G7/8/20 Hike! Geitner in Rome to Sell Stimulus and Bank Plan Sings Kumbaya to Chinese

The Official G7/8 Message from Rome: Please, Please Appease the Chinese

Kumba Yo: Rockin' Guano Apes Darker Version Replaces Joan Baez

If the mere thought of a meeting that ends up with government officials in the midst of a crisis singing Kumbaya makes you want to vomit here a quick refresher video of the traditional rendition:

But wait! There's  a new version that is secretly  being sent around to G7/8 officials as  inspiration (see video below)

Perhaps it wasn't clear to Secretary of Treasury Geitner from lame-duck George Bush's overture last December to the G Whatever when he sent out a very thoughtful and well prepared invitation: "hey guys why don't you pop over to the White House for beer while you're all in town and see if we can stabilize the financial markets and then have a group photo opp we can put out on the wire so it looks like we are all working together?" BIG success. Worked like a charm. So off to Rome goes Geitner to sell, sell, sell.

I always get a little confused among the G7, G8, G20 and BRIC.  Doesn't really matter because nothing ever happens other than lofty statements of good  intentions.  When you need the bloodied car cleaned after a rub out who you gonna call?  Harvey Keitel, not Tim Geitner. So after trashing the Chinese for currency manipulation just weeks into the job, someone from the Fed probably sent over a maturity schedule of Chinese holdings of short term treasuries.  Turbo-tax Tim shows up in Rome to sell his stimulus  and bank recap proposals (a bit light on the details). However, he's very chummy chummy to the Chinese.  But rumor has it after singing the anthemic campfire song like Joan Baez during  the the civil rights movement someone forwarded Geitner the latest sensational (and soon to be controversial ) youtube version by the Guano Apes.  Maybe Geitner's tougher than we think. Check it out.

Articles of the Day

Sticky's Twisted Picks

star date 02-10-09

From Today's Wall Street Journal

Credit Thaw? Cisco Issues Debt: 

Tapping the paranoid credit markets for $4 billion in a "museum" issuance  Cisco  will use the debt to buyback stock (further de-equitizing the financial system)  and build their a war chest for future acquisitions (way to deploy that money into creating new jobs guys!)

Alex Rodriguez Admits to Using 'Roids

Just when you thought there could be no more depressing news, the Yankees soon-to-be-former-icon Alex Rodriguez has emerged as the universe's newest Ex-Planet Pluto. Moving quickly to recover from the devasting Michael Phelps bong imbroglio, rumor has it Kelloggs is frenetically formulating an offer for Rodriguez to appear on the 63 trillion boxes of their Frosted Flakes to gussy up their tarnished image. "Hey, it's an improvement" said a company spokesman who spoke on a condition of anonymity. In response to Helen Thomas' piercing question at his first prime-time press conference President Obama spent 6 minutes addressing the scandal reciting from memory baseball statistics and used his extraordinary communcations skills with great humor and elan:  "I think it's fair to say Mr. Rodriguez has just gone  from A-rod to A-hole. Boy this is depressing!"

Dr. Doogie Geitner's Financial Proctology 101:

Timothy Geitner's plan to restore confidence in the banking system will be to further stigmatize "unhealthy" banks and create a caste system - how will Treasury determine which banks are healthy and which are not? It's anyone guess.  Presumably they will rely on the SEC, the regulators and rating agencies who got us into this mess.

Bad Omen: The Paulson Conspiracy Theory

Did Hank Paulson Tank the Markets to Profit from Obscure Tax Provision for Executive Branch Appointees?

"The Omen Theory" Way Out There on the Twilight Zone Curve But Provocative Nonetheless.

How the hell did this one slip under the radar? With a little help from an anonymous researcher-- let's just call he Stickgirl-- we have confirmed from an article from 2006 at Forbes.com that Hank Paulson may have pulled the wool over everyone's eyes and destroyed civilization for personal gain. In what looked like a ridiculously bad trade swapping his mid-eight figure compensation package at Goldman Sachs for $187,500 a year a federal pay package more suited for a first year associate and destroying his reputation in acting like a complete bumblehead at DOT, did Paulson do the unthinkable?

Blago: eery resemblnce to Damian??

No "sign of the sixes" visible

Remember Damian, the devil-child from the movie the Omen (the kid with the sign of the sixes underneath his Blago-shag do)? So here's how the conspiracy theory goes: Like Damian who kills his terrorified mom and ascends to become President of the United States, Paulson utilized exquisite timing and a little known provision where Executive branch appointees who, to avoid conflicts (think Dick Cheney and Halliburton-not), can sell their personal investment portfolios tax free and re-invest in treasuries and similar instruments; tax is due at the time they leave office but only if and when they decide to sell their permitted investments- like maybe never.

So Paulson swaps out of Goldman into treasuries mid-2006 when according to the Federal Reserve H15 report the monthly average on the long bond (30 year treauries) was 5.15%. Goldman shares were hovering around $150 a share. So theory goes as (we are making it up as we go along), Paulson sells $484 million or so of Goldman stock tax free and reinvests in treasuries. Fast forward, the world starts to collapse and Paulson starts acting more like Soupy Sales than a masterful calmer of markets-- say like Bob Rubin (who also benefited form this little "pearl of tax-planng." Rubin? Nah!!!! Too much integrity, too much consistency and leadership. So as the markets crater, there is a flight to quality and low and behold the yield on the long bond drops to roughly 3%. The $484 million portfolio of Paulson long bonds zooms to say $677 million give take a few bucks. So Paulson saves $100 million in taxes on the way into public service. Meanwhile Goldman's stock is in the tank dropping nearly 40-50% from his date of departure ranging from $75-95 a share recently. So had he stayed at Godman and not sold his holding would be worth say $300 million. Today under this thought experiment/conspiracy Paulson's holding would be worth $677. Close to a $400 million swing in net worth. And we thought he was dumb!

Now the point is not that Paulson actually perpetrated such a callous act to tank the markets on purpose so he could personally but rather what was supposed to eliminate a conflict of interest created one hell of plotline for the next installment of "The Omen". The reason this is not plausible is that the "666" would be visible at all times on Paulson's bald pate. However, Blago was recently seen at Endeavor and was presumably lobbying for the leading role.

Thanks for the tip Stickgirl--keep those leads coming to EPD. 

Love Sticky

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FORBES.com
A Loophole For Poor Mr. Paulson
Jessica Holzer, 06.02.06, 6:00 AM ET

WASHINGTON, D.C. -

For Henry Paulson Jr., a Goldman-sized tax loophole awaits his pleasure.

High-flying business executives almost always endure financial sacrifice when they make a detour into public service. Paulson is no different: The Goldman Sachs boss will see his annual paycheck shrink from last year's $38 million to a paltry $183,500 once he takes over the job of Treasury secretary.

But don't shed too many tears for Paulson. He has amassed quite a fortune--a roughly $700 million equity stake in Wall Street's premier investment banking house. And soon, he will have the chance to diversify a good chunk of those holdings without paying a dime to the Internal Revenue Service.

By accepting the Treasury post, Paulson is poised to take advantage of a tax loophole that allows government officials to defer capital gains taxes on assets they have to sell to avoid a conflict of interest, as long as the proceeds are reinvested in government securities or a broad array of mutual funds approved by the government within 60 days.

Technically, the tax kicks in once these replacement assets are sold, using the purchase price of the original assets as the cost basis, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. But why sell when you can avoid the tax altogether?

"The idea is never to sell," says Robert Willens, the top tax and accounting analyst at Lehman Brothers. "If you're able to hold onto the replacement assets until your demise, you never have to pay it."

The tax break was designed to ensure that the wealthy are not deterred from taking posts in government because they fear a big tax hit. But it amounts to a significant perk of public office.

Paulson's huge equity stake in Goldman served him well as he flitted around the globe singing the firm's praises to potential clients and investors. It was hard evidence of his faith in Goldman's continued success. But once he is gone from the bank, such a giant concentration of assets could be somewhat of an albatross for Paulson, who, at 60, is surely considering the tax consequences of diversifying his fortune.

It is not a stretch to suppose that, at the margin, the chance to unwind his stake in Goldman Sachs tax-free may have had an influence on his decision to take the Treasury job. After all, if he were to completely divest himself without any tax relief, he would be staring at a tax bill of well over $100 million, Willens says.

Paulson need only obtain a "certificate of divestiture" from the Office of Government Ethics to sell off his 3.23 million Goldman shares, worth about $484 million, tax-free.

But he may not escape paying taxes on the sale of the rest of his Goldman holdings, which are made up of restricted stock and options, depending on whether he received them as part of his pay package. Proceeds from the sale of assets received as compensation would be treated as ordinary income rather than a capital gain and thus would not qualify for the tax break.

Plenty of wealthy public servants, including Defense Secretary Donald Rumsfeld and former Secretary of State Colin Powell, have taken advantage of the tax break since it was introduced in 1989 under the administration of President George H.W. Bush. Deputy Chief of Staff Karl Rove has obtained a certificate of divestiture for stock sales in 23 companies since he joined the administration.

To get the tax relief, it must be deemed "reasonably necessary" for a public official to divest his shares, or a congressional committee must require the asset sale, according to section 1043 of the tax code.

Paulson should have no trouble passing this test: A large stake in a global financial firm would seem a clear conflict of interest with the duties of Treasury secretary, which include ensuring the smooth financing of the current account deficit and helping to manage financial crises.

Even a stake in an industrial company is enough to raise eyebrows nowadays. Outgoing Treasury Secretary John Snow, the former chairman of CSX Corporation, dumped more than $20 million worth of his former company's stock to avoid the appearance of a conflict of interest. And Snow's predecessor, Paul O'Neill, the former chairman of Alcoa, was dogged by criticism of his $100 million stake in the aluminum giant until he finally unloaded it. That's still small potatoes compared with Paulson's nest egg.

It is always possible that Paulson could follow in the footsteps of fellow Goldman alumnus Robert Rubin and avoid divesting his Goldman stake by placing it in a blind trust. But even the former Treasury secretary, who was the richest member of the Clinton administration, made ample use of the tax break, diversifying other portions of his fortune.

Poor Gov. Jon Corzine of New Jersey, who launched a successful bid for the U.S. Senate after Paulson shoved him aside to become the top dog at Goldman, wasn't so lucky. While serving on the Senate banking committee, he was pressured to sell off his $300 million stake in the investment bank. But alas, the tax perk is only available to members of the executive branch.

Crisis in Confidence " What Me Worry?"

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.html

Biden: "Even If We Do Everything Absolutely Right We  Have a 30% Chance of Stimulus Failing"

With Statements  Like That Who Needs  Skeptics?

Confidential Memo

To:  Joe Biden, VPOTUS

From: Agent Stickman,  Obama Admistration Double Secret Financial Operative

Re: "Only 70% Probability of Stimulus Working"

I have surrepticiously received numerous emails from around the globe expressing concern at best to downright consternation regarding your comments as reported in the Wall Street Journal that the $900 billion fiscal stimulus has only a 70% chance of success.  As your personal communications coach, I suggest using, for messaging purposes, a little less candor regarding the "Hail Mary" attributes of the "4th down and 36 yard" stimulus package.  I mean come on!  If this thing has a 30% probability of failing if we get it exactly right (which we know we won't) don't you think some people might say, "if can't we come up with something a little more thoughtful w/t/f are we doing this for?"  I might, as add food for thought Mr. Vice President that  lemmings who change their minds in mid-air following their comrades  over the cliff have a very short window of mental clarity.

While I don't necessarily disagree with your probability assessment (personally, I handicap this puppy of a stimulus as  50-50 proposition a best) but I would never admit that publicly particularly when President Obama is trying to re-assure people that this thing is going to work.  Perhaps if you could revise your word framing and estimate of success to fall more comfortably within 1 standard deviation of the expected mean outcome (see below) it would really help the market avoid the uderstandable impression we have absolutely no idea what we are doing other than what we are doing is gonna be really big.  I do hope I haven't overstepped my bounds but that's what you're paying me for sir.  My best advice, with all due respect  Mr. Vice President might just be  to shut the f*** up.  People will start to confuse you with former Secretary Paulson.  I wll carry at all times an updated resume (for you and me) so if this sick puppy turns out to be a dead dog Iwe are prepared for the 2010 mid-terms.

Caveat Emperor

Stickman

From Wall Street Journal

February 6, 2009, 11:27 am

Biden Urges Passage of Stimulus Despite Voter Backlash

Susan Davis reports from Williamsburg, Va., on the House Democrats’ retreat.

Vice President Joe Biden acknowledged today that Democrats could face political repercussions in 2010 fortheir support of the $900 billion economic stimulus package. “But when we do [approve it], I’m sure you’re going to be nailed in ads, ‘Well they voted on that’ 30 second ads,” Biden told roughly 200 members of the House Democratic Caucus gathered here for their three day annual retreat. “I promise you as [a colleague] once said to me, ‘I’ll come campaign for you or against you, whichever will help you the most in your district.’ And so will the president because, again, we’re all in this together.”

Vice President Joe Biden speaks about the benefits of the economic stimulus bill at a local train station in Laurel, Md., Thursday.

Cultural Icon Alfred E. Newman expressed grave concern about the stimulus package

The vice president also offered some trademark candor about the prospects of success.
He recalled a recent White House meeting with the president and senior aides in which they were discussing the many challenges the country faces. “If we do everything right, if we do it with absolute certainty, there’s still a 30% chance we’re going to get it wrong,” was his message at the meeting.

Biden warned that the consequences were too great for the country to allow politics to prevent action. “The only thing we can get wrong is not reaching a consensus among ourselves…and demonstrating to the American people that we’re thinking small and politically—you [House Democrats] have not, you’ve thought big,” he said. All but 10 House Democrats voted for the bill.

Echoing President Barack Obama’s remarks here Thursday, Biden aligned this moment with other great challenges the country has faced. “Not since World War II has a caucus gathered with so many challenges facing our country and the stakes so high,” he said. “The slope is pretty steep. The opportunities are great.”

Biden noted that history suggests many of the smart decisions made to aid the nation were unpopular, and that Congress will have to take tough votes. “There were very few decisions that were made [back then] that were popular,” he said. “That’s the bad news folks.”

Yet Biden sought to strike an optimistic tone here and underscored the importance of unity in the ranks. “This is about all of us, we’re in this together,” he said, and “when it works, as I’m absolutely convinced it will, I’m absolutely convinced, that our best days are ahead of us. I’m not just saying that, I really believe that with every fiber in my being that this is an opportunity.”

Epiphany at the Waverly: An Artist's Solution to the Financial Crisis

 A Question of Balance: How Does An Investor Sit on a One-legged Stool?

Answer: Verrrrrry, Verrrrry Sloooowly!

In trying to solve the doggedly-intractable financial crisis,  Our Savior of Last Resort(SOLR), President Obama, made a rare intellectual stumble on January 23rd as he tried to calm  the trigger-happy global financial markets.  Flexing  his considerable brainware, he  was trying to convince rational investors to perform the equivalent of an auto de fe,  characterizing  the the financial stimulus package as the  first leg of a three-legged stool.  He then used the bully pulpit asking the American public and the global financial markets to jump up onto this one-legged stool. Someone needs to play the prez that  old favorite song by the Moody Blues from their immortal album: "A Question of Balance":

Sometime soon he promised would tell us all about the other two legs.  I have long thought about the inherent instability and the metaphysical challenge of sitting on a one legged stool.  Isn't it impossible? .  No one in their right mind other than a few russian gymnasts could master this question of balance. Please come back to us all when we can see the three legged stool and assess its studiness and worthiness to "carry that load".  But tonight at an dinner at the Waverly Restaurant we dined with  well-know artist-man of science who gave me the ingenious and  obvious solution I had never considered to this near-physical impossiblity.  Only through the lens of an artist did the solution become aparent as to  how to sit on a one-legged stool.  The elegance and simplicity of his answer was stunning:  just turn it upside down.  Voila!!!!  The answer and the problem wrapped into one. Oh SOLR please hear our prayers.  Sitting on an upside down one-legged stool evokes the red-hot-poker-up-da-butt imagery drawn for the Marquis de Sade's "120 Days of Sodomy"

So show us ther other two legs, let us assess the sturdiness of the stool and maybe, just  maybe  we can take a load off of our minds and our feet and sit down on the stool of confidence.

Congressional Anatomy Lesson for SEC

Representative Ackerman Fired Up and Ready to Go!!!!

Has the Zeitgeist  Finally Arrived?  Da Da Da Dung!!!!

SEC Testimony: Hear No Evil, See No Evil, Speak No Evil

This video speaks for itself.   Rep. Ackernam Telling it like it is-- on behalf of the 13,000 Madoff victims-- listed alphabetically by first name (how weird is that?) on "Exhibit A"-- a mind-boggling 163 page excel spread sheet.  Click here to see entire list.

If you have 4 hours to spare you  consider watching- in their entireties- Parts 1 and 2 of the Harry Markopolis congressional testimony and  lets-have-a-human-barbeque SEC tesimony.  It's much more entertaining than a 4 hour opera- not that I have anything against the opera. It's a little bit like watching how they make sausage.

Here is Part 1 of the  extended  Markopolis congressional testimony

 Here is Part 2-- you really need to watch this as much of this as you can stand!