Department of Justice

What You Should Know about this “Unthinkable” Development…

There is no point in recapping the ongoing vendetta between former SIGTARP Neil Barofsky and former head of the NY Fed, and current Treasury secretary and resident TurboTax expert Tim Geithner. One need but follow the former on Twitter for a quick and concise sampling of the sentiments harbored vis-a-vis the latter. However, in the following interview Barfosky does touch on some points which in the context of the recent Liborgate, should be brought front and center, especially since the increasingly apathetic US audience seems to not care about one bit (as opposed to their distant cousins across the Atlantic for whom Lieborgate has become a daily distraction). Namely, what Barofsky says is that Geithner and other regulators who allowed Lieborgate to proceed should not only lose their job but we should "see [Geithner] in handcuffs."  Sadly that will never happen as it would actually be a deterrent to future crime among the highest echelons of America: something which is just not allowed to happen in a system whose very survival is increasingly reliant on rampant criminality.

Regulators and Politicians Work Hard … to Protect Corporate Wrongdoing and Smear Whistleblowers

Life ain’t fair

Back on May 30 we wrote "The Second Act Of The JPM CIO Fiasco Has Arrived - Mismarking Hundreds Of Billions In Credit Default Swaps" in which we made it abundantly clear that due to the Over The Counter nature of CDS one can easily make up whatever marks one wants in order to boost the P&L impact of a given position, this is precisely  what JPM was doing in order to boost its P&L? As of moments ago this too has been proven to be the case. From a just filed very shocking 8K which takes the "Whale" saga to a whole new level. To wit: 'the recently discovered information raises questions about the integrity of the trader marks, and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses being incurred in the portfolio during the first quarter. As a result, the Firm is no longer confident that the trader marks used to prepare the Firm's reported first quarter results (although within the established thresholds) reflect good faith estimates of fair value at quarter end."

Wasendorf take note: step 1, become powerful governor and/or senator (editor of SFO magazine won't cut it); step 2, hire Blankfein's lawyer for key personnel who can throw you under the bus

All 3 Libor Arguments Fail

How should we say this: we are shocked, shocked, that the DOJ won't prosecute itself.

BREAKING: DOJ says it won't prosecute Attorney General Holder after the GOP-led House voted to hold him in criminal contempt of Congress - Fox

And now, back to the far more important news of Tom Cruise and Katie Holmes divorcing.

LCH under investigation by Holder under antitrust statutes. And just who was the ultimate counterparty to the Corzine trade?

All Military-Age Men Are Labeled “Militants” In Areas of Conflict ... Including Inside the U.S.?

Even the strongest and toughest creature out there, and maybe the smartest one, that no one has been able to subdue yet....

As anyone who has ever traded CDS (or any other OTC, non-exchange traded product) knows, when you have a short risk position, unless compliance tells you to and they rarely do as they have no idea what CDS is most of the time, you always mark the EOD price at the offer, and vice versa, on long risk positions, you always use the bid. That way the P&L always looks better. And for portfolios in which the DV01 is in the hundreds of thousands of dollars (or much, much more if your name was Bruno Iksil), marking at either side of an illiquid market can result in tens if not hundreds of millions of unrealistic profits booked in advance, simply to make one's book look better, mostly for year end bonus purposes. Apparently JPM's soon to be fired Bruno Iksil was no stranger to this: as Bloomberg reports, JPM's CIO unit "was valuing some of its trades at  prices that differed from those of its investment bank, according to people familiar with the matter. The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter. "I’ve never run into anything like that,” said Sanford C. Bernstein & Co.’s Brad Hintz in New York. “That’s why you have a centralized accounting group that’s comparing marks” between different parts of the bank “to make sure you don’t have any outliers” .... Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm.

If you cannot read the writing on the wall then allow me to read it for you. The European Union has abrogated the Rule of Law for the good of the State. This is the second such abrogation with the first being the exemption of certain European institutions and the IMF from the Private Sector Involvement of Greece. Greece may be a one-off exemption as they claim but we now have a second instance where jurisprudence has been overturned for the good of the nations of Europe. This is not Socialism or Capitalism but rather some sort of Fascist governance which I publically decry as the echo of the jackboots sounds across the Continent once again. The precedents have now been set and the future is clearly marked by a return to the totalitarianism of a politically controlled State. My advice is therefore succinct:

RUN!

Taxation is theft. There is no denying this.  If I and a few brutes appeared at the door of an unsuspecting individual and demanded monetary compensation less we drag him off to jail, this would be a clear cut case of robbery.  It is a common tactic used by mobs or street gangs to offer protection with the barrel of a gun.  The only difference between shakedowns by private thugs and those employed by the state is the badge.  The badge legalizes extortion and imprisonment. With that being said, it has been three years since the financial crisis and governments around the world are still reeling in the lesser Depression.  Tax collections are down while public expenditures have skyrocketed in a vain effort to stabilize the economy.  Much of this mass orgy in spending has been financed by central banks printing money and the suppression of interest rates down to artificially low levels.  This is the Keynesian remedy to recession.  Spend what you don’t have via the printing press.  Have central bankers create paradise on Earth through counterfeiting.

So far it hasn’t worked.

All you need to know.