Apr 30, 2009 It Just Never Stops Karl Denninger 321gold ...inc ...s

It Just Never Stops

Karl Denninger
Market Ticker
posted Apr 30, 2009

From Reuters this morning: [Tue.]

The chairman of the U.S. House of Representatives Financial Services Committee said Congress will give the Securities and Exchange Commission the authority it needs to require hedge funds to register with the agency.

Of course. The banks were getting low on money to pay their bi-annual bribes, er, campaign contributions with.

I always find it amusing when the solution to some crisis is more laws, when the existing laws are ignored.

Speaking of which....

I wrote a post about Ponta Negra – a hedge fund that I thought was more likely than not to be fraudulent. I did not name Ponta Negra in the post but I put two of their marketing documents on the web and some people found them.

I withdrew that post after threats from lawyers. I also removed the documents from the web.

Oh boy, here come the lawyers making threats!

There's only one small problem - the widdle blogger was right!

I have done this because Francesco Rusciano of Ponta Negra has formally had his assets frozen by a Federal Judge at the request of the SEC. Also see here for the formal charges.

Now this isn't particularly newsworthy. No, the newsworthy part is this:

Anyway I will save you the suspense. All of this would not be the biggest story on my blog except that Ponta Negra is marketed out of the office of Paradigm Global – a fund of hedge funds owned and controlled by Hunter Biden and James Biden. Hunter and James are the son and brother of Vice President Joe Biden respectively.

Oops. Well, that explains the attempt to shut the widdle blogger up. Too bad it failed.

Anyway, go to the link for the base article and read it. It's yet another one of those "fund of funds" deals, and it appears that it is the Veep's family that's somehow involved. What's even better is that they appear to be tangled up with Stanford Financial up to their nuts.

This ought to be a lot of fun as it all unwinds, and you can bet I'll be keeping my ear to the ground.

If you look outside the US you find actual reporters who report actual news. Like, for instance, this from The Times in the UK:

John Thain, the Wall Street veteran who was ousted from Merrill Lynch following its takeover by Bank of America (BoA), has fired back at attempts to blame him for the investment bank's surprise loss and controversial bonus payments.

"Getting fired is one thing. But nobody has the right to say things that they know aren't true," he told the WSJ.

Mr Thain insisted that Mr Lewis knew that the bonus payments were being made ahead of schedule and agreed to them in writing. The WSJ reported that this claim was backed up by documents reviewed by the newspaper.

Oh oh - not in writing! You know, that nasty thing that happens when you use this old technology called "a pen" and it can be presented to this thing called "a jury"?

When it comes to the pied pipers of the world, on this side of the pond, we have this piece of putrid tripe:

The thumping chorus to drain the toxic assets clogging our banking system drones on as the economy patiently waits for the life-blood of new credit. Many argue that bank nationalization may be our only hope. This is naïve madness.

Early quarterly earnings reports from U.S. banks clearly demonstrate the banking system's hefty ability to absorb “toxicity” on its own. While there is a natural obsession among analysts and the financial media to dice and denigrate headline-earnings results, core operating margins appear substantively intact.

Uh huh. And who is this guy?

- Robert B. Albertson is principal and chief strategist for Sandler O'Neill & Partners LP.

Oh, I see. An investment banking concern. Ok.

Mr. Albertson is entitled to his opinion, of course, but I'd like to know what he bases that opinion on. Certainly it has to be more than the fact that banks reported "earnings" using various forms of accounting gimmickry, yes? Legal or not, things like shifting one's reporting period (as was done with Goldman) or pressing one-time gains from "advantageous" trading circumstances with crippled counterparties (e.g. AIG) is hardly an indication of soundness.

Nor should one consider stealing $700 billion from the taxpayer and then posting a couple of billion in "profit" a good indication of soundness. After all, any monkey can lose 95% of the money stolen from everyday Americans and then report "great profits!" with the remaining 5%.

Maybe Mr. Albertson can provide all of us with some actual analysis? How about putting market prices to all of these institution's holdings and showing me (and everyone else) that when this exercise is done the bank in question has a greater number for assets .vs. liabilities? Oh, and please do show your work; Dick Bove never does and yet he continues to pound the table that all is well even though if you hit the Cramer-style "buy-buy-buy" button last spring on his recommendation some of the banks involved (WaMu, Wachovia, etc) were either near or literal zeros, and essentially all of them have handed you a monstrous loss.

See, I and others have been trying to get our arms around the asset valuation problem since I first started screaming about Washington Mutual (WaMu) back in April of 2007, more than two years ago.

I still can't get to the facts but it's not for lack of trying. Rather, it is due to the lack of disclosure about exactly what's in the big bad black box, and that's an intentional act - by the banks.

Unfortunately when I take what I believe are reasonable indications of current market values and apply them to what is claimed for the composition of these portfolios, given what is disclosed, I get a really big number for the balance between assets and liabilities.

The problem is that it's in parenthesis.

Apr 29, 2009
Karl Denninger
source: http://market-ticker.denninger.net/archives/996-It-Just-Never-Stops.html

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