It’s a rare thing when insiders speak their minds publicly against the powers-that-be. Today in a global investment conference held in Qatar, an insider accused the entire US bank bailout of being a “sham”, and said it publicly at a global conference of his peers. Meet Mark Patterson, chairman of MattlinPatterson advisers, a firm which utilized the TARP program’s ‘matching funds’ to buy Flagstar Bancorp in Michigan. Patterson certainly didn’t pull any punches in blasting US Treasury Secretary, Tim Geithner’s bailout as being a deeply flawed plan which will not only ultimately fail, but is enriching Wall Street insiders in the process.
The Telegraph UK reports:
Mr Patterson said the US Treasury is out of its depth and seems to be trying to put off drastic action by pretending that the banking system is still viable.
“It’s a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds. They think they’re doing this for the greater good of society,” he said, speaking at the Qatar Global Investment Forum.
Mr Patterson said it would be better for the US to bite the bullet as Britain has done, accepting that crippled lenders must be nationalised. “At least the British are not hiding the bail-out,” he said.
Well said indeed, Mr. Patterson. We’d love to hear Mr. Geithner respond, but he’s off skipping through fields of green shoots, and worse yet, seems blissfully unaware that the US taxpayer is bearing most of the cost while seeing precious little of the upside. Perhaps when the last $100 billion of TARP funds has been magically transferred into private coffers, Mr. Geithner will make the hard choices we’re hoping for.
More from the Telegraph UK:
“This is not a normal recession and there will be no V-shaped recovery. The crisis has destroyed leveraged companies. We’re going to see a catastrophic increase in the number of LBO’s (leveraged buyouts) going into default because they’re knee-deep in debt and no solution exists since they can’t refinance,” he said.
“Alfa hedge funds have been making their money by gambling with excessive leverage, so the knife that cuts off leverage is going to cut off their heads as well,” he said.
Like many bears, Mr Patterson expects the great crunch to end in deliberate inflation, deemed a lesser evil than outright depression.
“The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed’s balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road,” he said.
We couldn’t agree more with Mr. Patterson, and he has our sympathies for exercising good judgment, but bad luck in choosing to short this rally from the start. As our colleague Tyler Durden at Zero Hedge once said, “Anyone with any common sense is losing money in this market”. Our only hope is that more insiders speak up like Mark Patterson did before the situation gets any worse than it already is.
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“Our only hope is that more insiders speak up like Mark Patterson did before the situation gets any worse than it already is.”
Something tells me it’s a little too late for that. We’re on a collision course with S&P 600. It’s already a done deal. The dumb money just hasn’t figured it out yet.
I hope this guy has good bodyguards…
..or some money saved up.. I don’t think his firm will be doing much business any more…
Sounds like the guy lost money in the market and now he’s blaming the system. He’d be more credible if he had no positions.
Sounds to me like he is a well-meaning Patriot.
I was able to get a copy of the letter the Treasury sent to Mr. Patterson to urge him to recant his words. Read it below:
To: Mark Patterson of MatlinPatterson
From: The Treasury, you Punk
Re: Stupid words, but we can save this thing yet!
Mr. Patterson,
We at the Treasury were deeply saddened to read your comments made in Qatar concerning the TARP program. While we bent over backwards to hand out money so you and your ilk could spend taxpayer money to enrich yourselves, we are rewarded with this kind of slap across the face. Here at the Treasury we have a saying:
“Don’t’ Piss Down My Back and Tell Me It’s Raining!”
Yes, we stole that line from “The Outlaw Josey Wales”; irregardless, please be advised that we do not take kindly to being portrayed as ripping off the public. We are doing that, but to say so publicly is in poor taste.
Luckily, after reviewing your comment transcript, we at the Treasury have a way this can be fixed. Please find the text of your new comments to be made, no later than Saturday Morning May 16th, which will include the following (Do not change or alter these words in any way):
“On my comments in Qatar I would like to clarify some items that were fabricated, misstated, misquoted, and mischaracterized. While I did use the word “sham,” what was not reported was that I stated that the TARP program was in fact a huge “SHAM-WOW” that was in effect sopping up the market ills of bad assets. This service is vital to the smooth flow of credit to households and small business. It has been reported that I said the taxpayers were getting “ripped off” but if you listen to the transcript closely you will hear that what I said was that any idea that losses for the taxpayer on TARP had been “WRITTEN OFF” was impossible because the deal they were getting was so awesome.
Thanks in advance for any corrections and any removal of any archived web material that states otherwise.
Mark Patterson”
The Treasury trusts you will follow our guidelines so as not to jeopardize the bank secondary offerings during this silly market bounce. Not that we are threatening you, but we do control the IRS and your MySpace page does include many “friends” of the female gender that are, how shall we say, of an age bracket that may become inconvenient should the FBI want to look into it. Not that we control the FBI.
Thanks in Advance,
The Treasury, you punk.
Sober,
I think the message they send him will be in the form of a tragic freeway accident.
I’m just sayin…
MB