"End of Wall Street Boom" - Must-read history

[Fat Lady Singing]

Seems to me that the AIG bonuses are a lightning rod for public outrage. If those execs are metaphorically strung up, what good will it really do?

So yeah, the story is diverting attention from the real problems. At the same time, it all just seems like this is the story of the week in the media. Next week, or the week after if this story has really strong legs, it'll be something else, and the public will forget about those bonuses.

Hey look! It's Elvis!

[JackRiddler]

.

No. If "Hey look, it's Elvis!" always worked, there'd be no talk of AIG at all, bonuses or otherwise. And the distraction to complete trivia is going to work less and less in this atmosphere. I'm more afraid of the Wrong Scapegoat Strategy (China, Iran, immigrants, black people who defaulted on their mortgages, the Democrats but not the Republicans or vice-versa), but outrage specifically focused on the economic consequences of the financial crash is not going away, and for good reasons it's mainly focusing in the right direction (Wall Street bankers) if not always the most relevant target in that direction. On this small point I see cause for optimism, or better: to believe there are opportunities for good people to organize a resistance aiming at the right goals.

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[Fat Lady Singing]

On this small point I see cause for optimism, or better: to believe there are opportunities for good people to organize a resistance aiming at the right goals.

JR, I certainly hope you're right. If everyone who had as good an understanding of the situation were to work as tirelessly as you and others on RI have to help the rest of us understand it, you'd no doubt be right.

It's just not in my nature to be optimistic, but pessimism isn't always realistic, either, and I have to recognize that.

[jingofever]

Skib at reddit asks: I know the chances are slim, but is there anyone who works for AIG that can tell us what the hell is going on internally? coney27 replies:

I work for a sister company closely tied with AIG. Workers at AIG, where I have friends who hold positions there, say that things are looking very grim. Everyday the company posts a standard email updating every corporate employee on the finical standings and current outlook in specific sectors the company is involved in. The emails literally only speak of the good things that can come in those sectors and pass by the awful financial news. The emails are basically there to try and "fool" a company employee in believing that things arn't really that bad compared to what is coming out of the news networks. On the contrary things are much worse than the corp. news stations are getting their hands on. Since I work for a sister company of AIG we are closely tied into many of the financial /bail out dealings that AIG has sucked up from the Govt. so we too fall under those very closely watched guidelines. I work in a re-insurance firm (i honestly don't feel safe in naming it) where i would say that 60 - 70 % of our clients we received are through AIG. But ever since AIG has been getting even more bad reviews by the taxpayers (more than when AIG received the first bailout) out intake has dropped dramatically over 40% December. Yes, the first bailout was suppose to keep the company afloat but everyone knew that with such an enormous company being unable to support its self; a good thing (a huge money maker) would come to a end. Like i said earlier now with people like me and you becoming even more irate with this new scandal of 74 bonuses, my friends who work directly with AIG have been furiously taking their corporate stock shares and moving them elsewhere, have been updating their resumes, using any type of social out puts to get new leads at a different companies, and have been using up all of their available vacation and sick time. One of my close buddies actually has been on vacation since the end of January where he has been in Japan looking to land a new lucrative position. Sorry ive been jumping around so much but i too am worried that I also might be out of a job soon enough when AIG does go belly up. And everyone at AIG KNOWS that it WILL file for Bankruptcy in the next 2-3 months after they sell off their subsidiaries. Just last week i had a meeting with a client in the AIG NYC office where people were acting like it was just another normal day. Even though i noticed little things that were different; tvs weren't tuned to CNN of CNBC rather turned to ESPN watching the upcoming NCAA tournament. Employees are told to act like normal, walk around with big smiles and never show any stress of the real world and media. Its just so sad to see so many hard working people who are just like you and me (other than the SVP and higher ups) just sitting around in their cubicals and offices knowing that soon enough they will be desperately looking for another job just to support their families. I feel like im rambling here so ill take a break and surf reddit for a while then come back and post more....

Edit: Im back after my cornbeef dinner hopefully i can stop darting around onto various ideas. I was going to mention ever since AIG started getting its "bad look" in the press about how badly it was tanking the public started looking very cautiously at whom it does business with. I could certainly tell just by working at a related re-insurance firm that both our corporate and private clients were worried about what would happen to their money they were paying towards their fees and premiums. Especially the public started pulling away from investing in AIG not just only in its publicly traded stock but also buy giving their personal insurance be it home, car, family, life, health etc to a company that was slowly fading into a dark death. People do not like doing a business no matter how big or old that company has been around. People see that their hard earned tax dollars are going to a company who literally takes in millions on top of millions of dollars every year..... who shouldn't be in any need of ANY govt. money due to its ridiculous gambling. Ever since the first bad headline popped up on CNN AIG has been swallowing in it own grave. I hate thinking like this after just spending my last 3 years at this sister company but its something I realized that I have to come to terms with. I also wanted to touch upon the point that AIG has been getting a ton of angry emailers, callers and death threats. This is infact a very true story. I would say that the lower end employees who do most of the grunt work arent in the eyesight of the gun. Nether the less the higher ups are under a constant threat. Literally today i was on the phone with a SVP and after taking a 30 min lunch he got back to his pc only to find 54 emails which 90% were irate customers asking him what part he had in with the bonuses and how could he even think of taking even MORE tax payers money. He left at the end of the day for good after spending 25 years at AIG. This has become common seeing people just leaving after not being able to take the constant stress. AIG is demanding to cut employees and then they expect for those remaining workers not only to maintain those clients they have now but to also bring in more revenue. The higher ups then realize that under this scenario its nearly impossible to maintain those clients that they have now and getting new business is out of the question. So you'll see at least 1 to 4 people a day pack up their belongings into a cardboard box.... saying good bye to a couple of people then just walking out without giving anyone else notice. Employees (me including) always have the idea that bankruptcy is just a step away...... so pretty much it really cant get any more grim that it is now.

EDIT / Update #2: I just wanted to let everyone know who is interested in this topic that I am unable to access reddit at work due to it not being a "business related website". I am sending this from my blackberry and I can see that this topic has gotten some attention in the past hours so I was willing to let you guys know that I will be able to answer some questions later today when I am able to get home from work (around 530 or 6 pm EST). Until then anyone that wants to post a question ill try to get around and answer them later today. Oh and if anyone is willing to group a post of all the questions i would very much appreciate it. BTW sorry about the issue of not using paragraphs for some reason I find it difficult to create a comment in this awfully small box. Ill try to break up my comments later tonight.

EDIT #3: Just got back home from work. I don't know how many more people are really still interested in this topic so ill try to keep it short and sweet.

I just quickly read through all of the comments here and just wanted to let people in on my position. I am a recent college grad (doubled major in accounting and business management, minor in psych.) and I have been working for this sister company since spring 2006 (Im a VP here... and if people arnt that familiar with big corporations there can easily be 20-100 VPs in just one office).

First off to comment on the people commenting on my lack of eloquence..... sorry I don't want to sound like a whiner but ive been working at least 10 - 12 hr days and coming home and basically passing out. So the my grammar and spelling are the last things i think about when im literally shooting ideas off the cuff.

Secondly, most lager companies now a days do require their employees no matter what department they are in to hold a degree in that field or a related one. Like i said in my earlier post most of these low end workers or "grunts" (i dont like that word very much) do great jobs at work. The little guys really do most of the hard work and then pass it up to the higher ups where they are given the credit. But in AIG's situation the higher ups are causing all the problems.

The people who are specifically asking about this last recent bonus give out (there have been 5 so far since the bailout) 74 specific people in the AIG department of FP (financial products) were given bonuses basically because they were promised these since late last year. Now these people are the ones who really gambled with AIG's fortune and sorely lost.

Not all of these higher ups (SVP and higher) are responsible for the collapse but a certain amount are. These numbers are evident from the "11" who quit right after they received the bonuses but the day after another 20 or so resigned(this was also not covered by the media). Infact, knowing this makes me happy, but just by leaving the company right after those bonuses were handed to them the govt. can legally recoup all that money and prosecute those who need to be. The govt. literally has a strangle hold over these people once the bailout was agreed to by AIG.

A good article that will give you some more insight if your not sick from all the media attend given to this already can be found here: http://www.courant.com/news/politics/hc ... 5256.story

To add a little tidbit in..... I was interviewed at this location in CT and let me tell you when that woman describes it as bare and hospital like, is a complete understatement. That office is completely down to business, besides spending their lunch hours eating pork chops and other extravagant meals (this is really not uncommon to see at other large firms).

Ill be posting more later if needed..... got more Cornbeef wating!!!! :p

[freemason9]

Seems to me that the AIG bonuses are a lightning rod for public outrage. If those execs are metaphorically strung up, what good will it really do?

So yeah, the story is diverting attention from the real problems. At the same time, it all just seems like this is the story of the week in the media. Next week, or the week after if this story has really strong legs, it'll be something else, and the public will forget about those bonuses.

Hey look! It's Elvis!

On the contrary, my pudgy little friend. I'm really, really enjoying the ascending populism. This time it might go somewhere.

And, perhaps, all Americans might finally come to understand that we can all be millionaires via legislation.

[JackRiddler]

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In the Treasuries situation and Chinese announcement, Lindorff joins the long and storied line of those who have seen the end of the American Empire. One of them's going to be right, more sooner than later...

March 18, 2009
The Decline of the American Empire
Who's Calling the Shots Now?

By DAVE LINDORFF

It may not be obvious today, and certainly it’s not how the corporate media reported it, but future historians are likely to look back at March 13, 2009 as the day that American imperialism began it’s inexorable decline. That’s the day that Chinese Premier Wen Jiabao announced that his country was “worried” about its holdings of over $1 trillion in US treasury securities, and warned that he wanted the US to assure China that it would maintain its good credit and “honor its promises” and “maintain the safety of China’s assets.”

There is no way that the US can accommodate Premier Wen and still finance and operate a global military system with over 1000 overseas bases, massive aircraft carrier battle groups, and with hundreds of thousands of men and women armed to the teeth with the latest high-tech military hardware, not to mention fight endless wars on the far side of the globe.

What China is doing is pulling the rug out from under America’s six decades of global military dominance. It is no coincidence that the weekend before Wen’s statement, Chinese naval vessels aggressively harassed a US intelligence ship, the Impeccable, that was operating in the South China Sea.

The implied threat in Wen’s seemingly mild comment was that if the US doesn’t trim its deficit spending dramatically, and get its economic house in order—which means dramatically reducing the American standard of living, and reducing wasteful spending of its military, China will simply cut back on its funding of the US deficit, in the form of buying US Treasury issues, an act which would cause the collapse of the US dollar and what’s left of the US economy.

Now this decline of the US as an economic and military power is not going to be an overnight thing, because China needs to keep selling manufactured goods to the US market—the largest in the world—and in order to do that, it needs to keep recycling dollars spent on Chinese goods back into the US, which to date has meant buying US debt issues.

But there are other ways to recycle dollars back to the US, most notably by investing in actual US assets. To date, China has done this cautiously, in part to avoid arousing political concern in the US. Typically China, when it has purchased shares of US companies, has done so by buying small minority stakes, as it did in the case of the Blackstone Group, a private equity investment firm. But if China were to decide to stop funding America’s massive deficit, this could change. It could decide to just let the dollar slide, and take advantage of the slumping value of US assets to start buying the US up on the cheap.

There is already talk of Chinese auto companies buying up General Motors and Chrysler, and why not? They could have those companies, not to mention most of the national banks, for a song now. But China wouldn’t have to limit itself—nor would it—to buying up dying companies. It could also buy entities like General Electric, Boeing and IBM, or it could buy agricultural assets and mines—or oil companies and oil reserves.

In fact, China has been using its vast trade-surplus-fueled currency reserves of dollars and Euros to lock up at cheap prices on long forward contracts for oil and other critical commodities. This is just the beginning. (It would be ironic and incredibly foolish if the US, which has spent several hundred billion dollars in borrowed money, and as much as $3 trillion if interest costs are factored in, on conquering and controlling Iraq, really did so to gain control of oil, since China has accomplished the same thing peacefully for a small fraction of that cost, by just buying forward supply contracts.)

It is likely that India, whose economy is doing even better than China these days, will do much the same thing.

The end result will be a vast permanent weakening of America, as its economy becomes increasingly subservient to the interests of its new owners.

There is a delicious irony here, since the US, for decades, has done precisely this kind of thing around the world to developing nations, buying up their industries and their resources, and manipulating and controlling their political systems, to its own advantage, always with the backing, or threatened use, of America’s powerful military. Now the once-might US (remember Dick Cheney’s “world’s lone superpower” and George H.W. Bush’s “New World Order”?) is reduced to pleading with China to leave its warships alone, and to shamelessly begging, as Hillary Clinton did in one of her first public statements as secretary of state, for China to “keep buying” US Treasuries.

From the point of view of the majority of the world’s people, who have lived for too long under the American jackboot, this is all a good thing. But forcing the new “Rome” to retreat back within its own borders will also be good for us Americans, who have had to pay for all those military adventures in the name of empire and corporate profits over the years with our blood and taxes.

The problem, for us, however, is that all this military and economic comeuppance will also be accompanied by a dose of reality about our own real living standard. As long as China, India and the oil-producing states were willing to just keep buying American government securities to finance our multi-generational spending binge, it was possible for the US government to keep us citizens all fat and happy by creating a series of bubble economies, pushing up our salaries and the value of our homes to absurd levels, while interest rates remained comfortably low and the US dollar, as the world’s reserve currency, remained strong enough for us to continue to buy goods, the production of which was increasingly being moved overseas.

Suddenly, however, in one brief speech, Chinese Premier Wen has made it clear that the US is no longer calling the shots. Nobody’s saying it out loud here in America, but behind the scenes, it’s clear that increasingly US economic policy is going henceforth to be dictated by governments in places like Bejing, Tokyo, New Delhi and Brazilia. Those same places will also increasingly be telling us where and even if we can use our once mighty military forces.

Given our post-WWII history, that can’t be a bad thing.

Dave Lindorff is a Philadelphia-based journalist and columnist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback). He can be reached at dlindorff@mindspring.com

Hope to comment later on strong and weak points in the above argument.

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[Fat Lady Singing]

Next week, or the week after if this story has really strong legs, it'll be something else, and the public will forget about those bonuses.

Hey look! It's Elvis!

On the contrary, my pudgy little friend. I'm really, really enjoying the ascending populism. This time it might go somewhere.

And, perhaps, all Americans might finally come to understand that we can all be millionaires via legislation.

Wow, more optimism! So rare these days... so rare here at RI. Perhaps you and JackRiddler will persuade me yet!

[jingofever]

U.N. panel says world should ditch dollar. It is my understanding that there are certain perks that come with having the reserve currency, particularly with oil. I'm not sure how it works but I hear people talk about it.

By Jeremy Gaunt, European Investment Correspondent

LUXEMBOURG (Reuters) - A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said.

Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value -- though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.

Some analysts said news of the U.N. panel's recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.

"Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollar's slide between 2002 and mid-2008," CMC Markets said in a note.

Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday.

It has significantly reduced the dollar's share in its own reserves in recent years.

GOOD TIME

Persaud said that the United States was concerned that holding the reserve currency made it impossible to run policy, while the rest of world was also unhappy with the generally declining dollar.

"There is a moment that can be grasped for change," he said.

"Today the Americans complain that when the world wants to save, it means a deficit. A shared (reserve) would reduce the possibility of global imbalances."

Persaud said the panel had been looking at using something like an expanded Special Drawing Right, originally created by the International Monetary Fund in 1969 but now used mainly as an accounting unit within similar organizations.

The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent's economic clout, which can be valued against other currencies and indeed against those inside the basket.

Persaud said there were two main reasons why policymakers might consider such a move, one being the current desire for a change from the dollar.

The other reason, he said, was the success of the euro, which incorporated a number of currencies but roughly speaking held on to the stability of the old German deutschemark compared with, say, the Greek drachma.

Persaud has long argued that the dollar would give way to the Chinese yuan as a global reserve currency within decades.

A shared reserve currency might negate this move, he said, but he believed that China would still like to take on the role.

And, perhaps, all Americans might finally come to understand that we can all be millionaires via legislation.

You don't mean in the same way that ZImbabwe has the most billionaires per capita, do you?

[smiths]

well, given the talk of chinese sabre rattling and dollar issues, and the very pertinent question of what is money, i present this fascinating piece ...


Buying Gold, Gossip & Russia’s Tu-160 Bombers
By Adrian Ash • March 19th, 2009

FOR A WORLD-LEADING CLEARER turning over $60 billion per day, London's wholesale gold market sure spooks easy sometimes.

"I've just heard central banks have been selling. You hear anything?" asked one breathless contact of BullionVault on Wednesday...just before the Federal Reserve's $1.25 trillion shot in the arm gamed the gold price so hard, so fast, the perma-bulls at GATA should demand a Congressional hearing into Ben Bernanke's long Comex position.

More often than not, however, professional dealers get all aflutter about rumors of central-bank buying, not selling. In late 2008, it was supposed to be the Saudis. Last month it was the Russians - or so gossip claimed. Gossip that the Kremlin was only too happy to buoy.

Come mid-March, the People's Bank of China (PBoC) fired up the tittle-tattle - and again, as if on purpose - by forecasting that despite "safe haven" demand for the US dollar in 2009, gold prices would "fluctuate at high levels...possibly breaking through previous highs..."

Now this week a report by the oh-so-sexily-named Central Banking Publications says that out of 39 reserve managers controlling $3.2 trillion in official currency and bullion hoards - some 42% of the world total - well over one-in-two feels Buying Gold would make a smarter move today than it did this time last year.

So are the emerging powers hoarding gold today or not? What's a private citizen trying to look after his or her own to make of this chatter?

Well, as a rule, it means little or nothing for the price of gold day-to-day. And like GATA's claims - highly detailed, much derided - that Western governments regularly fix the gold market to cap its ascent, rumors of central-bank buying never prove quite as dramatic as central-bank action to either defend or debase the currencies against which it's priced instead.

Raise overnight interest rates to double digits, for instance - as the Federal Reserve's Paul Volcker did in the early 1980s - and non-yielding gold will tumble against high-yielding cash. Cut and hold rates at zero, in contrast...while creating, say, $1 trillion of fresh money in a 425-word statement, as Ben Bernanke did Wednesday...and you'll send gold prices higher, just as surely as the Maestro's apprentice strolling into London and buying 50 tonnes on his own account.

Investment-house analysts, meantime, are more focused on the possible 400-tonne sale mooted to help save the world-saving International Monetary Fund (IMF). Yet the really big driver so far this year remains mutual-fund managers buying paper-shares in gold ETF trusts. Western coin buyers paying 10% mark-ups (or more...!) are meantime wrestling with Asian scrap-jewelry sellers as to who can tip the balance of apparent supply and demand.

Large-scale gold purchases by Beijing or the Kremlin would anyway come at the pit-head, rather than on the open market, as they look to "slow and steady accumulation" in the words of UBS's highly-regarded John Reade recently, quoted by the Financial Times. Buying gold direct from domestic miners was how South Africa more than doubled its official reserves in the late 1960s.
China and Russia now stand first and fourth among the world's gold-producing nations. Why announce their intentions, sticking a premium onto their dealer's offer, by going through the open market?

But behind the dealing-room noise, howwever, the cold facts of Asian, Middle East and Russian gold hoarding point to a deeper trend - an ugly if grand historical shift that finds its last cyclical turn almost 10 years ago to the day.

In mid-1999, the Swiss, European and UK central banks announced gold sales that did indeed shake the market. Back then, the gold price had been tumbling for the best part of two decades - thanks first to those double-digit US rates, and then to the fast-growing number of high-return alternatives for investment cash that sprouted worldwide as interest rates began to fall back but remained well north of the rate of inflation.

Prompted by investment-bank advisors and analysts, the late 20th century's heavy selling by West European governments coincided not only with both a multi-year low in the gold price and a bubble in earnings-free tech stocks. It also came together with Francis Fukuyama's "end of history" and Tony Blair - the UK prime minister then guilty of neither bombing Belgrade nor Baghdad - declaring his to be "the first generation [in Europe] that may live our entire lives without going to war or sending our children to war."

Put Blair's cant to one side (if you're not retching). Why did Europe's central banks have so much gold to sell in the first place? As BullionVault has noted before, the continent's 30-year scrap between its big nation states was preceded and worsened by frantic gold hoarding amongst the major players. Because a government must trust in another's long-term survival when accepting its paper as payment. Whereas gold bullion, as former Fed chief Alan Greenspan famously said - and just before the UK announced its 415-tonne sales back in May 1999 as it happens - "still represents the ultimate form of payment in the world.

"Germany in 1944 could buy materials during the war only with gold. Fiat money in extremis is accepted by nobody. Gold is always accepted."

Why else did the Nazis march straight to seizing the central-bank vaults on reaching Vienna, Prague and Warsaw? Why else did the United States grow its hoard from 500 tonnes in 1900 to almost 20,000 by the eve of World War Two...nationalizing privately-held gold on pain of a $10,000 fine or imprisonment when F.D.R. took office at the depths of the Great Depression?

Now, two generations later, China's official gold reserves remain unknown and unknowable to outside observers. But it has become the world's No.1 gold-mining state thanks to the collapse in South African output. And the fresh deluge of US money debasement only confirms why Beijing's bankers "hate you guys" as one policy-maker, Luo Ping - director-general of the China Banking Regulatory Commission - put it last month.

"Once you start issuing $1 trillion or $2 trillion," he said to the Financial Times, five weeks before the Fed issued...ummm...$1.25 trillion of new cash..."we know the Dollar is going to depreciate.

"So we hate you guys but there is nothing much we can do. Except for US Treasuries, what can you hold? Gold? You don't hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option."

Further west (but only a little, politically), Russia's official gold reserves have swelled by one-half this decade on the IMF's data, with new purchases peaking in August 2008 - just as the 58th army rolled into Georgia to defend South Ossetia's illegal, breakaway republic.

Under Vladimir Putin, the Kremlin said it wanted gold to grow from 2.5% to fully one-tenth of its foreign currency reserves, meaning four-fold growth of its bullion hoard if not a collapse in its paper assets. Just last month, the central bank stated that it was buying gold. On the available data, it had already added 109 tonnes to its hoard in the 15 months starting Jan. 2007 at a cost of some $27 billion.

Oh sure, that's peanuts compared to the total $4 trillion-worth of gold now thought to be above-ground at today's prevailing prices. But the vast bulk of that gold is held as jewelry, not monetary units like coins or bars. And according to Tsar Putin himself back in 2007, before this burst of gold-hoarding really got started, the ratio of Russian government debt to its national gold reserves was already stronger than for any other state in Europe.

Never mind how wide of the mark that metric was; Putin's claim shows how much gold bullion matters to Russia's political confidence - a confidence only called into use when debt and foreign currencies slide into crisis. And then this week, the current Kremlin incumbent, Dmitry Medvedev, goes and announces that he's "rearming" Russia, using the very word - "rearmament" - that Europe fretted over and feared all through its short 20-year peace between the first and second world wars.

Specifically, "[I will] increase the combat readiness of our forces, first of all our strategic nuclear forces," Medvedev declared Tuesday, piling historical weight onto Monday's more Cold-War-style news that Roscosmos, the Russian space agency, is planning a manned lunar mission for 2015.

Oh, and then there was the overnight news from Venezuela that socialist crackpot Hugo Chavez says Russia's long-range Tu-160 "Black Jack" bombers - each capable of carrying 12 nuclear warheads - are welcome to use the Caribbean island of La Orchila. You know, just for re-fuelling, cleaning the windscreen, emptying the ash-trays...but not ever as a permanent base.

So this isn't the Cuban missile crisis. Not yet at least. But the Kremlin's new saber rattling must still have caused a shock at the White House - just as it shocked anyone not tracking Russia's fast-growing gold reserves. Either that, or Team Obama is so smart, they were expecting some kind of pre-emptive strike ahead of the Fed's nuclear blast in the T-bond market.

"Foreign demand for long-term Treasuries has disappeared over the last few months," writes Brad Setser - an ex-US Treasury and IMF official, former economist for Nouriel Roubini's doom-and-gloom funsters at RGE Monitor, and a visiting or associate fellow pretty much everywhere worth having deep thoughts on big subjects.

Studying the latest official data (released Monday) in his blog for the Council on Foreign Affairs, "It is striking that for all the talk of safe haven flows to the US, foreign demand for all long-term US bonds has effectively disappeared," he explains.

In particular, "Over the past three months, almost all the growth in China's Treasury portfolio has come from its rapidly growing holdings of short-term bills, not from purchases of longer-term notes...and it is also still selling [mortgage] Agency bonds."

All told, China continued to buy US Treasury debt; it is "the only option" for China, Russia and everyone else at this stage of the game, as Luo Ping wailed to the FT last month. But of the $12.2 billion China purchased in January, fully 95% were short-term bills. "Russia also, interestingly, added to its holdings of short-term Treasury bills," Setser says.

And then, with the latest Treasury fund-flow data revealed...BOOM! The Federal Reserve prints $300bn to buy 30-year US debt, plus another $750bn to buy mortgage-agency bonds.

Someone's got to buy this stuff, and the forced buyers of this decade-to-date are starting to tire. They might just be looking to Buy Gold for much more than "portfolio diversification" as well.

There. How's that for rumor...?

Adrian Ash

http://www.dailyreckoning.com.au/buying ... 009/03/19/

[smiths]

[seemslikeadream]

AIG Sues US Government for Return of $306 Million in Tax Payments

http://www.nytimes.com/2009/03/20/busin ... .html?_r=1


While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

[seemslikeadream]

http://www.motherjones.com/politics/200 ... pay-reform

Top Geithner Aide Fought CEO Pay Reform

As a Goldman Sachs lobbyist, Mark Patterson once worked against a bill to curb executive compensation. The legislation's sponsor: Barack Obama.
—By David Corn and Jonathan Stein

Mar 20, 2009
On Wednesday afternoon, as President Barack Obama was leaving the White House for a town hall meeting in California, he spoke for 15 minutes to reporters about the AIG controversy. Responding to the rising rage over the $165 million or so in bonuses paid to executives at the bailed-out insurance firm, Obama noted that he was quickly developing policies to prevent future AIG-like catastrophes. And he slammed Wall Street's culture of "excess greed, excess compensation, excess risk taking." To demonstrate that he's committed to battling such greed, the president cited his work in the Senate to rein in executive compensation. Noting that he and Rep. Barney Frank (D-Mass.) had each introduced legislation on this front in 2007, Obama declared that "there were some people who attacked us, saying government has no business doing that."

One of Obama's opponents at that time was Mark Patterson, a lobbyist then for Goldman Sachs, the investment banking firm, which opposed the Frank-Obama initiative. Yet Patterson is now chief of staff to Treasury Secretary Timothy Geithner, the embattled point man in the Obama administration's endeavor to undo the notorious AIG bonuses. That is, a Washington influence-peddler who worked against Obama's effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.




In 2007, Frank, the chairman of the House financial services committee, introduced H.R. 1257, the Shareholder Vote on Executive Compensation Act. The bill required public companies to allow shareholders to hold nonbinding votes on executive compensation plans. The measure—dubbed "say on pay"—was a modest step, though only one of the few attempts then to address exorbitant salaries. It did not limit pay for corporate managers; the legislation would merely permit shareholders to express their displeasure with compensation packages. Corporations would be free to ignore the outcomes of these symbolic votes. Still, the banking industry opposed the bill. And Goldman Sachs, for which Patterson was a registered lobbyist from September 2005 to April 2008, was no fan of "say on pay." Sachs' chief executive, Lloyd Blankfein, who took home at least $70 million in 2007, has argued that shareholders are "less sophisticated and have less understanding" of compensation issues than corporate board members.

According to lobbying disclosure forms (PDF), Patterson was one of four Goldman Sachs lobbyists registered to work on HR 1257. How the group tried to influence congressional action on the bill is not revealed in the documents, but given Goldman Sachs' opposition to this reform, Patterson and the others were surely not trying to help the measure pass. (In January, a Treasury official confirmed to the Associated Press that Patterson's lobbying portfolio included this compensation measure.)

Despite industry opposition, the House approved Frank's bill on a 269-to-134 vote on April 20, 2007. That same day, Obama introduced a version of the legislation in the Senate. The bill, which initially attracted only five cosponsors, was referred to the Senate banking committee. Weeks later, Obama sent a letter to Sen. Chris Dodd (D-Conn.), the chair of that committee, asking him to hold a hearing on the proposed law. Obama wrote:


I believe public discussion and debate over executive compensation packages would force corporate boards to think twice before signing over millions of dollars to CEOs. Certainly, many CEOs are ably steering their firms and deserve their paychecks. But the rate at which executive pay has grown, as compared to stagnating wages among American workers, is rightfully frustrating shareholders and employees alike, especially given the lackluster performance of many of the companies paying these high salaries.
Dodd, then running against Obama in the Democratic presidential primaries, apparently was not convinced. He held no hearings on the bill, and the measure met a quiet death in his committee. (Whatever Patterson had done, he could claim a success.) But on the campaign trail last year, Obama repeatedly touted the legislation to show he was serious about corporate reform. At an Indiana press conference in April 2008, he said of the measure, "This isn't just about expressing outrage. It's about changing a system where bad behavior is rewarded—so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves."

As vice president for government relations at Goldman Sachs, Patterson, who had previously been policy director for Sen. Tom Daschle, handled a wide assortment of financial, banking, patent, energy, and insurance issues. He worked on tribal gaming matters. And he was registered to lobby on credit default swaps and carbon trading. Because of his lobbying activities, Patterson did not meet the tight ethics rules Obama adopted to slow down Washington's ever-spinning revolving door. His appointment—which was not subject to Senate confirmation—was questioned by White House reporters and criticized by government reform outfits. But the Obama administration granted Patterson a waiver, and the ex-Goldman Sachs lobbyist was able to join Treasury. (Goldman Sachs has been one of the biggest beneficiaries of the federal rescue of AIG; the fallen insurance firm, which has received $170 billion in funds from the Federal Reserve, has used that money to pay Goldman Sachs $6.8 billion.)

A spokesperson for Goldman Sachs would not provide any details regarding Patterson's lobbying. And the Treasury Department and the White House each declined to comment on Patterson's past lobbying for Goldman Sachs or his present work for Geithner.

On Wednesday, while recounting his and Frank's attempts to enact "say on pay" legislation, Obama pointed to their measures as examples of "smart regulations" that enhance "oversight, transparency, accountability." And he remarked, "All we're trying to say is you've got to be accountable to somebody. And it's that measure of accountability that I think is part of what has made America strong, and we have to get back to those kinds of values." But Geithner's right-hand man was not long ago paid well to undermine those values. How Patterson has gone from serving Goldman Sachs to serving the Obama administration is a tale that could use some more transparency.

UPDATE: After this story was posted, a Treasury Department spokesman issued a comment: "Mark Patterson is in full compliance with the administration’s strict ethics policy, and has recused himself from discussions on this and all other issues he worked on during his time in the private sector." Does this mean that Geithner's chief of staff cannot be involved in conversations and decisions regarding corporate compensation issues, including the AIG bonuses? If so, wouldn't that place Geithner at a disadvantage as he tries to handle such matters? We've asked Treasury for a response to these questions.

[jingofever]

Somewhere in this thread I posted a link to a Vanity Fair article about Iceland written by Michael Lewis (the same guy who wrote the article that started this thread). Turns out that a lot of the colorful anecdotes and descriptions are inaccurate: Vanity Fair’s Fishy Tales From Iceland. Is Michael Lewis sketchy? I read a piece he did for the New York Times Magazine where he claimed that Shane Battier of the Houston Rockets was either the most underrated player in the NBA or the outright best, even though his teams have never went past the first round in the playoffs.

[vigilant]

Main Entry: meg·a·lo·ma·nia
Pronunciation: \ˌme-gə-lō-ˈmā-nē-ə, -nyə\
Function: noun
Etymology: New Latin
Date: 1887
1 : a mania for great or grandiose performance
2 : a delusional mental disorder that is marked by feelings of personal omnipotence and grandeur

It was only a metaphor mixed with truth, per usual, it gave you a haircut.

[seemslikeadream]

http://www.democraticunderground.com/di ... =114x61003

AIG the culprit? NO.. Here's the real beneficiary of the bailout money.
If AIG fell, Goldman Sachs was going to be hurt, badly, because of the counter party issue.

The original bailout last fall to AIG was pushed by Paulson, Bushie Sec. of Treasury.
Who used to be CEO of Goldman Sachs.
Who was also a mentor to Geithner.

Lehman was a rival of Goldman Sachs. Lehman was allowed to sink.

The bailout program, designed by Paulson to give about 12 billion indirectly to Goldman
Sachs via AIG,
is being "managed" by...Neel Kashkari, a former Goldman Sachs VP.

Geithner was a protege of Robert Rubin.
Rubin was Clinton's Sec. Treasury who pushed for the deregulation which led to this mess.
Rubin came to Treasury job from.................Goldman Sachs.

Geithner's Chief of Staff, Mark Patterson, was a lobbyist for...Goldman Sachs.

The new AIG CEO, Liddy, who was appointed by Paulson, came from Goldman Sachs.

Sure is an ugly picture