"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street.”
That’s what President Obama told 60 Minutes last night. My response: You could have fooled me.
The simple fact of the matter is, the administration has bent over backwards to help “fat cat bankers.” From re-writing accounting rules to turn insolvent banks into suddenly profitable entities to the softball “stress tests” – banks have been helped out in every conceivable way.
Of course, let’s not forget that something had to be done. Our banking system was swirling down the tubes. The decision to bail the banks out was made early in the financial crisis – right after Lehman went down. That was before Obama took office. And the alternative to the bailouts – nationalizing banks, fixing them and then spinning them back out – was unsavory, for some reason.
It seems pretty clear to me that Obama could not have run on a platform of nationalizing banks. For one, the financial industry, which is a heavy campaign donor, would have applied their cash elsewhere. And second, there’s still a huge backlash regarding socialist policies. I still believe that bailing out banks is far more “socialist” than taking them over and then spinning them back out to stringer hands. But that doesn’t change the fact that Obama’s lament about “bailing out banks” is any less disingenuous.
Let’s face it: in America, our political system as well as our financial system, has been commandeered by the “fat cats.” The Treasury Secretary’s job has been a revolving door between government and Goldman Sachs for years.
I understand that the President is frustrated that banks are trying to block regulatory reform. But Obama could have started playing hardball months ago, and he didn’t do it.
*****Citigroup (NYSE:C) is set to pay back $20 billion in TARP loans. That will mean only Wells Fargo (NYSE:WFC) is left owing the government. It’s easy to look at this as good news. Banks are healthy and can pay their debts. Or so it appears…
But let’s not mistake these repayments for health. Banks have sold stock and bonds to raise money. In other words, the payments have been funded by investors. They’ve further diluted shareholder value to pay back the government. And it was government actions (like accounting rule changes) that put banks in a position to appear healthy enough to sell stock and bonds.
Is Citigroup healthy enough to stand on its own? We’ll see. But I wouldn’t buy the stock. And I can’t imagine Citi stock trading above $5 a share for years.
*****Dubai is getting $10 billion from Abu Dhabi. And OPEC has signaled that it will not cut oil production, even though reserves are rising and price is under pressure. Coincidence? I don’t think so…
We have no idea how much bad debt there is among OPEC countries. Dubai was exposed, but that’s because it doesn’t have the constant stream of oil revenue to help it make up for bad investments.
Not only is OPEC not planning to cut production, it acknowledged that pretty much every OPEC country is cheating and exceeding quotas. Could it be that some OPEC countries simply can’t afford to cut production because that would expose debt problems? It wouldn’t be surprised, that’s for sure.
We’ll keep an eye on this. If oil falls to $60 a barrel, as some think it might, and OPEC still votes to keep production steady, then we’ll know that all is not well for some OPEC countries. And of course, Venezuela would be my number one choice for money troubles.