Tuesday, April 7, 2009

Banana Republic Time Comes to America

There's a new twist to Treasury Secretary Timothy Geithner's toxic asset plan. FT reported last week that:
...US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
Hmm, I thought Citi and Chase were going to be selling toxic assets.

If this is the play, this sounds to me like Treasury and the FDIC have drawn up a list of banks that will be taken out. Why else would Citi and Chase want to participate in buying these assets unless they were going to get them on the cheap?

The "results" of the "stress tests" are coming up and this is likely the cover that will be used to force the targeted banks to liquidate toxic assets under two possible scenarios. The first scenario will be the takeover by the government of certain banks because they "failed" their stress test. Then the assets will be sold on the cheap into the open arms of Citi, Chase and the other usual suspects. The second scenario is where a bank CEO has been called in and told that his bank is top heavy in toxic assets, and that they must be liquidated immediately or the government will takeover the bank and fire him. He will, of course, then sell them on the cheap into the open arms of Citi, Chase and the other usual suspects.

It is really hard to believe that this kind of thing is going on in America, but it is. There are some serious hard ball players who want it all.

Geithner at Treasury and Sheila Bair at FDIC are the fronts. John Hempton at Bronte Capital is already calling for the indictment of Bair for what she has already tried to pull off:

[Bair] is totally captured by JPM and Citi.

After all WaMu was gifted to JP Morgan in a reckless and irresponsible manner and she attempted to gift Wachovia to Citigroup. It should not surprise me that Sheila Bair continues to act as if she is on the take. That represents no change in behaviour.

Recommendation: Indict Sheila Bair if she won't resign. Indict her now.
The results of the "stress results" are going to be interesting. From where I sit, this could be another sign that the United States is acting more and more like a banana republic, where the insiders and their designated front men do as they please, damn the people.

1 comment:

  1. Have you seen this: Congressional Panel Suggests Firing Managers, Liquidating Banks .

    This is crazy. Our free market society was supposed to liquidate these bad banks to begin with. That’s what it does with failed businesses. It’s what keeps the markets strong and thriving. Should have liquidated them to begin with. No business or country for that matter is too big to fail.

    What’s too bad is I doubt that the advice of liquidating them will be heeded.