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Newly, Look SEC will allow money market funds to "break the buck"
SEC Adopts New Rules for Money Market Funds
http://lawprofessors.typepad.com/securities/2010/01/sec-adopts-new-rules-for-money-market-funds.html
At its open meeting today the SEC adopted new rules designed to strengthen the regulatory requirements governing money market funds. These changes result from the financial crisis and the weaknesses revealed by the Reserve Primary Fund's "breaking the buck" in September 2008. The SEC's new rules are intended to increase the resilience of money market funds to economic stresses and reduce the risks of runs on the funds by tightening the maturity and credit quality standards and imposing new liquidity requirements.
Improved Liquidity: The new rules require money market funds to have a minimum percentage of their assets in highly liquid securities so that those assets can be readily converted to cash to pay redeeming shareholders. Currently, there are no minimum liquidity mandates.
Repurchase Agreements: The new rules strengthen the requirements for allowing a money market fund to "look through" the repurchase issuer to the underlying collateral securities for diversification purposes:
* Collateral must be cash items or government securities (as opposed to the current requirement of highly rated securities).
* The fund must evaluate the creditworthiness of the repurchase counterparty.
Suspension of Redemptions: The new rules permit a money market fund's board of directors to suspend redemptions if the fund is about to break the buck and decides to liquidate the fund (currently the board must request an order from the SEC to suspend redemptions). In the event of a threatened run on the fund, this allows for an orderly liquidation of the portfolio. The fund is now required to notify the Commission prior to relying on this rule.
S&P: THE MARKET IS LIKELY TO FALL 10%
27 January 2010 by TPC 4 Comments
http://pragcap.com/sp-the-market-is-likely-to-fall-10
According to Standard and Poors, a three pronged government attack is likely to take stocks lower over the coming weeks. The three reasons for the potential for more downside are:
1. Regulating the banks
2. Chinese rate hikes
3. Bernanke’s re-confirmation
S&P’s Chief Technican, Mark Arbeter, says the S&P 500 is likely to correct 10% further to the 1035 area. At these levels there are major trendlines, retracement levels and moving averages that should provide support to an uncertain market. The Nasdaq could fall to the 2050 level. The continuing dollar rally is only throwing fuel on the fire:
“We think a continued rally in the greenback will hurt those areas of the market that have provided a leadership role since the bear market bottom, namely emerging markets and commodities. While we think these investment choices will continue to move higher longer term, we would avoid them for now.”
Sam Stovall sees the decline as a potential buying opportunity, however. Unlike Robert Prechter, he does not see the resumption of a continued bear market:
“As a result of government interventions worldwide, global equity markets are in retreat and have stalled the 10-month bull market. While we believe the S&P 500 could decline by as much as 10%, we don’t think we are in the beginning of a new bear market. However, investors will need time to reassess the global earnings expectations as a result of governmental attempts to temper growth and prevent further financial crises.”
Source: S&P
Cash, short sell restrictions as "pre-emptive" - makes it harder to hedge WHEN this comes...S&P Downgrades US Debt
WASHINGTON D.C.—A credit-ratings firm issued a warning to the United States government about the country's borrowing, threatening to downgrade the nation's sovereign debt unless policy makers find a way to pull the economy out of its deflationary spiral while curbing public spending.
The statement from Standard & Poor's on Tuesday was the first formal declaration of concern from a ratings company about U.S. borrowing in the months since investors began to raise questions about the sustainability of government debt, estimated to have reached the size of the country's entire economic output for the year ending in March—the highest level in the industrialized world.
Yes, I just switched the word "Japan" for "U.S."
http://www.zerohedge.com/article/sp-threatens-downgrade-us-credit-rating-er-japan-excuse-me
There is no question that the U.S. is headed in this direction. Presently our GDP is about $13 to $14 trillion, and national debt is about $12.3 trillion. The news today is that the budget deficit is (shock!) higher than expected: $1.417 trillion. President Obama will announce in his State of the Union address that they will put a three year freeze on discretionary spending. The freeze will impact only 17% of the budget or $447 billion this year out of a $3.5 trillion federal budget. Defense, social security and Medicare will remain untouched. They expect to save $250 billion over 10 years. Ho hum. I understand you've got to start somewhere, but this is a small fraction of the real problem.
At the same time:
Obama and Vice President Joe Biden yesterday announced proposals for a package of tax cuts aimed at middle-income Americans that include an increased tax credit for child care and an expansion of tax credits to match retirement savings.
The White House also is backing a $154 billion jobs bill that passed the House last month. In addition, the president said Jan. 19 that he will add $1.35 billion to his budget for an education program to improve students’ test scores.
But ... This is one of those comic John Stewart moments when he gets flustered over obvious inconsistencies. But don't worry Obama will appoint a commission to resolve all of this.
By some estimates the national debt will double by 2019 and could balloon up to about $24 trillion. We'll get the dead fish from S&P long before that occurs.
Since we are pursuing the same Keynesian stimulus policies as is Japan, we will run into the same problem: a stagnating economy. Which means OMB predictions of tax revenues will be lower than budgeted.
The one thing that Japan has is savings. Their national debt is financed almost entirely by internal savings: "[S&P] noted Japan's status as the world's biggest net creditor, massive foreign reserves and the yen as a reserve currency."
While U.S. savings are growing, more than 30% of our debt is financed abroad. Which means China, Japan, U.K., Canada and other debt holders are concerned.
This means that the Administration is worried, especially after all of its promises to China. Since they can't cut spending significantly, there will be consequences:
1. Further decline of the dollar.
2. Higher debt costs because of sovereign credit downgrades.
3. Increased taxation, specifically a form of sales tax or VAT.
4. Slower growth as government sucks more capital out of the economy.
5. Inflation, as the government needs to pay off debt with cheap dollars.
I am not looking forward to the day when politicians realize there are economic consequences from their political decisions. The irony will be too great and we all will suffer from their ignorance.
PSS Attracting Put Interest-Payless Shoestores
Collective Brands March puts active
Collective Brands is recently down 23c to $19.28. PSS is expected to report Q4 EPS in early March. March 17.5 puts have traded 48 times on transaction volume of 10,219 contracts, above its open interest of 172 contracts according to Track Data, suggesting traders taking positions for downside price movement.
Moving into "urban basketball" shoes??
Collective Brands acquires ABove the Rim brand from Reebok
Collective Brands is acquiring the Above The Rim brand from Reebok International for an undisclosed amount and that Collective Licensing International, which is focused on brand building, management and licensing worldwide, will expand the ATR brand, with its rich heritage in the urban basketball market, to seize opportunities for the brand in the U.S. and across the globe.
GFRE-good story but why so volatile with FIDO owning a 12% slug. Did they flip 3m from the recent secondary?
MMR acting well...
Bernanke's STAFF opposed the Fed's AIG Bailout & now this:
A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide "troubling details" of Bernanke's role in the AIG bailout.
Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that's the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke's motives were. (source: HuffPo's Ryan Grim)
Bernanke begs Reid to support him, Reid announces accelerated reconfirmation vote Thursday.... Double dealing scum!
France's Sarkozy and UK's Brown call for a new Bretton Woods
Canny, Wrongola, Whistleblower in Fed starting to sing
- Withheld term sheet documents HAVE BEEN IDENTIFIED
- Geithner involved in giving money to GS & foreign banks
- Geithner ignored the prior efforts to settle the derivatives- Goldman initiated!!
- Paulson, Fed and Treasury are NOT insurance regulators!
What Does Senator Bunning Know, And, More Relevantly, What Does The Just Disclosed Fed Whistleblower Know?
http://www.zerohedge.com/article/what-does-senator-bunning-know
First, watch the below video. Note Senator Bunning's agreement with Zero Hedge on who the proposed head of the Fed should be (i.e., John Taylor). But that's irrelevant. What is - at 5:40 Bunning says that "Geithner will be fired by the President for his inability to handle his job as Secretary of the Treasury." True. What is even more relevant, and hints at a potential smoking gun, begins at 8:00 "[Bernanke's] staff did not agree with him [on bailing out AIG]...I am talking about an email that he sent his staff, after his staff recommended that the Federal Reserve not touch AIG, just like Lehman Brothers."
Ok fine, so Bernanke steamrolled opposition: that's nothing new - whoever thought the Fed is any more democratic than the country it is supposed to serve, surely is naive. Here is HuffPo's Ryan Grim on the matter:
A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide "troubling details" of Bernanke's role in the AIG bailout.
Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that's the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke's motives were.
And as we type, Harry Reid has noted that he wants to get a reconfirmation vote on Bernanke on Thursday - presumably before all the rot that will soon be uncovered about yet another Bernanke fiasco is made public. Hopefully the man who owns roughly $3 million in commercial real estate and is thus a direct beneficiary of a Bernanke reconfirmation, has done his math on senatorial support. A key question however is: shouldn't the debt ceiling issue be resolved first - after all the fact that our national debt "ceiling" is nothing but a joke these days, is a direct consequence of Fed policies to pile bail out upon bail out. It also leaves the question open of what additional information has to still be presented. Back to HuffPo:
Senators will be voting on Bernanke's confirmation for a second term in the coming days. But only senators on the Banking Committee have had access to documents that illuminate just what decisions he made and how he made them. And that access only came after Bunning publicly complained that Dodd and Sen. Richard Shelby (R-Ala.) were the only members of the committee could see them.
Darrell Issa identifies the specific documents that need to be disclosed (see below) and has requested from Edolphus Towns that these be made public, as the "Board's staff did not return calls" in an attempt to procure these documents directly.
Equities: More Downside To Come?
www.zerohedge.com
Submitted by Tyler Durden on 01/26/2010 15:15 -0500
Written by Nic Lenoir
We started the year saying that without a catalyst equities would trade between 1014 and 1236 for the S&P future, knowing that we think there are a number of risks that could lead to much more aggressive downside scenarios. Our outlook has not changed. And we still feel that China is one of those catalysts that could create serious problems in the market.
While the recent sell-off and risk aversion has been triggered by Obama's remarks on banking regulation, we think in the end whatever proposal he may come up with will be watered down to nothing. Every government over the past 30 years has been populist, especially in response to adverse equity market price action, so we think in the end politicians will scare themselves into doing nothing. Maybe this is the first time this principle will not be respected in 30 years, but we don't think so. Then there was obviously Paul Volcker standing in the background. He is the worst nightmare of all those who have been riding the whole of liquidity provided by governments around the world. However, as much animosity there might be between Congress and the Fed as they fight to decide who gets the stick to police around, it will be a hard task to debunk Mr. Bernanke out of his role as chairman. And no congressman really wishes he had not done what he did as in the end they have the most to lose if the established order was to be destroyed. If anything there is a greater chance Mr. Geithner's head rolls I would argue.
Meanwhile far away from this domestic political drama, China is taking steps to take liquidity. That is a development that could have far greater consequences. Indeed China's CPI is more sensitive to commodity prices as the US's (especially since we have been convinced to forget about food and gasoline) and 2009's rally in commodities means inflation numbers in China are likely to come in strong. The PBoC has no political capital when it comes to letting CPI getting far out of its target band. Congratulations to those who had called for early tightening in H1 2010. The fact is that China may start exporting its inflation through currency appreciation or yuan based inflation, and will hike rates as Chinese real estate is in the very late stage of a massive bubble. Surely that can't be good. If Asia and China is the motor of the rebound, then surely asset prices can't welcome a hiking cycle on the back of a real estate bubble and an unprecedented lending spree. How much is China willing to commit sepuku is anyone's guess but consequences could seriously threaten our fragile economic equilibrium.
Looking at price action, the Shanghai composite index has closed below the highs of September which invalidates a bullish impulse scenario. The 200 dma provides temporary support but we think further downside is likely.
We contended at the start of the year that no matter what happened medium-term US equities had to correct before anything else could happen even in a bullish scenario. The 1075/1065 support zone for the S&P future is not so far away. What will necessarily capture the eyes of the bears is that on a log scale we failed on the 61.8% retracement line at the highs (see weekly chart), so a very bearish argument can be made that we are entering the next huge sell-off from a technical standpoint. This is all the more interesting that the Dax shows the same feature in terms of retracement, and we also have a perfect a-b-c structure since the lows of March 2009 with c = a, so market symmetry definitely reinforces the bearish case. Note also on the daily chart for the Dax that the medium term supporting 100-dma has been violated on this last sell-off. On the hourly we feel that the S&P future may have completed a wave 3 of lower order, but bullish divergence is relatively mild, and so the rebound could well top around 1,105/1,108 before another drop to 1,065 to complete this initial sequence.
We will further update as the short-term price action develop but technically we have some strong arguments for a bearish case of greater order building up.
Good luck trading,
Issa's Special Report On AIG=End Of Geithner
We are currently going through the recently released Special Report by Darrell Issa: "Public Disclosure As A Last Resort:
How the Federal Reserve Fought to Cover Up the Details of the AIG Counterparties Bailout From the American People," and a cursory perusal indicates that this could be proverbial end for Tim Geithner...and Sarah Dahlgren is, not surprisingly, mentioned rather prominently...as is Davis Polk.
We will post more comments later but this section is critical:
GEITHNER’S ROLE IN THE AIG COVER UP REMAINS UNCLEAR
When asked directly if he was involved in the efforts by the FRBNY to prevent disclosure of the AIG counterparty payments, Secretary Geithner responded, “I wasn’t involved in that decision.” On January 8, 2010, FRBNY General Counsel Thomas Baxter wrote Ranking Member Issa to clarify the role of then-President Geithner:
[M]atters relating to AIG securities law disclosures were not brought to the attention of Mr. Geithner …. In my judgment as the New York Fed’s chief legal officer, disclosure matters of this nature did not warrant the attention of the president.
Mr. Baxter reiterated this claim in an interview with Committee staff. Questions of securities disclosure, Baxter said, were “legal stuff,” and Baxter did not bring legal stuff to the attention of then-President Geithner. However, Baxter said that “on significant policy issues, of course I would go” to Geithner.
However, documents received by the Committee suggest that Secretary Geithner was, at a minimum, engaged personally in reviewing what information about the AIG bailout would be revealed to Congress and the public. On November 6, 2008, SarahDahlgren, the FRBNY’s lead staff member in AIG’s operations, e-mailed Geithner with a proposed statement regarding AIG’s upcoming equity capital raise for Geithner’s approval:
[I]n terms of saying something publicly about our intentions, we … think that saying something that conveys the following … makes sense:
It is our (Federal Reserve/Treasury) continued intention to put the company in a sound capital position and exit the facility/preferred securities/common stock ownership as soon as practicable…
[I]f you are good with this, …we would also make sure that the company sticks to this line (echo)…. [emphasis added]
On November 13, 2008, Geithner received a report on AIG’s restructuring that would be sent to Congress, which Geithner had asked to personally review. Sophia Allison, a staff member of the Federal Reserve’s Board of Governors, e-mailed the draft congressional report to several Federal Reserve staff:
Attached is a draft Congressional report for the restructuring package for AIG announced on Monday, November 10. …I tried to take everything in the report from publicly available documents, such as press releases, the prior AIG Congressional Report, and AIG’s most recent 10-Q. If there is anything in the report that you believe should not be publicly disclosed, please specifically point that out. [emphasis added]
Michael Nelson, a staff member of the FRBNY, forwarded Allison’s email to Geithner with the following message:
Tim – this is the draft EESA-required filing on AIG that the Board owes the Hill, as you requested. [emphasis added]
In addition, Secretary Geithner’s meeting logs from his tenure as President of the FRBNY show that he was regularly engaged with top AIG officials and the FRBNY officials directly responsible for AIG’s disclosures to the SEC. Geithner’s schedule shows that he had at least six formal meetings with top FRBNY staff members about AIG-related issues between November 4, 2008, and November 21, 2008. It is unclear whether AIG’s disclosure obligations were discussed in these meetings.
At a minimum, the cover-up of the details about AIG’s counterparty payments began on Secretary Geithner’s watch, and the culture of the FRBNY in which this behavior occurred reflected his leadership. Secretary Geithner needs to explain his role in the cover-up, and if he thinks the behavior of his staff at the FRBNY was appropriate.
Next:
GEITHNER’S CLAIMS RAISE QUESTIONS ABOUT PURPOSE OF AIG BAILOUT
Secretary Geithner’s claim to SIGTARP that the backdoor bailout of AIG’s counterparties had nothing to do with the health of AIG’s counterparties also raises questions about why AIG was bailed out in the first place. As the Wall Street Journal notes:
[I]f Mr. Geithner now says the AIG bailout wasn’t driven by a need to rescue CDS counterparties, then what was the point? Why pay Goldman [Sachs] and even foreign banks like Societe Generale billions of tax dollars to make them whole?
Secretary Geithner now claims that the point of AIG’s bailout was to protect AIG’s insurance policy holders:
AIG was providing a range of insurance products to households across the country. And if AIG had defaulted, you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world.
However, as the Wall Street Journal further explains:
Yet, if there is one thing that all observers seemed to agree on last year, it was that AIG’s money to pay policyholders was segregated and safe inside the regulated insurance subsidiaries. If the real systemic danger was the condition of these highly regulated subsidiaries – where there was no CDS trading – then the Beltway narrative implodes.
Secretary Geithner’s inconsistent statements and apparent contradictions raise important questions about the decision to not only funnel billions of taxpayer dollars to AIG’s counterparties, but also the decision to bail out AIG itself.
And, at long last, Davis Polk is accused of interference with the disclosure process
The FRBNY and its attorneys at Davis Polk interfered with AIG’s securities disclosures in several ways. They edited AIG’s SEC filings in ways that made it more difficult for investors and the public to understand the ML3 transactions. They contacted the SEC directly and pressured it to treat AIG’s filings differently from other companies’ filings. In addition, they appear to have forced AIG to cancel a compensation-related filing that it was required to make. The FRBNY’s edits of AIG’s filings and the FRBNY’s pressure on the SEC were intended to serve the Fed’s interests by obscuring embarrassing details about the FRBNY’s backdoor bailout of AIG’s counterparties. Investors cannot be protected by a disclosure system that only requires full transparency when the Federal Reserve’s embarrassment is not at stake. The special SEC procedures established via FRBNY pressure also demonstrate that bailouts lead to enforced favoritism.
The conclusion
Finally, the secrecy, concealment, and lack of transparency in the conduct of the Federal Reserve have serious implications for the continued health of democracy and free markets. The Federal Reserve’s payment of par to AIG’s counterparties and the subsequent cover-up of information about these payments raise concerns about the accountability of the unelected bureaucrats within the Federal Reserve System. The fact that a quasi-government agency, unaccountable to the American people, likely wasted billions of taxpayer dollars and went to great lengths to prevent Congress and the American people from learning about these actions demonstrates the threat that the Federal Reserve poses to basic principles of American democracy.
First U.S. Debt Downgrade to AA from Egan-Jones
(from CNN) Should U.S.A. still be AAA? But Sean Egan, managing director of Egan-Jones Group, a smaller rating agency, questions whether the U.S. still deserves the highest rating. Egan said that despite the pressure that Congress and the federal government can bring to bear on the larger rating agencies in the upcoming financial regulatory reform, he believes the AAA rating will eventually have to be lowered. "It's inevitable that will happen, given the current trends. The government is backstopping everything that is politically relevant and in any kind of difficulty," Egan said.
He added that despite the improving economy and repayment of loans by many major banks, he believes the cost of bailouts is likely to climb. He points to the virtual blank check that the Treasury gave to mortgage finance firms Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) in December.The rescues of Fannie and Freddie have already cost the government $111.6 billion between them and losses are expected to climb on the roughly $5 trillion of mortgages they hold or guarantee.
But Egan said the bigger problem for the U.S. is the cost of entitlement programs and the cost to service the debt once interest rates start to rise from current low levels. That will only become a worse problem if the U.S. does lose its cherished AAA rating. "Once you fall off the AAA pedestal, its' very difficult to get back," Egan said. To top of page
We Need Convictions:Treasury,AIG,Goldman..
AIG and NY Fed under fire for hiding bailout facts
By David Goldman,January 26, 2010: 12:03 PM ET
http://money.cnn.com/2010/01/26/news/companies/aig_investigation/
NEW YORK (CNNMoney.com) -- AIG and the Federal Reserve Bank of New York have become targets of an investigation into whether the overseer had instructed the troubled insurer not to disclose certain key information to the public.
Neil Barofsky, special inspector general for the $700 billion bailout, is set to tell the House Oversight Committee on Wednesday that he has initiated an investigation into whether the New York Fed instructed AIG (AIG, Fortune 500) not to disclose more than a dozen controversial counterparty transactions to the Securities and Exchange Commission.
AIG payouts: Who got what
Counterparties that got more than $1 billion from the government and AIG.
AIG counterparty Total payment
Societe Generale $16.5 billion
Goldman Sachs $14 billion
Deutsche Bank $8.5 billion
Merrill Lynch $6.2 billion
Calyon $4.3 billion
UBS $3.8 billion
Deutsche Zentral Genossenschaftsbank $1.8 billion
Barclays $1.5 billion
Bank of Montreal $1.4 billion
Royal Bank of Scotland $1.1 billion
Wachovia $1 billion
Source:Special Inspector General for the Troubled Asset Relief Program.
The New York Fed, one of the primary overseers of AIG's $181 billion bailout, was headed by current Treasury Secretary Timothy Geithner when the counterparty transactions in question were made.
The Oversight Committee will hold a hearing on the matter on Wednesday at 10 a.m. ET. Barofsky, Geithner, former Treasury Secretary Henry Paulson and the lead attorneys for the New York Fed and AIG are all slated to testify at the hearing.
According to an advanced copy of his testimony, Barofsky will try to determine if there was "any misconduct relating to the disclosure or lack thereof" concerning the counterparty transactions. Barofsky will also announce an investigation into whether the Federal Reserve fully cooperated with his office in its audit of AIG (AIG, Fortune 500).
The probe follows an audit on AIG issued in November by Barofsky. That audit found that the New York Fed, then under the direction of Geithner, failed to use its clout to negotiate concessions from AIG's business partners.
As a result, $62.1 billion of taxpayer and AIG funds were essentially funneled to 16 banks that were counterparties to AIG insurance contracts. That amount represented the full-dollar value of the underlying assets that the counterparties had insured through AIG.
After the audit was released in November, House Oversight Committee Ranking Member Darrell Issa, R-Calif., asked Barofsky for copies of correspondence between the New York Fed and AIG. But Barofsky told Issa that he couldn't hand over a copy of the records because the New York Fed told him not to share them.
The Committee, chaired by Rep. Edolphus Towns, D-N.Y., subpoenaed the New York Fed for the documents earlier this month and recently received 250,000 pages of e-mails and other correspondence.
0:00 /4:26AIG could not fail
In its investigation of those documents, the Committee found that the New York Fed had urged AIG not to make any reference in its SEC filing that the counterparties had received the dollar-for-dollar value.
In dozens of e-mail conversations, the New York Fed expressed concern that the details of the counterparty transactions would be made public. In a Nov. 11, 2008, conversation, New York Fed official Alejandro LaTorre urged his colleagues to delete a reference to the full payouts from a request for proposals soliciting administrators for the counterparty transactions.
"As a matter of course, we do not want to disclose that the concession is at par unless absolutely necessary," LaTorre wrote.
Rep. Issa argued that the documents reveal a "secretive culture" at the New York Fed in which the overseer attempted to hide information from the public.
"It has become alarmingly clear that public disclosure was the last thing on the minds of the government officials charged with protecting the taxpayers' interests," Issa said in a statement. "Instead of disclosing as much information as available at the earliest possible opportunity to the American people, they did everything in their power to limit disclosure."
It's because of the Oversight Committee's release of the New York Fed's documents that SigTARP Barofsky decided to launch his investigations.
Fed Chairman Ben Bernanke, who will not appear at the hearing on Wednesday, asked the GAO last Tuesday to investigate "all aspects of our involvement in the extension of credit to AIG" in order to "afford the public the most complete possible understanding of our decisions and actions in this matter."
AIG declined to comment, and the New York Fed did not immediately return requests for comment. SigTARP confirmed that there were "multiple ongoing investigations" into the New York Fed and AIG, but Barofsky declined an interview request. To top of page
Hiding Financial Crimes behind fake "National Security" cover
http://www.reuters.com/article/idUSTRE60N1S220100124
U.S. securities regulators originally treated the New York Federal Reserve's bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.
The request to keep the details secret were made by the New York Federal Reserve -- a regulator that helped orchestrate the bailout -- and by the giant insurer itself, according to the emails. The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that "special security procedures" would be used to handle the document.
The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG's confidentiality request. The SEC had also agreed that if it determined the document should not be made public, it would be stored "in a special area where national security related files are kept," the lawyer wrote.In another email, a New York Fed official said the SEC suggested in late December 2008, that AIG file the document under seal and then apply to the regulatory agency for so-called confidential treatment, if central bankers wanted to stop the information from becoming public.
http://marketoracle.co.uk/images/2010/Jan/us-collapse-18-11.gif
"From 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made political contributions totaling $1.725 billion and spent another $3.4 billion on lobbyists -- a financial juggernaut aimed at undercutting federal regulation." ...that's an average of one million $, per year, per politician in bribes from the financial sector ALONE.
http://www.albionmonitor.com/0902a/copyright/wallstderegulation.html
Lee, you get what you pay for....OR what corporations have paid for. Surprised about the futures action today? Really???
OT-Block Bernanke-URGENT APPEAL TO PATRIOTS!
Email your Senator- now they want to cheat us with just 50 votes to renominate this private banker puppet
I am writing to ask you to implore your colleagues to vote against the confirmation of Ben Bernanke for a second term as Chairman of the Board of Governors of the Federal Reserve System. Bernanke has failed in his responsibilities both as a banking regulator and in his administration of Federal Reserve lending. Bernanke presided over the final phase of the $1.5 quadrillion financial derivatives bubble which is the central cause of the present world economic depression.
He was the principal advocate for the reckless and irresponsible policy of bailing out bankrupt money center institutions, allowing them to live on as zombie banks at astronomical taxpayer, but with no corresponding benefit whatsoever for the economic life of the broader society.
Bernanke is also responsible for the super-toxic alphabet soup of Federal Reserve lending facilities like the TAF, the TALF, and other taxpayer backed bank lending facilities which are being manipulated by the very institutions they were supposed to "save". For example, Bank of American, Citigroup and JP Morgan all admitted to using TALF monies to purchase distressed commercial real estate paper (CDS) USING TAXPAYER MONEY to then sell these newly purchased CDSs to the Fed at a price massively above the market price they bought this paper at!! So they abused the public trust with risky arbitrage while being bailed out. THE COST? ONE & ONE HALF TRILLION DOLLARS!
These betrayals of the public trust have offered 0% credit to predatory institutions including Wall Street banks, insurance companies, credit card companies, money market funds, and other financial institutions. Bernanke has thus used public resources to subsidize financial speculation in all of its most destructive forums, while doing almost nothing to provide cheap credit for production that would benefit factories, farms, mines, building construction, small business, exports, scientific research, energy production, and infrastructure building. Economic activity in all of these fields is now dying for lack of credit, which is being denied by the very institutions Bernanke is trying to save. Everything that Bernanke has done is diametrically opposed to the rational credit policy needed to fight an economic depression.
Bernanke must therefore be rejected. Instead, the Senate should support a new Fed chairman with the qualifications necessary to preside over the nationalization of this illegal, unconstitutional, and failed institution. The Federal Reserve Act of 1913 must be repealed. The future of the Fed is as a bureau of the United States Treasury responsible for providing cheap federal lending as a public utility for productive activity in the form of tangible physical commodity output, not speculation and financial services. In the future, the size of the money supply, short-term interest rates, and the approved categories of lending must be taken out of the hands of unelected and unaccountable cliques of predatory bankers, and deliberated in the full glare of publicity by the House, the Senate, and the president, as the United States Constitution actually requires.
Because of Bernanke’s pattern of subservience to Wall Street interests, it is clear that he cannot be the official suited to to carry out this historic transition. Worse, reports concerning telephone calls made by Treasury Secretary Geithner in September 2008 suggest that Bernanke may also be a party to illegal operations by the Fed in regard to the bailout of AIG and its derivatives counterparties at that time. It is unthinkable that the Senate would approve Bernanke unless and until these grave suspicions have been cleared up.
Today’s newspapers suggest that Bernanke, even if he should be rejected by the Senate this week, would still attempt to stay in power as a member of the Board of Governors through 2020, exerting his power through his colleagues presently on the board. This would amount to nothing less than a bankers’ insurrection. In this eventuality, the Congress must swiftly impeach Bernanke and remove him from office immediately.
Careful, Timmy G will threaten the market again!
Geithner Warns That Markets Could Dive If Bernanke Is Not Reconfirmed (VIDEO)
Huffington Post | Ryan McCarthy 01-25-10
http://www.huffingtonpost.com/2010/01/25/geithner-warns-that-marke_n_435131.html
What's Your Reaction?Greedy,Typical,Scary,Outrageous,Infuriating
Treasury Secretary Tim Geithner, in a recent interview with Mike Allen of Politico warned that the financial markets could react negatively if Fed Chairman Ben Bernanke isn't confirmed for a second term. (READ Politico's full story here.)
Geithner suggested that the market would see a failed Bernanke confirmation as "very troubling," but claimed that he was "very confident" Bernanke would receive enough Senate votes to win a second term.
"The markets would view this as very troubling thing for the economy as the whole," Geithner said. "I don't think they should be uncertain. I think they can be confident because we're very confident."
Predicting that the U.S. economy will begin to show positive job growth by this Spring, Geithner added that Bernanke has done a "remarkable job of guiding this economy through the recession."
The Treasury Secretary also expressed some sympathy for the millions of Americans still struggling to find work, or otherwise impacted by the financial crisis. The country is "in a moment where people are incredibly angry and frustrated by the damage this crisis caused...You see that across the country. That's perfectly understandable, and everybody involved in this effort is bearing a lot of the brunt of that frustration and anger."
In the second portion of the interview, Geithner said that the financial rescue program which "was designed to bring capital back into the financial system so banks could lend again" was "remarkably successful."
"The cost of credit and the ability for businesses across the country [to get credit]" was stabilized by the bailout, Geithner said, while acknowledging that the small business market is still having trouble getting credit.
Yup & Upside Down Osama on Drudge is now threatening us!
Of course, they also run with the terrorism "scare" stories- posting a Mirror !! article that no-fly people are trying to get on to planes for the US...
http://www.drudgereport.com
C2G- SEC Imposing Short Sale Rule in Feb
Nasdaq’s Hyndman Sees New SEC Short-Sale Restriction Next Month
http://www.bloomberg.com/apps/news?pid=20601103&sid=azZrn4HY8pk8
Jan. 22 (Bloomberg) -- The Securities and Exchange Commission may approve a rule next month that aims to keep short sellers from accelerating stock sell-offs, said Brian Hyndman, the senior vice president in transaction services at Nasdaq OMX Group Inc.
The regulation would take effect when shares fall 10 percent in a day and require bearish trades be executed above the best existing bid in the market, Hyndman said.
ISRG has always had questions about its "China" sales...
Volatility- signals FT's Lex
Markets
http://www.ft.com/cms/s/3/6f2d3774-0766-11df-a9b7-00144feabdc0.html?nclick_check=1
Last updated: January 22 2010 20:07
If the first 22 days of 2010 are anything to go by, investing is going to be an edgy affair this year. Sure, the financial crisis was terrifying. But for the past 10 months or so there was fun to be had and profits to be made by taking on risk once again. Confidence was returning. Recently, however, investors seem to be losing their nerve.
With the exception of Japan – supported by a weaker yen – all major equity markets are down year-to-date. Even glamour boys such as Brazil and China are 5 per cent off. Companies seem equally anxious. European investment grade corporates have raised €65bn this year, according to Bloomberg data, half the issuance compared with the same period last year. True, junk bonds have been flying off the shelves. But the anxious mood is reflected in the Vix index, a much-watched measure during the credit crisis that tracks the implied volatility of S&P?500 options. It has leapt by a quarter in two weeks.
Just as many had written them off, investors are also piling into the relative safety of government bonds. In spite of near record levels of US Treasury issuance, for example, ratios comparing the number of bids with securities offered are at levels not seen since September. The near-record difference between two-year and 10-year bond yields of 2.9 per cent early last week has narrowed more than 10 basis points. In other words the steep yield curve, a sign of recovery, is now flattening.
Why is everyone so spooked? Three things are to blame. First, the Obama bank levy and Volcker plan have upped the ante regarding regulatory risk in investors’ minds. Second, China’s crackdown on bank lending is tempering global growth expectations. Finally, Greece’s problems are a reminder of growing sovereign risk. As an old investment saying goes: greed is fleeting, fear is permanent.
Bye Bye, Ben and Geithner to BOOT!
On Bernanke's Reconfirmation
by CalculatedRisk on 1/23/2010 08:49:00 AM
A few articles ...
From the WSJ: Populist Surge on Hill Eases the Support for Bernanke
Alarmed that there might not be the 60 votes in the Senate needed to extend Mr. Bernanke's term beyond its Jan. 31 expiration, the White House entered the fray publicly for the first time, with officials trying to win support among Democratic senators. President Barack Obama "has a great deal of confidence in what Chairman Bernanke did to bring our economy back from the brink," deputy White House press secretary Bill Burton told reporters aboard Air Force One. "And he continues to think that he's the best person for the job, and will be confirmed by the United States Senate."
From the NY Times: Bernanke’s Bid for a Second Term at the Fed Hits Resistance
Two Democratic senators who are up for re-election this year announced that they would oppose Mr. Bernanke, whose four-year term as head of the central bank expires at the end of this month. Their decisions reflected a surge of opposition among some Democrats and Republicans to Mr. Bernanke, a primary architect of the bailout of the financial system and a contributor to policies that critics contend put the economy at risk in the first place.
From the Financial Times: Bernanke under pressure
From CNBC: Bernanke Vote: 'Unthinkable Has Become a Possibility'
Bernanke definitely supported policies that contributed to the crisis, and he failed to see the problems coming. However once Bernanke started to understand the problem, he was very effective at providing liquidity for the markets.
But since his renomination, he hasn't done himself any favors. As has admitted the Fed failed as a regulator, but he hasn't explained why - or outlined a clear path forward. And Bernanke keeps saying really dumb things, like claiming incorrectly to have an exploding adjustable rate mortgage. That was an ignorant remark considering his position as Fed Chairman and the plight of so many Americans. And quoting a bank robber in testimony to Congress when addressing the long term deficit (suggesting Congress steal from middle class Americans?), and this right after he claimed he wouldn't comment on areas outside of the Fed's authority. Dumb.
I definitely think we could do better.
CR,sweet trades-you are admirable!Watch Banks!
Unofficial Problem Bank Lists Increases to 584
by CalculatedRisk on 1/22/2010 10:42:00 PM
http://www.calculatedriskblog.com/
This is an unofficial list of Problem Banks compiled only from public sources. CR NOTE: This was compiled before the 5 bank failures today. There was a "timely" Prompt Corrective Action issued against Charter Bank, Santa Fe, NM and the bank was seized today!
Changes and comments from surferdude808:
The Unofficial Problem Bank List increased by a net two institutions to 584.
Aggregate assets total $305.3 billion, up from $304.8 billion last week. Additions include Pamrapo Savings Bank, Bayonne, NJ ($573 million); Capitol City Bank & Trust Company, Atlanta, GA ($322 million); Bank of Virginia, Midlothian, VA ($226 million); and Independence National Bank, Greenville, GA ($138 million).
Deletions are the two failures last week – Barnes Banking Company ($828 million), and St. Stephens State Bank ($25 million). The other change is a Prompt Corrective Action order issued by the OTS against Charter Bank, Santa Fe, NM ($1.3 billion) on January 20, 2010, which was already operating under a Cease & Desist order.
The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay, and the Fed and OTC data is more timely. The OCC data is a little lagged. Credit: surferdude808.
See description below table for Class and Cert (and a link to FDIC ID system).
Citibank Pending Collapse Prompts FDIC Panic Action
FDIC and Bank of England Announce Enhanced Cooperation in Resolving Troubled Cross-border Financial Institutions
FOR IMMEDIATE RELEASE
January 22, 2010
Media Contact:
Andrew Gray: (202) 898-7192
E-mail: angray@fdic.gov
The Federal Deposit Insurance Corporation (FDIC) and the Bank of England today announced their agreement to a memorandum of understanding (MOU) expanding their cooperation when they act as resolution authorities in resolving troubled deposit-taking financial institutions with activities in the United States and United Kingdom. The MOU was signed by FDIC Chairman Sheila Bair and Bank of England Governor Mervyn King.
The MOU represents a commitment by the FDIC and Bank of England to enhance their collaboration to promote greater coordination in the face of distress at banks that operate in the two countries and thus protect the wider public interest. It recognizes the importance of close and effective communication about the operations of financial institutions covered by the MOU and differing national laws, consultation on developing issues, cooperative contingency planning for firms covered by the MOU, and supporting the development of appropriate recovery (going concern) and resolution (gone concern) plans. In such areas, the MOU also underlines the need for the FDIC and the Bank to work closely together with other authorities in the United States and the United Kingdom.
Most importantly, the MOU represents a commitment to cooperate in the resolution of cross-border firms in compliance with the laws and regulations of the United States and the United Kingdom.
Bank of England Governor King and Chairman Bair agreed that this MOU is an important step towards improved coordination.
FDIC Chairman Bair said, "The recent financial crisis demonstrates that greater international coordination among resolution authorities as well as resolution processes capable of resolving the largest, most complex financial institutions are necessary to protect the public. This MOU is an invaluable step forward toward implementing the recommendations of the Basel Committee's Cross Border Resolution Group, which the FDIC co-chaired. It is also a further step in support of the continuing work of the Financial Stability Board's Crisis Management Working Group, chaired by Paul Tucker of the Bank of England."
Bank of England Governor King said, "A key legislative response in the United Kingdom to the recent financial crisis has been the adoption of a special resolution regime that enables failed UK banks to be resolved in the public interest. The Bank of England has in consequence become a resolution authority in the United Kingdom and, as such, it makes good sense to develop close relationships with other resolution authorities so that the toolkit and powers now available to us can be applied effectively to large and complex cross-border banks. The MOU should also help to enhance coordination with other regulatory authorities in the United States and United Kingdom."
Attachment:
Memorandum of Understanding - PDF (PDF Help)
# # #
Notes to editors:
1. Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,099 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.
2. The Bank of England has two core purposes: it exists to ensure monetary stability and to contribute to financial stability. In February 2009, the Banking Act 2009 was introduced which gave the Bank new responsibilities and powers in relation to financial stability. A key part of the Banking Act was the creation of a Special Resolution Regime (SRR) which gives the UK Tripartite authorities – the Treasury, Bank of England and Financial Services Authority (FSA) - a permanent framework providing tools for dealing with distressed banks and building societies. Further information about the UK Special Resolution Regime is available on the Bank of England's website at: http://www.bankofengland.co.uk/financialstability/role/risk_reduction/srr/
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-13-2009
No Jobs, No Jobs, No Jobs- State Unemployment Data Darkens Jobs Picture -http://business.theatlantic.com/2010/01/state_unemployment_data_darkens_jobs_picture.php
Today, the Bureau of Labor Statistics released December's state-by-state unemployment data. It isn't pretty. Even though the national rate was unchanged last month, most states saw their unemployment rates worsen. 43 states and the District of Columbia saw their unemployment rates increase from November to December, many significantly. This is a major change-in-direction from November's good news, when 36 states saw their unemployment rates decline. Let's consider some of the highlights.
First, the good news. There isn't much of it. Four states saw their unemployment rates decline: Oklahoma (0.5%), South Dakota (0.2%), Iowa (0.1%) and Michigan (0.1%). Yes, Michigan was one of the four best states this month when considering the direction of unemployment. Three other states had rates unchanged: California, Idaho and Minnesota.
Every other state saw its unemployment number increase, both in rate and nominal amount. The biggest losers were Louisiana and Mississippi, both seeing their rate increase by 0.8%. Five more had a 0.7% increase: Tennessee, Massachusetts, Connecticut, West Virginia and Nevada. In fact, 33 states (and DC) had their rates increase by at least 0.3%.
As far as number of lost/gained jobs, California was the best, with its unemployed workers declining by 18,300. Michigan was second best, with 11,400 fewer unemployed. It's nice to see those two states at the positive end of the spectrum.
The most jobs were lost by New York, which saw 36,400 more jobless. Texas was second-worst, losing 28,700 jobs. Florida followed with 23,500 more unemployed. Massachusetts and Tennessee round out the bottom five, each losing about 21,000 jobs.
The best state in the nation for employment remains North Dakota with a microscopic 4.4% unemployment rate, though the rate did increase by 0.3% in December. South Dakota and Nebraska were tied for second with 4.7% unemployment.
The worst state is still Michigan, despite its positive month, at 14.6% unemployment. Nevada and Rhode Island are nearly tied for second at 13.0% and 12.9% unemployment, respectively. South Carolina, California and DC are the other states with over 12% unemployment.
NVDA has been a disaster for two years++ rally to $19 a joke
Rambus to face two legal milestones this month
Two important legal events affecting high-speed chip interface maker Rambus (RMBS) are expected to take place this month. The company's antitrust case against several memory manufacturers is scheduled to go to trial on January 11. Rambus has accused Hynix, Micron (MU) and Samsung - the defendants in the case - of eliminating competition and stifling innovation in the computer memory technology and computer memory chip market. Meanwhile, the International Trade Commission is expected to make a decision in Rambus' patent infringement case against Nvidia (NVDA) in January. In a note to investors today, BWS analyst Hamed Khorsand wrote that Rambus has an advantage in the Nvidia case, since it won claim construction. Companies that win claim construction typically win the case, according to Khorsand. However, the analyst, noting that Rambus shares have jumped nearly 50% since the beginning of November, recommends that investors consider selling a portion of their shares in the company. Khorsand believes that the shares could tumble 50%-60% from current levels on negative news. In a separate note to investors today, Capstone Investment analyst Jeffrey Schreiner predicts that Hynix and Micron could be forced to declare bankruptcy if they lose their case to Rambus. Schreiner believes that investors should take a closer look at the risks the defendants face in the case. In early trading, Rambus gained 40c, or 1.64% to $24.80, while Micron jumped 39c, or 3.69%, to $10.95. :theflyonth
Bot XXXXX EEV @11.62 FWIW
Fugly, Like the End of the Pats Season
Stiglitz: Banks "consistently failed to fulfill their societal role"
Huff Post | Grace Kiser First Posted: 01-22-10 11:26 AM | Updated: 01-22-10 01:23 PM
In his testimony about compensation in the financial industry this morning, Columbia University economist Joseph Stiglitz told the House Financial Services Committee that banks have "consistently failed to fulfill their societal role" and criticized Wall Street pay.
It was precisely the industry's compensation schemes, Stiglitz said, that encouraged the reckless risk-taking that nearly "brought us to the brink of disaster."
The social benefits created by the sector are unclear, Stiglitz said, yet it is society that "repeatedly" bears the responsibility for Wall Street's failures. "Financial markets are a means to an end, not an end in themselves":
Market economies work to produce growth and efficiency, but only when private rewards and social returns are aligned. Unfortunately, in the financial sector, both individual and institutional incentives were misaligned.
Incentive pay in the financial industry, Stiglitz says, rewards short-term gains, but protects managers from the pain of longer-term negative profits, since the consequences of excessive leverage often become apparent only over extended time periods. Moreover, incentive compensation spurs predatory behavior, hinders innovation, results in the deterioration of product quality and encourages deceptive accounting procedures:
There is an ongoing dispute: was it poor models (which predicted that events such as those that occurred in 2007-2008 would occur less often than once in the lifetime of the universe), poor risk management, or the off-balance-sheet shenanigans that nearly brought down our banking system and with it the global economy? None of these possibilities puts a positive light on our bankers. But incentives played a key role in each of these interpretations. They had an incentive to engage in excessive risk taking, they had an incentive to engage in deceptive accounting, and they had an incentive to use--and seemingly believe--models that allowed them to undertake excessive risk. They had an incentive not to enquire too deeply into the assumptions used in those models. And they had an incentive not to think too deeply about how their incentive structures distorted, and continue to distort, behavior.
READ Stiglitz's testimony:
No Green Today, Canny, Crash Monday JMHO
So, What Does This Obama Stuff Really Mean for the Big Banks? You Know, From a Fundamental Perspective
Reggie Middleton's picture
Submitted by Reggie Middleton on 01/22/2010 08:21 -0500
* Alt-A
* Asset-Backed Securities
* BAC
* Bank of America
* Bear Market
* Bear Stearns
* Citibank
* Fail
* Goldman Sachs
* Investment Grade
* Lehman
* Lehman Brothers
* Mark To Market
* Monkey Business
* Morgan Stanley
* Prop Trading
* ratings
* Ratings Agencies
* Real estate
* Reality
* Reggie Middleton
* Stress Test
Well, it looks like Blankein, Dimon, et. al. really should have tried harder to make that meeting with the President a couple of weeks ago. It appeared as if he may have had something important to discuss. As my readers and subscribers know, I have been very bearish on the big money center banks since 2007, and quite profitably so. The last 3 quarters saw a much larger trend reversal than I expected, that resulted in the disgorgement of a decent amount of those profits - a disgorgement that I am still beating myself up over. You see, as a fundamental investor, I don't do well when reality diverges from the fundamentals for too long a period. Luckily for me, fundamentals always return, and they usually return with a vengeance. To keep things in perspective though, I am still up on a cumulative basis many, many multiples over the S&P (which is still negative, may I add) as well as your average fund manager. Why? How was I able to do this? Well, its not because I am supersmart, or well connected. It is because I keep things in perspective. Those that look at the records that I publish say, "Well he was down the last couple of quarters, so..." while disregarding what happened the 8 or even 40 or so quarters before that. Such a short term horizon will probably not be able to appreciate the longer term perspective and foresight that enabled me to see this entire malaise coming years ago and profit from it. No, I am not perfect and I do mess up on occasion, but I also do pay attention to the facts.
These facts pointed to a massive overvalutation in banks throughout the bulk of last year, again! I made it clear to my subscribers that the banks simply have too many things going against them: political headwinds, nasty assets, diminishing revenue drivers, over-indebted consumers, and a soft economic cycle. I also warned explicitly that I didn't think Obama would be nearly as lenient on the banks as Bush was. Well, the headwinds are stiffening. On that note, let's take an empirical look at just what this means in terms of valuation (note, I will following this up with a full forensic re-valuation for all subscribers, incuding a scenario analysis of varying extents of principal trading limits). Some of these banks are I-N-S-A-N-E-L-Y overvalued at these post bear market rally levels considering the aforementioned headwinds. Methinks fundamental analysis will make a comeback in a big way for 2010 as it meets the momentum and algo traders in a mutual BEAR feast on the big investment banks cum hedge funds. I can't guarantee it will happen, but the numbers dictate that it should. We shall see in the upcoming quarters.
We have retrieved information about trading revenues for GS, MS, JPM and BoFA. We have also retrieved some balance sheet data to reflect the trend in investment holdings and the level of leverage, but I will address that in a future post for the sake of expediency. While the banks don't break out the P&L for principal trading, we can sort of back into it. Remember, traders are fed bonuses off of net revenue, not profit.
Goldman Sachs
Trading revenues accounted for more than 50% of the total revenues over the last 8 quarters. The impact on earnings is magnified with the total trading revenues amounting to more than 150% of the total pretax income over the last 8 quarters except for the last quarter in which the earnings were positively impacted by substantial decline in compensation expense which was negative 519 million in 4Q09 against 5.4 billion in 3Q09. The negative compensation charge during the quarter was owing to accounting adjustments
Principal investments which are purely GS proprietary transactions contribution ranged within 5% to 15% of the total revenues except in 4Q08 when the huge write downs in principal investments offset the positive revenues from other sources. Revenues from principal investments ranged within 15%-50% of the total pre-tax income except in 4Q08.
Click to enlarge.
image009.png
Note: In the GS income statement, revenues from trading and principal investments is the GS total revenues from trading activities. This revenue item comprises of two heads - trading and principal investments.
Revenues from proprietary trading in FICC (Fixed income, currency and commodity) and Equities is clubbed with the trading revenues earned on the transactions done on behalf of clients and is reported under the former head. In first nine months of 2009, nearly 41% of the trading revenues came from interest rate related transactions and 37% came from equities.
GS trading revenues break up (in $ million)
3Q09
% of total
9M09
% of total
Interest rates
3,928
58.6%
8,314
40.6%
Credit
2,022
30.2%
4,358
21.3%
Currencies
(3,617)
-54.0%
(4,038)
-19.7%
Equities
3,406
50.8%
7,515
36.7%
Commodities and other
964
14.4%
4,307
21.1%
Total
6,703
100.0%
20,456
100.0
The latter head primarily represents net investment gains/ losses from certain corporate and real estate investments and investment in the ordinary shares of Industrial and Commercial Bank of China Limited. Total principal investments amounted to 20.7 billion which is just 6-7% of the total investment portfolio of GS.
Thus, most of proprietary trading revenues is included the former head . However, it difficult to differentiate between proprietary trading and client related trading. Revenues from principal investments in case of GS and MS are not trading revenues but are write-ups/downs on certain illiquid investments which are segregated as principal investments. We have created various scenarios to demonstrate the impact of decline in trading revenues on earnings.
image005.png
More of Reggie on Goldman Sac
http://pajamasmedia.com/instapundit/92237/
OT-CNBS Corporate Tool Jahn Whorewood says Big Insurance and Big Pharma NEED the Health Care Fraud Bill ..and will do anything to pass it. Mea culpa,Lee
Only Five minutes...Buffett Love from Becky then Whorewood said "HCR" WILL pass- the Senate prostitution bill, regardless of the public will. BlowHair Joe said WHOA Jahn, less than 30% of the public supports the bill. Jahn says, "who cares and what do they know?" Why again is this pr*ck on the air? Oh, he's a journalist...
WOW-Bernanke Exposed as Looter by SocGen's Edwards
Scandal: Albert Edwards Alleges Central Banks Were Complicit In Robbing The Middle Classes
ZeroHedge.com Tyler Durden on 01/21/2010 11:02 -0500
http://www.zerohedge.com/article/scandal-albert-edwards-alleges-central-banks-were-complicit-robbing-middle-classes
We apologize in advance for the NY Magazine-style headline, but this is a report that has to be read by all Senators who are preparing to reconfirm Bernanke for a second term. When voting for the Chairman, be aware that all of America will now look at you as the perpetrators who are encouraging the greatest inter and intra-generational theft to continue, and as prescribed by Newton 3rd law, sooner or later, an appropriate reaction will come from the very same middle class that you are seeking to doom into a state of perpetual penury and a declining standard of living.
America spoke in Massachusetts, and will speak again very soon if you do not send the appropriate signal that you have heard its anger - Do Not Reconfirm Bernanke.
You have been warned.
We present Albert Edwards' latest in its complete form as it must be read by all unabridged and without commentary. These are not the deranged ramblings of a fringe blogger - this is a chief strategist for a major international bank.
Theft! Were the US & UK central banks complicit in robbing the middle classes?
by Albert Edwards, Societe Generale
Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?
Ben Bernanke?s recent speech at the American Economic Association made me feel sick. Like Alan Greenspan, he is still in denial. The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion in a pathetic attempt to deflect blame from their own gross and unforgivable incompetence.
The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed.
Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate (see chart below). And now the bubbles have burst, along with central banks? credibility, what now?
After reading Ben Bernanke?s speech, once again denying culpability for the bubble, I really didn?t know whether to laugh or cry (remember that Ben Bernanke, like Tim Geithner, was a key member of the Greenspan Fed). I feel like Peter Finch in the film Network, sticking my head out of the window and shouting "I'm as mad as hell and I'm not going to take it anymore!" Although criticism of the Fed (and the Bank of England) has now become louder and more widespread, I feel my longstanding derision for their actions during the so-called ?good years? puts me in a stronger position than some to offer further comment.
Opening my 2002-2005 file of old weeklies I did not have to go any further than the first paragraph of the top copy (end of December 2005). “As far as Alan Greenspan’s tenure at the Fed is concerned, we have spared few words of derision. We have made plain our views that the supposed US prosperity that has accompanied his tenure has been based on a grotesque mountain of debt. We have likened the economy to a Ponzi scheme which will ultimately collapse. He has allowed the funding of strong economic activity by mortgaging the US’s future against one bubble (equity) and then another (housing), which is now beginning to implode”. These are almost consensus thoughts now, but not then.
The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion. Blaming the banks is simply a pathetic attempt to deflect the public fury from their own gross and unforgivable incompetence. We have stated before that banks are not the primary cause of the bust. Just as in Japan, a decade earlier, bank problems are a symptom of the bust. It is the monetary and regulatory authorities that are responsible for this mess. And it is not just obvious in retrospect. It was perfectly obvious from the beginning.
I was shocked by a recent survey of Wall Street and business economists, published in the Wall Street Journal (see Bernanke View Doubted 14 Jan? link). Asked whether they agreed or disagreed with the proposition ‘excessively easy Fed policy in the first half of the decade helped cause a bubble in house prices’, some 42, or 74% agreed with the proposition. So unbelievably there are still 12 economists surveyed who did not agree! Even more incredible, a majority of academic economists did not agree with the proposition. Maybe they have sympathy for a fellow academic or maybe they actually believe the preposterous proposition that the western central banks were not in control of the bubbles which were primarily due to tidal waves of surplus savings washing across from Asia.
John Taylor shows this to be nonsense. There was no global savings glut (see chart below)
John Taylor is well known for his famous ?Taylor Rule? for the appropriate level of interest rates and he has been very vocal in his criticism of Fed laxity in the aftermath of the Nasdaq crash in his paper ?The Financial Crisis and Policy Responses: An Empirical Analysis of What Went Wrong’, Nov. 2008 and elsewhere - link. His thesis is simple. Lax monetary policy caused the boom in housing upon which euphoric credit excesses were built. The subsequent bust was an inevitable mirror image of the boom. This simply would not have occurred had the Fed (and the Bank of England) acted earlier to tighten policy as shown in the Taylor?s counterfactual profiles (see charts below).
More recently, the San Francisco Fed published a paper this month showing that those countries which saw the steepest run-up in house prices over the last decade also saw the largest rise in household sector leverage (see charts below and link). Of course the causality runs both ways. Loose monetary policy generates higher borrowing which pushes up house prices. Subsequently this prompts other households to borrow against the rising value of their houses to finance consumption via net equity extraction.
Generally most commentators have fallen for the populist line that the banks are to blame. Very rarely does a leading commentator pin the blame where it deserves to be ? on the central banks. Hence, I was very interested to read the Financial Times Insight column on Tuesday from the deep-thinking columnist, John Plender (interestingly his title in the print edition was “Blame the central bankers more than the private bankers” was changed to “Remove the punchbowl before the party gets rowdy” in the web edition - link).
Plender?s point is classic Minsky. An unusually long period of economic stability, also known as The Great Moderation, engineered by Central Bank laxity inevitably created the conditions for the subsequent bust. “Central banks clearly bear much responsibility for past excessive credit expansion. The Fed’s gradualist and transparent approach to raising rates in middecade also ensured that bankers were never shocked into a recognition that unprecedented shrinkage of bank equity was phenomenally dangerous. Despite the popular perception that financial innovation caused so much of the damage in the crisis, the rise in bank leverage was a far more important factor”. His point that it takes guts to remove the punch-bowl when the party is in full swing is spot on. The Fed and the Bank of England were both gutless and spineless. Their love affair with The Great Moderation meant they simply were not prepared to tolerate a little more pain now to avoid a Minsky credit bust and massive unemployment later.
But what is the relationship, if any, between this extreme central bank laxity in the US and UK and these countries being at the forefront for the extraordinary rise in inequality over the last few decades (see cover chart)? And does it matter?
I was reading some typically thought-provoking comments from Marc Faber in his Gloom, Boom and Doom report about current extremes of inequality. It reminded me that our own excellent US economists Steven Gallagher and Aneta Markowska had also written on this. To be sure, the rise in inequality has been staggering in the US in recent years (see charts below).
It is well worth visiting the website of Emmanuel Saez of the University of California who has written extensively on this subject and now has updated his charts up until the end of 2008 (data available in Excel Format ? link). The New York Times reported on the recently released Census Bureau data and showed not only that median income had declined over the last 10 years in real terms, but that this is the first full decade that real median household income has failed to rise in the US - link. What is also so interesting from Professor Saez?s cross-sectional research is how inequality has clearly risen fastest in the Anglosaxon, freemarket economies of the US and the UK (also note that France, with much higher levels of equality, saw much more subdued growth in household leverage).
Our US economists make the very interesting point (similar to Marc Faber) that peaks of income skewness ? 1929 and 2007 ? tell us there is something fundamentally unsustainable about excessively uneven income distribution. With a relatively low marginal propensity to consume among the rich, when they receive the vast bulk of income growth, as they have, then the country will face an under-consumption problem (see 9 September The Economic News ?- link. Marc Faber also cites John Hobson?s work on this same topic from the 1930s).
Hence, while governments preside over economic policies which make the very rich even richer, national consumption needs to be boosted in some way to avoid underconsumption ending in outright deflation. In addition, the middle classes also need to be thrown a sop to disguise the fact they are not benefiting at all from economic growth. This is where central banks have played their pernicious part.
I recalled seeing another article from John Plender on this topic back in April 2008. His explanation for why there had been so little backlash from the stagnation of ordinary people?s income at a time when the rich did so well was simple: ?"Rising asset prices, especially in the housing market, created a sense of increasing wealth regardless of income. Remortgaging homes over a long period of declining interest rates provided a convenient source of funds via equity withdrawal to finance increased consumption” – link.
Now you might argue central banks had no alternative in the face of under-consumption. Or you might conclude there was a deliberate, unspoken collusion among policymakers to ?rob? the middle classes of their rightful share of income growth by throwing them illusionary spending power based on asset price inflation. We will never know.
But it is clear in my mind that ordinary working people would not have tolerated these extreme redistributive policies had not the UK and US central banks played their supporting role. Going forward, in the absence of a sustained housing boom, labour will fight back to take its proper (normal) share of the national cake, squeezing profits on a secular basis. For as Bill Gross pointed out back in PIMCO?s investment outlook ?Enough is Enough’ of August 1997, "?When the fruits of society’s labor become maldistributed, when the rich get richer and the middle and lower classes struggle to keep their heads above water as is clearly the case today, then the system ultimately breaks down.”- link. In Japan, low levels of inequality and inherent social cohesion prevented a social breakdown in this post-bubble debacle. With social inequality currently so very high in the US and the UK, it doesn?t take much to conclude that extreme inequality could strain the fabric of society far closer to breaking point.
4.941175
Agreed, kudos to fabs, More Correction Coming.
OT- Can you believe the Supreme Court ruling today to allow UNLIMITED CORPORATE SPENDING on elections? As if they already were not bought and sold...
Chinese Hackers KILL Microsoft's Internet Explorer- Mr. Softee goes limp...
(This is really pernicious- scripts send all your data overseas and your system basically shuts down)
Microsoft says it will issue a software fix to block Chinese hackers at 5.00am Friday, Australian time after "working round the clock" to fix the problem.
http://apcmag.com/update-ie-chinese-hacker-fix-due-at-5am-tomorrow.htm
The software giant, which has been embarassed by hackers using the flaw in Internet Explorer to hack some of the worlds largest companies undetected since mid-December, says the update will be the standard February cumulative update, with the inclusion of the security flaw fix.
Microsoft said the release would be issued as a "critical" package.
In the meantime, Microsoft continued to recommend people stop using Internet Explorer 6 or 7 immediately, and upgrade to Internet Explorer 8, which has some level of protection against the hackers (though not complete protection). For the protection to be effective, you must also install the latest patches to Windows such as XP SP 3, or Windows Vista SP1 (both of which have data execution prevention enabled by default.)
However, it did not go as far as repeating the German and French governments' advice that people should stop using Internet Explorer altogether, and switch to Firefox or Google Chrome instead, which are not subject to the same security flaw.
Microsoft continued to state that it had only seen live attacks targeted at Internet Explorer 6 users, even though the attackers could exploit machines running IE7 or IE8.
10200 coming, then break to 9000 JMHO
Where's F*er Fred?
OT:Mr. Market HATES Tax Cheat Timmy G.
Let's see if the Big O has any cohones
More on Glass-Steagall 2.0
http://www.prospect.org/csnc/blogs/tapped_archive?month=01&year=2010&base_name=more_on_glasssteagall_20
We have a little more detail on President Obama's new proposal for the financial sector:
1. Limit the Scope -The President and his economic team will work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit. .
2. Limit the Size - The President also announced a new proposal to limit the consolidation of our financial sector. The President’s proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits.
Again, without enough detail to see if the execution will match the principles, this is a pretty big deal. Proprietary trading especially is where banks have made huge profits, and they will fight like maddened animals to protect that profit center. Without more detail on how the limits on the market share of liabilities will be measured and enforced, it's hard to say how effective they'll be, but that's probably the best angle to take when thinking about shrinking bank size.
The key dynamic that makes this a real change from previous proposals is the switch from discretionary regulation to set rules about what banks can and cannot do. Nonetheless, Treasury officials point out that these ideas have long been part of the administration's plan; for instance, last June's White Paper [PDF] said that the government "should tighten the supervision and regulation of potential conflicts of interest generated by the affiliation of banks and other financial firms, such as proprietary trading units and hedge funds." In October, Treasury Secretary Tim Geithner told the House Financial Services Committee that regulators should be able to limit bank activities and compel them to shrink and separate, an option that was included in the House bill and the Senate's initial draft. Now, though, the president is apparently set to take away regulatory discretion and mandate that no banks will have these types of business, which is a major step.
Initial Claims Misses Estimate By 42K, Emergency Compensation Explodes By 652K Over Last Week
www.zerohedge.com
Submitted by Tyler Durden on 01/21/2010
After the double dip in new home sales and NAHB confidence, we are starting to see the beginning of the end of the improvement in firings: initial claims in the week ended January 16 came in at 482,000, higher than the estimate which expected a number of 440,000, which was supposed to be an improvement from the prior week's 446,000. The good news was that the spread between seasonally adjusted and non-seasonally adjusted insured unemployment rate tightened by 20 bps from 110 bps to 90 bps (3.5% SA vs 4.4% NSA).
But by far the worst news was EUC, or Emergency Unemployment Compensation, which as even Mr. Liesman acknowledges now is important, which shot up by a stunning 652,364 to 5,654,544. The end-beginning of the year transition sure caught the DOL offguard.
The combination of initial, continuing claims and EUC for the most recent period is a record 10,701,794 Seasonally Adjusted or a whopping 12,021,880 Non-Seasonally Adjusted. The double dip is here, and unfortunately for Obama, he is all out of stimulus bullets.
Swine flu threat exaggerated? WHO BOUGHT by Big Pharma
Irish Times, January 19, 2010 - insert-text-here
The World Health Organisation stands accused of being unduly influenced by pharmaceutical companies, writes RONAN McGREEVY
WHEN IS A pandemic not a pandemic? That critical question will be debated next week by the Council of Europe in an investigation that is likely to have worldwide implications. To date, the swine flu pandemic has killed more than 13,500 people worldwide. It is a significant number, but nowhere near some of the more ghastly estimates which surfaced when the H1N1 virus began in Mexico last June. The figure contrasts with the 35,000 people who die in the US alone from common influenza every year. There is now a growing feeling that the threat from swine flu was grossly exaggerated and billions were spent worldwide by governments stockpiling vaccines. There was talk of hundreds of thousands of deaths this winter, but, as the threat has receded, so has demand for the vaccine. To date in Ireland, almost 700,000 (one in six) of the population has been vaccinated even though the Government bought enough vaccines last summer to immunise 3.85 million people.
The Parliamentary Assembly of the Council of Europe (Pace) represents 47 countries throughout Europe. Unlike the European Parliament, it has no decision-making powers, but, as was demonstrated by its report into extraordinary rendition, it does have the power to make life uncomfortable for the powers that be. The impetus for a public inquiry has come from the president of the Health Committee of the Council of Europe Dr Wolfgang Wodarg, a German doctor and epidemiologist. Dr Wodarg’s charges against the WHO could hardly be more serious. He has accused it of changing the definition of a pandemic from one that breaks out in several continents at once and has above-average morbidity to one where the spread of the disease is constant. Dr Wodarg says that the WHO is unduly influenced by pharmaceutical companies and that the declaration of a pandemic hugely enriched the industry at the expense of taxpayers and governments. He also said it was strange that two vaccines were initially needed, not one, and that the swine flu epidemic could have been tackled using modifications of existing viruses. “There are systematic questions to be put so that we don’t get cheated by those who make us panic,” he said.
The WHO said it will vigorously defend itself and is conducting its own inquiry. Keiji Fukuda, special adviser to the WHO director-general on pandemic influenza, has said that “the world is going through a real pandemic” and “the description of it as a fake is both wrong and irresponsible”. The pharmaceutical industry has also issued statements defending its position, but the public appears to believe that the threat was exaggerated given the huge stockpiles of unused vaccines – even allowing for the fact that only one vaccine is needed instead of two. The Government ordered 7.7 million vaccines last summer, enough for two doses for each of the population. This was compromised of equal batches of Pandemrix, a vaccine made by GlaxoSmithKline, and Celvapan, made by Baxter. It has now emerged that a shot of Pandemrix is sufficient for both children and adults, except those with weakened immune systems. As a result the Government has renegotiated its contract with Baxter and will not be taking up 3.7 million doses of the Celvapan vaccine as had been originally ordered, resulting in a saving of between €25 million and €35 million from an original vaccine budget of €88 million.
The pattern is being repeated across Europe as countries scale back their vaccination plans. France wants to cancel 50 million of the 94 million doses it ordered. Switzerland is giving away more than half its store of vaccines to the WHO for distribution in other countries, as is the Netherlands. Germany and Spain are renegotiating their contracts with the pharmaceutical companies.
In the UK, Labour MP Paul Flynn, a member of the Council of Europe, is trying to find out how much money Britain spent on vaccines. “What we want to find out is whether this was decided on proper scientific basis or the pressure from pharmaceutical companies to make bigger profits. How powerful are the pharmaceutical companies in influencing the World Health Organisation?” he said. Prof Patrick Wall, associate professor of public health at UCD, said the WHO had been “damned if it does and damned if it doesn’t” in declaring a pandemic and the fact that the swine flu outbreak was never as bad as predicted may be testament to the success of the vaccine programme that it encouraged states to implement.
Prof Wall recounted that the chief medical officer, Dr Tony Holohan, had advised, even at the height of the swine flu scare, that the flu itself was relatively mild though there was no grounds for complacency. “I thought it was a good mantra,” Prof Wall added. He also says that the H1N1 virus is no ordinary flu virus and it was necessary to develop a new vaccine. “When this first happened, I said this virus would be the same as the other flu viruses, but I was wrong about that. It did not behave the same as a conventional flu virus. We needed to get the vaccine to vaccinate the vulnerable subset. There was no vaccine at the time, so we had to negotiate with the vaccine makers to make it. That was a legitimate approach.”
Prof Wall said the allegations against the WHO were serious and needed to be addressed if only to allay concerns in people’s minds about the objectivity of the organisation, which is the most important health body in the world. (PABLUM!) “His (Dr Wodarg’s) worries need to be banged on the head and sorted out, and an inquiry might help us learn lessons from this,” he said. To date, GPs have administered 250,000 H1N1 jabs. A further 356,000 people were vaccinated in HSE clinics, 46,000 through schools and 45,000 health care workers were vaccinated. Chairman of the Irish College of General Practitioners Dr Mark Walsh said the vaccination campaign was successful in targeting vulnerable groups. He said it was important to bear in mind that 22 people have died from the disease here and there have been nearly 1,800 confirmed cases. He believes things have not been as bad as feared because people took precautions in washing their hands regularly and there was also an element of good fortune, but the main reason was the vaccination programme. “As the level of vaccination increased, the incidence of the disease decreased and there may be a relation between the two. We as GPs just have to take advice from public health experts. I’ve heard the arguments about whether that it is really a pandemic, but in pandemics, mutations can occur, so it might be too early to say it is an over-reaction.”
Ireland's vaccination programme
3.85m : Number of vaccines bought by Government - 697,000 : Number vaccinated to date
SPX breaks 1130 support, next 1113.56 (FOTW)
NDX support at 1835, then 1720
Yesterday was another retail setup - Creamerco and other bloviators said "BUY" in advance of the Brown win in Mass. But the stock market ran up on assumed "health reform" passage already. Can't have it BOTH WAYS! Now it's collapsing as many Demos admit "it's back to the drawing board) (e.g. Feingold) and ignore that old B*tch Pelosi who should take her walker to a high SF hill and stumble down. She's venal
GOOG breaks 50 DMA -$590.68 Booyah!
Davy Jones' Locker? LOL- EXXI bought that land from Mitsui in December, Announcement on 30 December, MMR conference call available.
Good post-OT:Dimon Caught Looting JP Morgan! by Geraldo..
http://www.breitbart.tv/geraldo-encounters-haitian-looters-raiding-destroyed-bank/