Big three put heads together, turn tables on Cerberus

Cerberus will lose stake in Chrysler as condition of Treasury‘s plan. (WSJ)

Fate of Wagoner and auto industry decided by Rattner, Geithner, Summers in Roosevelt Room of White House. (WSJ)

On eve of G20 meetings, World Bank announces $50 billion program to boost global trade. (Reuters)

Fed takes the lead in stress-testing 19 banks. (Bloomberg)

Rockefeller investigates health giant for out-of-network rate-setting practices; points to “outright fraud.” (NYT)

Commerce Secretary Locke will push for “fair trade.” (WSJ)

What about Cerberus?

President Obama issued an ultimatum to GM and Chrysler today, setting out strict guidelines for the carmakers to meet before obtaining more government aid. Coupled with the forced resignation of GM CEO Wagoner, the Obama administration’s heavy-handed approach to Detroit, as compared to its approach to Wall Street, seems to indicate a double standard. Why not bank CEOs? asks David Sirota. The Huffington Post’s Sam Stein notes that Gibbs struggled to explain the differing approaches.

The irony of this is that a major Wall Street private equity firm actually owns 80% of Chrysler, but has managed to avoid serious scrutiny during the bailout process. Take it from Yahoo Finance’s Tech Ticker:

Continue reading What about Cerberus?

Fly on the wall has explaining to do

US has had government-appointed attorney inside AIG board meetings and on-site since 2005. (WSJ)

Cummings and 26 other members demand detailed information on why AIG made full payments to counterparties. (NYT)

Gillibrand defended Big Tobacco as lawyer at New York firm during ’90s. (NYT)

Treasury releases sweeping regulatory changes; SEC chair says fears of end of hedge funds are unfounded. (WSJ)

White House meeting at noon will include Dimon, Pandit, Blankfein, Lewis; Summers says meeting is measure of ties between government and banking industry. (Bloomberg)

Officials see policy failures in drugs & finance

Geithner to outline regulatory overhaul today; hedge fund managers Paulson and Cooperman warn against excessive measures. (NYT)

US drug war has been a failure, says Clinton in Mexico, blaming “insatiable demand.” (WaPo)

In face of worker protests, Corzine gets authority for 2-day furlough. (NJ Star-Ledger)

Auto task force will recommend loans rather than bankruptcy; Rattner sees “real people” behind numbers. (WSJ)

PIMCO‘s Gross says Fed needs to double balance sheet to $6 trillion. (Reuters)

A closer look at a toxic avenger

To paraphrase Paul Krugman, it looks like the zombies have won. Insolvent banks continue to roam the earth, sucking up unfathomable sums of taxpayer capital, provided to hedge fund intermediaries as nonrecourse loans. The scheme is designed to create inflated “auction” prices by incentivizing investors to over-bid on assets which carry almost no downside risk – for them, that is.

Geithner, Summers and company test-marketed the plan with friends and former colleagues on Wall Street thoroughly over the past month to find the formula that would send high finance into the fits of ecstasy we witnessed on Monday. Hedge fund directors were among Treasury’s most coveted focus groups.

Continue reading A closer look at a toxic avenger

Social fabric stretched thin

Wall Street expresses anger at policymakers at Future of Finance conference; private equity manager says Washington is “stretching our social fabric.” (WSJ)

Specter to oppose EFCA. (Washington Independent)

Top hedge fund managers raked in billions in 2008; Simons, Paulson, Arnold top Alpha list. (NYT)

Obama tax task force will include AIG director Feldstein, Morgan Stanley director Tyson, no fresh faces. (Bloomberg)

Clean energy lobbyists vie for stimulus funds; Cleantech for Obama will soon establish permanent group. (Bloomberg)

DeLong has a little brother in this fight

Since the Obama administration leaked details of its toxic asset plan on Friday night, the reaction in the blogosphere has been swift and harshly critical: the zombie plans have won, writes Paul Krugman; it’s a Rube Goldberg device for shifting losses to the Treasury, writes James K Galbraith; really bad ideas, writes Atrios.

There has, however, been one prominent exception: Brad Delong, who defends the Geithner plan in this FAQ posted Saturday. Josh Marshall and Hilzoy have since pointed to DeLong’s stance as evidence that the Treasury plan has not been universally panned by the reality-based community. Krugman saw fit to argue back. Meanwhile, the Obama administration is making a push to build blogger support for the new bank bailout, and DeLong is their highest-profile ally.

But DeLong has a credibility issue. Here at LittleSis, we have a sneaking suspicion that his views have been shaped by family ties: Brad‘s brother Chris, a hedge fund manager linked closely to Robert Rubin, is poised to profit handsomely from the toxic asset plan.

Continue reading DeLong has a little brother in this fight

Inflationary expectations

Treasury releases details of toxic asset purchase plan; government hopes generous loans to investors will encourage them to overpay for assets. (NYT)

Romer says private investors who participate in toxic asset plan are “the good guys here.” (Fox News)

Senate will vote on bonus tax legislation this week; Gregg says practical implications are bankruptcy for the US. (NYT)

Rattner says Chrysler and GM may need more than $21.6 billion requested. (Bloomberg)

Costco, Starbucks, and Whole Foods propose Employee Free Choice Act compromise, breaking with employer coalition. (WaPo)