Goldman Sachs Loses Grip on Its Doomsday Machine

Goldman Sachs Loses Grip on Its Doomsday Machine

www.bloomberg.com

Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov.

(visit the link for the full news article)

There has still been no explaination from Goldman Sachs as WHY they created a program as this in the first place.

Nice to see a somewhat MSM discussing and questioning this situation.

Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.

It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”

So the program could manipulate markets in unfair ways? Why did they have such a program? Have they done that in the past?

How could somebody do this? The precise answer isn’t obvious -- we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.

Market Manipulation

All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?

There has been such obvious manipulation in the metals market - is this program part of it?

Who has the software now?

“The copy in Germany is still out there,” the prosecutor said, according to an audio recording of the hearing. “And we at this time do not know who else has access to it and what’s going to happen to that software.”

This means that another government could get their hands on this software and if they are not too friendly with us - cause the U.S. demise to come a little faster than how it is going on.

Meantime, it would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways, too. Oh yes, and could the bank be a bit more careful about safeguarding its trading programs from now on? Hopefully the government is asking the same questions already.

I applaud this reporter - for questioning if the government will look closely at Goldman Sachs and this program.

OH - but I won't hold my breath - because most likely they are part of the whole program development. Otherwise more truth would be out there about the shape/reality the U.S. is in - which is bankrupt and not going to be able to pay our debts back.











www.bloomberg.com
(visit the link for the full news article)

If you threw raw meat to a Lion, would it not eat it?

Of course the greedy, corrupt a-holes were using the program!

IRM

It has been perfectly clear that Goldmans SOLE objective is to make money any way it can. Be it from back door handouts from the govt thru intermediaries like AIG or by pumping and dumping commodities.

So what makes anyone have any doubt that Goldman wouldn't use this program at their disposal to make as much money as possible be it thru its manipulation or some other way.

As a pure free market capitalist I used to respect Goldman and the other banks, but then came fall 08' and they took govt handouts and most appaling of all where paid thru backdoor intermediaries like AIG BILLIONS of dollars. Now I want to see them pay a hefty price for going from a free market capitalist entity to a corrupt govt handout organization.

Originally posted by questioningall
So the program could manipulate markets in unfair ways? Why did they have such a program? Have they done that in the past?

Isn't the answer obvious? Isn't it "fair" for GS to manipulate the markets to their own desires as long as it benefits them? They just don't want anyone else doing it because it defeats their own market manipulation, that's what makes it unfair, right?

As much as I love a conspiracy, I don't think that Goldman Sachs could use the program the manipulate the markets. What the program does is automate the trading of funds based on some complex criteria. This alone could never be used to manipulate the market.

What I believe the GS executives fear is that an outside party by knowing the equations, limits, and statistical tables used by Goldman Sachs's software can perform specific trades with the goal of triggering a condition that causes GS software to make a series of automated trades in response.

This scenario would allow someone to make market manipulation far in excess of the risk doing so poses to their own capital. Basically, an entity with a smaller capital base could use knowledge of GS's program to manipulate the market using GS level of capitalization.

Jon

Noam Chomsky talked about this over a decade ago.

In 1995, most of the recruiters at all Ivy League schools were from Goldman Sachs, JP Morgan, Morgan Stanly, AIG, etc. They were looking for "hot shot Ph.Ds in mathematics and physics." They didn't need to know anything about business, all they needed to know is how to devise complicated mathematical financial instruments and computer programs to "rip people off."

Here is a thread where you can hear the talk.

Why do they create such a program?, because they can and get away with it they did.

After all the Fed answers to Goldman Sach and the President answers to the Fed.

With all the corruption that is coming out of the corporate offices of Goldman Sach, have you seen anything been done to the crocks?

reply to post by Voxel


Well, it is actually possible for their automated trading programs to foment volatility in the market. That could in fact be a design feature of the software itself. Only GS knows what their software is designed to do, however.

It's apparently not that difficult to drive a stock price up or down with a relatively small amount of capital, as Jim Cramer explains in this Street.com interview where he apparently brags about doing this:


By the way, all this is very illegal. Fortunately for the wall street criminals, the sec is incompetent. No, this isn't a case of the government screwing up, it's done intentionally because Goldman Sachs donates to both major parties, and in return, those leaders design the laws and staff the regulatory commissions with people sympathetic to Goldman's need for corporate welfare.

Edit to add: That's why I voted for Nader

[edit on 9-7-2009 by Kaytagg]

reply to post by Kaytagg


Let's not forget that they also account for most of the members of Obamas "financial team".

Don't I fee so secure financially.

Last week (or maybe the week before) the NYSE lifted it's requirement for the full disclosure of all automated 'programmatic' e-trading from GS and others.

That being the case, the audit trail is closed. Now they can do whatever they want. And no-one outside the criminal world will ever know what happened.


Nor are we empowered to compel the financial cartel to explain anything.

But one more thing. These 'power houses' of finance DO NOT MAKE MONEY - they manipulate debt. They toil not, yet the fruits of all our labor are theirs by default. Ring any bells?

[edit on 9-7-2009 by Maxmars]

I don't trust any banksters but When I first read the story yesterday I summized that the black box program COULD be used to manipulate the market NOT that is was designed to ! Maybe I am wrong.

Put it this way, I could write a computer program to mix the coca cola ingredients in a different way than intended. Get my drift?

Originally posted by questioningall
So the program could manipulate markets in unfair ways? Why did they have such a program?

Apparently they had this program because OUR GOVERNMENT gave it to them!!!

Goldman Sachs "secret sauce/program/software" was given to them by our government, it is actually called "The Supplemental Liquidity Provider" Program ("SLP")!

Goldman Sachs and the Code of Gold

A couple of months ago, we also learned through Zero Hedge [4] that Goldman had profited greatly from a sweetheart deal with the federal government concerning a new program instituted by the Feds known as "The Supplemental Liquidity Provider" Program ("SLP"), launched while we were all eating Turkey last Thanksgiving. It is supposed to provide "market liquidity" (i.e.: an ongoing, active market) for selected groups of 500 different NYSE stocks per SLP participant. The problem is as Durden pointed out to all who were interested, it certainly appeared to him that Goldman was the only active participant in the program.

We also learned from Bloomberg [5] that as of April, Goldman-Sachs had reaped the benefits of more $100 million-plus days of trading revenue than it had in the history of its business, wow ! How did they do that?
******SKIP******
The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades. (and maybe pre-emptive ones at that)

Hmmm, does this mean OUR government gave Goldman Sachs a computer program/software that would give them an advantage over their competition, the means to make millions of dollars, and a way to manipulate the market?

[edit on 7/9/2009 by Keyhole]

Ars Technica had a pretty good write up of this story on the 7th:

Source

This section caught my eye and in my cynical opinion is the most likely real reason for the panic over this:

If you have your hands on the code that runs on Goldman's trading platform—again, one of the largest in the world—then you know with 100 percent accuracy which trades Goldman's computers are going to make in response to a given set of inputs. All you need then is even faster hardware so that you can get to those trades just a few milliseconds before Goldman, and you'll always beat the bank and therefore be able to sell to Goldman at a slight premium. Goldman will therefore make less on every trade, since you'll essentially be usurping their place in the pecking order.

When US government prosecutors claim that the release of Goldman's secret sauce could potentially expose markets to manipulation, what they're really saying is that some unknown party could use it to out-manipulate Goldman, and possibly even do something more ambitious like frustrate Goldman's platform so that it fails while simultaneously finding some way to short it.

so what's going to be the new mantra for Gordon Gecko in the new Wall Street flick...???

Great thread.

I was going to start a new thread about GS, but this one surely fits the bill.

Link to recent, in-depth article on GS rise to power. Includes all the culprits from both sides of the aisle. Seems fairly objective and independent. An absolute must read.

The Great American Bubble Machine

www.rollingstone.com...

My favorite quote: "Organized greed will always defeat disorganized democracy."

(Some great comments too.)

And today's "bright" earnings report news:

Goldman Sachs' $2.7B profit shows firm's prowess

news.yahoo.com...

And down the drain we happily go...............................



[edit on 14-7-2009 by kinda kurious]