The Hypocrisy of Barack Obama, Tim Geithner, Henry Paulson, and Christopher Dodd

This issue of the AIG bonuses raises concerns about conflicts of interest since the Financial Products Division of AIG was a large contributor to both President Obama and Senator Dodd.

It also gives fuel to the speculation that the retnention bonuses being paid to the AIG executives, some of whom have already left, are 'hush money' over the details of the payments of enormous sums of bailout money to politically connected businesses such as Goldman Sachs, who are also substantial contributors to both parties.

True or not, the failure of the Treasury Department to execute in this matter is alarming, and the lack of transparency by the Obama administration and the Democratic leadership is discouraging, if not appalling.

McCauley's World

Senator Christopher Dodd’s office recently announced that, “Democratic Sen. Chris Dodd, chairman of the Senate banking committee, demanded a full briefing from the Federal Reserve and the Treasury on why clauses weren’t attached to the four various AIG bailouts to halt bonuses.”

Yet the Senator well knows that while the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to that very bill. The provision, now called “the Dodd Amendment” by the Obama Administration, provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” — which exempts the very AIG bonuses Dodd and others are now seeking to tax.
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig—time/

Obama & Dodd Were Friend’s Of AIG Before AIG Was Their Enemy

Obama may be grandstanding about AIG’s bonuses now, but it’s worth noting that Obama himself is the second biggest benefactor of AIG political contributions. Second only to Senator Chris Dodd, who is quietly trying to tip-toe away from legislation he inserted into Obama’s “stimulus” spending spree that protected AIG’s bonuses.
http://www.kxmb.com/News/Nation/346030.asp

Key Congressman tried to alert Treasury about the AIG bonus issue "six or seven times" in the past weeks.

Kanjorski: Treasury and Administration Knew of AIG Bonuses for Weeks

Edward Liddy is the government appointed Chairman of AIG during its bailout phase.

Edward M. Liddy is currently the chief executive officer of American International Group (AIG), where he succeeded Robert B. Willumstad in September, 2008. Upon taking the position of CEO at American International Group, Mr. Liddy had to resign his board position at Goldman Sachs.

This September meeting was the key decision point on bailing out AIG. As we have reported earlier, the ONLY non-official present was Lloyd Blankfein, the Chairman of Goldman Sachs, a major counterparty at risk with the AIG Financial Products Division.

And lastly, we ought not to overlook The Real AIG Scandal - Slate

Brokers Recalling Loaned Shares in Citi

Since this morning Bloomberg reports that major brokerages have been calling in the loaned shares that have been used for legitimate short sales in Citigroup.

This in part explains the rally in Citi today, as the shortsellers cover their positions ahead of a 2:30 PM deadline today by which they must return the borrowed shares.

It does seem rather calculated, particularly its conjunction with the Federal Reserve announcement.

We have not seen this in the general news, just on the Bloomberg TV analyst reporting.

There is the implication that this is a calculated market operation being conducting among big traders and the major brokerage houses who hold the shares for borrowing from customer accounts. Marketwatch seems to imply that this is being precipitated by 'the authorities.'

Nice timing to help bolster the financials after the FOMC announcement. This has the Larry Summers/Robert Rubin touch.

It would be a good thing indeed if the Obama Adminstration did something meaningful to curb naked short selling and enforce the existing regulations. But if they are doing so for only their favorite companies, then this is not market regulation, it is crony capitalism and insider trading.

Seeking Alpha

Citigroup Inc. – Shares are being squeezed once again today and the company has a valuation some 23% higher today with shares stretching above $3.00.

Intrigue continues in the June 5.0 strike options where arbitrageurs are using conversion plays that typically land a credit to take advantage of the squeeze. The volume in that line has more than 150,000 contracts trading both sides today with puts bought and calls sold when investors can position long of the stock.

Earlier in the week rumors did the rounds that the authorities might be on the hunt for hard-to-borrow stock certificates in select financial names.

This in itself has created a surge at AIG and Citigroup as desperate short-sellers try to cover their positions. The conversion trade could be established earlier in the week for a credit of 20 cents, but given the near-panic buying in the stock has shifted to a 1.10 cost to traders.

The Obama Team's Economic Performance Is Pathetic

Wouldn't it be nice if one day the Obama Administration came up with a change, an innovative reform for the financial system that made us sit back and say, "Wow, that's great! That's exactly what we have been looking for."

So far it has been one misstep, one fumble, one tired old Henny Youngman routine after another. The Clinton Administration retread meets the road, and falls apart.

Things went badly beginning with the appointment of Larry Summers as key economic advisor.

Larry was one of the three man miracle team of Greenspan, Rubin and Summers that turned the Asian monetary crisis into the tech bubble after a smoke and mirrors economic recovery while the industrial base of the US continued to slide into the Pacific.

We have seen nothing that speaks of the promise that we felt when America said "enough" and voted for a change in the fall of 2008.

And after the Summers disappointment we received the the Rubin protege, Tim Geithner, with the thinnest of financial backgrounds, who while at the NY Fed helped to help transform the housing bubble collapse into the bailout bust.

His position at Treasury is such an obvious, glaring mismatch that he cannot even staff key jobs in his own department. Who would want to work under such an obvious, embarrassing failure?

This is not a poor performance. This is an abject, incompetent inability to address the most critical issue facing this country.

This is Obama's Iraq: a morass of crippling failure brought on by horrible advice from key advisors with their own agendas.

President Obama throws rhetoric at the problem from a distance, like he is still campaigning against something. He leaves the impression of a more articulate Bush, inspiring no lasting confidence, giving no impression that he is in charge, on top of the situation, in control with a well thought out plan. He can make you feel good while he is speaking, then reality sets in and you realize that there is nothing there. Where are the management skills to back up the rhetoric?

Don't get us wrong. This is still early in the game. But the Democrats are losing the early rounds, as the situation grows more dire.

Well, Mr. Obama, you are President now, and even though you have only a short time in the office, so far you have shown us nothing. Your shepherding of a stimulus bill through the Congress was a nightmare, made worse by Nancy Pelosi who is a mediocre House Speaker at best, but appears a dynamo in comparison to Majority Leader Harry Reid.

Tired old solutions, inbred beltway thinking, old boy insider dealing.

Embarrassing. Unworthy. Amateurish. Pathetic.

You are failing, and we see it, and the anger, and sense of quiet panic, is building.

Time to get serious, to get it together. Time to step up to the job and take command. Time to show us your best stuff, find the levers, roll up your sleeves, and step down from the pulpit.

Nasdaq 100 Futures Hourly Chart Into the Close

The market went out on its highs suggesting that we will get a strong opening tomorrow for the FOMC announcement at 2:15 PM EDT.

As a reminder, this Friday is the 'triple witching' option expiration. The markets are frequently volatile as the big players squeeze the overleveraged option speculators.

Adobe reports tonight after the bell.

To say that the better-than-expected housing start numbers ignited hopes for the economy and triggered today's rally is ludicrous rationalization.

This was a short squeeze for option expiry week, pure and simple.

Alcoa and Nucor announcements show how dire the economic situation has become.

Congressman Proposes 60% Income Tax Surcharge on AIG Bonuses

Interesting development indeed.

Michigan Democratic Rep. Gary Peters introduced a bill in the House of Representatives to impose a 60 percent surtax on bonuses over $10,000 at any company in which the U.S. government has a 79 percent or greater equity stake.

This is in addition to the usual income tax rate.

Its directionally not bad, but the level of ownership by the Federal government should be 51%, not 79%. And stiff penalties for management bonuses at any institution receiving TARP funds or FED support above a certain level are needed.

The reason that the Obama Administration is in this box over the contracted bonuses is that Geithner and Summers refused to take AIG into bankruptcy reorganization.

Why?

Perhaps it has something to do with the enormous exposure that Goldman Sachs had to AIG. Lloyd Blankfein, the chairman of Goldman Sachs, was the only non-government or Fed official who was at the meeting at which this bailout was decided.

Yes, the AIG bonuses are an enormous, shocking scandal.

But it is only the tip of the iceberg. Recall that we predicted early last year that the patsies and scapegoats would be thrown off the back of the getaway truck to try and satisfy the angry mob once the magnitude of the frauds became apparent even to the average person.

Well we are there, and they are throwing patsies out the window with greater noise and flourish, because, in short, the angry mob is getting louder, and they are afraid.

Reuters
Congress eyes bonus surtax amid AIG outrage
By Kevin Drawbaugh
Tue Mar 17, 2009 1:17pm EDT

WASHINGTON (Reuters) - Some members of the U.S. Congress on Tuesday proposed slapping a surtax on bonuses paid to executives at American International Group Inc, amid outrage over the large payouts.

Michigan Democratic Rep. Gary Peters introduced a bill in the House of Representatives to impose a 60 percent surtax on bonuses over $10,000 at any company in which the U.S. government has a 79 percent or greater equity stake.

"Currently, AIG is the only company that meets this threshold," Peters said in a statement. "The legislation I'm proposing will get taxpayers their money back.

President Barack Obama on Monday expressed "outrage" about $165 million of bonuses to employees of AIG, once the world's largest insurer, now being bailed out by the government.

Senate Banking Committee Chairman Christopher Dodd said Peters' approach was "worth pursuing as an idea."

California Democratic Rep. Brad Sherman, a House Financial Services Committee member with Peters, said he favors "a tax law to impose a substantial surtax on excessive compensation paid to executives at bailed-out firms, especially AIG."

New York Attorney General Andrew Cuomo has said he will subpoena AIG for more information about the bonuses, including the names of the recipients.

Peters said it was "beyond outrageous that the very people who brought AIG to its knees and helped create the current financial crisis are scheduled to receive hundreds of millions of dollars in bonuses while tax dollars keep their company afloat."

Iowa Rep. Bruce Braley and Connecticut Rep. Joe Courtney, both Democrats, released a letter signed by 90 members of Congress to Treasury Secretary Timothy Geithner urging that planned bonuses to AIG executives be stopped.

Braley also said in a statement that he introduced legislation "to increase the tax rate on any bonuses awarded by businesses receiving government TARP funds, including AIG."

New York Democratic Senator Charles Schumer warned AIG employees to return the bonuses they are receiving or face being slapped with a major tax on those payments.

"They should voluntarily return them (the bonuses). If they don't, we plan to tax virtually all of it," Schumer said.

Teabagging the Congress

You are probably already aware of this 'tea party' invitation making the rounds of email and the internet.

What is remarkable is that I received this today from one of the most conservative people that I can imagine, who STILL won't admit that the George W. Bush administration was a disaster for our economy.

It appears that the full spectrum, from left to right, of the public is angry, very angry, and the Democrats led by Obama are setting themselves up as the lightning rod to receive it, primarily through their bungling of the financial crisis.

Send a teabag if you wish. Personally I would make some tea with it first. Why waste? I am not sharing my Typhoo with anyone.

It is good, though, to do something if you are angry. Symbolic protests are a good first step. But what will get the attention of these power players will be something with a monetary impact, such as a major boycott, or a move away from the dollar and into non-financial assets.

The paid help may be fearful, but the ringleaders are drunk with power. They have been at this for some years now.

It has been some time since I have seen ordinary people so generally angry and disgusted by the US national government. Certainly not since the Nixon Administration. Something will have to give if the current course does not change.

Bailout Anger Creates Peril for Both Parties - MarketWatch

Tea Party - Please mark your Calendars

A tea party, what a wonderful idea, I just wish it had been mine. I have a feeling that USPS is going to have a lot of tea to contend with, after all it only costs 42 cents to send a message, hopefully heard round the world!!!

So please mark your Calendars

There's a storm abrewin'. What happens when good, responsible people keep quiet?

Washington has forgotten they work for us. We don't work for them. Throwing good money after bad is NOT the answer.

I am sick of the midnight, closed door sessions to come up with a plan. I am sick of Congress raking CEO's over the coals while they, themselves, have defaulted on their taxes.

I am sick of the bailed out companies having lavish vacations and retreats on my dollar. I am sick of being told it is MY responsibility to rescue people that, knowingly, bought more house than they could afford. I am sick of being made to feel it is my patriotic duty to pay MORE taxes.

I, like all of you, am a responsible citizen. I pay my taxes. I live on a budget and I don't ask someone else to carry the burden for poor decisions I may make. I have emailed my congressmen and senators asking them to NOT vote for the stimulus package as it was written without reading it first. No one listened. They voted for it, pork and all.

O..K. folks, here it is. You may think you are just one voice and what you think won't make a difference. Well, yes it will and YES, WE CAN!!

If you are disgusted and angry with the way Washington is handling our taxes. If you are fearful of the fallout from the reckless spending of BILLIONS to bailout and "stimulate" without accountability and responsibility then we need to become ONE, LOUD VOICE THAT CAN BE HEARD FROM EVERY CITY, TOWN, SUBURB AND HOME IN AMERICA.

There is a growing protest to demand that Congress, the President and his cabinet LISTEN to us, the American Citizens. What is being done in Washington is NOT the way to handle the economic free fall.

So, here's the plan. On April 1, 2009, all Americans are asked to send a TEABAG to Washington , D.C. You do not have to enclose a note or any other information unless you so desire. Just a TEABAG.

Many cities are organizing protests. If you simply search, "New American Tea Party", several sites will come up. If you aren't the 'protester' type, simply make your one voice heard with a TEABAG. Your one voice will become a roar when joined with millions of others that feel the same way. Yes, something needs to be done but the lack of confidence as shown by the steady decline in the stock market speaks volumes.

This was not my idea. I visited the sites of the 'New American Tea Party' and an online survey showed over 90% of thousands said they would send the teabag on April 1. Why, April 1?? We want them to reach Washington by April 15. Will you do it? I will. Send it to; 1600 Pennsylvania Ave. Washington , D.C. 20500 ..

Visit the website below for more information about the 'New American Tea Party'. I would encourage everyone to go ahead and get the envelope ready to mail, then just drop it in the mail April 1.

Can't guarantee what the postage will be by then, it is going up as we speak, but have your envelope ready. What will this cost you? A little time and a 40 something cent stamp.

What could you receive in benefits? Maybe, just maybe, our elected officials will start to listen to the people. Take out the Pork. Tell us how the money is being spent. We want TRANSPARENCY AND ACCOUNTABILITY. Remember, the money will be spent over the next 4-5 years. It is not too late.

Of course, if you agree with the way things are being done now, just delete this e-mail !!!!!

SP Futures Hourly Chart at Noon

It is important to remember that this is a 'triple witching' week with options expiring on Friday. In markets such as this in particular it is a week of shenanigans as the bigger house players squeeze the option punters who are essentially speculating with too much leverage. March is a big expiration.

We also have the Fed in a two day FOMC meeting with their announcement tomorrow at 2:15 EDT.

The uptrend has held so far. The first chart shows the hourly action up close, and the second chart shows the same scenario but within the context of the bigger picture.

This feels like a technical rally. And surely there is no recovery in the real economy six months out, which is what is required to justify a sustained market uptrend and a new bull market.

Although Ben Bernanke has made noises about a possible recovery at the end of this year, we would file that with his other economic pronouncements about the credit crisis being confined to subprime and so forth. He is constantly talking his book, which demands a rosy recovery. He won't get it.

There will be no recovery in our nation until there is significant reform enacted to bring our economy back into balance. The financial system, gone off the track with gambling, is draining our energy away from real productive efforts, acting as a hidden by substantial tax on the quality of our growth.




A view of the above chart within the greater context of this rally.

Senator Grassley: Throw AIG to the Wolves (and Ignore Us)

"You can fool some of the people all of the time, and all of the people some of the time,
but you can not fool all of the people all of the time."
Abraham Lincoln

But you can bloody well try.

Senator Grassley is a ranking member of the Senate Finance Committe. As such, he presided over a decade of erosion of safeguards and balance in our financial system.

He is also a member of a political party and a government that had the lead in ruining our country, undermining the Constitution, and allowing financial racketeers like AIG to flourish.

The fellows at AIG are indeed amoral pigs, and they make no pretentions to be otherwise, whereas Chuck Grassley and his ilk are venal hypocrites who are attempting to deflect attention from their own significant role in the current financial crisis, and a disastrous foreign policy conducted under false pretenses for the enrichment of private interests and corporations.

Those who take his pious pronouncements seriously are born to be shorn, over and over, again and again.

"I don't know whether the [$165 million in bonuses] is an issue as much as just the chutzpah of the people running AIG," Grassley said. "That they could thumb their nose at the taxpayers, it's more that.

"The attitude of these corporate executives and bank executives, and most of them are in New York, that somehow they're not responsible for their company going into the tank," he said.

"I suggest, you know, obviously maybe they ought to be removed, but I would suggest that the first thing that would make me feel a little bit better towards them [is] if they would follow the Japanese example and come before the American people and take that deep bow and say I'm sorry and then either do one of two things: resign or go commit suicide."

FASB to Make Dramatically Favorable Changes in Mark to Market Rules

It looks likea return to mark-to-assumptions is in the cards. The prospective rule change is targeted at large banking institutions with hold-to-maturity MBS portfolios.

This rule change will be generally known as marked-to-official-policy accounting, wherein our desired objectives are achieved by definitional manipulation and corporate decree. This is consistent with our national currency.

If the holder of a financial asset cannot obtain an active price, they can assume the cash flows will be maintained to maturity and value the asset based on that.

This is not decided yet, but we would imagine FASB is under intense pressure from the federal government and the banking lobby.


FASB to Propose Improvements to Mark-to-Market and OTTI
The American Banker
March 16, 2009

The Financial Accounting Standards Board agreed today to propose alternatives for improving mark-to-market accounting in illiquid markets and for “other-than-temporary-impairment” (OTTI). ABA has been requesting improvements to these mark-to-market issues for the past year and for improvements to OTTI for many years.

Mark-to-Market.

The proposal for estimating market values will take into consideration whether there is an active market (such as the number of recent transactions, whether price quotes are based on current information, whether price quotes vary substantially, etc.). If there is not an active market, then the quoted price is a distressed transaction unless certain other conditions exist. For distressed transaction prices, “Level 3” techniques (such as present values of future cash flows) are used instead of the distressed prices and should reflect an orderly transaction between market participants, including a reasonable profit margin for uncertainty in a non-distressed situation.

Other-Than-Temporary-Impairment.

FASB will also propose that the full market loss continue to be reported through earnings (and capital) only if the entity intends to sell or will be required to sell the security prior to its recovery. For all other OTTI, the amount of market loss will be split between the credit portion of the loss, which will be reported in earnings, and the remainder of the loss, which will be reported in “other comprehensive income.”

Effective Date and Comment Period.

The proposed effective date is for periods ending after March 15, 2009. However, FASB is concerned that some may not be able to prepare the information in time for March 31, 2009, reporting, and will request comments on whether it should be effective for periods ending after June 15, 2009, with early adoption (for March 31, 2009) permitted. Comments are due April 1, and FASB hopes to make its final decision on April 2.