Follow the Money
via Paul Kedrosky (click to enlarge)
I guess the disputed $175 million in deferred compensation payments should be on here as well, though the line would be too infinitesimally thin to draw. The CDS stuff gets the attention, but the securities guarantees are the largest flow. Are these guarantees of traded securities, like bonds and equities? If so, it sure is a happy notion for all of us taxpayers with portfolios that are well under water that we are going to send some of our money to help bail out the losses in the Goldman Sachs portfolio.
EvilRedScandi:
I don't know if it's just me but I don't like charts where "Other" adds up to 18.7, the figures represent billions of dollars, and the money comes from the government (via my wallet and yours).
March 20, 2009, 10:55 ammorganovich:
the guys in the AIG london office (where most of the losses originated) are beyond fools. 2 years ago, their manager was on TV describing how his strategy would provide outsized returns and had NO RISK. he literally said "i can't see how i could lose even $1"
what was this brilliant strategy? they wrote and held credit default swaps. that's it. they didn't lay them off or hedge.
this is a DEADLY DANGEROUS strategy.
consider:
you write a CDS for 50 basis points (1/2 of one %)
if it expires, you keep the money.
if the bond defaults, you pay out 10,000 basis points (100%)
so for every dollar you insure, you can win a half a cent or you can lose a dollar.
this is a 200:1 asymmetry.
where on earth was their risk management team on this one? they obviously had no understanding of what these contracts actually meant. they may seem small on a balance sheet, but you only need to write a $10 million contract to lose $2 billion. this is how a small group took the whole place down.
March 20, 2009, 1:24 pmdjaces:
Since nearly everyone agrees that the real fly in the ointment in the whole clustercopulation is the tens of trillions of dollars in credit default swaps looming out there and since Pelosi et al have decided the Constitution is obsolete maybe the easy way out is for the Congress to pass a bill retroactively declaring all the CDSs illegal and null and void. Since none of the financial geniuses seem to be sure who owes who what, that might be glad to be off the hook and not even challenge it. Of course, without the Damoclean sword hanging over us the Dems wouldn't have any more rescue packages to conceal all their socialist takeovers.
March 21, 2009, 3:25 amLink:
Our next train wreck is that the heads of Treasury and the Fed -- the two major agencies necessary to fix the banks -- will be ruined politically by the end of this week.
Barney Frank is holding another AIG show trial this coming Tuesday, with Geithner and Bernanke in the dock. In Barney's own words: "They have much to clarify for the American public. I look forward to their appearances.â€
Geithner may not last another week ... after the details come out about how Hank Paulson looted the government to save his partners at Goldman using backdoor AIG money ... with Geithner's help. Bernanke will be sullied, and his political position weakened.
I can't believe that Barney is freelancing to this extent ... Rahm would now how to rein him in ... so this must be with the blessing of Obama & Co. Is this what Obama & Co want? Cui bono?
Here's a telling story within the story. I heard some pro-Obama journalist say on Imus last Thursday ... that back in February Axelrod wanted to cap pay at big banks to no more than what the President made ... but got overruled by Treasury. I bet Geithner told Axelrod that if they did that, they would drive talent out of the big banks ... and that losses would skyrocket. A month later, it emerges as a populist issue. I see Axelrod's fingerprints all over this. The bonus story always had potential to be an issue, but it didn't have to be. You needed to have the flames fanned, and then Barney Frank & Co throw on some gasoline. Cui bono?
We need a crisis manager in the White House ... instead, we have an ACORN "community organizer." They thrive on agitating outrage.
March 22, 2009, 11:35 amPieter:
Much as I disliked the AIG and other bank bail-outs for giving money to the capitalists on very generous terms, the new toxic asset program seems even worse. Under the old program, we at least got partial ownership of the banks or a promise that we'd get interest on the money lent. It seems that, under the new matching scheme, the government will simply give the capitalists money.
Apparently, they like getting free money. From the NYTimes ( http://www.nytimes.com/2009/03/24/business/24markets.html?hp )
“This is the free-money rally,†said Barry Ritholtz, chief executive of Fusion IQ, an investment and research firm.
March 23, 2009, 1:30 pm