Chris Whalen: What Barack Obama Needs to Know About Tim Geithner, the AIG Fiasco and Citigroup

BTW, while…[the] folks in the Big Media churned out hundreds of thousands of words…waxing euphoric about the prospect for enhanced back office clearing of CDS contracts, the real issue is the festering credit situation in the front office. Truth is that the DTCC and the other dealers, working at the behest of Mr. Geithner, Gerry Corrigan and many others, have largely fixed the operational issues dogging the CDS markets. The danger of CDS is not a systemic blowup – though that will come soon enough. It is the normal operation of the now electronically enabled CDS market wherein lies the threat to the entire global financial system, this via the huge drain in liquidity illustrated above as CDS contracts are triggered by default events.

The only way to deal with this ridiculous Ponzi scheme is bankruptcy. The way to start that healing process, in our view, is by the Fed emulating the FDIC’s treatment of DSL, withdrawing financial support for AIG and pushing the company into the arms of the bankruptcy court. The eager buyers for the AIG insurance units, cleansed of liability via a receivership, will stretch around the block.

By embracing Geithner, President-elect Barack Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner and Ben Bernanke. News reports have already documented the ties between GS and AIG, and the backroom machinations by Paulson to get the deal done. This scheme to stay AIG’s resolution cannot possibly work and when it does collapse, Barak Obama and his administration will wear the blame due through their endorsement of Tim Geithner.

Read it carefully and read it all.

Posted in * Economics, Politics, Credit Markets, Economy, Stock Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The September 2008 Proposed Henry Paulson 700 Billion Bailout Package, US Presidential Election 2008

6 comments on “Chris Whalen: What Barack Obama Needs to Know About Tim Geithner, the AIG Fiasco and Citigroup

  1. Marion R. says:

    I don’t know whether to laugh or cry.

    A heroic job of finally taking a look under the hood, but a tragedy in his utter ignorance that the car is speeding down the highway and there are human beings in it.

  2. TheTombStone says:

    When creating a blog on politics or religion , is it legal to pull stories from the main stream media and post them on the blog?

  3. Byzantine says:

    Bishop of Tombstone,

    Congratulations and welcome to the internet. In response to your query, as long as the source text is excerpted and the source is credited, as with a hyperlink, it is considered fair use. It is also legal, though in poor taste, to make off-topic swipes in the public comments.

    Congratulations again on figuring out what that stylized lower case “e” is on your monitor.

  4. Cole says:

    Is it legal to post samples of music CDs or pages of books on amazon.com? It advertises the intellectual or artistic property so that people will want to purchase it. With online news, readers of blogs are directed toward the original site to read the whole piece and are exposed to the advertisements. A win – win situation.

  5. Irenaeus says:

    [i] Is it legal to pull stories from the main stream media and post them on the blog? [/i]

    Yes. It’s called “fair use.” Whether a particular use is fair depends on factors like [url=http://www.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000107—-000-.html]your purpose, how much you use, and how your use will affect the value of the copyrighted work[/url].

  6. Chris says:

    and frankly the web sites love being linked like Kendall does – it drives more traffic to their sites. I am thinking referral traffic is a big part of sites like the NYT. That site for instance I only go to if Kendall or Instapundit links it.