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oink, oink .....

oink, oink .....

It will be one of the world’s largest asset management firms with an impressive $700 billion war chest. Nothing short of the global economy depends on its success. 

And the Treasury Department has barely a month to get it up and running.

The bailout bill that President Bush quickly signed into law on Friday must do what financial experts have been unable to do for the last year - put a dollar value on mortgage-related assets that no one wants, move them off the books of ailing banks and unlock the frozen credit markets.

In signing the measure, Mr. Bush warned Americans not to expect instant results. “This will be done as expeditiously as possible, but it cannot be accomplished overnight. We’ll take the time necessary to design an effective program that achieves its objectives - and does not waste taxpayer dollars.”

Even after working feverishly over the last two weeks, the Treasury will not buy its first distressed asset from a bank for roughly six weeks, and almost certainly not until after the Nov. 4 elections.  

Treasury officials do not plan to manage the mortgage assets on their own. Instead, they will outsource nearly all of the work to professionals, who will oversee huge portfolios of bonds and other securities for a management fee.

The Treasury is expected to name a senior official to supervise the program. For now, various working groups creating the program are reporting directly to Henry M. Paulson Jr., the Treasury secretary.

Mr. Paulson has recruited several former colleagues from Goldman Sachs to advise him, though administration officials took pains to say that they were not dominating the process, pointing to other Treasury employees who were playing major roles.
“We will move rapidly to implement the new authorities, but we will also move methodically,” Mr. Paulson said in a statement after the House passed the bill on Friday.

The government will hire only a bare-bones internal staff of about two dozen people with expertise in asset management, accounting and legal issues, according to administration officials, and will outsource the bulk of the program to 5 to 10 asset management firms.

Administration officials said they had not yet selected the list of firms to run auctions or manage the assets. During the last few weeks, the Treasury has informally consulted major firms - including Black Rock, the Pacific Investment Management Company and Legg Mason - but none have been given a mandate, they said.

The selected asset management firms will receive a chunk of the$250 billion that Congress is allowing the Treasury to spend in the first phase of the bailout. Those firms will receive fees that are likely to be lower than the industry standard of 1 percent of assets, or $1 for every $100 under management. 

For Treasury Department, Now Comes Hard Part Of Bailout

plan B...

With No Plan B, House Reluctantly Passes Politically Risky Measure

By Jonathan Weisman, David Cho and Paul Kane
Washington Post Staff Writers
Saturday, October 4, 2008; A01

Henry M. Paulson Jr. was in his corner office in the Treasury Department on Monday afternoon, too nervous to turn on his television, when his chief of staff poked his head into the Treasury secretary's office to tell him the stunning news playing out on Capitol Hill: The House had just defeated the Wall Street rescue plan that Paulson had helped craft.

Within minutes, Paulson was on his way across the street to the White House, his senior staff hustling to keep up, for a meeting in the Roosevelt Room with the administration's economic team. There was no time for pleasantries, and before everyone had taken their seats, the former Goldman Sachs chief began firing off options.

Should they push for an immediate vote in the Senate? Should the Democratic leaders be flashed a green light to put together a bill that they could pass on their own, without Republicans? Should they make small changes to win over the dozen or so votes they would need on a second try in the House?

Forty-five minutes into the meeting, they were joined by President Bush, who asked the one question no one had considered: If his plan is not working, what is Plan B?

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Gus: reluctantly? Brother... Plan B was to let the "markets" sort themselves out rather than give moneys to those greedy monkeys who've bankrupted the place. But plan A should have been to help the poor folks at the bottom of the pile who got conned into these sticky risky mortgages that at most had a US$500,000 debt each over 30 years.

Taking this to extreme, I sorta add a few figures here which may or may not be wrong. Please, correct me if I'm on planet Bonkers...:

Now, the debt hole could be a small 5,000 trillions over 30 years (10 million homes at US$500,000 each). The banks have recovered some of these moneys in interest in the first couple of years of the "cheap" loans, say about 10 per cent of this value. the debt becomes thus about 4,500 trillions. over 30 years with reducible interest and expected climbing value of the homes say that represents about 150 trillion per year. Give or take half the value of this figjam, if everyone of these and more people default on payments forever, we're looking at a 100 trillion dollar hole per year, to which someone "might" still be able to resell the defaulted real estate for 90 trillions of return per year to new fully financed borrowers. (If the real estate can't be resold even at a fair loss, we're cactus.. Please note all this loose cannonball calculation explains why AIG has already burned 75 per cent of the US$80 billion loan from the Feds without having recued one single mortgage... Frightening.

Net deficit equals 10 trillions. Per year, more or less... until the real estate regain some greed value. This could be offset quickly by confidence but since it's not the only player in the pool of moneys, (count wars, need to slow consumption, oil, energy costs, et al) who knows.

This weird balancing act reminds me of a unique scale, at a lab once, that measured to a "nano-gram of a rat's fart" precision but was accurate only when the weight on the scale was above one kilogram... The mix had to be super-clean and the weighing had to be done under near vacuum conditions. Very very iffy... No fingers allowed.

Plan B would be to help the poor bums at the bottom of the scale pay the mortgages like get decent jobs for example, even on new capital works (like fixing bridges or becoming organic farmers, etc) and get the banks to reduce the interest rates to decent levels. Win-win for every one except... The next trick would be to make the hedgers, wedgers or whatever they call themselves take a dive to the bottom of the Pacific Ocean, joining the ever growing flotsam and jetsam there. Actually that should be plan A...

Have a good day.

screw you .....

As a rule, we may assume that any statute containing the word "emergency" in its title, preamble, or statement of purposes is a bad law. If you want an apt example, consider the Emergency Economic Stabilization Act of 2008, which the president signed into law on Friday, October 3, 2008, soon after its approval by the House of Representatives. Back in 1828, opponents of the tariff bill enacted in that year felt such outrage that they dubbed the law the Tariff of Abominations. With this precedent in mind, we might well refer to the bill just enacted as the Bailout of Abominations. 

Only four days earlier, the House had decisively voted down a proposed bailout bill put forward by the administration and congressional leaders of both parties. It seems that the people's denunciations of this bill had got their representatives' attention, at least for a day. The flood of phone calls and e-mails to congressional offices was said to have run more than 90 percent in opposition to a financial bailout. Never let it be said, however, that a bad bill - a bill so egregious that even the general public sees through its flimflam - can't be made worse. 

Sure enough, in the days after the bill's initial defeat, its managers took the monstrosity that had failed on Monday and made it even uglier. Their purpose, of course, was to buy off the bill's opponents in Congress by sweetening it with all sorts of more or less unrelated provisions intended to channel benefits to the opponents' constituents and supporters. In short, in Washington last week, business went on as usual: Congress is the name; corruption is the game. 

So, when this granddaddy of all bailouts was put up for a vote on Friday, many members of Congress suddenly realized how desperately the public interest required its passage, and it was passed by a wide margin. In the future, when you want to use that famous quotation "the public be damned," you can forget about citing William Vanderbilt and substitute the 110th Congress, which will go down in history as a gang that looked the people squarely in the eyes and said "screw you." 

The Bailout Of Abominations

the fuld factor .....

In 2006-that was just two years ago, when Wall Street still existed-the fifth highest-paid CEO in the United States, according to Forbes' annual roundup, was a man named Richard Fuld.  

Fuld sold enough shares in his company to make himself $122 million that year. This wasn't unusual for him: In five years, he'd reaped close to $376 million in total pay. 

The company that Fuld ran once was one of the leading investment banks in the country. It was called Lehman Bros. It is now defunct. 

In the annals of outrage over executive pay, Richard's Fuld's nine-figure payouts will occupy a fat chapter. It's people like Fuld who make a bailout of financial companies so hard to swallow for many-and why the bailout bill comes with caps on CEO pay. 

How could someone who messed up so badly have gotten paid so much for doing that? 

How Bad CEOs Get Rich

greedies versus do-gooders...

yes John...

But in his column today (7/10/08), Gerard Henderson manages to blame the good intentions of the bleeding hearts,  creepily including the deregulation alla Hawke and Keating for the problem, while glossing over with praise as usual the Costello/Howard years of fiscal restraint (constipation if you ask me, but)... If we listen to Gerard carefully, greed accounts for only a fraction of zero percent for the collapse of the financial markets. Put your hard hat and gumboots on:

The empirical evidence suggests that in so far as the financial crisis has been caused by what Americans term subprime lending - then the Democrats are as responsible for the mess as Republicans, if not more so. As Ralph R. Reiland pointed out late last month in the Pittsburgh Tribune-Review, "the roots of today's mortgage-based financial crisis can be traced back to the Community Reinvestment Act (CRA) which Jimmy Carter signed in 1977".

Put simply, three decades ago the Democrat administration responded to the demands of anti-poverty activists that banks should not discriminate against low-income earning minorities. Rather, they said banks should take affirmative action to meet the needs of low-income borrowers. And so the subprime loan phenomenon came to pass with the intention that banks should loan housing funds to clients who could not meet existing prudential regulations.
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No sir, no Gerard.
In the US, prudential regulations were pretty much non-existent at certain levels... The system made sure of that. The only thing that was holding the banks back in suckling the poor-bugger-area was that the poor did not ask for loans and the banks regarded the poor as too high risk — or they did not know they existed, except for pitiful amounts in saving accounts that cost the bank real money to keep opened... or food stamps to distribute...

As the poor section of the community was pointed out to the banking system by the "do-gooders" who hoped to help eliminate poverty and by governments in need to also help the economy via boosting the building industry (it was more or less the last viable hardcore thingy left in the homeland since all the other industries had flown to China, except those that involved the official laundering of money — the "market"), some people in the banking system realised there was a cunning opportunity, something to cream by creating a new kind of loan. Outrageous loans: cheap at first to pass below the radar, then designed to drive the poor into the ground by jacking up fees at will, introducing penalties and bumping interest rates beyond usury levels.

Foreclosure was nearly inevitable, thus, in the then climate of real estate prices going up and up, the banks could only win by reselling the property at a new higher price... Win-win boom... Further more these loans with their inbuilt crookery were on-sold in bundles for more than their real values, "because there was lots more money to be creamed of", in the "future".

These loan contracts should have been illegal. Even in the most of abject capitalist system.

Win-win for the greedy: the poor went back to where they came from and the banks made a tidy profit, including milking in the meantime any public or charitable assistance the poor may have received. What else do you want?

Wall Street CEOs creamed the excess in lavish bonuses for their magnificent management of the underlying process...

Banks are generally not generous institutions when they do not have to be. Even when they support community organisations and sports groups, there is a greater value perceived in advertising, and in being seen "good-willing", subliminally or not. Governments should have seen that, everybody should have seen that. In the eight years of his tenure, Bush  — and especially Greenspan — should have seen that. I believe they saw it coming... There was little or not an ounce of goodwill in the system. The "generosity" of the do-gooders was happily greedily mopped up by the banks and other financial institutions. Greenspan was the worse offender, whispering sweet-nothing to everybody to make them believe everything was fine-tuned, while he had to know that, secretly, things were already arse up. Many in the rich con-game would have known. Some on the lower rung would have known too and were ready to start tightening their butts.

So when there was no more poor to milk in the US  — they could not be milked in Europe because of real regulations and, spew-spew, "socialist"'s policies... the African poor were already under the influence of the Nigerian schemers, the Chinese would not have a bar of it and the Ruskies under Putin were too clever to let real greedy capitalism in the door — the system clogged up, sputtered then became very sick.

After the cream had been taken off, there was a deficit of 10 trillion dollars per year to be accounted for the subprime loans alone. The clever wedgers and clue-ey hedgers had already on-sold their stinky lots to the Europeans and were already soaking up the sun in the Bahamas with fortunes hidden in the Liechtenstein... Greedies:10 — Dogooders: nil... Referee: Black eye and a kick in the balls...

In their paradise, the greedies do not care much (even if sea level rise due to global warming, they just move up the beach), while the taxpayers weather the storm and foot the bill.  Then the greedy bunch will come back, all tanned, relaxed and ready to kick-ass again with more devious schemes — or, of all ironies, be put in charge of the "rescue" package.

Bring the party hats and pop the French champagne corks. Let the 15,000 horse power of the yacht roar, quietly...

We never learn.

End of story. 

not enough digits...

The US government's debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiralling figure.

The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount.

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see toon at top and blog above...

oink, oink, oink...

The existence of the White House effort to turn federal officials into instruments of the 2006 Republican campaign effort is already well known, as well as the existence of a so-called "asset deployment" strategy involving senior appointees in every federal agency. But the House report, based on a review of more than 63,000 pages of internal documents, includes fresh details about which Cabinet members participated and who benefited.

Chaired by Rep. Henry A. Waxman (D-Calif.), the committee makes clear in the report that Bush is hardly the first president to try to squeeze reelection support from the federal bureaucracy. It notes that one of President Bill Clinton's White House aides met with Cabinet secretaries and other senior appointees to brief them on tough races before the 1994 election, a precursor to at least 22 similar briefings that Bush aides conducted for top political appointees at 20 agencies between 2005 and 2007.