AppFactory

More CDS Winners Surface, AIG is Middleman

Though the AIG retention bonuses are center stage at the moment, in the case of some hedge funds, AIG is just the middleman facilitating the transfer of much, much larger amounts of taxpayer money to people who bet against the mortgage market and won... and who couldn't have possibly expected that their money would come from the taxpayer.... 

From today's WSJ:

Some of the billions of dollars that the U.S. government paid to bail out American International Group Inc. stand to benefit hedge funds that bet on a falling housing market, according to people familiar with the matter and documents reviewed by The Wall Street Journal.

AIG stood to earn a fraction of a penny each year for every dollar of protection it sold, according to securities filings, meaning it made less than $10 million annually on the $1 billion in insurance.

AIG Money Trail Widget - or Exxon Valdez Hits the Beach Again

I made an AIG Money Trail Widget that summarizes who got what.

Of course AIG publishing this info provides some transparency in to just how wrong things are with AIG... but not enough.... Aren't these banks just the first stop on a multi-stop journey for that money? Will we find out who the banks clients are? How many countries received bailout money? etc. etc.

Were any bank clients speculators who didn't actually own the underlying securities that the swaps covered? If the answer to the last question is "yes", how much public rage will there be about this?

How big is this spill?

A.I.G.'s Biggest Counterparties

Publish at Scribd or explore others: Government Business & Legal american internation A.I.G.

Off Topic? Nope.

Last weekend, I was in a Barnes & Noble store and thought to myself... I've read more than enough tech, business / economy stuff for today.... what section of this place haven't I been to in a while?... Art. I walked over to the art section and picked up the first book that caught my eye. A big and colorful Warhol coffee table book.

 

AIG Bailout Disclosure, The Fed's Open Government Test

Who is profiting from the CDS fiasco?? Did anyone buy the AIG CDS, or any other CDS, not as insurance to cover losses in CDOs they own, but as investments, betting that the CDOs held by others would fail? If such people are out there, will we find out who they are? And, if we do find out who they are, will the public be outraged by such speculation or applaud such a smart investor as being the last man standing?

When I wrote this back in November, the public outcry over the Fed's support of AIG had not risen to its current level. Now that the Fed has pumped so much tax payer money into AIG, the equation has changed.

Large institutions who themselves have collected piles of Fed money, and who also have collected on the AIG bailout thru the backdoor (as AIG counterparties), are in the early stages of being vilified.

Hedge funds, on the other hand, that speculated on AIG (or other CDSs) and have not received Fed bailout dollars, are being applauded as smart investors.

With this as a background, last week the Fed's Vice Chairman Donald Kohn admitted to the Senate Banking Committee that Fed bailout money was paid out by AIG to other firms, but wouldn't say to which because the Fed fears that this disclosure would undermine 'public confidence'.

If Open Government is to mean something, the Fed will need to openly publish the list of firms. Not doing so because it might undermine public confidence, suggests that the Fed is out of touch with what's driving public confidence.  Anyway, the WSJ has already published at least a partial list -- Goldman Sachs, Deutsche Bank, Merrill Lynch, Société Générale, Calyonl, Barclays, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, Lloyds Banking Group -- that as AIG counterparties indirectly reaped $50 Billion of bailout funds.

Federal Budget Process Diagram Makes It Look Easy

Nice diagram from the WSJ. Makes the budget approval process look easy. Given the Dems "we're-in-control-now-so-tough-luck-Rush" control over the process, September is actually possible.

Honest but....

How did you break your hand? And what about your mood? Nomination for Best Support Page ever?

click the image for larger view.

Gelform's version of same post.

Recovery Act Snapshot

Here's a slide that summarizes the Initial Implementing Guidance provided to agencies last week.

The Administration is committed to investing Recovery Act dollars with an unprecedented level of transparency and accountability so Americans know where their tax dollars are going and how they are being spent. The guidance issued today contains critical action steps that Federal agencies must take immediately to meet these objectives and to implement the Act effectively.

Obama's approach is pointed squarely at the dysfunctions of government management and operations, e.g. serving the bureaucracy trumps serving the public; get funded for one thing, use (some of) the money for something else; blow the money feeding the procurement, contracting, and auditing machinery; blow the money on unaccountable vendors; set no real measures for success, etc...
Recovery Act

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Coghead's Tank Runs Dry

 From Techcrunch:

Coghead, a visual web-based application editor that allowed users to develop enterprise applications using an intuitive GUI, is closing its doors. The company attributes its closing to the dire economic situation, and says that users will be able to access and download their data through April 30, 2009.

Here's the thing about Coghead. It had the air of being the category leader in what I, like many people, continue to believe will be a winning category as cloud based services mature. Coghead got a lot of good press, raised $11.2M, had experienced people, and good ideas. But there were obstacles.

First, Coghead followed a single application design pattern, the basic tabbed application. The enterprise space has too many needs to assume that a single (though strong) pattern would be enough. salesforce.com (and force.com) works because they have a rock solid anchor called CRM. Coghead would have needed an anchor application too -- and CRM is taken.

Second, the investment enterprise customers have in the Microsoft, IBM, Oracle, etc. platforms should not be underestimated by startups. The cost of switching would require demonstrating savings beyond any CIOs reasonable doubt.

Third, Coghead's platform was comprised of Coghead's software sitting on Amazon's cloud with Intalio's business process management software added in to complete the solution. Selling an offering from two startups sitting on a successful but new offering from a major vendor would surely require some seasoned salespeople.

Fourth, Coghead was pitching their platform to 'second and third tier ISVs and SIs to transform their businesses and become SaaS solution providers'. Where were the tier one players? This approach seems to be at odds with their enterprise focus, and sounds more like an SMB focus and already admitting that tier one players placed other bets.

Finally, in enterprise IT there is typically clear separation between development and production environments. The Coghead platform did not have this clear separation and -- to me -- this contributed to it not feeling enterprise grade.

With time, I believe Coghead could have chipped away at these obstacles and built a strong platform. Clearly, Coghead believed in what they had and ramped up its sales and marketing effort... just before the economy faltered... and so wasted the precious fuel startups need to keep going. Unfortunate timing. Maybe the investors and/or management were unwilling to fill the tank in the face of a serious down round and that, rather than the business proposition, is why the tank ran dry.

Credit Default Swaps - One More Winner

David Faber in his recently aired "House of Cards" on CNBC has some really interesting interviews with a Dallas-based investor, Kyle Bass, who appears to have played a similar move to John Paulson, and achieved similar results. 

From CNBC:

In a rare interview, CNBC's David Faber speaks with one of the few savvy investors who bet against the mortgage-backed security fever. Dallas's Kyle Bass - whose hedge fund soared 600% in just eighteen months

CNBC doesn't provide video embed code so I can't show it here. Click photo for link to video clip.

Faber appears to be picking up on a story from Bloomberg from December 2007.

Economic Data Transparency and Open Government

Some developing sources of government data.

Economic Activity
Example - Reporting of Bank Assets, Deposits, and Profitability
Regulator - FDIC
FIDC Data
Benefit - Improve and reduce time it takes to gain awareness of economic activity levels
Data Evaluation: Pretty Good. Mature reporting system of quarterly data.

Financial Markets Activity
Example - Credit Default Swaps
Regulators (Future) - Federal Reserve, Treasury
Benefit - Reduce exposure and risk associated with derivatives trading volumes
DTCC Data
Evaluation: Improving, but needs work. Public interface tacked on to existing system.

Government Accountability
Example - TARP
Regulator - Treasury
Benefit - Enable the public to track tax dollar spending US Treasury
US Treasury Data
Data Evaluation: Needs a lot of work. Just PDFs published periodically.

Government Accountability
Example - American Recovery and Reinvestment Act
Regulator: TBD
Benefit: TBD
Evaluation: TBD