Thursday, April 29, 2010
Failborger, Failborger, Chit,Chit, No bailout? Choke.
'You're out of order! You're out of order! The whole trial is out of order! They're out of order! It's just a show! It's a show! It's "Let's Make A Deal"! "Let's Make A Deal"!'
Since the players are looking to beat the casino, the dealers are watching the players. The box men are watching the dealers. The floor men are watching the box men. The pit bosses are watching the floor men. The shift bosses are watching the pit bosses. The casino manager is watching the shift bosses. I'm watching the casino manager. And the eye-in-the-sky is watching us all. Back home, they would have put me in jail for what I'm doing. Here, they're giving me awards.
'Well I am certainly wiser than this man. It is only too likely that neither of us has any knowledge to boast of; but he thinks that he knows something which he does not know, whereas I am quite conscious of my ignorance. At any rate it seems that I am wiser than he is to this small extent, that I do not think that I know what I do not know.'
'Instead of rating the man by his performances, we rate too frequently the performances by the man.'
New York Post via The King Report
By Paul Tharp
'A 90-percent tax on all bonuses in banking and financial services to a quadrupling of dividend taxes on portfolios, to 40 percent...a bedroom in the country's fabled seaside villas will get hit with a 20 percent surcharge -- on top of property taxes that will triple...The new laws forbid cash transactions above $2,000 at businesses, requiring they be paid with checks or credit cards under the threat of seizing shops for violations. Athens also will start paying whistle-blowers a 10-percent bounty on all cash recovered from tax cheats and clawbacks from secret banks abroad...tax breaks are being abolished...the self- employed who'll have to forfeit their long-held income tax rates of as low as 5 percent. They'll now have to pay 40 percent on incomes above about $52,000. ...Any household making more than $82,500 will pay a 40-percent tax, and those with income over $130,000 will pay a new top rate of 45 percent, each amounting to a 5-percent jump. Only those making $15,600 and under will escape the tax ax.'
The above is a description of the reasonable austerity measures that Greece will be expected to implement.
Good luck with that. What is Greek for 'Bazooka meet doom-cycle?'.
Dance recital for a young-un this morning so watching the baby until the sitter arrives...this disclosure for purposes of explaining why your humble blogger had Hee-Haw on without the sound muted.
Anywho caught some kommentator clutching a venti and asking a union leader that was organizing a demonstration outside Wall Street why he was being so... gosh golly... negative?
Can't we all just get along?
I mean, golly gee, the aphorism 'Failure to liquidate the insolvent banksters has led to the liquidation of a large part of the productive economy. A taxpayer financed bailout of rich folks' bad speculative bets has resulted in zombie banks and zombie customers... a fiscal tide that lifts no boats' is well...so...2009! The banks need our support brother cause the demand restoration project ain't workin' yet!
On March 30th your humble blogger posted: 'Soon the debate will fall on the continuum of a double-dip caused by the counterproductive populism of bankster bashing versus the political palliative of misdirection through scapegoating.'
Cue Goldie Scoldie Show Trial puh-lease.
Heard about Ritholz's commentary on Goldie through Honest Abe in Barron's...
He makes 1 point, 'The claim Paulson & Co. were long $200 million dollars when they were actually short is a material misrepresentation — that’s Rule 10b-5, and its a no brainer. The rest is gravy.'
My understanding was that the equity tranche was not part of the final deal, so not sure what the point is. The reference to Paulson being long was conditional, in some initial memo. Yes? Was it in the final structure? Don't think so. That's damn weak stuff. Folks didn't read the final deal? Seriously?
The late great Mark Pittman once wryly noted that almost no one in the media knew what yield was. What do you think the odds are that these same folks have any clue as to how a structured offering is circled?
What other point does Ritholz make?
'What you don’t see are all the emails, depositions, interrogations, phone taps, etc. that the prosecutors know about and GS does not'. Uh.. well neither does Ritholz, so again, what is the point?
For folks that have never participated in a structured bond offering, who never saw the gurus whip up iterations on the back of napkins, who never witnessed slivers of equity being presented as burnt offerings to the rating agency Gods, the current pablum narrative would appear to be unassailable.
Now I wasn't privy to this deal getting circled but will hazard a guess as to what the equity tranche (Paulson going long in the intial) was all about...
Paulson was more than willing to put down a sliver of equity in order to secure the AAA, but once it was confirmed that the rating agencies would give the pixie dust lipstick without it, it went buh-bye...
The ratings agencies are the enemies of the people, the rest was 'enabled' noise.
The 'selection' process on almost any comparable structured product was a reverse engineering of the rating agencies 'models' that had been tinkered over time in collusion with their fee-paying clients for the end goal of getting the AAA on the selected pig.
Will Goldie be found greedy before guilty by an impartial jury? That first assumes you can get an impartial jury, but yeh sure why not? The whole system was guilty of this. This was the game.
However if every other bankster is not brought up on similar charges than this episode is nothing more than a political diversion, the political palliative of misdirection through scapegoating in order to quell the 'counterproductive' populism of bankster bashing.
Isn't it curious though that the MSM is highlighting emails of 'French to English' translated puns while giving short shrift to the rating agencies' billowing inferno of melting, not smoking, guns?
S&P employee (2006): “Rating agencies continue to create an even bigger monster — the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”
S&P employee(2006): “We rate every deal. It could be structured by cows and we would rate it.”
Moody employee(2006): “I am getting serious pushback from Goldman on a deal that they want to go to market with today."
Moody employee(2006): "They’ve become so beholden to their top issuers for revenue they have all developed a kind of Stockholm syndrome which they mistakenly tag as Customer Value creation."
Oh and get this, as the FT reports today: 'The terms of the CDO contracts highlight how lucrative these instruments were for the agencies, with annual pay-outs of up to $50,000 made to track deals. Ratings surveillance fees are still being paid on CDOs that have suffered "an event of default" ...even toxic CDOs can continue to exist for many years.'
Seriously you can't make this stuff up! These folks are like arsonists who push for the bomb-making material and then, after planting the bombs and lighting the fuses, extort the firemen and get a tax on the water.
Isn't it curious that the accepted 'political' dimension of the SEC's motivations on Goldie was to strengthen financial reform and not obfuscate the hand-slapping being enacted upon the rating agencies on the Hill? A financial reform bill that says nothing, sees nothing, and does nothing about the rating agencies? Yes, I know you're shocked by that.
Isn't it curious that the Grecian, Spanish and Portuguese downgrades were coincident with the purported cessation of our debt monetization? Now that's a real strong dollar policy folks.
As once posted way back when in December 2008 : 'If we can accomplish the Houidini-esque stunt of funding this debt at manageable levels it will only be by literally defining AAA as anything American (i.e. if America becomes AA then literally AA is the new AAA, with the assumption that the reasons for our 'downgrade' would serve as deleterious to all others, except maybe Mr. Gold.)
I believe this vision is playing out. We are the last canary, and the biggest domino. But given the magic of our reserve currency, our 'downgrade' will only occur within the context of the world being downgraded first.'
That is the magic of our reserve currency and the elixir of the rating agencies, ensconced safely on our shores, a fact that is truly in the national security interest of the United States.
At no time do their hands leave their arms.