Risk Rap

Rapping About a World at Risk

No Transparency from Corzine

Whats on Corzine’s Agenda?

Gov. Corzine is calling a meeting at NJIT of New Jersey’s best minds to deal with the economic crisis. The meeting will be closed to observers and to the public.

Corzine should open up a window of transparency. All these closed door meetings only serves to estrange the government from the public trust. Remember Cheney’s closed door meetings and the role it played in formulating the nations failed energy policy. All American’s paid dearly for that one.

The economic crisis will seriously effect state and local governmental institutions ability to fund and provide services. Its amazing the degree of involvement governmental agencies and officials are stepping in to manage the crisis. Mr. Cozine’s Goldman Sachs pedigree will serve him well. It seems the collegian club of GS alums are in control of everything.

Is Corzine meeting with friends to carve up state regulated banks and insurance companies that are on the brink of insolvency?

Is Corzine discussing the closure of the public school and transportation systems because the state has cash flow problems?

Is Corzine discussing the seizure of state pension fund assets to fund the current cash flow needs and further deplete the pensions assets?

Is Corzine finalizing a deal on the sale of the NJ Parkway, Turnpike, The Port Authority and the State College & University system to a syndicate of private equity funds lead by the Chinese Investment Corporation and other large Sovereign Wealth Funds?

We don’t actually know. Thats why Mr. Corzine needs to provide a little transparency and let the citizens of New Jersey know whats going on and how it affects them.

Risk: transparency, accountability, public trust,

Music: The Rays, Silhouette on the Shade

September 22, 2008 Posted by | China, credit crisis, government, pop, private equity, sovereign wealth funds, taxation | , , , , , , , , | Leave a comment

Pennies from Heaven

Morgan Stanley and Goldman Sachs have changed their charters and are now bank holding companies. I believe this was necessary for Goldman and Morgan Stanley to have access to Federal bailout money in the newly proposed bank workout plan.

Paulson insists that we must move with great dispatch. I get nervous when these types of transactions occur with such velocity that I have a hard time understanding the value proposition. After all, if me and my countrymen are being asked to belly up to the bar and put $1Trillion into the game I want more of an understanding then believing Chris Dodd has seen the horror if we don’t act and it ain’t pretty.

Couple of questions:

Does this allow Goldman Sachs and Morgan Stanley to purchase commercial banks? Will Goldman and Morgan be opening up S&L’s and local community banks? If that is the case should we allow them to take over the management of the banking system considering their poor track records of managing investment banks? A disturbing characteristic of our managed economy is that the more colossal the failure the greater reward is bestowed.

Second question is a small technicality. Paulson’s suggestion to segregate good bank assets and bad bank assets centers around FAS:157 Level Three Assets. If the current holders of these assets cannot value them now, how will the Treasury acquire them from the failed banks and at what value will they carry them on their books? We should also assume that since the US Treasury will want to sell these assets how will it know its getting a good price or “fair value” when it liquidates its position?

Will Level Three assets be used as collateral for the new bank holding companies capitalization requirements? If these assets are not performing now, how can we assume these assets will perform in times of “real economic duress” to meet defaults in the future?

Level Three Assets are principally the CLO, MBS and Credit Default Swaps (CDS) that lie at the root of this crisis. If they functioned as they should, all credit risk should have been hedged out of the system and we should not be experiencing this economic crisis because of insurance CDS provided. Seems to me that the CDS were more snake oil then insurance. If they didn’t work when they were needed (see AIG) why would the US Treasury think there will be a market for them in the future?

Will the investment banks and financial engineers who enriched themselves on the creation and sales of CDS instruments be required to return the money they earned in commissions on the sale of this worthless junk?

Just asking.

Music: Billie Holiday with Lester Young: Pennies from Heaven

Risk: bank, managed economy, bank capitalization,

September 22, 2008 Posted by | banking, credit crisis, FASB, jazz, Paulson, TARP | , , , , , , , , , , | Leave a comment

Equinox Philosophizing

Today marks the autumnal equinox.

The day is as long as the night. The cosmic scales are perfectly balanced. The yin is a sweet muse to the yang. I like to think that everyone’s got an equal shot. All people are equally loved by God. Women should have equal rights. Grace is offered evenly to all that can perceive the miracles of the day. The chance of success has improved to equal money. The glass is just as full as it is empty but the main point is that there still plenty to drink because our blessings truly runneth over.

Don’t get even, look to straighten things out. Its the Equinox.

On the 23rd it will John Coltrane’s birthday. Reason alone to celebrate.

That is enough.

Music: John Coltrane Equinox

Risk: Support 50 50 fund raisers.

September 22, 2008 Posted by | art, holiday, jazz, seasons | , , , , | Leave a comment

Fund for Asset Remediation of Toxicity (FART)

Pepe Le Pew

Hank Paulson, the Senate and Congress are taking earnest steps to hammer out an agreement to create a super fund to acquire toxic bank assets, package them up, securitize the assets and release them in global secondary markets.

The program, Fund for Asset Remediation of Toxicity (FART) is requesting $700 billion dollar capital infusion from taxpayers. Paulson and leading members of the legislative branch of government are pumped to get a deal done and leading democrats are smelling sweet success of pushing this major legislative action through.

Though bipartisan support is strong some republicans are getting a whiff of potential problems in the plan. Tennessee Senator Jim Bunning, says the deal stinks and he won’t support socialists and communists running the Treasury Department. Says Bunning, “We won the cold war. We beat them. Why are they imposing their stuff on us. This reeks to high heaven.”

As part of the deal a special entitlement rider was added to the bill. All banks who participate in the FART program will be required to provide odor eaters to all new loan applicants to make sure that they are comfortable with the terms and conditions of the loan agreement.

Sarah Palin thinks she smells a rat. She said she’s oiling up her 22 and will shot on sight any rat or any rascally critters that will skunk the deal.

McCain and Obama were unavailable for comment at press time.

Music: Loudon Wainwright 3rd, Dead Skunk in the Middle of the Road

Risk: Taking things to seriously

September 22, 2008 Posted by | EESA, Paulson, politics, pop, TARP | , , , , , , , | Leave a comment