Now let me get this straight. Goldman Sachs (GS), aka "Government Sachs", has just received the largest penalty ever imposed on a financial firm. Yes, a whopping $550 million.
Relative to Goldman's 2009 net income of roughly $12 billion, this represents less than 5%, or about two weeks worth of earnings. In the case of British Petroleum (BP), they were arm-twisted into establishing a $20 billion escrow fund, or about 15 MONTHS of 2009 income. BP's escrow fund is to compensate victims.
For Goldman's victims, they were assessed $300 million, payable to 2 European Banks. Forgive me, weren't there a whole lot of other victims? So, BP is paying about 70 times that of GS. Seems reasonable to me.
BP's market capitalization has fallen by about half from peak to trough, a wipe-out on the order of $100 billion. BP's shareholders are the public. Goldman's market capitalization is down only 20%. It's shareholders are very largely Government Sachs alumni in senior policymaking positions. And, of course, management.
Are you beginning to see the problem here?
BP may still have stiff penalties imposed on it. The investigation is far from over.
Ok, so one company's alleged negligence led to economic disaster and the other's to ecological disaster? Is one that many times worse than the other?
Could the difference have anything to do with the rather sizable number of GS alumni in the government? Lloyd Blankfein walks away unscathed. Tony Hayward is driven out of Dodge.
Goldman's settlement permits it to walk away, while admitting virtually NO wrongdoing. Do you think that BP will be so lucky?
One can assume that investigators and senior officials of the SEC knew what they were doing. After all, why would they EVER want to bring down their future bosses?
Goldman officials praised the settlement. Yes, you read that correctly. Goldman officials praised the settlement! Doesn't that, in and of itself, say something? Do you think for one minute that the remaining BP officials will be thinking what a great deal they got?
But, Goldman had another huge reason to celebrate: the passage of the financial reform bill. Not only are Goldman's business interests protected, but the bill establishes new regulatory bodies. A full employment act for Government Sachs at government expense!
Marko's Take
Showing posts with label Securities and Exchange Commission. Show all posts
Showing posts with label Securities and Exchange Commission. Show all posts
Thursday, July 15, 2010
Wednesday, June 9, 2010
Ambac: Another Triple A To Bite The Dust
As the global financial authorities wrestle with the incredible mess known as the world economy, credit rating agencies Standard & Poors, Moody's and Fitch have come increasingly under fire. Of particular interest is the sheer volume of over-rated issuers who have subsequently defaulted http://markostake.blogspot.com/2010/05/bond-rating-agencies-yield-junky.html.
Now, we're NOT talking about junk-rated paper. Investors, who made the mistake of paying attention to ratings, have been stung by buying Triple A-rated paper which then was either downgraded to junk status or defaulted, resulting in massive capital losses.
To re-iterate, the Triple A designation means that the issuer has an infinitesimal probability of default for the forseeable future. Only 4 U.S.-based corporate issuers carry that rating: Johnson & Johnson (JNJ), Microsoft (MSFT), Automatic Data Processing (ADP) and ExxonMobil (XOM). Even Uncle Sam, who owns a printing press, is in danger of losing this elite status.
ABK was itself rated Triple A until 2008. The company is now facing bankruptcy, according to a recent filing with the Securities and Exchange Commission (SEC).
Ambac (ABK), however, takes this ratings lunacy to an entirely different level. At issue is MUCH more than ABK's own $1.2 billion in outstanding debt. The company, known as a "mono-line insurer", provides credit insurance for hundreds of billions of outstanding bonds. ABK, along with rival MBIA (MBI), are the two key companies providing this "service".
Issuers, who would NOT qualify for a Triple A, but would wish to carry that rating, pay a premium to the mono-line insurers to provide a guarantee to establish the soundness of their debt. In effect, ABK and MBI act as additional security to prospective investors who insist on purchasing only the very safest of bonds.
If the mono-line insurers default, their insurance becomes worthless and affects huge swaths of debt, including municipalities and mortgage-backed, collateralized obligations. If this insurance becomes unavailable, or is perceived to have no value, many prospective issuers will have to access the capital markets at a complete disadvantage. Not to mention the fact that the outstanding issues already insured will become far less liquid, resulting in extreme price pressure.
To be fair, the affairs of the operating company will be separated from that of its insurance unit, Ambac Assurance. However, a bankruptcy of a mono-line insurer would be un-precedented and, at the very least, throw its customers into disarray during what may be a highly contested process.
The big three rating agencies, whose self-serving methods have been completely exposed as fraudulent, continue to maintain that their business models are viable. What's wrong with having issuers shop for a rating that is to their satisfaction? Everything!
What investors are learning from the credit fiasco of the last 3 years is that the rating agencies provide ZERO information. In so doing, they have sown the seeds of their own demise. As investors learn to place no value on a credit rating, issuers will stop paying for these ratings and the problem will take care of itself. Any financial regulatory policy will be purely window dressing for public consumption and to curry political favor.
Washington, where WERE you? Oh, yes. Our friends at the SEC were too busy preventing the Bernie Madoff scam from duping investors. Or, preventing the investment banks from creating misleading derivatives, that led to massive financial system dislocations.
The irony of the financial meltdown is that there are so many villians, that each of them can easily point the finger at someone else. It was the investment banks' fault. It was the credit rating agencies' fault. It was the regulators' fault. It was the Senate Finance Committee's fault. It was the Federal Reserve's fault. It was George Bush's fault. On and on.
Systemic financial crises are not created without the participation of MULTIPLE parties, each of which is acting in their own interest. The only common thread is that, while all the villains cashed in, the investment world lost. America lost. The global financial community lost. At least the villians got their bonuses!
Marko's Take
Other links we like: http://www.lemetropolecafe.com/, http://www.shadowstats.com/, http://www.goldpennystocks.com/, http://harveyorgan.blogspot.com/ and http://www.youtube.com/markostaketv.
Now, we're NOT talking about junk-rated paper. Investors, who made the mistake of paying attention to ratings, have been stung by buying Triple A-rated paper which then was either downgraded to junk status or defaulted, resulting in massive capital losses.
To re-iterate, the Triple A designation means that the issuer has an infinitesimal probability of default for the forseeable future. Only 4 U.S.-based corporate issuers carry that rating: Johnson & Johnson (JNJ), Microsoft (MSFT), Automatic Data Processing (ADP) and ExxonMobil (XOM). Even Uncle Sam, who owns a printing press, is in danger of losing this elite status.
ABK was itself rated Triple A until 2008. The company is now facing bankruptcy, according to a recent filing with the Securities and Exchange Commission (SEC).
Ambac (ABK), however, takes this ratings lunacy to an entirely different level. At issue is MUCH more than ABK's own $1.2 billion in outstanding debt. The company, known as a "mono-line insurer", provides credit insurance for hundreds of billions of outstanding bonds. ABK, along with rival MBIA (MBI), are the two key companies providing this "service".
Issuers, who would NOT qualify for a Triple A, but would wish to carry that rating, pay a premium to the mono-line insurers to provide a guarantee to establish the soundness of their debt. In effect, ABK and MBI act as additional security to prospective investors who insist on purchasing only the very safest of bonds.
If the mono-line insurers default, their insurance becomes worthless and affects huge swaths of debt, including municipalities and mortgage-backed, collateralized obligations. If this insurance becomes unavailable, or is perceived to have no value, many prospective issuers will have to access the capital markets at a complete disadvantage. Not to mention the fact that the outstanding issues already insured will become far less liquid, resulting in extreme price pressure.
To be fair, the affairs of the operating company will be separated from that of its insurance unit, Ambac Assurance. However, a bankruptcy of a mono-line insurer would be un-precedented and, at the very least, throw its customers into disarray during what may be a highly contested process.
The big three rating agencies, whose self-serving methods have been completely exposed as fraudulent, continue to maintain that their business models are viable. What's wrong with having issuers shop for a rating that is to their satisfaction? Everything!
What investors are learning from the credit fiasco of the last 3 years is that the rating agencies provide ZERO information. In so doing, they have sown the seeds of their own demise. As investors learn to place no value on a credit rating, issuers will stop paying for these ratings and the problem will take care of itself. Any financial regulatory policy will be purely window dressing for public consumption and to curry political favor.
Washington, where WERE you? Oh, yes. Our friends at the SEC were too busy preventing the Bernie Madoff scam from duping investors. Or, preventing the investment banks from creating misleading derivatives, that led to massive financial system dislocations.
The irony of the financial meltdown is that there are so many villians, that each of them can easily point the finger at someone else. It was the investment banks' fault. It was the credit rating agencies' fault. It was the regulators' fault. It was the Senate Finance Committee's fault. It was the Federal Reserve's fault. It was George Bush's fault. On and on.
Systemic financial crises are not created without the participation of MULTIPLE parties, each of which is acting in their own interest. The only common thread is that, while all the villains cashed in, the investment world lost. America lost. The global financial community lost. At least the villians got their bonuses!
Marko's Take
Other links we like: http://www.lemetropolecafe.com/, http://www.shadowstats.com/, http://www.goldpennystocks.com/, http://harveyorgan.blogspot.com/ and http://www.youtube.com/markostaketv.
Tuesday, May 4, 2010
Government Sachs In The Cross-Hairs: What The Scandal Is All About
Goldman Sachs (GS), aka "Government Sachs" has been exposed for being what readers of Marko's Take, as well as anyone with a brain, already knew: the most corrupt and greedy institution on planet Earth! (But Marko... how do you REALLY feel?)
With so many allegations and opinions flying about, it's easy to get confused as to exactly what prompted the SEC complaint and how it relates to the Obama Administration's formerly cozy relationship with Government Sachs.
Goldman was accused of fraud by the Securities and Exchange Commission (SEC) in a lawsuit filed April 16. The SEC claims Goldman duped investors in a Collateralized Debt Obligation (CDO) called Abacus 2007-AC1, by failing to disclose that it was created with the help of hedge-fund firm Paulson & Co., which made a profit of about $1 billion when the investment collapsed in value. John Paulson became an overnight celebrity within the investment community by virtue of his huge score shorting the real estate market.
The CDO is a bet against the value of mortgages and the housing market overall. The securities themselves were allegedly created specifically to give hedge fund manager John Paulson a means to profit from the real estate meltdown. Goldman, for its part, put its own clients into these CDO's, which defaulted in droves.
Paulson and Goldman got rich as America and the world got poor.
Warren Buffett, the richest man in America, and the most hypocritical man in America, sees ABSOLUTELY NOTHING WRONG! Why should he? His investment in Goldman, made at terms not available to anyone BUT him, is in the money. What him worry? (But Marko... how do you REALLY feel?).
Goldman's defense filing included copies of six lawsuits, as well as a "demand letter" from the Louisiana Municipal Police Employees Retirement System, that the company's board launch an internal probe of "officers and directors responsible for the Abacus 2007-AC1 incident."
In addition, Goldman clients are up in arms, believing not only that they had been misled, but that GS used its trading operation to benefit itself at their expense. Goldman, trade against its clients for its own profit? You're kidding, right? NOT! (But Marko... how do you REALLY feel?).
Prosecutors have demanded trading records as part of a probe that has ensnared several hedge-fund managers, including Galleon Group founder Raj Rajaratnam.
The U.S. Attorney's office in Manhattan has alleged Mr. Rajaratnam was at the center of a massive insider-trading ring that generated millions of dollars in improper trades. Mr. Rajaratnam has denied wrongdoing.
The SEC move came as President Barack Obama is making a final push for financial reform in the Senate next week. “Wall Street titans still recklessly speculate with borrowed money,” he told supporters. “We cannot delay action any longer.”
And this explains the sudden ploy by President Obama to throw his cronies at "Government Sachs" under the bus. It's 2010, and the elections are coming up. How better to show the American people that you have their interests at heart? He's gotten what he can out of Goldman. They're no longer useful. No honor among thieves!
Suddenly, the market impression of GS has taken an extreme turn for the worse. Not only has its stock plunged, but now market fears that the cumulative effects of the SEC and the private lawsuits will imperil Goldman's excellent credit-worthiness.
The cost of insuring Goldman Sachs’ debt against default has risen to about the level of Morgan Stanley and Citigroup, two less profitable rivals, as Goldman’s regulatory woes take a toll on investors’ confidence and its standing on Wall Street.
Credit Default Swaps (CDSs) leapt to 160 basis points yesterday, a real market sign that this is no slap on the wrist, but a real threat to the most corrupt institution in the world. Couldn't happen to a better bunch of guys! And that's how I REALLY feel!
Marko's Take
Our newest video entitled "Social In-Security: The Problem" will be uploaded in the next 24 hours. You can access all our videos by clicking here: http://www.youtube.com/markostaketv.
With so many allegations and opinions flying about, it's easy to get confused as to exactly what prompted the SEC complaint and how it relates to the Obama Administration's formerly cozy relationship with Government Sachs.
Goldman was accused of fraud by the Securities and Exchange Commission (SEC) in a lawsuit filed April 16. The SEC claims Goldman duped investors in a Collateralized Debt Obligation (CDO) called Abacus 2007-AC1, by failing to disclose that it was created with the help of hedge-fund firm Paulson & Co., which made a profit of about $1 billion when the investment collapsed in value. John Paulson became an overnight celebrity within the investment community by virtue of his huge score shorting the real estate market.
The CDO is a bet against the value of mortgages and the housing market overall. The securities themselves were allegedly created specifically to give hedge fund manager John Paulson a means to profit from the real estate meltdown. Goldman, for its part, put its own clients into these CDO's, which defaulted in droves.
Paulson and Goldman got rich as America and the world got poor.
Warren Buffett, the richest man in America, and the most hypocritical man in America, sees ABSOLUTELY NOTHING WRONG! Why should he? His investment in Goldman, made at terms not available to anyone BUT him, is in the money. What him worry? (But Marko... how do you REALLY feel?).
Goldman's defense filing included copies of six lawsuits, as well as a "demand letter" from the Louisiana Municipal Police Employees Retirement System, that the company's board launch an internal probe of "officers and directors responsible for the Abacus 2007-AC1 incident."
In addition, Goldman clients are up in arms, believing not only that they had been misled, but that GS used its trading operation to benefit itself at their expense. Goldman, trade against its clients for its own profit? You're kidding, right? NOT! (But Marko... how do you REALLY feel?).
Prosecutors have demanded trading records as part of a probe that has ensnared several hedge-fund managers, including Galleon Group founder Raj Rajaratnam.
The U.S. Attorney's office in Manhattan has alleged Mr. Rajaratnam was at the center of a massive insider-trading ring that generated millions of dollars in improper trades. Mr. Rajaratnam has denied wrongdoing.
The SEC move came as President Barack Obama is making a final push for financial reform in the Senate next week. “Wall Street titans still recklessly speculate with borrowed money,” he told supporters. “We cannot delay action any longer.”
And this explains the sudden ploy by President Obama to throw his cronies at "Government Sachs" under the bus. It's 2010, and the elections are coming up. How better to show the American people that you have their interests at heart? He's gotten what he can out of Goldman. They're no longer useful. No honor among thieves!
Suddenly, the market impression of GS has taken an extreme turn for the worse. Not only has its stock plunged, but now market fears that the cumulative effects of the SEC and the private lawsuits will imperil Goldman's excellent credit-worthiness.
The cost of insuring Goldman Sachs’ debt against default has risen to about the level of Morgan Stanley and Citigroup, two less profitable rivals, as Goldman’s regulatory woes take a toll on investors’ confidence and its standing on Wall Street.
Credit Default Swaps (CDSs) leapt to 160 basis points yesterday, a real market sign that this is no slap on the wrist, but a real threat to the most corrupt institution in the world. Couldn't happen to a better bunch of guys! And that's how I REALLY feel!
Marko's Take
Our newest video entitled "Social In-Security: The Problem" will be uploaded in the next 24 hours. You can access all our videos by clicking here: http://www.youtube.com/markostaketv.
Tuesday, March 2, 2010
Government Sachs Under Fire!
Poor ole Government Sachs (sarcasm intentional!). Now, because of all the bad publicity, it seems that they have to disclose, as a "risk factor" of the company, the increasing drumbeat of negative publicity. We, at Marko's Take, are proud to have done our share to contribute to that negative publicity. Could the timing be more than just coincidental (immodesty intentional)?
Recall that just a couple of days ago, we took a hard, long look at the boys behind the curtain (http://markostake.blogspot.com/2010/02/government-sachs-how-big-menace-is-it.html).
Now, Goldman Sachs (GS) has been forced to whine that adverse publicity has become a "risk factor" in its annual report that any investor need to take into account before making an investment in the company (http://online.wsj.com/article/SB10001424052748704754604575095313135203110.html?mod=djemTMB_h). I can't recall such a disclosure in decades of being a professional investor!
In its annual report, the New York company said "adverse publicity" could have "a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations."
The unusual disclosure in a 12-page section of "risk factors", ranging from rocky financial markets to natural disasters, is the latest sign of Goldman's whipping-boy status among rivals, lawmakers and angry Americans because of the firm's giant profits.
Some corporate-governance experts said the move isn't surprising given all the unwelcome attention Goldman has received since the financial crisis erupted. In July, a Rolling Stone article compared Goldman to a "great vampire squid wrapped around the face of humanity." The phrase has been widely repeated in other publications and online, along with Chief Executive Lloyd Blankfein's comment to a U.K. newspaper in November that the firm is doing "God's work." (GOD'S WORK???)
But, before you feel TOO sorry for the boys, GS just released a report, filed with the Securities and Exchange Commission (SEC), confirming what Marko's Take reported in our piece last Friday: they make their money from proprietary trading, not traditional banking or investment banking activities
(http://www.ft.com/cms/s/0/a6ce91f6-256f-11df-9cdb-00144feab49a.html).
According to the report, GS made at least $100 million in net trading revenues on 131 days last year! – equivalent to once every other trading day, according to the filing with the SEC.
Goldman managed the result even as it took greater trading risks in 2009 than in the previous year. Its daily “value at risk” (VAR) – the most that the bank estimates that its traders could lose on a given day – was $218 million in 2009, up from $180 million during the previous fiscal year, which closed in November 2008.
Helps to have friends in high places, NO?
Goldman’s 131 $100 million trading days in 2009 shattered its previous high of 90 days, set in 2008. In last year’s 263 trading days, the bank lost money 19 times, Goldman said in the filing. Its daily losses never exceeded $100 milion. “It’s impressive, but it’s not unexpected,” David Hendler, an analyst with CreditSights said. “They were one of the few games in town in 2009.”
Trading and principal investments, which includes Goldman’s merchant banking activities, account for more than 75% of its total net revenue.
Once we at Marko's Take stop sobbing for poor GS, we would love to field your comments. Think we're picking on them? TAKE ME ON!
Marko's Take
Episode 3 of our new YouTube series is now posted at (http://www.youtube.com/markostaketv). Look for episode 4 exposing the internal machinations of the Federal Reserve to be posted shortly. Federal Reserve? Or do we mean Goldman Sachs? It's tough to tell the players apart without a scorecard!
Recall that just a couple of days ago, we took a hard, long look at the boys behind the curtain (http://markostake.blogspot.com/2010/02/government-sachs-how-big-menace-is-it.html).
Now, Goldman Sachs (GS) has been forced to whine that adverse publicity has become a "risk factor" in its annual report that any investor need to take into account before making an investment in the company (http://online.wsj.com/article/SB10001424052748704754604575095313135203110.html?mod=djemTMB_h). I can't recall such a disclosure in decades of being a professional investor!
In its annual report, the New York company said "adverse publicity" could have "a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations."
The unusual disclosure in a 12-page section of "risk factors", ranging from rocky financial markets to natural disasters, is the latest sign of Goldman's whipping-boy status among rivals, lawmakers and angry Americans because of the firm's giant profits.
Some corporate-governance experts said the move isn't surprising given all the unwelcome attention Goldman has received since the financial crisis erupted. In July, a Rolling Stone article compared Goldman to a "great vampire squid wrapped around the face of humanity." The phrase has been widely repeated in other publications and online, along with Chief Executive Lloyd Blankfein's comment to a U.K. newspaper in November that the firm is doing "God's work." (GOD'S WORK???)
But, before you feel TOO sorry for the boys, GS just released a report, filed with the Securities and Exchange Commission (SEC), confirming what Marko's Take reported in our piece last Friday: they make their money from proprietary trading, not traditional banking or investment banking activities
(http://www.ft.com/cms/s/0/a6ce91f6-256f-11df-9cdb-00144feab49a.html).
According to the report, GS made at least $100 million in net trading revenues on 131 days last year! – equivalent to once every other trading day, according to the filing with the SEC.
Goldman managed the result even as it took greater trading risks in 2009 than in the previous year. Its daily “value at risk” (VAR) – the most that the bank estimates that its traders could lose on a given day – was $218 million in 2009, up from $180 million during the previous fiscal year, which closed in November 2008.
Helps to have friends in high places, NO?
Goldman’s 131 $100 million trading days in 2009 shattered its previous high of 90 days, set in 2008. In last year’s 263 trading days, the bank lost money 19 times, Goldman said in the filing. Its daily losses never exceeded $100 milion. “It’s impressive, but it’s not unexpected,” David Hendler, an analyst with CreditSights said. “They were one of the few games in town in 2009.”
Trading and principal investments, which includes Goldman’s merchant banking activities, account for more than 75% of its total net revenue.
Once we at Marko's Take stop sobbing for poor GS, we would love to field your comments. Think we're picking on them? TAKE ME ON!
Marko's Take
Episode 3 of our new YouTube series is now posted at (http://www.youtube.com/markostaketv). Look for episode 4 exposing the internal machinations of the Federal Reserve to be posted shortly. Federal Reserve? Or do we mean Goldman Sachs? It's tough to tell the players apart without a scorecard!
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