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As Part of Bailout: Wives Of Wall Street Players Received Hundreds of Millions

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April 15, 2011 – Comments (11)

I've been away from blogging on vacay for a couple of weeks, and though I've stopped in to comment here and there, I haven't been following CAPS much.  Has anyone else here passed along this story? If so, sorry for the double post.

From the best blog on the Internet, EconomicPolicyJournal.com:

(seriously, it is. bookmark it. wenzel updates the blog about 6 times a day. great stuff always.)

This one is totally insane. Thank heavens Ron Paul has put pressure on the Fed, trying to find out what it is up to. Rolling Stone magazine is out with a story so hot, it is going to rock louder than any music band the mag has ever covered. RS reports:

Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the "other" budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."

But if you want to get a true sense of what the "shadow budget" is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall's haul doesn't seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn't seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches.
Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley's investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income.

The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility. But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called "giving already stinking rich people gobs of money for no f*cking reason at all." If you want to learn how the shadow budget works, follow along. This is what welfare for the rich looks like.


In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper East Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.


The Macks make for an interesting couple. John, a Lebanese-American nicknamed "Mack the Knife" for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of "palm healing." The only other notable fact on her public résumé is that her sister was married to Charlie Rose.


It's hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that's exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan's penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment."
It there was justice in this world, Bernanke for this maneuver alone should be bunking with Bernie Madoff for the remainder of his natural life..

And let's see how Bernanke's Princeton buddy and Fed-apologist, Paul Krugman, deals with this, since he is all for taxing the rich, while Bernanke appears to be all for printing money for the rich, hundreds of millions. 

Robert Wenzel's Economic Policy Journal

Oh, but the Fed has saved us right? Well since I'm not a trophy wife married to a Wall Street big shot, no, I guess it hasn't but thanks for asking.

David in Qatar

 

11 Comments – Post Your Own

#1) On April 15, 2011 at 7:20 AM, alstry (35.09) wrote:

David,

I have been blogging about this stuff for three years...nobody cares until everybody has nothing....or WW3 breaks out.

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#2) On April 15, 2011 at 9:59 AM, OneLegged (< 20) wrote:

Anywhere that that much cash exists corruption is sure to reside.  Always. 

 

The Federal Reserve needs to go.  The sooner the better.

 

+1

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#3) On April 15, 2011 at 10:07 AM, Bert31 (25.55) wrote:

Hi David,

That is an intersting article.  The piece says that this was a loan.  Any idea if it was ever repaid? 

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#4) On April 15, 2011 at 10:21 AM, Jbay76 (< 20) wrote:

+1

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#5) On April 15, 2011 at 11:59 AM, PainterPoker (21.46) wrote:

Nice blog. Alstry has a point, but I think a lot of people care they just don't know how to do anything about it or are too afriad to.

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#6) On April 15, 2011 at 12:08 PM, 4everlost (29.31) wrote:

#3)

"And here's the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree."

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#7) On April 15, 2011 at 12:38 PM, lquadland10 (< 20) wrote:

I am voting Ron Paul weather he runs of not. Interesting. Is not Krugman paid by a soros backed group? http://en.wikipedia.org/wiki/Paul_Krugman

Anyway is he not Centenary Professor at the London School of Economics

http://en.wikipedia.org/wiki/London_School_of_Economics

Founded in 1895 by Fabian Society members Sidney Webb, Beatrice Webb and George Bernard Shaw,[5

http://en.wikipedia.org/wiki/Fabian_Society

The Fabian Society is a British socialist movement, whose purpose is to advance the principles of democratic socialism via gradualist and reformist, rather than revolutionary, means. It is best known for its initial ground-breaking work beginning late in the 19th century and continuing up to World War I. The society laid many of the foundations of the Labour Party and subsequently affected the policies of states emerging from the decolonisation of the British Empire, especially India.

Today, the society is a vanguard think tank of the far left. It is one of 15 socialist societies affiliated with the Labour Party. Similar societies exist in Australia (the Australian Fabian Society), Canada (the Douglas-Coldwell Foundation and in the past the League for Social Reconstruction) and New Zealand.

http://en.wikipedia.org/wiki/Ben_Bernanke

According to a January 26, 2010, column in The Huffington Post, a whistleblower has disclosed documents providing "'troubling details' of Bernanke's role in the AIG bailout". Republican Senator Jim Bunning of Kentucky said on CNBC that he had seen documents which show Bernanke overruled recommendations from his staff in bailing out AIG. The columnist says this raises questions as to whether or not the decision to bail out AIG was necessary. Senators from both parties who support Bernanke say his actions averted worse problems and outweigh whatever responsibility he may have for the financial crisis.[45]

Ben Graduated from Harvard and MIT Harvard and its affiliates, like many American universities,[26][27] are considered by some to be politically liberal (left of center).[28] Conservative author William F. Buckley, Jr. quipped that he would rather be governed by the first 2000 names in the Boston phone book than by the Harvard faculty,

Mit in late 1960s and early 1970s, student and faculty activists protested against the Vietnam War and MIT's defense research.[39][40] The Union of Concerned Scientists was founded on March 4, 1969 during a meeting of faculty members and students seeking to shift the emphasis on military research towards environmental and social problems.

You should look at the people that graduated from there down at the bottom. 

 And let's see how Bernanke's Princeton buddy and Fed-apologist, Paul Krugman, deals with this, since he is all for taxing the rich, while Bernanke appears to be all for printing money for the rich, hundreds of millions.  Yep they do make strange bed fellows.

 

 

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#8) On April 15, 2011 at 8:42 PM, FleaBagger (29.31) wrote:

Somebody called that ball in that pocket when these plans were first being bandied about:

 

 

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#9) On April 15, 2011 at 8:59 PM, whereaminow (21.10) wrote:

Flea,

Those are great videos from the Khan Academy. Thanks for sharing!

David in Qatar

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#10) On April 17, 2011 at 9:37 PM, reledreem (< 20) wrote:

This is unbelievable. The corruption and sense of entitlement these people posess is infuriating. Why is this not a major news story ?

 

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#11) On April 21, 2011 at 11:30 AM, mtf00l (44.70) wrote:

The news is one of the assets on the books...

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