Wall Street Scams Continue Relentlessly

Lord knows we’ve had more than enough scandals ginned up by Wall Street over the years, and the message that banking executives proclaim after each is: “Don’t worry, we’ve learned that lesson, and it will never happen again.”

Which is how we got to the recent spectacle of Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. (JPM), testifying twice before Congress that although the bank’s chief investment office was taking huge proprietary risks with some $350 billion of its depositors money -- and lost $3 billion (and counting) by making a bunch of risky bets on an obscure, thinly traded derivatives contract -- everything is now fine and dandy because the unjustifiable gambling has been stopped dead in its tracks.

We were, of course, told pretty much the same thing after the collapse of the junk-bond market in the 1980s, the collapse of the Internet initial-public-offering market in the 1990s, the collapse of the telecom debt market in the early 2000s, not to mention the scandals over IPO spinning and laddering and the ones involving the trading of favorable corporate research for investment-banking fees.

We are told repeatedly that when Wall Street’s deeply flawed incentive system leads to one bad outcome after another, year after year, it will never happen again. Yet it does. And you can add this vital business to the list: The way state and local government officials hire Wall Street firms to raise the billions of dollars their municipalities need to build schools, hospitals, airports and sewers, and provide other essential services.

For some reason, Wall Street never seems to get the message that bribing government officials -- and paying each other off -- to get access to lucrative municipal-bond underwriting business is illegal. Wall Street has never learned this lesson because the miniscule price it ends up having to pay for misbehaving has absolutely no deterrent value whatsoever.

Indeed, what the cartel of the major banks does over and over again to win underwriting business from local government officials, and the way the cartel then sorts out among itself who gets what fees, is a microcosm of a much wider problem of the increasing power that the Wall Street survivors of the financial crisis have over the rest of us.

US Banking Industry: JPMorgan trading loss nearly triples to $5.8B US

JPMorgan Chase, the largest bank in the United States, said today that a trading blunder had cost the bank $5.8 billion since the beginning of the year — nearly triple its original estimate.

The company also raised the prospect that traders had attempted to conceal the trading loss. "This has shaken our company to the core," CEO Jamie Dimon told analysts.

The bank said all managers in the London office responsible for the trade had been dismissed without severance pay and that it planned to revoke two years' worth of pay from each of those executives.

For more: Business - CBC News

Financial Collapse At Hand: When is "Sooner or Later"? - by Dr. Paul Craig Roberts

Ever since the beginning of the financial crisis and Quantitative Easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.

In other words, financial deregulation leading to Wall Street’s gambles, the US government’s decision to bail out the banks and to keep them afloat, and the Federal Reserve’s zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position. It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. Everyone who purchases a Treasury bond is purchasing a depreciating asset. Moreover, the capital risk of investing in Treasuries is very high. The low interest rate means that the price paid for the bond is very high. A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

Financial deregulation converted the financial system, which formerly served businesses and consumers, into a gambling casino where bets are not covered. These uncovered bets, together with the Fed’s zero interest rate policy, have exposed Americans’ living standard and wealth to large declines. Retired people living on their savings and investments, IRAs and 401(k)s can earn nothing on their money and are forced to consume their capital, thereby depriving heirs of inheritance. Accumulated wealth is consumed.

As a result of jobs offshoring, the US has become an import-dependent country, dependent on foreign made manufactured goods, clothing, and shoes. When the dollar exchange rate falls, domestic US prices will rise, and US real consumption will take a big hit. Americans will consume less, and their standard of living will fall dramatically.

US banks’ derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality.

The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.

Read more: Financial Collapse At Hand: When is "Sooner or Later"? | Scoop News

Euro Rises on Optimism Over Greece

Given that the Greek government has been softened up for several weeks by way of numerous threats and apocalyptic predictions emanating from the IMF, the ECB and the EU's council of ministers, it is high time for the "good cop" to show up and promise that more good money will be thrown after bad to keep protecting the country's creditors – even if only in the shape of a rumor.

The official decision on the disbursement of the next tranche of loans by IMF/EFSF to Greece is only expected later this week, and the bigger decision regarding what to do about the fact that the Greek government is unlikely to be able to tap markets by 2012 is expected to be handed down in late June, but obviously something needed to be done to avoid markets getting bent completely out of shape until then.

Note EU-Digest: why are we so worried about what all those robbers on Wall Street think about Greece? They were the ones , under the leadership of Goldman Sachs, which created the problems there. All they want to see is the demise of the EU and the euro and how they can continue to enrich themselves over the backs of the taxpayers.

For more: Euro Rises on Optimism Over Greece - Seeking Alpha

Financial Industry: The hedge-fund scandal rocking Wall Street

One of Gordon Gekko's catchphrases from the original Wall Street film holds just as true today as it did in 1987. "The most valuable commodity I know of isinformation," Gekko told his minion.

Now the passing of inside information about companies is at the heart of a US investigation that this week moved from the opaque world of hedge funds to draw in the great and the good of American corporate life. 

The story centers on Raj Rajaratnam, the billionaire who ran Galleon, once one of the world's biggest hedge funds. Mr Rajaratnam was arrested by the FBI in October 2009 and charged with making millions of dollars from trading on inside information about companies including Google and Hilton Hotels. Prosecutors said his arrest with five alleged conspirators had uncovered the biggest insider-trading ring linked to a hedge fund.

Peter Hahn, a former US investment banker who is now a lecturer at Cass Business School, said: "We continue to see that the great and the good have feet of clay like everybody else. You can't assume that because someone has achieved a lot in their career it implies more about their conduct. 

For more: The hedge-fund scandal rocking Wall Street - Business Analysis & Features, Business - The Independent

Hub Trader: Fraudulent Practices on Wallstreet USA: Jim Cramer (NBC) brags about manipulating stock prices when he was a Wall Street trader

For the complete report from the HubPages click on this link

Fraudulent Practices on Wallstreet USA: Jim Cramer brags about manipulating stock prices when he was a Wall Street trader

Jim Cramer, the boisterous host of CNBC’s “Mad Money,” recently bragged in an interview about manipulating stock prices when he was a Wall Street trader, proving all too directly — and stupidly, I might add — that investment professionals profit off the backs of the naïve investing public.In the Web interview with TheStreet.com's executive editor Aaron Task, which is on YouTube and has been blasted all around the Internet, Cramer gave advice on how to keep a profit on a short-position by driving a stock price down. He gave a number of different examples of manipulation, which he admitted might be illegal, but said it didn't really matter because "the Securities and Exchange Commission never understands this."

And that is the sad point of Cramer's comments and this column: The people who are supposed to guard and protect the public's trust in the markets are letting the people down. They simply aren't doing their jobs effectively. For years the SEC tried to pin something, in a very public manner, on Cramer. But they could never really make anything stick; he ran circles around them. There are now thousands of hedge fund managers playing tricks just like the old Cramer used to when he was running a hedge fund. And regulators are looking on without making a call. And the public still continues to invest like they know better. And hedge fund managers continue to laugh all the way to the bank.

Note EU-Digest: "one day the market goes down 6oo points and the next day it goes up 600, with screaming "know it all" CNBC reporters hyping-up the public This has nothing to do with the investors money, but all about making a select group of Wall Street traders very rich. This fraudulent activity will never stop without very strict regulations on Wall Street".