Archive - 2010 - Story

As expected, Goldman did approach AIG about contract tear downs of its CDS contracts, and "Goldman would likely accept a small concession." This makes sense due to the draconian collateral margin demands that Goldman had previously extracted from AIG (12% positive haircut), and also due to spurious collateral demands made by Goldman ($1.3 billion more than BlackRock's estimated fair value). This is all as Zero Hedge reported yesterday. Yet another smoking gun emerges, this time not from Goldman, but from French bank Societe Generale...

You read it here first:

Hearing bank selloff fueled by a competitor 's bank analyst relaying details of his conversation w/ Volker- which had a very hawkish tone. Chatter of a block of citi to trade post close.

We started the year saying that without a catalyst equities would trade between 1014 and 1236 for the S&P future, knowing that we think there are a number of risks that could lead to much more aggressive downside scenarios. Our outlook has not changed. And we still feel that China is one of those catalysts that could create serious problems in the market. - Nic Lenoir

"With respect to these investigations, it is SIGTARP's policy not to comment publicly on non-public, ongoing criminal or civil investigations, and thus we cannot comment further at this time, other than to note that these assertions do not at this time constitute a factual finding by SIGTARP. At the conclusion of the investigations, however, we anticipate that the details of our findings will be reported to Congress, as appropriate, either through formal court filings or in the form of Investigative Reports." - Neil Barofsky

Dear Congressmen, please read this before your questioning of Tim Geithner tomorrow. A complete and thorough investigation by David Fiderer, into what is allegedly the greatest (Goldman-facilitated) taxpayer heist in history for the sole benefit of the self-proclaimed Masters of the Universe.

Also, Dear FRBNY general counsel Thomas Baxter - please tell us how the below is wrong? Because it would appear your proclamations of saving the world are not only self-serving, but flawed and hypocritical beyond measure:

"The party line, expressed in Too Big To Fail and elsewhere, is that an AIG bankruptcy posed a greater systemic risk than a Lehman bankruptcy, because AIG was so much bigger. But that analysis is highly superficial and very misleading. AIG itself was a holding company, which guaranteed the debt of its unregulated financial subsidiary, AIGFP. The lion's share of AIG's revenues and profits, and about 80% of its consolidated assets, were concentrated among its different insurance company subsidiaries. Those insurance companies were solvent. They did not pose any systemic risk. In fact, it's quite likely that they would have continued to operate outside of bankruptcy.

The only subsidiary with major problems was AIGFP, whose financial obligations were guaranteed by the parent. But AIGFP was only about one-third the size of Lehman. It's almost impossible to see how AIGFP ever posed a systemic risk, unless everyone's intention to provide a backdoor bailout to the banks. Put another way, it seems that the only reason that the government needed to step in for AIG was to provide a backdoor bailout to its banks."

• Yields 0.880% vs. Exp. 0.885%
• Bid To Cover 3.13 vs. Avg. 3.12 (Prev. 2.91)
• Indirects 43.1% vs. Avg. 43.70% (Prev. 34.86%)
• Indirect Bid To Cover: 1.71
• Alloted at high 88.79%
• Direct take down: very high at 10.8% - the "Direct Bid" presence continues to be a determining factor

The alternative to threatening with global thermonuclear warfare, should the Fed not get its way, is, of course, the Fed congratulating itself for its heroic activities that, in some interpretation of the quantum "multiple worlds hypothesis" theory, prevented certain [un]told destruction. Only problem is, of course, what the Fed prevented is merely wiping out the equity and subordinated bondholders in the GSE and the big banks, the preservation of whose perpetual bid for US Treasuries is and has always been the number one purpose of the Fed, so that the US can continue funding it ever increasing budget deficit. Yet a reminder of just how stunted logical thought is at the Fed, here is the Fed's Thomas Baxter, pulling a terrific Colonel Jessup, telling all that by bailing out AIG, the Fed should receive humanitarian of the century award, and a purple heart on top, for all the heat that Fed SVP Sarah Dahlgren should and will receive in Congressional testimony relatively soon.

"The President, in these last few days following the second revolution against big government started in Massachusetts, has come out swinging savagely against “banks” in numerous ways in numerous speeches. Let’s be clear. There are legitimate issues and reforms to be discussed. But my first question is why this exact moment? The answer is simple. When a failing government with totalitarian impulses needs help, it’s pretty standard strategy to call down a pogrom against an unpopular class of citizens. The bankers are nothing if not unpopular. Unfortunately for this President, he will, I hope, find the financial community not cowering from his Cossacks on a shtetl in the Pale of Settlement (Greenwich, CT), but meeting his accusations with logic and patriotism." - Cliff Asness

Harry Reid hopes to have enough votes to proceed with Bernanke's reconfirmation by Friday. More relevantly, Harry Reid hopes to have secured the value of his Commercial Real Estate holdings likely valued at over $3 million from collapsing should the Chairman not be reappointed, and have the opportunity to sell, sell, sell. But all Senators who have acquiesced to Reid's prodding for a Bernanke vote knew all this already. Right? After all, this is in no way a conflict of interest.

RANsquawk 26th January US Morning Briefing - Stocks, Bonds, FX etc.

Economicz does not get any more simplified than this.

A Hill aide has indicated that Hank Paulson has accepted the invitation, and will be present for tomorrow's grilling, keeping his old buddy Tim-O Tax company. We still have to hear if the last straggler, Goldman's Stephen Friedman, will also join the patriarchs of the wealth transfer plan under oath.

"Equities tend to do well when real rates are rising, but there are risks that it could be different this time if higher yields are driven by an inflation scare and/or heightened fiscal concerns. 'Start of tightening' remains our dominant theme of the year, and we continue to expect a consolidation in equities associated with the start of tightening. Market volatility around the start of Asian tightening and announcement of more onerous financial regulations confirms our long held view that the start of tightening could be many things other than the first Fed hike. With the general willingness of authorities to move away from crisis mode in recent weeks, we believe the tightening phase has now started and will intensify, and we expect positive payrolls will lead to a change in Fed language and the start of excess liquidity withdrawal in the next few months. We see 6% downside to MSCI Europe in the next 12 months and recommend selling into strength." - Teun Draaisma, Morgan Stanley

"Once private demand has become self-sustained, the sequencing of exit from accommodative monetary and fiscal policy should be guided by a variety of considerations, including whether: high fiscal deficits and debt are raising concerns about sustainability and sovereign risk—which is the primary consideration in many countries; low interest rates might be contributing to asset price bubbles; the exchange rate is under pressure to appreciate or depreciate as well as its position relative to medium-term fundamentals; and how quickly monetary or fiscal policy can be adjusted to changes in domestic demand." - IMF

After the double dip in now home sales and NAHB confidence, the unadjusted double dip in housing prices is following suit. Today's November Case-Shiller data showed that after having recorded several sequential increases in prices, November's -0.2% decline is substantiating the October -0.1% decline. The decline on a YoY basis was -5.3%. On a seasonally adjusted basis, the Composite 20 also indicated a moderation, as the sequential rate of increase declined from 0.3% to 0.2% in November, and indicated the same YoY decline as the unadjusted data of -5.3%.