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U.S. Rating Under Pressure From Deficit, Moody’s Says
By Inyoung Hwang
http://www.bloomberg.com/apps/news?pid=20601087&sid=al6JJa7EEsPI&pos=6
Feb. 2 (Bloomberg) -- Moody’s Investors Service Inc. said the U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.
The U.S. retains its top rating for now because of a “high degree of economic and institutional strength,” the New York- based rating company said in a statement today. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. Moody’s expects the ratios to remain higher compared with other Aaa-rated countries after the crisis.
President Barack Obama projected yesterday the U.S. budget deficit will rise to a record $1.6 trillion in 2010, representing 10.6 percent of U.S. gross domestic product, the highest level since World War II. The Treasury will sell $2.43 trillion in notes and bonds this year, a 16 percent increase from the record $2.1 billion sold in 2009, according to the average forecast in a Bloomberg News survey of 10 primary dealers that trade with the Federal Reserve.
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess, senior credit officer at Moody’s in New York.
How the government handles the credit crisis and recession without impairing its balance sheet and the economy’s ability to rebound will be issues that could weigh on the U.S. rating, the report said.
Government Spending
Obama proposed plans to offset spending by more than $1.2 trillion over 10 years, including a freeze on domestic programs and higher taxes and fees on households earning more than $250,000 and banks that benefited from the financial industry bailout.
The plan showed larger deficits and higher debt levels than in the original budget, Moody’s said. The ratio of debt to GDP in the U.S. will continue its trend higher, reaching 76.5 percent in 2019 compared with an earlier forecast of 70.1 percent, Moody’s said.
The budget deficit in 2009 was $1.4 trillion. The White House goal has been to reduce the deficit to about 3 percent of GDP, which most economists say is sustainable. The budget presented yesterday though predicts it’ll average 4.5 percent over 10 years.
I am and am active in state politics (but most are compacent or ummm. compromised
Canny,and EVERY instance of "Back Door Taxes to Hit Middle Class" has been pulled, starting with the Reuters story.
http://search.yahoo.com/404handler?src=news&fr=404_news&ref=http%3A%2F%2Fwww.drudgereport.com%2F&url=http%3A%2F%2Fnews.yahoo.com%2Fs%2Fnm%2F20100201%2Fbs_nm%2Fus_budget_backdoortaxes
Oh, and the banks have killed the "Volcker Rule", the WSJ informs us..
Found it cached in Canada: Backdoor taxes to hit middle class
Mon Feb 1, 4:09 PM, By Terri Cullen
NEW YORK (Reuters.com) --The Obama administration's plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families.
In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year -- effectively a tax hike by stealth.
While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.
The targeted tax provisions were enacted under the Bush administration's Economic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law lowered individual tax rates, slashed taxes on capital gains and dividends, and steadily scaled back the estate tax to zero in 2010.
If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.
Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent. The estate tax is eliminated this year, but it will return in 2011 -- though there has been talk about reinstating the death tax sooner.
Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a "patch" that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoiding income taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue.
Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year's levels, the tax will hit American families that can hardly be considered wealthy -- the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.
Middle-class families also will find fewer tax breaks available to them in 2010 if other popular tax provisions are allowed to expire. Among them:
* Taxpayers who itemize will lose the option to deduct state sales-tax payments instead of state and local income taxes;
* The $250 teacher tax credit for classroom supplies;
* The tax deduction for up to $4,000 of college tuition and expenses;
* Individuals who don't itemize will no longer be able to increase their standard deduction by up to $1,000 for property taxes paid;
* The first $2,400 of unemployment benefits are taxable, in 2009 that amount was tax-free.
Yes, a tribute to your experience & insight
AIG BOMBSHELL: NY Insurance Regulator Dinallo was transferring $20B to AIGFP when Geithner and Bernanke Bailed Out Goldman, SocGen and other speculators!
Democrats Say "Bye" to Populist Option
Obama's Junk Economics- http://www.counterpunch.org/hudson02012010.html
By MICHAEL HUDSON
In a dress rehearsal for this November’s mid-term election, Democrats and Republicans vied last week for who could denounce the banks and blame the other party the most for the giveaways to Wall Street that have swollen the public debt since September 2008, pushing the federal budget into deficit and the economy into a slump.The Republicans are winning the populist war. On the weekend before his State of the Union address on Wednesday, Obama strong-armed Democratic senators to re-appoint Ben Bernanke as Federal Reserve Chairman. His Wednesday speech did not mention this act (happily applauded by Wall Street). The President sought to defuse voter opposition by acknowledging that nobody likes the banks. But he claimed that unemployment would be much higher if they hadn’t been bailed out. So the giveaway of public funds was all for the workers. The $13 trillion that has created a new power elite was just an incidental byproduct. Unpleasant, perhaps, as American democracy slips into oligarchy. But the least bad option. People might not like it, but Main Street simply cannot prosper without creating hundreds of Wall Street billionaires – without enabling them to increase their bonuses and capital gains as bank stock prices quadruple. It’s all to get credit flowing again (at 30 per cent for credit card users, to be sure.)
So the rest of us must wait for wealth to trickle down. The cover story is that, like it or not, this is how the world works. At least this is the argument of the lobbyists who are drafting and censoring laws and signing off on just who is acceptable to run the Federal Reserve, Treasury and other public-subsidy agencies. The working assumption is that the economy cannot recover without enriching Wall Street.
In fact what the economy needs is to recover from the Bush-Obama supposed cure, i.e., from the mushrooming debt overhead. It needs to recover from the enrichment of Wall Street. It doesn’t need more credit, but a write-down for the unpayably high debts that the banks have imposed on American families, businesses, states and localities, real estate, and the federal government itself.
Instead of helping debtors, Obama has moved to heal the creditors, at public expense. If debtors cannot pay, the Treasury and Fed will take their IOUs and bad casino gambles onto the public sector’s balance sheet. The financial winners must come first – and it seems second and third, too. The rationale is that unless the government gives the large financial institutions what they want and saves them from taking a loss, their “incentive” to protect the economy from devastation will be gone.
Knuckling under to this protection racket is not the change that most people voted for in November 2008. So on Thursday afternoon, most Republican senators opposed a second four-year term for Bernanke. By leading the effort to re-confirm him, the Corporate Democrats (but not most of their colleagues who had to face voters this autumn) removed this albatross from the Republican neck and put it around their own.
For starters, Chairman Bernanke has convinced the President that the Fed should be the single regulator of Wall Street – ideologically kindred, and drawn from its ranks, or with its assent. There was no place in Obama’s Act Now list last Wednesday for the Consumer Financial Products Agency he promised a year ago as the centerpiece of financial reform. Its main sponsor, Elizabeth Warren, has been warning that hopes for reform are being overwhelmed by financial lobbyists arguing that truth-in-lending laws and anti-usury regulations threaten to reduce bank profits, forcing lenders to raise costs to consumers. In Bernanke’s world, regulations to protect consumers simply will oblige the banks to pass on the cost increase caused by this “government interference.” The more regulation there is, the more consumers will have to pay.
This is the inside-out picture drawn by bank lobbyists and purveyed by Obama’s economic team. Could George Bush have gotten away with it? Democrats have a friendlier and more compassionate face, but the substance remains the same.
Most economists believe that Obama is whistling in the dark when he says the economy will recover this year under Chairman Bernanke’s guidance. The financial screws are being tightened, yet the Fed refuses to abide by its charter and regulate credit card rates going through the roof. Instead of countercyclical federal spending to rescue the economy from debt deflation, Obama says that since we have given so much to Wall Street in the past year and a half, little is left to spend on the “real” economy. Sounding like a Republican in Democratic clothing not unlike his Senate mentor Joe Lieberman, his State of the Union speech urged creation of a bipartisan (that is, Republican-friendly) working group to agree on how to lower the deficit. The President proposes that starting next year Congress should freeze spending not already committed under entitlement programs.
Testifying Wednesday morning as a run-up to Pres. Obama’s evening speech, Messrs. Geithner and Paulson at least avoided the Washington ploy of emulating Alzheimer’s patients and saying that they couldn’t recall anything about their giveaways. Sophisticated enough to outplay their questioners in verbal tennis, the past and present Treasury Secretaries brazened it out. Using the Plausible Deniability defense, they claimed that they weren’t even in the loop when it came to paying AIG enough to turn around and pay Goldman Sachs and other arbitrageurs 100 cents on the dollar for securities worth about a fifth as much. Their underlings did it. “This was a Federal Reserve loan,” Paulson explained. “They had the authority. They had the technical expertise … and I was working on many other things which were in my bailiwick.” And in any case an AIG bankruptcy “would have buckled our financial system and wrought economic havoc.” Unemployment, he warned, “could have risen to 25 per cent.” The Fed had to protect people.
When there was no way to dodge, they frankly admitted what had happened, providing helpful pieties to the effect that it is the job of Congress to change the law to make sure nothing like this happens again. Yes, there was a big giveaway, but we saved the economy. Wall Street’s loss would have been the peoples’ loss. Certainly we need new rules to protect the taxpayer …. We’re all in the same boat. If the banks took a loss, they would have to raise the price of financial services and we would all have had to pay more. Thank heavens that everything is getting back to normal now.“A lot of people think the president of the New York Fed works for the government,” Democrat Marcy Kaptur of Ohio concluded, “but in fact he works for the banks on the board that elected you.” Not so, testified New York Federal Reserve general counsel Thomas Baxter. “A.I.G. wanted to keep the information confidential, for fear that it would lose business if customers were named.” And if it lost business, “This would have had the effect of harming the taxpayers’ investment in A.I.G.” So it was all to save the taxpayers money that the Fed spent $185 billion of their money.
But was it really necessary not to let A.I.G. go bankrupt in September of 2008? The Wall Street Journal’s editorial page blew the whistle on how the government’s wheeler-dealer insiders have been changing their story again and again – not usually a sign of truthfulness. “Secretary of the Treasury Timothy Geithner and predecessor Hank Paulson said they didn’t bail out AIG to save its derivatives counterparties” from bad credit default swap contracts because if it would have asked these counterparties to “take a haircut,” credit-ratings agencies would have downgraded AIG. A lower rating would have obliged it to post even more collateral on its other swap contracts, presumably because of the higher risk.
There are a number of problems with this story, the editorial explained. First of all, Goldman Sachs and other counterparties unilaterally said the prices had declined for securities that had no market price at all, only subjective valuations. A.I.G. would have been reasonable in disputing this. In any event, as the firm’s new 80 per cent stockholder, the U.S. Government said it would stand behind AIG. This should have removed fears of non-payment. But most important of all was the claim by Messrs. Paulson and Geithner that failure to “honor” AIG’s swaps would have threatened its far-flung insurance businesses on which so many American consumers depended. New York Insurance Superintendent Eric Dinallo, who was AIG’s principal insurance regulator at the time, testified before the Senate last year that these operations were not threatened at all! “‘The main reason why the federal government decided to rescue AIG was not because of its insurance companies.’ He was so confident in the health of the AIG subsidiaries that, before the federal bailout, he was working on a plan to transfer $20 billion of their excess reserves to the parent company.”
This directly contradicts Geithner’s claim “that the ‘people responsible’ for overseeing the insurance subsidiaries ‘had no idea’ about the risks facing AIG policyholders. He’s talking about Dinallo here. Instead of being safely segregated, Geithner said the insurance businesses were ‘tightly connected’ to the parent company. Paulson added that the healthy parts of AIG had been ‘infected’ by the ‘toxic assets.’ He added, ‘One part of the company would have contaminated the other.’” Does this mean that New York’s “heavy state insurance regulation was a sham,” the newspaper asked? It would seem that “When push came to shove, policyholders were not protected from a default by the parent company.” It urges that Dinallo be brought back to straighten the matter out.
Geithner closed his own comments by saying, “if you are outraged by what happened with A.I.G., then you should be deeply committed to financial reform.” This is rhetorical judo. The financial system in question is not the economy at large. It was A.I.G.’s carefully segregated bookies’ account for wealthy hedge fund gambles and Wall Street speculations that should have had little to do with the “real” economy at all.
'Opponents of Volcker Rule Misguided'-Buffet
"One of the lessons that investors seem to have to learn over and over again, and will again in the future, is that not only can you not turn a toad into a prince by kissing it, but you cannot turn a toad into a prince by repackaging it. But very imaginative people in the securities market try to do that. If you have bad mortgages they do not come better by repackaging them. To some extent the chickens are coming home to roost for the mortgage originators and securitisers."
Warren Buffett, Financial Times, October 26, 2007
Hat Tip to Prudent Bear
http://boards.prudentbear.com/
Greenie: Fine Line? No Hot Line (Cone of Silence...)
Gross is in cash mainly and 108K hits on GoogYourPrivacyGone
is lots:(though he's the #1 bond umm buyer)
http://www.google.com/search?q=PIMCO+Gross+%26+Treasury&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
Pimco’s Gross Boosts Cash to Most Since Lehman Failed
By Wes Goodman and Garfield Reynolds
insert-text-here
Dec. 18 (Bloomberg) -- Bill Gross, who runs the world’s biggest bond fund, cut government debt holdings and boosted cash to the most since Lehman Brothers Holdings Inc. collapsed in 2008 amid increasing speculation that interest rates will rise.
Gross, who manages the $199.4 billion Total Return Fund at Pacific Investment Management Co., increased cash to 7 percent in November from negative 7 percent in October, according to Pimco’s Web site. The fund can have a so-called negative position by using derivatives, futures or by shorting. He reduced government-related securities to 51 percent from a five-year high of 63 percent in October.
RALLY PLAYED, WILL NOT STAY!
JPM, LOL Shaken outta my small F short (-3%)
Nice Trades, Citi & Kaufman Falling over themselves to defend 70X multiple Amazon due to WOW 5% margins.
Opened small shorts on F, NFLX & AMZN
On F- "profit" from restructuring revaluations and phony Ford Credit gains-
http://www.breakingviews.com/2010/01/28/ford.aspx?sg=nytimes
Market opens higher following recent pattern THEN SELLS OFF
The averages opened higher and continued to advance. They're now at their best levels of the morning. Several times over the past couple of weeks the market has opened higher only to succumb to selling later in the day. That's resulted in a 7.0% drop for the averages over that time period. Investors received several economic reports today but each was basically in liner With that in mind the pattern of late day selling could continue. Source:FOTW
Sorry, third pump right on schedule
Canny, get your bop button finger fixed!
Futes pump, open pump, 10 am pump- even jpm says 'no mas'
OT-sorry Lee- even smilin' Buffet Becky looked like a fool as she explained at 8 am that the futes were strong because of Exxon - they hadn't moved all night from +57 and XON had just reported!
Trouble in Tech Land - Barrons
Handset vendors, carriers could start to get nervous, Barron's reports
Barron's Technology Trader columnist Eric Savitz says, some very odd things are going on in the mobile-phone market -- things that should make both the handset vendors and the carriers a little bit nervous. For starters, the one worm in Apple's (AAPL) otherwise impressive December-quarter earnings was that iPhone sales were shy of expectations. A few days later, Motorola (MOT) reported weak results, selling far fewer phones overall in the quarter than the Street had forecast. Qualcomm (QCOM) likewise provided disappointing guidance, as pricing pressure on handsets took a toll on the mobile-phone chipset provider. Crossing up Savitz's still-nascent theory that handset demand is weakening, Nokia (NOK) had a surprisingly strong quarter, recovering the five points of smartphone market share it had lost in the previous one. Of course, the really big mobile-device news last week came from Apple, with the rollout of the iPad. Both AT&T (T) and Verizon Wireless recently cut their data-plan rates, and there will be pressure to further trim them to promote adoption of all the new connected devices. The trend should intensify when 4G networks arrive in a couple of years. So, AT&T and Verizon (VZ) could be headed for a price war that will produce more customers, but also higher capital investment and thinner margins. Both stocks have appealing dividends, but Savitz see trouble ahead. And there's a special time bomb out there for AT&T, which at some point will lose its exclusive hold on the iPhone
Drudge: Blowout! White House Projects Record Deficit!
White House to paint grim fiscal picture: source
Andy Sullivan, Reuters, Sun Jan 31, 2010 - http://www.reuters.com/article/idUSTRE60U1PZ20100131
WASHINGTON (Reuters) - The White House will predict a record budget deficit in the current fiscal year and more big shortfalls for the next decade in its upcoming budget proposal, a congressional source told Reuters on Sunday. In its budget proposal to be released on Monday, the White House predicts a record $1.6 trillion budget deficit for the fiscal year that ends September 30, the Capitol Hill source said.
According to the estimate, deficits will narrow to $700 billion by fiscal 2013 before gradually rising back to $1.0 trillion by the end of the decade, the source said. (yeah, sure...)
President Barack Obama will seek to strike a balance between reducing the deficit over the long term and stimulating the economy in the short term to ease the pain of double-digit unemployment.
Criticized by Republicans as a big spender, Obama used his State of the Union address last week to tell Americans he would dig the country out of a "massive fiscal hole." That hole is even deeper than previously believed, according to the estimate by the White House's Office of Management and Budget. The estimate for the current fiscal year is significantly higher than the $1.35 trillion figure forecast by the nonpartisan Congressional Budget Office last week.
Despite the difference, both estimates indicate that the deficit will continue to hover at a level not seen since World War Two, when measured as a percentage of the economy. Last year the government posted a $1.4 trillion deficit.
THREE-YEAR FREEZE WON'T BE ENOUGH
In his budget, Obama will propose a three-year freeze on some domestic programs to save $20 billion next year and $250 billion over the coming decade. But that will not be enough to get deficits down permanently to the 3 percent of gross domestic product that most economists consider sustainable.
Deficits are projected to fall as the economy recovers, but they will still average roughly 4.5 percent of GDP over the coming decade, according to the estimate. (what recovery???)
Deficits are expected to rise again toward the end of the decade due to the increasing cost of retirement and healthcare programs as the "baby boom" generation retires. Obama has warned that the burgeoning U.S. debt could unnerve U.S. financial markets, driving up borrowing costs and putting future economic growth at risk. China, the biggest foreign holder of U.S. Treasuries, has urged the United States to get its fiscal house in order.
The grim forecast could help build support for a bipartisan commission proposed by the White House that would recommend ways to address long-term budget problems. Obama and his fellow Democrats face a growing voter backlash for the aggressive spending measures they have taken to stimulate the economy.
But Democrats point out that most of the fiscal mess has been inherited from the previous administration of Republican George W. Bush, who cut taxes and created an expensive prescription drug-benefit while pursuing wars in Iraq and Afghanistan.
The recession, which began in December 2007 and ended last year, also worsened the fiscal picture by depressing government revenues while forcing up spending on unemployment benefits and other safety-net program
Paulson: Russia tried to exacerbate US financial crisis
By Stephen C. Webster
Saturday, January 30th, 2010
henrypaulsontreasury2 Paulson: Russia tried to exacerbate US financial crisis. Russian interests attempted to force the U.S. government bailout of Fannie Mae and Freddie Mac by selling off its holdings in the two entities in 2008, then urging China to do the same, according to former U.S. Treasury Secretary Henry Paulson.
Paulson's claim is carried by his forthcoming memoir, “On The Brink.” An early copy was obtained by Bloomberg News.
"The Russians made a 'top-level approach' to the Chinese 'that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,' Paulson said, referring to the acronym for government sponsored entities," Bloomberg reported. "The Chinese declined, he said."
He reportedly added that he waited until returning to the U.S. before informing former President George W. Bush of what he called a "disruptive plan."
The New York Post called it flirting with "financial war."
Lehman author slams Paulson- NY Post
Former Lehman Brothers banker Larry McDonald has some choice words -- which he shared with The Post -- about former Treasury Secretary Hank Paulson's new book "On The Brink."<p> </p><br> The book, which will be officially released Feb. 1, is meant to be Paulson's account of the tumultuous days up to and after the epic failure of Lehman Brothers. McDonald, who co-penned his own book about Lehman's collapse, "A Colossal Failure of Common Sense," lays much of the blame for Lehman's bankruptcy and the financial crisis at the feet of Paulson and Fed Chief Ben Bernanke. McDonald's book, which was published last year, is now being released in China
My thoughts on Hank Paulson's new book; "Saving my Legacy"...er...sorry I mean "On the Brink." I think he is writing the book out of insecurity to salvage his legacy. He's a very private man, so why write the book now? Especially after he just spent most of 2008 in 14 hour days of tense workouts, coming up with new innovation after new innovation to help save a financial system he helped destroy.<p> </p><br> Make no mistake about it, Henry Merritt Paulson was the man that pulled the trigger that launched a bullet into the forehead of Lehman Brothers at Point Blank Range. It was the decision that obliterated the world's economy.
They, Paulson, Geithner and Bernanke were so over their heads they started playing god and F.. the system. They disgraced the SEC, the FDIC and Congress time after time because they thought they knew better. This is the most slipperiest [sic] slopes [sic] in the history of democratic capitalism because once you go down that road, you're putting more and more power and the justification of deceit in the hands of Government. Right out of the Kremlin's playbook.
It's the 21st century version of Iran Contra, just add 6 more zeros to the price tag. Our grandchildren will be paying the price.<p> </p><br> The decisions they made, forcing Bank of America to buy Countrywide at double the price they should have paid, shooting Washington Mutual and creating a windfall for JP Morgan, saving Bear, AIG, Fannie, Freddie, putting Ken Lewis in a headlock and making Bank of America buy Merrill for $50 bln when they could have waited 7 days and had it for $20 billion, and letting Lehman go = schizophrenia.<p> </p><br> When they let Lehman go it made the AIG bailout 7x more expensive, Merrill 2x, GM 3x, Chrysler 2x.<p> </p><br> Not to mention letting Lehman go made AIG's liabilities to Goldman go up by 5x!<p> </p><br> Only 9 pages of his new book devoted to his time at Goldman. Come on Hank!<p> </p><br>
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1:50 PM, January 29, 2010 ? By Mark DeCambre
Former Lehman Brothers banker Larry McDonald has some choice words -- which he shared with The Post -- about former Treasury Secretary Hank Paulson's new book "On The Brink."
The book, which will be officially released Feb. 1, is meant to be Paulson's account of the tumultuous days up to and after the epic failure of Lehman Brothers. McDonald, who co-penned his own book about Lehman's collapse, "A Colossal Failure of Common Sense," lays much of the blame for Lehman's bankruptcy and the financial crisis at the feet of Paulson and Fed Chief Ben Bernanke. McDonald's book, which was published last year, is now being released in China.
What he had to say:
Hello from Beijing!
My thoughts on Hank Paulson's new book; "Saving my Legacy"...er...sorry I mean "On the Brink."
I think he is writing the book out of insecurity to salvage his legacy. He's a very private man, so why write the book now? Especially after he just spent most of 2008 in 14 hour days of tense workouts, coming up with new innovation after new innovation to help save a financial system he helped destroy.
Make no mistake about it, Henry Merritt Paulson was the man that pulled the trigger that launched a bullet into the forehead of Lehman Brothers at Point Blank Range. It was the decision that obliterated the world's economy.
They, Paulson, Geithner and Bernanke were so over their heads they started playing god and F.. the system. They disgraced the SEC, the FDIC and Congress time after time because they thought they knew better. This is the most slipperiest [sic] slopes [sic] in the history of democratic capitalism because once you go down that road, you're putting more and more power and the justification of deceit in the hands of Government. Right out of the Kremlin's playbook.
It's the 21st century version of Iran Contra, just add 6 more zeros to the price tag. Our grandchildren will be paying the price.
The decisions they made, forcing Bank of America to buy Countrywide at double the price they should have paid, shooting Washington Mutual and creating a windfall for JP Morgan, saving Bear, AIG, Fannie, Freddie, putting Ken Lewis in a headlock and making Bank of America buy Merrill for $50 bln when they could have waited 7 days and had it for $20 billion, and letting Lehman go = schizophrenia.
When they let Lehman go it made the AIG bailout 7x more expensive, Merrill 2x, GM 3x, Chrysler 2x.
Not to mention letting Lehman go made AIG's liabilities to Goldman go up by 5x!
Only 9 pages of his new book devoted to his time at Goldman. Come on Hank!
Secret Banking Cabal Emerges From AIG Shadows: David Reilly
...Yankees in town, or Lakers tomorrow
Commentary by David Reilly
http://www.bloomberg.com/apps/news?pid=20601039&sid=aaIuE.W8RAuU
Jan. 29 (Bloomberg) -- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.
The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.
That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.
Saving the System
Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.
The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.
By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.
This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.
Geithner’s Bosses
The New York Fed is one of 12 Federal Reserve Banks that operate under the supervision of the Federal Reserve’s board of governors, chaired by Ben Bernanke. Member-bank presidents are appointed by nine-member boards, who themselves are appointed largely by other bankers.
As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”
And yet the New York Fed played an integral role in the government’s bailout of banks, often receiving surprisingly free rein to act as it saw fit.
Consider AIG. Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop.
“I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said.
Bernanke’s Denials
Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks.
You have to wonder then who really was in charge of our nation’s financial future if AIG posed as grave a threat as Geithner claimed.
Questions about the New York Fed’s accountability grew after Geithner on Nov. 24, 2008, was named by then-President- elect Barack Obama to be Treasury Secretary. Geither said he recused himself from the bank’s day-to-day activities, even though he never actually signed a formal letter of recusal.
That left issues related to disclosures about the deal in the hands of the bank’s lawyers and staff, rather than a top executive. Those staffers didn’t want details of the swaps purchase to become public.
New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.
That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.
Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.”
Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.
This belies the culture of secrecy obviously pervasive within the New York Fed. Committee Chairman Edolphus Towns noted during the hearing that the bank initially refused to disclose even the names of other banks that benefited from its actions, arguing this information would somehow harm AIG.
‘Penchant for Secrecy’
“In fact, when the information was finally released, under pressure from Congress, nothing happened,” Towns said. “It had absolutely no effect on AIG’s business or financial condition. But it did have an effect on the credibility of the Federal Reserve, and it called into question the Fed’s penchant for secrecy.”
Now, I’m not saying Congress should be meddling in interest-rate decisions, or micro-managing bank regulation. Nor do I think we should all don tin-foil hats and start ranting about the Trilateral Commission.
Yet when unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil.
Great movie- So much for "And now for something completely different"
OT-Understood, I followed Comverse as an analyst in the mid 80s thru late 90s. Post 9-11, application of these technologies and the upgrade of Esc*$h*elon ramped into action.... Did you see that Tony Blair justified the Iraq War by saying that 9-11 was the justification??
UFB!
http://feeds.bignewsnetwork.com/?sid=595050
Hey there, Fed. I thought 9K a while back but 9500 is a good technical re-trace. What are you seeing- how about that Q4 5.7% GDP- half stimulus, half inventory, all BS??
Ding, Ding, Ding!! You win my kewpie doll! And C2G, it's no coincidence that the SEC just approved "break the buck" rules. Amazing, that there's rampant insider trading going on all of 2009 and Mary Shapiro can't even get a conviction on Raj R. even when the paper trail leads back a decade (or more) - even to his Needham days.
30 years as an expat? Wow, you must have a real insight into the mess the U.S. is in... Please share! After five year in the UK for me, I was desperate to return to the US where people engaged and loved exercise and cared about a free nation AND the Constitution. Now I see the UK as a camera controlled police state run by a meglomaniac named Brown. Now we have the same in the US. Soon the Internet will be "curtailed" and these types of forums will be deemed "suspicious". Dossiers on everyone...like China under Mao and Russia under Stalin
Added EEV XXXX $12.50 HAGWE
You are a great wit! I only wish that the controlled corporate media was simply stepping up and recognizing that, if this whole charade blows up again, their cushy life of propaganda collapses too. Greece, Iceland, Turkey, Spain, Ireland, UK, US.... BOOM!
AIG: The Idiocy That Will Not Die
http://market-ticker.denninger.net/
Why do I smell a Fannie/Freddie debacle in here?
AIG owes $25.8 billion on the line, about $2.4 billion more than last week, according to Fed data released yesterday. The draw has increased for six straight weeks. The company said in November that it may borrow additional funds from its five-year Fed credit line to make payments on maturing commercial paper.
Wait a second.... payments on maturing commercial paper? Why would they owe payments on maturing commercial paper that they purchased? I thought that companies paid to borrow, not the other way around?
Oh wait - perhaps it's their commercial paper? Exactly what are they paying to borrow? And if it's expiring, does this mean they can't roll it over? How are these clown funding themselves?
Hmmmm..... so AIG borrowed a bunch of money, perhaps from the Fed Alphabet Soup program) to support the commercial paper market, which they are now shutting down (as of February 1st), and they have a problem rolling it over in the private market? That would make sense. But if they can't roll it over in the private market how is AIG going to be handling it's ongoing short-term financial needs?
These sorts of arcane things may not pique the interest of most Americans, but it should. AIG is now a ward of the state, with some $180 billion in money pumped into or through them. And while their AIGFP (financial products) division was at the center of this mess, writing credit-default swaps against CDOs that couldn't be reasonably valued in the market (due to their thin trading and no agreement on their value) with no money to back it up, the question remains - had AIGFP gone bankrupt along with the holding company would it have mattered to the regulated insurance subsidiaries?
Indeed, the entire point of structuring insurance businesses this way (every state has its own separate subsidiary) is to allow the firm to take one of their subsidiaries through bankruptcy if necessary without destroying policyholder interests in other states! Just go ask all the "Pup Company" insurance structures in Florida, for example, where you have "Joes Insurance of Florida" that is legally and financially distinct from "Joes Insurance" - very handy when a Cat 5 hurricane comes roaring across the state and lays a couple of cites waste!
I have seen nothing other than a bare assertion that we "had to" rescue AIG to prevent these policyholders from getting screwed. Indeed, over the years we have seen multiple instances where insurance company subsidiaries "blow up" and yet the impact remains contained to that specific subsidiary. This is not an accident, it is in fact by design!
So now with AIG as a ward of the state one has to, I believe, ask one simple question - how do we get out of this, and why are we continuing to pump money into AIGFP instead of severing the cord so the remainder of the company is protected?
Davos "Doom Loop": What us, worry? Banks double down on risk
27-01-2010 - 13:32
http://www.euroinvestor.co.uk/news/story.aspx?id=10852625
By Peter Thal Larsen
DAVOS, Switzerland (Reuters) - The Bank of England estimates governments the world over have spent or committed a staggering $14 trillion (8.62 trillion pounds) to prop up the financial system following the fall of Lehman Brothers in September 2008.
many of the factors that helped cause the previous crisis -- a sustained period of low interest rates, high levels of consumer debt in the West and excessive risk-taking by financial institutions -- remain in place. At the same time, supersized government bailouts could have created the conditions for future financial crises that will be larger and even more expensive than the one the world has just suffered.
Despite the protestations by politicians that such a large-scale rescue should never be allowed to happen again, their actions over the past two years suggest the opposite. "Knowing this, the rational response by market participants is to double their bets. This adds to the cost of future crises," Piergiorgio Alessandri and Andrew Haldane of the Bank of England wrote recently.
"This is a doom loop."
Good catch, Canny - Motorola downgraded to Sell from Neutral at Davenport
Black has great courage & insights
www.thecrimereport.org/.../john-jay-4109-accounting-control-fraud-as-weapon.ppt
Follow the Money to the Control Fraud "Superpredators"
Did we get answers to these questions?
10 Questions The Financial Crisis Commission Must Ask
http://www.huffingtonpost.com/eliot-spitzer/ask-the-bankers_b_420394.html?page=5
The Financial Crisis Inquiry Commission (FCIC) is holding its first public hearings and will hear testimony from the CEOs of some of the largest financial institutions. This is not the hearing at which experienced investigators would produce fireworks. The FCIC has not used subpoena authority or voluntary requests for information to obtain the background information essential in order to hold a real investigative hearing. In particular, it has not obtained AIG (and Fannie and Freddie's) emails and other critical internal documents such as their financial models, internal accounting records, and loss reserve data that are readily available and vital to understand what caused the crisis. Any aircraft crash investigator knows how critical it is to find the "black box" that records the information that is typically essential to finding the cause. In the financial context, these AIG, Fannie & Freddie emails and internal accounting and risk records are the "black box" that any competent investigator would demand to review.
FCIC should use this first public hearing for two quiet purposes. The primary goal should be to develop information. The subsidiary goal is to put the CEOs on record as to what went catastrophically wrong, which will allow the FCIC to judge their candor as the facts are developed. The FCIC, and the nation, need the utmost candor. The CEOs must testify under oath, as is the norm now for witnesses testifying before the House Financial Services Committee. Precisely because it is the norm it does not impute any wrongdoing to any witness.
The primary goal is gathering information because that is what the FCIC needs and that is what the CEOs can provide at the hearing and, more importantly, in response to requests for information that the FCIC should make at the hearing. The CEOs have expertise, access to all information on the facts critical to understanding the crisis, the analyses their firms' have conducted or received on the causes of the Great Recession, and the steps their officers, firms, and other entities took (or failed to take) in response to those analyses. Those analyses are critical both for what they will reveal directly (what did they know and when did they know it?) but perhaps more importantly what they will reveal that the largest (surviving) financial institutions did not know or understand as the crisis was developing. For example, if the financial institutions did not conduct urgent analyses in response to the FBI's September 2004 warning that an "epidemic" of mortgage fraud was developing that would cause a financial "crisis" if it were not contained and/or did not act on those analyses to change their operations that non-action would be one of the primary contributors to the Great Recession.
We suggest specific questions below, but our overall recommendation to FCIC for this initial hearing can be stated succinctly: the FCIC should enlist the financial industry as its research assistants. The industry should jump at the chance. Now, we are not naÏve and the FCIC must not be naÏve. The industry is self-interested. It has performed abysmally, sometimes criminally. It rightly fears that exposure of its emails, data, analyses, and actions (and failures to act) to the public will expose it to criminal prosecutions, administrative enforcement actions, civil suits, and well-deserved ridicule. The CEOs' most salient fears are that disclosure of the information will demonstrate that the massive bonuses paid to them and their officers were paid improperly (because they were based on phony accounting) and should be "clawed back" and that many senior officials should be fired. Tough. The only way to reduce the frequency and damage of future crises is to find out what caused this one. So FCIC must insist on total disclosures by these firms - no selective release of analyses that make the senior officers look good or were written to try to justify bonuses or help the lawyers defend the officers. It all must come out - and it must do so promptly. FCIC, and the nation, need to know now whether the firms are unwilling to provide all the analyses and underlying facts that FCIC needs to fulfill its statutory duty. If they are not willing to do so then the nation needs to know whether FCIC has the guts and integrity to use its subpoena authority immediately to obtain the information.
For the sake of brevity in the questions below we have not repeated each time the critical specific details (who, when, how?) any competent investigator would need to ask in the formal request for information in order to learn the specifics and identify the essential documents.
Here are our top ten questions:
1. AIG: What was your firm's relationship with AIG? How much exposure did you have to AIG? What information did you publicly disclose about that exposure? Did you think AIG's CDS strategy was "good business"? Do you think we still would have needed to rescue AIG if its derivatives had been centrally cleared, as some in Congress have proposed?
2. Disclosure: Were your financial statements during 2005-08 accurate? What did your officers disclose to your board about your bank's exposure to the nonprime mortgage markets before 2008? What specific information did you publicly disclose about your exposure to derivatives and nonprime mortgages? When did officers or employees of your firm recognize that there was a serious risk of a housing bubble? What did they recommend, and what changes did the firm implement, in response to the identification of this risk? Why?
3. Pay: What was your bank's total compensation for officers for each year from 2001 to the present? What were the components of that compensation? Identify and explain where compensation created perverse incentives in the following contexts: your bank, other banks, executive compensation advisory firms, audit firms, appraisers, rating agencies, loan brokers, loan officers? What aspects of compensation produced these perverse incentives? When did employees of your bank become aware of the literature in economics, criminology, and compensation warning of these perverse incentives? What specific actions did the bank take in response? Which elements of your bank's compensation system create perverse incentives?
4. Ratings: Why do you think the rating agencies gave AAA ratings to toxic CDOs? Did you think CDO credit ratings accurately reflected their credit worthiness? Did employees of your bank ever express concerns internally/publicly about the judgment of the ratings agencies? If so, when was the first time?
5. Moral hazard: What incentives at your institution helped lead to the financial crisis? What conversations did you have with the Fed regarding your exposure to CDS and other derivatives? What monetary value would you place on the government guarantee of your deposits?
6. Mortgage fraud: Name the three nonprime specialty lenders with the worst reputations for originating fraudulent mortgages. Name the three nonprime specialty lenders with the worst reputations for originating predatory loans. Is there any legitimate business reason why a secured lender would seek to induce appraisers to inflate the value of the secured property? When did employees of your bank become aware that coercion of appraisers to inflate appraised values was becoming common? What action did they take or recommend when they became aware?
7. Warnings: What were the three most significant specific steps your banks took in response to the FBI's September 2004 warning that the developing "epidemic" of mortgage fraud would produce a crisis if it were not stemmed? Why do you think the spread on nonprime mortgages fell after this warning, and other warnings? Why did bank loss reserves also fall during this time? What were your bank's analyses of these risks and the adequacy of loss reserves (industry-wide and at your bank) and how did they change as the markets exhibited these perverse patterns? What did your bank's officers recommend that the bank do in response to these perverse market conditions and what actions did the bank actually take? Were the industry reactions, and your bank's reactions, to the warnings adequate?
8. Lobbying: How much has your bank spent on lobbying over the last five years? This year? How many additional personnel has your bank hired full-time or as consultants to lobby the federal government?
9. Crimes: How many criminal referrals has your bank made for mortgage-related frauds in each year beginning in 2002? How many named your own officers or employees? Does the FBI have adequate resources to investigate such frauds? Explain how an epidemic of mortgage fraud must lead to widespread accounting and securities fraud if the mortgage paper is to be resold.
10. Regulation: Did the passage of the Commodities Futures Modernization Act of 2000 contribute to the crisis? Did the federal regulators' efforts to preempt state regulation of predatory mortgage lenders contribute to the crisis? Should the Federal Reserve have used its authority under HOEPA to regulate nonprime lending during the financial bubble? Provide any contemporaneous analyses of the role of regulation, deregulation, and desupervision in contributing to the crisis. Did your bank lobby (directly or indirectly through trade associations) in support of deregulatory efforts that contributed to the crisis?
Eliot Spitzer is a former attorney general and governor of New York. Frank Partnoy is a professor of law at the University of San Diego and the best-selling author of The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals, about the 1920s markets and Ivar Kreuger, who many consider the father of modern financial schemes. William Black is a former investigator of the S&L crisis and a professor of economics and law at the University of Missouri-Kansas City and the author of The Best Way to Rob a Bank is to Own One.
Mortgage Fraud Continues- by many of the original perps
(think this is a surprise to the FBI?)
Any request for loan level tapes is TOTALLY UNREASONABLE!!! Most investors don't have it and can't provide it. [W]e MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.
http://www.mortgagefraud.org/journal/2009/9/28/north-carolina-fbi-mortgage-fraud-investigation.html
http://money.cnn.com/2008/06/19/real_estate/mortgage_fraud/index.htm
Battling Rambo RMBS
Rambus will pursue patent damages
Silicon Valley / San Jose Business Journal
http://www.bizjournals.com/sanjose/stories/2010/01/25/daily93.html?ana=from_rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bizj_sanjose+%28Silicon+Valley+%2F+San+Jose+Business+Journal%29
Related News
* ITC: Nvidia violated 3 Rambus patents
* Recent deals for Class A space show market starting to move
* Rambus trades canceled by Nasdaq
Rambus Inc. still plans to pursue patent and antitrust claims against companies including Nvidia Corp., the company said Thursday.
During a conference call Thursday in which the technology licensing company reported a fourth quarter loss of $23.3 million, Rambus said that despite an International Trade Commission ruling against Santa Clara-based Nvidia (NASDAQ:NVDA), past damages are not accounted for.
Los Altos-based Rambus (NASDAQ:RMBS) also won a settlement with Samsung that will be worth about $900 million.
The company still has litigation pending against Micron Technology and Hynix Semiconductor Inc.
Fed Deception of Congress Regarding AIG
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
"Even as the Senate prepares to vote on the Bernanke nomination, Rep. Darrell Issa (R-CA) has asked the Chairman of the House Committee on Oversight and Government Reform to subpoena AIG-related documents from the Fed, documents which apparently prove that Chairman Bernanke played a major role in deciding to bail out AIG and, indirectly, Goldman Sachs (GS) and other large bank dealers.
In a January 26, 2010 letter obtained by The IRA, Issa claims that Bernanke overruled a recommendation by Fed staff that AIG be allowed to declare bankruptcy "just like Lehman Brothers" and instead authorized the bailout of the crippled insurance giant over the objections of Fed staff in Washington. The Fed appears to be withholding these documents from Congress until after the Senate votes on the Bernanke nomination.
Rep. Issa, the ranking member of the Committee, refers to a statement by Senator Jim Bunning (R-KY), whose staff has been examining these same documents under strict rules of confidentiality imposed by the Fed's staff, to the effect that Chairman Bernanke overruled the recommendation of his staff and pushed the bailout of AIG. How can the Senate vote on the Bernanke nomination when the Fed is refusing to comde clean on AIG?
Members of the Senate need to ask themselves a question: With the current disclosure by the Fed, what further revelations will surface regarding the central bank, AIG and the bailout of the large New York banks between now and November?
So given the above, why is Chairman Bernanke seemingly en route to confirmation? Why do members of the Senate seem to indifferent to the mounting popular anger at Chairman Bernanke and the Fed? There are several reasons the Senate is making a major political and economic miscalculation in its appraisal of Ben Bernanke's role at the Federal Reserve. The most significant is that Senators think that the Federal Reserve and the bailouts are not voting issues, because there are no traditional organized constituent groups that lobby around them.
Staffers who frame issues for Senators do not know that Fed and its profile in American politics has changed in a way reminiscent of the days of President Jackson and the battle over the Second Bank of the United States. After all, issue groups have an incentive to mislead incumbent Senators in a way biased towards the interest of incumbent financial interests. This is a terrible mistake for the political health of any Senator who wants to get reelected in 2010 or 2012. The bailouts happened from 2008-2009, and voters now understand them and loath them. And this applies equally to Democrats and Republicans in the Senate.
Look at how the Fed and AIG are changing the dynamic for incumbent GOP Senators. Republicans are seeing bailout-themed primary campaigns, where incumbents like Utah Senator Bob Bennett and Arizona Senator John McCain are explicitly attached to the bailouts. As noted above, democrats saw losses in Virginia, New Jersey, and Massachusetts. And Brown voters in Massachusetts showed significant dissatisfaction with Democratic ties to Wall Street. But the same populist wave will carry away Republicans as well.
Bottom line: A "yes" vote for Chairman Bernanke raises the likelihood of defeat for every member of the Senate standing for election in 2010 and 2012. And in any event, the rising tide of popular unhappiness with Washington and Wall Street promises to remake the American political landscape in a way not seen in the post WW II era. The comfortable assumption of stability in American political life is about to be replaced by instability and change, but that is what democracy is all about."
Political Risk: The Bernanke Nomination and the Return of American Populism - Institutional Risk Analyst
Elizabeth Warren Explains the Financial Crisis and the Problem with the US Banking System- from Jesse
This is from Elizabeth Warren's 26 January 2010 appearance on The Daily Show. Brilliant in its simplicity and its honesty. Very tough and straight talk. Why do we have to see this on the Comedy Central Network, and hear the usual drivel and obfuscation on the mainstream media?
http://jessescrossroadscafe.blogspot.com/
French Were Willing to Negotiate AIG Discounts, Barofsky Says
Tim Geithner is a Liar
www.dailybail.com
This is huge and pretty much destroys the argument made by New York Fed officials (Geithner) that foreign banks (Societe Generale) were not allowed by law to accept less than full value on derivative contracts with AIG.
---
Jan. 27 (Bloomberg) -- A French regulator was willing to discuss allowing lower payments to retire American International Group Inc.’s obligations to the country’s banks, according to congressional testimony that undermines part of the rationale the Federal Reserve Bank of New York gave for paying full value.
France’s regulator was “open to further negotiations” to discuss the possibility of concessions by AIG counterparties Societe Generale SA and Credit Agricole SA’s Calyon unit, in November 2008, Neil Barofsky, the special inspector general for the Treasury Department’s Troubled Asset Relief Program, said in prepared remarks for a House oversight committee hearing today.
New York Fed General Counsel Thomas Baxter wrote to Barofsky last year that the regulator declined to demand concessions from U.S. banks partly because “it would not have been appropriate” when rivals in other nations were unwilling or “legally barred” from giving discounts.
“It appears officials at the New York Fed deceived or even lied to the inspector general regarding the French regulator’s position,” said Joshua Rosner, managing director at Graham Fisher & Co., a New York investment research firm.
AIG’s obligations had to be resolved quickly to avoid “catastrophic consequences” for the economy, Baxter said in prepared remarks for the hearing. “Taking additional time to press further for a discount was not justified.”
In his remarks, Geithner said, “everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth.”
Barofsky learned subsequently that France’s Commission Bancaire was prepared to negotiate with the New York Fed, he said in today’s testimony. Previously the New York Fed told his office that the commission prohibited concessions, he said.
“The French regulators noted that such negotiations would have been unprecedented, would have likely required universal agreement among counterparties to make concessions, and would have had to be conducted in a transparent manner and at a high level, but continued negotiations were possible,” Barofsky said.
While the French regulators didn’t tell Barofsky what specific statements they made to New York Fed negotiators, they did say “they did not ‘slam the door’ to such continued discussions,” according to his testimony. Commission Bancaire spokeswoman Corinne Dromer declined to comment.
Looks like a Russian Sukhoi T-50
"easy and comfortable to pilot" as you engage multiple targets
(an amazing match to the F-22)
CBOE Mini-NDX volatility of 22 at low end 52-week range
CBOE Mini-NDX-MNX closed at 177.11. MNX February put option implied volatility is at 22, March puts are at 24, verses its 52-week high of 45 on February 23, 2009 and low of 17 on January 19, 2010 according to IVolatility.
Senate permits gov't to borrow an additional $1.9T
http://news.yahoo.com/s/ap/20100128/ap_on_bi_ge/us_senate_debt_limit
By ANDREW TAYLOR, Associated Press Writer Andrew Taylor, Associated Press Writer – 2 hrs 18 mins ago
WASHINGTON – Senate Democrats needed all the 60 votes at their disposal Thursday to muscle through legislation allowing the government to go $1.9 trillion deeper in debt.
Democratic leaders were able to prevail on the politically volatile 60-39 vote only because Republican Sen.-elect Scott Brown of Massachusetts has yet to be seated. Republicans had insisted on a 60-vote, super-majority threshhold to pass the measure. An earlier test vote succeeded on a 60-40 vote.
The measure would would put the government on track for a national debt of $14.3 trillion — about $45,000 for every American — and it served as a vivid reminder of the United States' dire fiscal straits.
The massive increase in the debt limit would allow majority Democrats to avoid another vote until after the midterm elections this fall. New estimates released by the Congressional Budget Office on Tuesday show that the U.S. this year could run a deficit matching last year's record $1.4 trillion shortfall.
To win the votes of moderate Democrats, President Barack Obama promised to appoint a special task force to come up with a plan for dealing with the spiraling debt.
And to get the support of moderate "Blue Dog" Democrats in a House vote next week, the measure includes tough new "pay-as-you-go" budget rules to make it harder to run up the deficit with new tax cuts or federal benefit programs. Senate Democrats had been reluctant to approve the new deficit curbs but relented and approved them by a 60-40 vote.
Several Republicans who had earlier voted for the new rules, which would make it more difficult to permanently extend some tax cuts that expire at the end of this year, switched their positions and opposed it.
They include John McCain or Arizona, who's facing a primary battle with former Rep. J.D. Hayworth, who's winning support from conservative "tea party" activists. The current $12.4 trillion debt ceiling is expected to be reached in mid-February.
Congress has never allowed the United States to default on its obligations, which would roil markets and likely cause the government to lose its AAA credit rating. "We have gone to the restaurant, we have eaten the meal. Now the only question is whether the government will ... pay the bill," said Finance Committee Chairman Max Baucus, D-Mont.
Democrats and Republicans alike share responsibility for running up the debt, but it fell upon Democrats to pass the measure since they control the government. It makes no difference that Republicans routinely backed increases in the debt when former President George W. Bush was in office.
Republicans blame recent generous spending bills enacted by the Democratic-controlled Congress for driving up the debt. Those measures, however, are just one relatively small part of the problem. The far bigger element is a sharp drop-off in tax revenues because of the recession and the economy's slow recovery, as well as higher costs, since more people are taking unemployment benefits and food stamps in tough times.
"Why $1.9 trillion?" said Sen. Judd Gregg, R-N.H. "So that Congress doesn't have to face up to the debt ceiling until after the next election. We ought to face up to it before the next election because the people in this country have a right to know whether or not this Congress is going to do something about controlling ... the debt.
Earlier Thursday, Obama's Democratic allies in the Senate rejected a plan attempting to adopt a modified version of the president's proposal to freeze spending on domestic spending passed by Congress in annual spending bills.
A 56-strong majority of senators supported the plan, but it failed because 60 votes were required. It serves as a marker for later this year when Congress passes its budget.
WARREN BUFFETT ON THE BUSINESS AND GOVERNMENT CONNECTION
Kevin Price, Published 01/28/2010
http://www.thecypresstimes.com/article/Columnists/Kevin_Price/WARREN_BUFFETT_ON_THE_BUSINESS_AND_GOVERNMENT_CONNECTION/27320
Warren Buffett rolled up his sleeves on the Fox Business Network in a very candid interview with the channel's Liz Claman, in which he discussed CEOs of failing banks, reconfirming Ben Bernanke, and his Berkshire company.
On the Bank Situation
"You'll always have banks that are too big to fail. We can't operate in this world without very big banks…If they are toppling the government will have to do something about it." This is contrary to conventional wisdom and of this writer. After a year we see that banks had more money than expected (witnessed in the pace in which they paid off their bailouts) and these government programs have done little to increase the pace of loans, since banks have found a way to get "money for nothing." Why risk their resources if they are washed in capital from Uncle Sam?
Furthermore, these policies have only undermined moral hazard at a time it is so greatly needed. The US cannot be in the business of rewarding bad decision making."If I were running things if a bank had to go to the government for help, the CEO and his wife would forfeit all their net worth…I think you have to change the incentives. The incentives a few years ago were try and report higher quarterly earnings. It's nice to have carrots, but you need sticks. The idea that some guy who's worth $500 million leaves and only has $50 million left is not much of a stick as far as I'm concerned." This was actually the highlight in the Buffett interview. We need a restoration of moral hazard in banking and that will only come when those responsible for bad decision making suffers for those choices."The CEO has to be the chief risk officer for a bank." This is a great observation and a view that needs to be restored. This is best achieved, in my opinion, by letting banks fail. Any executives behind such will find themselves looking for something else to do for a living.
On members of Congress who feel Ben Bernanke should not be reconfirmed:
"They ought to get down on their knees every night and thank the Lord that Bernanke was there through this. He took some unprecedented actions…He took the actions that were necessary to prevent panic from paralyzing this country." "Unprecedented" often means unconstitutional and has led to the expansion of government like we have never seen in our history, even in the Great Depression. What he has done is created instability in our monetary policy by pumping dollars into the economy at a pace we have never seen. Furthermore, his bailouts of large corporations have undermined the normal functions of a free market economy, such as moral hazard. He has created an economy without risk, which is far from free market in design. What he has done is criminal...two thumbs up for those members of Congress who wish to see him go.
On the future of Berkshire Hathaway's business acquisition
"We'll keep buying businesses, as long as I'm alive we'll keep buying businesses…we'll try to buy them for cash, sometimes we may have to use some stock, but we'll use as little stock as possible." If the US economy continues to reel from the unstable monetary and fiscal policies of the Obama administration, large corporations like Berkshire Hathaway will continue to benefit from them.
Nice idea also Shorts Ramping Bets Against Shipping, Trucking, And Soon-To-Be-Irrelevant Tech
Vincent Fernando | Jan. 28, 2010, 1:03 PM
http://www.businessinsider.com/shorts-pig-piling-onto-shipping-trucking-and-the-company-being-made-irreleveant-by-apple-2010-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29
TABLE
Latest data from Nasdaq shows that short interest has exploded for trucking company YRC Worldwide (YRCW), dry bulk shipper DryShips (DRYS), Comcast (CMCSA), and Palm (PALM). All are getting slaughtered in today's trading, except YRC which is holding onto gains by a thread.
Data is as of January 15th.
Chart
More weak revs firms like CTA,BOA,HRS
Harris Corporation retreats after reporting weaker than expected revenue
Harris Corporation (HRS), which develops radio communication products, reported Q2 EPS of $1.06 ex-acquisition costs compared with analysts' consensus estimate of 95c. Including all items, the company's EPS was $1.08. However, Harris' revenue came in at $1.22B, versus the consensus of $1.30B, but the company increased its FY10 EPS guidance to $4.25-$4.35 from $3.85-$3.95. Analysts' consensus estimate was $3.91. "Demand for the market's most advanced tactical radios resulted in significantly higher new orders," said Harris Corporation CEO Howard Lance. In a note to investors, Morgan Joseph analysts Michael French and James Moore responded to Harris' results by raising their targets on the stock to $56 from $47. The analysts noted that Harris' RF Communications unit produced higher margins than they had expected, and they believe that the company's broadcast communications segment appears to be rebounding. The analysts reiterated their Buy rating on the stock. In mid-morning trading, Harris slumped $2.22, or 4.87%, to $44.46.
Sage advice, fabian. Rules to live by...JMHO but I don't know how you and Lee and Canny trade the daily moves. I mean, gaming the S&P prop jobs is understandable, but it's like picking up nickels in front of a bus..maybe quarters LOL