Links 11/22/08

Otter survives ‘perilous’ sea crossing to Farne Islands BBC (hat tip reader Richard)

US officials flunk test of Amerian history, economics, civics AFP

Bankruptcy Is Option to GM Board Wall Street Journal. I read the article, and still don’t get it. Given that GM professes that it will run out of cash before the year ends, how is bankruptcy NOT an option? Yes, I know the real issue is solidarity of the board with Wagoner, but the willingness (until now) to give lip service to patent nonsense is altogether too common in Corporate America.

Citigroup May Get Government Rescue, Investors Say Bloomberg

US help for investors to buy ailing banks Financial Times

Embarrassed GM axes two private jets Guardian (hat tip reader Sean)

Tangled tangibles Bove vs. Winkler on Citi’s equity. The markets appear to be in agreement with Winkler.

“Recession? Why Worry?” Mark Thoma

Bust-outs and the Paulson Mob Independent Accountant. Shares a pet interest of ours: are all these Wall Street failures in fact bankruptcy fraud?
And unlike your humble blogger, knows case history.

Not Everything Can Be Too Big to Fail Peter Wallison, Wall Street Journal. Important.

Antidote du jour:

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  1. ndk

    Forty percent of respondents, meanwhile, incorrectly believed that the US president has the power to declare war, while 54 percent correctly answered that that power rests with Congress.

    While the rest of the fail is a little scary, I can understand their confusion on that one.

  2. Independent Accountant

    Don’t apologize, knowing case history does not require that much intellect, just “sitzfleish”. I reread my post and will post again on pre-bankruptcy finagling.

  3. Anonymous

    From Wallison

    This New Deal notion should be discarded.

    Exhibit A is the banking system, now mired in the worst financial crisis since the Great Depression — even though it has always been the most heavily regulated. Exhibit B is the S&L debacle less than 20 years ago. Thousands of S&Ls and more than 1,500 commercial banks collapsed in another memorable regulatory failure.

    No offense but this is complete tripe. AEI propaganda continues.

    There was a reason there were no bubbles from the mid-30s to the late 80s, New Deal regulation. It was when AEI boys got in and started doing things like "de-regulating" S&Ls and the banks, that got us to where we are.

    To claim what Wallison does above is simply Orwellian.

    There was plenty of problems with the New Deal, financial regulation wasn't one of them. Just shows we got a long way to go.

  4. Don

    I think that the Citi problem is being driven by panic. They don’t need a government bailout, other than if everyone panics and forces the government to intervene.

    On AIG and phony bankrupties, I believe that it is phony, but in a different sense. These businesses like AIG believed that there were implicit government guarantees to help them out in a financial crisis, and so they had no Plan B. They didn’t feel that they needed one. It turns out that they were right.

    Don the libertarian Democrat

  5. Yves Smith

    Saying Walliston’s piece was important did NOT mean I agreed. It is an articulate statement of an orthodoxy (that I happen to disagree with in large measure, but we do need to find a way to rationalize the financial sector) that is just not going away. It needs to be take apart piece by piece to expose the flaws.

  6. doc holiday

    The basic story is found written in Genesis chapters 6 through 9: God, grieved by the wickedness of mankind, decides to destroy the corrupted world, but instructs Noah to build the Ark and take on board his family and representatives of the animals and birds.

    >> Wouldn't you have liked to have been a fly in that room — as the debate went round and round … huh, huh, wouldn't yah have (punk)?

  7. Anonymous

    Re: Walliston’s piece. One thing that the present financial panic has exponsed is that “too big to fail” doesn’t necessarily mean too big for the stock to go to zero. In fact this might be one of the reasons for the collapse of C shares. This points though to another issue. Some of these institutions regarded as too big to fail also appear to be too big to know. I haven’t heard anything about how this might be dealt with except by an army of federal auditors. That would have to include auditing the rating agencies I guess.

    But how about this as a regulatory principle — too big to fail means too big period. In other words why not extend anti-trust legislation so that one of the criteria for approving merges would be that the combined institution would not be too big to fail. (This is the opposite of what is happening now.) Equally and in view of the evident trend to build larger and larger financial institutions, the goal of regulators should be to break up all those mega institutions that are now too big to fail. Finally, we might put pressure on non-American governments to enforce a similar rule by ruling that any financial institution dealing with non-American institutions deemed to pose a systemic risk would be ineligible for FDIC insurance or to receive loans from any institution part of the Federal Reserve system.

    It may already be the case that being “too big to fail” can make an institution subject to anti-trust legislation since it clearly anti-competitive in the market place (also known as moral hazard). Unfortunately, the incoming administration has too many stalwarts of the ancien regime for anyone too have any hope. This may be the first case of an administration failing before it even takes office. Sorry but there will not be change. I guess that’s good for New York/DC (in the most myopic perspective). It’s pathetic.

  8. Anonymous

    Regarding GM article and your statement that American’s corporate leaders give “lip service to patent nonsense”.

    Yves, I’m really sick of your constant criticism of the outstanding leadership of corporate America. At Wachovia Bank, our senior IT leaders have consistently level-set our table-steaks, orchestrated our partnerships, while leveraging our strategic synergies giving a win-win situation in a going-forward space. Are you implying this is just meaningless talk!? I’m OUTRAGED!

  9. Uncle Billy StuporSleuth

    “The rat is a banker, the amphibian the American taxpayer”

    {Evylle snicker}

    Frog eats rat after giving him the free ride. Always does; it’s his nature.

    Didn’t I post a nice link to a paper last week that went into gory detail about bk for fun and profit?

  10. doc holiday


    Perhaps if we triangulate here we can also see that the tax payer frog is the support base which is connected to liquidity, thus the banker rat is trapped on the back of the frog because it needs support, or otherwise will die in a sea of debt. This journey can only go so far, because the water is evaporating and one way or another thy both die …. moohhahahahahaha

    However, what happens if the fly to stage left flies by the frog and that in-stability lapse, knocks the rat off and the little fella has no way back to shore, or any way to re-mount the asset-backed vehicle/entity/structure/TARP???

    Whaddyah think of that, huh, huh?

  11. dearieme

    “While otters in Scotland do live in coastal areas, Mr Steel said it was “a rare event” to see them by the sea in England.”

    Thank God otters believe in the United Kingdom.

  12. Uncle Billy, StuporSleuth

    doc: I love your tough guy posts!

    And think you have a chokehold on the fragility of our little lovely triangle.

    I hope you’re still tracking the covered bond world developments.

    Gotta go… just ate some korean sushi and got a bad headache.

  13. Anonymous

    @doc holiday, very nice on the last one.

    When will it be time to grab the King and his friends, send them to Gitmo (Irony/they built it), use their information retrieval techniques, till one squeals and then grab the Wall St Priests that were complicit in the sham.

    Still find it hilarious that Channey/Bush used the same play book that the Church and Kings of old used to invade the middle east. Just to funny!


  14. Anonymous

    Sorry, only place to put this. Its from a friend in San Fran, who is a tax consultant and works for his fathers firm. It just leaves you breathless.

    If Citibank goes under, I will laugh my ass off forever.

    We just bought our house in September. The previous owner had two loans on the house and by the time we finished agreeing on the price, they were like 200K in the negative, so both of the note holders had to approve of the sale, because they were getting shorted. Their first loan was held by Citifinancial bank and the second loan was held by Citiresidential bank. The day AFTER we signed our FINAL documents, Citibank came up with a bogus charge of $6000 that they said was billed to them by an insurance company for the liability insurance during a time that the house was vacant for 9 months. They said they would void the entire contract and foreclose the house if we didn’t pay for this. The insurance company that the bill came from was of course Citibank Insurance. My Realtor ended up eating this and is trying to sue them right now to get it back. The lamest part of the entire fuckover was after they dropped this on us, they stopped answering the phone and faxes, or like 200 e-mails that they all sent them and went and hid under a rock. Citibank and all their companies are a complete bunch of douche bags.

    I’ll bet you anything that if they do go under, soon afterwords, we’ll hear a story about how their top execs earned 20 million apiece for their wonderful work.


  15. john bougearel

    Yves and Co,

    This week, I have been stupefied by the news of Citi and the automakers this week. You know how we have all anticipated this crisis to be far worse than imaginable…Well this week’s revelations signals to me that the actualization that things are actually going to be far worse than we all expect is really now just settling in. Soon, far worse than expected will be as familiar to me as my next door neighbor.

    But the stupefication is a numbing experience to me. I still do what I always do everyday, but the depth of apprehension has intensified. I am surprised, the apprehension seems as if it should paralyze me into inaction, but I can still wiggle my toes, walk and talk, and so I go on knowing so many are going to have to persevere through unimaginable difficulties.

    We have just descended to the next rung down in Dante’s Inferno.

    The time of railing on the missteps that led up to and compounded this crisis may be superseded by a more pressing concern.

    The time is drawing near which will soon be time to be reaching out to those in our communities persevering, just trying to hang on.

  16. doc holiday

    Re: "When will it be time to grab the King and his friends"

    > That will be up to Hillary now that she has bailed on The Senate, and thus, now she can live out her fantasy to be The Mouthpiece to play The Piper Song:

    See and hear: And it's whispered that soon
    If we all call the tune
    Then the piper will lead us to reason

    Your head is humming and it won't go
    In case you don't know
    The piper's calling you to join him
    Dear lady can you hear the wind blow

    >> That last line is a reference for Bill, but I may be wrong, but that's over my head and I'm just having a glass of ale…

  17. doc holiday

    Re: "something comes to mind. Do you ever sleep"

    > There is reason to believe that Yves is not a real person, but the only problem with that theory, is related to a few of those computer animated video cam things she apparently posted a few months ago, with some other ghost-like entity.


    Some people gonna call you up
    Tell you something that you already know
    Sane people go crazy on you
    Say no man, that was not
    The deal we made
    I got to, I got to, I got to
    Faith is an island in the setting sun
    But proof, yes
    Proof is the bottom line for everyone

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