Does Wall Street Run ‘One Way’?
Posted by Larry Doyle on July 10, 2009 8:47 AM |
Does the American public appreciate the essence of Wall Street? Is it as cutthroat and greedy as many would attest?
As with anything, I do not think it is fair or productive to generalize. There are plenty of world class people on Wall Street and the world is a better place for them. There are also plenty of people for whom I have no personal or professional regard. That’s life. Who couldn’t say the same about every industry.
While individual firms and certain executives would want the American public to focus on single situations, for our purposes currently let’s focus on the financial industry as a whole.
In so doing, it becomes very apparent that Wall Street is now showing it runs “one way.” How so?
The Wall Street Journal highlights how the financial industry is haggling over the valuation of warrants purchased by the U.S. Treasury as part of the TARP (Troubled Asset Recovery Program). The WSJ reports, J.P. Morgan to Send Warrants to Market.
I believe the WSJ ‘s choice of title for this article is amazingly weak. The simple fact is that Wall Street firms are complaining loud and clear about the price they may have to pay to repurchase warrants currently owned by the U.S. Treasury (that’s you and me, folks).
The WSJ writes:
Several Wall Street firms seeking to buy back warrants held by the government as part of the $700 billion financial bailout are complaining that the Treasury Department is demanding too high a price, according to people familiar with the matter.
The Treasury has rejected the vast majority of valuation proposals from banks, saying the firms are undervaluing what the warrants are worth, these people said. That has prompted complaints from some top executives. J.P. Morgan Chase and Co. Chief Executive James Dimon raised the issue directly with Treasury Secretary Timothy Geithner, disagreeing with some of the valuation methods that the government was using to value the warrants.
The inability to agree on a price has already prompted J.P. Morgan to take the next step in a complex process to remove the warrants from the hands of the government. The bank has waived its right to buy the warrants and will allow the Treasury to auction them in the public market, which bank executives say will result in an actual market price.
How gracious of Mr. Dimon! Who would be bidding on these warrants? Other Wall Street banks. Do you think there is a chance for more than a little bit of collusion in the bidding process to keep the warrant valuations excessively low? Of course. Who loses? The American taxpayer . . . again.
The banks are ‘flexing their muscles’ currently. They have very short memories as to the INDUSTRYWIDE bailout provided last year.
Let’s take a walk down the cavernous and hallowed thoroughfare known as Wall Street and look behind the doors and along the gutter. In doing so, perhaps we can expose some of the dirt and remind the executive inhabitants just how fortunate they are to have America as their partner!!
As we meander along, we see a crowd known in these parts as “Crony Capitalism.” This crowd is notorious for having perpetrated a massive sham in an examination known as Bank Stress Tests.
Further along on Wall Street, we see a few hustlers working some onlookers from out of town with what appear to be “Games of Chance: TALF, PPIP, TARP, FDIC, FASB.”
Let’s keep walking. Who is this out in the middle of the street, you ask? Oh, those are the local cops who ‘keep the peace.’ Let’s go meet them. We happen to encounter cops who seem to be extremely close with those in the industry. Too close, perhaps? Yes, many believe these cops are way too friendly. As such, we learn “FINRA Is Supposed to Police the Market.” We also meet other cops in the name of FASB who look the other way in condoning Wall Street’s “Putting Perfume on a Pig.”
Starting to smell around this street, no? Yep. It is. While the Wall Street participants would offer that they have paid back TARP funds and that taxpayers made money, let us remind them that across the entire financial industry, of which they are all inhabitants, the American taxpayer and the “TARP Has a $159 Billion Loss!”
We are almost finished with our journey, but before we end, let’s go over and see who the elderly man is over there. Oh, the Oracle. Yes, he has lots of experience and wisdom along this byway. Warren Buffett: “Wall Street Owes the American People.”
On that note, Mr. Dimon, Mr. Blankfein, Mr. Mack, Mr. Pandit, Mr. Lewis et al . . . your whining and complaining is not very becoming. In regard to the warrants, pay the American taxpayers more than they deserve. It’s the LEAST you can do, and you will still be WAY AHEAD in the process.