Lilguy

Bring in the Antitrust Division (on Banking)

I agree absolutely with Dr. Johnson's analysis. If the banks are "too big to fail" for the sake of our financial system and economy, then they are too big to exist.

I know it will would be difficult to show outright collusion--two Ibank CEOs negotiating prices or turf or whatever to the exclusion of others--but the effects of their actions has been to corner the financial system market. Moreover, they appear to have done so in a fraudulent manner with vastly over-priced assets misleadingly sold to unwary investors.

Some CEOs and other senior executives need to go to jail, and their banks split up (just like ATT a generation ago) or dissolved to avoid the TBTF potential. We all are better served by a more competitive banking environment.

What is most irksome at the moment is that Treasury & the Fed are actually facilitating and financing the the centralization of banking system thru deals such as JPM-BearStearns and BAC-Wachovia-ML. This is precisely the wrong direction to go.

Goldman Sachs One-Upped Wells Fargo in Accounting Shenanigans

The key question is whether BAC and MS can two-up WFC & GS. Given the absurdity--and transparency of the absurdity--of what we've seen so far, I can hardly wait for the mythical accounting reports.

Are the Banks Telling Us the Truth?

The banks covered up the fraudulent value of their assets on the way up; they are certainly covering up their toxic value on the way down. Most of these assets were never worth what the banks paid for them, much less what they claimed they were worth, and now things are just that much worse.

Why It's Better to Bail Out Borrowers than Banks

The roughly 7:1 ratio of USG & Fed commitments of financial aid to the financial sector (Wall Street) vs. debtors (Main Street businesses & consumers) ($9.3T vs. $1.3T) shows who has influence--access and money--in Washington. It does not reflect either a rational, cost-effective, fair, or equitable use of taxpayer funds. It is merely a reflection of who owns our political system. Money means more than votes.

And mainstream Main Street businesses and households do not. They will continue to go bankrupt--and households homeless--for years while Summers, Geithner, & Bernanke try to make the banks and bankers whole at taxpayers' expense.

Bail Out for Dummies - Part I

...and, so, remind me again: Why is this financial system worth saving if it is essentially bankrupt? Why are these banks "too big to fail" if, as it appears, they have already? Why are we putting America in such deep hock to save these frauds and fools?

I would note that, just last week (3/31), Bloomberg had an article detailing all the measures of the US Government to stimulate the economy. The programs together total commitments of $12.8 trillion. Wall Street's share of that is some $9.3 trillion. Main Street's share--money for the other 300 million of us--is a mere $1.3 trillion while the USG has set aside $2.5 trillion to cover the bad bets of the GSEs and likely funding needs of the FDIC. (Nothing like covering the bad debt of the USG with more debt guaranteed by the "full faith and credit" of the USG!)

Does any of that seem as wrong-headed to the rest of you as it does to me? What about the 5 million newly unemployed since the recession began? What about the 48,000 business failures last year--up from 28,000 in 2007--and the projected 62,000 such failures this year? What about the projected 1.5 million personal bankruptcies this year? ...and that doesn't even touch the massive damage to household wealth from decimated house values, depleted 401Ks, and overwhelming debt.

What the hell is the Administration (& its predecessor) and the US Congress doing??

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

Interestingly, it's now a day after Mr. Durden and others published their story about the AIG to bank transfers--and, so far as I can tell, not one single MSM has reported on what appears to be the USG laundering taxpayer money through AIG to the benefit of major banks.


I can only speculate why, but let me start by suggesting that maybe no MSM reporter could corroborate (or deny) this report--or maybe even explain it in a way that might reach mainstream audiences. Without corroboration, it's unlikely the MSM will publish on the topic. It would be interesting to know if they even tried.

I would also note that this is the second time I have seen what seems to me to be an important (and probably negative) piece of economic and financial information (the other was BOA/Merrill's David Rosenberg's call of an ongoing depression) that was not picked up by the MSM.

Frankly, I think we receive a much more complete picture of the economic and financial world (and other aspects of the world around us) through blogs like this. Occasionally, their reporting may be off the mark, but in the end (a) at least we have the info and (b) it is ALWAYS our responsibility to evaluate it and act accordingly.

Kudos to Durden, Zero Hedge, and Seeking Alpha for their work!

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

Transparency! We need it now!

Both the USG in the form of Treasury and the Fed as well as the financial sector have done nothing but try to hide the trading and investment actions and the values of their assets since this crisis began.

Now, apparently, they are all dealing with each other in massive insider deals that essentially rape the American taxpayer. But who's going to know if no one except these insiders can actually see the transactions among them?

The American public needs and deserves absolute transparency of the actions of the government that is suppose to advance its interests. If that occurs, the government will be less willing to make these horrendous, self-serving bailouts at taxpayers' expense, and progress can be made on a rational, balanced approach to rebuilding the financial marketplace. Until that happens, however, we will just be stumbling along, doling out trillions of taxpayer dollars to billionaires who either deliberately or through utter stupidity drove the financial sector into this massive hole.

Who's Gaining from the AIG Unwinds?

Transparency! We need it now!

Both the USG in the form of Treasury and the Fed as well as the financial sector have done nothing but try to hide the trading and investment actions and the values of their assets since this crisis began.

Now, apparently, they are all dealing with each other in massive insider deals that essentially rape the American taxpayer. But who's going to know if no one except these insiders can actually see the transactions among them?

The American public needs and deserves absolute transparency of the actions of the government that is suppose to advance its interests. If that occurs, the government will be less willing to make these horrendous, self-serving bailouts at taxpayers' expense, and progress can be made on a rational, balanced approach to rebuilding the financial marketplace. Until that happens, however, we will just be stumbling along, doling out trillions of taxpayer dollars to billionaires who either deliberately or through utter stupidity drove the financial sector into this massive hole.

The Complexity of the Bank Bailout Plan

Another question:

The FDIC charges banks premiums to cover the defaults of banks it insures. Is there any plan to have the recipients of the the TARP 2 bailout pay premiums against future stupidity, er, bad loans/securities/swaps?

I don't think so. So, the taxpayer gets stuck because his bank is offering lower interest rates to cover the premiums it must pay the FDIC, which will use that money to pay off the PPIPers and banks.

Ain't that grand!

The Complexity of the Bank Bailout Plan

Who really believes that the Geithner plan will:

1. stabilize the US banking industry?

2. improve liquidity and the expansion of credit?

3. turn around the US economy?

Really, folks, we're just throwing money down a manhole.

Is Bank Nationalization Still an Option?

I still think the Geithner Plan is ill-conceived and will ultimately cost the American taxpayer at least the trillion dollars being pledged. Moreover, if this plan fails to rejuvenate the banks--as I think most experts believe it will--the United States (Treasury, Fed, and anyone else in the USG) won't have any capital or credit left, and we'll have to nationalize the banks. It won't be a matter of having tried and failed, it will be an absolute national economic security imperative.

What is really irritating is that I don't think we need to risk that trillion dollars to prove that some very large banks are insolvent. Certainly well-planned and executed "stress tests" would do the job. So my hope in all this is that there is another level to the ongoing stress tests that has not been publicly disclosed (there always is something that's not disclosed) that will give Treasury the ability to make a thumbs up-thumbs down assessment of each bank's solvency.

The sooner we go through the so-called "pre-privatization" process, the better off our national economic security will be. It will slow the increases in national debt, ease pressure on taxes for generations, and enable the USG to focus on Main Street, not Wall Street.

Why AIG Wasn't Allowed to Fail

I don't buy the swap domino theory of systemic risk. Period.

Moreover, if the global financial structure is that brittle and fragile, it deserves to fail.

Then we can build one that is robust and responsive from the survivors.

I'm tired of this argument, much as I appreciate Felix explaining it again to us in language non-financiers can understand.

AIG Needs Transparency, Now

Without very thorough transparency on the uses of taxpayer money in ALL the businesses into which that money has been pumped--from AIG to CITI to GM and onward--investors will not have confidence in the market and citizens will not trust their political leadership.

This is a certain formula for an economic train wreck. While transparency may cast an even darker shadow over the recipients and show huge flaws in federal policy, opacity assures economic depression, political paralysis, and possibly social unrest.

Turn on the light! It's far better than cursing the darkness.

The AIG Scandal

Not defending Hank Greenberg here, but didn't AIG's plunge into CDSs begin AFTER he was forced out of AIG?? Maybe we should hang the subsequent management....as well as Greenberg.

The Economy, And Why It's Taking So Long to Fix It

Couldn't agree with you more on the key issues in the economy and the time it will take to resolve them.

One nuance I would differ slightly with you on is consumer confidence. Yep, it's in the pits and it will stay there for quite some time. But I see that as an effect of the loss of wealth from the housing bust and family financial investment--especially 401Ks--evaporating as well as the reality or threat of layoffs. People now see that they will have to work longer (or elders having to come back to work) and be more thrifty.

And--on this latter point--I think we're going through a cultural shift from spendthrift to ol' fashion thrift. That is what I see as the key consumption driver that will have an adverse effect on economic growth well after the housing and financial system busts have been stabilized. So, even when confidence starts rising, I wouldn't look for much increase in personal consumption.