THE $700 BILLION MEN; PAULSON PICKING RESCUE ADVISERS (scavengers gorging on US carcass?)

NY POST ^ | 10/6/08 | JAMES COVERT

[Liz]

Secy Henry Paulson today begins handpicking advisers to administer the $700B rescue plan.......drafting a list of between 5-10 Wall Street asset managers to tackle the massive mortgage mess. Paulson has the biggest say in how much the government decides to pay for troubled mortgages and other securities - If he pays too much - taxpayers could be on the hook for hundreds of billions of dollars if the government is unable to sell the securities at a profit......if Paulson pays too little, financial analysts agree it might fail to convince leery lenders to open up their wallets and start making much-needed short-term loans that are necessary for businesses to operate.........auctions of the securities aren't expected to start until mid-November.....big-name financial insiders for Paulson's rescue advisory panel include Bill Gross, legendary founder of the Pimco asset-management giant....... and Larry Fink, CEO of the investment firm BlackRock. Although experts in mortgage-related assets, critics said big names could be saddled with conflicts of interest if hired by the government. "Pimco is one of the larger beneficiaries of this bailout, as they were" with the government rescue of Fannie Mae and Freddie Mac.

[Liz]

You are spot on---for a "Repub," Paulson's sure been a drag on McC's chances in Nov. McC's numbers are falling like rocks while red states are fast turning blue. Watta stupid move he made---saying he was "suspending" his campaign as the bailout vote loomed. Where was his plan? He said NOTHING about "a plan" at the debate days later.

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MARCH 18,2008 Treasury Secretary Paulson concedes sharp decline, but not a recession

Int Herald Tribune---Reuters

WASHINGTON: The U.S. Treasury Secretary Henry Paulson Jr. said Tuesday that the American economy had turned down sharply, but he declined to label the current situation a recession. "We know we're in a sharp downclimb and there's no doubt that the American people know that the economy has turned down sharply," he said. "So to me much less important is the label that's placed on it today. Much more important is what we do about it." He said the Treasury was "all over" the turbulence in capital markets and that he did not think think the Bear Stearns shareholders believed they had been bailed out by the Federal Reserve. "The big focus on the part of all policy makers is to minimize the spillover to the real economy." Paulson said. "We need to keep our capital markets stable, functioning well." http://www.iht.com/articles/2008/03/18/business/18paulson.php

[Liz]

Thanks for the headsup. Nice to know Sammon is on the case.

[paratrooper82]

Never have, why start now?

[Liz]

Paulson named Neel Kashkari (asst to Paulson at Treasury and former pal at GS) to head the bailout effort......

Isnt that disgusting? I almost heaved when I found out.

[SE Mom]

We’re lucky to have PAULSON? You are joking, right? GS was in subprime up to their eyeballs- then they shorted them.

http://www.dailyreckoning.com.au/goldman-sachs-2/2007/10/19/

~snip~

It’s not like Goldman is barred from shorting the investment markets that it helps bring into being. Nor did it have any special insight; all of the big investment banks were busy creating and selling subprime junk in 2005-2006.

None of the other big banks, however, had the chutzpah to short the very market in junk they’d given birth to - not yet, at least. And few banks seem to have created bonds quite as toxic as Goldman did.

Take last year’s vintage, for example. In 2006, Goldman Sachs’ mortgage-bond division - Alternative Mortgage Products (known as GSAMP for short) - issued 83 home-loan-backed bonds, valued at $44.5 billion. In the subprime sector, it grew its business by 59% from 2005, unloading some $12.9 billion on to unsuspecting, stupid and/or greedy investment fund managers who thought a bond under-pinned by home-buyers with no hope of repaying might be worth having.

According to Inside Mortgage Finance, that made GSAMP the 15th biggest issuer of subprime-backed bonds in 2006. And come the start of the third quarter this year, those securities were being downgraded by the credit ratings agencies faster than anyone else’s.

Research from Citigroup, dated 22nd June, found that “portions of Goldman’s GSAMP-issued bonds, which include subprime loans from a variety of lenders, have been downgraded a combined 69 times by Standard & Poor’s and Moody’s Investors Service in the year through June 15,” as Reuters reported.

“Sixty of the GSAMP downgrades refer to classes from 2006 bonds,” Citigroup added, and one of Goldman’s 2006 crop - the GSAMP Trust 2006- S3 - may actually be “the worst deal...floated by a top-tier firm,” reckons Allan Sloane in the Washington Post.

In spring 2006, “Goldman assembled 8,274 second-mortgage loans originated by Fremont Investment & Loan, Long Beach Mortgage, and assorted other players,” explains Sloane after studying the public record. “More than one-third of the loans were in California, then a hot market. It was a run-of-the-mill deal [face-value $494 million], one of the 916 residential-mortgage-backed issues totaling $592 billion that were sold last year.

“The average equity [these] borrowers had in their homes was 0.71%...[meaning] the average loan-to-value of the issue’s borrowers was 99.29%.

“It gets even hinkier,” Sloane goes on. “Some 58% of the loans were no- documentation or low-documentation. This means that though 98% of the borrowers said they were occupying the homes they were borrowing on - ‘owner-occupied’ loans are considered less risky than loans to speculators - no one knows if that was true. And no one knows whether borrowers’ incomes or assets bore any serious relationship to what they told the mortgage lenders.”

Whatever the truth, one in every six of the 8,274 mortgages bundled together in GSAMP Trust 2006-S3 was already in default 18 months later. Whoever bought the S3 bonds will have either taken a 100% loss, or they’re now waiting - and hoping against hope - for some other schmuck to turn up and take this toxic waste off their hands at a very heavy discount.

Meantime at Goldman Sachs, the profits made by shorting the subprime market flipped Q3 ‘07 from “significant losses” to “significantly higher” net revenues. Goldman creamed it by selling ‘em twice, in other words...first as an asset...and then as a tasty short.

You don’t need to think this is more than ironic to wonder why anyone - most especially your pension or fund manager - would trust investment bankers to look out for your best interests. (More on that in Part II...)

~snip~

[grayhog]

Paulson’s job as CEO was not to trade securities, but to manage risk and move the firm towards the markets where he saw opportunity and away from those where he saw risk. He did that superbly and now GS is the last investment bank standing because of it.

The cynicism that rears its head on occassion here is a sad commentary on the character of some of the people posting here. These are serious times. We don’t do ourselves any favors and sound liberal-esque in making those kinds of comments

[Liz]

G/S and that crowd always prided themselves on their performances in the looting and bankrupting of pension funds.

Now they get the chance to loot the entire US govt.

Man, they will be laughing all the way to their several tax-free offshore bank accounts.

What fun they’ll have-—island-hopping to safe bank havens in their private jets.

[Liz]

There, there, now----just take a couple of these when you feel like posting.

[redgolum]

Forgot you were a Kiwi.

Things will be “interesting” for a while. Just hope this mess doesn’t end up like the last time with a world war.

OT, would love to go on a hunt in NZ one of these days! Know some people that have, and the pictures are beautiful.

[SE Mom]

We haven’t had a “free market” for years -liberal policy that became legislated created the subprime market. Fannie and Freddie sneezed and the ‘something for nothing virus’ -spread throughout the global system. It was a ponzi scheme of sorts and a scam of the first order and the entire economy of the world has been based on it for years now.

Cynical? Damn right I’m cynical. The reputation of Wall St has been ruined by the ruthlessness and rapacious greed of some.

Questioning my character- or that of others who don’t trust Paulson cleverly changes the subject, doesn’t it? Too many people who will be implementing this bailout are part of the mindset that created it in the first place. I know the excuse for that is that no one else understands how to deal with these complex instruments and toxic assets. We, the unsophisticated.

Shake your head in superior dismay at my dismal lack of knowledge, call me cynical and lacking character- all that while worldwide banks are failing, markets tank and the days of unearned credit die an ugly death.

I agree with you about one thing- these are serious times. Time for people to sober up. Unfortunately- people who didn’t participate in this orgy are finding themselves paying the price for those who did.

[SE Mom]

Ooops- too late :) Maybe I won’t have that third cuppa, though..

[DieHard the Hunter]

> OT, would love to go on a hunt in NZ one of these days! Know some people that have, and the pictures are beautiful.

If you do make it to NZ sometime, do look me up — I’m in the Auckland area, where most of the overseas aeroplanes land.

Just this evening I had drinks with FReeper “Dr. Ursus”, who is traveling thru New Zealand with his wife on a tour.

I’m always good for a coffee or a beer, and a chat — and I like playing tourguide if there’s time.

(One of the benefits of being a Guardian Angel is that you get to know the city really well: including where the best steakhouses, pubs, stores &tc are, which banks give the best foreign exchange, when the trains, ferrys and buses run and where to catch them, and how to get to the local sights and tourist traps. This is because tourists ask us this stuff all the time!)

[Thebaddog]

In a Fortune Magazine feature on Paulson, I learned some things. First, he came to Washington to "do something" so there is an ego running things. His son is a reporter for Christian Science Monitor and that would be a liberal paper as I recall. And Hank is bi-partisan, which you would expect from a democrat in a Republican administration, but he's tight with Schumer and Schumer is as partisan as it gets. IMHO, Bush got rolled and forgot a principle of deferring major legislation in the lame duck period.

What on earth was Bush thinking? And is there any communication or coordination amongst all the Republicans? Obama knew the plays before they were apparent, we have to do the same. Wake Up, People. How's that for a Jerry Jones riff?

[Liz]

Pour vous

[PapaBear3625]

We're handing this job over to people who are going to be out of office in January, and who will not be facing any personal consequence for screwing the taxpayers.

I would think that many people would find this disturbing.

[Liz]

Bush got rolled ......What on earth was he thinking?

Yeah, you'd think Bush would have learned from being duped into the massive transfer of US wealth into Mideast hellholes (and into war profiteers' pockets).

Here we go again.

OTOH, Bush probably played no role in this mess----as in the Iraq debacle, he let others call the shots.

[Liz]

These people are going to be out of office in January, and will not be facing any personal consequence for screwing the taxpayers.

Sounds like "a plan" to me (snicker).

[grayhog]

I appreciate your sentiment and emotion (and your tag line).

My point is the cynic does nothing to help the situation and in many cases makes it worse. In my experience, in the broadest sense, there are two types of people in the world — those that do and who are not afraid to lead; and those who sit by and go along for the ride and when things work out they reap the benefit and when things don’t work out, out comes the knives slashing away at those who acted.

So yes, I question the character of the cynic. There is a difference between a cynic and a critic.

Its obviously no fault of yours, nor is it of Hank Paulson’s, George Bush’s or even Barney Frank’s (as painful as it is for me to write). That is how capitalism works. The millions of actions and transactions that occur by millions of people over time create an economy. Sometimes things go off in the wrong direction, as has just happened, and it takes real skill and courage to get them back on path while avoiding disaster. Its happened before in our economy, just not in quite some time.

I do absolutely believe Paulson and Bernanke are our best chance at getting this right. If what they are trying doesn’t work, the angst we all feel today won’t compare to what lies down the road.

[SE Mom]

Thanks for your reply- we can agree to disagree :) I don’t trust Paulson- if I’m wrong I’ll be thrilled!

[JoeFromSidney]

Everyone who voted for the Bailout (now re-christened the Rescue) must be defeated the next time they stand for election (all Representatives stand for election this November). You may be thinking, "weeeeeelll, my congresscritter is good on issue X." No. He showed his true colors by voting for the Bailout. Get rid of him.

Contribute to the campaign of the opponent of anyone who voted YES.

Go to the election headquarters of the opponent and get yard signs and bumper stickers. Display them, and distribute them to friends and family.

Write letters to your local newspaper, opposing the treacherous congresscritter. Use these talking points:

• The Bailout does nothing to repeal the Community Reinvestment Act. Banks are still legally required to make loans to unqualified people.
• The Bailout does nothing to eliminate "Mark to Market." Banks can still see their capital evaporate if some other bank has to sell its assets at fire-sale prices. (The SEC has modified the rule, but they can restore it at any time.)
• The Bailout does nothing to correct Fannie and Freddie. Putting in new management doesn't alter the underlying problem, that they are backed by the taxpayer.
• The Bailout does nothing to correct the Fed's inflationary policies, which fueled the housing bubble.
• The Bailout will cost at least $2300 per person, $9100 per household, and $5300 per income tax filer.

If there's a talk show in your area, call in and lambaste your congresscritter for voting for this abomination. Call in to national talk shows urging that everyone who voted YES be voted out.

If your congresscritter voted NO, then do the opposite of these things. Support your congresscritter and work against his opponent.

There is still time to act before the election. We can make the Representatives who voted YES pay for their vote. Those Senators who are up for election this year can also be made to pay.

Remember, ballot box, jury box, cartridge box, in that order. Let's use the ballot box while we still have it.