FedUpUSA

Archive for the ‘Goldman Sachs’ Category

Well, it’s a little late at this point, but it appears that Congress has now awakened to the fact that the Federal Reserve and the US Treasury Department seem to have been complicit in allowing Goldman Sachs to funnel taxpayer funds all over the world.  Certainly this is a landmark case of ‘horse and barn door’ – for anyone paying attention, we were screaming about this here on FedUpUSA when it happened, well over a year ago.  I guess better late than never?  Just remember where all those billions of dollars went for when your kids and grandkids ask you why the US government takes everything they earn.

Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

 Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

 He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

 Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

 SETTLEMENT: Goldman Sachs admits it misled investors, pays $550M fine

GOLDMAN CONSENT: SEC vs. Goldman Sachs

JUDGEMENT: Final judgement of defendant

 Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

 Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

 Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

 Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

 Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

 ”I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

 FINANCIAL REFORM: How Congress rewrote the regulations

FIXED? Will new regulations prevent future meltdowns?

FINANCIAL OVERHAUL AND YOU: Mortgages, debit cards, loans, more

 The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

 ”The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

DesMoinesRegister

USAToday

I’m always amused by Goldman when it comes to their “publicly distributed” trading calls.  Like this one, for instance:

July 15 (Bloomberg) — Goldman Sachs Group Inc. said the dollar will weaken against the euro by January as U.S. growth slows, marking the bank’s second reversal in two months after it forecast in June the greenback would surge to a seven-year high.

After in June, eh?

Well the previous call was definitely wrong.  Indeed, you bought the top with that one.  Isn’t that special?

Now they expect it to “weaken”?  Gee, read a chart lately folks?

That’s a very pretty inverse head-and-shoulders – note that a material number of so-called “Analysts” also saw this a couple of weeks ago, but called for the advance to stop at the top of the channel, roughly.

I said at the time (in the nightly videos) that it might indeed do so, but that if the channel broke you were nuts to try to short it, as there was every reason to believe we could trade 1.33. 

A guarantee?  Oh hell no; there’s no such thing in trading. 

But I’ll say this – it seems that every time I hear a Goldman Sachs call promulgated to people “publicly”, the market does exactly the opposite of whatever that call is.  Indeed, from my perspective (and account balance!) they’ve been a great fade of late.

When you’re wrong half the time you look like a monkey with a fistful of darts.

When you’re wrong 80% of the time one is forced to wonder if the bad calls are intentional.

By Karen Weise

Deep in an article today on the government’s bailout of AIG, The New York Times cites sources saying that the Treasury Department’s “point man” on AIG, Don Jester, was a former Goldman Sachs employee who owned stock in the bank even as he was making decisions [1] on the bailout that ultimately channeled billions of taxpayer dollars to Goldman.

Owning stock in a company an official oversees typically is verboten, but because Jester was working as an outside contractor rather than an official employee, he was exempt from conflict-of interest rules [2].

American International Group building in New York City (Spencer Platt/Getty Images)

Goldman Sachs stood to benefit from the AIG bailout because Goldman had roughly $20 billion in insurance-like credit-default swaps with AIG — essentially bets by the investment bank that the housing market would go south. But if AIG collapsed, Goldman wouldn’t be able to collect on the bets. When the government instead bailed out AIG, taxpayers paid out the swaps at full face value, and Goldman Sachs got $12.9 billion [3] — more than any other of AIG’s customers.

Jester was Goldman’s deputy CFO when he left the firm in 2005. And here’s what the Times says [1] about his investments in Goldman:

Mr. Jester, according to several people with knowledge of his financial holdings, still owned Goldman stock while overseeing Treasury’s response to the A.I.G. crisis.

We contacted Jester this morning to comment on the story and confirm the stock ownership; we’ll post an update when we get a response. His spokesperson, Michelle Davis, told the Times that Jester followed what the paper paraphrases as an “ethics plan to avoid conflict with all of his stock holdings.” (According to a federal database search, Jester received $30,000 [4] for six months consulting at the Treasury Department.)

Earlier this year, a Times op-ed online dubbed Jester one of the “mystery men” [5] of the financial crisis and noted that Jester was at the center of the Treasury Department’s response to AIG’s impending collapse. During the chaotic two months in the fall of 2008, Timothy Geithner, then the head of the Federal Reserve Bank of New York, spoke on the phone with Jester 103 times — more than other person aside from then-Treasury Secretary Henry Pauslon. Jester relocated to AIG’s offices for a period of time, the paper reported.

The government’s decision to have AIG pay out Goldman and others bets at full value has been controversial. The Times said while several of the Federal Reserve Bank of New York’s outside advisors recommended it force banks to take losses on their bets with AIG, Jester advocated for full repayment:

According to the documents, Mr. Jester opposed bailout structures that required the banks to return cash to A.I.G. Nothing in the documents indicates that Mr. Jester advocated forcing Goldman and the other banks to accept a discount on the deals.

As an example of the advice against paying full value for the deals, the Times cited a presentation from an advisor [6] to the New York Fed, which outlined five reasons banks should agree to concessions. The Federal Reserve Bank of New York defended its decisions to the Times:

“This was not about the banks,” said Sarah J. Dahlgren, a senior vice president for the New York Fed who oversees A.I.G. “This was about stabilizing the system by preventing the disorderly collapse of A.I.G. and the potentially devastating consequences of that event for the U.S. and global economies.”

ProPublica

By Karl Denninger 

Goldman Subpoenaed by FCIC after Sending Billion Pages of “Rubbish” to Panel

The Financial Crisis Inquiry Commission (FCIC) is annoyed at the prospect of wading through billions of pages of “rubbish” that Goldman sent in response to an inquiry.

Here’s the result: Goldman Subpoenaed by FCIC After Panel Says Firm Hindered Probe

Goldman Sachs Group Inc. was subpoenaed by the Financial Crisis Inquiry Commission after panel members said the most profitable firm in Wall Street history engaged in a document “dump” to hinder a probe.

Goldman Sachs sent more than a billion pages of documents, FCIC Vice Chairman Bill Thomas said on a conference call with reporters today.

“We did not ask them to pull up a dump truck to our offices and dump a bunch of rubbish,” said Angelides, 56, who previously served as California’s treasurer. “This has been a very deliberate effort over time to run out the clock.”

Thomas said the panel’s requests to Goldman Sachs go back “several months.” Information the firm turned over didn’t comply with what was asked for and has put FCIC investigators in the position of “searching through the haystack for the needle,” he said.

“We expect them to provide us with the needle,” he said.

Federal prosecutors in New York are also investigating transactions by Goldman Sachs to determine whether to bring charges, people familiar with the matter said April 29. The company hasn’t been accused of criminal misconduct.

Finra Finds “Widespread Use Of High-Speed Algorithmic Trading” Was Likely Cause For Flash Crash

Zerohedge reports Finra Finds “Widespread Use Of High-Speed Algorithmic Trading” Was Likely Cause For Flash Crash

From Reuters: “Regulators probing the mysterious May 6 “flash crash” in the stock market are unlikely to find a single cause, though the widespread use of high-speed algorithmic trading was in general likely behind it, the head of the Financial Industry Regulatory Authority said on Monday. “We won’t stop until we finish the analysis. But I think the answer is there is unlikely to be a single cause,” Finra CEO Rick Ketchum told Reuters on the sidelines of a conference here. “It is much more likely to be a proliferation of algorithmic trading that was all subject to the same triggers and didn’t have the same controls.”

Unfortunately I cannot find any external reference to that quote from Reuters or anywhere else. The only reference I can find trace back to Zero Hedge.

If FINRA has indeed determined that high-speed trading is a problem, and in response kills the practice, it will eat into profits at Goldman.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
 Click Here To Scroll Thru My Recent Post List

Warren Buffett is All Wrong About Goldman – Something is Rotten on Wall Street

Shaun Rein, Forbes.com