Still feel miserable. T & S is back at the quack, hopefully finding out she doesn't have pneumonia. This has been the worst week health wise in quite a while, but soldier on we must.
I am going to get on to the subjects mentioned a while back on Friday week, but for today I'm just going to try to keep it simple and follow up on the subject of the banks, in particular DeutscheBank and the various curious emerging relationship with governments all over. Don't really feel up to much else but there's enough here for food for thought.,
For example, ever wonder why the proposed fine for DB was leaked so early in the process? Neither can I. Usually, the number gets out but only after a long bout of negotiation giving both sides a "win" in the ultimate proceeding. Not this time: Justice just let it out there. A bit of payback for the Apple tax nonsense (note the similarity in the numbers)? Probably not. Justice is too ham-handed to think up something like that...certainly before sending message..."We are not amused..." no, that one has been used. Bugger the entire banking sector in the equity market? Makes no sense. Not smart enough to realize that something like that could be the result anyway. Something to do with politics? Hummmm. Might be something there. Justice is nothing if not politics these days. Sending a message? To Whom? The American Voter? Like, "we're looking out for YOU!" OK, I'll buy that, should we move on?
Another thing to think about is just what did DB do that is worth $14 Billion in fines? So far, Justice hasn't uttered a peep except in generalities. Then again, I've been trying to figure that out for a while now as it relates to the entire sector, but the best thought I've had while trying to recover is the irony of the entire thing. From the Truth in Lending legislation a-way back when, to a lack of supervision, to the mishandling of Lehman, to Dodd/Frank, to the demand for far higher capitalization which in many cases has been negated by governmental fines, from new legislation which overnight made business lines at financial institutions unprofitable, to the constant meddling with the markets by central banks culminating in the insanity of negative interest rates which is a slow death to the banking system and now to this complete insensitivity as to what a stray word might produce by way of a repeat of 2007-08, I keep wondering--seriously--whether there is anybody left standing who knows what he (or she) is doing? So far, a goodly portion of this nonsense of the past 15 years has had a substantial foundation in governmental politics and now these clowns are telling us that they are the solution with the vast irony being that having demonstrated an inability to exercise the functions assigned to them in the past, these fonctionnaires conclude that the solution is provide themselves with even more functions by way of legislation conceived in the abstract and given birth in this charnal house of reason to which we refer as the Congress of the United States. Irony is hardy a good enough word.
As you can see, I haven't been feeling too well, but good news has just arrived: sinus infection not pneumonia for the bride. A new day is dawning. Tomorrow.
Showing posts with label Congress. Show all posts
Showing posts with label Congress. Show all posts
Monday, October 3, 2016
Tuesday, May 4, 2010
GETTIN SCARY
I not sure I should keep doing this. A couple of days ago the whole damn New York Times started to agree with me and 10 hours after yesterday's post the whole damn world starts getting the idea that maybe this Greek thing is a bit of a farce and starts selling everything that isn't nailed down beginning with the banks about which we have been warning for weeks. Didn't somebody make a movie about some little kid dreaming bad things that suddenly began happening? Now I don't want to be the bearer of bad tidings but maybe there's a buck in this somewhere. Then again, if there is, Carl Levin will probably start calling me a short-seller and haul me in front of his sub-committee. OH, the humiliation! Then again, maybe I'm dreaming. Oh well...
The funny thing about all of this is that it challenges a number of our well-conditioned beliefs as to how the world should work. Lately, the fashionable word in financial and regulatory circles is "transparency;" the more we know about...well, anything...the better off we will all be. Problem is I'm not sure that we weren't in better shape when there was a whole lot of guessing going on about the true state of affairs and problems could be approached in a quiet, deliberate manner without half the world looking over your shoulder. A case in point is the state of the European banking system.
Whether an individual institution or a group of institutions are facing difficulties depends little upon reality in today's marketplace. Perception is the new reality and perception can be created and perpetuated by either deliberate actions on the part of a few interested parties or purely by accident through the mechanism of pricing on credit default swaps. It's all out there and it's all hanging out. It is not the existence of CDOs themselves but the public nature of the valuation of the same and the direction and volatility of said valuation that can turn a good situation bad and a bad situation awful in the blink of an eye. Once perception begins moving in a certain direction it is very difficult if not impossible to change direction. In 1983 the U.S. banking system was effectively bust but no one REALLY knew it. People could guess but there was no mechanism to really profit on the guess work as there is today. The result then was the creation of a substantial time frame in which one could fix the problem; compare that to the ten minutes or so the Treasury and the Fed had in September of 2008. So, let's hope this Greek thing holds together and the tumult and the shouting dies in the next few days. Otherwise, we might be in for a rough time. Of course, the demonstrations planned for tomorrow aren't going to help and did you know the Greek navy went on strike? Far cry from, "England expects every man..." No wonder the Elgin Marbles are in the Brit Museum. Shame. The Greeks could have hocked them.
The funny thing about all of this is that it challenges a number of our well-conditioned beliefs as to how the world should work. Lately, the fashionable word in financial and regulatory circles is "transparency;" the more we know about...well, anything...the better off we will all be. Problem is I'm not sure that we weren't in better shape when there was a whole lot of guessing going on about the true state of affairs and problems could be approached in a quiet, deliberate manner without half the world looking over your shoulder. A case in point is the state of the European banking system.
Whether an individual institution or a group of institutions are facing difficulties depends little upon reality in today's marketplace. Perception is the new reality and perception can be created and perpetuated by either deliberate actions on the part of a few interested parties or purely by accident through the mechanism of pricing on credit default swaps. It's all out there and it's all hanging out. It is not the existence of CDOs themselves but the public nature of the valuation of the same and the direction and volatility of said valuation that can turn a good situation bad and a bad situation awful in the blink of an eye. Once perception begins moving in a certain direction it is very difficult if not impossible to change direction. In 1983 the U.S. banking system was effectively bust but no one REALLY knew it. People could guess but there was no mechanism to really profit on the guess work as there is today. The result then was the creation of a substantial time frame in which one could fix the problem; compare that to the ten minutes or so the Treasury and the Fed had in September of 2008. So, let's hope this Greek thing holds together and the tumult and the shouting dies in the next few days. Otherwise, we might be in for a rough time. Of course, the demonstrations planned for tomorrow aren't going to help and did you know the Greek navy went on strike? Far cry from, "England expects every man..." No wonder the Elgin Marbles are in the Brit Museum. Shame. The Greeks could have hocked them.
Monday, May 3, 2010
A NEW DAY DAWNING?
Not from where I sit. Not from where my really smart friend Larry sits either. He's gloomier than I am but then again he has a 5000 bottle wine cellar of really special Shirazs from Oz and a whole bunch of great Eyty stuff that he couldn't possibly drink so if anyone will stand me the price of a ticket to London life may well begin to look a bit brighter.
The Greeks collected 120 million Euros for three years from Euroland and a bundle from the IMF who is back in the nation building business once again after about 10 years of 10,000 out-of-work economists in search of a mission. God's in his heaven, yada, yada. I've seen this show before. It will take about six months for the Greeks to announce that they can't possibly comply with the IMF mandates whilst in the mean time the punters will be beginning to pound the 'Geese and the Spanish into submission while whomsoever is in charge of that gaggle that will be the House of Commons will be wrestling with what both of us fear will become the most unmanageable nation in Europe. Now, as Larry suggests this may all be a ploy on the part of the Euros who, knowing this deal hasn't a chance of working just wants to set up a smoke screen for the eventual rescheduling of all of these debts which are lodged in the banking system, but I'm not so sure. You see, Larry is a hell of a lot smarter than the guys (and gals) running this thing and whilst that's what HE would do, this mob hasn't figured it out...yet. Then again they might ask him for advice which they can probably get for free because God knows he doesn't need the money. That will give the two of us a wonderful opportunity to get gloriously drunk, sit back and laugh our bums off at the scene before us. If anyone's interested, I have his number.
Back on this side of the pond, The Leader is reveling in some good economic numbers which, sadly for him, have been over-shadowed by the oil spill in the Gulf. I think they are trying to blame it on George Bush but so far no such luck. The Fed is making encouraging sounds but still refuses to tighten up and the exposure to Fanny and Freddie just keeps going up. You may think I'm nuts but you heard it here first: I have seen financial institutions estimate possible losses in various sectors for almost 40 years. Those estimates all have one thing in common; they are always too optimistic. I think that at the end of the day the U.S. taxpayer is looking at one trillion in losses in these two pieces of junk and in the FHA. Suddenly, there comes the revelation that the bill put forward by Chris the Crook doesn't even mention Fan and Fred. Whatupwiththat? People are also coming to the understanding that not much is accomplished by this rubbish legislation, that TBTF remains, that Poo Bair hasn't a clue and will not have a clue as to how to deal with, say, a Bank of America much less Citigroup and the real effect of the language on derivatives will be to drive the business into the arms of institutions that we can't touch. Amazingly, it's the academics that are beginning to sound the alarm which is scary in itself. Yessirree, a real bright horizon out there.
We shall be following the sequence of events but in the mean time you will be happy to know that the rain held off for a time and the tomatoes were put in. A Victory Garden and Larry's cellar may get us through this.
The Greeks collected 120 million Euros for three years from Euroland and a bundle from the IMF who is back in the nation building business once again after about 10 years of 10,000 out-of-work economists in search of a mission. God's in his heaven, yada, yada. I've seen this show before. It will take about six months for the Greeks to announce that they can't possibly comply with the IMF mandates whilst in the mean time the punters will be beginning to pound the 'Geese and the Spanish into submission while whomsoever is in charge of that gaggle that will be the House of Commons will be wrestling with what both of us fear will become the most unmanageable nation in Europe. Now, as Larry suggests this may all be a ploy on the part of the Euros who, knowing this deal hasn't a chance of working just wants to set up a smoke screen for the eventual rescheduling of all of these debts which are lodged in the banking system, but I'm not so sure. You see, Larry is a hell of a lot smarter than the guys (and gals) running this thing and whilst that's what HE would do, this mob hasn't figured it out...yet. Then again they might ask him for advice which they can probably get for free because God knows he doesn't need the money. That will give the two of us a wonderful opportunity to get gloriously drunk, sit back and laugh our bums off at the scene before us. If anyone's interested, I have his number.
Back on this side of the pond, The Leader is reveling in some good economic numbers which, sadly for him, have been over-shadowed by the oil spill in the Gulf. I think they are trying to blame it on George Bush but so far no such luck. The Fed is making encouraging sounds but still refuses to tighten up and the exposure to Fanny and Freddie just keeps going up. You may think I'm nuts but you heard it here first: I have seen financial institutions estimate possible losses in various sectors for almost 40 years. Those estimates all have one thing in common; they are always too optimistic. I think that at the end of the day the U.S. taxpayer is looking at one trillion in losses in these two pieces of junk and in the FHA. Suddenly, there comes the revelation that the bill put forward by Chris the Crook doesn't even mention Fan and Fred. Whatupwiththat? People are also coming to the understanding that not much is accomplished by this rubbish legislation, that TBTF remains, that Poo Bair hasn't a clue and will not have a clue as to how to deal with, say, a Bank of America much less Citigroup and the real effect of the language on derivatives will be to drive the business into the arms of institutions that we can't touch. Amazingly, it's the academics that are beginning to sound the alarm which is scary in itself. Yessirree, a real bright horizon out there.
We shall be following the sequence of events but in the mean time you will be happy to know that the rain held off for a time and the tomatoes were put in. A Victory Garden and Larry's cellar may get us through this.
Tuesday, April 27, 2010
MY FRIEND JIMMY MARSHALL
...was a partner at the New York firm of White & Case. I was just a pup banker but Jimmy liked me and took me under his wing. He was a southern gentleman from an old Virginia family, had attended "The University" and it's law school and had been in the practice of law for over thirty years when I first met him...and yes, he was the great-great-great-great grandson.
Despite all of this, at the start of any negotiation Jimmy would always say, "Gentlemen (there were no ladies), in matters such as this someone has to be a son-of-a-bitch and since I am best qualified to perform that role I nominate myself." Jimmy always performed admirably.
Greece, Europe and perhaps the world has suffered from the absence of a Jimmy Marshall. No one took charge and the result is now a real question emerging as to whether Greece can survive without a major restructuring that could result in losses all around. Today, S & P lowered Greece's credit rating to junk while at the same time cutting it's rating for Portugal. As for Greece S & P was merely reflecting the market assessment which was pricing medium term risk at a level of 1200 bp above the Bund. At this level it is fair to say that the market has priced in a restructuring:on a mark-to-market basis the rivers are running red with blood.
Who takes the blame for this? Surely there is enough to go around but as the primus-inter-parus of this band of merry men, one has to tie the can onto Germany for this one. A clear statement of German support would have nipped this thing in the bud--yes it would still have been ugly but not to this extent. I feel like a real jerk as I had truly believed that the threat of the collapse of the Euro and the EU itself would be enough to get an adult response to this situation. That collapse is now very much in sight and one wonders whether there has been an organized effort to achieve this result or was it just incompetence that has ruled the day. So one is left to wonder where do we go from here? For the life of me, I'm out of ideas but to under estimate the scope of the financial catastrophy we might be witnessing would be seriously unwise. As I have stated the true condition of European financial institutions is undoubtably not as good at this stage as is the condition of our own and a series of sovereign defaults could set off a crisis not dissimilar from what we have just experienced. Let us hope this does not occur.
Jimmy, we hardly knew ya, but boy, do they need you now.
The Goldman hearings today are an embarassment. Carl Levin is a disgrace as a legislator and pretty much as a human being which is kind of redundant as he is a career politician. His colleagues are not much better. None of them knew what they are talking about. The Goldman mob was shown as being probably brilliant in their field but absolutely useless in the role assigned. They are narrow, inarticulate little nerds. Trading quants at best. They did no good to their firm or to themselves.
More on both these items tomorrow. Oh, in case you missed it, the stock market tanked on both of these events, the Euro is in the crapper and Treasuries are going flatter and flatter across the curve. Somebody must think we're in great shape which leads one to wonder what would be happening if the Yuan was convertible which it would have to become if broadly revalued. Be careful for what you wish.
The grandkids are great, thank you. Nice to be back
Despite all of this, at the start of any negotiation Jimmy would always say, "Gentlemen (there were no ladies), in matters such as this someone has to be a son-of-a-bitch and since I am best qualified to perform that role I nominate myself." Jimmy always performed admirably.
Greece, Europe and perhaps the world has suffered from the absence of a Jimmy Marshall. No one took charge and the result is now a real question emerging as to whether Greece can survive without a major restructuring that could result in losses all around. Today, S & P lowered Greece's credit rating to junk while at the same time cutting it's rating for Portugal. As for Greece S & P was merely reflecting the market assessment which was pricing medium term risk at a level of 1200 bp above the Bund. At this level it is fair to say that the market has priced in a restructuring:on a mark-to-market basis the rivers are running red with blood.
Who takes the blame for this? Surely there is enough to go around but as the primus-inter-parus of this band of merry men, one has to tie the can onto Germany for this one. A clear statement of German support would have nipped this thing in the bud--yes it would still have been ugly but not to this extent. I feel like a real jerk as I had truly believed that the threat of the collapse of the Euro and the EU itself would be enough to get an adult response to this situation. That collapse is now very much in sight and one wonders whether there has been an organized effort to achieve this result or was it just incompetence that has ruled the day. So one is left to wonder where do we go from here? For the life of me, I'm out of ideas but to under estimate the scope of the financial catastrophy we might be witnessing would be seriously unwise. As I have stated the true condition of European financial institutions is undoubtably not as good at this stage as is the condition of our own and a series of sovereign defaults could set off a crisis not dissimilar from what we have just experienced. Let us hope this does not occur.
Jimmy, we hardly knew ya, but boy, do they need you now.
The Goldman hearings today are an embarassment. Carl Levin is a disgrace as a legislator and pretty much as a human being which is kind of redundant as he is a career politician. His colleagues are not much better. None of them knew what they are talking about. The Goldman mob was shown as being probably brilliant in their field but absolutely useless in the role assigned. They are narrow, inarticulate little nerds. Trading quants at best. They did no good to their firm or to themselves.
More on both these items tomorrow. Oh, in case you missed it, the stock market tanked on both of these events, the Euro is in the crapper and Treasuries are going flatter and flatter across the curve. Somebody must think we're in great shape which leads one to wonder what would be happening if the Yuan was convertible which it would have to become if broadly revalued. Be careful for what you wish.
The grandkids are great, thank you. Nice to be back
Friday, April 16, 2010
LITTLE MISS MARY
Now the first thing you are going to hear is, "It is absolutely untrue that this was co-ordinated with the White House. This has nothing to do with the pending financial legislation before Congress. The SEC, after a long investigation acted under its own authority in this matter concerning Goldman Sachs. " This will be total crap. THis administration is a disgrace: it will use any ploy, any perceived advantage, any governmental entity to advance it's agenda and the hell with the consequences. Unfortunately, Goldman Sachs, arrogant slime buckets that they are (but smart ones) makes it easy for The Leader and his acolytes.
Now no one has had enough time to view the nature and substance of the charges in the SEC complaint but it is interesting that it is a civil complaint, not a criminal one. One of course can be certain that state's attorney's general will be raising holy hell (with creatures like Blumenthal and Cuomo in place what can one expect) and threatening indictments within hours but it is also interesting to note the furious response of Goldman to the charges, a response far and away more vehement than is usually seen.
Now I am sure, despite one's feelings as to the substance, there are thousands up and down the street that are secretly hoping for a public mass hanging, but this looks like it's going to be around for years. I personally don't like the practices followed by GS or other street firms for that matter but as I said yesterday we have gotten far, far away from that tablet that Mo brought down from the hill a few years back. Then again, if you have a minimum of $10 million, GS will be happy to call you a client; not too many members of the Little Sisters of the Poor get int 70 Wall. Who's right, who's wrong? I don't know, but this is going to be a circus. For all of the malfeasance and deliberate, outright fraud that occurred throughout this moment in history it seems just a bit ingenuous to single out Goldman but then again when you paint a target on your back, don't be surprised when someone aims at the 10 ring.
Have a nice weekend.
Now no one has had enough time to view the nature and substance of the charges in the SEC complaint but it is interesting that it is a civil complaint, not a criminal one. One of course can be certain that state's attorney's general will be raising holy hell (with creatures like Blumenthal and Cuomo in place what can one expect) and threatening indictments within hours but it is also interesting to note the furious response of Goldman to the charges, a response far and away more vehement than is usually seen.
Now I am sure, despite one's feelings as to the substance, there are thousands up and down the street that are secretly hoping for a public mass hanging, but this looks like it's going to be around for years. I personally don't like the practices followed by GS or other street firms for that matter but as I said yesterday we have gotten far, far away from that tablet that Mo brought down from the hill a few years back. Then again, if you have a minimum of $10 million, GS will be happy to call you a client; not too many members of the Little Sisters of the Poor get int 70 Wall. Who's right, who's wrong? I don't know, but this is going to be a circus. For all of the malfeasance and deliberate, outright fraud that occurred throughout this moment in history it seems just a bit ingenuous to single out Goldman but then again when you paint a target on your back, don't be surprised when someone aims at the 10 ring.
Have a nice weekend.
Thursday, April 15, 2010
DANDELIONS
Anybody out there like dandelions? They are really a delicious additions to a salad; bright, crunchy and slightly bitter. My grandmother loved dandelions. My neighbor seems to love dandelions...well, actually, she and her husband are, I suspect, the founders of the green movement and her lawn is covered with dandelions, which in the fullness of time produce that wonderful white thingy that every kid in the world blows off and spreads the seeds to every lawn within a hundred miles, which if not treated, are destroyed.
I was spraying the progeny of her last year's crop this morning when she advanced onto my property and told me I was destroying the planet. I asked her if the Weed be Gone might destroy her if--accidentally of course--I managed to spray her. She left in fear and anger. I fear I may have to build a fence. They make good neighbors or so I read someplace. Anyway, if you like dandelions, come on over. You can graze the neighbor's front lawn.
The scene today reminded me of The Leader and his Congressional caucus on financial regulatory caucus of yesterday. Two sides, of entirely different persuasion, each speaking nonsense to the other. In the case of the Repubs they were afraid to get roiled (memo to Mitch: by showing up you jerk you guaranteed it). In the case of The Leader because he hasn't the slightest idea of the substance of the subject and as usual, simply showed up to make political points which from time to time he does very well--except when he gets the crap kicked out of him by some guy named Ryan at which point he falls back onto his, "Let me be a petulant punk because I am the President" roll--which is becoming more and more the case. I have simply lost interest in commenting on this disgraceful exhibition any longer. I think I'm just going to wait and see what this Congress comes up with and comment on the final product except for this observation: if there are people who wish to game the system, they will game the system. Chris the Crook will not prevent it; indeed, look at his personal record. Imagine, he and Barney in the forefront of the protection of the American people. You couldn't make this stuff up. As for the "loyal opposition:" Ha! Over the past three generations, we have weened morality out of our society; this is the failure of the system. As for regulation, some guy named Mo had a pretty good set of rules a way back when. Maybe we should take a look at those one more time.
Looking across the pond, Greece and Portugal did very well in the Bond markets earlier in the week with a blow-out auction of 2 and 10 year stuff on behalf of the latter. The terms for the Greeks via the EU are becoming clearer and the IMF will be involved which, as suggested, was probably the way it was going to be all-along. The pressure appears to be off for a while but the political situation all across Europe is still quite fragile and any upset there could roil the markets once again. It was messy, but all-inall, I think the Euros did a pretty good job of holding things together...for now. The German by- elections will be important and within a month we have the general election in the UK which, while not what it used to be in the Grand Scheme of Things (sorry Mr. Bull), still must be watched. It's the politics not the finances which will be driving Europe in the coming months and then when June comes around nobody will care about anything other than the World Cup. Ah peace and quite until August and then we have pennant races and the start of football. Things are looking up.
Once again, thanks for all of you who helped with Google. It is greatly appreciated.
I was spraying the progeny of her last year's crop this morning when she advanced onto my property and told me I was destroying the planet. I asked her if the Weed be Gone might destroy her if--accidentally of course--I managed to spray her. She left in fear and anger. I fear I may have to build a fence. They make good neighbors or so I read someplace. Anyway, if you like dandelions, come on over. You can graze the neighbor's front lawn.
The scene today reminded me of The Leader and his Congressional caucus on financial regulatory caucus of yesterday. Two sides, of entirely different persuasion, each speaking nonsense to the other. In the case of the Repubs they were afraid to get roiled (memo to Mitch: by showing up you jerk you guaranteed it). In the case of The Leader because he hasn't the slightest idea of the substance of the subject and as usual, simply showed up to make political points which from time to time he does very well--except when he gets the crap kicked out of him by some guy named Ryan at which point he falls back onto his, "Let me be a petulant punk because I am the President" roll--which is becoming more and more the case. I have simply lost interest in commenting on this disgraceful exhibition any longer. I think I'm just going to wait and see what this Congress comes up with and comment on the final product except for this observation: if there are people who wish to game the system, they will game the system. Chris the Crook will not prevent it; indeed, look at his personal record. Imagine, he and Barney in the forefront of the protection of the American people. You couldn't make this stuff up. As for the "loyal opposition:" Ha! Over the past three generations, we have weened morality out of our society; this is the failure of the system. As for regulation, some guy named Mo had a pretty good set of rules a way back when. Maybe we should take a look at those one more time.
Looking across the pond, Greece and Portugal did very well in the Bond markets earlier in the week with a blow-out auction of 2 and 10 year stuff on behalf of the latter. The terms for the Greeks via the EU are becoming clearer and the IMF will be involved which, as suggested, was probably the way it was going to be all-along. The pressure appears to be off for a while but the political situation all across Europe is still quite fragile and any upset there could roil the markets once again. It was messy, but all-inall, I think the Euros did a pretty good job of holding things together...for now. The German by- elections will be important and within a month we have the general election in the UK which, while not what it used to be in the Grand Scheme of Things (sorry Mr. Bull), still must be watched. It's the politics not the finances which will be driving Europe in the coming months and then when June comes around nobody will care about anything other than the World Cup. Ah peace and quite until August and then we have pennant races and the start of football. Things are looking up.
Once again, thanks for all of you who helped with Google. It is greatly appreciated.
Friday, April 9, 2010
WALTZ ME AROUND AGAIN PAPPADOPOLUS
...or whatever the name is of the guy running the show. I once heard a sports talk show on the radio while driving that repeated a single piece of advice for athletes who considered themselves a good deal smarter than the rest of the world: JUST SHUT UP!. Great advice for the Greeks. Had they just keep quite and taken their medicine in the markets without complaining about the terrible undeserved interest rates that they were being forced to pay they just might...MIGHT...have gotten through this thing without further embarrassment. But no, they had to keep complaining, and now the whole thing is up in the air again with the IMF pounding at the door, the Germans acting like Germans and everybody mad at everybody else. What everyone is now seeing is what I admitted to miss--the Germans have cast aside any guilt about WW II and are acting like they always have acted,; arrogant and bull-headed--not wrong, mind you--which is why they have always been so loved in Europe.
Now there is no question that the elections in Germany are weighing heavily on Ms Merkel's stance, but come on! The remarkable German export engine is running under full power with record numbers being reported for the quarter benefiting both from the weaker Euro but also within the EU--indeed, mostly within the EU. To believe that Germany would risk the collapse of the Union over a matter of principle is a view hard to come by and indeed even Trichet, no lover of the Hun, dismisses the idea. Yet here we are waiting with baited breath for the coming of Monday to see where this thing is going. I confess to being shocked and incorrect in my assessment of the situation. I still would be long Greek debt, however. Too much is at stake which is not to say that we don't get a rescheduling. Goodness knows EVERYBODY knows how to do those things.
Changing the subject completely, the Prince & Rubin show should be required watching for all of us interested in the financial business. yesterdays event was remarkably enlightening from a number of standpoints. Prince was really good and I think skated through the thing to a point where he's not going to be bothered again. He apologized, admitted he and his management team screwed the pooch, that the entire industry got it wrong and suggested that more regulation might help in preventing a repeat of the same in the future (it will not). Battlin' Bobby, on the other hand, endeared himself to no one. Indeed, he was a disaster and whatever rep he had earned during his stint with the Clintonistas went up in smoke along with focusing a few folks on the fact that he ran Goldman Sachs for a bit, a firm not being viewed as a warm and funny bunch these days..
There's a few things about Bobby that the average Joe may not realize. To begin, he was not a finance guy originally; he was a lawyer. Bob worked at one of the finest firms in NYC, Cleary Gottleib Steen & Hamilton--trust me on this one; i sat on both sides of the table with these guys and I was never anything but impressed. Now Cleary represented Goldman back in the early eighties when the remake of American industry took off during the Reagan administration and Bob was representing Goldie in many transactions. I think he got the idea that the guys he was representing were beginning to make a hell of a lot more money than he was making ; a true whatsupwiththis moment that caused Bob to change shops. Over to Goldie goes Bob; winds up running the Arb business--in which in the eighties you would have to be unable to fog a mirror not to make money--winds up running the whole show and the rest is history. Bob signs on for Clinton, winds up as, "The greatest Secretary of the Treasury since Alexander Hamilton" (a view not universally shared), and parlays that into a "Mr. Fixit" job at Citicorp at $15 mil a year plus stock. While all this was going on, his old shop, Cleary, develops one of the damndest business lines you have ever seen in acting as counsel to deadbeat countries--perhaps that is too harsh--let us refer to them as debtor nations in the emerging world., at which they are very, very good.
I think Bob's greatest personal moment was when, as the world was going to hell in a hand basket, he was filmed walking down the steps of the Treasury directly to a bank of mikes from every news outlet in the world to announce everything was going to be fine, Daddy was on the case. Brilliant theater, and it worked. Of course, the next day he found $25 billion in a foreign exchange stabilization fund to lend to Mexico to bail out their chestnuts for about the third time in 13 years. Times were so simple then. Maybe the Greeks should take a lesson from Bob.
Oh, I forgot. Who was Mexico's general counsel for all things relating to international finance? Why Cleary Gottleib Steen and Hamilton. Funny how these things work out.
Have a great weekend.
Now there is no question that the elections in Germany are weighing heavily on Ms Merkel's stance, but come on! The remarkable German export engine is running under full power with record numbers being reported for the quarter benefiting both from the weaker Euro but also within the EU--indeed, mostly within the EU. To believe that Germany would risk the collapse of the Union over a matter of principle is a view hard to come by and indeed even Trichet, no lover of the Hun, dismisses the idea. Yet here we are waiting with baited breath for the coming of Monday to see where this thing is going. I confess to being shocked and incorrect in my assessment of the situation. I still would be long Greek debt, however. Too much is at stake which is not to say that we don't get a rescheduling. Goodness knows EVERYBODY knows how to do those things.
Changing the subject completely, the Prince & Rubin show should be required watching for all of us interested in the financial business. yesterdays event was remarkably enlightening from a number of standpoints. Prince was really good and I think skated through the thing to a point where he's not going to be bothered again. He apologized, admitted he and his management team screwed the pooch, that the entire industry got it wrong and suggested that more regulation might help in preventing a repeat of the same in the future (it will not). Battlin' Bobby, on the other hand, endeared himself to no one. Indeed, he was a disaster and whatever rep he had earned during his stint with the Clintonistas went up in smoke along with focusing a few folks on the fact that he ran Goldman Sachs for a bit, a firm not being viewed as a warm and funny bunch these days..
There's a few things about Bobby that the average Joe may not realize. To begin, he was not a finance guy originally; he was a lawyer. Bob worked at one of the finest firms in NYC, Cleary Gottleib Steen & Hamilton--trust me on this one; i sat on both sides of the table with these guys and I was never anything but impressed. Now Cleary represented Goldman back in the early eighties when the remake of American industry took off during the Reagan administration and Bob was representing Goldie in many transactions. I think he got the idea that the guys he was representing were beginning to make a hell of a lot more money than he was making ; a true whatsupwiththis moment that caused Bob to change shops. Over to Goldie goes Bob; winds up running the Arb business--in which in the eighties you would have to be unable to fog a mirror not to make money--winds up running the whole show and the rest is history. Bob signs on for Clinton, winds up as, "The greatest Secretary of the Treasury since Alexander Hamilton" (a view not universally shared), and parlays that into a "Mr. Fixit" job at Citicorp at $15 mil a year plus stock. While all this was going on, his old shop, Cleary, develops one of the damndest business lines you have ever seen in acting as counsel to deadbeat countries--perhaps that is too harsh--let us refer to them as debtor nations in the emerging world., at which they are very, very good.
I think Bob's greatest personal moment was when, as the world was going to hell in a hand basket, he was filmed walking down the steps of the Treasury directly to a bank of mikes from every news outlet in the world to announce everything was going to be fine, Daddy was on the case. Brilliant theater, and it worked. Of course, the next day he found $25 billion in a foreign exchange stabilization fund to lend to Mexico to bail out their chestnuts for about the third time in 13 years. Times were so simple then. Maybe the Greeks should take a lesson from Bob.
Oh, I forgot. Who was Mexico's general counsel for all things relating to international finance? Why Cleary Gottleib Steen and Hamilton. Funny how these things work out.
Have a great weekend.
Monday, March 29, 2010
BIRDS OF A FEATHER
Poo Bair and Paul Krugman spoke out today on the regulation of the banking system. As usual Poo hadn't a clue but oddly, Krugman got it right. Poo thinks that resolution authority will solve the TBTF problem because it will an orderly dissolution of an institution with expense to the taxpayer and not result in panic in the markets. According to her it was the bankruptcy of Lehman than caused all the problems.
In my mind, what causes panic is the thought that this dope would be allowed within 100 miles of the next mess. Size is what causes systemic risk; size which results in the involvement of the institution in multiple facets of the financial markets. She obviously has missed it so here's a head's up to Poo: there are A LOT of big banks out there that go to bed every night with a prayer of thanks that you are not one of their regulators. They are called French banks, British banks, German banks and a whole lot of other banks. Through no fault of their own one of our banks could wind up in deep do-do because of its involvement with one of those. Now what do you do. Resolution authority? By definition, we are in the sthook again and this time it's not our fault...not hat it was entirely our fault the last time. Not that she and her two-bit organization has a clue as to how to deal with the impending failure of a massive financial institution but she still misses the fact that when the balloon goes up what has to be done has to be done...right...now. And to think that this dumb-ass idea that $50 billion collected from the top 50 is going to anything to assuage the frenzied masses is beyond stupid. Think of it this way: Bank A in LA LA Land gets it all wrong and comes clean to the fact that they are a bit short of the ready. Big Bank B is their correspondent in the U.S. and clears for them. Everybody knows that Bank B has a big settlement risk with Bank A but nobody knows how much. If you are the rest of the bank alphabet he first thing you do is try to limit your exposure to both A & B; there goes B's liquidity and guess what? We are at the start of systemic risk. Now Poo what do you do? Announce that you are going to wind up Big Bank B like the 7th. National of Buttburn Alabama? No my love, because some adult somewhere will have said to the markets, "We have Big bank B covered." I bet the adult is in the Federal Reserve. Nobody likes it but that's the price of being in the regulatory business.
Now Krugman, for a change announced that the bill coming out of the Senate would actually CONFIRM the status of TBTF on the part of a number of banks. Could he have been reading the blog again? Whatever. He actually got it right. What he also got right was the concept that maybe TBTF is endemic in the business as it exists today. Of course his solution to this risk is more regulation as we will perhaps see from Barney's Boys in the Band...oops...House. Again, regulation governing U.S. financial institutions alone is about as useful as...well, let's not go to the barnyard. In fact it's about that useful in general. But like his hero, The Leader, Krugman is convinced of the power, intelligence and effectiveness of the government. Perhaps someone should ask Krugman how the GSEs got into such trouble under the direct oversight of Barney and Chris the Crook? I'm sure his answer would be they were just too lax. No, Paul. Politicize oversight and you have a recipe for failure, but he will never learn. What's the definition of mixed emotions? Watching a bus filled with economists going over a cliff and realizing their are three empty seats?
Anyway, Ky lost over the weekend and looked bad doing so. There is still justice in the world. Go Bulldogs. Woof! Woof!
In my mind, what causes panic is the thought that this dope would be allowed within 100 miles of the next mess. Size is what causes systemic risk; size which results in the involvement of the institution in multiple facets of the financial markets. She obviously has missed it so here's a head's up to Poo: there are A LOT of big banks out there that go to bed every night with a prayer of thanks that you are not one of their regulators. They are called French banks, British banks, German banks and a whole lot of other banks. Through no fault of their own one of our banks could wind up in deep do-do because of its involvement with one of those. Now what do you do. Resolution authority? By definition, we are in the sthook again and this time it's not our fault...not hat it was entirely our fault the last time. Not that she and her two-bit organization has a clue as to how to deal with the impending failure of a massive financial institution but she still misses the fact that when the balloon goes up what has to be done has to be done...right...now. And to think that this dumb-ass idea that $50 billion collected from the top 50 is going to anything to assuage the frenzied masses is beyond stupid. Think of it this way: Bank A in LA LA Land gets it all wrong and comes clean to the fact that they are a bit short of the ready. Big Bank B is their correspondent in the U.S. and clears for them. Everybody knows that Bank B has a big settlement risk with Bank A but nobody knows how much. If you are the rest of the bank alphabet he first thing you do is try to limit your exposure to both A & B; there goes B's liquidity and guess what? We are at the start of systemic risk. Now Poo what do you do? Announce that you are going to wind up Big Bank B like the 7th. National of Buttburn Alabama? No my love, because some adult somewhere will have said to the markets, "We have Big bank B covered." I bet the adult is in the Federal Reserve. Nobody likes it but that's the price of being in the regulatory business.
Now Krugman, for a change announced that the bill coming out of the Senate would actually CONFIRM the status of TBTF on the part of a number of banks. Could he have been reading the blog again? Whatever. He actually got it right. What he also got right was the concept that maybe TBTF is endemic in the business as it exists today. Of course his solution to this risk is more regulation as we will perhaps see from Barney's Boys in the Band...oops...House. Again, regulation governing U.S. financial institutions alone is about as useful as...well, let's not go to the barnyard. In fact it's about that useful in general. But like his hero, The Leader, Krugman is convinced of the power, intelligence and effectiveness of the government. Perhaps someone should ask Krugman how the GSEs got into such trouble under the direct oversight of Barney and Chris the Crook? I'm sure his answer would be they were just too lax. No, Paul. Politicize oversight and you have a recipe for failure, but he will never learn. What's the definition of mixed emotions? Watching a bus filled with economists going over a cliff and realizing their are three empty seats?
Anyway, Ky lost over the weekend and looked bad doing so. There is still justice in the world. Go Bulldogs. Woof! Woof!
Thursday, March 25, 2010
OEDIPUS REX
Look guys, it's not like somebody married their mother. The Greeks did what the Greeks do, they lied about their finances and you guys did would you guys do, winked and nodded at what the Greeks did all the while knowing that at some point everybody was going to get caught in this little charade and now is that point so let's get on with it and them then refinance already. Besides, you are making me look REALLY bad and wrong and I'm about to get REALLY pissed off. If that isn't bad enough now the Fro...er...French have started a cat fight of their own between He With the Hottest First Lady inTown (M. Le President), his #1 political rival who just happens to be the President of the IMF and the Head of the European Central Bank who used to be the Finance Minister of La Belle Republique. Under normal circumstances this would be a kick and a half but as I said, it's making me look bad.
I really thought this thing would be settled by now but with the adamant stand of Ms Merkel as to German support and her apparent requirement that the IMF get involved causing M. Sarkozy to damn near rupture himself and M. Trichet to lament over the fact that the EU should not need to involve the IMF (there's is no love for M. Strauss-Kahn here either) the mood is not sanguine. Fitch downgraded Portugal yesterday and continues to warn on Greece, the Euro continued to tank today (oh, those German exporters!) Ms. Merkel added to the fray in with language reminding one of the 1918 reparations (these guys just don't seem to forget) and the Spanish are getting very antsy as eyes are being turned towards them. Later in the day there was a talk about a joint effort, supplying funds at "the average of EU borrowing costs" which would involve the IMF. One is tempted to ask if that cost would be weighted in some way as to individual borrowers but that would probably be not constructive at this stage. We shall continue to wait and observe.
Meanwhile, on the other side of the world, the Chinese told the Congress to go suck on a rock as to the alignment of the Yuan. Predictable as we mentioned here yesterday. As relaxed as I was about the Greek drama...and perhaps as wrong as I could be...I remain very concerned as to how this situation could play itself out. I wouldn't mind being wrong here but with state of American politics in this, an important election year, the lack of understanding of Chinese politics and China in general on the part of the major players coupled with the important political issues internal to China as well as the ever-present issue of "face" when dealing in this part of the world, things could go REALLY south. I hope the administration has the ability to get hold of this quickly. Again, we shall wait and observe.
Sweet sixteen tonight. I hate Ky..
I really thought this thing would be settled by now but with the adamant stand of Ms Merkel as to German support and her apparent requirement that the IMF get involved causing M. Sarkozy to damn near rupture himself and M. Trichet to lament over the fact that the EU should not need to involve the IMF (there's is no love for M. Strauss-Kahn here either) the mood is not sanguine. Fitch downgraded Portugal yesterday and continues to warn on Greece, the Euro continued to tank today (oh, those German exporters!) Ms. Merkel added to the fray in with language reminding one of the 1918 reparations (these guys just don't seem to forget) and the Spanish are getting very antsy as eyes are being turned towards them. Later in the day there was a talk about a joint effort, supplying funds at "the average of EU borrowing costs" which would involve the IMF. One is tempted to ask if that cost would be weighted in some way as to individual borrowers but that would probably be not constructive at this stage. We shall continue to wait and observe.
Meanwhile, on the other side of the world, the Chinese told the Congress to go suck on a rock as to the alignment of the Yuan. Predictable as we mentioned here yesterday. As relaxed as I was about the Greek drama...and perhaps as wrong as I could be...I remain very concerned as to how this situation could play itself out. I wouldn't mind being wrong here but with state of American politics in this, an important election year, the lack of understanding of Chinese politics and China in general on the part of the major players coupled with the important political issues internal to China as well as the ever-present issue of "face" when dealing in this part of the world, things could go REALLY south. I hope the administration has the ability to get hold of this quickly. Again, we shall wait and observe.
Sweet sixteen tonight. I hate Ky..
Wednesday, March 24, 2010
SORRY BOUT THAT
I hit the post sign yesterday and BLAM it disappeared into cyber space. After a year, I'm getting this stupid letter recognition thing from Google. Can anybody tell me how to get them to stop this? I've tried.
Anyway, two of the worstest humans in the world appeared together today to talk about reforming our financial system. Chris the Crook actually sounded serious and sincere (we know better) but barney Baby was his usual partisan attack dog self. And now the games begin. The result, I fear, will be worse than the health bill although that is only from the standpoint of craftsmanship not as to the effect it will have upon the nation. Remember all that talk about insuring that we cooperate with other members of the G-7 or G20 or whateverthehell number of countries there were involved in this thing? No more. What we will have will be a completely partisan effort, designed to fix blame (in the wrong places), involving substantial ass-covering for the two Chairman and regulations that will probably, as a result, prove to have been ineffectual at the first sign of the next crisis...and yes, dear reader, there will be another crisis. The beneficiaries will undoubtably be the financial systems of or trading partners who will move quickly to take advantage of the restrictions and conflicts in our system. We shall see how this plays out after the spring break. If one is looking for a silver lining there is one: yesterday tThe Suit appeared to agree with a general feeling that is moving through the Congress that Fanny and Freddie are busted and at some point should probably be wound up. Unfortunately, there are also some hair-brained ideas that they should be replaced with MINI Fannies and Freddies. Gotta give these guys credit. They would own the world of the stupid. And so it goes.
Meanwhile, a number of their genius colleagues are bound and determined to pick a fight with the Chinese over the value of the Yuan. This appears to be a bipartisan effort demonstrating that dumb is where you find it. What is being missed here is the understanding that the boys running the show over there are not in total control of their economy as they are of civil rights (or the lack thereof) or foreign policy. They have their constituents and 600,00,000 un-or-underemployed citizens under the watch of local political leaders. It is a different China that 20 or for that matter even 10 years ago. Life is not easy for the leadership and being seen to bully them is a sure fired way to get nothing accomplished. This gang might also consider the manner in which we are viewed and that is as a mass of out of control fiscal nut cases which may not be far from the truth. There is also the belief--mistaken in my view--that if things get ugly universal support from our traditional asian friends will be there. If things do and if I am correct that situation will open up the uglies can of worms that we have seen in quite a while. Oh, I'm not talking about guns going off; keep in mind they own 2 trillion of our bucks and we have to borrow an enormous new amount every week. If they decide to sit out a big auction....
Still, the best show for the price is Greece and the Euros. What a kick, although one of the guys on tv pointed out that Thursday or Friday is Greek independence day. From whom, one might ask? Anyway, things could get out of hand. We shall be watching.
Sorry about yesterday
Anyway, two of the worstest humans in the world appeared together today to talk about reforming our financial system. Chris the Crook actually sounded serious and sincere (we know better) but barney Baby was his usual partisan attack dog self. And now the games begin. The result, I fear, will be worse than the health bill although that is only from the standpoint of craftsmanship not as to the effect it will have upon the nation. Remember all that talk about insuring that we cooperate with other members of the G-7 or G20 or whateverthehell number of countries there were involved in this thing? No more. What we will have will be a completely partisan effort, designed to fix blame (in the wrong places), involving substantial ass-covering for the two Chairman and regulations that will probably, as a result, prove to have been ineffectual at the first sign of the next crisis...and yes, dear reader, there will be another crisis. The beneficiaries will undoubtably be the financial systems of or trading partners who will move quickly to take advantage of the restrictions and conflicts in our system. We shall see how this plays out after the spring break. If one is looking for a silver lining there is one: yesterday tThe Suit appeared to agree with a general feeling that is moving through the Congress that Fanny and Freddie are busted and at some point should probably be wound up. Unfortunately, there are also some hair-brained ideas that they should be replaced with MINI Fannies and Freddies. Gotta give these guys credit. They would own the world of the stupid. And so it goes.
Meanwhile, a number of their genius colleagues are bound and determined to pick a fight with the Chinese over the value of the Yuan. This appears to be a bipartisan effort demonstrating that dumb is where you find it. What is being missed here is the understanding that the boys running the show over there are not in total control of their economy as they are of civil rights (or the lack thereof) or foreign policy. They have their constituents and 600,00,000 un-or-underemployed citizens under the watch of local political leaders. It is a different China that 20 or for that matter even 10 years ago. Life is not easy for the leadership and being seen to bully them is a sure fired way to get nothing accomplished. This gang might also consider the manner in which we are viewed and that is as a mass of out of control fiscal nut cases which may not be far from the truth. There is also the belief--mistaken in my view--that if things get ugly universal support from our traditional asian friends will be there. If things do and if I am correct that situation will open up the uglies can of worms that we have seen in quite a while. Oh, I'm not talking about guns going off; keep in mind they own 2 trillion of our bucks and we have to borrow an enormous new amount every week. If they decide to sit out a big auction....
Still, the best show for the price is Greece and the Euros. What a kick, although one of the guys on tv pointed out that Thursday or Friday is Greek independence day. From whom, one might ask? Anyway, things could get out of hand. We shall be watching.
Sorry about yesterday
Thursday, March 18, 2010
SO I'VE BEEN THINKING...
My sons have always told me that was trouble. I've been reading Chris the Crook's proposed fix for the financial system and it's hard to figure out where to start. So I've thought about it and decided that I'm not going to start,; I'm going to finish and wait until we see what come out of Barney and friends and what gets resolved. This is how I would finish by asking you to think about a simple scenario.
Suppose a young man by the name of Warren Buffett Jr. walked up to you, wise banker that you are, and asked you to lend him a million dollars. Now, I suspect you would begin by inquiring as to the purpose of this loan, it's term, method of repayment and for Mr. Buffett's financial statement. You get all of those things and they look ok, but perhaps not for the amount in question and not for the extremely fine rate for which young Warren is asking. You are about to term him down when in walks Pops and says something to the effect, "This is my beloved son in whom I am well pleased." Whoa! A mind changer? Maybe not because you ask pops, "Do you mean you are going to guarantee his loan?" And pops says, "No, but I stand behind him." Waddaya do?
Believe it or not, back in the good old days when relationships in banking meant something, business was often done on this basis in transactions involving parent companies and subsidiaries and formalized by what what were called "support letters" or some variation of the same. For a variety of reasons, a parent often couldn't issue a guarantee but bankers provided financing on the basis of the relationship with the parent (Damn GOOD!) and the belief that, for a variety of reasons the parent could never allow the subsidiary to default. Most often that was the result. The bank got a good piece of business and the near certainty that more goodies would come its way.
Now I know some of you are saying that's a really risky thing for a bank to be doing. Yep, but ask yourself have you ever owned a security issued by Fanny or Freddie and if you have did you ever look at and analyze their balance sheets? Bet you didn't. Why not, well because they had a big Uncle...the BIGGEST uncle in the world who would take care of them if anything happened. The entire world of bankers (yes Mr Little Guy you were a banker to them) believed that. And Fan and Fred, borrowed and borrowed and borrowed at rates far below at which a truly private company could borrow while their executives cooked the books, collected hundreds of millions of dollars of bonuses and assembled the most God-awful portfolio ever seen by mankind. But did you care? Of course not, you had Uncle standing right behind them with not even a support letter much less a guarantee. And guess what? You were right! You won and the taxpayers of the U.s Of A paid you out...or will. (If you're an equity holder, sorry 'bout that).
The world's banking system is pretty much another example of the same process which has become to be known as Too Big To Fail. As a result of what we have witnessed, every knuckle head on Capital Hill and in the news rooms of the world has ranted and raved about how we can never again allow an institution to become TBTF. The answer? More oversight and regulation and now something called resolution authority which is a political euphemism for the bankruptcy of a bank. Chris the Crook has even decided that somebody should have the authority to decide what businesses in which a bank can compete and if that somebody doesn't like what that business is somebody should have the authority to terminate the business, sell it, downsize it or whatever, irrespective of the rights, concerns or interests of the shareholders. Not only that, Chris is going to tell you which institutions are going to be subject to such "oversight" and create an orderly process in the almost impossible case something goes wrong because with government oversight, I mean, how could it?
What this proposed monumental piece of stupidity does, therefore, is to create 35 Fanny and Freddies for the whole world to see, or to put it another way, 35 institution that are TOO BIG TO FAIL all of which, being deemed to be under the strict oversight of the Government of the United States, will always pay their creditors as it would be simply impossible for the government to stiff anyone. If it did, would you invest in government bonds? Of course not which is why we will pay, and pay and pay every dime Fan and Fred owes forever. Now I wouldn't mind running one of these shops because you KNOW your funding costs are going to lower than any of the poor slobs with whom Uncle isn't in bed. And if I were a lender, guess who my preferred borrowers would be. Lend on MacDuff, and damned be him that first cries, HOLD, ENOUGH!
Fear: "The undiscovered country from whose born no traveler returns..." is that which takes the stupidity out of banking. Not always, but far better it is for this government and it's central bank, rather than putting together 1000 pages of crap to simply announce that in the future, it shall be our policy that no institution should be deemed to be Too Big To Fail. Lend at your own risk. You may get lucky but then again you probably will not.
Think about it...I'm finished.
Suppose a young man by the name of Warren Buffett Jr. walked up to you, wise banker that you are, and asked you to lend him a million dollars. Now, I suspect you would begin by inquiring as to the purpose of this loan, it's term, method of repayment and for Mr. Buffett's financial statement. You get all of those things and they look ok, but perhaps not for the amount in question and not for the extremely fine rate for which young Warren is asking. You are about to term him down when in walks Pops and says something to the effect, "This is my beloved son in whom I am well pleased." Whoa! A mind changer? Maybe not because you ask pops, "Do you mean you are going to guarantee his loan?" And pops says, "No, but I stand behind him." Waddaya do?
Believe it or not, back in the good old days when relationships in banking meant something, business was often done on this basis in transactions involving parent companies and subsidiaries and formalized by what what were called "support letters" or some variation of the same. For a variety of reasons, a parent often couldn't issue a guarantee but bankers provided financing on the basis of the relationship with the parent (Damn GOOD!) and the belief that, for a variety of reasons the parent could never allow the subsidiary to default. Most often that was the result. The bank got a good piece of business and the near certainty that more goodies would come its way.
Now I know some of you are saying that's a really risky thing for a bank to be doing. Yep, but ask yourself have you ever owned a security issued by Fanny or Freddie and if you have did you ever look at and analyze their balance sheets? Bet you didn't. Why not, well because they had a big Uncle...the BIGGEST uncle in the world who would take care of them if anything happened. The entire world of bankers (yes Mr Little Guy you were a banker to them) believed that. And Fan and Fred, borrowed and borrowed and borrowed at rates far below at which a truly private company could borrow while their executives cooked the books, collected hundreds of millions of dollars of bonuses and assembled the most God-awful portfolio ever seen by mankind. But did you care? Of course not, you had Uncle standing right behind them with not even a support letter much less a guarantee. And guess what? You were right! You won and the taxpayers of the U.s Of A paid you out...or will. (If you're an equity holder, sorry 'bout that).
The world's banking system is pretty much another example of the same process which has become to be known as Too Big To Fail. As a result of what we have witnessed, every knuckle head on Capital Hill and in the news rooms of the world has ranted and raved about how we can never again allow an institution to become TBTF. The answer? More oversight and regulation and now something called resolution authority which is a political euphemism for the bankruptcy of a bank. Chris the Crook has even decided that somebody should have the authority to decide what businesses in which a bank can compete and if that somebody doesn't like what that business is somebody should have the authority to terminate the business, sell it, downsize it or whatever, irrespective of the rights, concerns or interests of the shareholders. Not only that, Chris is going to tell you which institutions are going to be subject to such "oversight" and create an orderly process in the almost impossible case something goes wrong because with government oversight, I mean, how could it?
What this proposed monumental piece of stupidity does, therefore, is to create 35 Fanny and Freddies for the whole world to see, or to put it another way, 35 institution that are TOO BIG TO FAIL all of which, being deemed to be under the strict oversight of the Government of the United States, will always pay their creditors as it would be simply impossible for the government to stiff anyone. If it did, would you invest in government bonds? Of course not which is why we will pay, and pay and pay every dime Fan and Fred owes forever. Now I wouldn't mind running one of these shops because you KNOW your funding costs are going to lower than any of the poor slobs with whom Uncle isn't in bed. And if I were a lender, guess who my preferred borrowers would be. Lend on MacDuff, and damned be him that first cries, HOLD, ENOUGH!
Fear: "The undiscovered country from whose born no traveler returns..." is that which takes the stupidity out of banking. Not always, but far better it is for this government and it's central bank, rather than putting together 1000 pages of crap to simply announce that in the future, it shall be our policy that no institution should be deemed to be Too Big To Fail. Lend at your own risk. You may get lucky but then again you probably will not.
Think about it...I'm finished.
Wednesday, March 17, 2010
NOTHING MUCH TO ADD
...so I wont. Still haven't gotten my arms around Chris the Crook's latest work of art. Going to hold off another day. Stick with me would you? In the meantime...do you think this mob is Congress is doing the people's business? This could really give poling a bad name
Happy St. Pat's.
Happy St. Pat's.
Tuesday, March 16, 2010
WHILE WE WERE AWAY...
We're back and I wonder why. The grandkids were great, I sat through an original middle school play and survived (I thought I would never have to do that again) we have a glorious spring-like day and now I have to comment on the latest monstrous piece of political stupidity put forth by Chris the Crook which, if enacted, will pretty much end the finance business. I never though one could root for Barney Frank but these are strange times.
I hate to say it but I think I hit this one right on the head announcing some weeks back that what Chris the Crook would produce is a populist pill of rubbish as his parting shot to the American people. It is worse. In addition to being unworkable and foolish in conception it completely politicizes the regulatory process by requiring that the president of the New York Fed, the body which has prime responsibility for the really heavy lifting, be a political appointment of the President. Any semblance of international cooperation will be lost as it is New York that has the prime responsibility of dealing internationally and no independent central bank will have any desire to deal with a political hack in the first instance except on a very well-defined basis. Then too, it would appear that the government would be involved in every aspect of oversight and regulation with political appointees serving in tandem with the Federal reserve at every level which is a guarantee of failure in all roles undertaken. Some much seems wrong with this thing that it's difficult to be fully expressive unless all 2000 pages are reviewed, but one should keep in mind that which is not covered, to wit, Fanny and Fredie. Remember dear reader, these two swill dispensers hold over 5 TRILLION at risk with estimates of impaired assets standing around 20%. That's 1 TRILLION in potential losses to the taxpayers. And nary a mention: whatuowiththat, Chris? So far, it is madness but not enough is known to comment further. I'm trying to plow through this thing so I'll have more to say in the coming days.
Moving right along, I remain impressed with the Euros and the manner in which they continue to perform this marvelous gavotte which while denying any agreement amongst the member states to bail out Greece the assurance that, if needed, a bailout will be available remains firmly planted in the mind of the financial market. Sounds very French to me. They have always been good at that. There is a BIG chunk of refinancing due in a bit over a month's time but the success of Greece's foray in the Eurobond market two weeks ago has taken the edge off a bit. The stakes are too high for a calamity unless one is caused by a totally unforeseen event, so I remain convinced that one will not occur. If I had any money--which I do not--I would be long the "on the run" Greek Euros with a yield of around 6 1/2% Like the currency as well as what is happening on our side of the pond is hardly cause for optimism what with the very real possibility for a full blown constitutional crisis over this House health care vote looming this week-end. For their part, the Greeks are behaving rather well although for how long remains the real question. Just long enough is, I suspect, the answer.
More tomorrow. It's 60 degrees. Me and the Mutt are going for a walk
I hate to say it but I think I hit this one right on the head announcing some weeks back that what Chris the Crook would produce is a populist pill of rubbish as his parting shot to the American people. It is worse. In addition to being unworkable and foolish in conception it completely politicizes the regulatory process by requiring that the president of the New York Fed, the body which has prime responsibility for the really heavy lifting, be a political appointment of the President. Any semblance of international cooperation will be lost as it is New York that has the prime responsibility of dealing internationally and no independent central bank will have any desire to deal with a political hack in the first instance except on a very well-defined basis. Then too, it would appear that the government would be involved in every aspect of oversight and regulation with political appointees serving in tandem with the Federal reserve at every level which is a guarantee of failure in all roles undertaken. Some much seems wrong with this thing that it's difficult to be fully expressive unless all 2000 pages are reviewed, but one should keep in mind that which is not covered, to wit, Fanny and Fredie. Remember dear reader, these two swill dispensers hold over 5 TRILLION at risk with estimates of impaired assets standing around 20%. That's 1 TRILLION in potential losses to the taxpayers. And nary a mention: whatuowiththat, Chris? So far, it is madness but not enough is known to comment further. I'm trying to plow through this thing so I'll have more to say in the coming days.
Moving right along, I remain impressed with the Euros and the manner in which they continue to perform this marvelous gavotte which while denying any agreement amongst the member states to bail out Greece the assurance that, if needed, a bailout will be available remains firmly planted in the mind of the financial market. Sounds very French to me. They have always been good at that. There is a BIG chunk of refinancing due in a bit over a month's time but the success of Greece's foray in the Eurobond market two weeks ago has taken the edge off a bit. The stakes are too high for a calamity unless one is caused by a totally unforeseen event, so I remain convinced that one will not occur. If I had any money--which I do not--I would be long the "on the run" Greek Euros with a yield of around 6 1/2% Like the currency as well as what is happening on our side of the pond is hardly cause for optimism what with the very real possibility for a full blown constitutional crisis over this House health care vote looming this week-end. For their part, the Greeks are behaving rather well although for how long remains the real question. Just long enough is, I suspect, the answer.
More tomorrow. It's 60 degrees. Me and the Mutt are going for a walk
Wednesday, February 24, 2010
DUSTOFF 26
During the early days of Vietnam there was a certain HUEY pilot whose call sign was DUSTOFF 26. He flew Med Evac and as there weren't a lot of troops committed at the time, his call sign was often heard whenever an evacuation was needed. Over the course of the war, the call sign stuck; every med evac flight became know as a DUSTOFF. They saved a lot of guys at considerable cost to themselves so I thought from here on out, our Fed Chairman will no longer be known as Helicopter Ben but in honor of those brave guys we shall call him DUSTOFF.
DUSTOFF showed up on the Hill today in front of Barney and the boys. Yak Yak, Blah Blah. Things better but not great no change coming. Really a non-event. Hardly any talk about the governing legislation for the financial industry that is swirling about both the Senate and the House. I thought for sure one of those geniuses was going to ask him about derivatives in light of Arthur,Arthur's article of the other day (thank you Paul, for pointing out that Arthur, Arthur is conflicted seven ways to Sunday) but it never happened. Thank heavens for small favors
Anyway, to continue from our conclusion on Monday, there remains still a good deal of confusion as to the role derivatives played in the crisis primarily, I think, because the term is being used in connection with what happened with AIG with the focus being almost entirely on AIG. I suppose one could say that the instruments created by AIG which are the focus of all the conversation are technically derivatives but in fact they are really somewhat esoteric insurance policies not unlike, in their purpose, forms of guarantees that have been used by financiers since some Medici back in 14-something wrote a guarantee or a special purpose letter of credit in favor of Da Vinci completing some work for a buddy in Firenze. They have been around for years. Of course the quants on the street had to get fancy and support the creation of the same with all sorts of formulae to explain the risk profile allowing other quants to price the damn things so that a market could be made in them forgetting, of course, that none of this brain power was worth a crap if nobody wanted to buy them which, in the terms of the market is stated there being no bid. But, before these things got sliced and diced it was a series of fairly straightforward transactions between risk-takers and hedgers of risk with a finite number involved. No method of transparency would have improved upon the situation. Please keep in mind that underneath all of the underwriting done by AIG there should have been an asset: in other words if one were to call on the guarantee that which was the object of the guarantee would have to be delivered--sort of a "no tickee, no washee," as we used to say in the good old days before PC. But AIG, MBIA and the other geniuses who wrote this stuff were so sure of their math that they allowed their contracts to include the ability of the purchasers to require additional collateral if either the perceived credit of the underlying risk or its guarantor deteriorated. In short, they screwed themselves. And now, Houston, we had a problem. Irrespective of ownership of the underlying assets the guarantors were now required to pay up to the counterparties without an off-setting return of the guaranteed assets. With all respect to Arthur, Arthur, the problem was not transparency but plain ol' stupidity on the part of the underwriters. Hubris kills you every time in the end. That's not to say exchanges aren't a good idea; it's not to say more transparency is bad but it is to say that if you are arrogant and stupid and get into a business you know little about while suffering from all of the above you will probably get killed despite being as transparent as you can be. I'm all for improvement but let's first understand what happened and why before we go racing out to solve the unsolvable. Bold statement: This was a failure of market understanding and of management. We will never know but if the board of AIG had not been cowed by the dreadful Spitzer and fired Hank Greenberg this would not have happened. Government intrusion into business for the purpose of personal political gain. This is the result.
DUSTOFF showed up on the Hill today in front of Barney and the boys. Yak Yak, Blah Blah. Things better but not great no change coming. Really a non-event. Hardly any talk about the governing legislation for the financial industry that is swirling about both the Senate and the House. I thought for sure one of those geniuses was going to ask him about derivatives in light of Arthur,Arthur's article of the other day (thank you Paul, for pointing out that Arthur, Arthur is conflicted seven ways to Sunday) but it never happened. Thank heavens for small favors
Anyway, to continue from our conclusion on Monday, there remains still a good deal of confusion as to the role derivatives played in the crisis primarily, I think, because the term is being used in connection with what happened with AIG with the focus being almost entirely on AIG. I suppose one could say that the instruments created by AIG which are the focus of all the conversation are technically derivatives but in fact they are really somewhat esoteric insurance policies not unlike, in their purpose, forms of guarantees that have been used by financiers since some Medici back in 14-something wrote a guarantee or a special purpose letter of credit in favor of Da Vinci completing some work for a buddy in Firenze. They have been around for years. Of course the quants on the street had to get fancy and support the creation of the same with all sorts of formulae to explain the risk profile allowing other quants to price the damn things so that a market could be made in them forgetting, of course, that none of this brain power was worth a crap if nobody wanted to buy them which, in the terms of the market is stated there being no bid. But, before these things got sliced and diced it was a series of fairly straightforward transactions between risk-takers and hedgers of risk with a finite number involved. No method of transparency would have improved upon the situation. Please keep in mind that underneath all of the underwriting done by AIG there should have been an asset: in other words if one were to call on the guarantee that which was the object of the guarantee would have to be delivered--sort of a "no tickee, no washee," as we used to say in the good old days before PC. But AIG, MBIA and the other geniuses who wrote this stuff were so sure of their math that they allowed their contracts to include the ability of the purchasers to require additional collateral if either the perceived credit of the underlying risk or its guarantor deteriorated. In short, they screwed themselves. And now, Houston, we had a problem. Irrespective of ownership of the underlying assets the guarantors were now required to pay up to the counterparties without an off-setting return of the guaranteed assets. With all respect to Arthur, Arthur, the problem was not transparency but plain ol' stupidity on the part of the underwriters. Hubris kills you every time in the end. That's not to say exchanges aren't a good idea; it's not to say more transparency is bad but it is to say that if you are arrogant and stupid and get into a business you know little about while suffering from all of the above you will probably get killed despite being as transparent as you can be. I'm all for improvement but let's first understand what happened and why before we go racing out to solve the unsolvable. Bold statement: This was a failure of market understanding and of management. We will never know but if the board of AIG had not been cowed by the dreadful Spitzer and fired Hank Greenberg this would not have happened. Government intrusion into business for the purpose of personal political gain. This is the result.
Wednesday, January 27, 2010
...AND ON THE SEVENTH DAY
God rested. But he got bored and he said to himself, "Ah, let me fool around with this creation stuff and make a few things that re a bit different. And so he made aardvarks, and marsupials and all sorts of weird, one-of-a-kind animals. He also fooled around with humans, making a sub-species that looked like regular humans but were considerably less intelligent--stupid really--just for amusement. Today, we call this sub-species Congressmen.
They were on full display today as the Townes committee interviewed The Suit. By the by, have you noticed that Mr. Townes looks exactly like Howdy Doody? Honest to God I was looking for Buffalo Bob Smith to pop up behind this guy. SURPRISE! Look, I pull this string and his mouth moves! Intellectually, Mr. Townes is one of the stars so it is no surprise that The Suit put on a terrific show. When he's on, he's on and give him a bunch of straight men like this and brother, he was ON!
The subject was the AIG situation and it became immediately apparent that having received 250,000 subpoenaed not one congressperson had read more than a page. My son, who works within the Beltway hit it right on the head:
"Dad, all these people do is raise money for reelection. They have 20+ staffers and do what the staffers tell them to do." He should know; he was a staffer.
As you know I think the NY Fed could have done better with the AIG situation. I think that the inability of the Fed to guarantee the AIG obligations as it would have been illegal for them to do so should have led them to a market based effort involving making a market in the CDOs central to the issue. I do not know whether this was considered but having failed to adopt that approach the Fed really had little leverage against the banks. What did come out today that was not generally well known was that the rating agencies informed the Fed right in the middle of the mess that they were about to downgrade AIG which, had it occurred, would have created an event of default not only as to the CDOs but as to the insurance business as well. AIG was not the only insurance company involved in this business. The reaction of the market would have been catastrophic. I don't like Mr. Geithner; I don't think he should have been appointed to his present position but then he got it right. Had any of these so-called law makers had been asked to make a decision such as that the people in New York were asked to make I suspect they would have soiled themselves. They are disgraceful and they are liars as well. Practically every one of them accused the Fed of hiding the fact that the banks were being paid 100 cents on the dollar. Crap. I cursory reading of the Times and the Journal would show that the full payout had been reported for days. EVERYONE knew except these clowns.
The Suit also said something that should have sent chills down the spine of every one of these fools but of course they missed it. Speaking to the point as to who was watching the store Geithner said that the insurance commissioners in probably 30 states had no idea in what businesses the companies they oversaw were involved. No reaction. None. Zip. Nada. And this is the financial oversight committee of the Congress of the United States. We're doomed.
They were on full display today as the Townes committee interviewed The Suit. By the by, have you noticed that Mr. Townes looks exactly like Howdy Doody? Honest to God I was looking for Buffalo Bob Smith to pop up behind this guy. SURPRISE! Look, I pull this string and his mouth moves! Intellectually, Mr. Townes is one of the stars so it is no surprise that The Suit put on a terrific show. When he's on, he's on and give him a bunch of straight men like this and brother, he was ON!
The subject was the AIG situation and it became immediately apparent that having received 250,000 subpoenaed not one congressperson had read more than a page. My son, who works within the Beltway hit it right on the head:
"Dad, all these people do is raise money for reelection. They have 20+ staffers and do what the staffers tell them to do." He should know; he was a staffer.
As you know I think the NY Fed could have done better with the AIG situation. I think that the inability of the Fed to guarantee the AIG obligations as it would have been illegal for them to do so should have led them to a market based effort involving making a market in the CDOs central to the issue. I do not know whether this was considered but having failed to adopt that approach the Fed really had little leverage against the banks. What did come out today that was not generally well known was that the rating agencies informed the Fed right in the middle of the mess that they were about to downgrade AIG which, had it occurred, would have created an event of default not only as to the CDOs but as to the insurance business as well. AIG was not the only insurance company involved in this business. The reaction of the market would have been catastrophic. I don't like Mr. Geithner; I don't think he should have been appointed to his present position but then he got it right. Had any of these so-called law makers had been asked to make a decision such as that the people in New York were asked to make I suspect they would have soiled themselves. They are disgraceful and they are liars as well. Practically every one of them accused the Fed of hiding the fact that the banks were being paid 100 cents on the dollar. Crap. I cursory reading of the Times and the Journal would show that the full payout had been reported for days. EVERYONE knew except these clowns.
The Suit also said something that should have sent chills down the spine of every one of these fools but of course they missed it. Speaking to the point as to who was watching the store Geithner said that the insurance commissioners in probably 30 states had no idea in what businesses the companies they oversaw were involved. No reaction. None. Zip. Nada. And this is the financial oversight committee of the Congress of the United States. We're doomed.
Tuesday, January 26, 2010
MOMMA SAID...
Woke up this morning to discover that something happened to last night's posting: 1/5 got posted. No luck retrieving the rest (which of course was brilliant). The dog was sick as, well, a dog and the wife went to panic stations. Nurse Charlie was trying to get her to move and eat and pee and drink (the dog not the wife) while the latter was on the phone to the vet. Appointment in the afternoon by which time the dog was fine but the marital relationship had suffered. Cost: $120. Being able to tell the wife I told you so: priceless. Of course I'm now sharing the dog's house and missed the blog. See you tomorrow.
Be sure to watch the Hill testimony on AIG tomorrow. Rep Issa is on a which hunt, the jerk.
... there'd be days like this my Momma said...
Be sure to watch the Hill testimony on AIG tomorrow. Rep Issa is on a which hunt, the jerk.
... there'd be days like this my Momma said...
Friday, January 22, 2010
BETTY GRABLE
Talk about legs! The story was continued today in a manner that defies description and comprehension. Just when folks were beginning to get their arms around The Leader's statement of yesterday to which he has now attached Volker's name, it seemed that every Dumbo...eh...Democrat legislator jumped up to announce that they were not about to support Ben Bernanke's reappointment. Immediately, the leadership announced that they weren't sure they had the votes and delayed the confrontation until next week. Most folks had already concluded that The Suit was toast but the destruction of the administration's entire financial team had never been given serious credence except for a few viewers on the fringe. Reality then struck.
You gotta feel sorry for ol' Helicopter Ben. One should never trust a politician especially this present layer of pond scum that inhabits D.C. but having compromised every principal he had he rightfully might have expected better treatment than this. Didn't happen. The Leader, having decided that rank populism is the way out for him led by bashing anything that looks financial, dragged members of his party into that self-dug septic tank and the hell with anything or anybody that was in the way. It may be self-delusion on my part but I think that the public is warming to the idea that one can rely on nothing this guy says and that this administration is in the first phase of a death spiral from which they may not emerge. The stock market tanked again and I wouldn't be surprised to see a major correction beginning next week and unless there's somebody around to restore confidence the whispers of "double-dip" may become shouts. Not good.
If this wasn't enough, up pops Barney Baby announcing that he's about to end Fanny and Freddie's lives and replace them with something else. Once again The Suit was no where to be seen. And while this was going on The Leader was out in Ohio, tie-less talking to the working man. If he was Mexican I think he'd be wearing a leather jacket and screaming, "COMPADRES" at all and sundry that faced him. What a schtick!
Look, I'm not hoping for doomsday to arrive but this administration makes one yearn for the good old days of Jimmy Carter. Gang, unless somebody comes into touch with reality we could be in real trouble. Whether The Leader and Tall Paul have it right by the banks is rapidly becoming immaterial in an administration that is living in fairy coo-coo land. ... --- ... if anybody still remembers Morse Code.
Tough weekend coming up. Colts vs. the J E T S JETS! JETS! JETS! I'm torn
You gotta feel sorry for ol' Helicopter Ben. One should never trust a politician especially this present layer of pond scum that inhabits D.C. but having compromised every principal he had he rightfully might have expected better treatment than this. Didn't happen. The Leader, having decided that rank populism is the way out for him led by bashing anything that looks financial, dragged members of his party into that self-dug septic tank and the hell with anything or anybody that was in the way. It may be self-delusion on my part but I think that the public is warming to the idea that one can rely on nothing this guy says and that this administration is in the first phase of a death spiral from which they may not emerge. The stock market tanked again and I wouldn't be surprised to see a major correction beginning next week and unless there's somebody around to restore confidence the whispers of "double-dip" may become shouts. Not good.
If this wasn't enough, up pops Barney Baby announcing that he's about to end Fanny and Freddie's lives and replace them with something else. Once again The Suit was no where to be seen. And while this was going on The Leader was out in Ohio, tie-less talking to the working man. If he was Mexican I think he'd be wearing a leather jacket and screaming, "COMPADRES" at all and sundry that faced him. What a schtick!
Look, I'm not hoping for doomsday to arrive but this administration makes one yearn for the good old days of Jimmy Carter. Gang, unless somebody comes into touch with reality we could be in real trouble. Whether The Leader and Tall Paul have it right by the banks is rapidly becoming immaterial in an administration that is living in fairy coo-coo land. ... --- ... if anybody still remembers Morse Code.
Tough weekend coming up. Colts vs. the J E T S JETS! JETS! JETS! I'm torn
Thursday, January 21, 2010
CHANGE OF PLANS
No C. Fred today. Today was simply too bizarre to let slip by without comment
The day started slowly with the stock market in a bit of a funk primarily over the reports of monetary tightening in China. The, right on the dot for a change at 11:40 came The Leader, flanked on one side by Paul Volker and on the other by Bumbles Biden who rumor has to be the Vice President. The topic was the banks but rather than talk of taxes which everyone expected came this rambling, almost incoherent attack in the most populist of language culminating in the announcement that banks would no longer be able to trade for their own account (I think), have hedge funds (I think) use their deposits (I think) plus a whole bunch of other stuff...then exit stage left. The market, especially for financial shares tanked as The Leader was speaking. Even the talking heads, who are never at a loss for words didn't know what to make of it.
That wasn't bad enough. Two hours later, Barney Frank popped up to say that yeah, he supported what The Leader said, but it wasn't about to happen except on Barney's timetable which was 3-5 years. The market recovered for a brief period then really tanked as everyone seemed to realize that nobody knew what the hell was going on.
I'm exaggerating for effect of course and what everyone meant will come out in the clear tomorrow but I'd like to make a couple of points apart from the actual meaning of the two statements today.
1. What the hell The Leader is doing with a show like this with confidence in his administration a a low ebb and having just gotten his butt kicked in Mass is beyond me.
2. That Barney Frank can feel confident enough to stand up and in effect say I don't care what The Leader says, this is happening on my watch in my time frame tells me The Leader aint got much for street creds.
3. On every international initiative up to this point, The Leader has been essentially ignored. After this week we could be looking at the greatest collapse of American influence since the War of 1812 . If Barney feels he can tell the leader of his party to mind his own business, Foggy Bottom has a problem.
4. The Suit was nowhere to be found in all this. Methinks The Suit is toast.
5. Business confidence in this mob is slipping fast. We could be in deep do-do by mid year.
C. Fred tomorrow unless this tale has legs
The day started slowly with the stock market in a bit of a funk primarily over the reports of monetary tightening in China. The, right on the dot for a change at 11:40 came The Leader, flanked on one side by Paul Volker and on the other by Bumbles Biden who rumor has to be the Vice President. The topic was the banks but rather than talk of taxes which everyone expected came this rambling, almost incoherent attack in the most populist of language culminating in the announcement that banks would no longer be able to trade for their own account (I think), have hedge funds (I think) use their deposits (I think) plus a whole bunch of other stuff...then exit stage left. The market, especially for financial shares tanked as The Leader was speaking. Even the talking heads, who are never at a loss for words didn't know what to make of it.
That wasn't bad enough. Two hours later, Barney Frank popped up to say that yeah, he supported what The Leader said, but it wasn't about to happen except on Barney's timetable which was 3-5 years. The market recovered for a brief period then really tanked as everyone seemed to realize that nobody knew what the hell was going on.
I'm exaggerating for effect of course and what everyone meant will come out in the clear tomorrow but I'd like to make a couple of points apart from the actual meaning of the two statements today.
1. What the hell The Leader is doing with a show like this with confidence in his administration a a low ebb and having just gotten his butt kicked in Mass is beyond me.
2. That Barney Frank can feel confident enough to stand up and in effect say I don't care what The Leader says, this is happening on my watch in my time frame tells me The Leader aint got much for street creds.
3. On every international initiative up to this point, The Leader has been essentially ignored. After this week we could be looking at the greatest collapse of American influence since the War of 1812 . If Barney feels he can tell the leader of his party to mind his own business, Foggy Bottom has a problem.
4. The Suit was nowhere to be found in all this. Methinks The Suit is toast.
5. Business confidence in this mob is slipping fast. We could be in deep do-do by mid year.
C. Fred tomorrow unless this tale has legs
Monday, January 18, 2010
YO, PAULIE!
Wow, what a gig you got yourself. Dis is as good as that Tom Clancy Guy or james Patterson. Write a couple of best sellers or get a Nobel and pretty soon you can get people to write stuff for you and all you gotta do is put your name on it for it to sell. But I gotta tell ya Paulie, the difference wit you and dose utter two guys is dat dey put the utter guys name on the stuff so ifin it really stinks dey can say, "Well, you know how it is...I told ya I didn't do it." Take like da ting in da Times dis morning. Paulie, it's only got your name and whilst we knows you didn't write it 'cause you being a Noblist an all can't be dat stupid, you shouda put the guys name what wrote it so...what? You DID write it? Ah, Paulie, say it aint so.
If Paul Krugman had an ounce of street smarts that's what he would be hearing out where the real people live. While repeating the Big Lie that the stimulus package was too small but even at this level created jobs and stimulated the economy , he continues with the theory that it's really the banks that caused the entire thing and the lack of regulation during the Bush years.
It s becoming increasing apparent to anyone who isn't a Democratic Toad that there are multiple bad actors in this scenario but first and foremost was the Congress led by Barney and Chris. Fanny and Fred, constantly ignored by Krugman are key to an understanding of what went on. Remarkably, little interest has been paid to the fact that the worst offenders in the private financial community were not the banks, or more accurately, those institutions regulated by the Fed, but the other-regulated actors, the Bears, and the AIGs of this world.
Krugman compounds his mythical tale by leaping into the present claiming that the banks non-lending stance is complicating the problem for the poor Leader seemingly having no knowledge of the fact that before the crisis the banks, or at least the ones he so despises, were hardly the supplier of credit to the system. In 2007, the percentage of C & I loans (commercial and industrial) from commercial banks stood at 21%. Credit to American industry was not supplied by the banks but by a myriad of other sources all of which collapsed in the Crisis, but have now, to a goodly extent, returned.
To be sure, Mom & Pop businesses relied on banks for credit but not the Krugman-hated institutions. Guess what? They have withdrawn from local lending--especially real estate because
1. There clients are so uncertain of governmental policies going forward, few if any, are planning expansion, or to put it another was, there is little demand.
2. What policies have been discussed are contrary to economic growth
3. Why take a risk when monetary policy allows one to make a profit in the carry trade with little risk and NO USE OF CAPITAL (buy govvies and capital allocation is zero and The Leader and his deficits are creating A LOT of product to buy).
or so the bankers in my neck of the woods tell me. Krugman, like the mob surrounding The Leader are brilliant academic economists. Unfortunately, the real world is not something they understand or for that matter have any interest in understanding. If they did what they would hear is: "Yo Paulie! Get outta da way would ya! We done this before wit out you. We can do it again!"
If Paul Krugman had an ounce of street smarts that's what he would be hearing out where the real people live. While repeating the Big Lie that the stimulus package was too small but even at this level created jobs and stimulated the economy , he continues with the theory that it's really the banks that caused the entire thing and the lack of regulation during the Bush years.
It s becoming increasing apparent to anyone who isn't a Democratic Toad that there are multiple bad actors in this scenario but first and foremost was the Congress led by Barney and Chris. Fanny and Fred, constantly ignored by Krugman are key to an understanding of what went on. Remarkably, little interest has been paid to the fact that the worst offenders in the private financial community were not the banks, or more accurately, those institutions regulated by the Fed, but the other-regulated actors, the Bears, and the AIGs of this world.
Krugman compounds his mythical tale by leaping into the present claiming that the banks non-lending stance is complicating the problem for the poor Leader seemingly having no knowledge of the fact that before the crisis the banks, or at least the ones he so despises, were hardly the supplier of credit to the system. In 2007, the percentage of C & I loans (commercial and industrial) from commercial banks stood at 21%. Credit to American industry was not supplied by the banks but by a myriad of other sources all of which collapsed in the Crisis, but have now, to a goodly extent, returned.
To be sure, Mom & Pop businesses relied on banks for credit but not the Krugman-hated institutions. Guess what? They have withdrawn from local lending--especially real estate because
1. There clients are so uncertain of governmental policies going forward, few if any, are planning expansion, or to put it another was, there is little demand.
2. What policies have been discussed are contrary to economic growth
3. Why take a risk when monetary policy allows one to make a profit in the carry trade with little risk and NO USE OF CAPITAL (buy govvies and capital allocation is zero and The Leader and his deficits are creating A LOT of product to buy).
or so the bankers in my neck of the woods tell me. Krugman, like the mob surrounding The Leader are brilliant academic economists. Unfortunately, the real world is not something they understand or for that matter have any interest in understanding. If they did what they would hear is: "Yo Paulie! Get outta da way would ya! We done this before wit out you. We can do it again!"
Tuesday, January 12, 2010
WHAT A DIFFERENCE A DAY MAKES
Boy, was I wrong when I said not much was going on. Today exploded with action on the regulatory front all of which stank.
First, The Leader and his boys let it drop that they were trying to figure out ways to insure that the American Taxpayer gets all of his money from TARP back. Of course they couldn't give a damn about the taxpayer but here presented itself another way to lay a tax on the banks which they believe no one in the country cares about anyway. These guys are like Willie Sutton , who wen asked why he robbed banks replied,"Because that's where the money is." Actually, they are worse than Willie; he didn't lie about his reasons.
Anyway, what we have seen is that almost all the "banks" have repaid their TARP funds, with interest and with an additional healthy return generated for the USG by way of the sale of the warrants that were part of the deal. But it would appear that there might be a few problems along the way because if one remembers, a whole bunch of taxpayer money went to GM (now owned by the Gov.), GMAC, Chrysler, Chrysler Financial and AIG. That aint comin' back soon. Then of course there is the little matter of Fanny and Freddie, the makers of the feast about whom we have spoken ad nauseam over the months. So why tax the banks for the decision to bail out this bunch? Think Willie Sutton. Actually, if the actions of the Government were to be viewed from the prospectus of Cui Bono, why not tax the United Auto Workers? How far do you think that idea would get? Or better yet, is there a way to garnish the salaries of Congress? Just a little midwest populist jibe there, don't take me seriously. I'm a little past my "use by" date, but in my lifetime I have never seen a more venial, useless bunch than has been put together by The Leader and his handlers. These guys are the worst.
Well, let me rethink that. Came today Shelia ("Poo") Bair, head of the FDIC with another idea. With a split vote, the FDIC is now proposing a tiered level of deposit insurance to be paid by banks based upon the perception of risk that SOMEBODY will determine exists on the banks' balance sheets. To put it another way, she is proposing to tax liabilities (she claims it's not a tax) according to some credit determination made by SOMEBODY (you see, she doesn't have nearly the talent in house) at some point for some non-defined period of time. This is a Bair of very little brain. When questioned about this on TV this morning she was unable to come close to explaining her theory behind this. Nor has she apparently considered the fact that the cost of this hair brained scheme will be passed right through to the consumer depositors in the form of either lower interest payments, additional fees, reductions of service or all of the above including a few other delicious charges all of which will be blamed on the FDIC. Nor has she considered the fact that the two biggest risk takers, Goldie and Morgan Stanley have little if any consumer deposits but as bank holding companies they now come under the FDIC umbrella and the implied protection that that brings. If there is a X rated version of "Dumb and Dumber," she should be the star.
Finally, it now appears that Helicopter Ben may well be back in trouble as to his re-confirmation. He deserves it, the jerk, and on top of it all he is now in a nasty little open-air brawl with John Taylor, now of Stanford over the "Taylor Rule" which the good prof feels Mr. Bernanke has deliberately mis-catorgorized. Academics at each other's throats!! Hide the Children! I could care less if the Chairman gets himself into this little brawls except that it does no good for his institution in these times. Somebody had better start standing up for the only group of people who actually know what the hell is going on out there otherwise we are heading for a real mess if not catastrophy .
First, The Leader and his boys let it drop that they were trying to figure out ways to insure that the American Taxpayer gets all of his money from TARP back. Of course they couldn't give a damn about the taxpayer but here presented itself another way to lay a tax on the banks which they believe no one in the country cares about anyway. These guys are like Willie Sutton , who wen asked why he robbed banks replied,"Because that's where the money is." Actually, they are worse than Willie; he didn't lie about his reasons.
Anyway, what we have seen is that almost all the "banks" have repaid their TARP funds, with interest and with an additional healthy return generated for the USG by way of the sale of the warrants that were part of the deal. But it would appear that there might be a few problems along the way because if one remembers, a whole bunch of taxpayer money went to GM (now owned by the Gov.), GMAC, Chrysler, Chrysler Financial and AIG. That aint comin' back soon. Then of course there is the little matter of Fanny and Freddie, the makers of the feast about whom we have spoken ad nauseam over the months. So why tax the banks for the decision to bail out this bunch? Think Willie Sutton. Actually, if the actions of the Government were to be viewed from the prospectus of Cui Bono, why not tax the United Auto Workers? How far do you think that idea would get? Or better yet, is there a way to garnish the salaries of Congress? Just a little midwest populist jibe there, don't take me seriously. I'm a little past my "use by" date, but in my lifetime I have never seen a more venial, useless bunch than has been put together by The Leader and his handlers. These guys are the worst.
Well, let me rethink that. Came today Shelia ("Poo") Bair, head of the FDIC with another idea. With a split vote, the FDIC is now proposing a tiered level of deposit insurance to be paid by banks based upon the perception of risk that SOMEBODY will determine exists on the banks' balance sheets. To put it another way, she is proposing to tax liabilities (she claims it's not a tax) according to some credit determination made by SOMEBODY (you see, she doesn't have nearly the talent in house) at some point for some non-defined period of time. This is a Bair of very little brain. When questioned about this on TV this morning she was unable to come close to explaining her theory behind this. Nor has she apparently considered the fact that the cost of this hair brained scheme will be passed right through to the consumer depositors in the form of either lower interest payments, additional fees, reductions of service or all of the above including a few other delicious charges all of which will be blamed on the FDIC. Nor has she considered the fact that the two biggest risk takers, Goldie and Morgan Stanley have little if any consumer deposits but as bank holding companies they now come under the FDIC umbrella and the implied protection that that brings. If there is a X rated version of "Dumb and Dumber," she should be the star.
Finally, it now appears that Helicopter Ben may well be back in trouble as to his re-confirmation. He deserves it, the jerk, and on top of it all he is now in a nasty little open-air brawl with John Taylor, now of Stanford over the "Taylor Rule" which the good prof feels Mr. Bernanke has deliberately mis-catorgorized. Academics at each other's throats!! Hide the Children! I could care less if the Chairman gets himself into this little brawls except that it does no good for his institution in these times. Somebody had better start standing up for the only group of people who actually know what the hell is going on out there otherwise we are heading for a real mess if not catastrophy .
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