Feds Probing JP Morgan Silver Manipulation as Merkel Sounds Defiance to the Banks

"German Chancellor Angela Merkel accused the financial industry of playing dirty. 'First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to launch recovery packages, which increased our debts, and now they are speculating against these debts. That is very treacherous,' she said. 'Governments must regain supremacy. It is a fight against the markets and I am determined to win this fight.'"

UK Telegraph

The story of this crisis is the people versus the Banks. The largest mistake that Europe made was in bailing out their biggest banks, and not simply nationalizing them. But that would not have resolved the problem of the gangs of the New York and London, and their partners in the hedge funds and the ratings agencies.

I do not wish to sound pessimistic, but it will be a surprise if the US under the Obama Administration does anything meaningful and significant to curb the abuses of the large Wall Street firms. While the corruption in the campaign financial process and the revolving door between government and the Street remains open the progress to reform will remain a diversion at best.

NY Post
Feds Probing JPMorgan trades in Silver Pit
By MICHAEL GRAY
May 9, 2010

Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.

The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.

The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.

The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.

JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.

Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.

JPMorgan has not been charged with any wrongdoing.

The DOJ and CFTC each declined to comment, as did JPMorgan.

The investigations stem from a story in The Post, which reported on a whistleblower questioning JPMorgan's involvement in suppressing the price of silver by "shorting" the precious metal around the release of news announcements that should have sent the price upwards.

It is alleged that in shorting silver, JPMorgan sells large blocks of silver option contracts or physical metal -- actions that would bring down the price of the metal -- closely following news that would otherwise move the metals higher.

Last week, The Post got a telling e-mail the Justice Dept. sent to a concerned investor. "Thank you for your e-mail regarding allegations that JPMorgan Chase, and perhaps other traders, are manipulating the silver futures market," the e-mail read.

Telling, indeed, as the concerned investor, in an e-mail to Justice's Anti-trust division, never mentioned any companies or traders.

Currency Wars: Markets Shudder on Downgrade of Spain

There was unusually heavy put buying yesterday in NY markets on the Spanish stock index ETF.

Lzst month a group of US hedge funds were investigated for collusion in planning short selling assaults on the euro. Having exhausted the developing world, which has largely tossed them out, have the economic hitmen finally turned on the developing world as we forecast in 2005 that they would?

This is not to say that Greece, Portugal, or Spain are without problems or fault. There is a general crisis in many of the developed country fiat currencies, including the United States. The rising price of gold and silver, despite the heavy handed manipulation by a few of the banking centers, is a sure sign of a flight from paper controlled by central banks.

The US financial interests have been shown to exercise a disconcerting amount of control over the three US-based Ratings Agencies. I wonder how long it will be before any of the US states will have their credit ratings downgraded, and how those attacks might be structured. I am sure the government would then act to curtail their naked shorting and market manipulation activity.

As the NY based stock tout crowed on Bloomberg this morning, "The US can inflate its way out of this crisis much more easily than can any other country." Well, it is an advantage to own the printing press, and to control key elements of the global financial system.

And it makes one wonder how long the economic predators will be given free rein by the co-opted regulatory agencies and government in the US, which cannot even pass a motion to debate financial reform to the floor of its Senate. I would suggest that the debate, even when it moves forward, will not produce anything sufficient to promote a sustainable recovery. That is why this debate must move now to the floors of Parliaments and legislative bodies in the rest of the world. And there has to be much more openness compelled from their central banks with regard to private dealings with the US Federal Reserve. It is now a matter of national priority.

Wall Street Journal
Euro Drops To New One-Year Low On Spain Downgrade
By Bradley Davis
April 28, 2010

NEW YORK (Dow Jones)--The euro dropped to a new one-year low Wednesday as a ratings agency downgrade of Spain sent a rush of fear through markets that a sovereign debt crisis was spreading across the euro-zone periphery.

The euro dropped to $1.3129, its lowest level since April 2009, on Standard & Poor's downgrade of Spain's long-term debt, which was accompanied by a negative outlook. The downgrade follows S&P's slicing of the ratings of Greece and Portugal Tuesday, which sent the euro plummeting.

"The deep-seated nature [of the euro-zone sovereign debt crisis] is only now being realized by the markets," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J, "and we're looking at a potential funding crisis" of government and corporate debt in the euro-zone periphery "in the not too distant future."

Other ratings agencies are likely to follow with additional downgrades, analysts said, which will send the euro even lower...

The Financial Crisis: Are We All Responsible?

"Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease, but the very existence of a society." Samuel Johnson

As the hearings and scandals progress, and the revelations and charges start to cut closer to the heart of the credit swindles, inevitably there will be a movement to say, "We are all responsible. Let's allow bygones to be bygones, it was all a misunderstanding. Let's move on to something new. Justice is not important, and cannot be done."

There will be long accountings of how the problems arose, and how changes in the banking laws, broker deregulation, and the erosion of elite privileges compelled the Wall Street banks to take more and greater risks, to violate unspoken understandings about customer relationships, to take great risks, to bend the laws, to use money and influence to suborn perjury and the breaking of oaths, and to generally undermine the fabric of government.

There will be long analyses that suggest that trust has been lost, the trust that binds the social and financial interactions of people. And there will be an effort to regain that trust, to promise change and reform, and of course, justice.

As for justice they will say, but aren't we all responsible? Didn't we all believe the promise that 'greed is good?'

No.

The overwhelming majority of people are hard working, honest in their dealings, more concerned with raising families than ruling others, if anything distracted by their day to day problems. Long suffering, patient to a fault, too willing to the give the Wall Street bankers the benefit of the doubt for the very reason of their own good natures. They could not imagine themselves doing the things of which these men stand accused, so they cannot believe that others would so willingly lie and deceive, cheat and steal, attack the very heart of the nation, while wrapping themselves in a flag of hypocrisy, for a few more dollars that they can hardly need or even personally spend.

And why? Because it feeds their sickened hearts, their pathological egos, and the need to make others suffer loss for their own gains. It sets them apart from a humanity which they hold in contempt enmingled with a nagging self-hate, makes them feel superior and worthwhile, and at the extreme even as gods among men.

So when the fresh public relations spin and propaganda from Wall Street and the financial sector's demimonde starts this week, and seeks to confuse the issues and distort the true nature of the fraud, recall who profited and who lost, who was caught with their hands deep in the pockets of the many, and even now stand arrogantly unrepentant with the ongoing misery of others to their account. And who stood idly by while charged by sworn oaths with protecting the innocent, the unsuspecting many, from the predatory, lawless few.

"When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle." Edmund Burke

Or, in the words of William K. Black and Elliot Spitzer in their essay Questions on the Goldman Scandal at New Deal 2.0:

"We applaud the SEC lawsuit, but it will not solve the problem. Unless our financial system is reformed to put adequate protections and checks and balances in place, we can expect this kind of fraud to continue. Financial executives will continue to take risks they do not understand. Those who control the flow of capital will continue to churn out profits with socially disastrous consequences."

The banks must be restrained, the financial system reformed, the economy brought bank into balance, and justice done though the mighty fall, before there can be any sustained recovery.

William K. Black's Testimony to the Congress on Lehman's fraud

The recent US financial crisis is always and everywhere founded in regulatory capture, dissembling, influence peddling, and fraud.

Janet Tavakoli: Did Goldman Sachs Commit Fraud?

Highlights:

Yes. The only thing that was surprising how long the SEC took to do it.

The complaint does not go quite far enough. It was a blatant fraud, more than just a failure to disclose information.

And this may be the beginning of a lot of questions about a lot of investment banks. It has massive implications IF the SEC does its job right, which they have not done in the past.

Tavakoli Structured Finance

SEC Formally Charges Goldman Sachs In Derivatives Fraud with Paulson and Company - another 'Rogue Trader at Work?'

“Only fraud and falsehood dread examination. Truth invites it.”
Dr. Samuel Johnson

The SEC is formally charging Goldman Sachs with fraud in the derivatives markets, specifically with regard to Collateralized Debt Obligations related to subprime mortgages.

Investors in Goldman's Abacus CDO lost one billion dollars.

In addition to the company, an individual VP in Goldman's international group is being charged, Fabrice Tourre.

Paulson and Company, a major hedge fund, paid Goldman to structure a CDO based on mortgages that Paulson selected, so that they could bet against it.

"The product was new and complex, but the deception and conflicts are old and simple. 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,” said Robert Khuzami, director of the division of enforcement.

This could be construed as a deft way of throwing red meat to the angry mob, nailing a specific individual at Goldman while limiting the criminal charges against the company although there will be significant civil cases, and dealing with the billionaire hedge fund owner Paulson who made a fortune betting against the subprime market.

This could be more damaging if this includes other Goldman bets against its customers on products it represented and created, and it shows an overall intent to create fraudulent products for the purpose of shorting them. For now the SEC will not say if this fraud is a singular event or more systemic.

Goldman will almost certainly attempt to spin this as the actions of a 'rogue trader' who was an aggressive exception.

Last week the White House asked Jamie Dimon and Lloyd Blankfein to 'cool it' on their intense lobbying efforts against derivatives and financial reform.

Perhaps this will help them in their decision.

This is just the tip of the iceberg. The Wall Street Banks are knee deep in fraud.

No one can obtain the kind of consistently odds defying returns that Goldman was producing without either cooking the books or engaging in some type of gaming the system, which is a polite word for fraud. That is the same 'tell' as the steady and outsized returns that Madoff is producing.

Let's see if this goes any deeper, and if serious punishments and reforms result.

The SEC can only enforce the Securities Laws, but cannot bring criminal charges. Since Paulson is not being charged, since he made no representations regarding the products, only Goldman is being sued by the SEC. Their alleged gain in this is $15 million dollars, the fees it obtained from Goldman. And Goldman will say that they were only serving their customer, Paulson.

Certainly Goldman will be subject to civil lawsuits and discovery. But the real test of the Obama government will be any role that the Justice Department does or does not take in this. They could of course defer, using the show trials of the Financial Crisis Inquiry Commission as a rationale to take no action.

This is blatant fraud and white collar crime being conducted by an organization that is paying contributions to half the Congress and the Administration, and staffing key positions in the government with its employees. Do you really think it will be brought to full disclosure and equal justice?

In a statement Goldman says that "The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation." Fabrice Tourre was last seen being thrown under a bus, and could not be reached for comment.

Watch the Justice Department and the Obama Administration to see what they do or do not do, and you will be able to know their character and intents. But in fairness the big Broker-Dealers in the US are RARELY indicted for anything. They virtually own the country's political and justice system.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." Barack Obama to CBS News.

Time do something besides talk the US to death about what you are going to do, and how the Republicans and lobbyists are getting in your way, and how great it will be when you finally do it. The SEC is relatively toothless, and probably by design. The FCIC will be tramping in the weeds for the rest of the year.

You do not need the Republicans, and you do not need the Congress, to fully engage the Justice Department and the FBI in investigating this fraud, Mr. Obama.

The most likely outcome will be a disgorgement of profits and a wristslap, and a promise by Goldman to change its business practices, while admitting no wrong. That will be the 'business as usual' outcome, and a sign that reform is an illusion.

Meanwhile, the market manipulation continues. I thought it was cute the way in which the metals bears used this news to sell the market in an attempt to sustian their huge naked short positions. "Never waste a crisis."

The US Congress reacts to the scandalous news.


Breaking news on breaking the rules, more to follow.

SP Futures Reach Apex of Fraud As Earnings Season Arrives and Bank Accounting Dodgy as Ever, Doing God's Work

"At what point shall we expect the approach of danger? By what means shall we fortify against it? Shall we expect some transatlantic military giant, to step the Ocean, and crush us at a blow?

Never! All the armies of Europe, Asia and Africa combined, with all the treasure of the earth in their military chest; with a Bonaparte for a commander, could not by force, take a drink from the Ohio, or make a track on the Blue Ridge, in a trial of a thousand years.

At what point, then, is the approach of danger to be expected? I answer, if it ever reach us it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide." Abraham Lincoln

Earnings season begins again this week in the States.

Investors remain skittish despite rosy predictions for earnings. This may be because of the suspicion that there are continuing misrepresentations of the true financial picture being permitted by the regulators, the ratings agencies, and the accountants.

For example, Bloomberg reports that if Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo were taking the appropriate reserves against loan losses, it would virtually wipe out all their expected profits for 2010. And I suggest that this loss estimate is likely to be conservative. But of course this is not going to happen in the land of 'extend and pretend.'

Reserves against losses? We don't need no stinking reserve, not while we have the Federal Reserve.

So don't get all short this market just yet, and provide grist for the mill as it might just grind higher. The good guys don't win until they get on their horses and do something. Wait for a key breakdown, probably triggered by some disclosures.

Misrepresentation of the facts and figures abounds. Through the years I noticed a common denominator amongst the kleptocracy and slippery sons of privilege: when the going gets tough, they cheat, even more than usual. And they become righteously indignant if you call them on it. As one pampered son said to me, "If the professors are not smart enough to stop me, why should you care?"

That is how they got through university, and how they get through life. They cheat on their taxes, on their wives, their community, their civic obligations, their business dealings, their friends, and even themselves. And they spend a lot of time and money stuffing the hole in their being with possessions, both things and people, to create the illusion of substance and self-worth. And so often they have learned this from their parents either through abuse or example. There must surely be a special place in hell for anyone who twists such a pathetic half-life out of the gift of a child.

Someone sent me the series currently playing on HBO, "The Pacific." They knew I would be interested because my father was one of those kids who, right after high school graduation, took their first trip away from home, from Cherry Point to Tokyo via hell. Its a brutal series, but worth watching if you want a less romanticized version of what war is like, without the self-indulgence excess of the anti-war movies. I enjoyed the exposure they give to John Basilone, the only NCO to win both the Medal of Honor, and the Navy Cross posthumously, in WWII. I used to attend the church in his hometown of Raritan, NJ where they still have a parade in his memory every year.

That experience and the Great Depression made all our fathers and uncles as tough as nails, reminiscent of the character in the movie Gran Torino. My father wasn't pretty. He was rather rough around the edges with a hard shell, did not suffer fools gladly, and had a truly remarkable command of rough language, as I understand is the custom among Marine Corps sergeants. But he always stood his ground, and did the right thing even when it hurt, out of a sense of duty, honor and pride. And he made sure that I knew that being honest, and honorable and truthful was the right thing, the only thing, to do. And I thank him for it. I am glad he is no longer around to see this triumph of the privileged, and the submission of the many, in a country that he loved. Semper Fi, dad.

Bloomberg
Bank Profits Dimmed by Prospect of Home-Equity Losses
By Dakin Campbell and David Henry

April 12 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may have to set aside an additional $30 billion to cover possible losses on home-equity loans, an amount almost equal to analysts’ estimates of profit at the three banks this year.

The cost of these reserves was calculated by CreditSights Inc., a New York-based research firm whose prediction almost four years ago proved prescient after banks reported unprecedented mortgage-related writedowns. Recognizing the home- equity loan losses is unfinished business from the housing bubble, CreditSights said in a March 29 report.

Potential writedowns on the loans are casting a shadow over earnings, as analysts try to determine how much, and how quickly, loan-loss expenses will decline from the industrywide peak reached in June 2009. Banks led by New York-based JPMorgan begin reporting first-quarter results this week....

The Great American Bank Robbery

If you suspected that fraud, corruption, incompetence, and coverups at the highest levels are at the heart of our current financial crisis, you're right.

"...ideology enabled criminality and political failure led to economic crisis as Wall Street bought Capitol Hill..."

The Great American Bank Robbery
Video - Lecture
By William K. Black

1. Why do we have repeated, intensifying economic crises?
2. What can white collar criminology add to our understanding of what's going wrong?