Archive for the ‘SEC’ Category

On Tomorrow’s Secret Meeting To Plot The End Of High Frequency Trading

The MasterFeeds: On Tomorrow’s Secret Meeting To Plot The End Of Hi…

Sharevar addthis_config = { ui_cobrand: “The MasterFeeds”}

The MasterFeeds


High Frequency Trading – HFT – OR THE SCAM IN THE MARKET….

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene”

Further Evidence Of Quote Stuffing Manipulation By HFT

The MasterBlog
“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT | zero hedge

High Frequency Trading – HFT – OR THE SCAM IN THE MARKET….

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” 

Further Evidence Of Quote Stuffing Manipulation By HFT

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT | zero hedge

The MasterBlog

Goldman Sachs Will Settle Fraud Case for $550 Million

CNBC staff and wire reports
| 15 Jul 2010 | 07:43 PM ET
Goldman Sachs agreed Thursday to pay a record $550 million to settle civil claims it misled investors about a subprime mortgage product it sold in 2007, resolving a major public relations nightmare for the Wall Street financial giant.
The settlement, first reported by CNBC, sent Goldman shares up sharply in after-hours trading.(Click here for an after-hours quote)
“This is a very favorable outcome for investors,” said Bill Fitzpatrick, equity analyst for Optique Capital Management.
“The dollar amount wasn’t really going to be the issue, particularly if it was under a billion dollars and this has put some closure around what was a black eye for Goldman Sachs.”
“They pay $550 million and they get an $800 million pop in their stock price—they got off easy,” said Kevin Caron, a market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
The settlement came on the same day that the financial overhaul bill won final approval in the Senate, imposing the stiffest restrictions on banks and Wall Street since the Great Depression.
The deal calls for Goldman to pay the Securities and Exchange Commission fines of $300 million. The rest of the money will go to compensate those who lost money on their investments.
CNBC understands that the SEC was originally looking for a settlement near $750 million dollars and that management change within Goldman was not on the table during the negotiations. Goldman’s response over the complaint would have been due on Monday.
The fine was the largest against a financial company in SEC history. Goldman earned $3.3 billion in the first quarter of this year. It earned $13.4 billion in 2009.
The settlement also requires Goldman to review how it sells complex financial mortgage investments. Goldman acknowledged in a court filing that its marketing materials for the deal at the center of the charges omitted key information for buyers.
But Goldman did not admit any legal wrongdoing.
The investments were crafted with input from a Goldman client who was betting on them to fail. The securities cost investors close to $1 billion while helping a Goldman client—hedge fund billionaire John Paulson—capitalize on the housing bust.
The civil charges the SEC filed April 16 were the most significant legal action related to the mortgage meltdown that pushed the country into recession.
The SEC said its case continues against Fabrice Tourre, a Goldman vice president accused of shepherding the deal.
“This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” said Robert Khuzami, the SEC’s enforcement director.
The settlement is subject to approval by a federal judge in New York’s Southern District.
The Justice Department opened a criminal investigation of Goldman over the transactions in the spring, following a criminal referral by the SEC. Executives of the firm were grilled and publicly rebuked by senators at a politically charged hearing.
Of the $550 million Goldman agreed to pay, $250 million will go to the two big losers in the deal. German bank IKB Deutsche Industriebank will get $150 million. Royal Bank of Scotland, which bought ABN AMRO Bank, will receive $100 million.
Goldman will pay back $15 million in fees it collected for managing the deal. The remaining $535 million is considered a civil penalty.
Paulson was not charged by the SEC.
—The AP and Reuters contributed to this report.

© 2010

Goldman Sachs Agrees to Settle Fraud Case for $550 Million – CNBC

The MasterBlog

Freddie Pays Big for New CFO

Submitted by Bruce Krasting  on on 09/25/2009 03:32 +0200

Mr. Ross Kari has been appointed as CFO of Freddie Mac. He is getting a big paycheck.

Freddie Mac does not need a CFO. What is Mr. Kari going to do with his time? Freddie is in conservatorship. It is a ward of the state. He is not going to be doing any special transactions that justify this big nut for the taxpayers. Freddie borrows short term from Treasury to fund their portfolio; they sell their MBS and unsecured bonds to the Fed. What’s so complicated about that?

The whisper from D.C. is that something will be on the table for all of the Agencies by next March. Mr. Kari is likely to be out of a job by then. For his sake I hope he has a big parachute. On the flip side, if he does, there will be hell to pay.

Freddie is no longer a public company that has a big stock float or a presence on Wall Street. It has no earnings, only losses. It should be de-listed. This is not a Citi where there is a remote hope of a soft landing. Freddie is toast. There will be no stockholders meetings where Mr. Kari will be called on to report the success and progress at Freddie. It is unlikely that Freddie can even pay the dividend it owes to Treasury. They are losing $2+ billion a month. That number would be higher, but they are burying their losses by providing ReFi loans at 125% LTV. Half of these new loans go into default in less than one-year.

Freddie hired Mr. Kari to bring someone solid on board. That cost them. Freddie has plenty of talented people who can operate this ship for the next six months. This thing is on autopilot. The only reason Freddie did this (with the blessing of FHFA) is that they wanted to try to demonstrate that they had the right “team” to be the survivor Agency. This hire was about optics, not substance.

Mr. Kari is ex CFO of Fifth Third Bank. That makes him a player, but let’s not forget that Fifth Third took $3.4 billion in TARP money. This is what he had to say about repaying that loan back in July:

Fifth Third Bancorp’s Chief Financial Officer Ross Kari said the Cincinnati bank would wait until the economy improves until it would repay cash from the government.

Freddie needs to be absorbed by HUD. I think they will be. There is not much room for this pay grade at HUD. The President makes $400k, Senators $174k, Bernanke and Geither get $191k.

Who is making these choices? Who is approving them? Is anyone watching the store?

Posted by Bruce Krasting at 6:05
Freddie Pays Big for New CFO

The Master Blog

Charlie Gasparino reports that senior executives inside Goldman are in a panic over its image, trying to hire a “brand manager”-and even blaming a prejudice against the firm’s Jewish chiefs.

Goldman Execs Blame Anti-Semitism
by Charlie Gasparino
August 20, 2009 | 11:31pm

Charlie Gasparino reports that senior executives inside Goldman are in a panic over its image, trying to hire a “brand manager”—and even blaming a prejudice against the firm’s Jewish chiefs.

How worried are Goldman Sachs executives about their ability to manage the coming media tsunami when bonus season comes around?
Paranoia might not be too strong a word to describe the mind-set. People inside Goldman tell me that some senior executives say they believe the onslaught of negative stories detailing Goldman’s manifold ties to upper levels of government, charges that it somehow fraudulently profited from the subprime crisis, and now the press about the firm’s record earnings is so out of proportion to reality that the coverage contains an element of anti-Semitism—subtly playing off the racist myth of a conspiracy of Jewish bankers controlling the world for their own benefit. (Goldman was founded by a Jewish immigrant, and after years of being run by Gentiles Jon Corzine and Hank Paulson, is once again run by a Jew, Lloyd Blankfein.)
“Blankfein is scared to death about what might happen when the bonus numbers hit,” one executive says.
Blankfein, I am told, isn’t paranoid but really concerned about being placed in an untenable position for any CEO who needs to retain talent. If he doesn’t pay his people, many will simply jump ship to other firms—including private-equity firms—that will. If he does, he faces endless negative coverage about how Goldman is making its partners rich at the expense of taxpayers who bailed out the firm last year.
This quandary has resulted in some very serious discussions at Goldman to attempt to spin the bonus issue in the best possible (or least damaging) way. The Daily Beast has learned that Goldman is considering “a menu” of options: One possibility is to pay the vast majority of the bonus in stock. On Wall Street, executives receive a combination of stock and cash, with the cash portion comprising 65 percent of the total bonus. Goldman may just flip that around.
Another option, according to people close to the matter, is for Goldman to pay much smaller bonuses and just hand out larger salaries, meaning there won’t be a massive media event that occurs every year once all the bonuses, including Blankfein’s—which hit nearly $70 million for 2007, just months before Goldman’s bailout—are announced.
A third option, these people say, is for Goldman to forgo bonuses for the most part and just buy its stock in the open market. Because most of its executives have large pieces of their net worth tied up in shares of Goldman, the wealth effect would be bigger and less sensational than paying all those huge bonus packages at the end of the year.
Blankfein, of course, has a good reason to be worried. Brand and image is more important now than ever before, and the CEO’s internal research shows that Goldman is taking a beating like never before. Some of the criticism of Goldman is of course, absurd, like it committed securities fraud simply by shorting the housing market back in 2007.
Some of it isn’t: that the firm is now embracing the same type of risk that led to its near implosion back in 2008.
It almost doesn’t matter—it’s all starting to stick, and Goldman has suddenly replaced Citigroup, Merrill, and even Lehman as the leading culprit of Wall Street greed and abuse committed during the financial crisis. In the good old days, Goldman could just ignore the chattering class, make a lot of money, and tell the rest of the world to screw off.
No longer. The firm, like the rest of the former bastion of capitalism known as Wall Street, is protected by the federal government as a commercial bank. Goldman was bailed out with the rest of the financial system late last year, and while government bureaucrats don’t run Goldman like they run Citigroup, they are watching the firm like never before. And one thing government bureaucrats don’t like is bad publicity, even if it’s in fringe media publications.
That’s why Goldman has been looking for months for the right person to fill the job of “brand manager.” It’s the reason senior executives at the firm meet almost daily on how to repair the firm’s image. It’s the reason Blankfein “looks like shit,” according to one Wall Street CEO who considers himself a friend of the Goldman CEO and who says Blankfein has “become obsessed with the firm’s image problems.” And it’s the reason Goldman is weighing a menu of options that could soften what senior executives believe will be an onslaught of negative media attacks when the firm doles out bonuses to its best people at the end of the year.
“Blankfein is scared to death about what might happen when the bonus numbers hit,” one executive says.
Of course, there might not be any bonus money to hand out. The markets could implode over the next two months. The Fed could stop subsidizing Wall Street’s risk-taking and revoke Goldman’s charter as a commercial bank, meaning it is no longer Too Big to Fail and will have to pay more to finance trades and roll the dice in the bond markets. Goldman also could try to corner the market of drug stocks, betting President Obama’s health-care plan will fail, and guess what, the American people suddenly change their mind and embrace socialism and learn to love “the public option,” making Goldman’s trade an even worse bet than subprime debt back in 2007.
But barring any of this, Goldman will have a piggy bank of more than $11 billion to dole out in bonuses at year’s end, not exactly what most businesses would consider a problem, unless, of course, you’re Goldman and you’ve undergone the longest media-induced proctology exam in the firm’s long and storied history.
Spokesman Lucas Van Praag declined to discuss the specifics of the “menu” of options the bank is considering, but he said any stock-buyback program won’t be tied to bonuses.
What was interesting about Van Praag’s “denial” was that he won’t deny Goldman is weighing some large stock buyback. “I can’t comment on that,” he said before adding that analysts had been calling on the firm to do a stock buyback for some time.
One thing is certain: Goldman’s top executives might be getting much richer at the end of this year, but the firm’s reputation is sinking and may well sink further.
Consider this: Goldman produced record earnings in the second quarter, and if it just cranks out mediocre profits for the remaining two, Blankfein would be on course to receive a bonus of $50 million or more, according to people inside the firm.
This after Goldman was rescued from extinction (this is where I agree with the conspiracy theorists) nearly a year ago, when the financial crisis became most acute, with a $10 billion capital injection from the federal government, not to mention the tens of billions of dollars that flowed right to Goldman’s bottom line when the federal government bailed out AIG and honored all those insurance contracts Goldman held on its own portfolio of risky debt.
Of course, the flacks at Goldman would tell you that Goldman was among the first to repay its loan, and amazingly, they continue to spin that the firm wasn’t really bailed out when the Feds bailed out AIG. (Their rationale is too nonsensical to explain; trust me on this one, they’re full of shit.) Where they’re less full of shit on is the difficulties they face in dealing repairing the firm’s image.
The normally tight-lipped Van Praag put it this way: “We are obviously cognizant of the environment and the atmosphere that we’re operating in, but we also recognize that we have to pay our people to keep the firm competitive, which poses some issues for us.”
Van Praag also concedes that the recent attacks on the firm have hit home, particularly for Blankfein, after The New York Timesreported that former Treasury Secretary (and former Goldman CEO) Hank Paulson spoke to Blankfein far more than any other CEO during the height of the financial crisis last year, suggesting that Goldman received preferential treatment. “Is Lloyd worried about our image? Nobody likes negative publicity. It’s unpleasant,” the spokesman says.
Charles Gasparino is CNBC’s On-Air Editor and appears as a daily member of CNBC’s ensemble. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His book about the financial crisis, The Sellout, is scheduled to be published later in 2009.

August 2, 2009

$100 Million Payday Poses Problem for Pay Czar

In a few weeks, the Treasury Department’s czar of executive pay will have to answer this $100 million question: Should Andrew J. Hall get his bonus?

Mr. Hall, the 58-year-old head of Phibro, a small commodities trading firm in Westport, Conn., is due for a nine-figure payday, his cut of profits from a characteristically aggressive year of bets in the oil market.

There is little doubt that Mr. Hall is owed the money under his contract. The problem is that his contract is with Citigroup, which was saved with roughly $45 billion in taxpayer aid.

Corporate pay has become a live grenade in the aftermath of the largest series of corporate bailouts in American history. In March, when theAmerican International Group, rescued at vast taxpayer expense, was to give out $165 million in bonuses, Congress moved to constrain the payouts, and protesters showed up at the homes of several executives.

As it happens, one can see some of those homes from Mr. Hall’s front lawn in Southport, not far from his office. But his case is more complex. Mr. Hall, raised in Britain and known for titanium nerves and a collection of pricey art, is the standout performer at an operation that has netted Citigroup about $2 billion over the last five years. If Citigroup will not pay him the huge sums he has long made, someone else probably will.

The added wrinkle is that Mr. Hall works in a corner of the trading world that appears headed for its own infamy. Regulators are pushing to curb the role of traders like Mr. Hall, whose speculation in the energy markets may have played a major role in the recent gyrations of oil prices.

That suggests that last summer, drivers paid more at the pump, at least in part, because of people like Andrew J. Hall. How do you hand $100 million to a guy who may have profited because gas hit $4 a gallon?

Whatever the answer, the case of Mr. Hall highlights the hazards of mixing the public interest with capitalism at its most unbridled, and it raises basic questions of fairness. There was outrage last week over a report by the New York attorney general that about 5,000 traders and bankers at bailed-out firms got more than $1 million each last year. So it could be politically untenable for a company like Citigroup to pay gargantuan sums even to those who generate gargantuan profits — the very people the company must retain if it is to recover.

Among those who believe the Phibro-Citigroup relationship is doomed by bailout politics is the $100 million man himself. People with knowledge of talks between Phibro and Citigroup say that Mr. Hall is quietly pushing for what is being called “a quiet divorce” from his parent company and that he has had preliminary talks with one possible suitor.

Wary of publicity and worried that he will become the next marquee villain of the financial collapse, he has discussed with Citigroup’s leadership a number of possibilities, including a spinoff.

Mr. Hall has plenty of sway over the fate of Phibro because much of its value is thought to flow from his expertise and track record. If he leaves, he could start another firm and bring colleagues with him.

History suggests that he is accustomed to getting his way. Two years ago, Mr. Hall waged a legal fight with the Historic District Commission of Fairfield over an 82-foot concrete sculpture that he had placed on the front lawn of his 7,300-square-foot Greek Revival mansion, where he lives with his wife, Christine. He thought he did not need permission to display the work, but because of his neighborhood’s preservation restrictions, the state Supreme Court ultimately ruled that he did.

“The strange part is that I think he would been approved if he’d asked for permission,” says Richard Hatch, who headed the commission at the time.

Mr. Hall lent this work to the Massachusetts Museum of Contemporary Art, though not because he lacks display space. A few years ago, he bought a medieval castle in Germany from the neo-expressionist painter Georg Baselitz, and he and his wife have turned the property, said to contain roughly 150 rooms, into a private museum for their collection.

“He has about 4,000 pieces in what could easily be described as one of the world’s finest collections of contemporary art,” said a New York dealer, Mary Boone. It includes pieces by Andy Warhol, David Salle, Bruce Nauman and Julian Schnabel.

The son of a British Airways employee who trained pilots, Mr. Hall was raised near London, and he graduated from Oxford University with a degree in chemistry. He moved to the United States in 1981 to work for British Petroleum. His trading there caught the eye of Phibro, a firm that started as Phillips Brothers early in the last century and which, in the 1970s, was the home of Marc Rich, the fugitive pardoned by President Bill Clinton.

By 1987, Mr. Hall was running Phibro. It is based today in a generic red building, part of a bucolic, 53-acre office park that was once a dairy farm. (Its former neighbors included the notorious AIG Financial Products division.) The trading floor is a modest room that was once the company’s kitchen, before it downsized about a decade ago.

Mr. Hall and his colleagues — there are about 55 in the Westport office, and handfuls in London and Singapore — specialize in a variety of hedging and arbitrage techniques.

Generally, Phibro looks for anomalies in the market and pounces, taking advantage of unusual spreads between the spot price of oil and the price of an oil futures contract.

The company, for example, often wagers that the price of oil will rise so fast during a particular period, say six months, that it can make money by storing oil in supertankers and floating it until the price goes up. (If the price rises by more than it costs to lease the tankers, he makes money.)

Other deals are more complex. Right before the first Gulf War, Phibro placed an elaborate bet that the price of oil would spike and then go down faster than others were anticipating. The company earned more than $300 million from the gamble.

“He’s got great memory, great focus,” says Philip Verleger, an author of books about oil markets and a friend of Mr. Hall. “He’s not as arrogant as other people who make the kind of money he makes. Of course, you make that kind of money and you’re going to be a little arrogant.”

A spokesman for Kenneth Feinberg, the Treasury’s pay czar, said the reviews of compensation figures were just starting and that pay levels must strike the right balance between discouraging excessive risk-taking and encouraging reward.

“We are not going to provide a running commentary on that process,” the spokesman, Andrew Williams, wrote by e-mail, “but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance.”

The mere specter of such review is already hurting Citigroup. A person familiar with its staffing travails says that for months it has been trying to fend off competitors who are calling employees and saying, in effect, “Come and work for a company that doesn’t have to contend with public scrutiny.”

James Forese, Citigroup’s co-head of global markets, says Mr. Hall’s pay-for-performance contract is the kind the pay czar will like. “We’re confident in the value these types of profit-sharing arrangements bring to the company and its shareholders,” Mr. Forese wrote in a statement, “as they directly align compensation with performance.”

Still, the company is an awkward spot, and it is hard to say which is worse: the inevitable public outcry if Mr. Hall is paid $100 million, or the risk that he might take his talents to a firm in which the public has no stake.

%d bloggers like this: