Muni Bonds: Time to Head for Higher Ground?

J. P. Morgan and Charles Schwab have just announced a program to make municipal bonds more available to small investors.

Let's see, record low interest rates and looming risk of default from undisclosed obligations, or perhaps a brisk uptake in inflation. Sounds like a plan (for the big dogs to unload).

Yikes!

Culture of Deceit: Why Dick Fuld So Needlessly and Recklessly Perjured Himself Before Congress

"Truth is not only violated by falsehood; it may be equally outraged by silence."

Henri-Frederic Amiel

Yet another whistle blower who has been completely ignored by the SEC just stepped forward to finally be acknowledged by the media.

A Bloomberg analyst reported around noon NY time that they had verified Mr. Budde's story, and that indeed Dick Fuld easily had received cash in excess of $500 million in compensation for the period in question, higher than even Henry Waxman had asserted in his charts during Dick Fuld's testimony.

Mr. Budde, a former counsel who was frustrated and plain fed up with the culture of personal greed and deceit among the Lehman executives stepped forward again to tell his story after being completely ignored by the SEC and the Lehman Board of Directors.

Now, I have some sympathy for Dick Fuld. I mean, when you are making the big bucks owed to a master of the universe, and you eat widows and orphans for breakfast, what does it really matter if it is $300 million, or $550 million, or even the one billion that some estimate was the true total compensation? What is a few hundred millions when you can afford to wipe your derrière with Cohiba cigars, and gargle with Cristal Brut 1990? (Oh yeah, that's class, real class. I must finally be somebody, and not just some schmuck from the Bronx. I'll show them, show them all.)

I know I have trouble keeping track of what I have exactly in my own wallet at times, especially after paying the kids a couple of quid to walk the dog. And $200 million is hardly a significant sum anymore in the rapidly expanding compensation universe change on Wall Street. There is the locus of Bernanke's inflation, the FIRE sector, where the liquidity has been channeled, for years.

But what interests me most is why did Dick Fuld perjure himself over something to obviously verifiable, and largely irrelevant? Doesn't he file tax returns? Did he mess up using Turbo Tax like other board members of the NY Fed are said to have done? Or was he just a little bit ashamed of taking huge sums from a company that he ran into the ground in a Ponzi scheme? On the other hand Goldman execs celebrate their bonuses and just love to roll in their own irrational greed. Perhaps it was just a slip, a bad habit, a automatic reflex.

Fuld was widely disliked on the Street, and when those sharks and sociopaths, who would sell their own mothers for an eighth, don't like you there just have to be some serious personality issues involved.

But Dick is likely to be just another scapegoat, like Martha Stewart, in an escalating program to feed at first the small fry and now bigger 'outsiders' to the mob and the show trials, while the great bulk of the crime continues to be concealed.

And just so you don't feel too sorry for the Dickster, on November 10, 2008 Fuld sold his Florida mansion to his wife Kathleen for $100; this may protect the house from potential legal actions and judgements against him. They had bought it only 4 years earlier for $13.56 million.

Still, one can only ask the question, and wonder, what a brave new world, that has such people in it, virtually running the regulators, the Congress, and the government for their own irrational benefit and obsessive greed.

Bloomberg
Fuld Understated Pay More Than $200 Million, Lehman’s Budde Says
By James Sterngold
April 30, 2010, 12:02 AM EDT

April 29 (Bloomberg) -- Before Lloyd Blankfein of Goldman Sachs Group Inc. took his place, Richard S. Fuld Jr.’s angry face was the universal symbol of Wall Street greed.

On Oct. 6, 2008, three weeks after Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history, Lehman’s former chief executive officer found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform. Waxman has stared down plenty of CEOs over the years, yet this had to be one of the most intense confrontations of his career.

“Mr. Fuld will do fine,” Waxman said. “He can walk away from Lehman a wealthy man who earned over $500 million. But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis.”

Fuld said he was a victim, not an architect, of the collapse, blaming a “crisis of confidence” in the markets for dooming his firm. Reckless management had nothing to do with it. “Lehman Brothers,” he said, “was a casualty.”

Fuld and Waxman went on to disagree about just how much money Fuld had taken out of Lehman before it went under, Bloomberg Businessweek reported in its May 3 edition. Fuld, now 64, said his total compensation from 2000 through 2007 was less than $310 million, not the $485 million that appeared on Waxman’s chart. He said 85 percent of his pay was in Lehman stock that had become worthless. “I never sold my shares,” Fuld said at one point. At another, he said he had not sold the “vast majority” of them.

“That just seems to me an incredible amount of money,” Waxman responded.

Under Oath

Among those closely observing Fuld was a 49-year-old former Lehman lawyer named Oliver Budde who was watching the hearing at home on C-Span. Budde (pronounced Boo-da) was certain Waxman’s figures weren’t too high. They were too low, and he could prove it. Fuld, he believed, had understated the amount he was paid during those years by more than $200 million, and now he had done it under oath, for the entire world to see.

For nine years, Budde had served as an associate general counsel at Lehman. Preparing the public filings on executive compensation had been one of his major responsibilities, and he had been infuriated by what he saw as the firm’s intentional under-representation of how much top executives like Fuld were paid. Budde says he argued with his bosses for years over the matter, so much so that he eventually quit the firm. After he left, he couldn’t let the matter rest.

Contacting Regulators

He contacted the Securities and Exchange Commission and the Lehman board of directors and says neither showed interest in meeting him. He was so shocked by Fuld’s testimony in front of Congress that he started thinking about writing a book going public with his story, which is told here for the first time.

“I wasn’t surprised, because these guys don’t surprise me anymore,” Budde says. “But it just struck me -- they’re doing it again. I wasn’t going to sit back and watch...”

Reykjavík on the Thames: Hard Times Ahead for Britain

"Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity."

W. B. Yeats, The Second Coming

The UK had another debate last night, and the polls shows the Conservatives and the Liberal Democrats in a surprisingly close race, with Labour under Gordon Brown continuing to slip. We will be looking for more polls (not connected in any way to Mr. Rupert Murdoch thank you) over the weekend after yesterday's televised debates.

The election seems likely to result in a 'hung Parliament' with no clear majority for any party, suggesting the possibility of a coalition government.

As a reminder to American readers, most of whom do not even know that the Brits are holding an election or how their governments are formed, the Liberal Democrats would be considered the 'reform party' in this election, what the Yanks would call a 'third party.'

And to put an edge on it, the New Stateman reports that Mervyn King suggests that the coming austerity to be imposed on UK citizens to support the City Banks will ensure that the next party in power will not be elected again for many many years.

Of course that is what the US newspapers said about the Republicans ahead of their last election, but in a short period of time Mr. Obama has managed to alienate a large share of his election base by acting more like a moderate corporate crony than a reform Democrat.

This election is important in any number of ways, but for the US it is a peek into what the future may bring in their own midterm elections in November. It is unusual for a people to go all out for a third party when they are frightened. There has not been a viable third party in the states for almost a century. But the manner in which the elections are settled in the UK brings forward some interesting possibilities.

New Statesman
Mervyn King: next government will be voted out for a generation
30 April 2010

Governor of the Bank of England warns that austerity measures will be so unpopular that the next party in power will not be voted back in.

Mervyn King's comments were revealed just hours before the final leaders' debate.

The American economist David Hale, who has known King for many years, said in an Australian television interview: "I saw the governor of the Bank of England last week when I was in London, and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be."

The Bank of England declined to comment, but confirmed that King and Hale had had a private meeting in early March.

His comments come amid growing concern that none of the three main parties has been open about the scale of spending cuts and tax rises that will be necessary.

SP Futures Daily Chart: End of Month and the Bulls Need a New High, Badly

Its the end of April, and the bull run on Wall Street needs a new high to break the head and shoulders broadening top that is forming. They seem to have all they can handle to deliver another up month.



They might manage it into the close, but traders are edgy about going long into the weekend with the Greece situation still unsettled. Its probably once again up to the Banks to take it higher, using the government's money.

Just the other week I cautioned a friend on a chatboard I occasionally frequent to watch out for a divergence between gold and equities, with stocks going down while gold holds its ground or rises higher. This is a possible trend change, with the significance that could be quite dramatic in the coming months. At some point there is likely to be a revulsion against fraud, and the paper that supports it. It is unlikely to happen all at once, but in steps, or stages. There are powerful monied interests behind the status quo.

And so here we are, for now.