AIG driving GM into bankruptcy

sorry for the bad pun.

continuing to prove that government intervention will only make problems worse, here's an article that explains how the 100% payment of AIG counterparties will lead directly to GM going bankrupt.

GM: Bankrupt, UNLESS....

basically, since a lot of the bond holders of GM (who have control over whether to ok a haircut or force GM into bankruptcy) also own a lot of CDS on GM (issued by AIG), it's in the bond holders' best interest for GM to go chapter 11. now, i know a get a lot of complaints (well, just one from Ivan but that's 12.5% of my regular readers) when i blame the leftist, interventionists like Geithner and Obama for making matters worse than they already were, but here seems to be a clear case example showing how the rescue of AIG resulted in the failure of GM. of course, GM would have failed earlier without government intervention. but now, the taxpayers are out of trillions AND GM is still going bankrupt AND AIG counterparties (like foreign banks) are made whole. certainly, this will result in fewer (if any) benefits to GM pensioners and a massive loss of jobs - which means a further burden on taxpaying americans. for those that disagree, please explain how the "best and brightest" that obama has supposedly brought in are actually making things better.

geithner is either a crook or clinically stupid or both - please vote in comments

tim geithner is either a crook or stupid. my vote is for crook. i hope he comes after me and sues me for libel because i would love for him to prove in a court of law that he is not a crook.

in anticipation of the court case, let's go through the evidence we have to date. i have no doubt, over time, there will be plenty more evidence of illegality and gross malfeasance.

1. he is an admitted tax cheat. if you or i cheated on our taxes, we would probably be incarcerated. let's be clear about his problems which he described as "unintentional". the man cheated on his taxes, not one year, not two, but for four consecutive years. so, either he is clinically stupid and has no right to be in any position of power or he is a criminal. the man went from cheating the IRS to being head of the treasury department which oversees the IRS! al capone did the same crimes and went to alcatraz (before it was a tourist attraction). i understand in the rush to put someone in there, congress was bullied. but when you put stupid and/or criminals in charge, bad things happen (see #2-5 below).

2. he was preceded as ny fed chief by william mcdonough who helped destroy merrill lynch. why does no one talk about this? how convenient that the fed crammed merrill lynch down the throat of bank of america but did nothing for lehman brothers. mr. mcdonough's role at merrill was to, "assist senior management in the company's business development efforts with governments". I will bet anything that when andrew cuomo gets the list of merrill execs with big bonuses mr. mcodonugh will be on the list. and guess who was the head of the ny fed which had purview over new york banks like lehman and merrill? that's right - tim geithner!

3. the AIG bonuses. while i don't care about $165 million compared to the hundreds of billions that this crook has doled out, it has clearly captivated the public. and geitner of course was the one who engineered the bailout of AIG while he was head of the NY Fed.

4. the continued funding of AIG to pay off foreign banks. i'm shocked there's not more outrage on the counterparties to AIG. i like how the press reports that AIG lost $60 billion last quarter. they didn't "lose" the money. they're not scratching their heads thinking, "now where did i put that sack of money." it was a wholesale money transfer from taxpayers to other banks. included in those other banks are foreign banks like HSBC or Soc Gen. Why, why, why is the treasury secretary of the united states of america taking my tax payer money and giving it to foreign banks without any concession from them?

5. the lack of a cohesive plan. whether or not you believe his other actions are correct or not, clearly whatever plan he may have is ambiguous. tough decisions need to be made. but geithner is not making those tough decisions. in fact, it's unclear, what he's doing.

i know a lot of people say don't change a horse midstream but they are simply wrong. the argument seems to be that give him a chance... well, if he has screwed up this badly so soon, imagine what he good do if we gave him more months? intrade already says there's a 15% he's gone by june 30. joseph barr was only secretary of the treasury for 31 days. geithner has already outlived him. hopefully, not for much longer.

so is geitner just plain stupid or actually criminally complicit in giving money to his buddies (like he did at merrill lynch)? please vote in the comments.

goldman - where's the outrage?

i had planned to write a post on AIG counterparties but then i found this article which is short but articulate

It's not the bonuses. It's that AIG's counterparties are getting paid back in full.

in 20 years, when they write the history of the "bailout", the AIG part will go down as the largest theft in human history.

further thefts the government has helped perpetuate include the no bid contracts in Iraq. this is not partisan. all sides are stealing from taxpayers and giving to their friends. with one hand, Obama is trying to cancel the no bid contracts in Iraq, with the other he is giving money to banks and failing industries.

the AIG thievery is appalling. so was Hank Paulson's institution of the "no short rule". while mere mortals like you and me could not sell short companies like Goldman Sachs, existing owners of the shares could sell with impunity. this effectively let owners of Goldman shares (and other financial institutions) cash out before the free markets were able to really put a price on the shares. and who were the big owners (and therefore sellers) of those shares? why, it was Goldman employees! (Hank Paulson, before enabling his friends to steal taxpayer money was CEO of Goldman Sachs).

there is so much nastiness going on in the financial world, but one company keeps showing up. it's goldman sachs. perhaps they never get busted for their thievery, but hopefully we will get justice, in this world or the next. probably will have to wait for the next since goldman seems all powerful.

for example, goldman can even bully around the new york times

NY times in a long line of people who refuse to tell Blankfein and Co where they can shove it

not only is goldman screwing over the US taxpayers directly, but they also have no problems hammering their own investors. while we were forbidden from short selling their stock, they were busy donkey punching their own customers

Goldman Targeted by Investor Complaints of Naked Short-Selling

instead of investigating the $165 million in bonuses paid at AIG, i would rather the senate investigate the $10 billion that went to goldman at the same moment they paid out $11.4 billion in bonuses. that is absolutely egregious. it's 100x the bonus pool at AIG. where's the outrage?

Goldman Crimes

New York City nuclear CDS

There's a lot of confusion about what CDS is.

CDS = credit default swap which is a fancy way of saying you pay a premium and in the event of a default, you get a big check. and that is fancy way of saying you're basically buying a life insurance policy so, in the event of death you get paid.

people bought lots of CDS on Lehman Brothers. when Lehman failed, the owners of the CDS got huge checks, written by the writers of that CDS (in many cases AIG).

you can buy CDS on anything these days. one popular thing to buy is CDS on sovereign nations.

typically, CDS agreements have an annual payment schedule and are good for 5 years. In the case of the United States, the CDS trades at 100 bps, roughly meaning you would have to pay 1.00% of the insured amount each year for 5 years. if at any point during those 5 years, the US defaults on its loan obligations (ie, goes bankrupt), you would get paid the insured amount. so if you wanted $100 insurance on the US government, you would pay $1 each year for 5 years. If the US defaults during that time, you would be paid $100. approximately, this suggests that there is a 5% chance that the US defaults in the next 5 years.

in the case of Icelandic CDS, the rate is 1000 bps so you have to pay $10 each year for 5 years and if Iceland defaults, you would get $100. so the market suggests that there is a 50% chance of Iceland defaulting.

if you can buy insurance for anything and for any duration, why not buy insurance against a catastrophic event? now this is super grim, but, what do you think the CDS would trade at for protection against an atomic event happening in manhattan? ie, in the next 50 years, what is the chance that some sort of atomic detonation occurs in new york?

makes me want to move to a city that is already a wasteland, like LA.