Henry Paulson Joins Mayor Bloomberg's Crony Charity Team

A curious bunch has been named by Mayor Bloomberg to the board of his charity, the Bloomberg Family Foundation.

In addition to former Treasury Secretary Paulson, some of the members of the 19 person board include:

Former Oklahoma Sen. David Boren

Former Georgia Sen. Sam Nunn

Former Florda Gov. Jeb Bush

Dr. Tenley E. Albright, Amex CEO

Kenneth I. Chenault, Director and former managing partner of McKinsey & Company

Walter Isaacson, Aspen Institute President & CEO

John Mack, Morgan Stanley Chairman

What's going on here?

The Village Voice has this take:

Looks a Lot Like Bloomy for Prez Committee‎ -...For Republicans down in Florida, there's a Bush (Jeb) and a Cuban-American (Miami mayor Manny Diaz). For right-wing Dems, he's got that old military warhorse, Sam Nunn from Georgia; for urban Democrats, he's got Corey Booker from Newark. For financial advice he's got that Goldman Sachs vet and oh-so successful ex-Treasury secretary, Hank Paulson.

All of this will be overseen by the ultimate multi-tasker, first deputy mayor Patti Harris who insists she has plenty of time left over after overseeing the city's $60 billion budget. Quote of the day is from new city comptroller John Liu: "Jeez!"

Wall Street Rapes America, Edition 9

Wall Street is a very tough place, if you don't know what is going on, your money will be taken from you. I can't think of a more outrageous rape of the taxpayer, ever, than the TARP program run by GW Treasury Secretary Henry Paulson. It should be noted that Paulson's lieutenant in the rape of the taxpayer was Timothy Geithenr, who came up short paying his own personal taxes, but managed to help dole out $350 billion in taxpayer money through TARP and is likely to be confirmed by the Senate today as the new Treasury Secretary.

If you get the sense today that someone is laughing at you behind your back, you'll be right. It's Geithner.

Oh yeah, here's the latest outrage.

Merrill Lynch lost $15 billion in the fourth quarter of 2008 and more than $27 billion for the year. In October, Merrill received $10 billion in bailout money. But the problems were so deep that Merrill CEO John Thain(surprise a former Goldman man) sold the company to Bank of America. The actual sale to B of A was a shrewd move by Thain. It does, however make B of A look like it is run by a bunch of country bumpkins,taken advantage of by a New York slickster. We indicated as much at the time, when we wrote:

Has Bank of America Chairman Ken Lewis come to his senses? Has the ether Merrill Chairman John Thain slipped Lewis during his sales pitch to get Lewis to buy Merrill, at a premium to the market price in the middle of a crisis, worn off?

Closing date on the B of A takeover: January 1, 2009.

Employee bonuses at Merrill are normally paid out in January. Since Merrill had lost $27 billion in 2008, it is likely that Bank of America would have looked good and hard before passing out those bonuses. Thain found away around the bonus payout problem, he paid out the bonuses in December, when he was still in full control of the company. Reports indicate the bonuses amounted to between $3 billion and $4 billion.

To recap:

Merrill loses $27 billion.

Treasury gives Merrill $10 billion in bailout money.

Merrill uses the money to payout $3 to $4 billion in bonuses.

Oh yeah, Thain also spends $1.2 million refurbishing his office.

Bottom line: Wall Street has always run circles around the American taxpayer, but the Paulson-Geithner era has brought in such disrespect for the taxpayer that not even Shakespeare would have thought of penning such an open and brazen tragedy.

Middle America better wake up, and with Obama bringing "change" like Geithner into the Treasury, Barack ain't the directon from where they should be looking for change. America is burning.

The Robert Rubin Wing of Goldman Sachs is Doing Well Under President-elect Obama

The Robert Rubin Wing of Goldman Sachs (Citigroup) did very well for itself under GW and Treasury Secretary Paulson.

It appears that the trend will continue under Obama. Dean Baker spots a very interesting tax break as part of Obama's "stimulus" package (my emphasis):

The media seem to have largely overlooked the Citigroup tax credit in their discussion of the latest items in President Obama's stimulus proposal. According to theWashington Post, the proposal will allow companies to write off current losses against taxes paid over the last 4-5 years, not just 2 years,as in current law.

There are relatively few companies that could benefit from this tax break since most companies will not have losses so large that they would need more than two years of tax payments to balance them against. But, really big losers, like Robert Rubin's Citigroup, and other badly failing financial institutions, are losing much more money in 2008 and 2009 than they earned in 2006 and 2007.

Baker then asks the big question:

Did the political connections of Robert Rubin and others in the financial industry have anything to do with the decision of Obama's economic team to be so generous to them? I don't have an answer to that question, but the media should be asking it.

How tight are Obama and Rubin? Very tight.

The 2008 EPJ Awards

There are no statues or television events associated with my EPJ Awards, but feel free, if you are so inclined, to don a tuxedo before reading the remainder of this post, to pour yourself a glass of champagne, and to clap, cheer, hiss or boo when appropriate.

Economist of the Year: Peter Schiff

The award of economist of the year should go either to an economist who has made path breaking new discoveries in the science, or who has advanced the general level of economic understanding on the planet. Schiff falls into the latter category. His consistent and clear presentation of sound economics that proved correct in forecasting events over recent months, in the face of laughter and derision, will raise curiosity across the land about the business cycle theory, specifically, Austrian Business Cycle Theory.

Here's a YouTube video of Schiff battling mainstream nonsense. It puts everything into perspective:



Inside Operator of the Year: Treasury Secretary Henry Paulson

In short order, Pauslon was able to convince Congress to give him $350 billion to buy up distressed mortgages. Paulson managed to disperse the entire $350 billion to his crony buddies without buying one distressed mortgage. In a remarkable disrespect for Congress and the public at large, Paulson also changed, on a near daily basis, the reasons he was distributing the funds in the fashion he was.

Inflationist of the Year (Also known as the Robert Mugabe Award): Ben Bernanke

After nearly halting money printing through out the Summer of 2008, Bernanke has reversed engines and tells us that his monetary policy is now one of "quantitative" money supply control, which apparently is Bernanke's attempt to replace "speed of light" with "speed of money printing" in Einsten's equation E=MC2. Over the last three months, Bernanke has increased money supply, as measured by M2 nsa, at an annualized rate in excess of 20%. Bernanke's effort will result in a change by the end of 2009 from the belief that "cash is king" to the knowledge that cash, in the form of paper dollars, is toilet paper.

Madoff Family Members Had Exclusive Briefings from Treasury Secretary Paulson on the Financial Crisis

As I have pointed out before, those who try to get close to regulators are generally doing so for a reason. The reason is to get the inside scoop, and to try and influence regulations.

WSJ knows this. They write that Bernie Madoff's niece, Shana Madoff, was an active member of a number of associations."The benefit would be to have close encounters with the regulators to express your opinion," WSJ quotes an unnamed colleague of Shana's as sayng.

So how high up the financial regulation ladder were the Madoffs' "close encounters"? All the way up.

Shana and her father were both a part of Sifma (Securities Industry and Financial Markets Association), the industry's main lobbying group. Shana was on the compliance advisory committee. Her father was a member of the board.

According to WSJ:

Sifma is one of the financial industry's most powerful advocates in Washington. It's members have received exclusive briefings on the nation's financial crisis from Treasury Secretary Henry Paulosn and the architects of the Treasury's $700 billion financial markets rescue plan. The Madoff family and firm has contributed more than $50,000 to Sifma's political action committee, and tens of thousands more to sponsor industry meetings , Ms. Madoff helped organize.

Who knew Paulson was making these "extensive briefings" to anyone outside of Congress? Do you realize how much money could have been made by those who got a drift of the next direction of one of Paulson's ever changing policies?

Bottom line. In many ways Wall Street is a semi-rigged game, and it is rigged as a result of regulatory and other government agencies. In some cases, the government operators know the rigging they are conducting, most likely such is the case, for example, with Paulson, in other cases, government regulators are used as innocent dupes, e.g. most of the SEC. But, either way, the agencies are more a hindrance than a help in creating free flowing unrigged markets.

Bob Murphy Is Going to Flip

On Wednesday, Bob Murphy wrote at his blog:

Paulson Flips Again On Whether He Needs the Remaining $350 Billion In TARP

Now I didn't specify in the title of this post whether it means Paulson wants the money or not; do you remember? I know it's a tough question since I think Paulson has literally flipped twice in the past two weeks. But as of right now, Paulson claims he doesn't need to tap into the other half of the TARP. Now what would be funny is if he comes back and says, "Yeah, of course I want to spend another $350 billion. But I meant I wouldn't be spending it on troubled asset relief."

Guess what?

Paulson, in his statement on the automotive bailout, flips again and says he needs the remaining $350 billion of TARP funds for "financial market stability":

As a result of this decision [to bailout the auto industry], Treasury effectively has allocated the first $350 billion from the TARP...In the very short-term, the allocated but not yet disbursed TARP balances, in conjunction with the powers of the Federal Reserve and the FDIC, give me confidence that we have the necessary resources to address a significant financial market event. It is clear, however, that Congress will need to release the remainder of the TARP to support financial market stability. I will discuss that process with the congressional leadership and the President-elect's transition team in the near future.

I think Murph has Paulson figured out.

The Fish Are Really Beginning to Stink in the Lehman Non-Bailout

Last week came news that GW's cousin George Herbert Walker was able to buy the crown jewel of Lehman, Neuberger Berman on the cheap for $1.2 billion with no money down.

Today, NYT's Ira Ross Sorkin is breaking news of some activities at the time of the bankruptcy that can't seem to be properly squared by Hank Paulson and company:

In the early hours of Sept. 15, after the government refused to rescue the foundering Lehman Brothers, something odd happened. The Federal Reserve lent tens of billions of dollars to a subsidiary of the newly bankrupt bank.

In other words, government officials who had refused to risk taxpayers’ money on Lehman before it collapsed did just that after it collapsed.

On Monday the Fed lent the Lehman unit $87 billion through JPMorgan Chase. After being repaid on Tuesday, it lent another $51 billion — putting the bailout, arguably, in the same league as the initial $85 billion bailout for the American International Group.

This mystery loan is just one piece of the larger Lehman puzzle. Who lost Lehman? Why, and how? Three months later, those questions still nag...

...no one, least of all government officials, has fully explained why Lehman, one of the grand old names of Wall Street, was allowed to fail while so many others were rescued...

he recently disclosed documents detailing the Fed’s loan to Lehman’s subsidiary cast some light on a failed effort to prevent Lehman’s implosion from cascading through the financial system.

The loan, according to these documents, was a “carefully thought-out decision” to stabilize the market by propping up Lehman’s broker-dealer business, called LBI New York, so it could stay afloat long enough to “facilitate an orderly wind-down” of tens of thousands of trades with the other Wall Street firms. The unit was kept out of the Lehman bankruptcy.

That might seem like a reasonable explanation. But Henry M. Paulson Jr., the Treasury secretary, and Ben S. Bernanke, the chairman of the Fed, have said that they did not have legal authority to lend any money to Lehman. The firm, officials said, did not have enough collateral.

“We didn’t have the powers,” Mr. Paulson insisted. He also said Lehman’s bad assets created “a huge hole” on its balance sheet, adding that he had actually tried to find a way for the government to provide money to help support a deal between Lehman and Barclays, but legally could not. His explanation has evolved over time, however. He told reporters the day after Lehman went bankrupt: “I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.”...

Whatever the case, the Fed’s loan to the Lehman subsidiary makes all these explanations increasingly hard to square. Mr. Paulson said Lehman had lacked the collateral for the government to backstop a deal between Lehman and Barclays. But then the Fed turned around and lent a Lehman subsidiary billions, based on that same collateral.

Bottom line, Hank Paulson did not like Lehman and so he took it down. The payoff to the Bushies, so that they would go along, was Neuberger Berman, no money down.

(HTnick)

The Bushies Show Blagojevich How It's Done

There are no tapes of how this deal went down, but my bet is that it went down something like this.

Hank Paulson and The President, back in September:

Paulson: Lehman's a bunch of asssholes, lets take'm down.

The President: Ah, I dunno. My cousin George Herbert Walker works there and my brother, Jeb, is an advisor.

Paulson: Come on , outside of your cousin and your brother, they're assholes. I'll even let your cousin and your brother grab the crown jewel, Neuberger, from Lehman once it is in bankruptcy, and they won't have to put up any cash.

The President: Yeah?

Paulson: Yeah, consider Neuberger a new family jewel.

The President: What if somebody else tries to bid for Neuberger with cash?

Paulson: Fuck em. If anybody tries, we'll send them in an envelope an annonymous post card from Guantanamo saying "Wish you were here" and enclose a picture of former Lehman CEO Dick Fuld. They'll get the message.

Laughter all around.

High fives all around.

Bloomberg reports Wednesday:

Lehman Brothers Holdings Inc.’s planned sale of its investment-management division is valued at about $1.2 billion in stock, according to two people familiar with the transaction.

Lehman, in bankruptcy, was forced to deal away Neuberger Berman for no cash last week...

Analysts valued the money-management division at as much as $7 billion earlier this year, before market declines eroded its assets...When the business was valued at around $7 billion in August by Sanford & Bernstein analysts, it initially drew interest from some of the world’s biggest private-equity firms, including Blackstone Group LP and KKR & Co. Neither one ultimately bid...

The Walker [Group also] beat a bid of $2.15 billion for the whole division by private-equity firm Bain Capital LLC.... Carlyle Group [with $40 billion in cash on the sidelines]...weighed a bid... though it didn’t make an offer.

“Neuberger management [Lead by George Herbert Walker] received the deal of a lifetime by obtaining 51 percent of the common stock for no cash, because that will take control of Neuberger away from the Lehman bankruptcy,” said Martin Bienenstock, who heads the restructuring group at the law firm Dewey & LeBoeuf and represents Lehman creditors, today in a telephone interview.

In addition to cousin George Herbert Walker as CEO, GW's brother Jeb will remain an advisor. Plus they both most assuredly received tons of stock, no money down.

Blago, eat your heart out.

What Exactly Did Robert Rubin Do To Earn $115 Million?

WSJ is asking:

Was Mr. Rubin to be primarily a member of the board overseeing management, or a part of the management reporting to the board? Things became even murkier when Messrs. Weill and Reed described Mr. Rubin's job: "Bob will participate in strategic managerial and operational matters of the Company, but will have no line responsibilities."

As a great man of finance, Mr. Rubin would be paid CEO money -- a total of $115 million since 1999, not including stock options -- but without having to run a business or be accountable for the results. For years, journalists tried to figure out exactly what Mr. Rubin's job was at Citigroup, and perhaps even his fellow Citi directors weren't entirely sure.

Then WSJ reaches the only conclusion possible. He was the fixer. As former Treasury Secretary and former head of Goldman Sachs, he's the man with the insider hook-up:

Mr. Rubin was reportedly critical to securing the latest federal bailout of Citi -- $20 billion in preferred shares plus taxpayers taking on most of the risk in a $306 billion portfolio of dodgy assets. This is on top of the $25 billion in Citi preferred shares that taxpayers bought in October. Giving Mr. Rubin the benefit of the doubt that he is the fixer who delivered the federal cash, this could make his paycheck appear more reasonable to many shareholders.

Former Treasury Secretary and former Goldman CEO Rubin cut a deal with current Treasury Secretary and former Goldman Sachs CEO Henry Paulson for billions in taxpayer money and guarantees. Cute, eh?

Oh, to be the head of Goldman Sachs and a Treasury Secretary, this is a club you want to get into.

Citi wasn't stupid paying Rubin what they paid him. That's how insiders operate. Many, many years ago I worked for a money manager of sorts, who had this high powered white shoe law firm on his payroll. Month after month, he sent this firm a pretty big check. I never saw any of them and they certainly weren't doing any work for the firm. At the time, I didn't understand it. Why was my man sending this firm this huge check, which it appeared he had been doing for years? Then one day a knock came on the door and my man appeared to be in, shall we say, a little trouble. My man called the law firm he had been sending checks to for years, and they came over and sat down with the people who knocked on the door, all like true gentlemen, the white shoe lawyers all wore suspenders and horn rimmed glasses, and they all discussed this "misunderstanding" .

Something that usually doesn't go away very easily, completely went away. The door knockers went to knock on other doors of those who didn't have a downtown law firm on retainer.

That's what Rubin is there for at Citi, so that if a problem arises, he can sit down like a gentlemen, solve sticky problems and rape taxpayers when necessary.

Goldman Faces Loss of $2 Billion for Quarter

Goldman Sachs Group is likely to report a net loss of as much as $2 billion for its quarter ended Nov. 28, according to industry insiders, says WSJ.

Can you imagine what the losses would have been like if Hank Paulson wasn't shoveling money to them every way possible?

Goldman Sachs Starts the Avalanche That Will Crowd Out Non-Connected Borrowers

Goldman Sachs yesterday became the first US bank to issue debt backed by the Federal Deposit Insurance Corp under yet another new Paulson/Geithner government plan to shovel money to the politically connected. Goldman raised $5 billion.

Under this program, money raised is guaranteed by the FDIC, which makes it as good as a Treasury raise. Among others, JPMorgan and Morgan Stanley, GE Capital are all expected to follow Goldman.

When all is said and done. $300 billion is expected to be raised by this program. That's $300 billion that won't be available to non-bank, non-privileged elite.

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.

Alert: Paulson, Bernanke Testimony

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are scheduled to testify today before the House Financial Services Committee.

Grassely's Probe of Ex-Goldman Execs at Treasury Could Lead Directly to Paulson

Obviously, the political winds have shifted, Senator Chuck Grassely is calling for an investigation of ex-Goldman execs at Treasury. FT reports:

A senior Republican senator is seeking an investigation into potential conflicts of interest among former Goldman Sachs executives serving at the US Treasury and whether any officials exceeded their authority by implementing a controversial tax change without the approval of Congress.

Chuck Grassley, the most senior Republican on the Senate finance committee, asked Eric Thorson, inspector-general of the Treasury, to investigate the "independence" of several Treasury officials who formerly worked at Goldman Sachs and serve as advisers to Treasury secretary Hank Paulson, the former chief executive of the Wall Street bank.

Mr Grassley said in a letter to Mr Thorson that there was reason to be concerned that “relationships” between the officials and board members at two merging banks, Wells Fargo and Wachovia, gave the “appearance of preferential treatment”.

Mr Grassley singled out Robert Steel, a former Goldman official who worked under Mr Paulson at the Treasury before he became chief executive of Wachovia...

Mr Grassley, who has a reputation for aggressively uncovering and pursuing tax evasion, has a previous working relationship with Mr Thorson, who served as chief investigator for the Senate finance committee and whom Mr Grassley once praised for having “integrity and courage”.

Since ex-Goldman CEO and current Treasury Secretary Paulson signed and approved the tax change, this investigation is headed right at Paulson.

For background on this developing story, read my October 6 post, Pigs At The Trough: Behind The Citigroup, Wachovia, Wells Fargo Circus.

Inhofe: Forget Credit Squeeze, Freeze Paulson

U.S. Senator. Jim Inhofe (R-OK) lets go on Treasury Secretary Henry Paulson. He told the Tulsa World:

It is just outrageous that the American people don't know that Congress doesn't know how much money he (Treasury Secretary Henry Paulson) has given away to anyone.

It could be to his friends. It could be to anybody else. We don't know. There is no way of knowing.

He was able to get this authority from Congress predicated on what he was going to do, and then he didn't do it.

I have learned a long time ago. When they come up and say this has to be done and has to be done immediately, there is no other way of doing it, you have to sit back and take a deep breath and nine times out of 10 they are not telling the truth.

And this is one of those nine times.

Inhofe wants to freeze what is left of the initial $350 billion — reportedly $60 billion, but Inhofe concedes he does not know for sure, according to the Tulsa World.

Then he wants a provision requiring an affirmative vote by Congress before Paulson can get his hands on the second $350 billion of bailout money.

Inhofe may be the only member of the Senate who actually understands economics. He told the Tulsa World, with regard to extending unemployment benefits, that, "You don't stimulate the economy by giving away more money."

With regard to an automobile industry bailout, Inhofe said "If we keep on nursing a broken system, then we can't expect to have a different result come later on."

Issa Grills Kaskari

The link to this youtube video was posted in a comment below. I have never come across Karl Denninger before, but, as you will see, he gets it BIG TIME.

Hank Paulson Must Think Water Freezes at 60 Degrees

The latest news from our Treasury Secretary is that the consumer credit markets are frozen. The only problem is that Hank Paulson's idea of frozen is different than yours and mine. This guy is probably the only person lookng, in August, for the ice skating rink in New York's Central Park.

Robert Higgs explains:

Notwithstanding the many developments on the bailout front during the past six weeks, the New York Times, like other media outlets, continues to quote Wall Street insiders who report, as Alex Roever of JPMorgan Chase did recently: "You have a market that is frozen." What planet do these guys live on? It certainly is not the same one to which the Federal Reserve's data apply. I’ve been singing this song for many weeks, but I’m going to keep singing it until somebody in the news media wakes up and realizes that these "frozen credit market" tales are pure hooey. Look at the data, for crissake. By now we should all be ready to move beyond hysteria, get a grip on reality, and begin thinking about how to repeal everything the government has done during the past six weeks...

Memo to NYT: check the data on consumer loans published by the Federal Reserve System. The latest report, dated November 7, says: "Consumer credit increased at an annual rate of 1-1/4 percent in the third quarter. Revolving credit increased at an annual rate of 2-1/2 percent, and nonrevolving credit increased at an annual rate of 1/2 percent. In September, consumer credit increased at an annual rate of 3-1/4 percent." Would you describe this report as indicating a "frozen" credit market? Total consumer credit outstanding in September, $2,588 billion, exceeded the average amount outstanding in any year from 2003 to 2007, the period of the credit bubble.

My gut tells me that in Henry's mind unfreezing this non-frozen market means shipping more billions to the Robert Rubin wing of Goldman Sachs, i.e. Citigroup.

THE HEAT IS ON Issa to Paulson: I Want the Time and Date

Three cheers for two truth seekers in Congress.

Congressman Darrell Issa (R-CA), along with Congressman Dennis Kucinich (D-O), are raising important questions about the Paulson Bailout plan, and just how and why it was changed from a mortgage bailout plan.

“I want to know whether Congress was lied to or whether there was a team all along that had an alternate idea of how the money was spent,” Issa said, before demanding to know the “time and date” Hank Paulson, Treasury secretary, had decided to abandon his initial plan to buy up mortgages, reports FT.

"I think it's fairly obvious that Congress would have never passed the [rescue plan] had it known how Treasury would marshal the resources it was given," Kucinich said during his opening remarks before a hearing on the bailout.

Note to Kucinich and Issa, the Paulson bailout plan was a scam from the start. See my post The BIG LIE: The Supposed Paulson Bailout Plan, written BEFORE Congress even approved the plan. But, I really suspect the scam started with the takedown of the competitors of Goldman Sachs. An investigation (away from the clueless SEC) must be done to determine the exact causes that led to the collapse of these two firms. Goldman, Paulson's old firm, has publicly admitted that it has picked up 100 new major clients since the financial crisis began.

If Banks Are Supposedly Not Lending...

...why are they competing so aggressively for new deposits?

From today's WSJ:

Banks across the U.S. are engaged in a heated competition for deposits as the battered industry tries to shore up its funding sources.

From giant Citigroup Inc. to tiny S&T Bancorp Inc. -- which is based in Indiana, Pa. and has just 55 branches -- banks are responding to uncertain times by sharply increasing the interest rates paid on deposits.

Bottom line, if you are a good credit, you can get money. Banks aren't chasing deposits so that cash is piling up in their vaults. The frozen credit markets are just more Paulson propaganda.