Risk Rap

Rapping About a World at Risk

Retreat to the Alamo

As the country waits for the government bailout package to become law, large banks are retreating to a new Alamo. The new Alamo will protect a club of 5 bank’s that the Fed and Treasury desperately wish to protect. The five banks are Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and JP Morgan. It is upon these TBTF rocks that the American banking system will make its last stand in an Alamo fortress to weather the capital market storm.

The FDIC has arranged another marriage between Citigroup and Wachovia. Its truly a combination of weak sisters. Wachovia’s equity holders wiped out.

Hedge funds are cashing in their prime brokerage accounts. Three EU countries have acquired major stakes in Fortis Bank. Iceland an island country in the North Atlantic has nationalized its third largest bank.

New bank holding company, Morgan Stanley has just received an equity investment of $9 bn by Mitsubishi a Japanese bank that has also acquired 98% ownership in Union Bank California. The other new bank holding company, Goldman Sachs admits to a $50 bn war chest (recently augmented by Warren Buffett) in capital to make acquisitions of distressed banks assets. Once taxpayers assume ownership of the non-performing bank assets GS and other Club of 5 members will emerge from their bunker and get first pickings on a bunch of equity distressed regional and community banks at bargain basement prices. The banks are deleveraging while the Fed is asking the US taxpayers to leverage-up on more debt to fund that deleveraging.

President Bush made a statement this morning on the economic situation. W said he is ready to sign the EESA (Emergency Economic Security Act). This is an emergency situation said W. W also said he “appreciates the leadership of our legislators to come together and the true spirit of bipartisanship to serve the greater interests of our country.”

I wonder if anyone in this country knows what the word bipartisan means let alone willingly set aside parochial interest and actually practice it. This inability to come together is the result of twenty years of the fine art and practice of radical partisanship championed by Republican Rovian attack politics.

This Rovian posturing was ably demonstrated and on display for all the world to see during Friday’s debate. The Arizonian Maverick a self proclaimed champion of bipartisanship couldn’t find the courage in his Country First heart to look at Barack Obama to engage in a substantive discussion concerning this nations problems. His contempt for his opponent and his refusal have a dialog with him was truly ugly as it is despicable and exposes McCain as a Me Firster. Country be damned.

Due to a system malfunction the opening bell at the NYSE failed to ring. What kind of omen does this augur?

Music: Queen, Another One Bites the Dust

Risk: leveraging, political dialog, democracy, depression

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September 29, 2008 - Posted by | banking, credit crisis, EESA, rock, TARP | , , , , ,

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