Stick A Fork In It: 10 Year Greek Spread Hits Record 470 bps, 3 Year At 652 bps

The crisis everyone forgot just got worse than ever. And now that European and IMF rescuers are unable to get to Greece by air courtesy of Iceland's floating fiberglass factory, Greek 3 year just hit an all time record wide spread of 652 bps, even as the 10 Year is trading a 470 bps to Bunds or a 7.8% yield. Sorry G-Pap, no more guns or fire extinguishers.

And some more views on Iceland: "What if it spreads to the “big one”? Historically, eruptions of Eyjafjallajökull have often preceded eruptions by the bigger Mount Katla because there apparently are “eruptions channels” between the two. Katla’s last eruption was in 1918. Environmentalists believe that an eruption by Katla could lead to the melting of glaciers and flooding in Iceland as well as greater and more dense clouds down over Europe causing a negative impact on several sectors, particularly agriculture. The Geological office of the U.S. Interior Department says that “ash fall can have serious detrimental effects on agricultural crops and livestock depending mainly on ash thickness, the type and growing condition of a crop."

Daily Highlights: 4.19.10

• Asian stocks fall the most in two months on Goldman Sachs probe.
• China’s currency appreciation may help it to overtake Japan.
• China told banks to stop loans for third-home purchases in cities.
• EU and IMF to discuss new austerity steps.
• European shares lower, airline shares fall.
• Home sales, goods orders probably rose, showing US recovery sustainable.
• SEC, after Goldman, to investigate other firms that may have mislead investors.

The One Last Ethical Bank? Bear Stearns Just Said No To The Goldman-Paulson Scheme, Did Not Pass "Ethics Standards"

Surprises these days come from everywhere: one day we find that some of the wealthiest hedge fund managers are only so thanks to clever schemes involving the enabling of investment banks who have the biggest rolodex of "putzes," finding the last remaining "greater fools" available, another day we discover that a deal that Goldman had no qualms about, was passed on by what may well have been the last remaining ethical bank, Bear Stearns. Greg Zuckerman, as pointed out by Wall Street Manna, in his book "The Greatest Trade Ever" describes Paulson's meetings with Goldman, Bear and Deutsche to "ask if they could create CDOs that Paulson & Co. could essentially bet against. Ironically, it was Bear Stearns that rejected the offer: "[Bear Stearns trader Scott Eichel] worried that Paulson would want especially ugly mortgages for the CDOs, like a bettor asking a football owner to bench a star quarterback to improve the odds of his wager against the team ... he felt it would be improper." Eichel told Zuckerman, " 'It didn't pass our ethics standards; it was a reputation issue, and it didn't pass our moral compass." Sure enough, Goldman et al (allegedly) took down Bear shortly thereafter, and gave it away to Jamie Dimon for pennies on the dollar. In the world of Wall Street, where everyone tries to destroy the dumbest, those who play by some ethical historical rulebook all end up seeing a "run" on their liquidity sooner or later.

Blankfein, Cohn And Viniar Were All Closely Supervising Goldman's Mortgage Unit Operations

One of the most ludicrous claims over the past few days has been that the shady aspect of Goldman's mortgage unit operations began and ended with Fabrice Tourre, as per the SEC's complaint. The NYT's Louise Story has just disclosed the far too obvious: "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." Louise presents a comprehensive analysis of the chronological shift in mood over US real estate among Goldman's ranks, in which it become obvious that the very heads of Goldman were instrumental in making the critical decision to part ways with Wall Street's optimistic groupthink, driven primarily by the input of Goldman salesmen who listened to hedge funds and advised the firm's executives and analysts (coupled with the input of Tourre and Egol) that some of the "smartest" money was turning bearish on real estate as early as 2006.

Guest Post: Goldman's Blueprint For Dumping Toxic Assets: How These CDOs Were Designed To Fail

"Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a 'bet against our clients.'"

That claim, from Goldman's letter to its shareholders,
is easily refuted. The S.E.C. has brought fraud charges on one of
Goldman deals known as synthetic subprime mezzanine collateralized debt
obligations, or CDOs. While most of these deals remain shrouded in
secrecy, one of them, Anderson Mezzanine Funding 2007, Ltd.
lays out its blueprint in sufficient detail so that we can pinpoint how
and why this transaction's failure was never in doubt.

Europe - The Week Ahead: Greece And The Volcano

"And then the Volcano. Needless to say, at this early stage it is very difficult to say anything meaningful about the effect on the European economy, but here are my very preliminary thoughts (surely subject to possibly significant revisions): First, if the disruption to air traffic is contained to a week or less, then I think the total effect will be minimal. My guess would be that the effect on Q2 GDP would be within a rounding error (of 0.1pc) around our +0.8pc qoq forecast. Off the top of my head, air transportation is no more than some 0.1 pc of European GDP, and one would assume that a lot of what's been lost in the air will be made up in coming weeks. Also, ground transportation is having a field day, as illustrated by the fact that all trains out of Florence was fully booked for the next 3 days and none of the car rental companies had cars available for the next 9 days." Erik Nielsen, Goldman Sachs

Eyjafjallajokull Ash Diffusion Indicates Why Europe Is Panicking, 84% Of European Flights Cancelled

Watch volcanic ash diffusion in super slo-mo, as EuroControl reports: "At the current time, air traffic control services are not being provided to civil aircraft in the major part of European airspace. This includes Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, most of France, most of Germany, Hungary, Ireland, northern Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Slovakia, north Spain, Sweden, Switzerland, Ukraine and the UK."