Whistleblower to CFTC in JPM Silver Manipulation Struck by Hit and Run Car In London

I am glad that although Mr. Maguire and his wife are shaken they will apparently be all right.

The related story on his allegations regarding manipulation in the silver market is here.

It appears they have 'the perp in hand' as the say. This should provide some light. I am prepared to accept this as an accident, of course, but it is one hell of a coincidence if so. It could also be the act of some trader who had a bit too much to drink, and a grudge to bear after the testimony the day before. Or something else altogether.

I hesitate to say anything more at this point, except curiouser and curiouser.

As reported by Adrian Douglas, the Director of GATA who has been the contact for Mr. Andrew T. Maguire, and on the GATA website

"On March 25th at the CFTC Public Hearing on Precious Metals GATA made a dramatic revelation of a whistleblower source, Andrew Maguire, who has first hand evidence of gold and silver market manipulation by JPMorganChase, and who had tipped off the CFTC in advance of manipulation in gold and silver some months ago.

On March 26th while out shopping with his wife in the London area, Mr. Maguire's car was hit by a car careening out of a side road. The driver of the vehicle then tried to escape.

When a pedestrian eye-witness attempted to block the driver's escape he accelerated at him and would have hit him had the pedestrian not jumped out of the way. The car then hit two other cars in escaping. The driver was apprehended by the police after police helicopters were used in a high speed chase.

Andrew and his wife were hospitalized with minor injuries. They were discharged from hospital today and should make a full recovery."

Guest Post: Grading Alan Greenspan

The Maestro and the Hundred Year Flood
By Keith Hazelton, The Anecdotal Economist

Alan Greenspan’s self-serving “The Crisis,” a 66-page white paper outlining exactly why no part of the extant global financial/liquidity/credit/solvency/deleveraging crisis was the fault of the Federal Reserve whose board he chaired for 18 year or anyone or any other entity for that matter, contains among the many exculpatory assertions, a fascinating, if not stupefying, revelation that, in setting capital adequacy levels, reserves and leverage limits, policymakers:

“…have chosen capital standards that by any stretch of the imagination cannot protect against all potential adverse loss outcomes. There is implicit in this exercise the admission that, in certain episodes, problems at commercial banks and other financial institutions, when their risk-management systems prove inadequate, will be handled by central banks. At the same time, society on the whole should require that we set this bar very high. Hundred year floods come only once every hundred years. Financial institutions should expect to look to the central bank only in extremely rare situations.” (p16-17, all emphasis added.).

No sir, Sir Alan. Hundred year floods come on average only once every hundred years, as any undergraduate who has completed Statistics 101 would recognize, presumably based on many centuries of flood observations in a particular locale.

Now we know if one flips a coin 100 million times, a tabulation of heads/tails results likely will yield a result infinitesimally close to 50/50, so that one may conclude, on average, the actual observation results would prove the statistical probability for each flip that the coin lands heads-up is 50 percent (we conveniently are excluding any possibility of the coin landing, say, balanced vertically on edge.)

We also can be confident in such a large observation, however, that low-probability strings of 10, 20 or 30 consecutive heads-up or tails-up results – while extremely unlikely in 100 flips – would, in fact, be commonplace.

That such occurrences have low probabilities, even extremely low probabilities in smaller observation samples, is immaterial. Regardless of the number of observations, even low probability events are bound to occur, and they are neither randomly nor evenly distributed.

Similarly, nature has no constraints as to the frequency of hundred-year floods, only that on average they should occur once every century, but if it pleases nature to generate 10 hundred-year floods in a century, and none for the next 900 years, albeit a low-probability event, such an observation is completely within the framework of reality.

Neither are there constraints, apparently, on the frequency of meltdowns in the complex, deregulated financial environment we have invented and unleashed upon ourselves, even though, unlike nature, we completely are in control of the frequency and regularity of hundred-year financial disasters.

Which is what is so self-serving about the former Fed chief’s term paper. By defaulting to a “stuff-happens-once-every-hundred-years-so-there’s-no-point-in-trying-to-prevent-it-since-the-negative-effects-of-prevention-would-outweigh-the-flood-cleanup-cost” defense, Sir Alan absolves himself, his fellow FOMC decision-makers and Fed economists, successive Congresses and Administrations, the banking and financial system, China, Japan, Germany and, yes, the American “consumer” from any culpability in the generation-long, debt-fueled party which has induced this hundred-year hangover.

It’s also what’s wrong with economics in general. Since macro-economic theories and policies cannot be experimentally verified – we can’t go back in time to see how different decisions in the past would have altered the present and future – Mr. Greenspan expects to get a pass when he essentially observes that removing the Fed’s easy-money punchbowl earlier in decades past, or perhaps merely serving smaller portions of credit-debt-leverage punch along with deregulation cookies, somehow would have created a worse outcome than the present mess, and he concludes his term paper with an untestable assertion:

"Could the breakdown that so devastated global financial markets have been prevented? Given inappropriately low financial intermediary capital (i.e. excessive leverage) and two decades of virtual unrelenting prosperity, low inflation, and low long-term interest rates, I very much doubt it. Those economic conditions are the necessary, and likely the sufficient, conditions for the emergence of an income-producing asset bubble. To be sure, central banks have the capacity to break the back of any prospective cash flow that supports bubbly asset prices, but almost surely at the cost of a severe contraction of economic output, with indeterminate consequences." (All emphasis added.)

Which is followed by a monstrous, ominous, “be-glad-we-only-have-a-mess-of-this-hundred-year-severity-to-clean-up” whopper:

"The downside of that tradeoff is open-ended."

Cue scary music. Of course the consequences are indeterminate, Sir Alan, and we never will know what our present and our children’s future would have been like had other, more prudent fiscal and monetary policies had been adopted by all participants, but in parsing Mr. G’s conclusion above, we find exactly where, and with whom, the fault resides:

• Excessive leverage of financial institutions? Congresses, Administrations, the Federal Reserve, FDIC, OCC and OTS, without question.


• Two decades of virtual unrelenting prosperity? Apparently is was virtual prosperity, not real prosperity, because it came at a price of excessive, unsustainable leverage among individuals, businesses and governments.


• Low Inflation? An obsession with consumption of low-cost goods imported from low-cost, overseas manufacturers, again fueled with leverage, instead of savings.


• Low long-term interest rates? Why Alan, you remember, it’s the Federal Reserve which sets interest rates, and you were its chairman for 18 years.

The fault then, it would seem, dear Alan, “lies not in our stars, but in ourselves,” and certainly not in the hundred-year flood, to badly paraphrase William Shakespeare’s Caesar.

And it would be amusing – this whole “it’s nobody’s fault, stuff happens” bit about hundred year floods coming only once every hundred years – if not for the physical, emotional and national wealth-destroying carnage of “The Crisis” of the last three years.

Not to mention the many years, if not decades, in our now less prosperous future which will be required to rebuild ourselves from the ground up after such an easily avoidable catastrophe, unlike nature’s hundred-year floods, of our own design.

OK, so it’s only the second draft of his term paper – maybe he’ll revise the final publication to attribute at least some culpability, but don’t count on it. Right now, I give it a "D+."

The Maestro and the Hundred-Year Flood

US Justice Department Names JP Morgan and UBS as Conspirators in US Muni Bond Fraud and Bid Rigging

The big American banks are starting to look more like criminal enterprises than a well managed financial system that is put forward as 'the envy of the world."

Just yesterday a whistle blower stepped forward and named J. P. Morgan in a price manipulation scheme in the metals markets that reaps millions in profits by cheating investors. The CFTC commissioners said in this same public meeting that the markets have never been more transparent and efficient, even as they had known of this allegation for months, and apparently failed to seriously investigate. And there was no mention of this in the mainstream media.

Until the public demands serious reform the cheating and the looting and malinvestment will continue, until the currency and bonds collapse like some Third World kelptocracy.

Time for a 'distraction?' Perhaps. But this will not solve the basic problem, that the world's largest economy is grinding lower, crushed by inefficiency and corruption. And the impact on the rest of the world may be quite serious because of the position of the Dollar as the world's reserve currency.

The Banks must be restrained, and the financial system reformed, and the economy brought back into balance, before there can be any sustained recovery.

Bloomberg
JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy
By William Selway and Martin Z. Braun

March 26 (Bloomberg) -- JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a conspiracy to pay below-market interest rates to U.S. state and local governments on investments, according to documents filed in a U.S. Justice Department criminal antitrust case.

A government list of previously unidentified “co- conspirators” contains more than two dozen bankers at firms also including Bank of America Corp., Bear Stearns Cos., Societe Generale, two of General Electric Co.’s financial businesses and Salomon Smith Barney, the former unit of Citigroup Inc., according to documents filed in U.S. District Court in Manhattan on March 24.

The papers were filed by attorneys for a former employee of CDR Financial Products Inc., an advisory firm indicted in October. The attorneys, as part of their legal filing, identified the roster as being provided by the government. The document is labeled “list of co-conspirators.”

None of the firms or individuals named on the list has been charged with wrongdoing. The court records mark the first time these companies have been identified as co-conspirators. They provide the broadest look yet at alleged collusion in the $2.8 trillion municipal securities market that the government says delivered profits to Wall Street at taxpayers’ expense.

‘Sufficient Evidence’

“If the government is saying they are co-conspirators, the government believes they have sufficient evidence that they can show they were part of the conspiracy,” said Richard Donovan, a partner at New York-based law firm Kelley Drye & Warren LLP and co-chair of its antitrust practice. Donovan isn’t involved in the case.

The government’s case centers on investments known as guaranteed investment contracts that cities, states and school districts buy with the money they receive through municipal bond sales. Some $400 billion of municipal bonds are issued each year, and localities use the contracts to earn a return on some of the money until they need it for construction or other projects.

The Internal Revenue Service sometimes collects earnings on those investments and requires that they be awarded by competitive bidding to ensure that governments receive a fair return. The government charges that CDR ran sham auctions that allowed the banks to pay below-market interest rates to local governments.

CDR Fights Case

CDR, a Los Angeles-based local-government adviser, was indicted in October along with David Rubin, Zevi Wolmark and Evan Zarefsky, three current or former executives. The company and the three men have denied wrongdoing. Since last month, three former CDR employees who weren’t charged in the initial indictment have pleaded guilty and agreed to cooperate with the Justice Department.

More than a dozen financial firms are also facing civil suits filed by municipalities over the alleged conspiracy. Yesterday, U.S. District Judge Victor Marrero in Manhattan refused to toss out a lawsuit brought by Mississippi and other bond issuers....

‘Absolute Disaster’

Laura Sweeney, a Justice Department spokeswoman in Washington, declined to comment.

Banks may choose to cooperate with prosecutors because in light of the government bailout funds they’ve received “ a guilty plea would just be an absolute disaster for some of these companies,” said Nathan Muyskens, a partner at Shook, Hardy & Bacon in Washington and former trial attorney with the Federal Trade Commission’s Bureau of Competition.

“There have been antitrust investigations where there have been companies involved that were just never indicted,” he said in a phone interview.

At the same time, the government will probably focus on seeking to convict individual bankers, he said.

“When someone goes to jail for five years, that resonates,” he said. “When a company pays $200 million, it’s simply a balance sheet issue. Jail time is what captures corporate America’s attention...”

October Indictments

The indictments released in October didn’t identify any of the sellers of the investment contracts involved in the alleged conspiracy. They were identified only as Provider A and Provider B. They paid kickbacks to CDR after winning investment deals brokered by the firm, according to the indictments.

The firms did this by paying sham fees tied to financial transactions entered into with other companies, prosecutors said. Kickbacks were paid from 2001 to 2005, ranging from $4,500 to $475,000 each, according to the Justice Department.

According to the list contained in the court filing this week, the investment contracts involved were created by units of GE and divisions of Financial Security Assurance Holdings Ltd., a bond insurer formerly part of Brussels-based lender Dexia SA.

The kickbacks were paid out of fees generated by transactions entered into with two financial institutions that weren’t identified in the October court filing. The March 24 list filed by the defense named the two firms as UBS and Royal Bank of Canada..."

Read the rest of the story here.

S&P Market Indicator Downgrades US Sovereign Debt to aa+

I thought it was interesting that S&P market-derived indicator has downgraded the US sovereign debt to aa+, its lowest level in two years. Further, US credit default swaps are now showing more risk than the Eurozone.

But as the article goes on to say, the risk of a US default is improbable. Long before they reach that point they will pay off the debt through inflation, the monetization of debt. If you think that this is not possible, that they cannot do it, that 'inflation is impossible,' then you are sadly mistaken. They are already doing it, but are trying to limit its impact through aggressive perception management and a variety of accounting gimmicks. It is really remarkable to watch. People cling to what they wish to believe until it sweeps them over a precipice.

Still, there is a message in this market, and I think it is one of selective default, but also a coercion. Those who hold the debt of the US, and its Banks, will seek to rule it, even moreso than they do today.

This is nothing new. Previous generations have fought the same battle, and won. Freedom is not a place to visit, or a thing to be achieved. Freedom is a commitment, a way of life, that will endure only as long as men love it for themselves and their children, more than their weariness, or their fear, or vain comforts.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst yourselves, and when you lost, you charged it to the Bank... Beyond question this great and powerful institution has been actively engaged in attempting to influence the elections of the public officers by means of its money...

You tell me that if I take the deposits from the Bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin fifty thousand families, and that would be my sin. You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, I will rout you out."

Andrew Jackson on The Second Bank of the United States which was the Central Bank of his day

I would say that there is less risk to the US sovereign debt than there is to the US Constitution.

Wall Street Journal
U.S. Is Riskier Than Euro Zone; So Says CDS Market
By MICHAEL CASEY
MARCH 24, 2010, 4:47 P.M. ET.

NEW YORK -- Something troubling has occurred in the market for default protection on the debt of the world's biggest borrower.

As the folks at Standard Poor's Valuation and Risk Strategies division noted in a research note Monday, the difference between the spread on U.S. sovereign credit default swaps and an equivalent benchmark for AAA-rated euro-zone sovereigns flipped into positive territory March 12. As U.S. CDS spreads expanded to their widest levels in two years, that cross-region gap blew out to 5.7 basis points last Friday before narrowing to 4.7 Tuesday.

Wider CDS spreads indicate that sellers of insurance against a particular issuer's default are charging more for it. In effect, the positive U.S.-versus-euro zone spread means investors think the risk of a U.S. default--however remote--is greater than that on euro-denominated sovereign debt.

So much for the view that low inflation and loose monetary policy make for a rosier debt outlook for Treasurys than for the debt of crisis-hit euro-zone sovereigns.

"We've seen CDS on U.S. Treasurys break with euro CDS before, but never to the degree we have here," said Michael Thompson, head of research for S&P's

Valuation and Risk Strategies group. "If we sit on this precipice for a time, I think a lot of market participants would see this as a bit of a shot across the bow, a bit of a wakeup" for anyone who's complacent about U.S. debt. "

Wouldn't it also challenge U.S. Treasurys' status as the so-called "risk free" benchmark? S&P didn't go there. But the report did say the trend "reflects increasing market anxiety surrounding the U.S.'s credit quality." In other words, a fiscal deficit worth 10% of gross domestic product--in the absence of a clear plan to reduce it -- matters.

My first instinct was to dismiss the trend as an anomaly fueled by the technical quirks of an illiquid sovereign CDS market, where a conflicting array of investment strategies can confuse price signals. Some market participants use CDS contracts to hedge existing positions in underlying bonds, others sell default insurance as an alternative exposure to those bonds, while still more seek to extract arbitrage profits from playing between the two.

What's more, the AAA euro-zone benchmark doesn't reflect bets on a single sovereign's debt but rather a basket of the region's six remaining AAA-rated countries: Germany, France, Austria, Finland, the Netherlands and Luxembourg.

Disentangling its message on default risk could be messy. And what, after all, can a current-day contract on a future Treasurys default tell U.S. when a U.S. breach on its financial obligations is virtually inconceivable? [The government would pay for its debt with inflation long before opting for the blunt instrument of default.]

Yet, notes Mr. Thompson, "there is real money changing hands there [in CDS markets]. And if there is real money changing hands, there has to be real value ... The market is expressing some valuable information."

Short-term moves of a basis point or two can be attributed to technical factors, but such a lasting shift in the two regions' CDS relationship "is not technical," Mr. Thompson said. "I certainly wouldn't ignore it."

Thompson's team also noted that the deterioration in U.S. default swaps meant that S&P's "market-derived signal" dropped to 'aa+,' its lowest level in two years. The historical series for that indicator is based on an established correlation with actual S&P ratings.

There's no indication that S&P's separate ratings division is about to downgrade the U.S. 's vital 'AAA' rating. But over time, ratings analysts cannot stay blind to market signals like this one. As its weighs the stimulus needs of a still-fragile U.S. economy against future risks to debt servicing costs, the U.S. government can't ignore market signals either.

Michael Casey, a special writer with Dow Jones Newswires, writes a regular column about currencies and fixed-income markets. Previously he was Newswires' Buenos Aires bureau chief and before that, assistant managing editor for the U.S. economy, Treasurys and foreign-exchange group in New York.