Saturday, September 3, 2011

Bailout Fatigue? Bob Rubin Naked (Again!) Manufacturers of Downward Arrows Post Record Profits


They think you don't really want to know the full extent of the damage done to your future.

I think they are wrong.

(P.S. One of my most fervent wishes is that everyone remember that "boy genius" Robert Rubin (Clinton's Secretary of the Treasury twice!), surely one of the original planners involved in the infamous jobs crusade for all those unemployed in his wake, has reaped over a billion dollars from Citicorp after he left the Treasury. (Right. He never left.))

Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank's main operations even though he was one of its highest-paid officials. 
In other words, Rubin is speaking up because of the extraordinary criticism his role is attracting given the bailout of Citibank, and the fact, as the article points out, that Rubin made $115 million at Citibank - not including stock options!!! - since 1999. That's a lot of money for someone to earn who claims, as you will see, that he was...only following orders.
 Oh, and in 2008 as he denied all responsibility, he warned that "it was going to get much worse."

Thanks, Bob! Got another dollar for a beggar?

Bailout Fatigue

By Doug Hornig

I’ve used the term outrage fatigue on numerous occasions in this forum as a way of trying to explain why there has been such a muted outcry from the general population as the tally of financial atrocities committed against American citizens has exploded.

August 22 was just another average day with another average headline that could easily have been ripped from some radical economic watchdog website (liberal or conservative, either one): Wall Street Aristocracy Got $1.2 Trillion from Fed.

But the line wasn’t the work of someone out there on the anti-capitalist or anti-government fringe. It was attached to an article from the very mainstream Bloomberg News.

Bloomberg has been engaged in a long, frustrating FOIA litigation battle with the Federal Reserve over that entity’s reluctance publicly to reveal what it has been doing with our money. Slowly, the stone wall has been coming down. And looking at what’s behind it, it’s pretty obvious why the Fed would have preferred to keep its deeds locked away from all prying eyes.

Thus the above headline. And here’s an ugly truth that goes along with it: It’s a near certainty that the vast majority of those who saw it – probably not too many in number, since the story got scant coverage on the network news – said to themselves, Yeah, we already knew that. Ho hum.

Call it bailout fatigue.

Because, guess what? This is not a recycled story from last year. This is news that we didn’t know before the 22nd.

This money is not a part of the $16.1 trillion in emergency loans the Fed handed to US and foreign financial institutions between Dec. 1, 2007 and July 21, 2010, according to figures produced by the first-ever, one-time-only GAO audit of the central bank ordered by Dodd-Frank. Nor is it part of the $2 trillion quantitative easing program. Nor is TARP’s $700 billion in there, either.

Read that again. This $1.2 trillion – and perhaps we also have trillion fatigue, because that’s a lot of money – is separate from all that other stuff. It’s another hitherto secret funding program that we never would have heard of if Bloomberg hadn’t torn it from the Fed’s mouth like a rotten tooth.

The list of who got the bucks is a basic guide to the American banking industry. $107 billion to Morgan Stanley. $99 billion to Citigroup. $91 billion to Bank of America. Over $75 billion to State Street and just under that to Goldman Sachs and JPMorgan Chase. And the list goes on. And on. And on. Even the disgraced Countrywide Financial got in on the act, claiming about $12.5 billion.

In addition, as the Fed was bailing the leaky American boat, it must have asked itself, Why stop here? There are foreigners out there who need our help just as much.

So, almost half of the Fed’s top 30 borrowers were European firms. They included the Royal Bank of Scotland, which was propped up to the tune of $84.5 billion, the most of any non-US lender, and Zurich-based UBS, which got $77.2 billion. The big foreign borrowers also included Dexia, Belgium’s biggest bank by assets, the French Société Générale, Deutsche Bank, Barclays, and Crédit Suisse.

“These are all whopping numbers,” says Robert Litan, a former Justice Department official who investigated the savings and loan crisis in the 1990s. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.” 

So much for the free market, where failed business ventures … well, fail. But not to worry, the Fed did it all for us.


“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the US taxpayer,” says James Clouse, deputy director of the Fed’s division of monetary affairs in Washington.

Furthermore, the Fed’s official line now is that “nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.” In fact, $13 billion in interest income was supposedly realized.

That works out to an average of, yes, one percent.

Now that’s a pretty nice loan rate if you can get it. They could, and they did. Citigroup, for example, was the most frequent US borrower, in hock to the Fed on seven out of every 10 days from August 2007 through April 2010. On average, the bank had a daily balance at the Fed of almost $20 billion.

And the ability to raise truckloads of money for almost no interest raises another disturbing question: Did the banks really need this cash to stay afloat?

University of Pennsylvania finance professor Richard Herring, an authority on financial crises, is suspicious, saying that some banks may have used the program to maximize profits by borrowing “from the cheapest source, because this was supposed to be secret and never revealed.”

But regardless of whether banks needed the Fed’s money for survival or used it because it offered the opportunity to turn a quick, easy buck, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks, Herring notes.

Access to Fed backup support “leads you to subject yourself to greater risks,” Herring says. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.”


All of this might conceivably make citizens revolt against an entity that uses their money to secretly fund the “Wall Street aristocracy.” It might make them vote for a Gary Johnson or a Ron Paul, someone who favors dismantling the Fed.

Or not. When a story as big as this one generates a bare minimum of media coverage, you know it’s probably headed for that huge waste bin in the corner of the parking lot. The one marked Bailout Fatigue.
And is there an investment now that you can make and trust to pay off for a long time?

Yeeeeeeeeeeeeesssssssss.

Manufacturers of Downward Arrows Post Record Profits

Rare Bright Spot on Wall Street


NEW YORK (The Borowitz Report) – In what stock market analysts are pointing to as a rare bright spot in an otherwise gloomy period for Wall Street, manufacturers of downward arrows posted record profits this week.

While makers of cars, computers, farm equipment and practically everything else saw their fortunes plunge this week, producers of downward arrows notched double-digit gains, inspiring investors to snap up their shares like never before.

Companies like National Plunging Arrow Corp and Consolidated Downward Pointy Lines saw their shares rocket as investors rushed to participate in the suddenly red-hot red-arrow sector.

“We are seeing investors move out of Treasuries and gold and into downward-arrow stocks,” said analyst Harland Dorinson, who covers plunging trend-line manufacturers for Morgan Stanley. “At a time when the world is facing extreme uncertainty, the one thing we know for sure is that going forward there will be strong demand for downward pointy things.”

But the euphoria surrounding the plunging arrow sector may be short-lived, as some analysts caution that that investors’ mania for downward arrow stocks may be a bubble, with others warning that downward arrows are increasingly being manufactured in China, where the arrows are mass-produced using far cheaper labor.

For his part, though, Morgan Stanley’s Dorinson sees a silver lining in such gloomy forecasts: “Even if people wind up losing billions of dollars investing in downward arrows, you know what?

There’s only one way to show that.”


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2 comments:

TONY said...

A good showcase track for Bonnie. Saw her live with John Lee Hooker about 12 years ago. Magical. Tx
T

Suzan said...

Funny how Bonnie's almost elegiac pleadings seem to fit just about all occasions now, isn't it?

Love ya!

S