Wednesday, April 21, 2010

GOPsmacked SEC/Goldman case

The Republicans seem hellbent on aligning themselves with the masters of the imploded credit universe, which of course is their right. Their far right.

No one wading through the finance of mass destruction would fail to take note of the cynical, pernicious and central role of the derivative houses that used to be called investment banks until, to get bail out money, they morphed into bland banks, and after they got that money, they bailed out again from bank to continue their business as usual. Goldman was central to this, if only because they were more politically structured and legally astute, and last standing.

Buffett warns on investment 'time bomb' March 2003
The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy legendary investor Warren Buffett has warned.

The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.

But Mr Buffett argues that such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system.

The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.

But Mr Buffett argues that such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system.

Derivatives also pose a dangerous incentive for false accounting, Mr Buffett says.

The profits and losses from derivates deals are booked straight away, even though no actual money changes hand. In many cases the real costs hit companies only many years later.

This can result in nasty accounting errors. Some of them spring from "honest" optimism. But others are the result of "huge-scale fraud", and Mr Buffett points to the US energy market, which relied for most of its deals on derivatives trading and resulted in the collapse of Enron.

Some derivatives contracts, Mr Buffett says, appear to have been devised by "madmen".
Banks Boosted by Fixed Income
Goldman Sachs Group Inc.'s fixed-income group turned in a record performance in the first quarter, underscoring the investment bank's dominance in a business that is driving Wall Street's resurgence.

At Goldman, Chief Executive Lloyd C. Blankfein has emphasized fixed-income trading after taking the job in 2006.
There are and have been derivatives in currency and commodity markets but it was the fixed income credit derivatives that brought the world's financial markets to their knees.

It was about the time that Blankfein came on board that Goldman ramped up its CDO operations in subprime debt that formulated and foisted off the Abacus and other credit schemes which fornicated the credit hungry markets.

Wall Street reform and Goldman Sachs
Partisanship in the Senate is holding up Wall Street reform legislation the same week the Securities and Exchange Commission sued Goldman Sachs for alleged fraud. The mutterings of our Readers Who Comment suggest that the discussions on Capitol Hill reflect the significant differences of opinion that exist out there in the land.

Lawmaker questions timing of SEC's Goldman case
A top Republican lawmaker is raising questions about the U.S. Securities and Exchange Commission's fraud case against Goldman Sachs Group Inc, implying political motives

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