villain.

Obama is too Westley; he needs an Inigo. Geithner, Rubin, Summers, they ain't it.

Vizzini: DID I MAKE IT CLEAR THAT YOUR JOB IS AT STAKE?

Nor is it, at least not yet, Rahm Emanuel. Certainly not Hillary.

Grandson: I'm telling you, you're messing up the story, now get it right!

Krugman, Roubini, they and their ilk are too removed from the situation. They are ivory tower academics, less trustworthy in the eyes of the common folk than those in politicaly power.

No, I don't know who it will be, or if there will even be one. I know who it could be but she/he will have to make their identity known without my help, such as it is.

Humperdinck:I think you're bluffing.


I never bluff.




Tansy Gold

This is precisely what did Rowling in. She had a dark hero and threw him away. Literally.

I have nothing against Harry Potter, but the author has some serious holes in her psyche.

http://www.informationclearinghouse.info/article22174.htm



"We've explained the difference between a recession and a depression before. But we'll do it again. A recession is a pause in an otherwise healthy, growing economy. A depression is when the economy drops dead." Bill Bonner, The Daily Reckoning

March 09, 2009 "Information Clearing House" -- There's good news and bad news. The good news is that Obama's economics team understands the fundamental problem with the banks and knows what needs to be done to fix it. The bad news is that Bernanke, Summers and Geithner all have close ties to the big banks and refuse to do what's necessary. Instead, they keep propping up failing institutions with capital injections while concocting elaborate strategies for purchasing the banks bad assets through backdoor transactions. It's all very opaque, despite the cheery public relations monikers they slap on their various "rescue" plans. This charade has gone on for more than a month while unemployment has continued to soar, the stock market has continued to plunge, and the country has slipped deeper into economic quicksand.

Paul Krugman summed up the administration's response in Friday's column, "The Big Dither":

"There’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern....

Why do officials keep offering plans that nobody else finds credible? Because somehow, top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets ... are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away. ...

What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions.(Paul Krugman, The Big Dither, New York Times)

Krugman is right about the "dithering" but wrong about the toxic waste. Geithner and Bernanke know exactly what these assets are worth--- just pennies on the dollar. That's why Geithner has avoided taking $5 or $10 billion of these mortgage-backed securities (MBS) and putting them up for public auction. That would be the reasonable thing to do and it would remove any doubt about their true value. But the Treasury Secretary won't do that because it would just draw attention to the fact that the banking system is insolvent; the vaults are full of nothing but garbage loans that are defaulting at a record pace. Instead, Geithner has cooked up a plan for a "public-private partnership" which will provide up to $1 trillion in funding for private equity and hedge funds to purchase toxic assets from the banks. The Treasury will offer low interest "non recourse" loans (with explicit government guarantees against any potential loss) to qualified investors. If the hedge funds or private equity firms don't turn a profit in three years, they simply return the assets to the Treasury and get their money back. In essence, Geithner's plan provides a lavish subsidy to private industry on an totally risk free investment. It's a sweetheart deal.

At the same time, the plan achieves Geithner's two main objectives; it gives the banks the chance to scrub their balance sheets of junk mortgages and it also allows them to keep the present management-structure in place. The $1 trillion taxpayer giveaway to the hedge funds is just another juicy bone tossed to Geithner's real constituents-- Wall Street speculators.

Unfortunately, markets don't like uncertainty, which is why Geithner's circuitous plan has put traders in a frenzy. Wall Street has gone from scratching its head in bewilderment, to a stampede for the exits. In the last month alone, the stock market has plummeted a whopping 18 percent, indicating ebbing confidence in the political leadership. Geithner is now seen as another glorified bank lobbyist like his predecessor, Paulson, who is in way over his head. His lack of clarity has only added to the widespread sense of malaise. Markets require transparency and details, not obfuscation, gibberish and Fed-speak. This is how Baseline Scenario blogger Simon Johnson summed it up:

"Confusion helps the powerful... When there are complicated government bailout schemes, multiple exchange rates, or high inflation, it is very hard to keep track of market prices and to protect the value of firms. The result, if taken to an extreme, is looting: the collapse of banks, industrial firms, and other entities because the insiders take the money (or other valuables) and run.

This is the prospect now faced by the United States.

Treasury has made it clear that they will proceed with a “mix-and-match” strategy, as advertised....The course of policy is set. For at least the next 18 months, we know what to expect on the banking front. Now Treasury is committed, the leadership in this area will not deviate from a pro-insider policy for large banks; they are not interested in alternative approaches (I’ve asked). The result will be further destruction of the private credit system and more recourse to relatively nontransparent actions by the Federal Reserve, with all the risks that entails.

The road to economic hell is paved with good intentions and bad banks."(Simon Johnson Baseline Scenario)

This is unusually harsh criticism from a former head economist at the IMF, but Johnson's analysis is dead-on. Geithner is putting the interests of the banks before those of the country. The "public private partnership" is just a convoluted way of avoiding the heavy-lifting of rolling up the banks, wiping out shareholders, separating the bad assets, and replacing management. The same is true of Bernanke's Term Asset-Backed Securities Loan Facility (TALF) which is another futile attempt to restart Wall Street's failed credit-generating mechanism, securitization. It was securitization (which is the conversion of pools of mortgages into securities) which got us into this mess to begin with. It doesn't do any good to restore an inherently crisis-prone system that only works properly when the market is going up. There are more efficient ways to recapitalize the banks than the PPP, just as there are better ways to promote consumer spending than the TALF. Treasury should be looking into debt relief, jobs programs and higher wages, instead of barreling blindly down the same dead end. There are solutions that do not involve artificially low interest rates, government subsidies for toxic waste or lavish handouts to hedge funds. They simply require a commitment to rebuild the economy on sound principles of hard work, productivity and fair distribution of the the profits.

Even industry cheerleaders, like the Wall Street Journal, are skeptical of Bernanke's TALF and have denounced it as just another boondoggle.

Wall Street Journal: “If you missed the first hedge-fund boom, now may be the time to put up your shingle. Looking at the terms of the Federal Reserve’s new Term Asset-Backed Securities Loan Facility, investors using it should be able to generate hefty returns with little risk. The TALF effectively turns the Fed into a generous prime brokerage.”

Who needs a free market when Obama's Politburo is more than willing to prop up private industry with hundreds of billions of tax dollars?

There is another part of Geithner's plan that is even more troubling, that is, after the banks sell their dodgy assets to the hedge funds, what will they do with the money? Consumers are retrenching, so the pool of creditworthy customers will remain small. And businesses are trying to work off existing inventory, so they won't be borrowing to increase investment or retool anytime soon. If the opportunities for lending dry up, the banks will be forced to seek unconventional means for generating profits. My guess is the banks will put a large portion of their money into hedge funds for commodities speculation, which will push the price of oil, natural gas and other raw materials into the stratosphere just like they did last year when oil shot up to $147 bbl. The banks really have no choice; 65 percent of their business was securitized investments. That door has been slammed shut for good.

"TOO BIG TO FAIL"?

The Financial Times economics editor Martin Wolf warned in Friday's column of the dangers of our present course. He said:

"If large institutions are too big and interconnected to fail... then talk of maintaining them as “commercial” operations... is a sick joke. Such banks are not commercial operations; they are expensive wards of the state and must be treated as such.

The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. (Martin Wolf, Big risks for the insurer of last resort, Financial Times)

Citigroup is now officially a "ward of the state" although CEO Pandit and his scurvy band of pirates are still allowed to collect their paychecks and hang out by the water cooler. Citi's survival depends on the reluctant generosity of the US taxpayer who is now its biggest shareholder. The mega-bank has slumped from $58 per share to $1 per share in less than 2 years. It's now more expensive to buy a grande latte at Starbucks than it is to buy three shares of Citi...and, at least with the Starbucks, the buyer gets a buzz on. There's no upside to the Citi deal. It's a dead-loss. The real question is, how long will Geithner let this joke continue before he does his job?

Wolf is correct to draw attention to the myth of "too big to fail". In fact, the Kansas Federal Reserve President, Thomas Hoenig made the same point in a PDF released this week:

"We have been slow to face up to the fundamental problems in our financial system and reluctant to take decisive action with respect to failing institutions. ... We have been quick to provide liquidity and public capital, but we have not defined a consistent plan and not addressed the basic shortcomings and, in some cases, the insolvent position of these institutions.

We understandably would prefer not to "nationalize" these businesses, but in reacting as we are, we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis." (Too Big has Failed, thanks to Calculated Risk)

Hoenig and Wolf are smart enough to know that the problem is not as simple as it sounds. They know that the largest financial institutions are lashed together in a net of complex counterparty contracts--mainly credit default swaps (CDS)--which run into tens of trillions of dollars, and, that if one player is allowed to default, it could pull all of the others down the elevator shaft along with it. The problem could be resolved with proper regulation which would force all CDS onto a regulated exchange so that government watchdogs could make sure that they are sufficiently capitalized to pay off whatever claims are levied against them. But, so far, no one in Congress has taken the initiative to propose the necessary regulation. Thus, the taxpayer continues to pay off hundreds of billions of dollars of insurance claims against AIG, which was so grossly under-capitalized, it couldn't meet its own obligations. The AIG fiasco provides a window into the real motivation behind financial engineering and the alphabet-soup of complex debt-instruments. (CDOs, MBSs, CDS) Wall Street knew that the fastest way to fatten the bottom line was to circumvent minimum capital requirements and expand leverage to unsustainable levels. In other words, a system of debt-fueled capitalism with only specks of capital. It worked beautifully, until it didn't.

Nobel prize-winning economist, Myron Scholes, who helped invent a model for pricing options, added his voice to the growing chorus of angry reformers who think the CDS market should be scrapped altogether. According to Bloomberg News: Scholes said "regulators need to ‘blow up or burn’ over-the-counter derivative trading markets to help solve the financial crisis. The markets have stopped functioning and are failing to provide pricing signals... The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over.” (Bloomberg)

Treasury and the Fed have taken the position that they will not fix the system until they are forced at gunpoint. This is a prescription for disaster, not just because of growing public frustration or the free-falling stock markets, but because the banks are just the tip of the iceberg. The other non bank financial institutions are brimming with mortgage-backed sludge that will require emergency treatment, too. MarketWatch gives us a glimpse of the magnitude of the problem in last week's article "Banks fall out of bed, Citi shares under a buck":

"Market strategist Ed Yardeni's latest research shows that.....80.6%, or $7.4 trillion, of the assets held by the S&P financials companies were Level 2," he said in a research report. Level 2 assets are so-called mark-to-model, which are carried at a value based on assumptions, not true market prices."

What does "Level 2 assets" mean? It means that the financial giants are short on liquid assets--like cash or US Treasurys--and loaded with sketchy mortgage-backed paper to which they have arbitrarily assigned a value that no one in their right mind would ever pay. The entire US financial system, including the pension funds and insurance companies, is one humongous debt-bloated time bomb that is set to blow at any minute.

Surprisingly, Bernanke thinks he can simply wave his wand restart the moribund credit markets. That's what the TALF is all about. The problem is that even if the Fed buys all of the AAA securities held by the respective financial institutions, (most of them are non banks) that's still only accounts for 20 percent of the bad paper on the books. Here's what Tyler Durden said on Zero Hedge web site:

"Unfortunately for Geithner, who apparently did not read too deeply into the data, the bulk of the $1 trillion decline in securitizations came from home equity lending and non agency RMBS (Residential Mortgage Backed Securities), which reflect the "non-conforming" mortgage market, i.e. the subprime, alt-A and jumbo origination, loans which are the cause for the credit crisis, and which are rated far below the relevant AAA level. The truly unmet market, which the Treasury is addressing is at best 20% of the revised total amount." (Tyler Durden, Could TALF be the biggest disappointment yet?, Zero Hedge)

That leaves Geithner and Bernanke with few good choices. Either they expand TALF to include crappy AA (and lower) graded securities--putting the taxpayer at even greater risk--or they devise some totally new lending facility that will bypass the financial institutions altogether and issue credit directly to consumers and small businesses. There is no third option.

The problem with the TALF is that it ignores the new economic reality, that consumer demand has collapsed from the massive losses in home equity and retirement accounts. When credit markets froze last year, housing values dropped sharply raising havoc with household balance sheets and forcing a radical change in spending habits. That cutback in spending created a negative feedback loop to the financial sector which made it impossible to re-inflate the credit bubble. The ultimate size of the financial system will be determined, to large extent, by the capacity of people to borrow again which depends on many factors including job security, savings, and optimism about the future. Needless to say, the growing worry over a 1930s-type Depression will not help to lift spirits or improve the chances for a speedy recovery. That said, there are positive steps the administration can take now to restore confidence in the markets and put the ship o' state on even keel. These measures fall under three main headings; debt reduction (forgiveness), regulation and accountability. Confidence is not built on inspiring oratory or personal charisma, but concrete actions to reestablish a rules-based system that penalizes crooks and fraudsters. Recovery isn't possible without a strong commitment to these basic changes.

THIS REPORT IS AT LEAST TWO WEEKS OLD, AND THEREFORE OUT OF DATE, BUT A MATTER OF HISTORICAL INTEREST

http://www.cnbc.com/id/29598949

By Jane Wells

March 10, 2009 "CNBC" - -The man who predicted the current financial crisis said the US recession could drag on for years without drastic action.

Among his solutions: fix the housing market by breaking "every mortgage contract."

"We are in the 15th month of a recession," said Nouriel Roubini, a professor at New York University's Stern School of Business, told CNBC in a live interview. "Growth is going to be close to zero and unemployment rate well above 10 percent into next year."

Echoing a speech he made earlier in the day, Roubini said he sees "no hope for the recession ending in 2009 and will more than likely last into 2010."

Roubini, who is also known as "Dr. Doom," told CNBC that the risk of a total meltdown has been reversed for now but that the economy is going through "a death by a thousand cuts." He also said that "most of the U.S. financial institutions are entirely insolvent."

"The market friendly view for the banks is nationalization," said Roubini. "Temporarily take over the banks, clean them up and get them working again."



As for the claim that the Treasury Department can't legally take over the banks, Roubini said that most of the banks are already owned by the government and that the government could "put them in receivership" if it had to.

Earlier in the day, Roubini spoke to the CBOE Risk Management Conference and said he believes total losses could peak at $3.6 trillion in the financial system, with half of that being borne by banks and bank dealers and the other half borne by hedge funds and pension funds, among others.

He said that while U.S. GDP next year could be zero, global GDP could dip into negative territory.

"We could end up ... with a 36-month recession, that could be "L-shaped stagnation, or near depression," Roubini said. He puts the chance of a severe U-shaped recession at 66.7 percent, and a more severe L-shaped recession at 33.3 percent.

Roubini listed a litany of negative omens: Capex spending down 20-30 percent for investment grade companies, self-perpetuating deflation, all making a bad situation worse.

"If you expect prices to be lower tomorrow, why would you buy today?", asked Roubini. He says it's easier to break out of am inflationary cycle than a deflationary one, and while a year of deflation "is okay," longer would be "a disaster."

So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have "face value reduction of the debt." Rather than go through mortgages one by one, he says reduction has to be "across the board...break every mortgage contract."

Roubini also took issue with the $800 billion stimulus package, saying it's not enough. For one thing, there's only $200 billion upfront, and half of that is a tax cut, which Roubini calls "a waste of money" that is not going to make a difference.

Finally, while he says there will be "a light at the end of the tunnel", it'll probably get worse before it gets better. Those who believe in a second half recovery this year "are delusional" he says.

In fact, based on Roubini's calculations, we could conceivably see the S&P 500 at 500, the Dow at 5000.

Every major economist predicts the end of this "recession" at some point, but I have yet to see a single one that explains WHY it will end at that point. This scares me because I see this as a downward spiral of jobs losses and lower spending that leads to more job losses, etc.

What stops the spiral? And how scary is it that I think "Doctor Doom" is being optimistic?

and all the losses are written off.

In other words, if Bernanke and Geithner have their way, NEVER.

They STILL haven't made CDOs and all that alphabet soup illegal!!! In fact, they want MORE of it. Without any taint of regulation or market for clearing or any of those other things that people have said, Oh, we should have this!

This alphabet soup of securities is like a big wad of bacon grease and hair in the sewer line. Everything is blocked and nothing drains (except our jobs and savings).

I respect what Roubini says and agree with his points. But this prediction stuff is getting out of hand. Earlier I read a post over at TAE that the president's adviser Christine Romer (sp) says we will be on the recovery track by the end of this year. What's next, a WWE cage match? Twp out of three falls to determine when the recession started and will be over.

Demeter, thanks again for all the work you do in putting the WE together.

and the hopeful can predict recovery until the next election, but unless and until the debt is deleveraged, and the regulations written to prevent any such drunken debauchery from occurring again, there will be no recovery. It cannot happen in the absence of real, significant change and mopping up.

We can't get back on the ever-growing debt rollercoaster. That ride broke down, and it killed a lot of people, and/or their futures.

We need a nice, gentle merry-go-round, suitable for all ages and ladies, too.

http://www.alternet.org/story/130361/

It all happened faster than you can say “senior discount.”

Millions of baby boomers born into the dawn of the most spectacular economic expansion in history are being forced to re-imagine their retirement futures. Few news outlets have failed to seize upon the low-hanging pun: the boomers have gone bust.

Among the adjustments forced by the new circumstances, perhaps the cruelest twist for many boomers is the need to join younger generations in the roommate queue. The housing crash has forced record numbers of late-middle age homeowners to take in boarders or risk becoming boarders themselves. From California to Vermont, home-share organizations founded to assist the elderly are scrambling to meet the demands of newly bust boomers.

“In the last few months we've experienced explosive growth in interest by homeowners age 50-plus to find rooms and roommates,” says Jacqueline Grossmann, Chicago coordinator for the National Shared Housing Resource Center. “The trend now is getting younger and younger. People in their 50s and 60s are losing their nest eggs and increasingly willing to give up their privacy in exchange for rents of $500, $600 a month.”

“We've seen a 400 percent increase over the last few months of people nearing retirement age,” says Rita Zadoff, director of Housemate Match, a shared-housing program serving the Atlanta area. “We haven't been this busy since we helped Katrina victims find housing.”

Kirby Dunn of Home Share Vermont reports a “huge increase” of boomers seeking roommates in the last six months. “There has been a dramatic shift from elderly clients seeking a 'protective presence' to younger people with 'too much house' seeking financial help to make mortgage and utility payments,” she says.

Most of the nation's home-share organizations were set up with the disabled and seniors in mind. They now appeal to bust boomers because they are generally free services that screen potential housemates carefully. “Older people aren't comfortable finding roommates through Craigslist,” says Zadoff. “They aren't as used to the idea of letting strangers into their homes.”

Boomers are maximizing room occupancy for the same reason that their kids in their 20s and 30s are still competing for the best group rentals on Craigslist: they're broke.

The extent to which boomer wealth was based on home values is highlighted by a new report from the Center for Economic and Policy Research, entitled "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble." The report details how the collapse has left the majority of those around retirement-age almost completely reliant on entitlements. The net worth of median households in the 45 to 54 age bracket has dropped by more than 45 percent since 2004, to just over $80,000. Households headed by those aged 55 to 64, meanwhile, have lost 38 percent of net wealth.

“The collapse of the housing bubble has already destroyed almost $6 trillion dollars in housing wealth for homeowners," says report co-author Dean Baker, who testified last month before the Senate Special Committee on Aging. “This is compounded by the recent collapse of the stock market. The result is that many baby boomers will only have entitlements to rely on in their retirement.”

Make that entitlements, roommates, and each other.

As more and more boomers scale down their retirement plans and consider alternative living arrangements, it's worth asking: Is shared housing such a bad thing for aging boomers? Does a return to the Communal idea, borne of economic necessity, also have emotional, social, and environmental benefits? Why wait for the retirement home or hospice to live with other people? With the nation full of worthless, ridiculously large, and mostly empty houses, why not fill them with the newly penurious and like-minded boomers in need of housing?

Better yet: why not abandon these suburban houses altogether, and find more appropriate housing arrangements closer to urban cores, or build tightly knit communities on cheap rural land?

“Cooperation is the watershed in grappling with this economic downturn,” says Charles Durrett, of McCamant & Durrett, a pioneering architectural firm that specializes in ecologically sensitive shared housing projects for seniors and low-income people. “It doesn't make any sense—economically, emotionally, environmentally—for retired people to be living in these isolated homes and ranchettes, making thousands of individual trips to the grocery store and pharmacy.”

Terry S., a 62-year-old self-employed divorced psychologist in Pittsburgh, is one boomer considering the cooperative housing route. Until the crisis hit last year, Terry planned to spend her retirement between Europe and New York City, living off her IRA and savings. But the crash saw her wealth plummet by 60 percent. “My friends and I feel betrayed because we are now in the same or worse position than those who never saved their money, but may have a pension,” she says. The crisis forced her to rethink retirement, and she now plans to buy a house with her friends. She explains the logic:

Some of my friends and I shared a communal house in the 70s. We first came up with this idea when we were talking about the possibility of having to live in assisted living or nursing homes, and we decided it would be far better to all live together in a big house with friends we knew and loved and hire a nurse and a cook. One of my friends owns a construction firm and he says he can put an elevator in any home for less than $100,000. We have looked at several homes. One was a beautiful house that backed onto a huge city park and had a pool decks all around and could easily be converted into four private residences. It was $600,000, which would only be $150,000 per unit. Much less than the $4,000 a month to have half of a dingy room in a nursing home that smells like urine.

For those who can't afford to buy a comfortable retirement home with friends, there is a proliferating number of larger, shared-income communities with low financial thresholds. Known as “Intentional Communities” these small village-like settlements allow like-minded retirees to pool their economic resources and support each other during their “second journey.” While historically there has been little correlation between economic downturns and growth in America's commune movement—the greatest spike occurred during the boom decade between 1965 and 1975—the current economic downturn is dovetailing with a rise in the number of such communities around the country.

“We are in a period of elevated interest in intentional communities,” says Laird Schaub, executive director of the Fellowship for Intentional Communities. “There is no statistically meaningful data since the crisis began, but the after a lull in the 80s and 90s, the last decade has seen growing numbers of people in their 50s interested in this way of life.”

Tony Sirna, a veteran of communes and the Fellowship's web manager, says that while many people are currently drawn to income-sharing communities because of financial straights, he suspects many will stay on because of the social and cultural benefits of living with others and sharing resources.

“As a generation, boomers have a unique relationship to the idea of Community,” says Sirna. “Partly because of the Counterculture, many retirees are choosing to create non-corporate senior cohousing, as opposed to traditional senior communities in which they feel institutionalized.” Sirna says many shared-income communities are now at maximum capacity for the first time in decades, with waiting lists full of retirees eager to live the shared, cooperative life.

If the deepening economic crisis does lead the boomers back to Countercultural values, a generation will have come full circle. Whether they end up living in a group house, a shared apartment, or a full-on hippie-style commune, studies show that they will live longer and more fulfilling later lives. “The results here are truly amazing,” says Kirby Dunn, pointing to studies that gauge the effects of shared housing. “Across all programs and age-brackets, people say they feel safer, are less lonely, happier, and sleep better. They also call their family less often for help.”

This last item is of particular interest to the boomers' kids. They may not have made it to the mortgage stage of the game before the crisis hit, but that doesn't mean they don't have problems of their own.


View this story online at: http://www.alternet.org/story/130361/

The shrieking sound is louder still, but she doesn't make a sound. Behind her now, something dark and gigantic slithers past.

She's scared, sure, petrified, who wouldn't be, but she makes no reply --

-- and now a SHRIEKING EEL has zeroed in on her --

-- and now she sees it, a short distance away, circling, starting to close --

-- and Buttercup is frozen, trying not to make a movement of any kind --

-- and the Eel slithers closer, closer --

-- and Buttercup knows it now, there's nothing she can do, it's over, all over --

-- and now the Eel opens its mouth wide, and it's never made such a noise, and as its great jaws are about to clamp down

http://www.voxeu.org/index.php?q=node/3320

Jeremy Bulow Paul Klemperer
21 March 2009


Fixing the banks is an absolute priority in G7 nations. Doing this by buying toxic assets is costly, inefficient, and risky. Governments should focus on which liabilities, rather than which assets, they need to support. This column proposes creating “bridge” banks as a way of re-establishing a healthy banking system.

Summary of the argument

1. We cannot efficiently value or transfer “toxic” assets - so a good plan cannot depend upon this.

2. The UK’s Special Resolution Regime, or one similar to that of the US FDIC, can cleanly split off the key banking functions into a new "bridge" bank, leaving liabilities behind in an "old” bank, thus also removing creditors’ bargaining power.

3. Creditors left behind in the old bank can be fairly compensated by giving them the equity in the new bank.

4. We can pick and choose which creditors we wish to “top up” beyond this level, but should not indiscriminately make all creditors completely whole as in recent bailouts.

5. Coordinating actions with other countries will reduce any risks.

As we pour good money after bad in trying to save the banks, far too much time and attention has been focused on attempting to value or transfer or shore up the so-called “toxic” assets. This is natural enough, since they arguably caused the crisis, but it’s also wrong. Here’s why.

Flaws of the current approach

First, the toxic assets are very difficult to value. Many are held by only one or two owners so there is no real market even in good times. And even if a hedge fund buyer and a bank seller both thought that an asset was worth 50, the bank might demand 80 in the hopes of receiving that price in the next government bailout. Furthermore, the banks may be the “natural” owners of these assets. Say a bank makes a construction loan. Even if the loan sours, the bank may be the most knowledgeable party to hold and possibly renegotiate the loan.

Second, purchasing or guaranteeing “toxic” assets creates other problems too. Putting aside the obvious inequity of paying bank creditors a “risk premium” for having invested in failed businesses, how can we ever again rely on market signals to allocate capital efficiently among banks if their capital structures are effectively guaranteed by the government? And under schemes like the recent Citigroup, RBS and Lloyds bailouts, banks’ incentives to manage the “insured” assets are drastically reduced, as the government bears up to 90% of any marginal losses.

Lastly and perhaps most important, the obvious fiscal risks associated with the huge incremental costs of current policies may undermine confidence far more than paying off creditors in full may temporarily boost it, however superficially-attractive the latter approach may seem.

Re-establishing a healthy banking system is crucial, but doing so through the purchase of toxic assets is costly, inefficient, and risky.

How to reorganise the banks

How then can we make banks healthy without separating the “bad assets”? The answer is, instead, to separate the “bad liabilities”.*

Take Citigroup, for example. At the end of 2008 the bank had roughly $1.8 trillion in liabilities on its consolidated balance sheet, of which less than $800 billion were deposits.

Say Citi’s assets were worth $1.5 trillion. A new (“bridge”) bank that included all the assets plus say $1 trillion of the old bank’s most senior liabilities would still be comfortably well capitalised, even if the asset values were overestimated. The original bank would be left with all the equity in the new bank, worth $500 billion, and the remaining $800 billion in liabilities.

The original bank would still be insolvent, but that would not prevent the healthy new bank from operating efficiently and making good loans. If a risky original bank's marginal cost of funds is, say, 10% it will not be profitable for it to make new riskless loans at 7%, even if the market riskless rate is zero. By contrast, because the new bank is well capitalised, it can borrow on sensible terms if it has a profitable investment to fund.1

Giving the old bank an equity stake in the new bank is the best way to compensate the holders of old bank’s liabilities to the full liquidation value -- but not more than that value -- of their claims. It may also facilitate the reorganisation of the old bank if, as is likely, it goes into bankruptcy, since creating marketable equity in the new bank resolves the difficulty of valuing the old bank's assets, and avoids any need to sell the new bank on to a third-party – a transaction from which the government might be unlikely to get full value.2

The reorganisation could be managed under a regime like the UK’s Special Resolution Regime (SRR) or similar to that of the US Federal Deposit Insurance Corporation (FDIC)3 (there may be other possibilities too). The government’s role ends when the old bank has sold its shares or allocated them amongst its creditors.

Who loses?

Paying all creditors at least their liquidation claims is probably a pre-requisite for maintaining market confidence. It is anyway mandated by the Fifth Amendment in the US and by Human Rights legislation in Europe, and it is enshrined as the “no creditor worse off” principle in the recently-enacted UK Banking Act. So both the FDIC and the SRR assure the non-guaranteed creditors of the banks that they will be paid at least as much as they would receive under a liquidation of the institution, but not that they will get back every penny they are owed.4

Under a liquidation the junior creditors would suffer losses of $300 billion in our example (and the old bank’s shareholders would be wiped out), unless there were further government subsidies. A key virtue of isolating the junior liabilities rather than the troubled assets is that while the government may then choose to subsidise some of the junior creditors’ losses, it can more easily get off its current path towards subsidising them 100%.

For example, in the U.S. system the order of priority for debts is the following: (1) administrative expense of liquidation; (2) secured claims up to the value of collateral; (3) domestic deposits (both insured and uninsured); (4) foreign deposits and other general creditor claims; (5) subordinated creditor claims; and (6) equity investors. Recently issued subordinated debt has been guaranteed by the government, which would therefore take any loss on those securities in a reorganisation. (The UK prioritisation is a little different; in particular, it does not make domestic deposits senior to foreign deposits or other general creditors).

For a large bank like Citi or Bank of America the first three categories would be placed in the new bank, and so would be fully protected. Foreign depositors should probably also be made whole. As when the Icelandic banks defaulted, countries will try to “ring fence” the operations within their borders if their deposits are not paid. Furthermore, not paying foreign deposits would lead to tit-for-tat behavior and might increase systemic risk. Making these depositors whole, and protecting domestic depositors in a jurisdiction like the UK that does not have depositor preference, may give them more than their liquidation values, so the government would have to either infuse the new bank with enough capital that the claims of the remaining creditors would be worth as much as in a no-intervention insolvency, or make a cash payment directly to the old bank. (The infusion to the new bank makes its equity more valuable and therefore raises the value of the claims of the “original bank” creditors in insolvency. The amount of the equity infusion or cash payment is easily calculable if the new bank’s stock is traded, as explained in this note.5)

However, other general creditors (other than those with a government guarantee) including non-guaranteed bondholders and owners of credit default swaps that are not fully collateralised need not be paid in full. The government may, if it wishes, choose to pay these creditors more than they would receive in liquidation. (It can even buy their claims from the old bank at full value and place them in the new bank.) But because the old bank’s creditors’ leverage would be reduced to their financial claims, and they would not have the threat of bankrupting the new healthy bank were they not paid in full, this need only be done when not doing so would contribute to systemic risk.

If there is still concern that the new bank is undercapitalised, the government can infuse more equity, but in contrast to the current situation the infusion would no longer have to be large enough to pay off the junior creditors.

Finally, coordinating actions with other countries would resolve the concern that some have expressed that if one country alone fails to bail out a category of creditors, its institutions will find it hard to raise funding in the future. International coordination may also make it politically much easier to favour some groups of systemically-important creditors (especially foreign ones) over others.

For some banks, particularly those whose liabilities are almost entirely deposits, this approach may save little money relative to the current bailouts. And, of course, if it is systemically important to make every creditor completely whole, then there is no saving at all. But if the authorities do not believe that any bank creditors can be asked to lose a penny then they should say so. We can then stop worrying about things like whether, if the government buys (or “insures”) the troubled assets from the banks the government pays fair price or an extra couple of hundred billion, since in this case any overpayment simply reduces the amount the government will ultimately have to pay to make good all the creditors, by an equal amount.

If governments feel that they need to absorb more of the risk in the system, they should consider whether providing subsidies to bank creditors is the most effective use of their funds.
Conclusion

A plan that isolates the bad liabilities rather than the bad assets of the banks, and pays the owners of those claims everything they legally deserve in liquidation but does not fully immunise them from losses, will achieve three major objectives.

* It will help unfreeze the credit markets by creating healthy banks able to lend.
* It will assure that depositors are paid in full, and all creditors are paid at least their entitlement.
* It will make the bailout cheaper for the government, increasing its flexibility.

Finally, as an additional benefit, paying creditors based on market values rather than government guarantees reduces moral hazard in bank finance, and increases the prospect of better monitoring by sophisticated private creditors in determining the future allocation of capital across financial institutions.

There will be a lot more we will need to do to solve the financial crisis -- let's not make the bank bailouts more expensive than absolutely necessary.




* While presented in the form of a plan, what follows is intended to raise questions that deserve answers, rather than make definitive recommendations; some of this might require other legal means than those suggested here.


1. Why do undercapitalised banks have difficulty funding good, relatively safe loans?

First, because any new capital raised is effectively bailing out the senior creditors. If any capital raise has to come primarily from junior creditors, as is likely since the supply of depositors’ funds is relatively fixed, the senior creditors benefit because there will be more collateral available to secure their claims. If the new funds are used for any new zero net present value investment, then any gain of the senior creditors must be matched by an equal loss for the junior creditors – regardless of the riskiness of the new investment. So an undercapitalised bank will need a higher return on even the riskiest investments, if the funding must come from issuing more equity or junior debt.

Second, shareholders in a risky bank are biased against safe investments. Say that a bank that wished to borrow 80 pounds had to promise to return 100 – reflecting a 20% chance of not paying – even when the riskless interest rate is zero. Say that it could make a riskless investment with these funds that would pay off 90 – well above the riskless market rate (of zero). The sum of these two transactions would be a bad deal for the shareholders because they will receive 10 pounds less if the bank is able to pay all its obligations in full, and nothing otherwise. In addition, the probability that they will wind up with nothing will increase, because the risky assets the bank already holds will need a 10 pounds higher payoff to pay off the bank’s debts in full.

2. We have put all the assets, including the "toxic" assets, into the new bank, because this avoids the need to value or trade them (except to the extent that the market will estimate the value when putting a price on the new bank’s equity). A possible danger--depending in part upon regulatory rules--is that the new bank might nevertheless feel under pressure to sell these assets to improve its regulatory capital position. In that case, the "bad assets" might be better left behind in the old bank if the old bank’s liquidation procedures did not create even greater pressures to sell rather than to run to maturity or renegotiate, etc., as appropriate. (A plan that credibly focuses the government’s bailout efforts on liabilities rather than assets should reduce the difficulties of trading the troubled assets, but it may still be inefficient to trade them.)

3. An important difficulty in the US is that the FDIC procedures cannot be applied at the bank holding company level (where some large US banks hold significant assets and liabilities) rather than at the bank level, and subsidies may also be required at the holding company level to curtail system risk. It is easy to imagine a situation where the operating banks are themselves insolvent and perhaps appropriate for a “bridge” bank reorganisation, while at the same time the holding company would be required to go through Chapter 11 of the bankruptcy code in the US. In this case the US government might perhaps provide Debtor in Possession financing to the holding company as it resolved its affairs.

4. In fact, the SRR guarantees only that creditors will get back what would have been their liquidation values in the absence of prior government assistance. So the benefits they gained from the recent government schemes to insure their assets could be discounted from their liquidation values to compute their guaranteed minima. Whether the benefits that some groups of creditors gained from earlier bailouts, including the Lloyds/HBOS merger, can also be "taken back" by the government is beyond our legal expertise.

5. Say for example, that a bank had liabilities in the amounts of L1 and L2, both equal priority, but the government wished to elevate the seniority of L1 by making it a debt of the new bank. If the new bank, with this liability, establishes an equity value of E and a debt value of L1, the value of the L2 claim becomes E, whereas its previous value as an equal priority claim was ((E+L1) times L2/(L1+L2)), so the amount of a fair cash payment to the old bank is the difference between these values, which equals (L2-E) times L1/(L1+L2). (This reflects the facts that the excess of liabilities over assets is (L2-E), and the owners of L1 originally bore share L1/(L1+L2) of these losses).

This article may be reproduced with appropriate attribution.

GOT THAT, EVERYBODY?

The Real Screw Job - AIG Used as Funnel of U.S. Taxpayer Money

See these two screws on the bottom? Think of the little screw as AIG bonuses. That big nasty long screw is AIG funneling $183 billion dollars of your money to foreign banks and to banks that already have wads of cash on hand. Those two screw jobs are not even to scale because the large screw would go past the page. Look those two screws over. Now which one do you believe Populist outrage should be focused on?

So we are all outraged over AIG bonuses. Now lets amplify that outrage to the scale of the ripoff. The bonuses are only 0.001 of the real ripoff that just happened. Your tax dollars were funneled through AIG to foreign banks and to U.S. banks for worthless assets. Your own blind rage is a smoke screen, being used by media elites so you do not see the real screw job going on.






read more, and AIG charts & graphs...
http://www.economicpopulist.org/?q=content/real-screw-job-aig-used-funnel-us-taxpayer-money

(Sorry, couldn't resist).

O8)

(Edit: Nothing to do with "The Princess Bride" whatever that is (though I could guess). This Vizzini character, though, sounds interesting??? (as well as BUTTERCUP)).

They are very similar (for once). And well worth it.

(Mady Patankin) "Hello, my name is Inigo Montoya. You killed my father, prepare to die!"

Inigo Montoya: That's a miracle pill?

Valerie (Miracle Max's wife): The chocolate coating makes it go down easier. But you have to wait fifteen minutes for full potency. And you shouldn't go in swimming after, for at least, what?

Miracle Max: An hour. A good hour.


And watch out for flame spurts, lightning sand, and ROUS's. (ROUS's resemble Wall Street executives without their $3,000 suits on.)

That's what comes of posting without verification. It wouldn't be in Spellcheck, either.

Bennet Sedacca, money manager who blew credit alarm, dies

BLOOMBERG NEWS
March 20, 2009

Bennet Sedacca, a money manager credited with being one of the first to warn that Bear Stearns Cos. - and, by extension, the U.S. economy - would be run over by a credit crisis, has died. He was 49.

Sedacca, chief executive of Atlantic Advisors Llc in Winter Park, Fla., died Tuesday of a brain injury suffered in a fall at his Orlando home, according to an e-mail from Chelsea Valencia, a colleague at the firm.

On the financial Web site Minyanville.com, Sedacca posted a red-flag announcement on March 5, 2008, that "the great credit unwind is upon us."

The posting, which focused on Bear Stearns, constituted "the first murmurings of impending doom for the financial world," William D. Cohan wrote in his new book, "House of Cards." Sedacca had monitored the credit default swaps of Lehman Brothers Holdings Inc. and Bear Stearns for months and had noted the rising cost of insuring their short-term debt, Cohan wrote.

"I've been talking about it for years," Sedacca told Cohan. "Because if you think about it, if you have all this nuclear waste on your balance sheet, what are you supposed to do? You're supposed to cut your dividends, you're supposed to raise equity, and you're supposed to shrink your balance sheet. And they did just the opposite. They took on more leverage."

Sedacca had more than 28 years' experience in the securities industry, according to a profile on the Web site of Atlantic Advisors, a $3.5-billion investment-management company.

He was a senior vice president at PaineWebber and a vice president at Salomon Smith Barney. He also had worked at Drexel Burnham Lambert and lost his first fortune when the firm was liquidated in 1990, Cohan wrote.

http://www.newsday.com/services/newspaper/printedition/friday/news/ny-sedacca206076148mar20,0,6744254.story

Hope it was worth it.

Rather young for a death by falling, too.

with a fake fall. He slammed his neck down against the edge of a table, then spilled some tea on the floor by his feet.

The point being fatal falls are easy to stage.

http://www.businessinsider.com/henry-blodget-rogoff-the-worst-is-over-are-you-kidding-2009-3

Lots of interesting observations from an economist far more respected than Roubini but just as bearish:

* Things are worse overseas: some countries simply can't bail out their banks -- liabilities are 3 to 5 times GDP.

* May take 2 years before housing bottoms

* Ditto for equity markets

* Expects 1970s-like inflation when we come out of recession.

* Could have decade of Japanese in-and-out-of-recession if we don't seriously deal with banking system.

One of the money quotes (at 18:36): ?There is only one end game to this, to use the chess analogy, which is that most of the large financial institutions have to go through some kind of bankruptcy.?

Shortly after that, he's critical of the Obama administration for not "taking the bull by the horns" and taking a "wishing it away" approach to the economy.

VIDEO INTERVIEW AT LINK

Job growth not keeping up with population growth is a major factor in causing this recession. The Bush years fell about 5 million jobs short of matching population growth, and 20 million short of job growth during the Clinton years. Things wouldn't look nearly so bad with 5 million more jobs. And things would look pretty damn good with 20 million more jobs.

http://www.ourfuture.org/blog-entry/2009031220/congress-finally-ready-seriously-tax-rich


...History offers an answer: maybe. Since the last quarter of the 19th century, the years when wealth in the United States first started concentrating at epic levels, taxes on the rich have only risen significantly three times. Each of those three hefty hikes took place at times of national crisis, the last nearly 70 years ago, in a situation filled with parallels to today’s furor over AIG.

Back then, in 1940, the Nazis were marching in Europe, and President Franklin D. Roosevelt was anxiously trying to rearm America amid the Depression’s hard times.

“Not a single war millionaire,” the President flatly pledged in 1940, “will be created in this country as a result of the war disaster.”

U.S. corporate leaders of FDR’s day had other ideas. They mobilized to stop Roosevelt’s pitch for a stiff excess profits tax on corporate earnings. They actually refused to enter into defense contracts until Congress gave them a more business-friendly tax bill. (THEY ALSO PLANNED A COUP, BUT HE DOESN'T MENTION THAT!)

But then came the attack on Pearl Harbor, and FDR soon had the upper hand. In April 1942, just a few months into the war, Roosevelt proposed a 100 percent “supertax” on all income over $110,000 — the equivalent of about $1.4 million in today’s dollars — for couples filing jointly.

Congress, in the end, didn’t go along with FDR’s 100 percent tax, but lawmakers did eventually agree to a 94 percent top rate on income over $200,000, around $2.5 million in today’s dollars, and the nation’s top tax rate would hover around 90 percent, under Democratic and Republican Presidents alike, until 1964.

Over the course of these years of high taxes on America’s very rich, the Great Depression would end, World War II would be won, and the United States would usher onto the world stage the first prosperous, mass middle class nation in economic history.

FDR’s willingness — even eagerness — to take on the rich and powerful opened the door to all this success. Elected leaders in Washington today have yet to show anything close to that courage. The bailout executive pay limits Congress enacted last month and the AIG bonus tax the House adopted last week certainly do constitute positive steps, but neither goes nearly far enough....

..............

The AIG bonus tax, for instance, won’t touch Joseph Cassano, the power suit who ran the AIG division that wheeled and dealed the company into $99 billion in 2008 losses. Cassano left AIG last March, but not before collecting over $300 million for his toxic labors. He gets to keep all that, even if the House bonus bill adopted last week becomes law.

The same story holds for the executive pay bailout restrictions Congress passed in February. These place a $500,000 limit on what companies that get taxpayer bailout dollars can deduct off their tax bills for executive pay. That’s a welcome move, but this limit doesn’t in any way impact Lockheed Martin, the defense industry giant that rakes in billions of tax dollars via government contracts.

Lockheed’s CEO, the company has just announced, took home $26.5 million in 2008. Under current law, Lockheed gets to deduct, on its corporate tax return, almost all that $26.5 million.

One member of Congress, Rep. Barbara Lee from California, has introduced legislation to end such taxpayer subsidies for excessive executive compensation. Her new Income Equity Act, HR 1594, would deny all corporations tax deductions on any executive pay that runs over $500,000 or 25 times the pay of a company’s lowest-wage worker.

Lee, interestingly, had a similar bill before the last Congress. That bill went nowhere. Has the AIG bonus ruckus changed anything? We’ll soon see.

http://www.nakedcapitalism.com/2009/03/guest-post-mother-of-all-stealth-scams.html

Very long dissertation with much we've seen already, all tied together.

SEE ALSO

Investor on Private Public Partnership: "One would have to be a criminal to participate in this"

http://www.nakedcapitalism.com/2009/03/investor-on-private-public-partnership.html

Timmy Boy's Plan for Toxic Assests

AND

Guest Post: Some More Thoughts On FDIC And The "Systemic Risk Exception" Clause

http://www.nakedcapitalism.com/2009/03/guest-post-some-more-thoughts-on-fdic.html

I could troll through the online newspapers, I suppose...or do housework. Sigh. If it was warm enough, I'd go clean up the leaves outside.

Here's an example:

"But deep down, the British do not really trust the French and Germans, or regulation of finance that comes out of Paris or Berlin. That is not just because of fundamental differences of belief about how to run financial capitalism. It is also because the French and Germans are the proud owners of two financial centres, namely Paris and Frankfurt, that would love to topple the City of London as a centre for European trading."

/... http://www.economist.com/blogs/charlemagne/2009/03/do_not_believe_this_talk_of_eu.cfm

More:

""The Dutch welfare state is generous, so unemployment (forecast to rise from 3.9% to 9% next year) triggers less instant misery than in America. The government argues that “automatic stabilisers”, including higher welfare payments and a falling tax take, amount to a stimulus worth tens of billions, even if you cannot see new bridges and schools being built with it. The flip side is a brutal deterioration of public finances: a projected budget surplus of 1% next year has been revised to a 5.5% deficit.

One of the letter-writing economists, Lans Bovenberg of Tilburg University, says that Dutch politicians know what they have to do, for their sake and for Europe. They have to clean up the banks, even if this prompts voter complaints that Dutch money is helping French and German customers. They have to curb wages to boost exports. Thanks to Calvinist discipline, this should be doable. Most painfully, the Dutch can preserve the long-term solvency of the state only by raising the retirement age, to 67 or more. In political circles, other bold measures are aired, eg, an obligation on future governments to reduce deficits.

/... http://www.economist.com/world/europe/displaystory.cfm?story_id=13325391

And, of course:

"IT IS an ill wind that blows no one any good. For many in China even the buffeting by the gale that has hit the global economy has a bracing message. The rise of China over the past three decades has been astonishing. But it has lacked the one feature it needed fully to satisfy the ultranationalist fringe: an accompanying decline of the West. Now capitalism is in a funk in its heartlands. Europe and Japan, embroiled in the deepest post-war recession, are barely worth consideration as rivals. America, the superpower, has passed its peak. Although in public China’s leaders eschew triumphalism, there is a sense in Beijing that the reassertion of the Middle Kingdom’s global ascendancy is at hand (see article).

China’s prime minister, Wen Jiabao, no longer sticks to the script that China is a humble player in world affairs that wants to focus on its own economic development. He talks of China as a “great power” and worries about America’s profligate spending endangering his $1 trillion nest egg there. Incautious remarks by the new American treasury secretary about China manipulating its currency were dismissed as ridiculous; a duly penitent Hillary Clinton was welcomed in Beijing, but as an equal. This month saw an apparent attempt to engineer a low-level naval confrontation with an American spy ship in the South China Sea. Yet at least the Americans get noticed. Europe, that speck on the horizon, is ignored: an EU summit was cancelled and France is still blacklisted because Nicolas Sarkozy dared to meet the Dalai Lama.

Already a big idea has spread far beyond China: that geopolitics is now a bipolar affair, with America and China the only two that matter. Thus in London next month the real business will not be the G20 meeting but the “G2” summit between Presidents Barack Obama and Hu Jintao. This not only worries the Europeans, who, having got rid of George Bush’s unipolar politics, have no wish to see it replaced by a Pacific duopoly, and the Japanese, who have long been paranoid about their rivals in Asia. It also seems to be having an effect in Washington, where Congress’s fascination with America’s nearest rival risks acquiring a protectionist edge."

/... http://www.economist.com/opinion/displaystory.cfm?story_id=13326106

Yeah, sure, the front page of the Weekend FT was also a sight to behold. No comment from me for now. (See also, START eg. here: http://fistfulofeuros.net/afoe/the-european-union/continuing-a-beautiful-friendship/#more-5161 )

(Edited to cut the commercial crap).

http://www.boston.com/news/local/massachusetts/articles/2009/03/21/financial_services_executives_reap_big_retirement_benefits/?page=1

since I am too darned lazy (or weak while recouperating) to dig out my copy--I really ought to. Maybe the Kid can motivate me...

so, maybe we can do this again next week?

THE KID

Grandpa?

(The Old Man stops, turns)

Maybe you could come over and read it again to me tomorrow.

GRANDFATHER
(there is a pause; then --)

As you wish...

And his smile is enough. As The Grandfather steps out the door,

FINAL FADE OUT:
THE END

http://www.godamongdirectors.com/scripts/princess.shtml