Feds Gave $220 Million In Bailout Bucks To Two Morgan Stanley Wives For Some Reason

Reality · 05-05-2011, 11:15 PM

Quote:

http://consumerist.com/2011/05/feds-...ley-wives.html

Rolling Stone's Matt Taibbi - the guy who famously referred to Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" - has an interesting expose of how the wives of two Morgan Stanley hot shots, though they had no previous financial experience, set up their own investing initiative and got $220 million in bailout funds.

With a $14.87 million upfront investment, the firm got $220 million in free cash from the Feds, which it used to buy up securities valued at $253.6 million. How that "value" was determined, no one will disclose. $150 million still hasn't yet been paid back. Because the loan was a "non-recourse loan" it may never be. What's a non-recourse loan? Taibbi writes:

"Essentially, this means that if you don't pay the Fed back, it's no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed's books. If the securities lose money, you leave them on the Fed's lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. "Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, 'The government is giving out free money!' " says Black. "As crazy as he was, this is making it real."

Someone should make some calamari out of that vampire squid...

This is the easy money ticket I been looking for.

calintz · 05-05-2011, 11:55 PM

wow

good luck getting that $200m back now US government

Seraph · 05-06-2011, 07:43 AM

Quote:

"Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, 'The government is giving out free money!' "

That guy is my personal hero.

stroopwafel · 05-31-2011, 05:15 AM

It's a travesty those bankers and/or their wives can get away with that on the tax payer's money for sure, but there is no way they would have known. Because that presupposes that a)a close to 15 million $ investment would be next to worthless without a government bailout b)that the bailout would be applied to them or even that a government bailout would take place and c) at what rate it would be taxated.

So unless those bankers had truly prophetic gifts that a worldwide financial collapse would soon befall their shares, predict the governments response to this and subsequently calculate the profit margins they would make off the government's/Fed's banking crisis policies they wouldn't be able to pull it off.

Fact is that the banking world nearly imploded because of their reckless endeavours and speculation bubbles and that they were bailed out(by governments that aren't equipped, prepared or have the capacity to address the issue at the smallest detail) and that as a result a lot of people walked away with millions while leaving financial destruction for many other people in their wake. Regrettable but for the sake of stability there wasn't really any other choice. Not interfering would have most likely resulted in another great depression.

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05-05-2011, 11:55 PM	#2
calintz thank you based god Join Date: Oct 2007 Posts: 4,943	wow good luck getting that $200m back now US government

05-31-2011, 05:15 AM	#4
stroopwafel Praise the sun! Join Date: Mar 2011 Posts: 1,045	It's a travesty those bankers and/or their wives can get away with that on the tax payer's money for sure, but there is no way they would have known. Because that presupposes that a)a close to 15 million $ investment would be next to worthless without a government bailout b)that the bailout would be applied to them or even that a government bailout would take place and c) at what rate it would be taxated. So unless those bankers had truly prophetic gifts that a worldwide financial collapse would soon befall their shares, predict the governments response to this and subsequently calculate the profit margins they would make off the government's/Fed's banking crisis policies they wouldn't be able to pull it off. Fact is that the banking world nearly imploded because of their reckless endeavours and speculation bubbles and that they were bailed out(by governments that aren't equipped, prepared or have the capacity to address the issue at the smallest detail) and that as a result a lot of people walked away with millions while leaving financial destruction for many other people in their wake. Regrettable but for the sake of stability there wasn't really any other choice. Not interfering would have most likely resulted in another great depression.