A pair of important new articles.

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By David Fiderer

Did Societe Generale ever view its $1.2 billion investment in Adirondack 2005-2 as a buy-and-hold proposition? Or was the bank's original intention to offload the risk on to AIG? The answer is central to our understanding of the portfolio of collateralized debt obligations, or CDOs, that wiped out the insurance behemoth. The circumstances of SG's, and other banks' holdings, suggest that CDO market was a Potemkin's Village, a facade constructed to give the illusion of economic substance to a series of sham transactions.

That's why you have to wonder if these transactions were put together as package deals - to give the illusion that the banks' CDO activity was a reflection of legitimate market demand, and not an elaborate scheme of three-card monte.

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Testy Conflict With Goldman Helped Push A.I.G. to Edge

By GRETCHEN MORGENSON and LOUISE STORY

Billions of dollars were at stake when 21 executives of Goldman Sachs and the American International Group convened a conference call on Jan. 28, 2008, to try to resolve a rancorous dispute that had been escalating for months.

A.I.G. had long insured complex mortgage securities owned by Goldman and other firms against possible defaults. With the housing crisis deepening, A.I.G., once the world’s biggest insurer, had already paid Goldman $2 billion to cover losses the bank said it might suffer.

A.I.G. executives wanted some of its money back, insisting that Goldman — like a homeowner overestimating the damages in a storm to get a bigger insurance payment — had inflated the potential losses. Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities.

After more than an hour of debate, the two sides on the call signed off with nothing settled, according to internal A.I.G. documents and an audio recording reviewed by The New York Times.

Behind-the-scenes disputes over huge sums are common in banking, but the standoff between A.I.G. and Goldman would become one of the most momentous in Wall Street history. Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

Yesterday we ripped Pelosi for fumbling to find the politically correct answer on race.  So it's only fair today that we demonstrate the extreme intelligence of the exalted Sarah.  And energy is supposed to be her strongest issue.  This is why Sarah Palin is kept away from candid Q&A sessions.

Two bonus Palin clips added.

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See also:

Check out Sarah Palin, Bailout Socialist  >>

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Bonus Video:  2 people in over their heads -- Sarah Palin and Jeff 'The Dude' Lebowski.

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Video:  Sarah Palin in 1995 interviewed after Todd's snowmobile victory.

Video:  Recent update from Peter Schiff -- Feb. 2, 2010

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Video:  Peter Schiff needs our help -- January 17, 2010

Check out Schiff for Senate  >>

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Video:  Nassim Taleb and Hugh Hendry (Moscow last week) offer their investment outlook for 2010.

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Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”

“Deficits are like putting dynamite in the hands of children,” Taleb said in an interview with Bloomberg Television. “They can get out of control very quickly.”

“The problem we have in the United States, the level of debt is still very high and being converted to government debt,” Taleb said in an interview with Bloomberg Television. “We are worse-off today than we were last year. In the United States and in Europe, you have fewer people employed and a larger amount of debt.”

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Video:  TARP Neil Barofsky discusses his latest report -- Feb. 2, 2010

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Check out the SIGTARP page and view all reports  >>

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Summary:

But Barofsky warned that in his view, little had changed to head off another financial crisis:

• “To the extent that huge, interconnected, ‘too big to fail’ institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.”

•” To the extent that institutions were previously incentivized to take reckless risks through a ‘heads, I win; tails, the Government will bail me out’ mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.”

• “To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been
little fundamental change in the excessive compensation culture on Wall Street.”

• “To the extent that the crisis was fueled by a ‘bubble’ in the housing market, the federal government’s concerted efforts to support home prices…risk re-inflating that bubble in light of the government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.” (Fannie Mae, Freddie Mac, the Federal Housing Administration and other government agencies now insure more than 90% of all mortgages from the risk of nonpayment.)

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(Screenshot...don't click unless you're coming from our daily email...video is above)

Video:  An 89 year-old grandmother pasting bank protest stickers on ATMs.

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From the Huffington Post  >>

John Clinton Tuttle of Seattle, Wash. is waging guerrilla warfare against high interest rates and other depredations of the credit card industry. He's literally sticking it to 'em -- he's launched a campaign to encourage angry consumers to put bank-bashing stickers on ATMs.

"The credit card business is unethical," said Tuttle, 60, who told HuffPost he put 40 stickers on ATMs in Seattle last Thursday. The stickers say "Stand up to the rich bankers!" and direct ATM customers to Tuttle's website, creditcardrevolt.com, where he makes the case for five basic reforms for the credit card industry, including a 15 percent interest rate cap, better disclosure of rates and fees, and clearer contracts.

The PBS series "The Secret History of the Credit Card" crystallized his view that somebody needed to take a stand against the industry. But Tuttle said he didn't take action until after the president signed credit card reform into law last year.

"I thought when Obama won, that would be the end of it. I thought there would be real credit card reform," he said. "When the law passed in May, I saw that it was another joke. They pretended like it was reform but they were just tweaking the fine print. The real sign is the vote in the Senate -- 90 to 5. That's total baloney."

"As he was falling behind in the polls it would have been very easy for him to demagogue that issue, playing the populist card," he said. "And if he had come out against what he were trying to do we wouldn't have got it I believe. We wouldn't have had the TARP legislation passed and we would have been left defenseless."

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Comment from Jim M:

A correct assessment. McCain sold us out. Of course he was surrounded by Banksters as "advisers" . They convinced him that the sky was falling. This despite the fact that internal reports within the Federal Reserve itself showed that the Bailout/Tarp was not warranted: http://www.minneapolisfed.org/research/WP/WP666.pdf.

Interesting that the lions share of the TARP funds was later paid out as bonuses to retain the "talent"..... So much for the cash infusion being needed to recapitalize the Banks. Of course, the Banks lobbied successfully for a mark to fantasy accounting scheme that was effective in further cooking the books. Then the Federal Reserve bought these "under valued" assets at way above the true market price. The Federal Reserve had no intention of keeping this crap paper on their books, so they apparently have dumped it onto Fanny Mae and Freddie Mac. And that explains why on December 24th Geithner announced that the Government would be raising the loss limits on Fanny and Freddie to unlimited. Thus the Government has successfully transferred massive liabilities to the taxpayers. Nice job McCain. Thanks a lot.

Peter Hancock “is one of the people that basically developed the credit-default swaps market at JPMorgan in the mid-1990s,” said Ed Grebeck, CEO of Stamford, Connecticut-based debt-consulting firm Tempus Advisors and an instructor at New York University on derivatives. “Given that he was one of the pioneers, it’s probably the first good appointment that any one of these bailed-out firms has made.” 

“My biggest concern is you’re selling too fast and you’re being taken by Wall Street,” Benmosche told staff at an Aug. 11 meeting in Houston, according to a record obtained by Bloomberg. “I don’t want to feed Goldman Sachs’s bonus pool anymore. I don’t want to feed Morgan Stanley’s bonus pool anymore. I want to feed ours. In order to do that, you’ve got to stop giving this stuff away. You’ve got to ask for decent prices or we’ll wait.”

Whether on Wall Street or in Washington, the biggest frauds often are the perfectly legal ones hidden in broad daylight. And in terms of dollars, it would be hard to top the accounting scam that Obama’s budget wonks are trying to pull off now.  The ploy here is simple. They are keeping Fannie Mae and Freddie Mac off the government’s balance sheet and out of the federal budget, along with their $1.6 trillion of corporate debt and $4.7 trillion of mortgage obligations.

Never mind that the White House budget director, Peter Orszag, in September 2008 said Fannie and Freddie should be included. That was when he was director of the Congressional Budget Office and the two government-backed mortgage financiers had just been seized by the Treasury Department.

The White House is already forecasting a $1.3 trillion budget deficit for 2011, which is about $3 of spending for every $2 of government receipts. By all outward appearances, it seems Obama and his budget wizards decided that including the liabilities at Fannie and Freddie would be too much reality for the world to handle. So they left the companies out, in a trick worthy of Enron’s playbook, except not quite so hidden.

Democrats reacted possessively on Thursday to Republican Minority Leader John Boehner's effort to persuade JPMorgan Chase CEO Jamie Dimon that the financial industry should be giving Republicans money rather than Democrats.  Boehner's overture to Dimon, in which he made the case that Republicans better represent the industry's interests, was reported by the Wall Street Journal this morning in a story about how GOP fund-raisers are trying to capitalize on bankers' regrets over backing President Obama.  During the bailout debate, Waxman said, Dimon personally called Waxman and "impressed upon me how much he needed." It was delivered with bipartisan support, said Waxman, but the GOP now wants "to divorce themselves from Bush's bailouts." The retreat is "quite opportunistic," he said. "You would think that none of them voted for it."

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Different article from above:

Republicans are stepping up their campaign to win donations from Wall Street, trying to capitalize on an increasing sense of regret among executives at big financial institutions for backing Democrats in 2008.  In discussions with Wall Street executives, Republicans are striving to make the case that they are banks' best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street.

Video:  Senator Michael Bennet (D-CO) with President Obama -- Feb. 3, 2010

Because tripling the deficit is one big joke.

This one hits too high on the arrogance meter to be measured, as Obama and Senator Michael Bennet discuss (laugh about) the $12 trillion national debt and the burden it will place on future generations, specifically, Bennet's 10 year-old daughter who has already told Bennett that her generation will pay NONE of this debt.

Reminds of us Sam:

More clips of young kids like Sam:

The Next Generation Speaks: It's NOT My Debt!  (Video)  >>

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(Screenshot...don't click unless you're coming from our daily email...video is above)

Video:  Nancy Pelosi discussing FDR's funeral procession -- Feb. 7, 2010

Nothing earth shattering here.  Thirty second clip.  Thought it was interesting in the sense of needing to label all groups inevitably leads to later mis-labeling when 'accepted standards' change.  She could have simply said people of all races came to honor the President.

Still waiting for the day when none of this matters, groups no longer get offended by words, and we can concentrate on issues that matter such as the 'inter-generational pillage and plunder show' currently playing on Capitol Hill.

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(Screenshot...don't click unless you're coming from our daily email...video is above)

NBC Video:  Jimmy, Brian Williams, and The Roots turn the latest headlines about President Obama's proposed budget for 2011 into a slow jam -- Feb. 5, 2010

The overzealous Bush blaming for the deficit was a bit too scripted (though I agree he's partially at fault), still it's important that national debt issues are now being discussed on late night television.  Plus it was funny.  Fallon's audience is young and even a slightly misinformed exposure to inter-generational theft (in terms of irresponsible deficit spending) is undeniably better than no exposure at all..  The awakening of young people to these issues is the missing ingredient for action.

Imagine 35 million voters under the age of 35 making debt and deficit issues their top priority.  Wake me up when we get there.  Until then, I'll just keep churning out the ugly and painful for your consumption.  We toss it, you spread it.  That didn't sound right, but you understand.

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Her words then under Bush, versus her silence now under Deficit Obankster.

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Source:  House.gov

August 1, 2003

Washington, D.C. -- House Democratic Leader Nancy Pelosi released the following statement today on the Bureau of Labor Statistics' announcement that 470,000 people abandoned their job searches in July and that 3.2 million private sector jobs have been lost since President Bush took office:

“The fact is that President Bush’s misguided economic policies have failed to create jobs. Since President Bush took office, the country has lost 3.2 million jobs, the worst record since President Hoover. And today we learned that in July nearly half a million people gave up looking for a job.

“Job losses are taking a real toll on the financial security of American families. While Democrats are fighting for opportunity, jobs, and economic security for working families, Republicans continue to focus on helping those who need help the least.

“According to today’s survey, while the national unemployment rate dropped slightly, it still stands at a near record high. In addition, the unemployment rate for African Americans was still over 11 percent in July, and the unemployment rate for Hispanics was 8.2 percent in July.

“It is time for President Bush and the Republicans to get to work for all Americans, not just the elite few.”

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Don't Miss:

CORRUPTION WATCH: Taxpayers pay $101,000 for Pelosi's in-flight food, booze  >>



Video:  Meet The Press from this morning -- Henry Paulson, Alan Greenspan -- Complete broadcast -- February 7, 2010

I will be adding shorter, individual clips and links about the broadacast as I find them.  So keep checking this story.

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James H

This is how screwed up our government is. First guest is John Brennan, National Security Tool, talking about terrorism (he has no idea why Al Qaeda wants to kill us or what to do about it).  Next guest is Financial Terrorist, Hank Paulson.  If you were trying to do something about terrorism, why not get started right there on the set?  David Gregory, meanwhile, doesn't have the first clue and another terrorist slips away, right under our noses.

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(Just a screenshot...video is above)