STOCK MARKET WATCH, Tuesday April 20

Source: du

STOCK MARKET WATCH, Tuesday April 20, 2010

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Euro, Yen, Loonie, Silver and Gold

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Bush Administration Officials Convicted = 2
Names: David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

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This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

back again tomorrow

SINGAPORE – Oil prices rose above $82 a barrel Tuesday in Asia, clawing back a little ground after the fraud case against Goldman Sachs and flight disruptions in Europe from volcanic ash triggered a two-day plunge. ....

A rebound in stock markets helped boost crude prices. The Dow Jones industrial average rose 0.7 percent Monday as Citigroup Inc. reported better than expected earnings and revenue, and most Asian indexes gained Tuesday. ....

Investors are also eyeing a huge cloud of ash from an Icelandic volcano that has shut down air traffic in most of Europe for five days. Some cities, such as Barcelona and Rome, were beginning to receive flights Tuesday, but most European airports remained shut.

In other Nymex trading in May contracts, heating oil rose 1.70 cents to $2.17 a gallon, and gasoline gained 0.79 cent to $2.26 a gallon. Natural gas jumped 1 cent to $3.96 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

WASHINGTON (Reuters) – After two years cutting spending on schools, healthcare, and other public services, U.S. states are preparing to carve even deeper into funding for fiscal 2011, a think tank report said on Monday. ....

A Labor Department report last week showed unemployment rates fell in March in some states and state officials warily greeted the data as a sign their economies are on the mend.

But others, including California, continued to set new records with high jobless rates and many states saw no change.

For most states, fiscal 2011 begins this summer and governors are already suggesting cuts that "go even further than those that states have enacted to date," CBPP said.

http://news.yahoo.com/s/nm/20100419/us_nm/us_usa_economy_states_cuts

Michigan is like a victim of famine. Only it's a GOP refusal to raise taxes or prevent outsourcing.

WASHINGTON – The Federal Reserve wasn't aware that now-defunct Lehman Brothers used an accounting gimmick to mask billions in debt ahead of the 2008 financial crisis, Fed Chairman Ben Bernanke said Monday.

Even if the Fed did know the investment firm was using the accounting gimmick, dubbed Repo 105, if wouldn't have changed the Fed's view that the company was in bad financial shape, Bernanke said in prepared remarks to a House committee. ...

Although the Securities and Exchange Commission was Lehman's chief regulator, the Fed began to monitor the firm after trouble surfaced in the financial industry.

Two Fed employees were placed at Lehman to keep tabs of the company's liquidity position and its general financial condition, Bernanke explained. Beyond information gathering, the employees had no authority to regulate Lehman's disclosures, capital standards, risk-management practices or other business activity, Bernanke pointed out.

http://news.yahoo.com/s/ap/20100419/ap_on_bi_ge/us_bernanke_lehman

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Okay. It is plausible that the Fed did not know what Lehman was doing - even though Bernanke was personally involved in re-writing the leverage rules. Now, when we consider what kind of leadership was at the SEC during the Bush administrations it really boggles the mind that there was not wholesale suicide of financial firms before TARP. Oversight was just nonexistent.

An unrepentant Dick Fuld, the former chief executive of Lehman Brothers, will on Tuesday portray the bank as the victim of the financial crisis and argue that a court-appointed examiner into its demise “distorted” the facts. ....

In a report published last month, Mr Valukas found that Lehman broke its own risk limits and used an accounting technique called Repo 105 to improve its balance sheet by $50bn (€37bn, £32bn) by classing repurchase agreements as outright asset sales. ....

But Mr Valukas himself comes under attack from Mr Fuld, more than a year since the former Lehman chief was berated by lawmakers in a memorable post-crisis moment.

A still forthright Mr Fuld said that “the examiner’s report distorted the relevant facts, and the press, in turn, distorted the examiner’s report. The result is that Lehman and its people have been unfairly vilified”.

He said he had only learnt about Repo 105 when Mr Valukas asked him about it but added that, in any case, accounting rules “mandated” the controversial transactions to be treated as sales and regulators had complete access.

http://www.ft.com/cms/s/0/b1c42d20-4bdd-11df-a217-00144feab49a.html

or a morbid lack of curiosity.

...The Treasury Department auctioned $25 billion in three-month bills at a discount rate of 0.145 percent, down from 0.155 percent last week. Another $25 billion in six-month bills was auctioned at a discount rate of 0.220 percent, down from 0.240 percent last week.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,996.33 while a six-month bill sold for $9,988.88. That would equal an annualized rate of 0.147 percent for the three-month bills and 0.223 percent for the six-month bills.

http://news.yahoo.com/s/ap/20100419/ap_on_bi_ge/us_treasury_bills

WASHINGTON (AFP) – Insurance giant AIG may pursue Goldman Sachs on losses from six billion dollars of insurance deals similar to those that prompted recent SEC fraud charges, the Financial Times reported Tuesday. ....

AIG's actions might prompt others to redress their losses on the complex bundles, it said.

If the insurance firm established that their transactions had had disclosure issues like the SEC allegations, they could file a lawsuit, complain to the SEC, or both, said the daily.

http://news.yahoo.com/s/afp/20100420/bs_afp/usbankingpropertygoldmancompanyfraudaig

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Anyone else also want to join the firing squad? Sign up early before they start charging.

Are there any publicly traded law firms to invest in?

This will go on for years, like the IBM, AT&T and Microsoft anti-trust cases.

Love it.

That is the surest measure of the pit GS has dug for itself--when its vassal company turns upon it to sue. AIG thought they would never prevail, before, given the friends in high places. Maybe there is hope to dump the Goldman boys out of the White House and corridors of power...

....In a letter to clients, Goldman Sachs Group Inc. vowed to fight the government's charges that the bank and one of its vice presidents misled investors by selling complex financial products tied to mortgages that were expected to fail. Both Goldman Sachs and the vice president, Fabrice Tourre, were named in the Securities and Exchange Commission lawsuit on Friday.

The SEC charged that Goldman Sachs did not tell two clients that the investments they bought were crafted by billionaire hedge fund manager John Paulson, who was betting on them to fail. ....

Among the biggest sellers of CDOs were Merrill Lynch & Co., now part of Bank of America Corp.; Citigroup Inc.; Swiss banking giant UBS; and German bank Deutsche Bank, according to a banking industry official with knowledge of the transactions. He spoke on condition of anonymity because he wasn't authorized to publicly discuss the banks' dealings. ...

Citigroup denied any involvement in the transaction Goldman Sachs is charged in connection with. But Citigroup said it has talked with the SEC during the agency's industrywide probe of the role of derivatives in the financial crisis.

For Goldman Sachs, which is scheduled to report first-quarter earnings Tuesday, the stakes in the case couldn't be higher. The worst-case scenario would be if it were to lose its license to do business. While that may seem far-fetched, it could actually happen if the company lost a jury trial and any subsequent appeals. More realistically, experts said, the company is likely to settle the case.

http://news.yahoo.com/s/ap/20100419/ap_on_bi_ge/us_goldman_sachs_fallout

By Jack McHugh at The Big Picture

The SEC and other Banks

To follow up on the stories from last night, the Financial Times reported in January: SEC subpoenas big banks over CDOs


So that is a starting list.

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Just a starting list. And just a start to this saga. Goldman just happens to be the first target and, by logical extension, the keystone. If GS is brought to heel then other banks should follow quite easily.

4/19/10 Goldman Sachs prosecution threatens to open the floodgates on Wall Street

The US government's $1bn (£650m) fraud prosecution of Goldman Sachs has spurred calls for a wholesale crackdown on the opaque world of derivatives trading, with pressure mounting on the White House to deliver reforms forcing greater transparency in highly complex financial products.

President Barack Obama is engaged in a battle with Senate Republicans over an overhaul of financial regulation and has vowed to veto any bill that does not contain strong enough controls on derivatives.

The US government will face demands this week to use its 27% stake in Citigroup as a lever to extract more public information about trading. Citigroup's annual meeting will be held on Tuesday, and a shareholder group has urged the US treasury to vote its shares in favour of a resolution requiring greater disclosure from the bank on its collateral policy and speculative activities.

The Interfaith Center on Corporate Responsibility said that an "extraordinary opportunity" was being offered to send a message to Wall Street that "more derivatives disclosure is vital".

Alarm over misbehaviour in the derivatives sphere has been fuelled by a lawsuit taken out by the securities and exchange commission (SEC) against Goldman, which accuses the bank of colluding with a hedge fund, Paulson & Co, to stuff a mortgage-backed security package with specially selected, doomed home loans. While investors including Royal Bank of Scotland lost more than $1bn, the deal led to huge profits at Paulson & Co, which took a "short" position, betting on the transaction's failure. Both Goldman and Paulson & Co deny the allegations.

Analysts say that the case against Goldman could be the tip of an iceberg. A Dutch bank, Rabobank, accused Merrill Lynch over the weekend of a similar misdemeanour, claiming that Merrill marketed a collateralised debt obligation (CDO) while omitting to mention its relationship with a hedge fund betting against the product's success, resulting in a loss of $45m. Merrill called the allegation "unfounded".

Merrill, Citigroup and Deutsche Bank were the top three writers of mortgage-related CDOs in 2006 and 2007. All three banks saw their stock drop by more than 5% when the SEC announced charges against Goldman on Friday.

more...
http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-prosecution-wall-street-crackdown

The Financial Services Authority said in a statement today that it will begin a formal probe into the New York-based bank after the U.S. Securities and Exchange Commission filed an April 16 fraud lawsuit over Goldman Sachs’s marketing of a collateralized debt obligation. ....

The bank faces a possible fine or ban of individuals if the FSA finds a breach of its rules. Prime Minister Gordon Brown called on the FSA, which he created in 1997, to investigate Goldman Sachs two days ago, accusing employees of the bank of “moral bankruptcy.”

It is too soon to tell if there will be a criminal investigation in the case, said Heidi Ashley, an FSA spokeswoman in a telephone interview. A spokeswoman for Goldman Sachs in London declined to immediately comment.

http://preview.bloomberg.com/news/2010-04-20/fsa-to-start-formal-enforcement-investigation-into-goldman-sachs-in-u-k-.html

(Down a little. Good morning.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,387,322,253,562.56 + 4,490,392,052,236.28
DOWN 121,400,113.90 + UP 3,216,939,833.45

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,081,593 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,664.45.
A family of three owes $124,993.35. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 9,750,537,636.22.
The average for the last 30 days would be 7,800,430,108.98.
The average for the last 31 days would be 7,548,803,331.27.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 136 reports in 198 days of FY2010 averaging 7.12B$ per report, 4.89B$/day.
Above line should be okay

PROJECTION:
There are 1,010 days remaining in this Obama 1st term.
By that time the debt could be between 14.3 and 20.5T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/16/2010 12,877,714,305,798.84 BHO (UP 2,250,837,256,885.76 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,967,885,302,287.10 ------------* * * * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,784,233,006,741.37 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/29/2010 -000,032,502,739.57 ---- Mon
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon
04/13/2010 -000,086,542,536.22 ----
04/14/2010 +000,857,281,039.39 ------------********
04/15/2010 +039,328,943,525.65 ------------**********
04/16/2010 -000,121,400,113.90 ---

187,362,403,538.06 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4348733&mesg_id=4349051

(Down a good bit. Good day.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,370,106,355,832.40 + 4,492,943,059,383.98
DOWN 17,215,897,730.16 + UP 2,551,007,147.70

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,101,531 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,614.32.
A family of three owes $124,842.95. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 31 days.
The average for the last 22 reports is 9,182,258,532.26.
The average for the last 30 days would be 6,733,656,256.99.
The average for the last 31 days would be 6,516,441,539.02.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 137 reports in 201 days of FY2010 averaging 6.96B$ per report, 4.74B$/day.
Above line should be okay

PROJECTION:
There are 1,007 days remaining in this Obama 1st term.
By that time the debt could be between 14.2 and 19.4T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/19/2010 12,863,049,415,216.38 BHO (UP 2,236,172,366,303.30 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,953,220,411,704.60 ------------* * * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,730,972,389,413.83 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon
04/13/2010 -000,086,542,536.22 ----
04/14/2010 +000,857,281,039.39 ------------********
04/15/2010 +039,328,943,525.65 ------------**********
04/16/2010 -000,121,400,113.90 ---
04/19/2010 -017,215,897,730.16 - Mon

170,179,008,547.47 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4350173&mesg_id=4350197

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4350142

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7608743/Goldman-Sachs-implicated-in-shorting-Lehman-shares.html

6:00AM BST 20 Apr 2010
Goldman Sachs has been drawn into a fresh controversy as lawyers demand to know whether it was partly responsible for triggering Lehman Brothers’ downfall by shorting its rival’s shares.
..
Goldman has been subpoenaed to hand over documents to Lehman’s Bryan Marsal, the man responsible for winding up the bank’s affairs and repaying creditors. Goldman was named in the court filing along with four other firms, including hedge funds SAC Capital and Citadel. Goldman declined to comment on the Lehman case.
..
President Barack Obama is to make a landmark speech on financial regulatory reform which is expected to draw on Goldman’s current problems.

Both BaFin, the German regulator, and the European Union are looking into the situation.

------------- Was this the Big Shoe story?
Carl Levin: Another "Big Shoe to Drop" on Goldman

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4349746

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8176626

:donut: :donut: :donut:
I will check back as time allows today.

:hi:

They accept "Greed is good." They don't see Gekko as a figure of satire or horror. They want to BE him. In real life, the Gordon Gekkos made a lot of money. Their ill-gotten fortunes survived their brief, white collar prison sentences. I'm thinking of Michael Milkin and Ivan Boesky. They weren't allowed to work in the securities industry anymore, but they seemed to come out the other side of their prison sentences (2 years for Milkin, 3 1/2 for Boesky) with substantial fortunes remaining.

Maybe the 2000s will lead to a book like Den of Thieves, which was inspired by Wall Street greed during the 1980s. Or maybe we should require all members of the SEC to read that book annually.

"That darn Bailey Savings and Loan! They're Socialists!"

"Jump, George Bailey, jump!"

"Hooray for Potterville."

"Turn it off before the end. Let's pretend George gets arrested and goes to jail. Heh-heh, he finally gets to travel outside Bedford Falls--to Attica! Ahahah."

...channeling Potter at the inaugural!
(as much as I would like to!)

I hereby offer up the following theme:

http://www.youtube.com/watch?v=rmCpOKtN8ME&feature=player_embedded

http://www.cbsnews.com/stories/2010/04/19/earlyshow/living/ConsumerWatch/main6410628.shtml


TYPES OF SCAMS

Phantom Help: The "rescuer" charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily handle on his or her own, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.

Bailout - or "Rent-to-Own": The homeowner is deceived into signing over the deed, in the belief he or she will be able to stay in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back may be impossible, the homeowner loses possession and the "rescuer" walks off with most or all of the equity.

Bait and Switch: In this scam, the homeowner thinks he or she is signing documents to bring the mortgage current, but instead actually surrender ownership. Homeowners usually don't even know they've been scammed until they're evicted.

RED FLAGS TO BE AWARE OF

If the "rescuer" does any of the following, the "rescuer" could really be a thief at work:

- Calls itself "mortgage consultants"
- Advertises with flyers or solicits door-to-door
- Asks for upfront payment
- Tells you to make payments to them
- Tells You to transfer your deed to them

IF YOU THINK YOU'VE BEEN HAD

- Fill out a police report
- Contact your state's attorney general's office
- Notify your lender

http://hosted.ap.org/dynamic/stories/U/US_FORECLOSURE_RATES?SITE=AZMES&SECTION=HOME&TEMPLATE=DEFAULT

A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.

RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.

More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.

"We're right now on pace to see more than 1 million bank repossessions this year," said Rick Sharga, a RealtyTrac senior vice president....In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions....The states with the highest foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7605996/Goldman-Sachs-the-bank-that-thought-it-ruled-the-world.html

Goldman Sachs was ‘doing God's work' - but it is now being investigated for fraud. Harry Wilson reports.

'Long-term greedy” was the phrase that Sidney Weinberg, Goldman Sachs’s legendary managing partner from the 1930s to the 1960s, used to describe the American investment bank’s overarching strategy. Such a pious mission statement from a corporate titan would make a modern audience balk. However the phrase neatly encapsulates the way that Goldman Sachs has operated over the past 80 years, a period in which it has risen from being a little-known, slightly scrubby broker to the world’s most profitable, powerful and controversial financial institution.

When Lloyd Blankfein, Goldman Sachs’s current chairman and chief executive, was caught saying last year that the bank was doing “God’s work”, the contrast between Goldman Sachs’s own view of its business and what the rest of the world thought of it was vividly demonstrated.

His comments came just weeks after the firm was memorably described in an article in Rolling Stone magazine as a “vampire squid wrapped around the face of humanity relentlessly jamming its blood funnel into anything that smells like money”. Doing God’s work is the last thing most think Goldman Sachs is up to.

As Philip Pullman writes in his latest book, The Good Man Jesus and the Scoundrel Christ, “As soon as men who believe they’re doing God’s will get hold of power, whether it’s a household or a village or in Jerusalem or in Rome itself, the devil enters into them.”

Last Friday, those who believed that the devil was running the show at Goldman Sachs finally received the news they had been waiting for. America’s Securities and Exchange Commission (SEC) said that it was investigating the bank for misleading investors in so-called collateralised debt obligations, a complex financial product sold by the bank during the boom years of the Noughties.

Goldman Sachs immediately hit back, saying that it would “vigorously” contest the case. However some will have found it hard to hide a feeling of Schadenfreude that at last a bank that at its peak was worth more than $100 billion (£65 billion) was finally being brought to heel.

The story of the bank over the past decade has been one of inexorable rise. In the 1980s Salomon Brothers, now part of the American banking behemoth Citigroup, was the bank to beat on the global stage. In the 1990s a cluster of largely American firms vied for supremacy after the demise of Salomon’s, brought down in part by being found guilty of rigging bond market auctions. The 2000s, however, undoubtedly belonged to Goldman Sachs.

In whichever market observers cared to look at, whether it be share trading, bond trading, corporate advisory or securities underwriting, Goldman Sachs was either at the top or running a close second. Its success was born of a combination of brutally hard work, an undoubted ability to attract the best young minds and that undefinable X-factor that comes from being acknowledged as the best game in town.

“No one ever got fired for hiring Goldman Sachs” is still one of the markets’ mantras. Indeed it has been said that the bank was often hired by companies to advise them only because they were afraid that it might end up working for a rival.

For all its reputation, there has always been at least a hint that some of Goldman Sachs’s success had less to do with its market nous and more to do with its connections. After Lehman Brothers was allowed to file for bankruptcy in September 2008, Goldman Sachs, along with Morgan Stanley, was allowed to convert itself into a bank holding company just weeks later. This gave it access to tens of billions of dollars of government lending. One did not need to be a conspiracy theorist to point out that US Treasury Secretary Henry “Hank” Paulson – the man in charge of the bail-out – was the bank’s former chief executive.

This impression was not helped when Mr Paulson selected Neel Kashkari, a youthful former Goldman Sachs executive, to run the American government’s Troubled Asset Relief Programme, the equivalent of Britain’s Asset Protection Scheme. The move put him in charge of hundreds of billions of dollars of American taxpayers’ money. Again, Goldman Sachs was a beneficiary.

The American authorities’ case against Goldman Sachs prominently features another young Goldman Sachs banker, a French-born 31-year-old called Fabrice Tourre. Mr Tourre, who referred to himself in emails published by the SEC as “the fabulous Fab”, is alleged to have sold a debt product that he knew would fail to a group of investors, mainly large banks, including ABN Amro, now part of Royal Bank of Scotland.

Mr Tourre is alleged to have allowed another Goldman Sachs client, American hedge fund Paulson & Co, to select the complex bonds that were put inside the product. The SEC alleges that Goldman Sachs did this so that Paulson & Co could make money by betting that the bonds would fall in value (Paulson & Co has not been accused of any wrongdoing).

Goldman Sachs’s strong links with hedge funds have always aroused suspicion; however, the bank has argued that it has highly effective internal “Chinese walls”, barriers that stop employees from sharing information that might allow them or a client to trade on insider information.

The significance of the latest allegations is twofold. First, they suggest that Goldman Sachs was favouring one client over another. This is particularly resonant as Paulson & Co was one of the most high-profile success stories of the financial crisis and recently the subject of a best-selling book, The Greatest Trade Ever. The book detailed how Paulson & Co founder John Paulson made billions of dollars shorting the American sub-prime market.

Second, the allegations imply that Goldman Sachs made money from the travails of its own customers. It is often pointed out that the bank makes far more money from trading with its own money than it does from advising its clients. This so-called proprietary trading involves the firm putting billions of dollars of its own capital at risk by buying stakes in assets as diverse as golf courses – the firm was once the largest owner of golf courses in Japan – to oil and ships.

In the case of the sub-prime market, it is now well-known that Goldman Sachs, unlike almost all of its Wall Street rivals, took an early decision around 2006 to begin betting against the American housing market.

The SEC’s allegations suggest that these trades might have involved not just canny positioning by the bank, but actively putting its clients into trades that it knew would lose them money.

What this means for the future of Goldman Sachs is still too early to say. At best, the bank will be one of many financial institutions that become embroiled in a series of investigations relating to this issue – Britain’s own Financial Services Authority is already reported to be starting its own investigation into the matter. Finding safety in numbers would allow Goldman Sachs to argue that it was just doing what everyone else was.

It would be more serious, however, if the SEC’s investigation remained an isolated incident. If this was the case it could mark the beginning of the end for Goldman Sachs, going the same way as other investment banks that sailed too close to the wind and sank. Who now, aside from those with a long memory and an interest in markets, remembers Salomon Brothers or Drexel Burnham Lambert?

As one Goldman Sachs partner, quoted in Charles Ellis’s history of the bank The Partnership, said: “Only looking back could we see the real risk – the risk of arrogance. We didn’t see it then, but it was there and it was growing.

“The firm was at the top. We had always been the best – always the top students and the best athletes and the class leaders. And now we were the best firm – in our self-appraisal. But that was the first step towards arrogance.”

http://www.thepeoplesvoice.org/TPV3/Voices.php/2010/04/18/numerian-the-goldman-sachs-credo-so-what#more10994

Reading the SEC allegations against Goldman Sachs and Co., you get the impression the agency would prefer a simple world where you could charge a company with lying and be done with it. Lying to one’s clients is at the core of the suit against Goldman Sachs. Unfortunately there is apparently no law against lying in phone conversations and meetings, but there are laws against fraudulent written representations, and this is the legal foundation on which the SEC is basing its suit.

The meaty stuff in the SEC complaint is to be found in the behavior of Goldman Sachs and its employee who structured the transaction known as ABACUS 2007-AC1. Fabrice Tourre, now age 31, was a vice president on the structured product correlation trading desk. He put together the ABACUS deals and is said in the complaint to have left out pertinent information, or lied altogether, to the firm that helped set up the ABACUS deal and make it sellable to investors. No other Goldman Sachs employee is identified in the suit, and the management on the trading desk or in his department are described only in shadowy terms.

Goldman’s response this week to the suit says that they will defend themselves vigorously (and no doubt with many millions of dollars of legal expense), so they are not throwing Mr. Tourre to the wolves as some rogue trader. This would have been the logical thing to do since the allegations against Mr. Tourre are especially damaging. By embracing and defending him so readily, we therefore have to assume Mr. Tourre’s behavior is emblematic of the Goldman Sachs culture, and how he comported himself is how many others behaved at the firm. This in itself is very revealing about Goldman Sachs and its management.

The Transaction

The creation of the ABACUS-2007 transaction is certainly interesting and not too difficult to understand. We can follow the SEC complaint step by step.

• By early 2007, fissures were developing in the residential mortgage market in the US. A few months earlier, in the autumn of 2006, prices of homes had stopped climbing and in many markets had begun to fall. Defaults on home mortgages were beginning to rise sharply.

• Because of this, it was getting harder to sell collateralized debt obligations (CDOs) based on residential mortgages. This business was a specialty of Goldman Sachs, which set up the structured product correlation trading desk in 2005 to create and sell these CDOs. The CDOS were composed of one hundred or more Residential Mortgage Backed Securities (RMBS’s), which were themselves composed of over a thousand individual home mortgages. The RMBS market often structured their securities so that all the mortgages would be from California, for example, or all would be subprime or share some other commonality. This was convenient for creators of CDOs; they could devise sections, or tranches, with different risks, ranging from Aaa rated down to near-default risk, which was referred to as equity because it was tantamount to having no protection other than that of a shareholder.

• Investors who bought CDOs could choose which level of risk they would undertake; the higher the risk the greater the yield they could achieve. Because of this flexibility and the attractive yields, banks, mutual funds, pension plans, and endowments formed the customer base for these CDOs. These investors were getting a bit choosy, however, given the rising defaults in the mortgage market, and CDOs based on residential mortgage backed securities were getting harder to sell. Goldman had done several ABACUS deals in recent years, and this one under consideration by Fabrice Tourre was expected to generate up to $15 million in fees for the firm.

• What investors wanted to know was who selected the RMBS’s to include in the CDO? They were no longer willing to buy CDOs of this nature if Goldman Sachs selected the RMBS’s; they wanted the assurance that an independent third party had selected only the best securities for inclusion into the CDO. Despite the weakening residential mortgage market and rise in defaults, investors were not especially worried that the CDO tranche they were buying was going to deteriorate. Most everyone agreed housing prices in the US never declined on a national scale, and the CDO yields were still very attractive compared to US Treasuries.

• Not everyone agreed that the housing market was stable. In fact, John Paulson, owner of the Paulson & Co. hedge fund, believed the housing market was about to collapse. He wanted a way to bet against the housing market, and did a study of hundreds of RMBS’s that he thought were ultimately going to be downgraded and lose substantial value. He was particularly interested in those securities that featured mortgages from California, Nevada and Florida (where housing price appreciation had been the greatest), and subprime securities of the NINJA variety (no income, no job, and no assets verified for the home owner).

• Paulson approached Goldman Sachs in early 2007 with an idea for shorting the housing market. He would buy from Goldman Sachs an insurance policy, called a Credit Default Swap (CDS), based on the very RMBS’s he thought would likely lose value. He would pay a one-time fee for this CDS, and if he was right, Goldman Sachs would pay him as much as a billion dollars. Normally CDS’s are sold to clients who are using them to hedge the credit risk in assets they already own, but in the discussions with Goldman Sachs, Paulson made it clear he owned no residential mortgage securities, and was interested in the CDS as a pure speculative play against the housing market.

• The first question that came to Goldman Sachs’s mind was: how do we hedge this transaction? They needed cash flow equal to a billion dollars to pay to Paulson if the housing market did indeed collapse. It was Paulson who suggested Goldman Sachs create a CDO that would bring in a billion dollars; under the right terms a CDO could still be made attractive to investors who believed the opposite of Paulson, in other words that the housing market would not deteriorate. This is where the services of Fabrice Tourre came in to the picture, as he was assigned the task of creating another in the ABACUS series of CDOs.

• To solve the problem of the independent third party, Goldman Sachs approached the collateral management firm ACA Capital, which specialized in selecting and managing the securities in CDOs and had done 22 previous transactions. Tourre told ACA that Goldman was acting on behalf of a sponsor – Paulson & Co. – and that Paulson wanted to contribute to the initial selection of the RMBS’s to be included in the CDO. Paulson sent a list of 123 securities he wanted in the CDO, all of them from his own list of the weakest securities in the market according to his research. ACA accepted only 55 of them for inclusion.

• Several meetings were then set up among Paulson, Tourre and ACA to refine the group of RMBS’s that would ultimately be selected for the CDO. At no time in any of these meetings did Tourre mention that Paulson was going to enter into a side contract with Goldman Sachs to short these securities by purchasing a CDS from Goldman. In other words, it was never revealed to ACA that Paulson had a serious conflict of interest; in fact he had a reverse interest: he wanted the CDO to fail and to do so as quickly as possible. His real interest was getting the worst possible securities included in the CDO package.

• ACA was concerned about Paulson’s desire to include the weakest securities in the CDO. For example, he refused to allow any mortgages from Wells Fargo to be included, because Wells Fargo was known to have a more careful credit review process for mortgages than other lenders. Privately, Tourre assured ACA that Paulson’s financial and economic interest was entirely aligned with theirs, because Paulson and Co. was going to invest $200 million in the equity portion of the CDO. This was demonstrably a lie; Paulson never invested in any portion of the CDO.

• ACA has told the SEC that they would never have put their firm’s reputation at stake and acted as collateral agent for the ABACUS-2007 CDO had they known that Paulson was not going to invest in the CDO, or had they known that he was going to short portions of the CDO by buying a credit default swap from Goldman.

• When it came time to approach investors, Tourre put together a term sheet, prospectus, and other documents describing the ABACUS-2007 CDO. Great prominence was given to the fact that ACA was the collateral agent and had chosen the securities included in the CDO. There was never any mention that Paulson & Co. had participated in selection of these securities or was a sponsor of the CDO. Several investors have told the SEC they would never had bought the CDO had they known that the selection process was compromised and not entirely independent.

• The CDO closed on April 26, 2007. By late October, 2007, 83% of the securities in the portfolio had been downgraded, and by late January, 2008, 99% of the securities had been downgraded and lost substantial value. Investors lost hundreds of millions of dollars, and several bank investors had to be rescued by their governments because of these and similar losses.

• Meanwhile, Paulson’s credit default swap soared in value, and he eventually earned $1 billion in profit on his short of the mortgage securities market. This money came directly from the investors who lost at least at much on the CDO. For example, one investor, the Dutch bank ABN, negotiated with Goldman Sachs in late 2007 to get out of their tranche of the CDO, and paid Goldman $841 million to unwind their deal. This money ultimately went to Paulson.

Some Observations

Goldman Sachs has issued a brief statement in defense of their conduct, saying that their job has always been to match the interest of parties with different views about the market. In this case, Paulson & Co. thought the mortgage securities market was going to collapse, while investors in the CDO did not. Goldman gives you the impression they are a disinterested middleman matching buyers and sellers. This is exactly how a trader thinks, and it is traders like Lloyd Blankfein who run Goldman Sachs and have done so ever since the firm went public in the 1990s. This is not what Goldman Sachs used to be like when it was a private firm. Then, it operated only in the interest of one client at a time, and if there was any potential conflict of interest with another client, it would decline the transaction. This culture has died out on Wall Street, and this deal, created as it was on a trading desk, displays the consequences of the new culture where the most important thing is getting the deal done at the maximum amount of profit to the firm.

The behavior of Fabrice Tourre, if proven in court, is indefensible. Goldman Sachs will have to throw him over at some point and claim he did not act within the standards of the firm. They will probably do so in a negotiated settlement with the SEC, after stalling the settlement with legal tactics for a few years so everyone can forget about it. The SEC is demanding a jury trial and disgorgement of all profits, plus an assessment of penalties, so this is going to cost Goldman Sachs a hundred million dollars or more, but in this environment Goldman would rather pay this privately than risk a jury trial.

Notwithstanding whatever Goldman ultimately will say about Fabrice Tourre, he is being defended at the moment because the firm cannot afford to quickly jettison him without affecting morale at the company. He is also a typical Goldman employee – full of himself (he egoistically refers to himself in emails as “fabulous Fab”), aggressive with the facts, and unconcerned about conflicts of interest. Perhaps he lied more overtly than most employees would, but stretching the truth a bit must be common when the firm has to spend nearly every transaction skirting over and hiding the conflicts of interest involved.

Very little is said in the lawsuit about Goldman Sachs management. There is a Mortgage Capital Committee that approved the deal. They were made aware of the fees earned and the involvement of Paulson & Co. and the CDS he would undertake with Goldman. Apparently none of these senior executives were the slightest bit concerned about the conflict of interest or whether ACA needed to be misled about Paulson for them to enter into the deal. Management obviously did not insist that the written material be clear about Paulson’s role. These are obvious reasons to include Goldman Sachs & Co. as a defendant in the lawsuit.

John Paulson is given credit for being one of the few who saw disaster coming in the housing market. Readers here at The Agonist and at other blogs have long known about this potential, even as early as 2004. The difference between us and John Paulson is that we had no way to profit from this event, other than selling our house and renting. As a billionaire hedge fund manager, Paulson has access to the financial power structure and used it to his advantage. In fact, with this lawsuit we see his behavior is not entirely commendable. He certainly kept his mouth shut about his desire to short the mortgage securities market when he was meeting with ACA, and it is hard not to believe that he had an understanding in advance with Fabrice Tourre that his true role would never be revealed.

Paulson is not the only hedge fund manager who shorted the housing market. A Chicago firm called Magnetar has recently been revealed to have engaged in very similar transactions with other big Wall Street banks. Their true position was never revealed in these deals as well, so theoretically the SEC has lawsuits it can file against JP Morgan Chase, Bank of America and others.

It should also be remembered that a few weeks ago the chairman of JP Morgan Chase testified to Congress that not once in any of the executive meetings at the bank did someone postulate that the housing market might collapse. Yet this bank was at the time doing huge transactions with hedge fund managers who certainly did believe this to be case and were actively betting against the housing market. It is simply preposterous to believe that bank managements “didn’t see it coming.”

The SEC suit exposes Goldman Sachs to more civil lawsuits from the investors who can now claim they were defrauded into buying the ABACUS CDO. This would include the German bank IKB, which collapsed because of such investments, ABN of The Netherlands, and AIG, now owned by the US government. Goldman is facing serious problems with these tangential lawsuits.

Finally, when all is said and done, we are just getting a tiny peek at the culture of corruption that is Wall Street. Will there be more such revelations, or is this all we are going to be allowed to see?

Catering to the Peasant Thinkers among us.

"Goldman ‘Buy’ Ratings at 5-Year High Undaunted by SEC (Update1)" :puke:

Here's the link if you can stomach reading any more... (I can't)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIxeydTVivP8&pos=5

What I've heard none of is the REAL crime in all of this... By starting a built-to-fail fund of
mortgages Goldman/Paulson created a MARKET for less than diligent MORTGAGES. Talk about predatory...
But, on this fact... Not so much as a peep. All they're worried about is how much the rich guys
ripped off the other rich guys.

Anyway, I'm thinking of starting a pool on the outcome of all of this... Because, I'm sure that
when someday, someone is being carried off shouting, "It's PEOPLE! Soylent Green is PEOPLE!". The
course of events leading up to how things got so bad could be traced directly back to this singular
activity on the part of Goldman Sachs.

http://www.borowitzreport.com/2010/04/20/goldman-ceo-to-perform-community-service-as-treasury-secretary/


A Treasury Dept. spokesperson said that by performing community service as Treasury Secretary, Mr. Blankfein will be able to do less harm to the economy because he will have significantly less power than he had as Chairman of Goldman.

His experience at Goldman, however, will be “invaluable” in his new role as Treasury Secretary, the spokesperson said: “Lloyd Blankfein’s years of marketing worthless securities have prepared him for the important task of selling Treasuries to the Chinese.”


via Borowitz Report

I know, it's a joke column, but don't even GO there!

Miss Mattie had a quiet night, woke up at 5:00 ready to head outside. Much more active than yesterday, and the swelling on her nose and lower jaw is considerably less than yesterday afternoon. The pain medication makes her groggy and sleepy, which is what she needs, so when it wears off after about 6 hours she has a chance to get up and walk around and stuff, and the rest of the time she's in the office with me sleeping. It looks like she's gonna pull through just fine.

Many thanks for all your kind wishes. . . SMWers are without a doubt DU's Very Best People.




Tansy Gold, and Miss Mattie

Such a frightening experience, glad she is mending.

:)

Thank you for the news! Wishing you some calm and Miss Mattie a speedy recovery.

James Howard Kunstler -- World News Trust

Apr. 19, 2010 -- It's interesting and instructive to read The New York Times' lead story Monday morning, Top Goldman Leaders Said to Have Overseen Mortgage Unit. While it pretends to report all the particulars of the huge scandal growing out of Friday's SEC action against Goldman Sachs, the story really comes off as an attempt to create an alibi for the so-called "bank." It pretends that some kind of an intellectual struggle was going on among GS executives as to whether the housing market was doing just fine or poised to tank -- therefore muddling the company's intent in setting up investment deals based on sketchy mortgages designed to blow up so that a favored big customer, John Paulson, could collect on the deal insurance known as credit default swaps.

The truth is that anyone with half a brain could see the securitized mortgage fiasco coming from ten-thousand miles away. I said as much in Chapter Six ("Running on Fumes: the Hallucinated Economy") of my book The Long Emergency, which was published in 2005 but written well before that in 2002-4. And I had had no work experience whatsoever in banking generally or Wall Street investment banking in particular.

One week before the SEC action against GS, the Pro Publica website published a story about virtually the same kind of mischief being run out of the Chicago-based hedge fund Magnetar led by a clever young fellow named Alec Litowitz. Like Goldman Sachs, Magnetar deliberately constructed investments (bundles of bundled mortgage-backed securities called collateralized debt obligations) that were certain to fail so that Magnetar could collect on credit default swaps that amounted to a bet against products they themselves had participated in creating. There was no question that Litowitz and his employees did this absolutely on purpose. Nor is there any question that they aggressively sold positions in these CDOs to credulous investors like Thrivent Financial for Lutherans and others.

The question that now begs to be answered is: why is this activity not being investigated and prosecuted under the federal RICO statutes against racketeering? The Racketeer Influenced and Corrupt Organizations Act was designed to punish exactly this kind of behavior, whether the defendant's name ended in a vowel or not. How is it not a racket to deliberately and systematically construct investments designed to fail so you can collect what amounts to insurance against them -- and then to sell those financial instruments to customers without telling them that these investments were engineered to blow up? At the very least it amounts to a failure to disclose material information, which is the basis for distinguishing illegality. More to the point, it almost certainly amounts to prosecutable criminal fraud and insider trading.

more

http://worldnewstrust.com/index.php?option=com_flexicontent&view=items&cid=134:commentary-wnt-reports&id=7657:wheres-rico-james-howard-kunstler

Target Snubs Visa in Shift to Store-Branded Cards
http://www.bloomberg.com/apps/news?pid=20601087&sid=axg44vNEkykA&pos=5

“Guests tend to spend more at Target when issued a Target Credit Card instead of a Target Visa,” the Minneapolis-based company said today in a statement."

;)



heh

To own a bunch of shares of Apple! Wow.
Tansy, thanks for sharing Miss Mattie's upturn with us. Here's hoping every day is better and better.
hamerfan