Category Archives: Kleptocracy

Rajat Gupta: Did Goldman Frame Gupta To Save Its Skin?

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We know that Rajat Gupta was a big Obama supporter.

We know that Goldman Sachs switched its loyalties to Mitt Romney earlier this year, mainly out of animosity to Dodd-Frank, which they claim is crushing the banks.

As early as last year  ThirdPoint LLC, said to be part of a Michael Milken-related market racketeering network, attacked Obama.

[Third Point is a leading hedge-fund that’s  credibly alleged to have colluded with Goldman Sachs in collusive raids on rivals. Documents accidentally released in a lawsuit against Goldman Sachs by Patrick Byrne of Overstock now show that Goldman did in fact pass on non-public information of its clients to select hedge-funds .

ThirdPoint has since cut stakes in Goldman Sachs in March this year, probably sensing that the firm is due for a huge beating.]

GS’s troubles are ongoing.

In March 2012, Greg Smith, a senior manager, trashed the firm, specifically Lloyd Blankfein and Gary Cohn, for corrupting the culture…..as if that were possible.

Two other Goldman executives are under investigation for tipping caught on wire-taps, Henry King and David Loeb.

[This is the evidence that Judge Jed Rakoff wouldn’t let the jury hear. It was the core of the defense’s argument that, not Gupta, but the other proven tipsters at Goldman has passed on the Buffett tip. The jury, confused by hearsay that was wrongly included of Gupta talking about non-public non-material information to Galleon, hung the Galleon case on him and convicted on this insubstantial evidence.]

Last year,  after the SEC first began administrative proceedings against Rajat Gupta (March 2011) we heard that Lloyd Blankfein had hired a big-shot DC criminal attorney (August 23, 2011).

Then, in Feb 2012,  sources close to Goldman reported to the NY Post that the nine month long investigation would likely not lead to criminal charges.

Why not?

How did they become so sure that Blankfein wouldn’t be facing charges?

Did they fix the deal around that time?

Only a month later, March 2012, the defense reluctantly began sending particulars of its charges to Gupta.

Yet it had been investigating Big Raj for a decade, and had been on the Galleon case since 2007.

What took so long? Was there any pressure from Goldman?

Was the fix in by then, and is that why Goldman insiders were so sure that Blankfein would be off the hook?

After all. Gupta is a RETIRED director at Goldman, and his main professional association is with McKinsey, not with Goldman.

He had nothing to do with the trading culture of Goldman that was the source of its problems.

He just sat on a board, which probably met a few times a year. The public, angry at Goldman, wouldn’t know that they’d been fed Gupta, to protect the core of Goldman itself.

Did Blankfein figure out that throwing overboard a South Asian patsy, albeit a powerful one, one associated with the loss of jobs to Americans, would save his skin in the media, dominated, rightly, by anger over the financial crisis?  Did it help that Gupta was also an Obama donor?

That Blankfein had an eye on PR at this time is clear because around the same time that he  made some other interesting moves, as I noted earlier.

1. He announced his support for Romney (January 2012)

2. He told the press that Goldman was in the clear (February 2012)

(This was around the time the defense was asking for particulars of the charges to be sent)

3. Bharara starts sharing Brady material (Feb 2012)

In March 2012, a month later, Bharara was finally forced to disclose what specifically he had on Rajat Gupta.

4. Blankfein was hired as a public spokesman for gay marriage by Human Rights Campaign  (February, 2012).

The timing of all these events is surely extremely suggestive…

Blankfein’s attorney, Reid Weingarten, represented WorldCom CEO, Bernie Ebbers, who was convicted in 2005 of fraudulent accounting, in the largest such scandal in US history until the Bernie Madoff ponzi.

Charles Gasparino at The New York Post:

“Goldman Sachs will not support Obama,” the firm’s CEO, Lloyd Blankfein, muttered at a recent dinner.

It was a meeting with the CEO of Blackrock, Larry Fink, himself another of Wall Street’s top Obama boosters back in 2008. But “Larry is looking for someone to support this time,” a friend of Fink told me.

Blankfein has apparently found his pick. According to people who know him, Blankfein’s bet is that Romney will win the Republican nomination fairly early, putting him in a decent position to win the presidency — and in office does his best to water down some of the more insane aspects of the Dodd-Frank financial-reform law.

Some caveats: Romney barely won the Iowa caucuses and still faces much conservative skepticism about his various flirtations with big government as Massachusetts governor. Goldman still has many committed Democrats, and Wall Street support can be fickle. Blankfein might well reverse his bet if Obama takes a commanding lead in the polls.

But with the polls fairly even, the firm so far seems to be betting big that the GOP base will conclude that Romney has the best chance of winning over independents and beating the president in November. That would allow a reversal of Obama’s most leftist policies — including financial reform, which threatens to strangle Goldman and all the big banks while doing little to address the core problems that led to the 2008 collapse.

What makes Goldman’s move to the right so striking is just how far to the left it was in 2008. The Goldman community gave more than a $1 million to the 2008 Obama campaign, bested only by donors tied to the ultraliberal University of California. But the latest contribution records (through the end of September) show that Goldman-linked givers barely crack the top 20 of Obama donors, with a little more than $50,000 toward his 2012 re-election effort.

By contrast, Goldman-linked donors are Romney’s leading source of corporate campaign cash, spending $367,200 on his 2012 effort so far. That’s nearly $127,000 more than the firm put up for 2008 GOP nominee John McCain.

Not that Goldman has suddenly become a hotbed of Tea Party conservatism. Its beef with Obama is focused almost entirely on Dodd-Frank’s impact on its bottom line.”

Rajat Gupta: The N****** Of Wall Street

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(Source: Jury Representativeness: It’s No Joke In the State of New York http://papers.ccpr.ucla.edu/papers/PWP-DUKE-2011-001/PWP-DUKE-2011-001.pdf)

Ash Jen comments on an article at The Economist, “An Unlucky Man,” on the Rajat Gupta verdict:

1. David Sokol, an executive of Berkshire traded on his own account based on information available to Berkshire executives. There was NO case bought against him even when there is 10x more evidence available against him and who [sic] made couple of million dollars directly.

[Lila: Did they wire-tap Warren Buffet and Sokol?]

2. The other Goldman guy who provided information to Rajaratnam still works for Goldman. There was no case bought against him either.

[Lila; Commenter is referring to David Loeb. He doesn’t mention, mind you, Henry King and Mr. X, as well as a possible fourth person at Goldman tipping Galleon, and the multiple employees who had worked at both Galleon and Goldman. He doesn’t mention Blankfein and Gary Cohn who were named publicly by their own senior manager, Greg Smith, in March this year as being the source of Goldman corruption. Rajat Gupta was not mentioned by Smith.  Was Smith wire-tapped? Has he been subpoenaed. Of course, Smith, who joined in 2000, wants us to believe Goldman was just bouncing corporate babies on its knees until then. Haha, as the financial press, belatedly points out, and toldja! since we pointed this out repeatedly much earlier.

3. John Edwards clearly violated the rules of election fund [sic]. He got away scot free.

[Lila: He should have. It was a stupid vindictive case]

4. Mr. Corzine is another name.

[Lila: Now we’re talking]

All, I am saying is Indians are blacks of white collar crime in this country. For same level of evidence, they are prosecuted at a much higher rate than white guys. This is exactly what happens for blacks for low level criminal activity.

Black defendants are convicted at an 81 percent rate and white defendants at a 66 percent rate in an all white jury.

When the jury pool includes at least one black potential juror,conviction rates are almost identical.”


(Source: Jury Representativeness: It’s No Joke In the State of New York http://papers.ccpr.ucla.edu/papers/PWP-DUKE-2011-001/PWP-DUKE-2011-001.pdf)

Tyler Durden On The Plunge Protection Team

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Tyler Durden at Zerohedge has this week’s important report. None of it is surprising if, like me, you are a paranoid conspiracist, tired of being proved right over and over and over The report only confirms what any sensible observer, who wasn’t biased or ideological, could have seen.

I differ from Durden on a number of things, one being that I’m not sure the answer to our problems is an expansion of Federal regulation or the Department of Justice.

But I don’t fall into the opposite school of thinking, either. Let’s destroy national sovereignty isn’t the solution. I think there are other approaches, but since no one asked me, I’ll keep them to myself.  Let the ideologues knock themselves out. It’s too much fun watching to stop it.

The ideological divide, and purist positions are part of the problem, not the answer. And I wouldn’t be surprised if I were to find out that it has been set up that way intentionally. It certainly plays into controlling the terms of the debate.

Be that as it may, my position is that “insider trading” is secondary to the entire post-war conduct of the state-corporate complex.

Still, does that mean we need to defend Paulson…or Gupta…if they are guilty as charged? No. Live by force and fraud, die by force and fraud is a reasonable approach to take.

We needn’t take the part of the prosecution. Indeed, we can’t, when we remember how many people were lying on their loan forms, how many journalists had their lips stuck to the backsides of politicians, celebrities and Wall Street bigwigs they were supposed to be covering, and how many regulators looked the other way through it all.

But it is also wrong to think of Paulson or Gupta as private citizens either. They are BOTH king-pins of the state-corporate complex.  We don’t know exactly what either did wrong, and at this point Gupta’s actions look like peanuts next to the role of the plunge-protection team, but let’s wait and see it unfold.

I feel compassionate to them as human beings, for sure. And my own take was always that Paulson should just have been asked to step down, return that part of his fortune that was  dishonestly acquired to the victims or give it away to some charity of his choosing.

No waste of tax-payer money, no show trials, no time wasted.

But you know, in that case, we will also have to let the jails open and let the population out too. Including murderers (you don’t know what led them to kill, do you?).

If we are going to be determinists (“Bernanke’s money printing” made me steal and lie, your honor), then surely murderers should be let out too (“Child abuse made me kill) and serial cannibals (“Vicious snuff movies made me what I am, your honor). Let them all go.

And while you’re at it, stop ANY corporation or individual from using the laws (backed the by the state) too.

Where is the libertarian outrage over Googe’s lawsuits (using Federal courts) against competitors? Where is the outrage over corporate non-disclosure agreements (upheld by federal courts) signed under duress of various kinds to hide even criminal wrong-doing? Where is the outrage over blackmail and bribery used to steal what are by common understanding public funds meant for public use or to damage weaker firms or individuals? No outrage, right?

Instead, libertarians selectively defend fraud (“no such thing as IP”; no such thing as blackmail; no such thing as fraudulent advertising or marketing; no such thing as damaging pornography; no such thing as bribery).  Or rather, they’re all good things!

You get my drift.

Behold the ideologue. He’s not a bad guy. He’s even a good guy. But he’s become too clever in his conceit (pun intended…ideology is an extended conceit…in the literary sense… and it is conceited in the moral sense). So clever that common-sense and honor have fled long ago.

[Links and tidying up to follow…I just had to unburden myself of my feelings this morning. And by the way, I’m quite sure some of these blogs on the libertarian circuit are “sponsored” by various parties” as go-to sites.

I do go to them. But I still think my own thoughts.

Zerohedge:

“Today, BusinessWeek’s Michael Serrill and Jonathan Neumann have released a blockbuster report based on a FOIA response by the Treasury, which proves that in America rules are only for little people, that this country has been a banana republic for years, that Animal Farm was spot on, and gives excruciating detail of how Hank Paulson tipped off a select group of Goldman diaspora hedge fund managers about the eventual failure of Fannie and Freddie 7 weeks ahead of this information becoming public knowledge. The report basically is a summary of a meeting that took place at the offices of Eton Mindich’s Eton Park headquarters on July 21, 2008, 7 days after his famous ‘“If you have a bazooka, and people know you have it, you’re not likely to take it out,” speech and 7 weeks before both GSEs effectively filed for bankruptcy and were put into conservatorship. Now if it only ended there it would have been fine – a case of potential criminal collusion between the government (although nothing specific against Paulson as he didn’t actually trade: he just made sure his former Goldman colleagues made money), and the 0.00001% in the face of a few multi-billionaires who most certainly did trade on material non-public information sourced by Hank. Where it however gets worse is when one considers the actual role of one Eric Mindich in the hierarchy of the Asset Managers’ committee of the President’s Working Group on Capital Markets, better known of course as the PPT: a topic we discussed first back in September 2009 when we asked “What Is Goldman Alum Eric Mindich’s Role As Chair Of The Asset Managers’ Committee Of The President’s Working Group?” Back then we did not get an answer. Luckily, courtesy of a few answered FOIA requests, some real investigative journalism, and not reporting for the sake of brown-nosing just so one can get soundbites for their next name dropping “blockbuster” and straight to HBO movie, we are starting to get the full picture of just how high in US government the Goldman Sachs controlled “crony capitalist” adminsitration truly runs.

Before we get into the details of Mr Mindich’s curious relationship with the government, here is the gist of the BusinessWeek piece, which as noted focuses on Paulson who “said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.”

The gathering comprised some of Wall Street’s most storied investors. Mindich, a former chief strategy officer of New York- based Goldman Sachs, started Eton Park in 2004 with $3.5 billion, at the time one of the biggest hedge-fund launches ever. [Dinakar] Singh, a former head of Goldman’s proprietary-trading desk, also began his fund in 2004, in partnership with private- equity firm Texas Pacific Group Ltd. Lone Pine’s [Stephen] Mandel worked as a retail analyst at Goldman before joining Julian Robertson’s Tiger Management LLC, one of the most successful hedge funds of the 1980s and 1990s. He started his own firm in 1997. [Daniel] Och was co-head of U.S. equity trading at Goldman before founding Och-Ziff in 1994. The publicly listed firm managed $28.9 billion in November. One other Goldman Sachs alumnus was at the meeting: Frank Brosens, founder and principal of Taconic Capital Advisors LP, who worked at Goldman as an arbitrageur and who was a protege of Robert Rubin, who went on to become Treasury secretary.

In other words the point of the meeting was nothing short of the former Goldman CEO telling all his former Goldman colleagues just what he was planning on doing in his capacity as Treasury Secretary.

Others also benefited: Non-Goldman Sachs alumni who attended included short seller James Chanos of Kynikos Associates Ltd., who helped uncover the Enron Corp. accounting fraud; GSO Capital Partners LP co-founder Bennett Goodman, who sold his firm to Blackstone Group LP in early 2008; Roger Altman, chairman and founder of New York investment bank Evercore Partners Inc.; and Steven Rattner, a co-founder of private-equity firm Quadrangle Group LLC, who went on to serve as head of the U.S. government’s Automotive Task Force.”

The Invisible Wealth Of The Rothschilds

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Accounting for the Rothschild Wealth and Influence

by Markus Angelicus: November 21, 1997 :

Morton (1962) noted that the Rothschild wealth was estimated at over $6 billion US in 1850. Not a significant amount in today’s dollars; however, consider the potential future value compounded over 147 years!

Taking $6 billion (and assuming no erosion of the wealth base) and compounding that figure at various returns on investment (a conservative range of 4% to 8%) would suggest the following net worth of the Rothschild family enterprise:

$1.9 trillion US (@ 4%)
$7.8 trillion US (@ 5%)
$31.5 trillion US (@ 6%)
$125,189.1 trillion US (@ 7%)
$491,409.0 trillion US (@ 8%)

To give these figures some perspective consider these benchmarks:

A little of $300 billion US buys every ounce of gold in every central bank in the world (see John Kutyn’s estimate (http://www.gold-eagle.com/gold_digest/kutyn111597.html).
U.S. M3 money supply August 1997 was $5.2 trillion
U.S. debt is currently $5.4 trillion.
U.S. GDP (1997; 2nd Q.) is $8.03 trillion.
George Soros’ empire is worth an estimated $20 billion.

Arnaud de Borchgrave writes on April 28, 2011 in The Washington Times:

(You will see that his assessment of the crisis is exactly mine)

“An original $100,000 stake in Mr. Soros‘ fund was worth $150 million by 1994. Between 1970 and 2000, the return was 3,365 percent. (For 10 consecutive years, it did 42.6 percent per year.) In 1992, Mr. Soros bet billions against the British pound – and broke the Bank of England (“Black Wednesday”).

Comment:

I needn’t remind you that this is BEFORE the bursting of the stock market bubble, 9-11, the 2003 stock market revival that was stimulated by the Iraq war, the housing bubble, the 2008 crash, and the gold boom, all of which provided ample opportunities for people in the know to make killings in the market.

Related Posts

The 24..er..4 Companies that Rule the World

See also Zahir Ebrahim: My Experiments In Confusion: The Invisible House of Rothschild

and Zahir Ebrahim: My Experiments In Confusion: The Omnipotent Rothschilds

and Arnaud de Borchgrave: Geneva Gnomes’ Global Dread

(hat-tip to WeAreChange.org, Oklahoma)

Deconstructing Soros’ New World Architecture

BCCI: Hit Man For The IMF

Soros: Front For N.M. Rothschild

The CIA, the US Govt, the Stock Market, and Drug-Running

John Paulson’s Man at Treasury Will Design Regulations

Civil Society + Internationalist + Anonymous = World Government

The Easter Bunny On the DTCC

Rajat Gupta Faces Possibly 100 Years In Prison

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Update 3

Please note: the charges against Gupta are just charges and that he denies having passed any information to Rajaratnam. He also denies having profited from any of his Galleon investments. In fact, he claims he lost his entire investment. Also, this is perhaps the first time someone of Gupta’s stature has ever been charged with insider trading, which is usually never brought against managers, and never against anyone of his reputation, which, from all accounts, is sterling.

Update 2: It seems Gupta has been involved has also been accused of some shady deals in India that involved off-shore accounts, shell accounts, price-fixing (hmm… the government doesn’t fix prices?), and money-laundering, including an attempt to buy the Tamil Nadu Mercantile Bank, a very important bank in a state that receives the most foreign investment (Toyota, Ford, Hyundai all have shops there).

Who are those foreign investors, I wonder? And why did they want to buy a 33% stake in that particular bank? Remember TN is the state where Tamil separatism is strong and the Afro-Dalit movement is being fueled by foreign-funded NGOs and missionaries with divisive and false theories of history.

Update (November 21): I’m going to correct myself here.  I think the insider-trading charges by themselves are a side-show, but I have a feeling that they are only the tip of something else. And that something else might lie in India.

ORIGINAL POST

I was wrong about the threat to the US economy. I thought it had something to do with a tidal wave of cheap money fueling massive fraud, corruption, and crime.

I was thinking big. Along the lines of  trillions of dollars of derivatives, world-wide depression, and collapse of the paper-money system. At the heart of it was the Federal Reserve and a network of firms and speculators with Goldman Sachs at the center.

I was wrong.  It seems Goldman Sachs is actually one of the witnesses, standing in the wings, ready to testify against the really bad guy.

That would be this bloke,  Rajat Kumar Gupta.

Gupta is the former Worldwide Managing Director at McKinsey, board member of Goldman Sachs and Procter & Gamble (among many others); director of the Qatar financial authority; chairman of the board of the Indian School of Business, Harvard Business School, MIT Sloan (among others); Co-Chair of the American India Foundation and member of the board of the Bill and Melinda Gates Foundation (among others); and UN Sec. Gen. Special Advisor on UN Management Reform.

He is no longer any of these, of course.

He resigned his positions following his indictment on October 2, 2011 on six criminal counts of securities fraud and conspiracy in the Galleon Group investigation that has already led to a 11-year prison term for the head of Galleon, Sri Lankan born Raj Rajaratnam on 14 counts of insider trading and securities fraud (US v Rajaratnam). The Feds, bless their stony hearts, actually wanted to give him 19-24 years for doing what members of Congress do routinely, without a blink from anyone.

Insider-trading is not a victimless crime as it’s portrayed to be, but it’s also not out-and-out fraud.

And Gupta had a sterling reputation in the corporate world for decades before these charges.

Just for contrast, the Crazy Eddie case, perhaps the most notorious case of fraud before Enron, involved routine embezzlement of millions in company funds, falsification of accounts, money-laundering, securities fraud, and insider trading.  It earned Eddie only eight years in jail, of which he served less than two.

This is equality before the law?

Gupta was first charged by the SEC on March 2011 with administrative civil insider-trading charges for passing material non-public information to Rajaratnam, an old friend. He counter-sued, and both suits were dropped in August 2011.  Then came criminal charges, and Gupta surrendered to the FBI on October 26, before he was released on $10 million bail.

A lower middle-class boy from Calcutta who lost both parents in his teens, Gupta rose to become the first Indian-born CEO of a multinational  and a multimillionaire who hobnobbed with the richest men on Wall Street.

It was Some speculate that perhaps the proximity to the easy money of the hedge-fund crowd that led to the tragic end of what looks like an extraordinary career. Gupta was not just professionally successful but well-respected for his contributions to India’s development and humanitarian needs (especially in the wake of the Gujarat earthquake).  Apparently, whatever he did, he didn’t do it with an easy conscience, if Rajaratnam’s taped conversations are to be believed.

But something tells me there’s a whole lot more going on here than these details.

Trading on non-public information is a big no-no, true. But, Goldman Sachs gets to testify against Gupta? Look up the dictionary for “racketeer” and there’s a picture of G-Sachs,  as I’ve written before.

But I don’t see any charges, let alone a decade of jail-time, for, say, Hank Paulson.

Isn’t it strange that people like Robert Rubin (Citigroup’s corrupt chair who as Treasury Secretary tried to pull strings to prevent the downgrading of Enron’s debt rating when Citi was its biggest creditor); Hank Greenberg (whose years at AIG turned it into a hairball of corruption); Alan Greenspan (currency counterfeiter and market manipulator); Ben Bernanke (currency counterfeiter); and all the other malefactors who really did the damage to the world economy are still in business?

One of the insider tips for which Gupta was indicted was this one:

“Jurors in Rajaratnam’s trial also heard a telephone conversation, secretly wiretapped on Sept. 24, 2008, in which Rajaratnam tells Horowitz he had gotten a phone call saying “something good may happen to Goldman.” Prosecutors said Rajaratnam was referring to a tip from Gupta that Warren Buffett’s Berkshire Hathaway Inc. would invest $5 billion in Goldman Sachs.”

Say what?  Rajaratnam gets 11 years in jail for getting a tip about Buffett’s investment in GS?

And Buffett? Wasn’t that investment insider-dealing on Buffett’s part?

Economic Policy Journal notes:

” It appears that Warren Buffett has been given a pass for many years. His investment in Goldman Sachs at the height of the recent financial crisis, just before the government announced a bailout of Goldman and other investment banks, is highly suspicious. The purchase sure looks like a crony government-Buffett deal.
Early on I raised questions about Buffett’s timing on his recent Bank of America purchase. Now, NyPo is featuring questions about Buffett’s timing.”

I blogged about Buffett’s sweetheart deals in 2009, in this post and this one.

Let’s have a little proportion here, or else some of us are going to start thinking that these show trials (because that’s what they are) are just a convenient way to keep Asian Indian businessmen in their place and make it so they can’t challenge the older, more entrenched and powerful networks on the Street.

This is how a CFO from Infosys sees it:

“The government seems to have gathered enough evidence to show his complicity. What hurts is that Gupta’s punishment, if he is found guilty, will be disproportionate to his crime. And he, and Raj Rajaratnam of Galleon, are being publicly shamed and scanned while the Wall Street perpetrators of the U.S. sub-prime crisis which has led to massive joblessness and global economic recession, are being bailed out with taxpayer money and apparently forgiven their sins. “No one is punishing those who caused the global financial crisis through fraudulent means,” says Mohandas Pai, chairman of Manipal Universal Learning and former chief financial officer of Infosys Technologies, Bangalore.”

Still, as I’ve said, I still think there’s more than meets the eye here.

There is something much bigger than a few shady insider deals at stake.

This has to do with the whole anti-corruption and anti-money laundering drive in India. And, sure enough, the Indian government is investigating Gupta for his deals in India, as well.

I’ll bet all this is about fueling the Anna Hazare movement, with its weird resemblance to OccupyWallStreet, which, by the way, let out cheers when it heard about Gupta….

Curiouser and curiouser…

Rahm Goes Back To Chicago..

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Rahm Emanuel is being  reported as stepping down as White House Chief of Staff tomorrow.  Two close associates said that Emmanuel would be making an announcement over the weekend that he would be making a bid for Mayor of Chicago, now that Mayor Richard Daley will not be seeking reelection.

A piece at Slate sums up the reactions from the establishment and the “professional left.” To the former and to the media, Emanuel was a “fixer” who made things work. To such outlets as Daily Kos he was a Rasputin who sabotaged the progressive agenda.

But with no Rahm around, it’s not clear whom the left will have to blame for the failures of this administration.

Cyber Wars: Robot Traders Spoof High Frequency Trades

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Alexis Madrigal writes at The Atlantic about robot traders that spoof market orders and introduce potentially dangerous “noise” into high-frequency trading that could end up in a flash crash. The spoof trades can be used to coordinate what is effectively a denial service attack on certain nodes in the financial network. Essentially this is the same as what happens in the other DNS attacks in infrastructure critical to national security. It amounts to clogging the system with data so that it slows down and eventually seizes up.

“High-frequency traders have become a target for all kinds of people, but most of them appear to make their money being a little faster and little smarter than their competitors. And if they are playing by the rules, they improve the quality of markets by minuscule amounts trade after trade after trade.

But the algorithms we see at work here are different. They don’t serve any function in the market. University of Pennsylvania finance professor, Michael Kearns, a specialist in algorithmic trading, called the patterns “curious,” and noted that it wasn’t immediately apparent what such order placement strategies might do.

Donovan thinks that the odd algorithms are just a way of introducing noise into the works. Other firms have to deal with that noise, but the originating entity can easily filter it out because they know what they did. Perhaps that gives them an advantage of some milliseconds. In the highly competitive and fast HFT world, where even one’s physical proximity to a stock exchange matters, market players could be looking for any advantage.

“They are moving the high-frequency services as close to the exchanges as possible because even the speed of light matters,” in such a competitive market, said Stanford finance professor Peter Hansen.

Given Nanex’s data, let’s say that these algorithms are being run each and every day, just about every minute. Are they really a big deal? Donovan said that quote stuffing or market spoofing played a role in the Flash Crash, but that event appears to have had so many causes and failures that it’s nearly impossible to apportion blame. (It is worth noting that European markets are largely protected from a similar event by volatility interruption auctions.)

But already since the May event, Nanex’s monitoring turned up another potentially disastrous situation. On July 16 in a quiet hour before the market opened, suddenly they saw a huge spike in bandwidth. When they looked at the data, they found that 84,000 quotes for each of 300 stocks had been made in under 20 seconds.

“This all happened pre-market when volume is low, but if this kind of burst had come in at a time when we were getting hit hardest, I guarantee it would have caused delays in the [central quotation system],” Donovan said. That, in turn, could have become one of those dominoes that always seem to present themselves whenever there is a catastrophic failure of a complex system.

There are ways to prevent quote stuffing, of course, and at least one of the members of the Commodity Futures Trading Commission’s Technology Advisory Committee thinks it should be outlawed.

“Algorithms that might be spoofing the market are something that should be made illegal,” said John Bates, a former Cambridge professor and the CTO of Progress Software. But he didn’t want this presumably negative practice to color the more mundane competitive practices of high-frequency traders.”

Vatican Bank Being Investigated For Money Laundering

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From Newsmax comes a report that the head of the Vatican bank is being investigated for money-laundering. This is not the first time the the Institute for Religious Works (IOR), as it’s called, has come under suspicion for less than good deeds. It  was also involved in the Banco Ambrosiano scandal in 1982, a scandal that’s even found its way into pop culture (for eg. in The Da Vinci Code and in a recent TV drama).

“The head of the Vatican bank is under investigation for suspected money laundering and police have frozen 23 million euros ($30.21 million) of its funds, Italian judicial sources said on Tuesday. Neither Ettore Gotti Tedeschi, who has been at the helm of the bank for a year, nor the Vatican spokesman would comment immediately on the case, which involves alleged violations of European Union money laundering regulations.

The sources said Gotti Tedeschi and another executive of the Institute for Religious Works (IOR), as the bank is officially known, had been put under investigation by Rome magistrates Nello Rossi and Stefano Fava.

The sources said Italy’s financial police had preventively frozen 23 million euros of the IOR’s funds in an account in an Italian bank in Rome.

Two recent transfers from an IOR account in the Italian bank were deemed suspicious by financial police and blocked.

One was a transfer of 20 million euros to a German branch of a U.S. bank and another of 3 million euros to an Italian bank.

Gotti Tedeschi, a devout Catholic who has taught financial ethics at the Catholic University of Milan, is a close adviser to Treasury Minister Giulio Tremonti.

He is currently also head of an Italian unit of the Spanish Banco Santander , according to its website, and serves on the board of several major Italian banks.”

Read the rest of this piece at Newsmax.com.

More details at Associated Press.

UN: Abandon Dollars, All Ye Who Enter NWO (Updated)

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Update: (July 1): The alternative sites have just picked this up today July 1. See 321gold (via Press TV, Daily Reckoning)… Chuckle.  You get the scoop here…

One more call for replacement of the dollar with SDRs, which will be under central management at the BIS (Bank of International Settlements). My notes in italics.

Reuters, Tuesday, 29 Jun 2010

“A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value. Continue reading →

BP Oil Spill: Criminal Negligence Or Sabotage?

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I couldn’t find any other convenient run-down of the evidence pointing to sabotage or extreme negligence in the BP oil spill, so I’ve linked PrisonPlanet.com’s report.  I’ve checked the material and it’s well-sourced and confirms my own research, so I’m comfortable posting it. Continue reading →