Zero Hedge's deconstruction of Blankfein's testimony tomorrow

Below we present Lloyd's full, and merely 2 page, prepared testimony before tomorrow's Senatorial Hearing on the Tourregate. Here are the key amusing excerpts:

Today, the financial system is still fragile but it is largely stable. I want to express my gratitude and the gratitude of our entire firm. We held the government’s investment for approximately eight months and repaid it in full along with a 23% annualized return for taxpayers.

Lie #1: Goldman is still responsible for at least $21 billion in TLGP loans, which are FDIC, and thus fully taxpayer backed. Ironically, this is just a little more than Goldman paid out in bonuses in 2009. Perhaps that money should have gone to really paying out US citizens instead of the bonuses of those who shorted against the US housing market. In the very least, it would be a welcome change if Goldman, just like GM, were to actually acknowledge that the firm is still on the taxpayer bailout dole. To be sure, we note that "god" is finally grateful for being alive and earning billions courtesy of the record steep 2s/10s curve.

Until recently, most Americans had never heard of Goldman Sachs or weren’t sure what it did.

 Lie #2: Matt Taibbi made it all too clear what Goldman does.

We don’t have banking branches.

Truth #1: Which begs the question - why is Goldman still considered a Bank Holding Company and why has the FDIC used its depositor-discretionary funds to guarantee Goldman funding?

We provide very few mortgages and don’t issue credit cards or loans to consumers.

Truth #2: In fact, Goldman does nothing at all that benefits the broader US society.

The 35,000 people who work at Goldman Sachs, the majority of whom work in the United States, are hard-working, diligent and thoughtful.

Emphasis #1: According to Fabrice Tourre they are also full of "kindness and altruism."

We work with pension funds, labor unions and university endowments to help build and secure their assets for generations to come.

Correction #1: As Calpers disclosed today, some of America's biggest pension funds are now reconsidering their business relationship with Goldman Sachs. It would appear considering Calpers and others' stunning losses, that value of assets pledged to Goldman for safekeeping have plunged.

And, we connect buyers and sellers in the securities markets, contributing to the liquidity and vitality of our financial system.

Lie #3: Goldman is nothing more than a massive prop desk/hedge fund which feeds on infinite flow from its second to none inventory and client relationships. Furthermore, Goldman's disclaimers for its REDI trading platform force clients to sign off on the possibility that Goldman will actively frontrun them and/or trade against them. If Goldman wishes to join the HFT brigade and call borderline criminal activity "providing liquidity", so be it.

These functions are important to economic growth and job creation.

Lie #4: This statement should be corrected as follows: "These functions are important to Goldman's record bonus pools and ongoing liquidation of our competitors."

Goldman Sachs, in supporting financial regulatory reform, has made it clear that it supports clearinghouses for eligible derivatives and higher capital requirements for non-standard instruments.

Lie #5: Goldman Sachs is in fact lobbying with millions of dollars and doing all it can to persuade its lackeys Dodd and Corker to leave derivatives just as they are. As a case in point see Warren Buffett's (so far rejected) attempt at intervention in derivative reform.

As you know, ten days ago, the SEC announced a civil action against Goldman Sachs in connection with a specific transaction. It was one of the worst days in my professional life, as I know it was for every person at our firm.

Lie #6: The worst day in the life of every Goldman Sachs staffer (including Mr. Blankfein) was when it was disclosed that Q4 compensation benefits would be negative $519 million.

While we strongly disagree with the SEC’s complaint, I also recognize how such a complicated transaction may look to many people.

Correction #2: Spotting 10(b)-5 fraud is very simple. To all people.

While we strongly disagree with the SEC’s complaint, I also recognize how such a complicated transaction may look to many people.

Lie #7: How about something simpler? How about explaining to the people why your Director Stephen Friedman was buying shares of Goldman while in possession of material insider information, when he was a member of the New York Fed of all places? Is there something overly complicated about this flagrant case of insider dealing that the public should be "confused" about?
Yet all of the above is irrelevant - here is the one and only argument that is completely groundless, and is at the core of Goldman's defense. Frankly, we are shocked that Goldman continues pursuing this angle:

Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is we were not consistently or significantly net “short the market” in residential mortgage-related products in 2007 and 2008. Our performance in our residential mortgage-related business confirms this. We didn’t have a massive short against the housing market and we certainly did not bet against our clients.

Not much needed to be said here. Zero Hedge pointed out that Goldman indeed had a "massive short" against housing both in 2006 and in 2007. 2008 is irrelevant as Goldman's mortgage-loaded counterparties which Goldman had shorted via CDS as Goldman itself has confirmed, ended up being bailed out by the government with the resulting proceeds being funneled to Goldman directly, thus generating even more massive profits. We are speaking here exclusively of AIG, but we are confident Goldman was short all other competitors it knew were long mortgages.
To wit:
Exhibit A: Goldman DV01 in November 2006 and February 2007 - it is stated clearly that the firm is short risk mortgages, first with a $1 million DV01 and then with $2.8 million DV01

Exhibit B: Here is Goldman's absolute net exposure in March 2007 and September 2007. To anybody with 1st grade math skills, it is plainly obvious the firm was net short on both occasions.

Exhibit C: Here is a breakdown of Goldman's profitability in the mortgage space in 2005, 2006 and 2007.

These three tables refute all claims of Mr. Blankfein that the firm i) was not short mortgages and ii) was losing money on mortgages. The last is patently wrong until such time as a blowup of AIG would have destroyed the firm had the government not stepped in and bailed out Goldman.

"Need to decide if we want to do 1-3 (billion) of these trades for our book or engage customers,"

So said Goldman, in betting against Sub-prime in December, 2006.

"I'd say we definitely keep for ourselves. On (another), I'm open to sharing to the extent that it keeps these customers engaged with us."

(especially if we can front run their orders!)

So said Goldman.

"We don't bet against our clients."

So said Goldman.

"We just keep the good trades for ourselves!"

Doing God's work!

Pictures http://williambanzai7.blogspot.com/

Las Vegas Sands Singapore Casino

How much gaming goes on in Macau?

WSJ
In 2009, gambling revenue in Macau was about $14.9 billion, up 9.6% from $13.6 billion in 2008. Las Vegas Strip gambling revenue in 2009 was $5.6 billion, off 9.4% from $6.1 billion in 2008...

Macau recorded its two biggest months to date in terms of gambling revenue in January and March, and industry watchers and insiders are salivating at the prospect of a new golden age of gambling in Asian markets.

How profitable then, will Singapore eventually be, with a much lower tax rate for Casino operators?

Was any of this priced into the stock when it was $1.77 and touted on this blog?

It's Mutual Fund Monday

Remember the Monday statistics?

Which absolutely makes those who don't believe in this market just absolutely cringe?

Since September of 2009, you can count the down Mondays on one hand.

Meaning if you use that as an indicator, there is an 88% chance of the market being up today!

Hawking talks like a banker

Any banker on Wall Street warns is that any financial regulation could cause unknown and unforseen, immediate harm to the economy. Sort of like George Bush's terrorist light.  Now we have Stephen Hawking telling us to leave the aliens alone, or they'll colonize us!

LONDON (AFP) – Aliens may exist but mankind should avoid contact with them as the consequences could be devastating, British scientist Stephen Hawking warned Sunday.

"If aliens visit us, the outcome would be much as when Columbus landed in America, which didn't turn out well for the Native Americans," said the astrophysicist in a new television series, according to British media reports.

The programmes depict an imagined universe featuring alien life forms in huge spaceships on the hunt for resources after draining their own planet dry.

"Such advanced aliens would perhaps become nomads, looking to conquer and colonise whatever planets they can reach," warned Hawking.

Buffett gets backing for his weapons of mass destruction

In the new derivative deal proposed, Buffett puts is name on the line to help the big banks:

WSJ
The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.

Mr. Buffett's push is especially notable because he has warned of the potential dangers of derivatives, famously branding them "financial weapons of mass destruction."

Bloomberg: Stocks cheapest in decades

After missing 80% rallies, now we hear that stocks are the cxheapest in decades!

April 26 (Bloomberg) -- Even after the biggest rally since the 1930s, U.S. stocks remain the cheapest in two decades as the economy improves.

 And now, Jeremy Grantham, who has been relentlessly bearish, now says that Bernanke's  flawed policies could send the market to new highs. (Only to crash afterwards!) But you have to register first, to read his prose. So so you don't remind him!

The market's Goldman correction lasted all of two days. Even I thought that would would be more. Greece? That just got worse, and our market kept going higher.

So where are all those who were warning us about Greece and its contagion on stock prices?

Hiding! And reading Dow 36K!

Goldman's Wells notice was material to GS counsel--They dumped the stock!

Goldman determined that the Wells notice wasn't material to Goldman shareholders, even though it promptly knocked $13 billion off of the value of the company.

Only Goldman can claim $13 billion wasn't material.

But Goldman insiders? They thought otherwise. They furiously dumped $65 million of their own holdings, while keeping the Wells notice information quiet!

CHICAGO (Reuters) - Five senior executives at Goldman Sachs Group Inc sold company stock after the firm received notice of possible fraud charges, according to a report in the Wall Street Journal.

The stock sales, which totaled $65.4 million, were made by co-general counsel Esta Stecher, vice chairmen Michael Evans and Michael Sherwood, principal accounting officer Sarah Smith and board member John Bryan.

Your market bet

Who has more fight now????



Even now, the grizzly runs from a pussy!

Where is the double dip crowd, now?

With their useless 5 cents worth of advice?

But unlike George, these folks will tell you that they never predicted a double dip!


"Double dip? What are you talking about!"

How Goldman screwed Ghana

Without wearing their mask!

White boy wears a mask of a black man to rob banks

In each case, Zdzierak wore a Hollywood movie mask that is known as "The Player" which changed his appearance and made him look African-American. Police say Zdzierak was able to elude them easily because he was likely taking the mask off between robberies and driving to each location as a white man... when police were looking for a black man.

Zdzierak has been behind bars since his arrest on April 14th on $3 million dollars bond. On April 9th, Zdzierak allegedly held up the Key Bank in the Brentwood Shopping Center in Finneytown, then the Fifth Third bank in the Woodlawn Kroger, followed by the Key Bank near Tri-County Mall, the CVS in Springdale, and the Franklin Savings and Loan in Forest Park. Police say he also robbed the Chaco Bank in Forest Park March 5.

On Main Street, you rob a bank with a mask. On Wall Street, you do it with a prospectus! Ask Goldman! Or ask IKB, who got robbed by Lloyd and Co.!

Remember when Gilt.com sold out their expensive Halloween masks to the Wall Street Halloween party?

"I thought I'd died and gone to heaven when I saw the sale. I'm going to be the stud of the party," said a 38-year-old Gilt customer who asked not to named. The Greenwich Village finance professional wants his $258 Joker mask to surprise the other guests at a black-tie party thrown by a Goldman Sachs partner.



So what's underneath Goldman's mask?

Addressing the influential Treasury Select Committee, Gerald Corrigan, a Goldman Sachs managing director, accepted that the investment bank had "enabled politicians to mask borrowings" through a complex currency transaction in 2001.

The only difference between what was going on in Manhattan and Iowa, was that the white boys from Goldman, didn't wear their masks while they robbed!

Because the mask, was in the prospectus!

Goldman's comical defense

Blagojevich wants to call Obama as a witness

WSJ
Mr. Obama has said no representatives of his had anything to do with alleged deals for the Senate seat, according to the motion. Mr. Blagojevich argues those statements "contradict the testimony of an important government witness."

The filing said the witness was a union representative, without naming the person. Mr. Obama is "the only one who can say if emissaries were sent on his behalf, who those emissaries were, and what, if anything, those emissaries were instructed to do on his behalf," the motion said.

The alleged contradictory information was redacted in Thursday's filing.

Gupta tipped Raj about Buffett buy into Goldman

And he met him privately in his office, a couple times a month.

But when will somebody really say that the insider trade, wasn't Gupta's tip to Raj, but Goldman's massive buy of the financials the days before, with help from their tippee, Ben Bernanke, and Turbo Tim, and help on its way from Uncle Warren?

WSJ
A Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says...

That information "came" from Mr. Gupta, a person familiar with the matter says. Federal prosecutors notified Mr. Gupta in a letter that they had intercepted phone conversations between him and Mr. Rajaratnam. Mr. Gupta told Goldman last month he wouldn't seek re-election as a director.

Goldman directors even tipped the Buffett deal.

Anyone remember how Goldman reversed the steep sell-off the day before Buffett invested in Goldman? And how the financials reversed that day from their lows? Did anyone from Justice check out how Goldman traded in the SKF that day? How many shorts that they had laid out in that number?

And did Goldman, ramp and reverse the financials,  the day after the Government announced the shortseller rules, because they knew of Buffett's investment?

After all, didn't Byron Trott, Buffett's broker at Goldman, who put the deal of Buffett's investment into Goldman together--didn't he at the end of March 2009, start his own firm?

And didn't Goldman, change the rules on him alone, allowing Mr. Trott to sell his shares in Goldman, unlike the other executives who were handcuffed to the hip with their Goldman stock, because of Buffett's investment?

The Sunday before Buffett's announced investment, the Fed allowed Goldman to become a bank holding company. Then they blocked all short selling of the financials. Then Morgan Stanley announced their deal with the Japanese.

Buffett bought out Constellation Energy, to give confidence in the deal making arena, because that deal was on the ropes, and in the financials, names like State Street went from 30 to 64, Morgan Stanley, went from 12 to 34, and Goldman went from 86 to 144--all in ONE day--from 12:30 in the afternoon, to 8:00 am in the next day's pre-market!

Is someone going to say that the stocks ramped all because you couldn't lay out any more shorts, or those who were short, were instead tipped?

Here was the action in Goldman the day that Buffett's tip to the rest of Wall Street was announced.

Why did you have, instead, the move in the financials, the days before?

How is it, that when a company on Wall Street, reports good numbers, and the stock sells off; that everyonne already knew that news.

Was the street so incestuous, that everyone else knew the news that Gupta had tipped?

How many people did Raj also tip? Who were also dying on the vine in Septemebr of 08?

And even with this massive, wonderful tip, Galleon was down 7.23% in September of 2008, and he was down another 5.23% in October. Even though he was getting tipped!

Is it any wonder why he was having crumpets and tea with Gupta, in his private office!

Away from the wires!

So now are we to believe, that it was just Raj, alone, who ramped the financials, or was a better explanation, that Goldman Sachs, decided to deploy their capital, into a massive short squeeze, in the shorted names, because they knew that the PPT, would be behind them, in their effort to prop up the markets, on the backs of the shortsellers, because Trott had already told Goldman that Buffett was in, and the Fed, had already told Goldman, that on Sunday night, they would be a bank holding company, and that, they would then have access to Ben's billions?

And Ben, and Timmy, and Lloyd, will all suffer memory problems, because the sole rat, in this whole mess, was Raj, just like Goldman's sole rat, in the Abacus, was a 27 year old kid called Fab!

How wrong were the shorts on NFLX?

Go back a couple of years, and try and remember when the Citigroup analyst was "concerned" about NetFlix, and 30% of the float was shorted.

Do you remember those stories?

Remember the dreaded Netflix adhesive flap, that sometimes caused the Post Office sorters to jam, and then, they had to be sorted by hand?

Remember how the NY Times had that story?

Planted by some hapless short?

In fact, the the shill for the shorts, the analyst from Citigroup, had this to say:

In the report, Mr. Wible reiterated his sell rating on Netflix and his buy rating on Blockbuster. “Given the magnitude of this risk,” he wrote, Netflix is most likely to “work towards resolving this issue by redesigning its mailers.”

How did that paired trade--a short of NFLX and a long of BBI work out?

ABC bans bra ad

ABC wouldn't air this ad for Lane Bryant lingerie, on Dancing with the Stars because it showed too much skin.

Supposedly the DWTS  audience wouldn't be able to handle that much flesh!

Bears are trying

Obama to keep Goldman donations

WSJ
President Barack Obama won't return about $1 million that employees of Goldman Sachs Group Inc. donated to his 2008 presidential campaign, according to a spokesman for the Democratic National Committee...

Lawmakers in several states who received donations from Goldman are being challenged by political opponents to return the campaign funds...

Since 1989, no company has donated more to Democrats than Goldman. The company was the fourth-largest corporate source of campaign cash to Republicans during the same period.

Overall, Goldman has made $31.6 million in donations from its PAC and employees since 1989, according to the Center for Responsive Politics. About two-thirds of those donations have gone to Democrats, including about $1 million given to Mr. Obama's presidential campaign.

Blankfein: This suit against Goldman will hurt the country

FT
In the conversations with private equity executives and others, Mr Blankfein left clients with the impression that he was eager to fight the charges in court. The SEC has requested a jury trial. “He was very aggressive,” said one person called by Mr Blankfein on Wednesday. “He feels that the government is out to kill them, that they are under attack and the whole thing is totally political.” Mr Blankfein said the SEC action “hurts America”, this person said.

The NY Post has this editorial:
President Obama comes to town today to deliver what the White House is billing as a landmark speech at Cooper Union to push stringent new federal regulation of Wall Street in the name of "financial oversight."

This will play well on Main Street.

But in New York, Wall Street is Main Street - the centerpiece of the city's economy.

So the president and his fellow Democrats need to proceed with great care.

Clearly, the party sees this one as a political winner: Yesterday, it launched a major fund-raising appeal based on Obama's "Wall Street reform" plan, warning against a return to the days when "big banks feasted [and] just about everybody else suffered."

But that kind of rhetorical overkill is a dagger to the heart of an industry that is the heart of New York's economic well-being.

Wall Street makes billions and billions each quarter, yet a little rhetoric is a dagger to its heart?