What happened to all of the doom and gloom economic threads?

[Ulaven_Demorte]

Any thing for you to cheer about little man. Only 20,000 people got laid off, much better than expected.

Much better than the previous months, as was expected. Employment is a lagging indicator of economic health. If you had more than three brain cells bouncing around in that vacuous fuzzy skull of yours you would know this.

Don't worry little bear, I don't expect you to have anything positive to say.

 

[koalabear]

Much better than the previous months, as was expected. Employment is a lagging indicator of economic health. If you had more than three brain cells bouncing around in that vacuous fuzzy skull of yours you would know this.

Don't worry little bear, I don't expect you to have anything positive to say.

It is definitely lagging when people are still losing their jobs, little man.

 

[Ulaven_Demorte]

It is definitely lagging when people are still losing their jobs, little man.

I overestimated.. Two remaining brain cells.. Apologies..

I'll stick to smaller words for your benefit.

We aren't losing jobs at near the rate we have been. Last November showed a loss of over 580,000 jobs and December showed over 500,000 jobs lost (hint, that's a LOT more than 20,000). The economy has been getting better for months. Job losses will be one of the last areas to show gains.

Keep on hoping for failure though little bear.

 

[Frisco_Slug_Esq]

We know.




But we're still losing jobs and still celebrating the DOW crossing the magic 10,000K threshold...

 

[Ulaven_Demorte]

We know.




But we're still losing jobs and still celebrating the DOW crossing the magic 10,000K threshold...

Keep hoping against hope Cap'n..

 

[Frisco_Slug_Esq]

Mark Steyn has something for you to consider U_D...

At the National Prayer Breakfast, Barack Obama singled out for praise Navy Corpsman Christian Bouchard. Or as the president called him, “Corpseman Bouchard.” Twice.

Hey, not a big deal. Throughout his life, the commander-in-chief has had little contact with the military, and less interest. And, when you give as many speeches as this guy does, there’s no time to rehearse or read through: You just gotta fire up the prompter and wing it. But it’s revealing that nobody around him in the so-called smartest administration of all time thought to spell it out phonetically for him when the speech got typed up and loaded into the machine. Which suggests that either his minders don’t know that he doesn’t know that kinda stuff, or they don’t know it either. To put it in Rumsfeldian terms, they don’t know what they don’t know.

Which is embarrassingly true. Hence, the awful flop speeches, from the Copenhagen Olympics to the Berlin Wall anniversary video to the Martha Coakley rally. The palpable whiff given off by the White House inner circle is that they’re the last people on the planet still besotted by Barack Obama, and that they’re having such a cool time starring in their own reality-show remake of The West Wing they can only conceive of the public — and, indeed, the world — as crowd-scene extras in The Barack Obama Show: They expect you to cheer and wave flags when the floor-manager tells you to, but the notion that in return he should be able to persuade you of the merits of his policies seems entirely to have eluded them.

But, since Obama’s mispronunciation is a pithier summation of the State of the Union than any of the dreary 90-minute sludge he paid his speechwriters for, let us consider it: Is America a Corpseman walking?

...

Obama’s spending proposes to take the average Bush deficit for the years 2001–2008, and double it, all the way to 2020. To get out of the Bush hole, we need to dig a hole twice as deep for one-and-a-half times as long. And that’s according to the official projections of his Economics Czar, Ms. Rose Colored-Glasses. By 2015, the actual hole may be so deep that even if you toss every Obama speech down it on double-spaced paper you still won’t be able to fill it up. In the spendthrift Bush days, federal spending as a proportion of GDP average 19.6 percent. Obama proposes to crank it up to 25 percent as a permanent feature of life.

But, if they’re “unsustainable,” what happens when they can no longer be sustained? A failure of bond auctions? A downgraded government debt rating? Reduced GDP growth? Total societal collapse? Mad Max on the New Jersey Turnpike?

...

Testifying to the House Budget Committee, Director Elmendorf attempted to pull back from the wilder shores of “unsustainable”: “I think most observers expect that the government will act, that the unsustainability will be resolved through action, not through witnessing some collapse down the road,” he said. “If literally nothing is done, then eventually something very, very bad happens. But I think the widespread view is that you and your colleagues will take action.”

Dream on, you kinky fantasist. The one thing that can be guaranteed is that a political class led by Harry Reid, Nancy Pelosi, Barney Frank, a handful of reach-across-the-aisle Republican accomodationists and an economically illiterate narcissist in the Oval Office is never going to rein in unsustainable spending in any meaningful sense. That leaves Director Elmendorf’s alternative scenario. What was it again? Oh, yeah: “Some collapse down the road.”

... Good luck relying on Obama, Pelosi, Frank, and the other Emirs of Kleptocristan “taking action” to “resolve” that. In the last month, the cost of insuring Greece’s sovereign debt against default has doubled. Spain and Portugal are headed the same way. When you binge-spend at the Greek level in a democratic state, there aren’t many easy roads back. The government has introduced an austerity package to rein in spending. In response, Greek tax collectors have walked off the job.

Read that again slowly: To protest government cuts, striking tax collectors are refusing to collect taxes. In a sane world, this would be a hilarious TV comedy sketch. But most of the Western world is no longer sane. It’s tough enough to persuade the town drunk to sober up, but when everyone’s face down in the moonshine, maybe it’s best just to head for the hills. But where to flee? America is choosing to embrace Greece’s future when even the Greeks have figured out you can’t make it add up....

http://article.nationalreview.com/424153/unsustainable/mark-steyn

 

[Frisco_Slug_Esq]

Keep hoping against hope Cap'n..

It's reality.

And the sad part is, you won't believe it until your 401K is worthless...






I know. I know. The Democrats are going to save us. All we have to do is shut up and go along to get along...

 

[Ulaven_Demorte]

Mark Steyn has something for you to consider U_D...

http://article.nationalreview.com/424153/unsustainable/mark-steyn

Considered and dismissed. Steyn is opinion.. They're like assholes, and some stink worse than others.

You might as well have posted an echo chamber "Thinker" article.

 

[Spider Rand]

I overestimated.. Two remaining brain cells.. Apologies..

I'll stick to smaller words for your benefit.

We aren't losing jobs at near the rate we have been. Last November showed a loss of over 580,000 jobs and December showed over 500,000 jobs lost (hint, that's a LOT more than 20,000). The economy has been getting better for months. Job losses will be one of the last areas to show gains.

Keep on hoping for failure though little bear.

So we're still bleeding to death, we're just doing it more slowly. Maybe we're just running out of blood...

 

[Frisco_Slug_Esq]

Considered and dismissed. Steyn is opinion.. They're like assholes, and some stink worse than others.

You might as well have posted an echo chamber "Thinker" article.

You're not going to believe in ANYTHING other than an economic "miracle," are you?

Well, I guess I'll shut up now and leave you to your mopping.

Have a nice life.

 

[Songcatcher]

With the Dow climbing near 10,000 again what's happened to all of the dire, end of the world ravings of our resident "conservative" economists?

Where is all of this inflation we were warned about? According to reports the Consumer Price Index is down 1.5% overall from last year. Despite Augusts increase in prices, gasoline is still down 30% from the high a year ago.

Despite the dire warnings of some of Lit's resident math wizards the Chinese are still very much interested in buying US Treasury securities.

I guess the sky isn't falling after all.

Read it for yourself.

 

[Ulaven_Demorte]

It's reality.

And the sad part is, you won't believe it until your 401K is worthless...



I know. I know. The Democrats are going to save us. All we have to do is shut up and go along to get along...

Reality? You've not visited there in quite some time Cap'n. Too busy cheering for failure to see it from your little rabbit-hole I imagine.

My 401k has rebounded quite nicely thanks.. Not all of us were conned into cashing in our investments, and making our losses permanent, to buy gold on the advice of financial geniuses Rush Limbaugh, Glenn Beck, and hell, take your pick of "right" radio talking heads, who oddly enough had pretty lucrative deals for advertising their services.

 

[Ulaven_Demorte]

So we're still bleeding to death, we're just doing it more slowly. Maybe we're just running out of blood...

Yeah, that's why job losses are down. There aren't any jobs left to lose.

 

[Spider Rand]

Yeah, that's why job losses are down. There aren't any jobs left to lose.

No, there just aren't enough available jobs to be had. Businesses have trimmed the fat down to the bare minimums to still be able to be productive. We're hitting a threshold, not heading into recovery.

Numbers for long-term unemployed (people out of work for over 15 weeks) are at an all-time high. A lot of the drop in unemployment numbers comes from people simply giving up on finding work.

 

[Ulaven_Demorte]

No, there just aren't enough available jobs to be had. Businesses have trimmed the fat down to the bare minimums to still be able to be productive. We're hitting a threshold, not heading into recovery.

Numbers for long-term unemployed (people out of work for over 15 weeks) are at an all-time high. A lot of the drop in unemployment numbers comes from people simply giving up on finding work.

Once again for the cheap seats..

Employment is a lagging indicator of economic recovery. The numbers are heading in the right direction after steep job losses for several months. Nobody said that everything is fixed and it's all roses and sunshine from here on out. Only a fool would expect a full recovery already.
in other news, the daily fluctuations of the DOW is not the same as the GDP.

 

[Frisco_Slug_Esq]

Reality? You've not visited there in quite some time Cap'n. Too busy cheering for failure to see it from your little rabbit-hole I imagine.

My 401k has rebounded quite nicely thanks.. Not all of us were conned into cashing in our investments, and making our losses permanent, to buy gold on the advice of financial geniuses Rush Limbaugh, Glenn Beck, and hell, take your pick of "right" radio talking heads, who oddly enough had pretty lucrative deals for advertising their services.

You keep ascribing actions to most of us that we did not take to pump yourself up.

And, we can lose more jobs. LOTS more jobs.

This is good news for Obama. The more jobs he can shed, the more hands will be reached out for a hand out.
__________________

"Why are you here?"

"To get some money."

"What kind of money?"

"Obama money."

"Where's it coming from?

"Obama."

"And where did Obama get it?"

"I don't know... his stash, I don't know. I don't know where he got it from, but he's givin' it t'us to help us. We love him. That's why we voted for him... Obama! Obama!"

 

[Frisco_Slug_Esq]

More "mere" opinion which chooses to ignore the massive, overwhelming evidence of prosperity around the corner indicated by the LEI...

1) Debt and Deficits. At our current rate we will very soon pile up between $18 and $20 trillion in accumulated national debt. We use the euphemism “stimulus”, talk of massive borrowing in terms of percentages of GDP, and casually pontificate about “inflating” our way out of the debt. The fact is that the borrowing is now so massive that there is no way to pay back what we owe without massive cutbacks in accustomed services, and a probable decline in the apparent standard of living. I say “apparent” since many of the essentials that we are accustomed to—everything from sophisticated psychiatric counseling for long-term inmates, frivolous law suits, duplicate and needless medical procedures, to government employee expense accounts, farm subsidies, or grants to the arts and media—are not that essential and will gradually begin to disappear. Raising taxes will be in the short-term offered as a solution, but it won’t for long increase net aggregate revenue since it will eventually discourage economic activity.

And we lack both the patience and guts to cut taxes, and then use the long-term larger revenue stream, coupled with massive spending cuts, to balance the budget. In short, we will invent euphemisms like “stimulus” and “furlough” as the money runs out, and Americans adjust to a lower standard of living. One can already drive in rural central California and see roads that are cracked and full of potholes, random dogs that are not licensed, and thousands of trailer-rentals on blocks and garages-turned-into-rentals, as the government has given up on its old regulation and let large swaths revert to the 1940s and 1950s. I fear that any sixth grader from my 1965 primary school down the road could have read far better than an average contemporary high school graduate of my local community. This decline is not inevitable, given an expanding population, the prior investments of noble generations, continually evolving technology, and spreading globalization, but it is inevitable given the therapeutic culture, and present high-tax, high-spend, redistributive gospel of the present government. No one on either side of the political divide simply says the present borrowing is staggering, unsustainable, and must be paid back by real sacrifice. So we lie on, as if Greece should be our model.

Victor Davis Hanson

 

[trysail]

If you have an interest in hearing Henry Paulson's ( and Warren Buffett's ) perspective on the financial tsunami that nearly destroyed the United States ( and global ) financial markets in the fall of 2008, C-SPAN 2 will be rebroadcasting Warren Buffett's interview of Henry Paulson tomorrow on its BookTV channel. The rebroadcasts on C-SPAN 2 are scheduled for 1000 ( ET )and 1700 ( or 5:00 PM ET ) on Sunday, 14 February.
http://www.booktv.org/Program/11305...+Collapse+of+the+Global+Financial+System.aspx

http://www.booktv.org/Schedule.aspx
The original interview took place on 9 February at the Omaha Chamber of Commerce as part of Paulson's book selling tour to promote his newly published book on the subject.

 

[Frisco_Slug_Esq]

The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.

Walmart's taking a loss now!
Fed finally beginning to hike interest rates
There are too many dollars chasing too few goods...

Unwinding the Fed's stimulus is the biggest challenge for Bernanke in his second term, which began Feb. 1. Moving too soon could short-circuit the recovery. Waiting too long could unleash inflation and feed a speculative asset bubble.
...
David Rosenberg, chief economist at money manager Gluskin Sheff in Toronto, says the Fed's decision to bump up the emergency lending rate for banks is psychological but still packs a punch.

"The Fed is moving toward a new strategy of draining liquidity from the system," he says. "Will the Fed be raising the Fed funds rate soon? No. But what happens when it stops buying mortgages or even starts selling? That could have a material impact on mortgage rates."

Thank Gawd Obama saved us from a depression with his stimulus!

http://www.cnbc.com/id/35457298
http://finance.yahoo.com/news/Fed-bumps-up-rate-banks-pay-apf-4141548450.html?x=0&.v=3

What the hell was Bush's TARP all about, anyway??? DUMMY!!!

We need a strict separation of some sort here...

 

[Frisco_Slug_Esq]

The Fed feints

Monty Pelerin

Great hoopla over the Federal Reserve's surprise decision to raise the discount rate 0.25 % fills the media and the markets. Pundits discuss earnestly the spice has been added to the tea leaves. Barry Ritholtz lists three possible motivations behind the Fed's move:

1. Response to political pressures;
2. Proof the Economy is improving;
3. Inevitable ending of extraordinary accommodation.

The relevance of number 1 can be discounted rather quickly. Where could the "political pressure" come from? Other than lip service around election time, Congress never demands fiscal or monetary responsibility. It could refer to "hawks" on the Fed board, but they would not overrule Bernanke on anything substantive, which this move wasn't. Thus points 2 and 3 appear to be possible motivations.

The rate move was miniscule. Its size precluded it from having any meaningful economic effect. Thus, it must be interpreted as a "signal." But was it a signal meant to deceive? That is, was the move a "feint?"

The Fed traditionally sends a signal in advance of taking more serious economic measures. The rationale for a warning is to prepare markets for what is coming. It is believed that markets then adapt somewhat in advance of the future, stronger actions. This move was not a signal. As stated by John Williams of Shadowstats.com:

... the Fed has virtually no room to tighten credit in a system where the real (inflation-adjusted) broad money supply is in severe annual contraction, and where general bank lending into the flow of commerce is not adequate to maintain economic growth.

The Fed move was a feint designed to reinforce beliefs in points 2 and 3 above. But there is no economic recovery, and the Fed cannot stop its extraordinary accommodation.

The end of March will provide the proof. That is when Mr. Bernanke promised to cease Quantitative Easing. QE will not cease. There is not enough market demand to purchase the boatload of Treasuries needed to fund government deficits. New bond issuance needs to average $90 billion dollars per week this year. $40 billion is for new debt, while $50 billion is rollover of maturing debt.

If QE stops, the government defaults on at least some of its obligations. It does not have the money to pay its commitments without these bond proceeds. If Mr. Bernanke stops QE so does the Federal government. If QE stops, so will Social Security checks and other such payments.

Games will be played to attempt to cover up the continuance of QE. These games were played this year. The ultimate test is the level of Federal Reserve assets. What Mr. Bernanke claims is irrelevant. If Fed assets are increasing, so is QE, no matter how surreptitious it may be.

Mr. Ritholtz ends his post with this appropriate quote from Ralph Waldo Emerson:

I cannot hear what you are saying because what you are doing is speaking so loudly.

The Federal Reserve was established as an independent agency with goals to protect the banking system and the purchasing power of the currency. It has failed miserably in both respects. Over time, it also lost its independence and became highly politicized.

If Mr. Bernanke were truly to obey the charter of his agency, he would not enable the government to continue its irrational and ruinous spending. The fact that the government is dysfunctional is even more reason for the Fed to act. To paraphrase Ronald Reagan, "Mr. Bernanke, tear down this government. Do what your office demands."

Mr. Bernanke will not do his duty. But that merely postpones the inevitable. Markets will perform the task, and we will all be the worse for it when they do.

Monty Pelerin blogs at www.economicnoise.com

U_D, How confident are you still in the fiscal policies of the Obama administration?

 

[Beco]

Once again for the cheap seats..

Employment is a lagging indicator of economic recovery. The numbers are heading in the right direction after steep job losses for several months. Nobody said that everything is fixed and it's all roses and sunshine from here on out. Only a fool would expect a full recovery already.
in other news, the daily fluctuations of the DOW is not the same as the GDP.

Lagging yes, so they say. But ask any small business owner and he/ she will say, its not credit thats the issue, its that there's no customers...they'll also say, they have absolutely no faith that anyone in the White House has a clue how to fix the economy and create jobs, thats why small biz hasnt started hiring yet.

 

[Frisco_Slug_Esq]

Lagging yes, so they say. But ask any small business owner and he/ she will say, its not credit thats the issue, its that there's no customers...they'll also say, they have absolutely no faith that anyone in the White House has a clue how to fix the economy and create jobs, thats why small biz hasnt started hiring yet.

U_D will counter with, "my industry/company is on the leading edge of the economy and we are in full recovery mode..."



"... if we even had a slow down..."

 

[Ulaven_Demorte]

U_D will counter with, "my industry/company is on the leading edge of the economy and we are in full recovery mode..."



"... if we even had a slow down..."

A stunning lack of knowledge on display there Cap'n Pavlov.

Actually, my industry is one of the very first to suffer and one of the last to recover from an economic slowdown.

When the economy dips and companies need to tighten their belts the very first things that get cut are annual conventions and corporate retreats (even before they start to lay off any employees) especially to destinations like Orlando, Florida. It looks bad to stockholders when they get little or no dividend and the corporate leadership is "going to Disney World" for their annual pep talk and back slapping session.

You just keep assuming to know anything about me, my professional, and personal life and just keep making an ass of yourself.

 

[trysail]

There have been assertions that those fine, upstanding gentlemen at Goldman, Sachs actually created a fair number of garbage MBSs and CDOs for the sole purpose of purchasing CDSs on them. If that were the case, Goldman, Sachs could very rightfully be accused of a rather massive fraud. The payoff of the CDSs underwritten by AIG to Goldman at 100% on the dollar was, of course, enabled by the taxpayer-funded "rescue" of AIG. The numerous former Goldman people who have paraded through government ( Rubin, Paulson, Corzine are prominent names ) gives one pause to consider where their loyalty lies.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ax3yON_uNe7I



Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs
By Richard Teitelbaum

Feb. 23 (Bloomberg) -- When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.

Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.

A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.”

CDOs Identified
The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value.

The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place.

The banks should have to explain how they managed to buy protection from AIG primarily on securities that fell so sharply in value, says Daniel Calacci, a former swaps trader and marketer who’s now a structured-finance consultant in Warren, New Jersey. In some cases, banks also owned mortgage lenders, and they should be challenged to explain whether they gained any insider knowledge about the quality of the loans bundled into the CDOs, he says.

‘Too Uncanny’
“It’s almost too uncanny,” Calacci says. “If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that’s at the least unethical.”

The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion.

These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: “They may have been trying to shield Goldman -- for Goldman’s sake or out of macro concerns that another investment bank would be at risk.”

Poor Performers
Goldman Sachs spokesman Michael DuVally declined to comment.

Schedule A also makes possible a more complete examination of why AIG collapsed. Joseph Cassano, the former president of the AIG Financial Products unit that sold the swaps, said on a December 2007 conference call that his firm pulled back from selling swaps on U.S. subprime residential CDOs in late 2005. The list shows that the $21.2 billion in CDOs minted after 2005, mostly based on prime and commercial mortgages, performed as badly as or worse than the earlier subprime vintages.

A lawyer for Cassano declined to comment.

As details of the coverup emerge, so does anger at the perceived conflicts. Philip Angelides, chairman of the Financial Crisis Inquiry Commission, at a hearing held by his panel on Jan. 13, questioned how banks could underwrite poisonous securities and then bet against them. “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars,” he said.

‘Part of the Coverup’
Janet Tavakoli, founder of Tavakoli Structured Finance Inc., a Chicago-based consulting firm, says the New York Fed’s secrecy has helped hide who’s responsible for the worst of the disaster. “The suppression of the details in the list of counterparties was part of the coverup,” she says.

E-mails between Fed and AIG officials that Issa released in January show that the efforts to keep Schedule A under wraps came from the New York Fed. Revelation of the messages contributed to the heated atmosphere at the House hearing.

“What date did you know there was a coverup?” Republican Congressman Brian Bilbray of California demanded of Geithner. Lawmakers used the word coverup more than a dozen times as they peppered Geithner with questions.

Geithner said that he wasn’t involved in matters of disclosure and that his former colleagues did the best they could. In a Jan. 19 statement, the New York Fed said, “AIG at all times remained responsible for complying with its disclosure requirements under the securities laws.”

The government has committed more than $182 billion to AIG and owns almost 80 percent of the company.

Document Withheld
In late November 2008, the insurer was planning to include Schedule A in a regulatory filing -- until a lawyer for the Fed said it wasn’t necessary, according to the e-mails. The document was an attachment to the agreement between AIG and Maiden Lane III, the fund that the Fed established in November 2008 to hold the CDOs after the swap contracts were settled.

AIG paid its counter*parties -- the banks -- the full value of the contracts, after accounting for any collateral that had been posted, and took the devalued CDOs in exchange. As requested by the New York Fed, AIG kept the bank names out of the Dec. 24 filing and edited out a sentence that said they got full payment.

The New York Fed’s January 2010 statement said the sentence was deleted because AIG technically paid slightly less than 100 cents on the dollar.

Paid in Full
Before the New York Fed ordered AIG to pay the banks in full, the company was trying to negotiate to pay off the credit- default swaps at a discount or “haircut.”

By March 2009, responding to a request from Christopher Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, AIG released the names of the counterparty banks. In a filing later that month, AIG included Schedule A, showing bank names while withholding all identification of the underlying CDOs and the amounts of collateral each bank had collected. The document had more than 800 redactions.

In May 2009, AIG again filed Schedule A, this time with about 400 redactions. It revealed that Paris-based Societe Generale got the biggest payout from AIG, or $16.5 billion, followed by Goldman Sachs, which got $14 billion, and then Deutsche Bank and Merrill Lynch. It still kept secret the CDOs’ identification and information that would show performance.

‘Right to Know’
“This is something that belongs in the public domain because it was done with public money,” Issa says. “The public has the right to know what was done with their money and who benefited from it.” Now, thanks to Issa, the list is out, and specific information about AIG’s unraveling can be learned from it.

At the Jan. 27 hearing, the New York Fed was still arguing that the contents of Schedule A shouldn’t be fully disclosed. Thomas Baxter, the New York Fed’s general counsel, testified that divulging the names of the CDOs could erode their value: “We will be hurt because traders in the market will know what we’re holding.”

Tavakoli calls that wrong. With many CDOs, providing more information to the market will give the manager a greater chance of fetching a realistic price, she says.

Jack Gutt, a spokesman for the New York Fed, declined to comment, as did AIG’s Mark Herr.

Bad to Worse
Tavakoli also says that the poor performance of the underlying securities (which are actually specific slices or tranches of CDOs) shows they were toxic in the first place and were probably replenished with bundles of mortgages that were particularly troubled. Managers who oversee CDOs after they are created have discretion in choosing the mortgage bonds used to replenish them.

“The original CDO deals were bad enough,” Tavakoli says. “For some that allow reinvesting or substitution, any reasonable professional would ask why these assets were being traded into the portfolio. The Schedule A shows that we should be investigating these deals.”

Among the CDOs on Schedule A with notional values of more than $1 billion, the worst performer was a tranche identified as Davis Square Funding Ltd.’s DVSQ 2006-6A CP. It was held by Societe Generale, underwritten by Goldman Sachs and managed by TCW Group Inc., a Los Angeles-based unit of SocGen, according to Bloomberg data. It lost 77.7 percent of its value -- though it isn’t in default and continues to pay.

SocGen spokesman James Galvin and TCW spokeswoman Erin Freeman declined to comment.

Documentation Needed
Ed Grebeck, CEO of Tempus Advisors, a global debt market strategy firm in Stamford, Connecticut, agrees that more digging is necessary. “You need all the documentation and more than that, all the e-mails,” he says. “That would allow us to understand what went wrong and how to fix it going forward.”

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who delivered a report on the AIG bailout in November, says he’s not finished. He has begun a probe of why his office wasn’t provided all of the 250,000 pages of documents, including e-mails and phone logs, that Issa’s committee received from the New York Fed.

Schedule A provides some answers -- and raises questions that need to be tackled to avoid the next expensive bailout.

 

[koalabear]

Consumers’ confidence plummets in February
Index hits 10-month low over worries about jobs, overall economic recovery


http://www.msnbc.msn.com/id/35538750/ns/business-stocks_and_economy