Three-Card Monte Solution

Dear Jim:
If the TARP funds are the source of the large bonuses then how did
some of the financials pay back the TARP?

RY. Arlen

Dear Arlen:

The banks did not pay back the TARP, the public did. That was a product of the issuance of new shares or guaranteed borrowings in many cases. If you follow the money, the financials have more shares outstanding WITHOUT off setting increase in cash or other assets. This is why I said the financials kill everything they touch. Now they have cannibalized their own company for personal gain. The cash was exhausted in backing worthless OTC derivatives and bonuses. Yet in the recent bear market rally they were the darlings of the market place.

RY.
Jim

It all reminds me of three-card monte scam on a blind man called public and retail private money.

Public money was quickly used to pay the OTC winners. Then, FASB's critical decision to look the other way allowed worthless, illiquid assets to be valued at cost. This simple accounting entry converted losses into trading profits, which in turn, provided the necessary earnings for the stock market bounce. In addition, and probably more important, the earnings not only supported one last dip into the well of bonus distribution but also the issuance of stock in which the proceeds were used to repay TARP ahead of schedule. Don’t you remember those surprise announcements on F-TV?

Now the market stands around waiting for the cards to be reshuffled on the table for the next game. When the cards are turned over they will reveal currency debasement as the historically consistent solution to an excessive debt burden by a sovereign nation.