Archive - Sep 20, 2009

Edolphus Towns Is Latest Shark In Ken Lewis Chum-Filled Pool

There is blood in the water... that of Ken Lewis, and the sharks are all over it. The latest to join the dismemberment party of one Bank Of America Chief Executive Officer, is New York Representative, and Chairman of the Committee on Oversight and Government Reform, Edolphus Towns. And while the traditional defense provided by Lewis, BofA, and respective lawyers, has been one which delegates any wrongdoing to the attorney-client privilege gray area, Towns has told the bank it "cannot use attorney-client privilege when dealing with Congress." The last piece of armor that Lewis had has just been torn off. From a strategic point of view, the question now becomes whether Ken Lewis, soon to be faced with the traditional prisoner's dilemma, will out his "dealer" Hank Paulson, in exchange for a slap on the wrist, as the alternative could be a much more gruesome fate easily involving an 8x10 cell.

A Curious Snag In Debt-For-Equity Restructurings As Goldman And JPM Do A Stealthy Roll Up Of The Media Industry

As everyone is focused on such trivial matters as how much money Lloyd Blankfein and Jamie Dimon will make this year, or how many quadrillion in Treasuries the Fed will monetize in the next year or two, Wall Street's two behemoths, Goldman and JP Morgan, have been pursuing a stealthy roll up of the media industry, preparing to exercise full equity control over an unprecedented amount of TV, radio, newspaper and magazine companies. Whether their alleged motto "Propaganda or bust" is true, only time will tell.

Federal Reserve Accounts For 50% Of Q2 Treasury Purchases

The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchasesdwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases.

Weekend Reading

  • California's financial depression: unemployment and underemployment rate at Great Depression levels. 23 percent unemployment for biggest state in the nation. California will not see housing peak until 2030 (Dr Housing Bubble)
  • Jim Grant: Ringing the bell at the top (Financial Armageddon)
  • Peter Schiff: Lehman Brothers revisited (TheStreet)
  • FHA faces money squeeze after insisting it needs no new money (AP)
  • 2 Nobel economists confirm that credit is not credted out of excess reserves (Washington's Blog)

Leo Kolivakis's picture

We are in uncharted territory, so now more than ever, pension fund managers, board of directors and plan sponsors need to review their asset allocation more frequently, making all necessary adjustments as the environment evolves. Complacency and following the herd is highly irresponsible, ensuring mediocre performance over the long-term.