Archive - Apr 2010 - Story

It appears the Democrats at the SEC were hell bent on going after Goldman, even as the Republicans votes against action, in a close 3-2 vote. Some say this is the reason for the most recent surge in the market. As this event has already passed and at this point it will either be settlement (which Goldman has made clear it does not care about) or an actual jury trial, how this disclosure is in any way relevant to move the market is once again beyond us.

In a nutshell, Bernanke says he was not supervising Lehman, Fuld was not aware of Repo 105, and the SEC had never heard of such a concept.The only person who is not lying, Anton Valukas says that he "found Lehman was significantly and persistently in excess of its own risk limits" and confirms that the SEC is nothing but a pathetic liar lead by incompetent idiots: "we found that the SEC was aware of these excesses and simply acquiesced" and "we believe it is clear that the SEC wasLehman's primary regulator." And just in case the FRBNY thinks it can avoid claims of potentially criminal negligence "
Valukas concludes: "there were "serious lapses" in SEC, federal reserve bank of New York working together to avert Lehman's failure." In other the CEO, the Regulators and the deranged money printer all wash their hands of the fraud that very well may have led to the biggest and most dramatic bankruptcy in history, despite that the independent third party arbiter finds them all guilty of gross incompetence and possibly collusion.

"Mr. President, please show the American people the AIG emails. In the wake of the disclosures associated with Friday's government fraud accusations against Goldman, Sachs & Co., one of our nation's wealthiest, largest and most politically well-connected banks, it is inexcusable the U.S. government still refuses to release the thousands of emails that exist between AIG and Goldman Sachs. Unlike the Icelandic volcano, this was no natural disaster. Trillions of dollars have been defrauded from the U.S. taxpayer by a banking scam run by the top 1% of our country." - Dylan Ratigan

FT Alphaville has released the full September 2009 document that Goldman released in defense to the Wells Notice. Amusingly we note that Goldman requested a FOIA CONFIDENTIAL TREATMENT on the submission. That didn't work out too well. We are going through it now, although what is interesting is that Goldman, in defending its own practice with Abacus' (lack of) disclosure, inadvertently throws Merrill Lynch, and Magnetar, under the bus, claiming Merrill's Auriga CDO had comparable parallels to Abacus, which if the SEC finds strong enough in the GS case, it will certainly frown upon when perpetrated by ML-Magnetar. This has lead some to speculate that Bank Of America is likely next on the Wells Notice disclosure bandwagon.

This day is just getting weirder by the minute, as the floodwall holding all the pent-up Goldman inquiries finally breaks. The latest comes from Hugh Son at Bloomberg who informs that Elijah Cummings and Peter Defazio now insist that the SEC should "widen its probe to determine whether securities backed by bailed-out insurer American International Group Inc. were improperly created." And "should any of these transactions be found to include fraudulent
conduct, any resulting contractual payments from AIG- issued
credit-default swaps could be viewed as ill-gotten gains." We'll be happy with Goldman paying back the several billion over and above what the Fed paid it to make its returns on AIG CDS at par. In other words, any profit that Goldman made by buying CDS on AIG, then covering when it knew full well the government would bail out AIG, constitutes insider trading as we have claimed before, and the $2 billion in CDS-related profits on AIG should be immediately refunded.

April 19 (Bloomberg) -- Lehman Brothers Holdings Inc., which has been investigating whether any companies may have contributed to its bankruptcy, issued at least five subpoenas to investment firms and hedge funds including Goldman Sachs Group Inc., SAC Capital Advisors LP, Greenlight Capital Inc. and Citadel Investment Group LLC, according to court filings. Bankrupt Lehman is conducting its own probes separately from the 2,200-page report by examiner Anton Valukas that was published on March 11.

Just like the Hekla eruption caused the Dow to surge in complete disregard of cause and event, or, heaven forbid, logic, so this next news should finally force us to start selling the Dow 36,000 hats. Bloomberg reports that Bundesbank President Axel Weber has told German lawmakers that the €30 billion rescue package promised by the EU and the IMF will not be enough. Just how big will the shortfall be? Well, the recent expansion in the IMF's $50 billion rescue facility to $560 billion should provide some color on the matter. It gets worse: according to Bloomberg, "Weber, citing television footage of Greek demonstrators, expressed concern that sections of the Greek population either don’t care or fail to appreciate the seriousness of the situation their debt-laden country faces, the two people said on condition of anonymity because the briefing in Berlin today was held in private." How quaint - did anyone tell the Greek bureaucrats to look up the definition of the term "austerity" in this whole spectacle? As always, look for the American taxpayers to end up footing an ever greater portion of the Greek bailout bill. That's fine - they won't care: they have the brand new double double KFC burger, a new never to be read book downloaded on the iPad, and the GS witchhunt to keep them distracted, even as their taxes prevent the firesale of Santorini.

Breaking news: The Hekla volcano has erupted.

Count Europe's 2010 GDP a scratch. We expect Katla to complete the trifecta any minute. Iceland's (c)ash revenge will be complete.

Update: Icelandic Met Office says no eruption underway at Hekla volcano according to BNO which reported the original news.

Update 2: It appears the Iceland webcam was pointing at a different volcano according to http://www.aftenposten.no. We will keep you apprised of this situation, although based on seismic readings as we reported earlier, Katla is more at risk for any imminent action

Once upon a time investment bankers were supposed to facilitate capital formation for exciting new businesses. They were trusted advisors looking out for the interests of their investor clients, chaparoning to capital to efficient purposes.

How quant...(pun intended)

Now Wall Street has metastasized into a cesspool of predatory "financial intermediaries" like Goldman, who help predatory financiers like Paulson and Magnatar target suckers and fools in “private placements” of synthetic CDOs to sophisticated idiots. You know suckers and fools like AIG and your pension." - William Banzai

Uh Oh. We will get you more as we see it.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 19/04/10

One has to be living in a cave not to have noticed the recent surge in various earthquakes, tsunamis, violent riots and, recently, volcanic eruptions. This has lead some to wonder just whether the Mayans invented some time-shifting HFT algo to front run the doomsday block orders of 2012. Luckily there is now a convenient way to chart the daily catastrophic events that are happening with greater frequency than various big banks reducing their Non Performing Assets courtesy of Bernanke's vertical curve monstrosity and beating useless estimates (if everything is a buy on a dip due to temporary "disruptions" shouldn't one be really selling everything on the Fed's temporary (one hopes) insanity in unprecedented experimentation with ZRIP and excess reserves?). Hungarian website AlertMap has put together an interactive chart to keep track of all the recent catastrophes and calamities across the globe. And while it does a great job with pretty much everything, we can't identify the highlight over the Marriner Eccles building where the single greatest man-made catastrophe is developing.

Politico has released the Voice Mail that Lloyd's blasted to all employees on Sunday night. In it we read that Lloyd still thinks his firm has a reputation, let along one which must be defended. The most amusing part is where the CEO tells workers to "maintain the level of focus
on our clients" - we assume this means using Goldman's extensive idiot-rolodex, calling up the dumbest of the dumb money and using GS' "brand and reputation" in selling them whatever the most recent version of toxic crap that the smarter money du jour wants to short via Goldman and its second to none flow and prop desk.

With everyone expecting that China will now not be branded a currency manipulator once the delayed Treasury assessment is released in 3 weeks, new developments out of China indicate that the country was merely blowing smoke up the administration in its recent visit to Beijing, by promising the CNY would shortly be gradually revalued. Reuters reports that "Zhao Jinping, the deputy head of foreign trade research with the
Development Research Center (DRC), a think-tank under China's cabinet,
said Beijing was not comfortable enough right now to let the yuan rise
because its export sector had not fully recovered." So much for JPY strength due to a CNY reval. Now the JPY will be strong only because the endless carry trade may be unwinding for other Volcanic/Goldmanic reasons. Also, this certainly looks bad for Obama, as his foreign policy is increasingly perceived as a whole lot of bark and no bite: if Jinping speaks for the broader Chinese establishment (and in China nothing happens by accident) it will be evident that the president is simply incapable of bending our largest creditor to our will... as tends to happen when leverage (literal and metaphoric) is involved.

Recently, David Fiderer posted an informative piece entitled, “Goldman's Blueprint for Dumping Toxic Assets: How These CDOs Were Designed to Fail” in which he outlines certain mathematical points related to Goldman's wholesale creation of toxic CDOs. While these numbers are solid, in the sense that hindsight has shown them to be reckless given what we know now, they omit to consider the full hazard made possible by unchecked groupthink pervading the community of those who want to believe. It is my contention that the mathematics of these CDOs is not necessarily suspect, as he asserted in his piece, when one views those models through the clouded eyes of the real estate optimist, circa 2002-2007. Given the defective assumptions concerning the housing market, made while the boom was in full swing, by those unflinching optimists who wanted to believe, the numbers were not only no cause for alarm, but also, mistakenly showed a certain strength to the toxic pools reflected in the intense demand for these assets by those bullish on housing. The moral of this story is that, while blaming borrowers or greedy investment bankers is easy, and wholly appropriate in many cases, anyone who bought into the delusions of the boom, whether they be a bond investor or a lowly mortgage broker, must also blame themselves for accepting as fact the underlying assumptions which permitted these CDOs to be constructed with little regard towards the real risk of high default rates. For those who failed to see the wreck off in the distance, an introspective mea culpa is required prior to rightfully grabbing their torches and pitchforks in pursuit of the other, more willing culprits.