SP 500 and NDX Futures Daily Charts - Facebook Cometh Tomorrow Night

Leaving a bit early today. Will catch up tomorrow.

Facebook will price after the bell tomorrow. Expectations are for about $36 per share or so.

There was some interesting hypocrisy on Capitol Hill this morning by the Republicans who are red-faced over the JPM antics, since they have been adamant about turning back regulations.

A friend sent this in to my email.  I did not see it, so I do not know if it is literally true, but if so I thought my friend's observation was brilliant.

I watched part of a press conference today where the NYPD commissioner said, with a straight face, that a $50,000 SUV, stolen in NYC, could be sold in Africa for $150,000. Not surprisingly, not a single person there asked him why, if that was true, someone didn’t simply buy the vehicles and ship them there legally.

Hot Money Bets Backed By Taxpayers: Extreme Moral Hazard of 'Too Big To Fail' - Credibility Trap

The professor makes some excellent points about the real world of finance that bear some serious thought. He certainly left the Bloomberg spokesmodels yammering in search of a sound byte.

He misses a key point however. It is not that Jamie Dimon does not know, or even that he cannot know, about the risky speculation in his firm. It is that the system is so designed now that in the long run he is heavily incented not to care, as long as he can maintain a plausible deniability.  There are management controls, policy, and objectives that flow down from the top in any large corporation.  Dimon had a personal hand in recrafting the CIO to do what it was doing in order to sidestep the Volcker Rule.  This was no rogue operation.

As long as the profits are rolling in, the band plays on and the players keep dancing.

It is the same problem that led to the financial crisis, and the collapse of so many of the brokerage and investment houses, followed by a policy that made a show of reform, but concentrated their recklessness selfishness into a few enormously larger vessels, making them all the more effective at gaming and corrupting the system.

That is the problem one faces when the public is apathetic, and the political leadership is composed of cynically pragmatic dealmakers and shallow but ardent ideologues driven by narrow personal expediency, not firmly rooted in history, moral principles, and stewardship for the broader public trust.

It touches on an age old scheme in the mix of banking and speculation that most modern day economists seem to have forgotten, perhaps conveniently. Better to keep one's nose buried in intricate obfuscation than speak to the heart of things, the things that really matter, and risk professional isolation.

It is a sweet deal when one is permitted to play with enormous sums of money and leverage, keeping the wins for yourself, and laying off the losses on the public, enabled by the Fed and a system thoroughly rotten with corruption.

And when they go along the road with you long enough, you can obtain permission to do almost anything, and have them turn a blind eye to it, rather than be exposed along with you. That is the credibility trap.

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and 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 you, and when you lost, you charged it to the bank. 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 have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

Andrew Jackson, original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834,  Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

(h/t Yves)

Goldman Data Admits to Naked Short Selling, Disclosing Client Positions, Abusive Legal Practices

“He should be someone we can work with, especially if he sees that cooperation results in resources, both data and funding, while resistance results in isolation.”

Goldman Sachs


"To be a sophisticate in the 21st century requires the ability to shut one's eyes and one's mind to anything that one does not want to see or think about. The more glaring that the contradiction between what is said and what is done becomes, the harder it is to remain sophisticated. The tragedy is that the only alternative, that of becoming an independent thinker, is looked upon as more terrifying than to go on pretending to be deaf, dumb and blind."

Bill Buckler, The Privateer

Is there any wonder why economics stands as a disgraced profession, and the mainstream media is so oddly silent on so many things? Financial corruption permeates and undermines the fabric of society and its thought, by action and example.

It both frightens and tantalizes, rewards and victimizes. And as that contagion spreads into the government, as it inevitably does seeking power and greed, no one is safe.

"False opinions are like false money, struck first of all by guilty men, and thereafter circulated by honest people who perpetuate the crime without knowing what they are doing."

Joseph de Maistre

Standing for the truth can be isolating and painful, especially in a people who have given themselves over to selfishness and corruption. So much easier to take the money, and just go along to get along.

Often all one has to do is to close their eyes and say the words. It starts so easily. Who does not want to be flattered and favored, to be accepted as one of the better people, not one of them?

"This is the way in which he conceals from you the kind of work to which he is putting you...He scoffs at times gone by; he scoffs at every institution which reveres them. He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods.

Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J.H.Newman, The Time of Antichrist

Do you imagine that this time will be different? This is how an educated people of ordinarily good spirits can learn over time to tolerate almost anything, and in the end ignore even torture, cruelty, and murder, and to defend the indefensible with glib lies and slogans, until one day their grandchildren look at them with horror and revulsion asking, 'How could you have allowed this? What were you thinking? What have you become?'

Rolling Stone
Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'
By Matt Taibbi
May 15, 2012

It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.

The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.

Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed...

Read the rest here.

Here is the link to the Goldman court filing.

Eliot Spitzer on JPM and Bank Reform

“For all sad words of tongue and pen, The saddest are these, 'It might have been'.”

John Greenleaf Whittier

Flawed indeed.

Slate
Flawed Dimon
By Eliot Spitzer
May 14, 2012

What to do with Jamie Dimon? The CEO and Chair of JPMorgan Chase has tried so hard in the past several years to seem the “good banker.” He is so charming and gracious, yet all the while lobbying, cajoling, pushing, and wheedling to eviscerate any semblance of real reform on Wall Street. He shrugged off the cataclysm of 2008 as just something that happened, like the weather—no need for any structural reform.

Now the chickens have come home to roost—at least 2 billion of them—and it is clear that Chase is like every other big financial institution with distorted incentives. Thanks to a backstop of a federal guarantee, these gigantic institutions get to keep all the upside of crazy bets while the government gives them all the downside protection they need. Earlier this year, Dimon pooh-poohed concerns about the risks his traders were taking. Did Dimon not understand those risks, not care to know about them, or actually mislead the public about them?

But it isn’t so much money, they cry! True, in the context of Chase’s balance sheet, a $2 billion loss can be absorbed. But it shows once again the impossibility of trusting the banks in the absence of structural reform and regulation to control their willingness to take almost unmitigated risk. Of greater significance than the size relative to Chase’s balance sheet is that the loss was in a relatively stable market in which most people are finding it easy to trade. Imagine if the market had been choppy—the losses could have been even more gargantuan—and if several institutions had been in the same position, then the aggregate effect could have become once again cataclysmic.

It was Chase’s own lobbying on Capitol Hill and with the Treasury, the Fed, and other agencies that made these bets arguably permissible within the scope of hedging under the Volcker rule. Had they not lobbied and pushed and delayed and made the rule more complicated, these bets would have been illegal or at a minimum so transparent as to have been smaller and less damaging. The banks love to complain about the complexity of these rules. But the rule as proposed by Paul Volcker was simple. It is only because of the very lobbying by the banks that the complexity and loopholes crept in...

Read the rest here.