Goldman Sachs report 'blowout profits'

[Happy Face 29]

 

Dylan Ratigan's gone on tirades like this a couple of times.

 

Should do it more often.

[Park Life 70]

 

Dylan Ratigan's gone on tirades like this a couple of times.

 

Should do it more often.

 

The Govt ain't gonna do nowt. Sooner or later the people are going to have to act in the name of the people.

 

The thinktanks have already seen that average people as such aren't really necessary and we are moving slowly to the post human. There will be pockets of maga wealthy and vaste swathes of others left to fend for themseves. It was never (and it isn't possible) the intention of cartel capitalism to provide for the masses. Wealth creation of those kind of gargantuan sums and the whopping bonuses goes back into a very narrow fiancial driven sectors and money continues to accumulate amongst the ruling elite, they have never and will never give a fuck. It surprises me that a country so full of guns hasn't seen more incidents against Wall street and banking types.

[Geordieracer 0]

[Happy Face 29]

The US Senate has approved a landmark bill designed to overhaul the US financial system, by 60 votes to 39.

 

Earlier this month, the reform bill was passed by the US House of Representatives.

 

The vote is the culmination of months of political wrangling after President Obama committed to overhaul the banking sector after the 2008 financial crisis.

 

The reforms are designed to reduce the risks that banks take and prevent future crises.

 

http://www.bbc.co.uk/news/business-10654128

 

What will the bill do about financial regulation?

A new Consumer Protection Agency will be created with a mandate to clamp down on abusive practices by credit card companies and mortgage lenders. A big chunk of the enormous losses in the sub-prime mortgage market was due to fraudulent lending to US home buyers who had no hope of repaying their loans.

 

Regulatory oversight of the financial markets will be ramped up, with the creation of a new Council of Regulators that will bring together the heads of the various financial watchdogs. The Federal Reserve (the US central bank) is likely to have a leading role.

 

What about the big banks?

Regulatory authorities will be given new powers to seize and conduct an orderly liquidation of large financial firms like Citibank. It is hoped that this will address the so-called "too big to fail" problem, whereby pushing huge firms into a full-blown and complex bankruptcy process during the height of the financial crisis - as happened with Lehman Brothers - could destroy the entire financial system.

 

Large banks will be required to increase the amount of capital - money raised from shareholders - that they hold in reserve against possible loan losses. However, this requirement will only come into effect after five years, as a faster timetable might have forced poorly capitalised banks to cut their lending back.

 

What is the Volcker Rule?

Banks will be banned from proprietary trading activities (that is, the ability of traders to make large speculative bets on financial markets using their bank's money). This was a key plank of the so-called Volcker Rule, named after Paul Volcker, chairman of the Economic Recovery Advisory Board, who proposed it.

 

A second leg of the Volcker rule also survived negotiations, though in a limited form. Mr Volcker wanted to ban banks from making risky investments in hedge funds and private equity funds. Hedge funds make money via clever - but often high-risk - trading strategies, while private equity firms buy up and then shake up underperforming companies. Instead, the bill will limit banks investments in these funds to 3% of their capital.

 

And derivatives?

Derivatives are contracts that allow companies to hedge their exposure to (and hedge funds and banks to speculate on) the financial markets.

 

Under the reforms approved, most of the $600bn derivatives market will need to be cleared through third-party exchanges. This will reduce the risk that institutions that wrote these derivative contracts fail to pay out the amount they owe if they go bust.

 

Banks will also be required to hive off some of their swaps businesses into affiliated companies, in order to reduce their exposure to potential losses. Swaps are among the most profitable types of financial derivatives carried out by the banks.

 

Are the reforms popular?

The bill is surprisingly draconian, considering the initial opposition of Senate Republicans to reform.

 

However, clamping down on Wall Street plays well with voters from across the political spectrum, and it is likely that many senators had November mid-term elections in mind when they decided to vote in favour.

 

Public anger is likely to have been further inflamed by the return of big bonuses for bankers this year, as well as the accusations of fraud levelled at Wall Street firm Goldman Sachs by US regulators.

 

What do the banks think?

Unsurprisingly, the banks lobbied heavily against the new reforms.

 

President Obama criticised the financial services industry for unleashing "hordes of lobbyists and millions of dollars in ads" against the bill.

 

As financial markets have recovered over the past 12-18 months, banks have begun to turn in big profits again.

 

But most of those profits have been derived from the banks' trading activities, precisely the business area that will be worst affected by the new reforms.

 

The plan to hive off banks' proprietary trading and swaps businesses roused their particular ire.

 

And the requirement to shift derivatives contracts on to third-party clearing houses is likely to make them much less profitable, as the contracts will need to be simpler and their pricing more transparent.

 

What about here in Europe?

Brussels has revealed proposals for a national network of "resolution funds" partly paid for by the banks, which would be used to help dissolve failing banks rather than bailing them out.

 

There are also new rules on hedge funds and private equity funds which have been approved by EU finance ministers, despite opposition from London's financial hub, the City.

 

There is also a growing international consensus on the need to tax banks more heavily and to clamp down on banks' usage of tax havens.

[Happy Face 29]

CNBC has reported that the Securities and Exchange Commission has reached a settlement agreement with Goldman Sachs. The news was relayed via CNBC's Twitter feed. The reported settlement comes on the heels of Congress's passage of a sweeping financial reform bill earlier today.

 

The New York Times' Dealbook reports that the settlement totals $550 million. The bank will reportedly admit no wrongdoing.

 

Still, the bank's stock surged today rising 4.43 percent as rumors swirled about a settlement. With a cost of roughly $550 million (plus millions legal fees), Goldman Sachs likely came out ahead for the day, as the stock surge added hundreds of millions to the bank's market cap.

 

In April, the SEC charged Wall Street's most profitable bank with civil fraud over complex mortgage securities sold under its 'Abacaus' deals. The SEC alleged that Goldman failed to disclose the securities were chosen by another bank client, the hedge fund manager John Paulson, who made billions betting against the housing market. The securities were, according to the SEC, secretly designed to fail.

 

This morning, the Wall Street Journal reported that Goldman Sachs had floated the idea of simultaneously settling a host of mortgage-related cases pending with the SEC.

 

http://www.huffingtonpost.com/2010/07/15/g...m_n_648045.html

[Danny CL 0]

CNBC has reported that the Securities and Exchange Commission has reached a settlement agreement with Goldman Sachs. The news was relayed via CNBC's Twitter feed. The reported settlement comes on the heels of Congress's passage of a sweeping financial reform bill earlier today.

 

The New York Times' Dealbook reports that the settlement totals $550 million. The bank will reportedly admit no wrongdoing.

 

Still, the bank's stock surged today rising 4.43 percent as rumors swirled about a settlement. With a cost of roughly $550 million (plus millions legal fees), Goldman Sachs likely came out ahead for the day, as the stock surge added hundreds of millions to the bank's market cap.

 

In April, the SEC charged Wall Street's most profitable bank with civil fraud over complex mortgage securities sold under its 'Abacaus' deals. The SEC alleged that Goldman failed to disclose the securities were chosen by another bank client, the hedge fund manager John Paulson, who made billions betting against the housing market. The securities were, according to the SEC, secretly designed to fail.

 

This morning, the Wall Street Journal reported that Goldman Sachs had floated the idea of simultaneously settling a host of mortgage-related cases pending with the SEC.

 

http://www.huffingtonpost.com/2010/07/15/g...m_n_648045.html

 

Top Jewing.

[Matt 0]

The Volcker rule on derivtives trades is retarded. It will effectively mean that someone looking to hedge a rate for say, a year. will need to find the cash to post collateral against the mark-to-market if the trade turns against them.

 

It's not just banks against this- it defeats the whole object od hedging.

 

Some very poorly thought out legislation that if anything, favour speculators over hedgers.

[Danny CL 0]

The Volcker rule on derivtives trades is retarded. It will effectively mean that someone looking to hedge a rate for say, a year. will need to find the cash to post collateral against the mark-to-market if the trade turns against them.

 

It's not just banks against this- it defeats the whole object od hedging.

 

Some very poorly thought out legislation that if anything, favour speculators over hedgers.

 

It already happens, companies who have floated fixed rate debt have found themselves so far in the money on their swaps that they are busting their counterparty risk limits wide open.

 

Mark to market movements are settled day on day when valuations are agreed. It sound like a massive arse ache but in reality it isn't.

 

Hedging isnt always cashflow hedging fella.

[The Fish 9047]

The Volcker rule on derivtives trades is retarded. It will effectively mean that someone looking to hedge a rate for say, a year. will need to find the cash to post collateral against the mark-to-market if the trade turns against them.

 

It's not just banks against this- it defeats the whole object od hedging.

 

Some very poorly thought out legislation that if anything, favour speculators over hedgers.

 

It already happens, companies who have floated fixed rate debt have found themselves so far in the money on their swaps that they are busting their counterparty risk limits wide open.

 

Mark to market movements are settled day on day when valuations are agreed. It sound like a massive arse ache but in reality it isn't.

 

Hedging isnt always cashflow hedging fella.

 

You have a remarkable talent for teaching the wrong grandma how to suck their own particular brand of egg.

[Kitman 2188]

The Volcker rule on derivtives trades is retarded. It will effectively mean that someone looking to hedge a rate for say, a year. will need to find the cash to post collateral against the mark-to-market if the trade turns against them.

 

It's not just banks against this- it defeats the whole object od hedging.

 

Some very poorly thought out legislation that if anything, favour speculators over hedgers.

 

It already happens, companies who have floated fixed rate debt have found themselves so far in the money on their swaps that they are busting their counterparty risk limits wide open.

 

Mark to market movements are settled day on day when valuations are agreed. It sound like a massive arse ache but in reality it isn't.

 

Hedging isnt always cashflow hedging fella.

 

That sounds suspiciously like bullshit to me, but then I can't pretend to be an expert on this.

 

Isn't Matt's point that to hedge a forex exposure in the US, you'll need to fund a large lump of cash to post as security against the hedge in the event it becomes out of the money? Which presumably defeats the object of hedging which is about minimising exposure without undue funding costs.

 

Maybe you could explain what you mean?

[Matt 0]

Kitman- that's exactly what I mean. Take something vanilla such as fixed-floating rate swap. You've locked in a rate, now you have to post collateral as well, pushing up all-in funding costs. I'm not sure what will happen to existing books.

 

Also you need to take into account propreitary technology in more complex trades. Those hedging options will no longer exist because the system will show the whole world how its done soon as its posted.

 

Some companies already do post but they are usually of dubious creditworthiness and they scream and twist if you try to put one in place. This isn't hammering banks, it's hammering hedging as a whole which is a step too far.

 

Of course the UK may decide that they don't want to follow suit and all the banks move their core swap operations to London.

[Danny CL 0]

The majority of corporate bonds are issued at a fixed coupon. Some companies, especially in times of lower interest rates, like to float that debt. Its still hedging because the MTM gain on each swap is offset by the MTM loss on the bond in the hedge relationship.

 

It means that cash flows can be variable however, it can reduce interest cost.

 

However a lot of these corporates have counter party risk issues as swaps will be with different counterparties to the bonds. So to mitigate the risk of default on in the money swaps, they start CSA agreements settling positions on a daily basis.

 

http://en.wikipedia.org/wiki/Credit_Support_Annex

 

Probably not best to accuse someone of bullsh!tting kitman, you are clearly right about one thing, you are not an expert.

[Cid_MCDP 0]

I've been having to fill in as line maintenance the past month and a half and finally got back to my normal job this week. I ran across this on the news but didn't have time to post it, but I knew it'd be an interesting bit for this thread, so I emailed it to myself.

 

http://news.yahoo.com/s/time/08599200088000

Two weeks ago, along a marble corridor in the Rayburn House Office Building in Washington, I watched about 40 well-dressed men (and two women) delivering huge value for their employers. Except that we, the taxpayers, weren't employing them. The nation's banks, mortgage lenders, stockbrokers, private-equity funds and derivatives traders were.

 

They were lobbyists - the best bargain in Washington. Capitol Tax Partners, for example, is one of 1,900 firms that house more than 11,000 lobbyists registered to operate in Washington. Last year, according to the Center for Responsive Politics (CRP), firms like Capitol Tax were paid a total of $3.49 billion for unraveling the mysteries of the tax code for a variety of businesses. According to Capitol Tax co-founder Lindsay Hooper, his firm provided "input and technical advice on various tax matters" to such clients as Morgan Stanley, 3M, Goldman Sachs, Chanel, Ford and the Private Equity Council, which is a trade group trying to head off a plan to increase taxes on what's called carried interest, a form of income enjoyed by the heavy hitters who run venture-capital and other types of private-equity funds. (Time Warner, the parent company of TIME magazine, is also a client of Capitol Tax Partners.)

 

Since 2009, the Private Equity Council has paid Capitol Tax, which has eight partners, a $30,000-a-month retainer to keep its members' taxes low. Counting fees paid to four other firms and the cost of its in-house lobbying staff, the council reported spending $4.2 million on lobbying from the beginning of 2009 through March of this year. Now let's assume it spent an additional $600,000 since the beginning of April, for a total of $4.8 million. With other groups lobbying on the same issue, the overall spending to protect the favorable carried-interest tax treatment was maybe $15 million. Which seems like a lot - except that this is a debate over how some $100 billion will be taxed, or not, over the next 10 years. (Read about lobbyists and health care.)

 

And what did the money managers get for their $15 million investment? While lawmakers did manage to boost the taxes of hedge-fund managers and other folks who collect carried interest as part of their work, they agreed to a compromise (tucked into a pending tax bill) that will tax part of those earnings at the regular rate and another part at a lower capital-gains rate. The result? A tax bite about $10 billion smaller than what the reformers wanted.

 

The battle over that carried-interest provision was dwarfed by the real action this year - the massive financial-regulatory-reform bill hammered out by a House-Senate conference committee and targeting what the White House says were the causes of the economy's near meltdown in 2008. The legislation, which would bring more change to Wall Street than anything else enacted since the New Deal, was a Super Bowl for lobbyists. (Read more about the financial reform bill.)

 

The 40 people I saw in that Capitol Hill corridor in mid-June were part of an army of approximately 2,000 monitoring the two-week-long conference committee between Senators and Representatives trying to reconcile their different versions of the bill. Just outside the House Financial Services hearing room, two dark-suited, slightly graying men madly BlackBerrying looked up and blanched at my press credentials. After being promised anonymity, they explained that they'd been dispatched by their boss, as one put it, "to grab one of the senior staff on the Republican side and give him an idea about how to reword something in the Volcker rule."

 

The Volcker rule, named for former Reserve chairman Paul Volcker, who was one of first to suggest it, would prohibit banks from putting their own money into risky ventures such as private-equity or real estate deals. It's a restriction that its advocates believe could prevent the next financial implosion. Bankers hate it, but their lobbyists have been unable to fight it off. Instead, they have been chipping away at it, suggesting provisions that would allow some percentage of those funds to go into high-risk deals, delay the rule's implementation or exempt some big players

 

The two lobbyists I encountered in the hall are working on a narrower Volcker-rule carve-out. They're representing "some green-energy interests," one said. What's that got to do with the Volcker rule? He explained that Washington is encouraging green-energy investments by granting tax credits, but only investment entities like banks that make consistent profits have predictable tax liabilities and therefore can make use of such tax credits.

 

By the time the bill was finished, lobbyists seeking Volcker-rule carve-outs had won complete exemptions for most mutual-fund companies and a provision allowing banks to manage funds and still make investments of up to 3% of their capital and to take up to seven years to sell off the investments they already had. Another highly technical tweak allowed banks to define their capital differently from what was originally proposed, meaning that 3% limit on how much they could invest suddenly got lots higher. And the clean-energy troops won a provision that, depending on how the implementation rules get written, might allow exceptions for investments in small or start-up businesses that "promote the public welfare."

 

Complexity is the modern lobbyist's greatest ally. Three lobbyists showed me three different proposals for rewording what may be the bill's biggest-money section: a provision in the Senate version that would force the five major banks that do most of the country's trillions of dollars of trading in derivatives - and make nearly $23 billion a year doing so - to spin off those operations. Even holding the dueling paragraphs side by side by side, I found it difficult on first read to appreciate the differences. But with some pointers from the lobbyists, it was clear that billions in profits depended on the variations in this nearly impenetrable language

 

"Complexity is our enemy," says Elizabeth Warren, chair of the congressional panel overseeing the Troubled Asset Relief Program, who conceived one of the legislation's marquee provisions - a consumer-protection agency to regulate mortgages, credit cards and other financial products. "The more complex these bills are," she complains, "the more they can outgun us."

 

This is why when I hear somebody banging on about change or hell, even voting, I just kinda shake my head. The people of this country have practically no say in how she operates anymore. It's effectively completely out of our hands at this point.