Paulson and Friends, Translated

July 10 2008

Financial Institutions Must Be Allowed To Fail

Paulson: "Homeowners should not anticipate a government bail-out. Banks should not expect to be bailed-out by government, despite intervention by the Federal Reserve in the near-collapse of Bear Stearns in March."

Translation: Critical banks and GSEs must not be allowed to fail.

Paulson: "For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available. For market discipline to effectively constrain risk, financial institutions must be allowed to fail."

Translation: Expect the mother of all bailouts at taxpayer expense.

July 10 2008

Fannie, Freddie 'Insolvent' After Losses

Former Fed Governor William Poole: "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer"

Translation: "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer"

July 11 2008

Paulson Backs Fannie, Freddie in Their 'Current Form'

Paulson: "Today our primary focus is supporting Fannie Mae (FNM) and Freddie Mac (FRE) in their current form as they carry out their important mission"

Translation: We are working behind the scenes to address the inevitable failure of Fannie Mae and Freddie Mac. There is no conceivable way that Fannie and Freddie stay in their current form.

July 11 2008

Fed Says No Talks With Fannie, Freddie About Loans

Fed spokeswoman Michelle Smith: "There have been no discussions with the GSEs about access to the discount window"

Translation: We have plans to discuss the discount window with the GSEs as early as Monday, July 14.

July 13 2008

Paulson Statement on Freddie Mac, Fannie Mae

Paulson: "Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies."

Translation: There is not a snowball's chance in hell that Fannie and Freddie survive in their current form. We are working on contingency plans right now.

July 17 2008

Merrill Lynch: Don’t forget the salt

Merrill Lynch (MER) CEO John Thain: “Right now we believe that we are in a very comfortable spot in terms of our capital.” (July 17, 2008 — Thain on a conference call after posting Merrill’s second-quarter results)

Translation: We have nowhere near enough capital. If you believe we do, then you are a complete fool. After all, I have stated Merrill has no need to raise capital 8 times this year only to immediately raise capital. (See above link).

July 20 2008

Banks sound but economy to take time

Paulson: "Our banking system is a safe and a sound one."

Translation: Our banking system is on the verge of collapse.

July 23 2008

Death Spiral Financing at WaMu, Merrill Lynch, Citigroup

Washington Mutual (WM) CEO Kerry Killinger: "The capital that we have in place is sufficient to manage through this period. We have no plans at this point to raise additional capital."

Translation: We desperately need to raise capital. Unfortunately, death spiral financing and low share price prevents us from doing so.

August 19 2008

Freddie and Fannie fix under market pressure

Treasury Department: The Treasury has no intention of using its newly authorized power to invest in either the debt or equity of Fannie and Freddie.

Translation: We have every intention to invest in the GSEs, and far sooner than anyone thinks. We never would have asked for a blank check if we did not think we needed it. Boy do we need it.

August 22 2008

Buffett Says Fannie Mae, Freddie Mac 'Game Is Over'

Warren Buffet: "Fannie Mae and Freddie Mac, the two largest mortgage finance companies, don't have any net worth. The game is over as independent companies."

Translation: "Fannie Mae and Freddie Mac, the two largest mortgage finance companies, don't have any net worth. The game is over as independent companies."

September 4 2008

Bill Gross Wants Treasury To Buy Assets To Prevent Tsunami

Bill Gross: "Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami. If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury."

Translation: "Please rescue PIMCO. I bet the farm on a bailout."

Comments

[The Realist:]

These guys are all a joke. Although the bigger joke is that people continue to believe them. The way this transpired should warn everyone that things are really bad out there for all the financial institutions. Just a couple of weeks ago we were told by some banks that Fannie and Freddie were fine, that rallied the market. Now the fact that they are insolvent and bailed out by the taxpayer rallies the market. What gives?

As for Bill Gross, he is a pig. He bet the farm on a crappy investment and then looked to the tax payer to give him a great return so he can continue the fallacy that he knows what he is doing. The yield on all Fannie and Freddie debt should be re-adjusted to Treasury yields. If the government guarantees them then the yield should be the same as Treasuries. I wonder if Gross knew all along that he was specifically investing for a bailout, trying to make money on working Americans so he can get even richer? To make it worse he is actually quoted and parades around television giving his opinion. How come there were was no big bold text on the screen stating that Bill Gross has a majority of his holdings in this issue, would be wiped out if what he was suggesting did not get done and that he is a total scumbag?

2008 Sep 08 10:53 PM

[blondino:]

hey,
where's the big democracy in the US? is it not possible to initiate lawsuits against these people? this is like daylight robbery with some horrible gains for the selected few & the economy is being flushed down the toilet ...
giving away massive severance packages for removed top executives is like pissing in a pool full of swimmers from the poolside...if they did their job right why nationalize? if not, why the golden parachute?
this is all crap that...but what goes around, comes around and hits the fan with more brutal force...

2008 Sep 09 05:01 AM

[Still Renting:]

You did what I call a "Rush Limbaugh". And you did it well!

No, I am not being sarcastic. One of the things I love about him and what you just did was the saving, and later showing, the words of politicians (etc.) and demonstrating, in front of God and everybody, that their words were pure, unadulterated lies.

Now that we know them for what they are, shame on us if we believe anything they say.

2008 Sep 09 01:11 PM

[Still Renting:]

Blondino,

I think Mish really has built the beginnings of what could be used as a case against them. It would take a lot of work and a VERY educated judge and jury, but it could happen.

2008 Sep 09 01:12 PM

[pochovilla:]

When Henry talks people listen. It's just that we have no clue what he is saying when he says it.
Mish does a nice job of translation based on results
Watch him on an extended testimony on CSPAN and see the expression on the committee member's faces. They can't wait until January 09.

2008 Sep 09 06:38 PM

[Takayama:]

From my experience, people at the top whether government or management almost always tell you what is favorable, and keep the ugly side for you to discover for yourself later.

Few good and honest men in high office, mainly a nest of evil doers. Countless examples abound.

2008 Sep 10 05:53 AM

[monday1929:]

Take away their fraudulently obtained salaries and bonuses, it is the only thing they care about. RICO prosecutions , not settlements with their companies (stockholders) money paying the fines.
Fine them, then jail them.

2008 Sep 10 08:18 AM

[blondino:]

not only are FRE/FNM getting dilluted but the whole friggin market!

2008 Sep 11 10:50 AM