The Credibility of Credit Agencies

Peter Chatwell is almost spot on here. He says that Moody's "report is a warning shot to governments, setting out the line that they can’t cross with their budgets." Actually, he's only off by a single letter.
This is Moody's putting on a show of the Burlesque variety, all tease and no tits, to convince someone, anyone, that they and their brethren credit agencies are even remotely relevant or accurate. Remember that these are the same companies that would, by their own admission, rate a "deal structured by cows." A long time ago I said that this crisis would cause the US to lose its AAA rating, but I've long since realized that the rating is meaningless - and that it will never change. The dubious relationship between a sell-side research analyst and his bank's top client appears downright honorable when compared to that of a rating agency and firms that write agencies checks to grade their bonds.
Look, you can't have Mark to Magic without the magicians, but now that the rabbit is out of the hat and into the frying pan the curtain must fall on this sideshow.

clipped from www.bloomberg.com. The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years. Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA. Achieving the fiscal consolidation necessary to avert a downgrade will test “social cohesion” and may involve rewriting the “social contract” between governments and their people, Cailleteau said. “People have to decide what level of pain they are willing to accept to have a healthy economy.”

The New State of the Union

clipped from dealbook.blogs.nytimes.com President Obama plans to call on Thursday for taxing about 50 big banks and major financial institutions for at least the next decade to recoup all taxpayer losses from the Wall Street bailout fund. While the banks maintain that taxpayers made money from the bailout to save them (many have repaid their federal funds with interest and the government also has made money in selling the banks’ warrants that it held as collateral), losses to the bailout fund are expected from money paid to rescue the automakers Chrysler and General Motors and the insurance giant American International Group, and from a program to help troubled homeowners avert foreclosures. The administration official said that the auto manufacturers and A.I.G., as well as the housing finance giants Fannie Mae and Freddie Mac, both of which now are under government conservatorships, are not in a financial position to be taxed to recover taxpayers’ losses. The administration is calling the tax a “financial crisis responsibility fee,”

Taxing those who paid their loans back early and at a profit to the American people to pay for failures who are explicitly excluded from the tax and calling it a "responsibility fee" is perverted irony that passes for logic in the current Administration.
I'm not saying the banks didn't have a hand in the crisis because that's just as absurd as saying that they were more responsible than Washington lawmakers gagged by lobbying bribes and regulators who should be charged with criminal negligence. Let's not forget the American people, so quick to let their fingers be pointed for them at an easily vilified target. Groupthink on this scale hasn't been seen in 70 years. Nobody wants to blame themselves when it's so much easier to demand reparations from the rich with your head held high. After all, in our culture that honors victims before heroes being impoverished connotes a certain moral superiority - which makes it all the easier to remind the wealthy of their noblesse oblige.

Robertson puts it in real simple terms for the fools on the Hill

...but somehow I doubt even these clear and irrefutable facts from one of the brightest minds in finance will make them listen.
When all you're thinking about is reelection, or your immediate problems - in the case of dimwitted constituents, it's hard to see past to the burgeoning debt load that will put a vice grip on future generations. At least we'll all be green - cars will be too expensive and dollars will be crowding out all other colors in landfills.

clipped from www.cnbc.com The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC. "It's almost Armageddon ... if the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent. It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.” “The other thing is, they're buying almost exclusively short-term debt. And that's what we are offering, because we can't sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.” "The U.S. has to quit spending, cut back, start saving, and scale backward," Robertson said. “I really do think the recession is at least temporarily over. But we haven't addressed so many of our problems and we are borrowing so much money that we can't possibly pay it back, unless the Chinese and Japanese buy our bonds.”

The SEC Puts Family First

The world's most inept regulator may have had more motives than mere stupidity for ignoring the glaring Madoff fraud.
Aside from Markopolous' clear evidence against Madoff, that he spelled out in a way that even community college JDs and analysts at the SEC could understand, their own lawyer found suspiciously mismatched trades and inconsistencies in strategies. Her boss told her to make like Helen Keller, however, because it would create a few awkward moments at his upcoming wedding. I wonder if he'll be kind enough to offer his homeless aunt a couch to crash on.

clipped from www.finalternatives.com A lawyer in the SEC’s Office of Compliance Inspections and Examinations, assigned to look into Madoff’s relationship with hedge funds, told her supervisor that information provided by the now-convicted Ponzi schemer didn’t add up. Walker-Lightfoot’s investigation uncovered a slew of inconsistencies in documents and filings from Madoff. She brought the matter to the attention of her supervisors, one of whom would go on to marry Madoff’s niece. He then told Walker-Lightfoot to hand her Madoff findings over to another SEC lawyer; shortly thereafter, the material was boxed for transfer.

Welcome to the bandwagon, Bill.

Bil Gross believes that the US will lose its AAA rating within 3-4 years, something I said when the details of TARP first emerged. Of course the credit rating agencies will be a bit scared to eradicate the concept of "risk free" as we know it, but like Mr. PIMCO said - the downgrade will be priced in regardless of what the ratings are on paper.
Jay-Z and Giselle were too quick to switch to Euros in 2007 (unless they cashed out between April and July of 2008), but now might be a good time to consider what currency, if any, you want to hold in your bank account. Barrels of oil and gold bars might not fit in a wallet, but they won't evaporate either.
Note: While I think Oil's run-up is fully merited, I would take some profit now and leave it on the sidelines until an inevitable dip that leads to another buying opportunity. The curve is still contango, but a lot less steep.

clipped from ftalphaville.ft.com Bill Gross, manager of the world’s biggest bond fund, warned on Thursday the US was “going the way of the UK” and will eventually lose its top AAA credit rating - a fear that had already spooked financial markets on Thursday and could keep the dollar, stocks and bonds under heavy selling pressure, reports Reuters. The US will face a downgrade in “at least three to four years, if that, but the market will recognise the problems before the rating services — just like it did today,” said Gross, co-chief investment officer of Pimco and manager of the Pimco Total Return Fund, which has $154bn in assets. clipped from www.usnews.com

Godfather Paulson made banks an offer they couldn't refuse

This is nothing new to anyone, especially considering what we already knew about the BofA/ML prearranged marriage, but now there's proof that Paulson was a government gangster.

clipped from www.bloomberg.com Former Treasury Secretary Henry Paulson said nine U.S. banks would have to accept $125 billion in government investments or be forced to by regulators. “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance” “Your nine firms represent a significant part of our financial system. Therefore, in our view, you must be central to any solution,” the memo said. Three and a half hours after the meeting was scheduled to begin, Paulson had obtained the bankers’ signatures on half-page forms along with the handwritten amount of the federal government’s investment, according to the documents. He announced the actions publicly the next day. “Most Americans are going to be uncomfortable with the government forcing the banks into this arrangement,” said Tom Fitton, president of Judicial Watch, a nonprofit research group in Washington that obtained the documents under a Freedom of Information Act request. “This is, in many ways, thuggery.”

Chrysler's bankrtuptcy undermines America as a Nation of Laws

Those evil hedge funds, the “small group of speculators” Obama so harshly critiqued for daring to be the Davids to his rampaging Goliath, are otherwise known as Senior Secured Bondholders, as in the creditors first in line to get paid - and they're going to get the shortest end of the stick, right up their butt.

"A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said.

Right, like the sacrifices that the UAW is making - giving up a few benefits and taking a small pay cut in exchange for majority control of the automakers (which will later on let them adjust their salaries to whatever they wish).

Some of the hedge funds, Obama said, demanded returns twice as high as other lenders were getting.

Senior secured bondholders are supposed to get the most money, in fact they're supposed to get paid out before anyone else gets a penny! The fact that this populist message resonates so loudly across the country speaks only to the citizens' legal illiteracy.

Does Obama’s team have even the modicum of rudimentary intelligence to recognize that in continuing to blatantly ignore and break our country’s laws they are ensuring that nobody in their right mind will ever want to invest in these companies ever again? How do they expect banks to shore up private capital or for programs like PPIP to work? The government's need for private sector help is only going to grow as it spirals further into debt, so it would be wise to cease alienating the investor class and start making real concessions and working together to save the economy.

Please read the full statement at blogs.wsj.com As of last night’s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country’s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money. To facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more. Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company’s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.

Jake DeSantis is a Real American

We need more people like Jake right now. He's not a hero, but true American in the classical Federalist sense. These are people who aren’t afraid to look tyranny right in the face and say “Don’t Tread On Me”.

When a government is using outright extortion to get money from its citizens, when banks are forced to accept unwanted capital that comes with retroactive strings manned by a maniacal puppeteer, when debate is condemned by the White House, when succeeding in the American Dream becomes a crime, when the constitution is spat on by every half-wit in Washington - that is when we need to look back upon our Founding Fathers for guidance and resist oppression.

"Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master." - George Washington

Please read the entire letter here.

clipped from www.nytimes.com The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G. I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Most of those responsible have left the company and have conspicuously escaped the public outrage. After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

Andew "Consigliere" Cumo makes AIG an offer they can't refuse

Seems like we've gone from mob rule to outright Mafia politics.

extortion (plural extortions)

1. the practice of extorting money or other property, especially by a public official, by the use of threats
2. Extortion, outwresting, or exaction is a criminal offense, which occurs, when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion. Refraining from doing harm is sometimes euphemistically called protection. Extortion is commonly practiced by organized crime groups and the US Government.

clipped from online.wsj.com A memo sent by an American International Group Inc. executive appears to advise employees in the company's Financial Products division that their willingness to give back controversial bonuses would spare them from being publicly identified by authorities. "To the extent that we meet certain participation targets, it is not expected that the names would be released, at all," said the memo. New York Attorney General Andrew Cuomo said last week he had received a list of employees that received retention bonuses at the AIG unit but wouldn't make the names public immediately. Late Monday, Mr. Cuomo said 15 of the top 20 AIG bonus recipients had agreed to give back their payments, amounting to more than $30 million in cash. The state attorney general said he's aiming to recoup the 47% of the total bonus pool received by American employees. He also said he sees no public interest in publicly releasing the names of people who return their bonuses.

Brace for Impact

This is redistribution of wealth – plain and simple. It’s coming with tomorrow’s vote.
First they made healthy banks take bailout money, which I have been saying since the beginning was designed to nationalize them through retroactive amendments, and now they are plowing ahead at full speed – their wheels greased by the minor incident at AIG (the $165mm of bonuses in question is 0.1% of the $173bn that the government gave the firm!!!). Stealing the bonus of every bank employee in order to punish these select few individuals is like carpet-bombing an entire village just to kill one low-level insurgent who could never impact the outcome of the war.
Couple this with the guillotine blade of stagflation rising ever higher over our heads and it is becoming clearer by the day that the American way as we know it is coming to an end.
I don’t really know what else to say, except get ready to fight for your right to life, liberty and the pursuit of happiness. Washington will do everything in its power to take it away and will feed whatever senseless propaganda is required to achieve this purpose to the eager mouths of its constituents, blinded by rage.

March 18 (Bloomberg) -- U.S. House Democrats plan a vote tomorrow on a measure imposing a 90 percent tax on executive bonuses paid by American International Group Inc. and other companies getting more than $5 billion in federal bailout funds. “I expect it to pass in overwhelmingly bipartisan fashion,” Majority Leader Steny Hoyer of Maryland told reporters today in Washington. House Speaker Nancy Pelosi of California said, “The American people are very upset about what they’ve heard about bonuses.”

The legislation would apply to bonuses paid to employees at companies such as Citigroup Inc. and Fannie Mae and Freddie Mac, said Ways and Means Committee Chairman Charles Rangel of New York.

The measure is the first legislative response to a political furor that erupted after insurer AIG, which got taxpayer-funded bailouts totaling $173 billion, paid $165 million in bonuses last week to 4,600 employees. Many receiving bonuses are in AIG’s financial products unit, the credit-default swaps subsidiary whose losses pushed the insurer to the brink of bankruptcy in September.

The measure was being drafted today as AIG Chief Executive Officer Edward Liddy told a House Financial Services subcommittee that he asked employees who got bonuses over $100,000 to repay half.

The 90 percent tax would apply to people with overall income exceeding $250,000, including bonuses. The tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government’s investment in the company fell below $5 billion.

The Senate is readying a separate measure that would impose a 70 percent excise tax on the bonuses, split between the company and employee.

Congress is acting after Treasury Secretary Timothy Geithner said in a letter to lawmakers last night that his department’s lawyers determined it would be “legally difficult” to prevent AIG from paying the bonuses because they were required by contracts.

“We passed a recovery act, we did not pass a license to steal,” New York Representative Steve Israel, a Democrat, said at the news conference. “The middle class will no longer subsidize pay for failure.”

Asked how lawmakers reached the 90 percent figure, Rangel said, “We figure the local and state governments will take care of the other 10 percent.”

Scholes' other BS model

Old man Scholes wants to "blow up" the entire $531 trillion derivative market as a way to "prevent crisis". While I'm all for market-to-market over mark-to-model this plan is like curing a brain tumor by shooting yourself in the head. It would cause a complete collapse of the global economy. Of course this plan is just crazy enough for Washington to consider it. Oh, and that pricing model you spent years developing to capture arbitrage, yeah well we're nationalizing that bad boy too.

clipped from www.bloomberg.com Myron Scholes, the Nobel prize- winning economist who helped invent a model for pricing options, said regulators need to “blow up or burn” over-the-counter derivative trading markets to help solve the financial crisis. The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.” “Take the pricing mechanism from the desks in banks, which have made a huge amount of profits over the last number of years, and facilitate price discovery,” Scholes said. A total of $531 trillion in outstanding derivatives contracts traded over-the-counter as of June. Scholes was a partner in Long-Term Capital Management LP, the hedge fund whose $4 billion loss in 1998 set off a near- panic in financial markets and prompted the Federal Reserve to orchestrate a bailout by 14 lenders.

It's not just the bankers...

Although I've been a fan of the Governator, this is rather stupid. I understand that he probably already checked out mentally and is thinking about how he'll repopulate his stable after the hippies made him get rid of all those Hummers, but this is analogous to Jimmy Cayne smoking dope at a bridge tourney while Bear burned, and Dick Fuld shopping at Hermes after Lehman went bankrupt. Not that we should hold politicians to higher standards than shareholders hold executives (in fact, just holding them to equal standards of accountability and intelligence would be great progress) but this is an absurd move. You don't see Bobby Jindal jetting to India for some curry, and his state has a better credit rating.

clipped from www.luxist.com California Governor Arnold Schwarzenegger made a surprise appearance at the Geneva Motor Show today, where he checked out a $230,000 Bentley Continental GTC Speed. Accompanied by Bentley CEO Franz-Josef Paefgen, Schwarzenegger eyed all the Bentleys on display but seemed to prefer the GTC Speed, which he sat in and fondled lovingly. He has been in Europe this week attending the CeBIT 2009 in Hanover, Germany, billed as the world's largest technology trade fair for digital business solutions and information and communications technology. California is the first U.S. state to partner with CeBIT.

Private Sector: 1 Washington: -75,000,000,000

Doesn't take a genius to figure out that reducing a borrower's principal closer to market value is more effective at keeping them in their home long term than a temporary payment cut, but the USS Failboat and its crew of merry morons are too intent on steering us into an iceberg. The sheer idiocy of our government is only matched by our administration's undeserved arrogance.

clipped from www.bloomberg.com March 4 (Bloomberg) -- Patricia Greenberg’s townhouse in Irvine, California, was losing about $10,000 a month in value when she received a letter in February 2008 that looked too good to be true: An investor was offering to cut her $472,000 mortgage by 26 percent and her monthly payment by a third. It was no ruse. New York hedge fund manager Ralph DellaCamera Jr. says he’d purchased the mortgage for 60 cents on the dollar and forced the originator, MLSG Home Loans of Reno, Nevada, to eat the loss. Protecting his investment, DellaCamera lowered Greenberg’s debt to keep her in the home. DellaCamera reduced Greenberg’s mortgage by $121,300 and her interest rate to a fixed 6.375 percent from an adjustable 9.629 percent. The changes allowed DellaCamera to lock in a $65,900 profit [holy crap, capitalism works! and no phantom Keynsian multipliers anywhere!]. Greenberg now pays $2,400 a month instead of $3,800 and plows some of her savings into upgrading the Cape Cod-style residence [i.e. stimulating the economy]. One in five borrowers in the $10.5 trillion U.S. mortgage market owes more than their property is worth, but just one in 10 have received the principal reductions that research demonstrates is more effective at preventing defaults than the temporary payment reductions promoted by banks and the federal government. One reason banks resist lowering borrowers’ principal is that doing so could threaten their solvency. In the worst slump since the Great Depression, the banks’ unrealized losses exceed their capital cushions by $400 billion, according to Nouriel Roubini, a professor of economics at New York University’s Leonard N. Stern School of business. [so let's keep propping them up at the taxpayer's expense and pray that this problem will magically dissappear] “If your collateral is worth significantly less than the loan, it may be better to compromise and get half a loaf than hold out for the whole loaf and get nothing,” says David Dietze, president of Point View Financial Services Inc., an investment adviser based in Summit, New Jersey. [why would I take half a loaf now when I can milk the government so much I'll be too bloated to even eat a crumb!] “The banks need to flush out all the bad assets, says Louis Amaya, 44, NAD’s chief investment officer. “Let guys like us buy them, service them, reliquefy them into good loans.” The process will “put a lot of them out of business,” Amaya says. “There’s going to be some hard, short-term pain that needs to happen in order for us to start rebounding.” [wait, now I'm not even getting half a loaf for running my business into the ground?! American people don't want pain, they want unicorns shitting skittles and they want them now! Hedge funds are eeeevil! Don't listen to their logic, they're not even government regulated!] President Barack Obama announced a $75 billion rescue plan Feb. 18 that promotes more affordable monthly payments for as many as 9 million borrowers through government-subsidized interest rates and extended loan terms up to 40 years. While buying time for the financial system to stabilize and the economy to recover, the government program steers clear of restoring homeowners’ lost equity, a more effective method of stemming foreclosures, according to research by Credit Suisse Group AG, Goldman Sachs Group Inc. Bank resistance to more aggressive action was reflected in a December study by the Comptroller of the Currency, a federal banking regulator. After six months, more than 55 percent of the loans modified last year re-defaulted, that report showed. By comparison, 28 percent of homeowners whose modifications trimmed their principal by a fifth or more were late after six months. The Obama administration’s failure to close the negative- equity gap means that its plan “will likely join the dud parade of federal rescues,” says John Kiff, an International Monetary Fund economist in Washington. [Don't listen to the IMF! They're only concerned with helping the rich get richer! All I'm trying to do here is keep my poor bank from going bankrupt! Won't anyone think of the bankers?!]

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.”

NY Post Can't Count the Fraud

How can Uncle Bernie's distraught nephew of 50 years old have built a house with his wife in 1971 when he was 13 years old?

clipped from www.nypost.com Another family member has been burned by Bernard Madoff. His Long Island nephew, a 30-year employee of Madoff's company, has to sell his home after being wiped out in the Ponzi scheme. "It's emotionally devastating to our entire family," Wiener, 50, said at his Centerport, LI, home, which he was forced to put on the market after the "devastating financial loss" Uncle Bernie forced upon his family. Wiener and wife Carolyn built the four-bedroom, ranch-style home nestled on Northport Harbor, featuring a dock and brick patio in 1971. It's now listed for $1.3 million by Daniel Gale Sotheby's International. Another former employee of the firm, who spoke on the condition of anonymity, said Wiener worked on the 17th floor of the company's headquarters in Midtown's Lipstick Building. Wiener was in the dark about the shady dealings.

pwned

Presented without further commentary:

Did everyone forget what Ken Lewis said (including Ken Lewis)?

With all the talk of BAC buying LEH, I have to wonder if everyone forgot what BofA's CEO said less than a year ago, shortly before all but dismantling all of BofA's IB infrastructure.

clipped from blogs.wsj.com Here is what Lewis, the CEO of Bank of America, had to say on the company’s conference call to discuss its third-quarter results about an acquisition or joint-venture deal to salvage the dismal performance at its investment-banking unit (where profit fell 93% to $100 million). “I never say never, but I’ve had all the fun I can stand in investment banking at the moment.” So much for the hopes of some investors that the company will make an acquisition (of a Bear Stearns, or a Lehman Brothers or UBS’s Wall Street unit) to once and for all get into the top tier of investment banks — and perhaps acquire some adult supervision for its trading operation along the way.

They never learn

Western firms will keep lining up at Russia's oil teat for a drop of black gold, no matter what they have to endure to get there, or how little substance they'll get from the deal before Russia thanks them for building the infrastructure by kicking them out on their ass and taking the enterprise over. I'm amazed at the gullibility and stupidity of these major corporations. You'd think they would learn after Sakhalin.
Ironically, in an earlier Bloomberg article BP stated they would love it if Gazprom bought out the current Russian partner's stake in the business. Right - because having a firm that has already established a clear policy on ethics in regard to foreign business (Page Intentially Left Blank) and is responsible for making billionaires out of most people in the government, including the current President, is a far better partner than 3 oligarchs who just want you to pay them off better.

clipped from online.wsj.com Robert Dudley, head of BP PLC's Russian joint venture TNK-BP Ltd, abandoned Russia Thursday for an undisclosed location after Russian authorities refused to issue him a new work visa. His move could mean that BP loses control of a company that accounts for a quarter of its global oil production and 19% of its reserves. Since the conflict between BP and its Russian partners dozens of TNK-BP foreign employees have been forced to leave Russia after difficulties renewing their visas. The company also has been subject to a flood of tax, police and other probes. In an interview, Tony Hayward, BP's chief executive, denied the dispute threatened the British oil major's presence in Russia. Western businessmen and governments had been watching the TNK-BP dispute for signs of the direction Russia was moving under Dmitry Medvedev, the new president, who has said he wants to improve the rule of law in Russia, especially for business. The fate of BP's landmark Russian venture was seen as a litmus test.