“The soldier does not wish to appear a coward, disloyal, or un-American. The situation has been so defined that he can see himself as patriotic, courageous, and manly only through compliance.”
– Stanley Milgram
SEC Brings Action Against Goldman Sachs
Update 1(April 17)
Glad to see that Simon Johnson is making the same point I make here, that charges should also be brought against John Paulson, or the system is broken beyond repair.
“SAN FRANCISCO (MarketWatch) — The Securities and Exchange Commission on Friday charged Goldman Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product related to subprime mortgages.
The SEC alleged in a lawsuit that Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 158.38, -25.89, -14.05%) structured and marketed a collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities. However, it failed to disclose the role that a major hedge fund, Paulson & Co., played in the portfolio selection process as well as the fact that the hedge fund had taken a short position against the CDO.”
This hit the FTSE, which fell 100 points, and the DJIA, 120 points and caused a tumble in GS’s share value, down by about (GS 165.40) 18% this morning. Investment banks and brokerages are down 7.6%.
This is likely to start a sell-off in the financial sector as a whole (down 3.1%) and possibly the much waited next leg down of the great correction that began in 2007-08.
Michael Roston points out the obvious. The amount in question in the Abacus deal is $15 million bucks, which is chump change.
Point two. No one’s saying anything about John Paulson, who made $1 billion out of it.
[Or, to take another instance, what about the Greek government, which is also getting bailed out….by tax-payers of another country? No culpability for the governments who get into these kinds of deals?]
You’ll also notice, as I blogged earlier, that George Soros, another speculator, has also called for the IB’s to be broken up (using the same argument, “too big to fail means too big to exist” – something also pushed by David Einhorn and the left-liberals). Now, I can see the sense in the “too big to fail, too big to exist” mantra, especially, if it had been used against the banks before they helped themselves to tax-payer money. But I wonder why it’s being repeated now, after the fact….and not then..
I didn’t hear these same critics of size pipe up at that crucial time.
Why?
Did GoldmanTip Off Galleon?
“Wall Street’s most powerful firm is being drawn into the government’s sprawling insider-trading investigation.
Prosecutors are examining whether a Goldman Sachs Group Inc. board member gave inside information about the Wall Street firm to Galleon hedge-fund founder Raj Rajaratnam during the height of the financial crisis, people close to the situation told The Wall Street Journal.”
Rahm And The Killer Hedgie
Yves Smith has a piece at naked capitalism related to the extended Pro Publica (http://www.propublica.org/special/the-timeline-of-magnetars-deals) report by Jake Bernstein, Jesse Eisinger, and Krista Kjellman Schmidt that describes how hedgies manipulated subprime CDOs:
“Magnetar
1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies
2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created Continue reading
The CIA, the Banks, and Drug Running
Opium and the CIA, Peter Dale Scott:
“Protection for Drug Trafficking in America
Thus it is not surprising that the U.S. Government, following the lead of the CIA, has over the years become a protector of drug traffickers against criminal prosecution in this country. For example both the FBI and CIA intervened in 1981 to block the indictment (on stolen car charges) of the drug-trafficking Mexican intelligence czar Miguel Nazar Haro, claiming that Nazar was “an essential repeat essential contact for CIA station in Mexico City,” on matters of “terrorism, intelligence, and counterintelligence.” When Associate Attorney General Lowell Jensen refused to proceed with Nazar’s indictment, the San Diego U.S. Attorney, William Kennedy, publicly exposed his intervention. For this he was promptly fired. Continue reading
More On Einhorn’s Rumor-Mongering About Lehman
Matthew Goldstein and Steven Eder
(Hat-tip to Sean at Deep Capture):
“In forwarding Starr’s email to the SEC, former Lehman General Auditor Beth Rudofker wrote: “I phoned you earlier to review and pass on some recent rumor activity and information that is concerning to us.”
In June, Rudofker sent another email to lawyers at the SEC, pointing out additional “rumors” about Lehman that she said “continue to be destructive.” In her long email to the SEC, she said: “We have been able to prevent 3 stories containing these specific rumors that were set to run.”
Also included in the documents is a back-and-forth email exchange between Einhorn and Callan, in which Callan accused him of being “very disingenuous.” Callan said she would not have talked to Einhorn if she knew he was going to make a speech criticizing the firm’s finances.
“I can only feel that you set me up and you will now cherry pick what you like out of the conversation to your thesis,” she wrote in an May 19, 2008 email.
Einhorn defended himself in a lengthy response, saying that Callan knew Greenlight was “short” the stock when she reached out to talk to him.
“You had no reason to expect that our discussion was confidential in any way,” Einhorn wrote in response. “In fact, you knew that I do not want to be restricted in trading the stock and I did not request any information that you would not provide to any other investor who asked.”
A few days later, Einhorn gave another speech blasting the email exchange.
A spokesman for Einhorn declined to comment on Wednesday evening.
For his part, Starr now says, “obviously I was wrong” about Lehman. But he isn’t backing down on his criticism of Einhorn.
“I still stand by those words,” said Starr, who noted that his fund has $50 million under management. “I think that manipulating the market and running a high publicity business is just not appropriate behavior and disruptive to free and open markets.”
My Comment:
Goldstein is the excellent Reuters reporter whose story on Steven Cohen was reportedly spiked…
(more later)
Libertarians Rising: Helio Beltrao, Mises Brasil, and the Swedish Mises Institute
From Lew Rockwell exciting news from Brazil…and also from Sweden:
“The young Brazilian financial and ideological entrepreneur, Helio Beltrão, has done something great for the Austro-libertarian movement and the cause of liberty, for his country and the whole world: establish the Instituto Ludwig von Mises Brasil, and make it flourish. The website is already significant, and this month, MisesBrasil sponsored the first Austrian Economics conference in the country’s history. Continue reading
Airline Prices Could Go Up 25% Says Industry Spokesman
Airline prices are set to rise this summer, says an industry spokesman:
“Airline capacity and routes flown are still down compared to recent years,” said Mark Koehler, Priceline’s senior vice president, Air. in a statement.
“We haven’t experienced the widespread, aggressive airfare sales seen a year ago. In general, travelers will find that summer airfares could be as much as 25% more expensive than last year, on average, and that’s before factoring in extra fees for baggage, pillows, food and such. Travelers who want to save on air travel will need to plan ahead, be flexible and try different approaches to booking their trips,” he said.
Airlines have started to see increased traffic as travelers returned after cutting back during the recession. The International Air Transport Association recently cut its full-year loss forecast for the airline industry by half to $2.8 billion.
Shares of airlines stocks jumped this morning.”
So, for anyone planning to become a stateless globe-trotter – and we’re all for it if your wallet can take it – here’s another monkey-wrench tossed into your plans.
Not only are fees and security at airports increasing, as I’ve blogged before, but prices and services on airlines are going up too. They even have a lavatory fee coming up at budget airline Ryanair. And they’re thinking of reducing the number of lavatories to make room for more seats.
Personally, I don’t think budget airlines – unless you fly often – are much of a saver. I’d rather pay $100 more and feel free to carry as much luggage as I want, get fed regularly with something other than $5 bags of pretzels, and have wait-staff paid enough not to glower at you.
Not long before you’ll be asked to bring your own seats or stand all the way….
Soros Says Eight More Years Before Next Crash
George Soros sings the siren song of “government,” while admitting that government is the problem: Continue reading
China Defies US And Sells Gasoline To Iran
The Sino-US trade wars are heating up. On Friday, the US announced that it would impose stiff duties on Chinese-made oil country tubular goods, which are steel pipes used in the oil industry.
“According to US data, the OCTG trade case is the largest in US history against China imports valued at more than $2.6 billion in 2008 and about $1 billion last year.”
China responded on Tuesday with anti-dumping duties against the US and Russia:
“China has imposed anti-dumping and anti-subsidy duties on a U.S. specialty steel product, and also hit Russia with anti-dumping duties in the same case, its customs administration said.
U.S. producers will be assessed anti-dumping duties of up to 64.8 percent and anti-subsidy, or “countervailing,” duties of up to 44.6 percent on the grain-oriented electrical steel, it said on its website on Monday.
Grain-oriented electrical steel, also known as grain-oriented silicon steel, is used for the cores of high-efficiency transformers, electric motors and generators.
The state-backed China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters hailed the Ministry of Commerce’s April 10 ruling, which the Ministry has not yet publicly announced, state news agency Xinhua said.
“During the investigation the Ministry found that U.S. producers had received subsidies by the U.S. government, and their unfair competition hurt Chinese producers,” Xinhua said, quoting an unnamed person at the chamber of commerce.”
Meanwhile, China also announced its first trade deficit since May 2004
“According to the statistics from the General Administration of Customs, China’s exports were valued at US $112.11 billion in March, up by 24.3 percent year on year, while the imports were up by 66 percent to US $119.35 billion, trade deficit were US $ 7.24 billion. This is the first monthly trade deficit for China since May of 2004.”
What’s interesting is that this trade row with the US isn’t necessarily a sign of rising protectionism in China, as the media often reports. It seems to signal a move toward more trade with emerging markets in Asia and elsewhere. Thus at the recently concluded Boao Forum for Asia, (the Chinese Davos), the Chinese Vice-President called for open markets and not protectionism. Of course, this isn’t free trade, by any means, but state-driven mercantilism. It remains to be seen whether that is any better than state-driven protectionism.
Another example.
While some top oil-exporting countries have curbed their exports to Iran to avoid penalties from the US, state-owned Chinaoil has sold two cargoes of gasoline to Iran in defiance of the US, the first direct sales since January 2009.
As Russia has hardened its position and moved closer to the European and US stance, the Chinese move has become crucial for Iran. Iran continues to be the fifth largest exporter of crude in the world, but US sanctions have meant that its refineries have suffered from lack of foreign investment and it now relies on the world market for its gasoline needs.