PODCAST-TRANSCRIPT-WEEKLY-UPDATE-2009-APRIL-24 (FRANCONOMICS.COM)
SIGTARP (Special Inspector General of TARP) Report that TALF and pPiP are subject to Potential Fraud, Geithner Beaten Up by TARP COP (Congress Oversight Panel), etc.
Hello, I am Sam Mishra from franconomics.com with the macro-economic weekly podcast, for the week ending April 24, 2009. Also, now you can go to our website where you can find links to subscribe to this podcast using iTunes or Podcast Alley, in addition to the RSS feed…
First the poll news --- Some of you might have noticed that we had a poll running on our websites – and we thank the nearly 300 people who participated in this poll, which we started the day the Paulson bailout of $700 billion was announced, and the day we published our first of the Value Drain (tm) series of articles. Most of you blamed the housing bubble / unscrupulous banks, buying too much on credit, greedy executives with multi-million dollar compensation, the inefficient Bush presidency, and also the Iraq war as the top five reasons we are in this mess today. You can check the complete results under the concluded polls section on franconomics.com.
Last week we reported how the Federal Reserve and the Treasury are in a horse-race to bail out big Fat Banks as in Citi, Bank of America, and Goldman; while Bernanke is all set to dole out almost 7 trillion dollars, the Treasury under Geithner is limping along to cough up at least $2.5 trillion. By the time we are done, the black holes we call gilded gifted venerable “crème-de-la-crème” Wall Street banks and Financial Institutions could very well gobble up 1 years US GDP. This keeps bugging us at Franconomics, people are losing jobs and homes to foreclosures, Goldman mis-managed its business and without our doleouts would be bankrupt today, so why should we taxpayers be paying for the Goldman bonus? THIS IS LOOTING… Pure and simple.
This week was hot, hot, hot; in terms of [Honorable] Geithner facing the TARP COP Warren and taking some beating; while the Inspector General investing TARP related frauds in a 250 page testimony came out with the report that both TALF and pPiP are subject to potential fraud. Actually let me read what the report had to say on TALF and pPIP:
PPIP Fraud Vulnerabilities: Aspects of PPIP make it inherently vulnerable to fraud, waste, and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering. SIGTARP (Sigtarp here is the acronym for the Special Inspector General for the Troubled Asset Relief Program) has made a series of recommendations to address these concerns, including, among others, that Treasury should (i) impose strict conflict-of-interest rules upon Public-Private Investment Fund (“PPIF”) fund managers, (ii) mandate transparency with respect to the participation and management of PPIFs, including disclosure of the beneficial owners of the private equity stakes in the PPIFs and of all transactions undertaken in them, and (iii) that all PPIF fund managers have stringent investor-screening procedures, including
comprehensive “Know Your Customer” requirements at least as rigorous as that of a commercial bank or retail brokerage operation.
What does the same report say about TALF?
Expansion of TALF: The announced expansion of TALF to permit the posting of MBS as collateral poses signifi cant fraud risks, particularly with respect to legacy residential MBS (“RMBS”). SIGTARP has made a series of recommendations to mitigate these risks, including, among others, that Treasury should require a security-by-security screening for legacy RMBS; that any RMBS should be rejected as collateral if the loans backing particular RMBS do not meet certain baseline underwriting criteria or are in categories that have been proven to be riddled with fraud, including certain undocumented subprime residential mortgages (i.e., “liar loans”); and that Treasury should require signifi cantly higher haircuts for all MBS, with particularly high haircuts for legacy RMBS.
Now, if you have been following our podcasts, you know by now that the TALF funds come not from the treasury but from the Federal Reserve, so it is our initial conclusion at Franconomics.com that the Federal Reserve headed by Bernanke and the United States Treasury headed by Geithner are in collusion to bail out the corrupt bankers who risked too much, [louder] mismanaged their businesses, and would have gone bankrupt without help from the poor American taxpayer, who is silently suffering while the wall-stree bankers, with the help of Fed Chairman Bernanke and his ex-deputy Geithner (remember, Geithner was the President of Fed Reserve of New York before becoming the treasury secretary) .
Before we look at how the 6 week bear-market rally was interrupted this week, let me give some local real-estate data for my silicon valley listeners, who never learn, are still under social pressure (as in when will you buy that first dream home) and tell me: So.., in Cupertino, for the 20 business days ending on march 30th, 20 homes were bought and sold, not bad, 1 home per business day, and guess what? At $945,000 median price, the average home was down 11.5%. So, keep monitoring prices, whether you want to buy in Cupertino, for the same time last year, the median price of a a home was more than a million dollars there, or whether you want that mansion next to the home of Lindsay Lohan. Overall, for the whole of Santa Clara county, house prices were down 37.8% for this time period. This smells like a housing bubble gone bust in Silicon Valley… Now that we are talking about real estate, we hear about new programs and scams whereby you can get insurance to pay for your mortgages for 6 months, if you lose your job in the first two years, etc. etc. We have links to such news in our current news section, feel free to check those out from time to time. Our research also indicate that Obama doesn’t listen to anybody except Larry Summers when it comes to economics. We have reported on the Milton Freidmananite mind-set of Larry Summers in our last few podcasts --- greed is good and no regulations are the twin motto of all Friedmenites. So, the American financial and economic ship is more likely to sink not swim in the coming few quarters, taking millions more of jobs with it, and more bank assets going toxic, before the economy recovers again. So be very careful when buying a new home, for if you buy one today, and lose your job two years from now, these so called insurance mortgages will do nothing but make bigger holes in your pockets. [So] So, we did warn you on not buying a home this spring-selling season.
Now, lets take a look at stock markets. Dow’s 6 week rise was halted, with the Index falling less than a percent for the week. This was to be expected, because last week, the markets were flat, [matter of fact] with the Dow gaining 50 points last week. This week, it lost 55. Gold climbed from about 870 closing price of last week to almost 913 dollars per ounce, for the week.
OK, as always, let me leave you with a question. If the Federal Reserve loads up its balance sheet with toxic waste as additional fed assets, what will happen to its legacy assets, like the newly acquired long-term US securities? Unlike bank’s [Sarcastic] legacy assets which are nothing but mortgage loans gone toxic [it does not matter whether sophisticated bankers call these mortgage backed CDOs or CDSs], traditionally, the Fed’s assets have been US government securities, mostly short-term and some, long-term. And we brought to your attention last week the new asset purchases planned and currently underway by the Federal Reserve: $1 trillion in TALF, $1.8 trillion in commercial paper, $1.45 trillion in mortgage related assets from Freddie and Fannie [low volume] you can be sure some of this is toxic, like the toxic waste banks are trying to offload from their balance sheets through pPiP etc. also check our current news section for the news on Freddie’s acting CFO commiting suicide; and $540 billion in assets from money-market funds short of cash… Now, all these in addition to the longer term US securities which the Fed should not be buying in hundreds of billions in the first place. So, what will have to the 30 year US treasury bonds? And can we afford that going toxic, for the Federal Reserveis going to park all this toxic asset we just described next to its quota of US Treasury.
Folks, the US treasury is your treasury, and my treasury. What Ben and Timothy are doing is emptying its coffers and giving it away to the fat-cat wall-street-bankers. We have to stop it. This is risky for America, and risky for the Global economy. We can’t let a few plutocrats loot our tax dollars and play havoc with our lives. Tune in again next week for your next weekly podcast, and until then, stay well. Thank you for listening, and I am Sam Mishra from Franconomics.com, Thank you. You have a great week ahead.
