Posts Tagged ‘goldman sachs’
by Michael Piromgraipakd
September 26, 2011
The fear in this gentleman’s voice below is genuine and he speaks the truth the “establishment” does not want you to know. This mornings drop in the price of precious metals is the sign of a strengthening dollar. With the crash of the Euro, big money is flowing into what ever safe haven is available and apparently that is the Dollar. But jumping from a sinking ship into another will only make you wet. Below is an article by ZeroHedge detailing what’s going on.
ZeroHedge: In an interview on BBC News this morning that left the hosts gob-smacked (google it… it is the BBC after all), Alessio Rastani outlines in a mere three-and-a-half-minutes what we all know and most ignore. While the whole interview is worth watching, the money shot for us was “This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late!”. While he dreams of recessions, sees Goldman ruling the world, and urges people to prepare, it is hard to disagree with much (or actually anything) of what he says and obviously interventions and machinations means we will have days like this (in Silver for instance), there is only one endgame here and we hope there is less hopeful euphoria (and more preparedness) as we pull back the curtain further an further.
While we do not know who this trader is, one thing we can be 100% certain of is that he will never appear on CNBC.
Read the entire article HERE.
by Eric King
September 16, 2011
King World News
Identities of people involved in the alleged JP Morgan conspiracy to manipulate the price of silver have been exposed, along with the mechanisms of the manipulation of silver. King World News was contacted two days ago by key people familiar with this situation. This was described by an individual out of London who is very familiar with the lawsuit as, “The biggest news in a long time because these are actual people who are coming out and naming names of individuals who were involved in this alleged conspiracy with JP Morgan to actively manipulate the price of silver. People may go to jail over this. JP Morgan has all barrels pointing at them as traders are named in this suit, including senior traders at JP Morgan.”
Robert Gottlieb, who is currently a Managing Director/Trader at JP Morgan and an alleged participant in the manipulation is brought up in the lawsuit. What is interesting about Mr. Gottlieb is that in February of 2008 he made the following statement, “If you take just 1-2% of hard asset pension fund money earmarked for commodities and put that into gold, you can project much higher prices in the future than even where we are today.” The timing of the statement is so interesting because at the time Bear Stearns was massively short silver and the firm collapsed within weeks of his comments.
Guess who inherited that massive silver short position? You got it, JP Morgan. Not only did they pick up the massive silver short position, but they also picked up Mr. Gottlieb in the deal as you can see.
Stay tuned as we will have more interviews and comments from key people regarding the JP Morgan lawsuit.
Below are some critical portions from the lawsuit against JP Morgan that King World News was able to obtain. This is a 104 page document, so we just wanted to highlight key points from the suit:
1. Unlawful conduct. “Defendants combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the Commodity Exchange Inc. (“COMEX”) division of the New York Mercantile Exchange (“NYMEX”). Defendants thereby have violated Section 1 of the Sherman Act.
Also during the Class Period, certain of the Defendants, including JP Morgan, have intentionally acted to manipulate prices of COMEX silver futures and options contracts.
2. Purpose and Means. Defendants have effected their foregoing restraint of trade and manipulations in order to profit themselves. Defendants have caused declines in the price of COMEX silver, and COMEX options, and also stabilized such prices through diverse means. These means include (a) a dominant and manipulative short positions and market power manipulation; (b) repeated manipulative and uneconomic trades and trade manipulation; (c) false trades made to facilitate a trade manipulation; and (d) other acts.
3. Market Power Manipulation. (a) JP Morgan, gradually acquired control, between March 17, 2008 and August 2008, of an enormously large ounce short position in COMEX silver futures and silver that previously was held by Bear Stearns. This short position and JP Morgan’s existing COMEX short silver positions gave JP Morgan substantial market power in COMEX silver futures contracts.
4.Manipulative and Uneconomic Trades (a) During the Class Period, JP Morgan also made large manipulative trades that repeatedly caused sudden, unreasonable and artificial fluctuations in COMEX silver prices which profited JP Morgan. (b) One of these episodes occurred on August 14 and 15, 2008. JP Morgan’s trades caused a very large decline of almost $1.41 per ounce, or approximately 12%, in COMEX silver futures. This represented an approximately $220,000,000 increase in the value of JP Morgan’s COMEX silver short positions.
7. CFTC Commissioner Comment (a) Such depressions of the prices of COMEX silver futures through large uneconomic trades created benefitted JP Morgan’s extraordinarily large COMEX short position. (c) Also, these types of trades were reported to the CFTC by other persons. Plaintiffs further specifically allege that Commissioner Bart Chilton made public statements, including on October 26, 2010, to the effect that he believed there had been manipulation or related unlawful conduct in the COMEX silver futures market. “I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by member of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” Bart Chilton
58. JP Morgan executed its trades on this day through, at least, a futures floor broker named Marcus Elias. Marcus Elias was a former classmate and wrestling teammate of Chris Jordan, a senior silver trader at JP Morgan. After the close of floor trading on June 26, 2007, Marcus Elias acknowledged that he had executed purchase trades for JP Morgan at or near the lows of the market. Marcus Elias also executed sell orders on behalf of JP Morgan in the morning, which contributed to the price declines, and then purchased futures on behalf of JP Morgan subsequently as the market bottomed.
65. Through its trading conduct on this day, JP Morgan intended to force traders who were short out of the money puts to cover their positions. As options on July futures approached expiration, JP Morgan had no fundamental reason to believe there would be a price move downward. Yet JP Morgan maintained its put positions until the last available day to trade these options – an economically unjustifiable action because at expiration the options would expire out of the money and worthless. However, by virtue of this large put options position, JP Morgan knew that a large and less capitalized segment of the market was conversely short options. So, rather than simply liquidate its out of the money positions at a loss, JP Morgan sold futures into the market and placed “spoof” orders to generate widespread panic. This selling forced panicked traders to systematically sell silver futures. As discussed below, this conduct was repeated again in August 2008.
The suit also names Robert Gottlieb who came to JP Morgan from Bear Stearns along with a massive silver short position which JP Morgan inherited from Bear Stearns:
c. JP Morgan’s Communications with HSBC
88. Between 1996 and 2000, Robert Gottlieb, Christopher Jordan and Michael Connolly worked together at the Precious Metals Trading Desk of HSBC and at Republic National Bank of New York, prior to its acquisition by HSBC. 89. In 2006, Jordan began his employment at JP Morgan where, until 2010, he was one of JP Morgan’s principal COMEX silver futures and options traders. 90. After a brief stint at Bank of America as a commodities trader, Mike Connolly returned to HSBC in 2007, where he served as Senior Vice President of HSBC’s Precious Metals Desk. 91. In March 2008, Robert Gottlieb began his employment at JP Morgan Chase where he presently serves as a Managing Director/Trader. 92. Prior to JP Morgan’s acquisition of Bear Stearns in 2008, Mr. Gottlieb had worked for Bear Stearns from January 2006 forward. 93. Bear Stearns, through Robert Gottlieb and others, had developed the previously alleged large Bear Stearns short position in COMEX silver futures prior to March 17, 2008. 94. Contrary to standard antitrust compliance manuals, Mr. Gottlieb regularly spoke to, and communicated and met with HSBC silver trader Mike Connolly from the time that Mr. Gottlieb joined JP Morgan until at least October 2010.
d. JP Morgan’s Motive and Financial Incentive to Cause Lower COMEX Silver Futures Prices From The Second Quarter Of 2008 Forward.
95. By the second quarter of 2008 and continuing thereafter through the end of the Class Period, JP Morgan possessed a large financial incentive to cause lower COMEX silver futures prices. Lower COMEX silver prices caused the mark to market value of JP Morgan’s short COMEX silver positions to increase. The amount of the increase in the value of JP Morgan’s short COMEX silver short positions was at least $100,000,000 and was as much in excess of $150,000,000 for each $1 decline in COMEX silver prices.
116. According to other witnesses as well, on or before August 15, 2008, brokers who often executed trades for JP Morgan accumulated a significant number of September puts that were well out of the money. 117. As prices decreased, these September puts became much closer to being in the money. Accordingly, those who had been selling these puts had to close out their positions by buying back the September puts on August 15, 2008. 118. Chris Jordan at JP Morgan was selling back large amounts of September puts on August 15 at an enormous profit.
124. In his communications with the CFTC, the whistleblower described how JP Morgan signaled its co-conspirators in advance of the manipulation, so that JP Morgan along with its co-conspirators, could reap enormous profits by artificially and unlawfully suppressing and manipulating the price of COMEX silver futures and options contracts.
Read the entire article HERE.
By Nomi Prins
Aug 23, 2011 12:34 AM EDT
The Daily Beast
There’s a saying that loose lips sink ships. So can dead weight.
Goldman Sachs CEO Lloyd Blankfein, who just got himself a lawyer, may be facing the possibility of sinking, either because of his own words in April 2010 before the Senate Permanent Subcommittee on Investigations (PSI) or because his shipmates are distancing themselves in a legal version of every man for himself. Or both.
Recall that Blankfein emphatically told the subcommittee, “We didn’t have a massive short against the housing market, and we certainly did not bet against our clients.” The 650-page subcommittee report (PDF) presented on April 13, 2011, which cites Blankfein 79 times, begs to differ.
The report accused Goldman of trading against its clients by simultaneously shorting certain subprime mortgage securities (a.k.a. “cats and dogs”) while stuffing them into the collateralized debt obligations it sold. It also suggested that Goldman executives, including Blankfein, misled Congress in testimony surrounding the Abacus CDO, Hudson, Timberwolf, and other deals, by saying it didn’t have a big short.
The top lesson I learned before leaving Goldman in the wake of Enron was Goldman’s foremost internal policy is to protect Goldman. It’s also to protect the most powerful members. When cracks manifest in the corporate armor, those two policies are at odds.
The executives running Goldman are exceedingly wealthy, not least because when the firm faced its darkest hour and lowest stock price in years during the bank-created crisis of fall 2008, the government provided it billions of dollars in the form of cheap loans, FDIC debt guarantees, TARP, AIG make-wholes, and a late-night moniker change from investment bank to bank holding company, giving the firm access to excessive Federal Reserve aid.
On Monday, Goldman shares took a 6 percent beating during final and extended trading hours on the announcement that Blankfein had hired a lawyer, without waiting for specifics. The last time its shares hit a 106.51 level was in early 2009.
That kind of downward movement concerns the firm’s partners. So would a wide number of casualties. Securing a separate attorney is a way to divide the firm’s members, to keep from being summarily conquered.
You could look at Blankfein hiring external counsel as a normal prudent, legal move. But that’s naive, given the attorney he selected. Hiring a major criminal-defense lawyer is about more than the fear of a $550 million SEC wrist slap for bad documentation in the Abacus CDO. It’s about the real possibility of doing time.
Big-shot Washington defense attorney Reid Weingarten, of the firm Steptoe & Johnson LLC, has represented former Enron chief accounting officer Richard Causey (who pleaded out), former Rite Aid vice chairman and chief counsel Franklin Brown (found guilty by a jury on 10 counts of conspiring to falsely inflate his company’s value), and former WorldCom CEO Bernie Ebbers (convicted on nine felony counts by a jury). All three are in jail. Two of them, Ebbers and Causey, had undergone congressional panel investigations beforehand. Another of Weingarten’s clients, former Tyco counsel Mark Belnick, was acquitted, though Tyco CEO Dennis Kozlowski, who was not represented by Weingarten, was convicted and remains in jail.
This is not a great pack to be associated with. The outcomes for most of these guys weren’t great either.
Still, Goldman can use attorney independence to the firm’s advantage. Weingarten is coming in “fresh” to prove, if necessary, that Blankfein’s statement to the effect that the firm was engaging only in a “market-making” role, and thus not strategically betting against its clients, was not perjury, since it was true. And yes, a market maker can be on any and all sides of a trade. But that’s not the most pivotal point of consideration.
The case would go: for the specific deals delineated in the April report, did you knowingly create or enable a situation in which your clients were at a monetary disadvantage? The report time lines, trade volumes, and emails point to this conclusion, whereas Blankfein’s words are at odds with it.
I emailed Goldman Sachs spokesman David Wells to ask:
“Is this a preemptive move, or is there an expected or pending indictment in the wings? Will there be other members of Goldman similarly seeking external counsel?”
He referred me to a statement he issued earlier: “As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the PSI report hired counsel at the outset.”
This week in 1934, “public enemy No. 1” Al Capone was sent to Alcatraz, having already spent two years in an Atlanta prison for tax evasion. The charge that did him in was minor compared with the money he pillaged, but it nonetheless sunk him.
Blankfein may find himself in a parallel situation. If, as Wells indicates, the CEO hired outside counsel to deal with the PSI report, he may be considering the prospect of a perjury and related obstruction of justice charge.
But in Weingarten’s other major cases, the clients were charged with inflating books, committing fraud, or stealing money. His retention may indicate any federal case could revolve around more than the perjury and obstruction charges. It remains to be seen if an indictment is levied and, if so, whether Blankfein gets a Capone or a Belnick outcome.
Read the entire article HERE.
By Matt Taibbi
August 17, 2011 8:00 AM ET
Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – “Hey, chief, didja know this guy had two wives die falling down the stairs?” No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.
That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.
Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”
Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.
The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission’s records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted NARA to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission’s improprieties.
As a federally protected whistle-blower, Flynn is not permitted to speak to the press. But in evidence he presented to the SEC’s inspector general and three congressional committees earlier this summer, the 13-year veteran of the agency paints a startling picture of a federal police force that has effectively been conquered by the financial criminals it is charged with investigating. In at least one case, according to Flynn, investigators at the SEC found their desire to bring a case against an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating. In another case, the agency farmed out its inquiry to a private law firm – one hired by the company under investigation. The outside firm, unsurprisingly, concluded that no further investigation of its client was necessary. To complete the bureaucratic laundering process, Flynn says, the SEC dropped the case and destroyed the files.
Much has been made in recent months of the government’s glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn’s accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been “infected with the Goldman mindset from within.”
The destruction of records by the SEC, as outlined by Flynn, is something far more than an administrative accident or bureaucratic fuck-up. It’s a symptom of the agency’s terminal brain damage. Somewhere along the line, those at the SEC responsible for policing America’s banks fell and hit their head on a big pile of Wall Street’s money – a blow from which the agency has never recovered. “From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” says Sen. Chuck Grassley, the ranking Republican on the Senate Judiciary Committee, whose staff has interviewed Flynn. “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law.”
How did officials at the SEC wind up with a faithful veteran employee – a conservative, mid-level attorney described as a highly reluctant whistle-blower – spilling the agency’s most sordid secrets to Congress? In a way, they asked for it.
On May 18th of this year, SEC enforcement director Robert Khuzami sent out a mass e-mail to the agency’s staff with the subject line “Lawyers Behaving Badly.” In it, Khuzami asked his subordinates to report any experiences they might have had where “the behavior of counsel representing clients in… investigations has been questionable.”
Khuzami was asking staffers to recount any stories of outside counsel behaving unethically. But Flynn apparently thought his boss was looking for examples of lawyers “behaving badly” anywhere, including within the SEC. And he had a story to share he’d kept a lid on for years. “Mr. Khuzami may have gotten something more than he expected,” Flynn’s lawyer, a former SEC whistle-blower named Gary Aguirre, later explained to Congress.
Flynn responded to Khuzami with a letter laying out one such example of misbehaving lawyers within the SEC. It involved a case from very early in Flynn’s career, back in 2000, when he was working with a group of investigators who thought they had a “slam-dunk” case against Deutsche Bank, the German financial giant. A few years earlier, Rolf Breuer, the bank’s CEO, had given an interview to Der Spiegel in which he denied that Deutsche was involved in übernahmegespräche – takeover talks – to acquire a rival American firm, Bankers Trust. But the statement was apparently untrue – and it sent the stock of Bankers Trust tumbling, potentially lowering the price for the merger. Flynn and his fellow SEC investigators, suspecting that investors of Bankers Trust had been defrauded, opened a MUI on the case.
A Matter Under Inquiry is just a preliminary sort of look-see – a way for the SEC to check out the multitude of tips it gets about suspicious trades, shady stock scams and false disclosures, and to determine which of the accusations merit a formal investigation. At the MUI stage, an SEC investigator can conduct interviews or ask a bank to send in information voluntarily. Bumping a MUI up to a formal investigation is critical, because it enables investigators to pull out the full law-enforcement ass-kicking measures – subpoenas, depositions, everything short of hot pokers and waterboarding. In the Deutsche case, Flynn and other SEC investigators got past the MUI stage and used their powers to collect sworn testimony and documents indicating that plenty of übernahmegespräche indeed had been going on when Breuer spoke to Der Spiegel. Based on the evidence, they sent an “Action Memorandum” to senior SEC staff, formally recommending that the agency press forward and file suit against Deutsche.
Breuer responded to the threat as big banks like Deutsche often do: He hired a former SEC enforcement director to lobby the agency to back off. The ex-insider, Gary Lynch, launched a creative and inspired defense, producing a linguistic expert who argued that übernahmegespräche only means “advanced stage of discussions.” Nevertheless, the request to proceed with the case was approved by several levels of the SEC’s staff. All that was needed to move forward was a thumbs-up from the director of enforcement at the time, Richard Walker.
But then a curious thing happened. On July 10th, 2001, Flynn and the other investigators were informed that Walker was mysteriously recusing himself from the Deutsche case. Two weeks later, on July 23rd, the enforcement division sent a letter to Deutsche that read, “Inquiry in the above-captioned matter has been terminated.” The bank was in the clear; the SEC was dropping its fraud investigation. In contradiction to the agency’s usual practice, it provided no explanation for its decision to close the case.
On October 1st of that year, the mystery was solved: Dick Walker was named general counsel of Deutsche. Less than 10 weeks after the SEC shut down its investigation of the bank, the agency’s director of enforcement was handed a cushy, high-priced job at Deutsche.
Deutsche’s influence in the case didn’t stop there. A few years later, in 2004, Walker hired none other than Robert Khuzami, a young federal prosecutor, to join him at Deutsche. The two would remain at the bank until February 2009, when Khuzami joined the SEC as Flynn’s new boss in the enforcement division. When Flynn sent his letter to Khuzami complaining about misbehavior by Walker, he was calling out Khuzami’s own mentor.
The circular nature of the case illustrates the revolving-door dynamic that has become pervasive at the SEC. A recent study by the Project on Government Oversight found that over the past five years, former SEC personnel filed 789 notices disclosing their intent to represent outside companies before the agency – sometimes within days of their having left the SEC. More than half of the disclosures came from the agency’s enforcement division, who went to bat for the financial industry four times more often than ex-staffers from other wings of the SEC.
Even a cursory glance at a list of the agency’s most recent enforcement directors makes it clear that the SEC’s top policemen almost always wind up jumping straight to jobs representing the banks they were supposed to regulate. Lynch, who represented Deutsche in the Flynn case, served as the agency’s enforcement chief from 1985 to 1989, before moving to the firm of Davis Polk, which boasts many top Wall Street clients. He was succeeded by William McLucas, who left the SEC in 1998 to work for WilmerHale, a Wall Street defense firm so notorious for snatching up top agency veterans that it is sometimes referred to as “SEC West.” McLucas was followed by Dick Walker, who defected to Deutsche in 2001, and he was in turn followed by Stephen Cutler, who now serves as general counsel for JP Morgan Chase. Next came Linda Chatman Thomsen, who stepped down to join Davis Polk, only to be succeeded in 2009 by Khuzami, Walker’s former protégé at Deutsche Bank.
This merry-go-round of current and former enforcement directors has repeatedly led to accusations of improprieties. In 2008, in a case cited by the SEC inspector general, Thomsen went out of her way to pass along valuable information to Cutler, the former enforcement director who had gone to work for JP Morgan. According to the inspector general, Thomsen signaled Cutler that the SEC was unlikely to take action that would hamper JP Morgan’s move to buy up Bear Stearns. In another case, the inspector general found, an assistant director of enforcement was instrumental in slowing down an investigation into the $7 billion Ponzi scheme allegedly run by Texas con artist R. Allen Stanford – and then left the SEC to work for Stanford, despite explicitly being denied permission to do so by the agency’s ethics office. “Every lawyer in Texas and beyond is going to get rich on this case, OK?” the official later explained. “I hated being on the sidelines.”
Small wonder, then, that SEC staffers often have trouble getting their bosses to approve full-blown investigations against even the most blatant financial criminals. For a fledgling MUI to become a formal investigation, it has to make the treacherous leap from the lower rungs of career-level staffers like Flynn all the way up to the revolving-door level at the top, where senior management is composed largely of high-priced appointees from the private sector who have strong social and professional ties to the very banks they are charged with regulating. And if senior management didn’t approve an investigation, the documents often wound up being destroyed – as Flynn would later discover.
After the Deutsche fiasco over Bankers Trust, Flynn continued to work at the SEC for four more years. He briefly left the agency to dabble in real estate, then returned in 2008 to serve as an attorney in the enforcement division. In January 2010, he accepted new responsibilities that included helping to manage the disposition of records for the division – and it was then he first became aware of the agency’s possibly unlawful destruction of MUI records.
Flynn discovered a directive on the enforcement division’s internal website ordering staff to destroy “any records obtained in connection” with closed MUIs. The directive appeared to violate federal law, which gives responsibility for maintaining and destroying all records to the National Archives and Records Administration. Over a decade earlier, in fact, the SEC had struck a deal with NARA stipulating that investigative records were to be maintained for 25 years – and that if any files were to be destroyed after that, the shredding was to be done by NARA, not the SEC.
But Flynn soon learned that the records for thousands of preliminary investigations no longer existed. In his letter to Congress, Flynn estimates that the practice of destroying MUIs had begun as early as 1993, and has resulted in at least 9,000 case files being destroyed. For all the thousands of tips that had come in to the SEC, and the thousands of interviews that had been conducted by the agency’s staff, all that remained were a few perfunctory lines for each case. The mountains of evidence gathered were no longer in existence.
To read through the list of dead and buried cases that Flynn submitted to Congress is like looking through an infrared camera at a haunted house of the financial crisis, with the ghosts of missed prosecutions flashing back and forth across the screen. A snippet of the list:
PARTY MUI # OPENED/CLOSED ISSUE
Goldman Sachs MLA-01909 6/99 – 4/00 Market Manipulation
Deutsche Bank MHO-09356 11/01 – 7/02 Insider Trading
Deutsche Bank MHO-09432 2/02 – 8/02 Market Manipulation
Lehman Brothers MNY-07013 3/02 – 7/02 Financial Fraud
Goldman Sachs MNY-08198 11/09 – 12/09 Insider Trading
One MUI – case MNY-08145 – involved allegations of insider trading at AIG on September 15th, 2008, right in the middle of the insurance giant’s collapse. In that case, an AIG employee named Jacqueline Millan reported irregularities in the trading of AIG stock to her superiors, only to find herself fired. Incredibly, instead of looking into the matter itself, the SEC agreed to accept “an internal investigation by outside counsel or AIG.” The last note in the file indicates that “the staff plans to speak with the outside attorneys on Monday, August 24th , when they will share their findings with us.” The fact that the SEC trusted AIG’s lawyers to investigate the matter shows the basic bassackwardness of the agency’s approach to these crash-era investigations. The SEC formally closed the case on October 1st, 2009.
The episode with AIG highlights yet another obstacle that MUIs experience on the road to becoming formal investigations. During the past decade, the SEC routinely began allowing financial firms to investigate themselves. Imagine the LAPD politely asking a gang of Crips and their lawyers to issue a report on whether or not a drive-by shooting by the Crips should be brought before a grand jury – that’s basically how the SEC now handles many preliminary investigations against Wall Street targets.
The evolution toward this self-policing model began in 2001, when a shipping and food-service conglomerate called Seaboard aggressively investigated an isolated case of accounting fraud at one of its subsidiaries. Seaboard fired the guilty parties and made sweeping changes to its internal practices – and the SEC was so impressed that it instituted a new policy of giving “credit” to companies that police themselves. In practice, that means the agency simply steps aside and allows companies to slap themselves on the wrists. In the case against Seaboard, for instance, the SEC rewarded the firm by issuing no fines against it.
According to Lynn Turner, a former chief accountant at the SEC, the Seaboard case also prompted the SEC to begin permitting companies to hire their own counsel to conduct their own inquiries. At first, he says, the process worked fairly well. But then President Bush appointed the notoriously industry-friendly Christopher Cox to head up the SEC, and the “outside investigations” turned into whitewash jobs. “The investigations nowadays are probably not worth the money you spend on them,” Turner says.
Harry Markopolos, a certified fraud examiner best known for sounding a famously unheeded warning about Bernie Madoff way back in 2000, says the SEC’s practice of asking suspects to investigate themselves is absurd. In a serious investigation, he says, “the last person you want to trust is the person being accused or their lawyer.” The practice helped Madoff escape for years. “The SEC took Bernie’s word for everything,” Markopolos says.
At the SEC, having realized that the agency was destroying documents, Flynn became concerned that he was overseeing an illegal policy. So in the summer of last year, he reached out to NARA, asking them for guidance on the issue.
That request sparked a worried response from Paul Wester, NARA’s director of modern records. On July 29th, 2010, Wester sent a letter to Barry Walters, who oversees document requests for the SEC. “We recently learned from Darcy Flynn… that for the past 17 years the SEC has been destroying closed Matters Under Inquiry files,” Wester wrote. “If you confirm that federal records have been destroyed improperly, please ensure that no further such disposals take place and provide us with a written report within 30 days.”
Wester copied the letter to Adam Storch, a former Goldman Sachs executive who less than a year earlier had been appointed as managing executive of the SEC’s enforcement division. Storch’s appointment was not without controversy. “I’m not sure what’s scarier,” Daniel Indiviglio of The Atlantic observed, “that this guy worked at an investment bank that many believe has questionable ethics and too cozy a Washington connection, or that he’s just 29.” In any case, Storch reacted to the NARA letter the way the SEC often does – by circling the wagons and straining to find a way to blow off the problem without admitting anything.
Last August, as the clock wound down on NARA’s 30-day deadline, Storch and two top SEC lawyers held a meeting with Flynn to discuss how to respond. Flynn’s notes from the meeting, which he passed along to Congress, show the SEC staff wondering aloud if admitting the truth to NARA might be a bad idea, given the fact that there might be criminal liability.
“We could say that we do not believe there has been disposal inconsistent with the schedule,” Flynn quotes Ken Hall, an assistant chief counsel for the SEC, as saying.
“There are implications to admit what was destroyed,” Storch chimed in. It would be “not wise for me to take on the exposure voluntarily. If this leads to something, what rings in my ear is that Barry [Walters, the SEC documents officer] said: This is serious, could lead to criminal liability.”
When the subject of how many files were destroyed came up, Storch answered: “18,000 MUIs destroyed, including Madoff.”
Four days later, the SEC responded to NARA with a hilariously convoluted nondenial denial. “The Division is not aware of any specific instances of the destruction of records from any other MUI,” the letter states. “But we cannot say with certainty that no such documents have been destroyed over the past 17 years.” The letter goes on to add that “the Division has taken steps… to ensure that no MUI records are destroyed while we review this issue.”
Translation: Hey, maybe records were destroyed, maybe they weren’t. But if we did destroy records, we promise not to do it again – for now.
The SEC’s unwillingness to admit the extent of the wrong doing left Flynn in a precarious position. The agency has a remarkably bad record when it comes to dealing with whistle-blowers. Back in 2005, when Flynn’s attorney, Gary Aguirre, tried to pursue an insider-trading case against Pequot Capital that involved John Mack, the future CEO of Morgan Stanley, he was fired by phone while on vacation. Two Senate committees later determined that Aguirre, who has since opened a private practice representing whistle-blowers, was dismissed improperly as part of a “process of reprisal” by the SEC. Two whistle-blowers in the Stanford case, Julie Preuitt and Joel Sauer, also experienced retaliation – including reprimands and demotions – after raising concerns about superficial investigations. “There’s no mechanism to raise these issues at the SEC,” says another former whistle-blower. Contacting the agency’s inspector general, he adds, is considered “the nuclear option” – a move “well-known to be a career-killer.”
In Flynn’s case, both he and Aguirre tried to keep the matter in-house, appealing to SEC chairman Mary Schapiro with a promise not to go outside the agency if she would grant Flynn protection against reprisal. When no such offer was forthcoming, Flynn went to the agency’s inspector general before sending a detailed letter about the wrongdoing to three congressional committees.
One of the offices Flynn contacted was that of Sen. Grassley, who was in the midst of his own battle with the SEC. Frustrated with the agency’s failure to punish major players on Wall Street, the Iowa Republican had begun an investigation into how the SEC follows up on outside complaints. Specifically, he wrote a letter to FINRA, another regulatory agency, to ask how many complaints it had referred to the SEC about SAC Capital, the hedge fund run by reptilian billionaire short-seller Stevie Cohen.
SAC has long been accused of a variety of improprieties, from insider trading to harassment. But no charge in recent Wall Street history is crazier than an episode involving a SAC executive named Ping Jiang, who was accused in 2006 of enacting a torturous hazing program. According to a civil lawsuit that was later dropped, Jiang allegedly forced a new trader named Andrew Tong to take female hormones, come to work wearing a dress and lipstick, have “foreign objects” inserted in his rectum, and allow Jiang to urinate in his mouth. (I’m not making this up.)
Grassley learned that over the past decade, FINRA had referred 19 complaints about suspicious trades at SAC to federal regulators. Curious to see how many of those referrals had been looked into, Grassley wrote the SEC on May 24th, asking for evidence that the agency had properly investigated the cases.
Two weeks later, on June 9th, Khuzami sent Grassley a surprisingly brusque answer: “We generally do not comment on the status of investigations or related referrals, and, in turn, are not providing information concerning the specific FINRA referrals you identified.” Translation: We’re not giving you the records, so blow us.
Grassley later found out from FINRA that it had actually referred 65 cases about SAC to the SEC, making the lack of serious investigations even more inexplicable. Angered by Khuzami’s response, he sent the SEC another letter on June 15th demanding an explanation, but no answer has been forthcoming.
In the interim, Grassley’s office was contacted by Flynn, who explained that among the missing MUIs he had uncovered were at least three involving SAC – one in 2006, one in 2007 and one in 2010, involving charges of insider trading and currency manipulation. All three cases were closed by the SEC, and the records apparently destroyed.
On August 17th, Grassley sent a letter to the SEC about the Flynn allegations, demanding to know if it was indeed true that the SEC had destroyed records. He also asked if the agency’s failure to produce evidence of investigations into SAC Capital were related to the missing MUIs.
The SEC’s inspector general is investigating the destroyed MUIs and plans to issue a report. NARA is also seeking answers. “We’ve asked the SEC to look into the matter and we’re awaiting their response,” says Laurence Brewer, a records officer for NARA. For its part, the SEC is trying to explain away the illegality of its actions through a semantic trick. John Nester, the agency’s spokesman, acknowledges that “documents related to MUIs” have been destroyed. “I don’t have any reason to believe that it hasn’t always been the policy,” he says. But Nester suggests that such documents do not “meet the federal definition of a record,” and therefore don’t have to be preserved under federal law.
But even if SEC officials manage to dodge criminal charges, it won’t change what happened: The nation’s top financial police destroyed more than a decade’s worth of intelligence they had gathered on some of Wall Street’s most egregious offenders. “The SEC not keeping the MUIs – you can see why this would be bad,” says Markopolos, the fraud examiner famous for breaking the Madoff case. “The reason you would want to keep them is to build a pattern. That way, if you get five MUIs over a period of 20 years on something similar involving the same company, you should be able to connect five dots and say, ‘You know, I’ve had five MUIs – they’re probably doing something. Let’s go tear the place apart.’” Destroy the MUIs, and Wall Street banks can commit the exact same crime over and over, without anyone ever knowing.
Regulation isn’t a panacea. The SEC could have placed federal agents on every corner of lower Manhattan throughout the past decade, and it might not have put a dent in the massive wave of corruption and fraud that left the economy in flames three years ago. And even if SEC staffers from top to bottom had been fully committed to rooting out financial corruption, the agency would still have been seriously hampered by a lack of resources that often forces it to abandon promising cases due to a shortage of manpower. “It’s always a triage,” is how one SEC veteran puts it. “And it’s worse now.”
But we’re equally in the dark about another hypothetical. Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm’s executives were suspected of insider trading in September 2008?
It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases. “Street-level law enforcement is increasingly data-driven,” says Bill Laufer, a criminology professor at the University of Pennsylvania. “For a host of reasons, though, we are starved for good data on both white-collar and corporate crime. So the idea that we would take the little data we do have and shred it, without a legal requirement to do so, calls for a very creative explanation.”
We’ll never know what the impact of those destroyed cases might have been; we’ll never know if those cases were closed for good reasons or bad. We’ll never know exactly who got away with what, because federal regulators have weighted down a huge sack of Wall Street’s dirty laundry and dumped it in a lake, never to be seen again.
Read the entire article HERE.
by Tyler Durden
08/17/2011 16:27 -0400
In addition to the nationalization of his gold industry, Chavez earlier also announced that he would recover virtually all gold that Venezuela holds abroad, starting with 99 tons of gold at the Bank of England. As the WSJ reported earlier, “The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.” That’s great, but not really a gamechanger. After all the BOE should have said gold. What could well be a gamechanger is that according to an update from Bloomberg, Venezuela has gold with, you guessed it, JP Morgan, Barclays, and Bank Of Nova Scotia. As most know, JPM is one of the 5 vault banks. The fun begins if Chavez demands physical delivery of more than 10.6 tons of physical because as today’s CME update of metal depository statistics, JPM only has 338,303 ounces of registered gold in storage. Or roughly 10.6 tons. A modest deposit of this size would cause some serious white hair at JPM as the bank scrambles to find the replacement gold, which has already been pledged about 100 times across the various paper markets. Keep an eye on gold in the illiquid after hour market. The overdue scramble for delivery may be about to begin.
Read the entire article HERE.
by JS Kim
Chief Investment Strategist
June 6th, 2011
Please find below my interview with Max Keiser and our discussion regarding the Greek crisis and continued banker price suppression and manipulation schemes executed against gold and silver to prop up the US dollar and prevent a US dollar collapse. Max raises the issue of the European Parliament’s move to accept gold from EU nations as collateral as reported on Zero Hedge here, which I believe is a step towards making gold acceptable as money for the purposes of debt repayment. However, this step is nothing new as Bankers have long been known to make loans in weak currencies and demand repayment in much stronger currencies before, even when dealing with fiat currencies. For example, the World Bank, which has long dispensed loans in US dollars to struggling nations, started a program in the early1990s whereby it asked nations to repay their USD loans in local currencies, fully aware of the fact that the US dollar was falling against many global currencies very rapidly. The World Bank aggressively instituted this “we lend you money in junk US dollar fiat currency and repay us in better currency” program in 15 different currencies in the early 1990s and aggressively pushed it further in the 2000s. So it is no surprise at all that the European Parliament has extended and refined this World Bank program for their own use into a “collateralize your debt with real money (physical gold) but continue to take out loans in our junk fiat currencies”.
I also discuss the shenanigans of the gold/futures silver market with Max. Here is the link to the evidence and the letter I sent to CFTC Commissioner Bart Chilton in late summer of 2008 of Banker fraud in the gold futures markets and his reply to me. Mr. Chilton replied that the enormous arbitrage opportunities daily for several months in the summer of 2008 of $20, $30, $40 and $50 an ounce higher prices of gold futures in Asia versus the New York COMEX was due to Chinese banker manipulation of gold prices higher and not due to Western banker manipulation of gold prices lower. You can read, in that same article, my further line of questioning of Mr. Chilton’s response that went unanswered by the CFTC. Furthermore, I discuss with Max the recent shenanigans in gold and silver futures markets where nearly 99% of all daily transactions for the month of May, 2011 consisted of paper for paper swaps in the form of EFP (Exchange of Futures for Physical) and EFS (Exchange of Futures for Swaps). While at first the Exchange of Futures for Physical transaction may sound legitimate in name, all legitimacy disappears when one realizes that paper may be substituted for the “physical” component of this transaction.
Exchange Rule 104.36 enacted on February 18, 2005, which allows for the substitution of gold ETFs for physical gold, states that the “physical” part of the transaction “need only be substantially the economic equivalent of the futures contract being exchanged” and that “the purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds (‘ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied. Thus, acceptable gold-backed and exchange-traded ETF funds include, but are not limited to, the iSharesCOMEX Gold Trust (ticker: IAU), which began trading on the American Stock Exchange on January 28, 2005.”
GATA’s Adrian Douglas first brought to my attention Exchange Rule 104.36 in his article, “Commodity Exchanges Can Dump Gold Debts on ETFs”, prompting me to search the CFTC database even further. My search revealed a further amendment to the “exchange of future for physical” transactions enacted onMarch 11, 2005. This amendment stated that “for purposes of this Rule 414, the term ‘Related Position’ [Physical] shall include, but not be limited to, a security [a group or basket of securities], an option, [or] any commodity as that term is defined by the CEA or a group or basket of any of the foregoing. The Related Position [Physical] being exchanged need not be the same as the underlying of the Futures transaction being exchanged, but the Related Position [Physical] must have a high degree of price correlation to the underlying of the Futures transaction so that the Futures transaction would serve as an appropriate hedge for the Related Position [Physical].” This amendment not only opens up PM ETFs as substitutes for the “physical” component of a gold/silver futures transaction but even other metal ETFs or physical metals that have a “high degree of price correlation” to gold and silver.
Furthermore, remember that an EFP transaction can be used to either initiate or liquidate a futures position. Thus, from this amendment, though not specifically mentioned, it is obvious that SLV shares could be used in an EFP transaction to represent the “physical silver” part of a futures transaction. If you look at my below diagram, this may also explain why a huge number of spread positions in the gold/silver futures markets are initiated from time to time in the COMEX. I have illustrated how an EFP in silver futures may work below:
In recent months, the number of EFP transactions in silver AND gold, as opposed to the number of contracts settled in cash or settled in physical delivery, has exploded. When the majority of gold/silver futures transactions daily consist of EFP and EFS transactions versus cash settlement or physical settlement, this points to a pronounced manipulation of this market and an absence of any true price discovery in gold/silver futures markets.
ZeroHedge recently reported that JP Morgan was one of the largest owners of the likely bogus SLV ETF, holding 3,600,000 shares as of the end of the 2010 fiscal year calendar. ZeroHedge also reported that bullion banks, in early May, moved 20% of COMEX physical silver out of the registered category that is available to satisfy requests for physical delivery and into the eligible category that is not “eligible” for physical delivery. Scottia Mocatta followed this significant move by transferring 186,000 of their physical silver ounces from registered to eligible as well. JP Morgan, as of the May 27th CME report, held ZERO ounces of registered silver in the COMEX vaults.
In the meantime, selling of SLV shares reached an all time high in May. What does this all mean? I’m not quite sure I have the full answer yet as I keep digging, but I’m quite certain that whatever is going on in these paper for paper swaps in the gold/silver futures markets on the COMEX is not kosher and an attempt to hide physical shortages of precious metals that exist versus the open interest numbers in gold/silver futures. The CME makes it very difficult to compile stats regarding EFS and EFP transactions because while they provide a running total of month-to-date transactions for gold/silver futures contracts settled in cash and settled through physical delivery, they do NOT provide a running total of EFS and EFP transactions month-to-date in their daily metal reports nor do they respond to any requests for such information. When one of my staff members wrote the CME and inquired if running totals were available each month for EFS and EFP transactions in gold/silver futures, the CME staff answered no. Thus, one of my staff compiled the daily totals for EFS and EFP transactions for the month of May by pulling every daily report for gold/silver futures. This is what the totals looked like from May 2 to May 26, 2011.
For gold futures, from May 2, 2011 until May 26,2011, 0.01% of transactions settled in cash, 0.27% settled in physical, 78.22% consisted of EFP and 21.50% consisted of EFS (for a combined 99.72% of all gold futures transactions in EFP and EFS). For silver futures, from May 2, 2011 until May 26, 2011, 0.19% settled in cash, 0.93% settled in physical, 85.39% consisted of EFP, and 13.49% consisted of EFS (for a combined 98.88% of all silver futures transactions in EFP and EFS). Thus these paper for (possibly) paper swaps, if that is indeed what is happening in the EFP transactions, are casting huge distortions in the price of gold and silver to the downside.
Read the entire article HERE.
What was Timothy Geithner thinking back in 2008 when, as president of the New York Fed, he decided to give Goldman Sachs a $30 billion interest-free loan as part of an $80 billion secret float to favored banks? The sordid details of that program were finally made public this week in response to a court order for a Freedom of Information Act release, thanks to a Bloomberg News lawsuit. Sorry, my bad: It wasn’t an interest-free loan; make that .01 percent that Goldman paid to borrow taxpayer money when ordinary folks who missed a few credit card payments in order to finance their mortgages were being slapped with interest rates of more than 25 percent.
One wonders if Barack Obama was fully aware of Geithner’s deceitful performance at the New York Fed when he appointed him treasury secretary in the incoming administration. The president was probably ignorant of this particular giveaway, as were key members of Congress. “I wasn’t aware of this program until now,” Barney Frank, D-Mass., who at the time chaired the House Financial Services Committee, admitted in referring to Geithner’s “single-tranche open-market operations” program. And there was no language in the Dodd-Frank law supposedly reining in the banks that compelled the Fed to reveal the existence of this program.
It was merely one small part of that reckless policy of throwing mad money at the banks while ignoring the plight of homeowners whom the banks had swindled, a plan pursued by both the Bush and the Obama administrations that set the stage for the current slide into a double-dip recession. On Tuesday it was reported that home values have continued an eight-month decline back to their lowest point since the recession began. With housing in deep trouble there can be no rebound of consumer confidence or job creation, and the first-quarter growth rate was an anemic 1.8 percent even as Wall Street profits and bonuses flourished. Wages are stagnant, unemployment claims have recently risen and, as The Wall Street Journal headlined on Tuesday, “Economists Downgrade Prospects for Growth.” That same edition of the Journal reported that 44.6 million Americans now survive on food stamps, an 11 percent increase in that misery index over the past year, while Geithner’s friends at Goldman are doing quite well.
Actually, Goldman wasn’t even a bank and was therefore ineligible for those massive government handouts until Geithner helped gain approval for the instant conversion of Goldman from an investment house to a commercial bank. Goldman was granted that status, and with it access to the Fed’s lending, soon after the privilege had been denied to the fellow investment bank Lehman Brothers (the $30 billion mentioned above was in addition to the $43.5 billion Goldman borrowed from other Fed programs). Although Lehman was allowed to go belly up, Geithner engineered the massive bailout of AIG, a move that turned out to be a cover for passing money to AIG’s clients, including the aforementioned Goldman Sachs. The man’s intentions were clear, even if all the secret details were not, when Obama picked him to be his point man in salvaging an economy that Geithner had done much to wreck.
Geithner’s priorities were all too obvious from his days in the Clinton administration’s Treasury Department when he worked first under former Goldman honcho Robert Rubin and then Lawrence Summers, who took six-figure speaking fees from Goldman and other banks while he was an adviser to candidate Obama. It was the recommendation of Rubin and Summers that landed Geithner the job as president of the New York Fed, where he faithfully followed the policy lead of Goldman-CEO-turned-Treasury-Secretary Henry Paulson.
It was back then and is now accurate to speak, as a New York Times headline once put it, of U.S. politics dominated by “The Guys From “Government Sachs’ “–but on an international scale. From the crisis in Greece, where Goldman manufactured toxic tax-based derivatives with abandon, to its betting against the success of the mortgage-based derivatives that Goldman designed and sold to others, the company was nothing short of a massive wrecking ball in the international economy.
Oh yes, what did Goldman do with that taxpayer money it borrowed back in 2008? It needed the money to cover the lousy bets of its Fixed Income, Currencies and Commodities trading unit, which had lost $320 million. Typical of the Goldman dealings in that arena was the $1.3 billion solicited from Col. Moammar Gadhafi’s Libya sovereign wealth fund, which according to a report in Tuesday’s Wall Street Journal lost 98 percent of its value and almost cost some Goldman executives doing business in Tripoli their lives.
But they survived, as the guys from Goldman always do. With the general “no banker left behind” program pursued by Geithner under both George W. Bush and Obama, the theory was that saving the banks would save the country. The first part worked out brilliantly, but the second act never occurred.
Read the entire article HERE.
by Dean Henderson
June 1, 2011
Contributor to Global Research
(Part one of a four-part series)
The Four Horsemen of Banking (Bank of America, JP Morgan Chase, Citigroup and Wells Fargo) own the Four Horsemen of Oil (Exxon Mobil, Royal Dutch/Shell, BP Amoco and Chevron Texaco); in tandem with Deutsche Bank, BNP, Barclays and other European old money behemoths. But their monopoly over the global economy does not end at the edge of the oil patch.
According to company 10K filings to the SEC, the Four Horsemen of Banking are among the top ten stock holders of virtually every Fortune 500 corporation.
So who then are the stockholders in these money center banks?
This information is guarded much more closely. My queries to bank regulatory agencies regarding stock ownership in the top 25 US bank holding companies were given Freedom of Information Act status, before being denied on “national security” grounds. This is rather ironic, since many of the bank’s stockholders reside in Europe.
Buffet, Schwarzenegger and Rothschild
One important repository for the wealth of the global oligarchy that owns these bank holding companies is US Trust Corporation – founded in 1853 and now owned by Bank of America. A recent US Trust Corporate Director and Honorary Trustee was Walter Rothschild. Other directors included Daniel Davison of JP Morgan Chase, Richard Tucker of Exxon Mobil, Daniel Roberts of Citigroup and Marshall Schwartz of Morgan Stanley. 
J. W. McCallister, an oil industry insider with House of Saud connections, wrote in The Grim Reaper that information he acquired from Saudi bankers cited 80% ownership of the New York Federal Reserve Bank- by far the most powerful Fed branch- by just eight families, four of which reside in the US. They are the Goldman Sachs, Rockefellers, Lehmans and Kuhn Loebs of New York; the Rothschilds of Paris and London; the Warburgs of Hamburg; the Lazards of Paris; and the Israel Moses Seifs of Rome.
CPA Thomas D. Schauf corroborates McCallister’s claims, adding that ten banks control all twelve Federal Reserve Bank branches. He names N.M. Rothschild of London, Rothschild Bank of Berlin, Warburg Bank of Hamburg, Warburg Bank of Amsterdam, Lehman Brothers of New York, Lazard Brothers of Paris, Kuhn Loeb Bank of New York, Israel Moses Seif Bank of Italy, Goldman Sachs of New York and JP Morgan Chase Bank of New York. Schauf lists William Rockefeller, Paul Warburg, Jacob Schiff and James Stillman as individuals who own large shares of the Fed.  The Schiffs are insiders at Kuhn Loeb. The Stillmans are Citigroup insiders, who married into the Rockefeller clan at the turn of the century.
Eustace Mullins came to the same conclusions in his book The Secrets of the Federal Reserve, in which he displays charts connecting the Fed and its member banks to the families of Rothschild, Warburg, Rockefeller and the others. 
The control that these banking families exert over the global economy cannot be overstated and is quite intentionally shrouded in secrecy. Their corporate media arm is quick to discredit any information exposing this private central banking cartel as “conspiracy theory”. Yet the facts remain.
The House of Morgan
The Federal Reserve Bank was born in 1913, the same year US banking scion J. Pierpont Morgan died and the Rockefeller Foundation was formed. The House of Morgan presided over American finance from the corner of Wall Street and Broad, acting as quasi-US central bank since 1838, when George Peabody founded it in London.
Peabody was a business associate of the Rothschilds. In 1952 Fed researcher Eustace Mullins put forth the supposition that the Morgans were nothing more than Rothschild agents. Mullins wrote that the Rothschilds, “…preferred to operate anonymously in the US behind the facade of J.P. Morgan & Company”. 
Author Gabriel Kolko stated, “Morgan’s activities in 1895-1896 in selling US gold bonds in Europe were based on an alliance with the House of Rothschild.” 
The Morgan financial octopus wrapped its tentacles quickly around the globe. Morgan Grenfell operated in London. Morgan et Ce ruled Paris. The Rothschild’s Lambert cousins set up Drexel & Company in Philadelphia.
The House of Morgan catered to the Astors, DuPonts, Guggenheims, Vanderbilts and Rockefellers. It financed the launch of AT&T, General Motors, General Electric and DuPont. Like the London-based Rothschild and Barings banks, Morgan became part of the power structure in many countries.
By 1890 the House of Morgan was lending to Egypt’s central bank, financing Russian railroads, floating Brazilian provincial government bonds and funding Argentine public works projects. A recession in 1893 enhanced Morgan’s power. That year Morgan saved the US government from a bank panic, forming a syndicate to prop up government reserves with a shipment of $62 million worth of Rothschild gold. 
Morgan was the driving force behind Western expansion in the US, financing and controlling West-bound railroads through voting trusts. In 1879 Cornelius Vanderbilt’s Morgan-financed New York Central Railroad gave preferential shipping rates to John D. Rockefeller’s budding Standard Oil monopoly, cementing the Rockefeller/Morgan relationship.
The House of Morgan now fell under Rothschild and Rockefeller family control. A New York Herald headline read, “Railroad Kings Form Gigantic Trust”. J. Pierpont Morgan, who once stated, “Competition is a sin”, now opined gleefully, “Think of it. All competing railroad traffic west of St. Louis placed in the control of about thirty men.”
Morgan and Edward Harriman’s banker Kuhn Loeb held a monopoly over the railroads, while banking dynasties Lehman, Goldman Sachs and Lazard joined the Rockefellers in controlling the US industrial base. 
In 1903 Banker’s Trust was set up by the Eight Families. Benjamin Strong of Banker’s Trust was the first Governor of the New York Federal Reserve Bank. The 1913 creation of the Fed fused the power of the Eight Families to the military and diplomatic might of the US government. If their overseas loans went unpaid, the oligarchs could now deploy US Marines to collect the debts. Morgan, Chase and Citibank formed an international lending syndicate.
The House of Morgan was cozy with the British House of Windsor and the Italian House of Savoy. The Kuhn Loebs, Warburgs, Lehmans, Lazards, Israel Moses Seifs and Goldman Sachs also had close ties to European royalty. By 1895 Morgan controlled the flow of gold in and out of the US. The first American wave of mergers was in its infancy and was being promoted by the bankers. In 1897 there were sixty-nine industrial mergers. By 1899 there were twelve-hundred. In 1904 John Moody – founder of Moody’s Investor Services – said it was impossible to talk of Rockefeller and Morgan interests as separate. 
Public distrust of the combine spread. Many considered them traitors working for European old money. Rockefeller’s Standard Oil, Andrew Carnegie’s US Steel and Edward Harriman’s railroads were all financed by banker Jacob Schiff at Kuhn Loeb, who worked closely with the European Rothschilds.
Several Western states banned the bankers. Populist preacher William Jennings Bryan was thrice the Democratic nominee for President from 1896 -1908. The central theme of his anti-imperialist campaign was that America was falling into a trap of “financial servitude to British capital”. Teddy Roosevelt defeated Bryan in 1908, but was forced by this spreading populist wildfire to enact the Sherman Anti-Trust Act. He then went after the Standard Oil Trust.
In 1912 the Pujo hearings were held, addressing concentration of power on Wall Street. That same year Mrs. Edward Harriman sold her substantial shares in New York’s Guaranty Trust Bank to J.P. Morgan, creating Morgan Guaranty Trust. Judge Louis Brandeis convinced President Woodrow Wilson to call for an end to interlocking board directorates. In 1914 the Clayton Anti-Trust Act was passed.
Jack Morgan – J. Pierpont’s son and successor – responded by calling on Morgan clients Remington and Winchester to increase arms production. He argued that the US needed to enter WWI. Goaded by the Carnegie Foundation and other oligarchy fronts, Wilson accommodated. As Charles Tansill wrote in America Goes to War, “Even before the clash of arms, the French firm of Rothschild Freres cabled to Morgan & Company in New York suggesting the flotation of a loan of $100 million, a substantial part of which was to be left in the US to pay for French purchases of American goods.”
The House of Morgan financed half the US war effort, while receiving commissions for lining up contractors like GE, Du Pont, US Steel, Kennecott and ASARCO. All were Morgan clients. Morgan also financed the British Boer War in South Africa and the Franco-Prussian War. The 1919 Paris Peace Conference was presided over by Morgan, which led both German and Allied reconstruction efforts. 
In the 1930’s populism resurfaced in America after Goldman Sachs, Lehman Bank and others profited from the Crash of 1929.  House Banking Committee Chairman Louis McFadden (D-NY) said of the Great Depression, “It was no accident. It was a carefully contrived occurrence…The international bankers sought to bring about a condition of despair here so they might emerge as rulers of us all”.
Sen. Gerald Nye (D-ND) chaired a munitions investigation in 1936. Nye concluded that the House of Morgan had plunged the US into WWI to protect loans and create a booming arms industry. Nye later produced a document titled The Next War, which cynically referred to “the old goddess of democracy trick”, through which Japan could be used to lure the US into WWII.
In 1937 Interior Secretary Harold Ickes warned of the influence of “America’s 60 Families”. Historian Ferdinand Lundberg later penned a book of the exact same title. Supreme Court Justice William O. Douglas decried, “Morgan influence…the most pernicious one in industry and finance today.”
Jack Morgan responded by nudging the US towards WWII. Morgan had close relations with the Iwasaki and Dan families – Japan’s two wealthiest clans – who have owned Mitsubishi and Mitsui, respectively, since the companies emerged from 17th Century shogunates. When Japan invaded Manchuria, slaughtering Chinese peasants at Nanking, Morgan downplayed the incident. Morgan also had close relations with Italian fascist Benito Mussolini, while German Nazi Dr. Hjalmer Schacht was a Morgan Bank liaison during WWII. After the war Morgan representatives met with Schacht at the Bank of International Settlements (BIS) in Basel, Switzerland. 
The House of Rockefeller
BIS is the most powerful bank in the world, a global central bank for the Eight Families who control the private central banks of almost all Western and developing nations. The first President of BIS was Rockefeller banker Gates McGarrah- an official at Chase Manhattan and the Federal Reserve. McGarrah was the grandfather of former CIA director Richard Helms. The Rockefellers- like the Morgans- had close ties to London. David Icke writes in Children of the Matrix, that the Rockefellers and Morgans were just “gofers” for the European Rothschilds. 
BIS is owned by the Federal Reserve, Bank of England, Bank of Italy, Bank of Canada, Swiss National Bank, Nederlandsche Bank, Bundesbank and Bank of France.
Historian Carroll Quigley wrote in his epic book Tragedy and Hope that BIS was part of a plan, “to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole…to be controlled in a feudalistic fashion by the central banks of the world acting in concert by secret agreements.”
The US government had a historical distrust of BIS, lobbying unsuccessfully for its demise at the 1944 post-WWII Bretton Woods Conference. Instead the Eight Families’ power was exacerbated, with the Bretton Woods creation of the IMF and the World Bank. The US Federal Reserve only took shares in BIS in September 1994. 
BIS holds at least 10% of monetary reserves for at least 80 of the world’s central banks, the IMF and other multilateral institutions. It serves as financial agent for international agreements, collects information on the global economy and serves as lender of last resort to prevent global financial collapse.
BIS promotes an agenda of monopoly capitalist fascism. It gave a bridge loan to Hungary in the 1990’s to ensure privatization of that country’s economy. It served as conduit for Eight Families funding of Adolf Hitler- led by the Warburg’s J. Henry Schroeder and Mendelsohn Bank of Amsterdam. Many researchers assert that BIS is at the nadir of global drug money laundering. 
It is no coincidence that BIS is headquartered in Switzerland, favorite hiding place for the wealth of the global aristocracy and headquarters for the P-2 Italian Freemason’s Alpina Lodge and Nazi International. Other institutions which the Eight Families control include the World Economic Forum, the International Monetary Conference and the World Trade Organization.
Bretton Woods was a boon to the Eight Families. The IMF and World Bank were central to this “new world order”. In 1944 the first World Bank bonds were floated by Morgan Stanley and First Boston. The French Lazard family became more involved in House of Morgan interests. Lazard Freres- France’s biggest investment bank- is owned by the Lazard and David-Weill families- old Genoese banking scions represented by Michelle Davive. A recent Chairman and CEO of Citigroup was Sanford Weill.
In 1968 Morgan Guaranty launched Euro-Clear, a Brussels-based bank clearing system for Eurodollar securities. It was the first such automated endeavor. Some took to calling Euro-Clear “The Beast”. Brussels serves as headquarters for the new European Central Bank and for NATO. In 1973 Morgan officials met secretly in Bermuda to illegally resurrect the old House of Morgan, twenty years before Glass Steagal Act was repealed. Morgan and the Rockefellers provided the financial backing for Merrill Lynch, boosting it into the Big 5 of US investment banking. Merrill is now part of Bank of America.
John D. Rockefeller used his oil wealth to acquire Equitable Trust, which had gobbled up several large banks and corporations by the 1920’s. The Great Depression helped consolidate Rockefeller’s power. His Chase Bank merged with Kuhn Loeb’s Manhattan Bank to form Chase Manhattan, cementing a long-time family relationship. The Kuhn-Loeb’s had financed – along with Rothschilds – Rockefeller’s quest to become king of the oil patch. National City Bank of Cleveland provided John D. with the money needed to embark upon his monopolization of the US oil industry. The bank was identified in Congressional hearings as being one of three Rothschild-owned banks in the US during the 1870’s, when Rockefeller first incorporated as Standard Oil of Ohio. 
One Rockefeller Standard Oil partner was Edward Harkness, whose family came to control Chemical Bank. Another was James Stillman, whose family controlled Manufacturers Hanover Trust. Both banks have merged under the JP Morgan Chase umbrella. Two of James Stillman’s daughters married two of William Rockefeller’s sons. The two families control a big chunk of Citigroup as well. 
In the insurance business, the Rockefellers control Metropolitan Life, Equitable Life, Prudential and New York Life. Rockefeller banks control 25% of all assets of the 50 largest US commercial banks and 30% of all assets of the 50 largest insurance companies.  Insurance companies- the first in the US was launched by Freemasons through their Woodman’s of America- play a key role in the Bermuda drug money shuffle.
Companies under Rockefeller control include Exxon Mobil, Chevron Texaco, BP Amoco, Marathon Oil, Freeport McMoran, Quaker Oats, ASARCO, United, Delta, Northwest, ITT, International Harvester, Xerox, Boeing, Westinghouse, Hewlett-Packard, Honeywell, International Paper, Pfizer, Motorola, Monsanto, Union Carbide and General Foods.
The Rockefeller Foundation has close financial ties to both Ford and Carnegie Foundations. Other family philanthropic endeavors include Rockefeller Brothers Fund, Rockefeller Institute for Medical Research, General Education Board, Rockefeller University and the University of Chicago- which churns out a steady stream of far right economists as apologists for international capital, including Milton Friedman.
The family owns 30 Rockefeller Plaza, where the national Christmas tree is lighted every year, and Rockefeller Center. David Rockefeller was instrumental in the construction of the World Trade Center towers. The main Rockefeller family home is a hulking complex in upstate New York known as Pocantico Hills. They also own a 32-room 5th Avenue duplex in Manhattan, a mansion in Washington, DC, Monte Sacro Ranch in Venezuela, coffee plantations in Ecuador, several farms in Brazil, an estate at Seal Harbor, Maine and resorts in the Caribbean, Hawaii and Puerto Rico. 
The Dulles and Rockefeller families are cousins. Allen Dulles created the CIA, assisted the Nazis, covered up the Kennedy hit from his Warren Commission perch and struck a deal with the Muslim Brotherhood to create mind-controlled assassins. 
Brother John Foster Dulles presided over the phony Goldman Sachs trusts before the 1929 stock market crash and helped his brother overthrow governments in Iran and Guatemala. Both were Skull & Bones, Council on Foreign Relations (CFR) insiders and 33rd Degree Masons. 
The Rockefellers were instrumental in forming the depopulation-oriented Club of Rome at their family estate in Bellagio, Italy. Their Pocantico Hills estate gave birth to the Trilateral Commission. The family is a major funder of the eugenics movement which spawned Hitler, human cloning and the current DNA obsession in US scientific circles.
John Rockefeller Jr. headed the Population Council until his death.  His namesake son is a Senator from West Virginia. Brother Winthrop Rockefeller was Lieutenant Governor of Arkansas and remains the most powerful man in that state. In an October 1975 interview with Playboy magazine, Vice-President Nelson Rockefeller- who was also Governor of New York- articulated his family’s patronizing worldview, “I am a great believer in planning- economic, social, political, military, total world planning.”
But of all the Rockefeller brothers, it is Trilateral Commission (TC) founder and Chase Manhattan Chairman David who has spearheaded the family’s fascist agenda on a global scale. He defended the Shah of Iran, the South African apartheid regime and the Chilean Pinochet junta. He was the biggest financier of the CFR, the TC and (during the Vietnam War) the Committee for an Effective and Durable Peace in Asia- a contract bonanza for those who made their living off the conflict.
Nixon asked him to be Secretary of Treasury, but Rockefeller declined the job, knowing his power was much greater at the helm of the Chase. Author Gary Allen writes in The Rockefeller File that in 1973, “David Rockefeller met with twenty-seven heads of state, including the rulers of Russia and Red China.”
Following the 1975 Nugan Hand Bank/CIA coup against Australian Prime Minister Gough Whitlam, his British Crown-appointed successor Malcolm Fraser sped to the US, where he met with President Gerald Ford after conferring with David Rockefeller. 
Next Week: Part II: Freemasons & The Bank of the United States
Read the entire article HERE.
May 26, 2011
In a revelation that should surprise no one, lending records of the Federal Reserve Bank of New York released by a March court order show that the Fed made cut-rate emergency loans of up to $30 billion each to major banks in 2008 without informing Congress, shareholders or the American public.
Why did financial officials keep the loans—which were as low as .01 percent at a time when the Fed regularly charged 0.5 percent—a secret? Because the purchasing public might “inaccurately” lose faith in a bank openly seeking assistance, vice president of the New York Fed’s markets group says, in what looks to be a brazen act of Orwellian doublethink. —ARK
By Bob Ivry
May 26, 2011
Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.
The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.
Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.
“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
The Federal Reserve Bank of New York, which oversaw ST OMO, posted aggregate data about the program on its website after each auction, said Jeffrey V. Smith, a New York Fed spokesman. By increasing the availability of short-term financing when private lenders were under pressure, “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses,” he said.
Not in Dodd-Frank
Congress overlooked ST OMO when lawmakers required the central bank to publish its emergency lending data last year under the Dodd-Frank law.
“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.
Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash. Zurich-based Credit Suisse borrowed as much as $45 billion, according to bar graphs that appear on 27 of 29,000 pages the central bank provided to media organizations that sued the Fed Board of Governors for public disclosure.
New York-based Goldman Sachs’s borrowing peaked at about $30 billion, the records show, as did the program’s loans to RBS, based in Edinburgh. Deutsche Bank AG (DBK), Barclays Plc (BARC) and UBS AG (UBSN) each borrowed at least $15 billion, according to the graphs, which reflect deals made by 12 of the 20 eligible banks during the last four months of 2008.
No Exact Amounts
The records don’t provide exact loan amounts for each bank. Smith, the New York Fed spokesman, would not disclose those details. Amounts cited in this article are estimates based on the graphs.
One effect of the program was to spur trading in mortgage- backed securities, said Lou Crandall, chief U.S. economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a research company specializing in Fed operations. The 20 banks — previously designated as primary dealers to trade government securities directly with the New York Fed — posted mortgage securities guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac in exchange for the Fed’s cash.
ST OMO aimed to thaw a frozen short-term funding market and not necessarily to aid individual banks, Crandall said. Still, primary dealers earned spreads by using the program to help customers, such as hedge funds, finance their mortgage securities, he said.
“Spreads vary from one transaction to another,” making any calculation of dealers’ profits on the Fed loans impossible, Crandall said.
The Fed opposed disclosing details of its open market operations because doing so would probably cause borrowers “substantial competitive harm,” according to a March 2009 declaration by Christopher R. Burke, vice president of the New York Fed’s markets group. The declaration is filed in federal court.
Revealing the borrowing “could lead market participants to inaccurately speculate that the primary dealer was having difficulty finding term funding against its collateral in the open market and that the dealer itself must therefore be in financial trouble,” Burke said in opposing a media request for records about the borrowing.
Bidding Interest Rates
The New York Fed conducted 44 ST OMO auctions, from March through December 2008, according to its website. Banks bid the interest rate they were willing to pay for the loans, which had terms of 28 days. That was an expansion of longstanding open- market operations, which offered cash for up to two weeks.
Outstanding ST OMO loans from April 2008 to January 2009 stayed at $80 billion. The average loan amount during that time was $19.4 billion, more than three times the average for the 7 1/2 years prior, according to New York Fed data. By comparison, borrowing from the Fed’s discount window, its main lending program for banks since 1914, peaked at $113.7 billion in October 2008, Fed data show.
In March 2008, ST OMO was “desperately needed,” because of the shaken state of short-term credit markets, said Michael Greenberger, a professor at the University of Maryland School of Law in Baltimore and former director of the division of markets and trading at the Commodities Futures Trading Commission. After the Fed created other lending mechanisms and the Treasury Department began distributing money from the Troubled Asset Relief Program in October, ST OMO became “just a way for banks to have at it,” he said.
“At such low interest rates, it’s no longer a rescue, it’s a profit-making enterprise,” Greenberger said. “By December, a lot of money was made off this program.”
Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent.
Stephen Cohen, a spokesman for Goldman Sachs, declined to comment.
As its ST OMO loans peaked in December 2008, Goldman Sachs’s borrowing from other Fed facilities topped out at $43.5 billion, the 15th highest peak of all banks assisted by the Fed, according to data compiled by Bloomberg. That month, the bank’s Fixed Income, Currencies and Commodities trading unit lost $320 million, according to a May 6, 2009, regulatory filing.
Under ST OMO, cash changed hands through repos, or repurchase agreements, which the central bank has used to move money in and out of the banking system for at least 60 years. In a repo, the dealer sells securities to the Fed and agrees to buy them back for a higher price after a set period of time.
Open-market operations traditionally use repos to influence the federal funds rate, which is banks’ cost of short-term borrowing, said Sherrill Shaffer, the officer in charge of the discount window at the Federal Reserve Bank of Philadelphia from 1994 to 1997. He’s now a banking professor at the University of Wyoming in Laramie.
When the central bank increases the money supply — by paying cash for securities in repos — interest rates tend to fall. When it drains cash from the system by selling securities in reverse repos, rates can climb.
Pedal to Metal
Using repos to provide emergency cash, a step the Fed announced on March 7, 2008, was a departure from that process, said John H. Cochrane, a finance professor at the University of Chicago Booth School of Business.
“The Fed was slamming the pedal to the metal in the lender-of-last-resort category,” Cochrane said. “What they did was so far from what we conventionally think of as monetary policy.”
Credit Suisse’s borrowing peaked at about $45 billion in September 2008, the Fed charts show. Steven Vames, a Credit Suisse spokesman in New York, declined to comment.
RBS’s use of ST OMO hit about $30 billion in October 2008. The U.K. government has had a stake in the bank since Oct. 13, 2008. “RBS no longer makes any use of these emergency Federal Reserve lending programs and all money borrowed from the Fed has been repaid in full with interest,” said Michael Geller, a spokesman for RBS Global Banking & Markets in Stamford, Connecticut.
Frankfurt-based Deutsche Bank’s use peaked at about $20 billion in October 2008, its chart shows. The bank had 87 billion euros ($122 billion) in repurchase agreements with all central banks as of the end of 2008, according to its annual report. John Gallagher, a bank spokesman, declined to comment.
London-based Barclays’s peak reached about $20 billion in December 2008, the chart said. Mark Lane, a Barclays spokesman, declined to comment.
UBS, based in Zurich, borrowed as much as about $15 billion in late 2008, the chart shows.
“UBS’s usage of those facilities should be seen in the context of our overall desire to maintain flexibility and diversification in our funding sources, even during the crisis,” said Kelly Smith, a spokeswoman for UBS in New York. “Given UBS’s substantial presence and commitment to U.S. dollar-denominated markets, utilization of such facilities was relatively modest.”
Other banks listed in the Fed charts borrowed less than their peers. New York-based Morgan Stanley (MS) and Paris-based BNP Paribas (BNP), France’s biggest bank by assets, took no more than about $10 billion. Citigroup Inc. (C), JPMorgan Chase & Co. and Merrill Lynch & Co., which is now part of Bank of America Corp. (BAC), borrowed less than $5 billion each.
Mary Claire Delaney, a spokeswoman for Morgan Stanley, Jon Diat, a Citigroup spokesman in New York, Howard Opinsky, a spokesman for New York-based JPMorgan Chase, and Megan Stinson, a spokeswoman in New York for BNP Paribas, declined to comment on their banks’ borrowings.
“Look at it in hindsight and these programs did exactly what they were intended to do — stabilize the financial system, provide liquidity and instill confidence,” said Jerry Dubrowski, a spokesman for Charlotte, North Carolina-based Bank of America.
The bar charts were included in the Fed’s court-ordered March 31 disclosure under the Freedom of Information Act. The release was mandated after the U.S. Supreme Court rejected an industry group’s attempt to block it. Bloomberg LP, the parent company of Bloomberg News, and News Corp. (NWS)’s Fox News Network LLC had sued the central bank after it refused to release lending records under the FOIA.
Read the entire article HERE.
Read the original blog post HERE.
By Lauren Tara LaCapra
NEW YORK | Fri May 20, 2011 6:15pm EDT
The U.S. government has a real chance of finding inconsistencies between Goldman executives’ testimony to Congress and their internal documents, which means subpoenas could turn into something more serious, lawyers said.
The distractions and the reputational damage from any government action could result in clients hesitating to work with the bank.
There’s no evidence of that happening, but it is a risk. Even if the expected subpoenas turn up nothing, they reflect growing political pressure for the United States to do something — anything — to punish Goldman for the events of the financial crisis, experts said.
“Goldman is extremely vulnerable,” says Harvey Silverglate, an attorney who represented Michael Milken after the junk-bond king pleaded guilty to felony charges in 1990. “The statutes are so vague, a reasonably good prosecutor or a reasonably inventive prosecutor can manage to squeeze anything that might not look so great into a federal felony.”
For Goldman, there is a lot that does not look great.
A Senate subcommittee report in April said the bank offloaded much of its subprime mortgage exposure to unsuspecting clients in late 2006 and 2007 as the market was starting to tank. In some cases, it refused to end bad trades with customers, even as clients pressed them to.
Levin forwarded the report to the Department of Justice, and on Friday, the Wall Street Journal reported that Goldman executives expect the Justice Department to issue subpoenas for more information about mortgage-related matters.
Goldman Sachs spokesman David Wells declined to comment. At the time the Levin report was released, Goldman said, “While we disagree with many of the conclusions of the report, we take seriously the issues explored by the subcommittee.”
A key question as Justice Department prosecutors review Levin’s report will be whether they believe they can prove criminal violations beyond a reasonable doubt.
The Obama administration has had some trouble prosecuting senior corporate executives with ties to the housing meltdown. Prosecutors dropped a probe of former Countrywide Financial CEO Angelo Mozilo after determining his actions did not amount to criminal wrongdoing.
Justice also failed to win criminal prosecutions against two former Bear Stearns executives in 2009.
Two attorneys whose firms are involved in civil litigation against Goldman said that there wasn’t enough evidence for a criminal case.
“Prosecutors have been pretty careful not to indict someone unless they have the Raj Rajaratnam wire-tap smoking gun,” said one lawyer, who declined to be identified to avoid hurting his client’s case. “I’m not sure they have it here.”
Justice Department spokeswoman Alisa Finelli declined to comment about Goldman or political pressure on the agency.
Whether or not they believe the evidence unveiled so far warrants a criminal case, lawyers say the Justice Department may take some sort of legal action simply to send a message.
One former federal prosecutor said that the Justice Department might avoid pressing charges against the bank.
“Nobody wants to bring down Goldman,” said the former prosecutor, who declined to speak on the record because of current business relationships.
But pressing lesser charges against Goldman Sachs officials might make sense, he said.
“It’s going to send a message to the rest of the community that you can’t do this kind of activity.”
Prosecutors may seize on the difference between what executives said in front of lawmakers at a hearing last spring and what they said in email messages or other documents when the financial crisis was brewing.
In testimony to the Senate subcommittee in April 2010, Chief Executive Lloyd Blankfein said, “we didn’t have a massive short against the housing market and we certainly did not bet against our clients.”
The subcommittee report said the opposite on both of those crucial points, contending that Goldman’s denials “are not credible.”
Levin said that generally, in his estimation, “Goldman clearly misled their clients and they misled Congress.”
In a chart, the subcommittee shows Goldman holding short positions of $1.5 billion to $13 billion through most of 2007.
Blankfein also said that Goldman lost about $1.2 billion from activities in the residential housing market, while the subcommittee contends it actually earned money.
A Goldman spokesman said at the time of the report’s release that the testimony was “truthful and accurate.”
It’s unclear how prosecutors will interpret those discrepancies and turns of phrase.
The Department of Justice probe is the latest in a series of inquiries and investigations into Goldman. The bank paid $550 million last year to settle civil fraud charges with the U.S. Securities and Exchange Commission over a complicated derivatives deal.
The bank did not admit to any wrongdoing as part of that settlement, but acknowledged a “mistake.” The Commodity Futures Trading Commission is investigating a Goldman unit, and staffers have told Goldman they intend to recommend the commission bring charges, according to the company’s most recently quarterly filing with regulators.
A BELLY WOUND
In aggregate, this kind of political pressure is poisonous to a bank, experts said.
Peter Vinella, a director at the consulting firm Berkeley Research Group who specializes in bonds and derivatives, held a senior management position at Drexel Burnham Lambert before its collapse.
Vinella cautions that he does not think Goldman will go out of business, but said the high-profile accusations of dishonesty and double-dealing can wear on a bank’s reputation.
He compares the Goldman situation to Drexel’s downfall, which happened over a period of four years. Prosecutors first targeted individual employees in 1986. The Securities and Exchange Commission eventually sued the company and the Department of Justice settled felony charges with the firm. Drexel filed for bankruptcy in February 1990.
“What happens in these kinds of instances is usually not immediate,” says Vinella. “It’s usually this kind of slow, agonizing, belly-wound death.”
Eventually, he said, public officials, wealthy clients and talented employees no longer want to be associated with a bank that has garnered so much negative attention. As talented employees leave, clients who once flocked to Goldman for advice on major deals or to obtain financing may no longer see the cachet.
Veteran banking analyst Richard Bove of Rochdale Securities wrote in a note last week that the likelihood for the U.S. and Goldman to keep fighting “does not work for shareholders.” He downgraded the bank’s shares to “sell” from “neutral.”
According to Thomson Reuters data, 19 other analysts advise clients to buy the stock.
Some Goldman customers that spoke with Reuters said they plan to continue doing business with the bank if only to get access to information and attractive deals.
But there are signs that Goldman’s stature is waning, including its absence in some of the larger M&A transactions this year and its declines in trading revenue. Since the subcommittee report was released, Goldman’s stock has shed 13 percent, representing $10.8 billion in market value.
Said former Drexel executive Vinella, “You want to get bad news over with as quickly as possible and, with Goldman, we’re now almost into year three.”