Fireworks in Washington
Research for Online Investors

by John Dalt

1/27/10

Treasury Secretary Tim Geithner appeared before the House Oversight Committee this morning to explain the rescue of AIG and Goldman Sachs (GS) receipt of funds.

It was quite a verbal sparring match. The U.S. Government has pumped $180 billion into AIG. The anger is that $62 billion was paid out to third parties on credit default swaps (CDS) written by AIG. One of the largest recipients of these CDS was Goldman Sachs with almost $14 billion received. They were paid in full, as opposed to any negotiation to a lower payout.

AIG would have gone bankrupt without the government bailout. In bankruptcy the third parties would have certainly received much less than 100%, if anything. Turbo Timmy headed the New York Federal Reserve Bank. The New York Fed staff encouraged AIG not to disclose payments that were made to counter parties. Was he involved in this cover-up? Geithner declared innocence, that he had withdrawn from involvement in decisions at the New York Fed as he was under consideration for the job as Treasury Secretary. Reuters covers the story, “Lawmakers turn up heat on Geithner over AIG.”

Edolphus Towns NY- D, had the best quote, “"In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse."

Apple introduced the IPad this morning.  A cross between an IPhone and a laptop.  Amazon’s Kindle proved the demand for an electronic book reader.  The IPad will try to capitalize on this demand, plus add capabilities to surf the web and other computer applications to expand and build demand.  Apple released an IPhone developer’s kit today that supports the IPad.

The IPad weights 1.5 pounds and has a 9.7 inch display.  Retail was expected to be under $1000  After going through all the features, like any good salesman, the price was announced at $499 with 16 gig, or $599 32 gig of memory.

The Federal Open Market Committee (FOMC) finished their two day meeting today. Release of their statement spurred a rally in the markets.  The statement signals a stay the course strategy with interest rates unchanged. The Fed reassured the markets that they see signs of the economy recovering.

Check out our News Feeds page at galtstock.com, it is a great resource to catch up on the latest stories, or check headlines for news that interests you. We have eight different news feeds covering business, personal finance, government, and world news.

The market appears to have put in a bottom, we were down over 80 points on the Dow mid-day and rallied to close higher.  This is a classic reversal, and what we may have needed.  Don’t pop the champagne corks yet, we have to get through the populist rhetoric that is sure to dominate the President’s address this evening.

Thinking about Federal Reserve influence over our economy, and the controversy facing Bernanke's re-appointment, the following quote just seemed to fit today.  To fully appreciate the Fed's reach, witness the reversal of the market today, down 89 points when the statement was released to close up 41 points!

“Big banks are the state apparatus which we need to bring about socialism, and which we take ready made from capitalism... A single state bank, the biggest of the big, with branches in every rural district, in every factory, will constitute as much as nine-tenths of the socialist apparatus. This will be... so to speak, something in the nature of the skeleton of socialist society.”—Lenin

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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