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Oct. 27 2009 - 11:58 am | 311 views | 8 recommendations | 55 comments

Goldman Lobbies Senate, Says Full Transparency Sucks

ALTERNATIVE TRADING PLATFORMS AND THEIR EFFECT ON LIQUIDITY

The equity markets provide perhaps the best example of a highly evolved complex ecosystem, where care must be taken to preserve the benefits that have evolved from competition and innovation…

Crucially, liquidity is what helps to solve this mismatch problem. Market makers that see large volumes are best positioned to match differing size transactions. In traditional exchange trading, bids and offers are public, and this transparency helps buyers and sellers to achieve the best price.

For some market participants, however, the openness and transparency of the equity market actually mean they are unlikely to achieve the best price. The risk, particularly for large transactions such as those undertaken by pension funds or large mutual funds (where most small investors have most of their equity exposure), is that other market participants will use this transparency to undercut the intended transactions.

From a Goldman Sachs lobbying document (emphasis mine)

effective-reg-part-4.pdf (application/pdf Object).

This is from a lobbying document Goldman has been passing around the Senate on financial regulatory reform in general.

There is a lot of crazy stuff in this document, but the most notable is probably this passage, in which Goldman pooh-poohs the notion that complete transparency in markets creates accurate prices.

Instead, the bank argues that an over-the-counter market in which big traders like Goldman get to do deals in the shadows in “dark pools” without the retail investor having any knowledge of what the hell is going on is somehow better for everybody, that this somehow produces better prices. Of course the reality is that the two-tiered system creates one pool of fools whose every movement is visible to every animal on the Serengeti, and another pool of giant bloodthirsty carnivores who get to walk around invisible, picking off the dik-diks one by one.

Everyone I showed this to had the same reaction — “I can’t believe they said this out loud.”

One friend of mine put it this way: say Goldman buys a big block of stock from a pension fund in a dark pool. Now they have shares they want to get out of and flatten out their risk. So where do they sell? Well, a big chunk of it might go to the retail schmuck who has no idea what’s going on. He’s buying 1000 shares of whatever at $28, not knowing that Goldman has another 50,000 shares to go. Next thing you know, the schmuck’s shares are at $27.

Goldman salutes this process, noting the magic of so-called “non-displayed liquidity.” What the rest of us would describe as “hiding shit from the rabble,” Goldman calls “separating liquidity from information about the transaction.” You almost have to admire the sheer balls of this sort of propaganda:

Alternative trading platforms – so-called “dark pools” of liquidity – have evolved to address this problem. They work by separating liquidity from information about the transaction – the participants, lot sizes and transaction prices. Through the process of “non-displayed liquidity”, information does become available to both regulators and the public market – but not until the transaction is complete.

God bless this company. They’re never boring, that’s for sure.


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  1. collapse expand

    I’m sure there are a number of common literary reference for the situation where an organization of society has become dependent on something so large that only a group of clergy can run it, but that no one fully understands and that consequently runs completely out of control while the clergy continue to make everyone swear fealty to their little tin God. I can’t think of anything outside of science fiction, but there must surely be an obvious reference from antiquity.

    You have to dig the Chinese in this kind of situation. They’ve got their issues to be sure, but they’ve also got the death wagon zooming around the country giving corrupt officials and executives the mobile death sentence. Honest to God I’d like to be able to fear government again sometimes. At least we could fear someone who gets shit done.

  2. collapse expand

    US legal definitions: Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.

  3. collapse expand

    Excellent article, Matt. Here is a short poem I wrote that follows your analysis with our economy as a strip club.

    Naked Short Selling
    10/15/08
    The economy is now a strip club
    As Wall Strippers work the poles.
    But we’re the ones getting stripped this time
    From bets Wall Strippers sold.

    The Strippers parade on decaying stage
    With thong rule regulations.
    Goldman Sachs and Lehman Brothers
    Bring thoughts of regurgitation.

    The traders froth in the shadows
    And raise markers as they’re yelling.
    Hedge funds plunge with tinier thongs,
    It’s just about naked short selling.

    9 million trades on hedge funds
    With no delivery in five days,
    Bring phantom stocks that drop other markets
    And traders get a raise.

    Seven hundred billion is thrown
    To the Wall Strippers who want more,
    But banks won’t loosen lending belts;
    They’re not stripping for a class war.

    The shadows in the strip club
    Are stark with criminal shares,
    The Federal thong hangs by a thread
    But they got us by the short hairs.

    Thanks, Matt!

    http://www.BabblingOnInBabylon.com

  4. collapse expand

    You’re right, this IS ballsy document. Reading over the 1st few pages, I went from thinking it was double speak to thinking, damn, they’re just putting it out there and counting on congress to bite – complete with dark pools (sounds better than cesspools?) of liquidity.

    Even the preamble is a sight to behold, from its heading, “No idea is so good that it can’t be misapplied” to the 2nd paragraph:

    >Many good ideas aimed at reducing systemic risk and improving fairness for all market participants are now under consideration. But good ideas do not necessarily guarantee good outcomes. Execution and application matter. Securitization is an excellent example of how a good idea, when applied badly, can go terribly awry. In response to the banking crises, securitization was embraced as a means to reduce risk at individual banks. It worked – local banking problems became fewer and more easily managed. But when securitization was applies to low-quality assets and improperly used by banks to exploit gaps in regulatory oversight, it helped to create the current crisis.

    Holy projection of your company’s ills, Batman! More like bat-shit crazy.

    Going on the honey bee analogy (Mormons, you taking note?) to “Credit Default Swaps can lower corporate funding costs” to more on dark pools – you’d think it can’t get any loopier than this, but it most surely will.

    A week ago a co-worker was saying they didn’t understand the financial markets so she didn’t invest. I responded with “they don’t want you to understand.” At least she’s wise to stay away; Goldman and their ilk are counting on uninformed “investors” to line the muckety-mucks’s pockets, not giving a damn about any one else’s empty accounts.

  5. collapse expand

    “God bless this company. They’re never boring, that’s for sure”

    Heh. Boy howdy.

    Denniger adds a bit to this IMO: http://market-ticker.denninger.net/archives/1545-Goldmans-Dissembling-Dark-Pools-.et.al..html

  6. collapse expand

    Matt, keep digging on this issue. The rational they use to justify these Dark Pools is entirely false. Dark Pools allow for someone to trade securities while against other traders while being able to see their hand (short term trading is a zero-sum game). Instead of enhancing liquidity, it allows these guys to create arbitrage opportunities providing guaranteed profits by having an outside market to trade against.

    Another thing to look into…their relationship w/ Spear, Leeds & Kellogg. People have been speculating for years that this relationship allows them to trade against other accounts, squeeze hurting shorts, and use buying information to help their prop accounts. Chinese wall my ass…

  7. collapse expand

    What’s even more disturbing than the gall it takes to submit such a document to congress is the fact that they (congress) will more than likely agree with them and possibly even loosen the already non-existent oversight.

  8. collapse expand

    Liquidity is a false god. The abuses done in the name of liquidity far outweigh the benefits. Investors need to look at stock investments as they would buying part ownership in a new restaurant. Stocks are not CD’s.

    If Goldman worships at the altar of liquidity, perhaps they could buy some of the houses in my neighborhood that have been on the market for three years and counting.

    • collapse expand

      I agree actually, but for this we’d have to somehow encourage businesspeople to go back to being businesspeople. Sometime in the 1980s finance became synonymous with business and while finance is of course very important (for obvious reasons) it should be subordinate to the primary focus of the business itself. Every company cares about its stock price and its financial health, but when you look at real businesses that focus first on their primary business and subordinate their finances to their business goals you see much healthier long term companies.

      I’m no Apple fanboy and Steve Jobs seems like a bit of a domineering prick (and a product marketing genius), but if you read the corporate history of Apple with him at the helm and then read about it under guys like Scully and Amelio you can see the difference. One guy wants to run a company that “changes the world” (to borrow their phrasing) through its products and the other guys want to meet quarterly targets and such.

      Libertarians and economic conservatives don’t like concepts like this because they can’t be quantified, but the truth is that what you care about has a major effect on the way you make decisions and the person at the top sets the tone for the organization. Wanting to accomplish a non-financial goal isn’t a guarantee of business success, of course, but Southwest under Kelleher, Apple under Jobs, EDS under Perot, even A&F under Jeffries (who creeps me the Hell out) are companies that of course have financial goals, but have some larger objective as their first priority in a meaningful way. I’d even go so far as to say that a mega-conglomerate like Exxon-Mobil under Lee Raymond (whether you like their business or their politics, I don’t) had a clear vision and was run a certain way with a certain philosophy – the result being stability.

      Why this all matters with respect to financial outfits like Goldman is that companies run by people who have a vision for their company are less likely to whore themselves out to the market for extra capital that they don’t really need to accomplish objectives that they don’t really fully understand (and therefore can’t metabolize) as part of a broader business vision. If these companies aren’t leveraged to the hilt then they’re much less susceptible to the kinds of financial games played by companies like Goldman. They hoard capital, focus on a strategic vision and pursue that vision. Other companies that are focused on finance as their primary goal are often either constantly bobbing up and down or given to a lofty ascent followed by a precipitous collapse. They’re not running a business to accomplish business goals, they’re running a business as a financial concern focused entirely on churning money through. Obviously this can and does work for a lot of major companies, but it’s not a healthy way to run a company because it leads you to do stupid short term things like gut your pensions and benefits, leverage yourself to get into new areas that the market favors at the moment and take other risks that have no long-term strategic value and offer short-term benefits at long-term expense.

      Another way this ties back into financial companies like Goldman or Lehman or AIG is that these companies are being eaten alive by the sharks that they produce. They almost (sometimes outright) freely admit that they don’t understand what goes on in their product divisions, yet they reward transactions and fees based on today’s value and today’s expectations, meanwhile leveraging themselves to the hilt and making themselves prime candidates for collapse. When we’re in a position where people are seriously discussing regulations that amount to prohibitions on employees acting to destroy their employer you know we’ve gone round the bend. The reason we are in this situation is exactly related to something Matt mentioned in his first article on Goldman – the one that talked about how Goldman for decades was a company that was “long-term greedy.” The reason cited is often that it was run as a partnership, but the fact that it was run as a partnership was a function of the personality of the people in charge. They felt they had a stake in the company and they felt like enfranchising people with a partnership in that company produced a more stable company in the long-term. Lewis talks about the way this all changed in the 1980s with Salomon under Gutfreund making the decision to whore itself out to the very markets it manipulated for more capital against the wishes of all the other stakeholders.

      There’s no easy way out of this mentality, but it starts by fetishizing business instead of finance and elevating the concept of doing a good job at a company’s core business ahead of jerking off analysts and running up imaginary profits. People have to be in their business to be in business, but as long as we teach people that “A corporation’s sole responsibility is to make a profit for its shareholders” and compensate them like a crack dealer running a bunch of drug mules we’ll continue to get exactly what we’ve gotten. There was no magical golden era of business, but there was a time when businesses were in business for the long-term and (in large part) treated their employees and customers and competitors as such. It was a less efficient time with problems and excesses and it required the hard work of political and labor activists and other people to achieve, but our economy didn’t blow itself up every ten years, the living wage for the average worker actually rose and the entire country wasn’t drowning in personal or corporate debt.

      In response to another comment. See in context »
      • collapse expand

        “Libertarians and economic conservatives don’t like concepts like this because they can’t be quantified,…”

        Geez, are you bent, expat! It aint’ that they don’t care for unquantifiable concepts, it’s that they are destroyers, not creators like The Woz and Jobs!

        Also, puuuhlease don’t include Perot of EDS, who got into the Naval Academy thanks to his bro-in-law, (Pansy) Ramsey Clark, and got out of serving his full military obligation for his tax payer-paid for Academy education, thanks to his bro-in-law, Ramsey Clark, then got sweatheart government contracts due to his bro-in-law, then Attorney General of the DOJ, Ramsey Clark. Stick with the facts, please!

        The situation is simply that debt-financed billionaires looted the American economy, saddling the rest of us with their debt (which they made their loot off of selling, thanks to their bribed for restructuring of the tax laws under Carter, Reagan, Bush, Clinton & Bush).

        We are now in a forever debt-deleveraging until a very bloody revolution transpires.

        In response to another comment. See in context »
        • collapse expand

          “Geez, are you bent, expat! It aint’ that they don’t care for unquantifiable concepts, it’s that they are destroyers, not creators like The Woz and Jobs!”

          Eh, I don’t think that’s fair. A lot of libertarians are plenty creative, they just have a bent worldview from my perspective that favors internal consistency over all else. Some of them are just plain rapacious assholes using the ideology as a disguise for looting while others are quite sincere, but the end result is the same. I certainly wouldn’t describe myself as bent for noting this, but to each his own!

          “Anti-Perot rant”

          Presumably his brother in law didn’t create his business empire out of nepotism and run it successfully for decades. How he got into or out of the naval academy has very little to do with his business history – so while you may hate him it’s you who needs to stick to the facts. On a side note, the guy managed to get No Pass No Play through the Texas legislature and was way out in front of NAFTA, helping to unseat George H.W. Bush, so he’ll always have a special place in my heart.

          “The situation is simply that debt-financed billionaires looted the American economy, saddling the rest of us with their debt (which they made their loot off of selling, thanks to their bribed for restructuring of the tax laws under Carter, Reagan, Bush, Clinton & Bush).”

          With a gun? Did they show up at every company with a gun and force them to leverage themselves to the hilt, making themselves attractive targets for hostile takeover and M&A shops? Sure, once they built momentum by rolling a number of companies, aided by the newly complicit Reagan-era (and post-Reagan-era) SEC, they had a lot more leverage, but they got started by exploiting the greed of the large corporations. Hey, if you agree to go public we’ll get you all this great capital! Six months later they’re taking over, gutting pension plans, laying people off in droves and selling off assets.

          The world doesn’t get to be black and white for liberals or conservatives.

          In response to another comment. See in context »
  9. collapse expand

    Matt, for a better explanation of whats going on, read this: http://market-ticker.org/archives/1545-Goldmans-Dissembling-Dark-Pools-.et.al..html

    It’s arbitrage, pure and simple.

  10. collapse expand

    Until we have public financing of campaigns. we will have a Congress bought and paid for by the plutocrats, GS being a prime plutocratic entity (“person” under an odious 19th century law declaring corporations to be persons) and very strong lobbying reform, they will get away with these lobbying talking points (no matter how nakedly their scams are revealed in them). The only encouraging thing today is the mass protest against the banksters in Chicago.

  11. collapse expand

    GS must know they have Congress in their back pocket. Jim Jubak at msn.com money has a good piece today on how Goldman and the other “banks” are taking advantage of the taxpayers who bailed them out last year.

  12. collapse expand

    I hope someone keeps an eye on this. If the Senate falls for this and Goldman gets its way, I sure as hell want to know about it.

  13. collapse expand

    I can understand Goldman’s fondness for dark pools. When they pull down their pants in front of us, it makes their ‘moons’ so much brighter!

  14. collapse expand

    Here you go, Matt. This ‘ll get your panties in a wad:

    http://investorvillage.com/smbd.asp?mb=971&mn=309294&pt=msg&mid=8111507

    By the by. I can give you so many of these type stocks, you’d flat out heave. Seems there is a heavy lean on life-saving biotechs. After all, what’s Grampa writhing around in pain, wasting away to 90 pounds when there is money to be made?

  15. collapse expand

    I agree, they are shameless self-serving thieves. So what else is new? Scumbags have existed from the time that life first crawled out of the primordial scum. But throughout most of history, some predator or some badass has always come along to put the scumbags in their place, in their belly, or in the ground. The real violation of Darwinism here is the fact that our congress is feeding our carcasses to these scumbags, all the while passing laws that make whatever they want to do not only legal, but rewarding! We need a congress that will issue scumbag hunting licenses and put a bounty on scumbag scalps. By the way, it was recently reported that Bernie Madoff is eating pizza in prison that was made by a child molestor. It may be an anomaly, but at least it shows that the world is not completely void of karmic justice. I just hope the child molestor doesn’t wash his hands before serving Bernie his slice.

  16. collapse expand

    Goldman Sachs was NOT ‘naked shorted’ – correct !?
    Unfortunately it is only securities criminals so far who owe you a debt of gratitude Matt,not those of us who have had our assets stolen and our lives threatened for complaining about those making fraudulent claims about shell companies and now Fannie Mae,Freddie Mac and even your favorite stock Goldman Sachs being – ha ha – victims of ‘naked shorting’.
    Here’s a link to the scumbags such as Bud Burrell and Patrick Byrne and Mark Faulk and David Patch who threaten my life for telling the truth that your and their naked short claims are lies just as ex SEC Chairman Chris ‘Naked Shorts’ Cox lies about Fannie Mae,Freddie Mac, AIG and Goldman Sachs being victims of ‘naked short selling’ and allow Patrick Byrne to lie and host websites with stock fraud from Overstock.con that bribed ex Utah Gov Jon Byrne(now Obama’s China Ambassador)to claim his pump and dump frauds including Novastar Financial of Lanny Davis were victims of ‘naked short selling’.

    http://www.thesanitycheck.com/

    While they threaten my life with SEC’s blessings they love you.You should be proud.You by misinforming the public about the real causes of collapse of Fannie Mae and Freddie Mac may be helping Rahm Emanuel and Barney Frank’s boyfriend Herb Moses and their ilk escape responsibility you are also aiding the largest fraud and theft against the Americn public in history.Chris Cox of Enron fame thanks you.Florida’s Allen Grayson is correct about that Enron lobbyist.She is a pimp for more fraud against the American public.War fraud has led to massive stock fraud.

    Testimony Concerning Turmoil in U.S. Credit Markets: Recent …23 Sep 2008 … by Chairman Christopher Cox U.S. Securities and Exchange Commission …. Freddie Mac, and AIG, as well as the failure of Lehman Brothers and IndyMac. … This potential for unfettered naked shorting and the lack of regulation in this market … http://www.sec.gov/news/testimony/2008/ts092308cc.htm
    http://www.sec.gov/news/testimony/2008/ts092308cc.htm

    FOXNews Alan Grayson calls a whore a whore– Beltway whores freak out …‎ – 7 hours ago
    Beltway Insiders are beginning to realize that attacking Alan Grayson comes with a price: you get crushed… like a bug. Before Grayson went off to law …Huffington Post (blog) – 167 related articles »

  17. collapse expand

    “Consider the honey bee” (p. 3 of the GS link)

    OK, let’s consider the honey bee:

    For thousands of years, apes have taken honey from bees, usually stealing it and leaving a mess of a hive and nursing stings.

    Somewhere along the line a thoughtful ape figured out that if you take most of the honey but leave enough for the bees, the bees will put up with the theft – especially if first pacified with smoke (smoke informs the bees that there is a threat to the hive – fire – and that they’d better load up on honey and prepare to flee; never mind the ape).

    If managed thus, not only would the bees tolerate the theft, they’d be there the next season. Eventually, the apes even built portable homes for the bees, which the bees accepted.

    Then along comes an ape who thinks he’s smarter than the other apes, and even has an MBA – master’s in bee administration – to prove it. This ape hates to leave a hive with even a drop of honey. It’s a sign of waste. So this ape raids the hive, takes all the honey, and leaves a syrup made from high-fructose corn syrup (CDO) with added nutrients (CDS) behind for the the bees.

    Then all the bee-keeping apes begin to wonder why the bee colonies are failing. They look to the ape with the MBA and shout “J’accuse!” The ape with the MBA, having shared his honey with apes in influential positions, nods knowingly and begins writing bullshit papers suggesting, “Consider the honey bee…”

    Forget the honey bee; she’s alright if left alone to do her business; treated well, she’ll produce a surplus. But fuck that smart-ass ape with the MBA.

  18. collapse expand

    A must see video
    http://www.youtube.com/watch?v=VebOTc-7shU

    Watch this video and you’ll see why all liberals and moderate republicans should be voted out of office. Lets start taking our country back.
    Cybercorrespondent
    http://cybercorrespondent.blogspot.com

  19. collapse expand

    Meanwhile, back at the ranch…

    http://www.newdeal20.org/?p=5706

    Goldman Sachs abandons kittens (we’re not making this up)
    Saturday, 10/24/2009 – 7:10 pm by Lynn Parramore

  20. collapse expand

    Take a bat to the M-Fers!

    You know the words in these documents don’t really matter. The Congresspeople just need a buzzword they can use for the Sunday morning shows.
    News Jackal: How can you justify voting to give massive handouts to the very wealthy?

    Congress Zombie: It’s not a handout, it’s a liquidity guarantee.

  21. collapse expand

    The problem with reading Mr Taibbi is that I am working in a small office in Cape Town and the walls are not very thick.
    My uncontrolled laughter upsets many of my neighbours.
    They don’t know of course that I am laughing and crying at the same time.
    Great job!

  22. collapse expand

    GS: “The risk, particularly for large transactions such as those undertaken by pension funds or large mutual funds (where most small investors have most of their equity exposure), is that other market participants will use this transparency to undercut the intended transactions.”

    Now waitamminute, wasn’t it just a few months ago that Goldman Sachs argued in court that it possessed a computer program to undercut [other people's] public transactions by making massive high-frequency trades? (The court cased involved some dude supposedly stealing it. It’s in Matt’s archives for July, too lazy to look it up.)

    I guess Goldman knows from whence they speak, when they talk about undercutting.

    Put these two facts together and you have Goldman arguing openly that it makes money by sitting in the dark and undermining other people’s trades, people who have no “dark pools” to sit in. Goldman is arguing that it’s good when _they_ can do that to _other_ people, but _bad_ when _other people_ can do that to _them_. Just one of the perqs of being “too big to fail,” I guess.

    Official Pentagon policy: _U.S._ nuclear weapons are “instruments of peace” and promote _stability_. _Other_ countries’ nuclear weapons are tools of aggression and a _threat_ to stability.

    Goldman Sachs policy: _Our_ market manipulation is done to create prosperity and to stabilize the market. _Other_ peoples’ market manipulation is done to make a quick buck at the expense of average citizens and small investors.

  23. collapse expand

    Well, geez, of course Goldman Sachs (and JPMorgan and Morgan Stanley and gang) don’t want any transparency, else people would start paying attention to JPMorgan’s huge mortality swaps with other corporate reinsurers, and Goldman Sachs’ mortality derivatives trading, and mortality swaps and their latest scam, their mortality index, QxX.

    Then they might begin to put two and two together, a real change for arithmetic-challenged beer-commercial-drooling, sports fans’ Americans! And adding those two colossal numbers would yield the following: if GS and JPM and MS utilized naked shorting to trigger credit events to yield major credit default swap payouts, what would they do to manipulate and speculate on a mortality swaps market, especially since they will follow their normal procedure and begin selling swaps and CPDOs based upon those mortality indices.

  24. collapse expand

    You can always tell when business people are trying to do a flim-flam on you… they resort to scientific-sounding metaphors such as “highly evolved complex ecosystem.”

    Bet that one causes Senators’ eyes to glaze over within five seconds.

    I still remember some numbnuts salesman trying to sell me a surfactant that was basically ordinary soap for $19/quart, and his pitch was, “do you realize that there are six thrillion cells in the human body and they all need water to move nutrients?”

    Okay, asshole, how many zeroes in a thrillion?

    Next thing you know, Goldman Sucks is going to be dredging up social Darwinism and phrenology in their neverending quest to defend the indefensible.

  25. collapse expand

    As much as this outrages me, I can’t say I’m surprised. It seems that these large banks have the administration by the balls, scaring them with “if you don’t do this we will fail, then the country is fucked.” It’s akin to JP Morgan loaning the Brits and French billions of dollars preceding America’s involvement in WWI, except instead of fighting some reckless militarized German state to save JP Morgan (who was too big to fail at the time), we’re rewarding the very same banks that all but ensured their own downfalls without getting rid of any enemy (in this case greed and/or overt risk taking and/or lack of transparency).

    Obama’s been woefully ineffective in his first six months in office, allowing the public option clusterfuck to happen (stay on message!) and now embarrassing revelations about our involvement in Afghanistan and its Musharaff-esque president are being leaked to the press (get a lid on it, Rahm). It’s the 1990s Democrats all over again, just new(er) players.

  26. collapse expand

    Matt, speaking of Goldman demanding that no one regulate it, you should read this article by James Lieber: “We’ve Bailed Out The Banks. When Do We Go After The Crooks Behind Our Financial Collapse?”

    http://www.villagevoice.com/2009-10-27/news/we-ve-bailed-out-the-banks-when-do-we-go-after-the-crooks-behind-our-financial-collapse/

    In a nutshell – the people who defended the banks and companies who got us into this financial hell are the same persons Obama has appointed to regulate the – banks and companies who got us into this hell. Depressing.

    BTW – the reason I discovered this article was because I saw it this morning on the cover of ‘SF Weekly’. It was impossible to ignore the cover – it wasn’t just because it was in lurid red and black but because the screaming people on it were all brandishing torches and swords wrapped in barbed wire. (In other words, they weren’t happy!) This kind of lurid headline is usually not something you find in touchy-feely San Francisco – most of the people here think World War II could have been prevented if someone had just given Hitler a great big hug. So the fact that a SF mag is running this kind of enraged headline is fairly significant. Obviously it’s no longer just the tea baggers who are pissed off.

  27. collapse expand

    Well, actually Matt, Goldman is able to talk about large trades with a straight face because, again, sorry about this, but, uh, it is true. With a lack of liquidity in the market of a transaction of a particular size, the last thing you want to do is advertise it. There are basically two ways to do the trade and both are good for the seller and buyer, and also good for the market since it is much less disrupting. One, have your financial counterparty sell (or buy) the trade in drips and drabs over time. This doesn’t disrupt the market pricing and is fair to everyone. The other is to simply give the huge trade to a bank all at once. The bank then warehouses the risk to offset another position or more likely, it will then unwind the position in the market in smaller increments. In your example, you are worried about the guy who buys from GS but doesn’t know that there is alot more coming down the pike? Well, think about it….if GS owns a large position, aren’t they in the same position as the guy they just sold 50k shares to? If that guy gets hurt, then GS gets hurt too, so the LAST thing Goldman would want to do is unwind the position in a manner that moves the market. So they manage the position, selling in periods of liquidity and if they are smart – and lucky – they will make money on the trade. The very last thing they want to do is tell everyone in the market what they are going to do before they do it. The conversation would go like this – the market is 50 bid/51 offered and eveyrone knows GS has a ton to sell, they call another bank and ask, “can you make me a price?” What would you make them? And might you not front run the transaction since you know GS and this customer have a large position to unwind. The price moves and you and your customer get screwed. It would be like playing poker where everyone could see your cards.

  28. collapse expand

    “God bless this company?” LOL, Are you Agnostic Theist now, or did they finally get to you down in TX?

    Great prose!

    Peace,

    CREED

  29. collapse expand

    Just saw this. Any thoughts Matt?

    NYS Halts Mandatory Vaccines As Goldman Sachs Connection Exposed
    http://www.campaignforliberty.com/blog.php?view=26793

  30. collapse expand

    So, Goldman wants to keep its transactions a secret because it will tip off the rest of the market, yet they use “high volume trading” — as I understand it — to get a jump on the rest of the worlds transactions and buy/sell ahead of their intended transaction… Is that correct?

    The little guys doesn’t have a chance…

  31. collapse expand

    “Dark pools?” That’s almost as funny as Enron naming one of their fake energy-shuffling services “Death Star” — except that even Enron didn’t whip that shit out in front of Congress. With a straight face, no less.

  32. collapse expand

    Matt —

    You know that most pension funds would agree with Goldman here, right? I’m not arguing that the overall message about dark pools is wrong, necessarily, just that pension funds have a reputation as big, lumbering mammals — think not dik-dik, but prehistoric tree sloth. And there are a number of ways in which they can get bitten when trying to sell, say, 500K shares of IBM. I’m a biz reporter, so if you ever want to discuss these things, try me…

  33. collapse expand

    Hey Matt, not to change the subject too much… I was wondering if you have been watching the GS involvement in the pending doom at CIT. It seems they are sucking the last bits of blood from the dying carcuss in their typical extortional ways. 100s of millions (in fees) are flowing to Goldman. Something to keep an eye on. Appreciate your interpretation, since I (the public) am not very good at reading between the lines.

  34. collapse expand

    THE NAMING OF WALL STREET FAT CATS
    THE NAMING OF WALL STREET FAT CATS
    (The Naming of Cats, Old Possum’s Book of Practical Cats, TS Elliot)
    WilliamBanzai7’s Book of Wall Street Fat Cats

    The Naming of Wall Street fat cats is a difficult matter,
    It isn’t just one for bank holiday chatter;
    You may think at first I’m as mad as Cramer the CNBC hatter
    When I tell you, a fat cat must have THREE DIFFERENT NAMES.
    First of all, there’s the name that the trader’s use daily,
    Such as Jimmy, Dickie, Kenny or Jamie,
    Such as Henry or Lloydie, or Johnny or Bernie -
    All of them sensible everyday names.
    There are fancier names if you think they sound sweeter,
    Some for the gentlemen gangsters, some for the dames:
    Such as Maestro, Gorilla, Bandit and Ace -
    But all of them sensible everyday names.
    But I tell you, a fat cat needs a name that’s particular,
    A name that’s peculiar, and more infamous,
    Else how can he keep his pinstriped network reticular,
    Or save his whiskers, and cover his backside?
    Of names of this kind, I can give you a quorum,
    Such as Bootstrap, Lucky-me, or Will Con-you,
    Such as Ponzo, or Boeski and Screwless Ken Lewis -
    Names that never belong to more than one fat cat.
    But above and beyond there’s still one name left over,
    And that is the name that you never will guess;
    The name that no financial sleuth can discover -
    But THE WALL STREET FAT CAT HIMSELF KNOWS, and will never confess.
    When you notice a fat cat in profound meditation,
    The reason, I tell you, is always the same:
    His mind is engaged in a rapt contemplation
    Of the thought, of the thought, of the thought of the name of:
    His ineffable effable
    Effanineffable
    Latest, deepest and inscrutable CON GAME.

  35. collapse expand

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    I'm a political reporter for Rolling Stone magazine, a sports columnist for Men's Journal, and I also write books for a Random House imprint called Spiegel and Grau.

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