The Case for Gloom

Thursday, February 4, 2010

Because WordPress sucks, I couldn’t embed this slideshow.

Here is the link.

I’m just sayin’, is all.

Advertisements

The Goldman Scam

Friday, July 31, 2009

Or why Congress better tax 95% of Wall Street bonuses (with no bloody loopholes).

From a former Managing Director at Goldman Sachs, Nomi Prins, writing on Mother Jones:

Keep in mind that by virtue of becoming a bank holding company, Goldman received a total of $63.6 billion in federal subsidies (that we know about—probably more if the Fed were ever forced to disclose its $7.6 trillion of borrower details). There was the $10 billion it got from TARP (which it repaid), the $12.9 billion it grabbed from AIG’s spoils—even though Goldman had stated beforehand that it was protected from losses incurred by AIG’s free fall, and if that were the case, would not have needed that money, let alone deserved it. Then, there’s the $29.7 billion it’s used so far out of the $35 billion it has available, backed by the FDIC’s Temporary Liquidity Guarantee Program, and finally, there’s the $11 billion available under the Fed’s Commercial Paper Funding Facility.

Tactically, after bagging this bounty, Goldman asked the Fed, its new regulator, if it could use its old risk model to determine capital reserves. It wanted to use the model that its old investment bank regulator, the SEC, was fine with, called VaR, or value at risk. VaR pretty much allows banks to plug in their own parameters, and based on these, calculate how much risk they have, and thus how much capital they need to hold against it. VaR was the same lax SEC-approved risk model that investment banks such as Bear Stearns and Lehman Brothers used, with the aforementioned results.

On February 5, 2009, the Fed granted Goldman’s request. This meant that not only was Goldman getting big federal subsidies, but also that it could keep betting big without saving aside as much capital as the other banks.

Read this piece and then forward to your Congressperson and the White House with your feelings on the matter. The top talent is scamming you.


Why the Stimulus Will/Has Fail(ed)

Monday, July 20, 2009

Because it’s a matter of trust. The economy won’t recover until there is a palpable sense that we are doing the right thing. But no one can say, with certainty, that we are. Meanwhile, Americans, who truly understand being in debt, are watching the government pile on trillions with only a possible (it’s a bet!) positive outcome.

It’s beyond frightening. And though as a basic matter of economics – the money goes into circulation and revives the patient – what they are doing should work, there is a “spiritual” component here that is ignored. The patient has got to believe he’s going to get better. On that score, the doctors have a lot more work to do.

Just watch the Q2 GDP numbers beat expectations. We’ll hear that the recession is (near) over. And yet…their are plenty of layoffs on the horizon and no job creation; plenty of debt, and nothing resembling a balanced budget.

The hardest times are still ahead.

P.S. On a related note, if Congress doesn’t tax Goldman Sachs bonuses at, like, 90% (and they won’t), it will be hard to say that Americans aren’t justified in taking the law into their own hands down at 85 Broad Street. They shouldn’t. It is wrong to do so. But it will still be hard to say. Goldman Sachs represents the apotheosis of the moral hazard. Too big to fail, they make their profits on your back.


Bernanke, Paulson Lies

Thursday, June 18, 2009

Par for the course. Reflate those popped tires and keep driving towards that vast chasm in the distance.

Who trusts anyone right now?

From Austrian Filter via Zero Hedge:

February 28, 2007 – Dow Jones @ 12,268

March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is “going to be painful to some lenders, but it is largely contained.”

March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,”

March 30, 2007 – Dow Jones @ 12,354

April 20th, 2007 – Paulson: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” , “All the signs I look at” show “the housing market is at or near the bottom,”

April 30, 2007 – Dow Jones @ 13,063

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

May 31, 2007 – Dow Jones @ 13,627

June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

July 12th, 2007 – Paulson: “This is far and away the strongest global economy I’ve seen in my business lifetime.”

August 1st, 2007 – Paulson: “I see the underlying economy as being very healthy,”

October 15th, 2007 – Bernanke: “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

December 31, 2007 – Dow Jones @ 13,265

January 31, 2008 – Dow Jones @ 12,650

February 14th, 2008 – Paulson: (the economy) “is fundamentally strong, diverse and resilient.”

February 28th, 2008 – Paulson: “I’m seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.”

February 29th, 2008 – Bernanke: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

March 16th, 2008 – Paulson: “We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

March 18th, 2008 – Bear Stearns Bailout Announced

May 7, 2008 – Paulson: ‘The worst is likely to be behind us,”

May 16th, 2008 – Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning,” he said.

May 30, 2008 – Dow Jones @ 12,638

June 9th, 2008 – Bernanke: Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a “substantial downturn” appears to have waned,

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, “… in no danger of failing.”,”…adequately capitalized”

July 20th, 2008 – Paulson: “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

July 31, 2008 – Dow Jones @ 11,378

August 10th, 2008 – Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

September 8th, 2008 – Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 – 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

September 16th, 2008 – $85 Billion AIG Bailout “Loan”

September 19th, 2008 – $700 Billion Bailout Plan Announced

September 19th, 2008 – Paulson: “We’re talking hundreds of billions of dollars – this needs to be big enough to make a real difference and get at the heart of the problem,” he said. “This is the way we stabilize the system.”

September 19th, 2008 – Bernanke: “most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash,” Bernanke said. “Without action, they will fail soon.”

September 21st, 2008 – Paulson: “The credit markets are still very fragile right now and frozen”, “We need to deal with this and deal with it quickly.”, “The financial security of all Americans … depends on our ability to restore our financial institutions to a sound footing.”

September 23rd, 2008 – Paulson: “We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”

September 23rd, 2008 – Bernanke: “My interest is solely for the strength and recovery of the U.S. economy,”

October 31, 2008 – Dow Jones @ 9,337

March 31, 2009 – Dow Jones @ 7,609From


Rage Against Wall Street

Tuesday, June 9, 2009

Just had to post these two:

Matt Taibbi spanks Evan Newmark of the Wall Street Journal for attempting to enshrine Hank Paulson as a hero.

And this future Sarah Palin voter (this mess is now all Obama’s fault):


Insane April P/E Ratio

Monday, May 11, 2009

Just dig this chart here, courtesy of D-Short:

Oh yeah, sustainable rally! Go Bulls!


Big Surprise: Citi and BoA Fail Stress Test

Tuesday, April 28, 2009

From the Wall Street Journal.

Ken Lewis on life support. Pandit, too (though it really wasn’t his fault).

The real problem here is one, to repeat an oft used explanation, of confidence. No one believes the banks or the government. Any reasonably informed person sees what Geithner and Bernanke are doing and breaks out in a cold sweat. Borrowing and printing money to reinflate a bubble (our economy) is either genius or suicide. To me, it is most assuredly the latter.

We are in for years of topsy-turvy hard times with the outcome far from assured. Forget ripping the band-aid off quickly, they’re wrapping it up in bandages made of dollars. It’s going to hurt a lot more when it finally comes off.