Group Loops From Hell

Tyler Durden's picture

Having had a little too much first hand exposure to the world's biggest bankruptcy, we were delighted to peruse the alternative Lehman bankruptcy plan proposed by the likes of Fir Tree, Calpers, Owl Creek, Taconic and of course, Paulson & Co, who now own $9.4 billion in Unsecured Claims against the monster that is LBHI. Why monster? The graphic below, which could just as easily come from a Richard Feynman lecture on quantum chromodynamics, explains it all. While we will present a far more detailed summary of what is contained in the Paulson Plan as we affectionately call it, which if effected will likely result in about a $1 billion pay day to the ad hocs due to the materially higher GUC recovery should the sought substantive consolidation be enacted, the chart below which summarizes the labyrinth of simply intercompany claims between the various filed entities, demonstrates just how deranged an even modestly simple bank hold co looks like when undressed to its bare bones. And this is the kind of structure that Paulson (Hank) et al believed could be contained when they decided to cede to Goldman's purported demand to let Dick's baby fold... Instead of focusing on removing precisely the kind of complexity interwoven within financial organizations, created for the sole purpose of fooling regulators and shareholders that a given firm is in better financial shape than it truly is, or to afford it to take on exponentially more debt than legally allowed, Dodd Frank has done absolutely nothing to mitigate that one key problem that continues to reside at the heart of the American financial system: unprecedented and irreconcilable complexity, where the parts take on a life of their own, and fall out consequences are completely and utterly unpredictable. We may have a resolution mechanism, but this chart demonstrates why we will never use it.


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Sudden Debt's picture



D-Falt's picture

Nope.  It clearly lacks the artificial atmosphere necessary to prevent Blitzen's tragic asphixiation....

Misean's picture

There's a small thermal exhaust port, right below the main port...

Sudden Debt's picture

But it's only a few feet wide! And what about the laser gun turrets?!


divide_by_zero's picture

Quite possibly the schematic for a linear money/debt accelerator.

palmereldritch's picture

Dante's levels as toxic financial flywheels...Uh oh, I smell burnt toast again

onlooker's picture

""We may have a resolution mechanism, but this chart demonstrates why we will never use it. ""

correction--- cant use it. ie there is no mechanism

ebworthen's picture

My thoughts exactly.

I think our economy is no different. 

Someone gets off work from the hardware store, goes to the restaurant for dinner, is pulled over by a cop, insurance goes up, state gets some money, driver goes home and takes a sleeping pill.  Nothing is really produced; food picked by illegals on a farm subsidized by the USDA, oil from Arabia, utensils and plates made in China, Cop's gun made in Belgium - money shuffling around in a circle, our out of it.

snakeboat's picture

DUDE!  That's our GDP you're mocking there!

wisefool's picture

I see 3 distinct inputs to the dip (180°) and 4 outputs. I can set up an equation to buy all of them and sell it to some TBTF. I will donate the proceeds to charity <sarc> after I am finally awarded my PhD in Econ.

Cursive's picture

A mirror looking back into itself.

chindit13's picture

Ground loops?  Who's the taildragger pilot?  I'm betting Marla.

Misean's picture

I know, I know, but if we don't include a constraint for entropy, we'll have a perpetual motion machine.

Aristarchan's picture

Financially, we MUST keep marching along on the sordid road of bones that is the legacy of a system that, like scum, phlegm, diseased sperm and dead rats, floats wealth to the top. When you are a Master of the Universe, it is your right to expect those of lesser talent, intellect, guile, drive, ambition and conscience to give up their lives to support you on your road to stardom. To do less, would, of course, be un-American....and this stuff is too complex for the average working man to ever comprehend.....that is why we get paid so much money - it is even taxing for us....the men of the street who understand well these things, and understand that these constructs are best for you, the simple people who must give up your insignificant wealth as a tithe to allow us to continue on to be the best...the creme-de-creme, the scum on top. In complexity is wealth; in simple livelihoods comes naught but a shearing. It is arrogant of you to assume that you have a right to protest our ascendance. It is criminal of you to consider revolution to grab our wealth and transfer it to you....rabble, eat-cake peasents with no future and no hope. Yes, we have bought the laws and leaders of this country, and we have paid them well to do our deeds. as it should be.  Make your weak plans to change this wonderful American system, horde your guns and your bombs and spread the filth of your revolution and your treason. But remember, we own this country, and the losers you elect to represent you. You have one vote, we have the financial power to give us many votes. You are weak, you are scattered and un-cohesive and isolated...we all are one with your masters. Vote as you will, American Hillbilly, and we will buy them from underneath you before that vote is cast. Fuck you, you bunch of dissenting assholes. Wall street and corporate America is the new thousand year Reich. Where Hitler failed, we will succeed.

bretondog's picture

Sadly, Excellent


This is EXACTLY how these scum bags view the rest of us !

Well elucidated.



ReeferMac's picture



At least we all know where we stand....

andybev01's picture

"As the liquid reduces down make sure to skim off and discard the fats that float to the top, to ensure a clear and healthier stock".

gwar5's picture

First thought: Circular algorithms are for government workers.

Second thought: Increased complexity greatly increases chance of system failure

Third thought: Even greater complexity is required to solve the failure of a complex system

Fourth thought: Yes, we still have no fucking bananas


Aristarchan's picture

Greater complexity in the financial world...which seems to pride itself on being mathematically complex, is bullshit. People who try to use physics and mathematical theorems to guide them in a purely psychological market, are pure fucking fools.

gwar5's picture

That's why they have no fucking bananas

Aristarchan's picture

The science of bananas is pure and biologicaly calculable. You only get bananas from something that is real and has a basis that is repeatable. Markets are not bananas.

Misean's picture

A banana republic without bananas does not comnpute.

tom a taxpayer's picture

Fifth thought: Yes, we still have no fucking TBTF banksters in jail.

mudduck's picture

First thought; quick, reverse karate chop motion stopping right in front of your nose and hold hand in this position because it's the only way to stop your other hand from poking you in the eyes.

tony bonn's picture

complexity is designed to baffle people with bullshit. even if there were theoretical benefits from the complexity, they are consumed by the inability to administer. i forgot the quack bankster who said it - in connection with aig cds, but this ceo abandoned responsibility and claimed inability to untangle cds because he didn't fully understand them and could not untangle them. this from a fucktarded ceo trying to cover up his own malfeasance and claim that there was nothing he could do about his company's exposure to the cds mess.

Aristarchan's picture

Even the quants who devised them had no understanding of their real-world effects. To allow someone who understands the math, but not the impact, to commit you to billions of dollars of risk is totally fucking stupid. That is all you need to know about the people who run the large banks in this country, their regulators, their auditors, the rating agencies,and the politicos who change the rules (via money in their campaign coffers)  to allow this shit to happen. The people who run business and government in this country are too fucking stupid to be allowed to do anything but wipe my dog's ass. And, I suspect my dog is too smart to allow them access to his butthole.

doolittlegeorge's picture

actually it was "the stupid quant" who discovered the Ponzi scheme that was Bernie Madoff so again "you obviously have no idea the purpose of a quant."  On the other hand "you do understand the purpose of a CEO of a failed financial institution":  claim "the market moved against you" and "shakedown the only entity that ever has money anyways" namely "the people's money."  What makes "this time different" is that "they got the money."  In the Depression "there were no bailouts."  Unsurprisingly "we paid for World War II in its entirety."  Now "we can't even pay for a war against 1500 dead enders in Afghanistan." 

velobabe's picture

Aspen-area Madoff victims suing U.S. government


ASPEN — At least four Aspen-area victims of disgraced money manager Bernie Madoff are suing the U.S. government on allegations that it allowed the financial scam to carry on despite numerous warning signs over the years....

Read >

Monday1929's picture

The good news is it is still those same quants who are giving away free Puts. They are still using the busted theories. There MAY still be one last chance to profit from their broken minds and morals.

A portion of my profits will go to pay bounties to bankers to rat out their fellow rats.

andybev01's picture

Meaning that if what he said were true, he wasn't qualified to run said company.


bob_dabolina's picture

Is altitude sickness affecting me at 30,000 feet or does this look like an overcomplicated ponzi scheme

old naughty's picture

After looking at it for over an hour, I still couldn't net out the "positions"...And I am a f''king accountant. What's with the lower left, only two arrows, and the dotted lines mean more to be added?...I give up.


Thanks for sharing Tyler. Carry on looping.

mkkby's picture

Kill me and it's mutually assured destruction?  But it's not.  So just take them down and deal with it in bankruptcy court.  Competitors will buy up any assets with actual value and the crap will just disappear down the sewer where it belongs.  No real threat.

ebworthen's picture

This is a screw viewed from the top.

The taxpayer gets the tip of the screw.

"Uh-oh, we need some binary database dollars, cirlce is slipping!"

"Quick, tighten the screw."

bingaling's picture

A bunch of turds going down a toilet is the impression I get from it .

On another note ,if Paulson and co do figure out how to unwind Lehman and make a shitload of money doing it ,  TBTF will be history as the cannibals commence to feed on one another . I find it funny that these guys are looking for a meal in a toilet .

doomandbloom's picture

Richard Feynman...helped in create the atomic bomb...and its his theory based on which the Large Hadron Collider has been built..

i think he belonged to the dark side...

Coldfire's picture

I was quite certain that the net amount of these claims was quite "manageable" and "contained" and that adequate collateralisation was securely in place, with all ISDA "t's" crossed and "i's" dotted. But then I took off the derivatard tinfoil, stepped away from the crack pipe and beheld the nine-dimensional atomic clusterfuck. Whoa. Tower of Basel much?

Tic tock's picture

atomic bomb was going too get built anyway, LHC might still be useful, be mindful of intoning the subtle and insidious ways of the Dark, it seeks to show you much and it sucks the humanity out of a soul.

LHC is open up electrons, neutrons and protons which are thought to be made of a family called Leptons (Quarks), in greater detail. To discover more of how these Leptons appear. There's a mass conundrum- among other things- speaking of which, someone had worked out how to actually create Escher-like constructions in the real world,

Möbius symmetry, the topological phenomenon that yields a half-twisted strip with two surfaces but only one side, has been a source of fascination since its discovery in 1858 by German mathematician August Möbius. As artist M.C. Escher so vividly demonstrated in his "parade of ants," it is possible to traverse the "inside" and "outside" surfaces of a Möbius strip without crossing over an edge. For years, scientists have been searching for an example of Möbius symmetry in natural materials without any success. Now a team of scientists has discovered Möbius symmetry in metamaterials – materials engineered from artificial "atoms" and "molecules" with electromagnetic properties that arise from their structure rather than their chemical composition. 

doolittlegeorge's picture

Again "the loop is missing you and me."  That is the "great Jewish secret":  they understood (rightly as they so often do) that "all you Fight Clubbers keep screaming about here":  namely that "these Anglo's only have money in their government" so they "testify for all to see that we NYC Jews now have your valuable anglo government money so kiss my NYC Jew ass."  BEFORE A JEWISH SENATOR FROM MICHIGAN NO LESS!!!!   (Indeed to show just how worthless Blankfein is "he didn't get the joke our own government was playing on him!"  It's moments like this that I love our elected leaders and I mean that!  They GET IT!  More to the point "it's moments like this that I really appreciate the "young Mel Brooks."  He "got it" as they say too.  I need name name the movie--suffice to say they made it into a musical too!)  Answer of course is "park battleship Missouri off Israel and tell NYC Jew what you think of the new American non-state they've created."  Trust me "our government has the solution should they desire it."  Needless to say "the polls numbers would soar" and "finances would improve immediately."  Of course "you can always vote for tax cuts instead" so "repeat reruns of comedic genius Mel Brooks."  Here's one of my favorites:  "eye-gore what type of brain did you get for me?"  "I believe her name was Abby, doctor."  "Abby who?"  "I think her name was Abby Normal, doctor."

Downtoolong's picture

So, this is what a self regulating industry looks like, having more parties to sue.



bmfe's picture

em’s crop circles spellin pay dirt for bankruptcy types