Spitzer Gets in on the D.C. Circus Act

While an out of control Congress remains my biggest fear at the moment, I am troubled by the resurgence of people that I thought were dead and buried. Would AIG have blown up the world if Eliot Spitzer would have left Hank Greenberg alone? We will never know. But Eliot is right to focus on the bigger picture - the counterparty payouts from AIG to Goldman et al.

At least we now know where the money went - we had a right to know after all, and the stonewalling was outrageous. Goldman's stock very well would be at zero without Hank Paulson's intervention last fall - they got the money they needed and later Warren Buffett cut them a check, both of which added badly needed liquidity and saved 85 Broad from ending up like Lehman and Bear. But the shop is of course greatly hobbled, and now Wall Street is paying for the sins of many Goldman alums over the years.

More on that later, but this Spitzer interview with Fareed Zakaria might be of interest:

Meanwhile it appears the administration is coming to its senses over the AIG Bonus Tax - will the stock index futures get a (feeble) bid this evening as Team Obama comes to its senses?

When the excise tax initially passed the House this week, President Barack Obama appeared supportive, putting out a statement saying it rightly reflects the outrage that many people feel. Yet all weekend long, it appears the White House has been backing away from that position, with White House Chief of Staff Rahm Emanuel assuring the finanical community that the bill is not going to reach the president’s desk.

“You really have to differentiate between what you can legally do about bonuses moving forward and about clawing back old bonuses,” Bernstein said Sunday. “Clawing back old bonuses really does invoke constitutional issues. But as the president said, we are going to pursue, and I know the Congress feels the same way, any means—any legal means—necessary to do so.”

Bernstein suggested the House bill could scare off private investors the government needs now to come in to help buy up toxic assets as part of it’s bank plan—to be rolled out this week. This Week

Poor Tim Geithner - the furor is hitting the fan just as he tries to launch his TALF plan. Everyone in Washington needs to STFU and get working on Stimulus 2.0. Enough of the demonizing of Wall Street - it is time to move forward.

Unless of course the administration has a grander plan - one that neuters NYC and Wall Street for the next few years while the populist rhetoric continues. If it continues 40 is indeed the new 20 on the VIX, and hopes for a sustained rally in the S&P will have to wait, at least until credit markets show signs they can hold together.

But for the moment very few are standing up to Obama and his cronies - this quote is on the money, but the banker would not go on the record and use his name:

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.” “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” FT
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Preview for Tonight’s 60 Minutes:

Watch CBS Videos Online
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Spitzer: I failed in a very important way
CNN

White House: AIG Bonus Tax May Be ‘Dangerous’
ABC News

TRANSCRIPT OF THIS WEEK
ABC

Banker fury over tax ‘witch-hunt’
FT
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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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