America Is Running Out Of Rope, page 1

Karl Denninger

market-ticker.denninger.net...

Oh no, we don't cheat:

Goldman Sachs Group Inc. research analyst Marc Irizarry's published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster "neutral" in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman's traders the stock was likely to head higher, company documents show.

Nothing like selling bonds out the front door and shorting them on your prop desk, right? Oh wait, Goldman did that too!

Securities laws require firms like Goldman to engage in "fair dealing with customers," and prohibit analysts from issuing opinions that are at odds with their true beliefs about a stock. Steven Strongin, Goldman's stock research chief, says no one gains an unfair advantage from its trading huddles, and that the short-term-trading ideas are not contrary to the longer-term stock forecasts in its written research.

Riiiight. And I'm the Easter Bunny.

The tips usually go to top clients who have expressed interest in having the information and have short-term investment horizons, he says. Goldman doesn't want to overload other clients with information that isn't relevant to them, he says. "We are not in the business of serving thousands of retail customers," he says.

Let me guess: They also go to the proprietary (inside) traders that are gambling with the firm's money (and your "liquidity guarantee" as a taxpayer, since they're a BANK now.) Am I right?

Research-department employees prepare telephone scripts, then call top clients, typically several hours after the meeting has ended. Goldman says its in-house traders are prohibited from trading on the tips until after they've been relayed to clients.

Documents reviewed by the Journal indicate that anywhere from six to 60 clients are contacted, depending on the investment.

Oh, its even better. Let's see, we have a computer program that's engaged in a bit of "high frequency trading", and we have the guys that run our own trading (which includes that) that are in on the recommendations and they even know when these recommendations go out to the "select customers"!

There's nothing wrong with this, right? Nothing wrong with having a "slight edge' in knowing up front what's going to be said to these "good" (read: they have and swing around lots of money) customers?

Pull the other one boys.

Last year, the Financial Industry Regulatory Authority, the industry's self-regulatory body, proposed new rules meant to clarify existing disclosure obligations under the rule requiring "fair dealing" with all clients. Firms could issue contradictory ratings as long as clients were told that such inconsistencies were possible.

Yeah, ok. Shall we hire some more foxes to guard that henhouse?

What sort of scheme-laced system do we have here? These institutions have sold securities out the front door they're shorting out the back (subprime mortgage bonds), they're disseminating "short-term opinions" that differ from their published research reports, and even better, their own proprietary trading desks are in on the latter, so if and when the move starts they can get in on the action with their "high frequency trading" too!

You won't hear CNBS talking about this, I'll wager. Nor will you hear them talk about their parent company discuss their lobbying expenditures - the highest of any company in the first quarter at a mind-blowing $7.2 million dollars. Zerohedge has provided a copy of the disclosure form, which reads like a who's who of "how to screw the consumer", including issues such as the Credit Card Bill of Rights, the disapproval resolution on the second half of TARP, proposed TARP reform and accountability, the mortgage reform and anti-predatory lending bill and more.

The disclosure does not tell you which side or exactly what position has been taken by these paid hacks, but that's not hard to figure out - no corporation is going to lobby for something that would cost it money (while spending copious amounts of money), so the direction of these "contacts" is clear on their face. Nothing more need be said.

This is a serious issue for all Americans, since allegedly the "fourth estate", that is, the media, is supposed to be a check and balance on government (and corporate) behavior. But what happens when the media is the corporation? When conglomerates become entwined in the news system to the point that anything that would go against the corporation is suppressed by that very same media? When editorial independence is lost?

I have (as have others) heard CNBS anchors "slip" in the past and say things on the air that strongly hint (or outright state) that their producers don't want a certain slant covered. One wonders whether that producer just had their phone ring - and it was the executive offices of GE on the other end.

Let's be clear: These banksters have robbed well over $100 billion dollars from taxpayers and citizens via various schemes in the last decade. These scams have included securitizing loans that they either knew or should have known were laced with fraud, in some cases shorting them while selling them on to other people. It includes outrageously-complex and intentionally-obfuscated securities "packages" for municipalities which have resulted in huge losses for the town (and huge fees and profits for the bank.) It has included marketing "auction rate" securities which were claimed to be as liquid and safe as cash, when in fact nothing of the sort was true. The schemes and scams run the gamut but at their core was the intentional obfuscation of the true nature of the risk embedded in these instruments so that the dupe (that would be you, your town, your state) would wind up losing money all for their benefit: you would enter into a complex swap transaction you didn't understand, you'd buy a bubble house with an OptionARM after being told you "definitely" could refinance before payments would go up, your kid was sold an expensive educational loan package without being told that it was unable to be discharged in bankruptcy, you were given a credit card with 27 pages of fine print, and buried somewhere in there was vague language letting the company jack your interest rate to anything it wanted - including the 36% it did jack it to - if you missed an electric bill by three days.

Then, when the game of musical chairs ended and all this debt that could not possibly be paid off started to default these very same banksters went to Congress through Paulson and Bernanke, the chiefs of the bankster scam parade, and in my opinion literally committed economic terrorism: hand over $2 trillion dollars hiding all but $700 billion, or we detonate the entirety of the economy and everyone literally starves.

How does this differ from an old-fashioned Al-Quaida terrorist who calls in a nuclear bomb threat? "Hand over $2 trillion dollars or New York City will be vaporized."

Hmmmmm... sounds kinda like the same thing to me!

Now let's juxtapose this with the fact that every Congressperson took an oath to defend The Constitution against all enemies, both foreign and domestic.

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