Goldman Sachs

Everyone knows that Italy's unelected PM, Mario Monti, is a former Goldman Sachs International 'advisor.' As such, it is only natural that being part of the banking cartel he would do everything in his power to promote an inflationary agenda, one that seeks ECB bond monetization intervention, (another central bank headed by a former Goldmanite of course), perpetuates the status quo, and one that naturally contravenes everything that German citizens have been pushing for in their desire to avoid the risk of another hyperinflationary episode. Especially if, as is well-known, resolving Europe's problems, however briefly, facilitates an Obama re-election campaign because as conventional wisdom is also catching on, should Europe implode before November, Obama's reelection chances plunge accordingly. And yet, even as Goldman's tentacles had spread all over Europe (as seen here), conventional wisdom was that Goldman's influence in Germany was relatively muted.

Wrong.

Sell side Wall Street vs Reggie Middleton on FB - 6 buys, 3 neutrals, avg price target $39. NOBODY came out with a short @ IPO besides moi. Guess where I stand now...

Things appear to be going from worse to worserer as the failure of Light-Squared appears to have been a 'harbinger' of pain to come for the man who was 188th richest in the US. As Bloomberg notes:

• *SEC SAID TO AUTHORIZE LAWSUIT AGAINST HARBINGER'S PHIL FALCONE
• *SEC SAID TO PLAN TO SUE FALCONE OVER TAX LOAN, GOLDMAN DEAL
• *SEC MAY FILE LAWSUIT AGAINST FALCONE AS EARLY AS THIS WEEK
• *FALCONE LAWSUIT MAY INCLUDE CLAIM OF MARKET MANIPULATION

Back in August 2010 we asked: "Is Phil Falcone's Mega Bet On SkyTerra Going To Be His Last?", turns out it was. Soon the only betting Phil may be doing is whether or not the soap slips in the common shower bathroom, or how many divorce attorneys might be waiting on patrol outside his multi-million dollar mansions; but we only have one thing to add now: "Got Pre-Nup?"

In what may come as a shocking surprise to exactly nobody, the next great discovery as more and more layers of the global ponzi onion are exposed, is that China was, in fact, lying about everything. Yes, we know, stunning.

• Mario Monti: We Have a Week to Save the Eurozone (Guardian)
• Europe Central Bank Prepares to Relax Collateral Rules (WSJ)
• EU Banks' Risk in Eyes of Beholder: Worry Is That Lenders Are Boosting Gauge of Their Health (WSJ)
• Europe finally learns about subordination: Bailouts' Creditor Hierarchy Scares Private Bondholders (WSJ)
• Merkel Isolated in Race for Euro Crisis Solution (Spiegel)
• Fed’s Re-Twist May Lift Treasury Repurchase Agreement Rates (Bloomberg)
• China Said to Propose Keeping Limit on Local Government Loans (Bloomberg)
• Moody’s Downgrade Hits 15 Top Banks (FT)
• IMF Challenges Berlin’s Crisis Response (FT)
• Colombia to Auction Rights in 2013 to Gold and Coal, Not Coltan (Bloomberg)

Only when the lack of visibility on forward revenue and earnings was obvious to all did Moody's act

Here we come:

• MOODY'S CUTS 4 FIRMS BY 1 NOTCH
• MOODY'S CUTS 10 FIRMS' RATINGS BY 2 NOTCHES
• MOODY'S CUTS 1 FIRM BY 3 NOTCHES
• MORGAN STANLEY L-T SR DEBT CUT TO Baa1 FROM A2 BY MOODY'S
• MOODY'S CUTS MORGAN STANLEY 2 LEVELS, HAD SEEN UP TO 3
• MORGAN STANLEY OUTLOOK NEGATIVE BY MOODY'S
• MORGAN STANLEY S-T RATING CUT TO P-2 FROM P-1 BY MOODY'S
• BANK OF AMERICA L-T SR DEBT CUT TO Baa2 BY MOODY'S;OUTLOOK NEG

So the reason for the delay were last minute negotiations, most certainly involving extensive monetary explanations, by Morgan Stanley's Gorman (potentially with Moody's investor Warren Buffett on the call) to get only a two notch downgrade. And Wall Street wins again.

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo. But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

If you aren’t part of the solution, which is real relief for victims of fraud, fraud, fraud, fraud, then you are part of the problem.

The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.

Even as Moody is now about a week late on its Spanish bank downgrade where the banks are rated higher than the sovereign (which obviously is kept in check to prevent yields on bonds from soaring even more), here comes the next wholesale bank downgrade:

• Moody's expected to announce ratings downgrade for UK banks this evening - Sky Sources
• Exclusive: Big news - I'm told Moody's will announce downgrades of some of world's biggest banks, incl in UK, after US mkts close tonight. - Sky's Mark Kleinman

Looks like that fabricated 2 notch Margin Stanley downgrade (because 3 notches just won't do - those 4 months of Gorman-led "negotiations" made that painfully clear) is about to strike. The real question is: What Would Egan Who Do?

We have long been concerned at the implicit and explicit subordination of both financial and sovereign bondholders in Europe by the actions of their overlords political elite in pursuit of short-term liquidity fixes to insolvency issues. As talk of the ESM coming to life in the short-term and a 'Redemption Pact' in the intermediate term - which as Goldman describes involves mutualizing a portion of each country's debt (resulting in a partial upgrade of the existing pool of Eurozone sovereign bonds) in a European Redemption Fund (ERF) and, in the process, extending debt maturities (kicking that can) onto the public sector's balance sheet. As with all these mutualization schemes, the ERF ineluctably raises the twin problems of  'moral hazard' and 'subordination', which need to be mitigated. Goldman discusses these two sides of the same coin as it notes subordination is explicit when the ESM intervenes (and also with the ECB's SMP) but a little less obvious in the ERF (though still as painful) which is, we note, perhaps more appealing to keep the masses unaware.

• With big conditions, China Offers $43 Billion for IMF Crisis War Chest (Reuters)... US offers $0.00
• Mexico is not Spain: Mexican Yields Drop to Record as Spain’s Borrowing Costs Soar (Bloomberg)
• And live from Las Ventanas al Paraiso: G-20 Leaders Focus on Banks as Spain's Woes Challenge Merkel (Bloomberg)
• German Constitutional Court Gives Victory to Opposition in ESM Suit (WSJ)
• EU Europe’s Leaders Urged to Resolve Crisis (FT)
• Backing Grows for One EU Bank Supervisor (FT)
• Greek Leaders Close to Coalition, Aim to Ease Bailout (Reuters)
• China Economy Improves in June, Commerce Minister Chen Says (Bloomberg)
• China Looks for Loan Boost (WSJ)

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

Just read.