Where is Bernie's Trade Book? Who Were His Partners?

FINRA has found no evidence of trades by Bernie Madoff on behalf of his private investment fund through Bernard L. Madoff Investment Securities, a commercial brokerage founded in 1960.

This appears to be a brick in the wall of 'rogue trader' status. He could do it himself because he made no trades at all.

However this was not Bernie's only commercial operation in the securities business, in addition to his now nefarious private fund.

Primex was registered as Primex Holdings, L.L.C. in NYS in October of 1998. Primex is a joint venture involving a digital trading auction which operates out of Bernie's 18th floor office at 885 Third Ave.

Madoff's business partners in the Primex Exchange were Citigroup, Morgan Stanley, Goldman Sachs, and Merrill Lynch.

Did Bernie give any business to this joint venture? Did any of the above brokers have any investments or losses with the Madoff Fund? If not why not? It was one of the most successful funds, on paper, on the Street?

More questions than answers. Let's hope this one does not disappear down a black hole like the enormous put option positions placed on the airline stocks just prior to 9/11.


Madoff's fund may not have made a single trade
By Jason Szep
Fri Jan 16, 2009 6:55am EST

BOSTON (Reuters) - Bernie Madoff's investment fund may never have executed a single trade, industry officials say, suggesting detailed statements mailed to investors each month may have been an elaborate mirage in a $50 billion fraud.

An industry-run regulator for brokerage firms said on Thursday there was no record of Madoff's investment fund placing trades through his brokerage operation.

That means Madoff either placed trades through other brokerage firms, a move industry officials consider unlikely, or he was not executing trades at all.

"Our exams showed no evidence of trading on behalf of the investment advisor, no evidence of any customer statements being generated by the broker-dealer," said Herb Perone, spokesman for the Financial Industry Regulatory Authority.

Madoff's broker-dealer operation, Bernard L. Madoff Investment Securities, underwent routine examinations by FINRA and its predecessor, the National Association of Securities Dealers, every two years since it opened in 1960, Perone said.

Madoff, a former chairman of the Nasdaq Stock Market who was a force on Wall Street for nearly 50 years, allegedly confessed to his sons the firm's investment-advisory business was "basically a giant Ponzi scheme" and "one big lie," according to court documents.

He estimated losses of at least $50 billion from the Ponzi scheme, which uses money from new investors to pay distributions and redemptions to existing investors. Such schemes typically collapse when new funds dry up.

Each month, Madoff sent out elaborate statements of trades conducted by his broker-dealer. Last November, for example, he issued a statement to one investor showing he bought shares of Merck & Co Inc, Microsoft Corp, Exxon Mobil Corp and Amgen Inc among others.

It also showed transactions in Fidelity Investments' Spartan Fund. But Fidelity, the world's biggest mutual fund company, has no record of Madoff or his company making any investments in its funds.

DISCREPANCIES

"We are not aware of any investments by Madoff in our funds on behalf of his clients," Fidelity spokeswoman Anne Crowley said in an e-mail to Reuters.

Neither Madoff nor his firm was a client of Fidelity's Institutional Wealth Services business, their clearing firm National Financial or a financial intermediary client of its institutional services arm, she said.

"Consequently, his firm did not work with our intermediary businesses through which firms invest their clients' money in Fidelity funds," she added.

There also appear to be discrepancies between monthly statements sent to investors and the actual prices at which the stocks traded on Wall Street.

For example, his November statement showed he bought software maker Apple Inc's securities at $100.78 each on November 12, about a month before his arrest. But Apple's stock on that day never traded above $93.24. The statement also showed he bought chip maker Intel Corp at $14.51 on November 12, but Intel's highest price on that day was $13.97.

"You could print up any statements you want on the computer and send it out to a client and the chances are the client wouldn't know, because they are getting a statement," said Neil Hackman, president and chief executive of Oak Financial Group, a Stamford, Connecticut-based investment advisory firm.

To some, the numbers did not add up.

About 10 years ago, Harry Markopolos, then chief investment officer at Rampart Investment Management Co in Boston, asked risk management consultant Daniel diBartolomeo to run Madoff's numbers after Markopolos tried to emulate Madoff's strategy.

DiBartolomeo ran regression analyses and various calculations, but failed to reconcile them. For a decade, Markopolos raised the issue with the U.S. Securities and Exchange Commission, which has come under fire in Congress in recent weeks for failing to act on Markopolos's warnings.

Bank of America to Receive Additional $138 Billion in Government Assistance

The situation must have been rather dire indeed. They did not even wait for the weekend.

Its a nice amount of government aid for a single company. Too bad GM is not a bank.

Some animals are more equal than others.


Bloomberg
U.S. Gives Bank of America $138 Billion Lifeline
By Scott Lanman and Craig Torres

Jan. 16 (Bloomberg) -- The U.S. government agreed to invest $20 billion more in Bank of America Corp. and backstop $118 billion of its assets to help the lender absorb Merrill Lynch & Co. and prevent the financial crisis from deepening.

The government agreed to the rescue “as part of its commitment to support financial market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said today in a e-mailed joint statement.

Hours earlier, the U.S. Senate voted to allow the release of $350 billion in financial rescue funds, the second half of the $700 billion Troubled Asset Relief Program enacted Oct. 3 by President George W. Bush.

The U.S. already had injected $15 billion into Bank of America, the country’s biggest lender, and another $10 billion to Merrill to bolster the combined company against the global credit crunch.

Bank of America will absorb the first $10 billion of losses in the pool, of which the “large majority” of assets were assumed by the company in the Merrill purchase, the government said. The Treasury and FDIC will share the next $10 billion of losses.

The Fed will backstop assets with a loan after the government’s first $10 billion in losses, the agencies said.

Future Losses

The asset pool includes cash assets with a current book value of as much as $37 billion and derivatives with maximum potential future losses of as much as $81 billion, according to the term sheet provided by the government.

Separately, the FDIC said it plans to propose changing its bond-guarantee program for banks to cover debt as long as 10 years, from the current three-year maturity. The FDIC will soon propose rule changes to the Temporary Liquidity Guarantee Program, today’s statement said.

“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the joint statement said.

Shares of Bank of America plunged 18 percent yesterday, sliding to $1.88 to $8.32 in New York Stock Exchange composite trading after hitting $7.35, its lowest level since February 1991.

The bank moved up its fourth-quarter report to today at 7 a.m. New York time.

Bank of America Requires Significantly More Government Aid, Gives New Life to Nationalisation Rumours

Apparently some of the rumours and early reports may be true, at least with regard to the troubles at the Bank of America.

Just off the Bloomberg wire at 3:30 EST, Bank of America is formally requesting financial assistance and guarantees from the government to complete its acquisition of Merrill Lynch, according to 'people familiar with the matter.'

A later report on CNBC cites the amount of $200 billion to be requested in a new bailout tranche.

Los Angeles Times
Nationalization rumors slam Citigroup, Bank of America
By Tom Petruno
11:09 AM PST, January 15, 2009

The hottest rumor on Wall Street today was that the government was planning to effectively nationalize Citigroup Inc. and Bank of America Corp., perhaps as early as this weekend.

That talk has devastated many financial stocks, and hammered the broader market for a second straight session -- although buyers have been returning in the last half-hour.

The nationalization rumors were put to Federal Deposit Insurance Corp. Chairwoman Sheila Bair at an appearance in New York today, and her non-denial answer wasn’t likely to make investors feel better.

"I’d be very surprised if that happened," she said, according to Bloomberg News.

Some investors weren't sticking around to find out if the rumor was true: Citigroup fell as low as $3.36 early in the session and about 11 a.m. PST was off 43 cents to $4.10.

Bank of America fell as low as $7.35 and was off $1.56 to $8.64 about 11 a.m PST.

The Dow Jones industrial average was off as much as 205 points but has pared that to a loss of 43 points at 8,156.

The Dow’s closing low in the fall market collapse was 7,552, reached on Nov. 20.

The latest dive in the financials began early this week on fears that some of the biggest players have become bottomless pits for government capital, as bad loans continue to mount.

Those fears soared late Wednesday on news reports that Bank of America, which got $25 billion under the financial-system bailout Congress approved in October, was negotiating another capital infusion from the Treasury.

Ryan Larson, head trader at Voyageur Asset Management in Chicago, said the rumor today was that the government would take control of Citigroup and Bank of America via a "nationalization in AIG style" -- referring to insurance giant American International Group. The government took a 79.9% stake in AIG last fall in return for loans and capital injections to keep the company afloat.

AIG shares now trade for about $1.40.

The nationalization rumors may just be so much hysteria, but they show how faith in the financial system has again frayed badly. The average big-bank stock has plunged 24% just since Dec. 31.

GM Cuts 2009 US Sales Outlook to 27 Year Low - Wall Street Rallies

A grim outlook from General Motors today as it continues to attempt to wring concessions and donations from anyone and everyone.

The market rallied after this news. If this is confusing, read this blog entry from earlier today on the technical state of the SP500 futures.

Its reassuring to see that the economic carnage has not made the banks and hedge funds too glum to engage in the usual option expiry market manipulation. They'll never learn. Keep your powder dry because there are some rough seas dead ahead.

"As a dog returns to its vomit, so a fool returns to his folly. " Proverbs 26:11

Bloomberg
GM Says U.S. Auto Sales May Tumble to 27-Year Low on Economy
By Jeff Green

Jan. 15 (Bloomberg) -- General Motors Corp. cut its estimate for 2009 U.S. industrywide auto sales to 10.5 million units, a total that would be the lowest in 27 years, as a worsening economy crimps demand.

The new outlook replaces a projected range of 10.5 million to 12 million vehicles, GM said in slides for a Deutsche Bank AG conference today in Detroit. Global sales will fall to 57.5 million autos from 67.1 million last year, GM said.

GM is using the sales estimates to craft a proposal to cut costs, revamp operations and show it can repay $13.4 billion in Treasury Department loans. A weakening economy may force the biggest U.S. automaker to seek additional government funding after it completes the viability plan due March 31.

“We’re on track,” Chief Executive Officer Rick Wagoner told analysts. “We’re confident GM will come through this a stronger company.”

Wagoner said this week that the loans were sufficient for now and that he would review GM’s needs at the end of this quarter. He joined Chief Operating Officer Fritz Henderson and Chief Financial Officer Ray Young at the Deutsche Bank meeting.

GM gained 5 cents, or 1.3 percent, to $3.90 at 2:32 p.m. in New York Stock Exchange composite trading.

Global economic growth may slow to 0.5 percent this year from 2.3 percent, GM said today.

The U.S. recession is ravaging consumers’ auto purchases, sending deliveries plummeting to 13.2 million vehicles in 2008 after an average of about 16 million annually during the past decade. U.S. job losses last year were the worst since 1945.

Industrywide sales of 10.5 million vehicles in the world’s biggest auto market would be the lowest level since the 10.36 million units of 1982, according to research firm Autodata Corp. of Woodcliff Lake, New Jersey. The total in 1981 was 10.6 million.

Union Workers, Bondholders

GM is seeking concessions from its largest union and is chopping debt in half because the government can call the loans unless the company shows progress in reshaping itself by the March deadline. The Detroit-based automaker plans to drop or de- emphasize half of its brands and seeks to cull 1,700 dealers from its total of 6,400.

It’s premature to discuss how GM might work with bondholders to win their assent in reducing debt, Wagoner said this week. Government loan conditions require GM to cut its unsecured public debt by at least two thirds in an exchange with bondholders for equity or other methods.

The debt exchange is designed to pare $27.5 billion in unsecured debt to about $9.2 billion in a swap for equity, Young said.

Health-Fund Costs

GM also needs to reduce its obligations to a union retiree health fund to $10.2 billion, a 50 percent trim, in a separate equity swap, Young said. About $14.1 billion in other debt won’t be affected.

After saying it would run short of operating cash by the end of 2008 without an infusion of financial aid, GM received the first $4 billion in loans on Dec. 31 from the Troubled Asset Relief Program. The money is being used to pay bills, mostly to the automaker’s 3,000 suppliers.

An additional $5.4 billion is due this month. Should Congress agree to release a second $350 billion in TARP funds, GM will get $4 billion more in February. An initial progress report must be presented to the Treasury Department by Feb. 17.

The loans are secured by almost all of GM’s available unsecured assets and as a secondary lien against other assets already secured, Young said today. GM also plans to draw $1 billion in Treasury loans granted to the automaker as part of a $6 billion bailout of the GMAC LLC finance unit.