Thursday, January 22, 2009

The bankers get busy!

First they pay themselves. Merrill Lynch's compensation committee paid out bonuses one month earlier than normal.

We know why. The people at Merrill Lynch knew the firm was imploding, so they took the money and ran.

Now before Madoff was caught in his ponzi scheme, he had checks written for $173 million to be paid out early. Merrill Lynch, before their ponzi scheme imploded, paid out $4 billion in bonuses that people didn't deserve.

The difference is Merrill Lynch got $10 billion of taxpayer money from the TARP, and then paid out your money to it's employees. Madoff is now under house arrest, while John Thain, who orchestrated this scheme at Merrill Lynch, was out skiing in Aspen.

But Merrill's theft was "legal" while Madoff's wasn't. See TARP money couldn't be used for bonuses, if that money was spent on an "auction." So the cash instead, was handed over directly in a "Capital Purchase" plan, and no auctions were conducted for the troubled securities that the TARP was initially going to purchase. So take the money and run!

Now today, Ken Lewis, made headlines by his buying of 200,000 shares of BAC at 6. That was his shot at redemption, just like Geithner had to pay his taxes to get the Treasury job, (the difference is Geithner gets to keep his job, while Ken loses his) despite his lame Turbo-Tax excuse, but he's the new drug dealer for the banks, so it's time to get him on board. But his Turbo-Tax excuse was so wanting that Intuit actually came out with a press release!

"TurboTax, and all software and in-person tax preparation services, base their calculations on the information users provide when completing their returns. TurboTax also has built-in error-checking tools that routinely catch common taxpayer mistakes."

In any event, Jamie Dimon of JPM had the same idea as Ken, but he did it in size, buying $11 million worth of shares at $22.93.

We all know this is grandstanding by these executives, to help calm down the nerves of the public, and to stem some of the panic selling in their shares, because no matter what, these executives will get their compensation, as evidenced by Merrill Lynch early pay-out of their bonuses. But yesterday, it appeared that the bears had over-reached a bit on the financials, so they were entitled to rally.

And maybe, Geithner has given the heads up to the banks so that the next capital infusion will come by Treasury purchasing over-priced toxic assets, which would be another way to get capital into the banking system through the back door!

Maybe they will earmark the money that they were supposed to be using to be buying mortgage securities, and taking down long rates in their "quantitative easing." Has anybody checked what has happened to interest rates on the long end?

But the country is feeling a sigh of relief with Bush gone, and for the time being, Camelot lives in Washington, so the mood of the country is definitely changing, and so is the spin on the reporting of the news. Throw in Apple Computer handily beat estimates, and it looks like we may have the making of the emergence of Pollyanna, especially since the news is so bleak!

Look at the article in the Telegraph today, entitled Gordon Brown brings Britain to the edge of Bankruptcy.

They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.

Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here.

The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.

The political impact will be seismic; anger will rage. The haunted looks on the faces of those in supporting roles, such as the Chancellor, suggest they have worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer in a standard battle for re-election; instead he is fighting to avoid going down in history disgraced completely

The play on this headline? I would also take a look at the pound, which looks like it made a key reversal against the dollar today, and at $1.37, is worth a look.

None of these Central Bankers do anything in a vacuum!

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