Now I am madder! Reading an article in the Wall Street Journal today made me so mad I am not even finished reading it yet and I had to write this post.
I just got finished reading an article on Bloomberg about the incompetent SEC and their blatant and pointed failure to investigate short sellers or otherwise enforce any of the rules on the books with respect to short selling for years. It appears anyone with half a brain in the industry will tell you the shorts drove Bear and Lehman out of business. I mean this game has been going on for over a century. The fines that were levied were by the NYSE or the AMEX and who got the largest fine since July 2006 from the NYSE? None other than J.P. Morgan Securities. This is all old school BS from the Blue Blood firms on Wall Street who have been putting their competitors out of business when the opportunity arises for over a century.
Yea, that article did not piss me off so much because I have been writing for years how incompetent the SEC is / was / and will be for to long to be surprised or pissed off by anything those num-nuts did or did not do.
But this WSJ article... That is a different story.
So we have this Geithner protégé of Paulson and his infinite wisdom of continuing the print money and bail out Wall Street mentality he was trained into talking about is brilliant scheme to pump over $1 Trillion of cash into the hands of hedge funds or whoever is willing to then buy debt with it. Yea, OK, so it is bad enough that the Treasury / Fed / Guaranteed debt program has practically BEEN the debt markets for going on 6 months now but now we are going to expand it for another 6-9 months only through the avenue of the unregulated markets.
Yea, that is what I said. We are asking the pigs in the unregulated markets to bail out the "shadow banking system" i.e.; the business model that you borrow money from the "markets" and lend it to consumers to buy shit when you are not a bank and are not regulated like the banking industry.
Side note: I remember back in 1989, during the last real estate / banking / S&L / junk debt market bubble imploded and my mother was taking money from investors and buying foreclosures with it and flipping them and she got a letter from the MD State Banking regulator inquiring whether she was acting as a bank, taking deposits and paying a rate of return. This was basically harassment instigated by a local bank that obviously was not pleased by the competition she may or may have not posed to the property developer owners of the bank. Needless to say, since then it seems any organization could raise money from just about anywhere and lend it out so long as they did not open "retail" branches.
OK, so the Obama Administration's stance on pay for the participants:
To encourage investor participation, the Treasury believes participants in the program shouldn't be subject to executive-pay rules imposed by Congress. The law authorizing the $700 billion bailout and a provision in the $787 billion stimulus package impose tough pay restrictions on firms that receive government funds, including limits on bonuses.
Of course not. These people are hurting. I mean I just got finished reading about Greenwich's "Rodeo Drive" and the impact of these hedge fund folks declining income levels. God forbid we subject an unregulated industry to some kind of cap on how much of the cash they can strip from the government handout. I mean, the government is already willing to take a 10% loss. Now if I were a smart hedge fund manager, I would be willing to jump in and buy assets now only if I thought 1) they have fallen so far there is little to no risk buying them and 2) with a 10% write-off by the government up front, I know I can take my cut because I can easily beat the pathetic odds a desperate bunch of rookies in Washington are willing to give away to play this game.
This is a good one:
Administration officials are hoping the public will draw a distinction between financial firms that receive a government rescue, such as AIG, and those such as hedge funds and private-equity firms that participate as investors in broad government programs.
Let me rephrase this for you. The Administration officials are hoping the public is just stupid enough to allow them to take taxpayer money and give it to a bunch of unregulated pigs who are directly responsible for much of the malign in the financial markets right now and differentiate between those pigs and the other ones that Paulson bailed out last fall when he gave AIG $80 Billion that promptly went into the accounts of his former firm who was made whole on the worthless paper they held from AIG while managing to make a fortune shorting the stock and on AIG CDS's bought from third parties. Goldman knew the contracts AIG sold them would bankrupt AIG as there was no way in hell any company could cough up the kind of collateral needed to cover the contracts AIG sold for pennies on the dollar that covered billions in debt.
Read this:
Targeting mortgages that banks no longer want to hold, the Treasury and the FDIC will provide financing to buyers. The FDIC will auction off pools of loans that a bank wants to sell and will become a co-owner by forming a partnership with the highest bidder.
The partnership will then raise FDIC-guaranteed debt to finance a portion of the purchase price, with the Treasury willing to kick in between 50% and 80% of the equity needed to buy the assets. The Treasury will be an equal investor in the partnerships.
Why the F*** are they bothering with the private industry at all? Because the government is trying desperately to figure out how to make their buddies "whole" again. I mean, when the dot com crash hit shortly after dragging some long established companies in the toilet with them (along with the telecom industry, the Enrons' etc.) what a better way to dole out big fat government checks then to have a war?
Well the peace-nic administration is up to its eyeballs in war, debt, bankruptcies and the like. So how in the hell are they going to keep the artificial free market economy with it's consolidated global financial industry (not to mention almost total consolidation of every other GD industry in the US) afloat? Print money! Yea. And don't forget, include the unregulated financial markets, and don't forget, take the vast majority of the risk for further write downs or financial collapse, and don't forget, we are all partners here:-) Smiles for everyone. Back to Greenwich and "Rodeo Drive".
Oh don't forget:
Lastly, the government will expand the Fed's Term Asset-Backed Securities Loan Facility, or TALF, to help absorb risky assets dating back several years.
Yea, ingenious.
Lastly I am absolutely dumfounded pissed at the insistence of calling the s*** the banks bought over the past few years "assets".
In an op-ed piece in Monday's Wall Street Journal, Mr. Geithner wrote that the efforts will help tackle the glut of assets clogging bank balance sheets and will help provide some kind of normal price for these assets, which the Treasury believes are currently undervalued.
God Damnit, the stuff is worthless paper. Get over it. It is gone, lost, worthless. Write the S*** off and if you go under so be it. There are plenty of folks out of a job from the financial sector who are perfectly capable of opening a fricken retail bank to serve the rest of us lowly servant citizens...
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