The FBI is investigating Fannie Mae, Freddie Mack, Lehman and AIG. Why not Goldman Sachs and Merrill Lynch?
Paulson has a direct conflict of interest as Treasure Secretary. Paulson was CEO at Goldman Sachs when he came on as SOT two years ago.
If Paulson doesn’t have the decency to resign as SOT voluntarily, Congress must demand his resignation.
More Bush administration shenanigans.
Notational value appears to be a made-up number by those people who create derivatives. It bears no relation to fair market value, that is, what a willing buyer will pay for and a willing seller will sell for when neither is under no duress to complete the transaction.
There are over $1 quadrillion ($1000 trillion) notional value of over the counter derivatives sitting on computers worldwide. One type of OTC derivative is a collateralized debt obligation (CDO). While CDOs may be collateralized, the fail market value of the collateral may be much less than notational value.
A Merrill Lynch transaction at the end of July illustrates the shenanigans which is the OTC derivative and what should be fraudulent accounting practices. ML sold $30.6 billion notational value CDOs to an affiliate for $6.7 billion. As of June 30, ML carried the CDOs at $11.1 Billion, so there was a prior $19.7 billion writedown. The sale would thus produce an additional $4.4 billion loss.
Merrill Lynch financed 75 percent of the $6.7 billion sale and took back a non-recourse loan of a little over $5 billion secured only by the CDOs and got cash of $1.7. So it got $1.7 billion for the $30.6 billion notational value. The writedown on the books was to 22 percent of the 30.6 billion. However, ML only got $1.7 billion for sure so the true writedown is to 5.5 percent of the notational value.
I found the above information at www.elitetrader.com when I googled “notational value.” To get an idea of what we may be dealing with, look at the name of a CDO. Collaterized debt obligation. Collateraized by what? And whose obligation is it that is collaterized? Is there some entity out there that has the legal obligation to pay 100 percent of the notational value of a CDO? Or are these liabilities non-recourse. If so, then we have a giant $1.1 quadrillion Ponzi scheme.
Keep in mind that ML at one time was carrying these CDOs at $30.6 billion. There was more than just a liquidity problem with ML. There was a financial statement problem. And there is still a balance sheet problem because ML has some amount of liability exposure directly related to these alleged assets.
Even if there has been no formal regulation of derivatives, that does not mean that there aren’t plenty of people who may be guilty of criminal fraud. We’ve had the fox watching the henhouse at least since June of 2006 when Bush nominee Henry Paulson was confirmed as Treasury Secretary. Paulson was CEO of Goldman Sachs when he took on the job as SOT.
Obama said today or yesterday that he wants to retain Paulson as Treasury Secretary because he knows what’s going on. The question is, did he know what was going on two years ago?
Newt Gingrich unequivocally stated today in an NPR interview that Paulson was wrong on this $700 bailout of Wall Street. When asked if he felt betrayed by the Bush adminstration, Gingrich said no but that the administration was wrong in calling for it.
If the ML scenario above is representative of the relationship between notational and fair market value of all derivatives, then an implosion is inevitable. This monopoly money is being carried on books all across the planet. If there were a $700 trillion writedown, who takes the hit? Has there been as much notational liability created as notational asset value?
Dennis Kucinich introduced articles of impeachment against GW Bush in June of this year alleging that he created a massive propaganda campaign to sell the nation the Iraq war. Bush should be removed as president before his term is up because of his complete and total incompetence. This guy has been at the helm for almost eight years and has participated (by gross negligence) in taking apart this country’s financial system.
The Iraq war has played a part in the disintegration of the financial system. But to be so stupid as to allow a Ponzi scheme to develop in the name of free enterprise is unbelievable. And all the men and women in the military who have lost their lives or health because of the stupidity of one human being. And all the poor citizens of Iraq who have lost their lives or families and country because of the stupidity of one human being.
McCain is absolutely not the man for the job as president. He wants to continue the Iraq war until we win. The Iraq war is a Ponzi scheme of the Billie Sol Estes variety. BSE got loans on West Texas fertilizer tanks that did not exist. We are continuing to pursue the Iraq war on empty underlying assumptions. One of those assumptions is that if we don’t win the war, we will be fighting terrorists here in the USA. We might be doing that whether or not we continue the war. Another assumption is that we must have Mideast oil to continue our way of life and that the Iraq war is necessary to assure the continued flow of that oil to us. There is no guarantee that our way of life can continue no matter how much oil we import because our financial situation is so desperate.
Obama is right about keeping Paulson on as SOT. It’s wise to keep your enemy close so you know what he or she is doing.