Weekend Special: Eliot Spitzer's Call Girl...

...Ashely Dupre speaks to Diane Sawyer.

A Geithner Treasury Will Mean Major Changes In Financial Regulation

Tim Geithner clearly does not understand free markets. He sees market failures where the government must intervene to fix things. In Geithner, the Treasury will be run by a micro-managing interventionist.

Here Geithner's own words about financial regulation.

Timothy Geithner on the Usefullness of Fog

“Most consequential choices involve shades of gray, and some fog is often useful in getting things done." From WSJ as quoted by NYT.

Sounds like a real open truth teller, along the lines of Dick Nixon.

Bailouts Geithner Has Been Involved With

Barack Obama's choice for Treasury Secretary, Timothy Geithner, should be called the Bailout King. According to NYT:

[H]e was involved in the bailouts of Mexico, Indonesia, Korea, Brazil and Thailand.

This is in addition to his recent roles in the bailouts of Bear Stearns and American International Group, and Treasury Secretary Paulson's $700 billion boondoggle.

Unbelievable: More Money for Goldman Sachs and the Other Elite

The government has a new "shovel money to privileged banks" program that will launch next week. It will come through the FDIC and the final rules were just announced.

The program is called Temporary Liquidity Guarantee Program, or TLGP(Pronounced "Teelgup"). This program is designed to allow banks to issue FDIC insured debt, which pretty much means it's guaranteed by the U.S. and will be AAA rated.

Can you imagine how easy it would be for you to borrow money if the U.S. government guaranteed to pay back anything you borrowed?

Naturally, Goldman Sachs has already announced that they will raise money by selling bonds with this new guarantee Monday.

“The TGLP program could facilitate several hundred billions of government-guaranteed AAA-rated” bank term debt before the program ends on June 30, analysts led by Hans Mikkelsen at Bank of America wrote in a report yesterday, Bloomberg reports.

Talk about crowding out the non-privileged business sector. This sounds like it could be even bigger than Paulson's $700 billion boondoggle.

Senator Inhofe Delivers Floor Speech on Halting Handout of Bailout Funds

On Monday,Senator Inhofe introduced legislation to amend Section 115 of the Emergency Economic Stabilization Act (EESA) to require an affirmative vote on the part of Congress to approve Treasury's plan for the remaining $350 billion and require a freeze on any remaining funds of the first $350 billion, stating, "It is imperative that we not allow that amount of money to be added to a deficit approaching $1 trillion this year without any input from the legislative branch."

In a speech on the Senate Floor, Senator Inhofe went on to say, "Congress completely abdicated its responsibility by signing a truly blank check over to the Treasury Secretary. However, the lame duck session of Congress offers us a tremendous opportunity to change course. We should take it."

Read Jim Inhofe's NRO article on why the bailout money needs to be stopped, here.

Tim Geither In Profile

According to various news sources, Tim Geithner will be nominated as Treasury Secretary by Barack Obama. An official announcement is expected Monday.

Judging by his actions it does not appear Giethner believes in free markets. For him, the government needs to stand by with buckets and buckets of money.

According to reports, in 1997 he was instrumental in pushing then Treasury Secretary Rubin to OK a bailout of South Korea.

Geithner also was reportedly behind the $29 billion guarantee against losses that the Fed made to JP Morgan when JPM purchased Bear Stearns. The guarantees against losses, it should be noted was in addition to the fact that JPM stole Bear Stearns at a huge discount from its liquidation value.

His interventionist credentials are pretty well established on Wall Street. Here's Larry Kudlow's thinking on Geithner ans the next tranche of the $700 Billion Paulson boondoggle:

As for the TARP bailout story, it is generally believed that Geithner is a strong interventionist. And so we can expect him to move toward raising the second $350 billion tranche of the originally authorized $700 billion package by Congress

.

Geithner graduated from Dartmouth College with a bachelor’s degree in government and Asian studies in 1983 and from the Johns Hopkins School of Advanced International Studies with a master’s in International Economics and East Asian Studies in 1985, according to his official bio on the New York Fed site.

He joined the Treasury in 1988 and worked in three administrations, serving as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Treasury Secretaries Robert Rubin and Larry Summers.

He also worked for Kissinger Associates for three years.

He become New York Fed president in 2003. In that capacity, he worked as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.

One side note. Geithner graduated from the International School of Bangkok, Thailand. His father appears to be a possible CIA agent and is listed by the New York Times as the "program officer in charge of developing countries for the Ford Foundation."

Geithner falls under the Robert Rubin wing of Goldman Sachs influence, as he worked for Rubin when Rubin was Treasury Secretary.Geithner also serves as chairman of the G-10’s Committee on Payment and Settlement Systems of the Bank for International Settlements. He is a member of the Council on Foreign Relations and the Group of Thirty.

But it is his interventionist bent that could prove we have a major inflationist at Treasury. One Obama confident relates a recent conversation between an associate and a Fed official, in which the latter complained, "Christ, Geithner wants to save everybody."

More money hand outs to Wall Street, no wonder the market jumped 500 points on news of the Geithner selection.

Addicts to Power

Thomas P.M. Barnett explains what it is like in D.C. right now:

There is always the feeding frenzy when a new president takes office, especially if the break for the party in question is 8 years or more. You have this entire universe of super-talented, ambitious and supremely focused players who’ve gone into the exile of think tanks for the long winter, cranking all manner of—admittedly—pretty dull books (you want to say careful things) and attending conference after conference to network like crazy, and never turning down any commissions or what not. So when the floodgates open, it’s not pretty. I mean, you’re talking about true addicts to power—as in, people who’ve organized their entire lives around these moments of possibility.

Geithner to Be Nominated as Treasury Secretary

President-elect Barack Obama plans to announce his economic team on Monday and will name New York Fed President Tim Geithner his nominee for Treasury Secretary, NBC News is reporting.

The Treasury Capital Purchase Program

Here are the details released as of Nov 17th:

CAPITAL PURCHASE PROGRAM: $158,561,409,000 Total


$15,000,000,000 Bank of America Corporation
$3,000,000,000 Bank of New York Mellon Corporation
$25,000,000,000 Citigroup Inc.
$10,000,000,000 The Goldman Sachs Group, Inc.
$25,000,000,000 JPMorgan Chase & Co.
$10,000,000,000 Morgan Stanley
$2,000,000,000 State Street Corporation
$25,000,000,000 Wells Fargo & Company
$10,000,000,000 Merrill Lynch & Co., Inc.
$17,000,000 Bank of Commerce Holdings
$16,369,000 1st FS Corporation
$298,737,000 UCBH Holdings, Inc.
$1,576,000,000 Northern Trust Corporation
$3,500,000,000 SunTrust Banks, Inc.
$9,000,000 Broadway Financial Corporation
$200,000,000 Washington Federal Inc.
$3,133,640,000 BB&T Corp.
$151,500,000 Provident Bancshares Corp.
$214,181,000 Umpqua Holdings Corp.
$2,250,000,000 Comerica Inc.
$3,500,000,000 Regions Financial Corp.
$3,555,199,000 Capital One Financial Corporation
$866,540,000 First Horizon National Corporation
$1,398,071,000 Huntington Bancshares
$2,500,000,000 KeyCorp
$300,000,000 Valley National Bancorp
$1,400,000,000 Zions Bancorporation
$1,715,000,000 Marshall & Ilsley Corporation
$6,599,000,000 U.S. Bancorp
$361,172,000 TCF Financial Corporation

While Citi Crashes...

Citigroup stock is trading below $4.00 this morning, way off its all time high of $54.00.

Yesterday during a telephone conversation, investment advisor Bill Smith of SAM Advisors pointed out to me the absurdity of the current Citigroup situation.

Since Citi is crashing, you would think that the board of Citi would spend extra time focusing on Citi to right the ship. Instead 20% of Citi's board is part of Barack Obama's transition team: Robert Rubin, Richard Parsons, Chairman of Time Warner Inc. and Anne Mulcahy, Chairman and CEO of Xerox Corporation.

Smith is also highly suspicious of what Rubin does to earn his $17 million per year. Rubin thinks the salary is a quid pro quo from Citi for Rubin's taking down the Glass Stegall Act, while he was Treasury Secretary.

Nobel Prize Winner Scholes Freezes His Hedge Fund After Losses

Platinum Grove Asset Management LP, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October.

The decline left Platinum Grove Contingent Master fund with a 38 percent loss this year through Oct. 15, according to investors. Funds employing a similar approach of exploiting differences in the value of related securities fell 14 percent last month and 30 percent this year, according to data compiled by Hedge Fund Research Inc.

Somebody really ought to take Scholes' equations away from him. Scholes was also a partner in Long Term Capital Management that blew up in spectacular fashion in the late 1990's by losing $4 billion.

According to Platinum Grove's web site, they:

...rely upon sophisticated and proprietary quantitative modeling augmented by
qualitative research, on a global basis... Risk control is central to asset management and PGAM relies on an innovative risk-control framework and on sophisticated processes to add to returns while preserving capital.

The Coming Great Liquidation and The Opportunity

At WSJ, Andy Kessler makes a number of important points with regard to the market between now and the end of the year.

First, we are likely to see huge tax selling. Stocks that are down will see even more downward pressure between now and the end of the year, as investors sell stocks that are down to lock n tax losses.

And this goes for mutual funds as well. Kessler writes:

Mutual funds are also dumped for tax losses. When the stock market is down in the morning, it's usually because of mutual-fund redemptions.

Fidelity's giant Magellan fund, down 56%, is one of many in the $6 trillion stock-fund business having an awful year. As investors call or click to get out of these funds, Fidelity and the others have to unload shares the next morning to raise cash. This forced-selling overwhelms the system. New York Stock Exchange specialists, who are supposed to maintain an orderly market, stop buying and back away. You get huge drops, which can unnerve even more investors and cause them to redeem.

The redemptions could also cause huge legacy capital gains for some mutual fund investors. Kessler explains:

To make matters worse, in December mutual funds do capital-gains distributions. In a down year like 2008, you would think there are no taxes to pay. Think again. Legg Mason's Value Trust, run by Bill Miller, outperformed the market for 15 years by buying many "unvalue" names like Amazon. As investors redeem, he is forced to sell many of these stocks originally purchased at very low prices, triggering huge capital gains in a year his fund is down 62%. You can almost guarantee investors also will sell more of these funds to pay their unexpected tax bill.

Here's something the lame duck Congress should do immediately, temporarily lift the tax on capital gains distributions made by mutual funds to provide relief from these legacy capital gains.

And then, of course, there will be hedge fund liquidations because of the advisor fee structures at the funds. Kessler again:

...when hedge funds are down for the year, they work practically for free until they make up the loss. We'll see hedge funds close and stocks liquidated as -- no surprise -- hedge-fund managers like to get paid.

Bottom line, there is going to be huge technical downward pressure on some stocks between now and the end of the year.

Given that the Fed appears to be expanding money supply again, this should mean a huge "January effect" for January 2009. In a normal year, the January effect occurs as the technical selling pressure from the end of the year stops, often within a matter of days some stocks that faced huge selling pressure jump by 25% or more after the first of the year (Sometimes the climb starts the last few days of the old year).

With all the technical liquidations going on this year, watch the new low list carefully. Look for stocks of companies that are backed by solid operations and a solid balance sheet. If they appear to be going down for no reason day after day, it could very well be technical end of year selling pressure. Some of,these stocks will have huge rebounds, maybe 50% or more, within the first few days of January 2009. It will be a great opportunity, make your entire trading profits before February 1 and take the rest of the year off. It's going to happen for some.

On CEO's Whining About Short Sellers:

"You have to wonder if this helps or hurts investor confidence. When executives keep blaming shorts, it just shows they aren't taking the challenges to their company seriously. And it certainly implies they aren't planning any management shake-up."
-John Carney

From personal experience,I would say 95% of the CEO's, who have complained to me about short sellers, just didn't understand markets, trading patterns and how market makers operate. I think two companies that do have legitimate complaints are Bear Stearns and Lehman Brothers.

Sen. Inhofe: Paulson Threatened Martial Law To Pass Bailout

Sen. James Inhofe, R-Okla., revealed to a Tulsa radio station details of Treasury Secretary Henry Paulson's conference call as Paulson pressured to get the "bailout" bill passed.Clip is approximately one minute.

(Via LRC)

Carlyle Funded Bank Also Gets Treasury Money

Boston Private Financial Holdings Inc. will get $150 million in capital through the Paulson "Bailout" program. This comes on top of $173 million Boston Private raised in July from private investors, including $75 million from the Carlyle Group.

According to Chris Carey at BailoutSleuth, the total number of institutions that have been selected to receive taxpayer money from Paulson's $250 billion program is now just beyond 70.

Major Move In Long Bond Treasury Market

The 30-year U.S. Treasury bond climbed 5 points during the regular session today and is up another 4 points in after hours trading.

The big question is who is the aggressive buyer? Is it a short seller caught in a squeeze? Is there someone who actually believes that inflation over the next 30 years will not climb above 3.44%? Could it be the Fed?

Dramatic moves like this usually have a story to them. And more often then not they reveal themselves over time. But with a major move like this, guaranteed there are some shorts bleeding tonight.

For anyone with patience and staying power, this has to be an ideal time to short the bonds. There is no way I see these rates at these levels long term.

Money Supply Watch: Fear Continues; Fed Countering With Money Printing

There's a battle between fear and the Fed. Fed money printing is likely to win out in the long run.

M1 nsa for the week ended November 3 increased by $42.5 billion. This indicates that fear remains in the system. It is unlikely we will see a rebound in the economy until individuals stop pulling money out of other money components and putting the funds in cash and checking accounts, i.e. M1.

However, M2 nsa also increased for the week. It climbed by $45.6 billion. The Fed is clearly in money printing mode (as opposed to the slowdown this summer). The M2 money growth rate is now expanding week after week. The annualized growth for the last three months is almost at double digits at 9.89%.

If this growth in M2 is sustained, the downturn will end much sooner than most expect.

Swiss National Bank Makes Surprise Rate Cut

You know global inflation can't be too far away when even the Swiss are getting into the aggressive rate cutting act.

The Swiss National Bank on today made a surprise and steep one percentage point rate cut.

The Swiss National Bank said it's lowering its three-month Libor target range by one percentage point to a 0.5% to 1.5% range.

The move "will provide the Swiss franc money market with a generous and flexible supply of liquidity in order to bring the Libor down to the middle of the target range.

Jobless Claims Hit 16-Year High; Where The Cuts Are

The number of U.S. workers filing new claims for jobless benefits rose by 27,000 last week to their highest level in 16 years, according to the Labor Department.

Much of the job losses are comng from the fnancial sector, the high tech sector and, of course, Detroit's Big Three auto firms.

Here is A list of recently announced job cuts, as compiled by CNBC:

Boeing announced plans on November 19 to cut approximately 800 positions at a Wichita, Kansas plant, due to delays in the U.S. Air Force tanker-replacement project and the end of other programs. The layoffs, which will hit managers and both salaried and hourly workers, will take place mostly in the first half of 2009.

Citigroup is cutting as many as 53,000 jobs in its investment bank and other divisions throughout the world.

JPMorgan Chase hs annouced that it plans to cut least 10 percent and maybe 15 percent of its workforce.

Sun Microsystems said Friday it plans to cut up to 6,000 jobs, or 18 percent of its global work force, as sales of high-end servers have collapsed.

BT Group, the UK telecommunications firm, will cut 10,000 jobs, or 6.3% of its global work force, in the first quarter of 2009.

Applied Materials, the semiconductor-and-solar panel equipment maker, is slashing 1,800 jobs, the company annonnced after reporting four-quarter profits fell 45% on weak sales due to declining corporate technology spending.

Circuit City, which is filing for bankruptcy, is laying off about 17 percent of its domestic work force, which could affect up to 7,300 people.

Deutsche Post, German mail and logistics company Deutsche Post will cut 9,500 jobs at its DHL unit in the U.S. and eliminate U.S.-only domestic express shipping.

Nortel Networks plans to lay off 1,300 workers, nearly 5 percent of its workforce.

Motorola posted a third-quarter net loss and revenue fell a steeper-than-expected 15 percent, as a result the telecom equipment maker will slash 3,000 jobs in a cost-cutting effort.

Ford said it would cut 2,260 white-collar workers in North America.

General Motors, which previously said it would reduce salaried employment costs by 20 percent, will also cut another 1,900 salaried jobs on top of the 5,100 announced last summeR.

Fidelity Investments will start laying off about 2.9 percent of its global workforce later this month—affecting 1,288 workers in the first round from a workforce of 44,4000—and plans to trim more workers early next year.

Toy maker Mattel Inc. says it is cutting some 1,000 positions worldwide in response to the ongoing economic downturn.

Goldman Sachs notified roughly 3,200 employees this month that they have been laid off, part of previously reported plans to slash 10 percent of the firm's global work force. The move comes after laying off hundreds of support staff and junior bankers in June.

At Merrill Lynch, 10,000 employees could be released as a result of the merger with Bank of America.

Bank of America, the second-largest U.S. bank by assets said in June it expected to eliminate about 7,500 jobs over the next two years after the completion of its acquisition of Countrywide Financial Corp, the largest U.S. mortgage lender.

Barclay's plans to cut about 3,000 jobs as it brings Lehman Brothers into its fold. Lehman, which filed for bankruptcy last month, had 26,000 employees. About 10,000 have been given jobs until at least the end of the year.

Wachovia, said in August it would cut 6,950 jobs, 600 more than it had previously disclosed.

UBS said at the beginning of October it would cut another 2,000 jobs at its troubled investment bank. The job losses come on top of 7,000 jobs already cut, about 4,100 of which were in investment banking positions cut in the past year. The bank will have reduced its headcount by more than 10 percent to under 80,000.

Credit Suisse has cut more than 1,500 jobs, the majority in investment banking in the last year since 2007, and on Tuesday it said it would cut 500 more jobs.

HSBC said late last month it was cutting 1,100 jobs in its investment banking operation, or 4 percent of the workforce.

Commerzbank announced its plan to cut 9,000 jobs in the wake of its agreement to purchase Dresdner Bank from Allianz. About 2,500 jobs of the 9,000 cuts will be outside Germany.

Computer maker Dell, which is nearing the end of nearly 9,000 job cuts, has asked employees to consider taking up to five days of unpaid vacation, is offering voluntary severance packages and has instituted a global hiring freeze.

A Bet On The Robert Rubin Wing of Goldman Sachs

Prince Alwaleed bin Talal's Kingdom Holding said Alwaleed will increase his Citigroup stake, his largest holding, to 5 percent. His holdings in Citi are currently less than 4%.

In his mysterious role at Citi as "Director and Senior Counselor", since joining the bank n 1999, Rubin has pulled down $150 million in salary and bonuses.

Junk Bond Yields Spike

Fear continues strong throughout the economy. Average yields on US junk bonds have topped 20 per cent for the first time.

The yield on the benchmark Merrill Lynch US High-Yield index hit 20.81 on Wednesday after climbing to 20.27 per cent on Tuesday. Before Tuesday, the previous high for the index was 18.66 per cent in January 1991. The risk premium, or spread over comparable Treasury securities, is close to double what it was in 1991, when Treasuries were yielding more than 8 per cent.

Some long-term bonds issued by General Motors, one of the biggest non-investment grade issuers, have been yielding more than 50 per cent.