TheTradingReport

This analysis is from Martin Denholm, Senior Editor, Investment U
Wednesday, February 3, 2010

If you’ve ever listened to the uber-annoying Chris Berman recap NFL touchdown plays on ESPN, you’re no doubt familiar with his tiresome refrain: “He… could… go… all… the… way.”

When I read that Treasury Secretary Timothy Geithner will stop at nothing to get back “every penny of taxpayer assistance to the financial system,” I imagined a similar cry of: “We… want… every… penny… back.”

Probably not quite as brash as Berman, though. More like Oliver Twist asking for another cup of soup…

Speaking at the Senate Finance Committee, Geithner vowed to impose fees on America’s banks and other financial institutions until “the cost of the rescue to the taxpayer is zero.”

Very noble. But of course, none of this would be necessary if it weren’t for my fellow dastardly Brits, who started this mess…

Dear Britain: Take Our Rotten Bank, Or Take the Blame

Got a pesky credit crisis on your hands? Need someone to blame?

Just cast your eye across the Atlantic and blame the British. Writing in his new book, On The Brink, former Treasury Secretary Hank Paulson absolves himself of all responsibility for the credit crisis by flatly stating: “The British screwed us.”

According to the misguided former Goldman Sachs “fat cat,” the Brits triggered the financial crisis when the Financial Services Authority (FSA) refused to approve an agreement that would have seen Barclays buy out Lehman Brothers.

Hardly surprising, as it would have put British bank, Barclays, on the hook for all of Lehman’s debts. According to the Daily Telegraph, though, the FSA and U.K. Chancellor Alastair Darling were willing to go 50:50 with the U.S. Treasury on the deal… but Paulson rejected it because he feared “the toxic quality of Lehman’s assets would have guaranteed a loss.”

But he was just fine with Britain taking it all instead. So much for that much-ballyhooed “worldwide effort” and “global cooperation,” eh Hank?

Which brings us to the current Financial Crisis Responsibility Fee…

Bailouts and Bankruptcies

In the aftermath of the financial meltdown and the hundreds of billions of dollars that taxpayers forked out to save broken-down banks, President Obama, Geithner, et al have proposed the grandly named Financial Crisis Responsibility Fee (no confirmation on whether they had to hold a separate conference call to decide upon the name). It aims to raise $90 billion over 10 years, or for as long as it takes to pay back all the bailout money.

That’s assuming enough banks are still in business, of course. With 2010 just five weeks old, 15 banks have already gone bust. And the latest round of failures has put the FDIC on the hook for another $2 billion in payouts to affected customers.

Best regards,

Martin Denholm