Goldman's Blankfein gets grilled

[Valuist]

By some incompetent politicians. They are actually making Blankfein look like a sympathetic figure. The guy from Arkansas didn't even know what a "market maker" was. Blankfein had to explain things to him this guy clearly wasn't prepared for. Another politico is asking him about the AIG money. Yes, Goldman was a counterparty who benefitted from AIG getting bailed out. But who dropped the ball? How about Hank Paulson, who should've went to Goldman and the other counterparties and told them they'd have to take $0.50 on the dollar, and not be "made whole". But they didn't do that and GS was paid back in full. What were they going to do, turn it down? The politicians aren't helping their cause here.

[lamboguy]

By some incompetent politicians. They are actually making Blankfein look like a sympathetic figure. The guy from Arkansas didn't even know what a "market maker" was. Blankfein had to explain things to him this guy clearly wasn't prepared for. Another politico is asking him about the AIG money. Yes, Goldman was a counterparty who benefitted from AIG getting bailed out. But who dropped the ball? How about Hank Paulson, who should've went to Goldman and the other counterparties and told them they'd have to take $0.50 on the dollar, and not be "made whole". But they didn't do that and GS was paid back in full. What were they going to do, turn it down? The politicians aren't helping their cause here.
they got license to pick your pockets. and after they steal your money they arbitrate with the IRS the amount they pay in taxes. a couple of quarters back they claimed they made moenyh trading 89 out of 90 days. that is the equivilent of you cold conking 89 out of 90 exactas. who is kidding who here? that is exaduration either.

[ArlJim78]

its so phony, a total show trial.

congress should be the ones on trial. they have enabled all of the disasters we have faced.

[lamboguy]

its so phony, a total show trial.

congress should be the ones on trial. they have enabled all of the disasters we have faced.now that i think about it you are right. if you stole like these banks have stolen without guns, you would they would have handed you between 5 and 10 years behind a medium security federal correctional facility. all these guys do is hand back a few dollars that they stole to begin with and go on and do their merry business again. now you know why kids are so screwed up today.

[Valuist]

now that i think about it you are right. if you stole like these banks have stolen without guns, you would they would have handed you between 5 and 10 years behind a medium security federal correctional facility. all these guys do is hand back a few dollars that they stole to begin with and go on and do their merry business again. now you know why kids are so screwed up today.

They made it sound that Goldman was the CAUSE of the housing crisis, which is ridiculous. These derivatives weren't being sold to little old ladies or Joe the Plumber; nobody ever held a gun to anyone's head to make any trade, or take the opposite side of a Goldman trade. Everybody knows they are the best traders on the Street.

[prospector]

i'd rather see all the fannie and freddie personel in front of congress..including franks and dodd and other members who went along for the ride..
how many ex-goldman people now work for the government? we're not all stupid..just most of us..

[Tom]

The derivatives market nearly melted down back during Clinton. All these years later, still nothing have been done. Our government has been a failure for decades. A big thanks to the moron Greenspan for this. That guy should be on trial.

[JustRalph]

it was like watching the prison guard who left the gate open chastising the prisoner who slipped out and committed a murder

[Robert Goren]

You would think these days, the banks would hire better liars as their CEOs. The salesmen who did the actual selling must have been a lot better. I haven't talk to one person who saw any part of that circus that believed one word that came out of any of the Goldman people. If you did, would please list words on this forum. I am sure that it could not take up more than one line. JMO

[bigmack]

Just so we have a level playing field can we get Barn & Chris to testify as well?

http://i165.photobucket.com/albums/u70/macktime/nii.jpg http://i165.photobucket.com/albums/u70/macktime/cd.jpg

[slewis]

The derivatives market nearly melted down back during Clinton. All these years later, still nothing have been done. Our government has been a failure for decades. A big thanks to the moron Greenspan for this. That guy should be on trial.

Why dont you show us proof how the Derivative market almost melted down under Clinton???

Dont waste your time trying because your statement holds NO truth. (A nice way of me saying your full of shit)
I started trading these things when they 1st came to market... BEFORE the investment banks were even in the game.....

Secondly, the reason why they took off was because they were completely unregulated and were an off balance sheet instrument..
(go and research "off balance sheet bank trading instruments")

You blame Greenspan but he had no say as they were not required to be reported to the fed (or any other central bank regulator).

It's so easy catching the right wingers with their pants down.....

Now get together with Arl...Bigmack...Lefty....etc....and go over this post with a fine toothed comb to find grammatical errors......

It's about all you've got....


Just remember guys....what you lot know about racing...I forgot last Tuesday evening......

and what you know about the banking and the economy.....last Tuesday Eve between 8 & 10 PM.

[slewis]

By some incompetent politicians. They are actually making Blankfein look like a sympathetic figure. The guy from Arkansas didn't even know what a "market maker" was. Blankfein had to explain things to him this guy clearly wasn't prepared for. Another politico is asking him about the AIG money. Yes, Goldman was a counterparty who benefitted from AIG getting bailed out. But who dropped the ball? How about Hank Paulson, who should've went to Goldman and the other counterparties and told them they'd have to take $0.50 on the dollar, and not be "made whole". But they didn't do that and GS was paid back in full. What were they going to do, turn it down? The politicians aren't helping their cause here.

Really?? Accept 50 cents on the dollar??? All counterparties??? Do you have any idea how many times a derivative contract can be hedged??
How's about hedging against other instruments..including on balance sheet trades???
So your going to tell Deutche bank AG that you are not sticking to the contract and they get 50 cents on the dollar?? Really???
and you are an expert in German law I presume?? What if German law allows the seizure of all and any American assets in a case like this....even assets that are not related to Goldman or Aig???

You people have NO clue how complex and dangerous this situation was.

Yes Goldman should not have come out smelling like the rose they did in this.....but to tell ALL counteerparties.."tough shit...50cents on the dollar..OR better yet...bankruptcy" was NOT an option.

For two weeks the world currency markets came to a halt....you would have possibly run the risk of extreme measures....maybe even world war.

[bigmack]

Just remember guys....what you lot know about racing...I forgot last Tuesday evening......

and what you know about the banking and the economy.....last Tuesday Eve between 8 & 10 PM.
I've heard good things about you in the real world. From what I gather you're a bit green with this online thing.

Lighten-up. If you don't get overly instructive, you'll find a more pleasant environ.

You have recognizable insight. Don't bitch it up by being the aforementioned. :rolleyes:

http://i165.photobucket.com/albums/u70/macktime/welcome.gif

[ArlJim78]

Really?? Accept 50 cents on the dollar??? All counterparties??? Do you have any idea how many times a derivative contract can be hedged??
How's about hedging against other instruments..including on balance sheet trades???
So your going to tell Deutche bank AG that you are not sticking to the contract and they get 50 cents on the dollar?? Really???
and you are an expert in German law I presume?? What if German law allows the seizure of all and any American assets in a case like this....even assets that are not related to Goldman or Aig???

You people have NO clue how complex and dangerous this situation was.

Yes Goldman should not have come out smelling like the rose they did in this.....but to tell ALL counteerparties.."tough shit...50cents on the dollar..OR better yet...bankruptcy" was NOT an option.

For two weeks the world currency markets came to a halt....you would have possibly run the risk of extreme measures....maybe even world war.
That's a great story, and you tell it so enthusiastically.

[Tom]

Why dont you show us proof how the Derivative market almost melted down under Clinton???

Dont waste your time trying because your statement holds NO truth. (A nice way of me saying your full of shit)



Well, tell that to Frontline - they had a very informative show about it not too long ago. I may still have it on tape. And it was on a liberal network! :rolleyes:
Full of it, huh? I think Frontline has more credibility than a track shill.

[lamboguy]

The derivatives market nearly melted down back during Clinton. All these years later, still nothing have been done. Our government has been a failure for decades. A big thanks to the moron Greenspan for this. That guy should be on trial.
it was actually gone before it got to clinton, it started to go during bush senior

[lamboguy]

Why dont you show us proof how the Derivative market almost melted down under Clinton???

Dont waste your time trying because your statement holds NO truth. (A nice way of me saying your full of shit)
I started trading these things when they 1st came to market... BEFORE the investment banks were even in the game.....

Secondly, the reason why they took off was because they were completely unregulated and were an off balance sheet instrument..
(go and research "off balance sheet bank trading instruments")

You blame Greenspan but he had no say as they were not required to be reported to the fed (or any other central bank regulator).

It's so easy catching the right wingers with their pants down.....

Now get together with Arl...Bigmack...Lefty....etc....and go over this post with a fine toothed comb to find grammatical errors......

It's about all you've got....


Just remember guys....what you lot know about racing...I forgot last Tuesday evening......

and what you know about the banking and the economy.....last Tuesday Eve between 8 & 10 PM.
i knew MYRON SCHOALES, the brain behind long term capital. FISHER BLACK used to come over my house with his 2 daughters to go swimming in my pool. SCHOALES used to tell me he had a scam to beat the markets, a guy that has a chair at stanford, those 2 guys were responsebile for the black schoales volitility theory for the priceing of modern day options, aka derivatives. that is where this stuff all started. tom happens to think that all the problems that this country has comes from democratic rule. he is only half right, the other half comes from the republicans.
i understand how all these rightwingers hit a nerve. they seem to have very short memories.

[lamboguy]

i have a question, how come the rating agency's like standard and poor's and moody's don't get any heat from these deals. they rated the stuff AAA. if you can't trust the messagenger, how can you trust the message?

[Valuist]

Really?? Accept 50 cents on the dollar??? All counterparties??? Do you have any idea how many times a derivative contract can be hedged??
How's about hedging against other instruments..including on balance sheet trades???
So your going to tell Deutche bank AG that you are not sticking to the contract and they get 50 cents on the dollar?? Really???
and you are an expert in German law I presume?? What if German law allows the seizure of all and any American assets in a case like this....even assets that are not related to Goldman or Aig???

You people have NO clue how complex and dangerous this situation was.

Yes Goldman should not have come out smelling like the rose they did in this.....but to tell ALL counteerparties.."tough shit...50cents on the dollar..OR better yet...bankruptcy" was NOT an option.

For two weeks the world currency markets came to a halt....you would have possibly run the risk of extreme measures....maybe even world war.

If AIG went under, all the counterparties would've gotten NOTHING! Is $0.50 on the dollar better than nothing? Of course it is. I don't give a $hit how many times its hedged, Goldman, Deutsche Bank and the other major counterparties would've accepted it.

[ArlJim78]

i knew MYRON SCHOALES, the brain behind long term capital. FISHER BLACK used to come over my house with his 2 daughters to go swimming in my pool. SCHOALES used to tell me he had a scam to beat the markets, a guy that has a chair at stanford, those 2 guys were responsebile for the black schoales volitility theory for the priceing of modern day options, aka derivatives. that is where this stuff all started. tom happens to think that all the problems that this country has comes from democratic rule. he is only half right, the other half comes from the republicans.
i understand how all these rightwingers hit a nerve. they seem to have very short memories.
I'm trying to follow this, so it's because Fischer Blacks daughters swam in your pool that you don't have a short memory like right wingers?

[slewis]

i knew MYRON SCHOALES, the brain behind long term capital. FISHER BLACK used to come over my house with his 2 daughters to go swimming in my pool. SCHOALES used to tell me he had a scam to beat the markets, a guy that has a chair at stanford, those 2 guys were responsebile for the black schoales volitility theory for the priceing of modern day options, aka derivatives. that is where this stuff all started. tom happens to think that all the problems that this country has comes from democratic rule. he is only half right, the other half comes from the republicans.
i understand how all these rightwingers hit a nerve. they seem to have very short memories.Y

Well, a derivative is not an option and although there have been very intelligent and sophisticated math/financial whizzes that have developed strategies to eliminate risk and lock in profit (usually by arbing several trades in various markets)... once traders figure whats taking place they adjust pricing and that ends that.
BUT....the scenario (or similar) you've been made light of can possibly exist.

There was one very big bank in NY that was light years ahead of others in their pricing of Currency FRA's (a short term derivative) and for 2 or 3 years no one could figure how they were and what they were doing..... they cleaned up in that period.... Once someone figured the sophisticated model they engineered, the markets corrected themselves.
That institution at that point stopped trading that particular instrument and moved to (or tried) to something else.
BUT..it's not as simple as your friend suggested.

[lamboguy]

Y

Well, a derivative is not an option and although there have been very intelligent and sophisticated math/financial whizzes that have developed strategies to eliminate risk and lock in profit (usually by arbing several trades in various markets)... once traders figure whats taking place they adjust pricing and that ends that.
BUT....the scenario (or similar) you've been made light of can possibly exist.

There was one very big bank in NY that was light years ahead of others in their pricing of Currency FRA's (a short term derivative) and for 2 or 3 years no one could figure how they were and what they were doing..... they cleaned up in that period.... Once someone figured the sophisticated model they engineered, the markets corrected themselves.
That institution at that point stopped trading that particular instrument and moved to (or tried) to something else.
BUT..it's not as simple as your friend suggested.
not that this means anything, but Fisher Black was an economics pofessor at Sloan school of business and went to work for Goldman Sachs about 24 years ago to apply his options volitility theory to their trading programs at the time. i am not argueing with anything you have said here, and someone just just pm'd me to tell me who you are. as far as i can see you are top notch in the racing game, you hire good trainers and develop real good overachieving the development of babies. i am sure that your financial knowledge is just as sound as your top notch racing stable indicates. as far as horserace ownership i take a big back seat to your ability's, you make very few mistakes that i can see unlike myself. maybe you don't tolerate mistakes.

[slewis]

If AIG went under, all the counterparties would've gotten NOTHING! Is $0.50 on the dollar better than nothing? Of course it is. I don't give a $hit how many times its hedged, Goldman, Deut sche Bank and the other major counterparties would've accepted it.

Ok value,

As gentlemen, we'll agree to disagree. But let me point out that some instruments are hedged against 5, 10 20 year settlements.... Accepting a 50 cent on the dollar settlement possibly leaves exposure that is astonomical...

Example:

What happens if I hedged long term interest rates against a rise, and, through a derivative, lent to AIG at 9% maturing in 2020.
what do I do now? Who's going to pay me 9% for a 10 yr rate??

i might have stripped that out in 10 different hedges...many of which have moved against me.... instead of being "square"...I'm Fked...BIG TIME.

What Im trying to point out here is that since we now trade in a global banking market....(and have for 40 years and growing) with LONDON being the center...the complexities are ASTRONOMICAL.....
You would have had spikes in global banking rates and world economic collapse. (you see in the USA how if rates go up people cant pay mortgages and businesses cant get credit...you'd have this throughout the world.)

You've heard Geittner testify to this on cap hill...and although shit does come out of his and other mouths...this was one point they weren't bluffing on.

That's why when Bush was pres and this all went down..both dims and repugs all went along..and thank god they made the right choice. Especially since few of them know much about how this trading goes down.

[slewis]

Well, tell that to Frontline - they had a very informative show about it not too long ago. I may still have it on tape. And it was on a liberal network! :rolleyes:
Full of it, huh? I think Frontline has more credibility than a track shill.

If thats the case Tom, please accept my apology...But i would love to get my hands on a transcript of the show because they are either very mistaken or you misunderstood what they were saying....and dont take offense to that....I didn't know at first what a credit default swap was until I read what they were doing.
And like I said, I started trading these things (derivative swaps) when they first came out....and AIG was my most annoyinng and hated counterparty.

To show how snooty they are, their trading operations were based in Greenwich, CT., not down on Wall street like everyone else.

[bigmack]

But i would love to get my hands on a transcript of the show because they are either very mistaken or you misunderstood what they were saying....
http://i165.photobucket.com/albums/u70/macktime/4_28_10_06_51_56.png

Watch episode here:
http://www.pbs.org/wgbh/pages/frontline/warning/view/

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

[Robert Goren]

Fisher Black's theories work for a long time. Then in 2006 they stopped working. They stopped working because people began to manipulate the the numbers so the numbers that you would put in to Black's famous formula were not real. JMO

[slewis]

not that this means anything, but Fisher Black was an economics pofessor at Sloan school of business and went to work for Goldman Sachs about 24 years ago to apply his options volitility theory to their trading programs at the time. i am not argueing with anything you have said here, and someone just just pm'd me to tell me who you are. as far as i can see you are top notch in the racing game, you hire good trainers and develop real good overachieving the development of babies. i am sure that your financial knowledge is just as sound as your top notch racing stable indicates. as far as horserace ownership i take a big back seat to your ability's, you make very few mistakes that i can see unlike myself. maybe you don't tolerate mistakes.

NOt to deviate from the thread but thank you....But honestly, it's a team effort and we've put that together... From the farm, training management and financial aspect, nothing would be possible without good teamwork.
Egos play a big role in failure in this game...and a good team avoids that.

I am fortunate to be a part of this team and play my role.....and have recently offered my services to other owners who've seen our results.

[lamboguy]

Fisher Black's theories work for a long time. Then in 2006 they stopped working. They stopped working because people began to manipulate the the numbers so the numbers that you would put in to Black's famous formula were not real. JMOthat is true of anything in the market. Scholes got the nobel prize for economics for this volitility theory. i am almost positive that the credit default swaps were based on the Black and Schoales models.

Fisher Black died about 10 years ago. he was divorced when he came to my pool with his 2 kids, Ashley and Page. he was a nerd and my x-wife would teach him how to behave on a date.

[slewis]

http://i165.photobucket.com/albums/u70/macktime/4_28_10_06_51_56.png

Watch episode here:
http://www.pbs.org/wgbh/pages/frontline/warning/view/

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"


Ok Mack....this is good work and the first time I've seen this....

Now let me explain what took place...
Derivatives were taking a HUGE chunk out of the futures commodity game. They were giving banks and institutuions a way of "gambling" (or investing and speculating) without the CFTC regulations.
OF COURSE THEY ARE GOING TO SCREAM...AND LOUD THEY SCREAMED.

But it was NOT the derivatives that are the evil product here...

Let me give an example.....lets say insurance co's were not regulated.
Lets take for example, Florida, a high risk hurricane state.
I'm an insurance executive and run a solid company. I write policys according to actuarial stats and look to turn a profit while having proper reserves in case of disatser and claims. I'm responsible and make prudent decisions with company funds.....Then another guy, down the street has a small ins. co and
he wants to be big like me...but instead of working his way up the ranks and running a prudent operation...he writes tons and tons of policies and brags at lunch at the local watering hole..'aww, dont worry, a hurricane aint gonna hit".

Well this is what AIG did...It's NOT the derivative .... it's the fool NOT making prudent decisions that put a firm at enormous risk.
All for the sake of making BIG BIG money in a short period of time...

What Greenspan (and many others, right or left) mean by "the markets will take care of themselves" is exactly that..providing the ones pulling the strings are acting in a responsible manner.....
BUT..the thinking on Wall st has become one of GREED GREED GREED as opposed to responsible risk and resonable profit which is why I shouted that those at Goldman and AIG who embarked on this behavior should face jail time. They KNEW the risks but choose to rake in profits.....just like the young insurance exec writing policies...

It's not the Derivative or the Insurance policy that's really the problem here.

[Robert Goren]

I read a book on Fisher Black a few years ago. Interesting Guy. As for Schoale's Nobel prize, I agree with the people who believe that economics is not a true science. I put that Nobel prize for economics in with the peace prize. It is all about politics. Look at who won them last year. I was amused by Black detractors' famous phrase " Fisher Black and his Amazing Technicolor Formula" JMO

[Robert Goren]

Ok Mack....this is good work and the first time I've seen this....

Now let me explain what took place...
Derivatives were taking a HUGE chunk out of the futures commodity game. They were giving banks and institutuions a way of "gambling" (or investing and speculating) without the CFTC regulations.
OF COURSE THEY ARE GOING TO SCREAM...AND LOUD THEY SCREAMED.

But it was NOT the derivatives that are the evil product here...

Let me give an example.....lets say insurance co's were not regulated.
Lets take for example, Florida, a high risk hurricane state.
I'm an insurance executive and run a solid company. I write policys according to actuarial stats and look to turn a profit while having proper reserves in case of disatser and claims. I'm responsible and make prudent decisions with company funds.....Then another guy, down the street has a small ins. co and
he wants to be big like me...but instead of working his way up the ranks and running a prudent operation...he writes tons and tons of policies and brags at lunch at the local watering hole..'aww, dont worry, a hurricane aint gonna hit".

Well this is what AIG did...It's NOT the derivative .... it's the fool NOT making prudent decisions that put a firm at enormous risk.
All for the sake of making BIG BIG money in a short period of time...

What Greenspan (and many others, right or left) mean by "the markets will take care of themselves" is exactly that..providing the ones pulling the strings are acting in a responsible manner.....
BUT..the thinking on Wall st has become one of GREED GREED GREED as opposed to responsible risk and resonable profit which is why I shouted that those at Goldman and AIG who embarked on this behavior should face jail time. They KNEW the risks but choose to rake in profits.....just like the young insurance exec writing policies...

It's not the Derivative or the Insurance policy that's really the problem here. It is when the tax payers have bail the underwriter. Unlike real insurance, Derivatives all go bad at the same time. No company can be large enough to handle that. Besides that their reserves are invested in things that will go bad at the same the Derivatives. It be like your insurance company that sold hurricane insurance invested their reserves in real estate in the areas they sold the insurance for. It is a scheme that can possibly work. JMO

[bigmack]

It's not the Derivative or the Insurance policy that's really the problem here.
When you have a climate where each derivative is supported by yet another derivative and each of them lean on each other with no small measure of volatility within each, isn't that a problem given the risk of a downturn and one affecting the other in such a cancerous fashion?

[ArlJim78]

the greedy people were bailed out because they had friends in government who claimed that they were too big to fail, end of the world, armageddon, world war three, etc ,etc. the greed was wrong, but so was using fear to bail out their cronies. they should have failed, but now we have to watch this dog and pony show. yes they were greedy and stupid, but that is all the more reason to have let them get flushed. you'd be surprised how different they would behave if they knew that under no circumstance would there ever again be a public bailout. as long as we reward the stupid and the greedy we will not have fixed anything.

[slewis]

the greedy people were bailed out because they had friends in government who claimed that they were too big to fail, end of the world, armageddon, world war three, etc ,etc. the greed was wrong, but so was using fear to bail out their cronies. they should have failed, but now we have to watch this dog and pony show. yes they were greedy and stupid, but that is all the more reason to have let them get flushed. you'd be surprised how different they would behave if they knew that under no circumstance would there ever again be a public bailout. as long as we reward the stupid and the greedy we will not have fixed anything.

It's actually a refreshing change to agree with you guys for a change....

If you dont think we would have been headed for world castrophe...that's ok...you may have been correct... I disagree...
But we most certainly agree that the 'friends in high places" scenario should never have taken place....and now that things have been stabilized, the US govt should have had their lawyers write into the language of the bailout that at any time over the next 5 yrs, the senate contols all employment and salaries.... At this point the govt should legislate and clean house and anyone who was involved in the original scenario barred from the banking industry forever.

To see these guys survive this only to rack in millions today in my book is un-American and a slap in the face too its people.

[slewis]

When you have a climate where each derivative is supported by yet another derivative and each of them lean on each other with no small measure of volatility within each, isn't that a problem given the risk of a downturn and one affecting the other in such a cancerous fashion?

Problem mack is that it's not just one derivative vs another.... often its derivatives, an off balance sheet product, hedged against ON BALANCE sheet trading....which really becomes nightmare-ish...For example, some of the trades i might have been part of in 1995 might not have rolled off yet (I did a 20 yr deal only a few times) ..but they do exist....Think about the time elapsed from 1995 and all the complex trades done back 10 and 15 years...it's scary....some wont settle till Libors are set in 2015!!!

The point I'm driving home...and please dont misunderstand, is that NO ONE on the planet knew what the doomsday outcome might be.(or if).
I wont pretend I do, cause I dont....

What I'd like you to accept is that you are hearing the inside from someone who played this complicated game...so you can better understand why Washington made the decisions they did.... believe me..I'd have loved to see them all crumble.....but it wasn't realistically an option.

[ArlJim78]

It's actually a refreshing change to agree with you guys for a change....

If you dont think we would have been headed for world castrophe...that's ok...you may have been correct... I disagree...
But we most certainly agree that the 'friends in high places" scenario should never have taken place....and now that things have been stabilized, the US govt should have had their lawyers write into the language of the bailout that at any time over the next 5 yrs, the senate contols all employment and salaries.... At this point the govt should legislate and clean house and anyone who was involved in the original scenario barred from the banking industry forever.

To see these guys survive this only to rack in millions today in my book is un-American and a slap in the face too its people.
I wholeheartedly agree. It's a crime that the same ones are still in place, running the same scams most likely.

[bigmack]

Good stuff, appreciate the insight Slewis.

This civility is infectious.

http://i165.photobucket.com/albums/u70/macktime/securedownload.gif

[Robert Goren]

Problem mack is that it's not just one derivative vs another.... often its derivatives, an off balance sheet product, hedged against ON BALANCE sheet trading....which really becomes nightmare-ish...For example, some of the trades i might have been part of in 1995 might not have rolled off yet (I did a 20 yr deal only a few times) ..but they do exist....Think about the time elapsed from 1995 and all the complex trades done back 10 and 15 years...it's scary....some wont settle till Libors are set in 2015!!!

The point I'm driving home...and please dont misunderstand, is that NO ONE on the planet knew what the doomsday outcome might be.(or if).
I wont pretend I do, cause I dont....

What I'd like you to accept is that you are hearing the inside from someone who played this complicated game...so you can better understand why Washington made the decisions they did.... believe me..I'd have loved to see them all crumble.....but it wasn't realistically an option. My dad used to say "If they can't explain it in plain English, then it is crooked." I have seen nothing to make me think he was wrong.

[ddog]

Look,, it can be made complicated , but at the core of the mess is this....

There are needs in an economy for a "banking function" and there are needs for a "trading function".

However, there is not a need in our system for a hybrid of the two under one "house". You will have people say that will disadvantage us and firms will all move overseas. Hogwash, they need access to this market and this market can certainly control who has access to it.

The fact that the big boys who were bailed still have backing of the FED is a joke. At this time they should be pushed off the Fed tit and fend for themselves. Bring back parts of the G/S act phased in over 2 years and move ALL derivatives to a central clearing market and get it done NOW.

You can't handle the conflicts that arise and even the perception of conflicts that smell to the outside "mort" make the system tend toward fraud and worse.


Greenspan, CLinton, Bush,Rubin,Dodd,LEVIN and at least half or more of the current political/financial crowd way back in 1991 and since have pushed for exactly the opposite kind of system. They pushed to have wide open in the dark gambling deals with nothing to back up the deals.

It's FUNNY how Goldman and all like to paint the "morts" who did liar loans as the problem when IN FACT , lots of the "deals" they were buying insurance on or SELLING were just as much a liar deal in that the party on one side or the other HAD NO ABILITY TO PERFORM the contract in full.
Thus taxpayer bailout city.

It is exactly as Mccaskil stated in the hearing,gambling with Goldman(and others) playing the bookie role, but besides getting "to even" they got to rig some of the games that were being bet on by both parties . They payed off the refs (the ratings agencies) to approve the rules they wanted to play under.
Of course if anything blew up in their faces, well when you hold 60-65% of gdp on your books, well, let's just say I have yet to see the POTUS who would say, let it burn baby.

Of course Mr. Paulson(treas sec) getting the leverage limits lifted from 14-1 to 40-50/1 right in teeth of the storm didn't help.

In the course of time, if we have some people with the guts and money, there will be or should be criminal trials out of this all the way up to Geithner and Paulson.

I suspect due to the patriot act provision of immunity due to financial emergency they may have get of jail free cards. Interesting to see the trials anyway.


By the way, the whole rotten system is still in play. The problem we saw will be seen again in other "protections" unless we get a full on debt collapse of EU countries.

I wonder who is short the debt of those countries..........hmmmmmmmmm.

Going to be a hot time in the old town for the next 5-10 years or longer.

Buckle up.

[Robert Goren]

It only gets complicated when they try to hide the thievery. JMO

[riskman]

One solution proposed is to force all derivatives to trade on exchanges; in other words, if it’s too complicated to be standardized and made transparent, it can’t be traded at all.See here which is a preview of the Abacus CDO that is the subject of the GS controversy.
http://www.aleablog.com/abacus-for-dummies/

C.D.O.’s live in the over-the-counter market, where prices are not transparent. It is hard to see how highly illiquid synthetic C.D.O.’s make their underlying securities significantly more liquid. Can someone educate me on this?

[skate]

It's actually a refreshing change to agree with you guys for a change....

If you dont think we would have been headed for world castrophe...that's ok...you may have been correct... I disagree...
But we most certainly agree that the 'friends in high places" scenario should never have taken place....and now that things have been stabilized, the US govt should have had their lawyers write into the language of the bailout that at any time over the next 5 yrs, the senate contols all employment and salaries.... At this point the govt should legislate and clean house and anyone who was involved in the original scenario barred from the banking industry forever.

To see these guys survive this only to rack in millions today in my book is un-American and a slap in the face too its people.


I'm not sure that anyone here said "they didnt think we were headed for a World Catastrophe". Fact, we are experiencing now, that very World Catastrophe.

Who's fault? most everyone is at fault. Buy a house to flip, you're included in the fault.

With Congress being alerted, by Berksley Born (cf ?), more than once, during the late 90s.
And controls being lessen, on banks, the more the problems existed, thru late 90s, thru the 2000s, by congress.
Congress has the control, because they make Law.
With this overhead, the banks will listen to congress. Congress is on record, saying "we want more" in terms of Loans. This pressure was put on Fannie and the Commercial Banks, by Congress, no one else.

I could be wrong, but who is at fault.

Did Fannie or the Banks break law?

To borrow a line, id have to say " to see these guys (Congress) surive this only to rack in millions today in my book is un American and a slap in the face to its People.".

[Valuist]

Here's Peter Schiff's take on the recent Goldman hearings:

http://finance.yahoo.com/tech-ticker/senators-slam-goldman-schiff-slams-senators-%22they-have-some-nerve%22-474946.html;_ylt=Atke256ayHOE3rcQ5Hg0dLdk7ot4;_ylu =X3oDMTE4cGwybDNoBHBvcwMxNDgEc2VjA2FydGljbGVMaXN0B HNsawNzZW5hdG9yc3NsYW0-?tickers=XLF,GS,JPM,MS,BAC,C,FAZ

[slewis]

There is one more thing I'd like to add about Goldman since we're all on a Goldman bashing frenzy...

Let me explain an important aspect of trading that every banker is well aware of and thats EXPOSURE and CREDIT LIMITS.

When I traded with a counterparty, I would inform my credit department who that party was and what the amounts traded were. They gave me limits on how much I could place with any institution depending on that institutions ability to pay back (AAA rating, etc).If my limits were "full" to that counterparty, myself and other traders had to wait until old trades "rolled off" before you could deal with that party again. Very simple, right?
Well, this is where I think the Attorney General would have been able to put Goldman execs behind bars (although I'm not a lawyer and Im not certain what the charges might be). Goldman's exposure to AIG was ridiculously excessive which is why the Goldman execs shit their pants when Aig announced they were bankrupt.
So not only did Goldman execs know of the risks trading an instrument that could go bust, but they were way over exposed to AIG and I guarantee that when traders at Goldman saw traders at AIG in the market, the deals were just done with NO CREDIT CHECKS.
I would love for Mr. Blankfein to answer that one.

There are so many things that went bad here and for americans to have to suffer (there 401k's, housing, jobs, etc) without even an attempt to prosecute ALL the parties is like allowing smoking while pumping gasoline.

Just a disgrace.

[gales0678]

There is one more thing I'd like to add about Goldman since we're all on a Goldman bashing frenzy...

Let me explain an important aspect of trading that every banker is well aware of and thats EXPOSURE and CREDIT LIMITS.

When I traded with a counterparty, I would inform my credit department who that party was and what the amounts traded were. They gave me limits on how much I could place with any institution depending on that institutions ability to pay back (AAA rating, etc).If my limits were "full" to that counterparty, myself and other traders had to wait until old trades "rolled off" before you could deal with that party again. Very simple, right?
Well, this is where I think the Attorney General would have been able to put Goldman execs behind bars (although I'm not a lawyer and Im not certain what the charges might be). Goldman's exposure to AIG was ridiculously excessive which is why the Goldman execs shit their pants when Aig announced they were bankrupt.
So not only did Goldman execs know of the risks trading an instrument that could go bust, but they were way over exposed to AIG and I guarantee that when traders at Goldman saw traders at AIG in the market, the deals were just done with NO CREDIT CHECKS.
I would love for Mr. Blankfein to answer that one.

There are so many things that went bad here and for americans to have to suffer (there 401k's, housing, jobs, etc) without even an attempt to prosecute ALL the parties is like allowing smoking while pumping gasoline.

Just a disgrace.


this is where the credit dept (every firm has one) is supposed to sound the alarm bells , there must be e-mails from someone in credit to a trading head or management citing the massive overexposure to AIG - how about showing those e-mails?

[Valuist]

There is one more thing I'd like to add about Goldman since we're all on a Goldman bashing frenzy...

Let me explain an important aspect of trading that every banker is well aware of and thats EXPOSURE and CREDIT LIMITS.

When I traded with a counterparty, I would inform my credit department who that party was and what the amounts traded were. They gave me limits on how much I could place with any institution depending on that institutions ability to pay back (AAA rating, etc).If my limits were "full" to that counterparty, myself and other traders had to wait until old trades "rolled off" before you could deal with that party again. Very simple, right?
Well, this is where I think the Attorney General would have been able to put Goldman execs behind bars (although I'm not a lawyer and Im not certain what the charges might be). Goldman's exposure to AIG was ridiculously excessive which is why the Goldman execs shit their pants when Aig announced they were bankrupt.
So not only did Goldman execs know of the risks trading an instrument that could go bust, but they were way over exposed to AIG and I guarantee that when traders at Goldman saw traders at AIG in the market, the deals were just done with NO CREDIT CHECKS.
I would love for Mr. Blankfein to answer that one.

There are so many things that went bad here and for americans to have to suffer (there 401k's, housing, jobs, etc) without even an attempt to prosecute ALL the parties is like allowing smoking while pumping gasoline.

Just a disgrace.

I don't think anyone would say Goldman isn't without fault. It was then CEO Hank Paulson who lobbied Congress back in 2004 to raise the leverage limits to 40-1.......I wonder how silly he felt 4 years later going back to Congress to sell the bailout.

But having said that, I don't believe Goldman was the only one at fault. What about the other major banking institutions? And like Peter Schiff said, what about the core of the problem? Congress themselves pushing for banks to make risky loans to bad candidates. That still was the root cause of the entire problem.

[ddog]

No it wasn't and this is where people go off the rails.

1. you would have to class 50% or more of the loans in the latter days of the bubble as sub-prime. Not the case although many have gone bad.

2. people say "banks" - "non-banks" like Countrywide-New Century and hundreds of other were the sub-prime originators nothing in Fed regs forced them to loan anything.
Many regulated banks blew , but most of those were not due to sub-prime housing exposure but commercial and investing the pools created by the derivatives..

3. Anyone that thinks that the large firms didn't need something to sell and that need drove the origination will fall for anything.
If you really think Goldman and the others didn't know the paper out of lots of these were crap then you have not been paying attention.

4. there was nothing in the CRA that forced or stated loans should be made on a no-doc basis, there was nothing that said you should tweak and run them through until you got an ok.

5. you could have had all the housing in the country go bust and you wouldn't have had the fallout if not for the derivatives stacked on top of them. Last I heard the CRA didn't mandate helocs,etc.etc.

6. everyone seems to forget that there are other countries that never heard of our CRA and last I heard , lots of them had a crash as well.


As to e-mails and credit risk, let's just say there are some things one never commits to e-mails, also if you push the credit limit too hard you will get rolled.
Goldman and the others play Enron style games with off-balance sheet and "window dressing" before reporting time to make their books look better. The big boys all wink-wink at each other, it's why a lot of them all "report" at different times. Three card monte sums it up well.


Bonus money , next qtr nbrs rule all. Humans are very bad risk managers when their bonus is tied to that risk and they get to risk others money.

[delayjf]

1. you would have to class 50% or more of the loans in the latter days of the bubble as sub-prime. Not the case although many have gone bad.

So within the confines of that stock / derivative, how many or what % of those loans would have to be bad to sink the whole thing?

[Robert Goren]

If these guys are so smart, why did they think that if AIG is issuing insurance to me on worthless piece of paper that they weren't issuing insurance on other worthless pieces of paper for everyone else and when the s**t hits the fan that AIG would have enough money to pay off? This whole mess just amazes as to how dumb everyone invovled in it was.

[ddog]

So within the confines of that stock / derivative, how many or what % of those loans would have to be bad to sink the whole thing?



Look , if you are talking ABACUS it gets really complicated, i could argue NONE or all and have many on each side agree.

What I was trying to get across(i was not clear i am sure) was that the whole value of the mortgages issued after say 2006 that have defaulted now would be nothing much more than the FED has bailed out and has on their books now.


This ABACUS type deal was not what the MSM is talking about when they mention synthetic CDO.

These types were setup to "make a market" not tied to the cash flow of the underlying, in this case RMBS crap. These were just to bet long or short , that's all.

These deals serve no purpose other than for someone to take a bet, there is no productive use for them.

I do not think the SEC will win the case, the more I look at it , while the ABACUS type product is amoral at best it was not illegal and I don't see where Goldman hoodwinked anyone in the deal.


P.S. --- Robert , they were SMART , don't short them on that basis.

They knew where the suckers were, look around at the ones that died and the ones that needed bails, look at the money-makers today. That's not the dummies. Goldman/JP USED some of those others as tools to extract wealth from the "morts". SO FAR, SO FAR , it's been a beautiful thing to see on a technical level.

[Robert Goren]

P.S. --- Robert , they were SMART , don't short them on that basis.

They knew where the suckers were, look around at the ones that died and the ones that needed bails, look at the money-makers today. That's not the dummies. Goldman/JP USED some of those others as tools to extract wealth from the "morts". SO FAR, SO FAR , it's been a beautiful thing to see on a technical level. Goldman and almost all of the big banks would have gone under if the taxpayers had not covered AIG insurance.

[ddog]

Basically to boil it down , the amount of BETS ON the housing market so dwarfed the amount OF the housing market as to make a "how many bad mortgage nbr impossible to state".



This is what all the "reforms" were about , this was what all the non-regulation was about.

There was not enough productive(old style) activity left to make deals on so we had to gin up a casino to just bet on any old thing and skim off those bets.

That's what it devolved into and why there is going to be so much bad fallout left to come. Most of what "grew" the past 10-20 years was just smoke and mirrors.

[ddog]

Goldman and almost all of the big banks would have gone under if the taxpayers had not covered AIG insurance.



Not necessarily and even if so, you seriously think that with the gvt cronies chock full of like minded types there was ever any chance they were not going to get bailed? Bernake would have bought the whole book if CONgress had not sent in the bucks. In fact the CONgress money was just a drop in the bucket to what the FED(corrupt bloodsucking traitors that need to die) provided.


We are still bailing them out. Look at the EU stuff- tons and i mean tons of that debt that they can't pay back is stuff we are in up to our necks.


Lots of these guys are players and they played that time very well. I am not saying they had perfect foresight, but they had their boys at all the levers when it counted.

[skate]

There is one more thing I'd like to add about Goldman since we're all on a Goldman bashing frenzy...

Let me explain an important aspect of trading that every banker is well aware of and thats EXPOSURE and CREDIT LIMITS.

When I traded with a counterparty, I would inform my credit department who that party was and what the amounts traded were. They gave me limits on how much I could place with any institution depending on that institutions ability to pay back (AAA rating, etc).If my limits were "full" to that counterparty, myself and other traders had to wait until old trades "rolled off" before you could deal with that party again. Very simple, right?
Well, this is where I think the Attorney General would have been able to put Goldman execs behind bars (although I'm not a lawyer and Im not certain what the charges might be). Goldman's exposure to AIG was ridiculously excessive which is why the Goldman execs shit their pants when Aig announced they were bankrupt.
So not only did Goldman execs know of the risks trading an instrument that could go bust, but they were way over exposed to AIG and I guarantee that when traders at Goldman saw traders at AIG in the market, the deals were just done with NO CREDIT CHECKS.
I would love for Mr. Blankfein to answer that one.

There are so many things that went bad here and for americans to have to suffer (there 401k's, housing, jobs, etc) without even an attempt to prosecute ALL the parties is like allowing smoking while pumping gasoline.

Just a disgrace.



what's the crime babe?:bang: seems like you're saying they follow the rules.

[slewis]

Where did I say they follow the rules?

If your exposure to an institution like Aig is lets say 5 billion, and you buddy buddy up with the CEO of AIG at cocktail parties and the like, and he says to you, "look Skate, my two biggest traders wanted to arbitrage a deal today that would have netted us 16 million in hedged profit, but your Eurodollar trader turned us down...said you guys had filled the limits with us...costs us a bundle".
Then you say, Slew, I know the feeling, some of my guys told me a similar tale last month".

Look, we're AAA rated...you giys are Goldman...we've been around forever, so will you...lets get the trades done we need to....and not worry about exposure....business is booming....we'll make a fortune this year".

"Ok, as of Monday morning, we agree to both have our credit depts hold off on stopping any trades when we see each other in the market until something changes...deal"? Shake hands....deal".....

Now look Skate...Im not a lawyer...and this conversatiion IS not very responsible or prudent between these CEO's ...but stuff like thiis is the reason Goldman was 30 BILLION with a B...exposed to AIG...

So my point..since I worked on Wall ST for 20 yrs, is that Brokerage firms ABSOLUTELY break laws every day to various degrees..... If they couldn;t get Goldman and Co on this....they could do a Spitzer and find other shit....and make them pay with JAIL TIME and a plea and a signed agreement to leave the financial industry and never return...That HAS ABSOLUTELY been done before....If the Govt really wanted to...

[skate]

when you gave your take, what i read, goldey followed the rules.


you didnt give figures, you let me surmise, so?

[skate]

Welp, yes sir, i can agree, but...

see, what you say is correct and im not all that good at getting what little i have accross, so...

First, congress (jack reed, R Is, NYT qoute) says jack "more, we want more", he wasn't talking to goldie, but to the banking industry and that's just one quote.

Markets have been into, what you describe, forever.

They put more limits on the small player than they put on the AIGs. But, really, i can see the limits and i can see the HIGH (or NO) limits on an AIG type.

Goldey just might be the last to know, since AIG owes debt, and since they had something to hide.

To me , it's normal to give an AIG the highest cr. available and then some.

My bottom line is that congress did the pressing and they make the rules.
Now they want to make new rules, they just put the screws to ALL and they have the impudence to TV themselves as the-saviors.

anyhow, thanks, cause i gotta think you were doing the correct things.