AIG

The AIG insanity is really starting to piss me off. AIG has released a list of counterparties to the CDS, GIA and Securities Lending Transactions. As expected Goldman Sachs was the largest single counterparty closely followed by three European banks - France’s Société Générale, Germany’s Deutsche Bank and the UK’s Barclays. Isn't it nice of the US to bail out the rest of the worlds banks? We pay their pharmaceutical bills too.

Then we get the exciting news that the bonuses being paid out at AIG don't total $170,000,000 but instead $1,200,000,000 (nearly 10 times the original value), and $450,000,000 (3 times the original quoute) of it to the financial products division that got AIG into this mess. Isn't it interesting how the Treasury Department forced the UAW to take a haircut as a condition to bailing out the auto companies but the contracts can't be broken to AIG employees. No wonder the White House is worried about backlash. Here is a disgusting Larry Summers quote:

We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.

As Glenn Greenwald says:

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

Then you read a story in the NY Times, the Wall Street crowd in NY is still splurging on 5 figure afternoon dance parties with $750 magnums of champagne. An interesting quote from that article is here:

As for how he and his fellow Wall Streeters could still afford such afternoons, he said: "We all made so much money in the past five years, it doesn’t matter."

A 29-year-old man who works for a large investment management firm and was at Bagatelle’s brunch one recent Saturday and at Merkato 55’s the next, put it another way: "If you’d asked me in October, I’d say it’d be a different situation, and I don’t think I’d be here. Then the government gave us $10 billion."

To top it all off you read about how Sen. Evan Bayh (D-IN) is going to lead his band of Senate "moderates" in an effort to kill the mortgage cramdown bill and give the finger to regular homeowners facing foreclosure and eviction, because it might "reward" someone who was "irresponsible."

I guess AIG and Wall Street were really really responsible. Responsible that is for the mess we are in.

Cramer vs Stewart - KO Blow

John Stewart ran an amazing interview last night. It is the KO Blow in the Cramer vs Stewart series and needs to be seen. I will embed the three unedited not show on TV versions of the interview. Additionally I will put up the CBS Evening News summary and coverage of the interview. I won't be able to show any MSNBC coverage since the producers of MSNBC were told not to mention it today. Quite sad considering GE owns CNBC, NBC and MSNBC. For shame NBC, but it is a good illustration how ownership of multiple radio stations, TV stations and newspapers should be limited as it was in the 1980s. This mass ownership creates censorship rules favorable to their corporate master.

Part One - John Stewart vs Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part Two

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part Three

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

CBS Evening News coverage

Watch CBS Videos Online

Just a quick note. I was very impressed with Jon Stewart, he was obviously in command of the materials and research. Play clip 202, play clip 212, etc, in response to Cramer's answers to various questions. Jon Stewart is what journalism should be and it is sad that he outshines those who make it their chosen profession. I do wish for real journalism on shows such as Meet the Press, but it is rarely evident.

Nice to have a good White House Press Secretary

I didn't cover the tirade by CNBC's Rick Santelli. Suffice to say, he is a bit over-caffeinated in his self-denial rant on how the collapse is all the homeowner's fault.

White House Press Secretary Robert Gibbs addressed the briefing room today regarding Mr. Santelli's rant. It is a nice takedown and also a good example of how education and knowledge now has a place in the White House today. No more belittling reading or expert knowledge, instead we have policy based on facts, research and thought. I have to admit I am pretty happy about this change. By the way, watch the above video to its conclusion, it is more fun that way.

Ezra Klein - AND RANDIANS SHALL LAY DOWN WITH MARXISTS.

Ezra Klein has a story I never thought I would see. Greenspan backs bank nationalization.

Bonus points for a great blog post title AND RANDIANS SHALL LAY DOWN WITH MARXISTS. Something I thought I would ever see, but hopefully this will be the start of sanity in our economic policy.

SEC idiots in Congress

This is pretty self-explanatory video. I do want to say, I used to live in the Congressman's district. It is nice to see someone upset. Hopefully the SEC will start doing some oversight nowadays.

Banks still swilling champagne with your money

Apparently the banks still think Americans don't understand the basics of money. One of the fundamental properties of money and all currency is that it is fungible. What this means is that there is no difference between units of the same currency. Your dollar bill is worth the same as my dollar bill, when I have 100 dollar bills, it doesn't matter which ones I use to pay a debt with.

So when Citibank says "No TARP capital will be used for the stadium" referring to the $400 million deal that Citibank has made with the Mets, it is a LIE. This is not an exaggeration, an obfuscation, or a misstatement. It is a flat out lie. As they are BANKERS, they do know that money is fungible. Of course, my nieces know that as well, so it isn't much of a standard. Citibank is not alone in this, Bank of America spent $10 million on a big Super Bowl party. Of course all of this pales in comparison to the direct looting of taxpayers with the bonus payouts in 2008, Wall Street payed out $18,000,000,000 in bonuses. That is 5% of the first set of TARP payouts. In contrast, House Republicans unanimously voted down a stimulus package for regular people like you and I because 1% of the funds went to provisions that they disagreed with.

The class warfare is stunning. If you are a rich investment banker, you get billions of dollars, if you are a regular guy... You get to pay the rich banker. Color me disgusted.

Banks misusing bailout money, shocker

Apparently the banks are taking bailout money and NOT LENDING it, but instead using it to buy other banks for pennies on the dollar. Shocking, the greedy bastards are being ... greedy. Follow the link and see Ian's remedies. Hopefully someone will follow this guide or do something because otherwise we are just making the rich richer but not fixing our economy. Did I mention I really don't like investment bankers? As someone who worked in NYC, I have seen what bastards these guys are first hand. grr.

How did the finance crisis happen?

Watch it.

BTW - check out how transparent our bailout process isn't. Not surprising with these crooks in office but horrible for our country.

still think the bailout was due to poor people?

If you think poor people or greedy homeowners who wanted a house they couldn't afford are to blame for the subprime mortgage mess you should watch this video.



Dennis Kucinich is great on this but the real fun is when Rep Mark Souder speaks. He tears the entire business model up and rips into the execs, he specifically calls out how the issue was not the giving of mortgages to people but the demand for those mortgages from the industry to fuel their derivative market.
Here is a quote from Sounder:

Some of the answers just appall me, I mean, it is clear that greed lead to see no evil, hear no evil but report no evil. It is clear that there was fraud here but there's also to me, incredible gross incompetence, it is an embarrassment to the business profession...

Really the BS talking point that this is all the fault of poor people or minorities, or greedy people is done. Place the blame where it belongs, on the greedy scum on Wall Street. Pay particular attention to the talk of the role of the rating agencies. Pretty nasty stuff, these guys could teach the mafia how to run rackets.

The Invisible Hand of Idiocy

This article is excellent. Besides linking to it I will quote it:

---

Democrats fight for reasoned regulation of the markets using a consistent, fair framework. Republicans chaff at any restraint, sure that the market can be "self regulating." So how much data do you need to see which side is right?

---

Since 1929, Republicans and Democrats have each controlled the presidency for nearly 40 years. ... As of Friday, a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only ... Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.

---

$1700 in growth under Republicans, $290,000 under Democrats. Even if you exclude the failure of the markets under Hoover, Democrats still come out with six times the results of the GOP.

Of seven Republican presidents, three turned in negative results and the average rate of return was only 0.4%. Every Democratic president since 1929 has turned in a positive performance, with Bill Clinton setting the record at a 15.2% rate of growth.

So the next time someone suggests to you that the market averages 6%, or 7%, or 8% growth over the long term, remember this caveat: only when Democrats are in charge.

Don't Worry I landed on a Taxpayer

Offered without comment

Sometimes Humor helps

I recently found this blog, Sad Guys on the Trading Floor. I have to say, it is pretty funny. Check it out.

Various Ramblings

Lots of news in the past week plus, but so much seems redundant. CNBC and the various financial news are freaking out over every rise and fall of the DOW. I don't see the point, we know the market is volatile, take a pill people. On the other hand Paulson seems to have realized his plan was crap and didn't recapitalize banks and so some of the provisions in the modified bailout plan may get exercised. The modified plan has provisions to take equity in return for direct recapitalization. It appears he is moving in that direction. (h/t Henry Blodget@Clusterstock )

Sarah Palin and McCain have gone extreme lately. The direct implications they are making, calling Obama a traitor and terrorist have yielded very dark fruit in their base. It is now common for their rallies to echo with the crys of "Kill him", "Terrorist", and "Traitor". I find this very disturbing, it seems that this is their 2012 plan, get Obama killed by a weak willed Hannity viewer. Insanity, for more on subject check it out here. I have family that are going through JFK flashbacks, this isn't good.

We all saw the debate I am sure. My wife and I went to our neighbors house and we had a debate party. They fixed a very nice dinner and we brought dessert. It is clear to me that Obama "won" the debate. He was much more presidential and had actual plans. The shorter townhall format worked against him as he prefers more substantive answers. McCain managed to fill his bits with two or three lies per answer, he also declined to repeat a number of the attacks to Obama's face. He is definitely intimidated by Obama. I think the "that one" comment was part of his temper issue. McCain looked so unsteady during the debate I thought he might keel over. It would have provided entertaining theater but my dislike of the man is due to his policies, his lies and his bullying nature.

Bailout blues

I like this quote, it sums up how I feel nicely

As one really smart investment guru said to me, "it feels like they are so panicked about the next 10 days that they have no concern at all for the next 10 years and beyond." It just seems like we're diving off a cliff with absolutely nothing to break our fall.

(h/t Mike Lux)

Google and Nasdaq Fun

Google goes nuts today on Nasdaq. It looks like some Hedge Fund or Firm screwed up. Speculation is that someone in such a fund made trade on 10M shares instead of a 10K shares and chaos ensued.

What a mess, but it does illustrate how you and I play by different rules than the big boys. They make mistakes and the market is stopped and unwound to correct their error. Classic Fail.

Taxes

Our current income tax plan for 2008 is below. To pay for our Wall Street cleanup, our war in Iraq and Afghanistan, Health Care reform, and Alternate Energy we will need to raise more money. Considering that the Wall Street cleanup will cost us more than the Iraq war to date we should be making sure the wealthiest pay their way. They cost us all so much, and via corrupt, fraudulent methods.

For 2008, the Federal tax brackets for a single (unmarried) person are: 10%: from $0 to $8,025 15%: from $8,026 to $32,550 25%: from $32,551 to $78,850 28%: from $78,851 to $164,550 33%: from $164,551 to $357,700 35%: $357,701 and above This applies only to amounts above $8,950 (standard deduction of $5,450 plus the one personal exemption of $3,500) for an individual. For example, a single individual would actually pay: 0% of the first $8,950 of income, 10% of the income between $8,951 and $16,975, 15% of the income between $16,976 and $41,500, 25% of the income between $41,501 and $87,800, 28% of the income between $87,801 and $173,500, 33% of the income between $173,501 and $366,650, and 35% of the income exceeding $366,650. For 2008, The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007. The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

That is the current setup. What is needed is to add more brackets to income tax and tax each at progressively higher steps.

For instance

• 10%: from $0 to $8,025
• 15%: from $8,026 to $32,550
• 25%: from $32,551 to $78,850
• 28%: from $78,851 to $164,550
• 40%: from $164,551 to $350,000
• 44%: from $350,001 to $700,000
• 48%: from $700,001 to $1,400,000
• 52%: from $1,400,001 to $3,000,000
• 54%: from $3,000,001 to $6,000,000
• 58%: from $6,000,001 to $12,000,000
• 62%: $12,000,000 and above

Keep the deductions the same and also increase capital gains tax in similar ways. I see zero reason to have capital gains tax be less than income tax, if anything it should be more.

This would place the burden squarely on those who put is in this mess. I might point out that the top bracket for income tax is quite low considering the US's history and the number of brackets we have now is also low (see chart below). I am not sure how much more money this would raise, but it would redistribute the wealth. We do not need dynasties, they are not conducive to a democracy.

Partial History of U.S. Federal Income Tax Rates Since 1913
Applicable Year	Income brackets	First bracket	Top bracket	Source
1913-1915	-	1%	7%	Census
1916	-	2%	15%	Census
1917	-	2%	67%	Census
1918	-	6%	73%	Census
1919-1920	-	4%	73%	Census
1921	-	4%	73%	Census
1922	-	4%	56%	Census
1923	-	3%	56%	Census
1924	-	1.5%	46%	Census
1925-1928	-	1.5%	25%	Census
1929	-	0.375%	24%	Census
1930-1931	-	1.125%	25%	Census
1932-1933	-	4%	63%	Census
1934-1935	-	4%	63%	Census
1936-1939	-	4%	79%	Census
1940	-	4.4%	81.1%	Census
1941	-	10%	81%	Census
1942-1943	-	19%	88%	Census
1944-1945	-	23%	94%	Census
1946-1947	-	19%	86.45%	Census
1948-1949	-	16.6%	82.13%	Census
1950	-	17.4%	84.36%	Census
1951	-	20.4%	91%	Census
1952-1953	-	22.2%	92%	Census
1954-1963	-	20%	91%	Census
1964	-	16%	77%	Census
1965-1967	-	14%	70%	Census
1968	-	14%	75.25%	Census
1969	-	14%	77%	Census
1970	-	14%	71.75%	Census
1971-1981	15 brackets	14%	70%	IRS
1982-1986	12 brackets	12%	50%	IRS
1987	5 brackets	11%	38.5%	IRS
1988-1990	3 brackets	15%	33%	IRS
1991-1992	3 brackets	15%	31%	IRS
1993-2000	5 brackets	15%	39.6%	IRS
2001	5 brackets	15%	39.1%	IRS
2002	6 brackets	10%	38.6%	IRS
2003-2008	6 brackets	10%	35%	IRS

Dark Bailout

This clip works very well. The Bush/Paulson plan is just an attempt to steal our money.

Bailout failed

The Bailout failed, roll call here

	Ayes	Noes	PRES	NV
Democratic	140	95
Republican	65	133	1
Independent
TOTALS	205	228	1

I am happy to say my Representative voted against it. The Democratic tally was unfortunately for it. I am disappointed with our leadership.

Updated:

The problem was Pelosi and Reid wanted a bi-partisan bill. Yet we already know that the Republicans have no morals and will always go for personal gain over the good of the country. The republican’s couldn’t get the 70 votes they promised, and thank God. Though they needed 12 No votes to swap to pass. Those 5 promised but not delivered wouldn’t have made it.

What we need is a partisan bill, passed by Democrats despite the Republicans. The bill should be modeled after the successful Sweden bailout. Without the compromises that working with the Republican's demand we can actually make a bill that is good for this country.

This past bill was dangerous and nothing but a fig leaf on the Paulson plan. They need to move away from Paulson's plan and work with other plans actually designed by economists. Check out this link to two better bailouts

The summary is this:

1. Force banks to write down assets to market value, stop paying dividends, and raise new equity. We've basically tried this, and except for the top firms, it hasn't worked: Because no investors are dumb enough to invest.
2. Force banks to write down assets and then recapitalize them by converting debt to equity. This hits both bondholders and shareholders, and it costs the taxpayer nothing. It will also likely be so unpopular with Wall Street--and, more importantly, investors--that it would be politically untenable.
3. Force banks to write down assets and have the government take equity stakes via preferred stock. This is the way Buffett invested in Goldman (he was comfortable with the carrying value of its assets). It's the way the Sweden did it. It's also the way any responsible private market investor would invest.

As you can see option 3 is the tried and true method.

Bailout idiocy continues

Clap if you want the banks to live h/t Ian Welsh

First, Gretchen Morgenson in the New York Times reports that Goldman and no other Wall Street firm was involved in the AIG rescue talks and an AIG failure would have created a hole as big as $20 billion in Goldman's balance sheet.

I was speaking about this to my father. Here we see Paulson's cronyism, he has been at Goldman Sachs from 1974-2006. Lehman Brothers and Goldman Sachs were rivals. AIG's failure would have taken out Goldman Sachs, so Paulson saves AIG AND involves Goldman's in the talk. Only Goldman Sachs was involved. ref: naked capitalism

This is one of the major reasons why I am deeply suspicious of the bailout. It seems clear to me that Paulson isn't worried about the markets but worried about his firm Goldman Sachs.

The deal itself is crap. Let me quote Ian Welsh at FDL

In short, while this plan is an improvement on the original Paulson plan, which is saying, well, almost nothing. It's still a plan that, at the end of the day, won't work. That doesn't mean we won't see some short term benefits. Throw 700 billion bucks at the economy and the financial sector and it will do something. That's still a ton of money. But it won't fix the problem permanently, it will only patch it for a time and even during that time, things will continue to get worse. (For example, expect this to cause oil inflation.)

It's a bad plan that won't fix the economy or the financial sector. So we'll be revisiting this issue in 6 to 9 months or so when it becomes clear that the problem hasn't been solved, and that not solving it is costing a hell of a lot of money which could have been used to actually fix things.

For me one of the worst parts about this is no protection for homeowners in bankruptcy. They still lose their house, the bankruptcy judge has no power to save them. And idiots like Mayor Nickels are forcing homeless out of tent cities like Nickelsville when he doesn't have enough shelters to put them in.

In short I am losing hope for humanity. It looks like we are still digging the hole we are in, not realizing we need to do something different to get out of this mess.

Some Finance stuff due to Bailout stupidity.

All of this bailout nonsense is driving me nuts. Mostly because I have never seen such a load of crap passed around. First, the proposed plans range from totally bats$*t insane (Paulson's plan, GOP Plan) to sadly deficient. I think it is obvious to all that Paulson's original plan was nothing but a pure power and money grab, a giant theft planned before Bush's sunset. The GOP plan is just an way to show us all that Republicans have absolutely no brains. The want to deregulate their way out of this mess and reduce capital gains while doing it. I feel bad for those Republicans who have morals and a brain, the bulk of their party members are working hard to destroy that brand.

Dodd's plan, Barney's plan are all failed messes that build on the Paulson plan and try to "fix" it without fundamentally changing it. Come on, buying assets at their "book value" will not help a darn thing, it will just leak $700 billion out of our Treasury and bankrupt the country.

Look, the bond market is going wild, the interest on Treasury Bonds is very low. Everyone is trying to find a safe place to put their money. We need to issue more bonds and take this money and use it to buy these failing institutions. We need to invest into our own economy. We don't need to buy the toxic debt and leave these institutions intact making their profits for private enterprise. We need to nationalize everything we can get our hands on, we will lose out on some of this, but much of it will be valuable later. Then we can sell these institutions back to investors when they have regained their confidence and potentially make a profit.

We know we won't make a profit on toxic debt, it is completely worthless. But these companies are worth something. We need a different plan, not a bailout, but a nationalization plan.

Ref: Yglesias,