naked capitalism

Submitted by Leo Kolivakis, publisher of Pension Pulse.

I want to follow-up on my last post, the Mother of all stealth scams?. In that post, I argued that the AIG bonus bonanza and the upcoming bank bailouts are distracting people from the bigger problem coming down the road, namely, the bailouts of public and private pension funds that are grossly underfunded.

I argued that the pension Ponzi scheme has been going on for many years as billions of dollars were funneled into alternative investments on the pretense that they provide diversification from traditional stocks and bonds and deliver absolute returns under all market conditions.

That myth was exposed in 2008 when all asset classes except for government bonds and gold got hit very hard, including alternative investments like hedge funds, private equity and real estate. The lag in private equity and real estate means that they will continue to struggle in 2009. Hedge funds are not faring any better.

It turned out that the push towards alternative investments had more to do with senior pension officers wanting to profit through bogus benchmarks and some of them even profited from illegal kickbacks from the funds they invested with.

Against this backdrop, the New York Times reports that the U.S. is rounding up investors to buy bad assets:

Obama administration officials worked Sunday to persuade reluctant private investors to buy as much as $1 trillion in troubled mortgages and related assets from banks, with government help.

The talks came a day before the Treasury secretary, Timothy F. Geithner, planned to unveil the details of the administration’s long-awaited plan to purchase troubled assets, meant to remove them from the balance sheets of banks and, in turn, spur banks to lend more money to consumers and companies.

The plan relies on private investors to team up with the government to relieve banks of assets tied to loans and mortgage-linked securities of unknown value. There have been virtually no buyers of these assets because of their uncertain risk.

As part of the program, the government plans to offer subsidies, in the form of low-interest loans, to coax private funds to form partnerships with the government to buy troubled assets from banks.

But some executives at private equity firms and hedge funds, who were briefed on the plan Sunday afternoon, are anxious about the recent uproar over millions of dollars in bonus payments made to executives of the American International Group.

Some of them have told administration officials that they would participate only if the government guaranteed that it would not set compensation limits on the firms, according to people briefed on the conversations. The executives also expressed worries about whether disclosure and governance rules could be added retroactively to the program by Congress, these people said.

A spokeswoman for the Treasury declined to comment on the conversations over the weekend.

Administration officials took to the airwaves Sunday to reassure investors that the public would distinguish between companies like A.I.G., which are taking government bailout money, and private investment groups that, under this latest plan, would be helping the government take troubled assets off the books of some of the country’s biggest banks.

“What we’re talking about now are private firms that are kind of doing us a favor, right, coming into this market to help us buy these toxic assets off banks’ balance sheets,” Christina D. Romer, the White House’s chief economist, said in an interview on “Fox News Sunday.”

“I think they understand that the president realizes they’re in a different category,” she said, adding, “They are firms that are being the good guys here.”

Last week, the House passed a bill that would impose a 90 percent tax on bonuses paid since Jan. 1 by companies that owe the government at least $5 billion in bailout loans. This week, the administration is planning to call for increased oversight of executive pay at all banks and Wall Street firms.

Private equity firms and hedge funds have historically been only lightly regulated and have not been subjected to the same disclosure requirements that are applied to banks and trading companies.

Mr. Geithner faces a highly charged and politicized audience when he introduces the troubled-assets plan on Monday, after a week filled with vitriolic attacks over his handling of A.I.G. bonus payments.

Mr. Geithner and the Federal Reserve chairman, Ben S. Bernanke, are scheduled to testify to the House Financial Services Committee on Tuesday about the bonus payments.

Given that private equity firms, hedge funds and sovereign wealth funds are perhaps the only institutions with cash to invest in such a program, the administration went on the offensive on Sunday in an effort to win them over.

In phone conversations, the administration gave some of these prospective investors a preview of the program, the people briefed on the conversations said.

Three chiefs of investment firms said in interviews that they were impressed with the terms of the program — which would have the government lend nearly 95 percent of the money for any investment — but remained reluctant to participate because of the potential for future regulation.

“The deal is good, but it’s not worth it if I’m buying myself into a retroactive tax or a Congressional hearing,” the chief executive of a major investment firm said, insisting on anonymity because he did not want to seem at odds with the Treasury Department in the event that his firm ends up participating.

Despite the reluctance of some investors, others voiced optimism about the plan. Laurence D. Fink, chief executive of BlackRock, a money management company, said his firm planned to participate in the program.

“We will be raising money on behalf of our clients,” he said, adding that he was not worried about government intervening in his business. “I don’t see how Congress can interfere in this.”

Pimco, a large bond fund, also was expected to participate.

Still, a big stumbling block remained: how to place a value on mortgage-related assets that have not been traded for months.

Executives briefed on the plan said it did not address the central question of how to bridge the divide between what the banks want to sell the assets for and what investors are willing to pay for them. The government hopes that the subsidies it provides to investors are so rich that they will be willing to risk overpaying somewhat for the assets.

The White House plan is intended to leverage the dwindling resources of the Treasury Department’s bailout program with money from private investors to buy as many toxic assets as possible and free the banks to resume more normal lending.

Austan Goolsbee, staff director of the president’s Economic Recovery Advisory Board, said on Sunday that his discussions with private investors led him to believe that they would participate.

“What we have seen in our discussions with people is that if you lay out clear rules that are responsible, people want to participate if there’s a business reason to participate,” Mr. Goolsbee said on CBS’s “Face the Nation.”

“In this circumstance, where we’re trying to encourage the private sector to participate, that’s going to be treated totally differently than companies like A.I.G. or Fannie Mae, where they are only in business because the government saved them,” he said.

At least one administration official also seemed to signal that the 90 percent tax on bonuses passed by the House might not become law.

Vice President Joseph R. Biden’s senior economic adviser, Jared Bernstein, said on “This Week” on ABC that he thought President Obama might be concerned about “using the tax code to surgically punish a small group of people.”

On Sunday evening, President Obama appeared on CBS’ 60 Minutes to discuss the AIG bonus uproar and to back up his Treasury Secretary, Tim Geithner:

The president ordered Treasury Secretary Timothy Geithner to use every legal means to recover the bonus money from AIG. If it is not repaid, it will be deducted from the company’s next bailout payment. The House decided to extract its own revenge by passing a bill that would impose a tax of up to 90 percent on the AIG bonuses and on the bonuses of anyone making more than $250,000 a year who works for a financial institution receiving more than $5 billion in bailout funds.

“I mean you’re a constitutional law professor,” Kroft remarked. “You think this bill’s constitutional?”

“Well, I think that as a general proposition, you don’t wanna be passing laws that are just targeting a handful of individuals. You wanna pass laws that have some broad applicability. And as a general proposition, I think you certainly don’t wanna use the tax code to punish people,” the president replied. “I think that you’ve got an pretty egregious situation here that people are understandably upset about. And so let’s see if there are ways of doing this that are both legal, that are constitutional, that upholds our basic principles of fairness, but don’t hamper us from getting the banking system back on track.”

“You’ve got a piece of legislation that could affect tens of thousands of people. Some of these people probably had nothing to do with the financial crisis. And some of them probably deserve the bonuses that they got,” Kroft said. “I mean is that fair?”

“Well, that’s why we’re gonna have to take a look at this legislation carefully. Clearly, the AIG folks gettin’ those bonuses didn’t make sense. And one of the things that I have to do is to communicate to Wall Street that, given the current crisis that we’re in, they can’t expect help from taxpayers but they enjoy all the benefits that they enjoyed before the crisis happened. You get a sense that, in some institutions, that has not sunk in; that you can’t go back to the old way of doing business, certainly not on the taxpayers’ dime,” Obama said. “Now the flip side is that Main Street has to understand, unless we get these banks moving again, then we can’t get this economy to recover. And we don’t wanna cut off our nose to spite our face.”

“Your Treasury Secretary Tim Geithner has been under a lot of pressure this week. And there have been people in Congress calling for his head. …Have there been discussions in the White House about replacing him?” Kroft asked.

“No,” Obama said.

Asked if Geithner had volunteered or asked whether to step down, Obama told Kroft, “No. And he shouldn’t. And if he were to come to me, I’d say, ‘Sorry, Buddy. You’ve still got the job.’ But look, he’s got a lot of stuff on his plate. And he is doing a terrific job. And I take responsibility for not, I think, having given him as much help as he needs.”

But no matter what President Obama says, Robert Kuttner of the Huffington Post is absolutely right, it’s Geithner’s Last Stand:

The political and pundit classes have spent the past week expressing outrage over bonuses paid to AIG executives. In case you have been on Jupiter, this is the company that has received $183 billion from taxpayers to cover part of its gambling losses that helped crash the entire system.

The indignation over AIG will serve a useful purpose if it focuses public attention on the much larger issue — the failure of the entire approach that Treasury Secretary Tim Geithner and White House economic czar Larry Summers are using to rescue the banking system.

It would be hard to find two administrations more different than Bush and Obama. Yet, when it comes to bailing out financial firms, Geithner’s approach is a seamless continuation of his predecessor, Hank Paulson’s. It makes you wonder who is the permanent government. Perhaps Wall Street?

Even the players are the same Goldman-Citigroup crowd. The well named Neel Kashkari, the Citigroup executive brought in by Paulson to run the TARP program, is still in place. Geithner’s top assistant, Mark Patterson, is from Goldman. And most of the concepts are coming from the same Wall Street crew.

So far, the policy has been an abject failure. The latest idea is to use some of the remaining Treasury funds from the TARP program approved by Congress last October to anchor several trillion more in loans and loan guarantees by the Federal Reserve and FDIC. For weeks, Geithner has announced only vague principles of his next move.

Over the weekend, some details were released, and a full blown unveiling is expected any day. But at this writing, despite leaks from the Treasury to friendly reporters, the several agencies who need to be party to the plan are still in disagreement. And the unveiling may well be delayed again. Judging by the versions of the plan leaked to the New York Times and the Wall Street Journal for Saturday, and the Washington Post for Sunday. The plan seems to be changing daily.

In the latest version, the Treasury will put up between $75 to $100 billion to leverage loans and loan guarantees from the Federal Reserve and the FDIC (down from earlier projections as high as $200 billion.) The money will be used to entice a new round of speculative bets by hedge funds and private equity companies.

The FDIC is the newly drafted participant in this scheme and its leaders are said to be less than thrilled with its designated role. Compared to the Treasury, the FDIC has been a model of competence and transparency. The FDIC is coming before Congress to seek replenishment of its somewhat depleted insurance funds, and now Treasury is coveting that money to underwrite much of Geithner’s latest scheme. But you can only safely insure so many risks with the same capital (shades of AIG!)

The scheme is described as a public-private partnership, but most of the real money is slated to come from public agencies. So why go to all this trouble to enlist private money, which will put up little of the capital and bear little of the risk?

Under one part of the plan, the FDIC will put up most of the money to create a new public corporation which will capitalize private funds to buy up sketchy loans. In the second part, hedge fund and private equity speculators will purchase older toxic bonds clogging bank balance sheets, which Treasury now calls by the delightful name, “legacy” assets. (Sorry, a legacy is a gold watch from Grandpa. This legacy is junk.) Under yet another part of the plan, hedge funds and private equity companies are expected to buy newly issued bonds from banks, so that banks resume normal lending.

An alarming aspect of the plan is that private investment companies will manage the process on behalf of the government, despite the fact that government is providing most of the capital and insuring most of the risk. Basically, the Treasury is colluding with private speculators to create off-balance sheet entities, to offer new windfall profit opportunities and disguise the true degree of risk. If this all sounds vaguely familiar, Geithner’s Treasury, with no sense of irony, is offering a reprise of the several abusive and opaque gimmicks that produced this crisis, a tour that winds back down Memory Lane, from AIG to Enron.

Like everything else about the Paulson-Geithner approach, this latest twist is totally clubby and non-transparent. There is no objective process, and no public criteria. Congress is being kept in the dark. The Congressional Oversight Panel is being denied the documents it needs. (If you want to delve deeper, the Panel’s reports are must-reading.)

The Treasury does not have the staff resources to do the job properly, so it hires private investment bankers. This recalls the era when J.P. Morgan and his financier pals mounted a private rescue to halt the bank panic of 1907. But Morgan was a purely private banker, and he was using his own bank’s money. It this case, the Treasury is supposedly a public institution using taxpayer funds, yet behaving with all the transparency of Morgan.

Further, the problem that stopped Hank Paulson dead in his tracks last fall, when he gave up on trying to have the government purchase toxic assets, continues to stymie Geithner: how to price the assets. If the price that the hedge funds and private equity companies pay is too low, they make a financial killing with government guarantees. If it is too high, government will subsidize the loss. The idea that private speculators will divine the right price because this is “the market” speaking is delusional — look what these markets have delivered so far. Either way, far too much power is being given to the least regulated and least transparent players in the financial game, and too much is being left to the caprices of speculators. Indeed, these are many of the same firms that took the other side of bets with outfits like AIG, whose gambles crashed the system.

In addition, this desperation use of private equity companies and hedge funds is compromising government’s ability to regulate these shadowy players.

As recently as late last week, Geithner was sweetening the terms of his deal, because not enough players were coming to the table. At the G-20 economic summit next week in London, the Obama administration and the Europeans are likely to be at loggerheads over whether to toughen regulation of hedge funds and private equity. But it’s awfully hard to be a tough regulator when you are begging them to participate in your program.

It all adds up to the most expensive and risky way of trying to recapitalize banks, and the least likely to succeed. Instead of simplifying, it is adding complexity and leverage. In effect, Geithner is doubling down on the same kinds of speculations that crashed the system. This time, however, the government guarantees are explicitly negotiated in advance, rather than being cobbled together after the crash.

Since the administration knows that Congress is unlikely to appropriate another nickel for bank bailouts in the current climate, the Treasury is relying on the Federal Reserve as a largely unsupervised piggy bank, and drafting a reluctant FDIC as well. The Fed’s operations are beyond the direct scrutiny of Congress. The problem is that even the Fed can go broke, or it must resort to creating money to avoid that fate. The Fed’s own balance sheet has roughly doubled since last September to about $2 trillion. With the latest Geithner scheme, it will roughly double again. The Fed is known as a very conservative institution. But increasingly, it is holding the bag for the system’s most dubious assets.

On Thursday of last week, the Fed surprised everyone by announcing a plan to purchase $300 billion of Treasury bonds, to keep down the government’s borrowing costs. We have not seen this sort of intervention since World War II. The Fed has begun monetizing the public debt, a process that works for now, but one that could end in a far more severe form of the “stag-flation” that wracked the economy in the 1970s.

The main purpose of this entire strategy is to disguise the true depth of the hole in bank balance sheets and to prop up insolvent banks, not to repair the larger system. It has been largely designed by and for the same Wall Street players that created the crisis.

In the aftermath of the AIG debacle, the silver lining in this sorry mess is that the Geithner approach could well fall of its own weight. Not only are many inside the government skeptical. Financial markets are unlikely to be impressed. The press commentary is likely to be withering. And Congressional Democrats did not spare Geithner in their assault on the AIG bonuses, and are unlikely to be gentle in their appraisal of the plan when all the gory derails are finally released.

Which brings up the question: where in this affair is the president who hired Secretary Geithner and at whose pleasure the embattled treasury secretary serves? For the moment, President Obama is standing by his man, something he has to do until the moment that Obama decides to ease out Geithner, work around him, or fire him.

The problem, of course, is larger than Geithner. The entire Obama economic team is far too close to Wall Street and far too much a continuation of the Paulson approach. And though Geithner is primed to take the fall, the plan is the work of senior economic strategist Larry Summers as much as it is Geithner’s.

The grave political and economic risk is that Obama continues to let Summers and Geithner lead him down the garden path; the industry-oriented mortgage rescue saves too few homeowners; housing remains in the doldrums and mortgage securities with it; the hedge funds and private equity companies make some money with government guarantees, but the banking system remains comatose; and Republicans increasingly become the instruments of public anger.

For the moment, the president is a prisoner of this thinking and these appointees. If this were merely The West Wing, it would be the stuff of terrific drama. But alas, it’s reality; and we all will live with the consequences.

In a different possible scenario, however, Obama lets the financial and political marketplace test the Geithner plan for another week or two. Then, when its failure is palpable, Obama announces a dramatically different approach, either with or without a different treasury secretary.

If this movie were Bull Durham, the most plausible veteran that Obama could bring in to play Crash Davis to Geithner’s Ebby Calvin LaLoosh would be Paul Volcker. The former Fed chairman is no fan of the Paulson-Geithner approach.

If Obama handed Volcker the ball, as some kind of senior counsel, they could drastically change the game plan without even having to fire Geithner. This would be the smoothest and least awkward way of changing course. Obama could simply say that we tried variants on the Paulson formula and it didn’t work. Now it’s time to try something else.

The alternative course, which is winning converts across the political spectrum, is a variant on the Reconstruction Finance Corporation of the Roosevelt era. With an R.F.C. temporarily taking over the insolvent banks, you wouldn’t have to bribe hedge funds and private equity companies to speculate on toxic securities. Government would take over zombie banks and use government auditors to determine just how much new money was required to bring a vastly simplified financial system back to life. Shadow banks, loan securitization, and convoluted high-risk schemes would loom smaller, not larger. The process would have far greater simplicity and transparency. And it would be far more likely to get the banking system working again, more quickly and at less public expense.

Barack Obama is a president of great promise, reassurance, and political skill. In the next few weeks, we will learn how he performs in a crisis that is being worsened by his own appointees.

I hope President Obama reads Mr. Kuttner’s article very carefully because if he continuously panders to the big banks and their big hedge fund and private equity clients, his presidency is doomed.

And let me disclose that up until recently, I have been the staunchest supporter of President Obama. His administration’s latest moves, however, show me that all they are doing is pandering to the financial kleptocrats who engineered this crisis, just like the previous administration.

As far as bonus scams go, we are not immune here in Canada. On Friday, Nortel Networks won court approval to pay eight top executives retention bonuses as the telecommunications company reorders its finances under bankruptcy protection:

The company, under bankruptcy protection since January, says the payouts are necessary to boost flagging morale at the former tech giant.

But the ruling from U.S. and Canadian bankruptcy judges comes despite a legal challenge from about 60 former Nortel employees who were laid off without severance packages three months ago. The severance was withheld under the terms of Nortel’s bankruptcy protection.

Eli Karp, a lawyer representing the former employees, said his clients are dismayed with the ruling, the Globe and Mail reported Friday afternoon.

“In the context of the global financial climate the way it is today, our clients object to millions of dollars of bonus payments being made,” said Karp.

Earlier this month, Nortel received approval from courts in Canada and the U.S., to pay US$23 million in payments to a group of about 84 employees, according to BNN’s Michael Kane.

The eight execs would receive a share of that bonus pool.

“The bonuses would be paid to managers who were successful in cutting costs in their department, in accordance with Nortel’s restructuring plan,” Kane told CTV’s Canada AM.

The latest list of payees will not include chief executive Mike Zafirovski, Nortel said.

The controversial proposal comes before the courts as insurance giant American International Group faces tough criticism in the U.S. over its plan to pay bonuses to top execs, after accepting billions in bailout money from Washington.

Diane Urquhart, an independent financial analyst, said the Nortel plan will eventually cost Canadian taxpayers, but the effect is less obvious.

“To cut costs you terminate employees and also to cut costs you don’t pay those terminated employees severance pay. But clearly these employees still have monthly bills to pay and they’re going to go on public employment insurance plans,” Urquhart told Canada AM.

“Unlike in the AIG situation where there was American taxpayer outrage, this is a more subtle use of public funds that most people don’t recognize is going on. However, we should be outraged. In this time of economic stress, there are great strains on the employment insurance system of Canada.”

Nortel’s creditors wanted the high-paid executives excluded from the bonus plan and called for an earnings outlook for 2009.

Other lawyers involved have agreed with that viewpoint, or asked that the incentive payments will actually reward employees, not just keep them from leaving during uncertain times.

“Our clients take no objection so long as there is no incentive plan that rewards employees for simply staying with the company or that gives them an incentive to reduce benefits for former employees and retirees,” Mark Zigler, a lawyer at the Koskie Minsky law firm in Toronto, which represents former employees of Nortel, told The Canadian Press.

Nortel has been under bankruptcy protection since January, and is required to try to get the most for its creditors. Those debt-holders include the carriers of US$4.5 billion in debt, former staff members owed severance pay and retired managers.

Separate bonus programs cover about 95 per cent of Nortel’s employees, which award incentive payouts on a quarterly basis.

Diane sent me a clip of her CTV interview which you can watch below:

Nortel Networks who doubled their quarterly loss in bankruptcy and has cost millions of people who bought their hype over the years. Moreover, many of the largest pension funds got burned too. This decision is an absolute travesty of justice and begs the question, Why does failure merit reward?

The purpose of a bonus seems to have lots its meaning. As in the case of AIG and now Nortel, both on the brink of bankruptcy (Nortel under court protection), it is an affront to the sensibility of us all to hear that the executives of these companies are thinking they are due bonuses, further that they have the unmitigated gall to sue for them.

Since when did total failure warrant reward? Ever since Nortel and BCE went their separate ways, Nortel has been the subject of controversy due to mismanagement.

Where do these executives get the idea that this continued poor performance is due any reward? Their salaries should be drastically reduced in line with results of their ineptitude and in line with those investors who have lost millions.

Meanwhile, Nortel’s pensioners who were worried in January are now fighting for benefits:

The retirees, along with those laid off, are trying to salvage personal financial losses mounting from Nortel’s bankruptcy filing in January.

The company, which still employs about 2,000 people in Research Triangle Park, canceled severance payments to laid-off workers and terminated pension payouts on certain executive plans.

The ex-Nortel workers began soliciting $250 donations this week with the help of the Nortel Networks Retirees Association, a Raleigh social group with 300 members that was formed in 1993.

Working with other former Nortel workers around the country, the newly formed Nortel Retirees Protection Committee is hoping to sign up 1,000 people by March 22, a deadline set by the Miller & Martin law firm in Atlanta that would represent the workers.

“They want to see if we’re serious about it,” said Bob Starkes, president of the Nortel retirees group in Raleigh. “They don’t want to go forward if we’re only half-committed.” Jerry Aiken of Rougemont, in Durham County, stopped receiving a portion of his pension benefit this year after Nortel filed for bankruptcy protection.

Aiken, 56, retired from Nortel in 2003 after 27 years in various levels of management.

He wouldn’t specify the amount of his financial loss, but some executives have lost several hundred thousand dollars in special pension programs for high earners that aren’t guaranteed in bankruptcy proceedings.

“With enough people and support, we hope to get the attorneys recognized by the bankruptcy court,” Aiken said. “It puts you at the table as part of this whole process, and you at least have a voice.” Aiken is alarmed that his former employer is using its dwindling reserves to pay bonuses to executives who led the company into bankruptcy, instead of paying obligations to ex-workers who made the company successful in the past.

This week a federal bankruptcy judge approved Nortel’s request to pay as much as $22 million in bonuses to reward 880 key employees still at the company. Nortel is also seeking to pay up to $23 million in performance bonuses to 92 senior executives.

It’s unusual for workers to form their own creditors’ committee and hire a lawyer in a bankruptcy proceeding, said N. Hunter Wyche Jr., a Raleigh bankruptcy lawyer. Bankruptcy proceedings are highly structured, assigning priority rights to named categories of creditors. Priority creditors get paid first, ahead of workers and other unsecured creditors. Workers typically fill out a form and submit it to the bankruptcy court in a process overseen by an independent monitor.

It’s not clear if the bankruptcy judge would accept the Nortel Retirees Protection Committee as a party to the case.

Workers are given priority status for up to $10,950 in owed wages, commissions and salaries, Wyche said. Anything they’re owed above that limit is assigned a lower priority and paid out if there’s money left over.

Fred Moore was laid of from Nortel on Tuesday, after 24 years with the company. The Knightdale resident may not see any severance, which would have amounted to a half-year of his salary as a senior manager.

He’s not sure what the lawyers could do for him at this point, but he’s considering paying the $250 fee.

“If I did it, it would be to link arms with my former colleagues at Nortel, to right an injustice if the court decides there is one,” Moore said.

In his career, he laid off 16 people at Nortel before the hammer came down on him this week. Even though getting laid off was no surprise, he said getting the notice is still a psychological blow.

Starkes worked at Nortel for 30 years and retired in 1999. He’s not taking a financial hit as a result of the bankruptcy, but he’s worried the company will be unable to pay its underfunded pension programs and that federal insurance won’t cover all the losses for some workers. Federal insurance doesn’t cover special “unqualified” pension plans for executives and other high earners, leaving those ex-workers without a lifeline.

Starkes, 65, said the shock caused by Nortel’s bankruptcy can’t be overestimated.

“We basically married Nortel,” he said. “We’re probably the last generation who married a company. You gave your all to that company. It’s an emotional thing.”

It is a devastating blow to people who worked all their lives for a company only to be treated like garbage when they retire or get laid off. My father said it the best, “homo homini lupus” (“man is a wolf to man”).

This brings me to my concluding thoughts tonight. There was a remarkable interview that took place today between Fareed Zakaria and Eliot Spitzer (click here to watch it).

Mr. Spitzer was brilliant and you should carefully listen to the entire interview. He states that in times of crisis, “shared sacrifice” by executives of large corporations is needed for the good of the community. His thoughts on leverage and securitization are bang on.

It’s too bad that Mr. Spitzer was a target of hypocritical puratinism because listening to him today, I can’t help thinking that President Obama should have recruited him on his team.