Bernanke’s Bank Book

By MICHAEL GRAY

Fed Chairman Ben Bernanke’s AIG bailout in September was exactly what foreign investors needed.

AIG’s systemic risk would have crushed the same investors that the globe’s largest private banker, Big Ben, has to entice with his paper. Bernanke knew AIG’s collapse would  be horrible for business if he allowed the troubled insurance giant to bust.

Since Bernanke is a private company CEO, he really wasn’t looking at restricting bonuses or any other punitive measures toward the company. He needed to make the trade whole so the BRICs would not lose too much mortar.

Now our new  socialist government has taken up the mantle with its righteous indignation and copious amounts of swagger to cheapen and destroy a company we owe 80 percent of.

I wonder if this is about $173 million in bonuses, which is a rounding error based on the $165 billion injected into the trouble insurer,  or is there something else they missed besides the bonuses that will soon come to light.

Perhaps its about how Goldman Sachs –– where AIG CEO Ed Liddy and Treasury’s Hank Paulson once sat on the board together and to where it was reported this week over $30 billion in AIG rescue funds were received –– was treated royally on the taxpayers dime by the insiders.

Foreign Investors Getting TICked

As I’ve said many times, the market is not the economy. And the last week has demonstrated this perfectly. What the stock market is projection with this recent run up is nothing short of wishful thinking. Looking out six months does not give me any comfort that today’s Dow or S&P levels are priced correctly.

A real piece of data came out this morning showing foreign investors are slacking their appetite for US treasuries and US stocks and bonds overall.

The Treasury International Capital (TIC) flows for US paper for January moved negative for the second month in a row.

This will not get much news today on top of Ben Bernanke’s rosy 2009 forecast and Barney Frank’s AIG bonus outrage. But this news, along with the Chinese government raising the question of how the US will be able to finance all the stimulus, does not sit well with me.

The TIC data could be the start of an uneasy trend.

Net long-term TIC flows came in well below the forecast, totaling -$43 billion in January, while total TIC flows for the month fell to -$148.9 billion, according to data released by the US Treasury this morning.

Economists had been expecting net long-term flows to rise to $45.0 billion compared to the previous month’s downwardly revised $34.7 billion figure.

Total net TIC flows in December were revised up to $86.2 billion from a previously reported $74 billion.

Net foreign purchases of long-term securities were -$18.8 billion, and of that, net purchases by private foreign investors were -$10.2 billion, while net purchases by foreign official institutions were -$8.5 billion.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $30.9 billion. Foreign holdings of Treasury bills decreased $15.4 billion, the Treasury Department reported.

The monthly Treasury International Capital report measures net capital flows crossing US borders, or how much capital comes to the US from other countries and how much capital leaves the US for other countries. The difference between the two reflects the current account balance.

For more on Wall and Washington and the cratering economy see: https://mgray12.wordpress.com

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