Con-tango

Sarah Palin

This is just comic relief. I know I need it.

From Saturday Night Live… Sarah and Hillary

A car crash

Car crash, or The House said No!

I don’t know where I read it, but, it’s the best description I’ve found to illustrate the fear which has been brought upon market players, they will all be a lot more cautious after today for quite some time — just as you would after a car crash.

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Outline of Congress draft

From a Reuters factbox, I thought it would be a good idea to include here where the house bailout draft stands so far.

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Republican balls

Las Vegas
Courtesy of Iñigo Biain

Man, o’man, o’man, I’ve got to hand it to them, the some republicans have titanium balls, they started with a pretty large sum, $700 billion, but now, they’re asking you and me to take out of these clowns’ hands the potential risk of the whole $62 trillion insured debt (or credit default swaps).

As reported by Reuters:

On Thursday, a small group of conservative House Republicans —
including Texas’ Jeb Hensarling and Virginia’s Eric Cantor — offered
their own alternative to the Bush proposal. Focused on mortgage
insurance, the one-page alternative plan was presented to reporters at
a briefing.

The plan calls for the U.S. government to offer
insurance coverage for the roughly half of all mortgage-backed
securities that it does not already insure. The Treasury Department
would charge premiums to holders of the securities, under the plan.

Let me see,

• pay outright $700,000,000,000 or assume the risk of a debt default worth $62,000,000,000,000?
• or approximately $2,100, versus risking $186,000 for each one of the 300+ million US citizens.

Gee, when did Las Vegas take over the whole USA?

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Of foxes and chicken coops

Explosion

As I read, and keep on reading –we are living through a historic event–, it does not cease to amaze me how well aligned is the book with the talk. And, it is a relevant discussion point because it would seem that we have the fox in charge of the chicken coop…

Don’t I recall Mr. Paulson getting a compensation of Goldman Sach shares in the $100s of millions?
If GS fails he would stand to get a substantial haircut, or wouldnt he?

Update 09/29/2008: According to this article, Mr. Paulson sold the lion’s share of his GS holdings, about $492 million, at about the date of his confirmation; keeping for himself:

• 494,054 restricted shares of common stock (worth $60 million roughly at this moment’s $122.75 share price), all of which are vested and deliverable,
• plus, options to buy –at an unknown price– 680,474 shares of common stock, all of which are exercisable.
         

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Bailouts and Lynching

30’s Depression

I’ve been reading a little, here and there, to get a feel of what people think should be done with the proposed Paulson-Bernanke bailout.
Its been very interesting, from professor Sheehan who does not see the bailout as a requirement imperative, Buffet’s support with an advice to sell a few of the toxic papers to learn and pay market price, Krugman’s leaning on a traditional approach which warrants buying the securities of troubled companies to privatize later on, to a flooding of mail and telephone calls to lawmakers from enfuriated taxpayers whose majority outright oppose any bailout and a minority agrees to a very restrictive one, with a healthy dose of wall street exec lynching.

So, will the elected lawmakers approve this necessary piece of legislation, with 99 out of 100 taxpayers opposing the bailout?

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On mice

What to do with mice?

I thought this hilarious email from Hal was a good starting point for the (first moral hazard) question which is haunting us all: if the bailout is approved, will the mice get away with the cheese, or will the execs get away with a slap on the rolex and dozens of millions?

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country
has had crisis that has caused the need for large transfer of funds of
800 billion dollars US. If you would assist me in this transfer, it
would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be
my replacement as Ministry of the Treasury in January. As a Senator,
you may know him as the leader of the American banking deregulation
movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We
need the funds as quickly as possible. We cannot directly transfer
these funds in the names of our close friends because we are constantly
under surveillance. My family lawyer advised me that I should look for
a reliable and trustworthy person who will act as a next of kin so the
funds can be transferred.

Please reply with all of your bank account, IRA and college
fund account numbers and those of your children and grandchildren to
wallstreetbailout@treasury.gov so that we may transfer your commission
for this transaction. After I receive that information, I will respond
with detailed information about safeguards that will be used to protect
the funds.

Yours Faithfully Minister of Treasury Paulson

During 2007 broker execs earned $39 billion (see here and past history here)  in bonuses only. It doesn’t sound right !

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