Treasury Department

The unconscionable behavior of the political class should be thought of as a contagious disease that infiltrates any industry that comes within influence of the state.  Government contractors, lobbying associations, favored corporations, and even the press all seek to use the monopolized power of government to further their own interests.  Instead of attempting to roll back stifling regulations, many of these firms simply wish to get in on the spoils of the great extortionary scheme.  The results are always the same.  Politicians pretend to be saving the people from cold-natured capitalism while politically-connected businessmen and bankers act as if their commercial success is completely of their own doing.  The hidden truth is both act in tandem to fleece the average taxpayer.

Those who Benefited from Wall Street Fraud Must be Prosecuted … Including Rogue Government Officials who Aided and Abetted the Crimes

While some have talked of the 'credit-easing' possibility a la Bank of England (which Goldman notes is unlikely due to low costs of funding for banks already, significant current backing for mortgage lending, and bank aversion to holding hands with the government again), there remains a plethora of options available for the Fed. From ZIRP extensions, lower IOER, direct monetization of fiscal policy needs, all the way to explicit USD devaluation (relative to Gold); BofAML lays out the choices, impacts, and probabilities in this handy pocket-size cheat-sheet that every FOMC member will be carrying with them next week.

The three "de's:" deregulation, desupervision, and de facto decriminalization.

From the Treasury: "Here are the facts.  The Office of the Inspector General (OIG) recently released 11 investigative reports covering conduct that occurred as early as 2000.  In four cases, the OIG concluded that there was no evidence to support the allegations.  In one case, the misconduct was committed by a private citizen (a Treasury office was burglarized).  That leaves six cases in question.  Although any misconduct is unacceptable, this is a small number that does not fairly reflect a Department with tens of thousands of employees. None of the employees at issue were political appointees or senior officials, and there is absolutely no evidence of any pattern or trend."

There are few options left.

They're all Blowtards....

All you need to know.

All you can read.

A D.C. report card.

In all the recent talk of economic gloom and doom, not to mention JP Morgan rehearsing for its role as Federal Reserve and failing miserably, some forgot that Jon Corzine still walks free. That may change soon if James Giddens, trustee for the liquidation of MF Global has his way. In a report filed today, Gidden says: "As attempts were made to transform MF Global into a full-service global investment bank, management failed to add to its Treasury Department and technology infrastructure, which was needed to meet the demands on global money management and liquidity." He continues: "My investigation has concluded that management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions." So someone was at fault: who? "I have determined there may be valid claims against individuals and entities. In my capacity as Trustee, I will make every effort to ensure that such claims result in the greatest possible returns to customers in an efficient and fair manner, whether those claims are pursued by my office or others." And specifically from his list of recommendations: "Provide for civil liability for officers and directors in the event of a commodities segregation shortfall." Well, we know there is a shortfall. So... why is Jon Corzine still walking free? Oh wait, Valukas said there were "colorable claims" against Lehman management too. Last we checked Dick Fuld is still out there... somewhere. But generally yes: it just has not been JPMorgan's year so far.

Maybe the real reason that the Treasury offered China direct access (thus cutting out the middleman and offering China cheaper access than ever) was precisely because China was selling, and because the Treasury was concerned about the effect on rates, and wanted to give China some incentive to keep buying. As Jon Huntsman noted in a 2010 cable leaked by Wikileaks, the PBOC has felt pressured to keep buying, and as various PBOC officials have hinted in recent months, China is actively seeking to convert out of treasuries and into gold. And that makes sense — treasuries are yielding ever deeper negative real rates. People holding treasuries are losing their purchasing power. No wonder the treasury is willing to cut Wall Street out of the deal. And it isn’t like the Treasury would have taken this move lightly — cutting Wall Street out of the equation is a slap in the face to Wall Street

UK CPI this morning came in weaker than expected at 3.0% Y/Y in April, weighed by a fall in air fares, alcohol, clothes and sea transport, according to the ONS. The release saw aggressive selling of GBP in the currency market and has underpinned the rise in gilt futures. Alongside the 26th month low in UK CPI the IMF also issued their latest assessment on the UK economy and said further policy easing is required and that the Bank could cut its interest rate from the current 0.5% level. In other market moving news a Greek government source said that Greek banks are to receive a EUR 18bln recapitalisation down payment this Friday which initially saw the EUR and stock futures rally, however, the move was short lived as it became clear that the payment is scheduled as part of the bailout programme for Greece. Elsewhere, Fitch made a surprise announcement and downgraded the Japanese sovereign rating by two notches to A+, outlook negative. The move means Fitch has the lowest rating for Japan of the three main rating agencies so we remain vigilant for any comments from S&P and Moody’s today.

Just when we though that nobody would take advantage of the cover provided by the epic flame out of the FaceBomb IPO and the ongoing market crash, here comes Spain. Because there is nothing quite like a little Friday night action following a market drubbing and an "IPO for the people" shock in which to sneak the news that, oops, sorry, we were lying about all that austerity. Because while it came as a surprise to the market back in December when Spain announced it would post a 2011 budget deficit of 8.5% instead of the previously promised 6%, the market will hardly be impressed that Spain actually overspent by another €4.2 billion, to a brand new total of €95.5 billion of 8.9% of GDP. So Monday now has two things to look forward to: the Spanish bond margin hike on one hand courtesy of LCH.Clearnet earlier, and the fact that despite spending even more than expected, GDP growth has disappointed and the country is now officially in a double dip. Hardly what the country with the record wide CDS needs right now.

Update: JPMORGAN SAYS DIMON TO AGREE TO TESTIFY TO SENATE. Ummmm, there was an option?

As everyone (or at least Zero Hedge) long expected, JPM's prop trading debacle just got political and senators are about to demonstrate to the world just how little they understand about modern IG9-tranche pair trades. Expect to hear much more about JPM's "shitty" prop deal.