It doesn’t matter how you make the money, what matters is how much you make. Goldman Sachs look like they are again trying their best to drag the financial markets good name through the dirt, all in the name of a fast buck. Those interviewed in this Bloomberg report seem to be in little doubt that this latest example of financial engineering succeeded in helping GS and Greece get a better price for securities by arranging a currency swap which hid Greece’s true deficit problem. Doesn’t this sound all very familiar and didn’t our financial system nearly come a cropper because of dodgy financial engineering. If this turns out to be true, then I hope somebody’s got a big book to throw.

AIG has a long way to go toward making the US taxpayer whole but a the WSJ reports that they are in final discussions to sell MetLife their property and casualty insurance unit for upwards of $15 bln.When you have a $1.4 trln deficit, every little bit helps…

How much will the bailout of Freddie and Fannie cost the US taxpayer? Try $450 bln on for size.

Looks like this has gotten the attention of traders as the push the dollar lower across the board this afternoon.

Obama will announce his new tax on banks to “recover” the $120 bln the government will lose on TARP tomorrow around midday.

It is funny that he is going after banks, since most of the big one’s have paid off their TARP loans with interest. The money lost via TARP was on the automakers and AIG. Tax them. Put a tax on Chevys to get your money back…

The FDIC has sort of an interesting plan to tie the pay structures of banks to the fees they pay for deposit insurance.

The riskier the pay plan, the more the bank pays for deposit insurance. Seems like a fairly logical solution.

Restricted stock with multi-year vesting and clawbacks are the FDIC’s favored pay structure.

From the Atlantic: Cheap money makes us stoopid.

One of the most persistent narratives of the recent crisis portrays a nation of unsophisticated home buyers led astray by greedy bankers. Supposedly those bankers were willing to write risky loans because they intended to pass them on to some unwary investor. But this explanation falters in the face of a legion of failing commercial deals. Prospective landlords had all the expertise they should have needed to put a fair price on properties—and the majority of lenders who were originating loans for their own portfolios had ample incentive to perform careful due diligence.

The best explanation for the calamity that has overtaken us may simply be that cheap money makes us all stupid. The massive inflows of international capital, which Ben Bernanke has called the “global savings glut,” poured into our loan markets, driving interest rates lower—and, since most real estate is purchased with borrowed funds, pushing up the price of property in both the commercial and residential sectors. Rising prices, in turn, disguised any potential problems with the borrowers, because if they ran into cash-flow problems, they could always refinance, or sell. Everyone was getting bad signals from the market, and outlandish purchases looked almost rational.

The market has been focused on improved US economic data of late but last night’s report that GMAC is getting yet another $3.5 bln cash infusion from Uncle Sam served as a reminder that the mortgage monster has not yet been slayed. Lots of provisions have been made but there are still sizable losses to absorbed in the years ahead.

EUR/USD trades with a soft tone in quiet New York dealing. The IMF’s comments on Greece served as afresh reminder that the euro zone is dealing with troubles of its own…EUR/USD is at 1.4323.

Creditors are refusing to extend debt payments from Dubai World, threatening to prolong the debacle and increasing the chances of default on it’s $26 billion debt.

USD/JPY is trading at 87.10, EUR/USD 1.5015, cable 1.6550 and AUD/USD .9140 as the interbank market opens in a lively fashion. The reports over the weekend that the Dubai World credit issues may be averted have led to the unwinding of speculative positions in the JPY crosses. Next target in USD/JPY is a gap on the hourly charts back towards 88.20 and we can expect increasing volatility as markets become less liquid.

Good luck today.

This is an update on the Bloomberg story we were following yesterday.

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