GDP Estimates Coming Down (Michael Pento)

Goldman Sachs Cuts Q1 GDP Estimates

Tuesday, April 5, 2011
Euro Pacific Capital
By: Michael Pento

The Pollyannas that were busy doing their linear projections for U.S. GDP back in 2010, were telling investors that the first quarter of 2011 would produce 4%+ growth in real GDP. Their logic was based on an ersatz recovery based upon government printing and spending. But now the evidence of their folly is smacking them straight in the face.

It’s nice to react to new information, but it is always better to get well in front of it. Investors could have been surprised by the news today of a decrease in the Institute for Supply Management’s index of non- manufacturing to 57.3 from 59.7 in February. Or they could have anticipated that drop and positioned their portfolios accordingly.

EuroPac investors were not so easily misled. But if you were a client of Goldman Sachs you may find it a bit disturbing that GDP growth estimates for the first three months of this year were taken down a full percentage point today to 2.5%. The IMF is joining the GDP slashing parade and cut Q1 growth down to 2.8% from 3%.

The big houses are now forced to chase their tails and lower GDP forecasts because they haven’t yet realized the dangers associated with equating growth to inflation. China is quickly waking up to that realization and has now raised interest rates for the fourth time since October 2010. Note to Bernanke; the PBOC did so ahead of the March CPI data due out next week. Now that’s what I call being proactive.

The Fed’s counterpart in Europe Jean Claude Trichet has also scheduled in a rate hike this Thursday in an attempt to offer citizens in the old country a real return on their savings. In sharp contrast, Mr. Bernanke is assuring us that this current bout of inflation is just a passing fancy.” In a speech last night in Stone Mountain Georgia, Bernanke said, ““I think my take on inflation right now is that we are indeed seeing some increases, obviously.” He continued, “I think the increase in inflation will be transitory.”

The Fed Chairman gave us a peek into the keen insight behind his sanguine stance. The reason behind his comfort with the direction of inflation is—and remember this guy has a doctorate in economics—the recent increase in U.S. inflation is driven primarily by rising commodity prices globally, and is unlikely to persist. That’s it! No mention of his monetary policy being the cause of inflation in the first place.

Bernanke’s refusal to admit his own role in global inflation assures us that he will be as wrong in his inflation projections as he was about the sub-prime real estate crisis being contained.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Wall Street Compensation Sets Another Record at $135 billion (9+ miles of $1,000 bills)

Seneca Niagara Casino Hotel and Tower is 358' Tall

Stack of $1,000 bills to the Very Top of this Building equals $1 bil

Wall Street Compensation in 2010 is 135 of these buildings

The Wall Street Journal
By Aaron Lucchetti and
Stephen Grocer
2/2/2011

When it comes to paychecks, Wall Street's law of gravity is back in full force: What goes down must come back up.

In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.

The increase was fueled by a revenue rebound as the financial crisis recedes in the rearview mirror. At 25 large financial firms that have reported full-year results, revenue rose to $417 billion, another all-time high, even though last year's 1% increase was just a fraction of the industry's revenue jolt from 2008 to 2009 as trading and investment banking sprang back to life.

"Things are shifting back to where they were before," said J. Robert Brown, a law professor at the University of Denver who studies compensation and corporate-governance issues.

Buried in the numbers, though, are signs of how Wall Street's pay culture is bending in response to pressure from regulators and shareholders. Last year, deferred compensation made up as much as half of total pay, up from about a third previously, estimates Alan Johnson, managing director of Johnson Associates Inc., a New York pay consultant.

Bank of America Chief Executive Brian Moynihan got a 67% bump in his total compensation for 2010, the company said Monday. Goldman Sachs Group Inc. tripled the salary of Chairman and CEO Lloyd C. Blankfein and increased his stock-based bonus 40% to $12.6 million. Rest of $135 Billion Record Compensation

Huffington Post Also Weighs In

Wall Street pay is rising, while income for normal Americans has stagnated.

Even as the real economy limped, financial firms paid employees a record sum last year, the Wall Street Journal reports. In 2009, the last full year data are available, average wages for Americans fell 1.5 percent from the previous year, according to the National Average Wage Index. Median household income in 2009 was "not statistically different" from 2008, according to the Census Bureau.

But total pay at Wall Street firms rose 5.7 percent in 2010, as the 25 companies that have already reported results shelled out a record $135 billion. Even as regulators pressured firms to alter compensation, prominent executives got big pay bumps, seeming to suggest that the former Wall Street culture has emerged virtually unscathed from the recession.

Grandpa would be Remiss Without Affording Tim Geithner

Recognition and Accolades for His Contributions

to those Hard Working Folks on Wall Street

Treasury Secretary Timothy Geithner tackles five Myths about TARP: 1) cost taxpayers hundreds of billions of dollars, 2) was a gift for Wall Street that did nothing for Main Street, 3) left our financial system in weakened condition, 4) increased concentration in the financial system, and 5) served as the centerpiece of the Obama Administration’s strategy to control the economy.

Wall Street Gets What It Wants (Mostly)

While Obama vowed to change the system,

he filled his economic team with people

who helped create it.

By Christine Harper
Dec. 28 (Bloomberg) -- Wall Street’s biggest banks, whose missteps caused a global financial crisis and economic slowdown two years ago, were more agile when it came to countering the political and regulatory response.

The U.S. government, promising to make the system safer, buckled under many of the financial industry’s protests. Lawmakers spurned changes that would wall off deposit-taking banks from riskier trading. They declined to limit the size of lenders or ban any form of derivatives. Higher capital and liquidity requirements agreed to by regulators worldwide have been delayed for years to aid economic recovery.

“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup Inc., who estimated only 25 percent of needed changes have been enacted. “I’m astounded because we basically dropped the world’s biggest economy because of an error in bank management.”

The last two years have been the best ever for combined investment-banking and trading revenue at Bank of America Corp., JPMorgan Chase and Co., Citigroup, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Goldman Sachs CEO Lloyd Blankfein, 56, and his top deputies are in line to collect more than $100 million in delayed 2007 bonuses -- six months after paying $550 million to settle a fraud lawsuit related to the firm’s behavior that year. Citigroup, the bank that needed more taxpayer support than any other, has a balance sheet 14 percent bigger than it was four years ago. The Rest of the Story on Wall Street Gets What it Wants

“It was very clear by February 2009 that the banks were going to get a free pass,” said Simon Johnson, a former chief economist for the International Monetary Fund who is now a professor at the Massachusetts Institute of Technology’s Sloan School of Management. “You could see from the hiring of Tim Geithner and from the messages that he and his team were putting out that this was going to go very badly.”

Great Job Christine!

U.S. Chain Store Sales fall 2.1% week ending 12/4/10 (oh...oh...Grinch Sighting)

Retail stocks have been on a tear in 2010 with many publically traded retailers up 30 to 60% YTD. The media and naturally CNBC have been giddy with the Black Friday Results as they would have you believe it is a clear indication of increased consumer confidence.

Grandpa maintains those buying retailer stocks in December could very well be in for a rude awakening. When the retail community commences with Black Friday prior to Halloween and offers significant discounts 1 1/2 months prior to Christmas, I believe a measurable amount of the traditional December shopping volume was completed prior to December 1st. Time will tell however it will be "telling" sooner than late,r given 2.5 weeks until Christmas.

Not only were the week ending 12/4/10 chain store sales down 2.1% from week ending 11/27/10, the weekly change was negative 3 of the prior 4 reporting weeks. No, CNBC will not dig too deeply on this as Erin Burnett must keep the glass 1/2 full no matter the outcome to your portfolio. Just be careful out there.....XRT (retail ETF) is at all time highs since June 2006???...but hey, I am just the grandpa dude.

Dec 7 (Reuters) - The International Council of Shopping Centers and Goldman Sachs on Tuesday released the following seasonally adjusted weekly data on U.S. chain store retail sales.

Week Ending Index 1977 = 100 
Week Ending      Index             Year/Year Change          Weekly Change
Dec 4                  495.9                     2.6%                                -2.1%
Nov 27                 506.6                     3.5%                                 0.5
Nov 20                 503.9                     2.8%                                -0.6
Nov 13                 507.0                     3.4%                                -0.1

ICSC Research expects same-store sales for December to increase by 3.0 to 3.5 percent.The ICSC weekly U.S. retail chain store sales index is a joint publication between ICSC and Goldman Sachs Group Inc. It measures nominal same-store sales, excluding restaurant and vehicle demand, and represents about 75 retail chain stores. Link to ICSC

Insider Trading Is “Everywhere,” Matt Taibbi Says: “The Fear Is There’s No End to It”

Tech Ticker
11/23/10

When FBI agents raided the offices of three hedge funds on Monday, the reacton on Wall Street recalled the famous scene in Casablanca where Claude Rain's Capt. Renault character is "shocked, shocked to find that gambling is going on in here."

To Rolling Stone contributor Matt Taibi, author of Griftopia, there's nothing shocking at all about revelations of possible widespread insider trading on Wall Street. (See Massive Insider Trading Probe Could Nab Wall Street's Biggest Names)

"Everybody is trading on the inside somehow or another, so this isn't particularly surprising," Taibbi says. "A lot of sources I talked to suggested this is endemic to the entire culture."

The current investigations center around alleged insider trading prior to merger announcements such as MedImmune's takeover by AstraZeneca in 2007 and Merck's buyout of Schering-Plough in 2009, The WSJ reports.

While gaming takeovers is a "classic" form of insider trading, Taibbi says it's also evident in high-frequency trading, where exchanges provide a millisecond sneak peak at buy and sell orders, or the practice of clients front-running big orders by institutions.

"The real issue here is that it's everywhere," he says. "And the fear is there's no end to it."

Taibbi, who became widely known in financial circles in 2009 when he dubbed Goldman Sachs "a vampire squid on the face of humanity," says he is not cynical by nature. "But this Wall Street stuff is overwhelming," he says. "The more you look into it, the less you see the way out. The government seems so completely helpless to do anything positive in this situation."

Goldman In Insider Trading Probe? by Matt Taibbi

By Matt Taibbi
Taibblog
11/20/10

News leaked out today that the feds will soon be herding a whole pen full of Wall Street firms into court on insider trading charges, including, reportedly, our old friends Goldman, Sachs.

The basic charge here is that investment banks and other firms were leaking insider info about things like mergers to closely-allied hedge funds, who in turn placed the requisite bets on or against the companies in question.

The most interesting detail in the WSJ piece, to me, was a bit about an email sent by one John Kinnucan, a principal at an Oregon-based company called Broadband Research, to a number of his clients. The email reads, in part, as follows:

"Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information… (They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."

Aside from the amusing detail here in which Kinnucan brags about turning down an offer to cooperate with the feds (I ain't no stinking rat!) the thing to note here is the list of clients he sent this email to. Those include hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

Those are some interesting MF-ing names.

Citadel and SAC, along with Goldman and David Einhorn's Greenlight Capital, were among the firms subpoenaed by Lehman Brothers lawyers after that latter firm exploded in 2008. The allegation then was that a number of hedge firms worked with banks and other companies to spread rumors about Lehman at the same time some of those funds were holding big short positions.

Similar allegations, involving many of the same players, were made after Bear Stearns was blown apart in March of that year. There were multiple storylines in the that business, including one set of allegations that some hedge funds with short positions in Bear leaked information about Bear having a liquidity problem during that fateful week in March of 2008. Another extremely interesting detail, which I and others have reported on, involves the fact that all the big banks on Wall Street (including Goldman) and many of hedge funds (including Citadel) had a meeting at the Fed with Ben Bernanke just three days before the Fed announced its plan to subsidize the sale of Bear to JP Morgan Chase. This was on March 11, 2008; the only big bank that was not invited to this meeting was Bear, Stearns. It strains all credulity to imagine that the rescue of Bear was not discussed at that meeting and that none of the players at that meeting made moves based on those conversations.

The other crimes on Wall Street have been so pervasive and so massive in scope in the past decade or so that good old-fashioned insider trading — hedge funds and other gamblers robbing the great mass of uninformed investors by acting on exclusive intelligence not available to the rest of us — seems almost quaint. Compared to a situation in which the entire economy was based on fraud schemes like the mass sales of mismarked AAA-rated mortgage-backed assets, worrying about hedge-fund gamblers skimming a few billion here and there off of insider info seems almost misguided.

However there is a mounting pile of evidence suggesting a sort of widespread culture of insider trading in which a few players (specifically the major banks and a few of the biggest and best-connected hedge funds) have milked a seemingly endless stream of exclusive information, not occasionally or opportunistically but as an ongoing commercial strategy. I get about two or three letters a week from people in the finance business complaining that this or that company is openly advance-trading on a) information from the Federal Reserve about things like interest rate changes, or b) info about big client orders in things like commodities, or c) mergers and the like. Certainly there is a great deal to be suspicious of with regard to the behavior of certain companies in advance of major events like the rescue of Bear Stearns, the collapse of Lehman Brothers, the AIG bailout, the acquisition of Merrill Lynch by Bank of America, the emergency conversions to bank holding company status of Goldman and Morgan Stanley, and the announcement of major bailout programs like the TALF and the P-PIP.

Anyone who knew in advance how or when these deals were going down could make billions almost without trying, and we know that the heads of many of the major banks were in contact with key federal officials during this entire period. So there's that.

That's why it'll be interesting to see how far this federal probe goes. Many of the people I talk to insist that the insider-trading problem is a pervasive, systemic issue, not something that is isolated and limited to a few bad apples. So it'll be interesting to see if the Justice Department has a less indulgent view of insider crime than, say, Ben Bernanke's Federal Reserve. Not that I'm holding my breath for a huge roundup, but boy, wouldn't it be something if they aimed as high as this thing probably goes?

Huge Insider Trading Probe-Some charges could be brought before year-end

Will Someone Finally Go To Jail In Lieu

of the Meaningless SEC Fine Payment?

(just how do Wall Street Investment Banks have no losing

trading days in an entire quarter...?)

The Wall Street Journal
By Susan Pulliam, Michael Rothfiels,
Jenny Strasburg and Gregory Zuckerman
11/20/10

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide "expert network" services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries. "I have no comment on that," said Phani Kumar Saripella, Primary Global's chief operating officer. Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

"Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information," the email said. "(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."

The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management. SAC, Wellington and MFS declined to comment; Janus and Citadel didn't immediately comment. It isn't known whether clients are under investigation for their business with Mr. Kinnucan.

The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney's office, the FBI and the SEC declined to comment. The rest of the story

Bank of America (a.k.a. foreclosure-gate kingpin) manages a perfect trading record in Q3

Bank of Amerca can't get out of their

own way with foreclosures however they,

like JP Morgan Chase managed the manipulation

of the market superbly well in Q3 resulting

in a perfect quarter of trading.

By Dawn Kopecki
Nov. 9 (Bloomberg) -- Bank of America Corp. and JPMorgan Chase and Co., the two biggest U.S. banks by assets, racked up perfect trading records for the second time this year, making money every day last quarter after accomplishing the same feat in the first three months of 2010.

Traders at Charlotte, North Carolina-based Bank of America made more than $25 million on more than 55 days during the third quarter, the bank said in a Nov. 5 regulatory filing. New York- based JPMorgan, which doesn’t break out its results by quarter, made more than $200 million on 12 days in the first nine months and lost money on only eight, the company said today in a filing.

Goldman Sachs Group Inc., which makes the most revenue on Wall Street trading stocks and bonds, had losses in that business on two days in the third quarter while Morgan Stanley reported 10 losing days. Goldman Sachs and Citigroup Inc. both had perfect trading results during the first quarter.

Lower volatility and improving credit markets helped Wall Street’s trading results last quarter, said Jim Mitchell, a senior vice president at Buckingham Research Group in New York. “If you don’t have a lot of volatility and markets are generally positive, you don’t tend to have a lot of trading losses,” Mitchell said.

JPMorgan said its value at risk, a measure of the average amount the bank could lose on any given day, fell to $109 million in the third quarter from $178 million during the same period last year, driven primarily by a decline in market volatility.

Carry Trade

Chris Whalen, a former Federal Reserve Bank of New York analyst and co-founder of Institutional Risk Analytics in Torrance, California, said trading volume was also strong during the third quarter and banks benefited from the “carry trade,” the difference between their low cost of funds and the yield they earned on investments.

Trading revenue at eight of the biggest Wall Street firms declined an average of 12 percent through September from the same period a year earlier. Goldman Sachs generated 69 percent of revenue this year from trading, and said third-quarter trading results declined 36 percent. The seven days that New York-based Goldman Sachs made more than $100 million last quarter were the fewest since the fourth quarter of 2006.

Morgan Stanley said yesterday it made more than $100 million on one day last quarter, versus 18 days in the third quarter of 2009.

Morgan Stanley, also based in New York, had $1.43 billion in total sales and trading revenue for the third quarter, the lowest since the first quarter of 2009. Excluding losses and gains tied to its own credit spreads, Morgan Stanley generated $1.31 billion from trading fixed-income products, down 24 percent from the second quarter.

Economic Times Remain Tough Unless You are a Lobbyist

$4.65 million by The Pharmaceutical Research and Manufactures of America

Lobbying...Recession Proof

2010 Q2 Lobbying Investments

(not a complete list..two hours worth of headline reading)

$8.3 million by General Electric

$4.40 million by Verizon

$3.80 million by Comcast
$3.08 million by A T & T
$2.96 million by Merck
$2.89 million by Prudential
$2.72 million by GM
$2.71 million by Dow Chemical
$2.30 million by Pfizer
$2.40 million by The American Bankers Association
$1.85 million by Microsoft
$1.65 million by The Independent Community Bankers of America
$1.60 million by US Airlines
$1.58 million by Goldman Sachs
$1.53 million by Visa
$1.52 million by JPMorgan Chase
$1.47 million by American Airlines
$1.47 million by Citigroup
$1.43 million by Wal-Mart
$1.34 million by Google
$1.29 million by Wells Fargo
$1.20 million by Johnson and Johnson
$1.15 million by Oracle
$1.11 million by The National Association of Manufacturers
$1.09 million by Bank of America
$930,000 by The Real Estate Roundtable
$720,000 by Travelers
$671,000 by Delta
$590,000 by Credit Suisse
$560,000 by Goodyear
$552,000 by The Pharmaceutical Care Management Association
$531,000 by Chrysler
$500,000 by Amazon
$490,000 Hartford Financial
$463,000 by The Generic Pharmaceutical Association
$420,000 by The National Association of Chain Drug Stores
$419,000 by Honda
$410,000 by Express Scripts
$400,000 by The Consumer Bankers Association
$385,000 by Continental
$370,000 by NYSE Group
$330,000 by The Air Line Pilots Association
$200,000 by The Financial Industry Regulatory Authority (FINRA)
$160,000 by Southwest Airlines

Geithner Calendar...hey Tim, Mr. Blankfein is here to see you....again (Huffington Post)

Great Job Shahien!

...Mr. Geithner, thanks for waiting...Mr. Blankfein will see you now...

Shahien Nasiripour
Huffington Post
9/14/10

When it comes to spending time with Treasury Secretary Timothy Geithner, the head of Goldman Sachs may have an easier time getting a meeting than either the Speaker of the House or the Senate Majority Leader.

Goldman CEO Lloyd Blankfein has shown up on Geithner's calendar at least 38 times through March since the Treasury Secretary took office in January 2009, three more entries than Senate Majority Leader Harry Reid and 13 more than House Speaker Nancy Pelosi, according to a copy of Geithner's daily log recently published online by the Treasury Department.

All told, Geithner met with, spoke to, or attempted to secure conversations with Wall Street chieftains at least 49 times during the five-month period ending in March 2010, a slight increase from the 37 entries on his calendar during the previous five-month period.

But it's still far below his first five months in office, when Geithner met with chief executives from firms like Citigroup, JPMorgan Chase, Morgan Stanley and BlackRock at least 76 times -- more calendar entries than for the heads of the regional Federal Reserve banks, who are the top overseers of systemically-important banks like JPMorgan, Citi, Bank of America and Wells Fargo -- or for top members of Congress like Reid, Pelosi, their Republican counterparts, and the heads of the Senate and House committees overseeing financial institutions and economic policy.

A Huffington Post review of Geithner's calendar shows how personally involved he was in Congressional efforts to re-regulate the financial system; how Christina Romer, the former chair of the White House Council of Economic Advisers, slowly faded from the Treasury Secretary's daily log; how Republicans may have a case when they gripe about not being consulted on economic policy; the continuing involvement of former Treasury Secretary and Citigroup chairman Robert Rubin; the revolving door of access shown to former Fed chairman Paul Volcker; and how President Barack Obama's top economic adviser, Larry Summers, was in close contact during the early months of Geithner's tenure but then faded behind White House Chief of Staff Rahm Emanuel as the administration geared up for the pending political battle over financial reform.

The calendar entries show calls made and received -- both completed calls and attempts -- as well as face-to-face meetings in the Treasury Department and elsewhere. However, it doesn't show calls Geithner may have made from home or on his way home, or meetings he may have had on the fly while in the White House or on Capitol Hill. It's not totally complete, but it's as close to complete as available. Complete article

Welcome To America: 10 bailed-out banks spent $16.3M lobbying in 1H

Welcome to America Main Street

Eileen Aj Connell
AP Business Writer
Tuesday August 31, 2010

NEW YORK (AP) -- The 10 banks that received the most bailout aid during the financial crisis spent over $16 million on lobbying efforts in the first half of 2010, as the debate over financial regulatory reform reached its height.

Disclosure reports show that the banks that got the most government help in late 2008 and early 2009 also invested the most to influence members of Congress, the White House, the Federal Reserve, Treasury Department and a long list of federal agencies as new rules were enacted governing Wall Street and the nation's financial system.

"I'm not shocked that they spent that much money because I saw them every day," said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, who said more than 2,000 lobbyists worked on the financial reform bill.

The sweeping law signed by President Barack Obama in July topped 2,300 pages, and outlined broad rules for issues ranging from derivatives trading to the fees merchants are charged for processing credit and debit card transactions. It also covered the creation of a consumer financial protection bureau. Banks are continuing efforts to try to shape many of the new rules that are still being finalized.

The $16.32 million spent in the first half of 2010 was 26 percent higher than the combined $12.94 million they spent in the first half of 2009.

In prior years, the spending crept up at a much slower pace: 2009's total was about 2 percent higher than the nearly $12.7 million spent in the first half of 2008. And that was only 3.7 percent above the $12.25 million spent in the first half of 2007.

Leading the pack this year was JPMorgan Chase & Co., which spent $1.52 million on lobbying in the second quarter, on top of $1.51 million in the first quarter of 2010, for a total of $3.03 million, according to disclosure reports filed with the House of Representatives clerk's office.

Citigroup Inc., the largest bank recipient of government funds during the crisis in late 2008 and early 2009, was second. The New York-based bank spend $1.47 million on lobbyists in the second quarter, after spending $1.31 million in the first quarter for a total of $2.78 million.

And Wall Street titan Goldman Sachs Group Inc. was third, with $1.58 million spent in the second quarter, on top of $1.19 million in the first quarter of 2010.

All three banks declined to comment on their lobbying spending, which went toward hiring advocates to discuss the legislation with lawmakers and regulators. Lobbying figures do not include any campaign contributions that banks or their employees might also have made.

Mierzwinski said the big win for consumers was the financial protection bureau, which banks tried to remove from the law. The financial industry was in a weakened position during the debate, however, because of public anger over the economy's collapse and publicity over issues like Wall Street bonuses. Nevertheless, banks were rewarded for their efforts, he said. "They did manage to make changes."

Bank of America Corp. and Wells Fargo & Co. both also spent more than $2 million in the first half of the year. Spending far less were PNC Bank, US Bancorp, Capital One Financial Corp. and Regions Financial Corp. The American Bankers Association, the main trade group for the industry, also lobbied heavily, spending $4.2 million in the first half of 2010.

Consumer advocacy groups had their own lobbyists working the Capitol's halls during the finance reform debate as well, but their spending was dwarfed by the banks -- a total of $792,000 in the first half of the year for four of the top organizations. The Center for Responsible Lending topped the list, with $335,000 spent in the first six months of the year. U.S. PIRG tallied $227,000. The Consumers Union listed $150,000 and The Consumer Federation of America spent $80,000.

Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, said the heavy spending in part reflects the number of people needed to discuss issues with 535 members of Congress. One sentence in a law regulating the financial markets can have a big impact on a company's profit, she noted, and the industry made sure they had experts on hand to discuss every aspect with lawmakers.

"We're talking billions," Sloan said. "So the lobbying money is the most effective money you'll spend."

"It's not that I don't think that many would have preferred a different outcome," she added. "But I doubt that any of those banks didn't think it was worth it to have those lobbyists."

FDIC Closes Shorebank, $368 million hit however Goldman and others profit (Zero Hedge)

Failure Of Obama's Pet ShoreBank Costs Taxpayers $368 Million,

Which Immediately Goes To Goldman Sachs Among Others

Zero Hedge

After a lengthy attempt to bail out his pet bank, ShoreBank Chicago, Illinois, which included several alleged armtwisting episodes by the administration, the president has finally let the bank die (with its assets valued at about 50% of face). Yet instead of going to hell, it was immediately resurrected with a bevy of new owners, among them Goldman, Morgan Stanley, and BofA, all of whom received nearly $400 million in taxpayer money for their "generosity" to keep the bank zombified even in the afterlife.

Some details on the bank from the FDIC press release: "As of June 30, 2010, ShoreBank had approximately $2.16 billion in total assets and $1.54 billion in total deposits." In other words, the value of ShoreBank's assets was well below 70% of face, if the bank was undercapitalized at its current deposit level. Continuing: "The FDIC and Urban Partnership Bank entered into a loss-share transaction on $1.41 billion of ShoreBank's assets. Urban Partnership Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $367.7 million." Netting the incremental cost of taxpayer DIF subsidies, means that the real value of assets was ($1.54 billion - $367.7 million)/$2.16 billion or 54% of face. And this is a bank that Obama wanted to keep alive at all costs?

And just who is this "Urban Partnership Bank" that is receiving a taxpayer subsidy of $368 million? Why all the usual suspects of course: "The significant investors in Urban Partnership Bank are American Express Company, Bank of America, Citigroup, Ford Foundation, GE Capital Equity Investments, Inc., Harris Bank, the John D. and Catherine T. MacArthur Foundation, JPMorgan Chase & Co., Key Community Development Corp., Morgan Stanley, Northern Trust Corporation, PNC Investment Corp., State Farm Mutual Automobile, The Goldman Sachs Group, Inc., and Wells Fargo & Company." And so the old "out-of-one-taxpayer-pocket-and-into-another-Wall-Street-pocket" game continues, only this time it includes administration darling banks that should have been liquidated long ago.

By keeping ShoreBank artificially alive for far longer than it deserved, the assets amortized far more than they would have had it been taken into receivership by a non-conflicted bank, and thus the final cost to taxpayers would have been far less.

As it stands, Goldman and 11 other banks are receiving a multimillion dollar gift to conduct a portfolio liquidation run-off of ShoreBank's assets, while merely making sure existing deposits are serviced. At least we now know just how truly angry at Wall Street Obama is.

The funniest bit: this is how efficient the auction process was (from the press release):

FDIC received only one bid, which included an asset discount of $146 million and a 0.5 percent deposit premium. This saved the FDIC’s insurance fund $250 million to $334 million over liquidation.

This also padded the top line of the abovementioned banks by $368 million off the bat, over and above whatever they make as they collect the proceeds from the portfolio run off.

In other words, Wall Street's core banks could have come up with any bid they wanted, and the FDIC would have had no choice but to fund the difference, because the alternative would be, gasp, so much scarier. Hm, where have we heard this before.

FDIC Press Release


FDIC Supplemental Data
Zero Hedge

Charlie Gasparino on Lehman and ShoreBank

Build America Bonds to cost the federal government (a.k.a. taxpayers) $36 billion through 2019

By Esmé E. Deprez

Aug. 20 (Bloomberg) -- Build America Bonds, the fastest- growing part of the $2.8 trillion municipal debt market, will cost the federal government $36 billion through 2019, $6 billion more than forecast, the Congressional Budget Office said.

The U.S. subsidizes 35 percent of the interest cost of the taxable Build America securities, which were authorized under the economic stimulus legislation signed by President Barack Obama last year. Issuers have sold about $128.5 billion of the debt, according to data compiled by Bloomberg.

Federal spending on Build Americas will rise to $2 billion for the 2010 fiscal year ending Sept. 30, from less than $500 million in 2009, the non-partisan agency said yesterday in its semi-annual budget report. From 2009 to 2019, the total cost will grow to $36 billion, up from a $30 billion estimate in January. The Bond Buyer newspaper reported the findings earlier.

According to the CBO’s March analysis of Obama’s fiscal 2011 budget, his plan to expand and permanently extend the program -- as well as lower the subsidy to 28 percent -- would increase revenue by $80 billion over the 2011-2020 period. More than two-thirds of the Build America program’s cost is currently offset by higher tax revenue, according to the CBO.

The House of Representatives postponed on July 29 a vote to extend the Build America program for two years beyond its Dec. 31 expiration. Two previous extensions sought by the House were killed in the Senate.

Independent researcher CreditSights Inc. forecast on July 29 that total issuance would reach $165 billion by year-end, as borrowers come to market before the program is set to cease.

Build Americas yield about 5.63 percent on average, according to the Wells Fargo Build America Bond index. The index has an average maturity of 28.8 years and an average credit rating of Aa3 and AA- from Moody’s and Standard and Poor's, respectively. Both ratings are the fourth-highest investment grades.

Grandpa

Build America Bonds is synonymous with Build American Banks...the U.S. government continues to afford the Wall Street Banks with unbelievably profitable income producing opportunities while the U.S. taxpayer continues to struggle and our children and grandchildren are left with the financial shortfall. The following article albeit 5 months old, remains relevant.

CBO projects a $36 billion hit to the federal government while Goldman Sachs booked $55.7 million of Build America Bond fees as of March 2010.

By Michael McDonald
March 10 (Bloomberg) -- Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, has made $55.7 million from the sale of $36.4 billion of Build America Bonds, about a third of the fees it earned from its municipal business, it said in response to queries from Iowa Senator Charles Grassley.

The effort to underwrite the federally subsidized municipal bonds is “highly competitive” with “over 10 major firms” vying for the business, Goldman Chairman Lloyd Blankfein wrote in a letter dated March 1 to the top Republican on the U.S. Senate Finance Committee. Grassley said in a letter to Blankfein last month that he is “concerned that American taxpayers are subsidizing larger underwriting fees for Wall Street investment banks.”

Congress created the Build America Bond program last year as part of the $862 billion American Recovery and Reinvestment Act in an effort to revive the $2.8 trillion municipal bond market. The U.S. Treasury pays 35 percent of the interest cost if states and local governments sell the taxable securities for their capital projects instead of tax-exempt debt.

Goldman, which got $10 billion in taxpayer bailout money amid the credit crisis in 2008, was paid $54 million to lead underwrite or help sell $34 billion of the bonds and $1.7 million to serve as an adviser on a separate $2.4 billion of Build America Bond sales, the bank told Grassley’s office in a second communication dated March 9. Jill Gerber, a Grassley spokeswoman, confirmed the content of the letters.

Borrowers Paid More

Blankfein replied to Grassley that the bank is paid to “educate the market about the issuer and the securities they are offering,” as well as “assume the risk of underwriting.” He said that as Build America Bonds “have become better known to investors, underwriting fees have come down.”

The bonds are marketed to investors that typically don’t buy municipal securities because they don’t need tax-exempt income.

Goldman’s Fees

Goldman charges a fee of between 0.6 percent and 0.875 percent of the borrowed amount of money to underwrite Build America Bonds, compared with 0.875 percent for investment-grade corporate bonds and 0.5 percent to 0.625 percent for tax-exempt municipal securities, Blankfein said. Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment further.

The bank earned a total of $149.7 million underwriting and advising on the sale of municipal securities, including Build America Bonds, since the beginning of last year, according to information it provided Grassley’s office. It generated $885 million in revenue from underwriting all types of debt in the final nine months of 2009, or 2.5 percent of the firm’s $35.75 billion in total net revenue in the April through December period, according to company filings.

President Barack Obama last month proposed extending and expanding the program, which expires at the end of this year. There have been $84 billion of the securities sold since last April, according to data compiled by Bloomberg.

Goldman Sachs, which paid back the bailout last year, was the top underwriter as of Dec. 31 for debt issued under the stimulus program, followed by banks including JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley, Citigroup Inc. and Barclays Plc, according to data compiled by Thomson Reuters. Goldman Sachs led a group selling $2.6 billion of securities for Georgia’s Municipal Electric Authority this month.

Goldman Sachs lowers 2011 GDP (Zero Hedge) and the U.S. Equity market launches well off its low

The algorithmic gamers manipulating the U.S. Equity market embrace Goldman Sachs' reduction of 2011 GDP growth by 24% as a reason to launch the market well off its lows. The Dow was down 160 and closes down a paltry 21 points. U.S. Equities remain a must own replacement for those outdated Hummels as a pathetic non-farm payroll  report combined with Goldman Sachs' GDP reduction for 2011 creates a perfect buying opportunity to start a new collection of common stock (a piece of paper that will never drop in value).

So passe'

A must own for 2010...all the popular

kids are buying...

Zero Hedge

It's official: the double dip is here. Goldman's Jan Hatzius just lowered his GDP forecast for 2011 from 2.5% to 1.9% (kiss goodbye all those 93 EPS estimates on the S&P), increased his unemployment forecast from 9.8% to 10.0%, boosted his inflation expectation from 0.4% to 1.0%, and said that QE lite is now on the table, as he expects that "the FOMC to announce that they will reinvest the paydown of mortgage-backed securities in the bond market at next Tuesday’s meeting." Look for all other sell-side "strategists" (here's looking at you Neil Dutta) to lower their economic outlook in kind, and the 2011 S and P consensus to decline accordingly.

From Goldman Sachs:

Over the past two to three months, the US economic recovery has lost a considerable amount of its momentum. As a result, our forecast of a significant slowing in US growth in the second half of 2010—widely regarded as implausible just three months ago—is now increasingly accepted as the baseline. As the data disappointments intensified in early July, we indicated that we would consider revisions to our economic outlook. With the annual revisions to real GDP now behind us, we are making the following changes:

1. Slower growth in 2011. We continue to expect real GDP growth to average 1½% at an annual rate in the second half of 2010. However, we have scaled back the anticipated reacceleration in US output in 2011, largely due to heightened congressional resistance to extending various measures of fiscal stimulus. Thus, whereas we previously forecasted growth to rise from 2½% in the first quarter to 3½% by the second half, we now look for a more gradual pickup—from 1½% in the first quarter to 3% in the fourth quarter. The 2¼% fourth-quarter-to-fourth-quarter average is about 0.9 percentage points below our previous forecast; on an annual average basis our forecast for growth in 2011 drops to 1.9% from 2.4%. As a result of this downgrade, we now expect the jobless rate to rise to 10% by early 2011 and remain there for the rest of the year.

2. Continued disinflation, but at a slower pace than before. We now expect both the price index for personal consumption expenditures excluding food and energy (core PCE index) and the core CPI to slow to a year-to-year rate of ½% by year-end 2011; our previous forecasts were ¼% and zero, respectively. Although the growth revision implies a larger output gap over the next 18 months, two other considerations dominate: (a) upward revisions to core PCE inflation announced in the latest annual GDP revisions, and (b) signs that disinflation in rents may have ended.

3. A return to unconventional monetary easing by late 2010/early 2011. We expect the Federal Open Market Committee (FOMC) to respond to renewed upward pressure on the unemployment rate with another round of unconventional monetary easing. These measures could involve more asset purchases—probably Treasury securities—and/or a more ironclad commitment to low short-term policy rates. If the committee decides on more asset purchases, the amount would be at least $1 trillion (trn).

4. A “baby step” to unconventional easing next week. Although it is a fairly close call, we now expect the FOMC to announce that they will reinvest the paydown of mortgage-backed securities in the bond market at next Tuesday’s meeting. This would be a “baby step” in the direction of renewed unconventional easing, although it would probably be packaged as a decision to prevent a gradual tightening of the overall stance.

Why founding a three-person startup with zero revenue is better than working for Goldman Sachs (Antonio Garcia-Martinez)

Why founding a three-person startup with zero

revenue is better than working for

Goldman Sachs.

by Antonio Garcia-Martinez on 23. Jul, 2010 in Grandiose Propositions

The Road to Serfdom

I joined Goldman Sachs in 2005, after five flailing years in a physics Ph.D. program at Berkeley.

The average salary at Goldman Sachs in 2005 was $521,000, and that’s counting each and every trader, salesperson, investment banker, secretary, mail boy, shoe shine, and window cleaner on the payroll. In 2006, it was more like $633,000.

In the summer of 2005, I took one look at my offer letter and the Goldman Sachs logo above it, another look at my sordid grad student pad, and I got on a plane to New York within the week. I packed my copy of Liar’s Poker for reference.

My job on arrival? I was a pricing quant on the Goldman Sachs corporate credit trading desk (1). We traded credit-default swaps, both distressed and investment-grade credit, and in the bizarre trading experiment assigned to me, the equity part of the corporate capital structure as well.

There were other characters in this drama. The sales guys were complete tools, with a total IQ, summing over all of them, still safely in the double digits. The traders were crafty and quick-witted, but technically unsophisticated and with the attention span of an ADHD kid hopped up on meth and Jolly Ranchers. And the quants (strategists in Goldman speak)? Mostly failed scientists (like me) who had sold out to the man and suddenly found themselves, after making it through two years of graduate quantum mechanics, with a bat-wielding gorilla peering over their shoulder (that would be the trader) asking them where their risk report was.

Everything is quantifiable

Wall Street is inward-looking and all-consuming. There exists nothing beyond the money game, and nothing that can’t be quantified into dollars and cents.

To cite a particularly grotesque example, once a year, one of the partners would buy a pallet of White Castle burgers and first-year analysts and associates would have a burger-eating competition (with some nominal amount donated to charity). All trading on the Goldman Sachs trading floor would stop as every man on the floor would gather ’round to watch the plebes stuff themselves.

Trading turned from interest-rate swaps (minimal notional size: $50MM) to the over/under on the burger count for a particular analyst. Occasionally, one poor schmuck would puke, and the partner would rush to catch it with a plastic trash bin.

The odds-on favorite was a young analyst, who’d employ the Kobayashi technique to get the tiny greasepucks down. After sweeping the field with 26 burgers eaten, he’d leave the styrofoam cup containing a congealed scum of burger grease and bun and patty bits floating on top, as mute testimony of his victory. The trading floor smelled like the inside of a deep fryer for the whole day (2).

Link to complete article including:

• Death, Wall Street-style
• Line up and take a number
• Jose Cuervo, meet Smith and Wesson
• Better to be first in a village than second in Rome

Thanks to Business Insider for the head's up, Link to Business Insider

Judge approves $550 million Goldman settlement...OF COURSE, FRAUD is more than a 4 letter word, put the screws to people and simply pay a fine...welcome to America

NEW YORK (AP) -- A federal judge on Tuesday approved the deal calling for Goldman Sachs & Co. to pay $550 million to settle civil fraud charges that the Wall Street giant misled buyers of mortgage-related investments.

The agreement approved by U.S. District Judge Barbara Jones in Manhattan contained the largest penalty against a Wall Street firm in the history of the Securities and Exchange Commission.

Announced last week, it calls for Goldman to pay a $535 million fine and $15 million in restitution of fees it collected. It also requires $300 million to be paid to the government and $250 million to be set aside to compensate two European banks that lost money on their investments.

Karen Patton Seymour, a lawyer for Goldman Sachs, declined to comment on the approval.

"We are pleased with the court's approval of this settlement," said Robert Khuzami, director of the SEC Division of Enforcement.

In the judge's order, Jones wrote that she was not ordering Goldman Sachs to pay a civil penalty beyond the $535 million, but was continuing to preside over the case to ensure the terms of the agreement were carried out.

She noted that Goldman Sachs, which did not admit liability, nevertheless agreed to cooperate fully with the government by producing documents and other materials and by making its employees available for interviews. The company also promised to require its employees to testify at trial and other judicial proceedings that may occur.

Final approval of the settlement came on the same day that Goldman Sachs announced an 83 percent drop in second-quarter net income.

Goldman Sachs Group Inc. blamed its earnings fall on a rough spring for the financial markets, and it included in the quarter the $550 million charge for the settlement with the SEC.

The SEC filed a civil case against Goldman in April as it flexed its muscles against Wall Street following a series of embarrassments, including the agency's failure over two decades to detect that financier Bernard Madoff was stealing billions of dollars from his clients while portraying himself as among America's financial elite. Madoff is serving a 150-year prison sentence after last year admitting the fraud.

The SEC had accused Goldman of selling mortgage securities without telling buyers that they had been created with input from a client that was betting on them to fail. The securities cost investors close to $1 billion while helping the Goldman client capitalize on the housing collapse, the SEC charged.

In its settlement, Goldman acknowledged that its marketing materials for the deal at the center of the SEC charges omitted important information for buyers.

The SEC has said its case continues against Fabrice Tourre, a Goldman vice president accused of shepherding the deal.

Tourre filed documents Monday with the U.S. District Court in the Southern District of New York asking the court to throw out the case. He denies he made any materially misleading statements or omissions, or behaved wrongly in connection to complex mortgage-linked securities called collateralized debt obligations.

U.S. District Judge Barbara Jones presided over the Bernie Ebbers Worldcom trail and apparently, she did not see the same potential in Bernie as she does in Lord Blankfein. Bernie was sentenced to 25 years in prison while the "Lord" received a thumbs up on a fine a mere fraction of the $16 BILLION set aside for bonuses. Grandpa is so relieved to know that our judicial system is blind and takes fraud charges seriously!

Our grandchildren will truly appreciate you representing

"true Goldman Sachs justice" given your "tough" reputation...NOT!

Goldman Sachs Profit declines 82%, IBM Misses on Revenue and Housing Starts at 8 month low and Dow up 75 Points

One truly can not appreciate just how broken and manipulated our market has become until  the REALLY BIG NAMES miss and the U.S. Stock Market rallies 75 points (not on record volume by any means). Even Johnson and Johnson lowered its full-year earnings forecast.


The Dow Jones Industrial Average was down 146 points earlier in the day until someone started a rumor that the Federal Reserve was going to cease paying banks % on their reserves in an effort to "force" the banks to lend. Even post the rumor bash courtesy of Steve "I love Bernanke like a brother" Liesman, the market proceeded to launch even higher and closed near the highs of the day.

As grandpa has noted in prior posts, Mary Schapiro and her band of SEC incompentents are indifferent to rumor mongering as long as the equity market remains in launch mode. In addition, Mary was busy spewing how her "adult site" internet viewing employees have made serious changes to better protect the average investor.

Today's congressional spewing truly cut in to her "letters of recommendation" office time given the exodus of SEC employees pursuing a meaningful and well paying career with Wall Street firms they used to "regulate.

Not only did the algorithmic Cheetos eating, Red Bull drinking take every short trader to the woodshed, Apple beat the street estimates and bought a round of Red Bull kiddie cocktails for the entire 18 year old trading gamers.

Yes America, it was a great day for the bulls, as once again, they are doing their darndest to convince you to remain in the market as you need to have a long term horizon as no one can time the market. As if the Cheetos eating, Red Bull drinking gamers care about you, your family or your future!

Don't despair, you have Mad Money's Jim Cramer and the Fast Money clowns on your side and don't forget CNBC's Julia "place Barbie back in the box" Boorstin as she is a financial powerhouse!

Goldman Sachs, cranky after the weekend, Lowers U.S. Second-Quarter Growth Forecast by 33%

It appears that the fine folks at Goldman Sachs came back to work in a cranky mood. Not only do they cut their estimate for GDP growth by a 1/3, they took Bank of America off their conviction buy list.

By Carlos Torres
July 19 (Bloomberg) -- A surge in imports and slower consumer spending reduced U.S. economic growth in the second quarter, according to economists at Goldman Sachs Group Inc.

The world’s largest economy grew at a 2 percent annual pace from April through June, down from a previously estimated 3 percent pace, according to revised estimates by Goldman economists. Forecasts for the second half of the year remained at an average 1.5 percent pending the government’s annual revisions to gross domestic product due July 30.

“At that point, we may need to make downward revisions, judging from the relentless run on disappointments in recent weeks,” Ed McKelvey, a senior economist at Goldman Sachs in New York wrote in a July 16 note to clients. “While it is conceivable that the slowdown will prove fleeting, several factors strongly suggest otherwise.”

Among the issues that will damp growth in the second half are the loss of support from fiscal stimulus and inventory replenishment, the excess supply of vacant housing, state and local budget constraints, a lack of credit, and weak employment gains, McKelvey said.

The cut in the growth forecast follows similar reductions by economists at JPMorgan Chase & Co. and UBS Securities LLC in New York.

Dylan Ratigan on the Goldman Sachs Settlement...nothing changes and business as usual

$550 million fine is roughly 6 good trading days for Goldman Sachs. The fine nor the passage of "financial reform" will do anything to change the manner in which Goldman Sachs and other Wall Street firms manipulate the market.

On behalf of all grandchildren, Goldman Sachs, the Securities and Exchange Commission and every elected "representative" an apology is due them!!

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