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Things that make you go hmmm, episode 3

Stop me if you’ve heard this one already.  James Kwak at Baseline Scenario found this nugget buried in Monica Langley’s silly piece at the WSJ that Cinie dispatched yesterday:

Some bankers say they turned the conversations into complaints about the antibonus crusade consuming Capitol Hill. Some have begun “slow-walking” the information previously sought by Treasury for stress-testing financial institutions, three bankers say, and considered seeking capital from hedge funds and private-equity funds so they could return federal bailout money, thereby escaping federal restrictions.

James follows up with:

Ummm . . . if they could get capital from hedge funds and private-equity funds, wouldn’t they have done so already? And they are now resisting the stress tests? Simon is usually more negative about banks’ recent behavior than I am, but I’m catching up.

Veddy interesting.  So, the thing that bankers fear most in the world is ceding control to more responsible authorities.  Sounds like my 13 year old.  Let me see if I can wrap my head around this:  Banks come to government with hat in hands looking for handout.  The could have gone to private investors but didn’t.  Why?  Personal experience suggests that investors are calling in their capital and getting out of adventurous situations in areas like biotech.  One can only assume the investors are hurting for cash themselves or are saving it for some other purpose.  But, nevermind.  The bankers go first to the government for cash.  If the bank is in really bad shape, it would have to go to the dragon lady with the scary parts, Sheila Bair, at FDIC.  But then she would want to take it over, look into its underwear drawer and split it up.  So, they go to Timmy Geithner instead because they know that Geithner and Summers act like Sheila doesn’t have a brain in her head.

But then the public has to get involved.  It gets its knickers in a twist about some ‘bonuses’ and Congress begins to act like *maybe* they should mediate the situation to make sure their constituents don’t take them out in the next election.  And Geithner goes before Congress and asks for Treasury to have more control over non-bank entities.  It’s getting uncomfortable for the bankers.  If he gets what he wants, Geithner might be able to break up the banks in some backdoor way.  Now, suddenly, they don’t want no stupid government money after all.  I still don’t trust Geithner, Summers and Barry to do what is in the taxpayer’s best interest but you’ve got to wonder what it is that the bankers have to hide that they would turn down such a sweet deal to keep the government out of their stuff.  Fraud?  Embezzlement?  Gross irregularities and an Enron like complex of specter holding companies?  Well, yeah, they’re probably guilty of something.  Trillions of dollars don’t go missing overnight without leaving some kind of trace.

Let’s follow the money.   I love to watch the bankers squirm.

In other news:

Jake DeSantis quits AIG and sends his resignation letter to the NYTimes.  I *almost* feel sorry for Mr. DeSantis.  He says the financial services unit he was in was not responsible for the Credit Default Swaps.  He claims that he wasn’t born with a silver spoon in his mouth and that he agreed to take the job with AIG for an annual salary of $1, assuming the bonuses would cover his 12-14 hour days of work.

But then I thought, he couldn’t have been totally ignorant of what was going on with the CDS’s and how investors were leveraging themselves and the rest of the market into oblivion.  After all, he had every expectation that he would profit from it in some way.  Isn’t there a Good Samaritan law in NY or some kind of misprision thingy? (Lawyers, jump in at any time before I hurt myself)

In any case, it’s only a bonus to Mr. DeSantis, who says he can afford to weather the storm.  And I feel a lot less guilty after reading this part of his letter:

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

Ahhh, spoken like a true Republican deregulator.  Government is always the enemy even when it’s paying your salary.  Pffft! There goes my sympathy for Mr. DeSantis.  It was OK to receive taxpayer funds for the bonus as long as the taxpayer wasn’t angry about it.  But now that they’re catching on, Mr. DeSantis prefers to give the money to his own charitable causes, like the Mashie Niblick Save the Ruff Fund,  than back to the taxpayers from whence it came.

Mr. DeSantis, the government *is* the taxpayers.  You are in this uncomfortable position because the taxpayers are finally waking up to this fact and putting their foot down about the unconscionable behavior of finance institutions that lost our hard earned trilions of dollars in savings.  The taxpayers, including yours truly, are faithfully paying our taxes to the government so that it can administer unemployment benefits and medicaid and CHIPS money to the people suffering from the global downturn.  I would appreciate it if you spared us the indignant outrage and give the money back to the taxpayers who paid for it so it can be put to better use.

Really, Mr. DeSantis, you have no idea what hard is until you become one of the little people and you ain’t there yet.  As my Navy dad used to say, “Tell it to the chaplin”.


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