Market Minds

Over the past two weeks many banks issued press releases and opened up the PR spigot to indicate just how stable they all are now that a few have managed to pay down their TARP commitments. This of course, is nothing but a complete farce, and simply yet another chapter in the “consumer confidence” game played by the administration and its financial underlings. In order to see just how much the banking system depends on the continued unlimited wallet of taxpayers and Geithner’s printing presses, and how much certain law firms continue to depend on the somewhat less limited wallet of Wall Street, I present an October 31, 2008 letter recently obtained by Zero Hedge , in which Sullivan & Cromwell, Wall Street’s #2 favorite law firm (or is that #1: I am sure Wachtell Lipton would have a few choice words with regard to that particular league table rating, although it may be hard pressed to match S&C’s $241,975 in donations to the Democratic National Convention ), goes to town to make sure that its well-deserving clients including Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo get to not only have the taxpayers’ cake (in perpetuity), but eat more and more of it each day. Before I get into the meat of the letter, it just has to be a complete coincidence, that these are exactly the same 9 firms that a mere 2 weeks prior to this letter was sent out had a rather direct head to head with the President’s Working Group , during which each one was apportioned $x billion in TARP after exactly zero due diligence, in order to plug the dike of complete financial collapse with almost a hundred billion fingers of taxpayer dollars. But, as they say, once you’ve had a taste of the free buffet, you only want more and more and more. True to form: the banks promptly showed up for another serving, and Sullivan & Cromwell was gladly there to charge taxpayers at the preferential rate of almost a thousand taxpayer dollars an hour, compliments of one H. Rodgin Cohen (more on him later). Now it is no secret that when it comes to taxpayer guarantees and subsidies, the TARP is and has always been mere window dressing: as a backstop tranche, it only has to do with equity values, which as any rational observer of the financial system (this list of course excludes the likes of Dick Bove) knows full well, are at best equal to zero if all the FAS 115, 157, Level 3, Mark To Magic and other accounting sleight of hand gimmicks were to be removed

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H. Rodgin Cohen’s (Failed?) Quest To Backstop Every Bank… Ever (And Usurp Geithner’s Throne)