and, coincidentally, why no regular small-time investor should still be in it...
Labels: How the Stock Market Works, How the US Economy works, How the US works, Karl Denninger
posted by Anonymous @ 1:27 PM
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Yoo Hoo! Yes, Mr. Cop - Over THERE! (AIG)
Hmmm..... this is interesting....
"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples' hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he's wrought on America."
Oh, I see. There's that nasty "F" word, and this one you can say on TV!
But let's not be misdirected by bonus payments and "special legislation" eh? After all, anyone who believes this guy acted alone must be smoking something....
After the huge losses became known, Cassano was fired from AIG in early 2008, but he still received a salary of $1 million a month until Congress intervened. AIG has received about a $180 billion in bailout funds so far.
Ah. Let me see if I can grok this. Here's a guy who allegedly "hid" huge losses, was fired for it, but got a $1 million a month "salary" after being "fired", and he acted alone? That's why they paid him $1 million a month after firing him?
You expect The American People to believe that?
It gets better:
An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.
"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."
Yes, and again, there was nobody else within the firm that saw something like "Lichtenstein Subsidiary Profit, $10 billion" in the internal accounting of the company and thought that was funny?
Anyone remember the infamous "barge transactions" from the era of ENRON?
Of course AIG's CEO didn't see anything wrong with this.....
Earlier this month, AIG CEO Edward Liddy told Congress Cassano had done nothing wrong.
"I'm not a lawyer but there is no evidence of wrongdoing in any of this," said Liddy.
Really Mr. Liddy?
There's nothing wrong with moving transactions offshore through a series of shell companies to both avoid taxation and regulation, nor with having the accountant assigned to that unit intentionally kept away from the guy who's structuring the transactions so he can't ask "too many" questions? You seem to imply that you knew about it, but that sort of subterfuge (if it is as reported) in a company you are operating is all ok?
I must admit that in my time as a CEO I never ran a company as large as AIG (or anything even close to it) but I did, a couple of times, find people in the company who were intentionally concealing some aspect of what they were doing from me (and by extension, the other shareholders.)
My response? They were immediately fired and no, they didn't continue to be paid their salary or bonus.
Oh, and what about the external auditors? AIG has those, right? After all, it is a public company. Hmmmm....
Again I ask - who's interest does Mr. Liddy represent? Is it the taxpayer (as it should be, since this firm would not exist but for our largesse) or is it Goldman Sachs and other banking interests, given that Mr. Liddy was a director at Goldman before Hank Paulson, Goldman's former chief, tapped him to work for a "mere" $1 salary?
This is what the NY Daily News said back on March 17th (which unfortunately went under my radar at the time):
Company auditor Joseph St. Denis became concerned about the Financial Products unit, but Cassano barred him from checking.
St. Denis later quoted Cassano as saying, "I have deliberately excluded you ... because I was concerned that you would pollute the process."
St. Denis would recall Cassano saying he did not want to be promoted even further up the corporate ladder "because it would separate [him] from the money." St. Denis would remember Cassano telling him "AIG's corporate management was "scared to death" of him."
That's very interesting. What's even more interesting is his written testimony to the House Oversight Committee:
"I have deliberately excluded you from the valuation of the Super Seniors because I was concerned that you would pollute the proces."
My belief is that the "pollution" Mr. Cassano was concerned about was the transparency I brought to AIGFP's accounting policy process.
Ah, so Mr. St. Denis, the accountant, puts in writing (on October 4th 2008, before much in the way of funds were disbursed to AIG) claims that appear to be a "smoking gun" in regards to what has been going on within AIG (read the whole thing; its rather ugly) and yet somehow both Henry Paulson and Tim Geithner agree to transfer nearly $170 billion of taxpayer money to AIG to "bail it out", with full knowledge of this written testimony not only within the administration but also within the Congressional Committee on Oversight and Government Reform!
And where did this guy (Cassano) come from?
Joseph Cassano started out at Drexel Burnham Lambert under Michael Milken, "the Junk Bond King." Drexel imploded in 1990 and Milken landed in prison.
AIG promptly hired a team of Drexel people to start a Financial Products unit, Cassano among them. Cassano became the head and began dealing in securities known as "credit default swaps" out of one office in Wilton, Conn., and another in England, dubbed "the London casino."
You can't be serious? Drexel?
How does this sort of thing "fly under the radar" in Washington DC? Why you just make some "campaign contributions" to Chris Dodd and Barack Obama, the latter of whom wins the election and then allows yet another slug of money to be funneled through your former "employer" to hide the bad bets you made that now are being paid down to foreign banks?
Nor does this appear to be "just him" giving those "donations" either:
In March 2009 Cassano was linked to e-mails he authored in 2006 which solicited contributions from AIG executives for Dodd's campaign due to Dodd's position as incoming chairman of the Senate Banking Committee.[10]
Oh Mr. Cop! Mr. Cop! Mr. ERIC HOLDER!
One has to wonder - is the reason that Mr. Eric Holder, United States Attorney General, is not after this is due to campaign contributions made to his boss?
Has Barack Obama told his employee Eric Holder not to go after this guy?
And how about Chris Dodd? Nothing wrong there either?
Hmmmmm.
And no, I will not be satisfied if the law just goes after Joe here. Every single individual and firm that knew of this and did nothing, if criminal culpability is proved (and it sure looks like this "business" was intentionally structured in an attempt to avoid regulatory oversight and perhaps to unlawfully avoid paying taxes!), needs to hang from the (lawful) yardarm, including the accountants, external auditors and every single person within our government who knew and yet allowed the Treasury to be looted to pay off these "bad bets", including Henry Paulson, Tim Geithner and the entire Federal Reserve Board who approved the AIG transactions with The Fed.
Anyone remember Arthur Anderson?
PS: Mr. Cassano is alleged to have very extensive property holdings in The United States as well as having been paid some $300 million dollars over the last few years. Can we find a cop interested in serving up clawbacks and forfeiture actions for lunch?
Labels: Barack Obama, Chris Dodd, Eric Holder, Fraud, How the US works, Joe Cassano, Karl Denninger
posted by Anonymous @ 3:20 PM
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in The Market Ticker:Obama: The Market Is Issuing You A WARNING
Tuesday, February 10. 2009
[. . .]
Treasury is sitting on several trillion in backstops and financing of loans to cover "assets" that are in fact worth zero. It winds up eating the entire face value, while the Hedge Funds have made off with all of the coupon money in the meantime!
The risk here is that Treasury is backed into a corner due to ramping yields and perhaps even inability to roll over this debt at all and we find ourselves forced into immediate cash accounting as a nation. This in turn causes the instantaneous cessation of Social Security and Medicare payments, as that is the only bucket big enough to cover the shortfall.
Do you really want to go down that road Mr. President, because that is precisely what's at the end of it, and it may be only a year or two out!
If you think nobody beyond your vaunted administration has figured it out YOU ARE WRONG.
If you think Americans will pay taxes to an institution that intends to knowingly allow Hedge Funds to make hundreds of billions of dollars in profit while sticking the taxpayer with upwards of $2 trillion in losses and destroying all entitlements in a few years' time I suggest you have a mental examination and get your lithium dose adjusted.
Your approval rating and in fact American's tolerance of this blatant fraud, theft and chicanery is about to go straight down the toilet.
If you have an interest in having a successful Presidency (not to mention any chance of a second term or even a stable, sound America to be President of) you must immediately do all of the following:
- Revoke ALL of the so-called "23A Exemptions." Bernanke issued them, you need to direct him to revoke them. Safety and soundness of the banking system must come before any one firm or group of firms. There are literally hundreds of banks that are perfectly sound. There are also a bunch of big campaign contributing banks that are bankrupt and have been for the last eighteen months. Americans know this - the secret is out and its time to quit LYING.
- Send in the examiners. Yeah, I know, you're talking about "stress tests". Uh huh. Let's have those examinations now and forevermore in the future be public information. If a bank wants to operate under our laws and have the privilege of fractional reserve banking, they can open their books and examinations at all times to the public. Period.
- No more conduits, no more SIVs, no more games. If your "assets" are worth 20 cents on the dollar today that is their price. If that makes you insolvent then you are - period. We have an FDIC and we have the authority to "cram down" failed institutions for a reason. Use it.
- Send in the cops. The actions of major institutions up and down the line since this crisis began in mid 2007 and in the years leading up to it is at best grossly negligent and at worst felonious. We the people are done with being the patsies of a handful of thieves and frauds enabled by the 535 crooks in our Capitol. STOP IT NOW and start jailing the crooks or be judged as one of the felons. Your choice.
We are approaching yet another market implosion just like the one in September and October.
While it may come today or tomorrow, I wouldn't take that bet. In fact I expect that people will "rejoice" that you didn't wipe every common stockholder's equity stake in firms like Citibank, Bank America and Goldman Sachs - even though you should. Because I expected you to do the wrong thing, I actually bought some Citibank stock a short while ago. Were you to do the right thing my position would be worthless. It should be worthless. I'll bet its not - at least not immediately (and that I'll make a profit as a consequence of your idiocy.)
When and if this dislocation comes, however, it will destroy what is left of the American Banking System, it will expose that Bernanke has over one trillion dollars of garbage on The Fed's Balance Sheet, and that in turn will destroy the international market for United States Treasury Debt.
In the best case we wind up like Japan and have a bunch of zombies sucking up capital and doing nothing of value for our economy. In the worst case we get much higher yields in the bond market and the near-immediate bankruptcy of hundreds of midsize and larger firms, including virtually all financial firms in the S&P 500 and DOW, along with all major multinationals that have a captive financing function.
The Government cannot backstop it all. If you try the government fails outright. The market is bigger than you, it is bigger than The Fed, it is bigger than Treasury. You are subservient to The Market, not the other way around. Go ask Bill Clinton about The Bond Market when he tried to ramrod his Hillarycare plan through and what the reaction was. That's 1/100th of what you're about to experience.
If Bernanke tries to "cap" yields into such a dislocation (he has threatened to) he will cause everyone who owns Treasury debt to tender it to him with the consequence that he will be forced to print five trillion dollars in "new money". This will result in an eighty percent devaluation of the dollar almost instantaneously; gasoline will go to $10/gallon, Milk to $15/gallon, a loaf of bread to $10 and a hamburger at McDonalds will likewise be $10. Due to global wage arbitrage wages will not increase; this will as a consequence immediately render 50% or more of Americans homeless, hungry and jobless. What do you think happens next Mr. President?
The disease in our financial system is lying, too much leverage, outright fraud and hidden bankruptcy - all of it perpetrated through and with the explicit permission of government agencies including Congress, The Executive and The Fed. We have lived beyond our means through fraud for nearly 20 years and this is no longer possible. As a direct consequence trust has been destroyed and private capital has fled our credit markets and will not return so long as these diseases remain in the system.
Hiding the facts cannot cure the disease; the excessive debt must be defaulted; you cannot fix it by transferring where the leverage goes, such as to Treasury or The Fed. The liars and frauds must be exposed, charged and locked up, not protected and bailed out. Standards of living will contract and people must learn to live within their ability to earn, including the government, irrespective of politicians that think they can promise to borrow ever-increasing sums forever.
President Obama, this next crash in the markets, if it occurs, is your sole responsibility.
It will come as a consequence of your policies where you intend to try to shift the BANKRUPT institutions' losses to The Taxpayer - a debt that America cannot finance and which foreign governments and investors WILL NOT cover.
I'm well-aware of the Washington DC policy called "kick the can" but the can is now full of cement and if you think you'll get through your term before this all comes home to roost you are, to be polite, nuts.
You must stop the stupidity and you must stop it NOW.
The game of obfuscation and literally violating investors both foreign and domestic as a consequence of fraud countenanced by our government is over.
Both Americans and foreigners know about the lying and fraud; it is pointless to continue to dissemble and obfuscate as you are merely making a fool of yourself.
If you do not understand this and are being led by your "advisers", many of whom are the very people who advocated the changes in policy over the last 20 years that brought us here, you need new advisers, and you need them today.
By tomorrow it may not matter, and it will certainly be your fault.
Labels: Barack Obama, How US Economy Works, Karl Denninger, the impending Depression
posted by Anonymous @ 11:08 PM
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