The Gang of Eight Were Unconvincing Before the People's House. 
My best Congress source tells me that the eight CEOS of the eight banking houses (Goldman Sachs's Lloyd C. Blankfein; J.P. Morgan Chase's James Dimon; Bank of New York Mellon's Robert P. Kelly; Bank of America's Ken Lewis; State Street's Ronald E. Logue; Morgan Stanley's John Mack; Citigroup's Vikram Pandit, and Wells Fargo's John Spumpf) were unconvincing, condescending, irritating and insincere today, and that most of the Democratic members struggled with the fact. It was the
Democrats overwhelmingly who voted for the original TARP program on September 29 and then again on October 3, 2008. The Republicans in the meeting today sat by and watched the questioners squirm and the questioned pontificate and bloviate. Not a good day for the Republic if clarity and candor are the aim. The facts are that at least two of the bankers at the table of eight today area leaders of zombie banks. Citigroup is insolvent. Bank of America is insolvent. Both are being kept alive artificially with Federal Reserve power and Treasury maneuvers. How long can they be kept stumbling around like creatures from the Night of the Living Dead? No one has given a firm date but a good guess is about 6 months. We can either nationalize them now and take over their assets to be administered by the FDIC -- polite terminology, let the failure happen -- or we can nationalize them later. I am told that Citi and BofA cannot survive. We are delaying the inevitable. Why? There is not a clear answer. The Obama administration seems to believe that the banks are too big to let fail, and that their failure would create a death spiral, or perhaps just a hostile swoon by the public. We will likely know before the year is done.
Bank of America's No Good, Very Bad, Awful Day.
Ken Lewis of Bank of America did not suffer fools happily today when taunted and derided by the congress members. But today is nothing like the bad day that follows because of the breaking news story in the Wall Street Journal that last December Merrill, Lynch contrived to pay out fortunes to more than 850 executives. And that Bank of America knew about the pay outs before it closed the deal to buy Merrill. The facts are stark, all laid out by the enterprising New York State Attorney General Andrew Cuomo, who says he aims to investigate the more this "disturbing news." Fourteen executives were paid collectively $289 million. One hundred and forty-nine were paid collectively $289 million. And six hundred and ninety-six were paid $1 million each. This from a firm that lost in the fourth quarter more than $27 billion. Plunder, greed, folly. Every dollar of that money came from the U.S. Congress, from the TARP monety voted so eagerly by the Democrats of the 110th Congress and distributed so purposelessly by the conniving and obtuse Treasury Secretary Hank Paulson.
Ken Lewis Snapping.
The acerbic and witty Heidi Moore, Wall Street Journal, was a live bloger today at the gang of eight hearings, and she was dead on savagely smart the whole seven hours. Her many good moments for me (and we will discuss her day on the show Sunday 15) came to this at approximately 4 pm, with Ken Lewis struggling to stay civil.
3:58: Lewis is getting dangerously close to snapping. He says that Bank of America has a 10.6% Tier 1 capital ratio. He draws himself up and says something along the lines of "We made money in 2007. We made money in 2008. We didn't lose money as some banks across the world did. That you would ask that question to me is...amazing."
4 pm: The Rep. asks if the banks would consider being nationalized. Lewis, who is impatient, says "Are you talking to me?" in his best, though unwitting, DeNiro impression. That draws laughter from spectators, but he is genuinely indignant at being asked: "Absolutely not. I don't know why you would ask the question." Pandit says he will do everything he can to prevent nationalization.
That's very funny that the Congressional Democrats and staff think that the bank CEO's were "unconvincing, condescending, irritating and insincere". Pot. Kettle. Black.
And when an executive (Pandit, or is he Pander) says publicly that he "will do everything he can to prevent nationalization", you can be assured that really means, "nationalization is inevitable and I will stand on the track until that train runs me down".
We all assume that people - especially our elected leaders - make decisions that reflect their own inclinations, and that they do so of their own free will. Now, consider this:
In December 2007 the NIE released a report saying that Iran had halted its nuclear weapons program in 2003. This report, contradicted the previous NIE report’s conclusion which asserted that Iran had an active and on-going nuclear weapons program as late as 2005. Senator Harry Reid said pointedly in response to the 2007 report that he hoped the administration would “appropriately adjust its rhetoric and policy”. Bush was said to have told the Israelis that he cannot control what the intelligence community says, but that the NIE's latest (2007) conclusions do not reflect his own views. After Bush seemed to have distanced himself from the report, the White House would later go on to say that the President endorses the "full scope" of the US Intelligence Estimate’s findings concerning Iran.
There was also the time when the Bush administration refused Israel fly-over rights over Iraq for purposes of a possible strike on Iran’s nuclear facilities. Added to this were the TARP fiasco and the border fiasco; Dubai; immigration amnesty, and the totally inexplicable non-response to Russia’s adventurism in the Republic of Georgia among so many other second term puzzlements. And finally, the coup de grace: the handing over of our nation into the arms of the most radical anti-American leadership our country has ever seen – all this, with not so much as a whimper.
Don’t tell me that the man was not in some way compromised; that somebody (the likes of Putin, Pelosi or Reid) did not have the proverbial Bush pictures (of Lily) pasted on the wall near a fax machine somewhere.
From the always droll Calculated Risk commenters:
Nemo writes:
They are not expected to be made public for every institution.
JPMorgan: PASS
Wells Fargo: PASS
Goldman Sachs: PASS
Bank of America: results not public
Citigroup: results not public
Nemo | Homepage | 02.12.09 - 12:38 am | #
Calculated Risk writes:
Nemo, nice predictions. You need to add the other 13 or so banks. Imagine if they announced these banks passed, these banks need more capital, and then don't say anything about a few other banks (like Citi and BofA). ROFLOL. That is the same as making an announcement!
best to all
Calculated Risk | Homepage | 02.12.09 - 12:41 am | #
Pissed off in California writes:
"I wonder what category the Federal Reserve will fall into."
The TBTF column.
Pissed off in California | 02.12.09 - 12:47 am | #
It seems the revisionists are winning the war on truth, too.
Accountability? Nyet
Reading the "live blogger" reporting on this "hearing" is fascinating, as well as, troubling.
However, most salient is in her closing- "All we can say is: it took Congress to make Wall Street look good."
Also, the comment section where the truly remarkable brilliance and comprehension of Americans are found:
For instance-
"There is some revisionist history here. We forget had dire the situation was when most of these firms stepped in at governments behest to save the day."
"Given that Mr. Frank cares so much about TARP money and executive compensation, why hasn’t Franklin Raines been called to tesify today? This is a complete sham and a kangaroo court!!"
"We have reverted back to the witch hunts of Salem. All these CEOs should remind Congress of how much tax they pay into the system which subsidizes welfare/unemployment/federal salaries/etc…"
"Mr. Frank, owning a home and access to credit is not a constitutional right. It is privlege, so stop these insane hearings and stop forcing banks to make even more bad loans."
"These congressman are no more equipped to understand complex financial organizations like these than the jokers that I used to deal with when I sat on my local city council. Same stupid questions - whether it is zoning issues or TARP money. There is something about the allure of elected positions on city councils and the U.S. Congress that always seems to attract half-wits, malcontents and lunatics."
*Assimilatus Maximus 3D* has broken free of its chains and coming to a theater near you. See the monster gobbling up everything in sight while fighting off all opposition. Helpless citizens take to the streets and risk their lives to escape the destruction.
You will be mesmerized as *Assimilatus Max* withstands assaults from the Army, Navy, Air Force, and Marine Special Forces. Its armor is impenetrable by conventional arms; it devours everything in its path and grows stronger while wreaking havoc on mankind’s formidable spirit; the beasts hypnotic powers are inescapable and reduces them who fall into the spell to limp, hopeless empty shells. And the surprise ending will have you running for the doors!!!
This blockbuster is a must see! A sheer that marvel goes beyond anything ever seen before! The spectacular of spectaculars for generations to come! *Assimilatus Maximus in 3D!!!*
*Coming Soon! Don't miss IT!*
Marines really don't have Special Forces. They say they all are. What do I know? I was Army.