PJ McQuade, 52 Shades of Greed – Part 2

4 of Diamonds, Auction Rate Securities “Ghost Money”

Good as cash, except when you need it most.

The first auction rate security for the tax-exempt market was introduced by Goldman Sachs in 1988.[1] However, the security was invented by Ronald Gallatin at Lehman Brothers in 1984.[2]

Auctions are typically held every 7, 28, or 35 days; interest on these securities is paid at the end of each auction period. Certain types of daily auctioned ARSs have coupons paid on the first of every month. There are also other, more unusual, reset periods, including 14 day, 49 days, 91 days, semi-annual and annual. Non-daily ARS settle on the next business day, daily ARS settle the same day.

As bank loans became more expensive, the auction market became increasingly attractive to issuers seeking the low cost and flexibility of variable rate debt. Buyers received a slightly higher interest and an apparent assurance of liquidity through the auction process.

By early 2008 the ARS market had grown to over $200 billion, with roughly half of the securities owned by corporate investors. Because of their complexity and the minimum denomination of $25,000, most holders of auction rate securities are institutional investors and high net worth individuals.

In February 2008, the auction market failed, and most auction rate securities have been frozen since then, with holders unable to dispose of their securities. Investment banks that participated in the distribution and marketing have agreed to repurchase around $50 billion in securities from investors, including municipalities, under duress of investigations by U.S. state attorneys general.[4]

Student loan auction rate securities (SLARS) make up a large percentage of the ARS market.

Jack of Hearts -Lloyd Blankfein CEO of Goldman Sachs, Vampire Squid King. Admitted Goldman did things that ‘were clearly wrong and we regret’ but hasn’t changed behavior. Claimed to be doing “god’s work”.

http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511

Matt Taibbi analyzes the testimony of Lloyd Blankfein and other Goldman executives before the Senate Subcommittee on Investigations, chaired by Carl Levin of Michigan. Taibbi carefully documents enough detail to conclude that: “This isn’t just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.

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The thing is about the 2008 collapse, even now, years later, though I considered myself semi-intelligent, I still don’t really know what the hell happened.  Hopefully this deck will help myself and others gain a bit more insight into the intricacies of the collapse that just about destroyed our economy.

52 SHADES of GREED

Art Directors Marc Scheff & Daniel Nyari

This project is many things, but in the barest form is a deck of playing cards bearing illustrations of the people and financial institutions whose lust for money took the rest of us for a ride toward economic collapse.  The four illustrations I did are (l-r, clockwise) Countrywide (Ace of Clubs)), The SEC (2 of Spades), Lloyd Blankenfein (CEO Goldman Sachs) (Jack of Hearts) and Auction Rate Securities (4 of Diamonds).

The plan is to cut 1000 decks to hand them out around Wall St. on September 17th , the one year anniversary of Occupy Wall Street. To do this we have just announced a fundraiser which is going extremely well!   Everyone fueling the project with at least a $25 contribution will get a deck but we would like to raise enough to enable us to stage events related to art and financial education.

Check out the website for more details and info:  http://52shadesofgreed.com/

About PJ McQuade

Artwork and Design. NY, NY. Clients included Variety, The Hollywood Reporter, Toronto Life, ESPN, MTV Press, HOW, MAD Magazine & Penthouse. Check out www.pjmcquade.com to see more of his work.

2 comments

  1. Chris Gash

    Love these, PJ, and such a greta project! Congrats on the good press, too!

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