Thursday, December 1, 2011

Fed Relies on Bacon to Solve the PIIGS Crisis

Forget the President's Working Group on Financial Markets, aka The Plunge Protection Team, there is a new major player on the scene, and it appears they had major influence on yesterday's coordinated Fed announcement on global swaps. Unlike the Plunge Protection Team, which consists of government officials, this new group, the Investor Advisory Committee on Financial Markets, consists of top Wall Street operators.

WSJ's Susan Pulliam reports on the committee:
Wall Street executives, in a private meeting with a top Federal Reserve official in late September, recommended a coordinated effort by central banks to remedy the European financial crisis...The meeting...preceded a joint action Wednesday by the world's major central banks, which banded together to provide liquidity to the markets through cheap U.S. dollar loans.
Pulliam goes on to report that the private meeting with the Fed was headed by a hedge fund manager, Louis Bacon of Moore Capital Management:
Mr. Bacon has been asked to speak about Europe during meetings with the Fed a number of times. In an email exchange Sept. 20, a Fed official asked Mr. Bacon to lead the meeting. "I was wondering if you would consider leading off the discussion on Europe, as you did at a meeting last year," the official said in the email.
Of note in the Pulliam report is that the Wall Street elite who took part in the meeting sound like a bunch of cry babies calling for a Fed bail out. They suggested many ways:
The bulk of the three-hour meeting with [NY Fed President] Dudley on Sept. 27 at the New York Fed headquarters addressed the fallout from the financial crisis in Europe. Mr. Bacon, who was asked by Fed staff members to lead the discussion, began by saying he felt a Greek default was "likely" and he believed there was a "sizable risk of an accelerated Greek bank run," according to meeting minutes.

Committee members also said they believed a default by Greece would lead to increased pressure on the already weak position of French banks and create funding strains for European banks, according to the minutes.

The group suggested a number of ways to address the European crisis, including "coordinated credit easing and/or quantitative easing by" the European Central Bank. The group also urged "central bank guarantees of sovereign debt," "investments in European sovereigns and banks," "implementation of capital controls" and "government guarantee of bank funding and/or depositors," as well as "recapitalization of the IMF," according to the minutes.
Who besides Bacon is on the committee? WSJ reports:
Members of the Investor Advisory Committee on Financial Markets include some of the biggest names on Wall Street, including Keith Anderson of Soros Fund Management; Mohamed El-Erian of Allianz SE's Pacific Investment Management Co.; Peter Fisher of BlackRock Inc.; Joshua Harris of Apollo Management LP; Alan Howard of Brevan Howard Asset Management; Deryck Maughan, a former chief executive of Salomon Brothers who now is at Kohlberg Kravis Roberts & Co.; and David Tepper of Appaloosa Management LP.
Other members include:

Nicole Arnaboldi
Vice Chairman of Alternative Investments
Credit Suisse Group

Garth Friesen
III Associates

Scott Malpass
Vice President and Chief Investment Officer
University of Notre Dame

Lawrence Schloss
Chief Investment Officer and
Deputy Comptroller for Pensions
NYC Public Pension Funds

Morgan Stark
Managing Member
Ramius LLC

Bottom line, we see the elitists at work, again, calling for every possible intervention in markets, including the  "implementation of capital controls"! Got that? Calls for capital controls from those operating in the capital markets! These guys will say, do and be in favor of anything that will protect their positions. And this is who the New York Fed brings in to give them advice. Crony capitalism winning again.

1 comment:

  1. Now as is the case with many a political issue, nothing is ever black and white, regardless of what some politicians will have us believe. But of course in this case i’m referring specifically to Greece and it’s looming default. I have recently found a short article on pressdisplay that I think sheds its fare share of insight into the situation. In any case, here’s the page if you’re interested ( and hope you find it as handy as I have in deciphering some of the country’s current issues. Cheers!