Posts Tagged ‘Investment

12
Aug
10

Fed Effort to Aid Recovery Fails to Calm Investors

NEWS
Fed Effort to Aid Recovery Fails to Calm Investors

Thursday, August 12, 2010

More worried about the recovery, the U.S. Federal Reserve has taken a small step to bolster the U.S. economy.

Wrapping up a one-day meeting, the Fed said it will use money from its investments in mortgage securities to buy government debt on a small scale. That could help nudge down long-term rates on mortgages and corporate debt, but wouldn’t have a dramatic impact on stimulating economic growth, economists say.

Perhaps more importantly, the largely symbolic action sends a signal that the Fed sees the recovery weakening and that it stands ready to take more aggressive action, if needed, to keep it on track.

Delivering a more downbeat assessment, the Fed now believes economic growth will be ‘more modest’ than it had anticipated at its late June meeting.

The Fed, citing ‘subdued’ inflation, said it would keep its target for a key interest rate at zero to 0.25 percent for an ‘extended period’.
Investors reacted positively to the statement. Stocks that were down sharply before the announcement made up some lost ground. The Dow Jones industrial average, down about 100 points just before the Fed decision, was down about 40 a short time later. However, the market was likely to fluctuate, as it usually does while investors pore over the Fed’s statement.

Treasury prices rose slightly as investors were pleased by the Fed’s plan to buy government debt, which would reduce the amount of Treasury securities in the market. The yield on the Treasury’s 10-year note, which moves in the opposite direction from its price, fell to 2.77 percent from 2.82 percent just before the announcement.

Economists doubt the Fed can turn around the economy on its own. Some believe additional help from Congress is needed. Others are sceptical that easier credit or even more government aid will persuade Americans to shop more and hire more. Yet others think some jobs – like in construction – will never return to pre-recession levels, as the economy makes a structural shift.
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20
Jul
10

Goldman Sachs’s Fabrice Tourre Disputes SEC’s Fraud Allegations in Filing

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Goldman Sachs’s Fabrice Tourre Disputes SEC’s Fraud Allegations in Filing

Tuesday, July 20, 2010

Fabrice Tourre, the Goldman Sachs Group Inc. executive and co-defendant in the U.S. Securities and Exchange Commission’s charges that the bank defrauded investors, on Monday asked the court to dismiss the case filed against him by the U.S. Regulators.

Tourre, whose emails about a collateralized debt obligation were at the heart of the Securities and Exchange Commission or SEC’s complaint, denied that he made any materially misleading statements or omissions, or behaved wrongly in connection to complex mortgage-linked securities called collateralized debt obligations or CDO.

In a filing with the U.S. District Court in the Southern District of New York Tourre “specifically denies he made any materially misleading statements or omissions or otherwise engaged in any actionable or wrongful conduct” stemming from the CDO known as Abacus.
Tourre also argued that neither he nor his employer had a “duty to disclose any allegedly omitted information” in the marketing and sale of the CDO.

In April, the Securities and Exchange Commission accused the investment bank that it did not reveal that one of its clients, Paulson & Co, played a significant role in the selection of securities contained in the Abacus mortgage portfolio and which was later sold to investors.

Following the collapse of the housing market, the securities in that mortgage portfolio – Abacus – lost more than $1 billion.
Goldman said it was a “mistake” to state that the loans contained in the CDO had been selected by a third party without mentioning the role of Paulson & Co, a hedge fund that bet against the security.

Last week, in a settlement, Goldman agreed to pay $550 million to settle civil fraud charges brought in by the SEC. This is reportedly the largest ever for a financial institution and is less than the $1 billion fraud that the Commission alleged.

Tourre, who is the only Goldman Sachs executive named as a defendant in the SEC’s fraud lawsuit, has yet to settle with the regulator. Goldman also agreed to co-operate with the SEC in its case against Tourre.

Goldman Sachs declined $0.49 or 0.34 percent and closed Monday’s regular trading at $145.68. After hours, Goldman Sachs declined further $1.68 or 1.15 percent and traded at $144.00
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12
Jun
10

Goldman Sachs Crime watch – SEC Launches 2nd Major Investigation

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Goldman Sachs Crime watch – SEC Launches 2nd Major Investigation

Saturday, June 12, 2010

US securities regulators are hunting for fresh dirt on Goldman Sachs Group, hoping to bolster their lawsuit against the bank and perhaps force it to settle on terms more to the regulators’ liking.

Two months ago the Securities and Exchange Commission charged Wall Street’s most powerful bank with civil fraud in connection with a subprime mortgage-linked security.

The case hinges on whether Goldman misled investors when it marketed Abacus 2007, a mortgage-linked security that turned toxic during the mortgage crisis.

Now, the SEC is also looking at other collateralized debt obligations that turned toxic, including Hudson Mezzanine Funding, a source familiar with the investigation said on Thursday.

“You put a number of things together and then it becomes harder to defend against all of them,” said Annemarie McAvoy, a Fordham University School of Law professor and a former federal prosecutor

“So you finally cry uncle and say, ‘Fine, I’ll settle.'”

The expanding investigation of Goldman’s CDOs comes as federal prosecutors probe some of the complex mortgage-linked transactions that Wall Street firms cobbled together and which helped spark the worst financial crisis in decades.

Even the Financial Industry Regulatory Authority is getting into the act.

Reuters has learned the securities industry’s self-regulatory agency recently began its own investigation into whether Wall Street banks violated customary sales practices in hawking CDOs to institutional investors.

A document reviewed by Reuters reveals FINRA is looking into potential improprieties in the structuring of the deals and the relationship between the CDO underwriters and mortgage lenders.

Former Goldman customers also are putting pressure on the bank and its chief executive, Lloyd Blankfein.

Reuters previously reported that SEC lawyers had looked at the $1 billion Timberwolf deal before filing the Abacus lawsuit in April.

The SEC’s interest in the $2 billion Hudson CDO was first reported by the Financial Times.

U.S. Senator Carl Levin, during a hearing in April of the Senate’s Permanent Subcommittee on Investigations, raised Abacus, Timberwolf and Hudson while questioning a cast of past and present Goldman employees, including Blankfein.

In a Senate floor speech in May introducing legislation to curb conflicts of interest in Wall Street deals, Levin zeroed in on Hudson Mezzanine 2006-1.

“When Goldman first sold the securities to its clients, more than 70 percent of Hudson Mezzanine had AAA ratings,” he said. “But … within 18 months Hudson was downgraded to junk status, and Goldman cashed in at the expense of its clients.”

The Hudson deal closed in November 2006 and went into liquidation in May 2008.

The myriad investigations, coupled with the Timberwolf litigation, could create a tipping point at which Blankfein and other Goldman executives decide they have no choice but to reach some sort of comprehensive settlement, according to legal experts.

“Will there be more stuff? At this point, it certainly wouldn’t surprise me,” said White.

At the least, the SEC could be looking to bolster its Abacus case, which some saw as weak. SEC commissioners voted to bring the lawsuit in a split decision.

Fordham’s McAvoy said the SEC’s strategy could be to strengthen the initial case by adding new material from other deals.

“A lot of folks don’t think the initial case is as strong as the SEC made it out to be,” McAvoy said.

Goldman shares are down more than 25 percent since the SEC filed its lawsuit on April 16. The shares were off 2.4 percent to $133.49 in Thursday morning trading.
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05
Jun
10

Sky buys Virgin Media TV channels for $231 million

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Sky buys Virgin Media TV channels for $231 million

Saturday, June 5, 2010

British Sky Broadcasting (BSkyB) has bought Virgin Media Television, the current owner of seven TV channels including Living and Bravo.

Sky, the owner of Sky News, is paying $231 million (£160 million) in cash under the deal, which also sees it acquire the channels Challenge, Challenge Jackpot and Virgin1, the latter of which will be rebranded.

The purchase expands Sky’s portfolio of basic pay TV channels and means it does not have to pay carriage fees to offer the Virgin Media Television (VMtv) channels to its customers.

Meanwhile, Virgin Media will be given the option of carrying any of Sky’s basic HD channels, Sky Sports HD 1 and Sky Sports HD 2, and all Sky Movies HD channels for an incremental wholesale fee.

It will also make Sky’s basic and premium channels available to subscribers through its on-demand TV service.

VMtv said its seven channels – which span pay and free-to-air television – reach more than 24 million adult viewers every month.
Living is the third most popular pay TV channel in the U.K., and is the self-styled home of ‘guilty pleasures and trashy glamour’.

It offers a variety of popular programmes including Four Weddings and America’s Next Top Model in its schedules.

Virgin Media said the sale of VMtv would allow it to focus on providing subscribers with ‘super-fast’ cable TV and broadband provision.

Meanwhile BSkyB chief executive Jeremy Darroch described the acquisition as ‘an attractive investment opportunity’ that offered strategic and financial benefits.

‘We are pleased that, through commercial negotiation, we have been able to ensure wide distribution of our channels to a growing pay TV universe,’ he said.

Virgin launched Virgin1 in October 2007 although channels such as Living and Bravo came from the former ntl/Telewest business.

This in turn merged with Virgin Mobile in 2007 and was then rebranded as Virgin Media.
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• Source(s): British Sky Broadcasting / News Corporation
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29
May
10

Shell Buys U.S. Gas Assets From East Resources for $4.7 Billion

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Shell Buys U.S. Gas Assets From East Resources for $4.7 Billion
Saturday, May 29, 2010

••• Royal Dutch Shell, the energy major, has almost doubled its reserves of shale gas with the $4.7 Billion in cash acquisition of East Resources.

East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to its website. It has been operating in the Marcellus Shale Area for 25 years.

Companies from India’s Reliance Industries Ltd to Japan’s Mitsui & Co are spending billions of dollars on drilling to dislodge natural gas from shale – sedimentary rock composed of mud, quartz and calcite. Shell expects its share of gas in total output to rise to 52 percent in 2012.
“They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney, head of oil and gas research at ING Commercial Banking in Edinburgh.

The acquisition is the second-biggest oil and gas deal this year, after BP Plc’s acquisition of deepwater assets from Devon Energy Corp for $7 billion in March, according to Bloomberg data.

“We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in a statement today.

Exxon Mobil Corp, the biggest U.S. oil company, agreed in December to buy XTO Energy Inc, the country’s largest natural gas producer, for $31 billion to gain control of shale-gas assets.
• Source(s): Royal Dutch Shell PLC and Bloomberg L.P.
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07
May
10

Stocks turn negative for 2010

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Stocks turn negative for 2010

Friday, May 7, 2010

••• U.S. stocks continued to fall in early trading on Friday, with the Dow Jones industrial average and Standard & Poor’s 500 turning negative for the year as traders preferred to stay on the sidelines after Thursday’s unprecedented market plunge.

U.S. stocks saw a 10 percent correction in ten minutes on Thursday, sending investors in great panic. The Dow Jones industrial average experienced its largest-ever point decline in intraday trading, plummeting almost 1,000 points before recovering to close down about 348 points.

Speculation of bad trades emerged in the market as many traders suspected a glitch in the trading of Dow component Procter & Gambles played a role in the heavy selling.

Investors preferred to stay on the sidelines after the unprecedented plunge, even after payrolls data came in better than expected, as uncertainties over European debt problems were still haunting in the market.

According to the Labor Department, non-farm payrolls expanded by 290,000 in April, the most in four years as more confident employers stepped up hiring. The unemployment rate rose from 9.7 percent in March to 9.9 percent, mainly because 805,000 jobseekers resumed their searches for work as the economy showed more signs of recovery.

The Dow Jones industrial average dropped 112.75, or 1.07 percent, to 10,407.57. The Standard & Poor’s 500 index fell 13.14, or 1.16 percent, to 1,115.01 and the Nasdaq was down 36.41, or 1. 57 percent, to 2,283.23.
President Barack Obama says U.S. authorities are probing ‘unusual’ stock market activity which triggered a slump in the value of securities, and will act to protect investors.

Obama diverted from a statement at the White House on Friday on a sharp increase in job creation, saying he wanted to ‘speak to the unusual market activity’ that took place on Wall Street on Thursday.

‘The regulatory authorities are evaluating this closely with a concern for protecting investors and preventing this from happening again and they will make findings of their review public along with recommendations for appropriate action,’ he said.
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06
May
10

Record 998.5 point drop for Dow Jones before recovery

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Record 998.5 point drop for Dow Jones before recovery

Thursday, May 6, 2010

••• Panic selling swept U.S. markets on Thursday as the Dow Jones plunged a record of almost 1000 points before recouping more than half those losses.

It was unclear whether the sudden sell-off, the Dow’s biggest ever intra-day drop, was the result of fears over the Greek debt crisis, a mistaken trade or technical error.

The crash began shortly before 2.25 pm EDT, when in a white-knuckle 20 minutes America’s top 30 firms saw their share prices dive 998.5 points, almost nine per cent, wiping out billions in market value.

The drop eclipsed even the crashes seen when markets reopened after September 11, 2001 and in the wake of the Lehman Brothers collapse.

The Dow later recovered, closing nearly four per cent down, but spooked traders were left wondering whether a technical glitch had caused the blue-chip index to erode three months of solid gains.

Rumours swirled that a Citigroup trader had mistakenly sold 16 billion rather than 16 million stocks in Procter and Gamble shares, forcing the Dow down.

Shares in the consumer goods giant lost more than seven U.S. dollars, falling in a similar pattern to the Dow, trading at a low of $55 a share.

‘At this point, we have no evidence that Citi was involved in any erroneous transaction,’ said company spokesman Stephen Cohen.

A spokesperson for the New York Stock Exchange said the cause was still not known.

‘We don’t know, right now we’re looking into it,’ said Christian Braakman, ‘it’s all speculation.’

But after three days in which stocks have suffered triple-digit intra-day losses because of concern about Greece’s debt crisis, it was clear that the sell-off was real for some investors.

At the close, the Dow had recovered to 10,520.32, down 347.80 (3.20 percent), while the Nasdaq was down 82.65 points (3.44 percent) at 2,319.64. The Standard Poors 500 Index was down 37.72 points (3.24 percent) to 1,128.15.

Images of rioting as the Greek parliament passed unpopular austerity measures did little to ease market panic.

The parliament approved billions of euros of spending cuts pledged in exchange for a 110 billion euros ($138.55 billion) E.U.-IMF bailout just one day after three bank workers died in a firebomb attack during a huge protest.

On Thursday, police charged to scatter hundreds of youths at the tail-end of a new protest outside parliament that drew more than 10,000 people.

In Lisbon, European Central Bank chief Jean-Claude Trichet battled to reassure financial markets that Greece’s debt crisis would not end in default, but could not prevent the euro from falling to a 14-month low against the dollar.

Pleas for patience from the White House also had little impact.

The White House said that reforms in Greece were ‘important’ but would take time and that the U.S. Treasury was monitoring the situation.

‘The president has heard regularly from his economic team,’ said White House spokesman Robert Gibbs, adding that President Barack Obama’s top economic officials were closely communicating with their European counterparts.
• Source(s): Associated Press
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01
May
10

Goldman Sachs under criminal investigation

NEWS
Goldman Sachs under criminal investigation

Saturday, May 1, 2010

Federal prosecutors have opened a preliminary criminal investigation into alleged fraud at Goldman Sachs, sending shares in the Wall Street bank plunging.

Sources confirmed the U.S. attorney’s office had begun liaising with the Securities and Exchange Commission, which brought civil charges against Goldman two weeks ago, accusing it of misleading investors over a $1 billion derivatives deal.

Prosecutors have not yet determined whether there is evidence to bring criminal charges.

Goldman shares fell more than 9 percent on Friday to close at $145. Before the commission sued the company on April 16, its stock stood at $184.

The commission claims the bank cheated customers in a 2007 deal concerning a mortgage-backed security. Goldman allegedly failed to tell investors that U.S. hedge fund Paulson & Co was going “short” by betting that the security would decline in value. Paulson was allegedly allowed to stuff it with mortgages doomed to default. Royal Bank of Scotland backstopped the deal and was left with an $840 million liability.

The British Financial Services Authority is also investigating.

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29
Apr
10

Google ranked world’s most valuable brand

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Google ranked world’s most valuable brand

Thursday, April 29, 2010

Google was crowned the world’s most valuable brand on Wednesday by a research firm that found technology firms dominate when it comes to how much a name is worth in today’s markets.

Google, IBM, Apple and Microsoft topped global stalwarts Coca-Cola, McDonald’s, and Marlboro in a Top Ten brand value list packed with seven technology companies.

Google’s brand was worth more than $114 billion, a 14 percent climb from 2009, according to the annual Millward Brown Optimor ‘BrandZ Top 100 Most Valuable Global Brands’ report.
U.S. technology titan IBM saw its ‘brand value’ surge 30 percent to $86 billion while the worth of Apple’s name climbed 32 percent to $83 billion, according to the report.

Factors taken into consideration in the ranking include customer loyalty and opinions regarding brands and how they influence earnings.

Microsoft ranked fourth with its brand valued at slightly more than $76 billion, just ahead of the nearly $68 billion that Coca-Cola’s brand was said to be worth.

China Mobile, General Electric, and Vodafone claimed the eighth through tenth spots respectively.

Social-networking powerhouse Facebook made it onto a separate Top Twenty technology brands list for the first time with its company name value at $5.5 billion.

Electronics powerhouse Samsung saw the largest jump in brand value, soaring 80 percent from the previous year to $11.3 billion.

‘Technology brands demonstrated their pervasiveness in our daily lives,’ Millward Brown said in a release. ‘Use of social media was a key trend across many of the successful brands.’

The overall value of the Top 100 brands rose four per cent to more than two trillion dollars, according to Millward Brown, which specialises in advertising, marketing communications, media and brand equity research.

‘This ranking has elevated the importance of building brands among some of the world’s most successful companies,’ said Millward Brown global chief executive Eileen Campbell.

‘CEOs and CFOs around the world should be asking their brand and marketing teams how they can leverage brand to both protect and grow the business.’

An investor who put their money into a Brandz portfolio five years ago would have earned a double-digit return as opposed to losing cash with a set of stocks based on the SP 500 index, according to Millward Brown.

‘In the past, many companies were quick to cut their marketing spend during a down economy,’ said Joanna Seddon, head of Millward Brown Optimor.

‘A new trend has emerged in the wake of the recession as more companies realised the importance of maintaining and even increasing budgets to support brand loyalty and engagement.’
• Source(s): Millward Brown
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28
Apr
10

Goldman’s defense? We’re misunderstood

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Goldman’s defense? We’re misunderstood

Wednesday, April 28, 2010

Goldman Sachs on Tuesday denied reaping vast profits from the collapse of the U.S. housing market as its top executive and a star trader faced hostile questions in Congress over the 2008 financial meltdown.

In angry exchanges before a Senate investigative committee, the storied Wall Street firm was accused of fuelling a crisis that forced thousands of Americans from their homes and continues to ravage the U.S. economy.

Top Goldman Sachs officials have defended their conduct in the financial crisis, flatly disputing the government’s fraud allegations against the giant financial house. I did not mislead investors, insisted a trading executive at the heart of the government’s case.

But they ran into a wall of bipartisan wrath before a Senate panel investigating Goldman’s role in the financial crisis and the Securities and Exchange Commission fraud suit against it and one of its traders. Sen. Carl Levin (D-Mich.) accused Goldman on Tuesday of making risky financial bets.

About a half dozen protesters were in the committee room, dressed in prison stripes with names on signs around their necks of Fabrice Tourre, the only company official directly accused in the SEC suit, and Goldman CEO Lloyd Blankfein, who was also scheduled to testify.

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27
Apr
10

Goldman Sachs: Lloyd Blankfein Says Firm Doesn’t Need to Disclose Position

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Goldman Sachs: Lloyd Blankfein Says Firm Doesn’t Need to Disclose Position

Tuesday, April 27, 2010

Goldman Sachs on Tuesday denied reaping vast profits from the collapse of the U.S. housing market as its top executive and a star trader faced hostile questions in Congress over the 2008 financial meltdown.

In angry exchanges before a Senate investigative committee, the storied Wall Street firm was accused of fuelling a crisis that forced thousands of Americans from their homes and continues to ravage the U.S. economy.

Democratic Senator Carl Levin, the panel’s chairman, assailed Goldman as representative of Wall Street’s ‘unbridled greed,’ drawing them into a raging political battle over financial reform.

The Senate was expected to vote later on Tuesday on whether to proceed with debate about the most sweeping financial reforms in a generation, a day after Republicans successfully blocked a similar move.

Against this caustic backdrop executives battled to salvage the firm’s reputation, rejecting charges – recently filed by a U.S. watchdog – that Goldman sold clients a complex financial product devised by some who bet against it.

Levin demanded to know why Goldman had been ‘trying to sell a shitty deal’ to investors, fuming that ‘as we speak, lobbyists fill the halls of Congress hoping to weaken or kill reforms that would end these abuses.’
French trader Fabrice Fabulous Fab Tourre, who is at the centre of the Securities and Exchange Commission’s case against the firm, was among the first to be dragged before the committee.

He denied any wrongdoing: ‘I deny – categorically – the SEC’s allegation. And I will defend myself in court against this false claim,’ said Tourre.

‘I have been the target of unfounded attacks on my character and motives.’

If Goldman executives hoped to get an easier ride from Republicans, they may have been disappointed. Former Republican presidential candidate John McCain was scathing.

‘I don’t know if Goldman Sachs has done anything illegal,’ he said, adding that ‘from the reading of these emails and the information that this committee has uncovered there is no doubt their behaviour was unethical and the American people will render a judgment as well as the courts.’

Goldman chief executive Lloyd Blankfein was due to appear later in the day, but in prepared testimony said there was nothing wrong with Goldman hedging its bets by holding ”short” positions that would benefit the firm if housing prices collapsed.

‘(We) didn’t have a massive short (position) against the housing market and we certainly did not bet against our clients,’ he said.

‘If our clients believe that we don’t deserve their trust, we cannot survive,’ he said. ‘We believe that we managed our risk as our shareholders and our regulators would expect.’

Blankfein also said that, ‘while profitable overall,’ Goldman lost about $1.2 billion from investments tied to the residential housing market.
In the hearing, Levin pointed to Goldman email messages he said refuted the firm’s claims.

In one November 2007 message from Blankfein, he says: ‘Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,’ which are essentially bets that the market will drop.

Goldman Sachs on Tuesday denied reaping vast profits from the collapse of the U.S. housing market as its top executive and a star trader faced hostile questions in Congress over the 2008 financial meltdown.

In angry exchanges before a Senate investigative committee, the storied Wall Street firm was accused of fuelling a crisis that forced thousands of Americans from their homes and continues to ravage the U.S. economy.

Democratic Senator Carl Levin, the panel’s chairman, assailed Goldman as representative of Wall Street’s ‘unbridled greed,’ drawing them into a raging political battle over financial reform.

The Senate was expected to vote later on Tuesday on whether to proceed with debate about the most sweeping financial reforms in a generation, a day after Republicans successfully blocked a similar move.

Against this caustic backdrop executives battled to salvage the firm’s reputation, rejecting charges – recently filed by a U.S. watchdog – that Goldman sold clients a complex financial product devised by some who bet against it.

Levin demanded to know why Goldman had been ‘trying to sell a shitty deal’ to investors, fuming that ‘as we speak, lobbyists fill the halls of Congress hoping to weaken or kill reforms that would end these abuses.’

French trader Fabrice Fabulous Fab Tourre, who is at the centre of the Securities and Exchange Commission’s case against the firm, was among the first to be dragged before the committee.
He denied any wrongdoing: ‘I deny – categorically – the SEC’s allegation. And I will defend myself in court against this false claim,’ said Tourre.

‘I have been the target of unfounded attacks on my character and motives.’

If Goldman executives hoped to get an easier ride from Republicans, they may have been disappointed. Former Republican presidential candidate John McCain was scathing.

‘I don’t know if Goldman Sachs has done anything illegal,’ he said, adding that ‘from the reading of these emails and the information that this committee has uncovered there is no doubt their behaviour was unethical and the American people will render a judgment as well as the courts.’

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26
Apr
10

Goldman Sachs and “War Profiteering”

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Goldman Sachs and “War Profiteering”

Monday, April 26, 2010

Embattled Wall Street investment giant Goldman Sachs has hit back at claims it used the U.S. sub-prime mortgage crisis to make tens of millions of dollars in profit.

The financial giant, already facing fraud charges, found itself in the middle of a new firestorm on Saturday after emails released by a U.S. Senate panel suggested Goldman executives made huge profits out of the 2007 crisis.

Goldman fired back on Sunday, accusing the Senate Permanent Subcommittee on Investigations of having ‘cherry-picked just four emails from the 20 million pages of documents and emails provided to it’.

‘It is concerning that the subcommittee seems to have reached its conclusion even before holding a hearing,’ added Goldman Sachs spokesman Lucas van Praag.

The emails come at a bad time for Goldmans Sachs.

Earlier this month, the U.S. Securities and Exchange Commission announced it was charging the company with fraud, accusing it of ‘defrauding investors by misstating and omitting key facts’ about a product based on subprime, or higher-risk mortgage-backed securities.

On Saturday, subcommittee chairman Democratic Senator Carl Levin said Goldman Sachs and other investment banks had acted as ‘self-interested promoters of risky and complicated financial schemes that helped trigger the crisis’.

He said the bank had bundled toxic mortgages into complex financial instruments, got credit rating agencies to label them as AAA securities, and then sold them to investors, magnifying and spreading risk throughout the financial system.

In addition, Levin said, the bank often bet against the instruments it sold and rolled in profits as a result.

Van Praag said on Sunday the company had net losses of over $1.2 billion in residential mortgage-related products in 2007 and 2008.

‘This demonstrates conclusively that we did not make a significant amount of money in the mortgage market,’ he said.

But the four emails released by the subcommittee suggest that the company was able to make massive profits by shorting products including residential mortgage-backed securities and collateralised debt obligations (CDOs).

In one email, Goldman Sachs chairman and chief executive officer Lloyd Blankfein appeared to gloat about the strategy in an exchange with other top Goldman executives.

‘Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,’ the message said.

In another, a Goldman Sachs manager noted that the firm had bet against 32 billion dollars in mortgage-related securities that had been downgraded by credit rating agencies, causing losses for many investors.

‘Sounds like we will make some serious money,’ the manager wrote.

‘Yes, we are well positioned,’ his colleague responded.

In a third email, Goldman employees discussed securities that were underwritten and sold by the company and tied to mortgages issued by Washington Mutual Bank’s subprime lender, Long Beach Mortgage.

One employee reported the ‘wipeout’ of one Long Beach security and the ‘imminent’ collapse of another as ‘bad news’ that would cost the firm $2.5 million.

The ‘good news,’ the employee wrote, was that Goldman had bet against the very securities it had assembled and sold, meaning the failure would net the company five million dollars.

Blankfein and other current and former company personnel are scheduled to testify before the subcommittee on Tuesday.

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24
Apr
10

Goldman Sachs e-mails show bank sought to profit from housing downturn

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Goldman Sachs e-mails show bank sought to profit from housing downturn

Saturday, April 24, 2010

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they would make “some serious money” betting against the housing markets.

The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.

In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”

In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president.

The messages were released Saturday ahead of a Congressional hearing on Tuesday in which seven current and former Goldman employees, including Mr. Blankfein, are expected to testify. The hearing follows a recent securities fraud complaint that the Securities and Exchange Commission filed against Goldman and one of its employees, Fabrice Tourre, who will also testify on Tuesday.

Actions taken by Wall Street firms during the housing meltdown have become a major factor in the contentious debate over financial reform. The first test of the administration’s overhaul effort will come Monday when the Senate majority leader, Harry Reid, is to call a procedural vote to try to stop a Republican filibuster.

Republicans have contended that the renewed focus on Goldman stems from Democrats’ desire to use anger at Wall Street to push through a financial reform bill.

Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman’s public statements about its trading results. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products,’?” Mr. Levin said in a statement Saturday when his office released the documents. “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”

A Goldman spokesman did not immediately respond to a request for comment.

The Goldman messages connect some of the dots at a crucial moment of Goldman history. They show that in 2007, as most other banks hemorrhaged losses from plummeting mortgage holdings, Goldman prospered.

At first, Goldman openly discussed its prescience in calling the housing downfall. In the third quarter of 2007, the investment bank reported publicly that it had made big profits on its negative bet on mortgages.

But by the end of that year, the firm curtailed disclosures about its mortgage trading results. Its chief financial officer told analysts at the end of 2007 that they should not expect Goldman to reveal whether it was long or short on the housing market. By late 2008, Goldman was emphasizing its losses, rather than its profits, pointing regularly to write-downs of $1.7 billion on mortgage assets and leaving out the amount it made on its negative bets.

Goldman and other firms often take positions on both sides of an investment. Some are long, which are bets that the investment will do well, and some are shorts, which are bets the investment will do poorly. If an investor’s positions are balanced – or hedged, in industry parlance – then the combination of the longs and shorts comes out to zero.

Goldman has said that it added shorts to balance its mortgage book, not to make a directional bet that the market would collapse. But the messages released Saturday appear to show that in 2007, at least, Goldman’s short bets were eclipsing the losses on its long positions. In May 2007, for instance, Goldman workers e-mailed one another about losses on a bundle of mortgages issued by Long Beach Mortgage Securities. Though the firm lost money on those, a worker wrote, there was “good news”: “we own 10 mm in protection.” That meant Goldman had enough of a bet against the bond that, over all, it profited by $5 million.

Documents released by the Senate committee appear to indicate that in July 2007, Goldman’s daily accounting showed losses of $322 million on positive mortgage positions, but its negative bet – what Mr. Viniar called “the big short” – came in $51 million higher.

As recently as a week ago, a Goldman spokesman emphasized that the firm had tried only to hedge its mortgage holdings in 2007 and said the firm had not been net short in that market.

The firm said in its annual report this month that it did not know back then where housing was headed, a sentiment expressed by Mr. Blankfein the last time he appeared before.

“We did not know at any minute what would happen next, even though there was a lot of writing,” he told the Financial Crisis Inquiry Commission in January.

It is not known how much money in total Goldman made on its negative housing bets. Only a handful of e-mail messages were released Saturday, and they do not reflect the complete record.

The Senate subcommittee began its investigation in November 2008, but its work attracted little attention until a series of hearings in the last month. The first focused on lending practices at Washington Mutual, which collapsed in 2008, the largest bank failure in American history; another scrutinized deficiencies at several regulatory agencies, including the Office of Thrift Supervision and the Federal Deposit Insurance Corporation.

A third hearing, on Friday, centered on the role that the credit rating agencies – Moody’s, Standard & Poor’s and Fitch – played in the financial crisis. At the end of the hearing, Mr. Levin offered a preview of the Goldman hearing scheduled for Tuesday.

“Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients,” Mr. Levin said, referring to testimony given by Mr. Blankfein in January. “They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis. They bundled toxic and dubious mortgages into complex financial instruments, got the credit-rating agencies to label them as AAA safe securities, sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the financial instruments that they sold, and profiting at the expense of their clients.”

The transaction at the center of the S.E.C.’s case against Goldman also came up at the hearings on Friday, when Mr. Levin discussed it with Eric Kolchinsky, a former managing director at Moody’s. The mortgage-related security was known as Abacus 2007-AC1, and while it was created by Goldman, the S.E.C. contends that the firm misled investors by not disclosing that it had allowed a hedge fund manager, John A. Paulson, to select mortgage bonds for the portfolio that would be most likely to fail. That charge is at the core of the civil suit it filed against Goldman.

Moody’s was hired by Goldman to rate the Abacus security. Mr. Levin asked Mr. Kolchinsky, who for most of 2007 oversaw the ratings of collateralized debt obligations backed by subprime mortgages, if he had known of Mr. Paulson’s involvement in the Abacus deal.

“I did not know, and I suspect – I’m fairly sure that my staff did not know either,” Mr. Kolchinsky said.

Mr. Levin asked whether details of Mr. Paulson’s involvement were “facts that you or your staff would have wanted to know before rating Abacus.” Mr. Kolchinsky replied: “Yes, that’s something that I would have personally wanted to know.”

Mr. Kolchinsky added: “It just changes the whole dynamic of the structure, where the person who’s putting it together, choosing it, wants it to blow up.”

The Senate announced that it would convene a hearing on Goldman Sachs within a week of the S.E.C.’s fraud suit. Some members of Congress questioned whether the two investigations had been coordinated or linked.

Mr. Levin’s staff said there was no connection between the two investigations. They pointed out that the subcommittee requested the appearance of the Goldman executives and employees well before the S.E.C. filed its case.

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24
Apr
10

Apple Market Cap Bigger Than Microsoft? Not Quite Yet, It Isn’t

NEWS
Apple Market Cap Bigger Than Microsoft? Not Quite Yet, It Isn’t

Saturday, April 24, 2010

Boosted by upbeat investor reaction to its strong earnings report this week, Apple on yesterday became the second largest company on the S&P 500 Index in terms of market capitalization, surpassing software giant Microsoft.
Revenge, they say, is a dish that is best served cold. And if this is true, then Apple must be pleased as punch to see itself in the second spot in the S&P 500, second only to Exxon Mobil.

While coming second is in itself notable – with the notable exception of coming first – what must be especially pleasing to Apple is the company it has replaced – Microsoft.

To understand this, you must travel back in time to 1988. In that year, Apple filed a case against Microsoft, claiming that the Windows graphical user interface (GUI) infringed upon the Mac’s “look and feel.” Of course, since Apple had itself borrowed the Mac’s look and feel by looking at products from Xerox and feeling that the GUI is a good thing, the judges of the United States Court of Appeals for the Ninth Circuit ruled that Apple cannot get patent-like protection for the idea of a GUI.

What is more humiliating than being beaten by an opponent? Running back to the same opponent for help when you are down. And Apple was forced to do this in 1997, when Steve Jobs announced that Apple would join Microsoft to release new versions of Microsoft Office for the Macintosh, and that Microsoft made a $150 million investment in non-voting Apple stock. The money made a huge difference to Apple because in 1997 Apple was in deep trouble and was facing a huge finance crunch.

Enough history. Cut to the here and now. Apple is on top and has ousted Microsoft to become the No 2 company on the S&P index. It would be wrong to say that its iPod, iPhone and iPads are selling like hot cakes – it would perhaps be better to say that hot cakes are selling like iPads.

Purists may argue that the S&P 500 represents merely float-adjusted market cap. In fact, as Marco Tabini posted on macworld.com, “Microsoft’s full market cap still outstrips Apple’s by $275 billion to $241 billion.”

True, Microsoft’s market cap is still higher, but Apple has one psychological advantage that was once enjoyed by Microsoft in the PC era – the ability to drive the direction of the market. Now, Apple decides what happens.

Want proof? The iPad now accounts for 26 per cent of all of the mobile traffic on wired.com. The site is so impressed that they are making their Flash-heavy pages iPad compatible. “We are aware of the irony that the majority of wired.com’s videos, which use an Adobe Flash-based player, don’t play on the iPad. We’re working on that, starting with our homepage,” wrote Dylan F. Tweney in an article that appeared on the site.

Many many moons ago, when Steve Jobs hired John Sculley from Pepsi, he is reputed to have asked him, “Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?” Scully didn’t change the world. In fact, during his regime, Microsoft threatened to discontinue Office for the Mac if Apple did not licence parts of the Mac GUI for use with Windows. And those days, Microsoft got what it wanted. But it looks like iPad has just turned the tables.

• What is S&P 500?
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. After the Dow Jones Industrial Average, the S&P 500 is the most widely followed index of large-cap American stocks. It is considered a bellwether for the American economy.

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23
Apr
10

Software giant Microsoft posts 35 percent jump in profit in Q3

NEWS
Software giant Microsoft posts 35 percent jump in profit in Q3

Friday, April 23, 2010

Software giant Microsoft said on Thursday that its third-quarter net profit rose 35 percent to $4.01 billion, slightly better than expectations.

Microsoft said revenue hit a record $14.50 billion in the quarter which ended on March 31, up six percent over the same period a year ago.

‘Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox Live and our emerging cloud services,’ Microsoft chief financial officer Peter Klein said in a statement.

Microsoft said revenue from its Windows computer operating system was up 28 percent over a year ago, driven by strong demand for the latest version, Windows 7.

‘Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong,’ chief operating officer Kevin Turner said.

Microsoft’s fiscal fourth-quarter revenue will meet or exceed PC market revenues, said Klein, driven by a full pipeline of product updates including Office 2010, SQL server and SharePoint 2010.”You’ll see a wave of product launches in the fourth quarter,” Klein said.”Our business will continue to grow stronger than the market.”
• Source(s): Microsoft Corporation

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