Chrysler: "Badges?! We don't need no stinkin' badges."

U.S. Judge Rejects Chrysler Pension Bid to Move Case

2009-05-26 By Christopher Scinta - Bloomberg

“'There needs to be a resolution,' to the legal issues around Treasury’s involvement in Chrysler, [U.S. District Judge Thomas] Griesa said. 'I’m learning a lot this morning that’s important to me, both as a judge and a citizen.'”’

Wow! I'm in better & better company wondering what happened to the principles & precedents of economics, finance, and law in this country during the past 14 months.

“'Put simply, it is nothing more than a last-ditch, eleventh-hour effort by a dissident faction of the debtors’ senior secured lenders to obstruct and impede core matters in Chrysler’s chapter 11 cases from being heard in bankruptcy court, which is the proper forum' the U.S. Treasury Department said in a statement"

After their AIG fiasco, the Treasury is talking about "proper forums" for resolving bankrupt companies?! If the Federal Reserve were running it, in their new extra-legal "industrial policy" capacity, then the pensions wouldn't have objected!?

"Badges?! We don't need no stinkin' badges."

JRB

5/26/09

WSJ: Chrysler and the Rule of Law

Chrysler and the Rule of Law

The Founders put the contracts clause in the Constitution for a reason.

The Wall Street Journal

By TODD J. ZYWICKI -- 5/13/09

http://online.wsj.com/article/SB124217356836613091.html

This is too powerful and important to cut & paste. But, in deference to copyright I'll just excerpt. Please use the URL above to read the entire article. It's worth it. -- JRB

"The rule of law, not of men -- an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers -- is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak. Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right? Until Chrysler.

...

The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been brow beaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar. The absolute priority rule is a linchpin of bankruptcy law.

...

By stepping over the bright line between the rule of law and the arbitrary behavior of men, President Obama may have created a thousand new failing businesses."

We have, indeed, 'crossed the Rubicon'. All hail King Hussein!

JRB

5/13/09

The Emperor's New Clothes

Lawmakers Seek Geithner Help in Saving Obama Tailor
2009-05-15 Bloomberg News, By Nicholas Johnston

"U.S. lawmakers are seeking Treasury Secretary Tim Geithner’s help in persuading Wells Fargo & Co. not to liquidate Hartmarx Corp., the 122-year-old clothing company that has made suits for President Barack Obama. Representative Phil Hare said yesterday that more than 30 members of Congress, including House Financial Services Committee Chairman Barney Frank, will join him in asking Geithner to pressure Wells Fargo to entertain bids for the bankrupt company instead of closing it down. The lawmakers are drafting a letter with the request."

Well, why not? Once we 'crossed the Rubicon' into 'industrial policy' or economic 'national socialism' things like this became inevitable. Paulson tells Lewis to violate federal securities laws (Rule 10b-5), then we have the nationalization of the banking sector, AIG, GM, Chrylser, ... and now a tailor.

Perhaps this was not instigated by the White House but rather an act of fealty by his liegemen. After all, the courtier who anticipates, rather than simple responds to, his monarch's whims is the one who rises to the top. Wells probably won't need to foreclose as HartMarx will sell-out their inventory -- because no one will be seen 'at Court' wearing anything but. Buy stock, too, in his cobbler & haberdasher. And God help the foolish banker who forecloses on Michelle's favorite couturier!

As I said in 2006, 'the Republicans have failed to govern, but the Democrats will not fail to rule.' The last election probably was The Last Election. Let's hope not, but "the barbarians are inside the gates". Has the Republic fallen? We are certainly in it's decline.

JRB

5/15/09

P.S. OK, so I slightly conflated Caesar (Rubicon) and Hannibal (barbarians). Call it a "volitional solecism".

Federal Follies: OTC derivative regulation

U.S. Regulators Seek Trace-like Reporting for OTC Derivatives
May 14 (Bloomberg)

There are so many reasons why this won't work, or work well. Simply put, every derivative trade is unique whereas every bond (CUSIP) is the same.

"'It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers," Lubke said."

Unbelievable! First, it was the Fed who pushed banks to merge, and thus over-concentrate the market into "a handful of large dealers" and thereby created the 'systemic risk' they now purport to be able to regulate. Second, do they really think the Microsofts and World Banks will take Crazy Woman Creek Bcp as a ctpy just because they got TARPed? Third, the "handful" was also the result of the Darwinian "natural selection" -- aka "invisible hand".

"Can't anyone here play this game?"

JRB

Chrysler's death-rattles

U.S. May Be Preparing Filing for Chrysler Bankruptcy: NYT Link
2009-04-23 19:30:30.339 GMT
http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&partner=rss&emc=rss

Whazzamatter, can't the Barracudas at Cerberus fill out their own docts? In 1978-79 it took a Caravan of lawyers and an act of Congress -- the Vipers, literally, to have the U.S. govt perform such meddling. Today? Well, who needs law when you can rule by FIAT! (pun very much intended). As a rookie commercial lending officer "back in the day" I had to give the Chrysler Loan Gty Act and the then-new Chapter 11 (replacing Ch. XI) a side-by-side reading as my territory was the auto-belt, now rust-belt, of MI, OH, and IN.

The PBGC picks up only $2 bln of the $9.3 bln pension shortfall. That's assuming the $9.3b is fully valued. While ERISA plans are more accurate than GASBs, there are still some holes in the PPA of 2006 reforms, letting them Dodge their responsibilities. Pensioners and those soon-to-be, will find this Challenger-ing as the $7.3b gap is for their account.

While the UAW is hardly a sympathetic entity, why must the bricks fall on the poor slobs who spent 30 years on the assembly line. They did their jobs, so why can't management and the PBGC? It was the loss of Studebaker employees' pensions in ~1967 that led to ERISA and PBGC. Through (hyper-) active political mismanagement of ERISA, at the behest of corporate plan sponsors and with the full connivance of FASB, we're back to where we started. It was all so entirely unnecessary and avoidable. J'accuse! (It's so depressing, I've even lost interest in making more puns.)

JRB

4/23/09

Crisis Post-Mortem w/Volcker, Levitt

Congress Weighs O’Connor, Volcker, Levitt to Investigate Crisis

Bloomberg News 2009-05-08 19:49

One big question for them to ask & answer is, How bad would it have been if mortgage underwriting standards hadn't been abandoned? After that, Cont'l Illinois and the "TBTF" (too big to fail) doctrine: why was the Bear Stearns warning shot not heard (as everything & everyone was collateralized why was Bear 'systemic'?); as Bear was TBTF why wasn't Lehman? And why AIG, for Pete's sake? Collateral was their contagion, not CDS, and they're not an intermediary, so why not step into their CSAs instead of lending $182+ bln. The grand-daddy of all questions from this crisis is how to put the 'moral hazard' genie back in the bottle after bailing out everyone -- AIG, Citi, BSC, MMkt Funds, CP, TARP, TALF, ad nauseam, right down to Crazy Woman Creek Bancorp. of Wyoming and 604 other 'systemic' (?!) banks.

JRB

5/8/09

Paulson's deception

Lewis Testifies U.S. Urged Silence on Deal:

Bank of America Chief Says Bernanke, Paulson Barred Disclosure

of Merrill Woes Because of Fears for Financial System

(4/23/09) http://online.wsj.com/article/SB124045610029046349.html

Paulson hasn't the authority to instruct anyone to commit securities fraud. No one does. Geithner lied on his taxes, like half his fellow nominees, and now we learn Paulson strong-armed fraud & deception at BofA regarding Merrill. Markets were already skeptical about the federales forthcoming(?) bank stress-test results. You can imagine what they'll believe now.

We'll need to replace the entire regulatory edifice to expunge all the moral hazards created since 1984's Continental Illinois fiasco. But we're more likely to end up with something even worse.

JRB

4/23/09

Pirates of the Potomac

Chrysler Said to Seek Approval to Sell Most Assets by May 22 May 3 (Bloomberg)

Chrysler LLC, under orders by President Barack Obama to conduct a quick bankruptcy, will ask court approval to auction most of its assets in three weeks ... Chrysler wants a schedule that would require creditor objections to the sale to be submitted by May 11 and an auction held by May 22 ...

Who needs judges and due process when a president can simply issue "orders" to supercede both law & precedent. This is government by fiat, not by due process. (pun intended)

I still remember the Chrysler Loan Guarantee Act of 1979 (CLGA). I was a rookie banking officer responsible for accounts in MI, OH, & IN -- the bank's second largest portfolio, including (obviously?) the auto sector. I read the CLGA and the "new" Chapter 11 bankruptcy law side by side (replacing the "old" Chapter XI). "Plus c'est la change" because, then & now, the bailout required Chrysler develop more fuel efficient cars and other political 'ornaments'. ("... plus c'est la meme", a few years before that I received a swine flu vaccination!)

But the CLGA was hotly debated in Congress; such interferance in free markets was controversial. It was in fact an Act of Congress, not some ad-hoc back-door nationalization "ordered"(!?) by a president. Worse, it's not being nationalized, it's been made a gift to the UAW whose non-ERISA benefits have no legitimate claim. Back then we had not a pretense of due process we actually had due process. Taxpayers only guaranteed Chrylser's debt (which was bad enough), they (we) weren't the company's lenders. Nor did the CLGA really displace the bankruptcy code as many of its provisions were identical to Ch. 11's, except for the guarantees (and the ornaments).

Chrysler's secured, non-TARP creditors may be forgiven for feeling like due process has been hijacked by Somali pirates.

JRB

5/4/09

Geithner v. Hubris

Mr. Geithner Flexes Muscles

The Treasury Secretary Tells Investment Banks Government Is in Charge

4/22/09 - WSJ: http://online.wsj.com/article/SB124037255563841639.html

When AFL-CIO General Counsel Damon Silvers called Mr. Geithner a "banker" on Capitol Hill, Mr. Geithner responded that he has always been in public service, saying firmly, "Never ... never an investment banker." Former Sen. John Sununu later said, "I'd never confuse you for an investment banker." Mr. Geithner's tart reply: "I don't think you meant that as a compliment, but I'll take it as a compliment."

As I've chronicled in my blog, it's unfortunately painfully obvious Geithner was never in the private sector and certainly never an "investment banker". Nor a "capital markets" expert, either. Henry Paulson was an I-banker, not that you could tell from his dismal performance in 2007-08. "Can't anyone here play this game?" I'm not sure flexing his muscle is going to work given what's happened when he flexes his brain.

Nor is there anything automatically 'unethical' or immoral about that profession, just as there isn't with used car salesmen. (I've known some very ethical new-car salesmen; I assume they also traded in used.) Even Warren Buffett has one he likes (investment banker; don't know about his car salesmen).

Full disclosure: I was once a "banker" but of the "corporate banking" variety at a commercial bank. Later I became a derivatives trader or "capital markets" type. Today, I'm a financial regulator. And, yes, I can play this game -- I just can't get on the field!

JRB

4/22/09

No such thing as "bank capital" -- it's either an asset or a liability

U.S. Weighs Revealing Each Bank’s Capital Needs After Tests

2009-04-22 - Bloomberg News

"'Where there is a need for additional capital' Geithner told a congressional oversight panel in Washington yesterday ..."

Doesn't he understand there's no such thing as "capital"? There are assets & liabilities, "capital" is but an accounting conceit. The question is whether they need cash: cash to pay-off depositors right now, for "liquidity" of a solvent bank during a proverbial run-on-the-bank. Or for cash later, meaning they're insolvent and there's not going to be enough cash(flow) from assets to pay liabilities even in the probable fullness of time. ("probable fullness" being the purpose of a stress-test) In which case you don't "inject capital" you liquidate them, donating the healthy 'organs' to the deserving living.

JRB

4/22/09

Pension follies (farce as tragedy)

GM Pensions May Be ‘Garbage’ With $16 Billion at Risk
2009-04-08 17:07:50.395 GMT By Holly Rosenkrantz

Commentary: So we've gone full circle from Studebaker's 1963 bankruptcy (the genesis of ERISA) to ERISA in 1974 to GM & Chrysler's all-but-ineviatable bankruptcies in 2009: the sweet short stupid life of phony actuarial standards, liability-blind investing, and political compromise. The laws of finance are as immutable as those of physics: they cannot be 'gamed' forever (barely 35 years) and will not be compromised.

As I showed several years ago, if the PBGC had put on the perfect hedge (short 100% of common) at the perfect time (all-time high stk price) they still could not have hedged their United Air losses, which excludes pensioners' uninsured losses. So they probably could not have hedged GM either. You must regulate ALM if you want DB plans to survive.

There is no PBGC or other backstop for public plans, whose actuarial & accounting "standards" are far worse.

My research shows the DB model and 60/40 asset allocation actually could have worked, if ALM were properly managed. In fact, we should be able to retire at over 100% of final average salary, over 200% for some cohorts; but that's not going to happen. We'll be lucky to collect even 60% of FAS.

What can I say about all that now, except "too late".

JRB

4/8/09

AIG-FP's 10-Q: Collateral was the Contagion

AIG's 10-Q for 3Q-2008 has some interesting information. (The 10-K was less helpful as so much disappeared into the maw of Leviathan. And, yes, I'm behind on my reading!) Looking at FAS-157's so-called "fair value" or "market valuation" (a.k.a. MTM) of super-senior CDS/CDO, as a percent of notional I see that the MTM for YTD 9-mos (i.e., excl. 2007 MTM losses) of "regulatory capital" relief transactions on corporate loans and prime RMBS the losses were 0% on $248.3bln notional. But on one deal of $1.6 bln notional, deemed no-longer-regulatory-relief, it was 25%. For AIG-FP's "arbitrage" multi-sector CDOs the MTM loss was a whopping $19.9 bln or 66% of $71.6 notional -- again at super-senior attachments. But for corporate CDO & CLO only 3% of notional, and 3% again on mezz' tranche reg' relief CDS -- mezz'! Total MTM for the 9-mos was $21.7 billion on $377.3 bln notional, or 6%. I can't find any loss or claims-paid data, except for 2a-7 and other ratings or valuation puts.

Later in the 'Q they do a two-scenario roll rate analysis. Roll rates 30-to-loss were 80% for 2006 & '07 vintages, 70% for '05, and 60% '04 & earlier; severities ranged from 50% to 60%. (i.e., ballpark-ish to others' estimates) Their NPV of losses were $7.8 & $12.0 billion in their scenarios A & B, respectively. This compares to a "FV" or MTM loss of $30.2 bln (cumulative, not YTD) and a collateralization burden of $32.8bln. Scenario B simply increased the roll rates & severities by 20% (but not exceeding 100%, of course).

So: AIG was trying to collateralize at 109% of "FV", at 421% of expected loss in scenario A, and at 273% of stressed loss in scenario B! Now imagine Citi, Merrill, UBS, and others also out there trying to collateralize to 109%. Maybe they started 109% of expected loss but with each twist of the spiral it went up & up, to 200% and beyond. ('Loss-actual' was rising at the same time, too, injecting some nitrous-oxide into the turbocharger.) In other words ... Collateral was the contagion!!!

And remember, Leviathan, d/b/a Maiden Lane II LLC, doesn't play the"FV" / MTM game. The Fed is a PV shop, but they don't disclose how they PV or their assumptions. If they recognize they can't run their bank on a MTM basis why can't they recognize the banks can't be regulated on a MTM basis? Like Ben Graham's aphorsim, solvency regulation of financial institutions is a "weighing" machine not a "voting" machine. MTM is a discipline, not a religion. (Like I said before, FASB has made it into a fatwa.)

JRB

4/1/09

The Beltway's Governor Le Petomane rides again

Debt Swap Rules Risk Being ‘Rushed and Reactionary,’ A&O Says

2009-03-31 By Abigail Moses March 31 (Bloomberg)

"We've got to protect our phony-baloney jobs, gentlemen! We must do something about this, immediately, immediately, immediately!"

"Harrumph! Harrumph! Harrumph!"

"I didn't get a "Harrumph!" out of that guy!"

"Harrumph!"

"You watch your ass!"

Looks like Allen & Overy doesn't want to give a "Harrumph!" Instead, they're saying "Just give me 24 hours to come up with a brilliant idea to save our town. Just 24 hours. That's all I ask."

Count me among the dissenters to the federales' 'Shoot, Ready, Aim (we're the govt, we don't need to aim), Shoot again, Shoot the innocent so the guilty won't look bad, Shoot 'em all one more time' approach to crisis mgmt. Blazing Saddles, indeed.

JRB

3/31/09

"PPImP My SPV"

Treasury Statement on Public-Private Investment Program (Text)

I read the full text on Bloomberg. "... private sector investors standing to lose their entire investment in a downside scenario and the taxpayer sharing in profitable returns." -- But since the taxpayer is providing half the equity in each program, plus "non-recourse loans" in the "legacy securities" program, we obviously share the downside, too, much more downside.

In the so-called "legacy loan program" the FDIC's guaranty is collateralized by the (toxic) assets, but is are these also non-recourse? We, the taxpayer, already share in between 35% and 90% of the profits, depending on whether you use the corporate tax rate (35%) or the Barney Frank Special 90%, legislated 'in arrears' (so to speak).

Beyond that, it's hard to see an integrated or cohesive plan. The central problem is homeowners who can't afford their mortgages. We have several confused and/or confusing programs for that. Taxpayer "capital" has already been indiscriminantly sunk into banks. And now we have these intermediate "loan" & "securities" programs, along with all those other half-baked and less than half-executed programs (TALF, TARP, CP, MMkt,etc.).

If you fix the front-end problem, then do you need all these intermediate (intermediary) programs too? Probably not, as it's just one set of cashflows going thru the system, haphazardly propped up at various stages by this proliferation of federal programs, with much taxpayer "equity" injected at various points along the way. Hard to make sense of it.

Since there's so much convexity in the underlying mortgages & RMBS, won't these investors or funds need some swaps to manage rate risk? But what ISDA lawyer wants to dive into this morass of FDIC guaranteed loans, "non-recourse" Treasury loans with Treasury as 50% equity partner, all of which is probably subject to second-guessing and/or confiscatory taxes if successful? What is the governing law by which these 'brave new' PPIFs are organized: are they corporations, '40 Act companies, SPVs, LLCs, or is it just more ad-hoc Treasury decrees? In other words, who has regulatory jurisdiction and responsibility for bankruptcy or liquidation?

JRB

3/23/09

Regulation by hemlock

Grassley Suggests AIG Execs `Resign or Commit Suicide'

Bloomberg News, 3/17/09

The AIG fiasco just keeps getting more absurd. Unless you work for AIG because ACORN, the folks who have made an industry of voter registration fraud, have organized a guided "victim selection" tour for anyone less patient that Grassley. (The Stamford Advocate reported on Monday that 3 of 4 passengers were members of the media, a fact not reported elsewhere).

I'm sticking with my earlier forecast of GM, Chrysler, and/or AIG bankruptcies by May, although I suspect Congress would rather, and will, flush more billions & trillions down the drain first. After all, what's more important, our tax-dollars or their 15-second sound-bites?

Even Obama is now complaining about AIG's bonuses. Well, guess what, a federal bankruptcy judge has the authority to nullify employment and other contracts but the POTUS does not. It's called "law". Bankruptcy courts were established by Article I Section 8 of the U.S. Constitution, a document which also prohibits 'bills of attainder' such as Congress voted for a few days ago (the bonus tax).

Instead, we are getting incitements for mob violence. Well, after all, that is what "community organizers" do for a living: 'legislate' by threat & intimidation. (Which sounds like what state attorney generals do, extort & legislate by threat & intimidation.)

"Can't anyone here play this game!"

Soft on terrorism, tough on AIG. It's going to be a long century!

JRB

3/23/09

Proving the SEC is under-brained, not under-staffed

Naked Short Sales Provoke Complaints but No Cases

Wall Street Journal By KARA SCANNELL -- http://online.wsj.com/article/SB123742141942278703.html

Back when the SEC was banning short-selling and making a list of nearly 1,000 'unshortable' bank stocks -- "banks" like U-Haul, Moody's, CVS (drugstores), and GM -- I suggested they instead require shorts be executed via a three-way (short, broker, lender) order matching system on an exchange or at a clearinghouse -- e.g., NYSE or DTC. On 9/28/08 I even sent a letter (email) to the editor of the WSJ -- alas, unpublished (in its entirety, below).

Among other benefits, it would have made stock-lending more efficient for everyone, including for lenders like pension funds and insurance companies. (It would be a simple matter to include collateral monitoring in the matching system, too, to enable real-time counterparty risk surveillance -- i.e., counterparties & regulators could have seen both sides of AIG's sec' lending balance sheet. Oh well!) It would have given the SEC perfect and real-time transparency, and allowed them to use computers (!!!) to perform surveillance.

Instead, the SEC "...noted understaffing, saying four people ... review[ed] 1.38 million emails" over 18 months. That works out to reading 2 emails every minute of every working day. I'd say that proves the SEC is far more under-brained than under-staffed.

JRB

3/19/09

--------------------

To: wsj.ltrs@wsj.com

Subject: "Short on Common Sense" (9/25/08) -- a far better solution

Date: Sun, 28 Sep 2008 17:38:05 -0400

A simpler, more effective, and market-friendly solution to 'naked' shorting would be for the SEC require that all short sales (beyond "retail") be done through a clearinghouse, like DTC. The short-seller, securities lender, and prime broker input their instructions, DTC matches & settles them. Fewer fails, nobody's 'naked', there's an audit trail, and no more biweekly short interest surveys as the SEC would have real-time surveillance.

Take it a step further and create "dark pools" or crossing networks as alreadyexist for block-trading. Now you have all of the above, plus more efficient price & size discovery for the benefit of both securities borrowers (including shorts) and lenders (institutional investors). Granted, maybe it isn't the best time for that step.

GM and Ford aren't the most ludicrous names on the list. Moody's is there, but it's their opinions not their balance sheet that are the "systemic"risk concern. Is the SEC opposed to 'poetic justice'? The good folks at U-Haul (Amerco) are also on the SEC's list. That seems an even more unlikely short, what with all the capitalists packing-up in search of free markets and lower taxes.

JRB

Jack R. Buchmiller

Stamford, CT

9/28/08

Does Air Force One have training wheels?

Obama Says AIG Bonuses Show Need for Agency to Oversee Bailouts
2009-03-18 By Roger Runningen March 18 (Bloomberg)

We already have such an "agency" established pursuant to Article I Section 8 of the U.S. Constitution. It's called "Bankruptcy Court". (Just what do they teach at Harvard's law school these days?) The OTS is, or was, to AIG as the FDIC is to banks -- that's part of the Executive Branch, Mr. President. (Just what do they teach "community organizers" these days?) Except the OTS is not the liquidator of holding companies, nor is the FDIC nor Fed as that's the Bankruptcy Court's job, just as it is for bank holding companies (but not banks), insurance holding companies (but not insurers), securities holding companies, and just about every other kind of corporation. The reason we don't have a regulator specifically for "bailouts" is because the federal govt cannot, and therefore should not, be doing them (see Amendment 10 to the Constitution -- just what do they teach ... nevermind).

If he wants to do something constructive he should amend section 13(3) of the Federal Reserve Act to create a "legal lending limit" for the Fed. The formula for commercial banks used to be 10% of capital but was raised several years ago to 15% on unsecured and 25% on secured credits. I especially like the feature, as applied to commercial banks, of making bank directors personally liable for any loans in excess of the legal limit, although apparently that varies by state. That might focus the minds of Geithner, Paulson, & Bernanke a little better. ASAP, please, as there's no provision in the Bankruptcy Act applicable to the federal govt itself (see Article VI of the Constitution for precedent). As Walter Wriston put it so bluntly, "Countries don't go bankrupt." That's because we taxpayers have unlimited liability -- so why not these White House, Treasury, and Fed rookies, too? That'd teach 'em!

JRB

3/18/09

Tim Geithner and the Starship Enterprise

Only an idiot would have tried to rescue the S.S. Titanic by lashing themselves to it, even if they were skippering the U.S.S. Enterprise (pun very much intended, even though it's not of Nimitz-class size!) But here we (taxpayers) are.

But then apparently Geithner thinks he's skippering the Starship Enterprise:

"Put her into warp-drive, Ben!"

"But Captain, the ship's fisc can't take it much longer!"

"I don't care Scotty -- I mean Ben -- we've got to pull away the Klingon's Bonus Pool!"

"Excuse me, Captain Kirk -- I mean Tim, this isn't logical. We still must first escape the Subprime Death Star. (From which I told you not to try to pull the Starship Citibank out of by brute force because the Collateral Tractor Beam is too strong to defeat head-on. Besides, that's "Star Wars" not "Star Trek")."

"I don't care, you pointy-headed -- I mean eared -- Vulcan, Starship Citibank is the Federation's flagship! It's carrying Admiral Rubin! Go back to your station, Spock!"

[Spock to McCoy, aside] "I think the Captain has gone insane. Besides, we beamed-up Admiral Bob in the last episode. It's Captain Hank who's still aboard, even though relieved of command last season."

[McCoy to Spock] "Suicide or mutiny, Mr. Spock, which is more logical? "

[Spock ponders; fade to black]

JRB

3/18/09

Grassley Suggests AIG Execs `Resign or Commit Suicide'

Grassley Suggests AIG Execs `Resign or Commit Suicide'
Bloomberg News, 3/17/09

This just keeps getting funnier & funnier. Unless, of course, you are a taxpayer like us and unlike so many of our Senators and our Treasury Sec'y. Grassley should go to work for the NY Post as a cartoonist.

I'm sticking with my earlier forecast of GM, Chrysler, and/or AIG bankruptcies by May, although I suspect they'd rather, and will, flush more billions & trillions down the drain instead. After all, what's more important, our tax-dollars or their sound-bites? Even Obama is now complaining about AIG's bonuses. First Chuck Schumer announces a run on the bank at IndyMac, costing taxpayers billions, then Chris Dodd tries to sink Citibank with his moronic "nationalization" comment, so why shouldn't a "community organizer" chirp-in? Well, guess what, Mr. Obama, a federal bankruptcy judge has the authority to nullify those employment contracts but you, the POTUS, does not. It's called "law" -- something that we used to at least pay lip-service, but no more. At least in 2012 he can campaign on the slogan, "Soft on terrorism but tough on AIG."

"Can't anyone here play this game!" -- Hello Depression of 2009.

Is there any question that my suggestion back in September -- and not in hindsight, would have worked? (That 'collateral is the contagion' and therefore the federales should step into AIG-FP's ISDA CSA's as the 'credit support provider'.)

JRB

3/17/09

A cash investor suffers but a single loss; a mark-to-market counterparty suffers a thousand losses.

A cash investor suffers but a single loss; a mark-to-market counterparty suffers a thousand losses.

Each mark-to-market of one of those Warren Buffett-ish “weapons of mass destruction” is a mini-Hiroshima for one counterparty and, when the market zigzags the other way, a mini-Nagasaki for the other counterparty. All before Enola Gay has left the tarmac.

The federales are applying torniquets to the banks before checking to see if the cuts are arterial.

JRB

3/1/09