Goldman (and other banks) "Hedges"

The Market Ticker: Commentary on the Capital Markets
Sunday, April 12. 2009.
Posted by: Karl Denninger in Banking System at 14:55

There's a rumor about Goldman Sachs flying around on the street - allegedly they are about to report their second-best quarter in history, +$12 billion or so.

In addition, there is this from Bloomberg:

A 47 percent gain for the company’s stock price this year and a return to profitability in the first quarter may help Chief Executive Officer Lloyd Blankfein raise new money, analysts said. That might let Goldman Sachs, the sixth-biggest bank, return the cash received in October from the Treasury’s Troubled Asset Relief Program and shake off compensation and hiring restrictions imposed on banks that took the U.S. aid.

Gee, you don't think being paid by the taxpayer through AIG's "conduit" for losses that didn't (yet) happen at 100 cents on the dollar might have anything to do with that, do you?

And further (and potentially much worse) there is the repeated statement by Goldman executives that they were "fully hedged" against a potential counterparty default by AIG.

One wonders - was that "hedge" to be short the equity on AIG itself, perhaps?

Why is this important?

Because if that's how Goldman hedged they got paid twice and the taxpayer literally got robbed.

Someone in Congress needs to look into this now; there are already rumblings of investigation. Those rumblings need to get a lot louder and turn into subpoenas, not "polite inquiries."

If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

This is not small potatoes either - we're talking $100 billion+ in aggregate with these various banks on a worldwide basis.

We the people deserve answers on this right now and if persons in our government handed these banks $100 billion dollars of our tax money for what was a covered bet, allowing them to collect twice on a risk that had not yet been realized (when at most they were entitled to collect once via their private hedging activity) every single person involved in that scandal must be immediately removed from office, prosecuted if possible, and every nickel of those funds must be clawed back by whatever means are necessary.

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

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Pols Blast Time Warner Cable's Bandwidth Metering.

New York Congressman Calls Plan ‘Monopolistic' and Vows to Fight

by: Todd Spangler -- Multichannel News, 4/8/2009 11:37:09 AM MT

Time Warner Cable has raised the ire of politicians in New York and North Carolina over plans to impose monthly usage limits on broadband subscribers -- and charge them $1 per Gigabyte if they exceed the caps.

Rep. Eric Massa (D.-N.Y.), who represents a district in upstate New York, called the operator's bandwidth-metering plan "monopolistic" and said one of the outcomes could be that "middle-income families will see outrageous Internet bills."

"With limited choices in broadband providers, and virtual monopolies in many market areas, I view this as nothing more than a large corporation making a move to force customers into paying more money," Massa (pictured, left) said in a statement Tuesday. "I firmly oppose capping Internet usage and I will be taking a leadership role in stopping this outrageous, job-killing initiative."

Meanwhile, city council members and the mayor of Greensboro, N.C., are also lining up to oppose the MSO's usage-based pricing plan.

"I don't like it at all," Greensboro Mayor Yvonne Johnson said, according to a report in the local News-Record. "I'm not a happy camper about it. I think it's bad for their customers and it's bad for the city."

The Greensboro city council doesn't have authority to regulate Time Warner Cable but Johnson said local officials will voice their concerns with the operator.

Time Warner Cable has defended the plan, likening it to usage-based pricing schemes used by wireless phone providers.

The MSO kicked off a bandwidth-metering test last summer in Beaumont, Texas, and is expanding the model to four markets: Austin, Texas; San Antonio, Texas; Greensboro, N.C.; and Rochester, N.Y.

Under the plans being tested, customers are offered four different tiers ranging in price from $29.95 to $54.90 per month with maximum usage capped at 5, 10, 20 and 40 Gigabytes per month. Users who go over their caps are billed at $1 per Gigabyte in overage fees.

In a statement Monday, Time Warner Cable chief operating officer Landel Hobbs said the consumption-based billing plans will allow the MSO to upgrade its infrastructure to DOCSIS 3.0, to offer "wideband" service with speeds up to 100 Mbps as well as higher speeds for existing customers.

"With regard to consumption-based billing, we have determined that as broadband usage and penetration grow, there are increasing differences in the amount of bandwidth our customers consume," Hobbs said. "Our current pricing plans require all users to pay the same amount, whether they check e-mail once a month or download six movies a day. As the amount of usage has dramatically diverged among users, this is becoming inherently unfair and not the way most consumers want to pay for goods they consume."

Added Hobbs: "When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?"

Based on customer feedback, Time Warner Cable now is developing a "super-tier" that allows for up to 100 Gigabytes of broadband usage per month in all test markets and also is providing a "gas gauge" tool to customers so they can see how much bandwidth they're using in a given period, according to Hobbs.

Pali Capital analyst Rich Greenfield, in a note to investors Wednesday, said asking consumers to keep checking their consumption "sounds tedious."

"Let's start with a simple premise: moving from an all-you can eat ‘buffet line' for bandwidth usage via broadband to an a la carte system of paying for every gigabyte you eat is subscriber-unfriendly and will be confusing to the average broadband user," he wrote, referencing the opposition by Massa and the Greensboro city council.

"In an increasingly competitive world, the age-old saying of ‘keep it simple stupid' should not be overlooked," Greenfield continued. "If competition exists, we suspect a provider offering broadband without caps or a simplified strategy toward broadband will gain meaningful market share, assuming TWC continues to move forward with its bandwidth-cap strategy."

TWC is the only major U.S. cable operator trying out usage-based pricing, although other Internet providers, including AT&T, are also testing the concept.

Other MSOs, meanwhile, have implemented standard bandwidth caps but currently don't institute overage fees. ComcastCharter Communications and Cox Communications impose maximum-usage as well. limits subscribers to 250 Gigabytes per month, and both

At last week's Cable Show '09, Jim Blackley, Cablevision Systems senior vice president of corporate engineering and technology, said on a panel discussion that bandwidth-usage caps are not in the MSO's plans.

"We don't want customers to think about byte caps so that's not on our horizon," he said. "We literally don't want consumers to think about how they're consuming high-speed services. It's a pretty powerful drug and we want people to use more and more of it."

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.