LBX

AIG Suddenly Takes the Full Disclosure Route

Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.

Why Economists Have Downgraded Obama to Bush-Plus

This Administration is on track for the fastest plunge from close to 70% approval to single digits.

Monetizing the Debt: My Response to Zero Hedge

There is a bit of incongruity to this line of argument that there is "no collusion" between 17 primary brokers and the Federal Reserve.

By American jurisprudence's standard of legal proof, conspiracies are extremely difficult to prove and rarely done so in a court of law in America.

Cases of price fixing are, for the same reason, difficult to prove because it is virtually impossible to prove that a specific meeting occurred with the intent and the act of agreement to set prices.

However, in the real world, outside of legal standards of proof beyond a reasonable doubt, it is widely known that price fixing, collusion, and conspiracies happen regularly.

In fact, it is impossible to be in a senior position of ANY industry or trade group without knowing about the tacit agreements and "codes of conduct" that are, for all practical purposes, collusive behavior.

Look at the cases which are public:

It is standard operating procedures that financial institutions who purchase securities from each other have "repurchase" agreements that are triggered if the securities did not perform to expectation. These agreements are both formal, as well as informal and is standard with virtually any dealer on Wall Street.

Such agreements do not have to be "public" - especially if a party is so big and powerful that the other party cannot be without their business. The very threat of a cut off of future business is sufficient to enforce a "repurchase" when things go sour regardless of whether a formal agreement or conspiracy exist.

While it is a huge leap to go from this to suggest that the Federal Reserve have a "repurchase" agreement with 17 primary dealers --- which Zero Hedge may have claimed, it is not beyond reason or common sense to see that the feds and the 17 primary dealers are mutually dependent on each other --- and on the Treasury. There is every incentive and logic to have these parties "scratch each others' backs".

In fact, given the tightness of linkages between the Feds, Treasury, and the Dealers --- a time honored relationship between the sovereign and its financiers that predate the founding of the United States ---- it would be fantastic to suggest that such closely knit, mutual aid understandings do not exist.

I would go so far as to say that it is the exception, rather than the norm, for a relatively responsible large sovereign to not have such a close and mutually beneficial relationship.

Sure, relations can sour between an irresponsible regime (e.g. Zimbabwe) and its bankers, but between a major OECD nation and its banker? Or between the United States and its bankers? Not likely.

IIf the presumption is that such a close, mutually beneficial and dependent relationship exist, then it is not a far stretch to see the Federal reserve coming in to backstop their primary dealers ---- regardless of whether a formal agreement, a priori, exist.

Indeed, a series of precedents where the Feds have come in and backstopped the primary dealers would have created such an expectation, without the primary dealers and the Feds or Treasury every meeting and discussing such a thing either formally or informally.

The question still becomes: did this occur? And if it did, what was the reasons it did?

That is a question for economic historians, perhaps 50 years in the future when the issues are sufficient remote and the participants willing to break their silence.

Unless a "Mark Feld", or deep throat were to emerge.

Treasury: Still Going Nowhere

"Treasury: Still Going Nowhere"

This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

Treasury: Still Going Nowhere

"Treasury: Still Going Nowhere"

This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

Alarm Bells at IBM?

The problem is cash flow drying up...

AIG Suddenly Takes the Full Disclosure Route

Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.

Madoff Scandal: Where Was the SEC?

The current SEC Chairman cannot be solely to blame for a scam that occurred over decades.

American's entire financial structure and institutions, including the regulatory agencies, are clearly not up to the job of limiting the risk and fallout from systemic failures.

Six Myths about the Big Three

No doubt these 3 CEOs shouldn't fly on a scheduled airline flight - after all - by the time you add the expense of body guards, the 20 assistants that they bring along, the extra seats on the left and right for their brief case (can't expect them to work with one seat), and so on, they might as well have flown on their own jet.

Can you imagine what Northwest Airlines would have charged for in flight service of congac, caviar, and wine? Just the checked baggage surcharge would wipe out any cost savings.

Perhaps the final lesson that Detroit CEOs need to take from their Japanese counterparts is how to handle a similar crisis at a Japanese company.

Seppuku in front of Congress.

A group representing GM (GM) bondholders says it's willing to cut a deal to help the struggling automaker avoid bankruptcy, this after an advisor to the automaker task force said the committee was being quite difficult. GM -4.4% to $2.41.

How is it going to help when GM have a negative net worth?

"Women aren't going to stop wearing make-up," Barron's says, which is why the magazine predicts shares of Avon (AVP) ($17) could double over the next year.

As unemployment pick up, will Avon be the target of EEOC action aimed at getting men hired in proportion to the population?

Avon Man calling!

Are we there yet? "When we do hit the bottom - this year or years from now - how will we know?"

A long way from the bottom.

The unwinding of the bubble is still taking its time, with many corporations holding onto people when they should be terminating them to match costs with demand.

The second shockwave, in the form of a return to higher commodity prices, is just beginning.

Perhaps in another 3 years, there will be a bottom that is conclusively established.

Nortel Hangs 'For Sale' Sign on Calgary Campus

Um.... you mean "for rent"?

Who is going to buy that place in this market?

Or... should we say, it is already pretty rent when Nortel was in it?

BCE Inc. (BCE) has dispatched two senior officials to do battle with a relatively unknown KPMG partner who is blocking the world's biggest LBO buyout. At the same time, is is turning its attention to life without a takeover.

BCE need to dispatch a crack team.

Like the teams that went to Mumbai.

All they have to do is to take KPMG's senior partners hostage, and then promise to make them into solvent unless they found the deal solvent.

Banks are closing millions of credit-card accounts and cutting credit lines in an effort to inoculate themselves from a tsunami of defaults that could rival the subprime crisis. Too bad they're late to the party, again.

Right now, credit card debt is still priced with unemployment at a peak of 7.5% in mind.

Watch what happens to the default rates when unemployment hits 10+%.

Whats more, most credit card companies failed to price in the consequences of default rates being triggered on many / or all of a holder's accounts simultaneously, at which point, what was a manageable problem (e.g. 15-19% interest) becomes an unmanageable one at 30+% interest.

If the cards are close to the limit, the credit line is quickly exhausted, and the whole thing blows up, leading to predictable outcomes of default.

From a systems perspective, once these issues arise on a significant number of cards, the default rate can spike very quickly.