Saturday, April 17, 2010

April 17 2010: Message from Stoneleigh (and lots of Goldman)

Dorothea Lange TruckFarmWife November 1938
"Farm woman beside her barn door. Tulare County, California. No more horseshoes!"

Stoneleigh: The Automatic Earth is approaching a significant point in its evolution - a point where we need to increase the impact we have in order to provide a timely warning, or else.

To do that, first of all, will take more time and resources. Hence I am leaving my day job at the end of this month. It was no longer possible to do both, and I have chosen to devote my time to TAE, because that is where I feel I am needed.

The next leg of the decline is rapidly approaching and we intend to help people navigate it. We're looking at considerably expanding the site in order to accommodate what we feel is needed. Mood can turn on a dime, and when it does we should be looking at strong declines across the board, with increasing downward momentum. The global financial system is capable of seizing up in very short order, but there are always warning signals, and we intend to bring them to people's attention.

We are considering a number of options for presenting information at TAE. It is likely we will increase the frequency of posts, and make them shorter. We want to provide coverage that is more comprehensive, but more accessible at the same time. We also want to better organize the existing information so that readers can for instance more easily find the primers with our basic arguments, evidence for our position and recordings of interviews and talks (yes, there’ll be a YouTube channel).

I intend to write a book pulling together all information necessary to communicate the big picture. I want to do this as quickly as possible, but it will inevitably take time. And a book deal/advance would be good too.

In accordance with the aim of accessible information (and my personal enjoyment), I will be touring extensively in order to explain our position to people in person and give them a chance to ask as many questions as they like. I have done several talks already in the Pacific Northwest and in Ontario, and not only have people found them useful, they never seem to get enough or want to leave (not my words), and nor do I by the way.

My next talk will be in the Anderson Theatre at Hartwick College in Oneonta, NY, at 7pm on the evening of April 20. The following evening I will be speaking in Rhinebeck, NY (for details please e-mail New York City is scheduled for April 22/23, details will follow. On Sunday April 25, I will be presenting in Brockville, Ontario, at 2pm in the Brockville Public Library. 

Next month, on May 18, I will be doing a talk at the library in Tamworth, NH, more dates in that area should be known soon. I am working also on a plan for a short trip to Texas, involving either Austin, San Antonio or both. Specific details will follow nearer the time.

In June and July I will be heading to Europe for several weeks. I'll start in the UK, where 2-3 talks are tentatively booked, then travel to the Netherlands (we need contacts there still), Belgium, France and Italy. Arrangements are still fluid at this point, so if you would like me to speak somewhere, please let me know so that I can plan a sensible itinerary. The address to use for arrangements is StoneleighTravels(at)gmail(dot)com.

I recall requests for Finland, Berlin, the Czech republic and Switzerland, but I would need an email contact address and some sense of what arrangements would need to be made. Some destinations would involve a flight, due to time constraints, and would therefore be more problematic. But do send in your requests and arrangements, I'm open to anything that fits my schedule.

My talks do not need to be large affairs, and those who organize them do not need to have connections with academic institutions (as many of you seem to presume). I have presented in community centres, church halls and large living rooms. I am quite happy to speak to small groups of people informally if that is what people want. Transition Towns groups seem particularly appropriate. As long as I can cover my expenses and make a little bit of money for my efforts, I’m good.

I will also be speaking more formally at various colleges where the audiences will be larger and more organization is required. All I want to do is to get our message out so that ordinary people can save as much as possible of what they have worked hard for all their lives.

In August and September I am planning to travel in the American midwest. My initial thoughts are to visit Ohio, Wisconsin, Minnesota, Iowa, Kansas and Missouri, as these are places people have asked me to visit and are close enough together to be combined into a single round trip. I have other destinations tentatively in mind, depending on where the demand is. So far I have requests for California, Montana and Wyoming.

A major focus of this speaking tour is to help turn virtual communities into real ones. As we have pointed out many times before here at The Automatic Earth, connections with other people are what matter most in hard times. We have a virtual community of regular readers and commenters whom we very much appreciate. By traveling and bringing these people together for discussions, we can contribute to establishing groups of people in many localities who may be in a position to help each other, as they will be collectively forewarned.

Meanwhile, you can all help our efforts along by donating to the site (upper left hand corner) and/or visiting our sponsors. We need your support more than ever in our quest to expand this site and make it more valuable and more rewarding for you, our readers.

I am very much looking forward to meeting many more of you, whether you're avid readers of TAE or not.

With love,


Ilargi: To donate, go to the sidebar at the upper left hand corner of the site. And do visit our advertisers, there’s no commitments, but you do help us if you do.

And then or course there’s the Goldman Sachs story below. I’m pretty much with Dylan Ratigan on this. But I also have to wonder how much they can shove onto one rogue trader, and get away claiming innocence. We’ll see as we go forward.

Dylan Ratigan: SEC files civil lawsuit against Goldman Sachs

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S.E.C. Accuses Goldman of Fraud in Housing Deal
by Louise Story and Gretchen Morgenson

Goldman Sachs, the Wall Street powerhouse, was accused of securities fraud in a civil lawsuit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly intended to fail. The move was the first time that regulators had taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

In a statement, Goldman called the commission’s accusations “completely unfounded in law and fact” and said it would “vigorously contest them and defend the firm and its reputation.” The focus of the S.E.C. case, an investment vehicle called Abacus 2007-AC1, was one of 25 such vehicles that Goldman created so the bank and some of its clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

As the Abacus portfolios in the S.E.C. case plunged in value, a prominent hedge fund manager made money from his bets against certain mortgage bonds, while investors lost more than $1 billion. According to the complaint, Goldman created Abacus 2007-AC1 in February 2007 at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst. Mr. Paulson is not named in the suit.

Goldman told investors that the bonds would be chosen by an independent manager. In the case of Abacus 2007-AC1, however, Goldman let Mr. Paulson select mortgage bonds that he believed were most likely to lose value, according to the complaint. Goldman then sold the package to investors like foreign banks, pension funds and insurance companies, which would profit only if the bonds gained value. The European banks IKB and ABN Amro and other investors lost more than $1 billion in the deal, the commission said. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio,” Robert Khuzami, the director of the commission’s enforcement division, said in a written statement.

The lawsuit could be a sign of a revitalized Securities and Exchange Commission, which has been criticized for early missteps in assessing the causes of the financial crisis. The agency appears to be tracing the mortgage pipeline all the way from the companies like Countrywide Financial that originated home loans to the raucous trading floors that dominate Wall Street’s profit machine. At a conference in New Orleans on Friday, Mr. Khuzami indicated that he was scrutinizing other deals involving mortgage securities. “We’re looking at a wide range of products,” he said at a news conference. “If we see securities with similar profiles, we’ll look at them closely.”

Shares of Goldman Sachs plunged more than 10 percent in just the first half-hour of trading after the suit was announced Friday morning. They closed down 13 percent, at $160.70, wiping away more than $10 billion of the company’s market value. Investors sold other bank stocks, as well, as rumors swirled about which other firms might become embroiled in the commission’s investigation. Next to Goldman Sachs, Deutsche Bank’s American shares had the steepest decline, falling 7 percent. Goldman issued a second statement after the market closed saying that the firm had lost money on the deal in the S.E.C. case and that it provided investors with extensive disclosure on the deal. The firm said the losses in the deal came from the overall collapse of the mortgage market, not from the way the deal was structured.

The accusations amount to a black eye for the once-untouchable Goldman Sachs, a money machine that is the epicenter of Wall Street power. For decades, its platinum reputation has attracted top investors and stock underwriting deals. Several of its former chief executives have gone on to high public office, among them Henry M. Paulson Jr., the former Treasury secretary, and Jon Corzine, the former New Jersey governor. (Henry Paulson and John Paulson are not related.)

In recent months, Goldman has been defiant in the face of criticism, repeatedly defending its actions in the mortgage market, including its own bets against it. In a letter published last week in Goldman’s annual report, the bank rebutted criticism that it had created, and sold to its clients, mortgage-linked securities that it had little confidence in. “We certainly did not know the future of the residential housing market in the first half of 2007 any more than we can predict the future of markets today,” Goldman wrote. “We also did not know whether the value of the instruments we sold would increase or decrease.” The letter continued: “Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a ‘bet against our clients.’ ” Instead, the trades were used to hedge other trading positions, the bank said.

Goldman was one of many Wall Street firms that created complex mortgage securities — known as synthetic collateralized debt obligations — as the housing wave was cresting. At the time, traders like Mr. Paulson, as well as those within Goldman, were looking for ways to bet against the overheated market. For months, S.E.C. officials have been examining mortgage bundles like Abacus that were created across Wall Street. The commission has been interviewing people who structured Goldman mortgage deals about Abacus and similar instruments. The commission advised Goldman that it was likely to face a civil suit in the matter, sending the bank what is known as a Wells notice several months ago.

The S.E.C. action is a civil complaint, but it could be referred to criminal prosecutors who would have to prove that individuals intended to defraud investors. The S.E.C. focused on only one Abacus deal in its complaint, but Mr. Khuzami said in a conference call on Friday that the commission continued to look at the rest. All told, $10.9 billion of Abacus investments were sold. Mr. Tourre, the Goldman vice president named in the lawsuit, was one of the firm’s top workers running the Abacus deals, selling the investment to investors across Europe. Mr. Tourre was raised in France and moved to the United States in 2000 to earn his master’s degree in operations at Stanford. The next year, he began working at Goldman, according to his profile on the LinkedIn social network.

He rose to prominence working on the Abacus deals under a trader named Jonathan M. Egol. Mr. Egol, who is now a managing director at Goldman, is not named in the S.E.C. suit. Goldman structured the Abacus portfolios with a sharp eye on the credit ratings assigned to the mortgage bonds contained in them, the S.E.C. said. In the Abacus deal cited in the S.E.C. complaint, Mr. Paulson pinpointed those mortgage bonds that he believed carried higher ratings than the underlying loans deserved. Goldman placed insurance on those bonds — called credit-default swaps — inside Abacus, allowing Mr. Paulson to bet against the bonds while clients on the other side of the trade wagered that they would make money.

But when Goldman sold shares in Abacus to investors, the bank and Mr. Tourre disclosed only the ratings of those bonds and did not disclose that Mr. Paulson was on the other side, betting those ratings were wrong. Mr. Tourre at one point complained to an investor who was buying into Abacus that he was having trouble persuading Moody’s to give the deal the rating he desired, according to the investor’s notes, which were provided to The Times by a colleague who asked for anonymity. In seven of Goldman’s Abacus deals, the bank went to the American International Group for insurance on the bonds. Those deals have led to billions of dollars in losses at A.I.G., which received a $180 billion taxpayer rescue. The Abacus deal in the S.E.C. complaint was not one of them.

That deal was managed by ACA Management, a part of ACA Capital Holdings, which changed its name in 2008 to Manifold Capital. Goldman told investors the mortgage bond portfolio would be “selected by ACA Management,” according to the deal’s marketing document, which was given to The Times by an Abacus investor. That document says Goldman may have long or short positions in the bonds. It does not mention Mr. Paulson. ACA was not named in the suit. That firm was led to believe that Mr. Paulson was positive on mortgages, not negative, and so it did not see a problem with his involvement, the S.E.C. said. Mr. Tourre was aware of ACA’s misconception, the commission said.

In February 2007, Mr. Tourre met with both ACA and Mr. Paulson, and he sent an e-mail message to a Goldman colleague acknowledging the awkwardness of the situation. “This is surreal,” Mr. Tourre wrote. Nine days later, a Goldman colleague wrote Mr. Tourre and said, “the C.D.O. biz is dead. We don’t have a lot of time left.”

The Abacus deals deteriorated rapidly when the housing market hit trouble. For instance, in the Abacus deal in the S.E.C. complaint, 83 percent of the mortgage bonds underlying it were downgraded by rating agencies just six months later, and 99 percent had been downgraded by early 2008, according to the S.E.C. It takes time for such mortgage investments to pay out for investors who make bets against them. Each deal is structured differently, but generally, the bonds underlying the investment must deteriorate to a certain point before those who bet against the bonds get paid. By the end of 2007, Mr. Paulson’s credit hedge fund was up 590 percent..

Goldman Sachs hit with fraud charges

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For Goldman Sachs, a Winning Bet Carries a Price
by Louise Story and Gretchen Morgenson

For Goldman Sachs, it was a relatively small transaction. But for the bank — and the rest of Wall Street — the stakes couldn’t be higher. Accusations that Goldman defrauded customers who bought investments tied to risky subprime mortgages have only just begun to reverberate through the financial world. The civil lawsuit filed against Goldman on Friday by the Securities and Exchange Commission seemed to confirm many Americans’ worst suspicions about Wall Street: that the game is rigged, the odds stacked in the banks’ favor. It is the first big case — but probably not the last, legal experts said — to delve into a Wall Street firm’s role in the mortgage fiasco.

The move against Goldman came at a particularly sensitive time for Wall Street. Washington policy makers are hotly debating a sweeping overhaul of the nation’s financial regulations, and the news could embolden those seeking to rein in the banks. President Obama on Saturday stepped up pressure for financial reform by accusing Republicans of “cynical and deceptive” attacks on the measure. The S.E.C.’s action could also hit Wall Street where it really hurts: the wallet. It could prompt dozens of investor claims against Goldman and other Wall Street titans that devised and sold toxic mortgage investments.

And it raises new questions about Goldman, the bank at the center of more concentric circles of economic and political power than any other on Wall Street. Goldman — whose controversial success has leapt from the financial pages to the cover of Rolling Stone — has fiercely defended its actions before, during and after the financial crisis. On Friday, it called the S.E.C.’s accusations “unfounded.”

Wall Street played a complex and, at times, seemingly conflicted role in the mortgage meltdown. Goldman and others worked behind the scenes, bundling home loans into investments for sale to investors the world over. Even now, more than 18 months after Washington rescued the teetering financial system, no one knows for sure how much money was lost on those investments. The public outcry against the bank bailouts was driven in part by suspicions that a heads-we-win, tails-you-lose ethos pervades the financial industry. To many, that Goldman and others are once again minting money — and paying big bonuses to their employees — is evidence that Wall Street got a sweet deal at taxpayers’ expense. The accusations against Goldman may only further those suspicions.

“The S.E.C. suit against Goldman, if proven true, will confirm to people their suspicions about the total selfishness of these financial institutions,” said Steve Fraser, a Wall Street historian and author of “Wall Street: America’s Dream Palace.” “There’s nothing more damaging than that. This is way beyond recklessness. This is way beyond incompetence. This is cynical, selfish exploiting.”

On Friday, Goldman’s stock took a beating, falling 13 percent and wiping out more than $10 billion of the company’s market value. It was a possible sign that investors fear that the S.E.C. complaint will damage Goldman’s reputation and its ability to keep its hands on so many sides of a trade — a practice that is immensely profitable for the firm. It is unclear whether the S.E.C. can prevail against Goldman. The bank has long maintained that it puts its clients first and, in a letter in its latest annual report, reiterated that position. Goldman said that it never “bet against our clients” in its trades but rather was trying to hedge against other trading positions.

Still, Wall Street analysts said Goldman and other banks, having navigated the financial crisis, might now face a new kind of risk: angry investors. Most major Wall Street banks also created collateralized debt obligations, which are at the heart of the Goldman case. C.D.O.’s, which are essentially bundles of securities backed by mortgages or other debt securities, turned out to be among the most toxic investments ever devised. “Any investor who bought these C.D.O.’s and lost a significant amount of money is probably looking at their investment and wanting to know: what were the details behind the sale?” said William Tanona, an analyst at Collins Stewart. “Will they contact the S.E.C. and say, ‘Here’s the transaction we participated in, and we’d love to know who is on the other side of it?’ ”

Among the investors were several European banks, the S.E.C. complaint said. The biggest victim was the Royal Bank of Scotland, which inherited a loss of $841 million after it took over the Dutch bank ABN Amro, which made the original investments in 2007. According to a person briefed on the matter, Royal Bank, now controlled by the British government, is studying the documents but is not yet ready to decide whether to take action to recoup some or all of the money from Goldman. Goldman faces a dilemma in its response. Wall Street firms tend to settle cases like this one, but Goldman’s statement Friday indicated it intended to dig in its heels and fight, perhaps in part to discourage suits by investors. But that strategy could set it up for a drawn-out, messy and public battle.

The S.E.C. complaint named just one Goldman employee: Fabrice Tourre, a vice president in the bank’s mortgage operation who worked on the questionable transaction. But securities lawyers say Mr. Tourre appears to be a small fish. Federal investigators may try to gain his cooperation and extend their investigation to other Goldman employees. On Friday Mr. Tourre’s lawyer did not provide a comment on the complaint. A big question is how far up this might go. The S.E.C. said the deal in its complaint had been approved by a committee at Goldman called the Mortgage Capital Committee.

“It’s typical that they’d start with someone lower down on the chain and try to exert pressure on that person,” said Bradley D. Simon of Simon & Partners, a white-collar defense lawyer in New York. “Is it really conceivable that no one else was involved in this?” As the housing market began to fracture in 2007, senior Goldman executives began overseeing the mortgage department closely, according to four former Goldman Sachs employees, who spoke on the condition of anonymity because of the sensitivity of the matter.

Senior executives routinely visited the unit. Among them were David A. Viniar, the chief financial officer; Gary D. Cohn, the president; and Pablo Salame, a sales and trading executive, these former employees said. Even Goldman’s chief executive, Lloyd C. Blankfein, got involved. Top executives met routinely with Dan Sparks, the head of the mortgage trading unit, who retired in the spring of 2008. Managers instructed several traders to sell housing-related investments. Indeed, they urged Mr. Tourre and a colleague, Jonathan Egol, to place more bets against mortgage investments, the former employees said.

A Goldman spokesman did not reply to a request for comment on these executives’ roles. It is unclear if any of the top executives knew about all of Mr. Tourre’s actions. Mr. Blankfein has already been questioned about the toxic vehicles Goldman devised and sold, even as the bank realized the housing market was in trouble. Recent public statements made by Mr. Blankfein seem to conflict with the account laid out by the S.E.C. In testimony before the Financial Crisis Inquiry Commission in January, for example, Mr. Blankfein described Goldman’s approach to dealing with its clients: “Of course, we have an obligation to fully disclose what an instrument is and to be honest in our dealings, but we are not managing somebody else’s money.”

But the S.E.C. complaint says Goldman misled investors who bought one of the bank’s so-called Abacus deals. The bank failed to tell them that the mortgage bonds that underpinned the investment had been selected by a prominent hedge fund manager who wanted to bet against the investment, the S.E.C. says. Those bonds were especially vulnerable, the commission says. The deal cost investors just over $1 billion, a relatively small deal by Wall Street standards. At a conference in New York in November, Mr. Blankfein talked about the risks to the firm’s reputation that it faced as a result of the mortgage mania and ensuing credit crisis.

“Are we worried about our image and reputation, and what are we doing to fix it? The answer, of course, is we’re very concerned about this,” Mr. Blankfein said. He added: “People understand our bona fides who deal with us.”

Who gets hurt by toxic bonds?

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RBS lost $841 million in alleged Goldman fraud through ABN Amro aqcuisition
by Philip Aldrick

Royal Bank of Scotland was the biggest victim of the alleged sub-prime mortgage fraud orchestrated by Goldman Sachs and involving hedge fund Paulson & Co. In August 2008, the part-nationalised lender paid Goldman $841m (£545m) to close its position on the single trade. According to the US Securities & Exchange Commission, "most of this money was subsequently paid to Paulson". RBS acquired the problem trade in 2007 after buying ABN Amro, the Dutch bank that ultimately proved the cause of its downfall. RBS went on to post a £24bn loss in 2008, which led to a £45.5bn taxpayer bail-out that has left the state with an 84pc stake in the bank.
Following the SEC's accusations yesterday, RBS's lawyers were examining whether there would be any action to take against Goldman to recover losses. RBS found itself bearing the bulk of the losses because ABN had written insurance against the "synthetic collateralised debt obligation (CDO)" at the centre of the alleged fraud. However, according to the SEC, Goldman convinced investors to buy a poor quality CDO in the full expectation that it would collapse. Paulson, which was shorting the product, is alleged to have selected the sub-prime mortgage assets to be referenced by the "synthetic CDO" that were most likely to default.

Goldman then sold the CDO to investors to put someone on the other side of the trade without revealing Paulson's involvement. Investors would have believed the sub-prime assets to be high quality. ACA Capital, a monoline insurer that specialised in financial products, "wrapped" a $909m tranche of the CDO. In exchange for the protection, it charged investors $4.5m a year. ACA covered its position by getting ABN to "intermediate". For a $1.5m annual fee, ABN effectively took the risk of any loss if ACA was unable to pay. ACA was put into run-off in November 2007, leaving ABN with the bill for any losses. RBS acquired ABN at roughly the same time and paid off its $841m loss position the following August.

The other principal casualty was German bank IKB. Unlike ABN, IKB's involvement was fairly straightforward. It bought $150m worth of notes in the CDO, which paid annual interest. "Within months of closing [the deal], the notes were nearly worthless," the SEC said. "IKB lost almost all of its $150m investment." In total, "investors in the CDO lost over $1bn", the SEC said. "Paulson's opposite positions yielded a profit of approximately $1bn for Paulson." Goldman denies the allegations. No charges have been brought against Paulson.

Dutch RaboBank: Merrill Committed Same Fraud as SEC Claims Goldman Did
by Chad Bray

Merrill Lynch & Co. engaged in the "same type of fraudulent conduct" that Goldman Sachs Group Inc. was accused of committing by the U.S. Securities & Exchange Commission in a lawsuit on Friday, a Dutch bank said Friday. In a letter filed in New York State Supreme Court in Manhattan on Friday, lawyers for Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank, said Merrill Lynch committed a similar fraud in the structuring of a $1.5 billion collateralized debt obligation, known as Norma CDO Ltd.

"The SEC charges bear directly on the sufficiency of Rabobank's complaint as Rabobank has alleged that Merrill Lynch engaged in precisely the same type of fraudulent conduct in the structuring and marketing of Norma through having failed to disclose that Norma's collateral pool had been selected to benefit short positions taken by" an equity investor in Norma, said Jonathan Pickhardt, a lawyer for Rabobank. Rabobank sued Merrill Lynch in New York state court last year, alleging it was owed about $45 million in a senior secured loan when the CDO defaulted and was liquidated in 2008. The Dutch bank claimed Merrill Lynch misrepresented that the CDO was carefully structured investment vehicle when Rabobank made a $57.7 million upfront loan in March 2007.

Rabobank claims the Norma CDO was a "dumping ground" impaired subprime assets and was structured with the help of a prized Merrill Lynch hedge fund client as a bet against the mortgage-backed securities market.
Merrill Lynch has asked for the Rabobank complaint to be dismissed, saying the risks inherent in Norma's assets were fully disclosed in the transaction documents and has failed to show Merrill committed fraud. "The two matters are unrelated and the claims today are not only unfounded but weren't included in the Rabobank lawsuit filed nearly a year ago," said William Halldin, a Merrill Lynch spokesman.

On Friday, the SEC sued Goldman Sachs in U.S. District Court in Manhattan, claiming the investment bank committed fraud by misstating or omitting key facts about a synthetic collateralized debt obligation tied to subprime mortgages. In part, the SEC claimed a hedge-fund firm designed the investment, but then bet against it and investors weren't told of the hedge-fund firm's role or its intentions. Goldman denied the allegations and said it would "contest them and defend the firm and its reputation." John Heine, a SEC spokesman, declined to comment late Friday on whether the regulator was investigating the Rabobank allegations.

Matt Taibbi: “I Heard Whiffs of this Story” a Year Ago

Rolling Stone’s reporter Matt Taibbi talks with Bloomberg TV’s Carol Massar where he discusses SEC’s lawsuit against Goldman Sachs (GS).

Excerpts Below: Courtesy of Bloomberg Television

On whether he’s surprised about the Goldman lawsuit:

“No it doesn’t. But you know what’s interesting is that I heard whiffs of this story going back as far as a year and you know I’m one of the harshest critics of Goldman Sachs and I actually backed off the story because I didn’t really believe it. I thought it was too outlandish. So that tells you exactly how crazy this story is coming out now.”

On the timing of the lawsuit:

“That was the first thing I thought of. That the timing of this is extremely unusual. This story has been out there for awhile. The [NEW YORK] Times first broke it really in December. So why are they doing this now? Cleary it could have been because this bill is about to hit, crucial period in Washington, this financial regulatory reform bill, maybe this, you can look at this as a shot across Wall St’s bow during that period.”

On whether there is a whistle blower:

“That is hard to say. When I read Gretchen Morgenson’s piece in December it was not all clear to me who her sources were. I think she had several of them. So I don’t think this is something where there is a single whistle blower. I think that there are a number of parties who came forward with this story.”

On how solid the SEC case is:

“Yes. I don’t think the facts are really in dispute here and I’m sure it’s not going to be difficult for them to demonstrate what took place. I think what’s probably going to be more difficult is what happens after the civil suit. I talked to a former prosecutor for the justice department this morning who said that these sort of ‘failures to disclose cases’ don’t turn into criminal cases. So, maybe Goldman ends up paying a lot of money in a fine but I would doubt anyone goes to jail over this.”

On where does Goldman go from here:

“Well this is a massive blow to Goldman Sachs because you know it’s one thing to have some sort of left leaning reporter going after them, it’s another thing to have people, you know complaining that they are bilking the government out of money during the bailout, but this is a story about Goldman ripping off their own clients and this is going to resonate loud and clear across Wall St and across their entire client base. I can’t imagine who would want to do business with this bank after they’ve learned about this story and I think it’s going to be very damaging.”

On Blankfein:

“Lloyd Blankfein is in a tough spot right now. I was thinking about this this morning. Who is less popular the Pope or Lloyd Blankfein? It’s really a race for the finish right now. You know I almost think it would be too easy for Goldman if the solution was to get rid of Lloyd Blankfein. That would probably be the easy PR response for the company to remove him but I think there needs to be a deeper examination of how this company does business.”

On whether he has heard of other firms having similar relationships:

“No. I was working on a story about Goldman at the time when I started hearing about this. And here I have to confess that I am not a financial reporter. I was coming from a place where I didn’t even know what a CDO was until a year ago. So when I first heard about this stuff, it seemed like it was too complicated for me to take on at the time and didn’t want to make a mistake on it. But I did not hear about any other firms. This was strictly a Goldman Sachs story.”

On whether Goldman culture has changed since the crisis:

“I don’t think so. I think that when Lloyd Blankfein was responding to criticism how big the bonuses were at the beginning of last year and he said ‘well performance is the ultimate narrative,’ basically meaning that that we deserve this money because we work so hard, that tells you that they still really don’t get it. They still think they actually earned all this money and I don’t see any evidence that there has been a culture change at the company.”

FDIC shuts down 8 banks on Friday; 2010 total 50
As the U.S.regulators have shut down eight banks Friday, the total number of bank failures have risen to 50 in the nation this year. According to the Federal Deposit Insurance Corporation (FDIC), the banks that faced seizure included City Bank of Lynnwood, Washington, Tamalpais Bank of San Rafael, California, First Federal Bank of North Florida of Palatka, Florida, American First Bank, of Clermont, Florida, Riverside National Bank of Florida, Butler Bank of Lowell, Massachusetts, , Lakeside Community Bank of Sterling Heights, Michigan, and Innovative Bank of Oakland, California. The FDIC, backed by the government, would insure the depositors up to $250000 per account.

TD Bank Financial Group, a sub division of TD Bank (Canada), has decided to acquire the deposits and assets of all the three Florida banks, whereas Center Bank, based in Los Angeles, would assume the deposits and assets of Tamalpais Bank. The assets of City Bank, amounting to $704.1 million, would be taken over by Whidbey Bank, Washington. FDIC was however unable to find a buyer for the Lakeside Community Bank. Thereby, its direct deposit operations like social security and veteran benefits would be acquired by the First Michigan Bank in Troy.

Banks have been closing at a rising pace as the banking industry is working through massive mortgages and real estate loans. “State regulators and the FDIC were unable to find a buyer for Lakeside Community Bank, of Sterling Heights, Michigan, which was closed and deposits paid out,” the FDIC said. Customers who have any queries about their account transactions can call the FDIC toll-free at 1-800-830-4706 or can visit the FDIC’s website at

Banks have been closing at a rising pace as the banking industry is working through massive mortgages and real estate loans. “Lenders are collapsing amid losses on residential and commercial real estate loans which pushed the FDIC’s list of “problem” banks to the highest level since 1992 in the fourth quarter”, Toronto-Dominion Chief Executive Officer Edmund Clark said. The year 2009 had witnessed around 140 bank failures in the nation, the highest since 1992, the period of loan crisis. These failures had hit FDIC’s Insurance Fund by a whopping $30 billion. Twenty five banks were seized in 2008 and three were shut down in 2007. Bank failures this year will be higher than in 2009, according to projections by FDIC Chairman Sheila Bair.


APC said...

"...(yes, there’ll be a YouTube channel)

Um, there actually is a youtube channel. :O)

Dan said...

RE: Stoneleigh & it were

Stoneleigh!! I am already working to find speaking engagements for you in Vermont and Oklahoma! Bravo, and many thanks.

Goldman!!! Oh...I mean....Goldman. :( I was chatting about GS with my wife today, and we kind of agreed that someone at the SEC is getting awfully rich on this deal. It's the classic sports point-shaving scheme. The Shadow marketeers find out for insiders at the SEC, a few weeks ago, that this thing is going down...need I say more. SHORT, and sweet.

Anyway....the common ingredient is as ever the human preponderance toward unbounding avarice. Cripes...even the ex-Woodstock hippies and the anti-establishment rockers who blew their minds with power chords and smashed Stratocasters are currently living the high life and defending their piece-of-the-pie by saying, "...why shouldn't I get mine too???..."

Greed wins out every time. Sad.

Wolf at the Door said...

I will be in NYC on those dates and would be interested in attending once you have the where and the when. How big are these affairs usually?

Book is a great idea.

bluebird said...

On 4/16/10 SEC Charges Goldman Sachs With Fraud. Is anyone else wondering why this was announced when it was? Why not on 4/23/10? As they say...timing is everything. What do they know that we don't?

Stoneleigh - Book is a great idea!

anon10 said...

High-Frequency Trading as High-Tech Robbery

Also, I have been having difficulty signing onto my google account in order to post a message on TAE. I have had to recreate the account before I can get the system to post my message.

Is anyone else experiencing the same problem?

bernie said...

Goldman = Oliver North.
Paulson Inc.= Cheney/Bush.
Throw the dogbone in the opposite direction and run like hell.

Justice under the guise of democracy will be served. Pass the beernuts as the beat goes on.

Phlogiston Água de Beber said...


Thanks, for letting me know you blew up my comment. Here's the repost.

I wonder which brilliant economist predicted this tragedy.

Kenya's flower industry has been badly hit by the cancellation of flights across Europe because of the ash cloud caused by a volcano in Iceland.

The head of the Kenya Flower Council told the BBC it was costing growers between $1.5m and $2m a day.

She said about 500 tonnes of flowers were currently being kept in cool storage at Nairobi's airport.

Flowers are the East African country's biggest export earner, accounting for about 20% of all exports.

D. Benton Smith said...

This Goldman Sachs debacle might become the precipitating event.

Certainly the elements are mounting. They gather majestically, like dark planets moving into catastrophic alignment.

Goldman's sins are manifold, their enemies legion, and their victims numerous almost beyond counting. Once the cops are finished, what's to stop these others from closing in to settle old scores and maybe score a few hundred billions in the process?

And the friends who might come to the rescue aren't really their friends at all, are they? Which will pay better in the short term: saving the GS gravy train that most of them have been riding on, or shorting the bastards to the max and then suing any survivors into oblivion?

Simultaneously, a true Black Swan event is grounding air traffic across Europe... which could easily continue for a period measured in units of geological time.

All it would take is one more really good whack, like the arrival of the long awaited Commercial Real Estate Default crisis... and that should just about wrap things up.

Oh, well. That's enough mixed metaphor for one night. Maybe I'm just feeling gloomy. Think I'll get some sleep and see if the world is still here in the morning.

ciaoant1 said...

Hi, i'm from Greece and i've been following this blog for quite some time.

I am just postng this in order to check if maybe Stoneleigh would be interested in coming to Greece for a presentantion.

Keep up the good work

zander said...

Brilliant depiction by Ratigan, clear and unequivocal.
In the fullness of time I believe this ruse will be found to have been perpetrated by multiple financial institutions in the TBTF category or otherwise.
Of course none of this should be news to readers of TAE as this topic has been covered many times in previous posts albeit without a specific point of the finger, I'm a tad underwhelmed by it all due to the foresight of this blog, Others are treating it like the discovery of the Coelacanth.
maybe time and unfolding events may change my outlook.

@ gravity

At the very least you have to imagine a grim week for the euro. airline industry. A current loss of 390 M a day should see their prices going south from the off tomorrow, whether that feeds into the larger market remains to be seen.

@ Stoneleigh

The fact that you've decided to concentrate on this blog at the expense your day job says just about evreything we need to know about you. Respect


carpe diem said...

To Anon10,

I have been having the same problem with google forever. Have to create an account each time.
Haven't figured out the solution. If you do please feel free to share it.


Unfortunately I will not be in Switzerland when you are in Europe. I will be on my way to the states. Will just miss you on both continents. Pity. Maybe on your next round. Hope you write a book and best of luck in all of your endeavors.

Cassandra said...

Re Stoneleigh's European tour -

All being well (it was cash, not ash the UK was asking for!) Stoneleigh (and possibly Ilargi too) is coming to visit us in rural Italy, we hope this will be on the weekend of July 10th.

We are in the fortunate position of being able to invite up to 12 TAE people (we currently have six spare bedrooms) to hear her talk, to share skills and cement online friendships.

We can offer accomodation free of charge for up to three days, with a kitty for food and drinks.

If anyone is interested, please let us know either directly or via the comments section on here.

The nearest airport(!)/ferry port is Ancona, we may also be able to pick up people from Fermo railway station (45mins away).

This is us:

Sei Camini

Use of the pool is mandatory :)

Hope this of interest, and will allow Stoneleigh more time with people and less time travelling.

Pete and Marina

Unknown said...

I've read TAE (and TOD) for years. At first, I was a believer, but as time passed and nothing happened, I've become skeptical. Of course, getting the timing of these events right is very hard, but my impression is that you are all wrong. I think you are victims of heavy cherry picking... Stoneleigh predicted the second leg down for a while now, and the opposite happened. Why now? And why the need for a "timely warning"? If you believe a second crash is coming, why wait to the last minute? You should already have your gold stockpile in your bunker...

Glennjeff said...

Maybe they have Frederic.

Ilargi said...


I've read TAE (and TOD) for years. At first, I was a believer, but as time passed and nothing happened, I've become skeptical. Of course, getting the timing of these events right is very hard, but my impression is that you are all wrong.

Wrong about what exactly? Have you seen the US foreclosure numbers lately? What do you feel they will mean for housing prices?

I think you are victims of heavy cherry picking... Stoneleigh predicted the second leg down for a while now, and the opposite happened. Why now? And why the need for a "timely warning"? If you believe a second crash is coming, why wait to the last minute?

Wait till the last minute? We've been warning about this for years. Stoneleigh's argument now is that people's sentiment will change about economic prospects. Unemployment and foreclosures should spur that along nicely. A few more days like Friday might as well, especially if more cases against more banks come forth.

And no, it's not that "the opposite" has happened, what happened is that governments have confiscated your future tax revenues and doled it out to hide the financial systems' debts, without doing anything to solve these debts. In other words, it's about counting down till the time the bond markets lay down reality.

You'd have to be Jim Cramer to claim the problems are over, but then again, yes, there are Jim Cramers in this world.

You should already have your gold stockpile in your bunker...

I guess you haven't read us all that attentively...


Tristram said...

I welcome Stoneleigh's renewed commitment to the project, especially the part about "warning signals, and we intend to bring them to people's attention." TAE has been repeating more or less the same story line for a year now:

-- foreclosures up; house prices will tank
-- employment down or soft
-- markets out of sync with fundamentals
-- end is near

Except that the end of the rally / bottoming / recovery has not been near. I am a long-term pessimist, but I no longer believe the end is near, or that the next leg down will come suddenly. Markets have so much upward momentum, and TPTB are so good at manipulating them, and so many powerful interests are aligned, the pseudo-recovery might go on for a long time. I suspect it will chug chug chug until it stalls (and they will talk about a pause) and then drops a little bit (and they talk about that benign ice cream metaphor double dip), and then they will pour more gas on the fire and the economy will shudder and shake and spit sparks for a while before any real plunge, which might not happen for years. Warning signs will be abundant.

At the same time, even skeptics are open (and very much appreciative) of any evidence I&S can provide that the next leg down will come soon and sudden. I can't donate right now because paypal stopped accepting credit card transactions where the source IP is in Asia and the billing address is in the USA. But next geographic opportunity, I will.

D. Benton Smith said...

Hi, Frederick.

You wrote, "but as time passed and nothing happened, I've become skeptical."

Time has indeed passed, but I sternly disagree with your assertion that nothing has happened.

Roughly half of all the money in the world has vanished so tracelessly that no one even bothers to speak longingly of its former existence.

Home prices (the bedrock of our capitalist system) continue to lurch relentlessly downward, as the freshly unemployed nuvo-poor lose not just their jobs, homes and meager savings... but the very hope of ever having them again in their lifetimes.

The Fed loans money to primary borrowers at freebie rates in an attempt to re-ignite inflation through riskless leveraged speculation (i.e. basic 'bubble-nomics'.)

China (and our many other "friends" plot ways and means to replace the dollar as the world's reserve currency... while silently vacuuming the last odd coin and ingot from the world's secreted stashes of gold and re-hiding it Lord Knows Where.

Oil production has peaked, never to rise again, through the deadly combination of both depleting resource and demand destruction.

Sinister clowns, openly supported by the Republican Party, broadcast the rhetoric of violence and racism directly into the heretofore dormant brains of their 'Tea Party', whose sole claim to sanity is that their instinctive suspicion of themselves as primary victims is basically true.

Pretty much every cash strapped government in the world is hawking bonds on the street corner as though they were the pencils and apples being offered for sale by former stock brokers after the Crash of '29 (three commodities with price in common, but value not so much so... because you can at least eat an apple or scribble a suicide note with the pencil.)

The level of public debt has risen to such absurd and incomprehensible heights that I can say with complete certainty that it will absolutely, and of utter necessity, be repudiated with extreme prejudice by those called upon to pay it back.

It is ultimately not worth a wooden nickel, because a wooden nickel is wood.

Let me end off with one final analogy.

Our financially moderated world is a runaway freight train on a fragile trestle built of money, that stretches out over the abyss that consists of the real and physical substances necessary for the support of over six billion human lives.

The engineers at the controls know that the trestle is collapsing at the CABOOSE end of the train faster than the locomotive and club car are speeding ever farther out over the abyss... but still the only solution they can conceive of is to go faster if they can.

When the trestle finally collapse under THEM, personally, then they'll know that something has happened.

Unknown said...


Drop me a line so that I have an email address for you. I'll do what I can to make it to your neck of the woods.

Unknown said...

I'll have somewhat limited internet access for the next while as I'm traveling in upstate NY, so replies to enquiries may be delayed. It's great to hear from people though, and I will get back to you all when I get the chance.

Unknown said...

D Benton Smith,

Nice to see you back :)

M said...
This comment has been removed by the author.
D. Benton Smith said...


Please have someone more literate than yourself smooth out the attempt to sass your betters.

It embarrasses me on your behalf to see you try to be snide.

If you don't like what our good hosts are doing then just say so in straight language, because in its present form your sarcasm is so juvenile and your points so pointless that your comment ain't even got no entertainment value.

Bigelow said...

“Home mortgages have fallen a negligible amount, from $10.48 trillion in 2007 to $10.26 trillion at the end of 2009. As of the end of 2009, total equity in household real estate was a paltry $6.24 trillion of which about $5.25 trillion was held in free-and-clear homes (32% of all household real estate, i.e. 32% of $16.5 trillion).

That leaves about $1 trillion--a mere 1.85% of the nation's total net worth-- of equity in the 51 million homes with mortgages.

That is staggering conclusion, for it suggests that the bottom 80% of the nation's households which own a home have virtually no inheritable wealth left in their homes. And without that equity, what foundation of wealth is left? Their 7% share of the nation's financial wealth? That is 7% of $45 trillion, or $3 trillion, including all stocks, bonds and securities in IRAs, 401K retirement funds, savings and other accounts.

That's $3 trillion held by 108 million households, compared to $32.4 trillion held by the top 5% of households (72% of $45 trillion), roughly 7 million households.

The orgy of speculation, leverage and debt incentivized by the credit/housing bubble of 2000-2006 has, in the aftermath of the bubble's bursting, destroyed most of the nation's middle-class wealth. In effect, three generations of accumulated equity was blown off in "wannabe wealthy" consumption and speculation.”
Housing and the Collapse of Upward Mobility

Bukko Boomeranger said...

Re: SEC vs. Gollum Sux -- the thinking I've seen from uber-cynics like me is that this is all sham political theatre, that GS will get off with a wrist-slap, or maybe nothing at all, after sufficient headlines have been generated proclaiming "Government gets tough on Goldman!" But reading about how Gollum has gored RBS and other powerful players gives me hope.

It matters not how the Goldscumites have defrauded average folks who thought they had retirement funds, but are now staring at a future of catfood thanks to GS, Paulson (the not-bald one) and other bankmaggots. But if Goldman has afflicted bigger players like RBS, maybe THEY will have enough clout to draw blood. These other parties do not have enough muscle to kill the squid, of course, but maybe they can lop off a tentacle or two and weaken GS enough so that it will be more easily killed in the future. One can dream, eh?

And for anyone who's wondering about Stoneleigh talks, you should know that she's quiet. I had to cup my hand around my ear to hear her when she popped up in Vancouver, and that was in a half-empty pub. Stoneleigh -- get a mike!

memphis said...

Stoneleigh said...
D Benton Smith,

Nice to see you back :)

My thought exactly.

carpe diem said...
To Anon10,

I have been having the same problem with google forever. Have to create an account each time.
Haven't figured out the solution. If you do please feel free to share it.

Try logging into your gmail account prior to posting. I've found that works for me.

Greenpa said...

Re: M

About 90% probability that this is a paid disruptor.

A much more sophisticated one than previously- he/it has gone to the trouble to either create a faked blogger blog, or hijack an abandoned one. If you look at it, there's about 2 hours worth of work needed to post all that stuff back to 2007. Dates? Oh, please. Easy hacking, so far as we can determine here.

It's intended as a purely nasty post, designed to cause many, and particularly Stoneleigh, pain.

Pain slows you down you know.

So how many people do you know- let along artists- who have time to cruise around the internet looking for places to be just purely nasty? Destructive, instead of creative?

I doubt it. About 90%.

rcg1950 said...

Ad hominim attacks on I & S for failing to time the market correctly over short time frames strikes me as rude and rather silly.

Whether the market crashes this year or next is, aside from the condition of individual fortunes, of no great significance.The fundamental truth promulgated at TAE remains in tact: that we (the vast bulk of humanity) have made our very lives dependent upon the functioning of a hyper-complex global system the continuation of which relies upon ever increasing energy flows in a world of depleting resources. Common sense tells me that such a system in inherently unstable. Adding to that the criminal abuse of this system by a financial oligarchy with no sense of responsibility to anything more than beating the next quarter's eps expectations and fattening their bonus payouts and the odds for catastrophe seem to me to rise to near certainty over a relatively short time. (5 - 10 years is barely a clock tick against the backdrop of history)

Now I know that TAE is trying to advise individuals about what steps they may personally take to help them through the impending fall. That is one of the reasons I read this blog. But, while the longer term big picture view seems to me to be completely on target, I have to remain more skeptical regarding short term (from daily to quarterly) 'prognostications' regarding the ups and downs of various financial markets. This time frame is also the realm of hucksters, spin-meisters, newsletter subscription sellers, etc. To the extent that TAE makes these kinds of calls, it opens itself up to the nastiness that drips off of people like M. If you are going to engage in short term market predictions (a legitimate activity) I would urge you keep it separate from your socio-economic critique and clearly state that this is speculation with all the requisite disclaimers (a la Charles Hugh Smith at Of Two Minds). And of course, there should never be any naked assertions or market calls without giving reasons for it at the same time, not at some unspecified later date. That said, I look forward to your expanded site and your help in navigating the treacherous times ahead.

woodsy_gardener said...

memphis said...
Try logging into your gmail account prior to posting. I've found that works for me.

I've found that previously opening my custom GoogleNews or my Blogspot blog puts my Google account identity in comment posting.

Hey, I just did it.

bluebird said...

'M' has been around for awhile, discussed painting as a craft, and other skills. I looked at 'M's blog last year, it is not recent. see TAE 10/30/09

George said...

M -

If you knew Stoneleigh at all, or had the opportunity to speak to her regarding her motivations for this road trip, you would be ashamed of yourself.

Anonymous said...


I'll try to attend your coming (?) talk in Vermont, as mentioned by Dan. We plan to be in Montpelier in late May or early June.

Here in SWFL, most so-called progressives are still mesmerized by Obama and are of the opinion that the "recession is over"! The Tea Party types who dominate the scene are too busy with their fundamentalist Christian interests and support of US militarism. The organizer of Tea Party events locally is a rabid fundamentalist Christian who has been calling for the nuking of Iran for several years.

Perhaps in the next economic downturn the local "progressives" will be more interested in your courageous and diligent work.

Thank you for all you do.

M said...
This comment has been removed by the author.
VK said...


But a case study by the US National Aeronautics and Space Administration (NASA) suggests that even tenuous volcano ash clouds can inflict serious damage to an airliner. While the damage may not necessarily threaten the immediate flight, one cruise through an invisible ash plume can run up a multimillion-dollar repair tab.

The plume in the NASA study was so thin that the flight crew had none of the cues they ordinarily might rely on – odd engine readings, the smell of smoke of sulfur in the cockpit, or even outside electrical phenomena such as St. Elmo's Fire – to alert them to a plume's presence. And they had no visual clues on the aircraft after landing to tell them they'd encountered a plume.

The case study concludes that the engines sustained enough damage that key components could well have started to fail with only another 100 hours of flying time.

Iceland's Eyjafjallajökull volcano first sent steam and ash billowing into the sky last Thursday. Since then, canceled flights to, from, and within Europe have affected millions of travelers worldwide and reportedly is costing airlines some $200 million a day.

The airlines are planning on opening up 50% of European Airspace tomorrow, which is ridiculous given the risk involved here.

Greenpa said...

Bluebird, 3:30. Good memory! I looked.

I guess I'll have to revise my percentages. It's still not impossible that this M is a hijacker; the styles of writing are not exactly the same, and the content is quite different- but, your point does change things.

Chances M is a paid disruptor: 14%
Chances M is just an , um, you know what :86%

margfh said...


I hope when you come to the midwest you'll end up somewhat close to the Chicago area.

Ilargi said...

So M, first you accuse me of saying this:

"...‘President Obama should be pushed over a cliff ‘..."

And a few hours later you destroy your own statement by quoting my exact words on the topic, which make clear I never said anything remotely like that.

I wouldn't want to have you as my lawyer. You can't seem to argue a case without stumbling over your own words. It's more an innuendo kind of thing: "I know so and so didn't really say this and this in so many words, but who says he didn't mean to say it?"

I would never urge for anyone to be pushed over a cliff, but expressing my resentment over that outrageous truth-be-damned claim of yours seems pretty futile, and the issue is no longer present anyway, since you yourself just dismantled it.

As for Obama, yes, he's singlehandedly responsible, it comes with the job description. No ifs or buts allowed. The part about him fighting for unemployment extension is quite priceless. As in empty.

As for Stoneleigh and her job, you know nothing about that situation, nor about how it could have changed over the past 6 months, so all you have is more innuendo, or in other words more nothing.

Again, I wouldn't want you as my lawyer. I'd sure love to have you as the lawyer for the other side, though.


jal said...

How come I'm not removed?

I don't agree with the details of what most everyone is proposing.

I have my own opinions. I learn from others opinions. I change my mind.

The Polish plane probably went down because some autoritative figure did not want to change his plans and absolutely wanted the pilot to land.

The air safety authorities are trying to keep every plane out of the air.
Yet! The airline companies are hurting so much that they are willing to gamble with your life, ( the passengers are being just as stupid), and take you to your destination.

If I was the airline I would take you after you signed an iron clad waiver not to hold me responsible and that you would be responsible for the repairs of the plane.


M said...
This comment has been removed by the author.
Greenpa said...

What a sad world M lives in! :-) All motives are mercenary! An interesting reflection.

As for my not commenting on various things- au contraire, poopsie.

I commented on those things long ago. I'm not one to repeat myself- what a waste of time. Particularly when one knows the people on the opposite limb are not stupid, nor malignant.

scandia said...

@'s postings from you don't sound like the you I have imagined- And as an artist I presumed you would understand that Stoneleigh needs to follow her path,listen to her own drummer, etc...
I have had the opportunity to meet Stoneleigh. I feel certain that anyone would find her highly employable in the mainstream.
Her credentials are impressive. Thing is that's not what she wants to do. She wants to warn folks and participate in community. For her and her family, for Ilargi, for all of us ,this will be what helps us survive.
I think it is fair for her to ask to have expenses covered plus a
" pourboire ".

The Q said...

Ilargi Nov 5 2008:

"Ilargi: 40 years after it assassinated a black man who was one of the bravest and most beautiful people ever to walk this earth, and 45 years after that same man spoke about a dream he had, America -and the entire world with it- has every reason to feel proud and elated: it has elected, as its next leader, a black man named Hussein. "

"M" today:

"As for your post about Obama being pushed over a cliff....

Although I feel you have a feel for the pulse of the housing industry, not so much so for other aspects of the American economic and political landscape. You read too much like Denninger and Mish to my eyes."

While I too hoped Obama would be some improvement over Cheney Bush, I could not bear to listen to more than snatches of his soul-less, perfunctory, campaign speeches. The robotic, ersatz MLKisms with all the sincerity of a high school debating club champion were intolerable.

I think many dis-illusioned progressives are forgetting that Obama represented some unrealistic hopes among many black americans?
(Even among Ilargis?)

John Day said...

@ Stoneleigh,
I'm looking forward to your visit to Austin, Texas May 12th. I've signed on as a sponsor (in a humble way).

There seems to be a lot of fuss about who said what, and timing of things being a bit off.

Timing is always a bit off, because market makers make sure it is a bit off. The Fed, Goldman, the US Treasury, the Bank For International Settlements, etc.are all in a position to calculate what others are calculating, make it be wrong, and collect on the difference, in one way or another (silver, for instance).

As far as I can see, and I have been faithfully reading since early 2008, your fundamental information and assessments have been as right-on as possible.
Keep up the Good Work.


Steve From Virginia said...

Some things never change, the way social hierarchies assemble themselves in pop culture time.

Boom, shaka- laka!

Stoneleigh's Deflationary Roadshow. Sound's like good, clean fun, it's all the best company, the Band of Cassandras. Criss- crossing the country in beat up old pickup trucks, jet skis and snowmobiles, no doubt. Staying overnights in high- end resorts with hot tubs and 24 hour room service. James Howard Kunstler, Jeff Rubin, James Hansen, Nouriel Roubini, Susan Webber (Yves Smith), Nassim Taleb, Dmitri Orlov ... you get your fifteen minutes (after Ambrose Evens- Pritchard) on Max Kieser. Or, is it Keiser?

When you get to John Stewart and meet Al Gore you've made it one step away from the big time!


Then ... your fifteen minutes (seoonds) is up. You're washed up, history, a Gloria Swanson- esque has- been. "Hit the road, Loser!"

This is American machine culture in action, reducing the message to the media, like it always does, complete with squiggly ads for Lufthansa, University of Phoenix, weight loss and 'A mom earns $7148 per month part time on the Internet!' parading around the edges.

Take away Yves Smith and Goldman Sachs and substitute thermonuclear holocaust and it's all trivial.

"Gimme a beer, Honey! World War Three is on television!"

I'm certainly more bearish than Stoneleigh now. Horrors! She's sold herelf out to the matrix. She's on her way to being a media presence like Newt Gingrich. That she cancels out James Imhof is irrelevant, that's the Matrix's girlish/boyish charm. At bottom, everything becomes the bottom.

That's okay the blandishments are hard to resist. Personally, I think it's better to be a pedophile and be less relevant and more threatening as a consequence. What are the options: have the word 'Deflation' tattooed on your ass? How do you make waves when culture is Springer? Where does one stand out/fit in?

The trivialization by the process is aimed to make every form of content pointlessly impotent. Prognostications turn into sales pitches. It's comforting in a perverse sort of way, how America can digest anything and every concept including its own immolation and make 'entertainment' out of it. The Chinese are by character incapable of this, which is why China is such a pathetic, sniveling charicature of a real country. Can you imagine a Chinese show where a Canandian holds forth on the inevitable collapse and downfall of China?

In the USA we have the ludicrous suburban Blue Period 'Avatar' pimping the end of industrialism alongside the big- budget sendup of the militaristic- fetish jock-ocracy. Bring on the dancing hunter- killer robots!

"Swish, swish, swish? Are you gay?"

Hey! One of those killer robots is currently the Governor of (broke) California. 'Quelle Incompetent' as Yves Smith might say. 'Guv' and Barack "Mr Disappointment' Obama should hold hands and jump off the cliff together. Both of them are inept killer (North Korean) robots that simply shoot themselves in the foot over and over again. Better to melt 'em down now and get it over with.

The North Korea robot reference is an inside joke.

Whaddya going to do?

A good answer is nothing. I recall George the Electrician called for the end of the real estate bubble a long time before Roubiini or Dean Baker. He had it pegged. "The American character is to crawl away from the wreckage and start somewhere else." Good call, George.

Why not be a force in being. Nobody knows who you are; nobody on the Internet knows you're a dog.

At the same time I'm glad Stoneleigh is going on tour. It suggests there is still plenty of time to unload the crap that is cluttering up the house, sell the real estate and whatnot and sit back and watch the system based on 'stupid' unwind two years from now rather than next week.

It will inevitably, no need for a publicity tour to know that.

pasttense said...

Mugabe: I am surprised the TAE principals didn't suggest alternative donation methods. For example it seems clear they can directly use currency denominated in Euros, the US dollar, the Canadian dollar and the British Pound--so simply mailing currency in these in small amounts (under $100 anyway) should work--as well as various types of international money orders.

ben said...

steve (at 2.11am) - that was a fine example of postmodern apathy, to which i recently referred VK. thanks for taking one for the team.

Ilargi said...


We do mention these methods in the page you find when clicking "Go Here to Donate by Check or Money Order", right below the Paypal Donate and Subsbcribe buttons.

The address for these forms of donations is:

N.M. Foss
PO Box 486
Stittsville, Ontario
K2S 1A6


scandia said...

The suggestion that the civil charges against Goldman are just more leverage by the gov't sickens me.Probably true.
Naive me had experienced a surge of HOPE that justice would prevail at last...
Clearly regulators/justice dept. are impotent. Looks like some energy field other than governance will have to clean up the fraud or not.

@M...I have been thinking about your comment re Stoneleigh's plans etc...I do get your suspicious response. Lots of shysters milking the crisis. Stoneleigh, however, is not one of them.
And I do agree that those of us who are not American, who live outside the US have a different take on your country. I acknowledge I have unreasonably high expectations of a US president from a life time of " best friends, best of neighbours, land of the free..."
We are all caught with our myths down so to speak.
Finally I appreciate very much your honesty and hope you will continue to contribute here on the board.

scandia said...

Clever cartoon at The Independent to-day...

ogardener said...

If the MOTU are going to break laws with impunity, then why should the proles abide by them?

scandia said...

Excellent post by Kunstler to-day, " Where's Rico?"
Nails it down good!

jal said...


Real world Volcanoe ... Goldman ...

The USA has the best computers, programs and quad boys.

The market is not following the herd.

Computers cannot be emotionally affected by the herd.

Get the details at

70% Of European Flights Expected To Be Grounded Monday

No Endives!

There are only three possible outcomes. Either the eruption continues at its current level, or it could increase in size, or it goes dormant. Two of the three possible outcomes are bad news. Absent anything else, the Base Case has to be that the damn thing continues.

Forget Eyjafjallajokull, Mt. Katla Is Now Getting Ready To Rumble
You might want to read a blog from someone in Iceland.

On Goldman, Securities Fraud, And Skepticism
If the computers were capable of reading the news they would have shut down the markets.

Greenpa said...

The Q: "While I too hoped Obama would be some improvement over Cheney Bush, I could not bear to listen to more than snatches of his soul-less, perfunctory, campaign speeches. The robotic, ersatz MLKisms with all the sincerity of a high school debating club champion were intolerable."

Ok, this one I WILL repeat, partly because this is such a lucid example.

Are humans basically herd animals? (yes)

Do we need competent leadership? (yes)

Would a competent leader know how to turn the herd? (yes)

Does the herd respond to logic? (no, duh)

Will a competent leader speak to the herd in language the herd does respond to? (yes)

Will those statement BE, or SOUND logical to minds able to see a bit beyond the herd? (HELL no)

Regardless of ultimate actions; NO competent leader is going to speak publicly with the primary intention of making good logical arguments. They all PRETEND to; but that's because the herd is under the impression that their own actions and beliefs are solidly grounded in logic. (wild laughter)

What leaders are actually saying- virtually always- in public is "Heeeya! Yaaa! Getalong little dogie!"

That is really ALL they are saying. Any clue to actual intentions is in their actions- and those are also first designed to mislead opponents.

eg the suit vs Goldamn Sacks, AND the suit against the ex pres of Blackwater, could very easily be feints, designed to calm those clamoring for accountability. With some other specific results already planned, but not announced.

A more interesting recent herd action:

Obama killed the Orion rocket program, and Bush's Cowboys On The Moon! project. Let it be known that NASA had to be cutting back.

Reaction (HIGHLY predictable): huge uproar about loss of this great Amurican project- including heavy behind the scenes pressure from corporations losing contracts and congress persons who would lose jobs. Big noise; most of it from Repuglickens, thinking "ha! big screw up on his part! great campaign issue!"

Obama reaction: hey, guys, I'm really all for space; but lets forget the dumb moon, and go for the Asteroid Belt; then Mars!!

herd reaction: mumble mumble, disorganized, lots of support for big idea- and disarmed Repugs.

And Obama gets what he wanted, I think; which is more money for NASA without having Congress squeal about spending money on this crap while we're broke, and the survival of a great Herd Distractor, always useful.

If you're going to understand herd dynamics- you really have to learn NOT to expect public events and speeches to indicate much of anything about the current herdsmen's logic. They don't.

Whooopee Tie ai yay.

Greenpa said...

Polka Dot Gallows!

Royal Navy becomes free Ferry for Whining Brits!

wow. now there's a cost effective effort.

Greenpa said...

jal said...

"Computers cannot be emotionally affected by the herd."


The computers design their own models, and choose their own inputs now???

jal said...

"The computers design their own models, and choose their own inputs now???"

Ehehe! :-)

Not quit there yet.

Until the quad boys change the inputs they go on their merry way doing what they do best ... maximize the profits.


Greenpa said...

about my own comment at 11:02; be it understood that "competent", in this scientific discussion, does not mean anything similar to "good" - merely that the leader is generally successful in managing the herd and getting what he wants. eg:

"And Obama gets what he wanted, I think; which is more money for NASA without having Congress squeal about spending money on this crap while we're broke, and the survival of a great Herd Distractor, always useful."

Forgot to mention among the "what he wants" points; lots of big NASA contracts- all let to Repug buddies- get canceled. Lots of NEW contracts, wildly different from those- are now available; to distribute among supporters.

Just the facts, ma'am.

Phlogiston Água de Beber said...

Greenpa said...

Forgot to mention among the "what he wants" points; lots of big NASA contracts- all let to Repug buddies- get canceled. Lots of NEW contracts, wildly different from those- are now available; to distribute among supporters.

Hmmm, that does have the sweet fragrance of plausibility about it. I would add, having some experience in that biz, that a lot of the costs are incurred near the backend of such projects and the backend of a mission to Mars is a long way off. So, very little impact his administration's deficits.

Ilargi said...

Greenpa, No Body,

The infallible Blogger system ate your last comments. I spent all I could on trying to get them back, but what the monster eats, it ain't givin' back.


scrofulous said...


Watch oil, the peak price of 147 dollars occurred about 60 days before the Oct. 08 plunge.
Yes, it may look like the recovery will be longer, as happened after the dot com. (in time, a little less than three years dip to peak) but I feel that the true villain of the peace, oil, cannot be gamed like finance (it takes no genius or crystal ball to have known that) and with supply even more restricted now, any recovery will run head on into that oily limit, triggering the next step in a financial 'leg down'. I imagine over a shorter period - we are over a year down that road now.

That may be enough for ilargi to disagree with for now, but, while I am here, I might say that GOLD since I first recall him despising (on the oil drum years ago) has done me no harm and as well if GATA gets it's way will be oh so much better than buying loads and loads of hand powered tools. BWAH HAHAHAHAHAH!!!

Bigelow said...

The coming famine: risks and solutions for global food security

Shale gas, OCS drilling won't solve US energy woes

Gerald Celente: Economic recovery a cover up youtube

Anonymous said...

"Ice cap thaw may awaken Icelandic volcanoes"

The Q said...

Noam Chomsky interview:

Comparisons with early Nazi Germany often seem "too easy"; Surely history cannot repeat itself that closely, that quickly?

It is disturbing to read someone with Noam Chomsky's clarity of mind saying this.

Gravity said...

Ive found some mention of that anomalous average diurnal temperature range for 11-14 sept. 2001, which was significant and undeniable according to one study, and negligible, random or nonexistent according to others.

Here's some:

Worst case in causally confirming such effects would be that the constant high intensity of contrail exhaust does actively mask the true severity of global warming, so its actually worse, in the best case it actually overstates the warming effect, possibly rendering the real temperature increase as less significant than measured, maybe even revealing some cooling lately. In eiher case, clear and repeatable empirical measurements would require the unrealistically prolonged and repeated suspension of regular airtraffic over huge areas to permit relatively isolated measurement, and conspracywise neutralising, also assuming the absense of any incidentally unquantified clandestine aerosol geoengineering programs by way of such exhausts to accurately gauge possible effects, naturally.

MiscellanyEsq said...


I recall Greenpa raising the issue of a climate change/earthquake correlation. Interesting (and not surprising) that the effects of weight redistribution from ice thaw might have a similar effect on volcanoes.

Now we know that no man can move mountains alone, but mankind apparently can.


Anonymous said...

@ Q

Thanks for the link to the Chris Hedges piece.

Noam Chomsky is right on!

Ilargi said...

News post up.

Did the SEC plant a Goldman bomb?


carpe diem said...

New ash cloud forming and heading south east. Nevertheless they are planning to open up air space.

Just another reminder that the human race has no chance. Stupidity rules.


Thanks for the link regarding melting ice. I'm quite sure that all this seismic activity around the world is not coincidental. Which reminds me. There was a program on BBC last night called 'Beautiful Minds'. Last night they interviewed and looked at the life of James Lovelock of the 'GAIA' theory. Facinating stuff - and makes sense with everything going on at present. Of course he holds out no hope either. His websight is worth a look -

And on that jolly note I bid you all goodnight.