Starting in November 2008, the Federal Reserve Bank of New York under Timothy Geithner began urging American International Group, the huge insurer that the government had bailed out, to limit disclosure on payments made to banks at the height of the financial crisis, e-mail messages obtained by DealBook show.
The e-mail exchange between the bailed-out insurance giant and its regulator portray a strange reversal of roles, with A.I.G. staff arguing for the disclosure of certain details on payments for credit-default swaps to major banks, only to be discouraged by officials at, or representing, the Federal Reserve.
In a draft of one regulatory filing, A.I.G. stated that it had paid banks — including Goldman Sachs Group, Merrill Lynch, Société Générale and Deutsche Bank — the full value of C.D.O.’s, or collateralized debt obligations, that they had bought from the company.
In the response to that draft from the law firm Davis Polk and Wardwell, which represented the New York Fed, that crucial sentence was crossed out, and did not appear in the final version filed on Dec. 24, 2008.
In a March 12 e-mail message whose subject line is “Fw: counterparties” — importance: “high” — Kathleen Shannon, a senior vice president at A.I.G., writes:
“In order to make only the disclosure the Fed wants us to make, which we understand to be to not include the CUSIPs or Tranche names and give the amounts by counterparty on a total rather than a transaction by transaction basis, we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”
The messages were initially obtained by Representative Darrell Issa, Republican of California and ranking member of the House Oversight and Government Reform Committee, and first reported by Bloomberg News.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the S.E.C.,” Representative Issa said in an e-mailed statement.
Mr. Geithner, for his part, has defended the A.I.G. rescue, saying he had no choice but to pay full value
DOJ Antitrust Division Considering Launching Investigation Into Silver Market Manipulation By JPM
by ilene - May 1st, 2010 9:36 am
Courtesy of Tyler Durden
Eric King reports the breaking news that in a letter obtained by Ted Butler, the DOJ’s Antitrust department is considering launching an investigation into silver market manipulation by JP Morgan. Should an announcement of a full formal probe of manipulation by JPM follow, it would be tantamount to a confirmation of what numerous individuals have been claiming over the years, that JP Morgan, the LBMA, the CFTC, various banks, and even that kindly old grandpa who was so much against derivatives except when he was about to lose money as a result of regulation that he is spending the whole weekend telling his investors in Omaha to run, not walk, to Borsheim’s, and buy all their massively overpriced trinkets (you can’t be a quadrillionaire without first being a trillionaire), are nothing but a borderline criminal cabal that traffics in wealth extraction courtesy of a few monopolist players. As Eric King discloses in its letter the Anti-Trust division announces that "it will carefully consider the issue of silver market manipulation by JP Morgan and other traders. Generally the CFTC investigates these types of market manipulations. However, the suggestion that JPMorgan Chase may be signaling other traders, warrants further analysis. The DOJ will carefully consider the issue you raise, and you can be assured that if we conclude that silver traders have engaged in anti-competitive conduct, we will take appropriate enforcement action."
Ted Butler, always cutting to the point, says: "It’s about time a major government organization stepped up to end what has been a very serious crime in progress that has basically covered two decades…[JP Morgan's] level of concentration only exists in the silver markets. Concentration is the hallmark of manipulation or a monopoly. Our markets are supposed to be free markets, they are not supposed to be controlled by anybody. Right now the silver market is a monopoly, the chief monopolist is JP Morgan, and the only entity that can step up to JPM is the Antitrust division of the DOJ…If you want to put it into perspective, more important and more serious than what is currently happening with Goldman Sachs. This is a crime in progress, this is an allegation of current market manipulation. This is as serious as you get. You don’t get bigger than market manipulation."
And, as a scheduled daily reminder to Christine Varney: if you are evaluating JP Morgan…
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Release the Kraken: Silver Market Price Rebounds After Sharp Price Drop for Options Expiration
by ilene - April 30th, 2010 12:01 am
Release the Kraken: Silver Market Price Rebounds After Sharp Price Drop for Options Expiration
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The silver market is rallying strongly today, after the recent dip in price below $18 with respect to the options expiration and delivery dates for the May contract earlier this week. When futures options are filled, one is not paid in cash, but instead they receive active futures contracts at the strike price.
The market game is to either get the front month price below the key strike prices before the expiry to make the options worthless, or to take the price down below the strikes the day after to run the stops of the contract holders. The market makers can see the relative levels of holdings in market in near real time, privileged information not permitted to the average investor.
Three or four banks are short more silver on the COMEX than can easily be attributed to legitimate forward sales or hedging for all the miners in the entire world, for years of production. Granted, it is hard to determine what the truth is because they are allowed to hide their actual positions and collateral, so as to be able to make their leverage and risk difficult to determine. It’s the obsessive secrecy for improbable positions and returns that is the tell in most market manipulation and schemes such as Madoff’s ponzi investments.
Goldman Sachs was able to obtain the exemptions of a hedger in the markets through contrivance, for the purpose of their proprietary speculation. But if Goldman is the vampire squid, then J. P. Morgan is the kraken of the derivatives markets, having less leverage than the squid as a percentage of assets, but significantly more reach and nominal size, positions which seem almost impossible to manage competently against value at risk in the event of a very modest market dislocation. And of course the risk which a miscalculation presents could shake a continent of counterparties. These oversized positions appear to be integral to the misprision of legitimate price discovery that is at the heart of derivatives frauds in other markets.
The 4Q ’09 report from the Office of the Comptroller of the Currency reports that "The notional value of derivatives held by U.S. commercial banks increased $8.5 trillion in the fourth quarter, or 4.2%, to $212.8 trillion." J.P. Morgan alone has a total derivatives exposure…
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COMPUTERIZED FRONT RUNNING
by ilene - April 24th, 2010 1:07 am
COMPUTERIZED FRONT RUNNING:
HOW A COMPUTER PROGRAM DESIGNED TO SAVE THE FREE MARKET TURNED INTO A MONSTER
Courtesy of Ellen Brown, at Web of Debt
While the SEC is busy investigating Goldman Sachs, it might want to look into another Goldman-dominated fraud: computerized front running using high-frequency trading programs.
Market commentators are fond of talking about “free market capitalism,” but according to Wall Street commentator Max Keiser, it is no more. It has morphed into what his TV co-host Stacy Herbert calls “rigged market capitalism”: all markets today are subject to manipulation for private gain.
Keiser isn’t just speculating about this. He claims to have invented one of the most widely used programs for doing the rigging. Not that that’s what he meant to invent. His patented program was designed to take the manipulation out of markets. It would do this by matching buyers with sellers automatically, eliminating “front running” – brokers buying or selling ahead of large orders coming in from their clients. The computer program was intended to remove the conflict of interest that exists when brokers who match buyers with sellers are also selling from their own accounts. But the program fell into the wrong hands and became the prototype for automated trading programs that actually facilitate front running.
Also called High Frequency Trading (HFT) or “black box trading,” automated program trading uses high-speed computers governed by complex algorithms (instructions to the computer) to analyze data and transact orders in massive quantities at very high speeds. Like the poker player peeking in a mirror to see his opponent’s cards, HFT allows the program trader to peek at major incoming orders and jump in front of them to skim profits off the top. And these large institutional orders are our money — our pension funds, mutual funds, and 401Ks.
When “market making” (matching buyers with sellers) was done strictly by human brokers on the floor of the stock exchange, manipulations and front running were considered an acceptable (if morally dubious) price to pay for continuously “liquid” markets. But front running by computer, using complex trading programs, is an entirely different species of fraud. A minor flaw…
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Don’t Invest In Ridiculously-Rigged (And Thin) Markets
by ilene - March 31st, 2010 7:14 pm
Here’s Karl Denninger’s must-read take on the gold market rigging story. – Ilene
Don’t Invest In Ridiculously-Rigged (And Thin) Markets
Janet Tavakoli has written an interesting piece over at Huffington Post related to the gold market and a potential cornering attempt:
First, let your greed overcome all regard for the stability of the global market, and overcome your aversion to illegal activities.
….
Pump up the gold story. Get your friends to tell retail investors to buy some gold every month. Get your buddies in the financial business to offer exchange traded gold funds (ETFs) that claim to buy physical gold. This will sound safe to retail investors, but in fact, the ETFs are very risky. This will serve your purpose when you are ready to start a panic. These particular ETFs will allow the "gold" to be commingled with the custodian’s gold, and the custodian can lease out the gold. Moreover, the "gold" custodian can give it to a sub custodian that the manager doesn’t know. The sub custodian can give it to yet another sub custodian unknown to the original custodian. The manager will never audit the gold, and the gold is not "allocated" to a particular investor. Since this is an "exchange traded" gold fund, investors will probably assume the gold is regulated by the Commodities Futures Trading Commission (CFTC), but it isn’t. By the time investors wake up to the probability that there is very little actual gold backing their investment, your plan will be ready to execute.
That could be a problem, right?
Zerohedge has run a piece of alleged manipulation of the market (specifically, selling short an insane number of contracts – which would obligate you to deliver – when you have no possible way to do so.) This, however, isn’t necessarily manipulation per-se, nor is the assertion that these are "financial" (that is, we trade ‘em for money, not to actually buy or sell physical gold) assets false. They in fact are; if I sell short a S&P 500 Futures Contract I can assure you that I do not deliver a basket of 500 stocks to the buyer if I’m right (or wrong!)
However, the elements of a scam – which could be the intended…
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Eric King Follow Up Interview With GATA On The Trail Of The Biggest Gold Manipulation Story Disclosed
by ilene - March 31st, 2010 2:45 pm
More on the Andrew Maguire Whistleblowing Story from Zero Hedge. See also articles by JESSE’S CAFÉ AMÉRICAIN, such as King World Interview with Andrew Maguire ‘the Silver Market Whistleblower’, and News Coverage of the Maguire ‘Whistleblower’ Car Accident in the States.
Eric King Follow Up Interview With GATA On The Trail Of The Biggest Gold Manipulation Story Disclosed
Courtesy of Tyler Durden
The Andrew Maguire LBMA whistleblower story just refuses to go away, and it is about time someone from the mainstream media (yes, we know you read us constantly) finally picked up on this massive expose about the decades of fraud and manipulation in the commodities market, with a focus on gold and silver. Don’t worry, the Wall Street ad revenue sources you may lose from highlighting this "must read" story will be more than offset by the increased readership you will gain.
Today we have the latest segment in this saga, courtesy once again of Eric King who interviews GATA members Bill Murphy, Chris Powell and Adrian Douglas. As is pointed out in the interview, "The CFTC, on the public record, has been shown to have known in advance of massive market manipulation, and have done nothing." Isn’t this the same reason why Markopolos called SEC the biggest bunch of idiots in existence vis-a-vis their performance in the Madoff debacle? It is time someone big blew this up finally. Perhaps this will explain why it never gets mainstream attention: "JPMorgan chase is an agency of the US government, rigs the markets, and undertakes market manipulation." To all our readers: this is yet another "must hear" interview.
From King World News:
In this interview with GATA we continue the saga after just having interviewed Andrew Maguire, the whistleblower out of London. This gives a short and long-term view down the rabbit hole through the eyes of 3 of the GATA board members. GATA was so heavily involved not only in breaking the news at the CFTC meeting about the the metals manipulation but also at the same time quite possibly uncovering the largest fraud in history. The Gold Anti-Trust Action Committee was organized in January 1999 to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities. The committee arose from essays by Bill Murphy, a financial commentator, and by Chris Powell, a
…
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Propaganda Campaign Attempts to Mask the Economic Risks and Reality
by ilene - March 10th, 2010 5:35 pm
Propaganda Campaign Attempts to Mask the Economic Risks and Reality
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The propaganda campaign by the US government is trying to mask the fact that the economic recovery plan is failing and that America is rapidly losing confidence in Team Obama.
You cannot have a sustained recovery without changing the underlying conditions that caused the failure in the first place.
In addition to the media blitz dissected by Yves Smith in the essay excerpted below, I have never seen such a load of rubbish being put forward with regard to the markets in US financial assets and commodities, and I have seen quite a bit in the last twenty years. In particular, the campaigns against gold and silver in particular are heavy-handed, obvious, and reaching the point of hysteria.
The shorts are trapped, hopelessly trapped, and unable to deliver on their massive short positions. They are only able to manipulate the price in short term bursts, and continue to dig themselves deeper as the world demand continues to drain them.
Whoever heard of a bubble in which the major money center banks are so perilously short it? A bubble requires a broad participation and belief, and the encouragement of the market makers. And now a statement from an "SEC official" that there is a gold bubble. This, from the very people who allegedly could not see the tech, housing and credit bubbles until they fell on top of them.
And of course there are the funds and the wealthy, who mouth the same party line while lining their portfolios with huge positions and personal holdings.
Various exigencies can compel the big players to make statements swearing gold and silver are no good, no store of value against all the evidence of history. But the fact remains that the US dollar reserve currency regime is falling apart, tumbling like the humpty-dumpty construct that it is. And the status quo is shitting their collective pants about it, and the likely backlash from the public when their deceptions are exposed.
Don’t expect the Ancien Régime fiancier to fall easily, quietly, or quickly. But it will change; change is the only inevitability. And we all suspect what…
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Goldman Sucks
by ilene - March 8th, 2010 12:30 pm
Goldman Sachs
Courtesy of Prieur du Plessis
This video is a visualization of Matt Taibbi’s article “Inside the great American bubble machine” on how Goldman Sachs has engineered every major market manipulation since the Great Depression. Click here for Taibbi’s article.
Source: Lebed.biz (via YouTube), March 3, 2010.
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Is Abnormally Profitable Recent Performance On “Mutual Fund Mondays” Indicative Of Market Manipulation Or Just Herding?
by ilene - March 4th, 2010 8:41 pm
Is Abnormally Profitable Recent Performance On "Mutual Fund Mondays" Indicative Of Market Manipulation Or Just Herding?
Courtesy of Tyler Durden
With Erik Hane
Zero Hedge has previously discussed the bifurcation in market performance when comparing regular hour trading with that of the afterhours session, noting that in the September through December 2009 period, the market would have been flat if one were to strip away the benefit of gains after the market closed. Today, we take a look at a different set of data, namely observing a very peculiar market phenomenon associated with the term coined as Mutual Fund Mondays, especially over the past 6 months. Whereas on a long-enough timeline, the market performance on any given Monday (or, more specifically on any given first day of the business week), has averaged to about a 50% win/loss ratio, this is certainly not the case in the September 2009 – March 2010 period. In fact, during this time period, when the broader market has risen by only 10%, the positive contribution from Mondays has been 20%, implying that on all other days of the week the market has, on average, lost 10% in the past 6 months. Furthermore, the win/loss ratio for the first trading day in the last 26 weeks has been 85%: a nearly 3 standard deviations from the norm outlier. Let’s dig in.
To analyze this particular data set, we have split up the SPY performance from the past 52 weeks, and have primarily focused on the market performance (as captured by the broad SPDR ETD) on first day of any particular week. We notice two distinct regimes: one from March 1 2009 through the end of August, and a much more aggressive one beginning in September 2009 and continuing through today.
First, below we present is a price/volume chart of the SPY performance in the two periods under consideration.
While market volume is not a topic in this particular discussion, the secular decline as the market has kept going higher has only been interrupted by the brief correction in early February when the market was forced to undergo a breif 10% correction, which forced volume to spike up substantially. Now volume is back to normal.
Yet what we would like to bring your attention to are the following to charts, which scatterplot the performance of any given first week day mapped over time.
First – the…
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Who Is the ‘One Big Bidder’ For US Treasuries?
by ilene - January 14th, 2010 7:09 pm
Who Is the ‘One Big Bidder’ For US Treasuries?
Courtesy of Jesse’s Café Américain
There are a number of possibilities for the identity of the non-primary dealer domestic source of enormous purchases at the longer end of the yield curve in recent US Treasury auctions.
It could be a misclassification, a branch of a bank representing a foreign power. The problem with this theory is that [they] have a particular reluctance to buy the long end of the curve.
It also could be a legitimate domestic purchaser like a pension fund compelled to match duration of obligations, as is required by a little noted ruling of the US government a couple of years ago. They might be shifting out of other long term instruments with similar durations but more risk.
It might even be PIMCO. They certain have the money as the world’s biggest bond fund, and they do offer two Treasury ETF’s which although not directly related to the buys might be relevant on a cross trade. And they have recently been talking down Treasuries in favor of corporates, which doesn’t mean anything since traders often ‘talk their book.’ Still, unless its for the ETF it is hard to justify buying the long durations straight up in size. And while PIMCO says they do not like Treasuries, Benny and the Fed said they are buying long to keep interest rates lower. Why doubt them?
And of course, it might very well be the Federal Reserve Bank, or the Treasury via the Exchange Stabilization Fund.
It could also be the one big bidder who comes in with some regularity and smashes down the price of precious metals with the obvious intent of manipulating the market like clockwork just after the PM fix in London.
It might even be the big bidder who stands ready to buy the SP futures market at every turn, maintaining a floor on the market and a steady drift higher in prices with no change in fundamental underpinnings. Their hand in the market is apparent.
It is less probable, given the state of market manipulation by a few big proprietary trading desks riding another wave of cheap FEd money, but it might even be the party that entered the US equity market yesterday at 12:03 PM with a HUGE order (228,000…
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Time To Indict Geithner For Securities Fraud
by ilene - January 7th, 2010 2:06 pm
Time To Indict Geithner For Securities Fraud
Courtesy of Mish
The web of known parties guilty of fraud, coercion, or securities manipulation keeps getting bigger. Please consider N.Y. Fed Told A.I.G. Not to Disclose Swap Details.
…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
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(