Monday, November 30, 2009
Sunday, November 29, 2009
"The [NYFed] caved in to demands by [AIG's] trading partners that they be paid in full for complex securities they had insured with the company, saving soem of the world's biggest banks from billions in losses, according to a government audit. ... The banks that were paid off in full included [GSG]. Merrill Lynch and large French banks Societie Generale and Calyon, the investment bank unit of Credit Agricole Group, which were represented by the French bank regulator in negotiations with the [NYFed] last November, the report said. ... The audit provides a window into a bailout effort that has been shrouded by a lack of disclosure--raised in the report--and questions over why the US government in effect funneled tens of billions of dollars to the US and European banks that were AIG's trading partners", my emphasis, Serena Ng & Carrick Mollenkamp at the WSJ, 17 November 2009, link: http://online.wsj.com/article/SB10001424052748704431804574540290325376348.html.
"For more than a year, [GSG] has maintained that it wouldn't have suffered material losses had the government allowed one of its major trading partners, [AIG] to collapse. ... A revamped rescue package in November led to Goldman and 15 other banks being paid in full for $62 billion worth of insurance contracts they had with AIG to protect against losses tied to mortgage assets. ... The government auditor's report broadly fouind that the [NYFed] left itself little room in nogotiating with the banks for a better deal for taxpayers. ... In a separate series of trades, Goldman had sold protection against losses on the same assets to other trading firms. ... Goldman has said it was insulated against a material loss by an AIG default. And the audit pointed our that Goldman in fact was protected against some losses. For example, the firm had collected $8.4 billion worth of collateral--cash or a liquid equivalent--from AIG on a $13.9 billion portion of its bets. Separately, Goldman took steps to try and buy insurance against insurance by purchasing protection against an AIG default. ... The audit said, however, that given the fact that the market for those securities had tanked in November 2008, and then an AIG default would have sparked a rout, Goldman would have had a difficult time obtaining value for those assets. ... The bottom line: The audit said those assets that Goldman held would have been worth a lot less had AIG defaulted. ... The audit also raised questions about the insulation Goldman had purchased against an AIG default", my emphasis, Carrick Mollenkamp and Serena Ng at the WSJ, 18 November 2009, link: http://online.wsj.com/article/SB10001424052748504538404574542192562568738.html.
"Finally, Mr. Barofsky pokes holes in arguments made repeatedly over the past 14 months by [GSG], AIG's largest trading partner and recipient of $12.9 billion in taxpayer money in the bailiut, that it had facced no material risk in an AIG default--that, in effect, had AIG cratered, [GSG] wouldn't have suffered damage. ... As Goldman prepares to pay out nearly $17 billion in bonuses to its employees in one of its most profitable years ever, it is important that an authoritative, independent voice like Mr. Barofsky's reminds us how the taxpayer bailout of AIG benefited Goldman. ... Regarding his firm's own dealings with AIG, Mr. [Lucas] van Praag said that Goldman believed that its 'exposure was close to zero; because it insulated itself from a downturn in AIG's fortunes through hedges and collateral it had already received. ... So is Janet Tavakoli, an expert in derivatives at Tavakoli Structured Finance, a consulting firm. 'On Sept. 16, 2008, David Viniar, [GSG's] chief financial officer, said that whatever the outcome at AIG, the direct impact of Goldman's credit exposure would be immaterial,' she said. 'That was false. The report states that if the [NYFed] had negotiated concessions Goldman would have suffered a loss.' ... 'The prices of the collateralized debt obligations against which Goldman bought protection from AIG were in sickening free fall, and the cost of replacing AIG's protection would have been sky-high,' she said. 'Goldman must have known this, because it underwrote some of those value-destroying CDO's.' Ms. Tavakoli argues that [GSG] should refund the money it received in the bailout and take back the toxic CDO's now residing on the Fed's books--and to do so before it begins showering bonuses on its taxpayer-protected employees. 'AIG, a sophisticated investor, foolishly took this risk,' she said. 'But the US taxpayer never agreed to be a victim of investment that should undergo a rigorous audit'," my emphasis, Gretchen Morgenson at the NYT, 22 November 2009, link: http://www.nytimes.com/2009/11/22/business/22gret.html.
The NYFed didn't play "chicken" with Vampire Squid (VS). The correct response was to have VS's executives "shadowed" by FBI agents 24 hours a day. Like what happened to Joe Jett in 1994. I'm sure even Lloyd Antoinette Blankfein would realize if VS had pressed any claims, he would be indicted for something. As Laverntiy Beria said, "Show me the man, and I'll find you the crime", my 16 October 2009 post: http://skepticaltexascpa.blogspot.com/2009/10/which-mob-3.html. Well Mary Schapiro, read this and compare it to VS's claim it was fully hedged and had no AIG exposure. If true, it's because Timmy Boy put $85 billion into AIG. I think Barofksy is close to the truth here. "Improper and criminal"? Fine, VS, The NYFed should have said, "We will put out a press release 9:00 AM tomorrow with your statement. You have until 8:59 AM tomorrow to retract it. What do you want"? Even VS's attorneys could figure out what that meant. Suggestions? Read my 12 and 13 May 6 September 2009 posts: Hey Preet Bharara(PB), can you indict David Viniar (DV) for securities fraud based on his public pronouncements? Look into it. Boy. Or are you on VS's payroll? Here are some of my prior related posts:
Saturday, November 28, 2009
Friday, November 27, 2009
"Desperate for cash amid the worst fiscal crisis in years, New York State is pursuing tax debtors more aggressively than ever before, doubling the number of cases it is investigating and seeking to collect from delinquents ranging from JPMorgan Chase to an out-of-business convenience store on the Bowery. ... By the end of this year the state's Department of Taxation and Finance will have filed the largest number of warrants ever in a single year and settled about a million open cases, the most in state history", Nicholas Confessore at the NYT, 10 November 2009, link: http://www.nytimes.com/2009/11/10/nyregion/10taxes.html.
Quoted without comment.
There is no place in NY for the middle class. Leave.
Thursday, November 26, 2009
Wednesday, November 25, 2009
"The acquittals of two former Bear Stearns Cos. hedge-fund managers on securities-fraud charges is causing some soul-searching amid prosecutors who hope to hold Wall Street accountable for excessive risk-taking that helped lead to the financial crisis. ... This is particularly true for the investigations of former executives at [LBHI] and [AIG] which could be brought by the US attorney in Brooklyn, people famuilar with the matter have said. The Bear case was tried in Brooklyn. A spokesman for the Brooklyn US attorney declined to comment. ... Andrew Hruska, a former federal prosecutor [said] 'There's not as much unthinking animus [against Wall Street] by jurors as some prosecutors believe, and they can't just count on juries to gloss over facts that don't fit with the government's theory.' ... To be sure, the Bear case had certain unique characteristics, such as judicial rulings and expert witness testimony that was favorable to the defense. These advantages mightn't come into play in future cases. ... But the jury found that the emails, when read in their entirety, showed that the defendant's private ruminations weren't at odds with public comments", my emphasis, AE at the WSJ, 12 November 2009, link: http://online.wsj.com/article/SB10001424052748703811604574529921128557610.html.
"The quick 'not guilty' verdict reached Tuesday afternoon by a Brooklyn jury in the federal criminal trial of two former Bear Stearns hedge fund managers was at once surprising--for its failure to comport with the zeitgeist--but also entirely understandable, based on a close reading of the prosecution's arguments and the evidence the judge allowed to be introduced. 'There was a reasonable doubt on every charge, one juror told the Times afterward. 'We just didn't feel that the case had been proven.' ... But the jury eventually saw the entire message, in which Mr. Tannin ruminated at length about various courses of action ans seemed to be striving to make the soundest financial choice. In other words, it was just about what you would hope your fund manager would be worrying about in a precarious time. ... For now, [C&T] remain the only bankers indicted for their professional behavior in what became one of the worst financial crises in our history", my emphasis, William Cohan at the NYT, 12 November 2009, link: http://www.nytimes.com/2009/11/12/opinion/12cohan.html.
"The nasty juggernaut known as the US [DOJ] usually gets it man, regardless of whether or not the man targeted has committed any crimes. ... However, every once in a while, there is good news to report, and on Tuesday afternoon, the government's lousy case against former Bear Stearns hedge fund managers [C&T] was deep-sixed by a jury that could recognize the prosecutors' dearth of evidence. I don't have much confidence in federal juries, and I am sure that I never would be permitted to serve on one (Oh joy), but on this day, a federal jury in Brooklyn did its job and did it well. ... Second, they had a legal team that shot down everything that the federal prosecutors threw at them. Third, Judge Frederick Block could smell the dishonesty of the government's case and he was not afraid to do his job. Unlike most federal judges, Block did not see himself as being an arm of the prosecution, and that made a huge difference in the trial. Fourth, the government had no case. NO case. ... I closely followed this case and had a sense of where it was headed. (Interestingly, most of the media chose to present a rosy picture of the government's case, and at the breaks, reporters were seen laughing and joking with the prosecutors. ... However, the biggest howler came from prosecutors Illene Jaroslaw and Patrick Sinclair [J&S], who made off-the-record remarks that the Brooklyn jury was too unsophisticated to understand the intricacies of the case. ... First, and most important, the last thing that [J&S] wanted was for their presentation to be eye-glazing and they were hoping that the defense would present the argument that the securities markets were very complicated and maybe jurors should not try to figure out what constituted a crime and what was not a crime. ... Second, the reason that the trial was held in Brooklyn instead of Manhattan was because the court-shopping prosecutors wanted a Brooklyn jury, reasoning that a jury of working-class people would not be able to relate to a couple of once-wealthy Wall Street traders. [J&S] purposely wanted what they believed would be an 'unsophisticated' jury that would not understand the information the defense was going to present. Thus, to claim that the jury's alleged 'stupidity' was the reason that they lost is the ultimate proof that federal prosecutors are an arrogant lot", my emphasis, William Anderson at Lew Rockwell, 12 November 2009, link: http://www.lewrockwell.com/anderson/anderson270.html.
This case stank and always stank. C&T are "top executives"? It was brought to divert public attention from Vampire Squid's actions. It's the worst case since the Joe Jett fiasco, see my 8 August 2008 post: http://skepticaltexascpa.blogspot.com/2008/08/joe-jetts-alive.html.
Tuesday, November 24, 2009
Monday, November 23, 2009
Sunday, November 22, 2009
"The government's fast-moving insider-trading case is being built on information from five co-operating witnesses, some of whom received information from investors and companies that haven't been charged in the probe, potentially broadening the case, people familar with the matter said. ... The cooperators have pleaded guilty to charges including conspiracy and insider trading and are cooperating in the hope of getting lighter penalties, investigators say. ... The complaint alleges that Messrs. [Choo-Beng] Lee and [Ali] Far paid some of their sources $2,000 per quarter in exchange for information", Susan Pulliam at the WSJ, 6 November 2009, link: http://online.wsj.com/article/SB125746971902632491.html.
Black, I disagree. It appears the DOJ and SEC are acting to convince Joe Schmoe the Feds are serious about white collar crime. What should a prospective white collar criminal do to ward off the Feds? Have some Vampire Squid (VS) higher-ups take part in your scheme such that it you can't be prosecuted without bringing VS down too. Who says VS is good for nothing? Well Preet Bharara (PB), will you indict me for aiding and abetting say wire fraud, 18 USC 2, 1343? Doesn't the US Attorney's Manual state no VS senior executive should be prosecuted? Or is that in the Manual's "confidential" section?
Aparently PB has nothing important to do that he can waste time on this case. By going after some "high profile" types like the Galleon people, he diverts Joe Schmoe's attention from VS. PB, you are making a mockery of our system.
$2,000 per quarter. Wow. Lloyd Antoinette Blankfein's monthly cigar bill must be 100 times larger. This case shows one problem with DOJ prosecutors. They can't make a case without "co-operating witnesses". Well, PB, which VS can you get to co-operate?
Saturday, November 21, 2009
Friday, November 20, 2009
"Professor [Steve] Hanke argues that the chief enabler of both the Great Depression and our latest economic downturn is the [Fed], who sees itself as America's systemic risk regulator. This is the world upside down, Hanke explains: The [Fed] is the systemic risk. ... The bottom line is that the idea that government bureaucrats have enough knowledge to manage an economy well is the height of conceit--what Nobel Laureate Fredrich Hayek called the 'fatal conceit'," Walter Williams (WW), 5 November 2009, link: http://frontpagemag.com/2009/11/05/economic-myths-and-irrelevancy-by-walter-williams/
Does anyone remember JFK's adminstration and the Phillips Curve? We conquered the business cycle then! The economists here are still looking for the philosopher's stone. They are wasting their time. If they studied the Austrian Theory of the Business Cycle, they might learn something. This is pitiful. Where is George Stigler when we need him? That Lucas, a Chicago professor, should sprout this nonsense is inexcusable. Did he study the History of Economic Thought? It appears Geanakopolos has no concept of capitalization. He doesn't understand the efffects of central bank monetary base expansion on bank lending practices. This search for the "new paradigm" is an intellectual joke, see my 23 August 2007 post: http://skepticaltexascpa.blogspot.com/2007/08/alchemists-at-work.html. To end business cycles, kill the Fed. New thinking? That's laughable. Go back to gold!
I agree with WW, an economics professor at George Mason University.
Thursday, November 19, 2009
More crap from Uncle Sam. If a restructuring makes sense, no matter what the accounting, do it. See my 17 July 2008 post: http://skepticaltexascpa.blogspot.com/2008/07/schwartzman-and-mcteer-on-accounting.html. This is an accounting issue. Well PCAOB, SEC, Big 87654? Where are you on this?
Wednesday, November 18, 2009
Tuesday, November 17, 2009
Monday, November 16, 2009
Sunday, November 15, 2009
More WSJ editorializing in a news article. What "harsh" rulings? I like Rakoff more every day. Preet Bharara (PB) why not let Rajaratnam depose "your" witnesses? Are you afraid they might be impeached with inconsistent statements? Or your coaching them to give perjured testimony might be exposed? Would you suborn perjury? Would you buy my bridge over the East River? It's only $1 billion. Well PB? Will anything like this happen to Lloyd Antoinette Blankfein? hah! This case looks like another DOJ waste of time.
Saturday, November 14, 2009
Lenin gets around pretty well for a dead guy. After visiting California, my 10 July 2009 post, he is now making the rounds east of the Mississippi, link: http://skepticaltexascpa.blogspot.com/2009/07/lenin-comes-to-california.html.