So far, the bailouts are going to cost American taxpayers $ 4.6 trillion dollars. to put that number in perspective, here are the dollar amounts involved in a few other past expenditures:
Marshall Plan:
Cost: $12.7 billion,
Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase:
Cost: $15 million,
Inflation Adjusted Cost: $217 billion
Race to the Moon:
Cost: $36.4 billion,
Inflation Adjusted Cost: $237 billion
S&L Crisis:
Cost: $153 billion,
Inflation Adjusted Cost: $256 billion
Korean War:
Cost: $54 billion,
Inflation Adjusted Cost: $454 billion
The New Deal:
Cost: $32 billion (Est),
Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq:
Cost: $551 billion,
Inflation Adjusted Cost: $597 billion
Vietnam War:
Cost: $111 billion,
Inflation Adjusted Cost: $698 billion
NASA:
Cost: $416.7 billion,
Inflation Adjusted Cost: $851.2 billion
Yep--$ 4.6 trillion is a lot of money.
Saturday, November 29, 2008
Sunday, November 09, 2008
Did Abramovich steal a £1.2 bn stake in oilfield?
Chelsea's surprise defeat in Rome on Tuesday night may have disappointed Roman Abramovich but it may not preoccupy him for long. He has a match of a quite different kind on his mind. Lawyers in London are expected to decide this week whether to pursue a case against him on behalf of investors who have made a startling allegation. Abramovich, they say, effectively stole their £1.2 billion oilfield. The Russian billionaire has strenuously denied the allegation and many will find it an outlandish proposition.
At 42, Abramovich is one of the world's richest men with a fortune estimated at £15 billion and although there have been dark murmurings about how he managed to rise from street trading in Moscow to controlling one of Russia's biggest oil concerns, no one has ever proved he acted improperly. Now a long-running argument over ownership of a fabulously rich Siberian oilfield is reaching its endgame here in London. Abramovich has just won an important round in this fiercely-fought legal battle in the High Court but the Evening Standard has learned an appeal is being discussed.
If it goes ahead, it would plunge the Chelsea owner back into a legal maelstrom that has swirled around him for more than three years. At its heart is a claim that he and his company, Millhouse Capital, swindled investors - including more than 4,000 British shareholders - in a deal over a Russian oilfield described by one expert as "the pearl of western Siberia".
The Priobskoye field sits on a vast bog and can be worked only in winter when the ground freezes. It is more than 1,500 miles from Moscow and is one of the most hostile places on earth but in its southern part, wells are producing 150,000 barrels of oil a day. Half of these riches were owned by a British-based company, Sibir Energy, but according to its chief executive, Henry Cameron, they were stolen in what he described in a letter to shareholders as "barefaced corporate robbery".
Cameron is an Aberdeen lawyer who was dealing with the Russians when the Soviet fishing fleets came to Scotland in the Eighties. He switched to oil and, backed by British investors, headed a company that became Sibir. Part of its holding was a licence to drill for oil in Priobskoye. Sibir, through another company called Yugraneft, joined forces with Abramovich's oil giant, Sibneft, to exploit the Priobskoye field.
In his office in Mayfair, Cameron revealed how a venture he believed could make his investors rich turned into one of the oil industry's most bitter disputes. He speaks coolly, with all the detail of a complicated case at his command. But there is no disguising his anger.
Last week Mr Justice Christopher Clarke concluded in the High Court that the English courts were not the right place to decide the allegations against Abramovich. The billionaire was neither resident nor domiciled here, he said, adding that the case was about "the conduct of Russians, in Russia under Russian law". He dismissed Yugraneft's claims and said they were "an abuse of process".
Cameron is unrepentant. His team of lawyers is looking at grounds for an appeal and a decision is likely within the next few days. It will be watched closely by British companies who deal with Russia.
Some may wonder why, after this High Court setback, Cameron would seek to carry on fighting. The reason, he says, is that he believes a wrong was committed and he wants justice.
In his ruling, Mr Justice Christopher Clarke noted the Cameron camp's contention that "what has happened is nothing less than fraud on a grand scale". Cameron says trouble started soon after his company, Sibir, and Abramovich's Sibneft agreed their deal to exploit the Priobskoye field.
At first, Cameron says, everything seemed to go well. Then Sibir started talks to buy into Moscow's huge oil refinery, the only one in the city and considered one of the Russian oil industry's great prizes. Also bidding for the Moscow refinery was Abramovich's Sibneft, which had long sought control of this strategic asset.
This is the point in the story at which personalities appear to play a part. Sibir's biggest shareholder is Chalva Tchigirinsky, a construction tycoon who counted the mayor of Moscow, Yuri Luzhkov, among his friends. The mayor controlled the oil refinery through the large stake held by the City of Moscow.
Mr Luzhkov was no friend of Abramovich. Luzhkov once noted the hundreds of millions of pounds Abramovich was sinking into Chelsea Football Club and said: "He is spitting on Russia." His words stung Abramovich. He has invested heavily in Russian football. Charities in the country, especially those for Jewish causes, have benefited greatly from his wealth. He judged Luzhkov's rebuke unwarranted and unfair. Injury was added to this insult, it seemed, when Luzhkov teamed up with his friend Tchigirinsky to stop Abramovich's march on the Moscow refinery.
Mr Justice Clarke noted in his High Court judgment: "In April 2004 Mr Abramovich is said to have told Mr Yuri Luzhkov, the mayor of Moscow, that the reason he had diluted Yugraneft's interest in Sibneft-Yugra was to repay Mr Tchigirinsky for his having blocked attempts by Sibneft in 2001 and 2002 to take over the Moscow oil refinery."
The reference to "diluted interest" is at the centre of the alleged scam. In September 2002, an extraordinary meeting of representatives in the partnership to drill for oil in the Priobskoye field took place in Moscow. Abramovich's Sibneft representative met an executive who had been given power of attorney to act for Yugraneft, David Davidovich. Davidovich was an adviser to Eugene Schvidler, Abramovich's closest aide. At the meeting it was decided to increase the shares in the Priobskoye partnership by bringing in three new companies, all registered offshore.
The effect of the new share distribution was to cut Yugraneft's holding from 50 per cent to five per cent. Another meeting was held a few months later. Again, Davidovich had power of attorney to act for Yugraneft. And again, Yugraneft's share of the Priobskoye venture was cut, this time to one per cent.
"We knew absolutely nothing about it," Cameron said. "People have said: 'How can something like that happen without your knowing?' Well, if you're not expecting it, why would you check? You don't check the deeds to your house to make sure you still own it."
Mr Justice Christopher Clarke disclosed in his judgement precisely how Cameron and his colleagues found out the half-share they thought they had in one of Russia's richest oilfield's was actually worth a mere one per cent.
"In December 2003," the judge said, "an employee of Ernst and Young, who were Sibneft's auditors, hinted to Mr Betsky of Sibir that the dilutions may have occurred and followed that up with an email of 6 December which suggested that he should check the ownership status of Sibneft-Yugra."
Sibir did check. What Cameron and his associates found led them to believe the company had been the victim of fraud. Sibir brought a case in the Russian courts but without success.
Cameron's people discovered their shareholding had ended up with companies registered in the British Virgin Islands. They took their argument there but again it failed. The courts decided they had no jurisdiction.
So where were the shares? Cameron says it is impossible to put a precise value on the holding without an extensive valuation but an estimate is around $2 billion, or £1.2 billion. That amount of stock cannot simply disappear. Nor did it. As the High Court case revealed, in its accounts issued in 2004, Abramovich's company, Sibneft, carried this note: "In December 2003 the company increased its share in Sibneft-Yugra up to 99 per cent for the nominal consideration." The offshore companies had been absorbed into Abramovich's oil empire.
The following year, 2005, Abramovich sold out to Gazprom, the state-backed Russian energy giant. He is believed to have received £5.5 billion for his assets, which, by then, included virtually all the Priobskoye shares. As Cameron says, his company's half-share of the oilfield is now owned by Gazprom and there is little hope of recovering it.
But if his lawyers can find a way to prove Abramovich took it improperly, he says, there may yet be a chance of claiming the value back from him. Certainly, Abramovich could afford it. One of the effects of the recent litigation was to prompt an inquiry into his wealth. It revealed that many of his companies are registered offshore, with ownership of Chelsea Football Club held by Chelsea Ltd, which is owned by Isherwood Investments, a Cypriot company, which in turn is owned by Taverham Holdings, registered in the British Virgin Islands.
The complex network of companies controlled by Abramovich holds most of his assets. The High Court case laid bare, for the first time, his vast fortune. The judge noted that his £30 million house in Knightsbridge represented just 0.5 per cent of his net worth. He has houses and property in Britain, France, Sardinia, the United States and St Barts in the Caribbean. He also has two ski chalets in Colorado, a French château and three homes in Russia. He uses two executive jets and chooses from a fleet of helicopters and cars. He also has "several yachts on which he spends a great deal of time", the High Court documents record.
But Abramovich does not spend much time in Britain. The judge said the Chelsea owner spent only 57 days here last year on visits mostly connected to football matches. This fact has proved a major stumbling block for Cameron's lawyers.
The ruling that Abramovich is not domiciled in Britain leaves them searching for a way to bring the Priobskoye oilfield case before a British court. So far, they haven't found one, but Henry Cameron is determined not to give up. "We are not done yet," he said.
Abramovich's spokesman, John Mann, declined to comment. "We'll let this ruling, and previous rulings on this case, speak for themselves," he said.
Article Courtesy:
http://www.thisislondon.co.uk/standard/article-23583545-details/Did+Abramovich+steal+a+£1.2+bn+stake+in+oilfield/article.do
At 42, Abramovich is one of the world's richest men with a fortune estimated at £15 billion and although there have been dark murmurings about how he managed to rise from street trading in Moscow to controlling one of Russia's biggest oil concerns, no one has ever proved he acted improperly. Now a long-running argument over ownership of a fabulously rich Siberian oilfield is reaching its endgame here in London. Abramovich has just won an important round in this fiercely-fought legal battle in the High Court but the Evening Standard has learned an appeal is being discussed.
If it goes ahead, it would plunge the Chelsea owner back into a legal maelstrom that has swirled around him for more than three years. At its heart is a claim that he and his company, Millhouse Capital, swindled investors - including more than 4,000 British shareholders - in a deal over a Russian oilfield described by one expert as "the pearl of western Siberia".
The Priobskoye field sits on a vast bog and can be worked only in winter when the ground freezes. It is more than 1,500 miles from Moscow and is one of the most hostile places on earth but in its southern part, wells are producing 150,000 barrels of oil a day. Half of these riches were owned by a British-based company, Sibir Energy, but according to its chief executive, Henry Cameron, they were stolen in what he described in a letter to shareholders as "barefaced corporate robbery".
Cameron is an Aberdeen lawyer who was dealing with the Russians when the Soviet fishing fleets came to Scotland in the Eighties. He switched to oil and, backed by British investors, headed a company that became Sibir. Part of its holding was a licence to drill for oil in Priobskoye. Sibir, through another company called Yugraneft, joined forces with Abramovich's oil giant, Sibneft, to exploit the Priobskoye field.
In his office in Mayfair, Cameron revealed how a venture he believed could make his investors rich turned into one of the oil industry's most bitter disputes. He speaks coolly, with all the detail of a complicated case at his command. But there is no disguising his anger.
Last week Mr Justice Christopher Clarke concluded in the High Court that the English courts were not the right place to decide the allegations against Abramovich. The billionaire was neither resident nor domiciled here, he said, adding that the case was about "the conduct of Russians, in Russia under Russian law". He dismissed Yugraneft's claims and said they were "an abuse of process".
Cameron is unrepentant. His team of lawyers is looking at grounds for an appeal and a decision is likely within the next few days. It will be watched closely by British companies who deal with Russia.
Some may wonder why, after this High Court setback, Cameron would seek to carry on fighting. The reason, he says, is that he believes a wrong was committed and he wants justice.
In his ruling, Mr Justice Christopher Clarke noted the Cameron camp's contention that "what has happened is nothing less than fraud on a grand scale". Cameron says trouble started soon after his company, Sibir, and Abramovich's Sibneft agreed their deal to exploit the Priobskoye field.
At first, Cameron says, everything seemed to go well. Then Sibir started talks to buy into Moscow's huge oil refinery, the only one in the city and considered one of the Russian oil industry's great prizes. Also bidding for the Moscow refinery was Abramovich's Sibneft, which had long sought control of this strategic asset.
This is the point in the story at which personalities appear to play a part. Sibir's biggest shareholder is Chalva Tchigirinsky, a construction tycoon who counted the mayor of Moscow, Yuri Luzhkov, among his friends. The mayor controlled the oil refinery through the large stake held by the City of Moscow.
Mr Luzhkov was no friend of Abramovich. Luzhkov once noted the hundreds of millions of pounds Abramovich was sinking into Chelsea Football Club and said: "He is spitting on Russia." His words stung Abramovich. He has invested heavily in Russian football. Charities in the country, especially those for Jewish causes, have benefited greatly from his wealth. He judged Luzhkov's rebuke unwarranted and unfair. Injury was added to this insult, it seemed, when Luzhkov teamed up with his friend Tchigirinsky to stop Abramovich's march on the Moscow refinery.
Mr Justice Clarke noted in his High Court judgment: "In April 2004 Mr Abramovich is said to have told Mr Yuri Luzhkov, the mayor of Moscow, that the reason he had diluted Yugraneft's interest in Sibneft-Yugra was to repay Mr Tchigirinsky for his having blocked attempts by Sibneft in 2001 and 2002 to take over the Moscow oil refinery."
The reference to "diluted interest" is at the centre of the alleged scam. In September 2002, an extraordinary meeting of representatives in the partnership to drill for oil in the Priobskoye field took place in Moscow. Abramovich's Sibneft representative met an executive who had been given power of attorney to act for Yugraneft, David Davidovich. Davidovich was an adviser to Eugene Schvidler, Abramovich's closest aide. At the meeting it was decided to increase the shares in the Priobskoye partnership by bringing in three new companies, all registered offshore.
The effect of the new share distribution was to cut Yugraneft's holding from 50 per cent to five per cent. Another meeting was held a few months later. Again, Davidovich had power of attorney to act for Yugraneft. And again, Yugraneft's share of the Priobskoye venture was cut, this time to one per cent.
"We knew absolutely nothing about it," Cameron said. "People have said: 'How can something like that happen without your knowing?' Well, if you're not expecting it, why would you check? You don't check the deeds to your house to make sure you still own it."
Mr Justice Christopher Clarke disclosed in his judgement precisely how Cameron and his colleagues found out the half-share they thought they had in one of Russia's richest oilfield's was actually worth a mere one per cent.
"In December 2003," the judge said, "an employee of Ernst and Young, who were Sibneft's auditors, hinted to Mr Betsky of Sibir that the dilutions may have occurred and followed that up with an email of 6 December which suggested that he should check the ownership status of Sibneft-Yugra."
Sibir did check. What Cameron and his associates found led them to believe the company had been the victim of fraud. Sibir brought a case in the Russian courts but without success.
Cameron's people discovered their shareholding had ended up with companies registered in the British Virgin Islands. They took their argument there but again it failed. The courts decided they had no jurisdiction.
So where were the shares? Cameron says it is impossible to put a precise value on the holding without an extensive valuation but an estimate is around $2 billion, or £1.2 billion. That amount of stock cannot simply disappear. Nor did it. As the High Court case revealed, in its accounts issued in 2004, Abramovich's company, Sibneft, carried this note: "In December 2003 the company increased its share in Sibneft-Yugra up to 99 per cent for the nominal consideration." The offshore companies had been absorbed into Abramovich's oil empire.
The following year, 2005, Abramovich sold out to Gazprom, the state-backed Russian energy giant. He is believed to have received £5.5 billion for his assets, which, by then, included virtually all the Priobskoye shares. As Cameron says, his company's half-share of the oilfield is now owned by Gazprom and there is little hope of recovering it.
But if his lawyers can find a way to prove Abramovich took it improperly, he says, there may yet be a chance of claiming the value back from him. Certainly, Abramovich could afford it. One of the effects of the recent litigation was to prompt an inquiry into his wealth. It revealed that many of his companies are registered offshore, with ownership of Chelsea Football Club held by Chelsea Ltd, which is owned by Isherwood Investments, a Cypriot company, which in turn is owned by Taverham Holdings, registered in the British Virgin Islands.
The complex network of companies controlled by Abramovich holds most of his assets. The High Court case laid bare, for the first time, his vast fortune. The judge noted that his £30 million house in Knightsbridge represented just 0.5 per cent of his net worth. He has houses and property in Britain, France, Sardinia, the United States and St Barts in the Caribbean. He also has two ski chalets in Colorado, a French château and three homes in Russia. He uses two executive jets and chooses from a fleet of helicopters and cars. He also has "several yachts on which he spends a great deal of time", the High Court documents record.
But Abramovich does not spend much time in Britain. The judge said the Chelsea owner spent only 57 days here last year on visits mostly connected to football matches. This fact has proved a major stumbling block for Cameron's lawyers.
The ruling that Abramovich is not domiciled in Britain leaves them searching for a way to bring the Priobskoye oilfield case before a British court. So far, they haven't found one, but Henry Cameron is determined not to give up. "We are not done yet," he said.
Abramovich's spokesman, John Mann, declined to comment. "We'll let this ruling, and previous rulings on this case, speak for themselves," he said.
Article Courtesy:
http://www.thisislondon.co.uk/standard/article-23583545-details/Did+Abramovich+steal+a+£1.2+bn+stake+in+oilfield/article.do
Saturday, October 11, 2008
Fiscally Vulnerable Countries - World Bank Report
A new World Bank report on Thursday named 28 countries in Africa, Asia and the Middle East facing financial strains due to high food and fuel costs and now from a cascading credit crisis.
World Bank President Robert Zoellick said the world should not forget the "human rescue" needed in developing countries as it focused on the spreading market crisis.
Among the "fiscally vulnerable" countries are Jordan, Cambodia, Lebanon, Jamaica, Eritrea, Ethiopia, Tajikistan, Madagascar, Nepal, Sri Lanka, Rwanda, Malawi, Ivory Coast, Eritrea, Fiji, Haiti, Seychelles and Mauritania.
The Report, published ahead of weekend International Monetary Fund and World Bank meetings of finance and development ministers, said many of these countries had little or no room to take on new debt to afford the higher prices.
"Currently these countries, on average, are set to receive no increase in project and program aid," Zoellick said.
The Report on financially-strained countries said policy actions to deal with higher food and energy prices were causing the fiscal pressures.As prices climbed, governments have tried to shield the poor by imposing fuel and food tax rate cuts, increasing subsidies and underpricing electricity from oil and gas.
Zoellick also noted that it was important that the world's industrial countries did not forget their promises of aid to the poorest countries.
Zoellick said the G7 industrial countries were "far behind" on the promises they made at a 2005 summit of world leaders at Gleneagles, Scotland, where they pledged to double aid to Africa by 2010.
"The poorest cannot be asked to pay the biggest price," Zoellick said. "For the poor, the costs of crisis can be life-long," he added.
World Bank President Robert Zoellick said the world should not forget the "human rescue" needed in developing countries as it focused on the spreading market crisis.
Among the "fiscally vulnerable" countries are Jordan, Cambodia, Lebanon, Jamaica, Eritrea, Ethiopia, Tajikistan, Madagascar, Nepal, Sri Lanka, Rwanda, Malawi, Ivory Coast, Eritrea, Fiji, Haiti, Seychelles and Mauritania.
The Report, published ahead of weekend International Monetary Fund and World Bank meetings of finance and development ministers, said many of these countries had little or no room to take on new debt to afford the higher prices.
"Currently these countries, on average, are set to receive no increase in project and program aid," Zoellick said.
The Report on financially-strained countries said policy actions to deal with higher food and energy prices were causing the fiscal pressures.As prices climbed, governments have tried to shield the poor by imposing fuel and food tax rate cuts, increasing subsidies and underpricing electricity from oil and gas.
Zoellick also noted that it was important that the world's industrial countries did not forget their promises of aid to the poorest countries.
Zoellick said the G7 industrial countries were "far behind" on the promises they made at a 2005 summit of world leaders at Gleneagles, Scotland, where they pledged to double aid to Africa by 2010.
"The poorest cannot be asked to pay the biggest price," Zoellick said. "For the poor, the costs of crisis can be life-long," he added.
Friday, October 10, 2008
Number seeking arrears advice soars
The number of people seeking help after falling behind with their mortgage has soared by more than 50% during the past year, figures have showed.
Charity Citizens Advice said it had seen a 51% surge in people contacting it because they were in arrears on their mortgage or a secured loan during the three months to the end of September, compared with the same period last year.
There was also a 10% jump in people contacting it because they were unable to keep up with payments on their fuel bills.
Overall during the past 12 months, staff in bureaux in England and Wales have seen a 35% rise in people with mortgage and secured loan arrears problems, receiving 77,324 new enquiries since October last year.
But the charity said there had been a small reduction in the number of people contacting it because they were struggling with unsecured debts, such as credit, store and charge cards and unsecured loans
More details at :
http://www.thisislondon.co.uk/standard/article-23570873-details/Number+seeking+arrears+advice+soars/article.do
Charity Citizens Advice said it had seen a 51% surge in people contacting it because they were in arrears on their mortgage or a secured loan during the three months to the end of September, compared with the same period last year.
There was also a 10% jump in people contacting it because they were unable to keep up with payments on their fuel bills.
Overall during the past 12 months, staff in bureaux in England and Wales have seen a 35% rise in people with mortgage and secured loan arrears problems, receiving 77,324 new enquiries since October last year.
But the charity said there had been a small reduction in the number of people contacting it because they were struggling with unsecured debts, such as credit, store and charge cards and unsecured loans
More details at :
http://www.thisislondon.co.uk/standard/article-23570873-details/Number+seeking+arrears+advice+soars/article.do
London tycoons lose billions in meltdown
The financial meltdown has cost London's tycoons billions.
Their losses will have a massive impact on the city's economy, forcing hundreds of shops, bars, hotels and restaurants to close.
Steel magnate Lakshmi Mittal was the biggest single loser after seeing £20 billion wiped off the fortune that made him Britain's richest man.
UK property tycoon Robert Tchenguiz is facing losses of up to £1 billion after borrowing heavily from Icelandic bank Kaupthing. Dozens of wealthy Russian and east European oligarchs with properties in London have also suffered huge falls in their fortunes......
However, these are just paper losses for most, they have money to reinvest and the market will recover and they will be quids in again. Its a financial loss if anyone is forced to cash in now...and now is the time to buy...(I hope!)
More details at :
http://www.thisislondon.co.uk/standard/article-23569740-details/Bonfire+of+the+billionaires+will+hurt+London/article.do
Their losses will have a massive impact on the city's economy, forcing hundreds of shops, bars, hotels and restaurants to close.
Steel magnate Lakshmi Mittal was the biggest single loser after seeing £20 billion wiped off the fortune that made him Britain's richest man.
UK property tycoon Robert Tchenguiz is facing losses of up to £1 billion after borrowing heavily from Icelandic bank Kaupthing. Dozens of wealthy Russian and east European oligarchs with properties in London have also suffered huge falls in their fortunes......
However, these are just paper losses for most, they have money to reinvest and the market will recover and they will be quids in again. Its a financial loss if anyone is forced to cash in now...and now is the time to buy...(I hope!)
More details at :
http://www.thisislondon.co.uk/standard/article-23569740-details/Bonfire+of+the+billionaires+will+hurt+London/article.do
Chef Ramsay took KS&F out of the mix
Celebrity chef Gordon Ramsay was alongside the local councils and thousands of individuals who put their cash into an Icelandic bank account.
Gordon Ramsay Holdings, which runs the restaurant at Claridge's, Sloane Street, a string of gastropubs and Murano, has confirmed that until recently it banked with Kaupthing Singer & Friedlander [KSF], the UK offshoot of the Icelandic bank.
The firm said last night: "Gordon Ramsay Holdings would like to clarify that the company moved all of its corporate banking from Kaupthing Singer Friedlander [sic] to The Royal Bank of Scotland 10 weeks ago."
Gordon Ramsay Holdings, which runs the restaurant at Claridge's, Sloane Street, a string of gastropubs and Murano, has confirmed that until recently it banked with Kaupthing Singer & Friedlander [KSF], the UK offshoot of the Icelandic bank.
The firm said last night: "Gordon Ramsay Holdings would like to clarify that the company moved all of its corporate banking from Kaupthing Singer Friedlander [sic] to The Royal Bank of Scotland 10 weeks ago."
Friday, October 03, 2008
How the Bailout Is Like a Hedge Fund.
its funny, but The Wall Street bailout is alive again.
In an effort to make the $700 billion bailout palatable, the architects of the law have larded it up with all sorts of goodies, such as increasing the levels of deposit insurance, sparing some taxpayers the ravages of the Alternative Minimum Tax, and extending tax breaks for alternative energy. Henry Paulson's three-page sprig has sprouted into a 451-page Christmas tree. (The current version of the bill, in all its lengthy glory, can be seen here.)
What's most interesting about the Emergency Economic Stabilization Act of 2008 is just how much it reads like a prospectus for a hedge fund. In the past, hedge funds—secretive pools of capital—were open only to qualified (read: rich) investors. But with the stroke of a pen, President Bush will soon make all American citizens investors in the world's biggest fund—and a democratic one at that. Taxpayers won't just be the investors. We'll own the management company, too. Best of all? For at least a few months, we'll have the former CEO of Goldman Sachs run our investment for a very small fee. Call it the "Universal Hedge Fund."
Hedge funds use leverage: That is, they borrow money to amplify their returns. The Universal Hedge Fund will use massive leverage, borrowing up to $750 billion, which it will use to buy up distressed assets. The Universal Fund might best be described as a multi-multistrategy fund. Its stated goals are to maximize returns to its investors while promoting general market stability and bolstering the crippled housing market.
The fund's bylaws give the manager (the treasury secretary) significant discretion. He can buy troubled mortgage-related instruments from finance companies (Section 3[9][a], Page 5). But he can also invest in "any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability" (Section 3[9]B, Page 6). The manager then has the authority to manage the assets as he sees fit (Section 106[B], Page 22), collecting revenue streams, holding bonds to maturity, or flipping them for a quick profit (Section 106[c], Page 22). Like many of today's sharpest hedge funds, the Universal Fund will also have the ability to drive a harder bargain by demanding equity stakes, or new debt securities, from the institutions it is helping (Section 113[d], Page 35). It can also do what many of the big hedge funds, and so-called "funds of funds," do: bring in outside managers to run the investment (101[C][3], Page 8).
There are some important differences between the Universal Fund and its private sector peers. Hedge funds thrive on secrecy. The Universal Fund will operate with maximum transparency, disclosing all new sales and purchases on the Web within two days (Section 114[A], Page 39). Rather than send in all our money upfront, we hedge-fund investors will give the manager $250 billion to start with (Section 115[A][1], Page 40). And the proceeds won't be distributed via dividends or end-of-year partnership distributions. Rather, revenues and profits "shall be paid into the general fund of the Treasury for reduction of the public debt" (Section 106[d], Page 22).
The Bush administration's desire to turn all Americans into participants in the capital markets through the privatization of Social Security never got off the ground. But in the last months of its second term, it has managed to pull off something of a coup. Soon enough, we'll all collectively own various securities issued by lots of big companies. Too bad the Ownership Society is happening only because we became a Bad Debt Society.
Article Courtesy : http://www.slate.com/id/2201340
In an effort to make the $700 billion bailout palatable, the architects of the law have larded it up with all sorts of goodies, such as increasing the levels of deposit insurance, sparing some taxpayers the ravages of the Alternative Minimum Tax, and extending tax breaks for alternative energy. Henry Paulson's three-page sprig has sprouted into a 451-page Christmas tree. (The current version of the bill, in all its lengthy glory, can be seen here.)
What's most interesting about the Emergency Economic Stabilization Act of 2008 is just how much it reads like a prospectus for a hedge fund. In the past, hedge funds—secretive pools of capital—were open only to qualified (read: rich) investors. But with the stroke of a pen, President Bush will soon make all American citizens investors in the world's biggest fund—and a democratic one at that. Taxpayers won't just be the investors. We'll own the management company, too. Best of all? For at least a few months, we'll have the former CEO of Goldman Sachs run our investment for a very small fee. Call it the "Universal Hedge Fund."
Hedge funds use leverage: That is, they borrow money to amplify their returns. The Universal Hedge Fund will use massive leverage, borrowing up to $750 billion, which it will use to buy up distressed assets. The Universal Fund might best be described as a multi-multistrategy fund. Its stated goals are to maximize returns to its investors while promoting general market stability and bolstering the crippled housing market.
The fund's bylaws give the manager (the treasury secretary) significant discretion. He can buy troubled mortgage-related instruments from finance companies (Section 3[9][a], Page 5). But he can also invest in "any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability" (Section 3[9]B, Page 6). The manager then has the authority to manage the assets as he sees fit (Section 106[B], Page 22), collecting revenue streams, holding bonds to maturity, or flipping them for a quick profit (Section 106[c], Page 22). Like many of today's sharpest hedge funds, the Universal Fund will also have the ability to drive a harder bargain by demanding equity stakes, or new debt securities, from the institutions it is helping (Section 113[d], Page 35). It can also do what many of the big hedge funds, and so-called "funds of funds," do: bring in outside managers to run the investment (101[C][3], Page 8).
There are some important differences between the Universal Fund and its private sector peers. Hedge funds thrive on secrecy. The Universal Fund will operate with maximum transparency, disclosing all new sales and purchases on the Web within two days (Section 114[A], Page 39). Rather than send in all our money upfront, we hedge-fund investors will give the manager $250 billion to start with (Section 115[A][1], Page 40). And the proceeds won't be distributed via dividends or end-of-year partnership distributions. Rather, revenues and profits "shall be paid into the general fund of the Treasury for reduction of the public debt" (Section 106[d], Page 22).
The Bush administration's desire to turn all Americans into participants in the capital markets through the privatization of Social Security never got off the ground. But in the last months of its second term, it has managed to pull off something of a coup. Soon enough, we'll all collectively own various securities issued by lots of big companies. Too bad the Ownership Society is happening only because we became a Bad Debt Society.
Article Courtesy : http://www.slate.com/id/2201340
Rose relief as M&S is down but not out
Sir Stuart Rose earned some breathing space today, with a trading statement that suggests Marks & Spencer may be weathering the worst of the economic storm.
Although sales in the 13 weeks to 27 September fell 6.1%, this was slightly better than the City expected.
Sir Stuart said he is dealing with "unprecedented" conditions.
"Consumer confidence is fragile and the retail environment unpredictable."
Food sales are down 5.9% while general merchandise fell 6.4%. Full-year profits will tumble from the £1 billion recorded this year, perhaps by half, but Sir Stuart insists today's statement did not amount to a profits warning.
More details at :
http://www.thisislondon.co.uk/standard-business/article-23562885-details/Rose+relief+as+M+S+is+down+but+not+out/article.do
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