BANKING DOSSIER: There goes Glass Steigel

Citi eyes shift to create single unit for analysts

By Francesco Guerrera in New York

Financial Times, August 6 2008 03:00

Citigroup is working on a plan that would shift its equity research operations into its institutional securities business, reversing a reform implemented earlier this decade amid regulatory scrutiny of Wall Street conflicts of interest.

Details of the overhaul, which could be announced in the coming weeks, were not yet finalised and could still change, people close to the situation said.

However, under the current plan, Citigroup would create one unit for analysts from across its sprawling operations in the hope of cutting costs and serving clients more efficiently.

The move would reverse a decision taken six years ago when Citi moved equity research from ts investment bank to its wealth management unit. At the time, Eliot Spitzer, then New York Attorney general, and other regulators were investigating whether Citi and other Wall Street groups had tried to win investment banking assignments by publishing overly rosy research.

Citi declined to comment.

The latest overhaul is part of efforts by Vikram Pandit, chief executive, to get Citi's disparate components to work better together while cutting inefficiencies and restoring the company financially. The merger of equity, fixed-income and economic research would enable Citi to cut costs by eliminating duplicate back office and other support functions, people close to the company said.

The return of equity research to the institutional securities division was considered under Mr Pandit's predecessor, Chuck Prince, but was opposed by some senior executives. They had argued that moving the operations back into the institutional business could rekindle fears over bankers' influence on research. However, people close to Citi say the rules imposed on research
since the 2002 global settlement between banks and US regulators make such fears unfounded.

They add that putting equity analysts back into the institutional business is logical because institutional clients pay for most of its research output.

Most of Citi's rivals have similar arrangements with "Chinese walls" that prevent bankers from talking to - or otherwise influencing - analysts on client issues.

The new unit is likely to report to Hamid Biglari, chief operating officer of the institutional securities business, who has no direct oversight of either the investment bank or capital markets unit.

Citi's equity analysts were moved to the Smith Barney wealth management unit in 2002, before the global settlement, which required Citi to pay $400m.

Jim Kunstler - A Real Freakout

by James Howard Kunstler, published on his webpage, Clusterfuck, 3/17/08:

Things are getting very weird very fast -- and will probably get even weirder, faster, as the the train wreck of bad debt meets the Saint Paddy's Day Parade of bacchanalian excess at the grade-crossing of destiny. The train is carrying America's financial system, but the engine driving it is peak oil, because declining energy resources necessarily means declining capital wealth -- and declining value of all the institutions, instruments, and markers that denote that wealth or hope to profit by trading in it. The fiasco leads straight to the necessary reinvention of American life on other terms and by other means.

I've maintained for a long time that, even among those who recognize we have a big problem, there are many impediments to imagining a credible outcome. One thing I've noticed is that in any given public meeting (or lecture hall) you can divide participants into two groups: those who believe we will 'high-tech' our way out of this predicament; and those who believe we'll organize our way out.

I don't subscribe to either point of view, strictly speaking. Both POV's assume that there will be an orderly transition between where we're at now and where we're headed. They're tainted by the kindergarten ethos of entitled happy endings and outcomes, which has been the chief operating system for the Baby Boomers, a therapeutic bias for placing 'good feelings' ahead of reality -- which also has obliterated the tragic sense of life that acts as the only brake on humanity's inherent hubris.

Ultimately, in my view, the issue of what happens next will be settled not by the fantasies of the algae-biodiesel geeks or the wishful thinking of the sustainable futures organizers, but by the natural, self-organizing properties of a society responding 'emergently' to new circumstances. One of the implications of destiny-as-emergence is the probability that we will try any damn fool thing besides the right things to keep the old game going for a while -- even in the face of obvious failure.

I'm sure our political leaders will mount a campaign to rescue the futureless infrastructure of suburbia. It will necessarily be an exercise in futility. But it has already started. That's what the swindle of ethanol has been all about. And the touting of hybrid cars, and the flimflam of "energy independence." Even the "environmental" crowd" squanders most of its attention these days on how to keep all the cars running on something other than gasoline. They don't question the assumption that we will remain a car-dependent society.

As much as I loathe the suburbs in their grotesque late-stage efflorescence, I can understand why those stuck in them would wish to defend their misinvestments. I just hate to think of the political consequences when their disappointment catches up to the reality that the suburbs will not be rescued. And by that I mean not just the houses but the way-of-life associated with them and all its accessories, furnishings, and activities. Bewilderment will soon turn to rage out in the highway-strip-and-cul-de-sac empire.

Now, apparently, we'll also opt for a bail-out of all those who tried to become rich by getting something for nothing at both ends of the Ponzi scheme called the housing bubble -- the "little guys" who signed mortgage contracts they could never hope to pay off, and the Wall Street playerz who bundled these hopeless contracts into fraudulent securities (and their enablers in the ratings agencies, plus the hedge fund smoothies who tried to cash in by using recondite algorithms to dissolve the risk associated with imprudent lending.) The bail-out is likely to accomplish nothing except the more rapid bankruptcy of government at all levels and a second Great Depression at ground level (worse than the first one).

Over the weekend, the Federal Reserve engineered a $30-billion dollar Saint Paddy's day present for the JP Morgan bank by handing them the corpse of Bear Stearns. The object of the game is to prevent the "assets" of Bear Stearns from going to the auction block, on which they would be discovered to be nearly worthless, which would instantly render all similar assets held by the other big banks to be similarly worthless, and would result in a universal margin call that would pretty much unwind the hallucinated "wealth" acquired the past ten years.

Despite the heroics around the fate of Bear Stearns, it looks like the financial system is tottering anyway. Perhaps the last trick left in the rescue bag will be the 100-basis-point drop in the Fed rate rumored to be announced tomorrow. It won't help any of the big banks, since their problem is holding liabilities in excess of assets. Almost certainly it would crater the US Dollar.

The next thing in store for America, in my opinion, will be a rather new surprise: oil-and-gasoline shortages. While frightened money pours into the oil futures markets, driving the price up, strange behavior will start brewing in the actual physical allocation process. Imports of oil and gas to the US may not be as reliable as it had been when America seemed to be a solvent nation. The exporters may be changing their terms of doing business with us -- and that's nearly two-thirds of all the oil we need. The public would probably suck up oil price increases indefinitely, but shortages are going to be something else. A real freak out.

Stocks stumble at open on financial, economic woes

Here WE Gooooooooooooooooooo!

Wanna bet it's an avalanche?

First there is the Stats.

Then there is the increase in oil prices.

Then there is the fact that they can't cover up the commodity shortages.

Then there is the fact that sell orders mandated last week, are now approved by Corporate Big Shots, after the Little Guys sold last week.

Then there is the fact that Helicopter Ben is an idiot AND
Then there is the fact that Hank Paulson is giving an address that everyone already knows is going to be full of LIES and DECEIT And coverup ..

Then there is the fact that unfettered capitalism and crooks made for a HARD friggin market

Then there is the fact that everyone can see that momentum is buidling to dump the friggin DC BAS TAARDS.

And so on.

Turn on your radios today, the broadcasters are gonna get hysterical again!!

Yup, they most definitely will.

NEW YORK (MarketWatch) -- U.S. stocks stumbled at the open Thursday, after a fund managed by The Carlyle Group admitted it's close to collapse, dragging the dollar and boosting oil, while February retail sales were much weaker than expected, fueling concerns the economy is already in recession.

Can you spell

G-R-E-A-T D-E-P-R-E-S-S-I-O-N

Do you know about the IDES OF MARCH?

Aren't you glad you got them economic

Stimulus checks?

Right!

So you can drink away your disenchantment??

Uh, hunh.

Thought so.

Tighten your Xmas giving this year? Wall Street did NOT.

Big bucks brighten Wall St

Leela De Kretser

December 25, 2007 12:00am

THE gloom and doom that has hung over Wall Street ever since the sub-prime mortgage fiasco cleared in time for Christmas after financial firms doled out holiday bonuses.

Despite fears that the US economy is plummeting into a recession, bankers and traders at the biggest banks and finance companies were able to splurge big for the holidays, safe in the knowledge that bonus cheques on average grew by 14 per cent on last year.

The four biggest banks, Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns, were estimated to be paying out about $US32 million ($36.8 million) in bonuses, about 60 per cent of the total compensation employees got in 2007.

At the top of the list of trendy gifts that have Manhattanites trying to keep up with each other this year are "once-in-a-lifetime experiences", and "extreme luxury" items on sale at upscale retailers.

A $7700 doghouse at department store Neiman Marcus and a $3 million diamond-encrusted Victoria's Secret bra are among the most lavish. At Saks, the Masters of the Universe wrestled each other for the chance to spend $100,000 on a day at the Super Bowl with an NFL player.

Thanks to holiday bonuses, retailers and restaurateurs in New York enjoyed another happy holiday shopping season as Wall Streeters lapped up the usual high-ticket items of Kobe steaks, diamond jewellery and plastic surgery gift certificates.

But many were treating this Christmas as their last chance to buy.

The healthy size of the bonus cheques was due mostly to record earnings in the first half of the year, before a credit squeeze caused M&A (mergers and acquisitions) activity to almost dry up and many banks were forced to writedown billions of dollars on sub-prime mortgage bonds.

Most analysts predict that the stockings of Wall Streeters will not be so stuffed with cash next year as problems in credit markets and in structured investment vehicles continue to bite at the US economy.

At least half of the analysts polled by Bloomberg believe the US is heading for recession.

Already, some on The Street are feeling the pinch. At investment firm Merrill Lynch, which is expected to take another $6 billion hit to its books due to collateralised debt obligations this quarter, bonuses are likely to be down 40 to 70 per cent when the company makes its offerings in January.

Morgan Stanley CEO John Mack and Bear Stearns chief Jimmy Cayne also announced that they would forego their holiday bonuses this year in light of the banks' problems with investments in CDOs and sub-prime mortgage-backed bonds.

In Battery Park City, however, Goldman Sachs workers were smiling all the way to the ATM machine, celebrating a record $US17 billion in holiday tidings.

Goldman Sachs was the only one of the big banks to correctly predict that the market for reselling sub-prime mortgage loans was about to hit trouble and sell its holdings before the summer hit.

The most generous bonus cheque will be made out to Goldman Sachs CEO Lloyd Blankfein.

The Golden Boy will receive $US70 million extra after he successfully navigated the bank out of mortgage securities.

Goldman has offered a special charitable fund for well-minded workers to donate their holiday bonuses to this year.

One to watch!! The ISE-CCM Homeland Security Index

Cronus Capital Markets, Inc.

Dec 04, 2007 10:46 ET

The ISE-CCM Homeland Security Index Lists on the NYSE as an ETF

TORONTO, ONTARIO--(Marketwire - Dec. 4, 2007) - The ISE-CCM Homeland Security Index, originally developed by Cronus Capital Markets (CCM) and the International Securities Exchange (ISE), has been listed on the NYSE as the FocusShares ISE-CCM Homeland Security ETF (NYSE:MYP). Cronus Capital Markets took part in the closing bell ceremony on Nov. 30, 2007 as the ETF went live.

Exchange-traded funds (or ETFs) are open-ended investment companies that can be traded at any time throughout the course of the day. Index options on the ISE-CCM Homeland Security Index have been trading on the International Securities Exchange (ISE:HSX) since 2005 with Timber Hill LLC acting as the primary market maker.

The ISE-CCM Homeland Security Index, with 30 components, measures the performance of companies primarily engaged in the business of contractual work with the department of Homeland Security, law enforcement agencies, or providing products or services for the following efforts: intelligence and warning; border and transportation security; domestic counterterrorism; protection of critical infrastructure; defense against catastrophic threats; and, emergency preparedness and response.

Michael Soni, President and CEO of Cronus Capital Markets, stated that "Both individual and institutional investors will now have a direct avenue in which to participate in the growth of this important sector. Furthermore, investors will be able to hedge their portfolios against the risk of terrorism in a manner never before available."

According to Bruce Aitken, President of the Homeland Security Industries Association (HSIA), "The HSIA is the leading U.S. trade association for homeland security companies and we are pleased to participate in the launch of the FocusShares ISE-CCM Homeland Security ETF as the only tradable pure investment product relating to Homeland Security. Homeland Security is the business of all businesses and of every US citizen. Since 9-11 the business of homeland security has undergone a dramatic overhaul and America's safety will continue to require cooperation between the public and private sectors. We believe that the FocusShares ISE-CCM Homeland Security ETF is a major step in the right direction."

Both Mr. Soni and Mr. Aitken remarked that the existence of a Homeland Security ETF will drive institutional investor attention in the direction of the Homeland Security sector in a much more focused way, ultimately leading to increased investment for companies with homeland security solutions.

Cronus Capital Markets (CCM), headquartered in Toronto with offices in New York, Vancouver, and Los Angeles, is a global investment information firm strategically producing and distributing investment information to the investment community on relatively undiscovered "high growth" potential areas of the market. CCM operates in three divisions: CCM Indexes, CCM Research, and CCM Consulting. (www.cronuscapitalmarkets.com)

FocusShares is an investment management company that has a single mission - to develop and issue exchange traded funds (ETFs) that not only capture investor's imagination but, most importantly, allow investors to own and trade targeted investment objectives. FocusShares has built ETFs that are based on indexes from the International Securities Exchange (ISE). The ISE indexes are not just innovative; they're indexes for the real world. (www.focusshares.com)

The ISE, the world's largest equity options exchange, was founded on the principle that technology fosters and infuses new efficiencies and operational innovations into securities trading. After developing an innovative market structure that integrated auction market principles into an advanced screen-based trading system, the ISE launched the first fully electronic US options exchange in May 2000. The ISE continually enhances its trading systems to provide investors with the best marketplace to execute their options orders. (www.iseoptions.com)

HSIA, with over 700 members, has chapters across the United States and in Canada, Europe, and the Middle East. The Association monitors and analyzes legislation, regulation, and related hearings concerning homeland security; coordinates and disseminates to its members information regarding federal, state, and local requests for proposals (RFPs) related to homeland security procurement; develops position papers, reflecting industry positions and concerns that may be shared with government officials; and provides networking opportunities among industry and government leaders. Mr. Aitken is also the Co-Chair for HSIA's Global Alliance for Homeland Security, under which they have affiliated with the European Homeland Security Industry Association. (www.hsianet.org)

AP: Stocks End Volatile Week With Huge Drop

Saturday November 10, 12:51 am ET
By Joe Bel Bruno, AP Business Writer

[Oh, the bumpy ride is about to get a big big jolt!! And 2-3% of America is about to go HOMELESS, all savings lost, as those "savings" were in their HOMES.]

Stocks Skid Again; Investors on Edge As Wachovia Takes Writedown, Economic Worries Persist

NEW YORK (AP) -- Wall Street finished a turbulent week with another huge drop Friday after major banks warned of further losses on their debt portfolios, raising investor concerns that the credit market slump shows no sign of abating. The Dow Jones industrial average fell more than 220 points.

Bank of America Corp., JPMorgan Chase & Co. and Wachovia Corp. all said the ongoing credit crisis will cause another round of heavy losses during the fourth quarter. Financial institutions took big hits during the last quarter as losses from subprime mortgages hurt their balance sheets, and these three companies were just the latest to report bad news that sent stocks lower.

BofA said continued "market dislocations," including those related to securities it owns that are backed by loans, will affect its fourth-quarter results. The bank did not provide an estimate of how large the impact will be. JPMorgan said difficult conditions may cause a fourth-quarter writedown, but did not say how much.

Wachovia, the nation's fourth-largest bank said it faced a $1.1 billion writedown for October alone. Investors also were rattled by speculation that Barclays PLC was about to announce a $10 billion writedown, though the U.K. bank denied the rumors.

"The extent of the situation is unknown, and that uncertainty doesn't give investors any reasons to believe that a bottom might be in place," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research. "We just got more of the same this week rattling investors, and the question for investors becomes what's the next catalyst to drive stocks higher."

Further worries about the continuing credit market slump kept investors on edge a day after Federal Reserve Chairman Ben Bernanke said he expects the economy to "slow noticeably" this quarter.

He also said the dollar's weakness "may have some effect on import prices" -- which was confirmed Friday in new government data. The Commerce Department reported U.S. import prices soared last month at their fastest pace since early last year.

Meanwhile, the University of Michigan's preliminary November consumer sentiment index tumbled for its weakest performance since October 2005.

The Dow Jones industrials fell 223.55, or 1.69 percent, to 13,042.74. The blue chip index is down 1,155.35 points, or 8.14 percent, since its trading high of 14,198.09, reached in August.

The Standard & Poor's 500 index was off 21.07, or 1.43 percent, at 1,453.70, while the Nasdaq composite index tumbled 68.06, or 2.52 percent, to 2,627.94.

Friday's performance capped another dismal week for stocks. The Dow racheted up and down, including a 360-point plunge Wednesday that was the blue chips' third drop of more than 350 points in a month; the volatility was proof of how anxious and how quick to sell investors are in what has become a steady flow of bad news about credit losses.

For the week, the Dow dropped 4.06 percent and the S&P 500 tumbled 3.71 percent. The technology-focused Nasdaq, which often trades with more volatility, plunged 6.49 percent.

Light, sweet crude for December delivery on the New York Mercantile Exchange rose 86 cents to settle at $96.32 a barrel on the New York Mercantile Exchange.

Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.22 percent from 4.27 percent late Thursday. Yields and prices move in opposite directions. The bond market will be closed Monday for the Veterans Day holiday observance; the stock market will be open. Meanwhile, both gold and the dollar were lower.

Financial stocks were among the hardest hit Friday, though the banks that warned about the fourth quarter finished mostly flat amid hopes that their announcements might be signaling the end of the current period's trouble. BofA rose 49 cents to $43.99, JPMorgan fell 32 cents to $42.29, and Wachovia was up 31 cents at $40.61.

Investors were uneasy about tech stocks after Qualcomm Inc., the nation's second-biggest maker of chips that run mobile phones, predicted that heightened competition and legal troubles will cause 2008 results to fall 4 percent to 7 percent below Wall Street projections.

Qualcomm fell $1.66, or 4.2 percent, to $38.10.

Cisco Systems Inc. was another drag on the technology sector. It fell $1.05, or 3.5 percent, to $28.58 after the company warned of a dramatic decline in domestic business orders.

Merck & Co. said it will pay $4.85 billion to settle thousands of lawsuits over its painkiller Vioxx -- a move considered to be the biggest drug settlement ever. The offer was finalized early Friday as Merck and the plaintiffs met with three of the four judges overseeing the claims. Merck rose $1.13, or 2.1 percent, to $55.90.

Walt Disney & Co. shares fell 89 cents, or 2.7 percent, to $32.74 after the entertainment company said late Thursday fiscal fourth-quarter profit rose 12 percent, driven by sports network ESPN and turnout at its U.S. theme parks. However, executives remain concerned about a Hollywood writers strike that began this week.

Declining shares led advancers by a better than 2 to 1 ratio on the New York Stock Exchange, where consolidated volume came to 4.53 billion shares, down from 5.35 billion Thursday.

Overseas, Japan's Nikkei stock average closed down 1.19 percent and Hong Kong's Hang Seng index rose 0.08 percent. Britain's FTSE 100 was down 1.21 percent, Germany's DAX index fell 0.09 percent, and France's CAC-40 shed 1.91 percent.

The Dow Jones industrial average ended the week down 552.36, or 4.06 percent, at 13,042.74. The Standard & Poor's 500 index finished down 55.95, or 3.71 percent, at 1,453.70. The Nasdaq composite index ended down 182.44, or 6.49 percent, at 2,627.94.

The Russell 2000 index finished the week down 25.40, or 3.18 percent, at 772.38.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 14,709.29, down 559.53 points, or 3.66 percent, from 15,268.82 for the week. A year ago, the index was at 13,837.86.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

The Fix Is Always In At Goldman Sachs

The Fix Is Always In At Goldman Sachs

We hope Goldman fund investors are enjoying being fleeced by their asset managers. And in general, we think the shadowy nature of Goldman's less-than-arms-length relationships throughout the government and financial markets infrastructure certainly justify some serious inquiry.

[I tell you, between Henry Paulson and his shenanigans (BIG HAIRY BIG shenanigans) and people's naivity and inability to realize just what is at stake here in the world's markets, the world is quickly going to hell in a handcart. The time to have stopped all the secrecy was July 13, 2001 and an investigations launched THEN. Still not happening and unlike any time soon. and RAH! for Bill Bonner, who doesn't have enough clout, but should, to really rally the troops to do something about the crimes and corruption.]

---
9/21/2007

By: Joe Stocks

Goldman’s Quasi-Monopoly Earnings Report

Goldman Sachs (GS) – you know Goldman Sachs. They came out with an earnings report today. But first a little background.

Goldman gave us Robert Rubin, former Chairman of Goldman. He is the gentleman President Clinton called on to be Secretary Treasurer of the United States in 1995. During his tenure he orchestrated the bailout of Mexico, Asia, Long Term Capital Management, and Y2K. He is no stranger to moral hazard. His actions show that he actually embraced it. I think he was also responsible for Federal Reserve Chairman Greenspan to change his ways. After Greenspan uttered those famous words - “irrational exuberance” and knocked the equity markets for a loop in 1996, Greenspan became much more respectful of those that kept him in power. I thought that Greenspan meant what he said at the time with strong foundation, but his actions afterwards where of a different tune. Enough so that he bowed to the whims of both the Clinton and Bush administrations, taking irrational exuberance to bubble proportions.

Goldman also gave us John Thain. John is now CEO of the New York Stock Exchange. Mr. Thain helped to complete the reverse takeover of the NYSE by Archipelago in 2005. As you may have guessed – Archipelago’s largest owner - Goldman Sachs.

Well, who is the current Secretary Treasurer of the United States? It is Henry Paulson, former CEO and Chairman of Goldman Sachs. Mr. Paulson took the reins in early 2006. Yet another Goldman guy.

Everyday the Federal Reserve operates an open market operation to add and subtract liquidity from our financial system. This is where the big NYSE member banks go to get additional funds. I can’t think of another person that may be more important to a financial firm like Goldman Sachs on a daily basis. I am sure the Federal Reserve looked far and wide for someone to run this very important unit as it oversees domestic open market and foreign exchange trading operations as well as the provisions of account services to foreign central banks.

They picked Goldman Sachs former Chief Economist, William Dudley. An ‘economist’ for a trading operation? I know, it doesn’t sound right to me but maybe he takes direction well. William took this post in late 2006.

World Bank, you ask? Who runs the World Bank? The President of the World Bank is Robert Zoellick. Mr. Zoellick spent most of his career working for various governmental agencies. No Goldman connection here? Almost. He resigned in June 2006 to join Goldman. After a one year stint of indoctrination of how things work at Goldman, and who truly butters his bread, he was appointed World Bank President in June of 07’.

So, former Goldman people are in place as the United States Secretary Treasurer, the head of the NYSE, the head of the trading operations at the Federal Reserve (an economist at that), and President of the World Bank. Big deal? It gets better.

Just after the 1987 stock market crash the President of the US signed an executive order forming a committee of government and private individuals to monitor the financial markets. This group was named the ‘Working Group’. We traders have nicknamed this group the Plunge Protection Team – the PPT. Their mandate was to make sure all steps were taken to make sure nothing like that crash would happen again.

In 1998 the financial world was shaken by the financial shenanigans of a hedge fund named Long Term Capital Management. ( ‘Long Term’ lol!) After which time the US President’s Working Group approached the major NYSE member banks and said, “hey guys, listen, we ain’t suppose to let things like this happen. You guys need to get your act together.”

These banks formed the Counterparty Risk Management Policy Group (CRMPG) The members are the top NYSE member banks, General Motors, a couple of hedge funds, and some well connected law firms and accounting firms. The group met and produced a document but was asked again in 2004 by the Working Group to come with more defined policy procedure. This effort resulted in the publication titled ‘Toward Greater Financial Stability: A Private Sector Perspective’.

Who was the leader of this group? Gerald Corrigan, Chairman of Goldman Sachs. Who was the transmittal letter addressed to at the opening of the report? Henry Paulson, then CEO and Chairman of Goldman Sachs, now US Secretary Treasurer. Who developed the policy? Well here is an excerpt from the transmittal letter; “I want to express to you my sincere gratitude for the time and effort devoted to this project by Craig Broderick who served as a Member of the Policy Group and the others from Goldman Sachs who participated in the project and are named in the Report.”

Link to the report; www.crmpolicygroup.org/docs/CRMPG-II.pdf

Here is what the CRMPG stated as their primary purpose; “The primary purpose of CRMPG II — building on the 1999 report of CRMPG I — is to examine what additional steps should be taken by the private sector to promote the efficiency, effectiveness and stability of the global financial system. As practitioners, the members of CRMPG II recognize that periodic financial disruptions and shocks are inevitable. However, the Policy Group also believes that it is possible to take steps that would be capable of reducing the frequency of such shocks and, especially, to reduce the risk that such shocks would take on the contagion features that can produce systemic damage to the financial system and the real economy.”

Again it appears the CRMPG mandate is to control the markets. How else are they to reduce the frequency of periodic financial disruptions.

CRMPG: “since we know that financial disturbances and even financial shocks will occur in the future, and we know that no approaches to risk management or official supervision are fail-safe, we also know that we must preserve and strengthen the institutional arrangements whereby, at the point of crisis, industry groups and industry leaders, as well as supervisors, are prepared to work together in order to serve the larger and shared goal of financial stability.”

We need to work together for financial stability? What does that mean for the public or retail investor? Obviously every trade has a counterparty. If these firms get in trouble with sub-prime loans, is it their idea to transfer that risk to the public to insure their financial stability and therefore the stability of the US economy as what they represent, as we can not have failing banks and a strong economy. But it would be acceptable to have a block of retail investors (small counterparties) suffering financial disruptions as long as it did not affect the general public or the greater good of the large NYSE money center banks?

Former Federal Reserve Chairman Greenspan acknowledges the CRMPG and their collective “eye” on the market in a speech he gave in 2002; “In today's markets there is an increased reliance on private counterparty surveillance as the primary means of financial control. Governments supplement private surveillance when they judge that market imperfections could lead to sub-optimal economic performance.” Link to speech; http://www.federalreserve.gov/boarddocs/speeches/2002/200209252/default.htm
That leads me to Program Trading. Program trading ran about 16 to 19% of all shares traded on the NYSE from 1987 to 1998 when the Long Term Capital diabolical hit. Since that it has climbed to 65-75% of all shares traded on the NYSE.
The NYSE stock exchange issues a weekly report on Program Trading. For the week ending August 31st, program trading accounted for 73% of all shares traded on the NYSE. Now you will look at this report and see that it says 36.5%. What gives? Well, the NYSE formerly reported program trading as both sides of the trade. They did this for a couple of decades, or the inception of program trading. (Program trading is defined as a trade of 15 or more issues with a value over one million dollars.) Then in June of 2006, shortly after the Goldman guy took over, they changed the reporting to just one side of the trade. In addition, they deleted all past reports from their news archives. One day they were there, the next they were all gone. The old way of reporting worked for many years giving a more accurate summation of total program trading. I continue to use that number as it is more truthful. Link to recent report; http://www.nyse.com/pdfs/PT082707.pdf

Now you may suspect who the top program trader is. Well, sometimes it is Goldman but lately it has been Lehman Brothers. However, if you look at program trades made as the broker being the principal and not acting as an agent for others, Goldman does indeed take the top spot. For the referenced report they accounted for 25% of all program trades made as principal. Looking farther we see that the top six firms accounted for 69% of all program trades, or 50% of ALL shares traded on the NYSE. 50% of all shares traded in the hands of program traders of just six firms that are all members of the CRMPG, with the goal working together for the greater good? How would you like to be on the other side of those trades?

Again Greenspan in his speech of 2002 says it best.” To require disclosure of the structure of the innovative product either before or after its introduction would immediately eliminate the quasi-monopoly return and discourage future endeavors to innovate in that area.”

Quasi-monopoly returns! That, my friends, leads me to Goldman’s third quarter earnings release today. Earnings were up an eye-popping 88% from last year. It was as though Goldman was on the right side of every trade.

But how could this be? We saw the headlines;
‘Goldman's Exclusive Hedge Fund Drops By 10%’
‘Goldman hedge fund falls 22.5 pct in Aug’

Well, you see, Goldman doesn’t manage OTHER peoples money quite like it manages it’s own.

From the report - Asset Management (money they manage for others), Goldman: “Asset Management net revenues were $1.20 billion, 31% higher than the third quarter of 2006, reflecting a 40% increase in management and other fees, partially offset by lower incentive fees.”

Lower incentive fees? Fees were down 52% from last year. Incentive fees reflect doing a good job. Looks like their performance was lacking from last year.

Goldman: “During the quarter, assets under management increased $38 billion to $796 billion, reflecting money market net inflows of $31 billion, non-money market net inflows of $19 billion spread across all asset classes, and net market depreciation of $12 billion, reflecting depreciation in equity and alternative investment assets, partially offset by appreciation in fixed income assets.”

Increase of $38 billion. That’s a lot of money but still just 5% increase. But with $38 billion in net inflows after depreciation it appears that they had negative organic return on the assets that manage.

All on all, the money they manage for OTHERS had a bad quarter.

Now look at their proprietary trading unit – THEIR money. Trading and Principal Investments were $8.23 billion, 70% higher than the third quarter of 2006. Equity trading revenues were up a mind boggling 154%. This is in quarter were we saw a rough drop of about 3% in the S&P500.

Goldman: “Significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions.”

They shorted mortgage positions with THEIR money! Shorting mortgages – a bet that citizens will default on their loans and possibly lose their homes. Goldman made money when things were good by pushing these sub-prime loans, now they win again when they go sour.

OTHER peoples money (OTM); NEW YORK, Sept 13 (Reuters) – “Goldman Sachs Group's Global Alpha hedge fund fell 22.5 percent in August on losses from currency and stock trades, Bloomberg News reported, citing an update sent to investors.”
Goldman has the largest collection of hedge funds in the world. How is it that they receive 75% of their revenues from trading, but the hedge funds they manage for other people’s money under-perform the returns Goldman receives on its OWN money? When Goldman’s hedge funds are long sub-prime, why did not the shorting of mortgages strategy that they used for THEIR money save some of the OTHER people’s money? Trading is a zero sum gain. Did Goldman need someone to take the other side of the trade?

Greenspan said this in the same speech above; “Most financial innovations in over-the-counter derivatives involve new ways to disperse risk. Moreover, our constantly changing financial environment supplies a steady stream of new opportunities for innovation to address market imperfections. Innovative products temporarily earn a quasi-monopoly rent.”

I think everyone would have to agree that Goldman has been very innovative in benefiting from market imperfections. They place their former executives in high positions of public power. They manage the CRMPG that allows them insight into the inside workings of their competitors. They have been aggressive in their managed hedge funds by establishing a counter-party to their trades. They certainly are getting their share on THEIR money with “quasi-monopoly rent”.

And they are getting paid well to do it.

Goldman: “Compensation and benefits expenses were $5.92 billion, 68% higher than the third quarter of 2006” The number employees increased only 7%. Nice raise guys!

So how does Goldman get away with this? Obviously the influence peddling is there. Why is the financial community of the slightly less connected not out there screaming about the potential for collusion and manipulation by these large member banks with their CRMPG association? Trading is a zero sum game. Why are so many willing to take a bullet for Goldman on an un-level playing field?

I just read a commentary from Bill Bonner expressing some of what I mention here. He wrote this after a similar stunning Goldman report in June of 06’;
“Well, how is it possible that a company like Goldman – with thousands of traders – can make 75% of its revenues from trading? You'd think their lucky trades would be balanced out by their unlucky trades. They can't all be lucky. And they can't all be geniuses. As Buffett says, there aren't that many geniuses around.”
"Or to put it another way, here's a company making billions, mostly by trading. Who's on the other side of these trades? Who's losing? Where does the money come from? How is it possible for so many traders to have a result that is so far beyond equilibrium...it seems to defy gravity." Bill Bonner

So why do I care about all of this?

Greenspan (same speech) said this; “No one can deny that fully informed market participants will generate the most efficient pricing of resources and the most efficient allocation of capital. Moreover, it could be argued that, if all information held by individual buyers or sellers became available to all participants, the pricing structure would more closely reflect the underlying balance of supply and demand. Thus full information would appear to be the unambiguous objective. But should it be?”

“But should it be?” Hell yes it should be. Fully informed market participates is central to a free market. Allowing Goldman and the CRMPG, with the blessings of the Federal Reserve to sway the markets in the direction that benefits them most, in the name of financial stability is a bullet to the chest of capitalism. Who was Chairman Greenspan helping when he suggested adjustable rate mortgages at interest rate bottoms? Some kind of innovative sub-prime scheme perhaps? The time to save our free markets is now. The complacency bullshat needs to stop!

Joe Stocks

Posted by CRIMES AND CORRUPTION OF THE NEW WORLD ORDER NEWS mparent7777 Marc Parent CCNWON at 10:39 AM 0 comments Links to this post