Friday, December 5, 2008

The bull in the china shop

Well I am relieved.  It has been my contention that Sheila Bair is the bull in the china shop.  She confiscated Washington Mutual because it might cause a problem for her agency.  There is little evidence that WaMu was illiquid or insolvent at the time – and indeed if the losses were only what JP Morgan has assumed then the bond holders (which she wiped out) would have received considerable value – probably par.  

There is plenty of evidence she made these mistakes all on her own and she should resign.

Press reports indicate that Geithner wants her gone.  Geithner is no political hack wanting to get rid of the Republican.  He just wants to get rid of the dangerous and irresponsible bull in the china shop.

Some press indications are that Sheila Bair will be hard to remove.  She is a statutory appointment after all – and her position will survive a change in government.  And if she puts up a fight she will be even more destabilising.

A change in administration is the perfect opportunity for Sheila to resign.  Then she can do it without disgrace.  But my contention is that every day Sheila is in the position is another day added to the end of the financial crisis.  She, more than anyone, makes it clear that intermediate funding in banks is insecure – and fixing that perception is the first and most important thing needed to make this crisis go away.

So Sheila, you are going to be asked to resign anyway.  Please make it quick, give your successor time to undo the damage you did and help get this crisis over with.  

John Hempton


Anonymous said...

I don't remember the link where I read this but Countrywide decided to redo a couple of billion dollars worth of mortgages. Sleazebags that they are they are going to flow the adjustments to the actual holders of the mortgages and they take the hit and Countrywide looks like a compassionate company. The note holders are suing Countrywide, so Sheila threateneds them with an act of Congress if they tried to enforce their contract rights. She is something, God help us.

Anonymous said...

The rape of the Washington Mutual shareholders and bondholders ruined the market. It needs to be corrected!

Anonymous said...

lol how about trying to be not as apparent when toting the Obama line? The only reason some people are against her now is because Obama's new cabinet crew don't see her as a 'team player' (i.e. she is calling them on a lot of their bullshit), so the search is on for an excuse to remove her from her position.

Let's forget that these financial institutions were in trouble long before she ever did anything with WaMu. I mean it had to be her fault Citi is a mess. Hell, maybe we can drum up someway to blame Lehman and Bear on her.

What a joke.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.