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Wednesday, January 16, 2013

Inside view of the next Treasury Secretary

Pseudo-Spengler used to work for Jack Lew:
“When Lew was a COO at Citigroup, I was strategist for a credit derivatives hedge fund that did a great deal of business with Citigroup. We created collateralized debt obligations out of credit default swaps written on junk-quality debt, and through the magic of structuring, turned the junk debt into AAA-rated bonds. Citigroup not only underwrote these bonds, but bought virtually all of them through its so-called structured investment vehicles (SIV’s). These are off-balance-sheet devices sanctioned by the deaf-dumb-and-blind monkeys at the regulatory agencies that allowed banks to lever up AAA-rated paper at a ratio of 70 to 1. That is, Citibank bought $70 of these phony AAAs with $1 of actual shareholders’ capital. Of course, the supposedly AAA-rated paper rubber-stamped by Moody’s and Standard & Poor’s bore no more relation to a true AAA security than a Thai counterfeit Rolex bears to the real thing (in fact, the Thai Rolex holds up better under scrutiny — at least it will tell time). When the crisis hit, the price of these supposed AAA-rated bonds collapsed, leaving Citi with losses multiplied by the 70:1 leverage factor.

“That’s why Citigroup went bankrupt (or would have except for repeated federal bailouts). There was a daisy-chain between the hedge fund investment side run in part by Jack Lew, the structuring desk, and the structured investment vehicle. Citigroup took a fee for investing in hedge funds, took a fee for structuring the hedge funds’ investments, and also bought a great deal of the dodgiest product. We used to tell our counterparties at Citigroup that they were crazy to buy this garbage (in effect, we were short the phony AAA paper that Citigroup was buying with 70:1 leverage. And I told the whole world this was the case on CNBC.) One of the reasons I knew with certainty that the banking system would blow up in 2008 was that I knew in detail what Citigroup had bought on Jack Lew’s watch.
Perhaps those feigning outrage at Jackie Chan's charge that the USA is the most corrupt nation on the planet should consider taking this sort of thing into account.

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20 Comments:

Blogger Joe A. January 16, 2013 12:43 PM  

Cool.

Another crook who wasted and lost an absurd plenitude more of taxpayer money than he ever earned in his entire lifetime, getting a bigger handful of power and influence over even more of taxpayer money.

What could possibly go wrong?

Anonymous DrTorch January 16, 2013 12:50 PM  

Well obviously we need more oversight and regulation.

Anonymous DrTorch January 16, 2013 12:52 PM  

Oh, and Geithner is dipping into Fed Employees pension funds.

This made me smile.

http://news.yahoo.com/us-taps-pension-fund-avoid-211937220.html

Blogger Nate January 16, 2013 1:15 PM  

70:1 ....

is that all?

Anonymous Orville January 16, 2013 1:46 PM  

I actually had no issue with Mr. Chan's comment.

Blogger James Dixon January 16, 2013 1:49 PM  

You know, with the S&P up around 15% over the past year, I could have retired a wealthy man today if I'd had 70:1 leverage.

Anonymous Ferd January 16, 2013 2:11 PM  

Oh my aching head!!

Jack Lew IS John Corzine!!!

Anonymous Stilicho January 16, 2013 3:13 PM  

70:1 ....

is that all?


Come on man, this is Citibank. They aren't efficient enough to exceed that ratio except by accident.

Anonymous kh123 January 16, 2013 3:16 PM  

"These are off-balance-sheet devices... allowed banks to lever up AAA-rated paper at a ratio of 70 to 1."

Every time I read something on this subject, there's always that double-take moment where a seemingly innocuous line reads like it's straight out of Monty Python.

Anonymous kh123 January 16, 2013 3:53 PM  

...Continuing with "it's just a fleshwound" bit:

"As J.M. Keynes said, “A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.”"

The only question is whether Keynes meant this as accusation or viable option.

Anonymous David Of One January 16, 2013 4:02 PM  

According to Krugman ... the government needs to spend more to revive the economy.

http://cnsnews.com/news/article/krugman-more-government-spending-would-revive-economy-two-years

Anonymous Axe Head January 16, 2013 5:48 PM  

"According to Krugman ... the government needs to spend more to revive the economy."

Must be good for the Jews and bad for Whites then.

Anonymous Jason January 16, 2013 8:29 PM  

Why do you say he's pseduo-Spengler, Vox? He seems to me to be pretty thoughtful about many matters, even if you disagree with him.

By the way, I never thanked you for suggesting Bradbury's Dandelion Wine. It went down better the second time for me, reading it as an adult. I was surprised by how bourgeois it was, how much family plays a role in it (see for instance the section about The Happiness Machine). It made me feel nostalgic for a certain age in American history that has vanished, although I think and hope that it might appear again.

Anonymous David Of One January 16, 2013 9:02 PM  

Krugman makes some seemingly important distinctions during his recent interview (from the cited article) ...

“That's right, and that's not a number plucked out of thin air,” Krugman said. “That's a guess at how long it would take to get a serious spending program going,..."

So what is a "guess"?

The Oxford Dictionary:

Definition of guess

verb
estimate or conclude (something) without sufficient information to be sure of being correct

noun
an estimate or conclusion formed by guessing


It would appeart that "thin air" has a lot more substance than Krugman or his statements.

Now, as to what a "serious spending program" might mean ...

Anonymous Josh January 16, 2013 9:17 PM  

Why do you say he's pseduo-Spengler, Vox? He seems to me to be pretty thoughtful about many matters, even if you disagree with him.

He's not Oswald Spengler (the original Spengler), he's a guy who used the pseudonym Spengler.

Anonymous cherub's revenge January 16, 2013 11:24 PM  

He seems to me to be pretty thoughtful about many matters, even if you disagree with him.

Certainly not very thoughtful when you cross him on his advocating open borders for the US and Europe and tight, militarized borders for a certain Eastern Levantine country.

"Anti-Semite", "irrational Jew hatred" yada yada.

Anonymous p-dawg January 16, 2013 11:26 PM  

When a Chinese national is calling your country corrupt, that's serious.

Anonymous Jason January 17, 2013 12:23 AM  

Cherub's revenge, I think Spengler (yes, I know it's not Oswald, Josh) tends to support the immigration of high-IQ foreigners who will help promote tech entrepeneurship within the U.S. (thus create jobs and boost the economy), although admittedly he is more sanguine about Hispanic immigration than he perhaps should be. Still, he does argue that its important for the U.S. to have a sufficient level of immigration in order to have a sufficient base to provide for entitlements, a big problem in other Western nations (and Third world nations like Iran)that are undergoing population loss. Again, there may be flaws in Spengler's argument, but I do think it is a legitimate one. Israel, which has much higher rates of fecundity, doesn't have that problem.

Anonymous cherub's revenge January 17, 2013 7:42 PM  

So, Jason, if high IQ immigration is so good for a huge country as the US, it should be multiple times more effective in a small country such as Israel right?

I mean, there must be millions of Chinese and Indians that have higher IQs than the Jews in Israel, let's move them in there and have a controlled experiment and see how it works. White countries can shut down immigration both high and low IQ and be the control.

Sound good to you? How about it?

Because Goldman hate, hate, hated the idea when I ran it by him. I'm sure though he was just looking out for the Good Ole USA wanting us to have all the high IQ Brown hordes to ourselves. Yeah, that's it.

Anonymous Jason January 17, 2013 10:45 PM  

Cherub's revenge - What essay by Spengler are you referring to, and did you comment under the name of cherub's revenge? I'd be curious to read that exchange.

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