the finance industry / wall street

QE didn't have "bank recipients" in any real sense. QE is just the fed buying treasuries. The only difference between QE buying of treasuries and non-QE buying of treasuries is that non-QE usually involves short-turm repurchase agreements rather than outright sales, so is targeted at the short-term cost of capital, while QE involves outright purchase of at times longer dated treasuries, and the money used to buy these treasuries strictly-speaking didn't exist before it was electronically credited to the account of the dealer whom the fed purchased the treasuries from.

But it's not as though it involves the fed giving money to specific banks in any real way. It just basically changes the ratio of treasuries/cash in the market.

The idea that you're going to be able to prosecute goldman sachs executives for criminal financial fraud remains one of the most annoying and time-wasting red herrings of the left

Like "looting our economy" might sound catchy when Matt Taibbi says it but it is not a criminal statute on the books, nor would making it one do much to solve our problems.

i thought the net effect of QE was banks got free money by exploiting differences in interest or something. money was effectively created, and banks got some of it, was my understanding.

Hurting 2 stands with Bill O'Reilly on the universal innocence of the high rollers

hurting isn't saying that GS et al are "universal[ly] innocen[t]," he's saying that as far as he knows there may not be any legal grounds to prosecute them. i dunno if i agree -- and i'd like to see the SEC, the IRS and anyone else issue a subpoena or two before making a determination on that issue -- but he isn't saying that they're clean or innocent.

personally, i'd like to believe the "they prosecuted Al Capone for tax fraud" canard -- that is, if the Feds really wanted to nail Goldman Sachs et al they'd find something, ANYTHING and push it as far as they can -- and however much i may suspect that their inaction is b/c they really don't want to go after them, is there any real proof that that IS what is actually happening?!?

SEC has prosecuted Goldman Sachs FYI. but those are civil suits. Justic Dept suits are different, those are criminal.

http://www.sec.gov/news/press/2010/2010-59.htm

that's true, shakey. but if the SEC (or the IRS) sees criminal violations occuring, they can refer the matter to the Justice Department for investigation and possible prosecution.

and they have, it's just that the Justice Department hasn't pursued them because Holder is an asshole

I don't really know what the Justice Department is doing apart from making up legal arguments to support the assassination/police state that no one gets to actually read. and prosecuting medical marijuana distributors, I guess.

good job guys!

The idea that you're going to be able to prosecute goldman sachs executives for criminal financial fraud remains one of the most annoying and time-wasting red herrings of the left

― Scott, bass player for Tenth Avenue North (Hurting 2), Thursday

Difficult but not annoying or time wasting (I'd rather have Justice working on such a criminal case even if they lose-- it's not like they're gonna be drafting other legislation to tighten up regulations on wall street or doing other more important things if they're busy on such a case). As Newsweek that well-known left-wing mag noted:

A year later, in April 2011, the Senate Permanent Subcommittee on Investigations, chaired by Democrat Carl Levin, after a two-year inquiry, issued a fat report detailing several transactions, including Goldman's Abacus deal, that Levin and his staff believed should be investigated by Justice as possible crimes. The subcommittee made a formal referral to the department (as did the federal Financial Crisis Inquiry Commission, chaired by Phil Angelides), and Levin publicly stated his view that criminal inquiry was warranted. Goldman executives, including the firm's chief executive officer, Lloyd Blankfein, started hiring defense lawyers.

xp Philip

The Fed is doing both. Something like 60% of Treasury issuance to pay for the continuing insane deficits (35% of Federal spending is borrowed) wound up on the Fed's balance sheet last year. It does pass through banks: the Federal Reserve is a semi-private corporation owned by member banks and chartered by a 1913 act of Congress to get around antitrust concerns.

Also, political objections (in the form of objections to Fed board nominations) have all come from the Tea Party Right of late, which is very opposed to quantitative easing as a debasement of the dollar. Kinda naive, when it did so many good things, like force China further off its peg. In the long term, QE, by debasing the dollar just transfers wealth from savers and the wealthy (ie, the 1±%) to debtors. For the 99%, its terrible if you are a pensioner but ultimately helpful if you're underwater on your mortgage.

oh cool i'm glad they do this thing. stupid tea party. money is one of the few things that is for-real magic, and it's upsetting to me when there's a magic wand sitting there not being used.

Right, inflation is bad for savers of money and people on fixed income, good for people with debt, and kind of neutral for everyone else as long as it doesn't get out of control (all other things being equal, wages rise with inflation).

And most of the 99% right now are more likely to be people with debt than savers, although some are certainly on fixed incomes.

"The idea that you're going to be able to prosecute goldman sachs executives for criminal financial fraud remains one of the most annoying and time-wasting red herrings of the left"

http://ionenewsone.files.wordpress.com/2011/10/xlarge_oreillywestth.jpg

Ok Morbs, name a specific criminal statute and make a case to me that it was violated by a Goldman Sachs executive.

At the moment, the vast majority of prosecutable fraud from the mortgage bubble arises from "upstream" of the financial engineers at the Wall St. banks. Loan originators who falsified income documentation, appraisers who inflated appraisals to retain business, etc. A strong case can be made that only a few of the mortgage-back security aggregators really knew or care how bad the credit risks had become in the 2005-7 timeframe, so long as some fool in a Dusseldorf landesbank was willing to buy them.

William K. Black, one of the best sources on the lack of prosecution for credit-bubble fraud, IIRC notes that the majority of the white-collar crime investigators at the FBI and other Federal law enforcement agencies were reassigned to investigate money-laundering for terrorist organizations in the aftermath of 9/11. A budgetary request for more hires to replace them was nixed by Congress.

The subcommittee made a formal referral to the department (as did the federal Financial Crisis Inquiry Commission, chaired by Phil Angelides), and Levin publicly stated his view that criminal inquiry was warranted.

Ok, but you'd have to demonstrate criminal intent on the part of Goldman EXECUTIVES in structuring Abacus.

I mean it's not like these deals get personally signed off on by Lloyd Blankfein himself.

As you probably know, I'm not a lawyer; I'm an amateur asshole.

(just a joek, kidz)

http://upload.wikimedia.org/wikipedia/en/thumb/2/24/Poster-premiere-semi-pro.jpg/220px-Poster-premiere-semi-pro.jpg

Anyway my gripe about that line ("why haven't these guys gone to jail?") is that actionable criminal fraud makes up a tiny portion of what went wrong with our economy, and while it is often metaphorically accurate to say "these guys are crooks", it's rarely literally provably true. Further, it seems to me that the lust for a public hanging kind of distracts from the much bigger, harder systemic problems that need addressing.

if criminal prosecution leads to nationalizing the financial institutions responsible, that seems like a great step forward towards addressing the systemic problems.

how would criminal prosecution lead to nationalizing financial institutions?

if nobody's left to run it because they're all in jail, that seems like an excellent rationale for govt seizing control. i'm not sure, but can the govt be plaintiff against banks in a civil suit? that seems like another avenue to seize assets.

so not gonna happen

oh nothing good's gonna actually happen, but we have to go out Alamo-style.

Right, inflation is bad for savers of money and people on fixed income, good for people with debt, and kind of neutral for everyone else as long as it doesn't get out of control (all other things being equal, wages rise with inflation).

this is true but again, we don't really have inflation. we just have low rates, which are also good for debtors and bad for savers (but are also good for equities since it forces money [that wants returns] out of bonds and into riskier investments.). but we don't have prices increasing at a striking rate (recent episodic commodities bubble aside). and i've said this before, but i'm pretty dubious that the low rates are a result of fed policy at all, actually. There's enough demand for relatively safe assets that rates would probably be very low anyway.

Right, didn't mean to suggest we are seeing inflation, although I do think that the expanded money supply has contributed to mini-asset-bubbles. I think what it HAS maybe done is exerted enough upward pressure on prices to keep them from deflating, which is what I meant in my prior post.

That's an interesting theory about the demand for safe assets, and one I hadn't heard. But it seems like it almost has to be true that rates are lower than they would be without fed intervention. I mean the fed has spent, what, over a trillion dollars buying treasuries? And how big is the entire treasury market? 10 trillion? I can't find a clear number in my quick google search, but the additional demand added by the fed's buying would have to make a significant difference to rates, even if they'd be low anyway, I'd think.

lol "hedging": http://dealbreaker.com/2012/05/whale-sushi-on-the-menu-at-jpmorgan-executive-lunchroom-for-next-few-months/

hahaha yeah I was going to post about that

Wait, so JPM literally just did the math wrong? Like they didn't underestimate the risks of anything, but rather actually crunched numbers wrong? That's a little unsatisfying.

I don't think anyone really knows. I think it really is about underestimating the risks. Not like adding numbers wrong, but adding the wrong numbers, so to speak.

Anyway my gripe about that line ("why haven't these guys gone to jail?") is that actionable criminal fraud makes up a tiny portion of what went wrong with our economy, and while it is often metaphorically accurate to say "these guys are crooks", it's rarely literally provably true. Further, it seems to me that the lust for a public hanging kind of distracts from the much bigger, harder systemic problems that need addressing.
--Scott, bass player for Tenth Avenue North (Hurting 2)

Seriously JAIL THE BANKSTERS makes me want to throw myself off a bridge.

i don't even know where to put this:

http://www.bloomberg.com/news/2012-05-17/dental-abuse-seen-driven-by-private-equity-investments.html

almost too fucked up to comprehend

with each passing day I am more and more 'lol capitalism' (but also sad)

kind of lol but mostly smash

i know it for true that plenty of med mal lawyers really don't like to sue dentists, though medicare/medicaid fraud is beyond the scope of private lawsuits.

if i had a kid, who came home from school one day with a bunch of dental work i didn't know anything about, somebody would be taking a bat to the head by the end of that day

that story gives me freaky marathon man vibes.

Ok so I know this isn't EXACTLY within the thread, but since this has kind of become the smart-people-explain-finance-related-stuff thread, can anyone explain a bit about what a Greece Euro exit would mean?

This is one of the more provocative scenarios I've read for a Greek Euro exit:

http://brontecapital.blogspot.com/2011/09/models-for-greek-sovereign-default.html

wait i popped in here because the ows thread was getting too ideological for my taste but did somebody seriously just advocate for nationalizing investment banks?!?

nobody really knows what a greece euro exit would mean or how it would happen at the moment, i suspect. The new 'geuro' proposal (http://www.cnbc.com/id/47505085) strikes me as not completely insane and unworkable as a medium term solution that would probably just be a step towards ultimate euro exit.

can anyone explain a bit about what a Greece Euro exit would mean?

― this guy's a gangsta? his real name's mittens. (Hurting 2), Wednesday, May 23, 2012 10:22 AM (6 hours ago) Bookmark Flag Post Permalink

most likely the end of the euro and the world

http://www.slate.com/blogs/moneybox/2012/05/21/fear_contagion.html