WTF? NEWS
Published Irregularly Weather or Not We Feel Like ItAny Damned Time We Please
Important Dislaimer: In case any reader doesn't quite get it, this is parody protected under the first amendment of the Constitution of United Statements of America. If you don't like the law then feel free to go try and change it. If you are interested in further information on freedom of the press we suggest you start with John Milton's masterful essay "Areopagitica" (1644) http://www.uoregon.edu/~rbear/areopagitica.htm
Breaking Story: Exasperated Stickman Loses Cool; Tells Geitner in V-Memo "Just Write Down What I Tell You and Say It. I Can't Stand Watching This Anymore"
Howard Beale Is Alive and Well
WTF? News has received from an anonymous source the remnants of highly confidential encrypted voice memo from Double Secret Financial Operative Agent Stickman to Secretary Geitner. The recording was retrieved from a zip drive left taped under the Secretary's favorite table at an undisclosed D.C. IHOP restaurant. The zip drive was intended to self-destruct Mission Impossible-style within 10 seconds of playback. Geitner apparently left the zip drive unplayed under the table inadvertently. Here is a carefully reconstructed transcription of the voice memo; the anonymous source known only as "Deep Pocket" is recovering from second degree facial burns as the the zip drive triggered a heating mechanism planted in a bottle of maple syrup that exploded after the source listened to the memo on his laptop. The IHOP was evacuated without incident.
To: DOT Secretary Geitner
From: Agent Stickman
Re: Bailout
Tim, I really am getting quite [inaudible- frustrated?] in my inability to get through to you that you are starting to make former DOT Secetary Paulson look formidable. Going forward please just write down what I say very carfully and just say it. Your credibility is sinking faster than the Titanic; Leo DeCaprio's death scene brings young girls to tears, unfortunately your performance only brings tears to the world central bankers. Here's the drill:
(1)My God! Don't give the entire banking system a stress test unless you are fully prepared to find out that all of the patients are already dead which would not be a good thing for the market to hear right now even if its true. If you listen to Nouriel Roubini who has been batting a thousand you are a good $2.5 trillion short on top of the $8 trillion you and Hank seem to have thrown around during the prior administration. That adds up to a (inaudible: boatload?] of mullah which if the Chinese balk we are toast.
(2) Change the message framing: "Our primary messaging strategy should be as follows:
"We intend to eliminate the information discount that has been embedded in asset prices due to a lack of information and a complete lack of market-based liquidity. We are currently unable to reconstruct cash flow models that underlie the so-called 'toxic securities' " but we will institute formally the guidance for alternative valuation methodologies already recommended by the SEC, FASB and the Federal Reserve for valuing hard to value assets in a non-existent market. Any party (auditors, repo lenders, new management) forcing a writedown based on mark to market will be subject to personal civil and criminal penalties (kind of like Sarbanes Oxley). It's not that complicated. We don't have the information so we can't price the assets. Doesn't mean they're good or they're bad. We just don't know. It is what it is.
(3) Most importantly you formally declare that the "market is dysfunctional therefore mark to market (FAS 157) is completely inappropriate." You instruct all market participants to follow the new rules for cash flow vaulations. Like nature abhors a vaccuum, markets abhor uncertainty. They like rules even if they are stupid at least they can be evaluated and be adhered to . We then change the rules when we have enough information and actually know what we are talking about.
There will be a s---storm about Fas 157 but that will last baout 20 minutes. The market place has already barfed all over Tarp 1 , Tarp 2, Bank Recapitalization etc. ad nauseum. Rather than buying assets under the TARP crapola or trying to bring in private investors who will charge us an arm and a leg (why pay Blackstone, Blackrock, Cerberus et al returns in the mid to hi thirties that are only being artificially by offerring non-recourse below market rate financing of up to 75%). Better to do nothing and say nothing until we have the information when we can make an informed decision as to the best course of action. It's a whole lot better than saying something and then having to admit you are wrong or didn't know what you were talking about for the umpteenth time. In the meanwhile we insist that all federally insured financial institutions extend maturities on all performing loans on a rolling 90 day basis provided borrowers are making scheduled payments (other than principal payments at maturity which will be extended). These loans should be extend on the same tems, conditions and pricing. This buys us 90 days to get some information and if we need to do this again we revisit in 90 days.
(4) Here's the zinger
[transciption ends]