Big Banker - Wall Street Scam Continues...

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As I await the announcement by Geithner and his toxic asset removal plan... always nice to reflect on the on-going swindle of American Taxpayers...and what is coming our way....

Henry Merritt "Hank" Paulson Jr. (born March 28, 1946) served as the 74th United States Treasury Secretary and is a member of the International Monetary Fund Board of Governors. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs. In 2008, Time magazine named Paulson as a runner-up for its Person of the Year 2008, saying, with reference to the Global Financial Crisis of 2008: "if there is a face to this financial debacle, it is now his".

The swindle of American taxpayers proceeded more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought the same types of securities--preferred stock and warrants to purchase common stock in the future. Only Buffett's preferred shares pay a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar, Buffett "received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms.



Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency So when a group of persons are above the law... I think I recall ....

As President of the New York Federal Reserve Bank, Geithner was an active partner with Paulson in the forced sale of Bear,Stearns to JP Morgan, as well as the failure to backstop Lehman causing their resultant fall into bankruptcy. In my opinion. LEH's bankruptcy was the main reason that the financial crisis accelerated globally in mid-September and spread through the world, causing breakdowns of the financial system and the elimination of trillions of dollars of wealth (albeit fiat currency) in the United States and the world. And an opinion of the bailout plan....



Today we expect more: Tyler Durden, the pseudonymous blogger at Zero Hedge, has broken down the public/private component of Geithner's plan and revealed it to be something everyone can recognize: a bait and switch game.

The greatest bait and switch of this generation in all its visual splendor. As a result of the TALF's non-recourse nature, a hedge fund X can buy Bank X's MBS Portfolio which is marked on the bank's books at 80 cents on the dollar (but has a market price of 20 cents) for the marked price with a 3% equity check and TALF filling the balance. A day later, Bank X repurchases the portfolio from hedge fund X at the 20 cent market price, pays a $5 million fee for the "trouble" and waits for the portfolio to appreciate to 50 cents on the dollar by 2014. Hedge fund X takes a 75% loss on its nominal equity stake but more than makes up in transaction fees. The TALF portion takes a 75% loss with no recourse and no margin to fall back on....

As a result Bank X takes no writedown now, and in 5 years may book an equity profit of as much as $25 million (net of transaction fees paid to the Hedge Fund X), while Hedge Fund X books a profit of $3.2 million for one day's work...

In short, just one aspect of the Obama/Geithner plan may cost taxpayers over $700 billion dollars, not counting the eventual cost of the moral hazard this policy will create by allowing the banks and funds (and their stockholders and bondholders) to remain out of bankruptcy or receivership. By giving these parties a free pass on the ugly consequences of their actions the administration (and Congress, if they allow it) is almost guaranteeing that this mistake will be repeated. This linked article makes clear, hedge funds that overwhelmingly supported Democrats and Barrack Obama in 2008 are going to make a killing on this administration's proposal. It is without question the Greatest Heist in History.

The U.S. taxpayer loses $54.3 million on a $77.6 million TALF Investment, or 70% (net of 5 years of interest income).

Note: the maximum TALF size is $1 trillion. Will U.S. taxpayers suffer $700 billion in losses from the TALF? Ask your congressman.