• Global Financial Crisis, No Bailout Will Stop It

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    Sometimes,
    a bailout is not enough.

    When Dubai
    World black swanned global investors last month with what amounts
    to be a reported $80 Billion in debt liabilities, it sent shivers
    down the spine of many a financial manager and stock trader. For
    those who were paying attention, Dubai’s troubled assets were
    no surprise, it was simply a matter of time. Oft repeated by contrarian
    analysts and investors like Dr. Doom Marc Faber, Gerald Celente,
    Jim Rogers, and Karl Denninger, the mathematical certainty of the
    economic crisis would play out – eventually.

    It was a year
    ago that the entire global financial system, spear headed by the
    USA, faced the real possibility of total meltdown, that is if you
    trust the motivational fear tactics employed former Treasury Secretary
    Henry Paulson.

    This week,
    the American public received word that the banks once deemed too-big-to-fail
    will be paying back their TARP funds, ostensibly because they are
    now cured of the financial contagion that threatened sudden death,
    economic collapse and the implemntation of martial law.

    In addition
    to Bank of America and JP Morgan Chase, we have commercial real
    estate powerhouse and partially owned subsidiary of Warren Buffet
    Enterprises, Wells Fargo, which announced it will sell $10.4 billion
    in stock and exit the TARP bailout. According to a company statement,
    the bank plans to pay back $25 billion in taxpayer funds. CEO John
    Stumpf, presumably also doing gods work, says “we’re ready
    to fully repay TARP in a way that serves the interests of the U.S.
    taxpayer, as well as our customers, team members and investors.”
    Management did not comment on whether the share sales totaling around
    $14.8 billion, when you count additional plans to raise capital,
    will devalue, by way of dilution, the amount of market capitalization
    held by shareholders.

    Citibank, who
    also committed to repaying $20 billion in TARP funds yesterday saw
    a stream of positive news throughout the media when they announced
    their intentions. Just 24 hours later, Bloomberg reports that Citigroup’s
    Exit From the Bailout is Clouded by Citi Holdings Assets. It seems
    that CEO Vikram Pandit failed to mention that his company is “emerging
    from a U.S. bailout with higher capital levels and loan-loss reserves
    than any peer.” That amount to somehwere in the area of $617
    billion.

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    December
    16, 2009

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