Monday, June 22, 2009



Everyone knows the dollar's got the blues.


Twenty-twenty hindsight is often bashed as "easy for you" to affix blame. But it also allows you to examine the flaws which lead to disaster. So this is about an hour's worth of simple research from which I draw some conclusions that you might want to consider as you think about what you can do to determine cause not blame.

  • Whose work is 1000 times worth more than yours? Here's some of the gurus that helped make the current financial crisis what it is today:

    1. Royal Bank of Scotland:£9.6m pay package for chief executive Stephen Hester.
    2. HSBC: Michael Geoghegan receives a basic salary of £1.1m and a long-term incentive of £7.5m.
    3. Lloyds: Eric Daniels is paid an annual £1m in basic salary, plus a maximum of 200 per cent of salary, or £2m, as a long-term incentive.
    4. Citigroup: Vikram Pandit was awarded a $10.8m compensation package for 2008.
    5. MasterCard: recruited Mr Banga a $4.2m signing-on fee and stock and options worth about $7m.
    6. Merrill Lynch: executive vice president Peter Kraus leaves with more than $10 million in compensation. (500 lose their jobs)
    7. Merrill Lynch: Peter Kraus received a payout of $25 million dollars for working at Merrill Lynch for just three months.
    8. Merrill Lynch: Just before being taken over by Bank of America $4 Billion was paid as bonuses to executives.
    9. Citi senior exeutive Ajay Banga leaves to join MasterCard as president and chief operating officer. He is in line to become chief executive of the credit card company next year. MasterCard is paying Ajay Banga a $4.2m signing-on fee and stock and options worth about $7m.


    I stopped looking at the large array of exhorbitant executive compensation packages. I'd seen enough to know.

  • How is money handled by those in positions of control?

    1. A former Morgan Stanley vice president (36 year old Richard Garaventa Jr.) has been charged with embezzling
      more than $2.5 million from the investment bank.

    2. A former China head of Morgan Stanley Real Estate is being investigated by the United States Securities
      and Exchange Commission for possible violations of the Foreign Corrupt Practices Act.
      The S.E.C. believes that Mr. Peterson violated the act to make several property deals for the bank in China.
    3. Bernard Madoff (one-time Nasdaq chairman) caused $50 billion in losses - perhaps the biggest scam in Wall Street history.
    4. Texas billionaire R. Allen Stanford (Stanford Financial Group) was jailed on charges his international banking empire was a Ponzi scheme built on lies, bluster and bribery. More than $1 billion from Stanford's alleged scheme remains unaccounted for, and if anyone has access to it, it's Stanford.



    I stopped looking at the financial criminals of this past year. I'd seen enough to know.


  • What's so bad about our financial systems?


    1. 40 banks failed/closed so far in 2009 in just three states Georgia, North Carolina and Kansas.
      In the past year (as of June 2009) 99 banks failed according to the FDIC.
      The FDIC expects roughly $70 billion in losses due to the failures of insured institutions over the next 5 years.
    2. $700 billion in bailout money to faltering financial institutions.
    3. AIG $100 billion bailout by the U.S. government
    4. For 30 years of incompetence by American auto companies leads to sales off more than 30%...and requests for $34 Billion bailout by the U.S.Government to forestall meltdown.
    5. CitiGroup 75,000 job cuts and $20 billion handout from the U.S. government and backing $300+ billion of its toxic assets to keep it from collapsing. Most of these were off-the-books Structured Investment Vehicles (SIVs).
    6. Fannie Mae and Freddie Mac balance sheets riddled with toxic assets and the equity holders were wiped out.
    7. Money market funds, auction-rate securities, the Reserve Fund, Collateralized Debt Obligations (CDOs) decimate Wall Street with loses in supposedly secure investments that were given the AAA seal of approval by the ratings agencies.
    8. Moody's, Standard & Poors and Fitch gave AAA top ratings for Collateralized Debt Obligations (CDOs), which are based in part on pools of subprime mortgages. These agencies get paid by the issuers of the CDOs to make a supposed objective rating.
    9. Hedge funds - see Bernie Madoff and his $50 Billion scam.


    10. Fed Chairman Alan Greenspan whose reputation was deemed infallible, erred terribly in the risks in the system from subprime mortgages
      and the bonds sold against them. So he admits.



    In spite of the troubled environment, market rates for bankers has changed, improving the pay for bankers partly driven by a need to hold on to good staff – and partly to offset the threat of bonus taxes or caps in the US – UBS, Merrill and Morgan Stanley have all increased their basic pay substantially. Citi now plans to do the same. According to insiders and rivals, market salary rates for managing directors have jumped from about $250,000 (€180,000) only a few months ago, to closer to $400,000. As well as base salary hikes, banks are once more offering guaranteed bonuses to staff approached with lucrative offers by rivals.

    Regulators will be concerned – increasing basic pay and guaranteeing bonuses run
    directly counter to their efforts to push banks towards pay that better reflects
    long-term performance.


    Conclusion(s)and Observvation(s):

    Despite the many areas, layers and levels of financial managers; despite
    the oversight and national financial regulation by the Federal Reserve, the
    Security and Exchange markets; the gurus of the market and the corporate might
    which has never been so massive - systemic failure!

    Many of the money managers, despite reputations and ratings, are corrupt,
    inept, dishonest, and seemingly beyond the reach of laws in any effective manner.

    Of all those affected, the average "have not" citizen will suffer the most and those inthe "have" positions will recover soonest.

    These are elements which have historically lead to revolution. And in many casesthese have resulted in autocratic rule emerging even where revolution was fomentedto ease the burden of the average person. Almost always the means by which autocrats achieve this - the promise of change and them at the hand of the government which first represses opposition (and thereafter ever increasing).


    Beware Greeks bearing gifts, orators promising a return of glory and the
    arrogance of the wealthy. Thus will the meek inherit the earth following
    armeggedon.


    What can you do?


    Nothing! Like 300 million citizens will do. You'll sit back and take it. You hope
    some charasmatic leader will come to the rescue. You'll seek your personal level of
    greed, safety and satisfaction by working around the system to simply survive.

    I ask you how could one percent of the population impoverish the ninety-nine percent without that segment's fear, apathy or willing acceptance?