Madoff is Pleading Guilty Without a Deal

Reports are that Bernie Madoff is pleading guilty WITHOUT a deal with the prosecution?

Is there a separate deal with a third party?

He gets to live, albeit in prison, if he doesn't testify about who he worked with and where the money came from and went?

Follow the money (if you can).

According to the US government the total of the Claimed Account balances is now $64.8 Billion with $170 Billion in forfeitures.

Bernie beats the estimate of $50 Billion stolen. Rally time.

Oh and according to Bloomberg, the judge has ruled that the only victims who will be allowed to speak on Friday in court will be those who do NOT think Bernie should be sentenced to any jail time.

Do the thousands of other less forgiving victims get to have their say in a free speech zone in the south Bronx?

SP Futures Hourly Chart at 1 PM EDT - An Appearance of False Vitality Amidst Wasting Disease

Breakout or Fakeout?

The trigger for this rally was an internal memo to the Citigroup employees from Vikram Pandit, designed to bolster morale and most likely the stock price when it was widely leaked to the press. Vik gets a freebie on this one since the memo was 'internal.' No accounting for numbers, right? lol.

Citi CEO Pandit Defends Group Strength

Traders are choosing to interpret this as a positive sign that 'the worst is over' and are squeezing the short interest from an oversold condition. Here is a story on Citi from the WSJ. Does this sound like all is smooth sailing?

U.S. Weighs Further Steps for Citi: Regulators Plan for Contingency - WSJ

Anyone who actually believes the financial crisis is over based on this 'leaked internal memo' is a true believer indeed. In what we are not sure.

Let's see how this rally plays out. Here are the support and resistance levels.

Anything is possible here in the Speculation Nation.

By the way, Turbo Timmy Geithner will be on PBS' Charley Rose talk show this evening. He will say that things are getting dramatically worse in the US economy. But they are committed to fix our dire financial problems no matter what they must do. (hint: print).

Singapore: Three Years of 'Vicious Downturn" - Buys Gold, Loon, Renminbi and Yen - Sells Dollar and Pound

The projection that the Government of Singapore Investment Corp (GIC)has calculated for $3.8 Trillion in financial market writedowns over three years is interesting, considering we are only a third of the way there.

Remarkably, the selection for investment safety that Mr. Yeoh Lam Keong puts forward is very close to items served at the private table of Le Café Américain.

Interesting nonetheless, in particular because of their holding in Citigroup and UBS, and any insight they may have gained therein.

Reuters
Singapore's GIC sees more distress in markets
By Kevin Lim and Saeed Azhar
Tue Mar 10, 2009 2:35am EDT

Fancies gold; to avoid dollar, sterling currencies

SINGAPORE, March 10 (Reuters) - An official from the Government of Singapore Investment Corp (GIC) said he expects more weakness in financial markets in the next 12-18 months, and recommended investors hold gold and other safe assets such as government bonds.

GIC, one of the world's largest sovereign funds with an estimated $200 billion-plus in assets, has invested aggressively in troubled global lenders, picking up multi-billion dollar stakes in Citigroup and UBS in late 2007 and early 2008.

There is "systemic capital inadequacy globally", and the world will probably see "three years of a very vicious downcycle," GIC's director of economics and strategy, Yeoh Lam Keong, told the Investment Management Association of Singapore conference on Tuesday

"This is a very destructive process for assets."

Yeoh, who said he was speaking in his personal capacity, showed a slide prepared by GIC that indicated global writedowns in the financial sector could reach $3.8 trillion by 2013 and that only about 30 percent of the losses had been booked so far.

Yeoh suggested investors hold gold, sovereign bonds and currencies such as the Japanese yen, Chinese yuan and Canadian dollar.

He said he liked gold because governments were under pressure to cheapen their currencies to compensate for falling demand, and that some countries such as the United States and Britain would eventually be forced to monetise their debt by printing money.

"I would avoid these currencies like the plague," he said in reference to the dollar and sterling.

SP Futures Hourly Chart

Although there are many ways to play a market intraday, as indicated by the short term trendlines in red, the US equity markets are in a downtrend that is rather difficult to dismiss.

When will it end?

We are not sure what the catalyst will be, but at least an intermediate bottom will be reached at some point. In the meanwhile short term relief rallies and short squeeze attempts, such as we saw this morning, will occur on an almost daily basis.

Chris Whalen: Tim Geithner is a Disaster and Will Be Out by June

"Tim Geithner has no financial skills. The only reason he is there [the Treasury Secretary] is to protect Goldman Sachs."

Interview with Chris Whalen of Institutional Risk Analytics on TheStreet.com

Warren Buffett: "Economy Has Fallen Off a Cliff"

Warren Buffett is 'talking his book' for a portion of this interview, but he does have some unique insights into the real time economic conditions because of the position of his conglomerate in a number of key businesses that measure the pulse of economic activity.

He sees inflation ahead, and rightly so. The question however is, as always, when?

Adding debt capacity to the system now is useless. Yes, stabilizing the financial system is important. But the demand for debt is so lagging, and the prospects for profit so poor, that one wonders if only the desparate will cry for more credit while they drown.

The solution will be an improvement in the median wage, systemic reforms, and the orderly writedown of debt held by effectively insolvent banks. 'Saving the banking system' as it is constituted now is more than a fool's errand.

It is the path to a test of the fabric of our government not seen since the 1860's.

Bloomberg
Warren Buffett Says Economy Has ‘Fallen Off a Cliff’
By Erik Holm
March 9, 2009 09:29 EDT

March 9 (Bloomberg) -- Billionaire Warren Buffett, whose Berkshire Hathaway Inc. posted its worst results ever in 2008, said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s.

The American public is fearful, confused and changing their buying habits, which is showing up at Berkshire’s operating units, Buffett said during an appearance on the CNBC television network today. While the recession will end and future generations will live better than their parents, the economy “can’t turn around on a dime,” Buffett said, adding that some inflation is appropriate right now.

“We are doing things now that are potentially very inflationary,” he said. Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needs a commander-in-chief. “Patriotic Americans will realize this is a war,” he said....

Finacial Crisis Racks Up $50 Trillion in Worldwide Losses in 2008

This is the price we pay for chronic malinvestment, unsustainable imbalances, a bubble in the world's reserve currency, and a blind eye to protracted fraud and misrepresentation of the economic reality by the financiers and their partners in government.

Staggering losses to be sure, and more to come. But what is most discouraging is that so far we have made little or no progress towards systemic reform and a return balanced global trade with organic growth, savings, and an efficient world financial flow of goods, services, and wealth.


Economic Times (India)
$50 trillion wiped off world financial assets: ADB
9 Mar 2009, 1022 hrs IST,
ET Bureau

MANILA: The global crisis wiped a staggering $50 trillion off the value of financial assets last year including $9.6 trillion of losses in developing Asia alone, the Asian Development Bank said Monday.

``This is by far the most serious crisis to hit the world economy since the Great Depression,'' said ADB President Haruhiko Kuroda. But he predicted Asia would be ``one of the first regions to emerge from it.''

In a study commissioned by the Manila-based lender on the impact of the financial crisis on emerging economies, it estimated the value of financial assets worldwide, currency, equity and bond markets, to have dropped by $50 trillion in 2008.

It said developing Asia was hit harder, losing the equivalent of just over one year's worth of gross domestic product, than other emerging economies because the region has expanded much more rapidly.

In Latin America, losses were estimated at $2.1 trillion. According to the study, the figures provide clear proof of the close connections between markets and economies around the world, leaving few, if any, countries immune to financial or economic fallout. A recovery can only now be envisaged for late 2009 or early 2010, it said.

A sprawling region, developing Asia includes 44 economies from the central Asian republics to China to the Pacific islands. The bank had earlier projected the region's growth to slow to 5.8 percent this year from an estimated 6.9 percent last year.

The worldwide downturn has hit export-driven economies particularly hard. From South Korea to Taiwan to Singapore, exports have plunged by double digits in recent months as American and European consumers spent less on cars and gadgets....

Reykjavik on the Thames: A Run on the British Pound

The British economy is mortally wounded, and Gordon Brown is quite frankly not the man to fix it.

Britain faces the real risk of a crisis in the pound that will be worse than its euro peg crisis made famous by George Soros and the gnomes of Zurich chanting "Sell 100 quid! Sell 100 quid!"

Will investors flee from currency to currency in search of a safe haven as the global financial system collapses? Who can say. But it is certainly past time to hedge one's bets with sources of alternative wealth protection.


The Independent (UK)
Run on UK sees foreign investors pull $1 trillion out of the City
By Sean O'Grady, Economics correspondent
Saturday, 7 March 2009

Banking crisis undermines Britain's reputation as a safe place to hold funds

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London.

Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn hemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter.

The revelation will fuel fears that the UK's reputation as a safe place to hold funds is being fatally compromised by the acute crisis in the banking system and a general trend to financial protectionism internationally.

This week, Lloyds became the latest bank to approach the Government for more assistance. A deal was agreed last night for the Government to insure about £260bn of assets in return for a stake of up to 75 per cent in the bank. The slide in sterling – it has shed a quarter of its value since mid-2007 – has been both cause and effect of the run on London, seemingly becoming a self-fulfilling phenomenon. The danger is that the heavy depreciation of the pound could become a rout if confidence completely evaporates....

Weekend Reading: How Wall Street and Washington Are Betraying America

The original title for this essay was "How Wall Street and Washington Betrayed America." As you can see from the above, this blog has a slightly different perspective.

We would like to be able to say that this was an unfortunate problem that has occurred, and that we are dealing with its aftermath. The repair of the economy is just a matter of time and money.

It is not, and we are not.

The problem continues. This was not an exogenous event like an accident. It is a pernicious condition, a chronic wasting disease. The carriers of the infection are still at work.

The system is distorted, sick, incapable of self-cure. Feeding intravenous liquidity to obtain the appearance of health will not work, only allow the disease to progress. Strong medicine is required.

We will have no recovery until we have reform.

We will have no reform until the banks are restrained, and balance is restored.

The looting of the public Treasury will continue while the Congress and the Executive take their direction from Wall Street.

Paying for Policy in Washington
Wall Street's Best Investment
By ROBERT WEISSMAN

"The entire financial sector (finance, insurance, real estate) drowned political candidates in campaign contributions, spending more than $1.7 billion in federal elections from 1998-2008. Primarily reflecting the balance of power over the decade, about 55 percent went to Republicans and 45 percent to Democrats. Democrats took just more than half of the financial sector's 2008 election cycle contributions.

The industry spent even more -- topping $3.4 billion -- on officially registered lobbyists during the same period. This total certainly underestimates by a considerable amount what the industry spent to influence policymaking. U.S. reporting rules require that lobby firms and individual lobbyists disclose how much they have been paid for lobbying activity, but lobbying activity is defined to include direct contacts with key government officials, or work in preparation for meeting with key government officials. Public relations efforts and various kinds of indirect lobbying are not covered by the reporting rules.

During the decade-long period:

* Commercial banks spent more than $154 million on campaign contributions, while investing $383 million in officially registered lobbying;

* Accounting firms spent $81 million on campaign contributions and $122 million on lobbying;

* Insurance companies donated more than $220 million and spent more than $1.1 billion on lobbying; and

* Securities firms invested more than $512 million in campaign contributions, and an additional nearly $600 million in lobbying. Hedge funds, a subcategory of the securities industry, spent $34 million on campaign contributions (about half in the 2008 election cycle); and $20 million on lobbying. Private equity firms, also a subcategory of the securities industry, contributed $58 million to federal candidates and spent $43 million on lobbying.

Individual firms spent tens of millions of dollars each. During the decade-long period:

* Goldman Sachs spent more than $46 million on political influence buying;

* Merrill Lynch threw more than $68 million at politicians;

* Citigroup spent more than $108 million;

* Bank of America devoted more than $39 million;

* JPMorgan Chase invested more than $65 million; and

* Accounting giants Deloitte & Touche, Ernst & Young, KPMG and Pricewaterhouse spent, respectively, $32 million, $37 million, $27 million and $55 million.

The number of people working to advance the financial sector's political objectives is startling. In 2007, the financial sector employed a staggering 2,996 separate lobbyists to influence federal policy making, more than five for each Member of Congress. This figure only counts officially registered lobbyists. That means it does not count those who offered "strategic advice" or helped mount policy-related PR campaigns for financial sector companies. The figure counts those lobbying at the federal level; it does not take into account lobbyists at state houses across the country. To be clear, the 2,996 figure represents the number of separate individuals employed by the financial sector as lobbyists in 2007. We did not double count individuals who lobby for more than one company the total number of financial sector lobby hires in 2007 was a whopping 6,738.

A great many of those lobbyists entered and exited through the revolving door connecting the lobbying world with government. Surveying only 20 leading firms in the financial sector (none from the insurance industry or real estate), we found that 142 industry lobbyists during the period 19982008 had formerly worked as "covered officials" in the government. "Covered officials" are top officials in the executive branch (most political appointees, from members of the cabinet to directors of bureaus embedded in agencies), Members of Congress, and congressional staff.

Nothing evidences the revolving door -- or Wall Street's direct influence over policymaking -- more than the stream of Goldman Sachs expatriates who left the Wall Street goliath, spun through the revolving door, and emerged to hold top regulatory positions. Topping the list, of course, are former Treasury Secretaries Robert Rubin and Henry Paulson, both of whom had served as chair of Goldman Sachs before entering government. Goldman continues to be well represented in government, with among others, Gary Gensler, President Obama's pick to chair the Commodity Futures Trading Commission, and Mark Patterson, a former Goldman lobbyist now serving as chief of staff to Treasury Secretary Timothy Geithner.

All of this awesome influence buying has enabled Wall Street to establish the framework for debates in Washington, and to obtain very specific deregulatory actions, with devastating consequences."

Click below to find the full report with Executive Summary.

Sold Out: How Wall Street and Washington Betrayed America

Is the Bailout of AIG by the Fed a Bailout or a Payoff to the Major Banks?

In a Senate Banking Committee hearing in Washington on Thursday, Fed Vice Chairman Donald Kohn declined to identify AIG's trading partners. He said doing so would make people wary of doing business with AIG.

The Fed has far overstepped their bounds and are disbursing tax money in secret without the oversight of Congress.


Wall Street Journal
Top U.S., European Banks Got $50 Billion in AIG Aid
By SERENA NG and CARRICK MOLLENKAMP
MARCH 7, 2009

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.

Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.

More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.

The names of all of AIG's derivative counterparties and the money they have received from taxpayers still isn't known, but The Wall Street Journal has identified some of them and is publishing others here for the first time.

Lawmakers Want Names

The AIG bailout has become a political hot potato as the risk of losses to U.S. taxpayers rises. This past week, legislators demanded that the Federal Reserve disclose names of financial firms that have received money from AIG, which Fed officials have described as too systemically important in the financial system to be allowed to fail.

In a Senate Banking Committee hearing in Washington on Thursday, Fed Vice Chairman Donald Kohn declined to identify AIG's trading partners. He said doing so would make people wary of doing business with AIG. (ROFLMAO - Wary of doing business with AIG? - Jesse)

But Mr. Kohn told lawmakers he would take their requests to his colleagues. The Fed, through a new committee led by Mr. Kohn to discuss transparency concerns, is now weighing whether to disclose more details about the AIG transactions.

The Fed rescued AIG in September with an $85 billion credit line when investment losses and collateral demands from banks threatened to send the firm into bankruptcy court. A bankruptcy filing would have caused losses and problems for financial institutions and policyholders globally that were relying on AIG to insure them against losses.

Since September, the government has had to extend more aid to AIG as its woes have deepened; the rescue package now has swelled to more than $173 billion.

The government's rescue of AIG helped prevent its counterparties from incurring immediate losses on mortgage-backed securities and other assets they had insured through AIG. The bailout provided AIG with cash to pay the banks collateral on the money-losing trades; it also bought out underlying mortgage-linked securities, many of which are currently worth less than half their original value.

Banks and other financial companies were trading partners of AIG's financial-products unit, which operated more like a Wall Street trading firm than a conservative insurer. This AIG unit sold credit-default swaps, which acted like insurance on complex securities backed by mortgages. When the securities plunged in value last year, AIG was forced to post billions of dollars in collateral to counterparties to back up its promises to insure them against losses.

More Problems

Now, other problems are popping up for AIG. The insurer generated a sizable business helping European banks lower the amount of regulatory capital required to cushion against losses on pools of assets such as mortgages and corporate debt. It did this by writing swaps that effectively insured those assets.

Values of some of those assets are declining, too, forcing AIG to also post collateral against those positions. And if the portfolios incur losses, AIG will have to compensate the banks.

AIG had seen this business as a relatively safe bet for the company and its investors. The structures were designed to allow European banks to shuck aside high capital costs. A change in capital rules has meant that the AIG protection no longer meets regulatory requirements.

The concern has been that if AIG defaulted, banks that made use of the insurer's business to reduce their regulatory capital, most of which were headquartered in Europe, would have been forced to bring $300 billion of assets back onto their balance sheets, according to a Merrill report.

FDIC Warns of Bank Deposit Insurance Fund Failure

The few banks are taking down the many because the Obama Administration does not have the will to tie off the bleeding and stitch it up.

Why? Because the money center banks are politically connected to them through a corrupt campaign funding system and lobbying effort.

One way or the other this will be resolved. It is only a matter of when, how much, who pays, and who profits.


AFP
FDIC warns US bank deposit insurance fund may tank
Thu Mar 5, 7:39 pm ET

WASHINGTON (AFP) — The Federal Deposit Insurance Corporation is warning banks that its deposit insurance fund could dry up this year amid rising bank failures although the deposits would remain fully backed by the government.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC's plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.

Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protected.

"Without these assessments, the deposit insurance fund could become insolvent this year," Bair wrote.

The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of "a large number" of bank failures through 2010.

"Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative," she wrote.

The FDIC last Friday announced it would impose a temporary emergency fee on lenders and raise its regular assessments to shore up the rapidly depleting deposit insurance fund that insures individual customer deposits up to 250,000 dollars.

A week ago the FDIC reported a sharp depletion of the deposit insurance fund in the fourth quarter due to actual and anticipated bank failures, to 19 billion dollars from 34.6 billion in the third quarter.

The FDIC said it had set aside an additional 22 billion dollars for estimated losses on failures anticipated in 2009.

"Some have suggested that we should turn to taxpayers for funding. But banks -- not taxpayers -- are expected to fund the system, and I believe Congress would look skeptically on such a course of action," Bair wrote.

"All banks benefit from the FDIC's industry-funded status and should take pride in it. Keeping the guarantee industry funded will serve banks well once this current crisis passes. Turning to taxpayers for support, on the other hand, could paint all banks with the 'bailout' brush."