Financial Crisis

[Abrak]

In addition to the Greek sovereign issue and also the potential for developments in US municipalities, it seems that in Belgium Italy, Poland, France and Germany there are thousands of local and regional authorities who have engaged in CDS and other derivative activity with the likes of GS, RBS, Deutsche, Zurich, Dexia, Hypo, JPM etc who could all now be thinking of queuing up to litigate against the 'banksters'.....each case on its merits and these may not involve criminal activity even if the civial cases are ultimately upheld but at the very least German bankers won't be taking their holidays in French mining towns for a while.....

I think you are right - things are going to get very messy and GS is at ground zero of this witch hunt. Somehow people know that they shouldnt really take an Uzi to confront an investment banker so they are going to try to litigate them to death.

There are already two things that are coming out of the woodwork. One is the myth that 'the likes of GS always had a reputation of looking after clients and that now these 'clients' are realizing that in a lot of cases they were sold a lot of crap.' The reality is GS is an investment bank. Its primary clients tend to be say companies that wish to raise a bundle in a new issue. To the extent, GS has a reputation it is that it is pretty bloody good at making this company look gorgeous when it is a dog. The client is the one the pays them - the company - not the fund manager who takes the offer. In my experience sensible fund managers tend to treat you as an investment banker as a second hand car salesmen.

Secondly, it appears that, by the end of it all, just about every man and its dog were professional fund managers. Local authorities, City councils, Charity funds. In the good old days the guy who managed the British Coal Pension Fund had never met a coal miner - in fact it was debatable he had ever been to somewhere they even mined coal (although I am not sure that is actually possible in the UK anymore.) I remember asking one of the Thai banks why they didnt buy these MBS and they simply said that they didnt understand it and it didnt seem to make much sense - honest but true really.

[midas]

But isn't it a civil lawsuit instead of a criminal?

it is, but one could hope if enough incriminating evidence is collected/presented in the civil suit it might lead to a criminal one.

The momentum is surely gathering

The Honorable Eric Holder

United States Attorney General

U.S. Department of Justice

950 Pennsylvania Avenue, N.W.

Washington, DC 20530-0001

Dear Attorney General Holder:

The U.S. Securities and Exchange Commission (SEC) announced on Friday, April 16, 2010, that it had filed a securities fraud action against the Wall Street company Goldman Sachs & Co (GS& Co.) and one of its employees for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation ("CDO") that GS & Co. structured and marketed to investors. The SEC alleges that:

1. This synthetic CDO, ABACUS 2007- AC1, was tied to the performance of sub-prime residential mortgage-backed securities ("RMBS") and was structured and marketed by GS & Co. in early 2007 when the United States housing market and related securities were beginning to show signs of distress. Synthetic CDOs like ABACUS 2007-AC1 contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market.

GS & Co. marketing materials for ABACUS 2007-AC1 - including the term sheet, flip book and offering memorandum for the CDO - all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. ("Paulson"), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps ("CDS") with GS & Co. to buy protection on specific layers of the ABACUS 2007-AC1 capital structure.

In sum, GS & Co. arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors, as part of the description of the portfolio selection process contained in the marketing materials used to promote the transaction, Paulson's role in the portfolio selection process or its adverse economic interests.

As the SEC notes, financial manipulations such as this contributed to the near collapse of the U.S. financial system and cost American taxpayers hundreds of billions of dollars. On the face of the SEC filing, criminal fraud on a historic scale seems to have occurred in this instance. As an ever growing mountain of evidence reveals, this case is neither unique nor isolated.

If both global and domestic confidence in the integrity of the U.S. financial system is to be regained, there must be confidence that criminal acts will be vigorously pursued and perpetrators punished.

While the SEC lacks the authority to act beyond civil actions, the U.S. Department of Justice (DOJ) has the power to file criminal actions against those who commit financial fraud. We ask assurance from you that the U.S. Department of Justice is closely looking at this case and similar cases to further investigate and prosecute the criminals involved in this, and other financially fraudulent acts. Furthermore, if the DOJ is not currently looking into this particular case, we respectfully ask you to ensure that the U.S. Department of Justice immediately open a case on this matter and investigate it with the full authority and power that your agency holds. The American people both demand and deserve justice in the matter of Wall Street banks whom the American taxpayers bailed out, only to see unemployment and housing foreclosures rise.

This matter is of deep importance to us. As you may know, H.R. 3995, the Financial Crisis of 2008 Criminal Investigation and Prosecution Act, has been introduced, which authorizes you to hire more prosecutors, Director Mueller of the Federal Bureau of Investigation to hire 1,000 more agent as well as additional forensic experts, and Chair Mary Shapiro of the U.S. Securities and Exchange Commission to hire more investigators to continue to pursue justice and route out the criminals in our financial system. Part of financial regulatory reform should include removing the criminals and crafting a system that supports those who follow the law.

We in Congress stand ready to support you in protecting the American taxpayers from financial crimes such as the fraud that the U.S. Securities and Exchange Commission has charged Goldman Sachs with committing. We ask that you take up this case, and others, to pursue justice for the American people, to put criminals in jail, and seek to restore the integrity of our nation's financial system.

Sincerely,

Marcy Kaptur

MEMBER OF CONGRESS

and this

PETITION: NOT "TOO BIG FOR JAIL"

http://act.boldprogressives.org/cms/sign/p...rce=inf&t=3

Edited April 21, 2010 by midas

[churchill]

don't fall for this

Read 'The Big Short'

Paulson hasn't been accused or even associated with any impropriety. Maybe, just maybe his name is getting thrown in there so that the public can be somehow confused into thinking that poor, sweet, little GS were corrupted by the big, bad hedge fund man.

Paulson is up 5% this month.

For full disclosure purposes I should declare that MBMG intends to be an initial investor into the soon to be launched APM Paulson Advantage Fund

"APM Paulson Advantage Fund "and what does that invest in ?

and "MBMG intends to be an initial investor " via which fund ?

Advantage is the less leveraged version of Advantage Plus - the bankruptcy, distressed debt, and merger opportunity funds that have performed so well for Paulson

Via Osmium and Iridium

Some Paulson clients mull withdrawing money: report

http://www.reuters.com/article/idUSTRE63K06E20100421

Edited April 21, 2010 by churchill

[midas]

i sincerely wish your expectations will come true Midas. what this world needs is that a bunch of banksters do jail time. unfortunately the result is (in my view) preprogrammed and whatever huge fine (if any) might be slapped on them, the banksters will pay it... perhaps with a chuckle

You are right Naam

So a question to you flying ?

The more this story unfolds the more it seems to me that SEC is a complete waste of space and a toothless tiger?

How did this come about that they were only given power to pursue a civil case ? And even if this was the case before the crisis why haven’t their powers been vastly increased? Anyone would know in advance that a financial penalty imposed on a bank is laughable – it almost pays them to take the risk.

In Australia even our state regulators actively pursue infringements which are backed up by the threat of jail even for issues compared to what GS have done seem minor. For example anyone who has a trust account such as a lawyer or real estate agent is forbidden from “ dipping “ into that account even on a single occasion ( for example if that buinsess person has cash flow problems ) and they even a team of inspectors who can just arrive at the office and immediately inspect the Trust Account records on the spot. You can go jail if they find you have abused the trust account.

Its no wonder that these bankers have been so arrogant and self confident. Only the threat of jail ever works to keep people in line.

[midas]

Again I don’t understand the way ithis is written in The Times today : -

The headline reads

Goldman Sachs pulls ‘fraud’ banker’s licence

Goldman Sachs yesterday pulled the UK licence of the man at the centre of fraud charges brought against it in the United States, within hours of Britain’s financial regulator opening an inquiry into the allegations.

http://business.timesonline.co.uk/tol/busi...icle7103256.ece

How is that GS has the authority to be anywhere near the licensing process itself regarding banking ?

Shouldn’t it be “ FSA pulls ‘fraud’ banker’s licence ?

What are we in …a self licensing system ?

I always understood ALL ASPECTS of LICENSING should be 100% in the

hands of independent government regulators – and I think its highly improper if GS has any part in this

other than simply being " the licensee " ?

[AlexLah]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

[j_cheung]

But isn't it a civil lawsuit instead of a criminal?

it is, but one could hope if enough incriminating evidence is collected/presented in the civil suit it might lead to a criminal one.

Regrettably, I have to concur with the good doctor again. Much like what this picture betraying what the legit 'Mafioso' thinks of the U.S. Congress earlier this year ...

[sokal]

What the FFFF is this ? The krauts have shown some restraint in bailouts and money printing yet they are the one's who suffer a failed bond auction ? This market is a complete clusterf*ck. It makes me puke.

Failed Bund Auction Having Spillover Effects On Europe

[Naam]

What the FFFF is this ? The krauts have shown some restraint in bailouts and money printing yet they are the one's who suffer a failed bond auction ? This market is a complete clusterf*ck. It makes me puke.

that will scare the Krauts sh*tless!

[churchill]

I am not sure that anyone was prepared - exect some shocks

First thoughts on Greek aid activation

http://ftalphaville.ft.com/blog/2010/04/23...aid-activation/

[Gambles]

I remember asking one of the Thai banks why they didnt buy these MBS and they simply said that they didnt understand it and it didnt seem to make much sense - honest but true really.

Ditto - I was quite impressed. If everyone who didn't understand RMBS had just avoided them we'd be in a much better situation today.

But sadly there was no shortage of Wing Chaus

[Gambles]

don't fall for this

Read 'The Big Short'

Paulson hasn't been accused or even associated with any impropriety. Maybe, just maybe his name is getting thrown in there so that the public can be somehow confused into thinking that poor, sweet, little GS were corrupted by the big, bad hedge fund man.

Paulson is up 5% this month.

For full disclosure purposes I should declare that MBMG intends to be an initial investor into the soon to be launched APM Paulson Advantage Fund

"APM Paulson Advantage Fund "and what does that invest in ?

and "MBMG intends to be an initial investor " via which fund ?

Advantage is the less leveraged version of Advantage Plus - the bankruptcy, distressed debt, and merger opportunity funds that have performed so well for Paulson

Via Osmium and Iridium

Some Paulson clients mull withdrawing money: report

http://www.reuters.com/article/idUSTRE63K06E20100421

don't see that as a problem

It's easy enough to redeem - it's far from easy getting capacity

i.e. still much more demand than supply and the underlyings are predominantly liquid and realizable

[Gambles]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

I'm sure that Paulson can remember

A very legitimate, ethical, profitable trade.

Alex, have you read The Big Short?

[Gambles]

What the FFFF is this ? The krauts have shown some restraint in bailouts and money printing yet they are the one's who suffer a failed bond auction ? This market is a complete clusterf*ck. It makes me puke.

Failed Bund Auction Having Spillover Effects On Europe

Germand and French economies are off the scale in certain specific levels of vulnerability - while overall Greece is the biggest mess today (followed by the other GIPSIs) - Germany, France, Poland, NL and Belgium all face huge risks too.

ALL Euro sovereign debt is problematic to me.

[midas]

I am not sure that anyone was prepared - exect some shocks

First thoughts on Greek aid activation

http://ftalphaville.ft.com/blog/2010/04/23...aid-activation/

and some spectacular events also happening in the Greatest nation on earth

L.A. Judge Predicts Chaos As Budget Cuts Force Courtrooms To Close

Budget cuts are great news if you're criminal in L.A.The Los Angeles court system has already closed 17 courtrooms and another 50

'

http://www.businessinsider.com/la-judge-pr...to-close-2010-4

[churchill]

TEXT-Greek PM statement on activating EU/IMF aid

""Yesterday, we learned of the real deficit figures. It reminded us of all the mistakes ... that we inherited from the previous government.

We inherited a boat ready to sink; a country without credibility; a country that had lost the respect of its friends and its partners; an economy exposed to the mercy and the appetite of the speculators.

From day one, we have rolled up our sleeves and begun the difficult work to change this gloomy situation.

We prepared a plan with difficult and painful measures, but we regained our credibility.

After a marathon, we were vindicated in arriving at the powerful decision by the EU to support the country with a landmark mechanism.

We were hoping that such a decision would be enough to calm down markets in order to give us the possibility to borrow with lower rates."

Continued .. http://www.reuters.com/article/idUSLDE63M1AJ20100423

[AlexLah]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

I'm sure that Paulson can remember

A very legitimate, ethical, profitable trade.

Alex, have you read The Big Short?

Gambles, would the casino not be a more fun place if I could place a bet against your chosen number on the roulette table if I knew they would somehow make sure the ball would not end up on your number with a 90% accuracy?

[flying]

while overall Greece is the biggest mess today

Many also say California is in reality a bigger risk to the USD than Greece is to the Euro.

Yet it does not get much attention

[Gambles]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

I'm sure that Paulson can remember

A very legitimate, ethical, profitable trade.

Alex, have you read The Big Short?

Gambles, would the casino not be a more fun place if I could place a bet against your chosen number on the roulette table if I knew they would somehow make sure the ball would not end up on your number with a 90% accuracy?

not really interested in Dirty Casinos - happy to be a roulette wheel in an honest casino but not play against it

BUT the anlogy is surely if there's a guy who can count the cards so well that he can honestly beat the rest of the inferior poker players fairly and consistently then I would like to back him

[Gambles]

while overall Greece is the biggest mess today

Many also say California is in reality a bigger risk to the USD than Greece is to the Euro.

Yet it does not get much attention

I think probably because of the perceived implicit backing of the faith of USG

rightly or wrongly

[Gambles]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

so in the highly unlikely event that litigiousness runs out of control and spurious charges are laid at the door of John Paulson, his firm or the fund, Paulson will pay these himself, not take them from investors' profits. You could of course say that he can afford to.....but that's missing the point.....GS or any of the 'banksters' could afford to do lots of things that would be right and decent but they choose not to. Despite the injudicious hurling of brown smelly stuff against as many walls as possible, decent people behave like decent people and others are well you know just soooooooooooooo Goldman Sachs

[flying]

I got tired of watching banks go under in the US so stopped watching this site for a few weeks.

http://www.fdic.gov/bank/individual/failed/banklist.html

Looked back today & see they are still being shuttered at a brisk pace.

Eight last week....New one day record? Not sure...

Also glanced at the assets of the first one ( City Bank ) & it was over a billion.

As of December 31, 2009, City Bank had approximately $1.13 billion in total assets and $1.02 billion in total deposits. Whidbey Island Bank paid the FDIC a premium of 1.0 percent to assume all of the deposits of City Bank. In addition to assuming all of the deposits, Whidbey Island Bank agreed to purchase approximately $704.1 million of the failed bank's assets.

The FDIC and Whidbey Island Bank entered into a loss-share transaction on $455.6 million of City Bank's assets.

I know my pal Herr Naam has said many times these are all small pups that should not have been raising a leg with the big dogs but.... Still it is the FDIC backed by guess what taking the hit ultimately. Not so unlike the Big Dogs who got bailed backed by guess what?

In the end no mater the size you have to wonder how long & how many can be saved/bailed/loss share transactions....

This pyramid will not work/last for much longer. There is no end in sight AFAIK

I mean there was what 150 shut last year? 2009

57 so far this year 2010?

It is adding up small or not & trust me they are not all as small as we would like to suppose....Not that we did not also pay for the *Big Dogs* to lift their leg & piss on us tax payers.

Edited April 24, 2010 by flying

[midas]

its the growth in number of government departments in USA that amazes me....................

It may well create more jobs and hence consumers but this " productivity " isnt likely to help reduce the US debt ?

Health Care Bill 159 New Boards and Commissions Created

President Obama signed a government takeover of health care into law. Here is a list of new boards, bureaucracies, and programs created in the Obama health care bill. Bureaucracy Grows.

http://projectworldawareness.com/2010/04/h...ssions-created/

[AlexLah]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

so in the highly unlikely event that litigiousness runs out of control and spurious charges are laid at the door of John Paulson, his firm or the fund, Paulson will pay these himself, not take them from investors' profits. You could of course say that he can afford to.....but that's missing the point.....GS or any of the 'banksters' could afford to do lots of things that would be right and decent but they choose not to. Despite the injudicious hurling of brown smelly stuff against as many walls as possible, decent people behave like decent people and others are well you know just soooooooooooooo Goldman Sachs

Could you not say he pays these penalty's from investors losses?

The bonus money comes from somewhere,right?

[Gambles]

So a lot of noise, GS brought to court bla bla bla.

One guy is being sacrificed/charged, that's it. Once these guys like Paulson have to testify they just can say, I do not recall/remember.

Same sh1t, different day....

so in the highly unlikely event that litigiousness runs out of control and spurious charges are laid at the door of John Paulson, his firm or the fund, Paulson will pay these himself, not take them from investors' profits. You could of course say that he can afford to.....but that's missing the point.....GS or any of the 'banksters' could afford to do lots of things that would be right and decent but they choose not to. Despite the injudicious hurling of brown smelly stuff against as many walls as possible, decent people behave like decent people and others are well you know just soooooooooooooo Goldman Sachs

Could you not say he pays these penalty's from investors losses?

The bonus money comes from somewhere,right?

No, you couldn't really say that. It wouldn't make any sense in the overall context.

Please read The Big Short as a way into understanding this - people were buying and people were selling and some people were being honest brokers and others weren't....it's really not difficult to understand where the blame attaches if you follow what happened - just don't be naive enough to blame the wrong people just because the bad guys would liek to wriggle off the hook and place the blame anywhere except at their own door...

Sen. Carl Levin, D-Mich., who chairs the Senate Permanent Subcommittee on Investigations - "Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis."

[midas]

They could put all their energy into learning to speak an write Mandarin or Hindi

and take a chance on finding some work .......any work at any wage .... in one of these other countries-

anything would be better surely than not working for possibly a decade?

Millennials Are The Brokest Generation Ever

It means we are raising a generation of young Americans that are a financial mess

After all, most young Americans have never received any formal training on how to manage their money, and the role models of financial responsibility they do have (the rest of us) are hardly worth emulating.

But if each generation of Americans is becoming increasingly financially irresponsible, what does that mean for the future of this nation?

http://www.businessinsider.com/millennials...ion-ever-2010-4

[churchill]

EU Debt Crisis: Update - 2 Key Mistakes, 4 Deadly Dangers Ahead

'Over the past days, Greece’s 2009 deficit was revised higher from 12.7 to 13.6% of GDP, Moody’s downgraded Greece’s credit rating to below that required under the usual ECB standards, making Greek bonds unfit to serve as collateral for ECB loans. As noted recently in More EU/Euro Bleeding, And 3 Reasons Washington May Refuse Aid, all PIIGS block countries are now being hit with climbing borrowing costs, threatening a wave of sovereign defaults if they are shut out of bond markets and overwhelm EU and IMF resources.

Faced with borrowing costs now many hundreds of basis points above the roughly 5% envisioned by the latest rescue plan for 3 year notes, Greece formally requested the aid Friday April 23rd.

As of this writing, most asset markets are not overly concerned. Stocks remain near 52 week highs, and the EUR/USD is holding at support of 1.3300. Bonds and stocks are actually rallying on news of the request, reflecting a belief that aid will come and there is no immediate threat of default or contagion.

Our Take: Four Reasons to be Fearful

We find the continued calm amazing. To summarize our chief concerns:

Greece Inspired Fear Pushes Up Borrowing Costs For All PIIGS: This means countries that were in trouble but were managing, like Spain and Italy are now moving closer to the point at which manageable debt loads become unaffordable due to rising borrowing costs.

Greece Is Just The Beginning: Even if Greece gets through May, Spain needs € 30 bln in July: to avoid its own default, and it too is seeing rising credit default spreads along with the rest of the PIIGS block. Perhaps rates will have come down by then. If not, then even if the current rescue plan can be activated in time, that would essentially empty its roughly €40 bln coffers assuming Greece only needed € 10 bln. Greece will need about 20-30 bln more Euros, and that’s just Greece alone. Taken together, Italy and Spain alone would eventually overwhelm EU and IMF resources, never mind the rest of the PIIGS and other weak economies that can no longer access bond markets.

Doubtful Political Will: Would voters of contributing nations accept paying this bill, especially when untold additional amounts will be needed for any permanent solution (€ 80 per ECB official Weber just for Greece’s long term rescue)?

Contagion: The potential for rising rates to push the entire PIIGS block (and possibly large EU banks holding these bonds) into default is very real and growing, but ultimately it would only be a spark for even greater troubles. The next dominos to fall could be general credit liquidity and sovereign debt yields.

Just a few consequences to consider if that comes about:

Greek banks are major lenders in Eastern Europe. As major holders of Greek bonds, a default would likely cause a credit freeze in this region as Greek banks contract.

Japan currently pays only about 1.4% on its longer term bonds, yet its national (without considering municipal) debt service costs are already over 26%. A mere rise to 2.8% would put debt service at an unbearable 52%+ of its budget.

The US and UK would also be under severe strain with even a 1% increase in long term bond rates.

It’s the c-word that is so scary. Once interest rates start to climb, markets will not avoid a drastic pullback at the very least. Many other consequences, but you get the idea."

MORE .. http://seekingalpha.com/article/200621-eu-...ead?source=feed

[churchill]

Germany could say no to Greece aid: Finance minister

http://economictimes.indiatimes.com/news/i...how/5856080.cms

[flying]

Saw this on a few sites...... 600% foreclosure rate increase ahead according to BOA

Guess housing prices may have a way to go yet.....down

Inventory will be bursting at the seams.

The west coast manager of real estate owned, Senior Vice President Ken Gaitan, stated that Bank of America, which currently forecloses on 7,500 homes a month nationally, will increase that number to 45,000 homes per month by December of 2010.

http://www.irvinehousingblog.com/blog/comm...by-600-in-2010/

Edited April 27, 2010 by flying

[flying]

REPORT AIR DATE: April 20, 2010'Strategic Defaulters' Skip Mortgage Payments as Home Values Tumble