Andy Borowitz provides the one retort to Greg Smith that only free taxpayer money and trillions in bailouts can buy. In other news, we fully expect Mr. Smith to enact a voluntary refund of the 12 years worth of compensation and bonuses earned while working at Goldman any minute now. Or maybe epiphanies on Goldman "culture" following more than a decade of employment comes without compensation clawbacks?
Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over ClientsSubmitted by Reggie Middleton on 03/14/2012 09:15 -0500
Directly from the resigning mouth of the rapist to the raped... I even put some number to it for the analytical crowd..
Because every former employee confession has an equal and opposite reaction from "toxic and destructive" firms. And what a better way to test the PR disaster damage control skills of the firm's new global head of corporate communications: former Treasury aide and Geithner lackey Jake Siewert. In other news, Goldman is now promptly adding perpetual non-disparagement clauses to all employee contracts. Retroactively, if possible.
Stop us when this confession from Greg Smith, a now former executive director and head of the Goldman's United States equity derivatives business in Europe, the Middle East and Africa, sounds exactly like everything we have said about the firm over the past 3+ years (and why we just can't wait for the next trading "recommendation" from Tom Stolper). "Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it."
- Euro zone formally approves 2nd Greek bailout: statement (Reuters)
- In a First, Europeans Act to Suspend Aid to Hungary Unless It Cuts Deficit (NYT)
- UK Chancellor Looks at 100-Year Gilt (FT) - What? No Consols?
- Hilsenrath: Fed's Outlook a Tad Sunnier - (WSJ)
- Banks Shored Up By Stress Test Success (FT)
- U.S. dangles secret data for Russia missile shield approval (Reuters)
- Wen Warns of Second China Cultural Revolution Without Reform (Bloomberg)
- Wen Says Yuan May Be Near Equilibrium as Gains Stall (Bloomberg)
- Merkel Says Europe Is ‘Good Way’ Up Mountain, Not Over It (Bloomberg)
Dear friends at Zero Hedge, consider this your day of total and absolute Goldman vindication...
And the real lesson, dear friends, is that the good old USA is a subprime nation
Back to basics with some definitions:
DEFAULT, n. Semi-mythical celestial occurrence that passes by Earth every 76 years.
I was worried for a second about that Greek default, but I realise there's nothing to see now and all is well.
FEDERAL RESERVE, n. A wholly owned subsidiary of Goldman Sachs.
The Federal Reserve voted to give a few more billion dollars to Wall Street.
US GOVERNMENT, n. Another wholly owned subsidiary of Goldman Sachs.
We seem to be running out of Goldman Sachs alumni here in the Treasury. No, wait, we've still got hundreds of 'em.
This year has been characterised by a dash-for-trash as the flood of central bank liquidity sent the marginal dollar into every down-beaten, over-shorted, unprofitable, over-leveraged, illquid stock it could get its hands on. As Goldman notes today, however, this laggards-to-leaders strategy is starting to underperform in the last few weeks. Buying the trailing 12M laggards and selling the trailing 12M leaders had returned an impressive 7% YTD but since mid-February (which notably was when credit started to underperform equity markets more directly) performance of this 'pair' has lost almost 3%. It seems the liquidity-floats-all-boats mentality is indeed leaving the market and with a refocus on growth (that this likely implies) we suspect correlation will pick up once again to the downside.
What is fraud except creating “value” from nothing and passing it off as something? Frauds interlink and grow upon each other. Our debt-based money system serves as the fraud foundation. In our debt-based money system, debt must grow in order to create money. Therefore, there is no way to pay off aggregate debt with available money. More money must be lent into the system to make the payments for old debts. This causes overall debt to expand as new money for actual people (vs. banks) always arrives at interest and compounds exponentially. This process is called financialization. Financialization: The process of making money from nothing in which debt (i.e. poverty, lack) is paradoxically considered an asset (i.e. wealth, gain). In current financialized economies “wealth expansion” comes from the parasitic taxation of productivity in the form of interest on fiat lending. This interest over time consumes a greater and greater share of resources, assets, labor, and livelihood until nothing is left.
While hardly expecting anything quite as dramatic as the default of a Eurozone member, an epic collapse in world trade, or a central banker telling the world that "he has no Plan B as having a Plan B means admitting failure" in the next several days, there are quite a few events in the coming week. Here is Goldman's summary of what to expect in the next 168 hours.
So Greece has been saved – is that right? Well according to ISDA (the International Swaps and Derivatives Association) a “Restructuring Credit Event has occurred with respect to the Hellenic Republic” which in the vernacular means the Greeks are bust; tell us something we don’t know! The importance of this statement is that credit default swaps (CDS) on Greek debt are now triggered and holders will have their losses made good. There were any number of scurrilous rumours that ISDA would not declare a credit event to preclude their illustrious members from paying out, but when the net downside of $3 billion needs to be shared out amongst the likes of Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, UBS, BNP Paribas and Societe Generale, then a quick whip round in the bar after close of business and the jobs a good’un.
I hold up my hand, “One moment please” as I introduce you to the 800 pound Greek Gorilla that is about to enter the room. Allow me to now present to you the “OTHER” Greek debt that is outstanding and will have to be accounted for as the country defaults. Detailed below are some of the “OTHER” sovereign obligations of the Greek government which have now been submitted to the ISDA and I list some of them below. You will note that there are bank bonds, Hellenic Railway bonds, Urban Transportation bonds et al that are guaranteed by Greece. You will also note that there are bonds tied to Inflation, Floating Rate Notes, Asset-Backed securities and a whole mélange of other structured products with a Greek sovereign guarantee. What we all thought was fact is now clearly fiction and default will now bring “Acceleration” one could reasonably bet in all kinds of these securitizations and in all kinds of currencies. This could come from the ratings agencies placing Greece in “Default” or it could come from the CDS contracts being triggered depending upon each indenture and you will also note that a great many of these off balance sheet securitizations are governed by English Law and not Greek Law. You may also wish to consider the fallout to the banking system as the lead managers of all of these deals could find themselves behind the eight ball as various clauses trigger and as the holders of these securitizations line up at the judicial bench [ZH note: there is a reason why Allen & Overy is getting paid $1500 an hour to indemnify ISDA with a plethora of exculpation clauses - they know what is coming] The ISDN numbers are on all of these securities and the lead managers may be found on Bloomberg or other sources as well as the holders of the debt. The curtain just lifted and the show is about to get way too interesting!
For all this talk and hype, QE 3 is nowhere to be found. And it won’t be showing up anytime soon unless a full-scale Crisis hits. The reason for this is that the political landscape in the US has changed dramatically with the Fed becoming more and more politically toxic. As a result of this, the Fed (with few exceptions) has begun to shift into damage control mode.
That Goldman would have "thoughts" on the Greek PSI deal and European life in the aftermath, is no surprise: just be sure to take these with a pound of salt. After all Goldman is a key member of the ISDA's European Determination Committee (and co-chairman with JPM of our very own Treasury Borrowings Advisory Committee). Not to mention that Goldman is the firm that allowed the Greek default to happen in the first place, by allowing it to hide its unprecedented debt accumulation far beyond what was allowed by the Maastricht treaty. In either case, here is a summary of what Goldman sees happening next: "After the finalization of the PSI process, only small residual transactional uncertainty remains. The new Greece package ensures low funding costs that under certain assumptions could even be sustainable in the long term. Moreover, the exposure of the Greek private sector to the Greek government declines very substantially… …while the exposure of the European official sector rises to substantial levels. Late-April elections will be a risk; but polls suggest a pro-EUR government is the most likely outcome. The new government will be tasked with creating a better growth environment. Using our GES score, we observe key areas of structural improvement for Greece’s growth environment… …among others, the creation of a more business friendly environment, the establishment of conditions for increased openness to trade and a more effective rule of law." We will shortly present a far more realistic, and far less conflicted.