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"I followed the rules as I always have." Stephen Friedman, on his purchase and previous holdings in GS.
2500 years ago Euripides observed, Whom the Gods would destroy, they first make mad. Having risen beyond the confines of the rules of men, big finance, forgetting that the rules of true finance and economics apply to all, will fall by their own hand. The case of Stephen Friedman, who, while owning a stake in GS, chaired the NY Fed Board which approved their application to become a bank holding company and thus have access to government bail out funds- a shift denied to Lehman Brothers- is a perfect example of the "rules don't apply to me" perspective. This perspective doesn't end with Mr. Friedman. Fed Vice Chairman Donald Kohn, according to the WSJ, The Fed's logic was that the conflict wasn't created by any action of Mr. Friedman, the financial system was in crisis, and the New York Fed needed a new president if Timothy Geithner became Treasury Secretary. So Fed officials say Mr. Kohn concluded that the benefit from the continuity of keeping Mr. Friedman outweighed the conflict of interest. The virtues of continuity outweighed the conflict of interest, eh? In other words, maintaining the status quo- a policy which doesn't seem to comport with creative destruction- is more important than the judgment clouding effects of a large monetary stake in the outcome of a bureaucratic decision.
On the topic of the virtues of continuity, the big banks appeared to pass their "stress tests" with satisfactory grades, although they'll need to raise some extra capital because the rest of the economy isn't pulling its weight. I wonder if the policy of maintaining the status quo in finance, or even more mundane issues like a large financial stake in the outcome, might have influenced that assessment.
The credit card industry is in huge stress and things are about to get worse. Please consider Advanta Halts Credit-Card Lending Amid Surging Losses. Advanta Corp., the issuer of credit cards for small businesses, will shut down accounts for its 1 million customers next month and seek to pay off securitized debtholders early as the recession pushes defaults higher.
Lending will cease June 10 as part of a plan to preserve capital after uncollectible debt reached 20 percent on some cards as of March 31, the Spring House, Pennsylvania-based firm said yesterday in a statement. Advanta will use as much as $1.4 billion to pay investors as little as 65 cents on the dollar to buy back securitized credit-card loans. That would be the first so-called early amortization of a trust since 2003, according to JPMorgan Chase & Co. analyst Christopher Flanagan.
Sources in the Chicago metropolitan area confirmed Monday the existence of an extraordinary "business-man" imbued with the earning power and fiscal strength of 10 ordinary men. This invincible, superhuman associate is reportedly able to leap from assistant manager to vice president of operations in a single bound, and is believed to have a secret headquarters somewhere deep within the suburbs, where by night he assumes the identity of a mild-mannered family man. Sources claim the man draws his power from a special hand-tailored Italian suit that strikes fear into the hearts of rival equity firms everywhere. The only challenge to the business-man's dominance is reportedly his arch-nemesis, "the business-woman," whom he has kept trapped beneath a protective glass ceiling since 1973.
tom hazel had six months to go. He'd been at his job at the aluminum plant in Longview, Washington, for 29 years and six months. Under his union contract, he was eligible to retire with a full pension—about $1,000 a month, or $37.50 for each year of employment when he hit his 30th anniversary. It was a promise that had kept him going for decades in a job that otherwise had little to recommend itself. Temperatures in the foundry soared well past 100 degrees; workers were required to wear respirator masks, into which they tore holes to smoke cigarettes as they lugged massive iron studs and jackhammers. Once, a guy was effectively cut in half when a piece of machinery fell on him; other men were electrocuted, or burned to death by molten metal. Aluminum workers are also at elevated risk of leukemia and a host of lung diseases. "I don't know how many times I thought about quitting," one of Hazel's colleagues admits. "But I thought, 'Boy, I've got too many years invested here. I can't afford to give up those years.'"
This may be a first, but you haven’t seen anything yet. As the income of the USA collapses and the outrageous prejudice of the rescue of the ultra rich continues, the Federal Budget Deficit rises geometrically, not arithmetically. Economics is in motion. It is not a life form of still photos. Therein is the killer error of almost every economist on the planet. The premise of the Formula is motion. This winter is the death of the US dollar. Please protect yourself.
About $12 billion was pulled out of accounts at Bernard L. Madoff’s firm in 2008, according to several people briefed on an analysis of Mr. Madoff’s business records.
About $6 billion, or half, was taken out in just the three months before the financier was arrested in December and charged with operating an extensive Ponzi scheme, these people said.
Discussion of the 50% Retracement Rule,
potential future price levels, time studies, key dates, Fibonacci, Gann, Astro numbers, Robert Rhea's Great Depression analysis.
Bloomberg is out with an article describing how Milan city officials used derivatives to bet on the default of the Italian government. While we wait for the sounds of knee caps being broken, let’s take a deep breath and think about what may be going on here.
The article states that “The city council sold credit-default swaps that protected the banks against a decline in the value of Italian Republic securities”. The immediate thought that comes to mind is that were Italy to default on its debt, Milan would very likely not be able to deliver on its contract. This is far from an original insight – in fact, everyone from Janet Tavakoli (buying protection on Korea from a Korean bank) to Nassim Taleb (buying insurance on the Titanic from someone on the Titanic) have made this exact point. So, what’s going on? Are the banks that are buying Italy protection from Milan just plain dumb?
There are two important things to keep in mind whenever you read any piece of financial news in the press:
In the vast majority of posts I publish here and at When Giants Fall, I highlight news reports or commentaries written by others. Oftentimes, I include material that I don't necessarily agree with in its entirety, or that details solutions, for example, that I personally find lacking. For the most part, I assume that people know where I'm coming from and understand that its the essence of the material that matters, rather than the finer details. In many ways, the first of the following three articles, "Is America About to Go Broke?" by Scott Burns at MSN Money, serves as a good example. On the one hand, I've written about and agree with its premise that unfunded retirement and other social safety net obligations are an accident-waiting-to-happen with seriously inflationary consequences down the road. On the other hand, I don't necessarily think that Treasury inflation-protected securities, for instance, are the best way to protect yourself against this particular menace. Among other things, I believe that Washington will have every incentive to change the rules when inflation starts spiraling higher so that TIPS holders won't have the hedge against rising prices that they thought they had.
If you have any info that would help, please contact me at my private email address: bailout@michaelmoore.com
