Yesterday we pointed out how insolvent South Chicago bank ShoreBank was rescued in the last minute by a consortium of banks led by Goldman Sachs, after early unwillingness to provide rescue funding to the bank was overcome once the President allegedly got involved. Today we learn from Fox Biz' Charlie Gasparino that congressional republicans, led by Spencer Bachus, are calling for an investigation into what could turn out to be another crooked scam to bail out an administration darling, because GM and Chrysler were not enough, even as over 70 banks have failed year to date, which however do not have the privilege of being in the president's very good graces.
Hugh Hendry, whose previous appearances have been well-logged by Zero Hedge, and who is currently raking the money thanks to long Treasury bet and his EURUSD short from when the pair was 20% higher, has never been a fan of China, and almost got into a fight with Marc Faber recently discussing the country's future prospects. In fact, Hendry uttered this memorable soundbite back in February, in which he mopped the floor with Goldman permabull Jim "BRIC" O'Neill: "I love Jim O'Neill. I love that Goldman Sachs guy. He says you either get it, or you don't. I don't get it. In the future there will be a Confucius saying: the wise man not invest in overcapacity. The flaw of the business model, at the center of it is a craving for power as opposed to profit." BusinessWeek reports that Hendry has now officially put his money where his mouth is and has bought puts on 20 companies that will profit from “a dramatic collapse” of China’s growth. With the Chinese stock market approaching 52 week lows, will Ecclectica soon become the next Paulson & Co. hedge fund iteration, even as the latter continues (allegedly) to bet on a US recovery, and thus stands to lose tens of billions if the thesis does not play out (although we are fairly confident Paulson's long stock positions are matched by even longer CDS hedges... but without additional data, we can never be sure).
How Goldman's "Recommended Top Trades" Cost Clients Billions And Contributed To Goldman's Perfect RecordSubmitted by Tyler Durden on 05/19/2010 06:31 -0500
Zero Hedge has long discussed the strange phenomenon whereby Goldman recommends a trade only to unwind it shortly, after institutional clients who have been naive enough to follow it, end up losing millions, sometimes in a period as short as a few days. The observation there being that the only way Goldman scores something like a perfect 63 out of 63 quarter is by literally raping its clients, along the lines of what Goldman is currently facing civil and criminal probes for allegedly doing in the CDO space. And while our rant has been public for quite some time, yesterday was the first time the Bloomberg also decided to join the fray.
You heard my warnings about the "best of breed", "incomparable on the Street" (and all of the other groupie talk, worshiping phrases thrown at this company) Goldman pillaging clients and of their excessive overvaluation for over two years in BoomBustBlog, yet now the mainstream media is starting to catch on as Goldman's stock plummets (down over $5 yesterday and over 20% for the month, with more to go). I wonder when they will get around to the other investment banks and FIRE sector companies that I warned about. Let's reminisce...
Watch Senator Jeff Merkley Ripping Apart Wall Street Crony Interests Right Now In Attempting To Pass Volcker RuleSubmitted by Tyler Durden on 05/18/2010 20:05 -0500
Right now on C-Span Jeff Merley is ripping appart not just Wall Street, but crony and corrupt Senators who are blocking a vote on the Merkley-Levin amendment. As a reminder Merkley-Levin is the critical and actionable form of the Volcker Rule that if passed would destroy Goldman Sachs. Live C-SPAN webcast here.
What does a failed community bank that is not TBTF or have its former CEO running the Treasury have to do to not end up on the TGI Bank Failure Friday dinner list of busted banks? Simple - be located a few blocks from where the president grew up and to which he has a sentimental attachment. Additionally, casually dropping a few mentions of criminal CDO investigation this, grand frontrunning jury that, is sure to bring instant wire transfers from a few TBTF parties (whose former CEO did run the Treasury), even if these parties are the same that last week were on the receiving end of yet another Wall Street themed fire and brimstone sermon. Today ShoreBank, which should have failed in a normal capitalist society, received a reprieve after the Obama administration did not force banks to bail it out. In fact categorically so. Because otherwise what kind of a fair and efficient system would we have, if preexisting ties and crony relationships were all that matter in determining life or death. After all that's how things worked in Russia. And Russia was an evil empire.
One of the benefits of working for the US Treasury, in addition to printing infinite amounts of debt at ever higher Bid To Covers, is the ability to confiscate stuff. As part of the UST's Seized and Forfeited Program, every several months the Treasury organizes assorted auctions for items that one would typically find at a Goldman Sachs Hamptons Fried Calamari party. At this point, it seems Tim Geithner finds himself in possession of a few extra Veyrons, SLR Maclarens, Bentleys, Stingrays, Spyders and Murcielagos, and needs to urgently get rid of these just in case the Direct Bidders decide to stop taking down up to 30% of each and every UST auction. The upcoming auctions for 2010 will be held in Broward Country, FL, June 3; Riverside, CA, June 9, 2010; Miami, FL, August 11, 2010, and Dayton, NJ, on September 1, 2010. The US Treasury page for the upcoming auction can be found here, as to whether the final auction prices are reasonable, you can check what recent auctions have closed for at this link. Below is the flipbook of all the ridiculous items currently in the possession of the Treasury, and which are now auctionable.
The whole world is still stunned from what just happened today. In essence, Germany has taken a major step to not only declaring it is the master of the European continent and all those who don't like it can just focus on their own bankrupt banks (Sarkozy), but is breaking ranks with the US, as the surprising nature of today's move was aimed not so much at European "speculators" but at Wall Street. Furthermore, knowing full well it may soon lose access to US capital markets, Germany is likely preparing to abandon the EU and EMU (to which "good riddance" is likely all it has to say). But the key implication from today is that Bernanke must now move with urgency to find a way to keep the pressure on the dollar as he is now solidly losing the currency devaluation race. The impact of this on major multinationals and on the "must do" reflation experiment could be cataclysmic. Additionally, without gobs of new domestic liquidity to prop it up, the US market will now likely collapse, further forcing Bernanke to act against the interests of the US Middle class and America's savers. We can not wait to see what he pulls out of his sleeve. With ZIRP ravaging the nation, and negative interest rates still illegal, he may just find his hands very much tied.
In the meantime, here are some preliminary shocked observations on today's events from Goldman Sachs and Morgan Stanley.
- The only relevant piece from today's economic barrage: building permits down to 606k vs 680k exp., previous 685k
- Stephen Roach Op-Ed: New battle plan needed for a crisis-prone world (FT)
- Now this is funny: Goldman Sachs, facing a fraud lawsuit from U.S. regulators who accuse the company of misleading investors, is trying to convince more Americans to trust the firm with their retirement funds (Bloomberg)
- How the 'Flash Crash' Echoed Black Monday (WSJ)
- The day the Dow dived (NY Observer)
- Debt woes spur "Lehman II" concern for Europe's banks (Bloomberg)
Market leader Goldman Sachs is accelerating its drop on no news. Rumors for the weakness involve everything from the ludicrous suggestion that the firm could be looking at buying WHR, all the way to regulatory issues, with the Volcker rule now looking increasingly likely to pass. GS Volume is high and the weakness is finally spilling over not only in stocks, but also in carry trades, as the EURUSD and EURJPY both commencing the one way track after the recent short covering spree is now merely a memory.
The man who will soon be proven to have been right all along, Ron Paul, was interviewed on CNBC earlier discussing topics such as the Greek contagion, Goldman Sachs, surging gold and, of course, the Fed. Asked if this is just the beginning, the response is "Yes, this shouldn't surprise anybody, how long should we have been anticipating this? I have anticipated it since 1971, because the system that replaced Bretton Woods was an unviable system and this is proving the point, so this is the unwinding of the system and until we replace it with something you are going to continue to see this... You can't correct the problem of debt with creating more debt, expecting the Fed to endlessly create more money and credit. We are in for a lot more trouble as far as I can see." Can we grow our way out of this debt? "You'd have to cut taxes drastically and cut spending drastically. Politically you can't do that. People will resort to more spending, more deficits and more inflation of the money supply. If you see a GDP number go up, it is about equivalent to the money we have created - you don't have any more growth than the artificial stimulus of the money that we put in. We have not allowed the liquidation of debt, we have not allowed the elimination of the malinvestment still in the system."
- Asian stocks fall as weaker Euro fuels economic growth concern.
- China's growth passes peak and more tightening feared
- Crude-oil prices continued to slide toward the psychologically important $70/bbl on Monday.
- Euro falls to lowest since April 2006 on European debt crisis.
- Japan Machine Orders rise for first time in 3 months in March.
- Stocks slip on austerity fears.
- New Home construction in US probably rose as tax credit boosted sales: Survey.
Some appear to believe that "confidence in the banks" can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion. But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead. In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you. - Professor James Galbraith
Lars Schall of MMNews Germany has recently interviewed many outspoken critics of the inner workings of our global financial system including former Federal Housing Commissioner and Solari Inc. President Catherine Austin Fitts and Associate Professor of Economics and Law at the University of Missouri,Kansas City (UMKC) William K. Black. Below is my recent interview with Mr. Schall.
What do you think those bankers with perfect trading days in Q1 did with all the money they made? As Eli Broad said, "No one wants paper money — they want art.” This is the Fed's gift to these bankers.