Buy-Out Chief Mark Patterson: U.S. 'Sham' Bank Bailouts Enrich Speculators

Submitted By Trader Mark
This should sound very familiar to blog readers; look I'm no fancy hedge fund manager, nor Chairman of a buyout firm - but I have these (apparently now rare) things called eyes. Nothing new being said here that we have not pounded the table saying many times - the only difference is it is being said by someone who took the money and benefited. I don't blame him; if the government is handing out taxpayers money that's the "rules of the game"... at least he is honest about it. John Paulson said the exact same thing last December [Dec 6, 2008: We're Down 33% in 1 Month on Our "Investment"]

Hedge fund managers, who rank among some of the world's shrewdest dealmakers, told Congress the U.S. government's bank capital injection program did not have enough strings attached. "The current terms are overly generous to recipients," said John Paulson, president of hedge fund Paulson & Co.

John Paulson -- whose attack on the plan was dubbed "Paulson versus Paulson" by the lawmakers -- said any bank receiving federal funds should halt cash dividends on common stock and restrict cash compensation to executives. He also said the government should demand a higher dividend payment from participating banks, possibly around 10 percent instead of the 5 percent rate now in place.

Now let's contrast those views with the PIMCO's of the world whose head honcho speaks in terms of "Win / Win / Win" for all parties involved - including taxpayer. [Feb 21, 2009: Fortune - is PIMCO's Bill Gross Too Powerful?] As he does just about any program which benefits his firm. I can at least respect honesty from the guys higher up the page who swindle me and tell me up front... unlike the guy who is swindling me and then touting on CNBC we're all winners here.

Like many readers have said, at least the UK is putting their cards on the table - here in the U.S. we cannot handle the truth so we'll subsidize banks and then yell "We don't do nationalization in America. We're above that!" The oligarchs continue to laugh... and I am sure CNBC is talking about the below commentary day and night. What's that? Nary a mention?

Scoreboard. Buy stocks.

Via UK Telegraph

The US Treasury's efforts to stabilize the banking system through the TARP program is a hopelessly ill conceived policy that enriches speculators at public expense, according to a buyout firm supposed to be pioneering the joint public-private rescues.
“The taxpayers ought to know that we are in effect receiving a subsidy. They put in 40pc of the money but get little of the equity upside,” said Mark Patterson, chairman of MatlinPatterson Advisers.
The comments are likely to infuriate Tim Geithner, the US Treasury Secretary, because MatlinPatterson took advantage of the TARP’s matching funds to buy Flagstar Bancorp in Michigan. His confession appears to validate concerns that the bail-out strategy is geared towards Wall Street. Under the convoluted deal agreed earlier this year, MatlinPatterson has come to own 80pc of the shares while the US government has ended up with under 10pc.
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.

What happens in Qatar, stays in Qatar.

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.
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.
Matlin Patterson, however, has missed the Spring rebound, the most powerful rise in equities in over 70 years. “We shorted the equity rally because we thought it was lunatic. We’ve kept adding positions seven times, and we’re still holding,” he said.

Everything is fine... watch the pendulum as I swing it in front of your eyes... hand me your taxpayer money... everything is fine... stocks are going up... stocks going up means everything is right... Main Street is Wall Street... hand me your taxpayer money.... the market is all that matters... all is well, listen to the stock market.... hand me your taxpayer money

[May 9, 2009: William Black on Yahoo TechTicker]