The Whining of the Bailout Boys: SEC Whistleblower Gary Aguirre and John Mack

"In an interview on Bloomberg TV, John J. Mack, the former chairman and chief executive of Morgan Stanley, called for an end to the harsh words that have been hurled at Mr. Dimon and Lloyd C. Blankfein, Goldman Sachs's chief executive, over their pay."

CNBC, 11 February 2014

The Bailout Boys

"In 2006, Gary Aguirre, a then-client of GAP [Government Accountability Project] attorneys, rocked the financial world by alleging wrongdoing by Securities and Exchange Commission officials for their failure to not allow a proper investigation to proceed, possibly due to political connections.

Aguirre is a former SEC lawyer who was dismissed by the agency following his attempt to subpoena John Mack – a prominent financial figure who later became the CEO of Morgan Stanley – in an insider trading investigation of Pequot Capital Management, one of the country’s leading hedge funds. Aguirre’s story sparked outrage, a Congressional investigation, and (eventual) vindication by the U.S. Senate.

Aguirre’s battle dates back to June 2005, when he suddenly encountered resistance at the S.E.C. during the course of his investigation of Pequot. A $7 billion hedge fund, Pequot’s CEO was Arthur J. Samberg, another prominent financial figure and longtime friend of John Mack, who preceded Samberg as Pequot CEO. Hedge funds are unregulated private investment funds that typically engage in unconventional investment strategies, such as short-selling.

Prior to that date, Aguirre had been investigating the case for months, issuing over 90 subpoenas without obstruction. When Aguirre recommended that Mack’s testimony be taken under oath, he was told by his supervisor that it would be difficult to obtain approval for the subpoena due to Mack’s powerful “political connections.” Over the course of the next two months, Aguirre’s supervisors refused to allow him to issue Mack a subpoena. Aguirre questioned this decision at every level up the chain of command (including SEC Chairman Christopher Cox), reporting his superior’s behavior and providing evidence supporting his subpoena request.

In September 2005, Aguirre was fired 11 days after being awarded a two-step pay increase....

Aguirre eventually testified again in front of the Senate Judiciary Committee, offering further analysis of the role of proper oversight in regards to hedge funds. More and more evidence emerged supporting Aguirre’s allegations. Finally, the Senate Finance and Judiciary committees released their full report, which completely validated all of Aguirre’s claims. This was a significant victory.

In May 2009, after numerous insider-trading investigations by the SEC, Pequot closed down. Many economists also feel that these large-scale hedge funds had a significant effect on the sub-prime mortgage market’s burst, which led to the current global recession. The S.E.C. continues to be criticized for a lack of internal oversight, as evidence by the Bernie Madoff scandal (which also involved a whistleblower)."

Government Accountability Project, The SEC and Gary Aguirre

Related:
Versailles Watch: John Mack Whines About How Badly Wall Street CEO's Are Treated - Yves
Report Says SEC Erred on Pequot - NY Times
Gary J. Aguire - Wikipedia

Why Isn't Wall Street In Jail: The Notorious Case of Gary Aguirre and John Mack - Taibbi
Mary Jo White's Involvement in the Gary Aguirre Case - Taibbi
Mobsters of Wall Street - Jim Hightower

"Call him a fat cat who mocks the public. Call him wicked. Call him what you will. He is, he says, just a banker 'doing God’s work'."

Times of London, Goldman Sachs and Lloyd Blankfein

Gold Daily and Silver Weekly Charts - Gold Runs Higher - Vichyssoise

Janet Yellen's testimony today was a bit painful at times, but perhaps it will improve as she becomes more familiar with dancing in the lions' den. Her answer about raising the minimum wage shows her to be a tried and true economic General Pétain, well versed in failure and capitulation to the forces of neo-liberalism.   At least le Maréchal de Vichy had a few moments of greatness, although much earlier in life.

Trickle down stimulus is going to most likely stretch the social fabric to the point of tearing. But its failure is going to have to be demonstrated quite forcefully it seems. Keep an eye on the UK and parts of Europe for early warning signs.

It was interesting to see gold move higher with stocks, with silver moving higher as well, but somewhat sluggishly.  I have a suspicion that this is about gold's February delivery issues and the general shortage of physical gold bullion which is developing.  But only time will tell.

About 26,858 ounces of gold bullion came out of Scotia yesterday, in both categories of storage.  We have yet to see the kinds of deliveries tacked up that the standing and stopped orders suggests, but it looks like there will be no close shaves this month. 

I have marked the key overhead resistance levels for gold in red lines on this chart.  And you will notice that gold is still 'channel bound.'  

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Calling Down the Thunder

Initial Claims and Retail Sales might provide some economic grist for the market's mills on Thursday, but for today it was all bullishness as the thin volumes and lack of organic selling let stocks take off on the news that there will be a clear debt ceiling bill up for a vote tonight, and Janet Yellen's pandering to the corporate classes in her testimony today.

Stocks are rising on a tide of misdirected and overly narrow liquidity, compliments of the Federal Reserve which is the tip of the banking cartel.

On a more practical note, another winter storm is expected to sweep through the NYC metro area on Thursday offering some potentially significant snowfall. Let's see if this has any affect on the bull's ardor for more. It may improve the occupancy of Manhattan hotels.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds

“I believe in aristocracy, if that is the right word, and if a democrat may use it. Not an aristocracy of power, based upon rank and influence, but an aristocracy of the sensitive, the considerate and the plucky.

Its members are to be found in all nations and classes, and all through the ages, and there is a secret understanding between them when they meet. They represent the true human tradition, the one permanent victory of our queer race over cruelty and chaos.

Thousands of them perish in obscurity, a few are great names. They are sensitive for others as well as themselves, they are considerate without being fussy, their pluck is not swankiness but the power to endure, and they can take a joke.”

E.M. Forster

The word 'pluck' means spirited and determined courage. These days I think it might be best expressed as 'character,' or 'to be a mensch.

And it isn't often found amongst the financiers, or the one percent, or our pampered political overlords, with a few notable exceptions.  There is something about power and money that softens a person's mind and moral sensibility. 

They tend to become obsessed with themselves, and their special needs.  They all too often are told what they want to hear, like the admirers do for beautiful women who lose all sense of their real worth.  And so they lose the character that comes from remembering our common humanity, memento mori, and our own fallibility, weakness, and quite frankly, unworthiness.  No wonder the parable about the camel and the eye of a needle.

Therein lies the root of tragedy.  The best lack all conviction, while the worst are filled with passionate intensity, as Yeats observed in 1919.