Deutsche Bank Analyst's memo: Overpay For Our Assets, Or You'll Regret It

[seafan]

Deutsche Bank Analyst: Overpay For Our Assets, Or You'll Regret It

By Zachary Roth
February 12, 2009, 3:49PM

For a while now, it's seemed like Wall Street's message to government has been: We screwed up. But if you don't rescue us on our terms, you're all gonna be in trouble.

But you don't usually see that expressed quite as clearly as it was in a research memo sent out yesterday by a senior Deutsche Bank analyst, and obtained by TPMmuckraker.

In the memo -- one of Deutsche's daily "Economic Notes" sent out to the firm's clients, and to some members of the press -- Joseph LaVorgna, the bank's chief US economist, essentially, appears to warn that if the government doesn't pay high prices for the toxic assets on the books of Deutsche and other big firms, there will be massive consequences for the US economy.

Writes LaVorgna:

One main stumbling block to the purchasing of troubled assets has been pricing, specifically how does the government price a diverse set of assets in a way that does not put the taxpayer on the hook. However, this should not be the standard by which we judge the efficacy of the plan, because a more prolonged deterioration in the
economy will result in a higher terminal unemployment rate and a greater deterioration of the tax base. As such, the decline in tax revenues will crimp many of the essential services provided by the government. Ultimately, the taxpayer will pay one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line to pay for the massive debt issuance required to fund current and prospective fiscal spending initiatives.

We think the government should do the following: estimate the highest price it can pay for the various toxic assets residing on financial institution balance sheets which would still return the principal to taxpayers.

One leading economist described the memo to TPMmuckraker as a "ransom note" to the US government. And David Kotok of Cumberland Advisors, who writes such research memos for his own clients, acknowledged that the memo, like all such communications, could be interpreted as an attempt to influence policy-makers.

.....

Buckle up, people.

[Lost in CT]

1. Video of bank meeting below.

http://www.youtube.com/watch?v=DRm5WcjOikQ

[Karenina]

5. Thanks for that! I needed a good laugh!

Welcome to DU! :hi:

[Taverner]

2. Again, someone please tell me why we haven't nationalized all the banks?

[grytpype]

3. I know this Joe LaVorgna guy socially, and he is a total asshole.

Really, really awful.

[Thrill]

4. No surprise. This is why they tanked the stock market after Geitner didn't back the trillion dollar

truck up