by Rolfe Winkler
December, 2008 (Bloomberg)—After a successful hostile takeover of U.S. bank Citigroup, the Somali pirates are on track to secure a seat in the United States Senate. According to Pirate spokesman Ali Hashimi Mohammed, capital secured by Citigroup from the U.S. Treasury’s TARP program along with the booty of various captured ships is being used to finance a leveraged buyout of the seat previously occupied by President-elect Barack Obama. A letter of intent seen by Bloomberg puts the acquisition price at $1.2 trillion.
In a wiretapped conversation with Mohammed, embattled Illinois governor Rod Blagojevich said the seat “is a f****** valuable thing, you don’t just give it away for nothing.”
Mohammed countered that Citigroup’s corporate charter, now controlled by the Pirates, is itself “pretty f****** vaulable.” He noted that Citigroup’s capital requirements under Basel 1 currently allow them to finance the production of nearly $60 of loans for every dollar of capital.
“Capital requirements are a joke,” Mohammed told Blagojevich in the recorded call. “Our bank charter let’s us manufacture an unlimited amount of money with only a sliver of capital. I spoke to Bernanke yesterday and he wants us to lend, lend, lend in order to prevent deflation! He doesn’t care to whom or for what. So we’ll lend to ourselves to pay you for the Senate Seat.”
The Pirates have been able to raise $25 billion of fresh capital in order to increase lending. That figure includes the $20 billion government infusion into Citigroup last month, as well as the Pirates’ existing cash holdings of $5 billion from the sale of goods plundered from cargo ships in the Gulf of Aden.
At 60:1, the Pirates can use that capital to finance $1.5 trillion worth of new loans.
The Senate Seat is believed to be especially valuable as it will enable the Pirates to introduce legislation in Congress providing them with additional capital via TARP. With leverage ratios where they are and with no restrictions on the use of TARP capital, the Pirates could, theoretically, pay themselves tens of trillions of dollars in dividends.
“F*** me for not figuring this out first,” said Leon Black when asked for comment. Black, principal of private equity firm Apollo Managment, was famous for borrowing hundreds of millions against the assets of acquired companies in order to pay himself large dividends. “These Pirates are my f****** heroes!”
If they are able to squeeze out just $10 trillion over two years, which would be at the low end of expectations according to economist Mark Zandi of Moody’s Economy.com, it would imply an internal rate of return of 400%, enviable in today’s market.
In a twist, Bloomberg has learned that Federal Reserve Chairman Ben Bernanke financed the Pirates’ seizure of ships in the Gulf of Aden, a fraction of the proceeds of which were used to purchase Citigroup.
Asked by Bloomberg whether he knew about the Pirates’ pillaging, Bernkake said: “Did I know about it? Hell, I underwrote it. For the cost of two Kalashnikovs, an RPG launcher and a dinghy with an outboard I got $5 billion worth of assets that we can leverage at far greater rates in order to stimulate the U.S. economy. That’s a spectacular f****** return!”
Because the deal for the Senate seat has not been completed, other bidders are likely to emerge. Jesse Jackson Jr., believed to be “Senate Candidate #5″ in the wiretapped conversations of Governor Blagojevich, is one possibility. Bloomberg has learned that the Jackson family beer distributorship has applied to be a bank holding company in order to secure TARP capital to finance Jackson Jr.’s competing bid for the Senate Seat.
The distributorship was acquired in 1998 from Anheuser Busch, which sold the company to Jackson Jr.’s two brothers Yusef and Jonathan to resolve a boycott launched by their father Jesse Jackson Sr.
Jackson Sr. had alleged various and undocumented civil rights violations by Anheuser Busch. That dispute was resolved amicably after the sale of the distributorship to the Jackson family.
Living up to his nickname “Helicopter Ben,” economists anticipate that Bernanke will rain unlimited liquidity on all bank holding companies as part of a so-called “quantitative easing” policy meant to fight deflation.
“Yeehaw!” said Jackson Sr.