The Economy, stupid

[Texsox]

Yup.

 

Thank you.

[mr_genius]

IMO, the smart management move in those sort of situations is usually a hybrid. Stop hiring for open positions, offer some early retirements, allow jobs that are vacated to remain open, lay off some of your weakest performers, cut entry salary on the positions you absolutely need, bring down bonus and other executive plus-one compensation, find non-necessary operational costs to be cut... all those things first, then whatever is left, if you still need to cut, you make those tougher choices about job cuts versus pay cuts.

 

They probably need to cut out levels of management too.

[mr_genius]

So there are no winners, all that would be happening is spreading out the losses.

 

The US has embraced the 'race to the bottom'.

Edited March 23, 2009 by mr_genius

[Texsox]

The US has embraced the 'race to the bottom'.

 

Bingo, maybe that is the nagging feeling I could not put my finger on.

[mr_genius]

market is up a lot today

 

 

[NorthSideSox72]

market is up a lot today

The markets seem to like this toxic/bad asset buying program announcement.

 

ETA: Also, the upward surprise number on existing home sales probably helps.

 

[mr_genius]

The markets seem to like this toxic/bad asset buying program announcement.

 

ETA: Also, the upward surprise number on existing home sales probably helps.

 

yea, and the market was too low. a lot of money was on the sidelines. seemed oversold to me.

[NorthSideSox72]

yea, and the market was too low. a lot of money was on the sidelines. seemed oversold to me.

I was just discussing with some people this weekend, how oversold the market is, and how the ratio to book value for a lot of typically blue chip stocks is so banged up. Seems like a good directional move right now (at least before today's jump) to pick about 10 of these companies, C and the like, and buy in. Even of 2 or 3 fail, the rest will go up more than enough to make up for that.

 

[Y2HH]

I was just discussing with some people this weekend, how oversold the market is, and how the ratio to book value for a lot of typically blue chip stocks is so banged up. Seems like a good directional move right now (at least before today's jump) to pick about 10 of these companies, C and the like, and buy in. Even of 2 or 3 fail, the rest will go up more than enough to make up for that.

 

Yea, I picked up shares of Bank of America, Citibank, SiriusXM and Etrade weeks ago, I'm up over 50% on every one of them, some upwards of 150%. Of course, that's as of now, they will probably go up and down quite a bit in the short term before stabilizing, but I'm a long term buyer/holder of stocks, so I really don't care what they do for the next 5-10-15 years...

 

And like you said, if a few of them go under, and just one of them emerges from this, in 10 years I won't care about the ones that failed, the single success will make up for any losses, easily.

Edited March 24, 2009 by Y2HH

[Texsox]

Just wondering again,

 

How would the economy look if all those "bad" mortgages had not been made? I assume the home building industry would be down, as would the various spin offs in furniture, etc etc

 

and just to toss a log on the fire

 

If the economy is in trouble because of bad decisions made by lenders, were did government regulations help/hurt the situation.

[lostfan]

http://www.nytimes.com/2009/03/24/business...l?_r=1&dlbk

 

If Goldman Returns Aid, Will Others?

 

By ANDREW ROSS SORKIN

 

Any good news these days — not that there is much — seems to come with an asterisk. The market is popping, but, as some bears ask, is it just a setup for another bigger fall?

 

So here’s something else to ponder: Goldman Sachs is planning to give back its TARP money soon. Very soon, actually — ideally within the next month, according to people involved in the process. That’s a much quicker timetable than the end-of-year goal previously set out by Lloyd C. Blankfein, Goldman Sachs’s chief executive. As taxpayers, we should be thrilled that Goldman is going to quickly pay back the $10 billion it was given last October, right?

 

Well, not so fast.

 

Goldman’s sudden urgency to return the money stems, in part, from the uproar over A.I.G.’s bonuses last week, and the criticism of Goldman over revelations that the firm had been the largest recipient of government money as a counterparty of bets placed with A.I.G. It’s also paying a hefty 5 percent interest payment to taxpayers for that money.

 

“It’s just impossible to run our business in this environment,” said one senior Goldman executive who insisted on not being quoted by name for fear of crossing the Treasury Department.

 

Of course, another factor in Goldman’s decision to return the money is that it can: the firm is known to be sitting on a balance sheet with about $100 billion of available cash, so a mere $10 billion should be no problem.

 

Top Goldman managers held a series of meetings last week and tentatively decided to give the money back even more quickly than originally planned, people involved in the talks said. Goldman officials also privately held talks with Barney Frank, the Democratic chairman of the House Financial Services committee, about the subject, these people said.

 

They are expected to begin discussions with the Treasury Department as early as next week when Mr. Blankfein returns to New York from vacation. A spokesman for Goldman declined to comment.

 

If this plays out as Goldman hopes, the good news for taxpayers, of course, is that we will be made whole.

 

But here’s the asterisk, and it’s a big one. If Goldman succeeds in returning our money, it could put pressure on other banks to give their money back, too, lest they appear weak.

 

This, you’ll recall, was the logic used by the former Treasury secretary, Henry M. Paulson, last October when he strong-armed some of the chief executives of the nine largest banks to participate in the Treasury plan to inject $165 billion of capital into the banking system, even though some felt they didn’t need it.

 

The problem now is that many of them may still need the money. And yet they may try to follow Goldman’s lead. (Goldman envy can be costly — we saw what happened to Merrill Lynch when it tried to play catch-up by making riskier bets).

 

Already, some banks are bragging that they are starting to make money on an operating basis from trading profits and bigger lending margins.

 

To some, these pronouncements can make banks look like an overzealous kid on a bike, claiming he really doesn’t need his training wheels, as he strains to keep from wobbling.

 

It could create even more chaos in the financial system if some banks gave back the TARP money, only to howl soon after that they still needed it after all. “We see another $1.5 to $2 trillion of as yet unrecognized losses from U.S. assets still to hit global financial sector balance sheets and challenge its institutions,” said Daniel Alpert, a managing director of Westwood Capital.

 

“The near daily announcements over the past two weeks, by money-center banks and finance companies, that they are making money this year on an operating income basis, have become borderline irresponsible, relative to continued deterioration in value of the assets on their balance sheets and the continuing impact of a worsening recession,” he added.

 

Goldman, for lots of obvious reasons, wants to separate itself from this pack, and returning taxpayer money would certainly help. The firm’s famously well-paid executives — Mr. Blankfein made $60 million in 2007 (some of which was in stock, which has since fallen in value) — would be taxed at 90 percent of their bonuses if a bill passed by the House last week were to become law.

 

Goldman would also like to put an end to the whisper campaigns about ties between it and Mr. Paulson (and Timothy F. Geithner, too, for that matter).

 

Goldman, in an unusual move, considering its well-known reputation for secrecy, held a conference call with journalists last week to try to dispel what it said was a myth about its exposure to A.I.G. Goldman, in an artfully worded explanation, contended it was fully hedged, even as it accepted nearly $13 billion of the bailout money A.I.G. got from the government.

 

And then there is the simple matter that Wall Street and Washington make strange bedfellows.

 

Paying back the TARP money would probably give Goldman Sachs a bigger lead over its rivals. With a Yankees-like payroll, it will continue to be able to steal the best talent from weaker firms that still have TARP money and are subject to restrictions on pay and the like.

 

“The guys who have the least chains around them will be able to run the fastest,’ said Meredith Whitney, the banking analyst.

 

And who wouldn’t want to unshackle themselves?

 

Richard M. Kovacevich, chairman of Wells Fargo, expressed outrage at the TARP money he accepted and the strings that might be attached to it after the bonus bill passed last week.

 

“Is this America, when you can do what your government asks you to do and then retroactively you also have additional conditions put on?” he asked after a speech at Stanford University, according to Reuters. He went on to say that he wished he had never accepted the TARP money.

 

“We would have been able to raise private capital at that time, and with that private capital, given what is going on today, it is very unlikely that we would have had to reduce the dividend.” Whether that is true or not remains an open question, but you can bet he would like to give the money back too.

 

Ms. Whitney, however, said she wasn’t sure whether Wells Fargo was in a strong enough position to do so. The same goes for Citigroup and Bank of America. Perhaps the only firm other than Goldman that analysts feel confident can give the money back is JPMorgan Chase, which has expressed its own desire to return the cash.

 

It remains possible that Treasury could try to persuade Goldman to hold off on paying the money back until the economy stabilized. That could stir up a new flavor of public outrage.

[southsider2k5]

Hey they stole that line of thought from me a month ago!

[lostfan]

Hey they stole that line of thought from me a month ago!

That's why I posted it

[mr_genius]

http://www.nytimes.com/2009/03/24/business...l?_r=1&dlbk

 

nice. give all the money back. they shouldn't have got any in the first place.

[Texsox]

Finally.........an explanation we should all be able to understand.

 

 

Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

 

Word gets around about Heidi's drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi's bar and soon she has the largest sale volume for any bar in Detroit.

 

By providing her customers' freedom from immediate payment demands, Heidi gets no resistence when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.

 

A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.

 

He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS.

 

These securities are then traded on security markets worldwide. Niave investors don't really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nation's leading brokerage houses.

 

One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar.

 

Heidi demands payment from her alcoholic patrons, but being unemployed they they cannot pay back their drinking debts. Therefore, Heidi cannot fulfill her loan obligations and claims bankruptcy.

 

DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.

 

The suppliers of Heidi's bar, having granted her generous payment extentions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.

 

The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.

[lostfan]

lol Tex, where'd you get that?

[Texsox]

lol Tex, where'd you get that?

 

Scouting buddy of mine from up near Austin

[clyons]

Scouting buddy of mine from up near Austin

 

A toast to your buddy! (I'll buy at Heidi's).

[mr_genius]

"This entity -- Heidi's bar -- is not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate this problem, the more pressure there is on this establishment, the less we will see in terms of affordable boozing.'

[lostfan]

"This entity -- Heidi's bar -- is not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate this problem, the more pressure there is on this establishment, the less we will see in terms of affordable boozing.'

Nice

[southsider2k5]

http://www.washingtontimes.com/news/2009/m...donate-to-dodd/

 

EXCLUSIVE: AIG chiefs pressed to donate to Dodd

$160,000 streamed in as senator gained power on banking committee

Jennifer Haberkorn (Contact) and Jerry Seper (Contact)

Monday, March 30, 2009

 

As Democrats prepared to take control of Congress after the 2006 elections, a top boss at the insurance giant American International Group Inc. told colleagues that Sen. Christopher J. Dodd was seeking re-election donations and he implored company executives and their spouses to give.

 

Getty Images Sen. Christopher J. Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee, has lost some political standing heading into re-election because of his ties to American International Group Inc.

 

The message in the Nov. 17, 2006, e-mail from Joseph Cassano, AIG Financial Products chief executive, was unmistakable: Mr. Dodd was "next in line" to be chairman of the Senate Banking, Housing and Urban Affairs Committee, which oversees the insurance industry, and he would "have the opportunity to set the committee's agenda on issues critical to the financial services industry.

 

"Given his seniority in the Senate, he will also play a key role in the Democratic Majority's leadership," Mr. Cassano wrote in the message, obtained by The Washington Times.

 

Mr. Dodd's campaign quickly hit pay dirt, collecting more than $160,000 from employees and their spouses at the AIG Financial Products division (AIG-FP) in Wilton, Conn., in the days before he took over as the committee chairman in January 2007. Months later, the senator transferred the donations to jump-start his 2008 presidential bid, which later failed.

 

Now, two years later, Mr. Dodd has emerged as a central figure in the government's decision to let executives at the now-failing AIG collect more than $218 million in bonuses, according to the Connecticut attorney general - even as the company was receiving billions of dollars in assistance from the Troubled Asset Relief Program (TARP). He acknowledged that he slipped a provision into legislation in February that authorized the bonuses, but said the Treasury Department asked him to do it.

 

The decision has generated national outrage and put the Obama administration into the position of trying to collect the bonuses after they were distributed. It also endangers Mr. Dodd's re-election chances in 2010 as his popularity tumbles in his home state.

 

Despite all the claims that Washington has changed, the tale of Mr. Dodd's lucrative political ties to AIG is a fresh reminder that special interests continue to use donations and fundraising to sow good will with powerful lawmakers like Mr. Dodd.

 

"The message seems clear: The boss says I want you to support the senator," said Sheila Krumholz, executive director of the nonpartisan Center for Responsive Politics, which studies political fundraising and ethics. "And I think the employees got the message."

 

Representatives for Mr. Dodd did not answer specific questions about AIG's fundraising, but spokesman Bryan DeAngelis said in a statement: "Senator Dodd´s fundraising has always been above board, transparent and in accordance with campaign finance rules.

 

"As he said [earlier this month], contributions received from any individual who accepted these bonuses from AIG last week will be donated to charity. And last fall, he made the decision to no longer accept contributions from [political action committees] of companies receiving TARP money."

 

Officials at AIG-FP in Wilton referred inquiries to the firm's New York headquarters, where spokesman Mark Herr said he had been on the job only three weeks and had no information about the e-mail or the campaign contributions to Mr. Dodd.

 

Mr. Cassano's Washington attorney, F. Joseph Warin, did not return messages left on his voice mail or e-mail.

 

Mr. Dodd's plight also signals that the actions taken by lawmakers after they receive big political donations are being scrutinized by an increasingly distrustful public. A recent Quinnipiac University poll found Mr. Dodd lagging 43 percent to 42 percent behind former U.S. Rep. Rob Simmons, a Republican who plans to challenge Mr. Dodd, in a hypothetical race.

 

"The concern and the question is whether AIG was purchasing kid-glove treatment from their home state senator - from the senator chairing the committee charged with overseeing their industry," Ms. Krumholz said.

 

Political opponents already are using Mr. Dodd's financial ties to AIG and his role in the bonuses to weaken his political standing heading into re-election.

 

AIG's employees have been big financial backers of Mr. Dodd. Over his career, Mr. Dodd has collected $238,418 from AIG employees and their spouses, according to the Center for Responsive Politics. Mr. Cassano has donated $7,118 to Mr. Dodd's campaigns.

 

Mr. Cassano's November 2006 e-mail instructed his colleagues on how to make donations to the senator from Connecticut.

 

"As he considers running for president in 2008, Senator Dodd has asked us for our support with his reelection campaign and we have offered to be supportive," Mr. Cassano wrote.

 

The employees were told, "If you agree," to write checks for $2,100 from themselves and their spouses and to send them to Mr. Dodd's campaign within four days. They also were to ask the senior members of their management teams to do the same and send copies of their checks to the company.

 

The Dodd campaign collected $162,100 from AIG-FP employees and their spouses within six weeks of the e-mail, according to data from the Center for Responsive Politics and the Federal Election Commission.

 

Each of the seven AIG-FP executives to whom the Cassano e-mail was sent made two $2,100 contributions to the Dodd campaign - one for the primary and another for the general election campaign. The records also show that five of their wives also contributed $4,200 each to the Dodd campaign. The executive vice presidents are Alan Frost, David Ackert, Douglas L. Poling, Jake DeSantis, Jon Liebergall, Robert Leary and William Kolbert.

 

Mr. Cassano, who resigned in February after AIG-FP posted losses of $11 billion, followed his own advice. He and his wife gave Mr. Dodd's campaign $4,200 each.

 

Political fundraising in the workplace is legal, but a request from a boss may be viewed as a requirement, campaign watchdogs said.

 

Implicit in this [e-mail] is the presumption that, at best, noncompliance will not be looked up favorably ... at worst, it may have negative consequences on the employees," Ms. Krumholz said.

 

Mr. Dodd's campaign paid for events at AIG, as well. His Senate campaign recorded paying $400 at AIG Food Services on Dec. 7, 2006, about two weeks after the e-mail was sent. In March 2007, his presidential campaign paid AIG-FP $250 for a room rental fee, according to election commission filings. The payments could have been recorded weeks after the events took place.

 

Watchdog groups say Mr. Dodd's close association with AIG - over his career, the company's employees have been one of his largest donor bases - raises questions about his and his committee's ability to provide objective oversight. It was the $218 million in bonuses paid by AIG that became the focus of public outrage, igniting a torrent of criticism and congressional hearings in the wake of federal loan packages.

 

Earlier this month, Mr. Dodd defended the amendment to an economic stimulus bill that exempted bonuses to which companies receiving federal bailout funds previously agreed. He initially denied having any role in crafting the language, but he later said Treasury Department officials pressured him to make the change to protect the government from lawsuits.

 

Although the AIG-FP headquarters is located in Mr. Dodd's home state and a good number of the bonuses authorized for top company executives went to that office, Mr. Dodd has said he had no idea the amendment would impact the company.

 

"Let me be clear: I was completely unaware of these AIG bonuses until I learned of them last week," he told CNN last week. "I agreed reluctantly. I was changing the amendment because others were insistent."

[southsider2k5]

http://www.opensecrets.org/orgs/affiliates...p;id=D000000123

 

AIG financial services employees donated about $325,000 to Democrats, and $60,000 to Republicians. Here is the full breakdown. If the bonuses are under scrutiny, why aren't the donations? All of Congress should return every dime they have taken from any bank, brokerage, or any other instituation getting TARP money.

[kapkomet]

I asked this when this first started... do you think the campaign contributions will stop? No. And 80%+ goes to Democrats.

 

[BigSqwert]

If the bonuses are under scrutiny, why aren't the donations?

Great question

[kapkomet]

Great question

You don't know why? Come on now...