We Dun Need None 'a Ur Fi-nan-shul REE-form...

[GRG55]

...Just let the lawyers do it...:p

Wall Street beware: the lawyers are coming

By Frank Partnoy
Published: April 18 2010 21:01 | Last updated: April 18 2010 21:01

The US Congress will debate new financial legislation this week, but the real action in financial reform started last Friday with the fraud lawsuit filed by the Securities and Exchange Commission against Goldman, Sachs & Co. That case opens the litigation floodgates for more suits based on subprime mortgage fraud, and smart investors know it. Goldman’s market value fell $12bn during trading on Friday, more than 10 times the losses alleged in the case. Shares of other major banks, such as Bank of America, Citigroup and Morgan Stanley, lost more than 5 per cent. JPMorgan Chase was also hammered last week and announced a $2.3bn increase in its reserve for litigation expenses...

...Many lawyers previously thought such deals were bulletproof. Now, simplified, they look vulnerable. The SEC, by blazing a trail, has shown plaintiffs’ lawyers how they might frame private cases. (If you sue Goldman, they will come.) The potential damages are huge...

...These defences illustrate the second important point of the case: it shows how litigation can fill gaps regulation will miss. Regulators will never keep pace with financial innovation, and bankers run circles around even the best-intentioned rules, especially in derivatives. More fundamentally, Wall Street interprets detailed rules as a shield from liability...

...In contrast, the case demonstrates a more effective way to police bankers, because Wall Street cannot outrun a judge...

...Both government and private lawyers can be slow, as they were after scandals involving initial public offerings and stock option backdating, but the Goldman case is a signal that, even without reform, the lawyers are finally coming.

[ggirod]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

Watch congress for lots of bills that make a big public deal of slapping FIRE wrists with one hand while providing immunity from civil suits with the other. Sorry, but it is wishful thinking that all that money is going to sit idle when it can buy congressmen. Probably it is time to go long GS stock when it looks like the bottom because they will buy the government and smell like a rose by the end of 2011, when all their laws come through in a massive show of "bipartisan" concern. Congress will show how, by freeing GS and their ilk from lawsuits so they can return to God's work that they can unite for the good of the people. Mark My Words.

[don]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

[IMG]file:///C:/DOCUME%7E1/Don/LOCALS%7E1/Temp/moz-screenshot-15.png[/IMG]April 19, 2010
A Finance Overhaul Fight Draws a Swarm of Lobbyists

By EDWARD WYATT and ERIC LICHTBLAU

WASHINGTON — Assessing the battle to overhaul the nation’s financial regulations recently, Jamie Dimon, the chief executive of JPMorgan Chase, left no doubt about the consequences if Congress cracked down on his bank’s immense business in derivatives.



“It will be negative,” he said. “Depending on the real detail, it could be $700 million or a couple billion dollars.”



With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives, the complex securities at the heart of the financial crisis, the billion-dollar bank bailouts and the fraud case filed last week against Goldman Sachs.



The forum for all this attention is not the usual banking and financial services committees, but rather the Senate Agriculture Committee, a group more accustomed to dealing with farm subsidies and national forest boundaries than with the more obscure corners of Wall Street.
A main weapon being wielded to fight the battle, of course, is money. Agriculture Committee members have received $22.8 million in this election cycle from people and organizations affiliated with financial, insurance and real estate companies — two and a half times what they received from agricultural donors, according to the Center for Responsive Politics.



Much of that lobbying has centered on Senator Blanche Lincoln, the Arkansas Democrat who is the committee’s chairwoman and who last week introduced the bill that would prevent banks from trading derivatives directly.



The daughter of a sixth-generation rice farmer, she has found herself navigating a dangerous channel between Wall Street firms, which raised $60,000 at two fund-raisers for her re-election campaign so far this year, and her constituents, many of whom want a crackdown on the speculation that led to the financial crisis.


(This is classic misdirection MSM reporting. Note the $22.8M bestowed on the Ag Committee and the paltry $60,000 cited for its chairwoman. This is SOP for the 'press'.)



Other committee members, on both sides of the aisle, also have reaped donations from people and companies in the derivatives business, including Senator Saxby Chambliss of Georgia, who is the committee’s ranking Republican member; Kent Conrad, the North Dakota Democrat; and Charles E. Grassley, the Iowa Republican.
The committee will be the main arena for the derivatives fight for reasons dating to an era when farming was more important to the nation’s economy than finance. In their simplest form, derivatives can provide financial protection on the value of an investment or commodity. For example, by putting up a relatively small amount of money, a farmer could buy a derivative known as a forward or futures contract that would guarantee a set price for crops and thereby guard against ruinous price swings between planting and harvest.



But the most esoteric derivatives — which also are the most profitable for banks to create and trade — have little economic purpose other than to let investors place financial bets, critics say.



A more complex type of derivative helped to inflate the housing bubble in recent years, as Wall Street repackaged high-risk mortgages into securities that speculators could use to bet on the direction of the housing market. Financial institutions earned millions of dollars in fees for creating the securities. But many of the derivatives became worthless when foreclosures skyrocketed, leading to billions of dollars of losses — and taxpayer bailouts — at the banks and insurance companies that owned them.



Now, these obscure and largely unregulated securities — more than $600 trillion of which are tucked into investors’ portfolios, according to the Treasury Department — are at the center of the fight over financial reform led by the Obama administration.



“The best that we can do for the American people is to put in place rules that will prevent firms from taking this risk again, make sure we protect the taxpayer, bring derivatives out of the dark — that’s what we can do, ” said Timothy F. Geithner, the Treasury secretary.
The lobbying is not just coming from Wall Street. Manufacturers, airlines and other industries, which use derivatives to control their business and foreign currency costs, worry that an important means of protecting their assets could be curtailed by Mrs. Lincoln’s bill.



“I think a lot of members of Congress are just getting up to speed on how these markets work,” said Paul Cicio, who is president of the Industrial Energy Consumers of America, which represents an array of industries like fertilizers and chemicals. He said he worried that the lobbying prowess and financial resources of Wall Street firms, even when operating in the unusual environs of the agriculture committee, had the potential to out-muscle their opponents, which want greater regulation.



“Of course I’m going to be concerned, because they are big-money companies,” and derivatives make up substantial portions of their profit margins, he said. “But this is incredibly important, and it’s important to get it right.”


http://www.nytimes.com/2010/04/20/bu...ef=todayspaper

Rarely seen footage of lobbyists descending on a targeted committee

[we_are_toast]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

...Just let the lawyers do it...:p

Wall Street beware: the lawyers are coming

By Frank Partnoy
Published: April 18 2010 21:01 | Last updated: April 18 2010 21:01

The US Congress will debate new financial legislation this week, but the real action in financial reform started last Friday with the fraud lawsuit filed by the Securities and Exchange Commission against Goldman, Sachs & Co. That case opens the litigation floodgates for more suits based on subprime mortgage fraud, and smart investors know it. Goldman’s market value fell $12bn during trading on Friday, more than 10 times the losses alleged in the case. Shares of other major banks, such as Bank of America, Citigroup and Morgan Stanley, lost more than 5 per cent. JPMorgan Chase was also hammered last week and announced a $2.3bn increase in its reserve for litigation expenses...

...Many lawyers previously thought such deals were bulletproof. Now, simplified, they look vulnerable. The SEC, by blazing a trail, has shown plaintiffs’ lawyers how they might frame private cases. (If you sue Goldman, they will come.) The potential damages are huge...

...These defences illustrate the second important point of the case: it shows how litigation can fill gaps regulation will miss. Regulators will never keep pace with financial innovation, and bankers run circles around even the best-intentioned rules, especially in derivatives. More fundamentally, Wall Street interprets detailed rules as a shield from liability...

...In contrast, the case demonstrates a more effective way to police bankers, because Wall Street cannot outrun a judge...

...Both government and private lawyers can be slow, as they were after scandals involving initial public offerings and stock option backdating, but the Goldman case is a signal that, even without reform, the lawyers are finally coming.

Lawyers and Banksters fighting it out?! Guess I won't be losing too much sleep.

[Ghent12]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

Lawyers and Banksters fighting it out?! Guess I won't be losing too much sleep.

Reminds me of the advertisements for the movie Alien vs. Predator which was, "Whoever wins, we lose," or something to that effect.

[ViC78]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

If the lawyers win, guess who will be paying out?

April 20 (Bloomberg) -- American International Group Inc., the financial firm rescued by the U.S., is the lead insurer of Goldman Sachs Group Inc.’s board against shareholder lawsuits, said a person with knowledge of the policy
AIG Said to Insure Goldman Sachs’s Board Against Investor Suits - Bloomberg.com


As always, the taxpayers need to keep an extra load of KY handy.

[oddlots]

Re: We Dun Need Nun'a Ur Fi-nan-shul REE-form...

April 20 (Bloomberg) -- American International Group Inc., the financial firm rescued by the U.S., is the lead insurer of Goldman Sachs Group Inc.’s board against shareholder lawsuits, said a person with knowledge of the policy
AIG Said to Insure Goldman Sachs’s Board Against Investor Suits - Bloomberg.com

HA HA HA. I SHOULD HAVE SEEN THAT ONE COMING.

THOSE "F WORDERS" AS MY 10 YEAR OLD SON WOULD SAY.... MAY I REFER YOU TO THIS GEM FROM CHRIS WHALEN:

"On March 31, 2010, Bob Ivry and Jody Shenn at Bloomberg published a very important article on American International Group and its losses from insuring collateralized debt obligations structured by, you guessed it, GS. Entitled "How Lou Lucido Let AIG Lose $35 Billion With Goldman Sachs CDOs," the article outlines the process whereby AIG was left on the hook for billions in losses on CDOs sold to TCW Group in Los Angeles.
Whereas in the trades with Paulson GS was helping a client create and then sell short a CDO that was being sold to another client, in the case of TCW the GS firm was helping a client buy toxic loans to be contributed to a CDO in the knowledge that doing so would cause losses to a regulated insurer, AIG. The activities of GS to harm AIG make the subsequent payments by AIG to GS, using money from the US Treasury, seem all the more outrageous."

MAYBE THEY CAN TEAR UP THAT CONTRACT?