Posts Tagged
‘conflict of interests’
by ilene - October 13th, 2010 1:42 pm
Courtesy of Bruce Krasting
Thank heavens for the Federal Reserve. Were it not for them our deficit would have been 6% higher in the just ended fiscal 2010. The hard working folks at the Fed have contributed a net of $76 billion to the general revenue. They are now earning at a rate equal to 1/3 of all corporate tax revenues. Think of that, just a handful of people are making one third of what our largest corporations contribute. Talk about doing some heavy lifting!
I, and a few thousand others, have been bashing the Fed on a nearly daily basis. But actually we should be dishing out some praise for a job well done. $76b still goes a pretty long way these days. The even better news is that in 2011 the Fed will make us even more money than last. Way to Go Ben B! Here’s how they made the long green:
A graph of the Fed balance sheet as of 9/30. The total balance sheet comes to a modest $2.2 trillion. The net income generated from all these holdings is the $76b estimated by the CBO:
The net income number comes to an interest spread on the portfolio of 3.45%. There are some folks in the portfolio management business who would die for that result. The Fed did it the easy way. They borrowed money at no cost thanks to ZIRP.
We know the Fed is going to be buying in more paper during 2011. Jon Hilsenrath at the WSJ tells us that just about every day. If you don’t believe him just read the Fed minutes. QE-2 is baked in the cake. The leaks and guesses suggest that we are looking at another Trillion of POMO buys over the next year. The thinking is that the Fed will acquire a portfolio with an average maturity of around seven years. The yield on that maturity today is about 1.8%. Based on that a pro-forma look at the Fed BS a year out:
Assets: 3.2 Trillion
Income: 94 billion
…
Tags: conflict of interests, Interest Rates, the Federal Reserve
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by ilene - August 23rd, 2010 12:37 am
"HE WHO LOSES WEALTH LOSES MUCH; HE WHO LOSES A FRIEND LOSES MORE; BUT HE THAT LOSES COURAGE LOSES ALL." MIGUEL DE CERVANTES
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The Icelandic Chamber of Commerce commissioned ex-Fed Governor Mishkin to write a glowing report on their economy, even while the country was being destroyed from within by a rogue banking system and a corrupt regulatory regime.
Tags: conflict of interests, disclosure, Fed Gov. Mishkin, Icelandic Economy
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by ilene - April 16th, 2010 12:33 pm
Courtesy of Zero Hedge
Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.
The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.
"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."
Kenneth Lench, Chief of the SEC’s Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."
The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.
According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.
The SEC’s complaint alleges that after participating in the…
Tags: CDO, collateralized debt obligations, conflict of interests, Credit Default Swaps, FINRA, Fraud, Goldman Sachs, Housing Market, Paulson & Co., reality, RMBS, Robert Khuzami, SEC, Securities and Exchange Commission, short interest, subprime mortgages
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by ilene - November 19th, 2009 12:13 am
Ryan Grim is the senior congressional correspondent for the Huffington Post, former staff reporter with Politico.com and Washington City Paper, and author of the book, "This Is Your Country on Drugs." Ryan won the 2007 Alt-Weekly Award for best long-form news-story. – Ilene
Courtesy of Ryan Grim
Article appears originally in the Huffington Post
As the debate over an audit of the Federal Reserve intensifies in the House, one camp is trotting out eight academics that it calls a "political cross section of prominent economists."
A review of their backgrounds shows they are anything but.
In a letter to the House Financial Services Committee earlier this month, all eight wrote that they support the type of amendment now being introduced by Rep. Mel Watt (D-N.C.). Watt’s approach purports to increase Fed transparency while it actually would tighten restrictions on any audits that could go forward.
The letter was sent around Wednesday by Watt’s staff to members of the committee in advance of a vote scheduled for Thursday.
Watt’s measure is in competition with an amendment cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), which would repeal the restrictions that Watt leaves in place.
But far from a broad cross-section, the "prominent economists" lobbying on behalf of the Watt bill are in fact deeply involved with the Federal Reserve. Seven of the eight are either currently on the Fed’s payroll or have been in the past.
The Fed connections are not outlined in the letter sent around to committee members on Wednesday, but are publicly discernible through a review of their resumes, which are all posted online.
In September, Huffington Post reported that the Federal Reserve has accomplished a soft form of effective control over the field of monetary economics simply by employing — and being the means for career advance — for an overwhelming proportion of the discipline.
Now that the Fed is locked in a legislative battle on the Hill, it can call on those economists to give their "unvarnished" opinions to lawmakers.
The connections that the seven economists lobbying Congress have to the Fed are not incidental and four of them maintain current positions.
Let’s run the traps:
Frederic Mishkin is a former board member, having served from 2006-2008. His career at the Fed…
Tags: Americans for Financial Reform, Audit the Fed, central bank, conflict of interests, economists, lobbyists, political pressure, the Federal Reserve, Wall Street banks
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by ilene - October 14th, 2009 3:22 pm
More links in the most mind-boggling conflict of interest network ever. - Ilene
By Robert Schmidt, at Bloomberg
Oct. 14 (Bloomberg) — Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms.
The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.
As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations…
Continue reading Bloomberg article here. >>
Photo courtesy of Free Foto.
Tags: conflict of interests, Geithner, Goldman Sachs, Ponzi scheme, Sachs, Sperling
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site