The "up-to-the-minute Market Data" thread

Goldman: Clarity? It Appears So!

Clarification?

When AIG was rescued, Goldman Sachs had $10 billion of exposure to the insurance company that was offset with $7.5 billion of collateral as well as credit-default swaps that would have paid off in the event of an AIG bankruptcy, Viniar said on the March 20 call.

He also said on the call that Goldman Sachs recorded a gain “over time” on the value of the hedges it bought to guard against a default on AIG, even though the government enabled the insurer to honor its obligations. In today’s interview, he said those gains were booked “from 2006 to now” and that any gains booked in the first quarter “would have been very, very small.”

My point from the previous Ticker was this:

If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

Now I know that people speak "imprecisely" and reporters do not always get it right, but I think what was said in that Bloomberg article is:

*
Goldman got paid over time for their hedge (e.g. they bought CDS that went into the money, they were short the AIG equity as a hedge, etc.)
*
The "current" gain (in the last quarter) was basically zero on that hedge (if they were short the equity, for example, this would be expected, as the price of the stock is basically zero and has been all quarter.)

Ergo, they got paid previously on the hedge over the previous two years and change and as such the question still stands, and is in fact amplified: IT APPEARS GOLDMAN GOT PAID TWICE FOR THE SAME RISK AND THE SECOND PAYMENT CAME STRAIGHT OUT OF THE TAXPAYER'S HIDE.

If so, that transfer payment was improper as Goldman had already collected on the bet and thus must be clawed back.

The intent to transfer wealth is the key to understanding all economic catastrophes. It is also the key to understanding why this particular crisis more closely mirrors that of the German hyperinflation 1919-23, rather than the early years of the Great Depression in 1930s America. To fixate on the Great Depression, as Ben Bernanke is doing, ignores the true problem, and sets us off into wrong directions. Let me point out some comparisons:
1) Post WW I Germany was the biggest debtor nation in the world, at that time. Debtor nations are dependent upon foreign cash flows. In contrast, in the 1930s, like Japan in 1990, the U.S. was the biggest creditor nation in the world. That is why Germany had hyperinflation when it printed money, while 1990s Japan and 1930s America had deflation as they did the same thing. Because we are the biggest debtor nation in the world, the current money printing will result in hyperinflation, NOT deflation.
4) Post WW I Germany was heavily dependent upon foreign cash flows to plug holes in its budget after the War. Sales of bundesbonds to foreign buyers, including the American financier, J.P. Morgan, were critical. The USA is now even more dependent than post-war Germany once was, upon foreign cash flows. Sales of huge numbers of Treasury bills, notes and bonds are critical, and a lot of those sales are to China, who, unlike America to Germany in 1918, is currently our strategic competitor, and that makes our situation somewhat worse.
9) The Reichsbank claimed that it could control the events it created, just as the Federal Reserve does now. Questionable statistics were regularly published, just as is now the case in the USA. German authorities believed, just as American authorities now believe, that the perception is more important than economic reality. Eventually, however, when the foreign cash flows dried up, reality did reassert itself, as it always does, and the German economy entered hyperinflation.
10) Finally, most tellingly, the German "professional" economists called the 1918 post war depression, prior to the hyperinflation, "the credit crisis", or "the credit crunch", and the prevailing complaint was that banks were hesitant to lend money. Unwittingly, American professional economists, including Mr. Bernanke, have dubbed the present crisis with the same names, and the complaint is exactly the same. Notoriously, the prescribed remedy is also exactly the same, even though, from all the speeches given by Federal Reserve officials, rather than overtly intending to copy the Reichsbank, they seem to be blissfully unaware of the entire German event. Frightening...

seekingalpha.com...

I found this article to be right on. I just quick picked some of the points, more at link.

reply to post by HimWhoHathAnEar


"...the intent to transfer wealth."

Boy is THIS a mouthful!!! And SOOOOO true! Transfer it to all those who can't or won't be productive from those of us who are.

This is a good article,thank you and star!

reply to post by redhatty


See this are the news that truly represent the state of affairs within our nations well being.

And this type of news are the ones that many in government will like to keep out of the eyes of the American public, because it doesn't' play well with their intent on boosting the markets numbers in the financial for investors confidence.

So sad what is going on in this nation right now.

Breaking News: USA kicked off from the Bretton Woods conference, but the process of nullyfying the agreement that enabled the USA to supply the world with vast amount of dollars as the international currency will take some time. The decision met with resistence in the White House.

WASHINGTON – Aiming to assert control over the nation's economic debate, President Barack Obama on Tuesday warned Americans eager for good news that "by no means are we out of the woods" and argued his broad domestic agenda is the path to recovery.

news.yahoo.com...

[edit on 4/14/2009 by stander]

DAILY LAYOFF
Tue 4-14-2009

Perkins Coie -38
MEMC Electronics Materials -200
Qantas Airlines -1,750
FedEx Idles 14 Jets
Ingersoll-Rand -25
Idaho State University -73
ABB -38
John Deere Co. Update -200
Nordam Aviation Supply -50%
- approx 85 over next two months
Hallmark Cards -750
The Jersey Journal -17
Jet Works Air Center -12
Essar Steel -100
Discover Financial Services -500
The Homac Companies -54
East St. Louis -23
Casino Nova Scotia -12
Stork H.E. -24
Nashville Schools -200
Tegrant Corp. Closing Plant -50
Schmidt Unisia Inc. Closing Plant -38
Pilgrim's Pride Closing GA Plant -280
Another BFGoodrich Plant -70
Gardner Denver Closing Plant -366
GE Mebane Plant -100
Xiotech Corp. -50

TOTAL - 5,055 est

This is an excellent number for a Tuesday -
Probably not the real story -
but an easier number than usual ... on the eyes - .

[edit on 14-4-2009 by spinkyboo]

reply to post by spinkyboo


Wow that looks good enough to be a Sunday #

So, I wonder if, now that we are almost 6 million jobs gone, how long it will be before the numbers are small only because there are no jobs left at all

...Create Chaos...indeed...

Secrecy of U.S. bank stress tests strains release rules
www.reuters.com...

NEW YORK/WASHINGTON (Reuters) - U.S. banks have been told to keep quiet for now about results of a sweeping regulatory checkup into their health, raising questions about whether investors are being wrongly kept in the dark.

Government officials have been less than clear about how the results of these "stress tests" of 19 big banks will be released.

In the meantime, the Treasury Department and Federal Reserve have asked banks not to discuss the exams publicly out of concern that information will trickle out inconsistently and create market chaos, according to a source familiar with the talks between the government and the banks.

More at Link...

[edit on 4/15/2009 by Hx3_1963]

Originally posted by redhatty
reply to post by spinkyboo

 

Wow that looks good enough to be a Sunday #

So, I wonder if, now that we are almost 6 million jobs gone, how long it will be before the numbers are small only because there are no jobs left at all

I just said the same thing to my better - um... equal half..
Quite possibly running out of people to unemploy.
oh my.

Duty my @$$...

Goldman sells stock in "duty" to repay TARP
www.reuters.com...

WASHINGTON/NEW YORK (Reuters) - Goldman Sachs Group Inc sold $5 billion of stock to help fulfill what it called its "duty" to repay a federal bailout, but the government worries a quick return of funds could pressure other banks to repay their aid prematurely.

The sale of 40.65 million shares at $123 each gives the bank roughly half what it needs to return the $10 billion of taxpayer money it took from the Troubled Asset Relief Program.

"We never believed the investment of taxpayer funds was intended to be permanent," Goldman CFO David Viniar said on a conference call on Tuesday. "We view it as our duty to return the funds, as long as we can do it without negatively impacting our financial profile, or ability to act as a central liquidity provider to the global capital markets."

Viniar said repayment would depend on regulatory approval and the results of a government "stress test" gauging Goldman's ability to weather a deep recession. Nineteen banks are undergoing such tests, which are to be completed this month.

Repaying the funds would free Goldman from many government restrictions, including caps on executive pay. Chief Executive Lloyd Blankfein's compensation fell to $1.1 million last year from $70.3 million in 2007, Goldman's proxy filing shows.

The bank said it retains a $164 billion pool of cash and liquid assets that it could use to buy troubled assets and loans as rivals pare their balance sheets.

Tuesday's stock sale came a day after Goldman posted better-then-expected quarterly profit, bolstered by substantial risk taking, and after the bank's shares had more than doubled from their record low of $47.44 last November 21.

Some investors who bought the new stock, however, may have had quick losses. Goldman shares posted their largest percentage drop since January 20, closing down $15.04, or 11.6 percent, at $115.11 on the New York Stock Exchange. A Standard & Poor's index of financial stocks fell 7.7 percent.

More at Link...

[edit on 4/14/2009 by Hx3_1963]

reply to post by Hx3_1963


Looks like they stopped stressing

U.S. Planning to Reveal Data on Health of Top Banks

The Obama administration is drawing up plans to disclose the conditions of the 19 biggest banks in the country, according to senior administration officials, as it tries to restore confidence in the financial system without unnerving investors.

The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.

While all of the banks are expected to pass the tests, some are expected to be graded more highly than others. Officials have deliberately left murky just how much they intend to reveal — or to encourage the banks to reveal — about how well they would weather difficult economic conditions over the next two years.

As a result, indicating which banks are most vulnerable still runs some risk of doing what officials hope to avoid.

The decision on handling the stress tests underscores the delicate balancing act by the government, which has spent hundreds of billions to stabilize banks. Despite some signs of improvement in the financial system, many economists remain concerned that banks are still weighed down with toxic assets stemming from the housing downturn.

Until now, the Treasury Department has simply said that it will reveal the amounts of any new infusions of capital into banks that regulators judge to be at risk if the economic downturn is prolonged or the economy takes a further dive.

The administration’s hand may have been forced in part by the investment firm Goldman Sachs, which successfully sold $5 billion in new stock on Tuesday and declared that it would use the proceeds and other private capital to repay the $10 billion it accepted from the government in October.

That money came from the Troubled Asset Relief Program, or TARP, and Goldman’s action was seen as a way of predisclosing to the markets the company’s confidence that it would pass its stress test with flying colors.

Goldman’s action has put pressure on other financial institutions to do the same or risk being judged in far worse shape by investors. The administration feared that details on healthier banks would inevitably leak out, leaving weaker banks exposed to speculation and damaging market rumors, possibly making any further bailouts more costly.

The Goldman move also puts pressure on the administration to decide what conditions will apply to institutions that return their bailout funds. It is unclear if Goldman, for example, will continue to be allowed to benefit from an indirect subsidy effectively worth billions of dollars from a federal government guarantee on its debt, a program the Federal Deposit Insurance Corporation adopted last fall when the credit markets froze and it was virtually impossible for companies to raise cash. In ordinary times, regulators do not reveal the results of bank exams or disclose the names of troubled banks for fear of instigating bank runs or market stampedes out of a stock. But as top officials at the Treasury and the Federal Reserve Bank focused on the intensity with which the markets would look for signals about the nation’s biggest banks at the conclusion of the stress tests, the administration reconsidered its earlier decision to say little.

“The purpose of this program is to prevent panics, not cause them,” said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures were still being debated. “And it’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.”

More at link

Lots of not so nice numbers here...

New Stimulus Plan Is Needed For the U.S. Economy's Long Road Back to Health
www.usnews.com...

Spring seems to be round the corner one day and not the next, but the pace and timing of our economic recovery are even more uncertain. They will largely be determined by you and me and our neighbors—we consumers—since consumption makes up roughly 70 percent of our national economy.

Let's look at the tea leaves. For a start, we are a lot poorer. With house and stock prices way down, household net worth (assets minus debts), which peaked in mid-2007 at roughly $64 trillion, fell to $51 trillion by the end of 2008, a decline in excess of 20 percent.

Where once the average family felt that it did not have to save out of income but could rely on the rising value of homes and stocks, today we are saving like Scrooge on steroids. The savings rate has gone up from one-tenth of a percent of income in January of 2008 to 5 percent of income in January of 2009. That is the largest 12-month increase in the more than 60 years the government has been compiling the figures. Indeed, the rate is headed toward what had been the normal average, 8 percent of income, and possibly higher.

More at Link...



[edit on 4/15/2009 by Hx3_1963]

Your attention please...

Review this link please...

Posting work written by others. **ALL MEMBERS READ**

Going forward, if you post something that is not 100% your own writing or work you must use the QUOTE BOX TAG, post NO MORE THAN 15% of the original (or three paragraphs, whichever is least)

Pay particular attention to the bolded part.

Please adhere to this from now on..

Any post in violation of this, will be removed.

Thank you
Semper

reply to post by semperfortis


Semper, just for clarity, are you referring to "ex" tagging too? or just quote tags that need to be used?

Sorry to seem dense, but that warning seems to have come out of the blue from left field and I want to be sure I don't have to face the "discipline" for infractions

TIA

Goldman wants to go back, but can it?
www.reuters.com...

NEW YORK (Reuters) - Meet the new Goldman Sachs, trying to be the same as the old Goldman Sachs.

The fifth-largest U.S. bank said late Monday that it earned $1.66 billion in the first quarter, as it boosted its risk and assets.

It also raised extra capital to repay the government, in a move widely seen as an effort to avoid extra regulatory scrutiny, particularly when it comes to compensation.

More at Link...

reply to post by redhatty


[ ex] Tags as well

Semper

It seems that the thread is having too many long quoting from the links provided.

Now back to the subject, interesting that now some financial institutions are trying to get money back, only those that are not "banks" can do that faster because they are investments houses.

But also interesting that yesterday in CNBC they were talking about more bailout money for banks because they still needed help.

So even when investment companies are trying to give back money the financial institutions/banks still need more funds.

How about a little positive news?

The pound has risen above $1.50, its highest level against the dollar since mid-January, as a UK housing market survey raised hopes of a recovery. It also gained ground against the euro, hitting a six-week high of 1.13 euros. Sterling got a boost after a survey of chartered surveyors suggested increased optimism that home sales would pick up.

Sterling touched its lowest levels in 24 years in mid-January, nearing $1.35 as the depth of the UK's recession became clear.

The pound rose as high as $1.5038.

Source

Latest data:

DJIA 7920.74 +0.56 +0.17%

Sounds smooth doesn't it? But -

[atsimg]http://files.abovetopsecret.com/images/member/0bec91601569.png[/atsimg]

Quite a jittery start to the day, wouldn't you say?


FTSE 3959.69 -29.30 -0.73%


Now for the long view:

DOW:

[atsimg]http://files.abovetopsecret.com/images/member/5e0f1b96f4f4.png[/atsimg]


FTSE:

[atsimg]http://files.abovetopsecret.com/images/member/39b9a02ab92e.png[/atsimg]

Source

Sobering if you ask me...





[edit on 15/4/09 by pause4thought]

Goldman has sold $5billion in stock in saying it is thier "duty" to repay TARP funds. Maily, they are doing to this to get out from under the govenment restrictions.

Goldman Sachs is just so "lucky"! A conspiracy theorist might think this run of fortune has something to do with the former Goldman executives having influential roles in the Treasury Department.

Goldman Sachs Group Inc sold $5 billion of stock to help fulfill what it called its "duty" to repay a federal bailout, but the government worries a quick return of funds could pressure other banks to repay their aid prematurely.

www.reuters.com...

reply to post by pause4thought


Sounds good for them but not for the shrinking mighty dollar, still how is the unemployment figures in the UK compare to the US.

If they are starting to see a housing bottom it can only be by the willingness of people to purchase more houses that if the home buyers are well established in good jobs.