Lucid Links (042209, Morning)
Noteworthy Net-Worthies:
Perils of De Facto Nationalization, from Holman Jenkins in the Wall Street Journal — “He (Obama) wants Chrysler’s secured lenders to give up their right to nearly full recovery in a bankruptcy in return for 15 cents on the dollar. They’d be crazy to do so, of course, except that these banks also happen to be beholden to the administration for TARP money.” So there’s at least one explanation for why the administration doesn’t want to to give TARP money back. The GM-Chrysler mess looks more and more like an example of Mussolini’s self-contradicting definition of “fascism” in action — “The Fascist State organizes the nation, but leaves a sufficient margin of liberty to the individual; the latter is deprived of all useless and possibly harmful freedom, but retains what is essential; the deciding power in this question cannot be the individual, but the State alone.” Substitute “shareholders” for “individual” in Mussolini’s encyclopedia entry, and you’re basically there. In GM’s and Chrysler’s case, I believe that April’s sales results are likely to show that everyone is fighting over table scraps. If April was looking up compared to previous months, I think that news would have leaked by now.
This small portion of a larger spreadsheet from the Congressional Budget Office, which shows the White House’s and CBO’s fiscal 2009 deficit estimates, is worth re-presenting –
POR Economy architects Pelosi, Obama, and Reid, who hijacked economic expectations and crushed them beginning in June of last year, mostly own this. I’m still looking for their promise to make sure that fiscal 2009’s deficit would be $1.667 trillion, $1.845 trillion, or almost $2 trillion (where I’m estimating it will all end) in any of their statements during last year’s election campaigns. Funny, I’m not finding anything. If there really is nothing, it deligitimizes any claim that what the administration is doing is carrying out the voters’ wishes.
While on the topic, since it’s Earth Day, I thought it would be a good idea to show an earthly development that is really unsustainable –
I’m still looking for Team Obama’s promise to run deficits averaging almost a trillion dollars a year as far as the eye can see during last year’s presidential campaign. Funny, I’m not finding anything. If there really is nothing, it deligitimizes any claim that what the administration is doing is carrying out the voters’ wishes.
Andrea Tantaros has the same-sex “marriage” question of the day — “Why is it acceptable for Obama and Biden to (oppose it) but not a conservative female?” Answer: The elite know that Obama and Biden, to the extent they have made such statements, don’t really mean it.
Homeland Security head Janet Napolitano told Larry King this past weekend that “crossing the border is not crime per se.” She is, of course, wrong (HT Michelle Malkin). Glenn Reynolds’s sardonic line that “the country is in the very best of hands” comes to mind.
Obama must be getting his advice from Bernacke because this smacks of what he did with Bank of America and Merrill Lynch. The WSJ has the details: http://online.wsj.com/article/SB124045610029046349.html
Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. — a deal that later triggered a government bailout of BofA — according to testimony by Kenneth Lewis, the bank’s chief executive.
Mr. Lewis, testifying under oath before New York’s attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by …
Rest of the story here for those w/o WSJ subscription: http://www.news-to-use.com/2009/04/lewis-testified-that-us-urged-silence.html
…Lewis testified that the government wanted him to remain silent while the two sides negotiated government funding to help BofA absorb Merrill and its losses, the paper said, citing transcripts of the testimony.
Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren’t normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.
“Isn’t that something that any shareholder at Bank of America…would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript…
…Paulson repeatedly told Lewis that “the U.S. government was committed to ensuring that no systemically important financial institution would fail,” the Journal cited the former Treasury Secretary’s spokeswoman as saying…
This is what happens when the central theme of government becomes, “we must do something” But I ask you, why, why must it be the wrong thing?
Comment by dscott — April 23, 2009 @ 9:34 am
Apparently there is a theme with the Obama Admin. http://www.politico.com/blogs/joshgerstein/0409/Was_Freddie_pressured_to_toe_Obama_line.html
The Post said Kellermann and other Freddie officials “tussled” with the Federal Housing Finance Agency early last month as the company prepared to file a quarterly report with the Securities and Exchange Commission. Top executives, including Kellermann, were insistent that Freddie Mac inform shareholders of the cost to the company of helping carry out the Obama administration’s housing recovery plan, the two newspapers reported. The Post, citing several unnamed sources, said the regulators “urged the company not to do so.” An unnamed FHFA official who spoke to the Post disputed that, “saying the regulator did not oppose disclosure but how the information was portrayed in the filing.”
In the end, FHFA reportedly retreated and Freddie formally disclosed that the Obama anti-foreclosure plan could force the firm, which is in a federal government conservatorship, to take a pre-tax charge of $30 billion.
While the Obama administration might not want to have the pricetag for its foreclosure efforts look too big, the reason regulators may have pressured Fannie to understate the cost of the program is pretty simple: both Obama and Geithner said publicly that it wouldn’t have a material financial impact on Fannie or Freddie.
there’s that phrase again, “material financial impact” or more pointedly the ethical exercise of fiduciary trust.
Comment by dscott — April 23, 2009 @ 11:04 am
I was just reminded of something that also falls along this theme of Obama Admin officials telling people not to disclose material facts in violation of their fiduciary trust. The results of the so called stress test. How is it ethical not to tell the share holders that their company has not met or barely met the stress test or if they passed the test with flying colors? Isn’t this a violation of the corporate officers fiduciary trust? In fact isn’t it a violation of SEC rules not to disclose material facts that affect the price of a publicly traded stock or the health of the corporation? So much for transparency!!!
Comment by dscott — April 23, 2009 @ 12:30 pm
#2, this is a huge story, and only the WaPo is citing the $30 billion figure.
The “how the information was portrayed” issue probably goes to how much detail there is, and whether it can be tied to any specific beneficiaries, and perhaps ultimately to corruption.
It’s not unreasonable to think that it can be, and that Kellermann was promised negative repercussions as a result (so he killed himself to spare his family those repercussions), or those repercussions were delivered (and he was really killed).
Either that, or he knew too much in general about the skeletons, and was threatened or killed over those.
I’ll betcha the family, like Vince Foster’s, does NOT believe it was suicide borne of generalized despair. I hope they’re careful. Somebody is going to want to know how much Mrs. Kellermann knows.
Comment by TBlumer — April 23, 2009 @ 12:38 pm
#3, the forced breach of fiduciary duty that is being imposed on corporate officers is appalling.
And guess what? If someone sues because the stock tanks (even more), Uncle Sam will not be in the picture.
Comment by TBlumer — April 23, 2009 @ 1:32 pm
#5, Judge Andrew Napolitano just confirmed my thoughts on Cavuto. Bernanke, Paulson and Lewis engaged in a conspiracy to commit bank fraud against the stock holders of BofA by withholding material information on the merger. Given the other shotgun marriages both Paulson and Bernanke performed against the share holder’s interest, I say we have a major crime spree on our hands by the government.
Uhm, you know what, now we have a plausible reason why Obama threw out this nonsense about prosecuting former Bush Admin lawyers for their legal opinions on water boarding. A distraction from what’s really going on, a continuing criminal enterprise, that should be prosecuted under the RICCO statute. I’ve said before the Democrats have acted like a criminal organization shaking down businesses for campaign contributions and quid pro quo of the bail outs.
Comment by dscott — April 23, 2009 @ 4:19 pm
the plot thickens:
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/22/AR2009042203530.html
A parallel civil investigation into disclosure, accounting and corporate governance issues at Freddie Mac is also underway at the Securities and Exchange Commission, the company said in a March regulatory filing, which also disclosed the U.S. attorney’s investigation. The SEC has subpoenaed documents and deposed employees at the mortgage finance giant, but the investigation is still in an early stage, according to a source familiar with the matter.
Investigators had hoped to question David B. Kellermann, the Freddie Mac acting chief financial officer who police said was found dead yesterday in an apparent suicide, but he was not a target of the probe, sources said.
Comment by dscott — April 23, 2009 @ 4:42 pm
#7, this makes the possibilities raised in #4 a bit more plausible.
Comment by TBlumer — April 23, 2009 @ 10:15 pm