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3月30日 Score another one for the 'twister!It appears I was right again. (Yes, I know I said I was getting tired of saying that, but I don't think I really do).
Remember last week when I said that the real story at AIG was that Washington was basically using them to funnel money to unknown counterparties? Well according to the amusingly named author "Tyler Durden" over at ZeroHedge, that's exactly what is happening. Now they go into a fairly long-winded and arcane explanation that made even my eyes go glassy, so I'll save my readers the asprin overdose and simply give you the cliff notes version:
"In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories)."
They go on to point out how AIG now has government blessing to violate securities laws to unwind their exposure further:
"So - in simple terms, ISDA, which is the only effective supervisor of the Over The Counter CDS market, is giving its blessing for trades to occur (cross) below where there is a realistic market bid, or higher than the offer. In traditional equity markets this is a highly illegal practice. ISDA is allowing retrospective arbitrary trades to have occurred at whatever price any two parties agree on, so long as the very vague necessary and sufficient condition of "market quotations may be difficult to obtain" is met. As anyone who follows CDS trading knows, this can be extrapolated to virtually any specific single-name, index or structured product easily. In essence ISDA gave its blessing for below the radar fund transfers of questionable legality. The curious timing of this decision and the alleged abuse of CDS transaction marks by and among AIG and the big banks, is striking to say the least."
To dumb it down even further, this allows AIG to unwind it's CDS exposure at any price, regardless of what the market thinks the price should be. All that is required is for the counter-party to agree to that price.
For example, let's say AIG and Citi are counterparties to a CDS on a mortgage-backed security - let's call it the "Can't pay the bills" fund. Now the market values the CDS at $2 million. Naturally, nobody wants to unload their holdings at 2 cents on the dollar, so AIG and Citi agree on a price of...$100 million, in complete defiance of market forces. Citi unwinds it's CDS at a huge profit, and AIG suddenly needs $98 million in bailout funds. Citi walks away with huge profits on the books, AIG cleans up it's books and the government gets to print lots of money. Everybody is happy - Except you and me and about 6 billion other tube steaks.
And who are the recipients of our largess? Why none other than Citigroup, Bank of America and the perennial favorite, JP Morgan. And those are just the ones we know about. We still have no idea who the "foriegn" counterparties might be. The best way to find out? See which banks are posting huge profits. Odds are, it came from AIG bailout funds. 3月29日 Where's Bandar?
Well, it's been an exciting week in the house of Saud!
I know how much my readers love reading about the political mechinations of Saudi princes, so this is sure to be a page-turner. Apparently, Prince Bandar bin Sultan, son of the heir to the throne, has disappeared! Yes, that Prince Bandar.
Interesting timing as well, since Prince Bandar's father, Crown Prince Sultan is currently dying of cancer. He'll probably be dead within the year. Then to add further to the excitement, King Abdullah appointed some relatively unknown half-brother (more on him in a minute) to the post of "Second Deputy Prime Minister" - A post that has been vacant for quite some time. This is big, folks. Back in 2005, when King Fahd died and Prince Bandar was suddenly recalled, I knew there was trouble. I said then that there would be a battle for the throne, and it looks like I was right again. Consider the line of succession: The King is old, the crown prince is dying and the third in line is missing. And look at the men involved. Abdullah, as I commented in 2005, is hated by the people of Saudi Arabia. He's a brutal dictator, ranked the world's 5th worst. But he's also a "special friend" of the United States: (Real photograph - I seriously couldn't make this shit up!) Sultan, on the other hand, is not. In 2002, Sultan was one of the 3 princes personally named in a lawsuit for helping finance the 9-11 terrorist attacks. (The other two were Princes Turki bin Faisal and Mohammed bin Faisal). Further, Prince Sultan denied the United States use of Saudi bases to stage military strikes on Afghanistan after said attacks, stating that his government "will not accept in [Saudi Arabia] even a single soldier who will attack Muslims or Arabs." Which brings us to Prince Bandar. Look at the photo again: If Abdullah's cozy relationship with America pissed off the Saudi people, "Bandar Bush" here must have them positively seeing red. I mean, he's wearing denim for crying out loud! It's easy to see why certain people might want to prevent him from ascending to the throne. And finally, the "relatively unknown half-brother" of the King. You're not going to believe this guy. His name is Prince Nayef bin Abdul Aziz, and he just got a big promotion. He was 5th in the line of succession. With his appointment as Second Deputy Prime Minister, he is now third. So when Sultan dies (probably some time within the next year), and if Bandar doesn't turn up, this guy will be the next King. This is cause for concern. First of all, he's not really "unknown". Considering the failing health of the King and the Crown prince, Nayef is probably the most powerful man in Saudi Arabia. His last job was Minister of the Interior, where he oversaw all security within the Kingdom. In addition, he chairs the Supreme Council on Information, which oversees the nation's print, television, phone and internet communications. He chairs the Ministerial Oversight Committee on the WTO, which oversees all dealings with the WTO. He chairs the Supreme Committee on the Hajj, which gives him tremendous influence with religeous leaders devout muslims all over the country. He chairs the Ministerial Committee on Morality (Whatever that is, but it doesn't sound good.) He brokered the talks with Iran in 2001, even though he technically has nothing to do with the foriegn ministry. Am I painting a picture here? King Abdullah may wear the crown, but make no mistake - Prince Nayef runs the show. But what about the man himself? Well, for starters, he is known to have personally donated at least $33 million to the widows and orphans of suicide bombers in Palestine. Further, in 1997 when our old friend Osama was trying to smuggle missiles into Saudi Arabia to take out members of the royal family, the Saudi intelligence agency (at the time Headed by Prince Turki bin Faisal) buried a report that Osama had held a number of meetings with Nayef in the months prior. Yeah, you read that right. The Saudi Ministers of intelligence and interior conspired with a known terrorist to assasinate their own King and Prime Minister. He was also named in a (different) lawsuit in 2002 for initiating payoffs to Al Quaeda so they wouldn't attack targets within Saudi Arabia. He's also really cozy with the Ulema - a group of religeous scholars who advise the King on a variety of matters (including the naming of successors). So whether through faith, or cynicism, it appears Nayef is deliberately courting the militant, extremist and conservative voices within the kingdom, while at the same time pushing his way to the throne. So I have to ask...Could he have succeeded this time? Are they going to find Bandar's body out in the desert somewhere, with Nayaf's fingerprints on his throat? 3月24日 Yertle the TurtleOn the far-away island of Sala-ma-Sond,
Yertle the Turtle was king of the pond. A nice little pond. It was clean. It was neat. The water was warm. There was plenty to eat. The turtles had everything turtles might need. And they were all happy. Quite happy indeed. They were... untill Yertle, the king of them all,
Decided the kingdom he ruled was too small. "I'm ruler", said Yertle, "of all that I see. But I don't see enough. That's the trouble with me. With this stone for a throne, I look down on my pond But I cannot look down on the places beyond. This throne that I sit on is too, too low down. It ought to be higher!" he said with a frown. "If I could sit high, how much greater I'd be! What a king! I'd be ruler of all that I see!" So Yertle, the Turtle King, lifted his hand
And Yertle, the Turtle King, gave a command. He ordered nine turtles to swim to his stone And, using these turtles, he built a new throne. He made each turtle stand on another one's back And he piled them all up in a nine-turtle stack. And then Yertle climbed up. He sat down on the pile. What a wonderful view! He could see 'most a mile! "All mine!" Yertle cried. "Oh, the things I now rule!
I'm the king of a cow! And I'm the king of a mule! I'm the king of a house! And, what's more, beyond that I'm the king of a blueberry bush and a cat! I'm Yertle the Turtle! Oh, marvelous me! For I am the ruler of all that I see!" And all through the morning, he sat up there high
Saying over and over, "A grat king am I!" Until 'long about noon. Then he heard a faint sigh. "What's that?" snapped the king And he looked down the stack. And he saw, at the bottom, a turtle named Mack. Just a part of his throne. And this plain little turtle Looked up and he said, "Beg your pardon, King Yertle. I've pains in my back and my shoulders and knees. How long must we stand here, Your Majesty, please?" "SILENCE!" the King of the Turtles barked back.
"I'm king, and you're only a turtle named Mack." "You stay in your place while I sit here and rule.
I'm the king of a cow! And I'm the king of a mule! I'm the king of a house! And a bush! And a cat! But that isn't all. I'll do better than that! My throne shall be higher!" his royal voice thundered, "So pile up more turtles! I want 'bout two hundred!" "Turtles! More turtles!" he bellowed and brayed.
And the turtles 'way down in the pond were afraid. They trembled. They shook. But they came. They obeyed. From all over the pond, they came swimming by dozens. Whole families of turtles, with uncles and cousins. And all of them stepped on the head of poor Mack. One after another, they climbed up the stack. Then Yertle the Turtle was perched up so high,
He could see fourty miles from his throne in the sky! "Hooray!" shouted Yertle. "I'm the king of the trees! I'm king of the birds! And I'm king of the bees! I'm king of the butterflies! King of the air! Ah, me! What a throne! What a wonderful chair! I'm Yertle the Turtle! Oh, marvelous me! For I am the ruler of all that I see!" Then again, from below, in the great heavy stack,
Came a groan from that plain little turtle named Mack. "Your Majesty, please... I don't like to complain, But down here below, we are feeling great pain. I know, up on top you are seeing great sights, But down here at the bottom we, too, should have rights. We turtles can't stand it. Our shells will all crack! Besides, we need food. We are starving!" groaned Mack. "You hush up your mouth!" howled the mighty King Yertle.
"You've no right to talk to the world's highest turtle. I rule from the clouds! Over land! Over sea! There's nothing, no, NOTHING, that's higher than me!" But, while he was shouting, he saw with suprise
That the moon of the evening was starting to rise Up over his head in the darkening skies. "What's THAT?" snorted Yertle. "Say, what IS that thing That dares to be higher than Yertle the King? I shall not allow it! I'll go higher still! I'll build my throne higher! I can and I will! I'll call some more turtles. I'll stack 'em to heaven! I need 'bout five thousand, six hundred and seven!" But, as Yertle, the Turtle King, lifted his hand
And started to order and give the command, That plain little turtle below in the stack, That plain little turtle whose name was just Mack, Decided he'd taken enough. And he had. And that plain little lad got a bit mad. And that plain little Mack did a plain little thing. He burped!
And his burp shook the throne of the king! And Yertle the Turtle, the king of the trees,
The king of the air and the birds and the bees, The king of a house and a cow and a mule... Well, that was the end of the Turtle King's rule! For Yertle, the King of all Sala-ma-Sond, Fell off his high throne and fell Plunk! in the pond! And today the great Yertle, that Marvelous he, Is King of the Mud. That is all he can see. And the turtles, of course... all the turtles are free As turtles and, maybe, all creatures should be. 3月20日 THE MOST AWESOMEST THING EVER!I swear, if laughing at poetic justice were an olympic sport, I'd be taking home the gold right now. Seriously, you just can't make this stuff up! Check out the letter being circulated to employees of AIG as we speak:
They are living in absolute terror right now, and in the immortal words of jazz legend Chuck Mangione, it feels sooooooooo good!
I mean we all know this is just a smokescreen designed to steer the torch-weilding mob away from Washington, but how can you not enjoy a show like this? The New York Post is outing execs like James "Jackpot Jimmy" Haas, Douglas Poling and Jonathan Liebergall, complete with home addresses. A local action group calling themselves the Conneticut Working Families is even sponsoring bus tours of these guys' homes! (For educational purposes, of course. They certainly wouldn't want anyone doing anything...uncivilized...*wink wink*). They just want all of the honest, hard-working people who have lost their jobs and homes because of these people to see how the people who put them in the poor house are living.
But I feel it necessary to point out the dark side in all of this.
No, I'm not going to sit here telling my readers how non-violence is the way, or to act rationally or anything like that. I just want to pause for a moment and peek under the hood of this situation and try to descern why exactly AIG is getting so much negative press, and why they are getting it right now. So go grab some toothpicks to prop open your eyelids. We're about to delve into the arcane world of international finance.
When people hear that AIG (and others. They certainly aren't the only ones with their hands out) collecting $30 billion here, $85 billion there, they are often under the impression that the money just vanishes down some dark hole somewhere. It's sort of true, but not in the way one might immediately assume. In actuality, the money is being used to settle something called a "credit default swap" - a derivitive instrument that functions sort of like a bet. It's like me saying "I bet GM is going to go bankrupt" and you saying "No way, never happen." Of course when GM does go bankrupt, you are on the ropes to everyone who bet money with you. It sort of works like that, except you would be AIG, I would be lots of different "counterparties" and GM would be millions of homeowner mortgages.
Naturally, when all of those mortgages went belly-up, AIG got screwed. It was waaaaaaaaay overextended (It owes approximately $27 for every dollar worth of assets it owns) and now all of the counterparties are coming around with their hands out, looking to collect on the bets they won. So just who are these counterparties?
Well that's the big mystery in all of this. AIG has an approximately $2.7 TRILLION dollar counterparty exposure, and because the derivitives market is unregulated (Thank you very much, Larry Summers) nobody knows who ultimately holds the underlying paper. It could literally be anyone!
And that my friends, is why the federal government is throwing AIG to the wolves. It is not to distract the public away from Washington (though it is doing just that as a matter of fortune). The real goal is to ferret out the identity of those CDS counterparties. Washington currently owns 80% of AIG, and they are still no closer to the answers, so they are taking a more draconian measure. They are offering up the executives in the hopes of whipping the public into a frenzy. Then when they torch AIG headquarters (as they almost assuredly will), the secret CDS counterparties will come forward and demand Washington protect their interest in the company.
This is a failing of common conspiracy theories - they assume the government has perfect knowledge and are the sole actors. This is an arrogant and narrow-minded position to take. In this case, I think the government is truly in the dark about to whom they are shoveling mountains of dollars, and it has them very...very worried. Moreover, someone out there may be playing Washington like a fiddle. So much for American primacy. 3月18日 G.I.V.E. Until it Hurts!I could swear we've seen this movie before. Who here remembers the D.R.E.A.M. Act of 2007? Yeah, the one where illegal immigrants could earn their citizenship by going to die in Iraq. Remember how funny we all thought it was to name it something that could be abbreviated to spell out DREAM?
Well from the comedians who brought you that fiasco, I now present you with the G.I.V.E. Act of 2009.
So tell me, how exactly does that mandatory volunteer service feel? And I bet you all thought I was kidding or overreacting when I said one of the main themes of Obama's administration would be "We must all sacrifice! (Except for me of course, because I'm the President)" Well, laugh it up fools. I'll be sitting back sucking back my schadenfreude salad and shaking my head at all of your doubts. I just hope they have one of these in your fools' sizes:
When, oh when will they listen to me? 3月17日 RABBLE RABBLE RABBLE!Rant if it makes you feel better, but calling for AIG executives to commit suicide won't solve our problems. Of course, it is very entertaining listening to Chuck Grassley (R-Iowa) condeming these guys for accepting the bailout money he himself voted to give them... Yes it's true that AIG executives have had to hire on extra security at their Conneticut offices to defend themselves from the death threats that crashed the company's phone lines for 2 days running. Yes it's also true that New York will be handing down subpoenas for information on these bonuses, and they are deserving of every single one of those calls for justice. But let's keep our eyes on the prize, people. The fact that pigs gorge themselves at the trough of public funds should come as no surprise. They are afterall, pigs. They can't help themselves. But they didn't fill those troughs with your dollars in the first place. So while you are raging...while you are marching on Conneticut with your torches and pitchforks, determined to dispense the kind of justice upon the pig men that only an angry mob can provide, remember to spare some of that rage for the farmer who keeps feeding them.
3月12日 BlackmailCheck out the balls on Chrysler Canada's President, Thomas LaSorda:
"At a parliamentary committee hearing last night, Chrysler president Thomas LaSorda said the company would commit to maintaining roughly a quarter of its North American production in Canada if its 'needs' are met."
For those who are wondering, Chrysler's 'needs' include up to 3 billion dollars in federal bailouts, and wage concessions from the CAW totalling roughly $374 million per year. And if those 'needs' are not met, they are going to pack up and go to Mexico.
I say let them go. Let's see how they like doing business in Mexico, where the 'government' is only as strong where the drug cartels are weak. They think negotiating with the CAW is tough? Let's see how they do when the people on the other side of the table think nothing of rolling half a dozen severed heads into a police chief's daughter's quinceanera to make a point.
I'm sorry to sound so callous to Chrysler's employees, but those 9,000 jobs aren't worth $3 billion in federal bailouts. I'm sorry, they aren't. Maybe the CAW should be lobbying Bombardier and the federal government to create a national high-speed rail network. Then all of those Chrysler employees could retrain and get jobs laying rails and building maglev trains. Tell the car companies to go fuck themselves. They have controlled the federal government's agenda for far too long. 3月6日 Jeronimooooooooooooooo!So I was reading the financial news today, and it's a pretty grim picture. But have no fear, because the Sunshine Kid is on the job!
Seriously though, it's getting really bad out there. In fact, I read one article on smartmoney.com and the author went so far as to say that the economy is currently worse than the great depression! Granted, he's only using the S&P500 as his metric, but it's pretty bleak. Here's his chart:
The blue line tracks the great depression of 1929-32. The red line tracks the current depression. Like I said, pretty bleak. Now I know what you're thinking: "I knew this would happen when Obama took over, his crazy liberal policies will be the death of us all!" But not so fast! I've redrawn the same graph, with a big fat black line denoting the day of Obama's inauguration. Have a look: Now I'll be the first to admit Obama's policies are making things worse, but this ship hit the iceberg long before he climbed onto the bridge. I'm all in favor of roasting the new guy, but let's try and keep it in perspective. 3月2日 4th time's a charm!Belly up to the bottomless trough, you fucking pigs.
I kid you not, AIG is back asking the government for more money. Again. For the fourth freaking time. $30 billion this time. I think this brings the total to $305 billion. A third of a trillion dollars, and they will likely be asking for more in the near future.
As if this weren't bad enough, AIG has the freaking BALLS to SUE THE GOVERNMENT! Yeah, it's not enough that they are inhaling dollars faster than the federal government can shovel them out (AIG still managed to post a $60B loss last quarter), but they are actually suing the very people who are bailing them out! It would be comedic if it wasn't so tragic.
Oh, and the best part? According to the first article:
"To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets."
Read that again. To reduce their debt even further, they are using their own customers' life insurance as collateral. Guess what happens to those policies when AIG is forced into bankruptcy?
*poof*
Eat your fill, pig-men. Your customers need you fattened up for the summer roasts!
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