Charlie Whacks Warren Buffett For Defending Moodys

On Fox:

• He believes that rating credit is a sleazy business and it makes a lot of money so he’s going to own it. Well, that takes Warren Buffett down three notches in my book. - Charlie Gasparino

Here's the clip

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Citigroup And Deutschbe Bank Probed, Mutual Fund Outflows and US Budget Deficit Soars!

On Fox Business Charlie Gasparino reports: Government Probe into Wall Street Sales Widening

• ... Sources tell FOX Business that after the SEC initially requested information from all the firms when it began its probe last year, it came back and subpoenaed Citigroup and Deutsche Bank for additional documents, underscoring a heightened level of interest. In the case of Citigroup, the SEC has conducted depositions of senior executives there, these people tell FOX Business. Ironically, the SEC has not asked Morgan Stanley for the same type of additional information since its initial request, even as the Justice Department has begun evaluating the firm's CDO sales.
  
  As of today, neither Citi, Deutsche Bank nor Morgan Stanley have received so-called Wells Notices issued to either firm. A Wells Notice indicates that the commission’s enforcement staff is recommending to the full commission that the firms should be charged with civil securities fraud.
  
  That said, people with knowledge of the matter say the probes are ongoing.
  
  The SEC’s increased interest would also signal that the Justice Department’s probe of the sale of CDOs is actually wider than the two firms in the news as preliminary targets of federal prosecutors, Goldman Sachs and Morgan Stanley. The SEC regularly refers to the Justice Department cases which it considers significant.
  
  The wider interest by the government increases the chances that Wall Street and federal officials may ultimately reach a “global settlement” with the securities industry as it finds a pattern of allegedly improper conduct in the sale of these so-called structured products. In such a settlement, each firm will pay a fine based on the level of alleged misconduct....

Oooo... according to sources. :P However, as far as I can recall Charlie's sources had been fairly spot on.

And how about the issue of best fit news?

On WSJ I saw this news clip: ICI: Inflows To Long-Term Mutual Funds $7.85B In Latest Week

Before reading the article, ie based on the article headline, what's your assumption on what this article is about? ICI or Investment Company Institute is saying inflows to long term mutual funds was 7.85 Billion. Sounds rather positive, yes? I mean, don't you get the impression that money is flowing into mutual funds. Which is great yes?

Here is the WSJ article:

• Long-term mutual funds had inflows for the latest week on continued strength for bond funds, although U.S. equity funds posted outflows as markets were rattled late last week on European sovereign-debt issues, according to the Investment Company Institute.
  
  Total estimated inflows were $7.85 billion the week ended May 5. For more than a year, the lion's share of investment in mutual funds has gone to bonds, which typically thrive in a lower interest-rate environment. Meanwhile, stock funds have failed to consistently attract new investment despite the equity market's sharp rally.
  
  Equity funds had outflows of about $1.25 billion in the latest week, compared with inflows of $1.88 billion a week earlier. U.S. equities had outflows of $2.24 billion, while $988 million was added to foreign funds.
  
  At the same time, bond funds took in $8.57 billion, up from $7.26 billion the previous week, said the ICI. Taxable funds had inflows of $7.76 billion, while municipal funds added $808 million.
  
  Investors also put $525 million into hybrid funds, compared with $952 million the previous week. Such funds can invest in both stock and fixed-income assets.

But then I remember Zero Hedge had a short piece on the mutual fund flows. Retail Investors Flee From Market Even Before Record Market Crash, YTD Domestic Flows Into Stocks Are Negative

Hmmm.. Zero Hedge is contradicting what WSJ is saying. What is happening here?

• The weekly ICI number for long-term domestic mutual fund flows is out, and not surprisingly, retail investors were bailing out in droves from the stock market even before the massive flash crash of May 6. In fact, in the week ended May 5, retail investors had pulled a massive $2.235 billion out of the market, after the S&P had dropped a mere 5% or so from the prior week. We are positive that when the number for the current week comes out, the outflows will be stunning now that investors have no faith left in the rigged casino "capital markets." Of course, this is simple to explain: with everyone and their grandmother habituated to a market that can only go up, at the first sign of jitteriness everyone and their grandmother bails, although only the big institutions really get to exit: everyone else has to hope the SEC will not cancel their trades the next day. And now that the market has been thoroughly discredited, the primary dealers have no choice but to ramp it up on no volume yet again, in hopes of pulling in the momos and the housewives into it as usual, courtesy of the CNBC cheerleaders, just to pull the rug a few days before the next trillion dollar bail out is needed and "justified." Oh, and whoever cares, retail domestic flows into stocks year to date are negative by $1.5 billion. Tells you all you need to know about who is buying this "market" - momo emptor

So who is correct? Or whose pants is on fire? LOL!

Here is the ICI article: Long-Term Mutual Fund Flows

I will just highlight the table posted.

The WSJ just reported the numbers as it is. And yes it did mention the outflows but Tyler focused on the issue that more Americans pulled money OUT of the market.

And yeah, did you notice that less foreigners put money into the American market.

How would you want to interpret these facts?

And the American pie is getting poorer or perhaps some would say more bankrupt. Federal budget deficit hits April record

• The federal budget deficit hit an all-time high for April as the government kept spending to aid the recovery while revenue fell sharply.
  
  The Treasury Department said Wednesday the April deficit soared to $82.7 billion. That was significantly higher than last year's April deficit of $20 billion and the largest imbalance for that month on record. April's record deficit was higher than it would normally be because about a third of the increase resulted from benefits for May that were paid on the last day in April, analysts note. That was because May 1 fell on a Saturday.
  
  The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession which has pushed millions of people out of work.
  
  Total revenues for April were down 7.9 percent from a year ago...

Less Americans filed income tax returns. Made sense cos hey more and more people are unemployed. So what do you expect? But I am in awed. Last April deficit was 20 Billion. This April deficit is 82.7 Billion. Holy moly!

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Goldman Sachs $20 Billion Bonuses?!!!

On CNBC, Charlie Gasparion: Goldman Faces PR Dilemma Over Huge Bonuses

• Rival banks are eagerly awaiting this week's earnings announcement from Goldman Sachs not only for the third-quarter results but for how the firm deals with up to $20 billion in bonuses just a year after it received federal bailout money during the height of the financial crisis....Goldman received $10 billion of federal bailout money last year. But more significantly, Goldman benefited from the government's bailout of troubled insurer AIG because it held insurance contracts on debt that were made good once AIG was saved.
  
  On top of that, Goldman was able to be classified as a commercial bank, even though it doesn't hold substantial amounts of deposits from consumers.
  
  Because of that status, Goldman can borrow from the Federal Reserve's discount window, and more cheaply in the private markets to finance its trades, particularly in the fixed income market, one of the major drivers of its earnings.

Stinks like hell, yes?!

In an older posting: What's Wrong With Our Financial Worlds?

Written by Paul Krugman in his NY Times editorial: Reform or Bust

• ............
  What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses. This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.

That's exactly the problem isn't it?

Isn't it so clear?

Why are the executives still being paid with totally obscene money??

Why should they be insanely rewarded when they aren't "correspondingly punished if they later suffer even bigger losses"????

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Nice Work John Thain!

It was just on January 15th 2009 that John Thain made the following remark on a New York Times article.

• "We have been consistently cleaning up the balance sheet, repairing the damage that was done over the last few years" ( source: Bank of America to Receive Additional $20 Billion )

Cleaning up the balance sheet?

Repairing the damage that was done over the last few years?

Guess what good old Charlie has literrally found under John Thain's rug! (yeah, pun intended. What do you expect when you read his $87,000 rug!!! )

In a Daily Beast/CNBC exclusive, Charlie Gasparino reveals how Merrill Lynch’s CEO spent over $1 million and hired the Obamas' decorator to redecorate his office last year—even as the firm faced a financial crisis.

John Thain’s $87,000 Rug by Charlie Gasparino

Below, The Daily Beast presents Thain’s top 16 outrages.

1) $2,700 for six wall sconces.
2) $5,000 for a mirror in his private dining room.
3) $11,000 for fabric for a "Roman Shade.”
4) $13,000 for a chandelier in the private dining room.
5) $15,000 for a sofa.
6) $16,000 for a "custom coffee table.”
7) $18,000 for a “George IV Desk.”
8) $25,000 for a "mahogany pedestal table.”
9) $28,000 for four pairs of curtains.
10) $35,000 for something called a "commode on legs.”
11) $37,000 for six chairs in his private dining room.
12) $68,000 for a "19th Century Credenza" in his office.
13) $87,000 for a pair of guest chairs.
14) $87,000 for an area rug in Thain's conference room and another area rug for $44,000.
15) $230,000 to his driver for one year’s work.
16) $800,000 to hire celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000.

And that's not all!!

On the Naked Capitalism, Yvess Smith wrote the following: Merrill Execs Pay Selves Bonuses Ahead of Schedule (and Before BofA Closing)

• Playing fast and loose seems to be the theme of the evening. First we have the credulity-stretching China fourth quarter GDP release, and now we have the eleventh hour stealing of the silver by Merrill's top executives as one of the firm's final acts.
  
  Let us remember the fact set: Merrill managed to get Bank of America to agree to buy it in September, elbowing aside Lehman. The deal is subject to shareholder approval, however. BofA, realizing it has acquired a garbage barge, threatens to scuttle the deal unless Uncle Sam lends a helping hand. Negotiations proceed behind closed doors (and neither Merrill nor BofA shareholders are told prior to the shareholder vote that BofA has agreed to do the deal subject to some form of government support).
  
  Now we learn that after it was evident that the US taxpayer was going to subsidize the Merrill acquisition, the Merrill compensation committee accelerated bonus payments by a month to make sure they were paid out before the BofA deal closed.
  
  Efforts are being made to minimize the amount involved (it is claimed to be only $3-$4 billion, but the fact is amounts were reserved in prior quarters that are excessive in light of full year performance. So the fact that some of the amounts were allowed for in previous quarters is misleading).
  
  Were Merrill bankrupt, the bonus payments could be deemed fraudulent conveyance and clawed back. But we don't do either financial firm bankruptcies or clawbacks in this country.
  
  From the Financial Times:
  
  Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.
  
  The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.
  
  Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.
  
  Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money...
  
  Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.
  
  The bulk of $15bn in compensation was paid out as salary and benefits throughout the course of the year. A person familiar with the matter estimated that about $3bn to $4bn was paid out in bonuses in December.
  
  Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”
  

And yes, John Thain has been sacked!

Nice work John Thain!

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