“One of the reasons we had to rescue AIG was the fact that it was going to bring down Europe,” Pennsylvania Rep. Paul Kanjorski told reporters after his subcommittee held a hearing on systemic risk.

Later, in an interview with Reuters, Kanjorski said he was told that a large number of AIG’s counterparties were European.”

 That’s from a report from Reuters that also says that counterparties to AIG “made out like bandits” and that their names would not be revealed because people would stop doing business with them. Fed Vice Chairman Donald Cohn who did the stone-walling of lawmakers and reporters thinks we need more regulation.

Makes a lot of sense, right? Regulators fell down on the job so we need more regulators.  And we can’t tell you who got the tax payer money to the tune of hundreds of billions, because… well…because that’s a seeeeecret.

Yes, folks.  You don’t live in a republic any more. You live in a dictatorship of bankers.

NEW YORK (Reuters) – Such firms as Goldman Sachs Group Inc and Morgan Stanley were among the financial institutions that received payouts from American International Group Inc since the Federal Reserve first began to aid AIG, according to the Wall Street Journal.

Citing a confidential document and people familiar with the matter, the Journal said AIG paid at least two dozen U.S. and foreign financial institutions about $50 billion.

Goldman received about $6 billion, as did Germany’s Deutsche Bank AG ….

From Reuters, March 6, 2009

Comment:

It’s commentators who drive the important stories now. That includes, yes, people like yours truly (no room for humility here).

Example:

Back in 2005 and 2006, when I was I reading through comments on trader forums, I realized they had a better sense of how things were manipulated than the big name financial press.  I read Lisa Endlich’s book about Goldman Sachs, which is a rather drab book as far as real insider information goes, but it does tell you the main plot. And that stinks.  GS’s been pulling strings and rigging things in its favor for decades.  They have a history of really dreadful corruption.  I wrote several pieces for the alternative press and one for a financial magazine on Goldman. But no one took up the theme…

Based on what I’d figured out about who the players were and what they were looking for (a power grab), I called a double-top of the market in March 2007 and I warned of  imminent trouble in a piece on Malcolm Gladwell in April 2007.  Gladwell’s article (see my piece, “Bunk: The Art of Writing without Thinking”) seemed like he was testing the wind for something big. The crash came soon after.  There was a small crack (Northern Rock) three months later,  and then a  full-scale avalanche  six months later….

Mobs, Messiahs, and Markets (Wiley, August 2007) came out exactly in time and correctly described the history and mechanism of the crash.

Not too shabby for an ex-school-teacher, sometime pianist, and amateur trader typing with three fingers (not to slight my esteemed co-author in any way; he was, obviously, the star of the production)…

Forgive my childish glee at being right about something so horrible.  (I lost money over it too and stand to lose even more).  I guess it’s like a pathologist who finds a particularly horrible type of bacillus. He ought to be upset. But if he’s any kind of pathologist, he probably feels a kind of triumph….almost an aesthetic joy…

It may be a hideous germ, but it’s his germ…he caught it.

He added a piece to the puzzle.

Whoever said human beings were completely rational creatures?

On the Madoff front:

“Madoff has already begun relinquishing his assets, something he might not do if he planned to fight the charges.

He already has surrendered rights to his business and any of the assets held by the business. A trustee overseeing his assets said he has identified nearly $1 billion in assets that are available to reimburse investors who have lost money over the last five decades.

Shortly after his arrest, Madoff offered to relinquish many of his and his wife’s assets, including properties in Palm Beach and France, as well as his boats and cars.

The lawyers, however, have indicated in court documents that Madoff’s $7 million Manhattan penthouse and an additional $62 million in assets should not be taken from the family because they are in his wife’s name and did not result from any alleged fraud.”

More at Associated Press.

“If an investor put money directly into Madoff but redeemed some or all of his investment before Madoff’s arrest, would Irving Picard, the trustee in charge of gathering assets for pro-rata distribution to bilked investors, come after him for the money he already took out? Short answer: yes, if the investor had gains. And it’s even conceivable that the investor might have to cough up principal….”

More  here on the coming wave of litigation from the Madoff fraud.

Comment:

The Madoff case, as you know, puzzles me. From what I’ve read so far, everyone knew fraud was being perpetrated…and no one did anything. Now everyone, from “little people” who lost their retirement through their pensions funds to fund of funds managers and their clients, is expecting the SIPC to kick in and pay for the losses, or to recover them through litigation.  It seems to me that if a fund manager deliberately looked the other way, they were guilty of fraud; they should be the ones held accountable by their investors. But now that the government is involved, expect this to become a racket.

And on that gloomy note, why did Irving Picard, the court appointed trustee, need $28 million to adminster the estate of Madoff? That’s a lot of money. And he was asking for it within a fortnight of the breaking of the story.

 Latest reports indicate that no stocks were actually  purchased for customers:

“We have no evidence to indicate securities were purchased for customer accounts,” said Irving Picard, the court-appointed trustee overseeing the liquidation of Madoff’s assets.

At a meeting for investors, Picard detailed the history of the case and how claims will be processed. He said his office has received 2,350 claims so far and they expect the number of claims to double.”

Each of these claimants can now be covered for losses up to $500,000. For 5000 (conservative estimate) claims, that means there could be as much as  $2.5 billion in pay-outs.