What Wall Street bears no relationship to any longer is its primary mission in the U.S. economy: to be a fair and efficient allocator of capital to worthy businesses and innovators to propel job growth while also providing a medium for allowing investors to buy or sell stocks and bonds of those businesses at a fair price.
Are "pension-protection bonds" the solution to the ongoing pension crisis? I don't think so...
European Rescue Facility Gets Moody's Lowest Pre-Bankruptcy Rating Of AAA As Europe Prepares For Next Round Of BailoutsSubmitted by Tyler Durden on 09/20/2010 07:17 -0500
Earlier today, after a few prodding phone calls from European based sources to remind the rating agencies that their only purpose in life is to continue validating the global ponzi system, both Fitch and Moody's announced they would slap the European Financial Stability Fund (EFSF) with its lowest pre-bankruptcy rating of AAA. Of course, this kind of rude reminder that the facility exists, and ergo, that Europe is still broke can only mean one thing: the EFSF is about to be used again, perhaps as soon as tomorrow, when Ireland, whose largest banks are insolvent, will attempt to sell €1-1.5 billion of bonds (although today's most recent blow up in Irish-Bunds spreads does not bode well for that particular auction). In fact, even Goldman's traditionally cheery Erik Nielsen says "As I have discussed in recent weeks, we think there is a measurable probability that [the EFSF] be activated some time next year – along with the IMF – for Ireland and Portugal, and it could also be used if Greece needs another dose of cash sometime later on." And just to confirm that even a cursory glance beneath the covers demonstrates that Europe is and continues to be locked out of general liquidity markets, is today's ongoing 7 day Liquidity Providing tender result, which for the 5th week in a row shows that one solitary bank is using the Fed's swap line to borrow the meager amount of $60 million at the whopping rate of 1.17%.
A free market and laws against criminal fraud are both necessary. Indeed, they are interrelated and mutually self-reinforcing.
A Chat With Steve Forbes. The crash was a failure of government. We have the most hard left president and congress in history. The Fed should pursue a strong dollar policy. The rating agencies are a cartel we should get rid of. George Bush betrayed the Republican party by abandoning its principles.
In providing commentary to the FASB's attempt to solicit public response on its recent foray into bringing some transparency into "loans held to maturity" by Wall Street banks, Goldman Sachs does a terrific job of exposing the very prevalent, and very conflicted phenomenon better known as "lending to play" in Wall Street firms' attempt to get an allocation on the IPO underwriter syndicate of public company candidates, in exchange for providing debt to the same firm on very disadvantageous terms to both the underwriters' shareholders, and to secondary purchasers of such debt. In addition to providing broad mispricing incentive to an entire capital structure product, this practice also completely destroys the credibility of the ratings of the newly public company by the Underwriter syndicate due to tremendous conflicts of interest.
SEC Refuses To Sue Moody's Over Computer "Glitch" Which Inflated Ratings By 1.5-3.5 Notches On Thousands Of CDOsSubmitted by Tyler Durden on 08/31/2010 15:59 -0500
Another day, another SEC farce. Today, Schapiro's captured henchmen sent a notice to credit rating agencies about internal conduct and methods the firms use to determine the riskiness of financial products. As the alternative was to pursue a fraud enforcement action, in this particular case against Mark Zandi's Moody's, one can see why the SEC opted out for the action that would not implicitly open it up as well to like legal treatment by millions of investors, who had kinda, sorta hoped that the SEC would not allow this kind of fraud in the first place. As Housing Wire reports, "the SEC announcement stems from an inquiry by its enforcement division into whether Moody's Investors Service violated registration provisions or anti-fraud provisions of federal securities laws." Additionally, "the commission notes that Dodd-Frank gives federal district courts jurisdiction over SEC enforcement actions that allege violations of the anti-fraud provisions of the securities laws." In other words, while the SEC is a toothless, gutless, corrupt POS, others may take offense to this lack of responsible action and sue Moody's directly. And what is the reason for the SEC investigation? Why, a computer "glitch", which "inadvertently" raised the ratings of various notes by up to 3.5 notches! Housing Wire notes: "The SEC inquiry stems from allegations that a Moody's computer coding
error improved, "by 1.5 to 3.5 notches," the credit ratings for certain
debt obligation notes." Yet having been caught with its pants down was not enough for Moody's to actually fix the "glitch" - "shortly thereafter during a
meeting in Europe, a Moody's rating committee voted against taking
responsive rating action, in part because of concerns that doing so
would negatively impact Moody's business reputation." And people are surprised that wholesale market manipulation occurs on a day to day basis, with the ongoing blessing of the SEC...
I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!Submitted by Reggie Middleton on 08/27/2010 05:36 -0500
So, S&P finally gets around to Cutting Ireland’s Rating on the Cost of Bank Support, and of course Irish officials balk... Let's drill down into the facts.
Is Illinois Worse Off Than Greece with a Little LTCM and Bear Stearns Thrown In? In Case You Didn’t Know…Submitted by Reggie Middleton on 08/23/2010 14:10 -0500
What does Illinois have in common with Bear Stearns, Ambac Financial, LTCM and Greece? Come on fellas, let's roll the dice. I've got some pension money in case I come up snake eyes...
Some people in Asia burn joss paper, also called ghost money, on the Lunar New Year, to give their deceased ancestors something to spend in the afterlife. Because ghost money doesn’t represent a claim on any actual goods or services in this world, there is no reason for its issuers to exercise any particular restraint, and in Singapore it is possible to find notes issued by the First Bank of Hell, with the mythical Jade Emperor’s picture on the front, in denominations ranging into the millions and billions of dollars. Perhaps we’re counting on this charming tradition to make Asian investors comfortable with the prospect of continuing to add to their holdings of European and American sovereign debt, despite the obvious fact that the money they’ve already lent us is money they’ll never get a chance to spend in this life. - Daniel Cloud
No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park. The world financial system has temporarily been on life support by trillions of printed dollars that governments call money. But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same. Nevertheless, governments will continue to print since this is the only remedy they know. Therefore, we are soon likely to enter a phase of money printing of a magnitude that the world has never experienced. But his will not save the Western World which is likely to go in to a decline lasting at least 20 years but most probably a lot longer. - Egon von Greyerz, Matterhorn Asset Management
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism (Part 3)Submitted by Econophile on 08/14/2010 14:02 -0500
Until I began to examine the Dodd-Frank financial overhaul bill I had no idea that it would so significantly change the direction of the United States. It's scope is so vast and pervasive that it is difficult to grasp its totality. I wrote this article to try to explain this and why I believe it is so important for us to understand it. Because of its complexity it was not possible to do this briefly, so I wrote this major "white paper" and divided it into four parts to make it easier to digest. Please stick with me for the next few days; your eyes will be opened. This is Part 3 of 4.
John Carney's New York Times op-ed piece is a tour de force, a paean to nonsensical thinking. In, "Fannie Mae and Freddie Mac: Too Big Not to Fail," Carney ignores the Fannie and Freddie of the real world. Instead, he goes after the Fannie and Freddie that exist only in his imagination.
Pure cannibalization of a dead business model in action. Now all we can do is lean back, grab the popcorn, and wait for the Moody's response, as both companies junk each other (literally) into oblivion. Importanly, we learn that the passed Donk provision on rating agencies is pretty much a dealbreaker for the rating agency model. Once the SEC exemption is over, Mark Zandi better have that government job in hand: "In our opinion, the legislation will likely result in more instances of defending against litigation and other changes in operating practices that will likely increase operating costs and thereby reduce profitability and margins. The legislation, among other things, addresses the applicable pleading standards for certain litigation brought against rating agencies. This is contained in a provision whereby investors may be able to sue a rating agency if they can show that the agency knowingly or recklessly failed to (1) conduct a reasonable investigation of the factual elements relied upon by a credit rating agency's rating methodology, or (2) obtain a reasonable verification of those factual elements from independent third-party sources. While we believe it is likely that the new pleading standard will lead to an increase in litigation-related costs at Moody's and therefore poses an element of risk, whether the new pleading standard may increase the likelihood of successful litigation against Moody's will be determined in the future by the courts."
These are the Top 10 most read posts of the prior week:
- Marc Faber: Relax, This Will Hurt A Lot
- Ever Wondered How You Know You Are In A Depression? David Rosenberg Explains
- Guest Post: Gold Swap Signals the Roadmap Ahead
- "It's Not A Market, It's An HFT 'Crop Circle' Crime Scene" - Further Evidence Of Quote Stuffing Manipulation By HFT
- Jim Rickards Compares The Collapse Of The Roman Empire To The US, Concludes That We Are Far Worse Off
- LBMA Closes Off Public Access To Key Bullion Bank Trading Data
- S&P Priced In Gold: Comparison Between The Great Depression And Now
- Warren Pollock Warns Of Emergency Drug Shortage As EMTs Told To Go To "Alternate Protocols"
- China Calls Our Bluff: "The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation but [U.S.] Rating Agencies Still Give it High Rankings"
- Already Bought A 3D LCD In Anticipation Of QE "Instarefi" 1.999? You May Want To Consider A Refund