Bank of America Huddling Under TARP
By Andrew Jeffery Jan 15, 2009 7:45 am
Second bailout needed to complete Merrill acquisition.
Last September, as the financial markets skidded out of control, Merrill Lynch CEO John Thain sought to keep his firm from going the way of rival Lehman Brothers by selling out to Bank of America (BAC). At the time, B of A chief Ken Lewis was touted as a shrewd opportunist who seized upon a desperate rival.
Now, it appears, Lewis is the one groping for a helping hand.
According to the Wall Street Journal, the Treasury Department is preparing to offer up billions of dollars to help Bank of America complete the transaction. As in Citigroup's (C) recent bailout, where the federal government assumed the risk for a pool of distressed assets, taxpayers are about to buy Merrill's book of truly toxic debt.
Bank of America approached the Treasury Department in December, claiming it might have trouble closing the sale after learning Merrill's fourth-quarter losses would be larger than expected. Fearing the deal's collapse could inflict irreparable damage on the already wounded financial system, the Treasury is continuing to spend TARP money it doesn't have. With the first $350 billion already allocated, Treasury Secretary Hank Paulson is dipping into funds earmarked for a second round of capital allocation that hasn't yet been authorized.
The fact that Bank of America needs yet more money -- on top of the $25 billion it received just last October -- is evidence that, once again, regulators and bank executives have underestimated the scope of the debt crisis gripping the country's financial system. Deleveraging is underway - and it's gaining momentum. Nevertheless, lawmakers and regulators alike insist on using taxpayer money to try and slow down the accelerating juggernaut of bad debt.
To quote a recent op-ed in the Journal, which likened the government response to the current financial crisis to the circumstances described in Ayn Rand's Atlas Shrugged,
"Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism."
The similarities are so striking, it almost seems like regulators are using Atlas Shrugged as a playbook for their policy response to the crisis. They must not have waded through all 1,000 pages to see how the story ended.
No positions in stocks mentioned.
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2009-01-15 11:39:26
Fahrenheit 451 and the predation of our economy.
As you step out your door from the comforts of your home you are immediately on guard for predators. You stop off at the gas station to fill up and find that gas is 45 cents higher a gallon then what it is across town. You know they are sticking it to you but you can't afford the time or money to drive 30 miles through the city to get the cheap gas. You need a qt of oil and the store has it marked up 3 dollars above what you can get it at the auto parts store but it is not open yet. Next stop would be a coffee stand as you were a little late getting up but you decide to fore go that as the cup of coffee is over 3 dollars for one cup so you buy a banana for 79 cents instead even though you can buy them at the grocery for 47 cents a pound which for 79 cents could get you 4. As you are getting in your car you take a quick look about you to make sure predators are not close by. There have been lots of muggings in this location. Traffic is horrible as there has been another car jacking and you arrive 5 minutes late to work and the boss is standing at the time clock. He growls that he will dock you ½ hours pay for being late and you have to work through your break. At lunch time you look at the vending machines and you're tempted but the last bag of chips only had four chips in it.
Tonight you finally will get the easy chair you have been wanting. The economy has finally forced the store to drop the price down 75%. You know it still 30% more then it should be but your tired of the lawn chair. You have time to stop at the store to get a few items to snack on. You would like an apple but they are $2.79 a lb. You think about last fall driving by an orchard and seeing tons of apples on the ground rotting away thinking what a waste. You buy another banana and wonder how they can ship them from South America and sell them at 47 cents a lb and Apples' which are grown here just a few miles away are $2.79.
As you pull up in front of your house the delivery man is there with your chair. You help him unload it and then he wants a tip? Finally with a bowl of top Raman and the banana sitting on your card board box coffee table you settle in to relax and watch the late news. Suddenly the door is kicked in and in rushes a masked man with a gun. It's the same S.O.B that robbed you last year! What the hell is he doing out of prison already? You have only just lately saved up enough money to replace the TV he stole last year and he is out of prison already! You're still fighting the bank about the credit cards debt the thief put on your cards and he is already out on parole.
With the wild eyes of a druggie the thief grabs the TV and yanks it off the wall mount and rushes out the door. You clean the Top Ramon you spilt off the new easy chair and sit back down. With no TV to watch you pick up the mail. What's this? It's something from the Court House. It's a summons to appear in court for an old Parking ticket you forgot to pay. Four times the original fine and a threat that if you don't pay immediately you might face 1 year in jail. Tears of despair well up and the print blurs. I say to myself. SELF! Beef up! Then I notice another envelope. It looks official. Maybe I won the lottery? Nope! It's a foreclosure notice on my over priced home. The bank said the appraisal was good, The Realtor said I could not lose as home values always go up. The teaser rate would help me and in a few years I could refinance and get a home equity loan to make the new payments. I couldn't loose. God Dam Predators!
You turn on the radio that was hidden beside the easy chair. On the news they talk of spending billions to keep Government workers from being laid off. What the Hell! Didn't President Bush just say that the economy was fine? Why are they so worried about a few government workers getting laid off? Hell! When is the last time one even lost a job? When are they ever laid off? Everyone knows you can't fire a government worker. Then you hear about the 750 billion stimulus plan but it's going to support the predator banks. The same thieve that got us in this mess. You can't take it any more so you shut off the radio and go to bed. Just as your drifting off to sleep the phone rings! It's a Wall Street Broker and he wants to sell you shares of CitiGroup. He says you can't loose to which I reply. Your right I've got nothing left to loose.
You all have a nice night and sleep well. You Fffen Predators!
JPM
Tonight you finally will get the easy chair you have been wanting. The economy has finally forced the store to drop the price down 75%. You know it still 30% more then it should be but your tired of the lawn chair. You have time to stop at the store to get a few items to snack on. You would like an apple but they are $2.79 a lb. You think about last fall driving by an orchard and seeing tons of apples on the ground rotting away thinking what a waste. You buy another banana and wonder how they can ship them from South America and sell them at 47 cents a lb and Apples' which are grown here just a few miles away are $2.79.
As you pull up in front of your house the delivery man is there with your chair. You help him unload it and then he wants a tip? Finally with a bowl of top Raman and the banana sitting on your card board box coffee table you settle in to relax and watch the late news. Suddenly the door is kicked in and in rushes a masked man with a gun. It's the same S.O.B that robbed you last year! What the hell is he doing out of prison already? You have only just lately saved up enough money to replace the TV he stole last year and he is out of prison already! You're still fighting the bank about the credit cards debt the thief put on your cards and he is already out on parole.
With the wild eyes of a druggie the thief grabs the TV and yanks it off the wall mount and rushes out the door. You clean the Top Ramon you spilt off the new easy chair and sit back down. With no TV to watch you pick up the mail. What's this? It's something from the Court House. It's a summons to appear in court for an old Parking ticket you forgot to pay. Four times the original fine and a threat that if you don't pay immediately you might face 1 year in jail. Tears of despair well up and the print blurs. I say to myself. SELF! Beef up! Then I notice another envelope. It looks official. Maybe I won the lottery? Nope! It's a foreclosure notice on my over priced home. The bank said the appraisal was good, The Realtor said I could not lose as home values always go up. The teaser rate would help me and in a few years I could refinance and get a home equity loan to make the new payments. I couldn't loose. God Dam Predators!
You turn on the radio that was hidden beside the easy chair. On the news they talk of spending billions to keep Government workers from being laid off. What the Hell! Didn't President Bush just say that the economy was fine? Why are they so worried about a few government workers getting laid off? Hell! When is the last time one even lost a job? When are they ever laid off? Everyone knows you can't fire a government worker. Then you hear about the 750 billion stimulus plan but it's going to support the predator banks. The same thieve that got us in this mess. You can't take it any more so you shut off the radio and go to bed. Just as your drifting off to sleep the phone rings! It's a Wall Street Broker and he wants to sell you shares of CitiGroup. He says you can't loose to which I reply. Your right I've got nothing left to loose.
You all have a nice night and sleep well. You Fffen Predators!
JPM
2009-01-15 13:09:21
No matter what, all you have are bad choices!
I'm getting so very tired of hearing how we should save the "system."
Why will no one question whether the system should be saved in the first place? Why is the default position always that a few bad apples spoiled it for everyone and if we could just get through this bad patch, all will be better?
Why is the fix more of the same things that got us into the mess in the first place? Where, exactly, are we going?
Why will no one question whether the system should be saved in the first place? Why is the default position always that a few bad apples spoiled it for everyone and if we could just get through this bad patch, all will be better?
Why is the fix more of the same things that got us into the mess in the first place? Where, exactly, are we going?
2009-01-15 13:18:37
Banking Ping pong!
Last night I had a dream that Sandy (Weill), Chuck (Prince) Stan (ONeil), Rick (Fuld) and the boys at AIG and Fannie held a press conference where they said they were giving back everything they earned in the last three years. And then I woke up. I knew it was just a dream. No looking back, no investigations because this will create more social acrimony and we are 'officially" forward looking. When you don't undersand and recognize the failures of the past, you have the bad fortune of living in the twilight of the present. The financial holes grow bigger, the banks get nationalized. Say away from stocks, buy corporate and govenment bonds. It is better to be a realist than a dreamer. Bundle up, it will be a long financial winter.
2009-01-15 15:32:40
Just a quick question.
What do you think Ayn Rand would have thought the effect on the "Productive sectors" would have been to compensate CEO's with hundreds of million dollars for losing hundreds of billions of dollars, fraudulently concealing the true worth of their enterprises assets with off balance sheet accounting and securitization schemes all the while feigning economic health.
Then exporting the knowledge and skill base to low cost offshore countries while, espousing the need for more training of said knowledge and skill base?
To me it would seem a stretch to fit any of these behaviors under the heading of Objectivism.
I am thinking that the Colorado Bunker Option (CBO) she imagined would be looking pretty good, at least to parts of the Productive sectors; irrespective of how messed up the government response is.
Personally, I was always more of a Fountainhead fan.
Then exporting the knowledge and skill base to low cost offshore countries while, espousing the need for more training of said knowledge and skill base?
To me it would seem a stretch to fit any of these behaviors under the heading of Objectivism.
I am thinking that the Colorado Bunker Option (CBO) she imagined would be looking pretty good, at least to parts of the Productive sectors; irrespective of how messed up the government response is.
Personally, I was always more of a Fountainhead fan.
2009-01-15 18:05:14
Bubbles, bubbles everywhere
There is really only one bubble and that is the bubble of corruption. It is so large it fits Wall St., DC, Detroit, and even Califonificatia in it. The only way for it to burst is for the vipers to be cast out!! And that takes a revolution . . . in mind, in spirit, and in actuality.
2009-01-15 21:56:52
Fountainhead
o this I would like to add: Not only are they following the Atlas Shrugged playbook. They are also borrowing from The Fountainhead's Ellsworth Toohey when it comes to convincing the public of their nonsense:
â Reason can be fought with reason. How are you going to fight with the unreasonable? The trouble with you, my dear, and with most people is that you don't have sufficient respect for the senselessâ¦â
It is safe to say that Toohey would be delighted about the unconditional respect that today's politicians have for the senseless.
â Reason can be fought with reason. How are you going to fight with the unreasonable? The trouble with you, my dear, and with most people is that you don't have sufficient respect for the senselessâ¦â
It is safe to say that Toohey would be delighted about the unconditional respect that today's politicians have for the senseless.
2009-01-16 08:40:22
Fahrenheit 451 and the predation of our economy.
You made my day. Thanks
2009-11-24 20:00:24
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