Greed_is_Good-03.09.2009

Greed is Good Ep. 3

 

Money:

• Market Update
  • Dow:
  • NASD:
  • S&P:
  • Big Movers:
• Rally or 5000?
  • With the Dow and S&P 500 both down more than 50% off their October 2007 highs, a decent bounce is not hard to imagine,
  • In tune with the bearish tone, investors pulled billions out of equity mutual funds last week. According to the latest report from Trim Tabs, investors pulled $29.9 billion out of stocks in the week ended March 4, versus an outflow of $18 billion in the previous week.
• Sen. Richard Shelby, R-Ala says “Let Banks Fail”
  • “Close them down, get them out of business. If they’re dead, they ought to be buried
    • Shelby did not mention any banks by name but, when asked about Citigroup, he said: “Citi’s always been a problem child.”
  • “Once these evaluations occur, there may be some banks — and we don’t know which ones, and I’m not going to name any — that will never make it,” Sen. Charles Schumer, D-N.Y., said on NBC’s “Meet the Press.” “You don’t just keep putting money in, money in, money in — and the bank never solves it self.”
  • Kansas City Federal Reserve President Thomas Hoenig criticized as piecemeal the approach taken by the government in handling of the banking upheaval.
  • “We understandably would prefer not to ‘nationalize’ these businesses but, reacting as we are, we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis,” Hoenig said in remarks to a local group.
• Mark to Market Accounting
  • According to Reuters, a U.S. House Financial Services subcommittee is expected to hold a hearing on mark-to-market accounting rules as soon as March 12. The SEC’s chief accountant and the chairman of the Financial Accounting Standards Board, will be asked to testify, the report said.
  • He says, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”
• Nationalizing the Banks
  • the water torture that is keeping zombie banks alive is both expensive and dangerous. So why not just bite the proverbial bullet and nationalize them?
  • Why NOT TO NATIONALIZE
    • Domino Effect
    • Management Challenge
      • governments are ill-suited to manage businesses. I’d take the point a step further: Overseeing the management of dozens, or hundreds, or maybe even thousands of nationalized banks is a daunting task.
    • Political obstacles
      • GOP v. Liberals fighting
    • Confidence
      • there is a danger that it might undermine rather than bolster confidence
    • What to do – Good bank/bad bank
      • Bad bank inherits bad assets, markdown assets
      • Healthy company goes on its way
• AIG: Where Taxpayers money goes to die
  • A.I.G. nearly barreled off the cliff last September, when it couldn’t meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt.
  • Some $440 billion in credit default swaps sat on the company’s books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans.
  • The rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.
    • On Wall Street, those customers are known as “counterparties,” and Mr. Liddy wouldn’t provide details on who the counterparties were or how much they received. But a person briefed on the deals said A.I.G.’s former customers include Goldman Sachs, Merrill Lynch and two large French banks, Société Générale and Calyon.
  • That means the geniuses at A.I.G. who wrote the insurance were willing to bet more than double their company’s value that defaults would not become problematic.

 

Politics:

• Record 31.8 Million people on food stamps
  • Increase of 700,000 food stamps in single month
  • Food stamps, which help poor people buy groceries, are the major U.S. anti-hunger program, forecast to cost at least $51 billion in this fiscal year ending Sept. 30, up $10 billion from fiscal 2008.
  • The average food stamp benefit is $115 a month for individuals and $255 a month per household.
  • In April, food stamp benefits will increase temporarily by 13% under provisions of the recently enacted economic stimulus law. Ellen Vollenger of the Food Research and Action Center said some families will see increases of $80 a month
• Obama is Killing the Dow
  • Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest — with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap
  • From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president’s economic program seem bereft of rigorous analysis and a careful reading of history.
• Obama reversing stem cell legislation
  • he is reversing Bush administration limits on federal financing for embryonic stem cell research as part of a pledge to separate science and politics, White House officials said Friday.
  • Mr. Obama’s announcement is not likely to lead to any immediate change in government policy, since it may take many months for the National Institutes of Health to develop new guidelines for research.
  • research advocates are expected to push for the process to go as quickly as possible to ensure that universities have time to submit grant proposals that can be reviewed and accepted before September 2010, when the health institutes must commit the last of the $10.4 billion given to the N.I.H. as part of the economic stimulus program.
  • Because embryonic stem cells are capable of developing into any type of cell in the body, many scientists believe that they may one day be able to provide tissues to replace worn-out organs or nonfunctioning cells and, thus, offer powerful new treatments for diabetes, heart disease, Parkinson’s disease and other ailments. Some researchers say the stem cells may even be used someday to treat catastrophic injuries like damage to the spinal cord.
  • But many people have a moral problem with embryonic stem cell research because creation of the cells entails destruction of human embryos. For that reason, Mr. Bush ordered in August 2001 that federal research be limited to lines of cells that were already in existence, since the embryo destruction for those had already taken place.

 

Other:

• Ann Coulter Bashes Ag School, among others
  • Except Keith didn’t go to the Ivy League Cornell; he went to the Old MacDonald Cornell.
  • Communications” is a major, along with “recreation science,” most commonly associated with linemen at USC. But at least the linemen can throw a football, which Keith cannot because his mother decided he was not physically robust enough to play outdoors as a child.
  • Finally, you can stop pretending that you went to the hard-to-get-into Cornell.
  • Response
• Cornell Basketball redeems itself, makes it to March Madness
• Cornell issuing debt
  • The Trustees authorized the University to sell up to $500 million in taxable bonds to provide working capital and institutional liquidity.
  • The University is also set to reduce spending from the endowment by 15 percent starting July 1, with further cuts planned for subsequent years.

 

 

 

 

 

 

 

http://dealbook.blogs.nytimes.com/2009/03/06/volcker-split-commercial-and-investment-banks/

 

 

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