PODCAST-TRANSCRIPT-WEEKLY-UPDATE-2009-JUNE-14 (FRANCONOMICS.COM)
Goldman and JP Morgan Chase escape the authority of the Compensation Czar , Campaign Financing by the Banks is the cause of the current "Great Recession", Dow Jones is 37% up (from 6440) but 37% down from all-time highs, etc.Hello, welcome to the weekly economic podcast from Franconomics.com for the week ending June 14, 2009. I am Sam Mishra, your favorite economic podcaster, and let’s begin with the analysis of TARP (as in Troubled Assets Relief Program) repayments by Goldman Sachs and 9 other banks.
Have you all seen Twister? Nothing like narrating a storm from the location known as the eye of the storm, right? Well, nothing can beat this broadcast, which comes to you from the vicinity of New York City, and not the SFO Bay Area.Looks like nothing succeeds like lobbying from the inside, right? With its people in well-placed positions within the US Treasury, Goldman Sachs had no problems in getting rid of the government’s grip --- well they returned the $10 billion from TARP, but what about the $12.9 billion they took from AIG, they will never return that right? No wonder, the names of well oiled banking operators like Goldman and JP Morgan Chase are conspicuously missing from the list of seven financial institutions where Feinberg, the new compensation czar will control compensation. Actually, Feinberg, who previously managed the government's efforts to compensate the families of those killed in the Sept. 11 attacks, will have authority to influence pay at scores of companies. Amongst them are seven firms that have received large federal bailouts, including Citigroup, Bank of America, American International Group, General Motors, Chrysler as well as Chrysler Financial and GMAC, which provide loans to auto customers. The czarwill be able to determine salaries, bonuses and retirement packages for all executive officers and the 100 most highly paid employees at each company.
As the NYT reported, the government is giving up $1.8 billion in annual interest payments while leaving its support programs in place, even for banks that repay. That means that taxpayers are giving up part of their upside while continuing to be on the hook for losses. We the taxpayers don’t like it, do we? Specially when we are foreclosed and have to sleep in out cars, while the bankers in Goldman ensure that they will get their bonus in 2009 in generous proportions, right? Wrong. I refuse to let me tax dollars go towards funding the Goldman bonus, I don’t want to reward managers who mis-manage their business, drive their business operations bankrupt, and then pocket a term loan in billions from our tax dollars to keep the business going. Folks, if you are reckless with your personal finance and can’t pay mortgage, these banks foreclose your property, right? So, why are these Goldman executives not on the streets, looking for jobs? They are unfit to run their business, for the drove it bankrupt. Why is the administration bailing them out with a nice bonus? Is it because these rich bankers routinely fund the campaign finance of the congressmen, and the senators, and the presidential candidates? What we need is fundamental reform, and this should start with serious campaign finance reform. When Congress last debated regulation (or rather, de-regulation) of the financial industry in 1999, a study by the Center for Responsive Politics showed that members of Congress who supported the Gramm-Leach-Bliley Act received twice as much money from commercial banks, investment banks, and insurance companies as those who opposed the measure. The Gramm-Leach-Bliley Act was the product of many years of lobbying by the financial industry and allowed for the loosening of bank regulations that had been in place since the Great Depression.
On personal finance and home buying, we have been steady in our view for more than 2 years now that there are terrible times to buy that first dream home now. However, if you can’t control yourself any more, please look into something called the Neighborhood Stabilization Program, under which federal funds are available through state and local governments to certain income groups to buy foreclosed properties and thus stabilize neighborhoods. However, buying foreclosures is a can of worms – you need to know all underlying debts you will be responsible for which are attached to the property. Don’t let these banks fleece the gullible honest pay horse in you, for the federal government will not bail you out, if you go under. They will bail out the bank, for that is the honest and honorable system we live in…
Also, Dow Jones is up for the year, but at 8800, it is37% down from its all time high of 14143. Also, at 8800, it is 37% up from its 52 week low of 6440. Now, isn’t that interesting? If you bought at peak, you are losing 37% right now. If you bought at its recent, as in 52 week lows, you are making 37%. But long-term, it looks as if stocks have under-performed bonds. So, we will put our MBA hats on and bring more details on whether bonds are good and stocks are bad in a future podcast.
Tune in again for the next weekly podcast, and until then, stay well, take care of yourselves and your families…
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