We have been, and are being, robbed

[annarborgator]

Hey slider, it's looking more and more like my whining and bitching may be based in reality. And now it's going mainstream, too! From Barry Ritholtz's blog The Big Picture, this is a post titled "Taxpayer Funded GS Profits":

Makes you wonder if having a Treasury Secretary who was a former CEO of Goldman Sachs had anything to do with this.

Indeed, not only was Hank Paulson Goldie’s boy, but he was the same gentleman who so vociferously lobbied the SEC to allow the 5 largest iBanks to drop the net capital rule and leverage up 40 to 1.

So not only did he help set up the disaster, but he then oversaw the greatest transfer of wealth in the planets history — several trillion dollars from taxpayers to the management and shareholders of inept, incompetant, wildly irresponsible companies.

This is theft on the sort of grand scale thta calls for the population to revolt. Perhaps the French peasants were right; Time to bring the guillotine for executing nobles and bankers. . .

http://www.ritholtz.com/blog/2009/04/taxpayer-funded-gs-profits/

The post is referencing this from The Market Ticker:

Gee, you don't think being paid by the taxpayer through AIG's "conduit" for losses that didn't (yet) happen at 100 cents on the dollar might have anything to do with that, do you? And further (and potentially much worse) there is the repeated statement by Goldman executives that they were "fully hedged" against a potential counterparty default by AIG. One wonders - was that "hedge" to be short the equity on AIG itself, perhaps?

Why is this important?

Because if that's how Goldman hedged they got paid twice and the taxpayer literally got robbed. Someone in Congress needs to look into this now; there are already rumblings of investigation. Those rumblings need to get a lot louder and turn into subpoenas, not "polite inquiries."

If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

This is not small potatoes either - we're talking $100 billion+ in aggregate with these various banks on a worldwide basis.

http://market-ticker.denninger.net/archives/953-Goldman-and-other-banks-Hedges.html

I dunno about y'all, but a $100 billion THEFT seems to be a big enough deal to me to make it worth raising a little hell over. Please note that these writers are not crackpots, they are not fringe, they are not outsiders.

So slider why aren't the Dems outraged over this shit? AIG "stole" $165 million in bonuses and we had to go apeshit over it. But Goldman's $12 billion THEFT doesn't matter? Hmm. Something's rotten in Denmark and in my experience on the ranch, when things rot sometimes they spontaneously combust. In our case, if and when it explodes, that means society as we know it is gone overnight and all the rules change immediately.

Why don't you care about this slider? It's not a complicated issue to understand: you've been robbed at gunpoint.

[annarborgator]

More weird stuff from GS. First, it looks like they reported a FOUR month quarter rather than a three month quarter. Also, gotta love seeing the VaR spike in interest rate products (which leads me to believe they will continue sucking profits out of the AIG/taxpayer conduit).

Combined, I must give these a very serious Whiskey Tango Foxtrot.


http://1.bp.blogspot.com/_FM71j6-VkNE/SeOqoBbTU-I/AAAAAAAAB3w/OvnYv5YkDoA/s1600-h/GS+VaR.jpg

[Tipmoose]

AA: Its all Bush's fault.

[annarborgator]

LOL. O0

In all seriousness, hopefully we all know that regardless of who or what started the ball rolling, President Obama is the only man who has the chance of making any difference in all this. And he's decided to let the thieves dictate the rules. He's decided to marginalize Volcker (I don't think Volcker's a saint, but why marginalize seemingly one of the best FED chiefs we've ever had?). He's engaged in childish games with Congress and the media. He has failed to address any of the systemic issues and allowed them to remain latent, which only exacerbates the risk associated with those hidden weaknesses.

He has utterly failed, at this point, to carry out his sworn duties under the Constitution.

[annarborgator]

Interesting take from Ed Harrison (of Credit Writedowns) in a guest post on Naked Capitalism titled "The Fake Recovery", explaining his view of the Obama administration's plan. Basically, they are handcuffed by public opinion and the 2010 elections, forcing them to make a huge end-run aroung Congressional approval AND oversight for much of their plan:

1. Moderate fiscal stimulus. The Obama Administration decided not to seek massive stimulus earlier this year because they deemed it non-viable politically.This clears the first obstacle: deficit hawks.

2. Quasi-fiscal role for the Fed. Having partially assuaged deficit hawks, Obama still needed to close the output gap. Enter the Federal Reserve. You will have noticed that the Federal Reserve has added legacy assets as eligible for the TALF program. In effect, this allows banks to slip tens or even hundreds of billions of dollars in so-called toxic assets off their balance sheets. Mind you, these are assets already on the books impairing banks' ability to loan money. Under normal circumstances, one would expect the Federal Government to take these assets out of the system (bad bank, good bank, nationalization) after being given legislative approval to do so. However, as I have previously stated this approval is not going to be forthcoming. This is why the Federal Reserve is taking these assets on. In so doing, the Federal Reserve is taking on a quasi-fiscal role that re-capitalizes the banking system in order to stimulate the economy by increasing credit availability.

3. Quasi-fiscal role for the FDIC. The new PPIP is a similar end-run around Congress. After all, the role of the FDIC is that it "maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships." Meanwhile, the PPIP has the FDIC guaranteeing dodgy assets in a massive transfer of wealth from taxpayers to banks and select investors. (See my previous comments on this issue).

4. End of mark-to-market as we knew it. {. . .}the new guidelines do have two major implications. First,there are still many distressed loans on the books of U.S. banks that if marked to market would reveal devastating losses. Second, there will also now be many distressed securities on bank balance sheets that if marked-to-market would reveal yet more losses. In essence, the new guidelines are helpful only to the degree that it prevents assets being marked down due to temporary impairment. If much of the impairment is real, as I believe it is, we are storing up problems for later.

5. Interest rate reductions. One reason often given for a large increase in writedowns at financial institutions had been the coming reset of Alt-A adjustable-rate mortgages in 2009. With the subprime writedowns mostly accounted for, a souring of the much larger pool of Alt-A and Prime residential mortgage loans is the real Armageddon scenario. Well, part of this problem has been temporarily relieved because the Federal Reserve has reduced short-term interest rates to near zero and has begun trying to manipulate long-term interest rates lower by buying long-dated treasury securities.

6. Bank margin increases. Key to the whole program is banks' ability to earn massive amounts of money and re-capitalize themselves through retained earnings as opposed to shedding assets or receiving additional paid-in capital (see post from last April on these three methods of recapitalizing). The market for bank assets is distressed and few banks can get enough capital from private sources or investors. Therefore, Obama's plan hinges on the ability to allow these banks to earn shed loads of money as quickly as possible. If the banks cannot do this, we are going to have a big problem very quickly (Of course, I think the can).

http://www.nakedcapitalism.com/2009/04/guest-post-fake-recovery.html

The entire post is worth the read. Basically he expects a cyclical upturn late this year or early next, if the banks can earn enough profit off the money we're letting them have for nothing. He's not sure they will be able to engineer a sustainable recovery, though.

My question is: Is it really OK for the President to ignore the right of the people to decide how our money is spent? Is the House of Representatives not charged by the Constitution with the duty of overseeing public expenditures?

slider, help me out here man. I'm sure there's a good talking point on it. We'll see if it has any relevance on the actual issue under discussion. ;D

[MinGator]

I guess a stock "Republican's suck" or "Rush Limbaugh" comment will not answer your questions.