Transocean, the firm operating BP’s oil rig that exploded and created a blowout that is threatening most of the US Gulf coast, will make $270m from the loss of the rig because it was insured for more than it was worth.
I thought that this has been illegal since the Marine Insurance Act of 1746.
Moody’s just disclosed that it received a Wells notice from the SEC in March.
This means that they are in the SEC’s cross-hairs, and that a potential “enforcement action,” is likely.
You have to figure that once the SEC starts turning over rocks, they will find more, and for a company whose only capital is their credibility, it could be in trouble very quickly.
Seeing as how we already have evidence that all the major credit rating agencies are corrupt, there could be a domino effect.
This is going to make the collapse of the monoliner bond insurers look like a picnic.
The 4 most knowledgeable journalists at Guantanamo Bay have been banned for “revealing” the identity of one of the witnesses, “Interrogator #1”.
The reason that I put “revealing” in quotes is because the individual in question’s name has been public knowledge for years:
Now the military has taken another great step toward enhancing the credibility of the proceedings by booting four reporters for violating a judge’s secrecy order. Their violation? Publishing the name of a former military interrogator who was a witness at the hearing. The Pentagon has now barred Miami Herald reporter Carol Rosenberg, Toronto Star reporter Michelle Shephard, Globe and Mail reporter Paul Koring and CanWest news service reporter Steven Edwards from covering future military commissions at Gitmo.
And here’s the kicker: The identity of the interrogator had been widely reported before the trial. The name of the individual — known as “Interrogator No. 1″ in the courtroom at Gitmo — had been published during a 2005 court-martial in which he pleaded guilty to prisoner abuse in Afghanistan. And he had also allowed the use of his name in an interview with Shepard (!) in 2008.
BTW, it should be recalled that in the case in question the military is trying a child soldier.
Omar Khadr was 15 when the events in question took place.
Seriously, we have the gang that can’t shoot straight, or more accurately, the gang that is so concerned about managing the message that it’s making the “military tribunals” about as meaningful as Stalin’s show trials.
Welcome to our Gulag in the Caribbean.
Once again the Fed is trying to cover up its role in bailing out the financial bigwigs.
I think that they know that they will lose if it goes before the Supreme Court, so they are delaying in the hope of getting a “Get out of jail free” card from Congress in the financial regulation bill.
Their latest delaying tactic is that, after having lost at the Federal district and appeals courts, they are asking for an en banc (Full Appeals Court) review:
The Federal Reserve Board asked an appeals court to reconsider a ruling requiring the agency to disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever.
Attorneys for the Fed yesterday asked the full U.S. Court of Appeals in New York to reconsider a unanimous ruling by a three-judge panel. If the court refuses, the Fed can appeal to the U.S. Supreme Court.
“The decision is of exceptional importance,” the Fed’s lawyers wrote in a legal brief. “The real-world consequence of the panel’s decision will be serious, perhaps irreparable harm to the institutional borrowers whose information will be revealed.”
Nope. Everyone knows this information by now.
What they don’t know is just how much the Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve, are in the pockets of the financial industry, and how far they went to protect their buddies in Wall Street.
It’s time for the Fed to man up and fess up.
I invented a device that makes you read this in your head using my voice!
The Texas Court of Criminal Appeals has ruled that a lower court erred when it said that the Texas money laundering statute only applied to cash, which led it to dismiss the case against Tom Delay:
Co-defendants of former U.S. House Majority Leader Tom DeLay suffered a significant setback Wednesday in their quest to avoid a trial on charges that the trio conspired to launder corporate money during the 2002 elections.
The Texas Court of Criminal Appeals unanimously ruled that the lower state 3rd Court of Appeals erred when it accepted the co-defendants’ arguments that the money laundering law did not apply to them because the funds involved were checks, not cash. The all-Republican court, in effect, said the lower court acted prematurely.
I always thought that the ruling that check cannot be used to money launder was a pretty good indication of just how f%$#ed up justice and the judiciary are in Texas, and it’s nice to see the Texas Court of Criminal Appeals, which is the state supreme court on criminal matter (the Texas Supreme Court is the supreme court on civil matter), to recognize this.
The interesting thing here is that after his performance in Dancing With the Stars, I think that a Texas jury might be much more willing to convict.
Pass the popcorn.
Not a whole bunch of detail yet, but it appears that the SEC referred the issues in its civil fraud complaint against Goldman Sachs to the US Attorney in Manhattan, and they are now investigating. (See also here)
Obviously, an investigation does not prove guilt, nor does it guarantee a successful prosecution, though I think that the Prosecutors will have a lot to go on, because Goldman Sach’s personnel policy has employees regularly filling out self evaluation forms, and very likely these have some admissions of wrongdoing.
I think that a judge would be far more willing to grant a warrant for these records in a criminal investigation than he would for a civil investigation.
Remember when I said that Blanche Lincoln’s strong proposals on derivatives reform were, just for show?
I said the following:
I’m with David Dayen, this all happened within days of her primary challenger, Bill Halter (Reminder, he’s on My Act Blue Page) releasing ads saying that she was too close to the banking industry.
Everyone on Capitol hill know that her proposals will never go beyond a press release, and that behind the scenes, she will continue to do the big banks’ bidding.
This is just electoral politics, and a full court press from her Congressional Colleagues and the White House.
And sure as the sun rises in the east, and sets in the west, it’s happening.
Before the Republicans even got into the room, Democrats are weakening her proposals, with Gillibrand, Casey, and Stabenow taking point.
It’s what Glen Greenwald calls, “Villain Rotation“.
Basically, when an incumbent needs an electoral boost, they come out with a populist proposal, and then it gets killed by someone else, and when that person needs an electoral boost, they change places.
No, I am not talking about some sort of sordid liaison, I am referring to the fact that his primary opponent in the Florida Senate campaign, Mark Rubio, is is being investigated by the, “U.S. attorney, IRS and FBI,” for misusing Republican Party of Florida credit cards for personal use:
Meanwhile, in a separate inquiry, the IRS is also looking at the tax records of at least three former party credit card holders — former Florida House Speaker Marco Rubio, ex-state party chairman Jim Greer and ex-party executive director Delmar Johnson — to determine whether they misused their party credit cards for personal expenses, according to a source familiar with the preliminary inquiry.
………
Rubio billed the party for more than $100,000 during the two years he served as House speaker, according to credit card statements obtained by the St. Petersburg Times and Miami Herald. The charges included repairs to the family minivan, grocery bills, plane tickets for his wife and purchases from retailers ranging from a wine store near his home to Apple’s online store. Rubio also charged the party for dozens of meals during the annual lawmaking session in Tallahassee, even though he received taxpayer subsidies for his meals.
I’m kind of hoping for Rubio to win the Republican primary, and Crist to run as a 3rd party candidate, because I don’t see Democrat Kendrick Meek winning any other way.
He’s a good guy, but there are a lot of people in Florida who just won’t vote for a black man.
Here.
Economic Minister Christine Lagarde is calling for a full investigation.
So, that makes the SEC, the Limeys, the Krauts, and now the Frogs.
Is this a 2 week thing that will blow over, or the beginning of the death of a thousand cuts?
I’m rooting for the latter.
Admittedly, the full 7:47 isn’t about Jim Cramer, just the first 2:28, but anything that finishes with:
You get the sense that if Jim Cramer was around in 1912 he would have said ‘you’re not going to hear this from anyone else, but my sources tell me the Titanic has the best buffet on the high seas. And by the way if you want to get there faster, try the Hindenburg.
Stewart then goes on to the talking heads on the financial networks are describing the case in terms indicative of a, “Traumatic brain injury,” and then he proceeds to describe everything in terms that we can all understand.
And then he gets to Goldman Sachs, and the fact that the fraud division will be getting billions in bonuses, because, I guess, their job is to create fraud, not stop it.
At the end, as a bonus, he describes the Republican mindset on governance.
True Dat!
You know that the Vampire Squid* is “living in interesting times.”
It now appears that governments in both the UK and Germany are calling for investigations of the firm’s dealings.
Additionally, in a splendid piece of electioneering, the Tory opposition is calling for a ban on government contracts for the firm until the investigations are concluded.
Finally, in what might be the ultimate indignity, AIG is looking at suing Goldman Sachs on the insurance policies that it provided, on the theory that they were under no obligation to pay the arsonist who burnt down his own house.
It will be interesting to see where things goes from here.
Even with all the the opprobrium directed at the firm (see the Taibbi quote below), the consensus was that they would skate, because they were “too powerful” for any meaningful action to be taken against them.
If this case cracks that shell, I think that we will see many more rocks overturned to see what lurks beneath.
My guess is that this will all end with a token fine and no admission of wrong-doing, but I would be happy to be wrong.
*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
About bloody time!So, after the disastrous negotiations on healthcare with the Republicans, Barack Obama and His Stupid Minions™ begin to get a clue.
On financial reform, Organizing for America, the Obama campaign political arm, is running ads using Republican opposition to financial reform to Wall Street as a club to beat them with.
Certainly, this is better than their strategy on healthcare reform, which was to let Senator Olympia Snowe (R-ME) sandbag them by engaging in extensive negotiations when she had not the slightest intention of voting for cloture.
H/t FT Alphaville.
The lead SEC attorney in the civil fraud case against Goldman Sachs, aka, “The great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,”* is one Andrew Matthew Calamari.
I actually went and confirmed it with a Google, and Mr. Calamari is actually the associate regional director for the SEC’s New York office.
No really, click the link, it’s from the SEC.
As Dave Barry would say, “I’m not making this up.”
*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a vampire squid. This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
Peter Schiff on Alan Greenspan:
He’s not just the worst Fed chairman we’ve ever had, he’s the worst American we’ve ever had.
And it only goes up from there.
I would note that Schiff comes an extreme political philosophy, he is a wing-nut Randroid Libertarian,* but this does not mean that this does not bear watching.
It’s amusing, easily understood, and generally in accordance with the facts as we know them.
*He was an economic adviser to Ron Paul’s 2008 presidential campaign.
If the articles you have come across are confusing, Dylan Ratigan has a segment that makes it very clear.
It also makes it clear just how unethical, and possibly illegal, these actions were.
Goldman Sachs deliberately crippled products that they created, and then took out insurance policies against them, “naked” Credit Default Swaps (CDS), even though they did not own what they were insuring, and made lots of money when the US government bailed out AIG, so that AIG could pay off the policies.
And Timothy “Eddie Haskell” Geithner, our Treasury Secretary, still has not backed down from his position that the “naked” CDS is essential for “price discovery.”
The US Military ranks last in the world on the metric of equipment purchased per dollar spent:
In a study due out March 15, consulting firm McKinsey & Co. examined how efficiently 33 nations that account for 90 percent of worldwide defense expenditures perform a range of functions. The study looked at how these militaries go about doing certain tasks in three key areas: personnel, maintenance and weapon buying.
…………
“The United States and Australia are the lowest performing countries with regard to equipment output for every dollar spent,” McKinsey concludes.
Brazil had the greatest efficiency of the countries surveyed.
The Soviet Union spent themselves to destruction on huge amounts of military hardware, and it appears that the good old USA is spending itself to destruction on tiny amounts of military hardware.
General Stanley McChrystal is now saying that Dick Cheney’s model for the army,* with contractors galore, simply does not work:
The U.S. commander in Afghanistan said April 16 that the military is wasting money by employing too many private contractors to do jobs better done by soldiers or local Afghans.
“We have created in ourselves a dependency on contractors that is greater than it ought to be,” General Stanley McChrystal told an audience of French officers and military experts at France’s defense university in Paris.
Related Topics“I think we’ve gone too far. I think that the use of contractors was done with good intentions so that we could limit the number of military. I think in some cases we thought it would save money. I think it doesn’t save money.”
This is the right thing to say, but it’s a tough thing to say, since lucrative consulting gigs follow general officers who play the game, and now McChrystal will have to work for a living after retiring.
Of course, it’s going to take years to rebuild the capabilities that Bush I, Clinton, and Bush II privatized and moved out of the Pentagon.
*In one of his worst miscalculations in a lifetime of abject failure, Cheney did this as Secretary of Defense under Bush I, where he decided to privatize everything in sight that was not a “primary military function.”
In the story of the SEC filing charges against Goldman Sachs, I said that Magnetar was likely the firm that was lobbying for crappy CDOs.
This is not true. It was Paulson & Co. Inc., run by John Paulson, the protagonist of the book The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History, about his fabulously successful shorting of the subprime market.
My guess is that he’s going to seem a Paulson, no relation to the former Treasury Secretary, will find his star dimmed a bit, particularly since the SEC has made it clear that he is under investigation as well.
I guess he sounds a bit less like a brave hero now.
The SEC has charged Goldman Sachs and one of its VPs with, “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”
It sounds to me like they assembled a particularly crappy CDO at the request of a hedge fund, most likely the now infamous Magentar:
The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.
“The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement. “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.”
So it sounds like Goldman Sachs assembled CDOs, a form of mortgage backed security, at the request and to the specifications of the hedge fund Magetar, which demanded that the CDOs that it funded be as crappy as possible so that it could win on bets against high rated tranches.
This was apparently fairly common knowledge on the street, and Goldman did it anyway, and then sold the instruments as being “rock solid”. Oopsie
Background, and links to Pro Publica‘s and This American Life‘s stories on Magnetar’s, “burn down your neighbor’s house for the insurance money,” investment strategy are here.
There are two potential outcomes:
I hope for the latter, but I expect the former.
*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
Full complaint and embedded PDF of the filing are after break:
SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages
FOR IMMEDIATE RELEASE
2010-59Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.
Additional MaterialsThe SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.
“The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement. “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.”
Kenneth Lench, Chief of the SEC’s Structured and New Products Unit, added, “The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress.”
The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.
According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.
The SEC’s complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.’s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.
The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.’s undisclosed short interest and role in the collateral selection process. In addition, he misled ACA into believing that Paulson & Co. invested approximately $200 million in the equity of ABACUS, indicating that Paulson & Co.’s interests in the collateral selection process were closely aligned with ACA’s interests. In reality, however, their interests were sharply conflicting.
According to the SEC’s complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.
Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion.
The SEC’s complaint charges Goldman Sachs and Tourre with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties.
# # #
For more information about this enforcement action, contact:
Lorin L. Reisner
Deputy Director, SEC Enforcement Division
(202) 551-4787Kenneth R. Lench
Chief, Structured and New Products Unit, SEC Enforcement Division
(202) 551-4938Reid A. Muoio
Deputy Chief, Structured and New Products Unit, SEC Enforcement Division
(202) 551-4488
Embedded PDF of filing:
So, Andrew Cuomo has made it official, and former Obama “Car Czar” Steven Rattner is under investigation for kickback schemes involving the New York State pension system:
In case you were living under a rock, this is why he left so quickly from his position managing the bailouts of GM and Chrysler:
New York Attorney General Andrew Cuomo confirmed his office is investigating former Obama administration auto industry advisor Steven Rattner, in a growing probe into illegal kickbacks involving the state pension fund.
Rattner, who helped craft the federal rescues of General Motors and Chrysler, left the Obama administration abruptly last year. This morning, the private equity firm he co-founded, Quadrangle Partners, agreed to pay $7 million to settle allegations it made illegal payments to a New York state official and a political consultant in exchange for millions of dollars in pension investments.
But the settlement specifically excludes Rattner, who Cuomo says is no longer with the firm and remains under investigation. What’s more, Quadrangle issued a scathing statement against its co-founder.
“We wholly disavow the conduct engaged in by Steve Rattner,” the statmement says. “That conduct was inappropriate, wrong and unethical.”
This is a guy who operated a corporate “chop shop,” and we are surprised to discover that he is a dirt bag.
This “experience” thing, which justified, Rattner, Geithner, Summers, etc. is highly overrated.
Ethics first, allegiance to the American public second, and only then consider experience.