Infinite Unknown

Message to US taxpayers: “We will get our bonuses….and you will pay for it!”
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Dec. 4 (Bloomberg) — American International Group Inc., whose bonuses and perks drew fire from lawmakers after the insurer accepted a federal bailout, will make special retention payments that more than double the salaries of some senior managers, according to a person familiar with the matter.

Some executives among 130 recipients will get more than $500,000, about 200 percent of their salaries, to stay through 2009, said the person, who declined to be named because the information hasn’t been publicly disclosed. An undetermined number of lower-paid employees will also get cash awards to dissuade them from quitting, the person said.

“It seems like more than what you’d need to pay to get people to stick around,” said David Schmidt, a senior consultant at executive pay firm James F. Reda & Associates. “Nobody’s hiring, so where are you going to go?”

Chief Executive Officer Edward Liddy is encouraging top employees at AIG subsidiaries to remain so the units retain their value while he seeks buyers. The New York-based company is selling businesses, including its U.S. life insurance and retirement services operations, to repay loans in a $152.5 billion government rescue of AIG, which had a record $37.6 billion in net losses so far this year.

Best Interest

“We have to hold on to the talented people running our businesses,” said AIG spokesman Nicholas Ashooh, adding that many managers have lost much of their life savings. The executives “have deep business relationships that are not easily duplicated,” he said today in an e-mail. “Our competitors have been trying to hire them for years.”

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Tags: AIG, bailout, Economy, financial crisis, taxpayers, U.S.

If you oppose those disastrous bailouts people then you should have better voted for Ron Paul and not for Mr. ‘Change is Protectionism’ or Mr. ‘Bomb Them All’. Ron Paul would have listened to the people. He always did. Those elite puppets won’t.
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Survey shows that Americans think federal aid for the Big Three is unfair and won’t help the economy.

NEW YORK (CNNMoney.com) — A majority of Americans oppose a bailout of the troubled U.S. auto industry, according to a poll released Wednesday.

The CNN/Opinion Research Corp. poll, conducted by telephone on Dec. 1-2 with nearly 1,100 people, showed that 61% of those surveyed oppose government assistance for the major U.S. automakers.

The poll comes at a critical time for the American auto industry. Ford Motor, General Motors and Chrysler LLC are requesting up to $34 billion dollars in emergency loans from the government to amid the weakest auto sales in 25 years and persistently tight credit.

General Motors and Chrysler, burning through billions of dollars in cash, are the most imperiled. All three companies submitted plans to Congress on Tuesday making their case for funding, and industry executives are set to testify on Capitol Hill as lawmakers debate whether to take emergency action.

But Wednesday’s poll suggests that Americans believe bailing out the Big Three is a bad idea.

A full 70% of respondents indicated that a bailout is unfair to taxpayers.

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Tags: Chrysler, Economy, Ford, General Motors, GM, Politics, taxpayers, U.S.

The Volvo V70

General Motors and Ford Motor have approached Sweden’s government about financial aid for their lossmaking Saab and Volvo brands.

Related article: Ford Says It May Sell Volvo, Its Last European Brand

GM and Ford want to bolster the two marques’ finances in anticipation of selling them as the Detroit carmakers grapple with a cash crunch that threatens their survival.

Stephen Odell, Volvo’s chief executive, and Saab’s managing director Jan-Ake Jonsson have separately spoken to Maud Olofsson, Sweden’s industry minister, and other officials about securing funds, according to several people familiar with the discussions.

Ford and GM will both tell the US Congress they have long-term plans to dispose of the brands this week when they present detailed business and financial plans to support their request for $25bn of emergency funding.

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Tags: bailout, Cars, Ford, General Motors, GM, Government, Politics, Saab, Sweden, taxpayers, Volvo

Royal Bank of Scotland, Britain’s second biggest bank until the credit crunch struck last year, confirmed today that is now majority-owned by the taxpayer after a £20bn bail-out by the government.

The Edinburgh-based bank announced this morning that its existing investors had shunned its £15bn cash call, leaving almost all the new shares in the hands of the government. The taxpayer now owns 57.9% of the business. Only a handful of investors took up the offer to subscribe to new shares at 65.5p because the bank’s share price had been trading below that level, giving them no incentive to support the cash call.

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Tags: Banks, Economy, financial crisis, Government, Politics, RBS, Stock Market, taxpayers

The federal government committed an additional $800 billion to two new loan programs on Tuesday, bringing its cumulative commitment to financial rescue initiatives to a staggering $8.5 trillion, according to Bloomberg News.

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That sum represents almost 60 percent of the nation’s estimated gross domestic product.

Given the unprecedented size and complexity of these programs and the fact that many have never been tried before, it’s impossible to predict how much they will cost taxpayers. The final cost won’t be known for many years.

The money has been committed to a wide array of programs, including loans and loan guarantees, asset purchases, equity investments in financial companies, tax breaks for banks, help for struggling homeowners and a currency stabilization fund.

Most of the money, about $5.5 trillion, comes from the Federal Reserve, which as an independent entity does not need congressional approval to lend money to banks or, in “unusual and exigent circumstances,” to other financial institutions.

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Tags: Ben Bernanke, Citigroup, debt, Economy, Fed, Federal Reserve, financial crisis, GDP, Government, Henry Paulson, Inflation, Politics, Recession, taxpayers, Treasury

Nov. 26 (Bloomberg) — The Federal Reserve’s new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren’t sure they want more debt.

Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed’s new liquidity through deposits at the central bank.

“We are sort of spitting in the wind,” said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. “Banks won’t be throwing a lot of loans out there when they fear — rationally — those loans may not be paid back.”

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Tags: Banks, Ben Bernanke, Economy, Fed, Federal Reserve, financial crisis, Government, Henry Paulson, Politics, taxpayers, Treasury, U.S.

On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a labile Congress in September. Early on, Paulson put $125 billion in the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the US United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

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Tags: AIG, bailout, Banks, Bush administration, Chrysler, Citigroup, Derivatives, Derivatives market, Dollar, Economy, FDIC, financial crisis, Ford, General Motors, GM, Government, Henry Paulson, Lehman Brothers, Politics, Stock Market, taxpayers, Treasury, U.S., Wachovia, Wall Street, Washington Mutual

We will see hyperinflation, the dollar will fail and then the US will fail.
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Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, look through their notes before a hearing of the House Financial Services Committee in Washington, Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 24 (Bloomberg) — The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

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Tags: bailout, Banks, Ben Bernanke, Congress, Credit Crisis, credit crunch, Economy, FDIC, Fed, Federal Reserve, financial crisis, Government, Henry Paulson, Politics, taxpayers, Treasury

It’s not preferable, but all major U.S. financial companies will eventually be under government control because the alternative is so much worse, Hugh Hendry, chief investment officer at hedge fund Eclectica Asset Management, said Friday.

“All financials will be owned by the U.S. government in a year,” Hendry said. “I bet you.”

(Watch the accompanying video for Hendry’s full comments here.)

Nationalizations take dramatic losses from the private sector and places them on the larger balance sheet of the public sector, he said.

“It’s not good,” but society is vulnerable and society is going to have to intervene, Hendry said.

Shareholders Should Get Nothing

Because the taxpayers are forced to foot the bill for bailout out the banks, shareholders shouldn’t be compensated, Hendry added.

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Tags: Banks, Citigroup, Economy, financial crisis, Government, hedge funds, Politics, Stock Market, taxpayers, U.S., Wall Street

This Is Not A Normal Recession

Moving on to Plan B

“The Winter of 2008-2009 will prove to be the winter of global economic discontent that marks the rejection of the flawed ideology that unregulated global financial markets promote financial innovation, market efficiency, unhampered growth and endless prosperity while mitigating risk by spreading it system wide.” Economists Paul Davidson and Henry C.K. Liu “Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy”

The global economy is being sucked into a black hole and most Americans have no idea why. The whole problem can be narrowed down to two words; “structured finance”.

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Tags: AIG, Banks, Bear Stearns, Ben Bernanke, bubble, Credit Crisis, credit crunch, Derivatives, Derivatives market, Economy, Fannie Mae, Fed, Federal Reserve, Freddie Mac, Great Depression, Henry Paulson, Lehman Brothers, mortgage crisis, Mortgages, Politics, Recession, Stock Market, taxpayers, Treasury, Wall Street, Washington Mutual