Stanky banks

Go Citigroup! Best quarter since 2007! Thanks to an accounting trick and revenue from their fixed income trading unit. 

What is with these fixed income trading units? They made JP Morgan money, they helped Goldman sell $5 billion in stock. In fact, they seem to be single-handedly keeping their banks in the black. But what are they trading, and why is it they're making so much money now? 

Seems that AIG, owned by you and me, is selling these banks entire portfolios of fixed income instruments at really, really low prices. This is what it means, apparently, to "unwind" AIG's business -- sell still-valuable assets to investment banks at well below their market value in portfolio-sized transactions. The investment banks make big profits, and the soon-to-be-unemployed managers of these trading desks at AIG are eminently employable heroes to the investment banks.

But how could this happen? Probably because the government wants it to happen. This is one sneaky, anti-capitalist, anti-markets, anti-democratic method of giving more money to ailing investment banks. With Congress unwilling to give more money to bail the big banks out, these transactions provide another injection of capital into the banks through a third-party -- AIG.

One more quick observation: As Obama delivers noble rhetoric about why torture can't be justified in the name of expediency, his Treasury Department is subverting free markets and the democratic system to save the banking sector. I'm not drawing a moral equivalence, or suggesting that saving the financial system isn't necessary. Call me crazy, but funneling money to i-banks through selling AIG's tax-payer owned assets for cents on the dollar does seem logically analogous to torturing people for the sake of potentially life-saving information; in both cases, you damage our democracy for the sake of expediency. No caterpillars in bank vaults yet, though.

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