SP 500 and NDX Futures Daily Charts - Waiting for Greece and the Fed

The economic picture in the States is not good. It is muddling along, but is hardly sustainable or robust.

But the great attention of the markets now is focused on the Greek elections in mid-June, and what the Fed will do in the next meeting which is a few days later.

Taibbi: The Epic Failure of the SEC

"The big thieves hang the little ones."

I cannot argue with what Matt Taibbi says here, having quoted others like Bill Black about the same situation in great detail.

But in fairness to the SEC, this is hardly the case of a single regulator falling into porn-surfing indolence while they wait for another turn through the Wall Street revolving door.

The SEC is just another branch of regulatory incompetence and capture in good company with the CFTC and the FED, which gained even more regulatory powers in the recent 'reforms.' There are a few good regulators but they tend to be isolated and beleaguered.   The sad case of Brooksley Born was a good example of how bad regulatory policy drives out the good. 

This non-specific failure implies that there is much more than an SEC organizational or funding problem, and more likely systemic failure involving misplaced priorities and conflicts of interest that flow down from the Congress and the Administration among others. 

I would like to think that the people are getting a bit tired of handsomely paid and highly comped corporate and political 'leaders' who, when the time comes, don't know anything about anything that is surely within their direct responsibility. There are little to no downsides for failure if you are on the right side of the glass ceiling and a vetted member of the players club, a master of the universe.

And that moral hazard may be the most powerful attraction and incentive to bad behaviour of all. Power attracts the corruptible, without respect to race, gender, or creed.

Rolling Stone
SEC: Taking on Big Firms is 'Tempting,' But We Prefer Whaling on Little Guys
By Matt Taibbi

If you want to see a perfect example of how completely broken our regulatory system is, look no further than a speech that Daniel Gallagher, one of the S.E.C.’s commissioners, recently gave in Denver, Colorado.

It’s a speech whose full lunacy is hard to grasp without some background.

It’s by now been well-established that the S.E.C.’s performance in policing Wall Street before, after, and during the crash has been comically inept. It would be putting it generously to say that the top cop on the financial services beat has demonstrated particular incompetence with regard to investigations of high-profile targets at powerhouse banks and financial companies. A less generous interpretation would be that the agency is simply too afraid, too unwilling, or too corrupt to take on the really dangerous animals in this particular jungle. 

The S.E.C.’s failure to make even one case against a high-ranking executive involved in the mass frauds leading to the 2008 crash – compare this to the comparatively much smaller and less serious S&L crisis twenty years earlier, when the government made 1,100 criminal cases and sent 800 bank officials to jail – became so conspicuous that by the end of last year, the “No prosecutions of top figures” idea became an accepted meme in mainstream news media coverage of the economic crisis.

The S.E.C. in recent years has failed in almost every possible way a regulator can fail to police powerful criminals. Failure #1 was that it repeatedly fell down on the job even when alerted to problems at big companies well ahead of time by insiders. Six months before Lehman Brothers collapsed, setting off a chain reaction of losses that crippled the world economy, one of Lehman’s attorneys, Oliver Budde, contacted the S.E.C. to warn them that there were problems with the company’s accounting; the agency blew him off. There were similar brush-offs of insiders with compelling information in cases involving Moody’s, Chase, and both of the major Ponzi scheme scandals, i.e. the Bernie Madoff and Allen Stanford cases.

Read the rest here.

James Koutoulas Says JP Morgan Is Still Hiding Large Amount of MF Global Customer Money

I do not agree with Rick Santelli's throwaway line in the beginning that there was probably no illegality involved in JPM's trades in London, and certainly not with regard to Facebook where it appears that there was blatantly selective leaking of undisclosed negative financial information ahead of the IPO. And the corollary suggestion that any investigations there are a waste of time.

The trades themselves *may not* have been illegal, but as in most things, the felony is in the coverup and the deception for actions that may or may not themselves have broken but merely bent the law. After all, Watergate was all about 'a third rate burglary.'

Although I have been critical of Louis Freeh in the past for his stonewalling of financial information from MF Global claiming attorney client privilege, withholding it even from Federal investigators and regulators, I thought it was a bit unfair to criticize him for his $25 million in fees for managing the Chapter 11, without mentioning that James Giddens is also billing substantial fees for the MF Global bankruptcy for the brokerage portion of it.

Mr. Giddens billed $170 million for Lehman's bankruptcy for example. His fees for MF Global are not yet disclosed because he asked for an extension for filing them with the court to June 8. Bankruptcies, tort claims, and divorces are often rewarding ventures for the lawyers.

Interviews with Mr. Koutoulas are so rare that any deserve to be shared, even if the interviewer steps all over the interview with selective outrage. The extended corporate infomercial is what passes for financial journalism in the States these days, and in much of the 'straight news' as well unfortunately.

I enjoyed the suggestion that almost $800 million in customer money was transferred late in the game to JPM in London to satisfy margin calls. This was the personal conclusion I put forward about two weeks after the incident.

I also believe that JPM had deep knowledge of MF Global's finanical leverage, condition, and exposure as their banker, which they used before and after the fact.

And I agree that Obama's track record on Wall Street reform is shameful, and a continuation of the Bush policies without real reform. But the idea that Romney will somehow change that is, alas, a terrible fantasy. The torch of corruption is being passed from administration to administration now without regard to party affiliation. That is how bad it has become.

How about JPM's positions in the silver market Rick? Think we need an independent investigator there too in the face of four years of stone-walling by the CFTC? Or do we demand justice only where it might be embarrassing to the Democrats without really hurting Wall Street?

But as I have said before, my goal is to just get the MF Global customer money back for them. I have given up any hopes that justice will be done. So I am grateful for Mr. Santelli's attention. There is far too little of it being given to these gross injustices and violations of trust.

It seems as though ordinary people have few friends or champions these days, just various packs of vultures picking over their bones with fees, scams, and snares.

Freedom in Europe Is Eroding From the Edges, Financed by the Banks

"Greece is not an exception. It is one of the main testing grounds for a new socio-economic model of potentially unlimited application: a depoliticised technocracy in which bankers and other experts are allowed to demolish democracy."

Slavoj Žižek


"Corruption is a tree, whose branches are of an immeasurable length: they spread everywhere; and the dew that drops from thence hath infected some chairs and stools of authority."

Beaumont and Fletcher, The Honest Man's Fortune

This is a fascinating perspective on the financial situation in Europe from Slavoj Žižek which appeared in a recent edition of the London Review of Books. It reads like a modern variation of an age old script with dollars and bankers replacing bullets and shock troops, at least for now.

The role of Goldman Sachs and some of the other banks, with their attendant politicians who are in many cases now their direct representatives in the erosion of freedom in Europe, is fascinating to watch, in the manner of a train wreck in slow motion.

The monied interests are putting forward their own agendas and candidates while maintaining the charade of popular government, goose-stepping to the tune of financial expediency and the 'iron law of oligarchy' that helped to spawn the cult of the Übermensch at the beginning of the twentieth century.

The counter example is Iceland, and at an earlier period Sweden, which took a different course of action with their banks, direct confrontation and resolution of crony capitalism and the debt trap, rather than accomodation and appeasement.

The US and UK are little better off, having established a temporary equilibrium in which the monied interests are consolidating their gains. How else can one explain the lack of investigations and prosecutions of financial frauds, that become increasingly blatant and brazen, while the national economy continues to stagnate under the burden of crony capitalism and the most powerful political agenda is more tax cuts and sinecures for the super rich? And freedom continues to be assaulted and deconstructed in the name of the endless war on terror.

At some point the people will make a stand, and the Banks will make them an offer which they think that they cannot refuse. This is playing out now in Greece, and is coming to a country near you.

London Review of Books
Save us from the saviours
By Slavoj Žižek
25 May 2012

Imagine a scene from a dystopian movie that depicts our society in the near future. Uniformed guards patrol half-empty downtown streets at night, on the prowl for immigrants, criminals and vagrants. Those they find are brutalised. What seems like a fanciful Hollywood image is a reality in today’s Greece. At night, black-shirted vigilantes from the Holocaust-denying neo-fascist Golden Dawn movement – which won 7 per cent of the vote in the last round of elections, and had the support, it’s said, of 50 per cent of the Athenian police – have been patrolling the street and beating up all the immigrants they can find: Afghans, Pakistanis, Algerians. So this is how Europe is defended in the spring of 2012...

The prophets of doom are right, but not in the way they intend. Critics of our current democratic arrangements complain that elections don’t offer a true choice: what we get instead is the choice between a centre-right and a centre-left party whose programmes are almost indistinguishable. On 17 June, there will be a real choice: the establishment (New Democracy and Pasok) on one side, Syriza on the other.

And, as is usually the case when a real choice is on offer, the establishment is in a panic: chaos, poverty and violence will follow, they say, if the wrong choice is made. The mere possibility of a Syriza victory is said to have sent ripples of fear through global markets. Ideological prosopopoeia has its day: markets talk as if they were persons, expressing their ‘worry’ at what will happen if the elections fail to produce a government with a mandate to persist with the EU-IMF programme of fiscal austerity and structural reform.

The citizens of Greece have no time to worry about these prospects: they have enough to worry about in their everyday lives, which are becoming miserable to a degree unseen in Europe for decades...

Here is the paradox that sustains the ‘free vote’ in democratic societies: one is free to choose on condition that one makes the right choice. This is why, when the wrong choice is made (as it was when Ireland rejected the EU constitution), the choice is treated as a mistake, and the establishment immediately demands that the ‘democratic’ process be repeated in order that the mistake may be corrected. When George Papandreou, then Greek prime minister, proposed a referendum on the eurozone bailout deal at the end of last year, the referendum itself was rejected as a false choice.

There are two main stories about the Greek crisis in the media: the German-European story (the Greeks are irresponsible, lazy, free-spending, tax-dodging etc, and have to be brought under control and taught financial discipline) and the Greek story (our national sovereignty is threatened by the neoliberal technocracy imposed by Brussels).

When it became impossible to ignore the plight of the Greek people, a third story emerged: the Greeks are now presented as humanitarian victims in need of help, as if a war or natural catastrophe had hit the country. While all three stories are false, the third is arguably the most disgusting. The Greeks are not passive victims: they are at war with the European economic establishment, and what they need is solidarity in their struggle, because it is our struggle too.

Greece is not an exception. It is one of the main testing grounds for a new socio-economic model of potentially unlimited application: a depoliticised technocracy in which bankers and other experts are allowed to demolish democracy. By saving Greece from its so-called saviours, we also save Europe itself.

Read the entire article here.