2009 APRIL 10 PODCAST SUMMARY (FRANCONOMICS.COM)

pPiP (Public Private Investment Plan) exposed, CodePink Crashes Larry Summers' Party in Washington Economics Club for Working 1 day a week for a Hedge Fund and pocketing more than 5 million, etc.

This weekly economic update for the business week ending April 10, 2009, brought to you as a Podcast,  touches upon the following:

1. pPiP: the p-PIP or the Public Private Investment Plan, has the potential to drain another trillion dollars from the taxpayers to the elite banks and shareholders thereof. The debt-to-equity leverage is quite extraordinary --- 13 to 1. The Fed gives 13 dollars as debt for every dollar invested by a hedge fund, who can go after toxic "legacy" assets and offload them from the banks' balance sheet. It is a win-win for banks and hedge funds already invested in the banks, and lose-lose deal for the American taxpayer.

2. Stocks are still down 43% or the market cap of NYSE and Nasdaq combined is down 8 trillion dollars. If it rebounds half way through, investors will lose 4 trillion dollars. Add to that 1 trillion from TARP (Troubled Assets Relief Program) and the Stimulus, and 5 trillion dollars have been drained out from the American consumer by the Financial Criminals we call Successful Bankers. And if the pPiP plan is rolled out and insider wheeling and deeling goes on without any transparency, another 5 trillion may be drained out. This is a 10 trillion dollar value drain... or a 10 trillion dollar looting by elitist Plutocrats in the name of Democracy, Capitalism, and bringing the economy out of the recession.

3. People keep protesting against Larry Summers’ good living: $5 million salary for working 1 day a week in a hedge fund in 2008. His speaking engagements at Wall Street banks (six figure honorariums per speech in some cases) look like prescient investments by Wall Street banks like Goldman, since Summers heads the Economic brain-trust of the Obama administration. Goldman’s stock has climbed from recent lows of 47 to almost 130 dollars per share. Goldman is now selling stock so that it can return the $10 billion TARP money. How about the $12.8 billion they took from AIG? When will they return that?

4. Also, the Obama Administration did not reveal the results of the stress test. Obviously, a lot of banks are insolvent, and need further bailout / stimulus / pPiP. The government has managed to keep the markets going up so far --- Dow Jones is up 1500 points in the last one month, Gold holds close to $880 per ounce, with a technical support level of $850 per ounce. Is this optimism short-lived?

PODCAST-TRANSCRIPT-WEEKLY-UPDATE-2009-APRIL-10

Hello, hope you all are doing well. I am Sam Mishra, the chief podcaster at franconomics.com with the weekly update on the global macro-economy, for the business week ending April 10, 2009.


PPiP: Let’s talk about the PPiP – Public Private Investment Plan first. What is astonishing here is the debt to equity ratio. For each $ of equity, FDIC gives 6 $ as debt. And the equity comes from the treasury and the hedge fund 50 -50. In other words, for every half dollar that the private hedge fund inversts in, the government puts in $6.50, which is 13 times, 13 times what the private hedge fund invests in. WOW!  So, who is hedging? Not the hedge fund. Clearly, it is the American taxpayer. So, when Geithner says that companies can lose money in the PPiP plan, for the future of these toxic assets is unknown. The government can lose 13 times ---that gotta hurt….
We need transparency on this. First of all, the debt-equity ratio of 6 : 1 is horrible in terms of debt overhang for any prudent investor or businessman. Folks, I run a website Franteractive.net, where you can read up on Debt Overhang to understand why. But let me explain how the PPiP plan will work --- I will synthesize what three great economists --- Jeffrey Sachs, Paul Krugman, and Simon Johnson have been saying on this. Suppose I am capital world investors, and own 5% of Citi. I get into a deal with Wellington Management, which owns 5% of Goldman. Since I own Citi stock, I can’t buy troubled assets of Citi, but I can do it for Goldman. And Goldman’s stock holder Wellington Management reciprocates by off-loading the toxic assets from Citi’s balance-sheet  We boost each other’s balance sheets by a billion, using less than 100 million. Suppose this improves the market cap by a multiplied effect of 3, or by 3 billion for each company. 10% of 3 billion is 300 million, 5% of 3 bilion is 150 million. Now, let’s say the toxic asset which was actually worth only $300 million, and offloaded for $1 billion, comes back up in 3 years and settles at $500 million. So, the hedge fund loses only $50 million from its $100 million investement in the pPip. But it made $150 million in the stock, or it made $100 million. So, the hedge fund gets a 100% return. Now, if this sounds complicated, please feel free to read up the transcript on our website.

And how much do the tax-payers earn. Nothing, they lose $450 million. Hmmm, the hedge fund doubles the money, the bank’s market cap goes up by $3 billion. And the taxpayers lose close to half a billion! Folks, let’s not under-estimate the intellectual horsepower of some of these bankers ….They have put Geithners and Summers in the white house for a reason, to steal more money from us through pPiP. There could be no limit to how much the taxpayers would lose. It could very well be another trillion dollars! Just as TARP was close to a trillion.

This week, the heat was on, on Larry Summers. A couple of protesters from Women for Freedom organization CodePink crashed his party in the Washington DC Economics Club, citing they wanted their money back. They accused Larry Summers of pocketing $135,000 for one speech from Goldman Sachs, and also for enjoying the $5.4 million salary for working one day a week. We have placed the video on our homepage on Franconomics.com, and you can listen to it.  In particular, what bothered me the most was what Mr. Summers had to say about the minute long shouting at him --- all he had to say was that some days were pleasant, and some not quite as pleasant. When my bank accounts are bulging out with money, it is pleasant. When you have lost your home to foreclosure, and your job to unemployment, and your Tax money as TARP and now pPiP to Goldman Sachs and Citi, and some of which will flow back to me in future speaking honorariums, for I am an ultra-ultra-high-powered-elitist fat-cat, it is quite pleasant. But when you accuse me of working one day a week and make $5 million, that is quite unpleasant. How dare you do that. How dare you. I will slam you with another pPiP… 

Let’s revise cash-flows for the records. AIG received close to 200 billion in TARP – Troubled Assets Relief Program bailout, Goldman pocketed 12.8 billion from that. Goldman also pocketed 10 billion from TARP. And if they paid a little over 200,000 to Mr. Summers for two speeches, that is excellent investment for favorable terms from the Obama Administration down the line, right?  After all, GS stock has climbed from its lows of 47 in Decemer to close to 130 as of now, right? So nice, that they are selling their stock? And they want to return the $10 billion TARP. I say, you greedy goldman bankers, sell more stock and return the $12.8 billion that you took from AIG, for that is our money, the taxpayers’ money.

Folks, if you have seen your home and stock values fall, stay tuned for our second Value Drain article, which will show how a few trillion have vanished from the nest eggs of hard-working Americans and filled the coffers of these plutocrats, these Wall-Street insiders. We at Franconomics think that compared to a Martha Stewart, these greedy pigs who walk as respectable and SUCCESSFUL bankers on the hall ways of business schools and economics clubs and white house are the real insider traders. Unless we change our laws, and put some of these financial criminals in jail, this will not be a equitable and just society. Obama and Geithner might be giving the impression to you that they are on top of this Big Scam, but something is very wrong here --- Obama decided not to disclose the results of the stress tests, obviously some of these big banks are too insolvent…

Now, let’s talk briefly about stocks and gold. 
On the week, the Dow gained 65 points to close at 8,083. Compared to the same time last month, the Dow has gained 1500 points, a quite remarkable bear-market-rally. However, it is still off more than 43% from its 2007 peak of more than 14,000. In other words, the stock market cap of 20 trillion plus is only 12 trillion plus today. Assuming it rebounds 50% and investors who are losing 8 trillion will gain back 4, 4 trillion will still vanish. That, added to close to 1 trillion from TARP and stimulus, amounts to a whopping 5 trillion value drain, which happened during this financial scam. Added to it is the upcoming PPiP, which has the potential to drain another trillion from main-street to wall-street. <<Pause>> Gold closed down -1.62% at $878.80 for the week…Key technicians think that $850 per ounce is a good support…


We have come to the end of the podcast --- let’s think all week on how to prevent money that we work so hard to earn for our progeny, how that money can stop flowing into the investments and bank accounts of the greedy bankers? They have already taken 5 trillion. We should stop them from taking another 5? Now, how can we do that. Everybody who listens to this podcast should print out the transcript, and may be the transcript of last week’s podcast, and mail it to his or her senator or congressman. If you read other blogs, point the readers to our website as well. I am Sam Mishra from Franconomics.com, and I thank you for listening to our weekly podcast. You have a great week ahead, and stay well. Thank you.

CLICK HERE TO LISTEN TO THE PODCAST