Greece on the Rocks.

Baltic Dry Index. 3013 +07

LIR Gold Target by 2019: $3,000.

“Berlin's hard line is in part theatre to soothe voters before the regional vote in North-Rhine Westphalia on May 9. The EU/IMF bail-out is deeply unpopular in the industrial belt of the Ruhr.”

The Daily Telegraph.

Another Monday, another Greek bailout on the rocks. Another German Nein, non, nao, nie, nee, ne, negativa, negazione! We are not bailing out all the European PIIGS. The Telegraph thinks that this is just for German domestic consumption to fool the voters of North-Rhine Westphalia. I have my doubts. I doubt that Germany’s voters are in any mood to be contemptuously fooled. The Greeks are demanding that they get the cash before they default on May 19th. Even if the Telegraph is right, it doesn’t sound like Germany will pay off before May 10th. It isn’t enough anyway, suggests the analysts at Zero Hedge. 45 billion Euro is at least 9 billion euro short. 30 billion Euro thinks the Economist magazine, just referring to Greece, about a trillion plus short if contagion also blows up Portugal and Spain. My guess is that this is what drives German reluctance to start out on bailouts at all. My guess is that German policy is really to toss Greece out of the monetary union sooner rather than later.

“He who has his thumb on the purse has the power.”

Otto von Bismarck.

Germany refuses to help Greece unless it agrees to tougher terms
Germany's finance minister Wolfgang Schauble has raised fresh obstacles to the €40bn (£35bn) aid package for Greece, warning that Berlin will not transfer funds until Athens agrees to tougher terms.
By Ambrose Evans-Pritchard and Edmund Conway Published: 10:47PM BST 25 Apr 2010

Mr Schauble said no decision had yet been taken by Berlin or the European Union and that the outcome may yet be "negative". "It depends entirely on whether Greece goes through with the strict austerity in coming years," he told Bild Zeitung.

George Papaconstantinou, Greece's finance minister, insisted in Washington that the Germans were "completely on board" and that other EU states and the International Monetary Fund would provide a bridging loan if necessary. He said funds "will lose their shirts" if they have taken short bets on Greek debt. "I want to categorically state that any restructuring is off the table."

Mr Papaconstantinou also warned that other EMU states with big debts could fall foul of the markets. "What we are talking about is not merely a Greek problem. There are broader issues around the eurozone."

------Mr Schauble will meet Bundestag leaders today (Monday) amid rising doubts among Free Democrats (FDP) and Bavaria's Social Christians (CSU) over the wisdom of open-ended help.
Hermann Otto Solm, finance expert for the FDP, said Berlin must clarify the limits to any aid. "Our party is very concerned that it is not going to be a one-off rescue, but will turn into continuous, automatic help for any country that ends up like Greece. That we cannot accept," he said.

Hans-Peter Freidrich, head of the CSU group, said Greece should "seriously consider leaving the eurozone".

Italy's finance minister, Giulio Tremonti, said Germany must stop dragging its feet. "If your neighbour's house catches fire, it's not to your ­advantage to sit back and do nothing. You cannot fool ­yourself into thinking that just ­because your house is bigger and more beautiful, that it won't be at risk. In case you are wondering, I am speaking about Germany," he said.

Berlin's hard line is in part theatre to soothe voters before the regional vote in North-Rhine Westphalia on May 9. The EU/IMF bail-out is deeply unpopular in the industrial belt of the Ruhr. But Mr Schauble is also worried about a court challenge over breach of the EU's no bail-out clause.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7632538/Germany-refuses-to-help-Greece-unless-it-agrees-to-tougher-terms.html

Greek Debt Crisis: Lehman 2.0?
Submitted by asiablues on 04/25/2010 12:50 -0500
---------After two months of intense debate among European governments and market speculations, the joint IMF-EU Greek rescue package has finally been decided earlier this month. The size of the rescue package reportedly amounts to about €45bn ($60bn, £40bn), of which less than a third will come from the IMF.

The heavily indebted Greece needs to borrow some €54 billion this year and must refinance around €20 billion in April and May. Simple math could tell you this €45-billion bailout only helps avert a temporary liquidity crisis and would sustain Greece through this year at best. Calculations by The Economist suggest that even on optimistic assumptions, Greece will run up an extra €67 billion of debt by 2014, wh en its debt will peak at a scary 149% of GDP.

Greece underlying problems--flat growth, high debt load and interest costs--could take years to resolve. Additional rescue program(s) of at least an equivalent sum--or more--might be needed again in the next few years, depending on the progress of their austerity measures. This means resorting to a “debt restructure” to defer loans or pay back less than it owed, could still be a distinct possibility.

-----The proposed spending cuts and revenue raising measures have met with fierce resistance by the public workers. Economists such as Martin Feldstein argue in favor of exchange rate devaluation, hence an exit of the euro zone.

-----According to estimates by The Economist, foreign banks’ exposure to Greece, Portugal and Spain combined comes to €1.2 trillion. European banks have lent most of this. German banks alone account for almost a fifth of the total.
http://www.zerohedge.com/article/greek-debt-crisis-lehman-20

In regular bankster news, this week we are spoiled for choice. See Crooks Corner for the starring role of the great vampire squid in tomorrow’s great inquisition in Washington. Elsewhere, New York is the preferred venue for picking over the carcass of the great Lehman fraud. Bankster v Bankster threatens to reveal a lot about how the banksters really feel about each other.

“A bank is a confidence trick. If you put up the right signs, the wizards of finance themselves will come in and ask you to take their money.”

Jules Bertillon. A House of All Nations. 1938. Christina Stead.

April 26, 2010
Barclays boss called to US court over Lehmans

The president of Barclays is among a cast list of senior bankers who will play starring roles in the next two weeks in a courtroom drama that will captivate Wall Street and beyond.
Bob Diamond will be made to relive the events of the days before and after the collapse of Lehman Brothers as a bankruptcy court in New York decides whether Barclays paid too little — or too much — for the American division of the investment bank.

Also testifying will be Lehman’s former president and chief operating officer Bart McDade. He approached Mr Diamond as Lehman was imploding, desperately asking him to buy the dying bank’s broker-dealer business.

Lehman left $639 billion of debts when it filed for bankruptcy on September 15, 2008. Mr McDade subsequently went to work for Barclays to help it to integrate Lehman’s US investment banking unit into its operations, but he quit after less than two months.

Lawyers for the bankrupt Lehman estate are accusing Barclays of obtaining a secret discount when they swooped on Lehman’s US business. This undisclosed “asset grab” resulted in an $11 billion “windfall” for the British bank, Lehman’s lawyers say, and they want the money back.
Barclays insists that it had always made clear that it expected to make a profit from the deal. It is claiming that it is still owed $3 billion from the transaction. It, too, wants its money.

Jonathan Schiller, a managing partner at Boies, Schiller & Flexner, Barclays’ lawyers, maintains that there was no “secret discount” to Barclays, adding that Lehman is trying to take advantage of the turnaround in the financial markets since the deal was struck.

Lawyers for Lehman say that their case centres on the fact that Judge James Peck, who initially approved the sale and who is presiding over the case that opens today, was never given a crucial “clarification letter”, which altered the terms of the sale in Barclays’ favour after initial terms had been drawn up.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7107876.ece

We end for the day on banksterism with the truth coming out at long last. Below, Bloomberg covers the reality of how the ratings agencies really worked in the decade of derivatives gambling greed.

"No one ever made enough money."

Jules Bertillon. A House for All Nations. 1938. Christina Stead.

Bankers Said ‘Anything’ to Get High Rating, S&P Ex-Analyst Says

April 26 (Bloomberg) -- Just past midnight on May 3, 2005, Standard & Poor’s analyst Chui Ng e-mailed co-workers to broker a solution to demands by Goldman Sachs Group Inc. bankers that he said violated two or more of the ratings company’s internal guidelines.

Goldman Sachs was adding $200 million in debt at the “last minute” to a $1.5 billion bond pool called Adirondack Ltd., Ng wrote. That meant the New York investment bank would originate 13 percent of the pool itself, two-and-a-half times the 5 percent limit set by S&P.

Goldman Sachs also balked at Ng’s request to pay in advance for an insurance policy known as a credit default swap, which was being used to create the additional debt obligation.

The e-mails from Ng, who negotiated a compromise on Goldman Sachs’s requests, provide a rare window into the back-and-forth between the bank and a rating company assessing the risks in a financial product linked to subprime mortgages. The exchange was among 581 pages of private communications released last week by Senate investigators.

Ng, who no longer works in the rating business, said in a telephone interview April 23 that while the Senate documents contain an “incomplete record,” they show how banks pressured credit raters to lower standards as they created collateralized debt obligations, or CDOs, during the housing boom.

‘Strong-Arm’

“The bankers would say anything to get what they needed into their deals,” Ng, 47, said. “Goldman is very good at looking at every deal; every CDO that’s ever been issued.” Ng said the perception among professionals in the ratings business was that the bank had a team that would look for “inconsistencies across different deals and use that to strong- arm Moody’s, Fitch and S&P to change their criteria.”

Asked about Ng’s comments, Goldman Sachs spokesman Michael DuVally said in an e-mail, “Goldman Sachs and others relied upon the rating agencies to supply independent analysis and ratings.” He declined to elaborate. S&P spokesman Chris Atkins declined to comment for this story.

Moody’s Corp, Fitch Inc., a unit of Paris-based Fimalac S.A., and S&P, a unit of McGraw-Hill Cos., are the three largest rating firms in global debt markets.

Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations, said at a panel hearing April 23 that the raters compromised “their analysis, their independence and their reputation for reliability. And they did it for money.”

----- Ng rated several previous Abacus deals before resigning from S&P in March 2006.
Two days after his first e-mail on Adirondack to fellow members of an S&P criteria panel, Ng wrote that the firm’s modeling now accommodated Goldman’s demands. In return, the bank would put up more collateral, or find a replacement guarantor, if its own credit rating were downgraded, he wrote.

Compromise Wins

Ng’s compromise carried by a 4-3 vote while provoking sharp dissent, in part because the only one speaking up for the proposal in the released e-mails was Ng himself, Senate documents show.

“I would vote NO on this one,” wrote Lapo Guadagnuolo, a senior director of S&P’s structured finance office in London.

Kenneth Cheng, then a director in S&P’s CDO group, wrote that the compromise “opens up abuse of our criteria, devoiding it of much meaning.”

Michael Drexler, an S&P analyst in New York, also objected.

“Ignoring for a moment my stupid (and arrogant!) irritation that the correct side lost, in my mind this is a great example of how the criteria process is NOT supposed to work. Being outvoted is one thing (and a good thing, in my view) but being out-voted by mystery voters with no ‘logic trail’ to refer to is another. How can we possibly reconstruct the argument of the winning side for our future deals if it does not exist in writing for general reference?” Drexler wrote.

‘Backroom Decision’

“This is exactly the kind of backroom decision-making that leads to inconsistent criteria, confused analysts and pissed-off clients,” he added.

Reached by telephone Friday, Drexler said, “That’s exactly the kind of thing a young analyst shouldn’t put in writing. Thank God I was right.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=amAvyzN2iJww&pos=5

"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry, and manufactures of our country, and went far to destroy the morality of our people."

Pelatiah Webster. Political Essays on the Nature and Operation of Money, Public Finances, and Other Subjects. 1791.


At the Comex silver depositories Friday, final figures were: Registered 50.80 Moz, Eligible 64.53 Moz, Total 115.33 Moz.


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Crooks & Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Below, the ever excellent analysts at Zero Hedge take a look at the seamier side of the great vampire squid and its prop desk “blood funnels.” As the Chief Squid himself supported by the now under a cloud “the Fabulous Fab,” prepare for Senator Levin’s modern D.C. version of the Spanish Inquisition tomorrow, Zero Hedge finds that Goldie’s excuses so far are undermined by the figures they published at the time. The whole article, though complicated, is well worth the read before the two squids get to frantically spin for the cameras and Senators. Sadly it won’t be carried live on this side of the Atlantic. Perhaps just as well, lest it set off apoplexy in the trading rooms of IKB, ABN-AMRO, and RBS, to name just 3 former clients.

"It is always the best policy to speak the truth, unless of course, you are an exceptionally good liar."

Jerome K. Jerome, 19th century English novelist.

A Detailed Look At Goldman's Mortgage Trading Strategy In Late 2006 And 2007; The Goldman "Directive"
Submitted by Tyler Durden on 04/25/2010 18:04 -0500
One of the key topics over the next week will be just what was Goldman's exposure to the mortgage industry in 2006 and 2007, and was the firm actively short mortgage exposure or was it merely, as it claims, just a market maker without any active positions on its prop desk. Courtesy of Carl Levin's recently declassified Goldman emails and presentations we get an extensive glimpse into Goldman's net exposure, its DV01, its counterparties, as well as how the firm was planning on interfering with the market when it needed liquidity to offload legacy positions. We also get a rare glimpse into the contributions from Tourre's mentor, Jonathan Egol. Let's dig in.

------ The implications of the data in the table above are obvious, but first, here is the commentary associated with the DV01, with a focus on Goldman's VaR change between Q4 2006 and Q1 2007.

Daily Mortgage VaR increased from $13 mm to $85 mm between 11/24/06 and 2/23/08 largely driven by an increase in SPG [Structured Products Group] Trading desk. The risk increase in SPG Trading desk was primarily driven by a combination of increased volatility in ABX market and the desk increasing their net short in RMBS subprime sector.

Translation: the firm's SPG prop trading desk (no, not its client facing flow exposure, its prop operations) which likely held the bulk of prop capital around the end of 2006 and beginning of 2007, was already net short, and only got net shorter in the three months from November 2006 (before Abacus) into February 2007 (around the time Abacus was being marketed and the term sheet was being concluded).

----- There is much more, but here are the key observations:
Goldman was net short housing all the way back in November 2006, when it had a DV01 of ($1) million.

Goldman was already covering its shorts for the first time in February and March 2007, when the HSBC and New Century news were only just getting everyone else's attention.
Jonathan Egol and his traders were actively looking for dumb money on which to offload
"Paulson" like open axes. Alternatively, if the firm needed to cover shorts, they knew who had sold protection and could be persuaded to covering losing positions.

"A firm directive" had emerged in February to cover short positions. Surely a directive had originated these short positions in the first place. For Lloyd to claim the firm was still long mortgages in early 2007 is disingenuous.

Goldman was shorting not just mortgages and subprime, but all entities who it knew had exposure. This includes Merrill, Citi and UBS.

Goldman would increase its net long housing exposure going into H2 2007. The firm thought the worst was over. It wasn't. Goldman had nearly $8 billion in RMBS and CDO CDS with firms like AIG who would get annihilated when the eye of the hurricane finally passed. While the firm had bet correctly, it was so far ahead of its time, all its negative counterparty bets would have been worthless had these same counterparties not been bailed out.

Goldman is a monopoly.

Goldman always wins.
http://www.zerohedge.com/article/detailed-look-goldmans-mortgage-trading-strategy-late-2006-and-2007

"Ask not what your country can do for you - ask what you can do for Goldman Sachs."

With apologies to John F. Kennedy.

Why A UK Hung Parliament is Likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/


The monthly Coppock Indicators finished March:

DJIA: +168 UP. NASDAQ: +370 UP. SP500: +196 UP. The great Bull market goes on with the all three continuing higher in positive numbers.

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