What the story does mention that the products were marketed heavily overseas, what it does not mention is that the synthetic CDOs were typically against a large group of names, say 100. Payment was triggered if defaults exceeded a certain level. The lists contained names that sounded solid to foreigners, like Citigroup, GM, but were anything but. Some have alleged that the lists were deliberately seeded with famous names that had reasonable odds of failure.

Note that these synthetic CDOs, like credit default swaps and many other derivatives, are 1) handy tools for gathering and redistributing funds; and 2) responsive to visible and well-defined triggering events, should the designers so choose.

Joyeux Festivus, all.

Sure enough, Nardelli ending his HD tenure in a manner befitting the classic horror genre (from Jan. 9, 2007):

According to people familiar with the situation, while store workers were celebrating, the former CEO was already fielding calls from private equity firms interested in his formidable operational talents. The bright side for Nardelli in the world of privately owned corporations, of course, is that he won’t have to deal with any annual meetings or shareholder questions.

Whereupon Executive Suite Nightmare II: Six Sigma Dawn over Detroit. In a daring move, WSJ breaks genre in the piece, giving us an intricate, postcontemporary multi-character study, with portraits of seemingly familiar characters delineated by the telling historical detail:

[As he arrived at HD, Nardelli] didn’t have much experience with consumers or the fickle nature of the retail business. He lured to the company several of his former GE colleagues, who also lacked retail experience.

Mr. Nardelli instituted a military intern program that put Marines at his desk outside his office door, company officials have said. It came to symbolize Mr. Nardelli’s ill-fated tenure at the company. His pugnacious manner helped to drive off many talented and long-tenured executives, while many employees at its 2,000 stores felt demoralized.

Those who insist that narratives be strictly differentiable might have some trouble with these consecutive paragraphs:

Mr. Nardelli began to draw shareholders’ ire. His compensation in his six years at the helm — prior to his massive severance payment — exceeded $124 million, excluding certain equity awards. As well, some investors questioned his decision to expand into the low-margin wholesale supply business.

Mr. Nardelli’s experience at GE is one of the main reasons why Cerberus wanted him. Many of Cerberus advisers and executives are made up of former GE employees. Cerberus is also a big believer in the Six Sigma system and other lean management strategies, according to people familiar with the matter.

On one hand, all these pictures do suggest that maybe Nardelli is capable in operations —at GE he also had reputedly good working relations with the unions— but poor at seeing the big picture. A person like that could be usefully placed where others want someone around whom they can manuver reliably. Or on the other hand maybe he’s a very good gearshifter of wide-ranging experience.

People seem to equate this bailout to the early 80s bailout; that is leading to widespread misunderstanding of what’s at stake, but also of who stands to win (and lose).

Back then, no Cerberus, or Goldman Sachs, or other “Private Equity” players were buying CDS ‘insurance’ (from AIG and CIti and others), basically ‘hedging’ their bets against the odds that Chrysler would tank.

But in this new playground, we can’t even count the number of players waiting in the wings to swoop in and collect those Credit DEFAULT Swaps once Chrysler is declared bankrupt, now can we…?

Personally, I think the first bailout of Chrysler (back in the 80s) has a good deal to do with the current auto industry problems, because it taught the Detroit 3 that if they got into really serious trouble, good old Uncle Sugar was going to come and bail their sorry asses out. There was therefore no really strong kick in the ass to change their internal cultures in a way that would allow them to match their overseas competition.

Available data suggests that Cerberus is better off with a bankruptcy, as then the CDS behind the scenes will pay off. They’re certainly not going to take on additional liability.

Sure looks that way; as randiego@10 said, ‘the fix was in’. But the nature and composition of the fix is still worth delineating, eh?

First, Cerberus may have been stuck with more toxic mortgage assets than they’d anticipated, so the Wall Street bailout is almost certainly helping with that — unless they ALSO bet against those toxic assets. In which case, the Wall Street bailout is almost certainly helping with thosetoxic assets, also.

Wow, if anyone has a ‘outrage meter repair kit’ for super-cheap, I need one. Like randiego, mine’s completely busted up.

And just to note how busted mine is, I can’t even laugh at the dark irony of Paulson having been CEO of Goldman Sachs, which sold plenty of derivatives. So yeah, looks like Nardelli is screwed.

Black is now white. Up is now down. In is not out. Et cetera.

Once in a conversation with a colleague at University of Pennsylvania, she asked “I have a friend raised on the east coast who moved to Nebraska and never came back. Why in the world would anyone ever do that?” When I was in college, I met a girl from New York. I was going to school in MS. I told her I was from Nebraska, just a state above MS. She said “Where is Nebraska?” I remember being totally shocked. How could she get through 8th grade and not know? My goodness I had to memorize every state in the nation, even the little ones up in the northeast.

Not to hijack the tread off topic here, but we liberal Nebraskans might have a bit of a self esteem issue. Yes, Omaha voted Obama…which was great, but I discovered this blog in a desperate search for a different kind of discussion than the ones I was having in Omaha. Nebraska, like everywhere has it’s strengths and weaknesses.