PigMan of the Week Award

Thanks go to Lloyd Blankfein of Goldman Sachs for giving the markets some weasel-worded false encouragement Thursday morning that the credit crisis is "almost over." It helped to trigger a sucker's rally.

And "if we are in a recession, its a mild one." We'll put that one down in the books. In fact, we wish someone would take a look at your trading book.

Lloyd, who received about $70 million of compensation last year by some estimates, also said that shareholder votes on executive pay would "constrain the board and hurt the investment bank's ability to attract the best employees."

Lloyd, you get the "PigMan of the Week Award."

Reuters
Goldman CEO says "say on pay" a bad idea
Thursday April 10, 2:24 pm ET
By Joseph A. Giannone

NEW YORK (Reuters) - Goldman Sachs Group Inc (NYSE:GS - News) Chief Executive Lloyd Blankfein, who received about $70 million of compensation last year by some counts, said on Thursday that shareholder votes on executive pay would constrain the board and hurt the investment bank's ability to attract the best employees.

So-called "say on pay" initiatives, which allow shareholders to provide a nonbinding approval or rejection of a board's proposed pay package for senior executives, have become a hot topic among shareholder groups, pensions and other large investors focused on corporate governance issues.

In a spirited annual meeting held in a downtown Manhattan, a number of Goldman shareholders urged the board and investors to adopt an advisory vote as a tool to keep a lid on excessive pay. Advocates also argued the proposal would give shareholders a greater voice on an important matter, without binding directors.

Blankfein, in an extended response, expressed his concern that "say on pay" would limit directors in exercising their judgment.

Say on pay would "create a feedback loop. It would create a cloud, a constraint, a limitation on decisions that have been at the heart of what a board has done," Blankfein said.

The board, he said, needs to have the flexibility to weigh compensation packages and the market environment. He also expressed concern that decisions by board member could be judged by uninformed investors.

"Our compensation has been very well-correlated to performance," he said.

Goldman's shareholders apparently agreed, as the say on pay proposal was rejected, receiving approval by 43 percent of shares voted and 30 percent of shares outstanding.

Some speakers argued Goldman's compensation was enormously high. According to the proxy statement, Goldman's top five senior executives received roughly $250 million last year in salary, cash bonuses, stock awards and other compensation, excluding stock options.

For context, that haul was greater than JPMorgan Chase & Co's initial fire-sale takeover bid of $236 million for Bear Stearns Cos Inc.

"Nothing Fundamentally Broken on Wall Street" - Bernanke

If this is ANYTHING like the assurance that Benny gave us last year about the minimal impact of the subprime mortgage situation we'd have to conclude that the markets are probably screwed up beyond all recognition, and that a major Depression lasting twelve years and a day is on our doorstep.

THE FED
Nothing fundamentally broken on Wall Street: Bernanke
By Greg Robb, MarketWatch
Last update: 1:58 p.m. EDT April 10, 2008

WASHINGTON (MarketWatch) -- There is nothing fundamentally broken on Wall Street that a little regulation and incentives for participants to be slightly more honest couldn't fix, said Federal Reserve Chairman Ben Bernanke said Thursday. (You could have said the same thing about Ma Barker and her boys - Jesse)

Bernanke's comments put him at odds with former Fed chairman Paul Volker, who said in a speech earlier this week that the financial turmoil that began last summer showed that the "new Wall Street" hadn't passed the market test. (Our money is on Volcker. Ben is Bush-Paulson's schmendrick. Volcker is always and everywhere a no BS econo-asskicker. - Jesse)

At issue is the move by Wall Street over the past twenty years to an "originate to distribute" business model, where commercial and investment banks create new complex forms of securities and sell them to investors looking for high yield. This replaced the old "originate and hold" model. (Bring back Glass-Steagall. Bring it back today. - Jesse)

In a speech to the World Affairs Council in Richmond, Bernanke said that it is clear the originate-to distribute model "broke down at a number of key points." (No shit, Shalom. - Jesse)

But he quickly added that "these problems notwithstanding, the originate-to-distribute model has proved effective in the past and with adequate repairs could be so again in the future." (Our unquestioned nominee for Meshugener of the Year - Jesse)

This model "seems likely to remain an important component of our system of credit provision," he said. (The Wall Street three card monty system feeding bad debt to the world. These guys are like herpes. - Jesse)

The Bush administration and the Fed have poured billions of dollars into financial markets since August seeking to restore the flow of credit to consumers. (Its all about confidence, children. You can't buy back a good reputation - Jesse)

The Fed is concerned that a lack of credit is creating a vicious downward growth spiral. (That's what happens when a Ponzi scheme collapses, propeller head - Jesse)

"Healthy, well-functioning financial markets are essential to sustainable growth," Bernanke said.(Hence our almost-certain-to-be-severe recession - Jesse)

The turmoil has led some to raise fundamental questions about Wall Street. (Would y'all like that Necktie party with or without tar and feathers on a rail? - Jesse)

In a speech in New York on Tuesday, Volker said that in his view, simply stated, the bright new financial system, for all its talented participants, for all its rich rewards, has failed the test of the marketplace."

But Bernanke argued against any need for radical reform. (What would it take to require some serious reform? The dollar worth .20 euros and the Dow Industrial at parity with gold? - Jesse)

He trumpeted a recent road-map released by the President's Working Group on Financial Markets, chaired by Treasury Secretary Hank Paulson and which includes the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The PWG plan called for several steps to strengthen federal oversight of the mortgage and credit markets and a complete overhaul of the market for mortgage derivatives. (Their track record has been so outstanding, right Elliot? - Jesse)

The plan also said that credit-rating agencies must differentiate between ratings for derivatives and corporate bonds. (Grading on a curve? Let them eat CAPM model and only exchange traded products to be held by government regulated entities like banks - Jesse)

In addition, international financial market reform will be spearheaded by the Financial Stability Forum, set to release their recommendations this weekend.

Bernanke stressed that the financial crisis was not over. But he said it was not too early to draw some conclusions about the turmoil on public policy.

"We do not have the luxury of waiting for markets to stabilize before we think about the future," Bernanke said. (And we're not sure we have the luxury of waiting for you to quit being a spineless putz - Jesse)

He dismissed suggestions that markets should be left to sort the crisis out without government interference.

Bernanke, a student of the Great Depression, said that, although there are similarities between the current credit crunch and the 1930s, the U.S. "will not experience" anything like the Depression, which lasted for 12 years. (We are so fucked - Jesse)

Greg Robb is a senior reporter for MarketWatch in Washington.

SP 500 Bear Market Update - Daily Charts - April 10

In this comparison of the SP 500 declines in the bear markets of 2000-3
and 2007-9 we perform a more precise time comparison.

In each chart the end point is exactly 183 days from the top.

US Losses Likely to Top $1 Trillion - IMF and Soros

Worst from credit crisis yet to come; losses likely to top US$ 1 trillion
10 Apr, 2008, 1020 hrs
The Economic Times

SHANGHAI: The credit crisis is far from over, billionaire financier George Soros warned Thursday, urging regulators to move faster to contain damage from the collapse of the housing finance markets.

``I think the situation is more serious than the authorities admit or recognize,'' Soros told journalists in a conference call. Measures taken so far to slash interest rates and stimulate the economy were ``necessary but not sufficient,'' he said.

``Because of that, I think the situation is going to get worse before it gets better.'' Soros is promoting a new book, ``The New Paradigm for Financial Markets: The Credit Crisis and What It Means.'' He has urged regulators to move more aggressively to improve market oversight to curb risks from excessive reliance on debt for financial speculation.

He said he agreed with the International Monetary Fund's estimate of more than US$1 trillion (euro640 billion) in losses linked to the collapse of mortgage-backed securities. Losses disclosed by financial institutions so far are related only to the decline in value of those financial instruments, Soros said.

``They do not reflect in any way a possible decline in the value of the loans held by the banks,'' he said. ``We have not yet seen the full effect of the possible recession.''


Soros pointed to the potential for massive losses from complex investments linked to the U.S. subprime mortgage market, such as credit default swaps, or CDS, which allow investors to put bets on the likelihood that companies will default on bond payments.

He described as a ``Sword of Damocles'' the US$45 trillion (euro29 trillion) worth of credit swaps. ``That's more than five times the entire government bond market of the United States. It's almost equal to the entire household wealth of the United States,'' Soros said. ``This US$45 trillion market is totally unregulated,'' he said.