They have a deal. But what deal?

The UK bit the bullet and chose the "Public" solution of nationalisation : the US twists and turns to find a "Private" or "For Profit" solution, albeit a genetically modified one.

I propose a "Not for Loss" Capital Partnership within the framework of a US LLC.

eg a WaMu Partnership would operate as follows:

Step One: WaMu assets are put into the hands of a "Custodian".

Step Two: existing WaMu Equity is exchanged for proportional "Units" in WaMu gross revenues eg billionths.

Step Three: the WaMu "rump" now stripped of finance capital remains as "human capital" who receive an agreed proportional allocation of Units as "Managing Partners".

Step Four: the Treasury introduces Public investment as necessary from a Fund dedicated to the purpose, and in exchange receives Units from the Investor allocation, thereby diluting existing WaMu Investors.

Such a "Capital Partnership" is a simple, but radical, "hybrid" solution, and transcends the "Principal/Agency" conflict between the interests of owners and management which both the UK and US leave intact in different ways.

The interests of Wamu Partnership management and WaMu investors - whether existing private or new public investors - are now aligned in a simple, radical, and, for those interested in that sort of thing (there are a lot of petrodollars out there), Islamically sound, way.

It's not Rocket Science.

Wall Street and the Subprime Sting
WilliamBanzai7

Doyle Lonnegan: Your boss is quite a card player, Mr. Kelly; how does he do it?
Johnny Hooker: He cheats.
(From the Sting)

"This Sucker Could Go Down" "W"

It is ironic, that on the weekend that arguably
the greatest confidence game of all time is
reaching crescendo in Washington in the form of the
mother of all
Wall Street bailouts, Paul Newman, the star of The Sting,
the greatest Confidence movie of all time, has passed on.
In the Sting, Newman plays Henry "Shaw" Gondorf, a master con man who
orchestrates the greatest con until September 2008.

The Sting is chuck full of gangsters, incompetent cops, grifters,
colorful schemers, con men, marks
and shills, and keeps you on the edge of your seat straight though to its conclusion.
Just like the Great Subprime Swindle of 2008, there are
twists and turns galore, and you don't know how it
is going to until the final 10 minutes.

Welcome to the Great Subprime Swindle of 2008.
We are barely into what could not be a more fitting sequel to
the Sting.
In this new episode, the Wall Street gang succeeds
in conning Main Street USA out of its real
estate/retirement nest egg by
employing thousands of mortgage brokers, investment banking con men and
dubious ponziesque securities called collateralized Debt
Obligations and Credit Default Swaps. Like the Sting, the cast
is chuck full of colorful characters like Alan (the "Maestro") Greenspan, Dick (the "Gorilla") Fuld,
Maurice "Hank" Greenberg, James "Jimmy" Cayne
Henry "Hank" Paulsen and
Ben Bernanke (who will soon be known as "Father Moral Hazard"). What is it
with gangsters, con men, bankers and
nicknames? In the plot we get to watch innocent
bystanders a dopey mark like
AIG and now the American taxpayer, get conned and swindled out
roughly $700 Billion USD, no one knows for sure. As
in the Sting, the key stone cops (the SEC), show up
long after the action has taken place. Unlike the Sting,
there is no Shaw character to exact poetic justice against
the Wall Street gang.

One hundred years ago a man named Franklin Keyes, Esq.
(you guessed it, a Wall Street lawyer) published a tract
titled: "Wall Street Speculation, Its Tricks and Its Tragedies".
In it he says: "Wall Street is dominated by some of the brainiest
and shrewdest men in the country, natural born sharpers and schemers,
and before the average man can get the better of them,
except through the merest chance,
he will have to eat brain food for a long time."

Nothing could be further from the truth.

Paul Newman, you're than man, rest in peace.

THE NOT SO SURPRISING SUBPRIME PERFORMANCE OF THE SEC
WilliamBanzai7

As we prepare to parse through the
fine details of the new and improved
TARP, we can expect some
surprises. But there will is one non-surprise
that won't be very surprising at all.
The mother of all Federal interventions
in the global financial markets will
hardly make mention, if any at all, of the
once feared United States Securities and Exchange
Commission.

You will recall that during the last
mega Wall Street bust, the Dot.Com Bubble,
the SEC was humbled by the
aggressive enforcement tactics of
Elliot Spitzer. This time around, under
the feeble leadership of Chairman Cox,
the SEC seems misguidedly obsessed
with smoking out the evil doing
short sellers. You know, the same guys
who made the call on the opacity of the
Lehman and AIG financial statements. The ones
who guessed that something was cooking
between Goldman and AIG.
My theory is that the SEC,
shamed by the shorts, wants payback.

Last week, the FBI
announced that it is investigating who else--
AIG and Lehman, among many others.
At the end of the week the SEC made its own announcement,
it is terminating its voluntary
supervision program for Wall
Street investment Banks. Chairman
Cox admitted that the program
was flawed from the start. Duhhhh?

There are no more investment
banks to voluntarily submit to
the SEC's supervision. So the
whole silly operation is academic.
But, the silly idea of a voluntary program with an
opt out, that's right an opt out, reminds
me of Mark Twain's definition of
a banker: "A banker is a fellow
who lends you his umbrella when the
sun is shining, but wants it
back the minute it begins to
rain."

Chairmen Cox's primary mission when he
was appointed by W, was to neuter
the the agency. Sage McCain, the
then Chairman of the Senate Commerce
Committee, in his infinite regulatory ferver,
decided not to hold hearings on the
appointment. And the result: Mission
Accomplished!

While the SEC continues
its witch hunt for the wicked short selling
evil doers, the real culprits, the
Wall Street CEOs who lead the charge
into leveraged subprime bliss and
later lied publicly about their exposure
to the toxic byproducts,
are hiding out somewhere in
the Northeast frontier of Tarpistan.
And the once revered SEC, in all likelihood,
will not be the ones smoking them out.

R.I.P. (Regulatory Ineptitude Prevails) S.E.C.

The development of our Constitution in many areas was the result of compromise. Such compromise allowed some flexibility and checks and balances that contribute greatly to it remaining relevant for over 200 years. I just read the 116 page draft Recovery legislation and it seems to me to be workable in the same way ..,,,that is it includes flexibility and several forms of oversight that allows more reasoned and timely solution to the problem. It incorporates many of the thoughts I previously expressed in previous Curious Capitalist blog comments about the issues involved in the first 13 page draft. It gives the Treasury Secretary the authority to spend the $700 billion but in increments that would require additional verification based on what was done with the intitial drawdown of $250 billion. There are four different types of oversight reviewing the efficiency and economical conduct of the program, the effectivenss and impact of program results, the means to account for poor performance and fraud, and lessons learned on the actions/inactions of regulatory agencies. These oversight components allow more opportunity to change the program before all the $700 billion is spent. There are elements also encouraging lending entities to renegotiate troubled mortgages and some limited attempts to rein in CEO Golden Parachutes. The biggest obstacle will be if one of the key negotiators iare unable to compromise especially the House Republicans.