Friday, April 03, 2009

Newsflash: Banks to Participate in Revised Bailout Plan

Man I had so many other posts half written and waiting to go today. Jay Cutler, Curt Schilling, the Final Four, major league baseball and the title defense of Your World Champion Philadelphia Phillies, lots of stuff.

But then I saw this story.

If you have any interest, outrage, or just plain rage related to this whole bank bailout mess, and especially how some of these financial firms have been ready and willing to game the system and take advantage even despite receiving mass injections of taxpayer funds to keep them afloat, then I suggest you read that article, a report out of the Financial Times today. It's short and it's just preliminary at this point, but the essential gist of the link for those of you too lazy to read or just very bad at summing things up to main ideas, is that the largest U.S. banks, including Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley among others, are considering participating in the Obama administration's revised bank bailout plan. Not news, right? Well, there's a catch. Those banks, and others according to the report, are considering participating as buyers in addition to as sellers.

Why is that bad, you may ask? Well, for starters, check out this line from the article:

"This week, John Mack, Morgan Stanley's chief executive, told staff the bank was considering how to become "one of the firms that can buy these assets and package them where your clients will have access to them," according to the paper."

Hmmmmmmmmmmmmmmmm. Let's see. An investment bank. Using taxpayer funds to buy troubled assets, packaging them and making them available in little slices to its clients? Now gosh durn it if that doesn't ring a bell from somewhere, doesn't it? Does that remind you all of anything that's maybe happened before? I'm gonna have to skip some space here to give that quote a minute to really sink in -- Morgan Stanley's CEO wants to be "one of the firms that can buy these assets and package them where your clients will have access to them".

My hat blew clear off my head there when I read that again, so I had to go chase it down, sorry. Ok so, these banks are going to be permitted to take advantage of government lending unavailable anywhere else in the world, as well as the incredible leverage of the government providing almost all of the capital and taking on almost all of the risk involved in buying up these troubled asset pools from the revised TARP plan that they've now renamed so no one remembers this was the TARP plan, and all of this will be taxpayer-financed out of the new TARP. In other words, the very banks that contributed so greatly to the proliferation of risk and speculation that lie at the heart of the current crisis, are now planning to use taxpayer funds to buy each other's distressed assets at cheap prices that should reap significant rewards over time. The possibility of securitizing those crappy assets all over again and selling them to clients is just a bonus I suppose, I guess for the taxpayers who bear the largest burden under our tax system. My favorite quote of the article comes from Spencer Bachus, the top Republican on the House financial services committee, who vowed to fight against such ridonkery. Apparently Bachus told the Financial Times that it would mark "a new level of absurdity" if financial institutions were "colluding to swap assets at inflated prices using taxpayers' dollars". Ay-men to that.

So far, President Obama honestly does seem to feel our pain and our rage towards these meshuginas in the banks, and the bravado with which they continue to try to take advantage of the system and of the taxpayers of this country in the race for the Almighty Dollar, doesn't he? I can't wait to see his reaction to this one. Stay strong man, stay strong.

Oh and before I forget, don't forget the big blonkament on Sunday. No, not that one, I said the big one, the one I am actually going to be playing in. That's right, it's back -- Julius Goat's Bad Bankroll Management Tournament (BBmT). This will be the second run at the quarterly festival dedicated to those who know how to fritter away their bankroll in true bloggeresque fashion on tournaments with a clear negative expectation. The second BBmT goes down this coming Sunday, April 5, at 9pm ET on full tilt. Password is, appropriately, "busto". The buyin is a far-too-steep-for-your-bankroll $50 + $5, and, as the Goat himself puts it, the tournament wil feature both "Superstacks" and "Superdonks", as well as absolutely no BBT points at all. So come and check it out on Sunday evening -- in fact, be like me and go register now so you don't forget. There's some serious coin to be won lost in this thing for sure.

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Blogger StB said...

Ironically they are the right guys to do the job. The process is the same as how the mess started.

It shouldn't be a shock that Obama is clueless. Well maybe to those that still believe the media when they say he is sooooo smart.

11:53 PM  

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