second !

One of the main problems is size. AIG was a holding company that held mostly regulated insurance companies and one division that was not regulated but had outsized betting slips that it sold. The “casino” part of AIG had the possibility to take down Goldman, JPMorgan, and the largest German and French banks. Thus, the American taxpayer was put on the hook to rescue the International Financial System.AIG was “too big to fail” and that is the root of the “moral hazard” problem.We have made the future more vunerable. JPMorgan got to take over a huge lender, BofA got to take over a huge lender and huge broker, Wells Fargo got to ….That is instead of making these guys smaller, we made them bigger. We need a program to break them up into smaller institutions so that a decade from today we can let them fail.They KNEW THAT WE COULD NOT LET THEM FAIL!They KNEW THAT THE FAILURE OF ONE WOULD BREAK THE BACK OF THE WESTERN MONETARY SYSTEM.That is what let them take the risks they took.Any long term solution must decrease their size. No bank holding company should be allowed to have more than 5% of total deposits, thus BofA must be broken into 3 parts.

How about Citibank?Will it go broke???I personally don’t feel so as Bernanke said the big banks were OK….but not AIG.hero

… instead of the banks.

Some kind of scam like that is exactly what’s going to happen with the government getting to pick and choose in back door meetings which banks are insolvent. Just more secrecy with open ended deals to screw tax payers. Shame on the professor for buying into this crap I guess he’s afraid of losing influence with these corrupt buggers. It’s a B.S. plan with plenty of room for insider profits, deception, corruption and power consolidation.

Look around Bloomberg, WSJ, NYT, WP, LT, FT; in that last few days there seems to be a lull in the headline’s tsunami. I think the market may rally again today.Let’s see what the durable goods and new home sales reports Wednesday morning have to say…

Professor:This move has been proposed by others and quite some time ago but not under the guise of ‘nationalization’ but bankruptcy protection; nothing new I’m afraid and as far as Tiny Tim and Pope Ben being on the ball – you can’t convince anyone of that.There is a most apparent perception of a paradox (a paradox cannot exist) in the nature, characteristics and function of a bank which must be addressed prior to any bankruptcy protection and reorganization is effected and this is as follows:1. Is a bank providing an, a priori, service as nodes in the socio-economic infrastructures that is, an absolutely necessary, mandatory, critical / vital community service in a socio-economic grid or,2. Is a bank merely providing a commercially founded financial offering of lending money for profit?My argument is that it is either 1 or 2 – BUT not both. The Banks can’t have a preferred non-competitive status is a free capitalistic system for the undertaking of commercial activities whilst providing a vital utility service. It’s invalid and corruptive to the system as a whole.The Glass Steagall Act provided accordingly but those from GS lobbied to have this Act repealed – to be noted, Mr Summers, said to be instrumental in the repeal of this aforesaid Act, has been conveniently retained in the White House Administration despite his conflicts of interest in these very matters.My following comment is that the community service nodes of liquidity distribution should be inviolate as they grow /stem from a real socio-economic demand due to the the diversity of demographics within a very large populated World (read: hard wired infrastructure)- while those “counter-jumpers” who call themselves “bankers” and such like, should be only allowed to “compete” in commercial merchant free-enterprise which I believe will have a success rate of zero if taken off the ‘real- economy’ tit,as it were. That is, just like everybody else. Keywords: compete – competition – competePersonally I believe what is happening in the USA is as criminal as it is incompetent and insane but it will follow, without any doubt, that the USA will collapse in terms of total chaos during the next few months – perhaps within the next 60 days as it looks very likely that those critical analysts and serious investors in every country in the entire World, can now clearly see what Americans cannot.And, that is that American “leadership” has gone completely insane, lost all reason and retain only the integrity of “vegetarian” sharks!.I suspect that your “leadership” doesn’t want to use the terms “bankruptcy protection” due to the shame of the incompetence that it brings, justifiably, to this American cum Banker / political “leadership” in action – BUT the World can see – we are not blind!American “Leadership” has bankrupted the former Constitutional Republic of the United States of America – get used to it. You have also brought the rest of the World down and we have to get used to that!And now Geithner and Benanke demand new powers? Why don’t they use their existing powers on AIG, BoA C, etc., etc., etc?No? Why not? Don’t bother to answer as we all know why!Sorry Professor… your post doesn’t pass muster (with me). And besides, it’s too late anyway and I believe its for the best. Time for new horizons that bring new opportunities. “Good night Dick.”Ho hum

@ abovecongress must act now and achieve totalTRANSPARENCY.

Also… who would the banks loan to? There isn’t anyone who wants a loan (most folks are looking to tighten up and reduce debt), with the exception of the likes of the auto companies, and throwing money at them is the same as throwing it down a rat hole.Whatever happened to “pushing on a string?”Mark

The professors new found optimism clings to some pretty big “if’s”. If the stress test finds insolvent banks bla bla bla, how can the professor be assured that this new Geitner plan isn’t just opening the door wide open for further deception and insider secrecy? Is the professor being naive? Why start putting blind trust in these people now?

No! You’re really fourth. Sorry!

hayes.what do you mean by taxpayer…arent these Treasury issuances funded by chinese ? Why do you call tax payer money etc ?Tax payer is broke for the last 2 years.

Geithner’s worst fear . . but UK = [note: 40 year securities]

agree! If China and others are seriously considering a new world currency, you can bet they clearly disagree with the direction the US is headed and as soon as they can free themselves from this financial spider web things will deteriorate even more for the US. If China had been the source of this reckless behavior, it’s country would have been demonized by our MSM and all of the players in this global meltdown would have been in prison for life or executed.

Good comment. There was a lot of good sense in the anti-trust legislation enacted by our great-grandfathers. And the break up of AT&T led to huge innovation and growth in the telecoms and information services sectors that might not have happened in a less competitive environment.Public policy is sometimes best served by putting public limits on the growth of companies as dominance of any company or sector usually works against the public interest.

It’s easy to call someone a shill when hiding behind a “Guest” tag – and OR’s analysis has provided quality content to the comments section of the blog for enough years that he deserves respect. Last I read 68 percent of Americans thought Obama was doing a good job, so OR is well within the accepted range of opinion.

on CNBC, i heard a story about citigroup (unofficially BK on lifeline money from USA gov) offered millions to its employees and bankers to stay. that is outrageous. but employees and bankers still left citigroup, good move.like i said, if you work for institutions receiving gov money, then dont expect bonus, retention bonus, no raise, and no nothing, cuz you will be forced to give back those money by General Coumo blackmail style that will put you and your family at risk. either serve your country for free or leave. this is new Obama and Geithner retro lash style for people who will ultimately labeled as trouble maker who caused this mess and profited big. regardless whether you caused this mess or you actually tried to fix this mess. you will always be labeled as one who caused this mess and deserve nothing, not even a thank you. oh yeah, you and your family will be put in jeopardy by mob.

LB,The US voted in Bush, twice!It’s got nothing to do with Obama being good (or bad), but everything to do with desperation on the part of the American populace: that’s why the campaign was long on “hope,” but short on anything substantive.OR’s posts are never shallow, even though I do often take issue with him (too optimistic/bullish, but that’s only my opinion).Mark

Monetisation is debt default that pushes most of the losses outside US borders, so makes sense from a US-centric perspective as serving US interests. As the holders of US debt/assets end up hurting, they dislike the policies. This is why China and Russia are pushing for a new monetary order that doesn’t hold their assets/reserves hostage to American selfishness.I’m too busy here to watch too closely, but I think that the Chinese and Russians are doing a lot of behind the scenes preparation for the G20 that could spoil the game plan of Geithner/Brown to externalise their economic policies onto their creditors.

@ Mark: “The US voted in Bush, twice!”Call me an optimist, but I believe even Americans can learn from their mistakes.I’m not an uncritical fan of Obama, as his economic and foreign policies look too much like Bush-lite so far, but at least he has taken a stand against the worst war crimes, civil rights abuses and extra-legal, un-Constitutional, unaccountable excesses of Bush.

LB: This new monetization game with the Fed has really only just started. So the question is … will the G20 survive in its present form – or even at all?PeteCA

so the govt now willingly offers loopholes for the auctions — you bid and win and the bank decides not to sell — this is not only a flaw in execution but also in the general approach and a sign of more missteps to come. i enjoyed Obama’s metaphor about a toaster blowing up in your face and how credit cards and other financial deals like mortgages should be warranted like toasters to not blow up in your face. the CC and mortgage warranty will too have a clause that indemnifies the banks when their products blow up in your face.Roubini my biggest concern now is the TIMEFRAME. How long does a zombie stumble around trying to eat flesh and spew contaminated sputum and blood before you take him out? There should be not only the stress test for these institutions but also a timeframe test. the time is already too late.perhaps a law should be devised that states for e.g. if an institution is insolvent by $(____) with unsecured debt in the amount over $(____), then said institution is disqualified from filing 11 or 7 and can be taken over by govt or auctioned off. the parties said institution owes too will be forced to deal w/ new owners under new most likely less favorable terms. now this second point is important because it will in the future give pause to those that want to engage in riskier transactions.11 and 7 must be amended for hedgies and smaller institutions because in the next year there’ll be many filings.

On the other hand, the pace of reduction of inventories is so rapid that soon manufacturing could pick up (at least, according to a Bloomberg story I read the other day).SWK

Average US person needs to be raped as he/she is being done with. These illiterate/uninformed/uneducated/unwashed people voted for this corrupt chicago machine and the equally corrupt politicians for the congress. Now enjoy the ride. My problem is that I am equally suffering though I have never in my life voted for any of these corrupt politicians — they all are corrupt, regardless of Dem or Rep label. An extremely dishonest govt. in USA, just one step above Zimbabwe.

@All,May I ask a hypothetical question to all?Q: In the current circumstances, WHAT will you do if you were the head handling all economic affairs of a countery other than US to the best interests of the people in that country??I know it is very complicated and a lot of assumptions may be necessary (like an goods-exporter country is different from an commodity-exporter one) but we may try to simplify it a bit if possible.Thank you very much for your thoughts in advance.

i knew.

doing nothing is to the best interests of the people.

I recalled your comment back in October

BWII will be decided in Moscow, Beijing and Riyadh. When the time is right, there will be a coup against the dollar that will overturn dollar hegemony for good.The Arab Gulf exports 80 percent of its oil to Asia and imports 80 percent of its goods from Europe. The dollar is an artifact that is too expensive to maintain, but with so many US troops and ships in the Gulf, now would be an impolitic time to overthrow the dollar. More likely they will wait until the US is forced to withdraw from Afghanistan and Iraq, just as Eastern Europe waited until the Soviets were forced to withdraw in shame from Afghanistan two decades ago.In the meanwhile there are treaties being signed, infrastructure being built, currencies being realigned, and regional consolidation across Asia toward a more collaborative future.Hide replies Reply to this comment By London Banker on 2008-10-10 11:57:59

Is this the beginning of the coup on the dollar??http://www.rgemonitor.com/financemarkets-monitor/253977/#121642

Agree, the answer is to let the financial system fail and take our licks. But I have come to realize that everyone already knows this to be true! What’s really happening is that the Wall Street “status quo” is gaming the system trying to squeeze the tax payer in hopes that there will be enough money to keep the status quo going.But we know what’s probably going to happen, inflation, civil disobedience, tax riots, and social upheaval…It’s the 1960′s again.

Somewhere hidden deep below in a text with the title ‘U.S. Durable Goods Orders Unexpectedly Jumped 3.4%’ (Bloomberg):Regional reports indicate demand may be slumping once again this month. The Philadelphia Fed’s index of new orders fell in March to the lowest level in more than 27 years, and a similar measure from the New York Fed decreased to a record-low.Shadow more reliable than happy spins in titles, methinks.

you’d have spelled “bull market” as “bullsh_t market.”

“America” has excelled because it has exploited others better than anyone else. There isn’t anything exceptional with regards to “Americans:” such treatment of groups of peoples creates “inferior race” mentalities (not to mention extreme nationalism).If one is referring to the system by which the American people operate, then again I have to note that this system has functioned because it has externalized its less desirable (by)products on the rest of the world.As to Obama taking a stand, it’s been all lip service. He is only the mouthpiece of the system, the system that’s controlled by murderers with painted-on smiles.Mark

mob congress, that is scariest of all.

I never said that it was universally true. Of course there are exceptions. I think, however, that people are missing the part in which many of what they believe are “credit-worthy businesses” are really businesses whose future isn’t that of their past. There’s a paradigm shift going on (mostly due to resource depletion), and many reputable and honest businesses will no longer exist because they will not be meaningful in the future. And many will die because they rely on economies of scale which will not exist in the future.This is all easy to see the projection of things. Try some simple exercises in projecting something WAY into the future as natural resources deplete. It’s ALL been one big bubble, and bubbles always deflate.Mark

Translation of the press conference from Obamenglish to plain english :”Yesterday, Secretary Geithner announced a new plan that will transfer government resources to private businesses by over-paying for the assets that are preventing our banks from lending money.And we will continue to do whatever is necessary in the weeks ahead to ensure the banks shareholders and bondholders saveguard or increase their wealth, even if the economy gets worse.Finally, the least critical part of our strategy is to ensure that we do not return to an economic cycle of bubble and bust in this country. We know that an economy built on reckless speculation, inflated home prices, and maxed-out credit cards does not create lasting wealth. It creates the illusion of prosperity, and it’s endangered us all. “

Thanks! LB. Obi is certainly doing more lazy dumb a** Bush, the most shameful President is US history,Even though I admit that is not a very high bar:-)What I was trying to say is that I don’t believe in luck; that smart hard work usually pays, and that perhaps Obama may eventually harvest sweet rewards from his hard work.As a former tenured Professor, I am used to voice my opinions loud and publicly. Now that I retired and work FOR NO-ONE I am freer than before.

Democrat congress mob penalty = Grassley + Coumo mob penalty. Grassley penalty, first apologize and then commit hara-kiri. Coumo penalty, threaten to disclose your and your family to mob lynch unless you return money you work hard for. Ouch, that gotta hurt. Can you trust mob congress to do the right thing?

Conduct a systematc “indirect exchange” from investment in fiat paper assets to hard assets, a la Minsky.

“Smart and Hard work: Obama”I can [B]never[/B] take another of OR’s opinions seriously after a statement like this. It is what you might coin ‘jumping the shark” for me at least. Sorry but unapologetic.AM

If I understand your question correctly – I as the foreign govt. economic head would muster relevant resources that would entice 15-20% of DDA account holders in the largest US banks to withdraw completely their demand/time deposits and place them in a specially designated DDA type account in my country with appropriate incentives to do so, thus facilitating the removal of the enabling good assets, while leaving the toxic assets to finally collapse the institutions.Your thought on that one TfT ?

the money overlord bankers?

Treasury Notes Fall for Fifth Day Before Auction; Fed Buys Debtarch 25 (Bloomberg) — Treasury notes declined for the fifth day as U.S. sales of $98 billion of notes this week raised concern record amounts of government debt will overwhelm demand.U.S. securities fell even after the Federal Reserve today bought $7.5 billion of Treasury notes, its first targeted purchases of U.S. securities since the early 1960s. Investors failed to buy the amount of 40-year gilts offered by the U.K. at auction today. The Treasury’s record $34 billion sale of five- year notes today is the second of three note auctions this week to help revive the economy.http://www.bloomberg.com/apps/news?pid=20601087&sid=a6hIODmw_YXs&refer=home

i rest my case. if you dont work for free in Geithner’s gov/private deal, then you will be villainified.

Bank Executives are not really the people I want helping to determine the economic system that I must live within. That is why we’re here today. Banksters are not economists. They’re all profiteers that could care less about making a sound economy for the American people. FACT.

via CR – worth taking the time to read as it lays out the distinction between Growth rates and Growth levels – Frequently mentioned in this blog is the ‘good news’ of stabilizing economic indicators e.g. the WLI from ECRI. The reality is that stabilization at low levels without growth = stagnation.Presentation to the Forecasters Club of New YorkNew York, NYBy Janet L. Yellen, President and CEO, Federal Reserve Bank ofSan FranciscoFor delivery on March 25, 2009, 1:00 PM Eastern,”The Uncertain Economic Outlook and the Policy Responses1Good afternoon and thank you for inviting me. I’m delighted to speak before a group of such distinguished forecasters. As a member of the Federal Open Market Committee, I too must regularly predict the course of the economy and lately that has become a particularly hazardous occupation…”http://www.frbsf.org/news/speeches/2009/0325.html

PhilT,Thanks for the comments. My intent may be closer to what wethepeople commented. In another word, what a non-US economy would do to mitigate the impact from the actions of US Treasury and FedRes since summer 2007 to preserve its people’s interests? It may imply a thought of post-BW2 or how to get to post-BW2. LondonBanker’s comment cited by Hayes above may provide one possiblity. In any case, I think Sam will try his best to prevent the post-BW2 situation that reduces USD hegemony.Your approach seems more powerful and timely if implemented by account holders within the US and it may avoid the fluctuation in forex. My impression is a number of bloggers here did suggest the similar approach (withdraw fund from big-name banks and put it into a local one or a credit union).Thanks again for your thought.

“The professors new found optimism clings to some pretty big “if’s”. If the stress test finds insolvent banks bla bla bla, how can the professor be assured that this new Geitner plan isn’t just opening the door wide open for further deception and insider secrecy? “My advice?Forget it.This whole “stress test” on the banks is just a distraction. Much the same as the bonuese at AIG created pandemonium on the press. But where’s the outcry on exorbitant bonuses to all the bankers?So what’s the real stress test?It’s the stress test on the US Government credit status.That’s what.Check the credit default swaps on US Treasuries.The price is spiraling higher.Just as it should.PeteCA

PeteCA: Check the credit default swaps on US Treasuries.How does one do that?

I have never posted a comment like this before, but it is time.I’m forced to agree with other posters here.Prof. Roubini: You MUST explain why you are supporting the Geithner plan. It has been plainly and clearly lain out that this plan can be gamed. It is clear that banks WILL game this plan. The ability for bad asset holders to avoid writing down these assets because they can sell them to intermediaries and limit their own writedowns to 7% with the taxpayer paying all the rest is irresistible and unavoidable. I imagine this is how almost all of these assets will be sold.If you believe that the taxpayer should take these losses for the good of the economy, then please come out and say it.If you have another concept, please, enlighten us.But staying silent on this issue is causing us, your loyal readers and fellow economists, to question your judgement.I don’t think there is any issue that has come up that is more clear. Limiting bank losses to 7% under this program is a taking of $930 Billion from the US taxpayer. It is a disaster. I can’t for the life of me understand why you won’t address this as your most urgent post yet.We are all in agreement that this issue must be discussed.Please respond.–Brian

pjb,I disagree with LB’s take on what I affectionately call the ObamaNation of Desolation for their policies will surely cause a far greater misery index than if they just let the Greater Depression come so that we can all pay our just debts.I see that the EU is not happy with the American and British approach – perhaps LB is too concerned about his employment to be an unbiased observer at this point – maybe the Professor too.EU presidency: US economic plans ‘a way to hell’

Investment professionals rely upon real-time quotes for the prices of OTC derivatives. They can be obtained from companies like CMA Datavision at the following link:http://www.creditma.com/Home/index.phpHowever, these are sign-up services and they are expensive. I do not subscribe myself. So I just make a mental note – any time a financial commentator is nice enough to provide these updated charts in their articles. Chris Puplava does it from time to time, and occasionally others do. You can also see the info reported on Bloomberg now and then (they don’t show charts, but will report that credit default swaps on US treasuries have risen by a certain percentage over a recent time period. Try running a search on Bloomberg to get their latest articles.PeteCA

via Drudgehttp://www.youtube.com/watch?v=94lW6Y4tBXsDaniel Hannan MEP: The devalued (UK) Prime Minister of a devalued Government

http://www.reuters.com/article/domesticNews/idUSTRE52O5KB20090325Stimulus, bailout will lead to more fraud: FBIWed Mar 25, 2009 1:59pm EDTBy Andy SullivanWASHINGTON (Reuters) – The FBI is bracing for a wave of fraud and corruption cases stemming from the government’s multitrillion-dollar effort to get the economy moving again, the agency’s chief told Congress on Wednesday.The expected surge in economic crimes will place further strain on an agency already stretched thin as it investigates mortgage fraud, terrorism and corrupt politicians, FBI Director Robert Mueller said.”Our expectation is that economic crimes will continue to skyrocket,” Mueller said.Written by LF on 2009-03-25 14:37:54

March 23, 2009Dodd’s Wife a Former Director of Bermuda-Based IPC Holdings, an AIG Controlled CompanyBy Kevin RennieNo wonder Senator Christopher Dodd (D-Conn) went wobbly last week when asked about his February amendment ratifying hundreds of millions of dollars in bonuses to executives at insurance giant AIG. Dodd has been one of the company’s favorite recipients of campaign contributions. But it turns out that Senator Dodd’s wife has also benefited from past connections to AIG as well.http://www.realclearpolitics.com/articles/2009/03/dodds_wife_a_former_director_o.html

For example:European Central Bank resists rush to print moneyhttp://www.iht.com/articles/2009/03/24/business/ecb.php

How do we check this?

Hey, I bet many of you guys gave Bush the benefit of the doubt for close to EIGHT years! And you are not willing to give this guy even three months? Don’t you think there may be some kind of strategy behind what he is doing?I can tell you I was a sympathizer of the REPUBLICAN Party until at least the end of Bush’s first term. So you cannot really label me a Democrat die hard. On the other hand, if you are a Republican die hard,you won’t like Obama even if the guy walks on water.

Just some random guessing but don’t forget Roubini has long standing relations with Geitner and company as I’ve heard him reminisce in an almost nostalgic way when referring to people he personally knows in high positions on Obama’s economic team like Geitner, so he is surely pressured to go along with them. Secondly we are on the edge of a cliff that the Professor I’m sure doesn’t want to see us fall off of so maybe he’s conceding his ideas are not going to be used and we’re running out of time so he better be supportive of the efforts being made even though they wreak of moral hazard. The professor maybe compromising because the alternative is much dire and politically harmful to his own position.

The Geithner plan puts 93% of the risk on the taxpayers in return for only 50% of the ownership.If we take the Fed’s Maiden Lane and IndyMac’s mortgage loan portfolios as a benchmark the projected outcomes (low recovery value) are most likely to incure a significant loss for all participants.If some banker were to come to my office and offer me an extremely high risk investment (with maybe a 20% probability of a profit) that would require me to take on 93% of the risk, I would laugh him right out of my office. This should be the taxpayer response to this plan.I am having a difficult time seeing how this plan can be supported by taxpayers.

Check out the comparison with Brady Bonds made by one of the Professor’s pals at stern. Another smart guy who likes the TG plan.CommentaryGeithner Revisits Brady BondsRoy C. Smith, 03.24.09, 04:40 PM EDTAn important effort that we need to work.http://www.forbes.com/2009/03/24/brady-bonds-fed-opinions-contributors-geithner.html

So what is Goldman truly worth without being propped up indirectly by the taxpayer? Reading recent headlines one would think Goldman is hale and hearty.

http://archive.wbai.org/files/mp3/090325_090001dn.MP3.hit play.a. goodman , matt taibbi, sen. b. sanders interviews.3/25/09.

why are you saying “hang” what kind of person are you?

Its the money tax payers have borrowed from china therefor its tax payers money.

Obama sure knows how to pick ‘em!”WASHINGTON – President Barack Obama’s pick for the No. 2 post at the Environmental Protection Agency is removing himself from consideration.Jon Cannon, a professor of environmental law at the University of Virginia, says he is withdrawing as the nominee for deputy EPA administrator because of scrutiny surrounding the America’s Clean Water Foundation. Cannon once served on the now-defunct organization’s board of directors.The EPA’s inspector general’s concluded in 2007 that the foundation mismanaged $25 million in EPA grants.”

smart guy but his ideas are (how shall I say it nicely) outside of the box.e.g.he has proposed a solution of having banks run during this time of crisis with zero capitalhttp://blogs.ft.com/economistsforum/2009/01/a-capital-less-financial-system/________________________he has separately proposed to have the government buy up shares of failing banks on a 2 to 1 basishttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/20/AR2009022003230.html?nav=hcmoduletmv________________________In his current article he chooses to refer to the toxic assets euphemistically in Turbo/Obamaspeak as “legacy assets”Cabellero first argues that the market lacks the expertise to value the “legacy/toxic assets” – yet his/Turbo’s proposed solution draws on the market for the expertise to do the valuations e.g. Bill GrossHis second argument is that the non-recourse loans will reduce panic/uncertainty by offering superior (guaranteed) returns to private investors.His third argument is that by providing captial assistance the prices bid for the “legacy/toxic assets” can be goosed higher than what the market is willing to pay (and what the weak banks require to stay solvent).His first argument is self-contradictory – his second and third arguments suggest that in order to fix the problem those who created it (investors) must profit (at taxpayers expense). The question that he does not answer is why (by providing a windfall to the “investors” and a mulligan to the weak banks by way of the capital assistance program) the Turbo plan will work.He concludes: “The Legacy Assets program is well conceived and deserves to be supported.”He fails to even acknowledge that the masters of the universe who gamed the system for the past 10 years, facilitated by Turbo, Paulson, Summers, Rubin et al. will not do the same again.

For starters, if you had been reading this blog for a while you would, for example, know they were underwriting subprime securities and shorting them at the same time! They, of course, still consider this a perfectly ethical “hedging” strategy and argue the two “departments” involved “competed” against each other and were not aware of the other’s activities. Of course, one would have to stretch one’s imagination quite a bit to buy this argument:-) See, e.g.:How Goldman profited from subprime meltdownTraders at the company bet against securities backed by risky home loans even as Goldman’s mortgage department was underwriting them, raising questions about the balance of responsibilities.http://articles.moneycentral.msn.com/Investing/Extra/HowGoldmanProfitedFromSubprimeMeltdown.aspx

I wouldn’t be surprised (I have no time/interest to do the research since I, long ago, stopped wasting time and energy on exposing these crooks) if most of the billions in profits diz guys made in their subprime bets come from CDSs bought from AIG. And thus, a lot of the bailout AIG money, as you have also read here, is now in the hands of the GS vultures.Vat can we do, life goes on… I am long XLF leaps if which GS is part.http://finance.yahoo.com/q/hl?s=XLF

I wouldn’t be surprised (I have no time/interest to do the research since I, long ago, stopped wasting time and energy on exposing these crooks) if most of the billions in profits diz guys made in their subprime bets come from CDSs bought from AIG. And thus, a lot of the bailout AIG money, as you have also read here, is now in the hands of the GS vultures.Vat can we do, life goes on… I am long XLF leaps if which GS is part.http://finance.yahoo.com/q/hl?s=XLF

And, if you dig a tiny bit deeper you will actually boyz have a reputation for being the more professional, thorough and ethical in the business. They are to IB what PG is to consumer goods. So you can only start imagining where the rest of the IBs stand in my book. Some things will have to change, and will change…

Diz kind of sensitivities was something I was [fortunately] not raised with in Venuzuela. I would have used the word hang even if Obi was as white as stationary paper.I was using it to mean passing rushed, harsh, unjust judgment, on someone without knowing the facts/having seen the whole story unfold. Not giving them the benefit of the doubt, something most Amerikans certainly did offer Bush.

How do you see the result of the stress test affecting XLF?

PeteCA,You just freaked me out! It this right?PKB

Didn’t mean to suggest you were saying so, Mark. Just making a comment, really.While true that many businesses will not survive a paradigm shift of the sort you reference, others will emerge Phoenix-like from the ashes of the old. It will be a rough ride for a lot of folks in the meantime, though, I’ll grant you that.SWK

of course, TRANSFER it! Isn’t this what we excel at: Simply transfer the toxic waste and dump it on the backs of over 100 million taxpayers so things can return to the status quo; welcome to 3rd world status! No surprise-this great country has many billionaires at the same time it has penniless citizens as we fall in line to our hollow motto: “liberty and justice for all”!

http://www.youtube.com/watch?v=1BjX2dJlNl4&feature=related

Obama, Geithner, and Ben’s plan of cheap money to American is like cocaine to cocaine addicts.

f,but they will not disclose the nature of that (it)which is being transferred. that is the big secret.i can only imagine how fictitious, how large andblatantly criminal and fraudulent that IT is.all the b.s., pomp, “complexity” and “sophistication”conjured up to adorn exactly what? hmmm?something naked and common. fraud.?

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You folks are all so thoughtful on this blog. What’s really hard to get your head around is this: our financial system is a house of cards. The Federal Reserve Note represents a giant world-sized Ponzi scheme. At the moment there are still a lot of people who are willing to invest in the scheme. The worst thing about the out come of all such frauds is that they don’t fail in a soft landing. They crash.

Greetings Nouriel, Could you please make sense out of this transcript from your article” While banks have a receivership regime based on the FDIC taking over insolvent banks and working them out in a orderly way bank holding companies and non bank financial institutions do not have such conservatorship/receivership regime outside of Chapter 11 or Chapter 7 bankruptcy.That is why the government had to bail out the creditors of Bear Stearns and AIG and that is why the collapse of Lehman was disorderly.”The government can always seize any company in which it sees public intrests are in danger. The comment is using double standards. They seized Bear Sterns and transfer the risk to JP Morgan with a $30 billions cushion, and they seized AIG with $172 Billion up-front.Thanks

What is Mr. Obama doing what’s different than what Mr. Bush did?