Quote of the Day:
“We figure the local and state governments will take care of the other 10 percent.”
Rep. Charley Rangel's explanation for the 90% tax on tarp recipients bonus payments.
Counterquote of the Day:
"No man's life, liberty, or property are safe while the legislature is in session."
-- Mark Twain (1866)
Holy Smoke, America!! Did this really just happen to us? The American colonies rebel yell against England was "taxation without representation is tyranny!" Now we have a 90% tax rate with representation!! Perhaps it is time for another tax rebellion. The Senate is proposing a 70% tax on bonus payments, 35% paid by the company and the other 35% paid by the recipients. Even that is way too high. I think our representatives need to take a real deep breath, exhale slowly, then read the Constitution. Is this what they want for our future generations? I think not. This bill was composed mainly to make the most political hay over the public's distress over the bonus payments. It scares me how quickly this bill was passed. Congress, especially the house financial services committee, used delaying tactics and dogged resistance to prevent reform or overhaul of Fannie Mae/Freddie Mac for years. If they had acted half as fast on reform of these GSEs, (government sponsored enterprises, more on this later) the USA could have avoided the super recession we are experiencing and just had a nice regular recession that goes away in a year or two. If Congress can pass such outrageous tax bills for one reason, I am certain they will be able to think of more. Who knows, maybe all the opponents of war will tax the extra pay for overseas and dangerous duty military people receive.
Since the unions and activists have arranged busloads of people to hike to the AIG executives homes, would it not be fair to let the overtime pay of union workers be taxed the same as bonuses for people who do not get paid by the hour but by results? When it comes down to brass tacks, overtime is just another bonus. Since the UAW get paid when they are out of work, congress could really clean up here.
If the unions and activists cared more about all the taxpayers and not just the unionized ones, they would also organize a march in DC to all the congresspeople's DC homes to lodge complaints about their micromismanagement of this financial fiasco. Remember, all this started with Fannie Mae and Freddie Mac, not AIG.
Showing posts with label bailout. Show all posts
Showing posts with label bailout. Show all posts
Monday, March 23, 2009
Thursday, March 19, 2009
Congressional follies about AIG
Quote of the Day:
"Some People say I make jokes. I just watch the government and report the facts."
Will Rogers
First of all, a standing ovation is due to Edward Liddy, CEO of AIG for standing up to the arrogance of Steven Lynch. (A Massachusetts democrat, definitely not the comedian!) Mr. Liddy took the job for $1.00 and no stock options to try and help out his country. Mr. Lynch was way out of line in his questioning of Mr. Liddy and should apologize. What do you have to say for yourself, Mr. Lynch?
Second, this is $165 million, that's 6 zeros and 2 commas, not the trillions (12 zeros and 4 commas) that the bailout efforts and economic stimulus packages will cost the American taxpayers. This is just political grandstanding to deflect the interest of the press and public away from the massive spending the Obama Administration and Congress want to enact in the name of economic recovery. Politicos are very good at straining minnows and swallowing whales. It's called micromismanagement.
Third, were President Obama and Rep. Lynch both absent from law school the days contract law was taught? This was a pre-existing contract and failure to pay could have exposed AIG to lawsuits.
Fourth, will Timothy Geithner get his old job as Governor of the New York Federal Reserve Board back if he takes the fall for all this congressional hubris over $.0000165 trillion retention bonus that the original bailout bill allowed to go through in the first place?
I think Mr. Liddy should be given the chance to do what he said he will do in his recent letters to Treasury Secretary Geithner. Repay the bailout money and keep the good businesses of AIG intact and contributing to the USA economy. He was the CEO of Allstate, another large insurance company. He is offering all his experience for $1.00. He has a better chance of succeeding than any and all members of the house financial services committee could do. Remember, this committee repeatedly defended Freddie Mac and Fannie Mae right up until they went into conservatorship. How many of them work for $1.00. My educated guess is none,zip, goose egg, zero.
"Some People say I make jokes. I just watch the government and report the facts."
Will Rogers
First of all, a standing ovation is due to Edward Liddy, CEO of AIG for standing up to the arrogance of Steven Lynch. (A Massachusetts democrat, definitely not the comedian!) Mr. Liddy took the job for $1.00 and no stock options to try and help out his country. Mr. Lynch was way out of line in his questioning of Mr. Liddy and should apologize. What do you have to say for yourself, Mr. Lynch?
Second, this is $165 million, that's 6 zeros and 2 commas, not the trillions (12 zeros and 4 commas) that the bailout efforts and economic stimulus packages will cost the American taxpayers. This is just political grandstanding to deflect the interest of the press and public away from the massive spending the Obama Administration and Congress want to enact in the name of economic recovery. Politicos are very good at straining minnows and swallowing whales. It's called micromismanagement.
Third, were President Obama and Rep. Lynch both absent from law school the days contract law was taught? This was a pre-existing contract and failure to pay could have exposed AIG to lawsuits.
Fourth, will Timothy Geithner get his old job as Governor of the New York Federal Reserve Board back if he takes the fall for all this congressional hubris over $.0000165 trillion retention bonus that the original bailout bill allowed to go through in the first place?
I think Mr. Liddy should be given the chance to do what he said he will do in his recent letters to Treasury Secretary Geithner. Repay the bailout money and keep the good businesses of AIG intact and contributing to the USA economy. He was the CEO of Allstate, another large insurance company. He is offering all his experience for $1.00. He has a better chance of succeeding than any and all members of the house financial services committee could do. Remember, this committee repeatedly defended Freddie Mac and Fannie Mae right up until they went into conservatorship. How many of them work for $1.00. My educated guess is none,zip, goose egg, zero.
Sunday, September 28, 2008
abra cadabra.. poof!!!! WM becomes JPM!
Wow!! The FDIC did not even wait until the weekend to seize Washington Mutual(WM), the nation's largest savings bank and sell it to JP Morgan Chase (JPM). This will spare the taxpayers another bailout at the cost of shareholders and bond holders of WM. Hey!!! the people who took on more risk for more reward are left holding the bag, not the taxpayers and responsible mortgage holders!!! This is an event that should become a trend.
Just remember one thing. The root cause of this sub-prime lending crisis is the government's extension of credit (via Fannie Mae and Freddie Mac) to mortgage borrowers who could not handle the mortgage they were receiving. When Bill Clinton told Fannie Mae and Freddie Mac to lend money to people who could not handle the debt, that started the current sub-prime lending crisis. This occurred in 1995. In 1996 Bill Clinton became the first Democrat to be re-elected as President of the USA since FDR.
HHHMMMMMM!!!!
More to come.
Just remember one thing. The root cause of this sub-prime lending crisis is the government's extension of credit (via Fannie Mae and Freddie Mac) to mortgage borrowers who could not handle the mortgage they were receiving. When Bill Clinton told Fannie Mae and Freddie Mac to lend money to people who could not handle the debt, that started the current sub-prime lending crisis. This occurred in 1995. In 1996 Bill Clinton became the first Democrat to be re-elected as President of the USA since FDR.
HHHMMMMMM!!!!
More to come.
Monday, September 22, 2008
deja vu: another weekend another bailout act 3
Good Grief!!! The feds are getting more done on the weekend than they do during the week. This weekend they drafted a 3 page bill requesting congressional approval of a $700 billion bailout fund to buy the bad debts that banks & insurance companies are carrying on their books. The goal is to get financial institutions to stop hoarding cash and increase the liquidity of the short term credit markets. The fear is that without increased liquidity soon, there will be an economic meltdown and collapse similar to the Great Depression. My hope is this will be the last bailout needed. Altogether this bailout is pushing the $1 trillion mark, which is a high price to pay for a soft landing. I also hope that this turns the tide on large companies expecting the taxpayers to bail them out every time their business cycle enters the slump phase.
On another front of this bailout war, the Federal Reserve gave the last 2 major US investment banks permission to change their status to bank holding companies. On Sunday Goldman Sachs and Morgan Stanley received the Fed's blessing to buy a commercial bank. The goal here is to give these investment banks access to commercial banks' deposits for the short term loans that are the lifeblood of investment banks. Hours after this permission was granted, Morgan Stanley signed a nonbinding letter of intent for Mitsubishi UFJ Financial Group to buy 20% of Morgan Stanley. Alas, a wall street company trying to rise from the ashes without 100% assistance from the Feds!! Is that a light I see at the end of the tunnel?
On another front of this bailout war, the Federal Reserve gave the last 2 major US investment banks permission to change their status to bank holding companies. On Sunday Goldman Sachs and Morgan Stanley received the Fed's blessing to buy a commercial bank. The goal here is to give these investment banks access to commercial banks' deposits for the short term loans that are the lifeblood of investment banks. Hours after this permission was granted, Morgan Stanley signed a nonbinding letter of intent for Mitsubishi UFJ Financial Group to buy 20% of Morgan Stanley. Alas, a wall street company trying to rise from the ashes without 100% assistance from the Feds!! Is that a light I see at the end of the tunnel?
Wednesday, September 17, 2008
Another day another line in the sand drawn
The Federal Reserve Board announced an $85 billion loan to AIG in exchange for a 79.9% equity stake in the company. The Fed, along with the US Treasury, consider AIG too big, too interconnected to fail. The good news is the Fed might actually turn a profit on the deal. The Fed's hope is that AIG will be able to ride out the current storm in the credit markets and get back on its feet again. When that occurs, the Fed will cash in their equity stake and pay back the loan. Let's hope this works.
Apparently the "line in the sand" the Fed drew with Lehman Brothers can shift. It seems that sand line is actually calculated on a case by case basis. The criteria being how big the company is and what impact its failure will be on the US and world economy. Lehman Brothers just didn't qualify for a direct bailout. A year ago LEH's market capitalization was $33 billion, now it's in bankruptcy proceedings and selling off its assets at bargain basement prices. Barclays bank is offering $250 million for LEH's North American investment banking and trading operations. Barclays is also paying $1.5 billion for the LEH New York headquarters and 2 New Jersey data centers. The deal is subject to approval by the bankruptcy court. The deal would save almost 10,000 LEH employees from job loss. This makes me believe the court will have no problems with it, unless it considers the price way,way,way too low.
Here's another interesting development in the LEH bankruptcy, JPMorgan Chase (JPM)advanced LEH $87 million Monday morning to allow LEH to continue its trading operations and avoid disruptions to financial markets. The New York Federal Reserve Board reimbursed JPM for this. Apparently the treasury secretary's refusal to bail out LEH did not apply to loans made after no deal was reached and LEH decided to file chapter 11 bankruptcy. On Tuesday, JPM advanced LEH another $51 million. The bankruptcy court judge also appointed JPM as LEH's clearing house for its trading operation during the proceeding. This means that JPM has put $138 million into LEH to fund its trading operations in 2 days. This is over 50% of Barc's offer of $250 million for trading and investment banking operations. What this means is beyond me, if anyone out there has any knowledge on this please share it in the comments section.
Apparently the "line in the sand" the Fed drew with Lehman Brothers can shift. It seems that sand line is actually calculated on a case by case basis. The criteria being how big the company is and what impact its failure will be on the US and world economy. Lehman Brothers just didn't qualify for a direct bailout. A year ago LEH's market capitalization was $33 billion, now it's in bankruptcy proceedings and selling off its assets at bargain basement prices. Barclays bank is offering $250 million for LEH's North American investment banking and trading operations. Barclays is also paying $1.5 billion for the LEH New York headquarters and 2 New Jersey data centers. The deal is subject to approval by the bankruptcy court. The deal would save almost 10,000 LEH employees from job loss. This makes me believe the court will have no problems with it, unless it considers the price way,way,way too low.
Here's another interesting development in the LEH bankruptcy, JPMorgan Chase (JPM)advanced LEH $87 million Monday morning to allow LEH to continue its trading operations and avoid disruptions to financial markets. The New York Federal Reserve Board reimbursed JPM for this. Apparently the treasury secretary's refusal to bail out LEH did not apply to loans made after no deal was reached and LEH decided to file chapter 11 bankruptcy. On Tuesday, JPM advanced LEH another $51 million. The bankruptcy court judge also appointed JPM as LEH's clearing house for its trading operation during the proceeding. This means that JPM has put $138 million into LEH to fund its trading operations in 2 days. This is over 50% of Barc's offer of $250 million for trading and investment banking operations. What this means is beyond me, if anyone out there has any knowledge on this please share it in the comments section.
Sunday, September 14, 2008
Another weekend another bailout!!
As if Mondays aren't inherently bad already, The New York Federal Reserve board convened a meeting between federal finance officials and executives of major banks, thrifts and investment firms Friday night. Lehman Brothers (LEH), the USA's 4th largest investment firm was the major and most urgent reason for the meeting. On Wednesday, Sept 10, LEH CEO Richard S. Fuld announced a plan to sell the company. He proposed taking the real estate holding which are dragging LEH's stock value down and transferring them to a separately held and traded new company. Then majority shares of the remaining institutional and personal money management units would be sold to raise much needed cash. Bloomberg news reported that LEH received bids for these units for approximately $5 Billion. Fuld proposed the sale after negotiations for a capital investment from the Korea Development Bank stopped without an infusion for LEH.
Apparently this was not good enough or fast enough for the Feds. Timothy Geithner, president of the New York Federal reserve board started the meeting Friday night by advising the executives present to come up with a bailout plan or run the risk of being the next company to face liquidation, bankruptcy or takeover. Meetings continued Saturday and are expected to continue on Sunday as well. LEH share price closed Friday (9/12/08) at $3.65,the trading range on Friday was $3.17 - $4.22, the 52 week range was $3.17-$67.73. This makes Friday's close a loss of over 90% from the 52 week high. No wonder the feds are acting so quickly.
Another reason the Fed is acting quickly is to reassure Foreign Banks that their holdings of LEH and other US financial services companies bonds will not suffer sudden losses. This weekend European Union finance ministers met in Nice, France to discuss the economic downturn started by the decline of the US sub-prime market. German Finance Minister Peer Steinbrueck told reporters that "The news from the United States is bad." He also expressed hope that the LEH situation would be resolved before Monday's Asian Markets opened for trading. How did the US ever get to the point where we have to reassure the world of our ability to withstand market corrections?? Maybe it's time to let LEH fail and spare the US treasury and its financiers, the American taxpayers another expensive bailout. Who knows??
To the government's credit, treasury secretary Henry Paulson is insistent that there will be no cash bailout from the US treasury this time. Most of the banks that are considering buying LEH want the US to inject some cash into the deal a la Bear Sterns in March 2008. Hang in there Hank, we're counting on you.
Apparently this was not good enough or fast enough for the Feds. Timothy Geithner, president of the New York Federal reserve board started the meeting Friday night by advising the executives present to come up with a bailout plan or run the risk of being the next company to face liquidation, bankruptcy or takeover. Meetings continued Saturday and are expected to continue on Sunday as well. LEH share price closed Friday (9/12/08) at $3.65,the trading range on Friday was $3.17 - $4.22, the 52 week range was $3.17-$67.73. This makes Friday's close a loss of over 90% from the 52 week high. No wonder the feds are acting so quickly.
Another reason the Fed is acting quickly is to reassure Foreign Banks that their holdings of LEH and other US financial services companies bonds will not suffer sudden losses. This weekend European Union finance ministers met in Nice, France to discuss the economic downturn started by the decline of the US sub-prime market. German Finance Minister Peer Steinbrueck told reporters that "The news from the United States is bad." He also expressed hope that the LEH situation would be resolved before Monday's Asian Markets opened for trading. How did the US ever get to the point where we have to reassure the world of our ability to withstand market corrections?? Maybe it's time to let LEH fail and spare the US treasury and its financiers, the American taxpayers another expensive bailout. Who knows??
To the government's credit, treasury secretary Henry Paulson is insistent that there will be no cash bailout from the US treasury this time. Most of the banks that are considering buying LEH want the US to inject some cash into the deal a la Bear Sterns in March 2008. Hang in there Hank, we're counting on you.
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