More Welfare for the Rich

[tw]

From the Washington Post of 28 Oct 2008:
Coming to Detroit's Rescue?
Ford, GM, Chrysler Eligible for Aid Under Bailout Law, Treasury Says

[tw]

Coming to Detroit's Rescue?
Ford, GM, Chrysler Eligible for Aid Under Bailout Law, Treasury Says
Detroit's Big Three are eligible for aid under a broad interpretation of the law that authorized the $700 billion financial rescue, Treasury Department officials said yesterday. But they declined to discuss the details of any assistance.

"The law grants the secretary broad authority to purchase troubled assets that he deems important to improving financial stability," said Treasury spokeswoman Jennifer Zuccarelli.

Ford and General Motors are eligible because they are both chartered as thrift holding companies, so they can establish banks to make car loans nationwide. Other businesses, such as General Electric, Nordstrom, John Deere and Macy's, are chartered in the same way to issue credit cards or make loans to their customers. Chrysler would also be eligible, Treasury officials said.

Any company that remains favorable to George Jr is now eligible for more George Jr corporate welfare. Cheney said, "Reagan proved that deficits don't matter." What that really means is the average American does not matter.

How many spoke out when George Jr gave the airlines $8billion with no strings. Airline did not even have to repay that money. Airlines burned through that $8billion in a few months; then came back to George Jr for more. Did George Jr demand airlines fix the only problem? Of course not. MBAs believe welfare should only go to the rich. George Jr is again raping America to appease only the 'right' people.

A patriotic president refused to do this for NYC, Chrysler, Ford, and a long list of other companies. Therefore all fired their only problem and fixed themselves in the 1970s. But then Gerald Ford was a moderate Republican - who is told by god what to do. No, that is not mockery. That is what George Jr said.

Will you be informed enough to know that George Jr will destroy more American jobs two plus years from now? Economics will take even more revenge on us years from now due to more corporate welfare - to enrich Rick Waggoner, et al. If GM went bankrupt today, then few jobs will be lost. But with corporate welfare, numerous jobs will be lost when economics again takes revenge for another money game.

The Washington Post is reporting that George Jr has again threatened your job to make himself look good. Which rich George Jr friends are now entitled to a piece of that $700blllion - with no strings attached. Silence among the little people is why you are being financially raped - and do not even know it yet.

[TheMercenary]

http://www.slate.com/id/2121835/slid...entry/2121909/

[tw]

From the NY Times of 29 Oct 2008:

A Question for A.I.G.: Where Did the Cash Go?
The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting.

“You don’t just suddenly lose $120 billion overnight,” ...

Mr. Vickery and other analysts are examining the company’s disclosures for clues that ... company officials knew they had major losses months before the bailout.

Tantalizing support for this argument comes from what appears to have been a behind-the-scenes clash at the company over how to value some of its derivatives contracts. An accountant brought in by the company because of an earlier scandal was pushed to the sidelines on this issue, and the company’s outside auditor, PricewaterhouseCoopers, warned of a material weakness months before the government bailout.

The internal auditor resigned and is now in seclusion ...

These accounting questions are of interest not only because taxpayers are footing the bill at A.I.G. but also because the post-mortems may point to a fundamental flaw in the Fed bailout: the money is buoying an insurer — and its trading partners — whose cash needs could easily exceed the existing government backstop if the housing sector continues to deteriorate. ...

A.I.G. has declined to provide a detailed account of how it has used the Fed’s money. The company said it could not provide more information ahead of its quarterly report, expected next week, the first under new management. ...

A.I.G. had come under fire for accounting irregularities some years back and had brought in a former accounting expert from the Securities and Exchange Commission. He began to focus on the company’s accounting for its credit-default swaps and collided with ... the head of the company’s financial products division ...

The company’s independent auditor, PricewaterhouseCoopers, was the next to raise an alarm. ... About a week after the auditor’s briefing, Mr. Sullivan and other executives said nothing about the warning in a presentation to securities analysts ...

At this point, its obvious. AIG was simply a new variation on Enron accounting. Seven years later and the current American administration did virtually nothing to require fiscal responsibility? Of course not. That might cause a downturn. That would require the SEC to investigate which means the SEC needs more money and people. Instead, we do more economic stimulus. We threw more money at the richest members of our economy.

“We may be better off in the long run letting the losses be realized and letting the people who took the risk bear the loss,” said Bill Bergman, senior equity analyst at the market research company Morningstar.

Instead we are doing what Japan did to ignore their problems for 10 years. Save companies from bankruptcy? Bankruptcy executed early enough only removes top management, saves the company, its employees and its stockholders. Do we let AIG create further and larger economic calamity years later? Or do we swallow the medicine now. Currently Americans have dumped $120biilion into AIG. Next week, we learn how much more George Jr will dump into AIG - because "Reagan proved that deficits don't matter".

[Undertoad]

Originally Posted by tw

AIG was simply a new variation on Enron accounting. Seven years later and the current American administration did virtually nothing to require fiscal responsibility?

FAIL

Spearheaded Sarbanes-Oxley, enormously increased accounting regulations on public companies.

[classicman]

Great read UT! As stated repeatedly with citations in several other threads the responsibility of the regulation was incumbent upon the congress, not the president. Also, The democratically lead Congress is proposing and passing the bailouts, not the president.

[glatt]

Originally Posted by classicman

not the president.

You mean the guy who signed them into law and successfully gave speeches trying to get Republicans on the Hill to support them. That guy?

[classicman]

Yup thats the one!

[TheMercenary]

"What does it mean when Boston banks start making many more loans to minorities?" I asked in this space in 1995. "Most likely, that they are knowingly approving risky loans in order to get the feds and the activists off their backs . . . When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators plans to take the credit?"

Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.

http://www.boston.com/bostonglobe/ed...ancial_fiasco/

[tw]

Originally Posted by Undertoad

Spearheaded Sarbanes-Oxley, enormously increased accounting regulations on public companies.

Not correct. Sarbanes-Oxley created standards for the auditors. It did nothing to eliminate Enron style accounting in public companies. Sarbanes-Oxley was created by Senators (not by the administration) in response to Arthur Andersen - not in response to how Enron hid losses.

Enron style accounting means, for example, moving losses to structured investment vehicles so that losses no longer appear on the spread sheets. That was ongoing even months before AIG collapsed. As a result, hidden losses apparently are suddenly gobbling up $120billion.

Why a sudden market meltdown and frozen credit markets? Nobody can trust anyone else’s spread sheets. Six years after Sarbanes-Oxley, Enron style accounting still exists. Auditors such as PriceWaterhouse had serious doubts about AIG's accounting and said so. IOW PriceWaterhouse was not doing what Arthur Andersen did. And still the Enron accounting existed in AIG. Even AIG's internal auditor was sidelined and resigned. Did that do anything to change the fraudulent accounting? No. After being told that the auditors had serious doubts, AIGs president went right out and said the company was stable. He could do this because the accounting said so. Because Enron style accounting is was actually getting worse. As the Economist said, "financial innovation [occurred] in response to incentives created by governments."

Sarbanes-Oxley did not eliminate Enron style accounting. Sarbanes only required the auditors to do their job. Auditors can have doubts. But can do little when Enron style accounting is still legal.

From the Economist of 11 Oct 2008 and posted previously in Does Anyone feel like Bailing on 24 Oct 2008 (also in response to UT's previous and same claims):

The trouble is that financial innovation did not occur in a vacuum but in response to incentives created by governments. Many of the new-fangled instruments became popular because they got around financial regulations, such as rules on banks' capital adequacy. Banks created off-balance-sheet vehicles because that allowed them to carry less capital. The market for credit-default swaps enabled them to convert risky assets, which demand a lot of capital, into supposedly safe ones, which do not.

Well international standards such as Basel 1 and Basel 2 were created to address this problem in the banking industry. George Jr did nothing and even discouraged Basel 2. Fraudulent accounting encouraged by a business school graduate? Why not? Where did Sarbanes-Oxley or any proposed legislation from George Jr even try to address this. Nothing. Nada. This accounting is the deregulation that extremist Republicans have been advocating for a decade.

No laws were made to stop Enron style accounting (Enron accounting was well understood when Enron failed in 2001) because money games made the spread sheets look prosperous and will stimulate the economy. Prosperous spread sheets means a more popular president. Why would George Jr want honesty when his entire life was only about promoted an image and lies (such as Saddam's WMDs)?

UT - you keep sighting Sarbanes-Oxley as proof that George Jr wanted fiscal responsibility. George Jr and fiscal responsibility are oxymorons.

Even the Highway Trust fund that supposedly has plenty of cash has a liquidity problem? Where did the cash go? George Jr can borrow that money and not leave an IOW. Therefore the Highway Trust Fund that is supposed to have sufficient money could not pay its bills. More accounting that George Jr approves of. Sarbanes-Oxley also permits that type of accounting.

[Undertoad]

Not correct. Sarbanes-Oxley created standards for the auditors. It did nothing to eliminate Enron style accounting in public companies.

Not correct. The auditors sign off on the accounting; that's how it works. SOX had many provisions which would have prevented Enron's particular style of accounting; and we can't compare AIG, because the Times story only alleges a problem, and doesn't describe it at all.

If PWC has concerns over the books, that is a very big deal, and that would be SOX in operation, preventing a problem from being hidden.

the current American administration did virtually nothing to require fiscal responsibility

SOX is absolutely, positively the current American administration doing something enormous to require fiscal responsibility. In fact it is felt in the accounting community that Europe has easier standards and that companies can save money by HQing there. Can people still create economic bubbles? Yeah, as always. I doubt one can come up with any set of rules that would prevent it and still look like the economic system that has made this the richest nation on the planet.

[tw]

Originally Posted by Undertoad

Not correct. The auditors sign off on the accounting; that's how it works. SOX had many provisions which would have prevented Enron's particular style of accounting; and we can't compare AIG, because the Times story only alleges a problem, and doesn't describe it at all.

PriceWaterhouse had concerns as did the internal auditor. But they cannot flag losses that do not appear on the spread sheets. That was Enron accounting. That is what AIG was doing. AIG was also rating equities that did not have that value. PriceWaterhouse would not know. Those losses and massive risks that do not appear on a spread sheet cannot be detected by the auditor. Therefore PriceWaterhouse - fully conforming to Sarbanes-Oxley - could only have concerns. And nothing in Sarbanes-Oxley says those concerns need be publically reported.

PriceWaterhouse had concerns. AIG said it was fiscally stable. Markets only heard what was required by Sarbanes-Oxley. Therefore the public never knew AIG has maybe $1trillion of obligations with maybe $67billion in equity. The public knew exactly what PriceWaterhouse was required to report per Sarbanes-Oxley.

If Sarbanes-Oxley fixes accounting, then why did 3 major investment banks and a long list of other smaller banks and public companies go belly up or go running to the government for corporate welfare when the accounting said they were solvent and stable? Bottom line as The Economist also bluntly said:

The trouble is that financial innovation did not occur in a vacuum but in response to incentives created by governments. Many of the new-fangled instruments became popular because they got around financial regulations, such as rules on banks' capital adequacy. Banks created off-balance-sheet vehicles because that allowed them to carry less capital. The market for credit-default swaps enabled them to convert risky assets, which demand a lot of capital, into supposedly safe ones, which do not.

Money games in accounting are still situation normal as it was at Enron. Even credit markets frozen simply because nobody could trust the counter-parties accounting. Credit markets did not freeze due to a shortage of cash. Spread sheet myths are so routine that nobody knew who was going belly up next.

We have accounting consistent with right wing extremist principles: myths and lies. After lying, plahing money games, and blaming the unions, what does GM do? Change their operations so they can tap another $10billion of free government money. We protect those who pervert spread sheets rather than demand their removal. Another classic example of the problem is Rick Wagoner. He got the job even though he was running GM North America into the ground ... because he was an expert on spinning spread sheets.

[tw.]

oh, and....

cock!

[tw]

Originally Posted by tw.

oh, and....

Still cannot tell who is posting with this alias by analyzing his handwriting.

[lumberjim]

that's your mistake....it's not HANDwriting....it's cockwriting.


I typed that with my cock!