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From A Former Goldman Managing Director: How You Finance Goldman Sachs’ Profits
- Alan Grayson
- Bank of America
- Bank of America
- Bear Stearns
- Ben Bernanke
- Ben Bernanke
- Commercial Paper
- Comptroller of the Currency
- Consumer Credit
- Federal Deposit Insurance Corporation
- Federal Reserve
- fixed
- Goldman Sachs
- goldman sachs
- Grayson
- Jamie Dimon
- JPMorgan Chase
- Lehman
- Lehman Brothers
- Lloyd Blankfein
- Merrill
- Merrill Lynch
- Morgan Stanley
- New York Times
- Office of the Comptroller of the Currency
- TARP
By Nomi Prins, via Mother Jones
July 28, 2009 -- This is perhaps the most important thing I learned over my years working on Wall Street, including as a managing director at Goldman Sachs: Numbers lie. In a normal time, the fact that the numbers generated by the nation's biggest banks can't be trusted might not matter very much to the rest of us. But since the record bank profits we're now hearing about are essentially created by massive federal funding, perhaps it behooves us to dig beneath their data. On July 27, 10 congressmen, led by Rep. Alan Grayson (D-Fla.), did just that, writing a letter to Federal Reserve Chairman Ben Bernanke questioning the Fed's role in Goldman's rapid return to the top of Wall Street.
To understand this particular giveaway, look back to September 21, 2008. It was a frenzied night for Goldman Sachs and the only other remaining major investment bank, Morgan Stanley. Their three main competitors were gone. Bear Stearns had been taken over by JPMorgan Chase in March, 2008, Lehman Brothers had just declared bankruptcy due to lack of capital, and Bank of America had been pushed to acquire Merrill Lynch because the firm didn't have enough cash to survive on its own. Anxious to avoid a similar fate, hat in hand, they came to the Fed for access to desperately needed capital. All they had to do was become bank holding companies to get it. So, without so much as clearing the standard five-day antitrust waiting period for such a change, the Fed granted their wish.
Bank holding companies (which all the biggest financial firms now are) come under the regulatory purview of the Fed, the Office of the Comptroller of the Currency, and the FDIC. The capital they keep in reserve in case of emergency (like, say, toxic assets hemorrhaging on their books, or credit derivatives trades not being paid) is supposed to be greater than investment banks'. That's the trade-off. You get access to federal assistance, you pony up more capital, and you take less risk.
Goldman didn't like the last part. It makes most of its money speculating, or trading. So it asked the Fed to be exempt from what's called the Market Risk Rules that bank holding companies adhere to when computing their risk.
Keep in mind that by virtue of becoming a bank holding company, Goldman received a total of $63.6 billion in federal subsidies (that we know about—probably more if the Fed were ever forced to disclose its $7.6 trillion of borrower details). There was the $10 billion it got from TARP (which it repaid), the $12.9 billion it grabbed from AIG's spoils—even though Goldman had stated beforehand that it was protected from losses incurred by AIG's free fall, and if that were the case, would not have needed that money, let alone deserved it. Then, there's the $29.7 billion it's used so far out of the $35 billion it has available, backed by the FDIC's Temporary Liquidity Guarantee Program, and finally, there's the $11 billion available under the Fed's Commercial Paper Funding Facility.
Tactically, after bagging this bounty, Goldman asked the Fed, its new regulator, if it could use its old risk model to determine capital reserves. It wanted to use the model that its old investment bank regulator, the SEC, was fine with, called VaR, or value at risk. VaR pretty much allows banks to plug in their own parameters, and based on these, calculate how much risk they have, and thus how much capital they need to hold against it. VaR was the same lax SEC-approved risk model that investment banks such as Bear Stearns and Lehman Brothers used, with the aforementioned results.
On February 5, 2009, the Fed granted Goldman's request. This meant that not only was Goldman getting big federal subsidies, but also that it could keep betting big without saving aside as much capital as the other banks. Using VaR gave Goldman more leeway to, well, accentuate the positive. Yes, Goldman is a more risk-prone firm now than it was before it got to play with our money.
Which brings us back to these recent quarterly earnings. Goldman posted record profits of $3.4 billion on revenues of $13.76 billion. More than 78 precent of those revenues came from its most risky division, the one that requires the most capital to operate, Trading and Principal Investments. Of those, the Fixed Income, Currency and Commodities (FICC) area within that division brought in a record $6.8 billion in revenues. That's the division, by the way, that I worked in and that Lloyd Blankfein managed on his way up the Goldman totem pole. (It's also the division that would stand to gain the most if Waxman's cap-and-trade bill passes.)
Since Goldman is trading big with our money, why not also use it to pay big bonuses? It's not like there are any strings attached. For the first half of 2009, Goldman set aside $11.4 billion for compensation—34 percent more than for the first half of 2008, keeping them on target for a record bonus year—even though they still owe the federal government $53.6 billion, a sum more than four times that bonus amount.
But capital is still key. Capital is the lifeblood that pumps through a financial organization. You can't trade without it. As of June 26, 2009, Goldman's total capital was $254 billion, but that included $191 billion in unsecured long-term borrowing (meaning money it had borrowed without putting up any collateral for it). On November 28, 2008 (4Q 2008), it had only $168 billion in unsecured long-term borrowing. Thus, its long-term unsecured debt jumped 14 percent. Though Goldman doesn't disclose exactly where all this debt comes from, given the $23 billion jump, we can only wonder whether some of it has come from government subsidies or the Fed's secret facilities.
Not only that, by virtue of how it's set up, most of Goldman's unsecured funding comes in through its parent company, Group Inc. (Think the top point of an umbrella with each spoke being a subsidiary.) This parent parcels that money out to Goldman's subsidiaries, some of which are regulated, some of which aren't. This means that even though Goldman is supposed to be regulated by the Fed and other agencies, it has unregulated elements receiving unsecured funding—just like before the crisis, but with more of our money involved.
As for JPMorgan Chase, its profit of $2.7 billion was up 36 percent for the second quarter of 2009 vs. the same quarter last year, but a lot of that also came from trading revenues, meaning its speculative endeavors are driving its profits. Over on the consumer side, the firm had to set aside nearly $30 billion in reserve for credit-related losses. Riding on its trading laurels, when its consumer business is still in deterioration mode, is not a recipe for stability, no matter how much cheering JPMorgan Chase's results got from Wall Street. Betting is betting.
Let's pause for some reflection: The bank "stars" made most of their money on speculation, got nearly $124 billion in government guarantees and subsidies between them over the past year and a half, yet saw continued losses in the credit products most affected by consumer credit problems. Both are setting aside top-dollar bonuses. JPMorgan Chase CEO Jamie Dimon mentioned that he's concerned about attracting talent, a translation for wanting to pay investment bankers big bucks—because, after all, they suffered so terribly last year, and he needs to stay competitive with his friends at Goldman. This doesn't add up to a really healthy scenario. It's more like bad déjà vu.
As a recent New York Times article (and many other publications in different words) said, "For the most part, the worst of the financial crisis seems to be over." Sure, the crisis may appear to be over because the major banks of Wall Street are speculating well with government subsidies. But that's a dangerous conclusion. It doesn't mean that finance firms could thrive without the artificial, public-funded assistance. And it certainly doesn't mean that consumers are any better off than they were before the crisis emerged. It's just that they didn't get the same generous subsidies.
Additional research by Clark Merrefield.
Article From Mother Jones, h/t amsterdamtrader
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Very provocative, especially coming from an ex GS Man. GS is going to poison his dog or something for going rogue on their sorry asses
What a bunch of dirty rotten freekin thieves.
Makes me ashamed to be an American anymore,,
Excellent article and kudos to Nomi Prins for having the stones (registered trademark of a GE sub, I think) to produce this article.
This is called having the greatest margin account in the world. I would love to be able to sell 1 futures contract then keep multiplying the position every ten points on the way up without regard for how much I was down.
little 'rich' - why not add several zero's at every point
Apocalypse Now-
I liked reference of the Henry Waxman cap & trade bill - Do you think he is a tool of the pig bankers?
http://newsbusters.org/blogs/mitchell-blatt/2009/07/01/henry-waxman-ques...
Check out this picture, then let me know!
Oh, and one other thing Samuel L. Jackson would like to say...
I've had it with these mother fuckin snakes on this mother fuckin plane!
the financial crisis is over for the banks - they have direct access to the printing presses - Roubini, Taleb, Rosenberg and others saw the crisis coming and sounded the alarms ever louder as the September/October climax approached. My question is who are the new Roubini's out there who are predicting what is next - (not to be presumptuous but he and the others who called the crisis totally and completely missed the recent rally and have come late to the party with diluted predictions). So what is next and who is the guru that we perma bears can follow?
I still think Schiff, Faber, Pento, and a few others are right on - we are going to have a currency collapse. History, that is, the history of fiat currencies, is on their side.
anyone here subscribe to Shilling? I what he's saying these days?
agree that Faber was pretty good at calling both the crisis and the rally - maybe I should subscribe to him
Shilling is saying the s&p will drop to 600. I don't know, though he does have a decent track record. Personally I think he underestimates the power of free money from the Fed.
http://www.businessinsider.com/henry-blodget-gary-shilling-still-filled-...
thanks
Better do your own research.
I think Bill Bonner over at the Daily Reckoning is worth a look. He saw the bust coming and the recent rally, now he is seeing another bust again. He has never stopped calling this a depression and he is sticking to that. Generally its hard to fault his logic, he keepos things simple and its the simple views that are usually the most elegant.
As far as I am concerned his outline for the crisis has been pretty much spot on. He sees dow 10 000 in this suckers rally before we start turning down again.
These traders, especially at Goldman, they must know something in order to have increased their VaR. They aren't gamblers, they are traders, amongst the best in the world. They don't haphazardly increase risk without having an edge. It's simple game theory, which means their edge must be pretty fucking significant in order to have increased their VaR from $180 million in 2008 to $240 million. They definitely know something we don't.....
Yeah, unlike the rest of us, they know that if they blow up they can get more money. It really is that simple.
I think you are right - the precendent has been set, they can always get new money.
Like the handle, btw.
u'd like it in yer azz...
It's not a matter of personal preference anymore. It is what it is. Lube up, we will get into deeper trouble if we let the shenanigans on Wall Street stay.
I think, like many others do, that GS has gotten an implicit "ok" from the government (much like Bernanke's and Paulson's implicit "suggestion" to Lewis to not disclose the Meryl losses) to bring this market up by any means necessary. It's in the government's best interest to have this market back over 1000, and the best way is to let the hedge fund traders juice the market with any tricks they have available. The knowledge that the SEC won't investigate anything unscrupulous means that these government-protected entities can do whatever they want, which is why they can afford to increase their VaR so drastically. They can do it because they know they can bully this market around and make it do what they want.
You mean their front-running trades? Or that they have a large enough share of the trading volume to be able to control the overall direction? Or a bit of both?
And maybe most importantly, they can go to the window for more free cash.
Imagine if you decided to sell the S&P at 970, then double down (or up if you will) at 980 and then double that position again at 990 and so on without fear of margin calls or running out of cash.
To me this is what GS and others have at their disposal as a result of the sweetheart deals they made while the world was coming to an end last year.
I can't really get pissed because 1, I wish I could do it, 2, I know I can't count on the Congress to do anything about it because they are eating the whole bullshit line about "If we didn't do it the world would have ended" and 3, I'm not ready, willing, and able to drive a truck load of fertilizer down to their offices to prove my point.
Hey Tyler,
What happened with the "The Debt Bitch" this morning? Just wondering?
Look up and left. Also, she can be found on our contributors page.
HELLO! Thanks.
Can I get $10 billion from the Fed at 0%? I will buy futures and try to convert it to $20 billion and pay myself a $10 billion bonus. If I cannot, oh well...
TD
I applaud your work, it is people like you who make the world a better place in the face of such evil self centred greed.
Thank you most sincerely
That is a mutherfucking outrage. These clowns are going to go tits up again (probably soon with the CRE collapse in progress) and we are going to be left holding the bag. Fuck you Ben!
CRE won't bring them down, since BB will just print them more money.
You want change? It all starts with HR 1207 and S 604.
Otherwise, the funny money printing just continues, and those closest to the source benefit most. It is always the way in a fiat currency system.
Big cheating.
All the Reps and Senators should be FIRED for this outrage. They are either complicit or have been had to the point of criminal negligence/incompetence. Heads need to start getting separated from shoulders!!!
Never before in all of human history have so few robbed so many of so much.
It is pathetic to be an American in 2009.
The Reps and Senators had little say in the matter. Note who really bailed them out - the Fed. Where did the AIG money come from? The Fed. Who took on the BSC bad assets? The Fed.
That is where your anger should be directed, not the elected reps. The have little to no power. I laugh everytime Barney Frank announces some new initiative - like the House is ever going to lead change against the banksters. That idiot is delusional.
Humbly: a) I know. b) All the Reps and Senators are CULPABLE at this point for NOT doing anything to stop this. Anyone in the House or Senate who did NOT ACT to stop it with maximum authority and effort over the past 6 months is now an ACCOMPLICE by any rational measure.
True, they are accomplices, but unwitting ones. I doubt many understand how the Federal Reserve system really works, though it appears they are waking up (how many co-sponsors does HR1207 have?).
If the Senate shoots down S 604, you will have real grounds for anger. That would be nothing short of pure contempt for the American people.
278 co-sponsors as of last week-----call your friggin senators and congress wienieeeezz-----confrontation via voice is getting into the front yard--do it.
witting or unwitting the reps in congress are
crooks and traitors.....it is their job as
representatives to attend to the people's
business - in this case the protection of
money and vital interests.....
most of them however, especially the likes of
waxman, frank, schumer, rangel, dodd, peolosi,
reid were wantonly and maliciously involved
in carrying out orders for goldman sachs....
ignorance carries about as much weight as a wet
bikini on rerun's fat ass.
It's part of the fucking job description to know what the fuck you're doing. Don't give me this bullshit that they are unwitting accomplices. What a crock of shit that is.
Mazarin - "Never before in all of human history have so few robbed so many of so much." - What about Russia, Hitler, name your favorite dictator.
The author is Nomi Prins... this "ex GS Man" with "stones" happens to be a very attractive woman. Ever heard of Google?
GREAT freakin' point and apologize Ms. Prins.
http://www.motherjones.com/files/legacy/toc/2007/11/nomi-prins.jpg
Your work, like TD's, shining light on these Compensated Psychopaths rocks nonetheless:
"Goldman's CEO, Lloyd C. Blankfein, bagged a record bonus last year of $67.9 million, including $26.8 million in cash. That amount was nearly double the $38 million that Hank Paulson made at the firm in 2005, the year before he became the treasury secretary."
I feel like a bigger and bigger sucker every day for settling for making an honest buck... but many thanks to you both.
Perhaps he can do something "for good" by becoming the next TSecretary and not pay any taxes, or the CFTC or SEC...no I guess all of those positions are filled at the moment with GS folk....where can they put him ????HMMMMMMMM
I used "stones" originally in this thread and from my viewpoint, it is an asexual term.
Meh, I gives a damn if the author is male or female. She is The Man for writing this article. Being attractive is merely an enjoyable distraction
Why would they not want to pay off their debts instead of paying out bonuses? What interest rates are attached to these loans? I think Buffet got 10%.
Seems one lot of speculating, sub-prime seems to have been replaced by another even worse scenario.
At least sub-prime problems moved very very very very very (add lots more because houses don't move much) and submit HFT in less than a second to go wrong and what do you have?
This bubble being blown on yet again more cheap FED credit is going to blow up faster and explode with consequences that will destroy everything.
Yet again the FED intervene with too easy money.
What do savers do? They can't save. People who have been prudent for years are punished yet the banksters still get their bonuses.
As the volume of easy money increases, bubbles will get larger. LTCM --> dot-com --> subprime. Every time there is a bailout, the newly printed dollars end up disproportionately in the hands of the banksters, who use it to fund another bubble.
Ultimately it will lead to collapse.
That may be true, but when you include credit as money, the money supply is going to probably continually decrease going forward. The housing bubble was the last one for a while. This current rally is just a dead cat bouncing, and it's about to drop back to the pavement again very soon, anyway.
Why is credit going to contract? Look at the Cash for Clunkers program, sold out in 4 days. Americans are not going to lose their taste for credit, and banks aren't going to cut them off, because they need each other.
Classic three card Monty.
Nomi Prins, the author of this excellent article for Mother Jones has a new book coming out and a bunch of other great coverage on MoJo:
Book: http://www.amazon.com/Takes-Pillage-Bailouts-Backroom-Washington/dp/0470...
MoJo dish: http://www.motherjones.com/authors/nomi-prins
Wow, I was under the impression---having been told it repeatedly---that GS people are just smarter than everybody else. Well, let me see....if I got $12.7 billion from the AIG bailout, plus the $6 billion I forced out of AIG so that the taxpayer had to buy the carcass, plus a temporary gift of $10 billion known as TARP, plus $191 billion in unsecured debt, some from the Friendly Reserve Bank, plus the Fed was buying my CP and taking MBS' off my books way above market, plus I got $29.7 billion from FDIC's TLGP, plus enough clout so that I could get five minute service on my BHC application, plus I had co-located servers with the various exchanges, plus I had paid a fee for a "look-see" on incoming orders, plus my debt was guaranteed by the taxpayer, plus i got an exemption on permitted risk levels.........I guess I could make some money even in a zero interest rate environment.
Now 300 million Americans are standing behind the partners of Goldman, ready to absorb their losses, so that these annointed few can live a life far above what most Americans can dream of---and then have to tolerate the supreme arrogance of these freeloaders who actually think they have talent.
Guys and gals at Goldman: Paul Jones has talent. You guys just have a sufficient lack of conscience and an overabundance of self-absorption to think putting the taxpayer at risk solely for your own benefit is your right. Well, when a few of your heads are on a stick at the entrance of 85 Broad, you will be singing a different tune.
The drums are beating; the knives are being sharpened. Can you feel the hate growing?
Please remember the structure that premised much of this AIG/GA money to begin with was the evolution of the side letter into a CDS.
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=351
They feel the hate, that's one of their motivators.
Goldman Sachs is a CRIME SCENE. Assets should be frozen under RICO. Audit of all trades going back at least 10 years should commence. All Sr. Officers and Managing Directors should be arrested as Treasonous Enemy Combatants and held under arrest indefinitely until Audits are concluded.
That will never happen. a > $1M in campaign contributions guaranties that they are untouchable. Have you hear any comments from Obama on the bonus issue? Total silence speaks louder than anything else
I want to see these parasites paraded out of 85 Broad in leg irons, dammit.
Who is John Galt? Blame the sheeple for ignoring the wolves at the edge of the meadow. Sheeple don't fight - they become lunch? Did you just hear GS burp? How rude!
Well-said Anonymous #20059 - They are not so smart, just so without conscience. I am sure vampire squids are quite clever while ensnaring their prey also, just not as enterprising as GS, as squids only kill what they need to eat.
I don't think GS is motivated by us hating them, they are in a bubble themselves and just think they have earned what they get. They do not inhabit the regular world of poor and middle-class people.
They think: “Nobody else works this hard or this smart, we deserve this. The raw beauty and power of capitalistic "free" markets and all the "innovation" and "efficiencies" modern economies bring to the common man would be doomed without our greed, strong-man monopolistic, parasitical, corrupt ways and if our prowess at cronyism and manipulation was not defended, promoted, and idolized at all cost. The scummy skim we take from the investors and taxpayers is a small price for the little people to pay for our invaluable services to the U.S economy.”
Goldman is SCUM! This is detestable!
When the government fears the people, there is liberty. When the people fear the government, there is tyranny.
Thomas Jefferson
I ain't scairt.
The US is the most corrupt country in the world. Spending 27 trillion to enrich goldman sachs and aig. And obama is enabling the whole process. But this is not the worst. Obama is planning massive military attack on Iran within the next 30 days. Obama has a hatred for the middle east peoples and is fulfilling his Stalinist mentality. death camps to follow.
I would say, based on the sheer size of the corruption, you are right.
you are a moron!
Here is one of the major these exposed as fallacy: American business schools are the bestin the world. How then did they manage to lose trillions of dollars? They bought into the Kool-Aid.
whats kool-aids ticker? probably only company that will sl show Q2 top line growth
Thank you Nomi Prins / Thank you Tyler Durden / Dankjewel amsterdamtrader.
I thank Mother Jones first.
A Senate panel seeking evidence of fraud tied to last year’s mortgage crisis has issued subpoenas to financial companies including Goldman Sachs Group Inc. and JPMorgan Chase & Co., said U.S. Senator Tom Coburn, a Republican from Oklahoma.
http://www.bloomberg.com/apps/news?pid=20601110&sid=abVd1xu2lcbk
Ben Bernanke and Hank Paulson should be scrubbing Madoff's toilet.
Goldman Sachs is a part of the Neo Fascist Mussolini business model. The US is a failed State destined for 3rd world status Andy Xie is a former colleague of Stephen Roach at Morgan Stanley, and now a board member of Rosetta Stone Advisors. He is an Asian financial expert. He believes the USFed is locked in a tight corner, while the investment community suffers from a massive blind spot. He wrote, "The United States has no way out but to print money. Dollar weakness reflects the market's wavering confidence in the Fed. If the wavering continues, it could lead to a dollar collapse. Markets are trading on imagination. The world is setting up for a big crash, again." Contrast with a comment made by Jeffrey Immelt, the CEO of General Electric. He believes the US should take a cue from the Chinese, who are growing fast, invest in industry, and make things. Wow, what wisdom! So the great financial engineering movement promoted by Greenspan and Wall Street mainly produced big bond fees and a wrecked banking system. Yes, without any equivocation or doubt, tragically. The financial engineering devices were based upon innovation in leverage and fraud without benefit of tangible production, serving as the vast illusory machinery atop a gigantic system totally dependent upon inflation. It imploded. Another alternative exists, beyond Xie's radar. In addition to hidden monetization will come issuance of USGovt bonds outside the US$ Sphere. When the news breaks, it will hit like a tsunami. MONETIZATION BACKFIRE Talk is everywhere one turns that the USGovt has little recourse but to print money and cover their debts. Such moves shift the risk from the USTreasury Bond to the USDollar in clear fashion. The Chinese Govt and Bank officials have been extremely vocal in the last few months, especially in the last few weeks. They abhor and are angry at both the rising USGovt deficits and the rising risk from direct monetization of those deficits in debt issuance. One could fill an entire page with warnings by the Chinese against American profligacy, reckless policy, and more. Every week contains major news wire stories, which do not receive proper attention in the US financial press. The Chinese are noticing even more dangerous developments, such as ineffective official stimulus, unproductive rescue of dead banks, endless credit derivative covered costs (AIG and Fannie Mae), entirely new programs with staggering price tags (health care), refused disclosure of disbursed Congressional funds, and tremendous waste, all of which not only result in gargantuan government deficits, but add risk to the USDollar from a failure standpoint. The criminal angle is increasingly being discussed in the open. Goldman Sachs has exposure from Ultimate Insider Trading software tools that were stolen, now being torn apart in London and Germany for evidence discovery. Perhaps worse, the US Federal Reserve is under challenge by the US Congress (in charge of its contract) for disclosure and audit that could eventually reach the US Supreme Court. The Chinese are in town to meet with the USGovt officials on continued debt support. The public will surely NOT be told what is discussed. One informed contact wrote this morning that the US lies as a terminal patient in the Intensive Care Ward, and seeks a death with dignity from its Chinese creditor doctors.
There are many 'third world' nations without any major debt. It is the 'first world' nations that have debt at 90% of their GDP or beyond. If being a rich country means getting more into debt, then I think that definition has to change. Checkout the debt load of BRICJ countries. I include Japan in this too as they are net creditors to the first world.
Yes, and Japan is also deep in debt; they don't balance their annual budgets, either. It's like I have a great investment portfolio so I go and max out all my credit cards. Then my investments go bad -- I'm broke. When Japan's dollar position goes up in smoke, they will really be broke.
I would like to believe you, but so far all the Chinese have done is bitch and moan and do not a damn thing about it.
We own them as much as they own us.
The Chinese government is scared to death that the US consumer has started to save in great quantities. That's not good for their mercantilist export agenda. Real unemployment in China is more than twice of what it's reported and it's not getting better. If you want to see a revolution, start looking at what is happening in China.
Great rant (in a good way). I'm out of breath just reading it.
Do you mind if I use it as the signature on all my comments?
Roach was recently on Bloomberg? I believe panning the green shoots.
I'm sure the interview can be found.
yes yes yes , but what the dollar bears dont seem to understand is that it is King of the Fiats. Without Gold or oil making a massive leg higher , what else is the dollar going to devalue against? The euro? The gbp? The yen?
Please.....
There is noway GS will ever be kicked out of the loop because they are the hedge fund/ money laundering/ bank of the Bilderberg Group. This group controls what goes on and down in the financial world and there is no rival power that can stop their agenda. All things happen to and for their benefit. GS is just one of their vehicles for manipulation of the worlds financial markets, Obama is their latest loudmouth puppet on a stool and distraction is the way they maintain their control. The US Federal Reserve and other central banks around the world are controlled and directed by this Group who sets global financial policy. It's all a set up, so best not to fight it but to join them and go along for the ride. None of us or all of us put together will not change things now as they have too much control. The US Govt is a joke, they just do what they are told. Ever wonder why Obama is on TV every day... DISTRACTION, DIVERSION, DECEPTION!! Keep the people entertained and brain dead.
Never underestimate a desperate and fully pissed off mob of people. If it comes to that point, well, I think there will be desperate and fairly pissed of mobs of Americans all over the states. I hope we don't see it go down that route, but honestly, the kind of people that existed in the 30s are not the kind of people that exist today in America. I think we could see, if not revolution, some serious rioting. I hope not, I hope this shit gets resolved in the upcoming elections... but I also hope that China doesn't decide to bail on the US ("You want to inflate your way out? Ok let us help you...")and I also hope that my long list ends up well... but who knows at this point. Honestly, I am so sick of getting hammered from the underground with imminent collapse of the US economy and then listening to the mainstream tell me all day how green my garden is starting to look... that I'm burnt out... I just don't care anymore...
Perhaps Soundgarden said it best: Blow up the outside world.
Just sick of it.
Bah Bah - you wuss!
Just wow.
Blow, man blow. We can fix it... this won't end well. Might be 5 yrs., but it won't end well.
Obama is history.
What has Obama got to do with GS ? GS is a crook in its own right. They have perfected the art of swindling the taxpayers over a century. Republicans and Democrats have equal hand in letting this continue thus far.
Obama is Goldman Sachs whore, Dude...just like Bush before him. Have you not been paying attention?
Blame both parties, not just one for the mess.
What are you all talking about? Goldman Sacs is at this point pretty much the U.S. government - the GS entities are the firewall to keep all of you less intelligent people in the dark. Try to keep up with me you small minded fools.
Obama may be a GS whore, so what was Paulson??? The GS pimp? is that a moral, better thing? It is in GS' interest for us to see this thru political idealogue eyes, that way we are always blaming the other party when that party is in power, rather attacking corruption wherever it exists, in any party.
The contemporary politicians of this country are bumbling fools. Not the great souls that founded this nation. Every single one of them (except a handful who demand accountability) is a scoundrel.
Yeah, that about wraps it up, well said.
...the slave-owning, native american-slaughtering "great souls" who founded this country, you mean? that post started off so well. don't drink the kool aid from junior high school history textbooks
... slave owning... just like the rest of the freaking globe at the time by the way... native-american slaughtering... oh that hadn't happened anywhere else in the world or ever or still today, a technologically advanced culture exploiting a less advanced culture... yeah, only the founding fathers did that.
Grow the hell up. The founding fathers set up a government that lasted over 200 years... a pretty mean feat. That it was dependent upon a virtuous and god-fearing population is why we are burning out now.
That reminds me that those native Americans did a nice job killing and enslaving each other as well.
That still doesn't make the founding fathers "great souls". America was born a spinoff of the British empire, A British Empire 2.0 if you will.
The contemporary citizens are the real bumbling fools - they elected them and most still think of them as their savior. It will need to get much worse (S&P 200) before the brain dead zombies realize they have nothing to eat.
U.S. founding fathers both committed genocide, enslaved people and also formed a government and a constitution that provided the mold and ideal of liberty for the next 200 years, for both US citizens and many other people of the world.
That crazy-making contradiction has exhibited itself over and over again in US history, including the civil war, because the US was built on two foundations of disparate materials: the ideals of equality/the right of people to govern themselves and also the right of one man to profit from the forced theft of land and labor of another man.
The U.S. constitution has been used to say African slaves were 3/5 of human and could be kidnapped, imprisoned and forced to labor for life and also by many to aspire to, and achieve, democractic rights.
At times U.S internal markets have been a beacon of democratic free, fair and entrepreneurial markets compared to moribund central planned economies and corrupt crony bribed-up banana republic bureaucracies. The U.S. also has been a brutal imperialistic power using the full force of the government and its military to invade and ruin countries, such as in So Am and Caribbean, purely for the profit of favored corporations.
U.S. constitution has also been a beacon of equal rights for previously oppressed groups acheiving equal consideration under the law, while Americans have also exterminated Native Americans, and lynched African Americans and contine to discriminate against many types of people.
Having said that, I don't mind someone appealing to the best ideals of the founding fathers and the US constitution while fully realizing that most of them were horribly flawed and failed to see the liberties they agitated for were everyone's rights.
If only we held our US constitution in informed esteem and vigilantly defended its adherence, while also constantly working for a more perfect union...I sincerely believe we would be much better for such reverence to the constitution, not the worse for it.
No selfish corrupt imperialistic greedy politicians or corporations hold up the U.S constitution as a laudable ideal and nor due the promote the economic ideals the fairer and freer home-grown, locally beneficial markets of the emanicpated American colonies that shrugged off the domination of the British regime supported crony-istic monopolistic businesses. Instead, corrupt selfish ones try to ignore, bury, or subvert the constitution. Why do we have our kid's pledge allegiance to the flag (the home team colors with malleable meaning) rather than the constitution - the contract binding our nation, that which constitutes us.
America cannot exist without leverage speculation. Besides entertainment it is the only way to earn large profits. If GS and the rest are not allowed to help inflate financial assets again America is doomed. Listen, the administration and the Fed know this score. They hold their noses and do it because there is no alternative or rather the alternative is the end of life as we know it.
Everyone here should acknowledge they too benfit from the path taken during our dilemma. In the choice of the devil or the deep blue sea we chose the devil.
when exactly will i benefit???
"America cannot exist without leverage speculation. Besides entertainment it is the only way to earn large profits."
umm, how about maybe -- oh, I don't know -- MAKING?STUFF?
"If GS and the rest are not allowed to help inflate financial assets again America is doomed. Listen, the administration and the Fed know this score. They hold their noses and do it because there is no alternative"
As Max Keiser would say, you seem to have Stockholm's Syndrome and have fallen for your captors...he suggests that the govt. could have paid off every underwater mortgage in the US for the same amount they've blown on the banks. gimmie a break with that "they have no alternative but to rape the American public repeatedly" crap.
I was using a voice laced with disgust and sarcasm. That sort of thing doesn't come through in this sort of forum. Let me try to put it a different way. Those things are a crude sort of summary of what a good portion of our elites feel. They might not think of it in exactly those terms.
I too believe they all know the score. They could however, be a little less fuckin obvious.
Yes pump it back up, we all know that's part of the prescription, but places like GS need to stop with the bullshit about how they EARNED the big bonuses and how without the ability rape and pilage the village would collapse.
rapier:
Bullshit.
Nothing could possibly help our country more than disbanding Goldman, except throwing out all the bums in our government and overthrowing the Fed.
The problem is that our system is so fucked that we have to just start over.
Soon.. spreading money around the world to banks and their cronies will not be enough..... "We need to take it directly to the people!". "We will have secret drops from the sky to spread it evenly for maximun benefit, because that is how the impartial Fed operates".. Driving one day, in a remote cornfield, I see a helicopter dropping money with hundreds of GS employees underneath. "Wow",I think to myself "that must be some algorithm to be able to predict that..."
But we have transparency. GS's government force field is completely see through.
this article ranks with the end of the end of the recession for quality and worthiness....
monde cane
Great article. One question - who the heck are Group Inc? First I've heard of them. Sounds like some shadowy corporation from the likes of the X-files or Buffy the Vampire Slayer
That was a typo.
It's really "group think"
I think everyone here should start up a bank holding company and use that status to borrow billions from the fed window at 0% and bet it all on the market. If you make money..then good for you. If you lose, then try to borrow more to cover the loses. If the fed catches on that your insolvent then declare bankruptcy and simply walk away--assuming you didn't borrow too much--in that case you might be deemed to big to fail and granted even more money. What a great system we have.
If your new bank holding company wanted to make a safer bet then simply plow those billions into treasuries. It seems crazy that the fed would loan out billions to a bank only to have that bank loan those funds to the treasury department and collect the premium. The fed could have just given the treasury the money and wrote a big fat check to the banks for nothing. It's just another round about giveaway to the banks of taxpayer money. Did I mention what a great system we have
Dream on. Only a handful of bank holding companies got money. There are plenty of decent bankers who have seen their FDIC premiums go through the roof to fund this bullshit. Many of them have done everything right and they won't make it because they are being robbed too. This is simply the government in bed with a handful of companies who, as others have posted, probably all run around nekkid at the Bohemian Grove and bow to that stupid ass owl, Moloch. I can't believe we let these asswipes bankrupt our country. I can't fucking believe it.
Premiums shooting up for the banks that had nothing to do with it, interest rates to zero for people who saved, taxes into perpetuity for those yet unborn, and not a single new bank license granted to a solvent individual or group (since they could run the wounded like C and BAC into the ground). Heaven forbid something quaint like competition.
But record bonuses for the guilty.
Could someone please tell me where I can get an application to become a bank holding company. I want in.
Please, will someone kindly throw a real, physical rock or brick at Goldman Sachs' facade on State [sic?], or at least some real, physical rotten eggs? The revolution has to start somehow. I'm sure that, between us all, we could pony up sufficient funds to help out the individual if/when s/he gets caught. Anybody feel like becoming a folk hero overnight?
I can't take the risk (not a citizen; don't live in NYC anyway).
They are stealing the money from somewhere. The question is, who are they "trading" with and taking that money from.
In other words, they have been feeding off the bears for a long time.
I have a hunch this is going to reverse itself in a pretty hard way. Controlled bursts down. Then recoveries. Those buying the dips may be in for a surprise.
I don't know if the powers that be will ever allow 666 to get broken, but this might head back to the 700s.
I have a question:
Does anyone really know, or have any idea, what Goldman, or Group INC, or whomever's true leverage ratio is?
Group Inc. The full name of Goldman Sachs is 'The Goldman Sachs Group Inc'. Is there a parent called Group Inc for 'The Goldman Sachs Group Inc.'. What The Fuck
I am also angry that I am not reaping the rewards like GS executives. I too am angry that I cant trade this one way directional market. I'm pissed HFT firms front run my orders. I'm pissed about all of the fleecing that has gone on, BUT I tend to think that they do deserve big bonuses. They kept their companies prosperous when they were on the brink of failure, not just alive, prosperous. They made strong moves and pulled spectacular maneuvers that most people couldn't imagine in order to do so. Like the movie The Shawshank Redemption, they crawled through a river of shit and came out clean on the other side. They protected their share holders unlike LEH or BSC. This makes them VERY valuable to the marketplace. This makes them worth lots and lots of money to the marketplace. This means they deserve those big bonuses. The smart and calculated will always prosper from the less intelligent masses. I do not agree with their methods and I feel they are not ethical or moral people, but ethics and morals are not rewarded in the marketplace, shrewdness, greed and intelligence is rewarded. So as the saying goes Dont hate the player, Hate the game. If you wanna raise hell, go after the FED and other officials that let it go down this way. That is who is guilty, The banksters were doing what they are supposed to do. What captains at the helm are supposed to do, protect the ship.
That's certainly one way of looking at it. "Succeed" at all costs--never mind that the costs are borne by somebody else. If Capone had the access to power and the ability to make the rules that GS does, he surely would've died in nicer accomodations than Alcatraz. Like somewhere on the Upper East Side.
Anon 20249, BULLSHIT
Perhaps it is time for a Molotov Cocktail party at 85 Broad?
Toward an actionable blueprint for ending the reign of the kleptobankers:
From http://edupreneursvkleptobankers.wordpress.com/
"Canonical research findings suggest that American entrepreneurs who establish popular online markets for customized education will catalyze the creation of many good jobs in America, and will end the reign of America’s kleptobankers. Some of the researchers: Clayton Christensen, Paul Romer and Paul Krugman."
Can we get a facebook link for this stuff. Facebook's not allowing me to post the link to this article, only goes to zerohedge.com
It's just a matter of time when some scumbag government official or Wall Street sleazeball gets whacked.
There were significant economic recessions in the late 1800s and early 1900s before the great depression hit in the 1930s. Then, there was an significant economic inflection point in the late 1980s that played out with the last bad recession in the early 1990s. The major difference in these time periods was that in the 30s, no one was willing to take risks. The lack of risk takers produced the great depression. The other periods had Rothschild's, Morgan's, or a fed that insisted banks keep there lending window open to "liquidity providers". These groups provided the risk capital to keep the system running.
Does anyone think that with the current state of disclosure and transparency, the Paulsen treasury and Bernacke Fed decided/realize, that there were few groups that could provide the risk capital that system needed at the time? Clearly Goldman and Morgan were given a sweet deal. Morgan has yet to capitalize, a perfect example of how hard it is to find animal spirits when things look bad. Is it possible the genius of Goldman is that they saw the opportunity to be the animal spirit arm of the government?
I promise few people on this web site are abused by Goldman Sachs more than I am, however, I am in awe of there recent results relative to the other public companies able to access the government funds. Wondering what other people who have a better insight into history and the current opportunities at the fed and treasure window think.
making large profits with 0% loans is not
exactly what i would call finacial genius...
it would be nice if it could make honest
profits with its core business rather than
in highly manipulated markets....
making large profits with 0% loans is not
exactly what i would call finacial genius...
No, but genius *is* convincing the people in government to give you all that free money, leverage up to the yin-yang, and then not have to worry about any affects of taking that leverage. If LEH and BSC had that same genius, they'd still be around today.
In the end, it doesn't matter--GS is going to crater at some point, and the country is going to default.
For those of us left who are short the market do you ever wonder if the coming crash will be so big and so fast that the leveraged ETFs freeze up? What I mean is that the counterparty stops paying out and declares bankruptcy like AIG - except that there will be no bailout for us. This is what worries me most to take all the punishment and then get screwed when the shit really hits the fan.
That is the irony in holding FAZ hoping for big gains, for instance. Would you really want a big bomb to blow and seize up banks who might be a counterparty? Even just a "holiday" or such...
Puts look better day after day.
"Puts look better day after day."
But what happens if the clearinghouses can't pay up?
First the member of the exchange would have to go under. Then the after netting positions would have to be too large for the exchange to handle. It is possible but not likely. Plus, the exchange definately falls into the TBTF category.
I had this discussion on a theoretical level with the head of strategies of a large brokerage yesterday. I don't believe that the system wil implode because there is a lot of vested interest by everyone in seeing it continue to work, but if it did cease to function, then the last thing I would worry about would be about my portfolio.
That is the difference between the Japanese deflation scenario and the Roman Empire collapse.
Thanks for the replies. This is one of the big question marks I've had for a while.
Here's the second question: is there any chance they'd close the exchanges until the first trading day after options expiration just to screw the put holders? I know that'd create havoc with hedging, etc, but so did the short-ban, I think.
I'm just trying to cover all the hypothetical bases.
Leveraged ETF's are supposed to be daily settled. That means you would only lose 1 day of profits in the event of counter-party default. Furthermore, depending on the ETF, the inverse equity swaps that are the underlying are written with about a dozen counter-parties. That means that an individual default would be a negligible on overall performance.
I like inverse ETF's, but you must remember to use them with caution. They are subject to time decay and that nasty compounding of returns works both up as it does down. I am looking forward to the inverse ETF's with monthly settlement. More counter-party risk, but you will get a performance that will follow long-term performance much better (you can actually buy and hold one of those)
i'm pretty sure Direxion noted in their prospectus that there can be a daily limit in the event that the shit hits the fan.
http://www.shavethetraders.com/index.html
There is also unrecognized public financing to GS in that they are allowed to profit through market manipulation. Given we are currently playing a zero sum game, their profits have to come from someone's pockets and that is the retail, pension fund and other institutional investors who are attempting to trade on fundamentals.
Does this argument hold any water?
The last paragraph says it all. It's exactly why there will be no real recovery!
The last paragraph says it all. It's exactly why there will be no real recovery!
The last paragraph says it all. It's exactly why there will be no real recovery!
Great post, having previously worked at GS within equities ( poor relation to the BSD in FICC) can agree with this post. The trading desks there think it's back to the glory days of 2004-2006
Government sponsored financial terrorism.
I usually don't buy into the conspiracy theory thing, but it kind of makes sense. The Gov't needs equity markets to rise, so what better use of capital then lever up GS so they can do it for them. Kind of like giving the smartest\most connected player in town incentive to rake it in, just so long as they move the markets up.
Bank of Canada Governor Mark Carney
http://www.bankofcanada.ca/en/bios/carney.html
.. worked 13 years for the "firm" in various departments.
Carney followed the template and declared "the recession over" recently. He was refuted by Canada's finance minister, the minister of economy and lastly the Prime Minister Stephen Harper himself.
The rot is deep and we are in for a major ride.
Global manipulation by GS-FED-TREASURY. How much longer can it go on? Seems that Canada's top political class is waking up to it.
Anyone who thinks Bear and LB were 2 of GS '3 main competitors' is an utter moron.
UBS, DB, etc anyone? Bear was a 2nd rate 3rd tier firm.
Ditto to most of you guys and gals. As I said in my blog a few months ago. "Hell if the guvment(lol) gave me $10 bil I could make a profit too". http://paynecapital.blogspot.com
Rick Aristottle Munariz of the Motley Fools is paid to mislead investors about Sirius XM Radio. He is part of a news media collusion lead by CNBC and their own Jim Cramer. Jim Cramer's street.com web site is also hip deep into the collusion. Jim Cramer and his writers, especially Scott Moritz are all part of the scandal and it leads upward to CNBC/GE executives and Goldman Sachs. Thank god their is now an investigation taking place with Goldman Sachs. Goldman Sachs was investigated and 10 firms, including Goldman Sachs were fined $1.4 Billion dollars in 2003. Now the full blown investigation by Boston's Chief Financial Regulator William Galvin will reveal the corruption of Goldman Sachs again and I can only hope that William Galvin will follow the money trail and check the bank accounts of Rick Aristottle Munariz of the Motley Fools along with Scott Moritz of the Street.com Just check these 2 writers banking accounts and the investigation will reveal that they are being paid off to write mis-leading stories about Sirius XM Radio. The money trail from these 2 writers will lead to >>> Motley Fools >>> Street.com >>> Jim Cramer >>> CNBC >>> GE / CNBC executives >>> NAB >>> Goldman Sachs.
It has all been a news media collusion along with the combination of Wall Street corruption by Goldman Sachs to destroy Sirius XM Radio inc. by naked short selling, flash trading, superfast computers, using secret software to manipulate the Sirius XM Stock price in decimal places the past few years since the Siri /XM merger was announce in Jan 2007. It was a pact agreed to by the news media and Goldman Sachs, which is why CNBC keeps reporting positive story after positive story about Goldman Sachs. All are into this collusion knee deep and this is why they will not report Goldman Sachs and their biggest scandal in the history of Wall Street.
Goldman Sachs got greedy. The scandal with Sirius XM Radio, worked so well with their secret software that was making them millions of dollars a day. Well, their Greed expanded into not just naked shorting & decimal place trading Sirius XM radio, but Goldman Sachs, next said , heck this secret software works so well, along with CNBC's cover up lets do it to our competition the banking industry. Goldman Sachs next used these tactics on the banking industry in 2008 - 2009. They have been protected by CNBC by paying CNBC millions of dollars a month in advertising or shall we say paid protection.
Goldman Sachs greed almost ruined this country when they began using naked shorting and their secret software to attack the banks. It was their Greed of making millions using this software attacking Sirius XM Radio and when they expanded their scandal to the banking industry, they were now making over $100 million dollars a day. This is a fact, as Goldman Sachs made over $100 million dollars a day in 46 of 64 trading days last Quarter 2009 ( April , May, June 2009 ).
CNBC is part of the scandal, taking in million a months from Goldman Sachs for their silence. Why wouldn't Goldman Sachs pay CNBC millions of month, that was nothing to them, since they are making over $100 million dollars a day. They helped CNBC try to ruin the competition ( Siri ) and now CNBC will help them ruin the other Banks. A true partnership by Goldman Sachs & CNBC.
The scandal lives on today, but thankfully the investigation by William Galvin will be expanded into the news media collusion of CNBC, Motley Fools & Street.com along with many other news media types.
Their Greed and goals have cost the average investors of the World hundreds of billions of dollars the past few years. In the end the truth is going to come out, but how does the people of the World hear the truth when the news media is part of the Scandal.
Well, a few years ago, CNBC & Goldman Sachs would have gotten away with it, but thank you www.Satwaves.com , www.twitter.com/stockshockmovie and the many social media outlets and bloggers out there. Thank you for helping bring the truth to the World. Each day we get closer and closer to the biggest scandal in the history of the United States. ( Written by Richard Keane – August 30th, 2009 )