The speed and range of developments in international finance take some keeping up with. e.g Crude futures rose US$25 per barrel,(24.3%)before the NY Mercantile Exchange closed yesterday - US$130 + (it closed out at US$123) and no one expects it to drop today.
Congress and the Senate are clucking about the demands Hank Paulson is making - ie litle short of financial Dictatorship. He want the till stuffed full of US$700 Bn and he wants the keys and he wants protection from the law courts . Forever.
Barney Franks (Chairman of the Financial Services Committee) who looks like an unmade bed and has a grasp of international finance equivalent to Ted Steven's understanding of the internal workings of the Internet.To think this intellectual Titan can decide on what/what not to do gives no comfort in this quarter.
Faced with anxious self important people like Steny Hoyer, Nancy Pelosi, Barney Franks, who want controls on short selling, oversight (with all it's delays) on his actions, Hank Paulson could well decide to tell them go Fuck themselves.
Hank is 63, immensely wealthy, can readily get another job, is no doubt going to be replaced whoever wins the Presidential election.
Why does he want the hassle ?
Hank was very up beat and confident over the weekend - exuding steely charm as he circulated through the TV studios and saying basically ...Hey folks it's Hank's way or NO way.
Just imagine ....what would happen if Hank resigned ... or even threatened to resign ?
He really knows the shit the market is in ...According to page 20 the Goldman Sachs 10-Q regulatory filing for the first quarter of 2006:
During the three months ended February 2006 and February 2005, the firm securitised $19.25bn and $15.24bn, respectively, of financial assets, including $18.15bn and $14.43bn, respectively, of residential mortgage loans and securities.
2 pages later ... exposures to Variable Interest Entities “which primarily issue mortgage-backed and other asset backed securites and collateralised debt obligations” included $22bn of CDOs, $2.9bn of “asset repackagings and credit-linked notes” and $6.5bn of “mortgage-backed and other asset-backed” securities.
Just remember Hank (Wall Street's highest paid Exec) was also hauling dowen big potatoes for this...$18.7 million cash bonus (none of those fancy share options for Hank the Bank)for half a year of work as the Chairman & CEO of the Goldman Sachs Group for 7 years, just before joining George Bush as Treasury SecretaryPerhaps more significantly on the day he left ..."Goldman filed with regulators last Thursday for a sale of Mr. Paulson's 3.23 million common shares, worth $491.6 million based on that day's closing price."
Meanwhile his cronies on the Street have magically got their Get out of Jail card by putting on their magic Cloaks and becoming regulated Banks ! With one bound they are free!
Update on Shoes waiting to drop (UK section)
Already we note that the crazy restrictions placed on short selling have been extended to GM and Ford creating a false market in their shares. This will simply build up expectations of a fall ....they wouldn't demand a stop on s/s unles there really WAS / IS a problem.
Apparently their addition to the list of over 800 financial companies relates to their crdit arms. Ford owns Ford Credit outright, and GM qualified through its 49% stake in GMAC and its mortgage unit ResCap.
This also reflects on Bradford and Bingley Bank (which we have been following here) their Mr Crawshaw (now suffering from stomach Cramps) who very cleverly bought up to a maximum of £12bn worth of mortgages from GMAC-RFC (the US's 11th largest mortgage lender) .
Those home loans (now turning sour big style) were to be bought in quarterly tranches, worth a minimum of £350m per quarter, until the end of 2009.
Five tranches are now left to buy, by the hugely loss making bank - so they are committed to spending a further £1.75bn to fulfil their legally enforceable side of the bargain.
GM shares dropped 11.7% yesterday.
B & B shares are trading at a near lifetime low of 26p on the expectations that the FSA can find someone who will pick up this poisoned chalice.... an increasingly unlikely propsect as the company has been hawked around the City for weeks. The shareholders who are the Banks who supported the recent share issue will be happy to take the loss if they go into administration and be done with it.
Nobody amongst them ,evidently has the heart to pick up this pile of sepsis.
Anybody who has failed to heed the call already, who has funds with B&B Bank are advised to get round there sharpish and withdraw anything they may have. Relying on prompt receipt of their funds via a Government inspired / sponsored guarantee is hopelessly optimistic.