Ward on Words

Two interesting headlines in the WSJ: One headline says "J.P. Morgan Profit Jumps 47%. " The other reads: " New Hit to Strapped States ." So what is the new hit to the distressed states? Borrowing costs are on the rise. Here's an example of the duress states are feeling: In Texas, J.P. Morgan Chase & Co. has taken control of a debt that it back-stopped in a 2001 deal that requires the public agency running the Houston Texans' football stadium to pay back a 30-year bond over the next three-and-a-half years. "Think of having a 30-year mortgage, and then someone suddenly says you have to pay your house off in five years," said Janis Schmees, executive director of the Harris County Houston Sports Authority, which built the stadium. "That is pretty much our scenario." A representative for J.P. Morgan declined to comment. What shows as profit for bankers exerts an extremely heavy burden on everyone else.

In recent months, there has emerged a terrible mythology around Henry Paulson's audacious plan to save our financial sector. The whispers have grown into kind of a roar: TARP will turn a profit for the government. To understand this mythology, we need to go back to those dark days of the fall of 2008, when our economy went into a free-fall of its own weight and it looked like nothing would save us from a Depression as terrible as the one that we call the Great Depression. Henry Paulson, then Bush's Treasury Secretary, cobbled together his rescue plan we all know as the Troubled Asset Relief Program, or TARP. In September 2008, Paulson did his best to explain his new plan . Here's some of what he said back then: As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million...

Wall Street Journal has a fabulous story today about the success of one particular government entitlement program - the bailout of the banks. While unemployment remains high in America, while those on Social Security are likely to see cuts in their entitlement program in the near future, while our federal, state and local governments are seriously in debt, our financial sector gleams brightly as a vision of success. According to the WSJ story , the average monthly salary in 2009 in finance and insurance is nearly $12,000. A month. Up 23% from a year earlier. More than double the average in NYC. And that's just the wages paid to the new hires. Imagine the possibilities for growth in this sector!!! Especially when you can sell an instrument to one party and sell insurance (or take out insurance for yourself) that allows one to profit when the instrument you created blows up after you sell it off. (As long as you disclose the names of the people who purchase the insur...

Bank of America has posted its third consecutive quarterly loss. Apparently, the double whammy of paying back TARP and defaults on consumer loans has packed quite a punch to the firm's bottom line. From Bloomberg : "'Economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth,' [Bank CEO Brian] Moynihan said in a statement. 'We are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer business.'" Specks of sun are breaking through, perhaps, but clouds of high unemployment and sluggish consumer spending remain heavy and dark everywhere you look. Given the gloom surrounding the current economic outlook for consumers outside of Wall Street, why would BoA consider taking the hit now to repay TARP? Wasn't TARP designed to help struggling, massive banks recapitalize? More from Bloomberg: ...

GM predicts a profitable year in 2010. Now that IS bold! The company, clawing its way out of bankruptcy. The economy, still shedding jobs by the tens of thousands each month (down from the hundreds of thousands shed in a few months ago - leading many to predict the beginning of the jobless recovery.) And a prediction unprecedented in optimism. The Wall Street Journal characterized GM's statement as a "bold and surprising forecast," and noted the company has not seen a profitable year since 2004. The WSJ also noted that "significant hurdles remain to repairing GM's bottom line, namely winning back tens of thousands of customers and improving the profitability of vehicles sold." And the newspaper gives us another curious statement: "When GM started piling up billions of dollars in losses in 2005, Rick Wagoner, its CEO at the time, stopped offering financial guidance." Does this mean the CEO shut down from stress? Failed to steer the shi...

Jon Stewart's take on the absence of three CEOs from an important meeting with the President of the United States... The Daily Show With Jon Stewart Mon - Thurs 11p / 10c Clusterf#@k to the Poor House - Flight Delay www.thedailyshow.com Daily Show Full Episodes Political Humor Health Care Crisis Apparently, phoning it in was the best way for these top-notch bankers, mired in fog, to touch base with Obama... It's a bitch when weather gets in the way of a personal meeting with the president.

...for all 30 members of its management team. Nice press release includes few pertinent details. Would love to know if this means the 30,000+ employees not affected by this plan now get bigger bonuses. After all, Goldman's $17 billion bonus stash needs to be distributed to the many thousands of deserving employees, right? In the press release, Lloyd Blankfein offers up this quotable nugget: "The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders' meeting in May. We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm's performance and incentivizes behavior that is in the public’s and our shareholders’ best interests. "In addition, by subjecting our compensation principles and executive compensation to a shareholder advisory vote, we are further strengthening our dialogue with shareholders on the important issue of compe...

Bank of America is set to pay back $45 billion it owes TARP. Funny how the need to free the company from CEO pay restrictions provided motivation for such an action... For more, here's Felix Salmon's report . And here's what the WSJ has to say .

All I can say after reading the story in this month's GQ written by Matt Latimer, Republican speechwriter for George Bush is: no wonder we're swirling around in the toilet today. Some quotes from Latimer's story below... Matt learns about the impending crash... "Chris had just come from a secret meeting in the Oval Office, and without so much as a hello he announced: 'Well, the economy is about to completely collapse.' "'You mean the stock market?' I asked. "'No, I mean the entire U.S. economy,' he replied. As in, capitalism. As in, hide your money in your mattress. The secretary of the treasury, Hank Paulson, had sketched out a dire scenario. And Chris said we’d have to write a speech for the president announcing his 'bold' plan to deal with the crisis. (The president loved the word bold .) We had to reassure the American people that everything was going to be okay. As it turned out, Secretary Paulson had a pla...

Hindsight, they say, is 20/20 - but who today can say they KNEW last fall that Goldman Sachs would rake in tons of money since becoming a bank holding company? Certainly not me. I absolutely cannot brag about my prescient vision in this matter. I totally believed that when they transformed from high rolling investment bank to boring but regulated bank they'd be scaling down the risk, and thus, the scale of their profits. Here's how Goldman characterized the shift in a press release: “'While accelerated by market sentiment, our decision to be regulated by the Federal Reserve is based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding,' said Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs." I bought the story that regulation would provide "prudential supervision." So did the Wall Street Journal : "With the move, Wall Street as it has long been kn...

My ire level is raised this morning - and if I had ever been able to absorb the color-coded messages of our national security alert system, I'd apply the most stressed-out federal color to my own particular sense of security right now. But in my mind, the colors of our national security alert system remain blended in a melange of beige; thus I'll label my color red. Not commy red (that's been out of style since The Wall came tumbling down) - not red-state red, though I'm on board, this morning, with their loathing of government. I'm seeing rage-red today. Flaming hot flickers of red hot rage. Enough to make me want to raise a fling a bunch of verbal pitchforks at people. My ire level is raised today simply because I made the mistake of perusing the news. Here's a sampling of what I've read: WaPo's Bonuses beat profits as bank industry imploded . A news story (but didn't we know this already?) informing us that the NY AG has determined...

Fascinating story about Goldman Sachs in New York Magazine... The magazine's story on our new millennial G-men (no Elliot Ness here!) talks about leverage, layoffs and the firm's "essential" position in the American capital markets. Some key quotes include: On the tarnish now seen on Goldman's gleam: "Ever since the bank crossed paths with U.S. taxpayers, getting saved with at least $10 billion in government aid last year and then parlaying that into $5.1 billion in profits in 2009 (so far), the firm has been seen as the ugly essence of capitalism at its most cynical—by Washington, by the public, by the financial press, even by some of its clients. Stalwart voices of Wall Street like the Financial Times and The Wall Street Journal have criticized the firm’s undue influence on government and its ruthless pursuit of risky profits. Venom is flowing from more unlikely quarters as well: A recent Rolling Stone article called Goldman “a great vampire squid w...

Stop the haggling - we want to be generous! That's the news coming out of Goldman Sachs' PR office today. They've bought back warrants from the feds for $1.1 billion - the full value as determined by the feds. Just a few weeks ago, Goldman had wanted to pay just $650 million for the warrants. Lloyd Blankfein, Goldman CEO, had this to say in the press release: “This return is reflective of the government’s assistance, which benefitted the financial system, our firm and our shareholders,” said Lloyd C. Blankfein, Chairman and CEO. “We are grateful for the government efforts and are pleased that this additional money can be used by the government to revitalize the economy, a priority in which we all have a common stake.” He added, “Because Goldman Sachs advises companies with their growth plans and raises capital to support that growth, the best and most sustainable operating environment for us is one where consumer and business confidence and economic growth flour...

 In Cool Hand Luke , Paul Newman, in the title role, is serving a jail sentence for chopping the heads off of parking meters (foreshadowing the rage felt today in Chicago for the parking meter mess .) Luke is a rebel, fond of questioning authority and, as seen in the scene posted above, the authorities don't want to be questioned; they want to be blindly obeyed. "What we have here is a failure to communicate," says the chain gang captain, after beating Luke to the ground. The American consumer is feeling a little beaten up these days, what with the crushing collapse of their portfolios and job prospects. There are grumblings 'round the fact that Goldman Sachs, JPMorgan Chase, BoA and Citigroup are having such fabulous success at a time when the rest of the nation remains paralyzed by the crash of the economy. We're puzzled, those of us outside of the Wall Street / Washington, D.C. corridor, by the extreme diversity in luck. All those "too-big-to-...

Way back in 1976, the Bicentennial year of our nation, when we celebrated 200 years of American independence, Ronald Reagan introduced a very popular character into the national lexicon. The Welfare Queen. Reagan was one of the best raconteurs on the American political stage, perhaps rivaled only by Lincoln. When he spun his tale of fraud and waste, Reagan described "a woman in Chicago. She has 80 names, 30 addresses, 12 Social Security cards and is collecting veterans' benefits on four nonexisting deceased husbands.... Her tax-free cash income alone is over $150,000."* People were outraged! Outraged that one woman could do such harm to the system. According a February 14, 1976 NY Times article, Reagan's story was a bit of a stretch. The Queen in question was prosecuted by the Cook County State's Attorney's office for defrauding the system of about $8,000. But never mind. Reagan continued on for years with this story of destructive fraud, paintin...

Apparently the fabulous profits "earned" by Goldman Sachs this quarter aren't quite enough for the investment banking firm. According to this story by Allan Sloan in the Washington Post, they're haggling with Treasury over the price of the stock purchase warrants it gave the feds last fall. Not in the economic biz, so I'll let Sloan explain the warrants: "The warrants are very valuable, especially with the recent sharp run-up in Goldman's stock price. The warrants carry the right (but not the obligation) to buy 12.2 million Goldman shares at $122.90 each. Goldman's closing price of $160.03 on Monday put the warrants "in the money" by a bit more than $450 million. (That's the $37.13 difference between $160.03 and $122.90, multiplied by 12.2 million.) Given that the warrants still have more than nine years to run, they're clearly worth more than $450 million because their owner has years of upside. However, because there'...

Full confession: I'm not a Fox News fan. When I watch the channel, I end up like Krugman's proverbial boiled frog . I watch and watch, then find myself boiling over in rage, hurling curses at the screen, particularly when Hannity is running at the mouth. Since becoming a mother, I've tried to limit the "swears" (as my son calls them) and thus limit my time with Fox News. But I saw this clip and realized that Glen Beck and I are kindred spirits, at least when it comes to our thoughts on Goldman Sachs. Beck uses a low-tech blackboard and some signs to show the flow of money from the feds to the now profitable Goldman. Quite an interesting analysis! Check it out... This is actually one time I want the Fox News guys agitating the masses over an issue. Keep it up, Glen...

When reading a WSJ story with the headline "A Tale of Two Bailouts," my mind began thinking of Dickens and his rather famous opening paragraph for A Tale of Two Cities, the Dickensian tale of the French Revolution, when the unwashed masses rose up in violence against the privileged ruling class. "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair...." Interesting, how apt that quote remains today.... For Goldman, the Crash has truly been the cause of some very good times . However, for CIT, another TARP recipient, the worst of times are possibly approaching. It is a financial institution that still teeters on the verge of bankruptcy. And it is not yet clear if the feds will bail CIT out. So what does CIT's possible ...

Goldman Sachs is reporting a "robust turnaround" in performance (says the NY Times. ) That "robustness" translates into net earnings of $3.44 billion just for the second quarter of 2009. According to their own press release , GS business highlights include: *Ranking first in worldwide announced M&As for the year-to-date *Record quarterly net revenues of $736 million in equity underwriting *Repurchase of their stock form the TARP Capital Purchase Program It's been a heck of a great year for Henry Paulson's old employer.... According to today's NY Times story : "Many analysts are likely to welcome the news as another sign that the financial industry is stabilizing, and the Goldman results will probably set a positive tone for a slew of other bank results expected in the coming week. Other banks like JPMorgan Chase have been emerging as strong players since last year’s financial troubles, and analysts also expect them to record strong...

On the same day we learned of the bleak June jobs report , with its grim news of nearly a half million lost jobs, the Wall Street Journal is reporting that the firms on Wall Street are on track for one of the biggest bonus payouts ever . 2009 has been particularly good for Goldman Sachs, the Journal reports: "Based on analysts' earnings forecasts for 2009, Goldman Sachs Group Inc. is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal." Ahh, the riches that come from having friends in high places! What good would Paulson’s TARP have been if it hadn’t been profitable for his friends and former colleagues at Goldman? He cleared out its competitors, fed it TARP money directly and indirectly through AIG. They’re ...