Remember the old American Express Travelers Cheques commercials on TV with Karl Malden? They always started with this line; "You're about to witness a crime." What followed was a choreographed pick-pocket routine resulting in a hapless American tourist frantically looking around for their wallet and wishing they had packed Travelers Cheques.
Get Karl Malden's face and voice in your mind (youtube link below) and then read this headline....
Lehman's gonna shed assets?
"You're about to witness a crime..."
Where do these shedded (read: shredded) assets go? Who would buy these tainted goods in this environment of rising interest rates, stagflation, and failing banks? The Fed? But that just means more credit creation and dollar debasement. As Chuck Prince said recently, shortly before getting fired, Wall Street and the Fed are just playing a game of musical chairs using other people's money.
But this is a deadly variant on musical chairs combined with financial Russian Roulette that results in dead banks, scuppered funds, and impoverished savers and pensioners littering the carpet.
Maybe CaLPERS, the California Public Employees' Retirement System will buy some of this Lehman junk. Amazingly, Socially Responsible CaLPERS foolishly bought BearStearns junk paper last year even when many, including this blogger screamed, 'don't do it.'
"The California Public Employees' Retirement System, the nation's largest public pension fund, has invested $140 million in such unrated CDO portions, according to data Calpers provided in response to a public records request. Citigroup Inc., the largest U.S. bank, sold the tranches to Calpers.
"I have trouble understanding public pension funds' delving into equity tranches, unless they know something the market doesn't know,'' says Edward Altman, director of the Fixed Income and Credit Markets program at New York University's Salomon Center for the Study of Financial Institutions.
"That's obviously a very risky play,'' he says. "If there's a meltdown, which I expect, it will hit those tranches first.''
Chuck Prince, the dancing Dark Prince of finance sold those nice teachers radioactive debt sludge.
Citibank sold the toxic debt to CaLPERS:
Back in early summer, Chuck Prince laid out his strategy for running Citigroup, the world's largest bank, in simple and worrying terms. "As long as the music is playing, you've got to get up and dance. We're still dancing." A few weeks later the music duly stopped and the markets went into turmoil. This week Mr Prince resigned, leaving his bank with total losses worth up to $17.5bn to write off - and the warning that more may be to come. That sounds rather a hefty bill for a party but, as the bank boss said: "When the music stops, in terms of liquidity, things will be complicated."
The ugly truth is that insurance funds and pension accounts are where bad debts go to die.
Workers and savers end up footing the bill for Wall Street's bonuses and Fed-crimes against the dollar. Not immediately, but sooner or later -- and on that fateful day when the fund has to report that they miscalculated the true worth of the paper napkins that Moody's scribbled AAA on - that Citi or some other Wall Street alchemist from hell sold them - everyone has to take a cut in their pension payouts - and you see headlines like this;
CaLPERS must know that they are being used by Wall Street to dump toxic debt waste, don't they? Is their whole 'Socially Responsible Investing' schtick just a cover?
On Friday, it was announced that BlackRock Inc. and Maurice 'Hank' Greenburg are buying into Lehman. But what we've seen in the past are financial intermediaries buying into the game of musical security chairs, repackaging or 'securitizing' and then reselling them, with the help of a compliant Fed that is making cheap money available to carry out these schemes in exchange for worthless debts that the Fed ends up vouching for - backed up by America's Social Security account - that many argue will blow up sooner or later leaving anyone born after 1980 with nothing.
Invariably, 'passive' accounts such as insurance and pension funds that are managed by people who are easy marks for fast talking Wall Street toxic debt pushers always buy this junk. They are Wall Street's patsies whose function is to cover sub-prime and related crimes.
So, when you see a headline about banks shedding assets, remember...
You're about to witness a crime...
Here's a film I made on this topic I made for Al Jazeera; Savers Versus Speculators