The headline in today’s Financial Times was “Goldman push to repay US taxpayer.”
The story detailed how Goldman Sachs was planning to sell common stock to raise $5 billion to pay back the $10 billion in money it received through the TARP (Troubled Asset Relief Program) bailout. No where in the story did it talk about paying back the $12.9 billion it received from the bailout of AIG provided by US taxpayers.
The scrape over AIG bonuses is an indication of the core problems of the current financial crisis—a complete lack of due diligence, a reliance on the fact that no one is paying attention and a media and public attention span of a two year old.
How else can Congress and the Administration express shock over these bonuses that were known beforehand. Futures Publisher Ginger Szala blogged back in January regarding AIG bonuses yet those whose job it was to look over the details of the various government sponsored bailouts express shock and anger!
“I have no confidence that they intend or desire to change,” [Carl] Levin told me. “These bankers got away with murder, and it’s obscene that close to nothing is being asked of financial institutions. I get incensed at the thought that a bank that’s getting billions of dollars in taxpayer money is out there buying fancy new airplanes.”
New York Times, Jan. 28, 2009, Column by Maureen Dowd, Wall Street’s Socialist Jet-Setters
A couple months ago I wrote a Futures editorial that got a big response, largely because it took on the arrogance of companies and their corporate jets. At the time I was chiding the car makers, but apparently executive self entitlement has spiraled to the point that even when a company is taking public money, it’s willing to buy a corporate jet for $50 million and be shocked when the government, which loaned the company money, steps in and says no.
In Citigroup’s defense I know this thought process isn’t rampant in its rank and file. One of its executives told me once that while traveling with their children, he and his wife had to stay at a lesser star hotel because their hotel of choice was overbooked. His children were angry, and he and his wife were so appalled by their reaction, that for years afterward when they traveled they stayed at Motel 6’s until the kids quit complaining.
That’s what the government has to do with these Wall Street elite. (more…)
Spurred by the Lehman Brothers Chapter 11 bankruptcy, Merrill Lynch’s acquisition by Bank of America and AIG’s (American International Group Inc.) 60.79% decline, the Dow Jones Industrial Average today closed down 504.42 points, dropping to 10,917.51 from 11,416.37.
The S&P 500 dropped 59.01 points, closing at 1,192.69. That’s the biggest single day drop since Sept. 11, 2001.
According to Lehman, none of the company’s broker-dealer subsidiaries or other subsidiaries of LBHI was included in the Chapter 11 filing and all of the U.S. registered broker-dealers will continue to operate. Neuberger Berman, LLC will continue to conduct business as usual.
Lehman’s bankruptcy will reportedly result in the loss of 25,000 jobs, and the liquidation of the company, as negotiations with foreign wealth funds failed when the Federal guarantees failed to materialize. Such guarantees were made for Bear Stearns, when JP Morgan acquired it in March.
In the shadow of events, the Federal Reserve Bank has created the new Term Securities Lending Facility (TSLF), which could provide support and liquidity to the stressed markets. The Federal Open Market Committee announcement is scheduled for Tuesday, as is the Treasury International Capital (TICS) data, which will announce the amount of foreign capital entering or exiting U.S. markets.
Tuesday should be another intersting day.
