Lazy Saturday News and Views

Out of Town News, Harvard Sq., Cambridge, MA

Good Morning, Conflucians!!!!

It’s a gorgeous Saturday morning here in the Boston ‘burbs. I just love Spring!

Personally, I’m still mainly interested in the Blago-Rezko-Obama story, but there is some other news today.

ECONOMIC MELTDOWN

The New York Times informs us that Rating Agency Data Aided Wall Street in Mortgage Deals Yes, as you probably already guessed, the fix was in on those “complex investments” from the very beginning. The ratings agencies were collaborating with the investment banks to make sure all those “high risk” bets came out the way the banks wanted them to.

The rating agencies made public computer models that were used to devise ratings to make the process less secretive. That way, banks and others issuing bonds — companies and states, for instance — wouldn’t be surprised by a weak rating that could make it harder to sell the bonds or that would require them to offer a higher interest rate.

But by routinely sharing their models, the agencies in effect gave bankers the tools to tinker with their complicated mortgage deals until the models produced the desired ratings. [….]

But for Goldman and other banks, a road map to the right ratings wasn’t enough. Analysts from the agencies were hired to help construct the deals.

In 2005, for instance, Goldman hired Shin Yukawa, a ratings expert at Fitch, who later worked with the bank’s mortgage unit to devise the Abacus investments.

It really is time to break up these greedy “too big to fail” (TBTF) banks, but the Obama administration still defends their right to exist. Scarecrow at FDL has a great post on Larry Summers’ latest excuse for TBTF: Why Is Larry Summers Afraid of Having Many Small Banks? Summers says we can’t do that because that’s what was tried before the Great Depression, and it failed.

…if we broke up the megabanks and instead had many smaller regulated banks, it would be the end of America and the financial industry as we know it.

And that would be bad why? Scarecrow:

Funny, I always thought the smaller bank system, if that’s what it was, failed because Wall Street wasn’t sufficiently regulated, and the local bank runs happened because we didn’t have the FDIC at the time. So is Larry now saying that having the FDIC to take over smaller bank failures has been a failure?

And what’s he saying about needing diversified megabanks that lose money on risky stuff but loot, uh, borrow money from better managed activities? Surely he doesn’t mean to argue for letting the investment casino borrow from the government-guaranteed deposit-based divisions?

Reuters: Goldman emails: firm lauds profits from shorts

Goldman Sachs Group Inc officials discussed making “serious money” in 2007 off the subprime crisis as mortgages were starting to falter in rapid numbers, according to a collection of e-mails released by a Senate panel on Saturday.

“Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,” Goldman Sachs Chief Executive Lloyd Blankfein said in an e-mail from November 2007.

“Sounds like we will make some serious money,” said Goldman Sachs executive Donald Mullen in a separate series of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralized debt obligation, or CDO.

Amazing News: Alexi Giannoulias Plans to Run for Obama’s Former Senate Seat

Alexi Giannoulias and Barack Obama

Holy Toledo! Former mob-connected investment banker and Obama basketball buddy and current Illinois State Treasurer Alexi Giannoulias is going to challenge recently appointed Senator Roland Burris for Senate in 2010, according to Lynn Sweet of the Chicago Sun-Times.

Illinois State Treasurer Alexi Giannoulias, 32, opens his exploratory bid for Senator today hoping his close association with President Obama, generational appeal, record and early start locks him in as a front-runner in what today is a very undefined field.

Giannoulias, I am told, is running no matter the election scenario or the other contenders. Last week, William Daley, the former Commerce Secretary and mayoral brother, floated his name in order to head off Giannoulias securing early endorsements. Rep. Jan Schakowsky (D-Ill.) is also mulling a run, with her chances of getting in more likely in a special election.

Former Obama fundraiser Jordan Kaplan is in charge of raising the necessary funds for Giannoulias’ campaign, estimated at 5 million for the primary and 15 million for the general election.

Speaking to the DNC in August, 2008, Giannoulias referred to Obama as his “friend and mentor.” Obama was instrumental in getting Giannoulias elected as State Treasurer.

In the 2006 Democratic primary…Obama endorsed first-time candidate Alexi Giannoulias for state treasurer despite reports about loans Giannoulias’ family-owned Broadway Bank made to crime figures. Records show Giannoulias and his family had given more than $10,000 to Obama’s campaign, which banked at Broadway.

In response to the criticism over this and his endorsement of Dorothy Tillman, who had been accused of getting jobs for her relatives under former Chicago Mayor Harold Washington,

Obama rejected the notion that such endorsements conflict with his promotion of ethics reform in government.

“I have been very proud of my track record as a state legislator and as a U.S. senator in terms of maintaining highly ethical behavior throughout my public life,” he said in a recent interview. “Dorothy Tillman and Alexi Giannoulias were strong supporters of mine. There were no allegations that they had done anything illegal. And it was not a conflict for me to show my support for them.”

Giannoulias hosted a fund-raiser for Obama’s presidential bid in September, 2007–an event that was closed to the media and was not listed on Obama’s schedule.

A man who has long been dogged by charges that the bank his family owns helped finance a Chicago crime figure will host a Windy City fund-raiser tonight for Sen. Barack Obama.

Alexi Giannoulias, who became Illinois state treasurer last year after Obama vouched for him, has pledged to raise $100,000 for the senator’s Oval Office bid.

Obama kept his Senate campaign funds in Giannoulias’ Broadway Bank in 2004, but did not use the bank for his Presidential campaign funds. Another friend of Barack Obama’s, Antoin “Tony” Rezko, was also a Giannoulias customer, and used the Broadway Bank to float $450,000 in bad checks while gambling in Las Vegas.

The senior Senator from Illinois, Dick Durbin is apparently backing Giannoulis, arguing that Burris is “unelectable.” So it looks like the deal is done.

Rezko Sentencing Could Be Delayed a Second Time!

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Via The Real Barack Obama, Antoin “Tony” Rezko has apparently expressed interest in talking to prosecutors again:

On Thursday morning, U.S. District Judge Amy St. Eve canceled deadlines by which lawyers were to submit filings on the sentencing of the Wilmette businessman.

Rezko was to be sentenced Jan. 6 — a rushed date he recently requested as he seeks to be freed from solitary confinement.

The possibility of another change comes two days after Gov. Blagojevich was charged in shakedown schemes and the feds revealed they had secret recordings of the governor.

Now that he knows other members of the “combine” have been spilling their guts, Rezko might be feeling a little more talkative himself. Awhile back he was having “intense” conversations with investigators, but then he clammed up after his protege, Barack Obama, became the “president elect.”

From the LA Times:

Now, why would a judge extend the period before sentencing when the convicted prisoner expressed a desire to get on with prison? Without a new briefs deadline, the expedited Jan. 6 sentencing could now be pushed back further.

Because Rezko, in the hopes of reducing his sentence, is singing in his cell about Blagojevich and maybe others. He’s not done with his song repertoire and the feds haven’t fully checked out his information to determine how grateful to be in sentence-seeking.

A footnote at the bottom of one page in the 76-page …

… Blagojevich complaint confirms Rezko is cooperating with the FBI, news that could cause an increase in the pre-holiday consumption of Mylanta by other Chicago pols.

This could get interesting…stay tuned.