Time to Fire Ken Lewis of Bank of America
Step right up to the bar here in Bailout Nation, 2009 version. Open 24 hours, we never close. No bailout too big, no investment/money pit too dumb. Yes folks, we can handle your bad assets, recapitalize your bank, no muss, no fuss. Yes, here in America, we cannot be bothered with things like plans and strategies and maximizing returns for taxpayers.That’s right, we avoid the planning, and pass the savings onto to you, the home viewer!
Really, how the hell did we ever win WWII?
~~~
So the horrific deal Citibank cut with Treasury was a blueprint, an example for the next foolish investment — and here it is: Bank America, a supposed good bank, that couldn’t wait to get their hands on Merrill Lynch, now a bad bank.
And now that we all see what a terrible decision that was by supposedly sophisticated private sector players, well, then rather than take the hit, BoA has their grubby hands out begging for some taxpayer loot to paper over their idiotic decision-making. First they bought that giant manure pile CountryWide, and now they own another stinking pile of enzyme-free donkey-fazoo, Merrill Lynch.
I say, fuck ‘em. Why do I have to pay for their bad judgment?
Enough already! Fire Ken Lewis, he’s a bum. He’s made several horrific acquisitions, and needs to serve up his head on a platter for his god-awful lack of judgment. Toss out the entire Board of Directors, too, as they all suck. They’ve bankrupted the company, its time they all need to go.
Making matters even worse, this shitpile has been building up since last month. The WSJ reports:
The U.S. government has agreed to commit billions in additional aid to Bank of America Corp. to help the nation’s largest bank by assets close its acquisition of Merrill Lynch & Co., according to people familiar with the situation. Discussions over these funds began in mid-December when Bank of America approached the Treasury Department. The bank, already the recipient of $25 billion in committed federal rescue funds, said that it was unlikely to complete its purchase of the ailing Wall Street securities firm because of Merrill’s larger-than-expected losses in the fourth quarter, according to a person familiar with the talks.
Hey Lewis, you bought it, its yours, leave us out of your mess!
Don’t look now, but here comes the year’s most overused phrase: systemic risk:
“Treasury, concerned the deal’s failure could affect the stability of U.S. financial markets, agreed to work with the Charlotte, N.C., lender on the “formulation of a plan” that includes new capital from the $700 billion Troubled Asset Relief Program, according to the person familiar with the talks. The terms are still being finalized, this person said. Details are expected to be announced with Bank of America’s fourth-quarter earnings, due out Jan. 20.
Any possible arrangement might protect Bank of America from losses on Merrill’s bad assets. There would be a cap on the amount of losses the bank would have to absorb, with the federal government being on the hook for the remainder, said one person familiar with the matter.”
What a joke this has become. Are we supposed to be somehow comforted that the Federal Reserve and the Federal Deposit Insurance Corp., alongside the Treasury, are involved in the negotiations? They do not seem to have clue.
Time for an orderly liquidation: Start with Citi, move on to BofA, fire the execs, toss the Board, spin out the assets to competent managers who now how to manage risk and avoid excess leverage.
ENOUGH ALREADY ~!
>
Sources:
Bank of America to Get Billions in U.S. Aid
Deal Is Said to Be Reached on Fresh Bailout Cash; Lender Told Government It Needed Funds to Absorb Ailing Merrill Lynch
DAN FITZPATRICK, DAMIAN PALETTA and SUSANNE CRAIG
WSJ, JANUARY 15, 2009
http://online.wsj.com/article/SB123197132814683053.html
January 14th, 2009 at 9:22 pm
spin out the assets^ to competent managers who now how to manage risk and avoid excess leverage.
… in pieces, geographic or otherwise, that are small enough to fail…
Thought that worth including.
January 14th, 2009 at 9:25 pm
not only did they buy, wasn’t it at a huge premium to where it was trading at the time.
This goes further back for BAC though, I live in DE and am very well aware of what was going on at MBNA before they bought that too.
I guess his strategy is to buy bad companies and pay too much for them. One might call that the opposite of Buffett’s strategy.
Ken Lewis is a moron, remember last year when he kept saying the dividend was safe. total bullshit.
January 14th, 2009 at 9:26 pm
This to me is smelling like a SATYAM scam. Fill the balance sheet with a bunch of dookie to cover up the dookie you already had. Then beg with your tail between your legs asking for a hand out.
January 14th, 2009 at 9:28 pm
also, it looks like a few at Merrill already know how bad it is at BAC, they bought it for the brokerage right, then the head of brokerage bounces. There were at least some smart people at Merrill, David R. is there after all.
January 14th, 2009 at 9:33 pm
The upper execs need to be body tattooed ‘under new management; (i.e the Fed)
http://www.flickr.com/photos/35468141938@N01/202957931
January 14th, 2009 at 9:37 pm
You’re reading my mind tonight, Barry. Charlie’s due to come on in the coming days in defense of his buddy Lewis.
But another sacred cow (“corporate geniuses”) getting prepped for slaughter. That’s the real silver lining in this mess – all the myths are being shattered to pieces. Will we learn anything from these lessons and respond though?
January 14th, 2009 at 9:41 pm
amen….Barry, you’re the man
they should sell every bank branch across the country to a mom and pop franchisee…see how ordinary folks whose asses are on the line make loans and run a bank
January 14th, 2009 at 9:42 pm
When I first heard about the idea of a Tarp that would buy up a bunch of crap, the marco-economist in me thought: “Yes, now you’re on the right path…ring fence the shit…segregate bad assets from good assets…”
Think about it…if you wanted to really “fix” the banking system…. you would, as Barry suggests here, LIQUIDATE the banks that couldn’t make it-Wipeout shareholders, force Bill Gross and other bondholders to finally take a hit…Toss the toxic shit into the Tarp at the going rate…and then sell the Good Stuff….
I hear there’s “Trillions on the sidelines”….Those TRILLIONS will remain on the sidelines until the Government gets out of the way…it will stay on the sideline UNTIL it knows what it’s buying and it’s a good price.
Agree with the sentiment…Ken Lewis and Co. were trying to “pick bottoms”…they were wrong…they should feel the pain….
- AT
January 14th, 2009 at 9:44 pm
Amen, brother. I’d rather live on pine bark than give these ass-wipes another dollar of my children’s future earnings.
January 14th, 2009 at 9:49 pm
We are sitting on 359% debt per GDP…Barry, if you get this outraged everytime something breaks until this is finally unwound, you’ll kill yourself.
Do what I do…stay short and you are basically getting paid to wait…and sleeping like a baby.
January 14th, 2009 at 9:52 pm
What I posted earlier is more appropriate here…as Mannwich says, Dimon has his hand out too:
http://news.yahoo.com/s/nm/20090115/bs_nm/us_jpmorgan_1
January 14th, 2009 at 10:02 pm
Steve Barry,
Im’ just curious and would like to know your answer, how come you don’t use margin to short instead of the QID, margin rates are way down from where they were a few months ago?
January 14th, 2009 at 10:05 pm
@Steve Barry.
Indeed. Dimon is going to find himself “in a corner.” He’s looking around and seeing his Bro’s getting a ton of cash and their stocks, while shitty, are not going to ZERO. At some point he’s going to want to do a “Me Too” dance outside of the Treasury Building.
One of the interesting and terrible aspects of the Airline industry has been the regularity of bankruptcies and reorganizations….An Airline is a piece of shit….It goes bankrupt….Some crazy bank decides to take their debt “again”…The New Airline emerges with a cleaner balance sheet….and then ruins it for everyone else. Repeat Cycle…again and again and again.
In this case, unfortunately for the Decent Banks, they’re going to face competition from U.S. subsidized/Welfare Banks….not Healthy at all.
January 14th, 2009 at 10:07 pm
OMG when will it all end Barry, WHEN? It’s like a nightmare that never ends and when you wake you realize you’re still in the nightmare! The banks should be let to fail already- a QUICK DEATH! I don’t want to go down the buzz saw feet first, lets put an end to it.
January 14th, 2009 at 10:08 pm
@ Andy Tabbo:
According to Vice Chairman Kohn, I don’t think we want to stigmatize anyone as a “Welfare Bank.”
They might not come to the window to borrow more money.
January 14th, 2009 at 10:09 pm
Ben22:
For one, I can’t margin and go short in an IRA…that is where I began my QID investment. I also don’t worry about those nasty ST cap gains distributions in my IRA. I do have some QID outside my IRA…I guess I could short on margin, but QID has performed reasonably well…72% return with distribution last year, vs. 42% loss for QQQQ in the most volatile market we will ever see. I am aware that leveraged ETFs match DAILY, not long term trends, but that could actually work in my favor too. I keep a close eye on it so I’ll be fine.
January 14th, 2009 at 10:13 pm
A “stinking pile of enzyme-free donkey-fazoo”.
That’s one thing that I like about this website.
All of the wonderful technical terms that I never knew about.
January 14th, 2009 at 10:19 pm
@ Steve Barry:
Do you consider puts on the S&P too expensive?
January 14th, 2009 at 10:24 pm
hey Barry – I agree with you, but there’s an old saying: “don’t hate the playa – hate the game!”
ken lewis is a monkey’s ass – but blame Hank Paulson for giving him the money!
January 14th, 2009 at 10:26 pm
there is just no end to it…. Inflate or die indeed.
January 14th, 2009 at 10:31 pm
Moss:
The VIX, implied volatility, as high as it is will make puts marginally more expensive than in the past, but VIX could go right back to 90… if you need to hedge, I say do so immediately…support is gone.
As for QID…I”ll steal a line from the pumptards on CNBC…I am getting paid to wait for the debt bubble to unwind (and it hasn’t even started yet…at fresh new highs)…I bought a lottery ticket on a depression that is about to payoff.
January 14th, 2009 at 10:33 pm
Steve,
Thanks, makes perfect sense since sounds like most of it is IRA.
I’d also agree, 72% aint too shabby! How many people need to make that to break even after last year?
January 14th, 2009 at 10:37 pm
BTW, ouside of QID, I own mostly FDIC Insured CDs…laddered.
Nothing gave me a bigger thrill than recently locking in a 5% CD, only to see the offered rate drop to 4% 2 weeks later. I want to crush the banks.
January 14th, 2009 at 10:39 pm
@SB: You’re not alone in that thought. Good night all. Time to hibernate for the evening.
January 14th, 2009 at 10:42 pm
Moss in re: Options Volatility…..
I believe we are now in the beginning stages of Major Fifth Wave….one of the aspects of a Fifth Wave is that it tends to be “slower moving” than any other leg down. Fifth Waves tend to be more of an “acceptance” phase, similar to the Five Stages of Grief.
I don’t expect Volatility to get ANYWHERE NEAR what we saw in Oct-Nov. I can see this final leg down to 600-625 as nasty whipsaw down….a begrudging grind lower as investors begin to “accept” the idea that we’re facing an economic Depression….probably not GP 2.0, but a Depression all the same.
If you believe this idea…Selling Calls as an options strategy would be better than buying Puts.
January 14th, 2009 at 10:52 pm
I was at my Chase branch earlier…within 2 blocks, there is a B of A, a WaMu and a Citibank…Way too many bank branches…WaMu is now Chase, so it is as good as gone…oops, another commercial RE vacancy and 15 layoffs
January 14th, 2009 at 10:58 pm
Yes, way too many banks.
January 14th, 2009 at 11:16 pm
I’m with Steve Barry, I have been patiently sitting on the QID since October. I bought SKF in the fall of ‘07 and sat on that for a good long while finally selling at $81- well before it hit it’s stride. Here’s looking at you from the IRA, but not till I see the whites of their eyes Steve!
January 14th, 2009 at 11:20 pm
Remember on your fast money segement you said… Perform Triage? This is what triage looks like.
I think the regulators are encouraging the strong banks to pick up the weak banks. The Fed will back their risky plays of consolidation so that the zombie bank issue is over sooner rather than later. The financial industry is clearly going to shrink dramamtically, the question is how long will it take and sit around being an issue. I think the government is trying to make it happen quickly. They were slow to recognize the issue of the credit bubble and once by the time they did it was too late. Now they have no choice but to have a few survivors get massive amounts of government funds and flush the junk out of the system.
January 14th, 2009 at 11:45 pm
The banks are on the precipice. Their fears that the Obama administration will not play ball according to the Paulson rules are real. Notice that these deals are being sought prior to next Tuesday morning. JPM moved up earnings beacuse of this desire to get more cashish from that POS Paulson, IMO. BAC, JPM and others will be begging for another hit before Tuesday. We are in big trouble. Better bonus everybody out at the bank or they will leave — where are they gonna go?
January 14th, 2009 at 11:50 pm
Why stop at Lewis?
January 14th, 2009 at 11:52 pm
Damn Right Barry, Fuck them. It is time for an organized citizenry to consider taking steps to administer harsh, physical beatings to these execs and the Fed actors that are flushing us all down the toilet. We are truly “the Forgotten Man”, the only entities that have no vote in the matter is the taxpayer.
We may need insurrection. I am so disappointed in our new President, who is just continuing this awful travesty. What was I hoping for.
We need revolution, a new cadre of Minutemen, a mega Boston tea party. We need murder in the streets, burning of the capitol. Beheading of the legislature.
January 15th, 2009 at 12:00 am
awilenksy – amen
If you ask me, we are setting ourselves up for some old fashion class warfare. It’s the bankers, corrupt politicians and well connected rich folks versus everyone else. Make no mistake about it, that is what this first group of people are engaging in. The regular people have not started to fight back yet but their patience is being tried. If unemployment breaks 10% there will be a lot of angry people with free time on their hands.
January 15th, 2009 at 12:15 am
We need to quit talking about moral hazard as if its a future problem. BAC is trying to extort taxpayers for money to fund strategic acqusitions. So, banks that are managing well will be punished for executing a good strategy and earning money but not being large enough to get enough money from the taxpayers to buy other companies.
I don’t feel sorry for the banks, but it seems like we are picking the wrong winners.
January 15th, 2009 at 12:30 am
Steve Barry — what do you think of the possibility that our debt bubble might not be going to pop for quite some time — maybe a decade or so?
I would have expected, given the mayhem and crumbling that we have seen thus far in the economy, that the debt-to-gdp ratio would certainly have begun to decline by NOW, if it were going to correct at all.
And when it DOES begin to decline, it’s almost certainly not going to do so in any kind of slow, measured manner. The very nature of bubble-popping dictates that everyone supplying the “pressure” that keeps a bubble inflated heads for the exits in a hurry. There are no signs of this so far, and I’m skeptical that even the Fed+Treasury debt creation combined with the Incredible Shrinking GDP would be sufficient to hold off the kind of debt collapse that would bring that ratio back into the realm of reality.
For that to happen, we would have to see (IMHO) a near-total collapse of the bond markets, both corporate and Treasury bonds (which would also imply a collapse in the US dollar, which coincidentally happens to be what Ben is now working diligently towards, so I’m not ruling anything out). But it doesn’t appear that this is likely at this time.
So I’m wondering if the current mayhem is only the warm-up for the Main Event, maybe a decade or so away.
None of this has much impact on your QID strategy, only on the magnitude of the rewards.
And for those eager to crank up the leverage (and risk), I would point to the use of calls on QID. But caveat emptor, as the risks of being wrong on the timing will put the Big Hurt on you in a major way. Playing with financial nitro is not for the faint of heart. You can’t do those inside an IRA either, but they’re a lot cheaper than buying QID on margin, and you get a lot more leverage, depending on the strike prices selected.
January 15th, 2009 at 12:33 am
Full disclosure — I AM using QID calls, as well as purchases of QID.
So if the rest of you want to bid up my calls/shares, Thank You Very Much.
January 15th, 2009 at 12:50 am
constantnormal @ 12:33
Why is it better to buy calls on QID than puts on QQQQ…? Liquidity on QQQQ puts is higher, and there’s plenty of leverage to be had there.
January 15th, 2009 at 12:55 am
constantnormal @ 12:30
Yes, I think they’ll do whatever they can to avoid a sudden popping of the bubble. They’ll pile on as much government debt as it takes, and devalue the currency as much as it takes.
The long run price will be much higher… but at least they’ll delay Armageddon.
January 15th, 2009 at 1:00 am
If Geitner gets confirmed as Treasury secretary, the hogs will continue feeding at the trough, i.e., the Ken Lewis types will continue to get carte blanche.
But if by some chance Obama decides to pull the nomination over this petty nanny and tax issue, the next guy (or gal) may not want to throw endless amounts of money at the banks.
January 15th, 2009 at 1:08 am
As far as I know, buying puts and calls in an IRA is no problem. Been doing it for years. Defined risk products are fine, what you can’t do is write options. That being said, the government interference risk factor remains nearly impossible to quantify. That makes option plays on leveraged ETFs a bad idea, in my book. I like SRS, but for all I know Bernanke will announce tomorrow that the govt is going to buy up all commercial real estate. Of course they can’t do it, but not everybody knows that.
As for the credit bubble, the percentage figure will almost certainly spike further upward – just like it did in the thirties – as GDP declines. But that won’t last long.
Credit has peaked. That’s why it can’t last another decade. Rising unemployment, falling asset prices, changing sentiment, these are the tell. To name only a few.
Have a look at the graphic in this article from Minayanville’s Mr. Practical:
http://www.minyanville.com/articles/GDP-Fed-Credit-deflation-inflation-crisis/index/a/17847
January 15th, 2009 at 1:31 am
said it here last year, but i like it, so i’ll keep repeating it.
3 worst trades of all time:
3) BAC buys Countrywide
2) BAC buys Merrill
1) US taxpayer buys BAC
enjoy the leg down.
January 15th, 2009 at 1:45 am
Greeeeeeeeeeeeen Acres is the place to be….
We shoooo know howda hooooood wink’em down here in Nawth Carolyena don’t we y’all????
Yee Haw!!!
January 15th, 2009 at 1:47 am
Andy by the way, back to the 60 minutes issue of the other day.. that was sure some deeeeeep investigative reporting 60 minutes did on BofA some weeks back wasn’t?
That deeeeeeeeeeep investigative reporting ace Lesley Stahl really got to the bottom of that story didn’ she?
January 15th, 2009 at 2:29 am
Awilensky @ 11:52 & OnlineBrokerReview@ 12:00
I agree with your posts but wonder what, if anything the ordinary person can do now, to prevent/reorient the scenario that is unfolding. If we all just sit by, passively watching & commenting, adjusting our short positions while we wait, the Fed & government bailouts will continue to tax us & our future generations to benefit the other few.
The “Change Now” that so many hoped for, appears, even before the inauguration to be “More of the Same, & Maybe Worse”. I and many readers of this blog, Naked Capitalism and Mish are fed up with what is happening. Our representatives in Washington have heard our voices, tabulated our opposition calls and faxes & then proceed to act against us and our best interests. They know what we and the majority of the American people object to yet they continue to ignore us! They act against us. Our voices must be honored NOW.
January 15th, 2009 at 3:41 am
The big firing is happening Monday, later Bush. …waves.
January 15th, 2009 at 3:50 am
OK, but how are you going to practically IMPLEMENT this and maintain what seems to be your libertarian tendencies? Who but the Federal Government could force these “too big to fail and too big to succeed” banks to split themselves up????? Perhaps it could be done with breathing new life into old, disused aspects of anti-trust provisions? But merely getting angry (I share your rage) and jawboning won’t do what desperately needs to be done or these monstrosities will only be crying “Systemic risk” again in the future and taxpayer provided socialism of risk and freedom to privatize gain will return.
January 15th, 2009 at 5:09 am
“Really, how the hell did we ever win WWII?”
The allies had more cannon-fodder and more worker ants than the axis powers. That simple – war is attrition.
January 15th, 2009 at 6:01 am
Scepticus,
I, too continue to wonder the same thing.
I can just see the US debating the cause, responsibility, guilty parties and immediate action needed as bombs go off around us! Kind of like what we are doing right now!
The global complexity of the world is devouring itself. Throw in dashes of moral and financial ineptitude and right here/right now is where you will find yourself!
The computational power of the PC increased faster than intelligence of its users. So now, we sit and wait for the ultimate outcome of our foolishness.
January 15th, 2009 at 6:06 am
On the Japanese front it was the Atomic Bomb. On the western front it was the sacrifice of many lives more than the germans had in play. We were hoodwinked by Churchill and FDR who rallied a nation comprised of a gritty people, not numbed by constant amusement.
We were a more serious people back then, but like all things human the cost of winning has put us in a precarious position with the invention of atomic power, a threat of oblivion now to the United States
as well as the rest of the world.
The Law of Unintended Consequences has yet to play out.
January 15th, 2009 at 6:16 am
@constant:
I expect debt to GDP to soar now…
1) GDP, the denpminator is going to drop
2) Government is now taking on the current bad debts and slathering on more with TARPs, etc and fiscal stimulus coming
3) Lost tax revenue from depression will increase gov’t deficits
The only thing that can reverse this is paying down the debt (not likely) or defaulting on much of it (sadly inevitable). It could happen like ripping off a band-aid, but we would be living in caves….or they can drag it ot 25 years, like Japan. They chose, and would always chose Japan.
January 15th, 2009 at 6:18 am
I have a brokerage account at Merrill which mainly consists of money market funds, some FXP and IAU. If BAC went belly up (which I don’t think would happen), would I be at any risk of losing any portion of funds in my Money Market accounts?
Also, if you were looking to move assets to an on-line brokerage, who would be your top three?
TIA
January 15th, 2009 at 6:44 am
OK, so Paulson is funding CITI as it sells it’s brokerage unit while he funds BOA as it buys Merrill. Lewis blackmails Paulson who cuts an 11th hour deal in secret using a TARP slush fund – which is like a bottomless pot of porridge. So much for transparency & accountability.
Two minor questions, how are guarantees – like the $300B guarantees to CITI valued against TARP? Zero or almost zero since it’s like a bazooka in his pocket, he won’t have to use it?
And Bernanke’s purchase of $20B of toxic assets from AIG for 50% of face value, how was that price determined, negotiation or were there other interested buyers? Just wondering how the Fed paid 50% when others were buying similar assets for 8%. A is the difference a gift from BB to AIG?
January 15th, 2009 at 6:51 am
When does Wells spring their surprise on the taxpayers? They have all those worthless second mortgages and HELOCs and Wachovia has all those Golden West Pick-a-pays. Wells is taking a chance not loading up their stagecoach with TARP bucks now since the Obama gang looks like it might dispense some tough love with bankers bonuses and dividends going forward.
I wonder how Bloomberg is doing with their Freedom of Information lawsuit against BB & Co, who feels compliance with the law is not in the best interests of the public. Does he realize that he is not the Sun King and this is still a democracy? (Well, we were)
January 15th, 2009 at 7:48 am
Yup, the continuing aftermath of the “Plan”. Anyone with even a casual knowledge of financial history could predict this ongoing financial collapse as trillions are further wasted in vain attempts to reflate the debt bubble.
Sillier still is the commonly held thought that there still is a blueprint for interventions done the “right” way. When the market finally does bottom the last cockeyed plan will take credit like the rooster bringing up the sun.
January 15th, 2009 at 8:00 am
If we were a real democracy, we would likely have a dozen political parties, and we would likely be in a different kind of mess right now, whether worse or not can never be known.
However, we are a democratic REPUBLIC and as such our representatives are theoretically supposed to to our will. But our will is corrupt, we want something for nothing, entitlements. Event those at the to of the food change with billions in ill-gotten bribes, seek even more for failing.
The system has contracted a fatal virus. And there is no cure.
Like mother earth, which has never been in the peril that the Greens say it is, (when pushed to the breaking point the Earth will just kick us off the planet) our system will die it’s own death in its own good time and start all over again. All that remains to be known is the timing.
January 15th, 2009 at 8:19 am
@Patrick Neid.
Well said. I think we see the continued rise of the science of Behavorial Economics/Finance. The Friedmanites and Keynsians will have some splainin’ to do after all this is said and done. Human Beings don’t operate “rationally” sometimes. “Herding” behavior and the emotions of “greed” and “fear” are more powerful than the “rational decision making” predicted by the Real Economists.
January 15th, 2009 at 8:27 am
You said it Barry. F*** ‘em is exactly what I said out loud when I heard about this on the radio. I’m sure Lewis knew that he would get bailed out when he bought CountryWide and Merrill. After all, Bank of America is too big to fail!
January 15th, 2009 at 8:31 am
B.R.: Are you channeling Jimmy Rogers?
You’re going to have plenty of material for Bail Out Nation’s sequel and it will be on fire. 2009 is the year that will teach Bernanke and Paulson not to believe in the power of positive thinking.
January 15th, 2009 at 8:32 am
I agree with Zenster. Obama is starting to look like more of the same. I can’t believe he is defending this Sec of Treasury pick. The guy is a criminal and should be punished.
Money and power can buy a lot of JUSTICE???
January 15th, 2009 at 8:35 am
The best financial blog!
January 15th, 2009 at 8:43 am
For those talking about FXP, Cramer had a short rant on it the other day. Yeah, I know, Cramer….but he’s got the basics right. That ticker is a fraud.
http://www.cnbc.com/id/15840232?play=1&video=996981859&__source=yahoo%7Cheadline%7Cquote%7Cvideo%7C&par=yahoo
January 15th, 2009 at 8:51 am
BR said
Why do I have to pay for their bad judgment?
reply:
—————-
My, My My! Aren’t you Mr Pollyanna. Dreamer. Fantasy Man. How’s the air up there in the clouds? A frown is just an upside down smile. Nobody likes a complainer.
Nothing is going to happen. This is America. The only people who are held accountable are those who had little do with the problem of the moment. Popularity matters. When you hold a responsible person accountable, it just makes everyone else look bad for letting it happen in the first place. Ranks close. People change the topic of the conversation. Bullies chase everyone away.
In this case we’re dealing with business leaders. It’s not their fault and firing them won’ t undo the bad things. It’s almost their right to be where they are … In fact it’s their duty to stand firm and show their resolve and support. This is American leadership!
Behind closed doors, they’re just telling you to f*ck off and nobody is taking you seriously. In fact, a lot of the people you feel most strongly about are just laughing at you right now. Nobody can touch them and they know it. Responsibility has a different meaning when it is applied to princes and princesses. “Boo Hoo Hoo”,many are undoubtedly saying, sarcastically.
Nobody is going to do anything, at least to the people you feel so strongly about . Get that through your head now. Things just aren’t done that way in American business. The best you will get is a sacrificial scapegoat who will only be a weak schmuck that nobody likes.
January 15th, 2009 at 9:07 am
BR said
Why do I have to pay for their bad judgment?
reply:
—————-
To be technical, the Business Judgment Rule says so. That’s what. As long as there were no laws broken or tortious violations of fiduciary responsibility, they can pretty much do whatever they want as long as they have a good story. The amount of energy necessary to overcome the inertia is overwhelming. Nobody is going to waste it on them and they know it. All these leaders have to do is ignore you. You, buddy, are just harmless noise. And so is everybody else who doesn’t approve of them.
January 15th, 2009 at 9:11 am
Seriously, who did NOT see this coming, I could tell they were trying to become TBTF from the word go. Which probably only means they didn’t care from their Due Diligence what kind of toxic sludge was off book at Merrill, theirs is probably just as bad and we just haven’t gotten full disclosure yet.
I just laugh at this country anymore, it reminds me of the old Steibeck book “Lifeboat”; when the SHTF, you start to see the character of people who only care for themselves, with no thought as to accountability or responsibility. Screw women and children first, it’s every man for himself.
January 15th, 2009 at 9:27 am
Lefty:
If the S and P falls to this level, can I get my burger back??
http://www.iii.co.uk/news/?type=afxnews&articleid=7117398&action=article
Depression ahead, prepare for stock rout-SocGen
January 15th, 2009 at 9:43 am
Barry – it’s a little early for Post of the Year candidates, but I’ll submit this one right now. Excellent work. Keep it up!
January 15th, 2009 at 9:49 am
David Faber just dressed down Bank Of America….
Freaking great commentary….
Was it really the Merrill Lynch assets?
Or is it something else?
Great reporting/commentary.
January 15th, 2009 at 9:49 am
Since we’re using excretement to describe banks, specifically, BOA, how about this: Merrill Lynch is the soiled toilet paper sitting atop a steaming pile of Countrywide shit that BOA bought to disguise its own pile of excretement sitting underneath.
Wachovia is the soiled toilet paper that Wells wiped its ass with to hide its steaming pile of shit loans that it has on its books. CFC and Wells were fierce competitors for the crap loans they were both issuing back in the boom. How could it not have a steaming pile of shit loans like CFC?
But what the fuck is “enzyme-free” shit?
January 15th, 2009 at 9:49 am
I’m NOT comparing y0u to Larry K, B, just noting that both of you are blowing major gaskets as this whole stink heap ages. (Larry wants to waterboard Madoff; maybe Bernie made off with some of Larry’s pile, who knows.) Anger seems to be growing; probably a good thing. Keep on rockin’, Barry.
January 15th, 2009 at 9:54 am
@BG “The global complexity of the world is devouring itself. Throw in dashes of moral and financial ineptitude and right here/right now is where you will find yourself! The computational power of the PC increased faster than intelligence of its users. So now, we sit and wait for the ultimate outcome of our foolishness.”
Very well put. However there is a great slowness coming. We’ve all been running in the rat race for too many centuries now and we’ve finally outpaced ourselves. This is why population growth is falling off – we’ve no time for it any more. See the link below for a simple explaination of the fundamentals. Even this nice little document only scratches the surface of the new era on the other side of this depression.
http://www.edstrohbehn.com/db1/00001/edstrohbehn.com/_download/NoteonDemographicsandGDP2008-07-04.doc
The author concludes:
“Growth has been the American birthright. This founding truth of the American dream is about to be challenged, as annual growth will be reduced, on average, by two percentage points over the next decade before it rebounds partially. This numerically-small slowdown has the potential to effect dramatic changes, so the nation’s preparation for and response to this change will define who we are for many years. Any response will require the concerted efforts of individuals, families, churches, institutions, corporations and government.”
January 15th, 2009 at 9:59 am
@jdamon33: I’m pretty happy with Schwab. They “seem” (the key word being “seem”) to be doing just fine.
January 15th, 2009 at 10:26 am
“Growth has been the American birthright. This founding truth of the American dream is about to be challenged, as annual growth will be reduced, on average, by two percentage points over the next decade before it rebounds partially.”
We are about to find out that growth is no more an American birthright than death and destruction was preordained for all the cultures we annihilated on the way to our “manifest destiny”. Yet our evaluation of every single economic metric–housing, automobiles, consumer goods, etc.–everything– is predicated on the notion that growth is good, contraction, or even just stasis, is bad. It is because we are so religiously devoted to growth that this whole house of cards came tumbling down. When real growth would not obtain, we juiced the money and credit to create the illusion of growth, and we continue to try to re-ignite growth with the same lame tools, but ultimately, money and credit expansion can only create an illusion of growth, not the real thing.
Demography is destiny, and the population, ex-immigration, is not growing. Immigration is collapsing now, as well. The only way to re-visit the growth of our past is to try to expand the empire, but there are no sparsely-settled frontiers to tame.
My prediction: Major, as in WWIII, war within the decade.
January 15th, 2009 at 10:29 am
Right on, Curmudgeon. Smoke and mirrors (the three card monty, if you will) became the tour de force of the U.S. We haven’t even begun to feel the ramifications of this yet but we will in the coming year(S) (plural).
Economic instability usually helps lead to wars (and big ones) and I think that’s the greatest danger we’re facing here.
January 15th, 2009 at 10:31 am
That SocGen piece doesn’t pull any punches…
January 15th, 2009 at 10:45 am
He’s a bum, but he knows the right people; and in modern America, that trumps everything.
Short term pain for long term gain… pass it on.
January 15th, 2009 at 11:15 am
Well if after WW II the battle was to win the world through open markets and democratic principles, we have lost. I’m not the only one, it seems, calling for heads. But that doesn’t matter The shear burden of all the fake money covering bad debt on top of a non-producing economy is bound to smother our economic system, likely to death.
January 15th, 2009 at 11:22 am
Ever since Bear Stearns it has begun to look as though the US government has taken up the job of making corporate takeovers a risk free operation. After Bear there was Citi where the US government ‘guaranteed’ ~350 Billion of the ~370billion assets being acquired. Then came the Cerberus bailouts, now this. Obviously, everyone knows the only way for the business world to succeed, (actually the huge financial conglomerate business world) is if every move they make is gauranteed against negative consequences by the taxpayer. As our loyalty to the new Corporatocracy must be demonstrated lest (or even if) our jobs and homes be taken, it is our duty to support this nascent new world order, with complete and total fealty. The leglislative body should begin studying ways to dissolve itself within the next year, unless BofA has some use further need of it, that is. Also I think it’s time we made the President’s salary paid by a direct tax on financial corporations, and his title changed to CBO — Chief Bailout Officer.
January 15th, 2009 at 11:28 am
Really, how the hell did we ever win WWII?
We didn’t, the Russians did. 80% of German casualties were on the Eastern front. We played a big part as did the Brits but the Russians did most of the heavy lifting.
January 15th, 2009 at 11:37 am
Boomer Says:
January 14th, 2009 at 11:20 pm
Remember on your fast money segement you said… Perform Triage? This is what triage looks like.
Boomer you’re right of course. This is Triage. Huge bank consolidations where the strong swallow the weak backed by the govt. There’s no other way.
Reading some of this stuff, which definitely falls into the “cancel my subscription immediately” category makes me wonder what it would have been like if the internet had existed during the great depression. We’d all probably all be too busy out selling apples to have time to pontificate.
January 15th, 2009 at 11:57 am
The Curmudgeon @ 9:49
“But what the fuck is ‘enzyme-free’ shit?”
I was wondering the same thing. I think it would be difficult to get the enzymes out, and leave everything else.
January 15th, 2009 at 12:02 pm
Every morning, I wake up, naive in the idea that all the sh*t that would hit the fan has already done so.
Every evening, I go to bed realizing there’s more excrement.
January 15th, 2009 at 12:12 pm
Not sure if anyone has mentioned this, but don’t forget to claw back the bonuses while in B/K! No manager should be allowed to keep a performance based bonus (no matter how it’s calculated) if the steer the firm into bankruptcy. It doesn’t seem like the grandees of the Street have a clue how to manage an asset (let alone risks) so they should have all the wealth they extracted clawed back if the firms they supposedly managed all these years go bankrupt. The “pain” should not be felt by the shareholders & bondholders alone (and it certainly should never be felt by the taxpayer!)
Regards,
TDL
January 15th, 2009 at 12:16 pm
I put 13 years in with B of A Mortgage Wholesale division. B of A always prided itself on it’s mortgage portfolio and maintained that in wouldn’t play risky mortgage game. Executives maintained “The competition will go under”
What does Ken Lewis do? He goes and buys the the WORST Fu**ing performing portfolio on the market, Countrywide. And to add insult to injury, he pays a 50% premium for Merrill. WHAT A MORON!!!!
I’ve got to come out of retirement because of this jack ass.
January 15th, 2009 at 12:17 pm
@ DL (12:50a)
My rationale for choosing calls on QID vs puts on QQQQ is that QID is already 2X leveraged — it “should” be moving twice as much as QQQQ, ergo the options will be applying leverage to an already leveraged platform.
Nothing any sane person should be doing, but these are not exactly sane times. It is certainly not a low-risk strategy. But then I don’t try to time the bottom or top, getting in a bit early and out a bit early as well.
My biggest nightmare is that I’ll wake up on some Monday to find that Bernanke/Paulson/whomever have declared war on sellers, and made short-side ETFs, puts, and basically any form of short-selling illegal. Yeah, I know that’s not a rational possibility, but then these are not exactly rational times — anything can happen.
January 15th, 2009 at 12:28 pm
Bruce (@9:27) — that’s only a drop to 500, and while the implication is that they expect it to occur within CY2009, it could easily slide lower through 2010 (… 2011, 2012, …?). Just look at how the Nikkei performed after 1990 to see where this particular yellow brick road goes.
That seems like not such a dire prediction to me, and probably even includes a bit of inflationary oomph pushing up stock prices (or dollar destruction, take your pick of perspectives).
Frankly, given the policies being pursued by the folks in power (current and future), a mirroring of the Japanese experience seems inevitable. I plan to be on the short side for the rest of my life (58). There’s not even a hint of light as far down the tunnel as I can see.
January 15th, 2009 at 12:38 pm
Here’s a question. Why do campanies that large and that powerful hire guys like Dickie Fuld and Ken Lewis? It seems analogous to the SD Chargers drafting Ryan Leaf. When Cong. Waxman was waxing Dickie FUld, why didn’t he do the rest of us at least some favor and get the people who hired DF in front of some condign hostile fire?
To me, the Lewises and Fulds are symptomiatic of something worse. My question is who are these clown-show lackeys who look at potential CEOs and say. “Ken Lewis! He’s a screaming buy! We’d better give him stock options and keep him farting through silk just to get him on the team!”
January 15th, 2009 at 12:55 pm
constantnormal @ 12:17
My main point is just that the transaction volume on QQQQ puts is far greater than the volume on QID calls. So the bid/ask spreads on the QQQQ puts is going to be a lot lower.
I personally stay away from anything that is even moderately illiquid.
January 15th, 2009 at 1:11 pm
Charlie G. on CNBC right now defending Kenneth Lewis! Did I call this yesterday or what? What a shameless sychophantic hack he is. Pathetic.
January 15th, 2009 at 10:18 pm
@ConstantNormal: That nightmare is waay too tame. It sounds like something louisXVI would have said at the start of his financial crisis.
For a proper nightmare, think heads, then think about getting shorter, by about 1 head. Then when you wake up in the morning you can think about short selling again. Then when you go to sleep you can dream about getting shorter. Then you can wake up and repeat the process, eventually it will become self fulfilling.
January 16th, 2009 at 2:37 pm
@Steve Barry:
Why buy QID when you can short QLD? 8% better return on shorting the Ultra long. Even better results shorting the other ultra longs.
January 18th, 2009 at 12:01 am
@Mannwich: Couldn’t agree more. That was too embarrasing to watch. Complete incompetent loser.
As for Ken Lewis, if he had any integrity whatsoever he would resign immediately, however, no one at BAC expects that to happen. Ken’s arrogance makes Dick Fuld look like a humble man. His comment during the press conference “losses at Merrill Lynch were much higher than anyone expected” are laughable. Expected?? Every analyst on Wall Street had warned that this was a disastrous deal.
The only reason Ken has not been fired already is that there is no one in the bank to succeed him; he has forced out all of the most capable leaders (Hance, De Molina, Oken, Taylor, etc.). We can all only hope that the board is finally engaged and quickly trying to attract one (or all) of them to return and try to save BAC. As for Lewis, we can only hope that he is forced to pay back all of his excessive pay since becoming CEO, and ends up in jail. Others that need to be fired include: Steele Alphin (Lewis’s witless lapdog), Joe Price (the CFO who led the “due diligence on Countrywide and Merrill), Amy Brinkley (Chief Risk Officer….gimme a break)and Liam McGee (known for his mantra “just say yes to everyone” when he declared Home Equity as the top priority of the company just as the market had peaked).
February 4th, 2009 at 11:09 pm
Fuck Ken Lewis. Fuck Harry Reid. Fuck that CUNT Nancy Pelosi.