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Thread: Stress Test results are to turn out rigged - plus Chrysler bankruptcy rigged ?

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    Default Stress Test results are to turn out rigged - plus Chrysler bankruptcy rigged ?

    from www.Goldenjackass.com, member area, by analyst Jim Willie:

    "The Stress Tests for banks are beginning to reveal a very likely pathway for Wall Street banks to seize regional banks. That would expand their depositor base, dilute their toxic assets, and more, as part of a vile consolidation. Instead of bankruptcy liquidation, Wall Street banks probably seek to seize healthier regional banks, by rigging the tests, and spreading the cancer. They are trying to survive by holding the neighbors ransom. The details of the Stress Test are leaking out, and regional banks are set up to appear far weaker than New York banks, whose balance sheets are reinforced by loose fictitious valuations permitted by the FASB rules. This story is developing. See the AP exclusive article":

    http://finance.yahoo.com/news/AP-Exc...658.html/print

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    Default Re: Stress Test results are to turn out rigged?

    ^^^ there is a whole bunch of strangeness surrounding these stress tests ...

    - early on Turner Radio claimed to have obtained a copy of the results, which were scary with 16 of 19 banks already technically bankrupt. This got zero mainstream news corroboration, with some smaller news corroboration now starting to trickle out.

    - the FASB 'mark to magic' accounting rule change versus derivatives valuations does indeed take a lot of 'official accounting' pressure off the balance sheets of large banks. This doesn't mean that their future losses will be any smaller, only that the US gov't is no longer requiring that these future loss risks be accounted for in advance by 'marking to market' - and in turn forcing big write-offs plus bigger reserves.

    - The Regional banks have two big problems of their own ... the rapidly imploding commercial mortgage market (which will arguably make 'subprime' mortgages losses look small in comparison), plus the need for the FDIC to jack deposit insurance premiums sky high to cover the losses from the umpteen banks that have already gone belly-up. Regional banks have far more dollars out in commercial loans as a percentage of total exposure, and FDIC insured deposits comprise a far higher percentage of their account dollars, compared to Wall St. banks.

    - The conspiracy theorists will tell you that while the big Wall St. banks are now 'under the thumb' of the US Gov't via TARP money strings, the Regionals didn't take much TARP money to begin with ... and many dearly want to immediately pay back the TARP money that they DID take (but Obama won't allow them to do so). This leaves many Regional banks as 'loose cannons' from the standpoint of any conspiracy theory of US Gov't 'social engineering' via manipulating the economy. Most recent example being that Wall St. banks willingly took huge losses on Chrysler stocks / bonds to facilitate a gov't sponsored transfer of Chrysler majority ownership to the UAW ... losses which were contrary to the interests of their shareholders and investors, but losses which are arguably being stealthily reimbursed via TARP. But Regional banks are likely to put the interests of their own shareholders and investors ahead of potential gov't interests. Thus any measures which would force a Regional bank into crisis, and in turn facilitate an FDIC takeover with sale / transfer to a big Wall St. bank, would remove that Regional bank's ability to make its own 'loose cannon' decisions.

    !~
    Last edited by Melonie; 05-03-2009 at 07:08 AM.

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    Default Re: Stress Test results are to turn out rigged?

    speak of the 'devil' ...



    (snip)"A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.

    The White House and a spokesperson for the investment bank in question challenged the accuracy of the story.

    "The charge is completely untrue," said White House deputy press secretary Bill Burton, "and there's obviously no evidence to suggest that this happened in any way."

    Thomas Lauria, Global Practice Head of the Financial Restructuring and Insolvency Group at White & Case, told ABC News that Rattner suggested to an official of the boutique investment bank Perella Weinberg Partners that officials of the Obama White House would embarrass the firm for opposing the Obama administration plan, which President Obama announced Thursday, and which requires creditors to accept roughly 29 cents on the dollar for an estimated $6.8 billion owed by Chrysler.

    Lauria first told the story, without naming Rattner, to Frank Beckmann on Detroit's WJR-AM radio.

    Perella Weinberg Partners, Lauria said, "was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House press corps would destroy its reputation if it continued to fight. That’s how hard it is to stand on this side of the fence."(snip)

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    Default Re: Stress Test results are to turn out rigged - plus Chrysler bankruptcy rigged ?

    another angle from Karl Denninger ...



    (snip)"These other lenders apparently thought they were getting a raw deal. That's up to the judge to decide. If he decides that the deal offered originally is fair, he can cram down the capital structure and force everyone to take it.

    But he can also find that the negotiation was arbitrary, capricious, unjust, unfairly slanted in terms of who it favored, or simply throw the whole thing in the trash can, rip it up and start over.

    You can bet these 20 lenders will ask to be heard on those points, and they should if they feel they were being treated unfairly.

    The cute part of this will be to see if they do.

    See, some of them may have been playing with CDS too, and if so, they might have a reason to see Chrysler go into BK simply on that basis. That is unlikely to find much sympathy with the judge.

    My problem with this so-called "pre-structured" deal is this:

    Banks including JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. lent Chrysler $6.9 billion, reselling some of their secured loans at discounts to investors. Chrysler took a $4 billion bailout loan from the U.S. Treasury and was racing to reduce debt in order to meet a government deadline today for more aid, after workers agreed to give up $10 billion in future pension benefits.

    Is there a "side agreement" in here somewhere - or worse, some arm-twisting? We don't know, but I bet in a bankruptcy, with aggressive creditors who feel they got the Chrysler Building stuffed somewhere painful, we will find out.

    Here's the problem as described by Oppenheimer:

    “Our holdings in secured Chrysler debt are entitled to priority in long-established U.S. bankruptcy law, and we are obligated to our fund shareholders to support agreements that respect these laws,” the company said in an e-mail.

    That is sort of correct. Priority is sometimes overridden by a bankruptcy judge, who has pretty close to plenary authority.

    If President Obama tried to ram something down their throat that was clearly inequitable then this should become apparent in due course.

    The objections from the group of lenders also drew criticism from Michigan lawmakers, including Democratic Representatives John Dingell and Sander Levin.

    “The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.

    Yes they will Mr. Dingy, and it is entirely possible that they'll get far more fighting this than they would playing "nice-nice."

    It is of course expedient for everyone to take the cheap shots within the government when they want to demonize people. I prefer to see the evidence, and from where I sit the jury is out on whether priority was respected at all along with whether there was some unseemly (or worse) arm-twisting going on with TARP'd banks that "agreed".

    I'm reserving judgment on the acts, but I call BS here and now on the rhetoric. "(snip)

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