Good luck Lockyer.
Thursday, December 31, 2009
Good luck Lockyer.
I agree. Lloyd Antoinette Blankfein, repent. Before it's too late.
Wednesday, December 30, 2009
Tuesday, December 29, 2009
a. D&T gives the Fed a "clean opinion", noting the financials are on a "comprehensive basis of accounting other than" US GAAP, referring to footnote 4 (page 11). D&T's opinion in substance states it only did some arithmetic, "An audit also includes ... assessing the accounting principles used and significant estimates made by mangement". Did you do this D&T? Don't be bashful. Tell us.
1. The Fed loaned depository institutions (DI) $544,010, others $100,082, had $553,728 in central bank liquidity swaps and $411,996 in investments in variable interest entities (VIE). On the liabilities side the Fed has $860,000 in DI deposits. Each of these amounts is at least ten times the comparable 2007 balance.
2. The Fed collected $43,003 in 2008 interest income. Averaging its 2007 and 2008 footings, during 2008 the Fed had $1,580,252 in average assets, a 2.72% yield. Does the Fed think it has an "AAA" loan portfolio? Did Moody's or S&P tell it that? The Fed's income statement had no loan loss provision. Banks usually do. Page 116 of Citigroup's 2008 financials has a $33,674 loan loss provision. As critical as I have been of Citigroup, I conclude an insolvent Citigroup is in better financial condition than the Fed. Imagine, I said something nice about Citigroup.
5. Here the Fed describes its various programs "designed to support the liquidity of financial institutions and to foster improved conditions in financial markets".
11. "Accounting principles for entities with the unique powers and responsibilities of a nation's central bank have not been formulated by accounting standard-setting bodies. The Board of Governors has developed accounting principles and practices that it considers to be appropriate for the nature and function of a central bank". Like 2 + 2 = any number ZB wants it to be? ZB's financials do not reconcile US GAAP and ZBAAP. Why not ZB? "Accordingly, fair values, earnings, and any gains or losses resulting from the sale of such securities and currencies are incidental to the open market operations and do not motivate decisions related to policy or open market activities". Is ZB indifferent to how much of Joe Schmoe's money he loses? I realize AU 623.10 does not require a reconciliation for D&T to opine on ZBAAP financials. Still D&T, show us some professionalism and refuse to be associated with ZB's sham. Instead of feeding us pap like you did in my 5 December 2009 post: http://skepticaltexascpa.blogspot.com/2009/12/big-87654-firm-angles.html. AICPA ethics interpretation 203-1 states in part, "There is a strong presumption that adherence to officially established accounting principles would in nearly all instances result in financial statements that are not misleading". Was ZBAAP designed to mislead? What say you D&T?
12. "Loans are reported at their outstanding principal balances net of unamortized commitment fees". What are the $544,010 + $100,082 = $644,092 worth? I'd be amazed if this pig slop could be sold for $500,000 in the market. It might only be worth $322,046 or 50% of par.
21. "At December 31, 2008 and 2007, no loans were considered to be impaired, and the Reserve Banks determined that no allowance for loan losses was required". Huh? Every Fed loan is impaired. If the counterparty could have gotten non-Fed financing it would have. This is a joke. Aren't you impressed that D&T accepted this? Has the Fed an "internal control issue"? Need it hire SOX consultants? This sounds like a job not for Superman, but Huron.
22. At 2008 the Fed has Treasury paper worth $566,427 recorded at $502,189, meaning the Fed "made" $64,238 speculating in Treasury paper. Hey ZB, quit and set up a hedge fund. You have a promising future ahead of you.
25. Tells us about Fed VIEs. The Fed is exposed on $405.4 billion in VIE assets. During 2008 it took $5,237 in net losses on the VIE portfolio. How many losses are to be recognized?
32. ZB has an interesting chart here. It states, "At December 31, 2008, the sector/rating composition of [Maiden Lane] II's portfolio, recorded at fair value as a percentage of fair value, was as follows (in millions):" Then we see a chart with percentages. Read it carefully and see if you can figure out what it means. The chart is not expressed in dollars.
33. Apparently ZB lent ML III about $30 billion. See my 26 November 2009 post about ML III: http://skepticaltexascpa.blogspot.com/2009/11/aig-sequel.html. D&T, are you sure these assets were not impaired at 31 December 2008? In July 2008 Merrill Lynch (MRL) sold $30 billion of what may have been similar paper for 22 cents on the dollar, my 7 October 2008 post: http://skepticaltexascpa.blogspot.com/2008/10/fair-value-accounting.html. Was D&T aware of MRL's sale? But isn't MRL a D&T client? Fun and games. D&T may have been unaware of MRL's sale. Why? Because $30 billion in immaterial to MRL. Isn't it?
34. We are told the VIEs use fair value accounting. I don't believe it.
40. "As of December 31, 2008, both the probable loss and the fair value of the FRBNY's loan commitment were deemed to be zero, because under a range of scenarios it is unlikely that the FRBNY will be required to make the loan". The FRBNY thinks it will not suffer any losses on its $60,000 and $244,800 commitments to AIG and Citigroup respectively? If you say so D&T.
Remember, this is the same group that gave us the "stress tests".
"Contrary to conventional wisdom, the Fed's activities are already widely audited. [D&T] examines the Fed's financial statements, which are published", Robert Samuelson (RS) at Newsweek, 7 December 2009, link: http://www.newsweek.com/id/224596. RS, the Fed's "audited" financials aren't worth the paper they are printed on.
Jim Willie questions the Fed's balance sheet and solvency at Financial Sense, 15 December 2009, link: http://www.financialsense.com/fsu/editorials/willie/2009/1215.html. ZB, we are not all fooled. D&T, take note.
George Washington quotes William Bregman (WB), a former Fed economist at Naked Capitalism, 15 December 2009, "Well, for one thing, the appearance of extensive auditing authority doesn't mean audits are effective. Good auditing requires the willingness and ability of auditors to do their jobs", link: http://www.nakedcapitalism.com/2009/12/guest-post-the-feds-independence-argument-is-false.html. Well said WB. D&T's "audit" fails.
30 years ago I said the difference between bankruptcy today versus in the 1930s, was then you went bust. You gave your creditors your assets. They sold them, got 50 cents on the dollar and walked away. Now you go to the Fed. It prints a pile of money which you give your creditors and pay them 100% in fifty-cent dollars. See ZB, we're not that stupid. We figured out what you do. My bottom line: as of 31 December 2008, the Fed was insolvent by $100-400 billion. Thank you very much D&T. For nothing. As far as I am concerned, D&T is just a bunch of bookkeepers.
"Harris County [DA] [PL] will re-evaluate a new policy downgrading crack pipe residue charges in response to conerns raised by Houston Police Department [HPD] officials. ... 'She met with the command staff of [HPD], and everyone on the command staff urged her not to do this policy because of the burglaries that were going to increase,' said Ray Hunt, vice president of the Houston Police Officers' Union. 'This is about decreasing the caseload of the [DA's] office and decreasing the number of people in jails.' ... The minimum weight, one-hundreth of a gram, is equivalent to half a grain of rice. ... 'Addicts may become so addicted to the drug that they engage in thefts, burglaries, prostitution, and other crimes in an effort to support their habit. By arresting a suspect for a small amount of crack cocaine, HPD may be preventing that suspect from committing a burglary later, for example,' according to the [HPD] release", my emphasis, Brian Rogers at the Houston Chronicle, 10 December 2009: http://www.chron.com/disp/story.mpl/headline/metro/6762482.html.
We might reduce the number of HPD officers and see if GB still sings this song. GB reminds me of a Big 87654 partner praising Sarbox.
Monday, December 28, 2009
Sunday, December 27, 2009
"John Vandevelde, a lawyer for Mr. Kenneally, said his client was never a senior officer of the firm and 'always relied on the fully informed advice of the outside auditors.' ... A court-appointed examiner looking into [NC's] collapse found in 2008 that KPMG, the company's accountant, 'contributed' to some of the accounting and financial reporting strategies. At the time, KPMG said it strongly disagreed with the report's conclusion. KPMG declined to comment further Monday. ... 'This shows our focused effort to pursue and scrutinize those who dealt in or sold or created mortgage-related structures regardless of vehicle they used,' said Robert Khuzami, the SEC enforcement director", Kara Scannell at the WSJ, 8 December 2009: http://online.wsj.com/article/SB10001424052748704825504574582102923058362.html.
No Morrice. You had to put a "former" NC executive in as US Treasury Secretary. Well Schaprio, when will you try to get similar restitution from Lloyd Antoinette Blankfein and David Viniar at Vampire Squid (VS)? I last commented on NC on 13 April 2009: http://skepticaltexascpa.blogspot.com/2009/04/kpmg-sued.html.
I'll believe Khuzami when I see VS's officers get the same treatment.
Saturday, December 26, 2009
Friday, December 25, 2009
Thursday, December 24, 2009
"The US [Fed] is one unloved central bank. ... But anger toward the Fed is running so hot that the organization will probably have to take some kind of hit to appease the public and lawmakers. The question is where it's most willing to concede ground. ... For the Fed, what makes this period so dangerous is that the central bank has become a lightning rod for the severe recession and the huge bonuses going to Wall Street bankers who helped cause the mess", my emphasis, Peter Coy at Businessweek, 14 December 2009.
Cooper and I live in alternative universes. The Fed has no credibility. Only China, Japan and a few other countries hold up the dollar. If they stop, it will crater. This article was titled "The Danger in Tying the Fed's Hands". I see no danger in that. I think its hands should be cut off, like certain Islamic countries do to thieves.
"As California loses its white majority, it is also losing any sense of ethnic or cultural coherence. This will be the state's most devastating loss. ... The hatred they share for whites is hardly enough to unify blacks and Hispanics. Though the press is squeamish about reporting it, the blacks in South-Central deeply resent the influx of Hispanics. AR has already reported (Dec. 1992) on one of the irresolvable questions that face growing numbers of minorities. What happens to affirmative action benefits when there are no more whites left whose interests can be sacrificed? ... So where does this leave the poor bloody white man? It has begun to dawn on him that if public schools spend their time teaching Hmong and Guatemalans how to speak English there may never be time for algebra or Shakespeare. It has begun to dawn on him that as the numbers of tax money receivers overtakes the number of tax payers, he can look forward to having his very own, probably brown-skinned dependent to take care of. It has begun to dawn on him that the newcomers show few signs of becoming American and that they resent him because he is American. It has begun to dawn on him that as more than 600 black, Hispanic, Vietnamese, and Chinese gang members gun each other down every year, he might be caught in the cross-fire. Although there are times when parts of California still feel just like the paradise they used to be, more and more whites can see the future well enough to know that it holds no place for them. The white exodus has begun. ... Whites who would doubtless find 'ethnic cleansing' a loathsome horror in the Balkans do not hesitate to practice a form of it themselves. ... When neighborhoods lose their white majorities schools decay, crime increases, taxes rise, welfare proliferates, and what was once an outpost of civilization subsides into barbarism", Marian Evans at American Renaissance, March 1993, link: http://amren.com/ar/1993/03/index.html.
"Once the envy of the other 49 states, California has become the measure of failure. Historically a trend-setter, once again, as California goes, so may go the nation. ... 'The same pressures that drove the Golden State toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the enrtire country,' concluded the study, 'Beyond California: States in Fiscal Peril.' ... California, Illinois and New Jersey repeatedly have used borrowing or accounting schemes to put off tough budget decisions. ... The problem will only be aggravated by bailing out states like California that repeatedly have used poor judgment in relying disproportionately on cyclical industries, and that have borrowed excessively or employed accounting gimmicks rather than making tough decisions about which activities to stop doing, or do less of. ... The 'too big to fail' approach to fiscal management is merely more of the same poison that made these states so economically ill", Editorial at the Orange County Register, 2 December 2009, link: http://www.ocregister.com/common/printer/view.php?db+ocregister&id=222145
This was written almost 17 years ago!Quoted without comment.
Wednesday, December 23, 2009
"But while the President gears up his campaign for Climate Change [CC] awareness in Denmark, a Population Change anti-awareness campaign has long been in full swing in America. The acid test of the sincerity of the [CC] activists: do they publicly demand a US immigration moratorium to keep carbon emissions from increasing? ... 'The campaign recognizes immigration as the number one factor driving US population growth and makes the point that when immigrants settle in the US their energy use quickly becomes Americanized. As a result, immigrants' carbon emissions skyrocket. The result is a quadrupling of immigrants' carbon footprint compared to the amount of carbon emissions they produced in their home countries.' Mexicans don't illegally immigrate to avoid starvation. The average life expectancy in Mexico is over 76 years. ... Yet why are those [CC] insights so seldom applied to the quesation of Population Change? ... The changing nature of the population has far-reaching ramifications that deserve well-informed public discussion. But, of course, that's not a fashionable view on either the Left or the corporate Right. ... To serve my country, I just have to have a thick enough hide to withstand rage-filled respectable conduits of the reigning dogmas screaming 'How dare you? at me. ... California has already been inundated, fiscally, by the rising tide of population change. But only evil people like me are aware of that--and dare to tell the rest of America", Steve Sailer at Vdare, 3 December 2009, link: http://www.vdare.com/sailer/091203_climate_change.htm.
Britain, see your fate in California. London sounds like Los Angeles, see my 11 October 2009 post: http://skepticaltexascpa.blogspot.com/2009/10/boskins-baaack.html.Yes Sailer.
Tuesday, December 22, 2009
Monday, December 21, 2009
Sunday, December 20, 2009
Saturday, December 19, 2009
Friday, December 18, 2009
"The Inspector General of the [SEC] has provided suggestions on how the agency might improve its chances of catching the next Bernie Madoff. The report has an all-too-familiar-ring. Whenever a new financial scandal erupts the finger-pointing begins: Who knew what when, and why didn't they do something? ... In each case, the SEC's hybrid role as regulator, inspector and enforcer made it particularly difficult for the agency to explain why it came so late to the game. Often adding to its embarrassment in the discovery that someone had been pestering the SEC about the abuse it didn't uncover on its own. Whistleblowers told the agency that no money manager can really get a 10% return every year in perpetuity, that securities built from leveraged real-estate plays may prove problematic, and that no company can book billions of dollars in sales from products no one seems to buy. ... To reflate trust in the post-Enron stock market, Congress stuffed the Sarbanes-Oxley Act with protections for those who know how to out their lips together and blow. ... The IG said the problems include a lack of technical knowledge by line attorneys and many supervisors, little institutional memory for the enforcement staff to draw upon, and weak support from the SEC's other divisions. These are indeed persistent problems--so persistent that some skepticism is warranted that the IG's procedure-heavy recommendations will, in themselves, improve the SEC's investigative performance. ... The safeguards however, can quickly turn into new kudzu, doomed attempts to substitute institutional process for individual judgment. ... From my experience, however, the slush pile of unsolicited investor complaints yields few hits. ... Unfortunately, few of these professionals have any incentive to talk to the SEC. Corporate whistleblowers are often rewarded with a pat on the back followed by a shove out the door, Sarbanes-Oxley notwithstanding. ... And, unlike the criminal authorities, the SEC has no mechanism for giving a free pass to informants, although it's currently considering a move in that direction. ... That leaves short-sellers. ... Almost any public squaring-off against a company by short-sellers (or, for that matter, by journalists or analyst firms) invites a lawsuit. ... The Enforcement Division [ED] hires young lawyers who are smart and hardworking, but devoid of industry experience. ... They need all the help they can get, and the SEC should encourage industry professionals to volunteer information routinely. Additional examination of the tips that bounce into the agency is not enough", my emphasis, Richard Sauer (RS) at Barron's, 23 November 2009, link: http://online.barrons.com/article/SB125875977157458161.html.
My experience dealing with the SEC is that it's worse than TD thinks. The SEC's "neophyte lawyers" (NL) are mostly interested in who is the "relator". If the relator is a nobody and the complaint is about a potential employer, they jump through hoops to ignore the obvious. The NLs are primarily interested in filling up their rolodexes while on the public payroll. I would prefer an SEC that was merely incompetent to today's SEC. Substance vs. form at the SEC? Hahahahahahaha. The SEC's IG needed consultants too! Most SEC investigations are a waste of time. See my 9 December 2008 post about SEC success stories: http://skepticaltexascpa.blogspot.com/2008/12/linda-thomsen-please-go-home.html.