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commentary on Politics and a little bit of everything else

Morgan Stanley gets a criminal look over on some of its CDO business…….

This story is  a light shown on something that been going on since 2009, when the SEC asked the US Attorney’s office to sit in on its investigation into Morgan Stanley’s betting against clients  CDO’s*……It is alleged that Morgan Stanley took better performing CDO’s for themselves and only offered investor’s ones with more risk…..

Morgan Stanley is saying they have not be formerly notified by the US Attorney’s Office that they are the target of a specific investigation…..

One should remember that a Justice investigation does not mean a criminal complaint will be filed…..

In other news……

It has been reported that Goldman-Sachs has entered into settlement talks with the SEC in its civil case……

One feature of the Morgan Stanley deals was a structure that could increase the magnitude of the bullish investors’ exposures to the underlying mortgage bonds. This feature, which was disclosed in some offering documents, made it more likely that such investors could lose money if the underlying bonds performed poorly.

Morgan Stanley traders took the more profitable, bearish side of these transactions, according to traders. These positions weren’t disclosed in some deals. It couldn’t be determined how much money Morgan Stanley made with these wagers.

The SEC’s industry-wide civil investigation into Wall Street activities in selling CDOs began in 2009. Beginning earlier this year, prosecutors from the Manhattan U.S. attorney’s office began showing up to meetings arranged by SEC investigators who were questioning individuals about their firms’ practices, people familiar with the matter said.

There have been several rounds of SEC subpoenas issued in the probe, a person familiar with the matter said.

Last summer, the SEC asked Wall Street firms about any of their clients that were betting against CDOs, the person says. In the fall, Morgan Stanley provided offering documents to the SEC about CDOs, including its Dead Presidents deals. Morgan Stanley and other firms received a subpoena in December 2009 asking about its sale and marketing of CDOs, people familiar with the matter said.

In the past six weeks, a fresh round of SEC subpoenas have asked a smaller number of Wall Street firms for a broad range of information on CDO deals, including prospectuses, offering documents and other data that would include disclosure statements.

More……..

*Note…..CDO’s…

Pools of bond-related investments called collateralized-debt obligations…….

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May 12, 2010 Posted by | Blogs, Breaking News, Crime, Government, Law, Media, Men, PoliticalDog Calls, Politics, The Economy, Updates | , , , , , | 1 Comment

Today’s stock drop was partially triggered by a technical mistake…Not the market…..

A trader talks on his mobile phone outside the New York Stock Exchange on Thursday.

[ A trader works the phone OUTSIDE the Market  ]

Sometimes a mistake is magnified by a little panic….

This time the situation in Greece  was the underlining one….

But a mistake that showed the market that several stocks where down to pennies added to the selling dive that caused the market to halt trading…..

The market ended up only down 300 points instead of the 1,000 points it was for a while during the day…..

From the New York Times…..

The height of panic on Thursday was reached shortly after lunchtime in the United States. First some currencies began to fall rapidly, with the euro suffering especially against the Japanese yen.

That could have been an indication that some large traders were unwinding positions. It has been popular to borrow yen at low interest rates and then use the money to speculate in higher yielding assets denominated in other currencies. Anyone unwinding such a trade would buy yen to repay the loan.

Then, within a few minutes, the United States stock market appeared to be collapsing. Some of the decline was real, but another part of it was simply trading gone awry.

Temporary plunges in the price of Procter & Gamble and 3M, the former Minnesota Mining, cost the Dow about 300 points, and appeared to be the result of errors, not intentional sell orders. Similarly, Accenture, a large consulting firm, fell from more than $40 a share to one penny.

From the Wall Street Journal.….

The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were working with other regulators to review “unusual trading activity.” The major U.S. stock exchanges said they were looking for trading glitches and examining potentially erroneous trades in multiple stocks. Major exchanges said they will cancel erroneous trades that occurred during the selloff.

Multiple stocks, ranging from Accenture PLC to Boston Beer Co., momentarily lost nearly 100% of their value, changing hands for just one penny. Exchange-traded funds, which are index funds that trade like stocks on exchanges, were also temporarily vaporized. The $9.5 billion iShares Russell 1000 Value Index Fund went from $59 to around 8 cents in the blink of an eye.

“It happened so quickly, it was like a torpedo,” said Scott Redler, chief strategic officer at T3 Capital Management, a hedge fund. “It was mayhem.”

Unnerved traders frantically searched for an explanation, scouring the trade blotters for clues to the cause. Many pinned the blame on an erroneous trade for a basket of stocks which caused shares for companies such as Procter & Gamble Co., one of the market’s most stable blue-chip stocks, to fall 35% in two minutes.

The market was already down some 500 points when the selloff began. Televisions showed images of standoffs between Greek police and protesters, and the European Central Bank declined to step up its effort to stabilize government debt markets.

May 6, 2010 Posted by | Blogs, Breaking News, Computers, Government, Media, Other Things, The Economy, Updates | , , , , , | 3 Comments

Today's stock drop was partially triggered by a technical mistake…Not the market…..

A trader talks on his mobile phone outside the New York Stock Exchange on Thursday.

[ A trader works the phone OUTSIDE the Market  ]

Sometimes a mistake is magnified by a little panic….

This time the situation in Greece  was the underlining one….

But a mistake that showed the market that several stocks where down to pennies added to the selling dive that caused the market to halt trading…..

The market ended up only down 300 points instead of the 1,000 points it was for a while during the day…..

From the New York Times…..

The height of panic on Thursday was reached shortly after lunchtime in the United States. First some currencies began to fall rapidly, with the euro suffering especially against the Japanese yen.

That could have been an indication that some large traders were unwinding positions. It has been popular to borrow yen at low interest rates and then use the money to speculate in higher yielding assets denominated in other currencies. Anyone unwinding such a trade would buy yen to repay the loan.

Then, within a few minutes, the United States stock market appeared to be collapsing. Some of the decline was real, but another part of it was simply trading gone awry.

Temporary plunges in the price of Procter & Gamble and 3M, the former Minnesota Mining, cost the Dow about 300 points, and appeared to be the result of errors, not intentional sell orders. Similarly, Accenture, a large consulting firm, fell from more than $40 a share to one penny.

From the Wall Street Journal.….

The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were working with other regulators to review “unusual trading activity.” The major U.S. stock exchanges said they were looking for trading glitches and examining potentially erroneous trades in multiple stocks. Major exchanges said they will cancel erroneous trades that occurred during the selloff.

Multiple stocks, ranging from Accenture PLC to Boston Beer Co., momentarily lost nearly 100% of their value, changing hands for just one penny. Exchange-traded funds, which are index funds that trade like stocks on exchanges, were also temporarily vaporized. The $9.5 billion iShares Russell 1000 Value Index Fund went from $59 to around 8 cents in the blink of an eye.

“It happened so quickly, it was like a torpedo,” said Scott Redler, chief strategic officer at T3 Capital Management, a hedge fund. “It was mayhem.”

Unnerved traders frantically searched for an explanation, scouring the trade blotters for clues to the cause. Many pinned the blame on an erroneous trade for a basket of stocks which caused shares for companies such as Procter & Gamble Co., one of the market’s most stable blue-chip stocks, to fall 35% in two minutes.

The market was already down some 500 points when the selloff began. Televisions showed images of standoffs between Greek police and protesters, and the European Central Bank declined to step up its effort to stabilize government debt markets.

May 6, 2010 Posted by | Blogs, Breaking News, Computers, Government, Media, Other Things, The Economy, Updates | , , , , , | 3 Comments

SEC asks Justice to probe for criminality in Goldman-Sachs……

I said a few days ago to not expect a criminal case against Goldman-Sachs……

And I still believe it….

While the Dog could certainly be wrong….

Criminal Cases against these Mega companies very seldom yield big results….

And with an election coming in November and two years from now…..

You don’t want to bite the hand that feeds you…..

Stay tuned…….

Prosecutors haven’t determined whether they will bring charges in the case, say the people familiar with the matter. Many criminal investigations are launched that never result in any charges.

The criminal probe raises the stakes for Goldman, Wall Street’s most powerful firm. The investigation is centered on different evidence than the SEC’s civil case, the people say. It couldn’t be determined which Goldman deals are being scrutinized in the criminal investigation.

A spokesperson for the Manhattan U.S. Attorney’s office declined to comment. Goldman declined to comment.

Goldman shares fell 2.6% in after-hours trading to $156.08 after The Wall Street Journal reported the news of the investigation. At the 4 p.m. market closing, Goldman shares were up 2.1%.

Some background……

The SEC and Justice Department often coordinate their actions on investigations. The probe underscores heightened efforts by the Manhattan U.S. Attorney’s office in prosecuting white-collar and Wall Street crime. It is in the midst of pursuing the largest insider-trading case in a generation, charging 21 individuals and negotiating 11 guilty pleas in that matter.

But the Goldman probe presents a significant challenge for the government. Prosecutors in the Brooklyn office of the U.S. Attorney last year lost a high-profile fraud case against two former Bear Stearns Cos. executives, in the first major criminal case linked to the financial meltdown.

Prosecutors had accused the Bear Stearns employees of lying to investors in 2007 about the health of two funds that eventually collapsed. The case centered on what the government viewed as incriminating emails indicating the traders knew the mortgage market would fall but didn’t disclose that view to investors.

To bring any criminal charges in the Goldman matter, prosecutors would need to believe they had gathered evidence that showed that the firm or its employees knowingly committed fraud in their mortgage business. Proving such intent to break the law typically is the toughest hurdle for prosecutors to clear.

Another stumbling block: Such financial cases can be highly complex.

More……..

April 29, 2010 Posted by | Blogs, Breaking News, Counterpoints, Government, Law, Media, Men, Other Things, PoliticalDog Calls, Politics, The Economy, Updates | , , | Leave a comment

Goldman-Sach’s will probably settle with the SEC soon…..

APGoldman Sachs CEO Lloyd Blankfein may turn camera shy when it comes to fighting the SEC’s charges.

[ Goldman Sachs CEO Lloyd Blankfein may turn camera shy when it comes to fighting the SEC’s charges. ]

After all the hype…..

All the Congressional tongue lashing…..

AND MEDIA ATTENTION!

The Securities Exchange Commission and Goldman-Sach’s will probably settle the case and move ahead…

All the stuff about criminal investigations will quietly go away…

There is an election coming up in November and two years from now….

Politician’s are going to need donations from Wall Street fat cats……

And Goldeman -Sachs employs a lot of them……

And this stuff is just the price of doing business…..

Goldman Sachs may soon settle its fraud case with the Securities and Exchange Commission, opting to end the legal fight rather than endure a repeat of the public flogging it received Tuesday in Washington, sources familiar with the matter told The Post.

After 11 hours of accusations by members of the Senate Subcommittee on Permanent Investigations, people close to the bank said Goldman is mulling closing the SEC fraud-case chapter on the belief the firm’s reputation, already damaged, might not endure a street fight with the Wall Street watchdog.

It’s almost a certainty that there will be a settlement,” said a source.

As another person put it, the SEC has an “unlimited supply of ammunition” in the form of e-mails and records that it could release, and Goldman officials would like to avoid having those documents fired back at them the way they were on Tuesday.

A Goldman spokesman declined to comment.

The SEC on April 16 announced that it had sued the Wall Street giant on charges it misled investors about the details of a mortgage-securities deal in which billionaire hedge fund king John Paulson influenced some of the collateral used in the transaction and then bet against its performance.

The SEC also sued Goldman mortgage trader Fabrice Tourre, who’s been accused of concealing Paulson’s involvement when marketing the deal to investors.

Up to now, Goldman, which has endured a withering fusillade of criticism from the public and politicians, has declared that the SEC’s case against it and Tourre has “no basis in fact.”

However, the growing view inside the firm is that Goldman may not be able to afford going toe-to-toe with the SEC in the court of public opinion…….
More……..

April 29, 2010 Posted by | Blogs, Breaking News, Government, Law, Media, Men, Other Things, PoliticalDog Calls, Politics, Polls, The Economy, Updates | , , | Leave a comment

Goldman-Sach's will probably settle with the SEC soon…..

APGoldman Sachs CEO Lloyd Blankfein may turn camera shy when it comes to fighting the SEC’s charges.

[ Goldman Sachs CEO Lloyd Blankfein may turn camera shy when it comes to fighting the SEC’s charges. ]

After all the hype…..

All the Congressional tongue lashing…..

AND MEDIA ATTENTION!

The Securities Exchange Commission and Goldman-Sach’s will probably settle the case and move ahead…

All the stuff about criminal investigations will quietly go away…

There is an election coming up in November and two years from now….

Politician’s are going to need donations from Wall Street fat cats……

And Goldeman -Sachs employs a lot of them……

And this stuff is just the price of doing business…..

Goldman Sachs may soon settle its fraud case with the Securities and Exchange Commission, opting to end the legal fight rather than endure a repeat of the public flogging it received Tuesday in Washington, sources familiar with the matter told The Post.

After 11 hours of accusations by members of the Senate Subcommittee on Permanent Investigations, people close to the bank said Goldman is mulling closing the SEC fraud-case chapter on the belief the firm’s reputation, already damaged, might not endure a street fight with the Wall Street watchdog.

It’s almost a certainty that there will be a settlement,” said a source.

As another person put it, the SEC has an “unlimited supply of ammunition” in the form of e-mails and records that it could release, and Goldman officials would like to avoid having those documents fired back at them the way they were on Tuesday.

A Goldman spokesman declined to comment.

The SEC on April 16 announced that it had sued the Wall Street giant on charges it misled investors about the details of a mortgage-securities deal in which billionaire hedge fund king John Paulson influenced some of the collateral used in the transaction and then bet against its performance.

The SEC also sued Goldman mortgage trader Fabrice Tourre, who’s been accused of concealing Paulson’s involvement when marketing the deal to investors.

Up to now, Goldman, which has endured a withering fusillade of criticism from the public and politicians, has declared that the SEC’s case against it and Tourre has “no basis in fact.”

However, the growing view inside the firm is that Goldman may not be able to afford going toe-to-toe with the SEC in the court of public opinion…….
More……..

April 29, 2010 Posted by | Blogs, Breaking News, Government, Law, Media, Men, Other Things, PoliticalDog Calls, Politics, Polls, The Economy, Updates | , , | Leave a comment

FiveThirtyEight on the SEC going after Goldman-Sachs……

Hale “Bonddad” Stewart over @ FiveThirtyEigth gives us a rundown on the SEC compliant……

First, the document filed by the SEC is a complaint. The purpose of this document is to define the issues for trial. Usually, the person filing the complaint has done a lot of investigation before filing the document — so much so that they can more or less anticipate what the defendant will do.

Then goes over the specifics…..

a) Use of interstate commerce for purpose of fraud or deceit….to wit……..

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—

He then makes Seven more points……

Then gives this analogy on why the SEC should win the case……


Let me add this personal thought. I have very high hopes that the SEC wins this case. As I mentioned above, they have a good case. But the real reason is best illustrated by a story. This year my wife and I went to opening day at Wrigley Field (which should be a national holiday). While we were walking around the streets that surrounded Wrigley we saw a group of four cops — and I mean cops. All I could think of when I saw these guys was one of them saying to a someone, “don’t make me.” My guess is at least two of them were ex-football players. They were standing in a group talking and basically making their presence quietly felt. At this point I knew nothing bad was going to happen on that street. Why? Because of this group of cops — they would make sure nothing bad happened. In essence, you felt this quiet law enforcement presence on the street. That’s what the SEC needs to do — or more importantly, needs to establish. Right now, there is no law enforcement presence on Wall Street at all. Wall Street needs to know there is a cop on the beat to deal with excesses in the system.

For the whole Post…..and the numerous comments…..

The Dog still thinks Goldman-Sachs will still be proudly standing after this whole thing is all over…for those you who want to read another Goldmen-Sach caper…..

Dig this.…….

April 26, 2010 Posted by | Blogs, Breaking News, Counterpoints, Government, Law, Media, Men, Other Things, PoliticalDog Calls, Politics, The Economy, Updates | , , , , | 1 Comment

Goldman-Sachs Is Charged With Subprime Fraud……

The Securities and Exchange Commission has gone after the giant financial services company and one of it’s Vice President’s civilly……

They are charging that the company and  VP Fabrice Tourre ….. sold collateralized-debt obligations, or CDOs pegged to sub-prime loans to investors while failing to disclose that a major hedge-fund client had a role in picking the securities and was betting against them…….

In other works……some client of theirs picked bad credit loans..told them to sell them to people..while they, the originator of the loans, actually bet that they would probably fail..and didn’t tell the buyer this…….

Goldman-Sachs who is supposed to state any and all risk know to them…..made money on the fee’s…probabaly on both ends…..

The Securities and Exchange Commission on Friday charged Goldman Sachs GroupInc. with defrauding investors, alleging that Goldman let a big hedge fund fill a financial product with risky subprime mortgages and then failed to disclose that to the product’s buyers.

The SEC said in the civil complaint that Goldman and Fabrice Tourre, then vice president, created and sold opaque collateralized-debt obligations, or CDOs, that hinged on the performance of subprime-mortgage-backed securities. The complaint charges that Goldman promoted these securities to customers while failing to disclose that a major hedge-fund client had a role in picking the securities and was betting against them.

Goldman Sachs, which in a statement called the accusations “completely unfounded in law and fact,” could face steep fines and be on the hook to repay nearly $1 billion of investor losses. The charges mark the first action regulators have taken against a Wall Street firm for betting on the housing market’s collapse, and represents another blow to an investment bank under attack for how it handled the financial crisis.

The hedge fund, Paulson &Co., paid Goldman $15 million to create the CDO in early 2007, when the U.S. housing market and related securities were beginning to show signs of distress, the SEC complaint said.

According to the SEC, Goldman Sachs failed to disclose that Paulson played a significant role in selecting the CDO’s portfolio, but the firm then bet against it by entering into a credit-default-swap transaction with Goldman to buy protection on certain layers.

As a result of that bet, Paulson made about $1 billion, SEC said.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Shares of Goldman plunged 11% in early-afternoon trading.

More

April 16, 2010 Posted by | Blogs, Breaking News, Government, Law, Media, Men, Other Things, PoliticalDog Calls, Politics, The Economy, Updates | , , , , | Leave a comment

Kenneth D. Lewis, the CEO of the Bank of America, will take early retirement….

After riding thru a very rough period for the bank and its acquisitions…Kenneth D. Lews, the CEO of the United States largest bank, largest retain brokerage, largest credit card holder and largest mortgage holder…..Bank of America is leaving (joining other Wall Street CEO’s gone)…..he will receive pension benefits worth $53.2 million, and other compensation (including stock trading at a low of $16 vs a high of $54 in 2006) worth almost  $81 million…….

I posted earlier that Lewis got a whole lot of people mad at him for buying Merrill Lynch during crunch time last year after he found out the company was just about worthless…his defense was that Paulson and Bermenke forced him to do it….but neither forced him to allocate almost $5 billion in salaries for employees after borrowing billions of dollars from the government to prop up the Bank after the merger ……. something any reasonable person would not do, fearing that the government and stockholders would be pissed …..

And they still are………

October 1, 2009 Posted by | Politics, The Economy | , , , , , , , | Leave a comment