Washington must be reading my blog...

...and just stealing the metaphors instead of heeding its advice. I told you - the banks will be nationalized. This has been part of the Master Plan from the start.

clipped from www.ft.com Nationalisation, long regarded in Washington as a folly of Europeans, is gaining rapid ground among US opinion-formers Lindsey Graham, a Republican senator for South Carolina, said that many of his colleagues, including John McCain, the defeated presidential candidate, agreed with his view that nationalisation of some banks should be “on the table”. “You should not get caught up on a word [nationalisation],” he told the Financial Times in an interview. “I would argue that we cannot be ideologically a little bit pregnant." Barack Obama has recently moved more towards what he calls the “Swedish model”: In the early 1990s, Sweden nationalised its banking sector then auctioned banks, having cleaned up their balance sheets. Mr Obama made it clear last week that he favoured this model over the piecemeal approach taken in Japan. Senior administration officials acknowledge that the financial rescue plan unveiled last week could result in the temporary nationalisation of some weak banks.

You can't be half pregnant

Why would the government want to convert their high-dividend yielding (and theoretically profitable, as they're financed with low-yield debt) preferred nonvoting shares in the banks into voting common stock?
At least Goldman wised up and is pulling out of this TRAP as quickly as they can. I can only foolishly hope that the rest of the banks who were forced to accept government money by Paulson and Bernanke will follow suit quickly, lest they become just another foot solider of the government forced into sodomizing itself at the whim of deranged puppetmasters who refuse to learn from history (or even yesterday's news) and care only about elevating their populist pulpit, even if they have to build it with soiled paper bricks and toxic mortar (see the Fannie Mae article from yeserday).

clipped from www.reuters.com Policymakers are considering an idea that the government change its existing holdings in the banks, which have taken the form of preferred shares -- non-voting stock that carries a fixed dividend -- into convertible preferred shares that could be converted into common stock, the paper said. Under this proposal, the shares would automatically convert into common equity if there was a decline in the bank's health, as measured by its tangible equity ratio, for example, the paper reported. The Obama administration is considering an expansion of the Federal Reserve's consumer-lending facility, known as the Term Asset-Backed-Securities Loan Facility (TALF) that could potentially buy up toxic assets clogging the system, the Wall Street Journal said, citing people familiar with the plans.

First Socialist National Bank

I could care less about executive compensation, and quite frankly most CEOs should be taken out back and shot by the shareholders for selling their companies out to the government by accepting TARP money, especially when not every bank needed it – but every big bank was required to take it by Paulson and Bernanke on that fateful weekend when capitalism got its first fatal stab in the back.

Here’s the thing that absolutely nobody in Washington or Main Street understands: virtually all of those bonuses were paid to the employees who earned them because of their performance. The CEOs did not take a dime (nor should they have done anything but write a suicide note). While it’s great to rouse the peons with claims that banks paid employees millions “just for showing up” and “pushing paper around” that has never been the case. It’s true that an employee who consistently produced for many years, but then had an off year, would still be paid a [much smaller] bonus – because the bank understood correctly that it’s likely that this employee will generate revenue again, and did not want him to quit. There are virtually no cases, however, where an employee who routinely lost money for the bank was retained, let alone paid a bonus (case in point – almost everyone on mortgage desks was let go way before anyone started talking about a bank bailout). Those who make the big bucks have quotas, if you fail to meet them for 2 or 3 years you’re out on your ass. This is how this business works.

Furthermore, and most importantly, a bonus is a percentage of revenue that you brought the bank. That is – these people are getting a fraction of what they directly contributed to the bank’s bottom line. The best traders and their teams can leave and make money elsewhere, and in fact there has been a massive outpouring of all the best talent from sell-side shops in 2008. This will, by grade school logic, result in far greater losses for the banks in the future. On the other hand, retaining an employee who on average brings in $10mm/year revenue for $2mm/year bonus isn’t a difficult choice in a rational world. Arbitrarily limiting that person’s comp just because some secretary in Nebraska who can't pay her mortgage and has 8 kids doesn’t make that much in her lifetime is a tenet of socialism.People in a capitalist society get paid based on what they earn, not based on what they need, or what the government thinks they should earn.

clipped from www.bloomberg.com President Barack Obama called bonus payouts at banks getting rescue funds “shameful” as he and Treasury Secretary Timothy Geithner announced the government will require financial companies getting aid in the future to cap compensation of top officials at $500,000 a year. A New York state comptroller report that $18.4 billion in bonuses were paid out to Wall Street executives and employees as the U.S. sank into a recession further inflamed Americans. “For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy, and I will not tolerate it as president,” Obama said. On Wall Street, there is concern that compensation curbs would hinder a company’s ability to attract top-notch employees, and that would lead to a talent drain, Meredith Whitney, an analyst at Oppenheimer & Co., said on Bloomberg Television. “If you cap compensation, the best and the brightest are still going to figure out a way to make money and it may not be on Wall Street, when those minds are needed most,” Whitney said. William Cohan, a former investment banker at Lazard Ltd. and JPMorgan and author of “The Last Tycoons” about Lazard, disputed that notion.“What do they do? They push paper around,” Cohan said, “Where else can you get paid $500,000 to do that?” Senator Claire McCaskill, said small-business owners are calling the bonuses “obscene” and other lawmakers say they are getting angry calls and mail from constituents on the subject. McCaskill said today the Obama plan is in line with what lawmakers are seeking in an effort to change “the arrogant, greedy culture that created this mess in the first place.”