Continue reading Treasury Does Not Have the Authority to Allow Ken Lewis to Violate Securities Laws

Treasury Does Not Have the Authority to Allow Ken Lewis to Violate Securities Laws originally appeared on BloggingStocks on Fri, 05 Feb 2010 16:20:00 EST. Please see our terms for use of feeds.

Continue reading Paulson: Not Saving AIG Would Have Pushed U.S. Unemployment to 25%

Paulson: Not Saving AIG Would Have Pushed U.S. Unemployment to 25% originally appeared on BloggingStocks on Wed, 27 Jan 2010 17:00:00 EST. Please see our terms for use of feeds.

Continue reading Closing Bell: Roubini saves the day (CIT, STP, MOT, JPM)

Closing Bell: Roubini saves the day (CIT, STP, MOT, JPM) originally appeared on BloggingStocks on Thu, 16 Jul 2009 16:00:00 EST. Please see our terms for use of feeds.

People revealed earlier this week that Treasury Secretary Tim Geithner made its closely-watched list of the 50 Most Beautiful People.

Beautiful? Really? 50 Most Beautiful Treasury Secretaries perhaps -- but only because Hank Paulson looks like a rodent and Robert Rubin looks like the dad in that Twister Sister music video. Business Insider found time to do some digging and uncover the makings of a scandal. Joe Weisenthal reports:

Continue reading Is Tim Geithner really one of the 50 Most Beautiful People?

Is Tim Geithner really one of the 50 Most Beautiful People? originally appeared on BloggingStocks on Sat, 02 May 2009 15:40:00 EST. Please see our terms for use of feeds.

An outspoken group of Bank of America (NYSE: BAC) shareholders has been calling for CEO Kenneth Lewis's head lately, with investors none too pleased by the bank's near-disastrous acquisition of Merrill Lynch. However, testimony is hitting Wall Street today that indicates Lewis was simply following government orders by keeping hefty losses at Merrill under wraps.

Lewis testified under oath before New York Attorney General Andrew Cuomo in February, asserting "it wasn't up to me" to disclose Merrill's fourth-quarter losses toward the end of 2008.

According to Lewis, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson pressured him to stay mum about Merrill Lynch's troublesome balance sheet. The regulators reportedly urged Lewis to proceed with the merger, warning that the deal's failure would "impose a big risk" to the nation's financial system.

Continue reading Was Bank of America's CEO intimidated by the feds?

Was Bank of America's CEO intimidated by the feds? originally appeared on BloggingStocks on Thu, 23 Apr 2009 11:00:00 EST. Please see our terms for use of feeds.

Last fall, former Treasury Secretary Hank Paulson decided it would be good to buy the toxic waste off of bank balance sheets, so he persuaded the President and Congress to spend $700 billion to create the Troubled Asset Relief Program (TARP).

Once he got the money, he changed his mind and decided that buying toxic waste made no sense -- so he used it to buy big chunks of senior preferred stock in U.S. financial institutions (FIs). Why? I don't know, but it certainly was not to get lending going again.

Continue reading Add $590 billion from TARP, cut lending 23% -- What gives?

Add $590 billion from TARP, cut lending 23% -- What gives? originally appeared on BloggingStocks on Tue, 21 Apr 2009 12:40:00 EST. Please see our terms for use of feeds.

This week, Texans watched a meteorite burn up in the atmosphere leaving a few glowing pebbles in the scrub for astronomers to recover. It turns out that when 3,000 people accepted positions in the Bush administration, they thought they were hitching their career wagons to a star. Now, it looks more like their careers were attached to that flaming out meteorite instead. How so?

With the national unemployment rate at 7.6%, the unemployment rate among those Bush appointees is 75%. Or put another way, only about 25% of those 3,000 folks have found jobs. It turns out that this unemployment rate is much higher than for former Presidents Ronald Reagan, George H.W. Bush and Bill Clinton staffers -- about half of which had jobs within a month of leaving their government posts.

Continue reading Unemployment for Bush appointees is 10 times national rate

Unemployment for Bush appointees is 10 times national rate originally appeared on BloggingStocks on Sun, 22 Feb 2009 10:30:00 EST. Please see our terms for use of feeds.

Mr. President, congratulations on passing your $787 billion stimulus bill. We hope it helps to lessen the pain of the declining economy. But the stock market has been tanking and record numbers of people are joining the ranks of the unemployed. Going to Canada for your first Presidential trip is the opposite of W's first trip to Mexico. And your talk about gloomy economic prospects stands in sharp contrast with W's out-of-touch proclamations of solid economic fundamentals. But doing the opposite of W is not going to cut it.

Are you wondering why there's bailout backlash? I think it may be because we need you to put your communications skills to work by giving us a recovery roadmap. In concept, this is a simple idea -- just tell us:

Continue reading Memo to President Obama: We need a recovery roadmap

Memo to President Obama: We need a recovery roadmap originally appeared on BloggingStocks on Sun, 22 Feb 2009 09:10:00 EST. Please see our terms for use of feeds.

In looking back over 2008, there is one piece of good news -- but it's a silver lining on a black cloud. What am I talking about? In 2008, the U.S. had the lowest inflation rate since 1954 -- 0.1%. Back in 1954, prices actually fell 0.7%. The 2008 inflation report is good news in one sense, and ominous in another.

The good news is that the price of gasoline fell so much. In December gasoline lost 17.2%, the largest monthly decline in records that go back 71 years. Overall energy prices also dropped by a record 8.3% as home heating oil and natural gas showed declines.

If only it weren't for the reason that prices were falling, this news would put a smile on my face. And the reason for the fall is that the economy can only grow if consumer spending grows. And that's not growing because consumers are making less money and they can no longer borrow to make up the difference. This means that demand is dropping for just about everything -- including gasoline.

Continue reading Ominous good news on inflation

Ominous good news on inflation originally appeared on BloggingStocks on Fri, 16 Jan 2009 17:20:00 EST. Please see our terms for use of feeds.

Is Hank Paulson using TARP to make us rich? originally appeared on BloggingStocks on Wed, 07 Jan 2009 15:40:00 EST. Please see our terms for use of feeds.

A spokesman for JPMorgan Chase (NYSE: JPM) Thomas Kelly said his firm has not disclosed what it did with the $25 billion in emergency bailout money it has received. In fact, JPMorgan Chase is declining to provide any such disclosure.

AP has reported that none of the 21 banks that received $1 billion or more from taxpayers is tracking, or at least willing to disclose how they are using the money. Let me be clear -- THIS STINKS TO THE HIGH HEAVENS!

What kind of deals did Treasury Secretary Paulson make with these favored financial institutions? The money would be very easy to track. Why wouldn't that be a part of the bargain?

Paulson obviously did not read Conservative bankers? Surely you jest!, but he should have. Of course, having former Goldman Sachs (NYSE: GS) CEO Paulson negotiate with his Wall Street buddies on behalf of the taxpayer is highly suspect. At a minimum we have the good 'ol boy network operating in full form.

The banks simply are avoiding what should be required scrutiny by pleading ignorance. I don't believe the money can't be tracked, or even traced now after the fact. What happened to the idea of more transparency? More cover up I fear!

The banks should be subject to full disclosure. The use of the funds should be subject to review. Government money should be subject to the Freedom of Information Act. Why all the secrecy?

PS: Personal emails I have been receiving and the initial comments indicate strong sentiment about this issue. I encourage those that care to forward this story to their elected officials and friends encouraging full disclosure -- as promised! Obama used the internet to help win the White House, lets use it to get someone to listen with an internet blast from all over the country!

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money.

Banks not disclosing billions -- why all the secrecy, Paulson? originally appeared on BloggingStocks on Mon, 22 Dec 2008 11:44:00 EST. Please see our terms for use of feeds.

Flying shoe-dodger, President George W. Bush, has a track record of rewarding the guilty. After the faked intelligence that gave him the ammunition he needed to invade Iraq in 2004, Bush awarded a Presidential Medal of Freedom to CIA Director George "Slam Dunk" Tenet. And to reward the banks that got us into the current financial catastrophe, Bush rammed through Congress a bill that uses $700 billion of our tax dollars to pay bonuses to the executives who run those banks.

How did he do that? As usual, he did it secretively. The law that created the bailout bill includes provisions that limit executive compensation for banks that get bailout money. Specifically, the bill requires that banks report to the IRS any compensation above $500,000 paid to their top five executives. If that reporting does not occur, the IRS can impose tax penalties. Not only that, but there is no limit to what people below the top five can get paid -- so there never was any way to keep taxpayer money from paying millions to the traders and investment bankers who often get more than the CEO.

Continue reading Bush rewards the guilty with our tax dollars

Bush rewards the guilty with our tax dollars originally appeared on BloggingStocks on Mon, 15 Dec 2008 10:01:00 EST. Please see our terms for use of feeds.

Yesterday I wrote: The truth is that General Motors (NYSE: GM), Ford (NYSE: F) and privately held Chrysler are led by bloated egos, with cars being built by bloated unions that are now begging to be saved by a bloated government. See: Auto industry bailout: A bloated government to lead a bloated industry

Among the comments that I received yesterday Duane wrote, "Hey I got an Idea, let the oil companies bail out the auto makers...they are in bed together anyway!"

Before I could respond to Duane that his idea was not entirely mischievous and that some variation of this might have merit, someone else beat me to it, as Jerry followed with, "Right on! Bloated egos, bloated unions, poor quality, shoddy workmanship, inferior products, lack of vision, arrogance extraordinaire. BANKRUPTCY will offer a cure. bailout will foster bad behaviors. I like the idea of letting the oil companies bail out the gas guzzling car industry."

This got me thinking about the fact that the government is not likely to be any better at guiding the car companies then they have been themselves for all of the same reasons. So what else can we do? The answer is that Treasury Secretary Hank Paulson should force the auto companies into bankruptcy instead of saving them and then sell them to Exxon Mobil (NYSE: XOM), Conoco Phillips (NYSE: COP), and Chevron Corp (NYSE: CVX).

Continue reading Auto industry bailout: Oil companies should take over!

Auto industry bailout: Oil companies should take over! originally appeared on BloggingStocks on Wed, 10 Dec 2008 15:12:00 EST. Please see our terms for use of feeds.

Harvard's business school (HBS) has been celebrating its 100th anniversary this year. And it looks to be at the peak of its power. That's unfortunate because five of its most powerful graduates have made significant contributions to absolutely wrecking the global economy. HBS admits people who are natural leaders. Unfortunately, many of the most powerful of these leaders have followed the path of destruction.

Here are five Harvard MBAs who wrecked the economy:

• George W. Bush ('75). The best thing I can say about Bush is that he said he was sorry for all the problems that occurred while he was in the White House. Unfortunately, he seems to believe he was a victim of events outside his control. One of his HBS professors said of Bush "He showed pathological lying habits and was in denial when challenged on his prejudices and biases. He would even deny saying something he just said 30 seconds ago."
• Hank Paulson ('70). As Treasury Secretary Paulson has consistently ignored the severity of the financial crisis -- In June 2006 he gave a speech at HBS in which he said, "this is by far the best global economy that I have seen in my career" -- but this September he was able to sell Congress on an ineffective plan to fix what he finally realized was an imploding economy -- a plan has kept changing. The economy has continued to crash despite his bone-headed efforts to save it.

Continue reading Five Harvard MBAs who wrecked the global economy

Five Harvard MBAs who wrecked the global economy originally appeared on BloggingStocks on Sun, 07 Dec 2008 13:40:00 EST. Please see our terms for use of feeds.

There is no way to know why stocks go up or down every day. That's why I always find it somewhat silly when I see simple explanations for the movement in prices. The explanation offered for today's 494 point rise is that investors are celebrating the rumor that Timothy Geithner will be the next Treasury Secretary. How does the media know that investors are only celebrating Geithner's appointment and not that of Bill Richardson as Commerce Secretary?

Make no mistake. I agree with the choice of Geithner and made a case for him over former Harvard president, Lawrence Summers, and former Fed Chair Paul Volcker. My reasoning for Geithner was that he had excellent interpersonal skills and high energy coupled with an intimate familiarity with the current financial crisis. Unlike Summers, Geithner is highly unlikely to alienate people, and having picked Hillary Clinton as Secretary of State, President-elect Obama will have enough drama on his hands with both Clintons.

Geithner shares something with current Treasury Secretary Hank Paulson -- he graduated from Dartmouth. I hope that he makes far better use of that Ivy League education in the Treasury Secretary's role than his predecessor. While Geithner will be left with a huge mess that was not helped by his fellow Dartmouth alum, it will be difficult for him to do a worse job than Paulson. The world will be depending on him.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Did stocks rise 494 points on the Geithner bounce? originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:30:00 EST. Please see our terms for use of feeds.

I have to hand it to Secretary of the Treasury, Hank Paulson. He is willing to go in front of the country and admit that he made a mistake. I was there two months ago. Soon after he proposed the idea that the only way to save the financial system was to spend $700 billion in reverse auctions to buy toxic waste from financial institutions, I became convinced it would not work.

Why? Because there was no way to put a solid price on those assets. If the Treasury bid more than they were worth to the bank, then the taxpayer would take a loss. If the Treasury bid less than what the bank thought the assets were worth, then the bank would need to write off that loss against its capital. Since it would not be able to raise more capital, the bank would become a zombie.

The question is what to do with that money now that Paulson has realized that he was wrong. So far he's given away $159 billion to 24 banks. But there's nothing to stop them from using the money to pay $26.6 billion in bonuses. I think a cull and capitalize plan would work better. Such a plan would create a smaller number of very profitable and well capitalized banks -- and get rid of the rest.

Continue reading Paulson admits his asset purchase plan is wrong

Paulson admits his asset purchase plan is wrong originally appeared on BloggingStocks on Wed, 12 Nov 2008 12:00:00 EST. Please see our terms for use of feeds.

Continue reading Wall Street's meltdown: In search of a villain

Wall Street's meltdown: In search of a villain originally appeared on BloggingStocks on Wed, 22 Oct 2008 17:20:00 EST. Please see our terms for use of feeds.

It appears from today's Senate Finance Committee testimony that Hank Paulson and Ben Bernanke are getting eaten alive on both sides of the aisle. Since the world has not ended since Sunday night passed without another weekly multi-billion bailout, it looks like their desperate pleas for unfettered authority to spend $700 billion of our money are not working.

I was just watching the hearings and Paulson and Bernanke are looking like they have no idea what they are talking about. They keep mentioning how 'market mechanisms' will help people want to buy toxic waste when such mechanisms failed before their proposed $700 billion plan. They want to hire people from Wall Street to run 'reverse auctions' which will ask banks to compete to sell their toxic waste -- whoever is willing to sell for the lowest price wins.

This is an idea that comes from Bernanke because he thinks auctions work, based on academic research. But the simple fact is that the banks will need to write down their assets and raise capital if they sell below book value. So they will not participate in the auction.

Continue reading Try again, Hank

Try again, Hank originally appeared on BloggingStocks on Tue, 23 Sep 2008 14:00:00 EST. Please see our terms for use of feeds.

The New York Times reports that Hank Paulson's desperate plan to use $700 billion of your tax money to buy toxic waste from banks could wipe out their capital. Either that or it could saddle taxpayers with losses that could hit unprecedented levels. To avoid this unpleasant choice, I have an idea -- I call it Tax Shield Preferred (TSP) -- that could provide capital to banks that sold their toxic waste at below market prices.

And make no mistake -- that is what Paulson's plan proposes to encourage. He wants financial institutions (FIs) that hold mortgage-backed securities (MBSs) to participate in so-called reverse auctions which will reward the FI willing to accept the lowest price with a part of that $700 billion. If an FI had booked its MBSs at 60 cents on the dollar and it sold them for that price to Paulson, then if their market value was 20 cents on the dollar, the taxpayers would take that a bath on the 40 cent difference. On the other hand, if the FI sells its MBS for 20 cents on the dollar to Paulson, then the FI takes that 40 cent loss as a reduction to its capital.

To explain the significance of this, I will have to do something a bit painful -- use some numbers. For example, if an FI holding, say, $10 billion worth of MBSs on its books and $8 billion worth of capital sells those MBSs for 20 cents on the dollar, it would need to take an $8 billion loss on the sale. Technically, this would leave the FI with no capital. And it's hard to see how that would help solve the problem. This is where TSPs come in.

Continue reading Will Paulson plan wipe out bank capital? Maybe not: Here's how

Will Paulson plan wipe out bank capital? Maybe not: Here's how originally appeared on BloggingStocks on Sun, 21 Sep 2008 21:08:00 EST. Please see our terms for use of feeds.

Hank Paulson is spending this morning on the talk show circuit trying to scare up $700 billion of our money. And he wants that money by tonight. Not only that, but he wants to be able to spend it without anyone ever being able to question his decisions. Paulson and his colleagues have already thrown $800 billion at the problem and that didn't work. So what's the big hurry? And exactly what does he think will happen if he doesn't get the money?

This administration has a penchant for secrecy that seems to be at odds with how a democracy is supposed to work. For instance, a judge ordered the vice president to retain records that he was planning to destroy. There is a small chance that he has done things in office that he doesn't want anyone else to know about. Meanwhile, Section 8 of the Act Paulson is pushing so hard to pass says "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." In other words he wants absolute power and complete secrecy.

As I explained to janelanaweb.com, Paulson perceives that the global financial system will cease to function unless he gets his money. Now the New York Post provides a little detail from anonymous sources -- which if true -- could help shed some light on what's irking Paulson. According to the Post, if the Fed had not injected $105 billion into the money markets on Thursday, the Dow would have dropped 22% to 8,300. That's because, "money market funds [which have $3.4 trillion in assets] were inundated with $500 billion in sell orders prior to the opening," according to the Post.

Continue reading Why is Paulson so desperate to spend $700 billion of our money?

Why is Paulson so desperate to spend $700 billion of our money? originally appeared on BloggingStocks on Sun, 21 Sep 2008 10:25:00 EST. Please see our terms for use of feeds.