Frontrunning: October 5

• Eric Dinallo joins the fight: Split the financial supermarkets to make them safe (FT, h/t Miles)
• Report on bailouts says treasury misled public (NYT) and continues doing so every single day
• Lying treasury to announce BlackRock, Wellington and AllianceBernstein have raised $1.9 billion for PPIP (Bloomberg)
• Larry Summers and the White House economic team (New Yorker)
• Government Sachs lets one well run dry (Reuters)
• CIT's Peek about to join Lewis on the unemployment line (Bloomberg)
• 47% will pay no federal income tax (CNNMoney)
• Thune: Time for a TARP exit strategy (WSJ)
• Open interest surge signals peak as traders see slump (Bloomberg)
• Borrowing for dividends raises worries (WSJ)
• FSA sets out tough new liquidity rules (FT)
• BofA to select emergency CEO (WSJ)
• Defensive with a measure of equanimity (Hussman Funds)
• Deal proposed to Lehman Brothers Europe creditors (AP)
• Paul Krugman makes no cents (Post)
• HSBC chief fears a second downturn (FT)

Comments

[Anonymous]

This is great.

1) GS is make $1 billion on CIT BK.
2) GS upgrade for large banks (as they have been declining for 2 weeks). http://www.bloomberg.com/apps/news?pid=20601087&sid=acliKCKr6Xlk
3) Even George Soros states the are financial institutions are "basically bankrupt".

I guess it is time for GS to sell off their shares before the market tanks.

[Careless Whisper]

Props to the NY Post and John Cochrane. Brilliant.

[Green Sharts]

From the NYT article:

Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.

Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.

In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.

The inspector general said government officials need to be more careful when describing their actions and rationale. In a letter included with the report, the Federal Reserve concurred with Mr. Barofsky’s concern about the statements made last year, but the Treasury Department said that any review of announcements last year “must be considered in light of the unprecedented circumstances in which they were made.”

Translation of Treasury Department comment:  "Yes, we lied to the American public but it was for their own good.  They couldn't handle the truth."

[chindit13]

Looks like the ISM Service sector number was released to subscribers a little earlier than usual.

[Bearish Spirits]

Saw that too.  "Estimated" BATS exchange numbers for SPX were at +11 while the market was still +6!  Just like last week...although I would like to know where the mini-dump after the announcement came from.

[Green Sharts]

Hussman's weekly commentary links to a very good piece on what the stock market is pricing in for earnings, revenue and profit margin growth over the next 2-3 years; huge profit growth on relatively modest revenue growth, which suggests a return of profit margins almost to their 2007 peak.  It is a pipe dream.

http://www.hussmanfunds.com/rsi/forwardearningsmargins.htm

[Miles Kendig]

Eric Dinallo, candidate for the office of New York State Attorney General fires the first shot of his campaign.  Time will tell if his run is simply one more in a long line of politicians that have used that particular bully pulpit to squeeze their way up the food chain. His proximity to the events of last year give him particular claim to swap favors since it is highly unlikely Mr. Dinallo will ever write his memoirs that dare to include the real juice of the matters under his preview during his service as NY State Insurance Commissioner.

[ghostfaceinvestah]

Dinallo is a joke, that guy should be in prison, not running for office.  He was overseeing MBIA, Ambac, FGIC, et al, while they were writing the exact same coverage as AIGFP.  Yet he did nothing to stop them (and yes, they were writing this coverage inside their state-regulated insurance opcos).

Then, when it all collapses, he allows MBIA to raid their existing FG opco to fund a new opco to write only Muni business, leaving the policyholders facing the old opco high and dry.  The whole mess is now in court.

I am sure Dinallo has a lot to say - about the frauds he helped enable.

[Jim B]

Paul Krugman has no credibility...  His economic theories are based more on politics rather than common sense and economic theory.  The last time I watched him on a financial panel (which was and will be the last time I waste 5 minutes of my life watching him), he thought the government was not spending enough.... LOL :-(