Matt Taibbi Asks Why The Fed Gave $220 Million In Bailout Money To The Wives Of Two Morgan Stanley "Bigwigs"

Tyler Durden's picture

Matt Taibbi has resurfaced with another stunner of Wall Street impropriety which will lead to merely more silence, even more unanswered questions and be quickly buried by the kleptocratic oligarchy.

The Real Housewives of Wall Street: Look Who's Cashing In On the Bailout

Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

From Rolling Stone Magazine

In August 2009, John Mack,
at the time still the CEO of Morgan Stanley, made an interesting life
decision. Despite the fact that he was earning the comparatively low
salary of just $800,000, and had refused to give himself a bonus in the
midst of the financial crisis, Mack decided to buy himself a gorgeous
piece of property — a 107-year-old limestone carriage house on the Upper
BeerEast Side of New York, complete with an indoor 12-car garage, that
had just been sold by the prestigious Mellon family for $13.5 million.
Either Mack had plenty of cash on hand to close the deal, or he got some
help from his wife, Christy, who apparently bought the house with him.

The Macks make for an interesting couple. John, a Lebanese-American
nicknamed "Mack the Knife" for his legendary passion for firing people,
has one of the most recognizable faces on Wall Street, physically
resembling a crumpled, half-burned baked potato with a pair of
overturned furry horseshoes for eyebrows. Christy is thin, blond and
rich — a sort of still-awake Sunny von Bulow with hobbies. Her major
philanthropic passion is endowments for alternative medicine, and she
has attained the level of master at Reiki, the Japanese practice of
"palm healing." The only other notable fact on her public résumé is that
her sister was married to Charlie Rose.

It's hard to imagine a pair of people you would less want to
hand a giant welfare check to — yet that's exactly what the Fed did.
Just two months before the Macks bought their fancy carriage house in
Manhattan, Christy and her pal Susan launched their investment
initiative called Waterfall TALF. Neither seems to have any experience
whatsoever in finance, beyond Susan's penchant for dabbling in
thoroughbred racehorses. But with an upfront investment of $15 million,
they quickly received $220 million in cash from the Fed, most of which
they used to purchase student loans and commercial mortgages. The loans
were set up so that Christy and Susan would keep 100 percent of any
gains on the deals, while the Fed and the Treasury (read: the taxpayer)
would eat 90 percent of the losses. Given out as part of a bailout
program ostensibly designed to help ordinary people by kick-starting
consumer lending, the deals were a classic heads-I-win, tails-you-lose
investment.

So how did the government come to address a financial crisis caused
by the collapse of a residential-mortgage bubble by giving the wives of a
couple of Morgan Stanley bigwigs free money to make essentially
risk-free investments in student loans and commercial real estate? The
answer is: by degrees. The history of the bailout era reads like one of
those awful stories about what happens when a long-dormant criminal
compulsion goes unchecked. The Peeping Tom next door stares through a
few bathroom windows, doesn't get caught, and decides to break in and
steal a pair of panties. Next thing you know, he's upgraded to homemade
dungeons, tri-state serial rampages and throwing cheerleaders into a
panel truck.

The impetus for this sudden manic expansion of the bailouts was a
masterful bluff by Wall Street executives. Once the money started
flowing from the Federal Reserve, the executives began moaning to their
buddies at the Fed, claiming that they were suddenly afraid of investing
in anything — student loans, car notes, you name it — unless
their profits were guaranteed by the state. "You ever watch soccer,
where the guy rolls six times to get a yellow card?" says William Black,
a former federal bank regulator who teaches economics and law at the
University of Missouri. "That's what this is. If you have power and
connections, they will give you a freebie deal — if you're good at
whining."

This is where TALF fits into the bailout picture. Created just after
Barack Obama's election in November 2008, the program's ostensible
justification was to spur more consumer lending, which had dried up in
the midst of the financial crisis. But instead of lending directly to
car buyers and credit-card holders and students — that would have been
socialism! — the Fed handed out a trillion dollars to banks and hedge
funds, almost interest-free. In other words, the government lent
taxpayer money to the same assholes who caused the crisis, so that they
could then lend that money back out on the market virtually risk-free,
at an enormous profit.

Cue your Billy Mays voice, because wait, there's more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans.
Essentially, this means that if you don't pay the Fed back, it's no big
deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100
million from the Fed to buy crappy loans, which are then transferred to
the Fed as collateral. If Hedge Fund Goon decides not to repay that
$100 million, the Fed simply keeps its pile of crappy securities and
calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy
a bunch of crap securities and stash them on the Fed's books. If the
securities lose money, you leave them on the Fed's lap and the public
eats the loss. But if they make money, you take them back, cash them in
and repay the funds you borrowed from the Fed. "Remember that crazy guy
in the commercials who ran around covered in dollar bills shouting, 'The
government is giving out free money!' " says Black. "As crazy as he
was, this is making it real."

read the full article here

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Mister Meaner's picture

Welcome to Facsism.

http://www.google.com/images?um=1&hl=en&newwindow=1&safe=off&client=fire...

Some images of how it ended for Mussolini.

That's the only hope we have for Hope and Change®

willien1derland's picture

Trademark is a very nice touch - I admire your attention to detail - Great post

Vendetta's picture

indeed.  It is such a bummer that our military doesn't work for the citizens of the US regardless of what individual soldiers may be led to think.

Abitdodgie's picture

You are quite right ,I mean its not like the American public will do anything , talk about no balls , or pussy whipped. Or is it they just don't give a shit and are quite happy selling their children into slavery , just to be left alone with a flat screen.

Oh regional Indian's picture

Flat Screen Flat Earth, Flat Line. Round Belly, Round in the Chamber, Round and round.

A big, fat un-holy mess of a country has the rest of the world in it's beef-fat dripping maws.

Talk aside, this is going to be a heck of a party people. It's played so many times before and the 2% of the wide awake population usually gets Rounded Up by the Flat thinkers, first.

Revolution, what an out-moded concept. If this can be reversed, it has to be precisely that, reversed. Drop out of the system. You'll be amazed at how little you can thrive on. Note I said thrive, not survive.

Dial back, sit home, no dis-traction, listen to the voice in your own head. 

ORI

http://aadivaahan.wordpress.com/2010/08/19/want-to-save-the-world-or-at-least-your-self/

AR15AU's picture

+1

The sheep will keep getting fleeced until fraud is punishable by death.

silvertrain's picture

It is in China..There was just a story not long ago about a baby formula scam going on..Straight up lead to the head and a dirt nap for them...

trav7777's picture

for every fraud uncovered they have 100 more

malikai's picture

Kill the chicken to scare the monkey.

Stormdancer's picture

Rope is cheap and reusable.

cosmictrainwreck's picture

same ol' bullshit propaganda as in USA...nail the little guy and big dogs skate; how many comrades inside the Forbidden City have they "prosecuted"?

Translational Lift's picture

If this is true...ALL of these fuckers should be drawn & quartered ...then hung from a lamp post!

Magic Mamaliga's picture

+1000 "To counterfeit is death"

laughing_swordfish's picture

As I have said before:

It's time to party like it's 1789.

 

Vagabond's picture

We could seriously use a masked vigilante.

espirit's picture

We have our very own - WB7!

flacorps's picture

I don't recall a mask on Robespierre.

DarkAgeAhead's picture

They walk among us, but I'm pretty sure none are up to this job.

www.reallifesuperheroes.org

TruthInSunshine's picture

Hang the Fed.

Now.

Any questions?

Hugh G Rection's picture

names and addresses please?

SheepDog-One's picture

Those wives must have had some WILDLY incriminating testimony and photos.

I am Jobe's picture

Agreed. Start sharpening. No bankers or their families to be spared moving forward. Show this on TV Worldwide. Time to honor themselves has come. Meet eh blade Biatches I say. Let the games begin.

willien1derland's picture

There is a GREAT IDEA - What a REALITY TV SHOW that would make! Weakest Link theme - the show starts with the lesser criminals & each can offer up info to prevent their execution (not there beat down or prison time) by naming someone who has stolen more than them - I am uncertain of the Season Finale but take your pick of the top banksters & Government accomplices - we can have people bid on the 'punishment' with proceeds that directly retire government debt - Need a creative ZHer to name the show - any ideas?

Stormdancer's picture

I haven't had a TV for years.  You just enunciated the only thing I've ever heard that might entice me to buy one.  :)

 

Nahh.....I bet someone would webcast it....

Abitdodgie's picture

If someone went to the white house and started to shoot the place up , who would join him , that's right no-one .

caconhma's picture

During the Russian revolution (and after it), these people were just buried alive. It was the justice for endless thievery. Just curious, how many pornography bosses were bailed out?

This shit is just unbelievable. There is no any fucking regard about any law and/or the people of America. This will end very badly. People will be really mad.

America is not fucking & shitty Egypt. We will have a very bloody revolution.

God bless Internet. I doubt you will find it in our "free" Rothschild family controlled mainstream media.

scaleindependent's picture

 

 Tax cuts, free loans, and Fed Reserve Corp.  giveaways for the 0.1%  plutocrats AND austerity for the rest: Paul Ryan budget for the proles! Biatch!

Mentaliusanything's picture

Matt has a shorter life span than Tyler?

Over and unders taken ?

One cannot keep kicking a bull in the balls and expect a MOOOOOOOOOO

cxl9's picture

Matt has a shorter life span than Tyler?

Nah. Taibbi managed to stay alive in Russia during the 1990s, exposing the staggering corruption of the day and embarassing the oligarchs. Presumably that was considerably more dangerous than writing articles about taxpayer rip-offs in America, which of course will go largely ignored. Taibbi also knew right where to draw the line in Russia. There were certain powerful people he knew better than to piss off if he wanted to stay alive. Read all about it in The Exile: Sex, Drugs, and Libel in the New Russia.

bankonzhongguo's picture

This is why it is not simply enough to prosecute the banksters.

Regrettably, they and their entire families may need to be killed before things will be made right.

This country had a revolution to get rid of people like this.

And the Fed, DOJ and team Obama knew all about this FOR YEARS. 

Just like all the radiation falling out of the sky into your kids' milk and Happy Meals.

Just to make it interesting, what does Charlie Rose think of his in-laws about this?

Kinda like John Stewart and his silent NYSE brother.

How about a show on this Chuck?

Journalist?! Its crimes against humanity (again).

Just what common denominator joins all these lumbering Beasts?

Thanks for the story Mr. Taibbi.

 

Mack the Knife.

Knife the Mack.

 

 

IQ 145's picture

 Amazing; it's just like ancient Rome, or everyplace else; the rich really do pay each other off out of the public purse; who woulda thunk it. Matt better shut up or he's gonna have a one car accident.

pesamystik's picture

guillotine, hah. people here aren't going to do a damn thing about it. that's what the internet is for, a collective place for us to moan and despair. nothing else will come of it besides this article.

laughing_swordfish's picture

I'm not so sure.

We're getting very close to a "Marie Antoinette Moment" here...

As an earlier poster alluded to, the Chinese know how to handle this sort of thing.

Ordinary criminals (murderers, drug dealers, etc.) get the "needle" (intra-cardiac injection of carbolic acid) - quite painful, but quick and quiet.

For "economic crimes" (fraud, product adulteration, self-dealing, theft of government funds), it's a different story.

First, the local population is mustered in a nearby stadium - "Public Executions Today!"

After a period of cheerleading by Party cadre, the condemned are led out, each with a sign  around his neck detailing his crime: "I embezzled" "I adulterated food" "I stole from the pension fund" and so forth. One by one, each is led to a microphone to confess his crimes and beg for mercy from the people.

Of course, none is forthcoming.

After this little bit of theater is performed, the guards blindfold each criminal and truss them up in a kneeling position, placing them in a row. Then, after more exhortation of the crowd, the leader of the guard detail draws his service weapon and slams home a magazine.

Finally, the leader goes carefully down the row ...one bullet, one piece of justice administered.

Most fittingly, the cost of the proceedings is billed to the families of the condemned - right down to the cost of the bullet.

There was a video of one such proceeding on YouTube a while back, but it's been taken down...

 

Pour Encourager Les Autres...

samsara's picture

Matt and RR doing the good work.

If nothing else,  He can claim  "Vampire Squid"  as a lexicon add.

jus_lite_reading's picture

Perhaps he should ask WHT THERE ARE NO PITCHFORKS AND PIKES IN THE STREETS!!!!!

weinerdog43's picture

How is that the only serious investigative journalism on the financial mess starts and stops w/Matt Taibbi? 

Forbes? Fortune? NY Times? WSJ? Barrons?...One might start to wonder if there's an actual conspiracy to keep the plebes in the dark.  Hmmmm.

bania's picture

are you asking this question rhetorically? or do you really need it spelled out for you?

weinerdog43's picture

It's not as funny when you have to explain the joke. 

tamboo's picture

who'd a thunk it!

*Jewish Media moguls, Jewish Actors, Comedians, and writers

"Financed by Jewish Bankers"

http://www.vnnforum.com/archive/index.php/t-44990.html

Widowmaker's picture

You will eat junks but you are absolutely, absolutely right.

All it takes is the Jews coming out against this shit of which there are -- none.

Widowmaker's picture

You will eat junks but you are absolutely, absolutely right.

How many do you hear coming out condemning this shit?

Not -- fucking -- one.

tamboo's picture

Seeking Nominations for the 100 most Destructive Jews in America!
http://www.vnnforum.com/showthread.php?t=44723

Mentaliusanything's picture

Hey Tambo yah getting a lot less junks = WINNING

Mentaliusanything's picture

Jesus (thorn in side) I forgot ... they go to bed early and get up late.

Hate mail coming in (well is not Sunday) SOOOOOON

Mentaliusanything's picture

That was a good laugh. Conspiracy bitches

JustPrintMoreDuh's picture

Off with their heads!

FubarNation's picture

Makes a fellow really not want to pay his taxes this year.......or any other.

silvertrain's picture

bet that she has bar gold in a horse stall...

Cleanclog's picture

Frickin incredible!!!  Take to all the wires and do not let this story get buried.  Tweet, post, FB, letters to Congress, etc.  Thanks ZH for bringin it to us, and thanks Matt for researching and writing and Rolling Stone for publishing!

What next?  Gates Foundation to underwrite her palm healing work for anti malarial work?

Mae Kadoodie's picture

Maybe someone can ask The Bernank about this during his press conference in a couple of weeks.