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.
+++++
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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Showing posts with label Goldman Sachs fraud. Show all posts
Showing posts with label Goldman Sachs fraud. Show all posts
Monday, 26 April 2010
Friday, 23 April 2010
St. George's Day
Baltic Dry Index. 3006 -03
LIR Gold Target by 2019: $3,000.
We open this morning saluting England and England’s patron saint St George. He may have been cashiered by the Vatican for slaughtering dragons, and may have been Turkish before the Turks knew they were Turks and emigrated to Germany, he may even have been showing off for a damsel in distress, but no matter, for England, and many other parts of the world including Newfoundland Canada, St George represents that noble English tradition of righting wrongs and standing up for the weak. There is no record of St George ever visiting England, or for that matter Newfoundland, although immigration records for the period of the decline of the Roman Empire in England are incomplete, burned during the arrival of Angles and Saxons from Germany, and Jute from India. We wish all celebrating St George this day, a most wonderful day.
"I don't see how you could be righting wrongs...because you've turned me from right to wrong, leaving me with a broken leg."
Don Quixote.
Up first, Greece goes from worse to worser. The tax and work shy Greeks say “hell no, we won’t pay!” Well they haven’t quite said that yet, but I suspect that it's not very far off. Even the dumbest Greek can see that exiting the one size fits all Euro offers the best, least damaging way out of their current predicament. With friends like the wealthy but miserly Germans, who needs enemies once in the Euro. The Greeks when they joined the Euro, were promised that this would never happen, they could party away and send the bill round to Berlin for settlement, the Greek way of life is non negotiable. Sadly, Greece is probably only the outlier of what lies ahead for the UK, USA and Japan.
An election is coming. Universal peace is declared and the foxes have a sincere interest in prolonging the lives of the poultry.
T.S. Eliot
Escalating Greek default fears rock Europe's debt markets
Greece's debt crisis has reached a dramatic crescendo after the EU revealed that the country's debt and deficit figures are even worse than feared and leading banks began to talk openly of debt-restructuring
By Ambrose Evans-Pritchard, International Business EditorPublished: 8:25PM BST 22 Apr 2010
With contagion spreading across Southern Europe, spreads on 10-year Greek bonds exploded to almost 600 basis points over German Bunds in panic trading, pushing borrowing costs close to 9pc. Rates on two-year debt rose to 10.6pc in a market gone mad.
“It is clear that the Greek situation is a very serious one,” said Dominique Strauss-Kahn, head of the International Monetary Fund. “There is no silver bullet to solve it in an easy manner.”
Credit default swaps (CDS) on Portuguese debt surged 50 basis points in a matter of hours to an all-time high of 270. Markit said the CDS on Spain reached a fresh record of 175, and Ireland jumped to 162, with jitters reaching Hungary, Bulgaria, Romania, Russia and even Argentina.
“This is now a real test of EU leadership,” said Julian Callow, of Barclays Capital. “Europe needs to act very fast to ring-fence Greece to prevent contagion. There has never been a default in Western Europe since World War Two and the whole financial system is depending on the assumption that it cannot be allowed to happen. There may need to be some sort of 'Brady bonds’ or 'Barroso bonds’,” he said, referring to the solution for Latin American debt in the 1980s.
The Parthenon was closed to visitors, a symbol of the Greece’s paralysis as public employees carried out yet another general strike, this time as EU and IMF officials were holding their second day of tense talks in Athens.
Ilias Iliopoulos, head of the Adedy union, said the protest was a warning that calls for further cuts would meet resistance. “These bloodthirsty measures won’t help Greece exit the crisis. A tragic period begins,” he said. Greece is already squeezing fiscal policy by 6pc of GDP this year – cutting the deficit by 4pc – in the most draconian cuts ever imposed on a modern developed country.
Goldman Sachs said it is expecting Greece to offer some sort of “voluntary debt-restructuring” to creditors over coming months. Erik Nielsen, the bank’s Europe economist, said the rescue formula may evolve into a mixture of loans and debt forgiveness in order to give Greece “a much longer breathing space”.
-----City bankers are bracing for a possible haircut of up to 50pc on €270bn (£235bn) of Greek sovereign debt, hoping that any losses will be split between creditors and some sort of EU resolution fund.
The trigger for Thursday’s wild moves was a report by Eurostat, the EU’s data agency, that Greece’s budget deficit last year was at least 13.6pc of GDP, and may be revised to over 14pc after a probe into “off-market swaps” and social security funds. Overall debt may be 5pc to 7pc of GDP higher than thought, pushing the total for 2009 to 122pc.
US rating agency Moody’s downgraded Greece’s debt one notch to A3 and warned of more to come. “The debt may stabilise only at a higher and more costly level,” it said.
Moody’s rebuked the EU’s “fractious” handling of rescue talks and said the country would in any case need more than the €45bn of aid so far ear-marked by the EU and the IMF.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7621289/Escalating-Greek-default-fears-rock-Europes-debt-markets.html
Below, more detail on the oil rig disaster in the Gulf of Mexico. I suspect that this disaster is going to shape the future of offshore drilling off America in years to come. At this point it’s far too early to know how large an environmental impact, if any, this tragedy will have, but it’s sure to be seized on by the anti-offshore drilling interests on the east and west coasts.
As oil rig sinks, hope fades
Chances of rescuing the 11 missing workers diminish by the hour, Coast Guard says
By BRETT CLANTON and MONICA HATCHERHOUSTON CHRONICLE April 22, 2010, 11:29PM
Hope faded Thursday of finding 11 missing offshore workers alive as the sun set on a second day of searching and the massive drilling rig that exploded into flames late Tuesday night sank into the Gulf of Mexico.
With the fire doused and the rig submerged, the Coast Guard launched a sweeping effort to clean up petroleum spewed into the water and seal off a well at the sea floor that may have still been leaking oil.
As it did, investigations began and questions continued to swirl about the cause of the accident at the Deepwater Horizon, a half-billion-dollar rig owned and operated by Swiss-based Transocean that was under lease to BP.
And the attention of a nation — even of the president himself — focused on an oil rig in the Gulf that few would have ever known or cared about had it not been for a tragic accident there.
Coast Guard officials said search and rescue efforts for the missing would continue but acknowledged that chances of survival diminished by the hour.
-----Transocean's Deepwater Horizon is among an elite class of deepwater drilling rigs that have been in high demand in recent years as major Western oil companies, facing access limitations onshore, extend their search for oil and gas into more difficult regions.
The semi-submersible rig, held in place by giant thrusters, entered service in 2001, can operate in 10,000 feet of water and drill to a depth of 30,000 feet.
When the rig caught fire, BP had already finished drilling an 18,000-foot exploratory well at its Macondo prospect, located 41 miles offshore Louisiana, David Rainey, the company's vice president of Gulf of Mexico exploration, said Thursday.
Production was near
The British oil giant had discovered an unspecified quantity of oil there and was taking the final steps to temporarily abandon the well so it could come back later and start production, he said.
The BP well contains commercial quantities of oil and was being prepped to tie in to BP's nearby Pompano platform, a person familiar with the plans said.
Those plans, however, could be on hold as the cleanup effort continues and officials try to get to the bottom of what happened.
Transocean is launching an internal investigation, Rose said. The Coast Guard deployed a robot submarine to take video of the sunken rig in an effort to piece together details of the accident and track potential leaks of diesel fuel and oil from the rig.
-----Transocean's Rose had earlier speculated the explosion was caused by a blowout as the crew was cementing in pipe-like casing that secures the walls of the well, though he noted it was too early to say definitively.
A blowout occurs when the pressure of hydrocarbons in a reservoir exceeds the weight of drilling fluids put on top of it to hold it in place.
Blowout called unlikely
Ted Bourgoyne, professor emeritus in petroleum engineering at Louisiana State University, said it is uncommon for a blowout to happen in such a late stage.
Further, instruments on the rig should have warned of a spike in pressure and told workers to engage the huge blowout preventer that can seal the well at the sea floor.
“I think there was probably equipment failure involved,” he said.
Scott Amann, a spokesman for Cameron, the Houston firm that built the blowout preventer used by the Deepwater Horizon, said it is too early to speculate on the cause of the accident but is speaking with BP and Transocean about the situation.
http://www.chron.com/disp/story.mpl/metropolitan/6968685.html
In Goldman scandal news this Friday, Bloomberg’s experts below think the great vampire squid should cut and run. Reading between the lines, that sounds like a coded way for saying Goldie and the banksters have more to lose by fighting and opening up to the searchlight of disclosure than they lose by reaching a pre-trial settlement. “God’s work” on Wall Street, apparently doesn’t come with a guaranteed iron clad defence in court. “The devil made me do it. Let’s make a deal.” Next week, the Chief Squid and “the Fab” get to sing for their supper at the Senate hearing into Wall Street bankster reform. This promises to be the best viewing since last century’s O.J. Simpson trial.
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
Goldman Sachs Should Cut Losses in SEC Standoff, Lawyers Say
By Joshua Gallu and David Scheer
April 23 (Bloomberg) -- Goldman Sachs Group Inc. may be better off cutting its losses instead of fighting what it terms “unfounded” fraud claims, say professors of securities law who have examined the U.S. Securities and Exchange Commission’s lawsuit against the bank.
The most profitable firm in Wall Street history will probably lose what is typically the first hurdle in court, a motion to throw out the April 16 suit because it lacks legal merit, the professors said in interviews this week. After that, Goldman Sachs’s risks will mount and its negotiating position will weaken, they said.
“There’s a very low probability that Goldman could get the case dismissed,” said Thomas Hazen of the University of North Carolina at Chapel Hill, whose books include a two-volume treatise on broker-dealer law. “Every pretrial motion the SEC wins, Goldman gets one step closer to losing.”
Goldman Sachs is the first major Wall Street firm accused by regulators of fraud connected to the collapse of the subprime mortgage market. The SEC’s allegation that Goldman Sachs defrauded investors sparked a 13 percent, one-day decline in its shares. The New York-based firm, led by Chief Executive Officer Lloyd Blankfein, 55, said it will vigorously contest the claims. It must weigh the risks of a drawn-out legal battle against the benefits of a more immediate resolution.
------Blankfein and other executives at the bank are scheduled to testify at a Senate hearing next week along with Fabrice Tourre, the Goldman Sachs banker who was also sued by the SEC. The Permanent Subcommittee on Investigations will explore investment banks’ role in the financial crisis at the April 27 hearing.
Blankfein yesterday attended a speech by President Obama in New York City pushing for financial regulatory reform, as Congress weighs legislation that could crimp profits for Goldman Sachs and the biggest U.S. banks. The legislation may come to the Senate floor as early as next week.
Even if top managers are certain they’re right on the merits of the case, Goldman Sachs should probably settle, said senior executives at three of the firm’s rivals. The executives, speaking anonymously because they wouldn’t comment publicly on a competitor, said Goldman Sachs would be better off by deciding to settle the suit, cut its losses, and focus on repairing the damage to the firm’s reputation.
Paulson’s Pick
Two of the executives said they also believe Goldman Sachs may have to change senior management to give the appearance that the firm is changing the way it does business.
-----If the SEC’s case survives a dismissal motion, the case would probably proceed to discovery, when the agency may seek additional testimony or information from the firm. That process could provide fodder for private lawsuits, additional allegations from regulators, or media attention that would further tarnish the firm’s image, according to George Cohen, a corporate law professor at the University of Virginia School of Law, and Lisa Casey, who teaches securities law at the University of Notre Dame in Indiana.
“The evidence and rumors would be difficult to contain,” Casey said. “The market could react any time more information leaks out to the press.”
-----If Goldman Sachs settles or loses at trial, “people are going to ask, ‘Am I one of the clients who Goldman does deals for, or am I one of the clients Goldman does deals against?’” Dombalagian said. “There’s the saying that if you don’t know who the mark at the table is, you’re probably the mark.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVTs5FgBoCVg&pos=2
A politician looks forward only to the next election. A statesman looks forward to the next generation.
Thomas Jefferson.
At the Comex silver depositories Thursday, 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.
Today, round two is over in the UK general election, as the UK’s 3 dwarfs compete for the honour of leading the UK into a Greek like austerity existence. In our dumbed down, media trivialized, US style presidential election, honesty gets checked in at the studio cloakroom, as two neophytes compete with a grumpy old Scot’s class war socialist, for the prize of raising taxes and cutting spending, in a desperate attempt to undo 13 disastrous years of Blair-Brown mismanagement and incompetence. Of course all 3 deny any such thing will happen, setting up the stage for an unprepared and very likely angry public to go ballistic at some point ahead, when the truth is suddenly sprung on them later in the year. Stay long precious metals, preferably far away from H.M.G.’s reach. As things stand at present, polls suggest that in a hung Parliament, Scotland’s gift to the English will likely cling on to power in some form of temporary coalition regime. Under the grossly unfair system of rotten boroughs that greatly exaggerate the socialist vote, the loony new age global warming, lets disarm and sign up to the Euro Liberal Democrats, have an outside chance of winning the popular vote, while only getting about a third of the seats as the other parties.
The trouble with free elections is, you never know who is going to win.
Leonid Brezhnev.
Cameron Failure to Top Clegg in Debate Signals Hung Parliament
April 23 (Bloomberg) -- Conservative David Cameron failed to derail Nick Clegg in the U.K. campaign’s second debate, four instant polls showed, pointing to a hung parliament with Prime Minister Gordon Brown’s Labour Party as the largest bloc.
In a 90-minute televised debate, Brown, 59, compared his 43-year-old opponents to children “squabbling at bathtime.” Cameron, who led polls until Clegg’s surge after last week’s debate, said a government without a majority would prevent “decisive action” to narrow a record budget deficit. Clegg dismissed such warnings as “ludicrous scare stories.”
Of four surveys released immediately after the event, two showed Clegg won and a pair favored Cameron. That suggests the debate will produce little change in polls on the overall race in coming days. Most since last week show Labour winning a plurality of seats in the May 6 election.
-----A YouGov Plc daily poll before last night’s debate put the Conservatives at 34 percent and Labour at 29 percent, with the Liberal Democrats at 28 percent. That would leave Labour with 278 seats to 251 for the Conservatives and 88 for the Liberal Democrats, according to the standard calculations used by academics and pollsters.
-----Such a result may roil markets because a divided government would be too weak to fix Britain’s finances, some economists say. The pound slumped 1 percent in the two days after the debate last week and weakened in early Asian trading, dropping 0.2 percent at 8:16 a.m. in Tokyo. It has lost 5.1 percent against the dollar this year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRrgY9cLEIfU&pos=8
Why A UK Hung Parliament is Likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/
Each candidate behaved well in the hope of being judged worthy of election. However, this system was disastrous when the city had become corrupt. For then it was not the most virtuous but the most powerful who stood for election, and the weak, even if virtuous, were too frightened to run for office.
Niccolo Machiavelli.
Another weekend, and Iceland is now sending its ash to Reykjavik and Canada. If there ever was any Icelandic ash over Europe, it certainly isn’t affecting commercial airplanes judging by our heavily contrailed skies. In the biggest bureaucratic blunder probably ever, in our dumbed down modern world, it looks like no one is going to be held to account for disrupting the lives and wealth of millions. Have a great weekend everyone.
Below, in response to a few requests last week, another link to the villages of the River Pang Anglo-Saxon region.
http://www.tidmarshwithsulham.co.uk/default.htm
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.
+++++
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
+++++
LIR Gold Target by 2019: $3,000.
We open this morning saluting England and England’s patron saint St George. He may have been cashiered by the Vatican for slaughtering dragons, and may have been Turkish before the Turks knew they were Turks and emigrated to Germany, he may even have been showing off for a damsel in distress, but no matter, for England, and many other parts of the world including Newfoundland Canada, St George represents that noble English tradition of righting wrongs and standing up for the weak. There is no record of St George ever visiting England, or for that matter Newfoundland, although immigration records for the period of the decline of the Roman Empire in England are incomplete, burned during the arrival of Angles and Saxons from Germany, and Jute from India. We wish all celebrating St George this day, a most wonderful day.
"I don't see how you could be righting wrongs...because you've turned me from right to wrong, leaving me with a broken leg."
Don Quixote.
Up first, Greece goes from worse to worser. The tax and work shy Greeks say “hell no, we won’t pay!” Well they haven’t quite said that yet, but I suspect that it's not very far off. Even the dumbest Greek can see that exiting the one size fits all Euro offers the best, least damaging way out of their current predicament. With friends like the wealthy but miserly Germans, who needs enemies once in the Euro. The Greeks when they joined the Euro, were promised that this would never happen, they could party away and send the bill round to Berlin for settlement, the Greek way of life is non negotiable. Sadly, Greece is probably only the outlier of what lies ahead for the UK, USA and Japan.
An election is coming. Universal peace is declared and the foxes have a sincere interest in prolonging the lives of the poultry.
T.S. Eliot
Escalating Greek default fears rock Europe's debt markets
Greece's debt crisis has reached a dramatic crescendo after the EU revealed that the country's debt and deficit figures are even worse than feared and leading banks began to talk openly of debt-restructuring
By Ambrose Evans-Pritchard, International Business EditorPublished: 8:25PM BST 22 Apr 2010
With contagion spreading across Southern Europe, spreads on 10-year Greek bonds exploded to almost 600 basis points over German Bunds in panic trading, pushing borrowing costs close to 9pc. Rates on two-year debt rose to 10.6pc in a market gone mad.
“It is clear that the Greek situation is a very serious one,” said Dominique Strauss-Kahn, head of the International Monetary Fund. “There is no silver bullet to solve it in an easy manner.”
Credit default swaps (CDS) on Portuguese debt surged 50 basis points in a matter of hours to an all-time high of 270. Markit said the CDS on Spain reached a fresh record of 175, and Ireland jumped to 162, with jitters reaching Hungary, Bulgaria, Romania, Russia and even Argentina.
“This is now a real test of EU leadership,” said Julian Callow, of Barclays Capital. “Europe needs to act very fast to ring-fence Greece to prevent contagion. There has never been a default in Western Europe since World War Two and the whole financial system is depending on the assumption that it cannot be allowed to happen. There may need to be some sort of 'Brady bonds’ or 'Barroso bonds’,” he said, referring to the solution for Latin American debt in the 1980s.
The Parthenon was closed to visitors, a symbol of the Greece’s paralysis as public employees carried out yet another general strike, this time as EU and IMF officials were holding their second day of tense talks in Athens.
Ilias Iliopoulos, head of the Adedy union, said the protest was a warning that calls for further cuts would meet resistance. “These bloodthirsty measures won’t help Greece exit the crisis. A tragic period begins,” he said. Greece is already squeezing fiscal policy by 6pc of GDP this year – cutting the deficit by 4pc – in the most draconian cuts ever imposed on a modern developed country.
Goldman Sachs said it is expecting Greece to offer some sort of “voluntary debt-restructuring” to creditors over coming months. Erik Nielsen, the bank’s Europe economist, said the rescue formula may evolve into a mixture of loans and debt forgiveness in order to give Greece “a much longer breathing space”.
-----City bankers are bracing for a possible haircut of up to 50pc on €270bn (£235bn) of Greek sovereign debt, hoping that any losses will be split between creditors and some sort of EU resolution fund.
The trigger for Thursday’s wild moves was a report by Eurostat, the EU’s data agency, that Greece’s budget deficit last year was at least 13.6pc of GDP, and may be revised to over 14pc after a probe into “off-market swaps” and social security funds. Overall debt may be 5pc to 7pc of GDP higher than thought, pushing the total for 2009 to 122pc.
US rating agency Moody’s downgraded Greece’s debt one notch to A3 and warned of more to come. “The debt may stabilise only at a higher and more costly level,” it said.
Moody’s rebuked the EU’s “fractious” handling of rescue talks and said the country would in any case need more than the €45bn of aid so far ear-marked by the EU and the IMF.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7621289/Escalating-Greek-default-fears-rock-Europes-debt-markets.html
Below, more detail on the oil rig disaster in the Gulf of Mexico. I suspect that this disaster is going to shape the future of offshore drilling off America in years to come. At this point it’s far too early to know how large an environmental impact, if any, this tragedy will have, but it’s sure to be seized on by the anti-offshore drilling interests on the east and west coasts.
As oil rig sinks, hope fades
Chances of rescuing the 11 missing workers diminish by the hour, Coast Guard says
By BRETT CLANTON and MONICA HATCHERHOUSTON CHRONICLE April 22, 2010, 11:29PM
Hope faded Thursday of finding 11 missing offshore workers alive as the sun set on a second day of searching and the massive drilling rig that exploded into flames late Tuesday night sank into the Gulf of Mexico.
With the fire doused and the rig submerged, the Coast Guard launched a sweeping effort to clean up petroleum spewed into the water and seal off a well at the sea floor that may have still been leaking oil.
As it did, investigations began and questions continued to swirl about the cause of the accident at the Deepwater Horizon, a half-billion-dollar rig owned and operated by Swiss-based Transocean that was under lease to BP.
And the attention of a nation — even of the president himself — focused on an oil rig in the Gulf that few would have ever known or cared about had it not been for a tragic accident there.
Coast Guard officials said search and rescue efforts for the missing would continue but acknowledged that chances of survival diminished by the hour.
-----Transocean's Deepwater Horizon is among an elite class of deepwater drilling rigs that have been in high demand in recent years as major Western oil companies, facing access limitations onshore, extend their search for oil and gas into more difficult regions.
The semi-submersible rig, held in place by giant thrusters, entered service in 2001, can operate in 10,000 feet of water and drill to a depth of 30,000 feet.
When the rig caught fire, BP had already finished drilling an 18,000-foot exploratory well at its Macondo prospect, located 41 miles offshore Louisiana, David Rainey, the company's vice president of Gulf of Mexico exploration, said Thursday.
Production was near
The British oil giant had discovered an unspecified quantity of oil there and was taking the final steps to temporarily abandon the well so it could come back later and start production, he said.
The BP well contains commercial quantities of oil and was being prepped to tie in to BP's nearby Pompano platform, a person familiar with the plans said.
Those plans, however, could be on hold as the cleanup effort continues and officials try to get to the bottom of what happened.
Transocean is launching an internal investigation, Rose said. The Coast Guard deployed a robot submarine to take video of the sunken rig in an effort to piece together details of the accident and track potential leaks of diesel fuel and oil from the rig.
-----Transocean's Rose had earlier speculated the explosion was caused by a blowout as the crew was cementing in pipe-like casing that secures the walls of the well, though he noted it was too early to say definitively.
A blowout occurs when the pressure of hydrocarbons in a reservoir exceeds the weight of drilling fluids put on top of it to hold it in place.
Blowout called unlikely
Ted Bourgoyne, professor emeritus in petroleum engineering at Louisiana State University, said it is uncommon for a blowout to happen in such a late stage.
Further, instruments on the rig should have warned of a spike in pressure and told workers to engage the huge blowout preventer that can seal the well at the sea floor.
“I think there was probably equipment failure involved,” he said.
Scott Amann, a spokesman for Cameron, the Houston firm that built the blowout preventer used by the Deepwater Horizon, said it is too early to speculate on the cause of the accident but is speaking with BP and Transocean about the situation.
http://www.chron.com/disp/story.mpl/metropolitan/6968685.html
In Goldman scandal news this Friday, Bloomberg’s experts below think the great vampire squid should cut and run. Reading between the lines, that sounds like a coded way for saying Goldie and the banksters have more to lose by fighting and opening up to the searchlight of disclosure than they lose by reaching a pre-trial settlement. “God’s work” on Wall Street, apparently doesn’t come with a guaranteed iron clad defence in court. “The devil made me do it. Let’s make a deal.” Next week, the Chief Squid and “the Fab” get to sing for their supper at the Senate hearing into Wall Street bankster reform. This promises to be the best viewing since last century’s O.J. Simpson trial.
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
Goldman Sachs Should Cut Losses in SEC Standoff, Lawyers Say
By Joshua Gallu and David Scheer
April 23 (Bloomberg) -- Goldman Sachs Group Inc. may be better off cutting its losses instead of fighting what it terms “unfounded” fraud claims, say professors of securities law who have examined the U.S. Securities and Exchange Commission’s lawsuit against the bank.
The most profitable firm in Wall Street history will probably lose what is typically the first hurdle in court, a motion to throw out the April 16 suit because it lacks legal merit, the professors said in interviews this week. After that, Goldman Sachs’s risks will mount and its negotiating position will weaken, they said.
“There’s a very low probability that Goldman could get the case dismissed,” said Thomas Hazen of the University of North Carolina at Chapel Hill, whose books include a two-volume treatise on broker-dealer law. “Every pretrial motion the SEC wins, Goldman gets one step closer to losing.”
Goldman Sachs is the first major Wall Street firm accused by regulators of fraud connected to the collapse of the subprime mortgage market. The SEC’s allegation that Goldman Sachs defrauded investors sparked a 13 percent, one-day decline in its shares. The New York-based firm, led by Chief Executive Officer Lloyd Blankfein, 55, said it will vigorously contest the claims. It must weigh the risks of a drawn-out legal battle against the benefits of a more immediate resolution.
------Blankfein and other executives at the bank are scheduled to testify at a Senate hearing next week along with Fabrice Tourre, the Goldman Sachs banker who was also sued by the SEC. The Permanent Subcommittee on Investigations will explore investment banks’ role in the financial crisis at the April 27 hearing.
Blankfein yesterday attended a speech by President Obama in New York City pushing for financial regulatory reform, as Congress weighs legislation that could crimp profits for Goldman Sachs and the biggest U.S. banks. The legislation may come to the Senate floor as early as next week.
Even if top managers are certain they’re right on the merits of the case, Goldman Sachs should probably settle, said senior executives at three of the firm’s rivals. The executives, speaking anonymously because they wouldn’t comment publicly on a competitor, said Goldman Sachs would be better off by deciding to settle the suit, cut its losses, and focus on repairing the damage to the firm’s reputation.
Paulson’s Pick
Two of the executives said they also believe Goldman Sachs may have to change senior management to give the appearance that the firm is changing the way it does business.
-----If the SEC’s case survives a dismissal motion, the case would probably proceed to discovery, when the agency may seek additional testimony or information from the firm. That process could provide fodder for private lawsuits, additional allegations from regulators, or media attention that would further tarnish the firm’s image, according to George Cohen, a corporate law professor at the University of Virginia School of Law, and Lisa Casey, who teaches securities law at the University of Notre Dame in Indiana.
“The evidence and rumors would be difficult to contain,” Casey said. “The market could react any time more information leaks out to the press.”
-----If Goldman Sachs settles or loses at trial, “people are going to ask, ‘Am I one of the clients who Goldman does deals for, or am I one of the clients Goldman does deals against?’” Dombalagian said. “There’s the saying that if you don’t know who the mark at the table is, you’re probably the mark.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVTs5FgBoCVg&pos=2
A politician looks forward only to the next election. A statesman looks forward to the next generation.
Thomas Jefferson.
At the Comex silver depositories Thursday, final figures were: Registered 50.80 Moz, Eligible 64.53 Moz, Total 115.33 Moz.
+++++
Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, round two is over in the UK general election, as the UK’s 3 dwarfs compete for the honour of leading the UK into a Greek like austerity existence. In our dumbed down, media trivialized, US style presidential election, honesty gets checked in at the studio cloakroom, as two neophytes compete with a grumpy old Scot’s class war socialist, for the prize of raising taxes and cutting spending, in a desperate attempt to undo 13 disastrous years of Blair-Brown mismanagement and incompetence. Of course all 3 deny any such thing will happen, setting up the stage for an unprepared and very likely angry public to go ballistic at some point ahead, when the truth is suddenly sprung on them later in the year. Stay long precious metals, preferably far away from H.M.G.’s reach. As things stand at present, polls suggest that in a hung Parliament, Scotland’s gift to the English will likely cling on to power in some form of temporary coalition regime. Under the grossly unfair system of rotten boroughs that greatly exaggerate the socialist vote, the loony new age global warming, lets disarm and sign up to the Euro Liberal Democrats, have an outside chance of winning the popular vote, while only getting about a third of the seats as the other parties.
The trouble with free elections is, you never know who is going to win.
Leonid Brezhnev.
Cameron Failure to Top Clegg in Debate Signals Hung Parliament
April 23 (Bloomberg) -- Conservative David Cameron failed to derail Nick Clegg in the U.K. campaign’s second debate, four instant polls showed, pointing to a hung parliament with Prime Minister Gordon Brown’s Labour Party as the largest bloc.
In a 90-minute televised debate, Brown, 59, compared his 43-year-old opponents to children “squabbling at bathtime.” Cameron, who led polls until Clegg’s surge after last week’s debate, said a government without a majority would prevent “decisive action” to narrow a record budget deficit. Clegg dismissed such warnings as “ludicrous scare stories.”
Of four surveys released immediately after the event, two showed Clegg won and a pair favored Cameron. That suggests the debate will produce little change in polls on the overall race in coming days. Most since last week show Labour winning a plurality of seats in the May 6 election.
-----A YouGov Plc daily poll before last night’s debate put the Conservatives at 34 percent and Labour at 29 percent, with the Liberal Democrats at 28 percent. That would leave Labour with 278 seats to 251 for the Conservatives and 88 for the Liberal Democrats, according to the standard calculations used by academics and pollsters.
-----Such a result may roil markets because a divided government would be too weak to fix Britain’s finances, some economists say. The pound slumped 1 percent in the two days after the debate last week and weakened in early Asian trading, dropping 0.2 percent at 8:16 a.m. in Tokyo. It has lost 5.1 percent against the dollar this year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRrgY9cLEIfU&pos=8
Why A UK Hung Parliament is Likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/
Each candidate behaved well in the hope of being judged worthy of election. However, this system was disastrous when the city had become corrupt. For then it was not the most virtuous but the most powerful who stood for election, and the weak, even if virtuous, were too frightened to run for office.
Niccolo Machiavelli.
Another weekend, and Iceland is now sending its ash to Reykjavik and Canada. If there ever was any Icelandic ash over Europe, it certainly isn’t affecting commercial airplanes judging by our heavily contrailed skies. In the biggest bureaucratic blunder probably ever, in our dumbed down modern world, it looks like no one is going to be held to account for disrupting the lives and wealth of millions. Have a great weekend everyone.
Below, in response to a few requests last week, another link to the villages of the River Pang Anglo-Saxon region.
http://www.tidmarshwithsulham.co.uk/default.htm
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.
+++++
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
+++++
Tuesday, 20 April 2010
The Fab Goes on Tour.
Baltic Dry Index. 3002 -07
LIR Gold Target by 2019: $3,000.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
We open this morning with more on the Goldman scandal that typifies all that is wrong with parasitic casino capitalism and unrestricted hedge fund derivatives gambling. Was the great credit calamity, that nearly brought down the world’s economic system and plunged the world into the worst and continuing recession since the Great 1930s Depression, deliberately made in Goldman heaven at 85 Broad Street? But first this news from London. The “fabulous Fab” goes on the lam. Well actually just takes some time off. With the European airlines closed down and going out of business fast, and the trains and ferries that link John Bull’s advanced civilization with the natives of Europe jammed up with stranded refugees trying to get home, going on the lam from the world’s recently impoverished taxpayers isn’t exactly an option thanks to Iceland.
It’s morally wrong to let a sucker keep his money.
W.C. Fields. Goldman Ethicist.
Goldman's staffer charged by SEC takes time off
April 19, 2010, 3:08 p.m. EDT
Fabrice Tourre, a Goldman Sachs Group Inc. employee at the center of a government case against the bank over its sale of mortgage securities, is taking some time off but isn't suspended, the Fox Business Network reports Monday, citing Goldman Sachs.
Tourre remains an employee, according to the report.
Reuters also reported that Tourre remains with the firm. "He remains an employee of Goldman Sachs," and has taken a "personal decision to take a bit of time off," the news service quoted a Goldman Sachs spokesman as saying. The spokesman, who wasn't identified by name, also told Reuters that Goldman had found Tourre did "nothing wrong" during an internal investigation it conducted after the Securities and Exchange Commission first contacted the bank about the case.
http://www.marketwatch.com/story/goldmans-staffer-charged-by-sec-takes-time-off-2010-04-19
Below, a NY Times article we covered just before Christmas. I suspect that someone at the SEC was providing background briefing back then. I suspect that there is still a whole lot more to come out.
"The product was new and complex, but the deception and conflicts are old and simple."
SEC Director Division of Enforcement Robert Khuzami.
Banks Bundled Bad Debt, Bet Against It and Won
By GRETCHEN MORGENSON and LOUISE STORY Published: December 23, 2009
----- Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.
Goldman’s own clients who bought them, however, were less fortunate.
Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.
----- One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.
Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.
------ But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests.
“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”
Investment banks were not alone in reaping rich rewards by placing trades against synthetic C.D.O.’s. Some hedge funds also benefited, including Paulson & Company, according to former Goldman workers and people at other banks familiar with that firm’s trading.
Michael DuVally, a Goldman Sachs spokesman, declined to make Mr. Egol available for comment.
----- From 2005 through 2007, at least $108 billion in these securities was issued, according to Dealogic, a financial data firm. And the actual volume was much higher because synthetic C.D.O.’s and other customized trades are unregulated and often not reported to any financial exchange or market.
----- Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.
Even before then, however, pockets of the investment bank had also started using C.D.O.’s to place bets against mortgage securities, in some cases to hedge the firm’s mortgage investments, as protection against a fall in housing prices and an increase in defaults.
Mr. Egol was a prime mover behind these securities. Beginning in 2004, with housing prices soaring and the mortgage mania in full swing, Mr. Egol began creating the deals known as Abacus. From 2004 to 2008, Goldman issued 25 Abacus deals, according to Bloomberg, with a total value of $10.9 billion.
Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.’s didn’t contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures.
Rather than persuading his customers to make negative bets on Abacus, Mr. Egol kept most of these wagers for his firm, said five former Goldman employees who spoke on the condition of anonymity. On occasion, he allowed some hedge funds to take some of the short trades.
------ Mr. Egol and Fabrice Tourre, a French trader at Goldman, were aggressive from the start in trying to make the assets in Abacus deals look better than they were, according to notes taken by a Wall Street investor during a phone call with Mr. Tourre and another Goldman employee in May 2005.
On the call, the two traders noted that they were trying to persuade analysts at Moody’s Investors Service, a credit rating agency, to assign a higher rating to one part of an Abacus C.D.O. but were having trouble, according to the investor’s notes, which were provided by a colleague who asked for anonymity because he was not authorized to release them. Goldman declined to discuss the selection of the assets in the C.D.O.’s, but a spokesman said investors could have rejected the C.D.O. if they did not like the assets.
Goldman’s bets against the performances of the Abacus C.D.O.’s were not worth much in 2005 and 2006, but they soared in value in 2007 and 2008 when the mortgage market collapsed. The trades gave Mr. Egol a higher profile at the bank, and he was among a group promoted to managing director on Oct. 24, 2007.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=1&pagewanted=2
Up next, AIG heads to the lawyers. The first of many I suspect.
AIG eyes action on Goldman over CDOs
By Francesco Guerrera in New York and Brooke Masters in London
Published: April 20 2010 00:00 Last updated: April 20 2010 01:09
AIG, the US government-controlled insurer, is considering pursuing Goldman Sachs over losses incurred on $6bn of insurance deals on mortgage-backed securities similar to the one that led to fraud charges against the US bank.
AIG’s move over the deals that caused it a loss of about $2bn is a sign that Friday’s decision by the Securities and Exchange Commission to file civil fraud charges against Goldman could spark actions from investors who lost money on mortgage-backed securities.
If AIG and others discover that their transactions had disclosure issues similar to those alleged in the SEC charges, they would be able to complain to the SEC, file a private lawsuit, or both, lawyers said.
People close to the situation said that AIG was reviewing deals to insure $6bn-worth of Goldman’s collateralised debt obligations in the run-up to the crisis. They added that AIG had yet to decide whether to take action. AIG and Goldman declined to comment.
http://www.ft.com/cms/s/0/db7dc52a-4bee-11df-a217-00144feab49a.html
We end on the subject of Goldman’s Madoff moment in the sunlight, busy capping a 141 year record of financial success, with the WSJ covering the hedge fund that seems to have got a pass in the developing scandal. Mr. Paulson, it seems, bet on red and black in the politics of money talks.
“In early 2008, the firm hired former Federal Reserve Chairman Alan Greenspan…. In September 2008, Paulson bet against four of the five biggest British banks. His positions included a £350m bet against shares in Barclays; £292m against Royal Bank of Scotland; and £260m against Lloyds TSB. He eventually booked a profit of as much as £280m after reducing its short position in RBS in January 2009.” Wikipedia.
APRIL 20, 2010
Paulson Gave to Both Parties
Politicians Seek to Tar by Association, but Bank and Paulson Gave Across Aisle
John Paulson, the man at the center of the government's case against Goldman Sachs Group Inc., has held political fund-raising events in recent weeks for top politicians of both political parties.
According to people familiar with the events, Mr. Paulson organized one of the events on behalf of the Republican National Committee and featured RNC Chairman Michael Steele and Republican presidential hopeful Mitt Romney. The other was for Democratic Sen. Charles Schumer of New York.
Mr. Paulson's bipartisan support for politicians points to the difficulty both parties face as they try to use the case against Goldman for political gain. Goldman was charged last week by the Securities and Exchange Commission with civil fraud relating to its trading in mortgage-related investments.
Mr. Paulson wasn't accused of wrongdoing. A spokesman said: "John Paulson supports a variety of candidates in both political parties based on keeping the United States the financial and economic capital of the world."
A spokesman for the RNC and Mr. Schumer declined to comment. A spokesman for Mr. Romney didn't respond to a request for comment.
http://online.wsj.com/article/SB10001424052748703757504575194502882068296.html?mod=WSJ_article_MoreIn
Below, Der Spiegel on Europe increasingly laid low by Iceland’s ash not cash. A-tissue, a-tissue we all fall down.
Eyjafjallajökull's Economic Impact
Airlines Fear Losses Higher than 9/11
04/19/2010
The disruption to air traffic caused by Iceland's volcanic ash is not just affecting German airlines' bottom lines. The knock-on effect on the entire economy could be severe. The initial estimates are of losses amounting to 1 billion euros a day.
Five days of quiet, plane-free skies have left Europe's airlines furious and warning that some companies may not survive. Now Brussels says it could come to the rescue of some of the airlines that are losing millions of euros a day due to closed airspace.
On Monday, Competition Commissioner Joaquin Almunia said that the European Union was prepared to react as it had after the Sept. 11, 2001 terror attacks. "If member states would decide to help with state aid and provided conditions for receiving state aid were not discriminatory, we are ready to think in a similar framework to after Sept. 11," he said at a conference in Brussels.
The International Air Transport Association (IATA) estimates that the losses caused by the volcanic ash cloud from Iceland could be higher than those incurred after Sept. 11, which saw airlines lose more than $10 billion (€7.4 billion). Officials at German airline Lufthansa alone say the company is losing €25 million a day.
IATA has warned that if the flight ban goes on for longer than a week that some of the 150 European airlines could go bust. The smaller airlines would be the first to go, IATA President Giovanni Bisignani said on Monday.
Airlines Slam Government
According to a study by the Swiss bank UBS, Europe's six biggest airlines -- Easyjet, Ryanair, British Airways, Iberia, Air France-KLM and Lufthansa -- together have seen losses of up to €140 million a day.
The ongoing paralysis is hitting Europe's airlines on the stock markets, as well. Shares in airlines fell by between 3.5 and 4.5 percent on Monday, with Germany's biggest airlines Lufthansa and Air Berlin each losing 5 percent of their value.
The two airlines have sharply criticized the flight ban in Germany, which after being eased somewhat on Sunday, has been re-imposed until 2 a.m. on Tuesday.
The two companies have slammed Transport Minister Peter Ramsauer and German Air Traffic Control (DFS) for closing German airspace. Lufthansa boss Wolfgang Mayrhuber said that the safety concerns had been unfounded.
----Meanwhile, his colleague Economy Minister Rainer Brüderle in Chancellor Angela Merkel's cabinet says he fears that the affects on the wider German economy could be significant. "If the global economic value-added chain is interrupted for a long period of time, then we get to a serious situation, because many of our industrial giants are dependent on air transport," he said in Berlin on Monday.
-----For example, replacement parts and components for machines and facilities built by German manufacturers cannot be transported. Many medical supplies are also usually delivered by air. "Urgent, perishable or high quality goods" cannot simply be transported by trucks or ships instead of by air he said.
Around 35 to 40 percent of international trade is conducted by air. This would amount to trade worth around €350 billion from Germany, the equivalent of around €1 billion a day. There are, of course, compensatory factors and some businesses can make up the losses later "but not 100 percent," according to Trier.
The affect is already being felt in one of Germany's leading companies. Carmaker BMW is not able to send important components to the United States, a spokesman said on Monday. While the production in the plants was continuing as normal, if the flight ban continues for two more days, the situation could get critical. "In the worse case scenario the conveyor belts might stop," he said.
http://www.spiegel.de/international/business/0,1518,689883,00.html#ref=nlint
APRIL 20, 2010
Vow to Renew Flights Clouded by Ash Warning
European Regulators Suggest Loosening Ban, but Pilots Ask for More Research; U.K. Sees New Plume From Iceland's Volcano
European regulators planned to start lifting flight bans Tuesday, but news late Monday put those plans in doubt even as pilot groups and scientists called for more caution before putting planes back into European skies clouded by volcanic ash.
Britain's National Air Traffic Services agency said late Monday that flying conditions were "worsening" in some areas. "The volcano eruption in Iceland has strengthened and a new ash cloud is spreading south and east towards the U.K.," the air-traffic agency said in its latest update. The agency said it still hopes to clear some airports to reopen Tuesday, though not the London gateways that handle the bulk of the country's air traffic.
The news came after European air-safety authorities agreed earlier Monday to relax flight bans that it enacted after Iceland's Eyjafjallajökull volcano (ay-yah-FYAH'-tlah-yer-kuh-duhl) started erupting violently Thursday, spewing a cloud of fine but potentially dangerous dust high into the atmosphere. Days of airspace closures across most of northern and central Europe, the world's biggest restriction of flights since 2001, have left more than eight million passengers dislocated and cost airlines at least $1 billion dollars.
Following criticism by airlines that authorities were being overly cautious in grounding flights, European Union officials agreed Monday to divide EU airspace into three zones based on ash concentrations in the atmosphere. European aviation authorities will establish a "limited" no-fly zone surrounded by a buffer area. Airlines will be allowed to fly outside the zone once they are opened by national authorities.
http://online.wsj.com/article/SB10001424052748704671904575193292611544742.html?mod=WSJEUROPE_hps_LEFTTopStories
In other European news, Greece edges closer to default. They may be out of sight amidst all of Iceland’s ash, and not a feature in this particular Goldman scandal that threatens to bring to an end Goldie’s 141 year Wall Street checkered career, but Greece is not helped if Europe’s tourists can’t get to visit and spend their hard earned cash. Europe’s fix-its and the IMF team had a hard time getting there too.
If at first you don't succeed, try again. Then quit. There's no use being a damn fool about it.
W.C. Fields.
Greece’s Uncertain Future Weighs on Bond Market
By MATTHEW SALTMARSH Published: April 19, 2010
Yields on Greek bonds pushed to fresh highs on Monday and shares in Athens sank as investors continued to worry about the country’s near-term ability to finance its debt. Some raised the specter of default even if international aid arrived soon.
Analysts said traders shifted out of Greek bonds amid worries about the country’s ability to raise more than 11 billion euros, or $14.8 billion, in May, especially in light of the delay of a crucial meeting that was to be held Monday between European, Greek and International Monetary Fund officials.
Vassilis Papadimitriou, a spokesman for the Greek government, said the meeting, postponed because of travel chaos in Europe, would go ahead Wednesday provided that European Union and central bank officials were able to get to Athens. Airports across Europe remained closed Monday because of the volcanic eruption on Wednesday in Iceland, which has spread potentially hazardous ash across the Continent.
Bill Murray, a Washington-based spokesman for the I.M.F., confirmed on Monday that most members of the I.M.F. team had arrived in Athens to discuss “policies that could be the basis for a fund financing program.” He declined to comment on the duration of the mission.
Even with those talks expected to move ahead, investors were worrying about the country’s financing needs — in coming months and years.
http://www.nytimes.com/2010/04/20/business/global/20drachma.html
So, Goldman is a serial arsonist that has turned betting against its clients' interests into a science. The Times article makes it clear that shorting subprime and luring gullible investors into the trap, was standard operating procedure. Goldman's CEO Lloyd Blankfein dismisses the criticism with a wave of the hand saying, "They were sophisticated investors," which is the same as saying "buyer beware". It's worth noting that shorting subprimes exacerbated the pain in housing by creating incentives for originators to issue more mortgages to people with poor credit. This prolonged the housing boom and deepened the recession when the bubble finally burst. The eventual downturn was largely engineered by Wall Street.
http://www.counterpunch.org/whitney04192010.html
At the Comex silver depositories Monday, final figures were: Registered 48.85 Moz, Eligible 66.08 Moz, Total 114.93 Moz.
+++++
Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, you really couldn’t make this nonsense up. Yet another reason for the UK to leave the insane European Union. The world doesn’t just owe Europe a free living Greek style, it owes them free or subsidized holidays as well. Another unintended consequence of the error of the great Nixonian error of fiat money.
April 18, 2010
Get packing: Brussels decrees holidays are a human right
AN overseas holiday used to be thought of as a reward for a year’s hard work. Now Brussels has declared that tourism is a human right and pensioners, youths and those too poor to afford it should have their travel subsidised by the taxpayer.
Under the scheme, British pensioners could be given cut-price trips to Spain, while Greek teenagers could be taken around disused mills in Manchester to experience the cultural diversity of Europe.
The idea for the subsidised tours is the brainchild of Antonio Tajani, the European Union commissioner for enterprise and industry, who was appointed by Silvio Berlusconi, the Italian prime minister.
The scheme, which could cost hundreds of millions of pounds a year, is intended to promote a sense of pride in European culture, bridge the north-south divide in the continent and prop up resorts in their off-season.
Tajani, who unveiled his plan last week at a ministerial conference in Madrid, believes the days when holidays were a luxury have gone. “Travelling for tourism today is a right. The way we spend our holidays is a formidable indicator of our quality of life,” he said.
Tajani, who used to be transport commissioner, said he had been able to “affirm the rights of passengers” in his previous office and the next step was to ensure people’s “right to be tourists”.
The European Union has experience of subsidised holidays. In February the European parliament paid contributions of up to 52% towards an eight-day skiing trip in the Italian Alps for 80 children of Eurocrats.
Tajani’s programme will be piloted until 2013 and then put into full operation. It will be open to pensioners and anyone over 65, young people between 18 and 25, families facing “difficult social, financial or personal” circumstances and disabled people. The disabled and the elderly can be accompanied by one person.
In the initial phase, northern Europeans will be encouraged to visit southern Europe and vice versa. Details of how participants are chosen have not yet been finalised, but it is expected the EU will subsidise about 30% of the cost.
http://www.timesonline.co.uk/tol/news/world/europe/article7100943.ece
Below, the more things change the more they stay the same. Goldie has form as they say.
In the early 20th century, Goldman was a player in establishing the initial public offering market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading business schools, a practice that still continues today.
On December 4, 1928, it launched the Goldman Sachs Trading Corp. a closed-end fund with characteristics similar to that of a Ponzi scheme. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward. Of this case and others like Blue Ridge Corporation and Shenandoah Corporation John Kenneth Galbraith wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.
Wikipedia.
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.
+++++
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
+++++
LIR Gold Target by 2019: $3,000.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
We open this morning with more on the Goldman scandal that typifies all that is wrong with parasitic casino capitalism and unrestricted hedge fund derivatives gambling. Was the great credit calamity, that nearly brought down the world’s economic system and plunged the world into the worst and continuing recession since the Great 1930s Depression, deliberately made in Goldman heaven at 85 Broad Street? But first this news from London. The “fabulous Fab” goes on the lam. Well actually just takes some time off. With the European airlines closed down and going out of business fast, and the trains and ferries that link John Bull’s advanced civilization with the natives of Europe jammed up with stranded refugees trying to get home, going on the lam from the world’s recently impoverished taxpayers isn’t exactly an option thanks to Iceland.
It’s morally wrong to let a sucker keep his money.
W.C. Fields. Goldman Ethicist.
Goldman's staffer charged by SEC takes time off
April 19, 2010, 3:08 p.m. EDT
Fabrice Tourre, a Goldman Sachs Group Inc. employee at the center of a government case against the bank over its sale of mortgage securities, is taking some time off but isn't suspended, the Fox Business Network reports Monday, citing Goldman Sachs.
Tourre remains an employee, according to the report.
Reuters also reported that Tourre remains with the firm. "He remains an employee of Goldman Sachs," and has taken a "personal decision to take a bit of time off," the news service quoted a Goldman Sachs spokesman as saying. The spokesman, who wasn't identified by name, also told Reuters that Goldman had found Tourre did "nothing wrong" during an internal investigation it conducted after the Securities and Exchange Commission first contacted the bank about the case.
http://www.marketwatch.com/story/goldmans-staffer-charged-by-sec-takes-time-off-2010-04-19
Below, a NY Times article we covered just before Christmas. I suspect that someone at the SEC was providing background briefing back then. I suspect that there is still a whole lot more to come out.
"The product was new and complex, but the deception and conflicts are old and simple."
SEC Director Division of Enforcement Robert Khuzami.
Banks Bundled Bad Debt, Bet Against It and Won
By GRETCHEN MORGENSON and LOUISE STORY Published: December 23, 2009
----- Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.
Goldman’s own clients who bought them, however, were less fortunate.
Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.
----- One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.
Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.
------ But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests.
“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”
Investment banks were not alone in reaping rich rewards by placing trades against synthetic C.D.O.’s. Some hedge funds also benefited, including Paulson & Company, according to former Goldman workers and people at other banks familiar with that firm’s trading.
Michael DuVally, a Goldman Sachs spokesman, declined to make Mr. Egol available for comment.
----- From 2005 through 2007, at least $108 billion in these securities was issued, according to Dealogic, a financial data firm. And the actual volume was much higher because synthetic C.D.O.’s and other customized trades are unregulated and often not reported to any financial exchange or market.
----- Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.
Even before then, however, pockets of the investment bank had also started using C.D.O.’s to place bets against mortgage securities, in some cases to hedge the firm’s mortgage investments, as protection against a fall in housing prices and an increase in defaults.
Mr. Egol was a prime mover behind these securities. Beginning in 2004, with housing prices soaring and the mortgage mania in full swing, Mr. Egol began creating the deals known as Abacus. From 2004 to 2008, Goldman issued 25 Abacus deals, according to Bloomberg, with a total value of $10.9 billion.
Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.’s didn’t contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures.
Rather than persuading his customers to make negative bets on Abacus, Mr. Egol kept most of these wagers for his firm, said five former Goldman employees who spoke on the condition of anonymity. On occasion, he allowed some hedge funds to take some of the short trades.
------ Mr. Egol and Fabrice Tourre, a French trader at Goldman, were aggressive from the start in trying to make the assets in Abacus deals look better than they were, according to notes taken by a Wall Street investor during a phone call with Mr. Tourre and another Goldman employee in May 2005.
On the call, the two traders noted that they were trying to persuade analysts at Moody’s Investors Service, a credit rating agency, to assign a higher rating to one part of an Abacus C.D.O. but were having trouble, according to the investor’s notes, which were provided by a colleague who asked for anonymity because he was not authorized to release them. Goldman declined to discuss the selection of the assets in the C.D.O.’s, but a spokesman said investors could have rejected the C.D.O. if they did not like the assets.
Goldman’s bets against the performances of the Abacus C.D.O.’s were not worth much in 2005 and 2006, but they soared in value in 2007 and 2008 when the mortgage market collapsed. The trades gave Mr. Egol a higher profile at the bank, and he was among a group promoted to managing director on Oct. 24, 2007.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=1&pagewanted=2
Up next, AIG heads to the lawyers. The first of many I suspect.
AIG eyes action on Goldman over CDOs
By Francesco Guerrera in New York and Brooke Masters in London
Published: April 20 2010 00:00 Last updated: April 20 2010 01:09
AIG, the US government-controlled insurer, is considering pursuing Goldman Sachs over losses incurred on $6bn of insurance deals on mortgage-backed securities similar to the one that led to fraud charges against the US bank.
AIG’s move over the deals that caused it a loss of about $2bn is a sign that Friday’s decision by the Securities and Exchange Commission to file civil fraud charges against Goldman could spark actions from investors who lost money on mortgage-backed securities.
If AIG and others discover that their transactions had disclosure issues similar to those alleged in the SEC charges, they would be able to complain to the SEC, file a private lawsuit, or both, lawyers said.
People close to the situation said that AIG was reviewing deals to insure $6bn-worth of Goldman’s collateralised debt obligations in the run-up to the crisis. They added that AIG had yet to decide whether to take action. AIG and Goldman declined to comment.
http://www.ft.com/cms/s/0/db7dc52a-4bee-11df-a217-00144feab49a.html
We end on the subject of Goldman’s Madoff moment in the sunlight, busy capping a 141 year record of financial success, with the WSJ covering the hedge fund that seems to have got a pass in the developing scandal. Mr. Paulson, it seems, bet on red and black in the politics of money talks.
“In early 2008, the firm hired former Federal Reserve Chairman Alan Greenspan…. In September 2008, Paulson bet against four of the five biggest British banks. His positions included a £350m bet against shares in Barclays; £292m against Royal Bank of Scotland; and £260m against Lloyds TSB. He eventually booked a profit of as much as £280m after reducing its short position in RBS in January 2009.” Wikipedia.
APRIL 20, 2010
Paulson Gave to Both Parties
Politicians Seek to Tar by Association, but Bank and Paulson Gave Across Aisle
John Paulson, the man at the center of the government's case against Goldman Sachs Group Inc., has held political fund-raising events in recent weeks for top politicians of both political parties.
According to people familiar with the events, Mr. Paulson organized one of the events on behalf of the Republican National Committee and featured RNC Chairman Michael Steele and Republican presidential hopeful Mitt Romney. The other was for Democratic Sen. Charles Schumer of New York.
Mr. Paulson's bipartisan support for politicians points to the difficulty both parties face as they try to use the case against Goldman for political gain. Goldman was charged last week by the Securities and Exchange Commission with civil fraud relating to its trading in mortgage-related investments.
Mr. Paulson wasn't accused of wrongdoing. A spokesman said: "John Paulson supports a variety of candidates in both political parties based on keeping the United States the financial and economic capital of the world."
A spokesman for the RNC and Mr. Schumer declined to comment. A spokesman for Mr. Romney didn't respond to a request for comment.
http://online.wsj.com/article/SB10001424052748703757504575194502882068296.html?mod=WSJ_article_MoreIn
Below, Der Spiegel on Europe increasingly laid low by Iceland’s ash not cash. A-tissue, a-tissue we all fall down.
Eyjafjallajökull's Economic Impact
Airlines Fear Losses Higher than 9/11
04/19/2010
The disruption to air traffic caused by Iceland's volcanic ash is not just affecting German airlines' bottom lines. The knock-on effect on the entire economy could be severe. The initial estimates are of losses amounting to 1 billion euros a day.
Five days of quiet, plane-free skies have left Europe's airlines furious and warning that some companies may not survive. Now Brussels says it could come to the rescue of some of the airlines that are losing millions of euros a day due to closed airspace.
On Monday, Competition Commissioner Joaquin Almunia said that the European Union was prepared to react as it had after the Sept. 11, 2001 terror attacks. "If member states would decide to help with state aid and provided conditions for receiving state aid were not discriminatory, we are ready to think in a similar framework to after Sept. 11," he said at a conference in Brussels.
The International Air Transport Association (IATA) estimates that the losses caused by the volcanic ash cloud from Iceland could be higher than those incurred after Sept. 11, which saw airlines lose more than $10 billion (€7.4 billion). Officials at German airline Lufthansa alone say the company is losing €25 million a day.
IATA has warned that if the flight ban goes on for longer than a week that some of the 150 European airlines could go bust. The smaller airlines would be the first to go, IATA President Giovanni Bisignani said on Monday.
Airlines Slam Government
According to a study by the Swiss bank UBS, Europe's six biggest airlines -- Easyjet, Ryanair, British Airways, Iberia, Air France-KLM and Lufthansa -- together have seen losses of up to €140 million a day.
The ongoing paralysis is hitting Europe's airlines on the stock markets, as well. Shares in airlines fell by between 3.5 and 4.5 percent on Monday, with Germany's biggest airlines Lufthansa and Air Berlin each losing 5 percent of their value.
The two airlines have sharply criticized the flight ban in Germany, which after being eased somewhat on Sunday, has been re-imposed until 2 a.m. on Tuesday.
The two companies have slammed Transport Minister Peter Ramsauer and German Air Traffic Control (DFS) for closing German airspace. Lufthansa boss Wolfgang Mayrhuber said that the safety concerns had been unfounded.
----Meanwhile, his colleague Economy Minister Rainer Brüderle in Chancellor Angela Merkel's cabinet says he fears that the affects on the wider German economy could be significant. "If the global economic value-added chain is interrupted for a long period of time, then we get to a serious situation, because many of our industrial giants are dependent on air transport," he said in Berlin on Monday.
-----For example, replacement parts and components for machines and facilities built by German manufacturers cannot be transported. Many medical supplies are also usually delivered by air. "Urgent, perishable or high quality goods" cannot simply be transported by trucks or ships instead of by air he said.
Around 35 to 40 percent of international trade is conducted by air. This would amount to trade worth around €350 billion from Germany, the equivalent of around €1 billion a day. There are, of course, compensatory factors and some businesses can make up the losses later "but not 100 percent," according to Trier.
The affect is already being felt in one of Germany's leading companies. Carmaker BMW is not able to send important components to the United States, a spokesman said on Monday. While the production in the plants was continuing as normal, if the flight ban continues for two more days, the situation could get critical. "In the worse case scenario the conveyor belts might stop," he said.
http://www.spiegel.de/international/business/0,1518,689883,00.html#ref=nlint
APRIL 20, 2010
Vow to Renew Flights Clouded by Ash Warning
European Regulators Suggest Loosening Ban, but Pilots Ask for More Research; U.K. Sees New Plume From Iceland's Volcano
European regulators planned to start lifting flight bans Tuesday, but news late Monday put those plans in doubt even as pilot groups and scientists called for more caution before putting planes back into European skies clouded by volcanic ash.
Britain's National Air Traffic Services agency said late Monday that flying conditions were "worsening" in some areas. "The volcano eruption in Iceland has strengthened and a new ash cloud is spreading south and east towards the U.K.," the air-traffic agency said in its latest update. The agency said it still hopes to clear some airports to reopen Tuesday, though not the London gateways that handle the bulk of the country's air traffic.
The news came after European air-safety authorities agreed earlier Monday to relax flight bans that it enacted after Iceland's Eyjafjallajökull volcano (ay-yah-FYAH'-tlah-yer-kuh-duhl) started erupting violently Thursday, spewing a cloud of fine but potentially dangerous dust high into the atmosphere. Days of airspace closures across most of northern and central Europe, the world's biggest restriction of flights since 2001, have left more than eight million passengers dislocated and cost airlines at least $1 billion dollars.
Following criticism by airlines that authorities were being overly cautious in grounding flights, European Union officials agreed Monday to divide EU airspace into three zones based on ash concentrations in the atmosphere. European aviation authorities will establish a "limited" no-fly zone surrounded by a buffer area. Airlines will be allowed to fly outside the zone once they are opened by national authorities.
http://online.wsj.com/article/SB10001424052748704671904575193292611544742.html?mod=WSJEUROPE_hps_LEFTTopStories
In other European news, Greece edges closer to default. They may be out of sight amidst all of Iceland’s ash, and not a feature in this particular Goldman scandal that threatens to bring to an end Goldie’s 141 year Wall Street checkered career, but Greece is not helped if Europe’s tourists can’t get to visit and spend their hard earned cash. Europe’s fix-its and the IMF team had a hard time getting there too.
If at first you don't succeed, try again. Then quit. There's no use being a damn fool about it.
W.C. Fields.
Greece’s Uncertain Future Weighs on Bond Market
By MATTHEW SALTMARSH Published: April 19, 2010
Yields on Greek bonds pushed to fresh highs on Monday and shares in Athens sank as investors continued to worry about the country’s near-term ability to finance its debt. Some raised the specter of default even if international aid arrived soon.
Analysts said traders shifted out of Greek bonds amid worries about the country’s ability to raise more than 11 billion euros, or $14.8 billion, in May, especially in light of the delay of a crucial meeting that was to be held Monday between European, Greek and International Monetary Fund officials.
Vassilis Papadimitriou, a spokesman for the Greek government, said the meeting, postponed because of travel chaos in Europe, would go ahead Wednesday provided that European Union and central bank officials were able to get to Athens. Airports across Europe remained closed Monday because of the volcanic eruption on Wednesday in Iceland, which has spread potentially hazardous ash across the Continent.
Bill Murray, a Washington-based spokesman for the I.M.F., confirmed on Monday that most members of the I.M.F. team had arrived in Athens to discuss “policies that could be the basis for a fund financing program.” He declined to comment on the duration of the mission.
Even with those talks expected to move ahead, investors were worrying about the country’s financing needs — in coming months and years.
http://www.nytimes.com/2010/04/20/business/global/20drachma.html
So, Goldman is a serial arsonist that has turned betting against its clients' interests into a science. The Times article makes it clear that shorting subprime and luring gullible investors into the trap, was standard operating procedure. Goldman's CEO Lloyd Blankfein dismisses the criticism with a wave of the hand saying, "They were sophisticated investors," which is the same as saying "buyer beware". It's worth noting that shorting subprimes exacerbated the pain in housing by creating incentives for originators to issue more mortgages to people with poor credit. This prolonged the housing boom and deepened the recession when the bubble finally burst. The eventual downturn was largely engineered by Wall Street.
http://www.counterpunch.org/whitney04192010.html
At the Comex silver depositories Monday, final figures were: Registered 48.85 Moz, Eligible 66.08 Moz, Total 114.93 Moz.
+++++
Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, you really couldn’t make this nonsense up. Yet another reason for the UK to leave the insane European Union. The world doesn’t just owe Europe a free living Greek style, it owes them free or subsidized holidays as well. Another unintended consequence of the error of the great Nixonian error of fiat money.
April 18, 2010
Get packing: Brussels decrees holidays are a human right
AN overseas holiday used to be thought of as a reward for a year’s hard work. Now Brussels has declared that tourism is a human right and pensioners, youths and those too poor to afford it should have their travel subsidised by the taxpayer.
Under the scheme, British pensioners could be given cut-price trips to Spain, while Greek teenagers could be taken around disused mills in Manchester to experience the cultural diversity of Europe.
The idea for the subsidised tours is the brainchild of Antonio Tajani, the European Union commissioner for enterprise and industry, who was appointed by Silvio Berlusconi, the Italian prime minister.
The scheme, which could cost hundreds of millions of pounds a year, is intended to promote a sense of pride in European culture, bridge the north-south divide in the continent and prop up resorts in their off-season.
Tajani, who unveiled his plan last week at a ministerial conference in Madrid, believes the days when holidays were a luxury have gone. “Travelling for tourism today is a right. The way we spend our holidays is a formidable indicator of our quality of life,” he said.
Tajani, who used to be transport commissioner, said he had been able to “affirm the rights of passengers” in his previous office and the next step was to ensure people’s “right to be tourists”.
The European Union has experience of subsidised holidays. In February the European parliament paid contributions of up to 52% towards an eight-day skiing trip in the Italian Alps for 80 children of Eurocrats.
Tajani’s programme will be piloted until 2013 and then put into full operation. It will be open to pensioners and anyone over 65, young people between 18 and 25, families facing “difficult social, financial or personal” circumstances and disabled people. The disabled and the elderly can be accompanied by one person.
In the initial phase, northern Europeans will be encouraged to visit southern Europe and vice versa. Details of how participants are chosen have not yet been finalised, but it is expected the EU will subsidise about 30% of the cost.
http://www.timesonline.co.uk/tol/news/world/europe/article7100943.ece
Below, the more things change the more they stay the same. Goldie has form as they say.
In the early 20th century, Goldman was a player in establishing the initial public offering market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading business schools, a practice that still continues today.
On December 4, 1928, it launched the Goldman Sachs Trading Corp. a closed-end fund with characteristics similar to that of a Ponzi scheme. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward. Of this case and others like Blue Ridge Corporation and Shenandoah Corporation John Kenneth Galbraith wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.
Wikipedia.
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.
+++++
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
+++++
Monday, 19 April 2010
Sached! Government Sached!
Baltic Dry Index. 3009 +08
LIR Gold Target by 2019: $3,000.
“Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.”
We open with the continuing havoc to international air travel in Europe, where the economic consequences are now starting to build. Below, the Journal covers the story, with the airlines now starting to take the line that the complete shutdown is a gross over reaction. Who knows? But will the public, by now conditioned to expect jet planes engines to cease working and planes to fall out of the sky the moment they hit volcano dust, really pay to fly in new a form of Russian roulette? I have my doubts that many families will take a chance just to help airlines lose less money. “Fly us, if it’s the last thing you do,” doesn’t sound very persuasive to me. The first time a plane really does fall out of the sky, all hell will break loose even if the pilots manage to get it back on the ground without loss of life. I’m not too sure either that insurance coverage will be viable for planes operating against the recommendation not to fly. I suspect that it would invalidate both the airlines insurance coverage itself, and all of the separate passenger insurance policies. Give an insurance company wiggle room, and they’ll wiggle right out of having to pay anything. My guess is that a government or EU bailout will soon be on the table.
APRIL 18, 2010
Extended Disruptions Will Hurt EU Recovery
Airlines Lobby Governments to Lift Flying Bans as Some Take Experimental Flights to Test Effects of Volcanic Ash on Jets
The extended closure of European airspace because of a cloud of volcanic ash threatens to snuff out the region's feeble economic recovery and has prompted airlines to take unusual measures in an effort to regain some control of the situation.
As aviation authorities prolonged the ban on flights into Monday, bringing the number of canceled flights to more than 63,000, hard-hit European airlines conducted test flights over the weekend to assess the safety of operating through ash and dust spewing out of an Icelandic volcano since Thursday. Many aviation officials say that authorities have overreacted by closing vast swathes of airspace without detailed analysis of atmospheric conditions and the dangers posed.
"It is completely safe to operate flights during hours of daylight," said Peter Hartman, chief executive of KLM Royal Dutch Airlines.
British Prime Minister Gordon Brown interrupted his campaigning for the U.K. national election to call an emergency cabinet meeting to figure out what to do about the thousands of Britons stranded outside the country, potentially by routing them through Spain or using the Royal Navy.
Late Sunday, aviation and meteorological authorities held out a slight hope that more flights could operate Monday as winds appeared to shift slightly, carrying the cloud away from eastern Germany, Poland and the Czech Republic, a spokeswoman for the European Union's transport commissioner said.
Meanwhile, airlines improvised solutions to move passengers where they could. The Air France unit of Air France-KLM SA said it would operate nine long-haul flights Monday to airports in southern France that reopened. Continental Airlines Inc., one of the largest trans-Atlantic operators, said it was changing its schedule to put more flights into the few open airports in Southern Europe. Delta Air Lines Inc. said it planned extra flights with larger aircraft when skies reopened. And Indian carrier Jet Airways, which flies to North America using a hub at Brussels Airport, started using Athens Airport to refuel planes.
Economists said that if the closure ends in coming days, its financial impact will remain limited to industries such as aviation, tourism and manufacturers that rely on just-in-time delivery by air. If the flight ban drags on, however, the pain will be far deeper, analysts predicted.
"Europe is the biggest exporter in the world and the second biggest importer. It is China's biggest customer," said Eric Chaney, chief economist at AXA Group. "Trade has been the biggest component in the global recovery and [an extended grounding] will have a significant impact on global trade and on the recovery that's still fragile."
Trade groups representing European airports and airlines on Sunday called for an "immediate reassessment of flight restrictions" in a joint statement, saying nearly seven million people had been affected.
"The eruption of the Icelandic volcano is not an unprecedented event, and the procedures applied in other parts of the world for volcanic eruptions do not appear to require the kind of restrictions that are presently being imposed in Europe," said the statement from the Association of European Airlines and Airports Council International Europe.
Aviation authorities and safety experts have said they are following United Nations guidelines and experience from past incidents.
-----Axel Raab, spokesman for the German national air-safety agency, DFS, said Europe lacked balloons able to measure the density or concentration of the ash in the air and equipment to do so wasn't in place because it had never been needed. Weather stations were being upgraded and a plane was being fitted with equipment to measure how much ash is really in the air, he said.
The growing airline push-back came as the ash cloud threatened to cause broad economic impact just as Europe and the world were pulling out of recession. In a forecast released Friday that doesn't account for the grounding, the accountancy firm Ernst & Young predicted a "feeble" recovery for the 16 nations of the euro zone, with growth of just 1% this year after a negative 4% in 2009.
Damage is spreading beyond air-travel and tourism to businesses that rely on air cargo—including overnight shipments and freight that moves more slowly in the bellies of passenger jets. For anyone trying to ship to or from Europe, the closure has a "tremendous impact because nothing is moving, whether it's a legal document, or seafood, or fresh flowers, or heavy freight," said Norman Black, spokesman for shipping giant United Parcel Service Inc.
http://online.wsj.com/article/SB10001424052748703594404575192160633439360.html?mod=WSJEUROPE_hps_LEFTTopStories
Up next, “the name’s Fab, Fabrice P. Tourre.” Below the NY Times astutely notices that the wretched man named at the centre of the SEC’s civil fraud suit leveled Friday against God’s workers toiling away for billion dollar bonuses at Goldman Sachs, is drumroll, French! Worse he’s described as “an effusive young Frenchman” who “masterminded” the mortgage deals that were deliberately designed to fail. Luckily “The Fab,” yes according to the WSJ he really did sign off on his emails that way, is now safely parked away in London which no one can reach thanks to a wayward volcano in Iceland. A third strike against him surely after strike one being a mastermind star at Government Sachs, with strike two being a “cheese eating surrender monkey,” from France!! But the NY Times thinks that more were involved in ambushing the duped Goldman client list of the formerly fabulously rich and sometimes famous. I suspect that this story is going to grow, and grow, and grow. Knives are being sharpened in Europe to claw back billions from the alleged American fraudsters. Is Goldie the American UBS? Stay long gold and silver, two decades of financial crime is about to come crashing down.
"I want us to do even more to encourage the risk takers"
Gordon Brown. 2004.
Top Goldman Leaders Said to Have Overseen Mortgage Unit
By LOUISE STORY Published: April 18, 2010
-----Among those who saw disaster looming were an effusive young Frenchman, Fabrice P. Tourre, and his quiet colleague, Jonathan M. Egol, the mastermind behind a series of mortgage deals known as the Abacus investments.
Their elite mortgage unit is now at the center of allegations that Goldman and Mr. Tourre, 31, defrauded investors with one of those complex deals.
The Securities and Exchange Commission filed a civil fraud suit on Friday that essentially says that Goldman built the financial equivalent of a time bomb and then sold it to unwitting investors. Mr. Egol, 40, was not named in the S.E.C.’s suit.
Goldman has vowed to fight the S.E.C. But the allegations have left many on Wall Street wondering how far the investigation might spread inside Goldman and perhaps beyond.
Pressure on Goldman mounted on Sunday as two members of Congress and Gordon Brown, Britain’s prime minister, called for investigations into the bank’s role in the mortgage market. Germany also said it was considering legal action against the bank.
Mr. Tourre was the only person named in the S.E.C. suit. But according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street.
According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.
Lucas van Praag, a Goldman spokesman, said that senior executives were not involved in approving the Abacus deals. He said that the executives had sought to balance Goldman’s positive bets on the mortgage market, rather than take an overall negative view.
Mr. Tourre, who now works for Goldman in London, declined to comment, as did Mr. Egol, Mr. van Praag said.
-----By early 2007, Goldman’s mortgage unit had become a hive of intense activity. By then, the business had captured the attention of senior management. In addition to Mr. Blankfein, Gary D. Cohn, Goldman’s president, and David A. Viniar, the chief financial officer, visited the mortgage unit frequently, often for hours at a time.
Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies.
The decision to get rid of positive bets on mortgages turned out to be prescient. Unlike most other Wall Street banks, Goldman profited from its mortgage business as the housing bubble was inflating and then again when the bubble burst.
http://www.nytimes.com/2010/04/19/business/19goldman.html?hp
APRIL 19, 2010
SEC Probes Other Soured Deals
The Securities and Exchange Commission, after having hit Goldman Sachs Group Inc. with a civil fraud charge, is investigating whether other mortgage deals arranged by some of Wall Street's biggest firms may have crossed the line into misleading investors.
The SEC's case against Goldman Friday has exposed an open secret on Wall Street: As the housing market began to wobble a few years back, some big financial firms designed products aimed at allowing key clients, such as hedge funds, to bet on a sharp housing downturn.
Among the firms that created mortgage deals that soon went sour were Deutsche Bank AG, UBS AG and Merrill Lynch & Co., now owned by Bank of America Corp. It isn't known what deals the SEC is investigating.
Further cases could hinge on whether the SEC sees what it considers misrepresentation, and not just questions such as whether a deal favored one client over another. A critical part of the SEC's case against Goldman is that the firm allegedly misled investors by not notifying them of the role of hedge-fund investor John Paulson—who was dubious of the housing boom—in selecting what went into the mortgage deal Goldman sold. Goldman said it fully disclosed the investments and didn't need to reveal the Paulson connection.
The deals generated about $1 billion in total fees for the firms, traders say. Investors that bought them often lost heavily. Now private lawsuits, along with the SEC's case against Goldman, are shedding light on how some of these mortgage deals were put together.
Soured mortgage investments helped trigger the near-collapse of American International Group Inc., which had insured at least $1 billion of bond deals issued by Wall Street firms in 2005 that reflected hedge funds' input, according to documents reviewed by The Wall Street Journal and people familiar with the matter. Taxpayers had to foot the bill for AIG's rescue.
http://online.wsj.com/article/SB10001424052748704508904575192294041013802.html?mod=WSJEUROPE_hps_LEFTTopWhatNews
Looters in Loafers
By PAUL KRUGMAN Published: April 18, 2010
Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb “sacks,” as in looting and pillaging. The student replies, “Goldman Sachs.”
Sure enough, last week the Securities and Exchange Commission accused the Gucci-loafer guys at Goldman of engaging in what amounts to white-collar looting.
I’m using the term looting in the sense defined by the economists George Akerlof and Paul Romer in a 1993 paper titled “Looting: The Economic Underworld of Bankruptcy for Profit.” That paper, written in the aftermath of the savings-and-loan crisis of the Reagan years, argued that many of the losses in that crisis were the result of deliberate fraud.
-----We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.
And Goldman isn’t the only financial firm accused of doing this. According to the Pulitzer-winning investigative journalism Web site ProPublica, several banks helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure.
So what role did fraud play in the financial crisis? Neither predatory lending nor the selling of mortgages on false pretenses caused the crisis. But they surely made it worse, both by helping to inflate the housing bubble and by creating a pool of assets guaranteed to turn into toxic waste once the bubble burst.
As for the alleged creation of investments designed to fail, these may have magnified losses at the banks that were on the losing side of these deals, deepening the banking crisis that turned the burst housing bubble into an economy-wide catastrophe.
http://www.nytimes.com/2010/04/19/opinion/19krugman.html?hp
Goldman May Face U.K., German Inquiries After Suit
By Michael Patterson and Tony Czuczka
April 19 (Bloomberg) -- Goldman Sachs Group Inc. faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations.
Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.
Politicians that were forced to bail out their banks during the financial crisis are turning on Goldman, which critics say helped caused the turmoil and profited from it. The European Union is also probing Goldman’s role in arranging swaps for Greece that may have masked the country’s budget deficit.
“We will see politicians throughout the world piling on Goldman Sachs,” said Scott Moeller, a former investment banker now teaching at Cass Business School in London. “Now they have vulnerability. Everyone and anyone, especially politicians, are going to be trying to make hay with this one.”
----- “It looks as if people were misled about what happened,” Brown, who faces a national election on May 6, said on the BBC’s Andrew Marr program yesterday. “The banks are still an issue. They are a risk to the economy.’
Royal Bank of Scotland Group Plc paid $841 million to Goldman Sachs to unwind its position in Abacus, which it inherited when it bought parts of ABN Amro in 2007, according to the SEC. The Edinburgh-based lender is now controlled by the British government after receiving a 45.5 billion-pound ($70 billion) taxpayer rescue, the world’s biggest banking bailout.
The SEC said Goldman Sachs misled investor IKB Deutsche Industriebank AG about Paulson’s role in the trade. Dusseldorf- based IKB lost about $150 million in the Abacus CDO, most of which went to Paulson, which reaped a $1 billion profit in total from betting against the vehicle, according to the SEC.
Legal Steps
IKB became Germany’s first casualty of the U.S. subprime- mortgage crisis in 2007 after its investments in asset-backed securities soured. KfW, Germany’s state-owned development bank, pumped almost 10 billion euros ($13.5 billion) into IKB in 2008 to shore up the country’s banking system.
The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Merkel. “Then we will look at the records and consider possible legal steps.”
Goldman Sachs said in a statement it had provided “extensive disclosure” to IKB about the risk of the underlying mortgage securities. Paulson, which hasn’t been charged with any wrongdoing, said in a statement that it didn’t “sponsor or initiate” Goldman’s Abacus program. The fund said that while it did purchase credit protection from Goldman on some Abacus securities, it wasn’t involved in the marketing.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNSmRVxms8jg&pos=2
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
At the Comex silver depositories Friday, final figures were: Registered 48.85 Moz, Eligible 66.75 Moz, Total 115.60 Moz.
+++++
Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, more on the British whitewash of the climategate scandal.
“Time will bring to light whatever is hidden; it will cover up and conceal what is now shining in splendor.”
Horace.
Climategate: a scandal that won’t go away
From Macbeth to Watergate, it’s not the act that leads to nemesis, but the attempts to 'trammel up the consequence’ , writes Christopher Booker
By Christopher Booker Published: 7:22PM BST 17 Apr 2010
-----Confronted with all those scandals surrounding the “Climategate” emails and the UN’s Intergovernmental Panel on Climate Change, the political and academic establishments have responded with a series of inquiries and statements designed to show that the methods used to construct the official scientific case are wholly sound. But as was illustrated last week by two very different reports, these efforts to hold the line are themselves so demonstrably flawed that they are in danger of backfiring, leaving the science more questionable than ever.
The first report centred directly on the IPCC itself. When several of the more alarmist claims in its most recent 2007 report were revealed to be wrong and without any scientific foundation, the official response, not least from the IPCC’s chairman, Dr Rajendra Pachauri, was to claim that everything in its report was “peer-reviewed”, having been confirmed by independent experts.
But a new study put this claim to the test. A team of 40 researchers from 12 countries, led by a Canadian analyst Donna Laframboise, checked out every one of the 18,531 scientific sources cited in the mammoth 2007 report. Astonishingly, they found that nearly a third of them – 5,587 – were not peer-reviewed at all, but came from newspaper articles, student theses, even propaganda leaflets and press releases put out by green activists and lobby groups.
In its own way even more damaging, however, was the report from a team led by Lord Oxburgh on the scientific integrity of the East Anglia Climatic Research Unit (CRU). Two sets of evidence have been used more than anything else to drive the worldwide scare over global warming. One is a series of graphs showing how temperatures have suddenly shot up in recent decades to levels historically unprecedented. The other is the official record of global surface temperatures. For both of these, the CRU and the key group of top British and American scientists involved in those Climategate emails have been crucially responsible.
Lord Oxburgh himself is linked to various commercial interests which make money from climate change, from wind farms to carbon trading. None of the panel he worked with on his report were climate “sceptics”; and one, Dr Kerry Emanuel, is an outspoken advocate of man-made global warming. Even so, it was surprising to see just how superficial their inquiry turned out to be, based on two brief visits to the CRU and on reading 11 scientific papers produced by the research unit in the past 24 years, chosen in consultation with the Royal Society (which is itself fanatical in promotion of warming orthodoxy).
The crown jewels of the IPCC’s case that the world faces catastrophic warming have been all those graphs based on tree rings which purport to show that temperatures have lately been soaring to levels never known before in history – thus eradicating all the evidence that the world was hotter than today during the Medieval Warm Period, long before any rise in CO2 levels. Best known of these graphs, of course, was Michael Mann’s “hockey stick”, comprehensively discredited by the expert Canadian statistician Stephen McIntyre and Professor Ross McKitrick. But the IPCC was able to defend its case with the aid of another set of “hockey sticks”, based on different tree rings, produced by Mann’s close allies at the CRU.
The most widely quoted of the Climategate emails was that from the CRU’s director, Philip Jones, saying that he had used “Mike’s Nature trick” to “hide the decline”. If there was anything in the CRU’s record which a proper inquiry should have addressed it was the story behind this email, because what it highlighted was the device used by the CRU to get round the fact that its tree-ring data hopelessly failed to show the result the warmist establishment wanted. When their Siberian tree rings showed temperatures in the late 20th century sharply dropping rather than rising, the “trick” used by Prof Jones and his colleague Dr Keith Briffa, copied from Mike Mann’s own “hockey stick”, was simply to delete the downward curve shown by the tree rings, replacing them with late 20th-century temperature data to show the dramatic warming
they wanted.
The significance of this sleight of hand can scarcely be exaggerated. Why, in using this misleading graph, did the IPCC not explain the trick that had been played by its leading scientists? If tree rings were so inadequate in reflecting 20th-century temperatures, why should they be relied on to reflect temperatures in earlier centuries? Why, when fresh Siberian tree ring data came to light, making a nonsense of the CRU’s earlier temperature reconstructions, did the CRU simply ignore the new data?
Anyone who has followed the meticulous analysis of this curious story by Steve McIntyre on his Climate Audit website might well conclude that we are looking here at a complete travesty of proper scientific procedure, matched only by the bizarre methods used by Mann himself to construct his original hockey stick. Yet these are the men, Mann, Jones and Briffa, who acted as the “lead authors” of the key chapters of the IPCC’s 2001 and 2007 reports.
They quite shamelessly promoted the rewriting of history produced by themselves and a small group of colleagues – the so-called Hockey Team – which the IPCC in turn used as its main evidence to convince the politicians that the world faces unprecedented warming.
Yet scarcely a hint of this hugely important story is contained in the Oxburgh report, which simply glosses it over, hoping to appease critics by throwing in a few vaguely critical comments about how Jones and his team were a trifle “disorganised” in archiving their data. It ignores the utterly damning critiques of the CRU’s methodology produced by McIntyre and McKitrick. It does not even begin to question the way the CRU has compiled its global temperature record, relied on by the IPCC as the most authoritative of all the official data sources for surface temperatures.
Yet this in turn has given rise to all sorts of controversies, not least when Prof Jones last year admitted that much of his data had been “lost” (following his repeated refusals of applications to see it by McIntyre and others). More damaging still was the charge by senior Russian scientists that, in compiling its global record, CRU had cherry-picked the data supplied from Russia, suppressing that from most of the country while retaining the data from the vicinity of cities which, thanks to the “urban heat island” effect, showed a warming trend. So even the accuracy of CRU’s temperature record has been called seriously in doubt, although one would never have guessed it from Oxburgh.
http://www.telegraph.co.uk/comment/columnists/christopherbooker/7601929/Climategate-a-scandal-that-wont-go-away.html
“The least productive people are usually the ones who are most in favor of holding meetings”
Thomas Sowell. American Economist.
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.
+++++
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
+++++
Below, Mr "straight kind of guy" bets on the UK election.
LIR Gold Target by 2019: $3,000.
“Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.”
We open with the continuing havoc to international air travel in Europe, where the economic consequences are now starting to build. Below, the Journal covers the story, with the airlines now starting to take the line that the complete shutdown is a gross over reaction. Who knows? But will the public, by now conditioned to expect jet planes engines to cease working and planes to fall out of the sky the moment they hit volcano dust, really pay to fly in new a form of Russian roulette? I have my doubts that many families will take a chance just to help airlines lose less money. “Fly us, if it’s the last thing you do,” doesn’t sound very persuasive to me. The first time a plane really does fall out of the sky, all hell will break loose even if the pilots manage to get it back on the ground without loss of life. I’m not too sure either that insurance coverage will be viable for planes operating against the recommendation not to fly. I suspect that it would invalidate both the airlines insurance coverage itself, and all of the separate passenger insurance policies. Give an insurance company wiggle room, and they’ll wiggle right out of having to pay anything. My guess is that a government or EU bailout will soon be on the table.
APRIL 18, 2010
Extended Disruptions Will Hurt EU Recovery
Airlines Lobby Governments to Lift Flying Bans as Some Take Experimental Flights to Test Effects of Volcanic Ash on Jets
The extended closure of European airspace because of a cloud of volcanic ash threatens to snuff out the region's feeble economic recovery and has prompted airlines to take unusual measures in an effort to regain some control of the situation.
As aviation authorities prolonged the ban on flights into Monday, bringing the number of canceled flights to more than 63,000, hard-hit European airlines conducted test flights over the weekend to assess the safety of operating through ash and dust spewing out of an Icelandic volcano since Thursday. Many aviation officials say that authorities have overreacted by closing vast swathes of airspace without detailed analysis of atmospheric conditions and the dangers posed.
"It is completely safe to operate flights during hours of daylight," said Peter Hartman, chief executive of KLM Royal Dutch Airlines.
British Prime Minister Gordon Brown interrupted his campaigning for the U.K. national election to call an emergency cabinet meeting to figure out what to do about the thousands of Britons stranded outside the country, potentially by routing them through Spain or using the Royal Navy.
Late Sunday, aviation and meteorological authorities held out a slight hope that more flights could operate Monday as winds appeared to shift slightly, carrying the cloud away from eastern Germany, Poland and the Czech Republic, a spokeswoman for the European Union's transport commissioner said.
Meanwhile, airlines improvised solutions to move passengers where they could. The Air France unit of Air France-KLM SA said it would operate nine long-haul flights Monday to airports in southern France that reopened. Continental Airlines Inc., one of the largest trans-Atlantic operators, said it was changing its schedule to put more flights into the few open airports in Southern Europe. Delta Air Lines Inc. said it planned extra flights with larger aircraft when skies reopened. And Indian carrier Jet Airways, which flies to North America using a hub at Brussels Airport, started using Athens Airport to refuel planes.
Economists said that if the closure ends in coming days, its financial impact will remain limited to industries such as aviation, tourism and manufacturers that rely on just-in-time delivery by air. If the flight ban drags on, however, the pain will be far deeper, analysts predicted.
"Europe is the biggest exporter in the world and the second biggest importer. It is China's biggest customer," said Eric Chaney, chief economist at AXA Group. "Trade has been the biggest component in the global recovery and [an extended grounding] will have a significant impact on global trade and on the recovery that's still fragile."
Trade groups representing European airports and airlines on Sunday called for an "immediate reassessment of flight restrictions" in a joint statement, saying nearly seven million people had been affected.
"The eruption of the Icelandic volcano is not an unprecedented event, and the procedures applied in other parts of the world for volcanic eruptions do not appear to require the kind of restrictions that are presently being imposed in Europe," said the statement from the Association of European Airlines and Airports Council International Europe.
Aviation authorities and safety experts have said they are following United Nations guidelines and experience from past incidents.
-----Axel Raab, spokesman for the German national air-safety agency, DFS, said Europe lacked balloons able to measure the density or concentration of the ash in the air and equipment to do so wasn't in place because it had never been needed. Weather stations were being upgraded and a plane was being fitted with equipment to measure how much ash is really in the air, he said.
The growing airline push-back came as the ash cloud threatened to cause broad economic impact just as Europe and the world were pulling out of recession. In a forecast released Friday that doesn't account for the grounding, the accountancy firm Ernst & Young predicted a "feeble" recovery for the 16 nations of the euro zone, with growth of just 1% this year after a negative 4% in 2009.
Damage is spreading beyond air-travel and tourism to businesses that rely on air cargo—including overnight shipments and freight that moves more slowly in the bellies of passenger jets. For anyone trying to ship to or from Europe, the closure has a "tremendous impact because nothing is moving, whether it's a legal document, or seafood, or fresh flowers, or heavy freight," said Norman Black, spokesman for shipping giant United Parcel Service Inc.
http://online.wsj.com/article/SB10001424052748703594404575192160633439360.html?mod=WSJEUROPE_hps_LEFTTopStories
Up next, “the name’s Fab, Fabrice P. Tourre.” Below the NY Times astutely notices that the wretched man named at the centre of the SEC’s civil fraud suit leveled Friday against God’s workers toiling away for billion dollar bonuses at Goldman Sachs, is drumroll, French! Worse he’s described as “an effusive young Frenchman” who “masterminded” the mortgage deals that were deliberately designed to fail. Luckily “The Fab,” yes according to the WSJ he really did sign off on his emails that way, is now safely parked away in London which no one can reach thanks to a wayward volcano in Iceland. A third strike against him surely after strike one being a mastermind star at Government Sachs, with strike two being a “cheese eating surrender monkey,” from France!! But the NY Times thinks that more were involved in ambushing the duped Goldman client list of the formerly fabulously rich and sometimes famous. I suspect that this story is going to grow, and grow, and grow. Knives are being sharpened in Europe to claw back billions from the alleged American fraudsters. Is Goldie the American UBS? Stay long gold and silver, two decades of financial crime is about to come crashing down.
"I want us to do even more to encourage the risk takers"
Gordon Brown. 2004.
Top Goldman Leaders Said to Have Overseen Mortgage Unit
By LOUISE STORY Published: April 18, 2010
-----Among those who saw disaster looming were an effusive young Frenchman, Fabrice P. Tourre, and his quiet colleague, Jonathan M. Egol, the mastermind behind a series of mortgage deals known as the Abacus investments.
Their elite mortgage unit is now at the center of allegations that Goldman and Mr. Tourre, 31, defrauded investors with one of those complex deals.
The Securities and Exchange Commission filed a civil fraud suit on Friday that essentially says that Goldman built the financial equivalent of a time bomb and then sold it to unwitting investors. Mr. Egol, 40, was not named in the S.E.C.’s suit.
Goldman has vowed to fight the S.E.C. But the allegations have left many on Wall Street wondering how far the investigation might spread inside Goldman and perhaps beyond.
Pressure on Goldman mounted on Sunday as two members of Congress and Gordon Brown, Britain’s prime minister, called for investigations into the bank’s role in the mortgage market. Germany also said it was considering legal action against the bank.
Mr. Tourre was the only person named in the S.E.C. suit. But according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street.
According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.
Lucas van Praag, a Goldman spokesman, said that senior executives were not involved in approving the Abacus deals. He said that the executives had sought to balance Goldman’s positive bets on the mortgage market, rather than take an overall negative view.
Mr. Tourre, who now works for Goldman in London, declined to comment, as did Mr. Egol, Mr. van Praag said.
-----By early 2007, Goldman’s mortgage unit had become a hive of intense activity. By then, the business had captured the attention of senior management. In addition to Mr. Blankfein, Gary D. Cohn, Goldman’s president, and David A. Viniar, the chief financial officer, visited the mortgage unit frequently, often for hours at a time.
Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies.
The decision to get rid of positive bets on mortgages turned out to be prescient. Unlike most other Wall Street banks, Goldman profited from its mortgage business as the housing bubble was inflating and then again when the bubble burst.
http://www.nytimes.com/2010/04/19/business/19goldman.html?hp
APRIL 19, 2010
SEC Probes Other Soured Deals
The Securities and Exchange Commission, after having hit Goldman Sachs Group Inc. with a civil fraud charge, is investigating whether other mortgage deals arranged by some of Wall Street's biggest firms may have crossed the line into misleading investors.
The SEC's case against Goldman Friday has exposed an open secret on Wall Street: As the housing market began to wobble a few years back, some big financial firms designed products aimed at allowing key clients, such as hedge funds, to bet on a sharp housing downturn.
Among the firms that created mortgage deals that soon went sour were Deutsche Bank AG, UBS AG and Merrill Lynch & Co., now owned by Bank of America Corp. It isn't known what deals the SEC is investigating.
Further cases could hinge on whether the SEC sees what it considers misrepresentation, and not just questions such as whether a deal favored one client over another. A critical part of the SEC's case against Goldman is that the firm allegedly misled investors by not notifying them of the role of hedge-fund investor John Paulson—who was dubious of the housing boom—in selecting what went into the mortgage deal Goldman sold. Goldman said it fully disclosed the investments and didn't need to reveal the Paulson connection.
The deals generated about $1 billion in total fees for the firms, traders say. Investors that bought them often lost heavily. Now private lawsuits, along with the SEC's case against Goldman, are shedding light on how some of these mortgage deals were put together.
Soured mortgage investments helped trigger the near-collapse of American International Group Inc., which had insured at least $1 billion of bond deals issued by Wall Street firms in 2005 that reflected hedge funds' input, according to documents reviewed by The Wall Street Journal and people familiar with the matter. Taxpayers had to foot the bill for AIG's rescue.
http://online.wsj.com/article/SB10001424052748704508904575192294041013802.html?mod=WSJEUROPE_hps_LEFTTopWhatNews
Looters in Loafers
By PAUL KRUGMAN Published: April 18, 2010
Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb “sacks,” as in looting and pillaging. The student replies, “Goldman Sachs.”
Sure enough, last week the Securities and Exchange Commission accused the Gucci-loafer guys at Goldman of engaging in what amounts to white-collar looting.
I’m using the term looting in the sense defined by the economists George Akerlof and Paul Romer in a 1993 paper titled “Looting: The Economic Underworld of Bankruptcy for Profit.” That paper, written in the aftermath of the savings-and-loan crisis of the Reagan years, argued that many of the losses in that crisis were the result of deliberate fraud.
-----We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.
And Goldman isn’t the only financial firm accused of doing this. According to the Pulitzer-winning investigative journalism Web site ProPublica, several banks helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure.
So what role did fraud play in the financial crisis? Neither predatory lending nor the selling of mortgages on false pretenses caused the crisis. But they surely made it worse, both by helping to inflate the housing bubble and by creating a pool of assets guaranteed to turn into toxic waste once the bubble burst.
As for the alleged creation of investments designed to fail, these may have magnified losses at the banks that were on the losing side of these deals, deepening the banking crisis that turned the burst housing bubble into an economy-wide catastrophe.
http://www.nytimes.com/2010/04/19/opinion/19krugman.html?hp
Goldman May Face U.K., German Inquiries After Suit
By Michael Patterson and Tony Czuczka
April 19 (Bloomberg) -- Goldman Sachs Group Inc. faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations.
Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.
Politicians that were forced to bail out their banks during the financial crisis are turning on Goldman, which critics say helped caused the turmoil and profited from it. The European Union is also probing Goldman’s role in arranging swaps for Greece that may have masked the country’s budget deficit.
“We will see politicians throughout the world piling on Goldman Sachs,” said Scott Moeller, a former investment banker now teaching at Cass Business School in London. “Now they have vulnerability. Everyone and anyone, especially politicians, are going to be trying to make hay with this one.”
----- “It looks as if people were misled about what happened,” Brown, who faces a national election on May 6, said on the BBC’s Andrew Marr program yesterday. “The banks are still an issue. They are a risk to the economy.’
Royal Bank of Scotland Group Plc paid $841 million to Goldman Sachs to unwind its position in Abacus, which it inherited when it bought parts of ABN Amro in 2007, according to the SEC. The Edinburgh-based lender is now controlled by the British government after receiving a 45.5 billion-pound ($70 billion) taxpayer rescue, the world’s biggest banking bailout.
The SEC said Goldman Sachs misled investor IKB Deutsche Industriebank AG about Paulson’s role in the trade. Dusseldorf- based IKB lost about $150 million in the Abacus CDO, most of which went to Paulson, which reaped a $1 billion profit in total from betting against the vehicle, according to the SEC.
Legal Steps
IKB became Germany’s first casualty of the U.S. subprime- mortgage crisis in 2007 after its investments in asset-backed securities soured. KfW, Germany’s state-owned development bank, pumped almost 10 billion euros ($13.5 billion) into IKB in 2008 to shore up the country’s banking system.
The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Merkel. “Then we will look at the records and consider possible legal steps.”
Goldman Sachs said in a statement it had provided “extensive disclosure” to IKB about the risk of the underlying mortgage securities. Paulson, which hasn’t been charged with any wrongdoing, said in a statement that it didn’t “sponsor or initiate” Goldman’s Abacus program. The fund said that while it did purchase credit protection from Goldman on some Abacus securities, it wasn’t involved in the marketing.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNSmRVxms8jg&pos=2
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
At the Comex silver depositories Friday, final figures were: Registered 48.85 Moz, Eligible 66.75 Moz, Total 115.60 Moz.
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Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, more on the British whitewash of the climategate scandal.
“Time will bring to light whatever is hidden; it will cover up and conceal what is now shining in splendor.”
Horace.
Climategate: a scandal that won’t go away
From Macbeth to Watergate, it’s not the act that leads to nemesis, but the attempts to 'trammel up the consequence’ , writes Christopher Booker
By Christopher Booker Published: 7:22PM BST 17 Apr 2010
-----Confronted with all those scandals surrounding the “Climategate” emails and the UN’s Intergovernmental Panel on Climate Change, the political and academic establishments have responded with a series of inquiries and statements designed to show that the methods used to construct the official scientific case are wholly sound. But as was illustrated last week by two very different reports, these efforts to hold the line are themselves so demonstrably flawed that they are in danger of backfiring, leaving the science more questionable than ever.
The first report centred directly on the IPCC itself. When several of the more alarmist claims in its most recent 2007 report were revealed to be wrong and without any scientific foundation, the official response, not least from the IPCC’s chairman, Dr Rajendra Pachauri, was to claim that everything in its report was “peer-reviewed”, having been confirmed by independent experts.
But a new study put this claim to the test. A team of 40 researchers from 12 countries, led by a Canadian analyst Donna Laframboise, checked out every one of the 18,531 scientific sources cited in the mammoth 2007 report. Astonishingly, they found that nearly a third of them – 5,587 – were not peer-reviewed at all, but came from newspaper articles, student theses, even propaganda leaflets and press releases put out by green activists and lobby groups.
In its own way even more damaging, however, was the report from a team led by Lord Oxburgh on the scientific integrity of the East Anglia Climatic Research Unit (CRU). Two sets of evidence have been used more than anything else to drive the worldwide scare over global warming. One is a series of graphs showing how temperatures have suddenly shot up in recent decades to levels historically unprecedented. The other is the official record of global surface temperatures. For both of these, the CRU and the key group of top British and American scientists involved in those Climategate emails have been crucially responsible.
Lord Oxburgh himself is linked to various commercial interests which make money from climate change, from wind farms to carbon trading. None of the panel he worked with on his report were climate “sceptics”; and one, Dr Kerry Emanuel, is an outspoken advocate of man-made global warming. Even so, it was surprising to see just how superficial their inquiry turned out to be, based on two brief visits to the CRU and on reading 11 scientific papers produced by the research unit in the past 24 years, chosen in consultation with the Royal Society (which is itself fanatical in promotion of warming orthodoxy).
The crown jewels of the IPCC’s case that the world faces catastrophic warming have been all those graphs based on tree rings which purport to show that temperatures have lately been soaring to levels never known before in history – thus eradicating all the evidence that the world was hotter than today during the Medieval Warm Period, long before any rise in CO2 levels. Best known of these graphs, of course, was Michael Mann’s “hockey stick”, comprehensively discredited by the expert Canadian statistician Stephen McIntyre and Professor Ross McKitrick. But the IPCC was able to defend its case with the aid of another set of “hockey sticks”, based on different tree rings, produced by Mann’s close allies at the CRU.
The most widely quoted of the Climategate emails was that from the CRU’s director, Philip Jones, saying that he had used “Mike’s Nature trick” to “hide the decline”. If there was anything in the CRU’s record which a proper inquiry should have addressed it was the story behind this email, because what it highlighted was the device used by the CRU to get round the fact that its tree-ring data hopelessly failed to show the result the warmist establishment wanted. When their Siberian tree rings showed temperatures in the late 20th century sharply dropping rather than rising, the “trick” used by Prof Jones and his colleague Dr Keith Briffa, copied from Mike Mann’s own “hockey stick”, was simply to delete the downward curve shown by the tree rings, replacing them with late 20th-century temperature data to show the dramatic warming
they wanted.
The significance of this sleight of hand can scarcely be exaggerated. Why, in using this misleading graph, did the IPCC not explain the trick that had been played by its leading scientists? If tree rings were so inadequate in reflecting 20th-century temperatures, why should they be relied on to reflect temperatures in earlier centuries? Why, when fresh Siberian tree ring data came to light, making a nonsense of the CRU’s earlier temperature reconstructions, did the CRU simply ignore the new data?
Anyone who has followed the meticulous analysis of this curious story by Steve McIntyre on his Climate Audit website might well conclude that we are looking here at a complete travesty of proper scientific procedure, matched only by the bizarre methods used by Mann himself to construct his original hockey stick. Yet these are the men, Mann, Jones and Briffa, who acted as the “lead authors” of the key chapters of the IPCC’s 2001 and 2007 reports.
They quite shamelessly promoted the rewriting of history produced by themselves and a small group of colleagues – the so-called Hockey Team – which the IPCC in turn used as its main evidence to convince the politicians that the world faces unprecedented warming.
Yet scarcely a hint of this hugely important story is contained in the Oxburgh report, which simply glosses it over, hoping to appease critics by throwing in a few vaguely critical comments about how Jones and his team were a trifle “disorganised” in archiving their data. It ignores the utterly damning critiques of the CRU’s methodology produced by McIntyre and McKitrick. It does not even begin to question the way the CRU has compiled its global temperature record, relied on by the IPCC as the most authoritative of all the official data sources for surface temperatures.
Yet this in turn has given rise to all sorts of controversies, not least when Prof Jones last year admitted that much of his data had been “lost” (following his repeated refusals of applications to see it by McIntyre and others). More damaging still was the charge by senior Russian scientists that, in compiling its global record, CRU had cherry-picked the data supplied from Russia, suppressing that from most of the country while retaining the data from the vicinity of cities which, thanks to the “urban heat island” effect, showed a warming trend. So even the accuracy of CRU’s temperature record has been called seriously in doubt, although one would never have guessed it from Oxburgh.
http://www.telegraph.co.uk/comment/columnists/christopherbooker/7601929/Climategate-a-scandal-that-wont-go-away.html
“The least productive people are usually the ones who are most in favor of holding meetings”
Thomas Sowell. American Economist.
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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Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
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Below, Mr "straight kind of guy" bets on the UK election.
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