“Hey, Ben. Get to the spending, already. Let’s go! That balance sheet is shrinking. Do you think we are paying you to shrink the balance sheet? No sir-ee, Bob. Expansion. Expansion. Ex-pan-sion. Aggressive… aggressive… let’s be aggressive. Right? Get it?
Let me put it in terms you can understand. If the Fed’s balance sheet doesn’t hold one third of all corporate debt by this time Monday, you’re fired. [Aside] What? How? Four years? Oh. [To Speakerphone] I mean, you won’t be looked upon favorably for reappointment in 2010. You get the idea. [Aside] He get’s the idea.”
Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.
The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.
Bernanke May Need to Ramp Up Fed’s Asset Purchases [Bloomberg]
So, according to reports, the events of the last several days have left AIG scared shitless. The fear emanating from the insurer, and specifically Team Financial Products, is two-fold. The first thing causing them to quake in their boots is you, the American taxpayer. You really get scary when it comes to your money.
A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn’t show up at all.
“It’s a mob effect,” one senior executive said. “It’s putting people’s lives in danger.”
The second thing causing them to almost comically soil themselves, is the monster they’ve created with their own two hands which, shockingly, the company is yet to officially speak as candidly about as this guy:
“It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”
And yet, he can’t stop publicly encouraging them to do so! Clearly this is merely a case of needing fresh material, but lacking inspiration (and the matter of the fact that few things roll off the tongue like “fuck off and die”). He’s a Senator, so suggesting castration probably won’t do, but surely you people can come up with something as effective but less touchy than Grass’s current track.
Earlier: Chuck Grassley Dead Serious About Wanting AIG Execs Dead
Probably not, though they are offering incentives for investors who promise not to sue Ponzi-Boy, which seems rather neighborly of them. Per the NYDN:
The IRS is set to announce today that it’s giving Bernie Madoff’s victims a bigger break on the losses they suffered in the $65 billion scheme.
We hear that in a hearing this morning called by Sen. Chuck Schumer, among others, IRS Commissioner Doug Shulman is expected to announce that the taxman will let Madoff’s victims take a 95% theft loss deduction, going back five years.
The deduction will allow people to claim “phantom profits” as losses — not just the investments they put in — helping them recover the taxes they paid on those non-existent earnings. And those deductions will be allowed to carry forward for 20 years, giving victims plenty of time to get some money back.
Folks who sue Madoff will have to settle for 75% of what they invested.
“GM CEO says bankruptcy ‘could work’ but would be too risky,” is the exact ticker line.
“That, Mr. Wagoner, is the sound of inevitability.”
The situation is fluid.
So here’s the scoop:
A “whistleblower” says that Barclehs is planning to “dodge taxes.” Maybe it is the reporting style in the International Herald Tribune, or the fact that Her Majesty’s Revenue and Customs representative doesn’t know the difference between tax evasion and tax avoidance (one might explain this away by pointing out that the distinction and usage of the two terms is less clear in the United Kingdom) or, perhaps, we have actually gotten to the point where an allegation of tax planning is enough to fire up the investigative machine.
“We have received papers relating to allegations of tax avoidance in the banking industry which we are studying carefully,” HM Revenue & Customs said.
The Guardian newspaper reported on the weekend that the documents reveal the existence of a scheme codenamed Project Knight, which appeared to be an attempt to obtain tax relief in different countries.
The newspaper said the 2007 plan was created by a team within Barclays Capital, a subsidiary of the bank, to legally avoid tax.
Barclays said that the project was voluntarily and fully disclosed to the tax office.
Lesson #1: In this environment, do not give your legal tax avoidance plans secret sounding codenames like “Project Knight.” Barclays investigated for alleged tax dodging [The International Herald Tribune]
So, this is all well and good, if you’re into accountability and things of that nature, but wouldn’t it be a bit more useful at a place like, say, Citi, or BAC, where the question isn’t “will they fuck up again” but “when” and “how hard”?
JPMorgan Chase & Co must allow shareholders to vote on measures that would tie executive bonuses to the bank’s long-term stock performance, U.S. regulators have ruled.
The AFL-CIO Reserve Fund, a union investment fund, had sought a shareholder vote to add the measures to JPMorgan’s bylaws. The bank tried to prevent a vote from happening, citing logistical difficulties the move would create for shares already issued, but the SEC said in a letter dated March 9 that the vote should go ahead.
The fund is proposing that the bank’s most senior executives keep 75 percent of their shares for two years after leaving the company. The fund is also proposing that JPMorgan’s board of directors should prohibit these executives from hedging their shares to offset losses.
As previously mentioned, Chris Kotowski, the analyst staffed with Meredith Whitney’s old beat at Oppenheimer, has some big spiked heels to fill. When it came to the Dollar Dom’s baby, would he attempt to imitate his predecessor’s style, working the Big C over with a spreader and truss bar, while telling the Street, “This dump is less than a quarter away from being consigned to the scrap heap of corporate history, GET OUT NOW”? Or would he attempt to step out of her shadow, proclaiming the place “a goldmine,” and enclosing choice photos of himself in a scantily clad Leprechaun suit? Save for the suit, none of the above. Kotowski seems to be taking the dry humor approach (you can almost feel the smirk on his face while banging this one out, sitting there going to himself “Citi: Perhaps Not A Complete Lost Cause,” chuckling, and going, “No, no, that’s not it.” “Citi: I Could Go Either Way…In A Moment Of Weakness, I’d Probably Fuck It.” “Hah, no, Chris, I don’t think the Street’s ready for this kind of genius…but save it for later.” “Citi: When Will It Go To Zero? We’ll Put The Under/Over At 4 Days, And Take The Under”).
Goldman Offers Loans To Stretched Employees (NYT)
The offer is set up to address the investments employees have in certain in house funds, which can make calls for further capital. Those employees that are unable to meet the calls are at risk of losing their jobs (via contractual obligation – though those may have very little to no value going forward depending on political whim).
“A spokesman for Goldman Sachs confirmed the existence of the loan program but declined to elaborate. The funds that are the most troubled were raised right before the financial crisis. Goldman raised $20 billion in its most recent private equity fund and some $9 billion in the Whitehall real estate funds in 2007 and 2008.
About a third of the money in the funds typically comes from Goldman and its employees, and since 1991, the bank and its employees have accounted for $7.5 billion of the $26 billion in the Whitehall funds.” Citi And Morgan Stanley Look To Sidestep Bonus Cap (Reuters)
In what can only be defined as “expected”, the banks are starting to try to work their way out of the cap imposed by the President and Congress, though I think they’re moving a little quick on this one. Traditionally, the words “be patient” are of value; it wouldn’t hurt anything to appear to be toeing the line for a little while.
“Executives at these banks and other financial institutions that received government aid are discussing increasing base salaries for some executives and other top-producing employees, the paper said, citing people familiar with the situation.
[...]
Citigroup officials have considered designating which 25 executives will be subject to bonus limits, the paper said, citing people familiar with the discussions.
In that scenario, the new rules might not apply to lower-ranking yet still highly lucrative traders and investment bankers, the people told the paper.
“We will comply with the restrictions, in addition to the substantial changes we have already made to our compensation structure,” a Citigroup spokeswoman told the paper.” Swiss Playing “Old Man” At Tax Laws (FT)
You have to really appreciate Swiss methodology. “Oh sure we’ll help! Now, where did I put my glasses..”
“Switzerland has warned countries against expecting swift results from its decision last week to water down bank secrecy laws, saying it could take years for the necessary legislation to come into action.
Hans-Rudolf Merz, Switzerland’s finance minister, said renegotiating the country’s more than 70 double taxation treaties “won’t be so fast” as each would have to be approved individually by the country’s parliament.” UBS In more Hot Water (Reuters)
“Luxembourg financial regulator CSSF, which is looking into the case, said [UBS] had to ensure at all times that the money invested in the products was actually there and has given Switzerland’s largest bank three months to make changes to UBS’ custodian bank in the wake of Madoff’s arrest.
UBS has rejected the calls to reform its Luxembourg operations and said it would defend itself vigorously as it did not believe that the CSSF was correct.” Larger US Companies Stepping Up Against President’s Proposals (Bloomberg)
“Not in this economy.
That’s Intel Corp.’s argument against new taxes on overseas income. It’s Overstock.com Inc.’s objection to making unions easier to form. Ditto Lockheed Martin Corp.’s case against scrapping production of the F-22 jet.
U.S. companies are stepping up their fight against President Barack Obama’s proposals not aimed squarely at reviving the economy. They say Obama is trying to do too much, taking the focus off fixing credit markets and proposing ideas that may hurt rather than help.”
Iowa Sen. Charles Grassley suggests AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.
The Republican lawmaker’s harsh comments came Monday during an interview with Cedar Rapids, Iowa, radio station WMT. They echo remarks he has made in the past about corporate executives and public apologies, but went further in suggesting suicide.
Grassley says AIG executives should follow “the Japanese example” by publicly apologizing and “do one of two things: resign or commit suicide.”
And then his spokesman said he didn’t really mean it:
Casey Mills says the senator “doesn’t want U.S. executives to do that,” but says those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.
And then we were reminded, this isn’t the first time Grassley’s urged executives to kill themselves:
[The senator] said executives at firms that seek government help need to take responsibility for “driving their corporations into the ground” and adopt a “Japanese ethic.”
“One of the things you do is, you either go out and commit suicide, or you go before the American public and you take a very deep bow and you say, ‘It’s all my fault and I’m sorry and I’m going to straighten it out.’ Or you might resign,” Grassley said.
And that’s why, au contraire, Casey, we think he does.
