The New York Times has a dynamite article, Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis. Not only did Goldman Sachs, JP Morgan Chase, work many deals to hide Greece's debt, another word dear to our heart, derivatives comes into play. Firstly, the hands in the cookie jar:
As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
The overall theme and message here is the financial sector controls the world through debt and even nations now. I hate to sound conspiracy theory, but assisting in hiding sovereign debt as well as something bankers can trade, generate large fees from....well, if looks like a duck....
Wow. I'm getting more than a little CT (conspiracy theory) on this story it has so many twists and turns. Blackrock supposedly released documents which prove Goldman Sachs was willing to tear up contracts, in other words take a hair cut on the back door bail out.
A month before the September 2008 rescue, Goldman Sachs approached AIG about tearing up contracts protecting the bank against losses on collateralized debt obligations, or holdings backed by mortgages, according to a BlackRock Inc. presentation dated Nov. 5, 2008. Goldman Sachs was the only counterparty willing to cancel the credit-default swaps and bear the risk of further CDO losses, provided that AIG make payments based on the bank’s larger-than-average estimate of market declines.
I can't find out much more information than this blurb from the Financial times:
Several leading international banks have received subpoenas from US regulators investigating one of the complex securities markets at the heart of the financial crisis, people familiar with the probe say.
The Securities and Exchange Commission sent subpoenas last month to banks including Goldman Sachs, Credit Suisse, Citigroup, Bank of America/Merrill Lynch, Deutsche Bank, UBS, Morgan Stanley and Barclays Capital, these people said. Requests for information were also made by the Financial Industry Regulatory Authority, which oversees broker-dealers.
The Wall Street Journal has an investigative piece outlining how Goldman Sachs Fueled AIG Gambles. It appears Goldman Sachs acted as a middleman for even more CDSes from other banks.
Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman.
In Goldman's biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal's analysis and people familiar with the trades.
Goldman Sachs has forgotten the 21st Century version of the golden rule: you can steal from all of the people some of the time, and some of the people all of the time, but you can't steal from all of the people all of the time.
(Bloomberg) -- “I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.
Goldman released its trading records from the 3rd Quarter today, and it was impressive.
(Bloomberg) -- Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, reaped more than $100 million of trading revenue on 36 days in the third quarter, down from a record 46 in the preceding three months.
The firm’s trading division lost money on only one day during the quarter, down from two days in the second quarter, according to a quarterly filing with the U.S. Securities and Exchange Commission. New York-based Goldman Sachs made at least $50 million on 53 of the 65 trading days in the period, or 82 percent of the time.
The statistical probability of losing money on only 1 out of 65 days goes a little beyond just skill.
Goldman Sachs is still charging fees on interest rate swaps long after the actual bonds are sold. Nice business model! Fees on underlying assets which no longer exist.
New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.
The most-densely populated U.S. state is making the payments under an agreement made during the administration of former Governor James E. McGreevey in 2003, when New Jersey’s Transportation Trust Fund Authority sold $345 million in auction-rate bonds whose yields fluctuated with short-term interest costs. The agency finances road and rail projects.
Robert Kuttner brings up the obvious solution to the problem of Goldman Sachs - or any other firm - reaping "profits" from computer-directed milli-second trading -- called High-Frequency Trading -- which as far as I'm concerned, is front-running, plain and simple.
It seems a few in Congress are really wondering why Goldman Sachs is being enabled to gamble with taxpayer money and how it is they were given exemption to the normal rules to limit risks of bank holding companies. Will Congress get a Dear John Letter in response?
Ben Bernanke Chairman Federal Reserve System 20th Street & Constitution Avenue, NW Washington, DC 20551
The NY Times as a great article about the role of high frequency traders in the financial market, and how they gain at a loss to others.
It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.
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