M. Burke's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/189667/comments http://seekingalpha.com/article/149586-goldman-s-success-put-down-those-pitchforks?source=feed#comment-593814 593814 FIRST, re hedge against AIG: Goldman's comments on their need for cash flow from AIG (or collateral) have been very narrowly constructed. "We were hedged against AIG etc". Goldman has NEVER addressed whether the counterparty they were counting on could pay. If not, they certainly did need the government to step in.

Moreover, why is it that the government stepped in the way they did? They should have kept the cash, provided a 6 month guarantee and started settlement discussions. In the monoline case, caounterparties took a haircut. Why was there no haircut in this case?

SECOND, re the billions the banks are making (some of it real and some even sustainable): The game plan always was for earnings to recover sufficiently to cover the losses. However, it matters how you were put in a position to make that money. I kept wondering how Goldman was recovering so well with so much less leverage (down from high 20's to 14). Then the crowing starts about the new pricing power on Wall Street - caused in major part by the demise of Lehman and Bears Stearns. Nothing like killing the competition, right, Hank? People just need to keep in mind that that new pricing power as it applies to institutions is coming out of somebody's hide that might otherwise employ somebody. Of course, as long as a banker is employed, why worry about the loss of jobs with respect to people who really need them

THIRD, before we think this is all sustainable, we might want to consider all the numerous transfers of tax payer money to the banks that occurred in broad daylight as freebies with no conditions that probably totaled 500 billion to $1 trillion. For exmaple, did anybody ever wonder how Wells Fargo declined to bid on Wachovia on a Saturday, lost it to Citi for $1 on Monday and then came back on Thursday with a $billions offer? Look at changes to section 382 of the tax code which rightly spread the use of tax-loss carryforwards by acquirors over 20 years. All of a sudden, they could be used immediately. Presto! Wells Fargo! The one press report I saw which quickly disappeared - we can't tank the financial system - suggested Hank illegally changed the tax code (only Congress can do that; Hank's IRS is limited to interpretations of existing law and regulations) and that Congress was furious. Several weeks later a friend of mine told me how a smaller bank had just doubled its sale price due to the section 382 change. Section 382 is just one example (section 382 SUBSEQUENTLY was changed by Congress). Now either this is all cronyism at its worst or it indicates that all the banks were insolvent and needed to be recapitalized any way they could. Personally, I call the totality of it all Grand Theft Auto in Broad Daylight, but maybe they were all insolvent.

FOURTH, going back to Bear Stearns and Lehman, Hank and the boys are very smart people - although I think he was way behind the curve on the financial crisis the whole time (even Rahm Emmanuel of all people was ahead of Hank and tried to warn him). Re Bear Stearns, I still believe that Hank took the opportunity to get even with Bear for Long-Term Capital and help Goldman. Re Lehman, he saw a happy confluence of events of making a lesson of somebody who just happened to be another major competitor of Goldman. It is all very convenient that in both the Bear case and the Lehman case new authority for Hank and the boys only arrived very soon after their demise. Just couldn't move quickly enough. Darn. Didn't Hank and the boys understand that Lehman paper was in money market accounts?

And now we are going to do it all over again. We are restructuring America without actually restructuring America and still expect to get the benefits. We are turning America into a mirror of Europe without pausing to understand that America's dynamic economy has propped up Europe for decades and they still only have lower growth. When our dynamism falters, we both go down together and China isn't going to bail us out with an economy 1/4 the size. And now watch as the regulatory reforms get watered down even more so more very little changes. We are only in the third inning of this financial crisis and we are already creating the next one

And Wall Street pay? If Goldman and others were as good as they think they are, they would get the same amount of money over time even if they introduced 3-4 year pro-rata vesting. Guess they can't risk the test of time after all. They will still take the risks and expect to get bailed out if they fail. And now the moral hazard is even greater as we have created institutions that are even bigger than before.

One last thing, we hear all the time that nobody is to blame. That this was a Black Swan, a 100 year storm. What a crock! This was man made. It was out there for all to see. Lots of important people were warning about it and were ignored. Let the good times roll. Even the people making all the money knew it was going to end and partied on.

God forbid the American people ever come to understand all the things that have gone on. That America will always recover is just an assumption. The things we have done in the last ten years (including Larry Summers getting Clinton to sign the deregulation act and now lecturing us (like Barney Frank and Chris Dodd, innocents all) about responsibility) and our current responses make you wonder whether it is going to be true this time. Chuck Schummer "the American people don't care about these porky little things" as Don Young of Alaska threatens a Florida Congressman with potical extinction if he turns down a $10 million earmark that the Alaskan wanted for Florida (being generous, you think?) or Ted` Stephens $250 million bridge to nowhere that got overturned so Congress just gave Alaska the $250 million to use for any purpose. Chuck Prince on risk" When the music is playing, you have to dance." Translation: My job is more important than Citigroup or the country. Tom Delay ..... Who needs enemies with the self-destruction we are inflicting on ourselves. We have seen the enemy and it is us!

]]> Sun, 19 Jul 2009 11:52:59 -0400 FIRST, re hedge against AIG: Goldman's comments on their need for cash flow from AIG (or collateral) have been very narrowly constructed. "We were hedged against AIG etc". Goldman has NEVER addressed whether the counterparty they were counting on could pay. If not, they certainly did need the government to step in.

Moreover, why is it that the government stepped in the way they did? They should have kept the cash, provided a 6 month guarantee and started settlement discussions. In the monoline case, caounterparties took a haircut. Why was there no haircut in this case?

SECOND, re the billions the banks are making (some of it real and some even sustainable): The game plan always was for earnings to recover sufficiently to cover the losses. However, it matters how you were put in a position to make that money. I kept wondering how Goldman was recovering so well with so much less leverage (down from high 20's to 14). Then the crowing starts about the new pricing power on Wall Street - caused in major part by the demise of Lehman and Bears Stearns. Nothing like killing the competition, right, Hank? People just need to keep in mind that that new pricing power as it applies to institutions is coming out of somebody's hide that might otherwise employ somebody. Of course, as long as a banker is employed, why worry about the loss of jobs with respect to people who really need them

THIRD, before we think this is all sustainable, we might want to consider all the numerous transfers of tax payer money to the banks that occurred in broad daylight as freebies with no conditions that probably totaled 500 billion to $1 trillion. For exmaple, did anybody ever wonder how Wells Fargo declined to bid on Wachovia on a Saturday, lost it to Citi for $1 on Monday and then came back on Thursday with a $billions offer? Look at changes to section 382 of the tax code which rightly spread the use of tax-loss carryforwards by acquirors over 20 years. All of a sudden, they could be used immediately. Presto! Wells Fargo! The one press report I saw which quickly disappeared - we can't tank the financial system - suggested Hank illegally changed the tax code (only Congress can do that; Hank's IRS is limited to interpretations of existing law and regulations) and that Congress was furious. Several weeks later a friend of mine told me how a smaller bank had just doubled its sale price due to the section 382 change. Section 382 is just one example (section 382 SUBSEQUENTLY was changed by Congress). Now either this is all cronyism at its worst or it indicates that all the banks were insolvent and needed to be recapitalized any way they could. Personally, I call the totality of it all Grand Theft Auto in Broad Daylight, but maybe they were all insolvent.

FOURTH, going back to Bear Stearns and Lehman, Hank and the boys are very smart people - although I think he was way behind the curve on the financial crisis the whole time (even Rahm Emmanuel of all people was ahead of Hank and tried to warn him). Re Bear Stearns, I still believe that Hank took the opportunity to get even with Bear for Long-Term Capital and help Goldman. Re Lehman, he saw a happy confluence of events of making a lesson of somebody who just happened to be another major competitor of Goldman. It is all very convenient that in both the Bear case and the Lehman case new authority for Hank and the boys only arrived very soon after their demise. Just couldn't move quickly enough. Darn. Didn't Hank and the boys understand that Lehman paper was in money market accounts?

And now we are going to do it all over again. We are restructuring America without actually restructuring America and still expect to get the benefits. We are turning America into a mirror of Europe without pausing to understand that America's dynamic economy has propped up Europe for decades and they still only have lower growth. When our dynamism falters, we both go down together and China isn't going to bail us out with an economy 1/4 the size. And now watch as the regulatory reforms get watered down even more so more very little changes. We are only in the third inning of this financial crisis and we are already creating the next one

And Wall Street pay? If Goldman and others were as good as they think they are, they would get the same amount of money over time even if they introduced 3-4 year pro-rata vesting. Guess they can't risk the test of time after all. They will still take the risks and expect to get bailed out if they fail. And now the moral hazard is even greater as we have created institutions that are even bigger than before.

One last thing, we hear all the time that nobody is to blame. That this was a Black Swan, a 100 year storm. What a crock! This was man made. It was out there for all to see. Lots of important people were warning about it and were ignored. Let the good times roll. Even the people making all the money knew it was going to end and partied on.

God forbid the American people ever come to understand all the things that have gone on. That America will always recover is just an assumption. The things we have done in the last ten years (including Larry Summers getting Clinton to sign the deregulation act and now lecturing us (like Barney Frank and Chris Dodd, innocents all) about responsibility) and our current responses make you wonder whether it is going to be true this time. Chuck Schummer "the American people don't care about these porky little things" as Don Young of Alaska threatens a Florida Congressman with potical extinction if he turns down a $10 million earmark that the Alaskan wanted for Florida (being generous, you think?) or Ted` Stephens $250 million bridge to nowhere that got overturned so Congress just gave Alaska the $250 million to use for any purpose. Chuck Prince on risk" When the music is playing, you have to dance." Translation: My job is more important than Citigroup or the country. Tom Delay ..... Who needs enemies with the self-destruction we are inflicting on ourselves. We have seen the enemy and it is us!

]]> http://seekingalpha.com/article/111653-more-financial-pitfalls-ahead-s-p?source=feed#comment-335309 335309
I forgot one amazing moment at an amazing time approaching September 15.

I actually tried to introduce a way to save Lehman Brothers that the people who saw it thought had merit. It finally made its way to Dick Fuld but not until the last Sunday. Frustrated, I tried to reach major commercial banks and investment banks. The common message I got back was stunning. We do not want to save Lehman.

For the investment banks, it seemed like shooting yourself in the foot. After all, who was going to be in your syndicates now other than commercial banks with bigger balance sheets who are trying to kill you. Good call!

As for the commercial banks, at least you could fathom the response.

However, by the time it was over 2 days later, one had to ask "Don't the Fed, the Treasury, the commercial banks and the investment banks know that Lehman's downfall would have drastic repercussions?" These are the best & brightest who are the pros, the ones who know. It is their business to know. Lehman Structured Notes in money market funds here and around the world. You guys know those notes are only as good as Lehman's credit. The only lesson you possibly can take from it is "The DNA id the DNA is the DNA" You've competed so ferociously for so long that you don't know any other way to respond. Watch your livelihood go down the drain. Now all we have are commercial banks. Some of the new ones don't even seem to know what that means as they make public statement after public statement that not much will change in their business models. May I introduce you to the Fed, your new master. Of course, the Fed and the Treasurer have shoveled so much money into the banks outside of TARP through the side door with little public notice to the tune of hundreds of billions of dollars that go right out the door in bonuses, deferred comp, dividends.

We want Lehman to fail! From the guys with no new business model.

Three major items will be looked back on. How the crisis built and burst, how some many people could have prevented the trough from being so severe but did nothing, and how inept and ineffective the response to the crisis has been. We may never get to the first because most of the people responsible refuse to take any responsibility. We already have the second. The third is off to a really bad start.

Restructuring America without actually restructuring America.

Right behind those three will be the expose on who got taken care and the staggering sums involved. Either its grand Theft Auto in full public view or the problem is so massive that all of the banks are insolvent and you have to get every dollar to them before too many people realize it. That the same people keep benefiting from each action tips my view one way.

It may be that both are true - in which case we're $8 trillion heading toward $11 trillion.

Lastly, this debacle will have two additional debilitating effects that are significant but not talked about very much. First, America's soft power has reached new lows, compromising our national security. Second, numbers like $8 trillion will make $100 billion seem like not that much money, disabling a governor on the spending of additional massive amounts of money and compromising our children's future well being.

Superimposing all of this on a retirement problem that was already coming to a theatre near you, we have a perfect storm and we created it. A White Swan that everybody is desperately trying to convince the public is a Black Swan.

Here's hoping for the Hollywood ending. The American people are traditionally at their best in a crisis and not so good the rest of the time. We had better be at out best because anybody who tells you this will be behind us in the next 12 months is either in denial or delusional.]]> Sun, 21 Dec 2008 21:10:03 -0500
I forgot one amazing moment at an amazing time approaching September 15.

I actually tried to introduce a way to save Lehman Brothers that the people who saw it thought had merit. It finally made its way to Dick Fuld but not until the last Sunday. Frustrated, I tried to reach major commercial banks and investment banks. The common message I got back was stunning. We do not want to save Lehman.

For the investment banks, it seemed like shooting yourself in the foot. After all, who was going to be in your syndicates now other than commercial banks with bigger balance sheets who are trying to kill you. Good call!

As for the commercial banks, at least you could fathom the response.

However, by the time it was over 2 days later, one had to ask "Don't the Fed, the Treasury, the commercial banks and the investment banks know that Lehman's downfall would have drastic repercussions?" These are the best & brightest who are the pros, the ones who know. It is their business to know. Lehman Structured Notes in money market funds here and around the world. You guys know those notes are only as good as Lehman's credit. The only lesson you possibly can take from it is "The DNA id the DNA is the DNA" You've competed so ferociously for so long that you don't know any other way to respond. Watch your livelihood go down the drain. Now all we have are commercial banks. Some of the new ones don't even seem to know what that means as they make public statement after public statement that not much will change in their business models. May I introduce you to the Fed, your new master. Of course, the Fed and the Treasurer have shoveled so much money into the banks outside of TARP through the side door with little public notice to the tune of hundreds of billions of dollars that go right out the door in bonuses, deferred comp, dividends.

We want Lehman to fail! From the guys with no new business model.

Three major items will be looked back on. How the crisis built and burst, how some many people could have prevented the trough from being so severe but did nothing, and how inept and ineffective the response to the crisis has been. We may never get to the first because most of the people responsible refuse to take any responsibility. We already have the second. The third is off to a really bad start.

Restructuring America without actually restructuring America.

Right behind those three will be the expose on who got taken care and the staggering sums involved. Either its grand Theft Auto in full public view or the problem is so massive that all of the banks are insolvent and you have to get every dollar to them before too many people realize it. That the same people keep benefiting from each action tips my view one way.

It may be that both are true - in which case we're $8 trillion heading toward $11 trillion.

Lastly, this debacle will have two additional debilitating effects that are significant but not talked about very much. First, America's soft power has reached new lows, compromising our national security. Second, numbers like $8 trillion will make $100 billion seem like not that much money, disabling a governor on the spending of additional massive amounts of money and compromising our children's future well being.

Superimposing all of this on a retirement problem that was already coming to a theatre near you, we have a perfect storm and we created it. A White Swan that everybody is desperately trying to convince the public is a Black Swan.

Here's hoping for the Hollywood ending. The American people are traditionally at their best in a crisis and not so good the rest of the time. We had better be at out best because anybody who tells you this will be behind us in the next 12 months is either in denial or delusional.]]> http://seekingalpha.com/article/111653-more-financial-pitfalls-ahead-s-p?source=feed#comment-335276 335276
This is one sorry pathetic debacle that, despite disingenuous assertions to the contrary, was not a once in a century storm which implies random violence, not a Black Swan, but a White Swan as Taleb said. It was not rocket science. It was a known hype that depended on housing prices going up forever - which they never have - and the continuation of the low cost leverage party that started in 1982. Then we applaud as geniuses firms selling $2 billion in toxic securities in one room while they were betting $4 billion in the next room the thing would implode. Betting 2:1 against your own clients. And I should live so long as to witness a Congressional hearing in which members of Congress hold not only the other party responsible but also members of their own party when the blame is obvious. The hypocrisy has reached all time highs. And we the voters are responsible for the people we elect and don't hold accountable so I guess we deserve the country we have. There are very few statesmen left who think of their country first before the accumulation of political power and money.

And then the auto bailout. Just when maybe we might get something right, we turn victory into defeat. Instead of turning an industry around and preserving our manufacturing base, everybody goes back to feeding at the public trough, making sure that there will be either a public funds annuity for as far as the eye can see or an implosion that will turn a deep recession into something worse. And let's not forget the moral hazard associated with institutions too big to fail. By public policy we have now created institutions far larger - so hold on to your hats and your wallets for the next time or later this time. The party is over. The American consumer would have experienced a lower standard of living for the next decade just from the deleveraging effect. In a credit crisis and a financial crisis, this will be far worse. With the banks and credit card companies jacking up interest rates and cutting off home equity lines of credit even for responsible people, we will have a whole decade of people deemed unworthy of reasonable rates or any credit at all, Given that insurance companies now use credit scores for premium calculations, guess who else is licking their chops, By the time the banks and the insurance companies are finished with the American consumer who will be able to buy a car. Even now that market is going to be a 10-14 million unit market for the next 5 years. The demand destruction already going on is severe and picking up steam. There are even signs that we have scared enough people to not only cut back but also start saving. God help us. Deleveraging, a credit crisis, a financial crisis, a screwed up bailout and savers!!!! All at the same time. We are doomed! ( Do you think Wall St earnings projections will ever catch up?) Did I forget China, the financier to the U.S., is at risk with its growth rate falling below the 8% level the Government feels is necessary to keep the "through train" going moving the peasants from rural areas to urban locations that must have enough housing, jobs, infrastructure and growth to absorb them. The appearance of reverse migration back to the countryside and the pockets of social unrest starting to unfold has China scared to death.

Moreover, we have the spectacle of America, the land of free markets and capitalism and mucho advice to the rest of the world on how to responsibly resolve a financial crisis, resolving to get the benefits of restructuring America without actually restructuring America. This predictably will only make matters worse and more durable. Alice in Wonderland and Kafka sitting next to each other at the tea party beaming. Is this a great country or what! The inmates, bright as they may be and they are, were running the asylum.

LOTS of influential people predicted the danger (Gramlich, Buffett, Templeton, Roubeni etc.). According to the NY Times, even AIG - yes, that AIG - in 2005 yelled out loud "No, we are not going to write any more CDS on Merrill Lynch mortgage securities because of loosening underwriting standards". Maybe we should have a formal mechanism for this kind and quality of input to be vetted more thoroughly and a formal report issued to a broad spectrum of institutions. Instead all the warnings were just brushed aside and, in some cases, the people issuing the warnings terminated. The party was just too delicious.

It takes a long time to build a great country but a not so long to destroy it. As secretary Paulsen said "We are all to blame." Kudos to us all. If we continue to mismanage this crisis........











]]> Sun, 21 Dec 2008 19:27:42 -0500
This is one sorry pathetic debacle that, despite disingenuous assertions to the contrary, was not a once in a century storm which implies random violence, not a Black Swan, but a White Swan as Taleb said. It was not rocket science. It was a known hype that depended on housing prices going up forever - which they never have - and the continuation of the low cost leverage party that started in 1982. Then we applaud as geniuses firms selling $2 billion in toxic securities in one room while they were betting $4 billion in the next room the thing would implode. Betting 2:1 against your own clients. And I should live so long as to witness a Congressional hearing in which members of Congress hold not only the other party responsible but also members of their own party when the blame is obvious. The hypocrisy has reached all time highs. And we the voters are responsible for the people we elect and don't hold accountable so I guess we deserve the country we have. There are very few statesmen left who think of their country first before the accumulation of political power and money.

And then the auto bailout. Just when maybe we might get something right, we turn victory into defeat. Instead of turning an industry around and preserving our manufacturing base, everybody goes back to feeding at the public trough, making sure that there will be either a public funds annuity for as far as the eye can see or an implosion that will turn a deep recession into something worse. And let's not forget the moral hazard associated with institutions too big to fail. By public policy we have now created institutions far larger - so hold on to your hats and your wallets for the next time or later this time. The party is over. The American consumer would have experienced a lower standard of living for the next decade just from the deleveraging effect. In a credit crisis and a financial crisis, this will be far worse. With the banks and credit card companies jacking up interest rates and cutting off home equity lines of credit even for responsible people, we will have a whole decade of people deemed unworthy of reasonable rates or any credit at all, Given that insurance companies now use credit scores for premium calculations, guess who else is licking their chops, By the time the banks and the insurance companies are finished with the American consumer who will be able to buy a car. Even now that market is going to be a 10-14 million unit market for the next 5 years. The demand destruction already going on is severe and picking up steam. There are even signs that we have scared enough people to not only cut back but also start saving. God help us. Deleveraging, a credit crisis, a financial crisis, a screwed up bailout and savers!!!! All at the same time. We are doomed! ( Do you think Wall St earnings projections will ever catch up?) Did I forget China, the financier to the U.S., is at risk with its growth rate falling below the 8% level the Government feels is necessary to keep the "through train" going moving the peasants from rural areas to urban locations that must have enough housing, jobs, infrastructure and growth to absorb them. The appearance of reverse migration back to the countryside and the pockets of social unrest starting to unfold has China scared to death.

Moreover, we have the spectacle of America, the land of free markets and capitalism and mucho advice to the rest of the world on how to responsibly resolve a financial crisis, resolving to get the benefits of restructuring America without actually restructuring America. This predictably will only make matters worse and more durable. Alice in Wonderland and Kafka sitting next to each other at the tea party beaming. Is this a great country or what! The inmates, bright as they may be and they are, were running the asylum.

LOTS of influential people predicted the danger (Gramlich, Buffett, Templeton, Roubeni etc.). According to the NY Times, even AIG - yes, that AIG - in 2005 yelled out loud "No, we are not going to write any more CDS on Merrill Lynch mortgage securities because of loosening underwriting standards". Maybe we should have a formal mechanism for this kind and quality of input to be vetted more thoroughly and a formal report issued to a broad spectrum of institutions. Instead all the warnings were just brushed aside and, in some cases, the people issuing the warnings terminated. The party was just too delicious.

It takes a long time to build a great country but a not so long to destroy it. As secretary Paulsen said "We are all to blame." Kudos to us all. If we continue to mismanage this crisis........











]]> http://seekingalpha.com/article/77408-clear-channel-shareholders-get-shafted?source=feed#comment-168462 168462
I said the solution was so obvious that I did not bother to contact Clear Channel or Highland several weeks ago.

That issue could, as you noted, be solved with the $3.20

I wondered why would you sacrifice $3.20 per share when putting the $3.20 in escrow offering to buy the top riskiest slice of the debt for the $2.1 billion would make the fair value issue go away. It would have a two or three time limit and would preserve the chance for the $2.1 billion to go back to shareholders as the markets eventually normalize.

Ofr course, we both think the real issue was not fair market accounting losses but the underlying implicit unsaid message that, unless we get what we want, the deal will unwind and the stock will sink.

You're comments are right on.]]> Thu, 15 May 2008 20:35:50 -0400
I said the solution was so obvious that I did not bother to contact Clear Channel or Highland several weeks ago.

That issue could, as you noted, be solved with the $3.20

I wondered why would you sacrifice $3.20 per share when putting the $3.20 in escrow offering to buy the top riskiest slice of the debt for the $2.1 billion would make the fair value issue go away. It would have a two or three time limit and would preserve the chance for the $2.1 billion to go back to shareholders as the markets eventually normalize.

Ofr course, we both think the real issue was not fair market accounting losses but the underlying implicit unsaid message that, unless we get what we want, the deal will unwind and the stock will sink.

You're comments are right on.]]>