"...There is something going on here we don’t know about. So far, while the media has been distracting us with the $165 MILLION bonus fiasco, they have glossed over the $170 BILLION payoffs at 100 cents on the dollar to international bankers.

This is either just plain stupid (and I believe bankers are greedy, but rarely stupid), or there is a quid-pro-quo involved.

I cannot prove this, buy it is my belief that we are witnessing a financial war between the US Dollar and the newly emerging Euro for supremacy as the official global reserve currency.

This is a banking war, fought between Anglo-Americans (Wall $treet and the City of London) and the ECB. The latter, however, lacks the ability to print money like the FED does. In fact, the EU really has no FED equivalent, which is why they are waffling on a stimulus package.

My theory is that, in exchange for bailing out the AIG counter-parties (who would otherwise be insolvent), those counter-parties have capitulated to US Dollar hegemony.

There you have it.

Wish I could prove it.

I can’t, but it sure explains a lot of what is going on and why..." - I posted this last week



http://www.nytimes.com/2009/03/27/business...egulate.html?hp

March 27, 2009
Geithner Calls for Major Overhaul of Financial Rules
By EDMUND L. ANDREWS and LOUISE STORY

WASHINGTON — The Obama administration on Thursday detailed its wide-ranging plan to overhaul financial regulation by subjecting hedge funds and traders of exotic financial instruments, now among the biggest and most freewheeling players on Wall Street, to potentially strict new government supervision.

The Treasury secretary, Timothy F. Geithner, outlined the plan, which goes further than expected, in a hearing on Thursday before the House Financial Services Committee. Mr. Geithner, in his opening statement, called for “comprehensive reform. Not modest repairs at the margin, but new rules of the game.”

“Financial institutions and markets that are critical to the functioning of the financial system and that could pose serious risks to the stability of the financial system need to be subject to strong oversight by the government,” Mr. Geithner said in prepared remarks.

To that end, Mr. Geithner said: “Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take. We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.”

Mr. Geithner did not provide details for how all this will work, saying that the proposals would be outlined over the coming.

The plan, which would require Congressional approval, would give the government new powers over “systemically important” banks and other financial institutions that are so big that their collapse would jeopardize the economy as a whole.

The government would have the power to peer into the inner workings of companies that currently escape most federal supervision — insurance companies like the American International Group, multibillion-dollar hedge funds like the Citadel Group and private equity firms like the Carlyle Group or Kohlberg, Kravis & Roberts.

If regulators decided that a company had become “too big to fail,” as was the case with A.I.G. in September, they would subject it to much stricter capital requirements than smaller rivals and much closer scrutiny of its borrowing levels and its trading partners, or counterparties.

But the most striking new proposals, and the ones that may provoke the most heated opposition from the industry, would regulate so-called private pools of capital — hedge funds, private equity funds and venture capital funds — and the gigantic market in financial derivatives, including instruments like credit-default swaps, the insurancelike instruments that allow investors to hedge against bond defaults.

Hedge funds and private equity funds manage money for wealthy individuals and institutions like pension funds. They operate almost entirely outside the regulation of either the Securities and Exchange Commission or the Federal Reserve.

Under the administration proposal, hedge fund, private equity and venture capital fund advisers would for the first time have to register with the S.E.C. They would be required to provide the government — on a confidential basis — information on how much they borrow to leverage their investments as well as information about their investors and trading partners.

The S.E.C. would then share those reports with a new “systemic risk regulator.”

Hedge funds have generally not been implicated in the financial collapse, which stemmed primarily from reckless mortgage lending and exotic financial instruments tied to subprime mortgages.

But the hedge fund industry for years has fought even minimal federal regulation, like S.E.C. registration. Now, a growing number of lawmakers and policy makers are worried that hedge funds have become too big a part of the financial market to operate without government monitoring.

Administration officials also want to prevent a repeat of the gigantic Ponzi scheme perpetrated by Bernard L. Madoff.

John A. Paulson, a hedge fund manager who made billions by betting against the housing market, said in an interview on Tuesday that the main goal of any regulation of hedge funds should be to protect investors from frauds like that of Mr. Madoff.

“We’re for anything that protects investors,” Mr. Paulson said. While he acknowledged that some hedge funds might have relied too heavily on leverage to improve their returns, he added that “there hasn’t been one problem at all to global systemic risk in the U.S. and abroad from a hedge fund.”

Leon G. Cooperman, a longtime hedge fund manger who runs Omega Advisors, said that new regulations were not needed and that he found the call for new rules to be mere finger-pointing.

“I’m already heavily regulated,” Mr. Cooperman said, saying that his fund was subject to oversight from the S.E.C., the Commodity Futures Trading Commission, the Fed and other organizations.

“The truth of the matter is, most major hedge funds are registered with the S.E.C., they are regulated with the C.F.T.C., and they are subject to Federal Reserve margin requirements,” he said, referring to the Fed’s rules that require all investors to set aside funds when buying securities on credit. “The regulatory system is already in place. Let them enforce what they have.”

There is likely to be an even bigger fight over the proposal to regulate financial derivative products. Some derivatives, like stock options and interest rate futures, are already regulated because they are traded on exchanges like the Chicago Board of Trade.

But the administration would regulate trading in more exotic derivatives that trade privately, like the credit-default swaps that were used both to hedge against and to speculate on high-risk mortgage-backed securities. These more exotic products have been traded almost entirely in the informal, over-the-counter market that lies outside regulatory scrutiny.

The administration would require that all standardized derivatives be traded through a regulated clearinghouse. Traders would be required to provide documentation on their collateral and borrowings. They would also be subject to new eligibility requirements, and their trading and settlement practices would be subject to new standards.

But the proposals are all but certain to provoke criticism from all sides — traders who say the rules are too intrusive and policy experts who say the approach is too vague.

Edmund L. Andrews reported from Washington, and Louise Story from New York.

Meanwhile domestic banks and others in the AIG fiasco are only getting 30 cents on the dollar.......or that appears to be the current offer as I hear repeatedly on the broadcast of the morning session of House cmte with Secretary of Treasury..........I expect the howls over this are just gaining volume.


lenal

I think that the fix is in (with appropriate royalties to graham). The BigBanks KNOW what their kaka is worth - somewhere between 22 cents (what Blackstone paid for Lehman's) to 30 cents (the AIG figure).

All banks would be immediately declared INSOLVENT if they had to "mark to matket" at either value.

Instead, they have determined that they can "live" with 84 cents, taking a 16 cent hit on their books. The rest, as they say, is up to us taxpayers. All the mimbo-jumbo from Geithner is just a set up so that the "private" money can come in at 84 cents, with us picking up all but 6 cents of it.

Such a deal.

So let's do the math.

The Banksters take a 16 cent hit, and they get to stay in business (which means we get to avert a global collapse).

The hedge hogs will pony up 72 cents, with 5/6 of that guaranteed by FDIC, or 60 cents.

Of the 12 cents they have to actually reach into their pockets for, we (taxpayers) will guarantee half (6 cents).

Is this right?

TomHye - where are you when we need you?

Hi Jeff. Have you read the article in the Atlantic entitled "The Quiet Coup"? I just posted a link to it in this thread.

http://www.commongroundcommonsense.org/for...0&start=180

If you haven't read it yet you might want to check it out.

Well, he buries the lead, but on page 3 we finally get it"

"...This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that. As Neel Kashkari, a senior Treasury official under both Henry Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for the third group involved: the taxpayers..."


I agree. We taxpayers are going to permit those hedge hogs on the sidelines to buy kaka at a price that will make the banks whole.

On our nickel.

"EU presidency: US stimulus is 'the road to hell' - EU president calls Obama's plans to spend his way out of recession 'the road to hell'"

By AOIFE WHITE, Associated Press

Last updated: 3:45 p.m., Wednesday, March 25, 2009

BRUSSELS -- The head of the European Union slammed President Barack Obama's plan to spend nearly $2 trillion to push the U.S. economy out of recession as "the road to hell" that EU governments must avoid.

The blunt comments by Czech Prime Minister Mirek Topolanek to the European Parliament on Wednesday highlighted simmering European differences with Washington ahead of a key summit next week on fixing the world economy.

It was the strongest pushback yet from a European leader as the 27-nation bloc bristles from U.S. criticism that it is not spending enough to stimulate demand.

Shocked by the outburst, other European politicians went into damage control mode, with some reproaching the Czech leader for his language and others reaffirming their good diplomatic ties with the United States.

The leaders of EU's major nations -- France, Britain and Germany, among others -- largely ignored Topolanek and his remarks.

Obama pays his first official visit to Europe next week, aiming to thrash out reforms to the global financial system with the Group of 20 nations and call on NATO allies to commit more troops to the U.S. war in Afghanistan.

Europeans leaders hope the new U.S. administration will agree with them on tightening oversight over the global financial system -- which they see as crucial to fixing the global economy.

Instead, the United States is focusing its efforts on economic stimulus and plans to spend heavily to try and lift itself out of recession with a $787 billion plan of tax rebates, health and welfare benefits, as well as extra energy and infrastructure spending.

To encourage banks to lend again, the U.S. government will also pump $1 trillion into the financial system by buying up treasury bonds and mortgage securities in an effort to clear some of the "toxic assets" -- devalued and untradeable assets -- from banks' balance sheets.

Obama insisted Tuesday that his massive budget proposal will put the ailing U.S. economy back on its feet.

"This budget is inseparable from this recovery," he said, "because it is what lays the foundation for a secure and lasting prosperity."

But Topolanek took aim at Washington's deficit spending.

"All of these steps, these combinations and permanency is the road to hell," Topolanek said.

"We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way."

"Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the liquidity of the global financial market," Topolanek said.

Topolanek spoke the day after he was ousted by his own parliament.

The Czech Republic currently holds the six-month rotating EU presidency but its leadership is in question, with Topolanek hanging on to a caretaker government at home after losing a "no confidence" Tuesday.

In Washington, State Department spokesman Gordon Duguid said he did not expect the Czech poltical turmoil to affect Obama's upcoming trip to Prague because the president was traveling to attend an EU event.

Analyst Nicolas Veron, a research fellow at the Bruegel think tank, said Topolanek's view is not widely shared by EU leaders.

"I don't think the damage can be as large as the very strong wording of this would lead one to think," he said.

"Many people have doubts about the U.S. plan but what he said is much stronger."

Veron said European leaders worry that the U.S. plan may not work or could cost taxpayers heavily -- but he did not doubt the U.S.' "fiscal robustness" or that it still had extra room to maneuver to stoke economic growth.

Martin Schulz, leader of the Socialist group in the European parliament, immediately chided Topolanek, saying his comments were "not the level on which the EU ought to be operating with the United States."

"You have not understood what the task of the EU presidency is," he told the Czech premier.

EU Commission President Jose Manuel Barroso also said it was "not helpful ... to try to suggest that Americans and Europeans are coming with very different approaches to the crisis."

"On the contrary, what we are seeing is increased convergence," he told the parliament.

But Europe's resistance to the U.S. call for new stimulus measures is starting to weaken despite Germany's fierce opposition to any new spending program this year.

French President Nicolas Sarkozy said Tuesday he is prepared to support the economy with a new spending package.

EU officials say they can't rule anything out -- even an EU-wide stimulus that could help nations like Ireland and Spain, which can't afford any extra stimulus.

British Prime Minister Gordon Brown has also supported U.S. calls to ramp up fiscal stimulus -- government spending and tax cuts -- although the Bank of England has warned that Britain's swelling public deficit may make it unable to afford new spending.

------

Associated Press writers Raf Casert in Strasbourg, France, Jane Wardell in London and Desmond Butler in Washington contributed to this report.