FedUpUSA

Archive for November, 2010

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Obama greets JPMorgan Chase CEO Jamie Dimond

Bestselling investigative reporter Charles Gasparino’s latest tome Bought and Paid For: The Unholy Alliance Between Barack Obama and Wall Street commences not with a scene from the much-ballyhooed first one hundred days of the new Administration, but at a hush-hush 2007 pow-wow at Johnny’s Half Shell in Washington, D.C. between then-Senator Barack Obama and executives from Wall Street’s top firms — Lehman Brothers, Merrill Lynch, BlackRock, Goldman Sachs, Bear Stearns — which went so swimmingly the only warm fuzzy it lacked was the ghost of Humphrey Bogart intoning, “Barry, I think this is the beginning of a beautiful friendship.”

From there the Fox Business Network senior correspondent and Daily Beast columnist lays out in gobstopping detail just how well both sides have since profited from this extended dalliance, combining fiery outsider indignation with hard-won insider knowledge, narrative prowess, and a true knack for the telling anecdote — disgraced Bear Stearns hedge fund manager Warren Spector spending his days knocking on Florida doors as a volunteer Obama campaign worker  and nights bedded down at luxury hotels while his preferred candidate ceaselessly derides Republicans as the party of Wall Street is but one among many doozies. 

Bought and Paid For is, in short, required reading for anyone interested in the obscured behind the scenes machinations of the economic maelstrom we currently find ourselves mired in. Gasparino was recently kind enough to speak with TAS about his book.

TAS: What compelled you to write Bought and Paid For?

Charles Gasparino: The notion of Big Government and Big Wall Street colluding to do bad things is something I’ve covered for a long time. I’ve always been interested in the conflicts between public policy and finance. What I’ve seen over the years is this seemingly bizarre anomaly of how Wall Street, which is allegedly the epicenter of capitalism, in reality thrived on something that is very anti-capitalist, which is Big Government. Crony capitalism. And these guys aren’t doing it just to make money on fees selling government bonds to finance the deficit or government programs. The people at the top have political beliefs that are strongly aligned with progressivism.

TAS: Reading your book I was surprised to learn how kindred a spirit the big players of Big Finance saw in Barack Obama, particularly at first. They weren’t supporting him simply as a pragmatic, strategic move. David Axelrod joked about Obama having a “man crush” on JP Morgan CEO Jamie Dimon and you write financial executives saw the future president as “a guy who could have easily worked at a big Wall Street law firm if he hadn’t gone into community organizing first.”

Gasparino: I think a lot of the country was projecting something onto Obama they wanted to see but maybe wasn’t there. Here was one of the most far left politicians I have ever seen — based on his record, based on his associations, everything. People forget Reverend Wright, aside from his racially charged language, taught liberation theology, which basically says the Bible is infused with Marxism. That’s his spiritual mentor. And all these Wall Street guys were lining up to support him.

TAS: Why?

Gasparino: Well, first, McCain couldn’t stand them. It was oil and water. He screamed at Hank Paulson any chance he got. He’d spent five years in a prisoner-of-war camp, crashed a couple planes — not exactly the type of guy who’s gonna kiss a banker’s ass. McCain was foreign to them and his campaign doubled down on that foreign-ness by picking Sarah Palin. When they looked at Obama they saw a guy who went to their schools, who shared their manners, who didn’t break their chops. Obama was just so personally charming that something like Reverend Wright or Bill Ayers didn’t have any effect. They believed at heart Obama was a moderate who understood them. And it panned out. If you look at one line of work that’s done very well under Obama it isn’t construction, it isn’t small business or entrepreneurship. It’s all the big banks that started making a ton of money the minute they got bailed out, and all those bailout mechanisms Bush put in place have been carried over and doubled down on under Obama.

TAS: Do you think the difference between the media caricature of Wall Street as a militant free-market bastion and its limousine liberal reality will ever be cleared up in the general public’s mind?

Gasparino: I think it already has been. That’s why the President started attacking Wall Street like a minute after Scott Brown won Teddy Kennedy’s seat. The public has definitely started to put it all together. I’m not a member of the Tea Party by any stretch of the imagination, but I will say one of the good things about that movement is that they understand this inside game, they don’t like it, and they want it to end. They understand how corrupting it is for the entire system when Big Business can exploit the growth of Big Government. They instinctively know there is huge hypocrisy in Obama calling these guys fat cats when Wall Street is just exploiting what he presented them to exploit. Now, Wall Street shouldn’t be commended for that, but let’s be honest about it: this was a partnership…. This country is in desperate, desperate straits because government has skewed the incentives. The free market, which has been demonized, wouldn’t have given these guys a bonus. It would have destroyed all of their businesses.

TAS: Could there be Big Government on the scale we’ve recently seen it without the complicity of Big Finance and Wall Street?

Gasparino: They feed off each other. If there were no bailout, I guess you could say there’d be no opportunity to make money off the bailout. But what we can say is you need someone to underwrite Obamacare. Wall Street is there to do that. BlackRock managed all the toxic assets of Bear Stearns. When they do cap-and-trade, they’ll be creating a new commodity to be traded on some exchange somewhere. The Fed, urged on by the White House, went in and bought $1.3 trillion mortgage backed securities, artificially propping up the market with taxpayer money. All the Wall Street firms that bought for pennies on the dollar are benefiting from the appreciation of a market that is only appreciating because of taxpayer money. Forget financial reform. The banks have made a killing since the bailout. And the average American? They’re stuck with the wonderful stimulus package that gave us 9.6 percent unemployment.

TAS: The last chapter of your book sums up this collusion between Big Finance and Big Government, sarcastically, as “Money Well Spent.” Does the failure of recent government intervention — diehard, never-could-be-convinced-otherwise defenders notwithstanding — signal that we’re on the verge of this sort of alliance no longer being money well spent?

Gasparino: Look, I think crony capitalism hurts the system. It basically allows a few privileged, wealthy, connected people to do well exploiting the spoils of government that the rest of us can’t. It’s getting worse, it ain’t getting better. The small business lobby is not as strong as the fat cat lobby in Washington. The bailouts of the last 30 years are how Wall Street got used to taking so much risk, and the latest bailouts? The government thought by creating a market of mortgage-backed securities somehow that whole shadow banking system that allowed the banks to make those loans in the first place would come back, but it never did because banks think logically about this: “Why should we be extending loans when we can just make money off this one program?”

Unintended consequences. That’s the problem when government gets involved in this stuff. When will banks start making loans again? Well, you need the mortgage market to deflate. It’ll only deflate when we have more pain. Now, there was no easy answer. But if you let natural forces take control in the financial crisis…firms go under, they stop lending, prices of securities drop dramatically, lots of losses. A tremendous amount of pain. And then the ones that survive pick up the pieces. But look what happens when you bail them out. They limp along for two years. Instead of the immediate pain you have a dead man walking. That’s what we have right now. The bailouts just postpone the inevitable.

The Spectator

Government Sachs strikes again.  Big Time.

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How to succeed in Washington in 6 simple steps…

1 – Establish your early career at Goldman Sachs.

2 – Go to work for a few Presidents.

3 – Derail Brooksley Born for kicks.

4 – Leave government and steal $46 million from taxpayers on GM’s bailout.

5 – Write a high-profile NYT op-ed praising Obama and the GM bailout.

6 – Interview with Obama to replace Larry Summers.

Total Government Sachs round trip points earned – ?

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This is how it works – first you kiss the ass, then you get the job.  Not exactly new news, but Roger Altman has perfected it.  Here’s a NYT op-ed from Altman this Summer that praises Obama and tells a bunch of whopping lies.  Please shield your eyes while reading:

So before leveling such fierce criticism, corporate America should remember the president’s actual record.  First, Mr. Obama inherited an economy teetering on the brink of depression.  Immediately upon taking office, he forged a $787 billion economic stimulus program, and is wisely trying to expand it now.  Was this program perfect?  Of course not.  But it has been effective. Every serious economic model indicates that it contributed to recovery.

Second, at that same time, the credit markets were in tatters and simply not functioning.  The administration submitted the biggest banks to confidence-building stress tests.  It skillfully invested in financial institutions, kept the mortgage markets afloat and undertook other creative initiatives to solidify the financial industry.  These have worked more quickly and more successfully than anyone predicted. The system is healthy again.

Third, the president made the courageous decision to put General Motors and Chrysler through bankruptcy.  As a result, both survived and, today, G.M. in particular is coming back fast — along with its hundreds of suppliers.  Moreover, taxpayers are likely to recover the full value of their investment in the company.

Guess what?  Roger Altman made $46 million on the GM deal and then was publicly criticized – scribd document is below – by the bankruptcy court for asking for $18 million more.  Here’s some detail:

Source – Future of Capitalism

Roger C. Altman has an op-ed piece in the New York Times that is remarkable for a whole variety of reasons, but let’s begin with the most outrageous.  Mr. Altman is identified at the end of the piece only as, “Roger C. Altman, an investment banker, was a deputy secretary of the Treasury during the first Clinton administration.”

In fact Mr. Altman is founder and chairman of Evercore Partners, which advised on the GM deal.  Evercore, after being paid $46 million by GM pre-bankruptcy, turned around and asked for a $17.9 million “success fee.” 

A U.S. bankruptcy trustee termed the fees “staggering” and “inordinately large” and said it “clearly exceeds the bounds of reasonableness” given that “Evercore had no success at finding a purchaser or funder for the Debtors.”

Even by the standards of the crony capitalism (or cronyism) of the late Bush-early Obama administration, this has to be some kind of new low. 

Earn tens of millions of dollars in fees from a deal paid for by American taxpayers, then turn around in the press and praise the president for his “courageous decision” on the deal without disclosing that you were intimately involved in it.

It’s one thing for Mr. Altman to attempt this stunt, it’s another thing for the Times to allow him to get away with it.  Never mind the question of whether the decision to put a private company into bankruptcy should be a presidential decision in the first place.

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And the final piece of the puzzle.  From Reuters, just 9 hour ago.  Altman looks to replace Larry Summers on the White House economic team…

Obama interviews Altman as new economic adviser

(Reuters) – President Barack Obama on Tuesday interviewed investment banker Roger Altman, a former Treasury official, as a candidate to replace departing economic adviser Larry Summers, a White House official said.

Altman, 64, is a veteran of both Washington and Wall Street, steeped in the ways of politics and finance and potentially able to act as a bridge to the private sector that business observers say the Obama White House badly needs.

Summers’ replacement will also play an important role in helping Obama find new ways to stimulate a sluggish economy after voters punished the president’s fellow Democrats in November 2 congressional elections for stubbornly high unemployment and government deficits.

He served two stints at the Treasury Department, first in 1977-81 as assistant secretary in the administration of President Jimmy Carter, and second in 1993-94 as deputy secretary under President Bill Clinton.?

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The Daily Bail

 And threaten, I’m sure….

Seems like we just went through this not too long ago.  Well, it’s because we did.  ENRON gave us the blue print by which to unravel this mess back to the engineers.  You would think we would have learnt that lesson, but unfortunately, that is not the case.

Jon Stewart interviews Bethany McLean and Joe Nocera, authors of ENRON The Smartest Guys In The Room and now out with their new book, All The Devils Are Here.  In this interview they explain what happened in easy to understand terms as well as what is happening now – Wall Street is already onto the next thing that will blow up the financial system.