It's Happening!!

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By no means do we claim to have clairvoyant powers here at the Balcony, but simple logic application can make us look as if we do sometimes...

Just hours after posting our Bonus Consolidation concept, this just came in from today's NYTimes! If we understand the situation correctly, the absence of bonuses (along wih some questionable investment decisions) has led many GS employees to serious liquidity shortages, and the Bank is now offering them loans that will allow them to maintain their previous lifestyles (we shall refrain from making any judgements). To my mind these loans clearly fall under the subprime category, and we all know what happens eventually to the subprime lenders: Bailouts!!! So if the government is willing to subsidize loan related losses but not bonus payments, it should not have taken more than 5 minutes to the guys at the Goldman structuring desk to spot the arbitrage and come up with the appropriate structure...
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Making Sense of the Chaos

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What may seem as a series of random chaotic moves to the untrained eye, is indeed a well orchestrated plan to put some order to the chaos. Here is what we know so far:
1. AIG has achieved a unique status with the US government (we shall call it Bailout Consolidator), by which it can secure multiple mega-bailout packages on request.
2. Most of the funds are subsequently channeled to major financial institutions (GS, SocGen etc.) thus sparing the government the administrative nightmare of having to deal with multiple individual bailouts presumably on a weekly basis.
3. A non-negligible part of the funds is used to pay bonuses to AIG employees presumably for the market consolidation services they are providing.

The next logical step is obvious. In the name of fair competition, part of AIG’s next bailout package will be used to pay the bonuses of every single Wall Street employee removing the one major obstacle for the proper functioning of the credit markets, while further elevating the company’s status to Bailout/Bonus Consolidator.
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The times, they are a-changing.

Bob Dylan was singing the tunes of his times against the evil of his times, and the people were taking to the streets in protest, but those times are now changing and we need some new icons to bring us up to date.

Welcome to the new era.

Pure Genious (II)

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They said that he is probably the most talented politician Washington has seen in a very long time. Now we know why. He spent the first two months of his presidency talking down the economy with an unprecedented vengeance repeatedly using words like "crisis", "mortal danger of absolute collapse", "disaster", "catastrophie", etc. His strategy has become clear: He wanted to make sure that any sense of optimism has been eliminated (with the possible exception of V. Pandit), and ultimate gloom has captured our collective thinking, so that he can be 100% accurate when he says that "things are not as bad as we think"!!

On a scale of 1-10, exactly how bad would that be, Mr. President? -1,000,000 give or take?

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Let’s recap last night’s meeting notes

Let’s follow up last night kickoff note about AIG and the bonuses being paid out to those people who significantly contributed to those records results (just two weeks ago, but hey at my age i tend to forget those details).

We ‘ve been working overtime over here this weekend to try and see how we can spin this story so that people forget about this shit and focus the real problems, like how much more money you should give us to find new ways to spend.

Our PR guys assure us that the only way to circumvent a crisis is with a far bigger one. So let’s release these lists of counterparties (basically this shows you where your money is going, hint: GS, SocGen etc).

Crisis averted. No how much do we owe our PR firm?

AIG doing its thing

OK. I have to think of something to say, but really there are so many quotable lines over the internet right now coming from Cuomo, Frank, Summers et al that i am thinking i should just pace myself. This is obviously going to kickstart another round of hilarity so i am just going to sit back and enjoy the show.

It's so obvious that by now everything goes, it's just game on all around.

Read here and here or just google your ass.

Clueless

In the news category under the general name "what could have possibly tipped him off?", we learn today that former St. Louis Federal Reserve Bank President William Poole thinks that "federal authorities seem not to have a clue as to what our financial course is or should be". Such an insightful comment of course was bound to have its consequences. So now the Chinese premier who has had no problem whatsoever lending to the US $1.95 trillion so far, has confessed that he has become "a little bit worried about the security of their assets".

A Madoff and Two Stanfords

Now hold on a minute. OK i understand that today was a news day, and that people were glue to the TVs watching the guilty plea and more importantly what he wore, what car he drove, if he was wearing his rings and some were even disappointed we didn’t have a white Bronco style chase. But i never flipped the switch on my TV, never. I‘ve followed this from the beginning. How did i miss that this thing just got from 50b to 65b?

Life imitating art

As always Hollywood is the place that extreme scenarios are put together and the rest of the world is trying to catch up. Thousands of our readers remember the apocalyptic scenario of financial catastrophe as described in the movie Fight Club. Clearly it seems to be materializing. In an interesting twist, the rest of the movie is also coming to life.

And in another twist of this ever ending circle, art will try once again to imitate life.

You Win Some, You Lose Some

B.M.W. (the car maker, not the arsonist movement from a previous post), got some sobering news today, that could potentially dampen the elation felt throughout the company from the milestone legal victory they got earlier this week.

Things Look Even Worse From the Outside

Thank God that Pres. Obama chose T. Geithner over T. Friedman as his C.B.O. (Chief Bailout Officer), thus allowing the Nobel laurate to think things over and go from overly concerned in late January to borderline Apocalyptic in early March...

Pure Genious

The theory that a 70-year old man was single-handedly preparing, on a monthly basis, thousands of fake customer reports, detailing countless fictional trades that were actually adding up and could stand up to the scrutiny of their receipients (including all major international banks) seemed entirely plausible to all of us from day 1. Nonetheless, it appears now that US prosecutors are having second thoughts and are entertaining the idea that some of the Fund's employees might have actually participated in the fraud! We are left wondering what or who could have possibly tipped them off...