IRA Goes Off The Rails – Mark To Market

Posted by Karl Denninger

In what I can only describe as a self-serving piece for keeping banking “exactly as it is” (which is inherently unsustainable and thus can’t be) IRA tries to refute the value of mark-to-market with a stunning piece.

Finally, on April 2, 2009, FASB allowed banks to use “cash flow” to value bonds when the market was illiquid – exactly like Bernanke said last week. This fixed the immediate problems in the system, and the economy and financial markets have been on the mend ever since. In fact, the stock market bottomed on March 9, 2009 – the very day markets found out that Representatives Barney Frank and Paul Kanjorski would hold a hearing to force FASB to change the misguided accounting policy.

No it didn’t.

1. Remember FHLB Seattle again? Their “at market” losses on a portfolio of trash, er, loans was some $300 million.  They claimed that the real loss to be realized over time was in fact $12 million, using model-based accounting.  After all, these loans, while deeply underwater, weren’t really impaired.

Or so they told Congress.  I remember the testimony well.

But now, one year later, they are suing the banks that packaged up all this dog squeeze.  Among the pieces of trash being sued over are the very same securities against which they said that a model-based valuation system showed a tiny $12 million loss.

Are they suing for $12 million?

No.

That “tiny $12 million loss” in fact is some $311 million – almost exactly what the market price predicted it would be.

Geithner accused of back door bailout…

By Richard Teitelbaum

Feb. 23 (Bloomberg) — When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury SecretaryTimothy F. Geithner got the most attention.

Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.

Letter to our Government…

Unsustainable Deficits and Bond Boycotts: Panic at the Fed or Back to Financial Normalcy?…

By F. William Engdahl

Global Research, February 24, 2010

The decision of the US Federal Reserve to raise its key interest rate was definitely not a sign of confidence in the US economic recovery or a signal that Fed policy is slowly returning to normal as claimed. It was rather a signal of panic over the weakness in US Government bond markets, the heart of the dollar financial system.

Financial markets have reacted with jubilation, by buying dollars and selling Euros, at the decision by the Fed to raise rates for the first time since 2006 for its so-called Discount Rate, going from 0.5% to 0.75%. The Discount Rate is the interest rate charged for banks to borrow from the central bank. At the same time the Fed left its more important short-term Fed Funds rate unchanged and historically low — between 0.0% and 0.25%. In its official statement the Board of Governors said the rate move was intended to push private banks back into the private inter-bank borrowing market and away from reliance on Federal Reserve subsidized money which had been provided since the financial crisis began in August 2007.

Goldman Is Unpopular Because ‘It Brings Envy,’ Corzine Says…gee ya think so??

By Michael J. Moore and Deirdre Bolton

Feb. 24 (Bloomberg) — Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, is unpopular because some people envy its performance, said Jon Corzine, the company’s former chairman and chief executive officer.

“When you’re successful it brings envy,” Corzine, 63, said today in a Bloomberg Television interview. “People are broadly frustrated with the financial institutions, and since it is the leader of the industry and has shown great success over a long period of time, I think it’s more vulnerable.”

Ellen Brown: Solution to the Credit Crisis? The Campaign for State-owned Banks‏

The frog, the scorpion and Goldman Sachs…

By James Rickards

Americans are quite familiar with customer data mining by large corporations even if they are unaware of the network science behind it. No sooner do clerks scan bar codes at the check-out counter, then e-coupons turn up in our in boxes with just the right timing to get us thinking, “yeah, good idea; let’s buy some ink cartridges while they’re on sale today.” My favorite is Google which posts relevant ads on Gmail before you’re done typing the key words; although they often miss the mark like when you’re writing about the shoe bomber and they offer you a deal on Italian loafers.

These techniques are the benign side of data mining. They are, at worst, mildly annoying and, at best, extremely helpful, allowing us to save money when we were in the market for the suggested goods anyway. This is what economists call value added, that is, taking some raw material, in this case data, and processing it to improve the finished product or lower costs.

Now consider another example of data mining, not done by retail firms, but by giant investment banks such as Goldman Sachs. These banks have thousands of customers transacting in trillions of dollars in stocks, bonds, commodities and foreign exchange daily. By using systems with anodyne names like SecDB, Goldman not only sees the transaction flows but some of the outright positions and whether they are bullish or bearish. Data mining techniques are just as effective for this market information as they are for Google, Amazon, Wal-Mart and others. It’s not necessary to access individual accounts to be useful. The data can be aggregated so that the bank can look at positions on a portfolio basis without knowing the name of each customer.

The State of the Nation: I am afraid

Posted on 27 January 2010

Omi­nous devel­op­ments in America have been a long time coming, in part pre­cip­i­tated by “we the people” – a cit­i­zenry that has been asleep at the wheel for too long. And while there have been wake-up calls, we have failed to heed the warnings.

Just con­sider the state of our nation:

We’re encased in what some are calling an elec­tronic con­cen­tra­tion camp. The gov­ern­ment con­tinues to amass data files on more and more Amer­i­cans. Every­where we go, we are watched: at the banks, at the gro­cery store, at the mall, crossing the street. This loss of pri­vacy is symp­to­matic of the growing sur­veil­lance being car­ried out on average Amer­i­cans. Such sur­veil­lance grad­u­ally poi­sons the soul of a nation, trans­forming us from one in which we’re pre­sumed inno­cent until proven guilty to one in which everyone is a sus­pect and pre­sumed guilty. Thus, the ques­tion that must be asked is: can freedom in the United States flourish in an age when the phys­ical move­ments, indi­vidual pur­chases, con­ver­sa­tions and meet­ings of every cit­izen are under con­stant sur­veil­lance by pri­vate com­pa­nies and gov­ern­ment agencies?

We are meta­mor­phosing into a police state. Gov­ern­mental ten­ta­cles now invade vir­tu­ally every facet of our lives, with agents of the gov­ern­ment lis­tening in on our tele­phone calls and reading our emails. Tech­nology, which has devel­oped at a rapid pace, offers those in power more inva­sive, awe­some tools than ever before. Fusion cen­ters – data col­lecting agen­cies spread throughout the country, aided by the National Secu­rity Agency – con­stantly mon­itor our com­mu­ni­ca­tions, every­thing from our internet activity and web searches to text mes­sages, phone calls and emails. This data is then fed to gov­ern­ment agen­cies, which are now inter­con­nected – the CIA to the FBI, the FBI to local police – a rela­tion­ship which will make a tran­si­tion to mar­tial law that much easier. We may very well be one ter­rorist attack away from seeing armed forces on our streets – and the Amer­ican people may not put up much resis­tance. According to a recent study, a greater per­centage of Amer­i­cans are now willing to sac­ri­fice their civil lib­er­ties in order to feel safer in the wake of the failed crotch bomber’s attack on Christmas Day.

NUCLEAR: Did Goldman Offer To Tear Up AIG CDS?

Corruption

The Market Ticker

Posted by Karl Denninger

Oh oh.

Remember, Blankfein testified in front of the FCIC at 10:12 AM on 1/13 that he never got a request to take less than 100 cents on the dollar for AIG credit default swap contracts.

Well then what’s this that Zerohedge dug up?

As everybody knows, AIG got a huge government bailout in September 2008 to help make payments on derivatives contracts with banks, including Goldman. Yet in the previous month, Goldman approached AIG about “tearing up” its contracts, according to a November 2008 analysis by BlackRock, then an adviser to the New York Fed.

WHAT?

Oh yeah. Here’s the link to the Zerohedge article, and the paper in question is right here:

Thanks and noted on the tear up stand down.

We should get back with Goldman.  I will talk with Bill.

Date: 10/31/2008 6:57 PM.

Which followed:

Also, I spoke to Manzari this morning.  He asked me to stand down on tearing up / unwinding CDS trades on the CDO portfolio.

That appears to be a smoking gun in that it documents that there was an active negotiation on “tearing up” – that is, unwinding CDS trades at less than 100 cents on the dollar and that negotiation was intentionally terminated.

Will we next be entertained by a discussion of what the word “is” means, or can we take the above at its obvious face value – that GOLDMAN ITSELF APPEARS TO HAVE OFFERED TO TEAR UP THE CDS ON AIG’S PORTFOLIO!

If there indeed was such an offer – as is all but stated here – and if indeed there was an order given to “stand down” on such negotiations then those persons responsible must be summoned to the dock and compelled to provide testimony, as it appears that one or more individuals who have already stated that no such negotiation was possible may have committed perjury, never mind dispensing more than $10 billion of taxpayer money to Goldman Sachs unnecessarily – at best.

http://market-ticker.org/categories/18-Corruption