Explore your future - intuition wired

by Dan Eden for Viewzone

I am a skeptic. I don't believe in fortune tellers or psychics. I certainly doubted that I could forsee the future. But, as I did the research for this article, I discovered that I was wrong. Everyone can see into the future and we do it all the time.

Ooop! That wasn't supposed to happen.

Our journey starts with an experiment conducted in 1976. Dr. Kornhuber asked a number of volunteers to be wired with EEG electrodes to measure their brain activity. He then asked the volunteers to flex the index finger of their right hand, suddenly and at various times of their own choosing. He wanted to measure how fast it took for the mental decision to move the finger to actually make the finger move. His results were not what he expected.

Kornhuber expected to find a sharp peak in electrical activity when the decision was consciously made, at which point he would begin timing the trials. However, what he found is remarkable, namely that there is a gradual build-up of recorded electric potential for a full second, or perhaps even up to a second and a half, before the finger is actually flexed. This seems to indicate that the conscious decision process takes over a second in order to act! Even more surprising was that the volunteers were not aware of this delay and believed they were acting spontaneously and instantly.

So what happened? Did the brain somehow "know" that the decision would be made in the future and begin planning the action?

The experiment received little attention until another experiment conducted by Dr. Libet in 1979 raised questions about our conscious perception of time and the idea of "now."

Everything "now" happened already!

Libet tested subjects who had to have brain surgery for some reason unconnected with the experiment and who consented to having electrodes placed at points in the brain, in the somatosensory cortex. He monitored the electrical activity while stimulating their skin. To his amazement it took about a half-second before the subjects were able to perceive the stimulation. Further experiments showed that this same delay - about a half second - was needed for all sensory input to reach consciousness.

The significance of this is enormous. Everything we know about the external world right now - the sounds, the sights, the feelings - are all being delayed. Everything that you think is happening right now actually happened already, about half a second ago!

So how is this possible? How do we drive cars, catch baseballs, swat flies and write or draw if it's all delayed? Well, the obvious answer is that we have adapted the ability to compensate for the delay by projecting our behavior into the future, which is really "now."

Confusing? Wait... it gets even better.

Five Seconds In The Future

Marilyn Schlitz connected volunteers to a series of monitors, similar to a lie detector, to measure their heartbeat, perspiration and other nervous activity. She then had them sit in front of a computer screen and began showing them a series of images which were selected at random by the computer from a large collection. These images were described as either "neutral" (boring) or "emotional" (erotic or morbid). As expected, the subjects showed physical and mental excitement when the "emotional" images were shown and showed less reaction to the "neutral" images. But as the experiment continued, something weird happened.

Researchers began to see that most people, unconsciously, began to react to the "emotional" images a full 5 seconds before they were selected by the computer program! What's more, they did not react to the "neutral" images. This result was statstically significant (p=0.00003) and has been repeated many times. It strongly suggests hat subjects can perceive the future.

Another study, described in the Journal of Alternative and Complementary Medicine, was reported by psychophysiologist Rollin McCraty and his colleagues from the Institute of Heartmath in Boulder Creek, California. McCraty's group simultaneously measured skin conductance, heart rate, and brainwave activity before, during, and after 26 participants viewed emotional and calm pictures. They found that both the heart (p <>

How do you feel? Here are eight pictures, some neutral and some emotional. Before you view each image, try to sense how you feel. Is the picture neutral or emotional? This isn't a real test but it will give you an idea how the actual experiment worked and felt.

FUTURE GLOBAL CONSCIOUSNESS

Five seconds isn't a long time to see into the future. It doesn't allow you to pick tomorrow's lottery number or predict the headline. But there is strong evidence that this ability to see future events may extend for several hours.

Dr. Roger Jahn from Princeton University developed a small computer (the Random Event Generator or "black box") that generated random numbers. The numbers were converted to either "1" or "0" and were recorded over various time intervals. The device was similar to flipping a coin and resulted in an equal number of "1s" and "0s."

The pattern of ones and noughts - 'heads' and 'tails' as it were - could then be printed out as a graph. The laws of chance dictate that the generators should churn out equal numbers of ones and zeros - which would be represented by a nearly flat line on the graph. Any deviation from this equal number shows up as a gently rising curve.

During the late 1970s, Jahn decided to investigate whether the power of human thought alone could interfere in some way with the machine's usual readings. He hauled strangers off the street and asked them to concentrate their minds on his number generator. In effect, he was asking them to try to make it flip more heads than tails.

It was a preposterous idea at the time. The results, however, were stunning and have never been satisfactorily explained.

Dr Nelson, also working at Princeton University, then extended Prof Jahn's work by taking random number machines to group meditations, which were very popular in America at the time. Again, the results were eyepopping. The groups were collectively able to cause dramatic shifts in the patterns of numbers.

From then on, Dr Nelson was hooked.

Using the internet, he connected up 60 random event generators from all over the world to his laboratory computer in Princeton. These ran constantly, day in day out, generating millions of different pieces of data. Most of the time, the resulting graph on his computer looked more or less like a flat line.

But then on September 6, 1997, something quite extraordinary happened: the graph shot upwards, recording a sudden and massive shift in the number sequence as his machines around the world started reporting huge deviations from the norm. The day was of historic importance for another reason, too. It was the day when over one-billion people, from all around the globe, watched the funeral of the loved Diana, Princess of Wales at Westminister Abbey.

It seems that, without making a conscious effort to focus on the "black boxes," the collective psyché of humanity was able to change the random pattern. This amazing event prompted Nelson to install the "black boxes" in 41 different countries around the globe and wire them together over the internet so that the collective results could be instantly monitored. And this is when he noted something even more extraordinary.

Something happened just prior to 9-11-2001 also!

On September 11, 2001, the normally flat line of the boxes began to peak, warning of an event of terrible proportions a full 4 hours before the first plane hit the World Trade Center! Could the collective human mind have "known" what was going to happen?

According to the researchers:

"One way to think of these startling correlations is to accept the possibility that the instruments have captured the reaction of a global consciousness beginning to form. The network was built to do just that: to see whether we could gather evidence of a communal, shared mind in which we are participants even if we don't know it.

Groups of people, including the group that is the whole world, have a place in consciousness space, and under special circumstances "they," "°" or "we" become a new presence. Based on evidence that both individuals and groups manifest something we can tentatively call a consciousness field, we hypothesized that there could be a global consciousness capable of the same thing. Pursuing the speculation, it would seem that the new, integrated mind is just beginning to be active, paying attention only to events that inspire strong coherence of attention and feeling. Perhaps the best image is an infant slowly developing awareness, but already capable of strong emotions in response to the comfort of cuddling or to the discomfort of pain."

In the last weeks of December 2004 the various "black boxes" again went crazy, showing dramatic peaks while everything seemed peaceful and calm. Just 24 hours later, an earthquake deep beneath the Indian Ocean triggered the tsunami which devastated South-East Asia, and claimed the lives of an estimated quarter of a million people. Was this another example of "future shock?"

Several other historical "emotional" events have been recorded by this method and continue to suggest that the effect is real, yet still unexplained. The boxes are now monitored and studied by the Global Consciousness Project and the results and graphs for past and present are made available to the public at the website.

What's happening right now in the world?

What color is this dot?

[It's usually green or yellow. If it changes to orange or red... something bad is going to happen!]

The colored dot above shows the current status indicator for the Global Consciousness Project. It's linked to the Global Consciousness computer. It changes to different colors depending on the results of more than 68 "black boxes" or "eggs" (as they are now called) located all over the globe and sampled many times each second. The color coding represents the level of coherence or correlation among the eggs, which is reflected in the probability of the Chisquare. The expected level is about 50%, and big shifts in either direction are notable. The GCP's formal testing looks for increased interegg correlation, which is represented here by the warm colors, orange and red. That means something's disturbing the global consciousness... possibly indicating that something bad is about to happen!

* Blue starts to fade in at 90% and above.

* Green represents about 50%

* Yellow starts fading in from green at 40%.

* Orange fades in at 15% or so.

* Red is 5% which is regarded as "significant".

* Bright red is 1%, or odds of 1 in 100.

What does this mean?

Since out nervous system is hard wired with a delay of about one half of a second, we have had to develop the ability to anticipate the future. This function is not only beneficial but vital to our survival. Hand-eye coordination and avoiding danger in the "real time" world demand that we have this ability. It is not surprising then that this ability should extend beyond a half-second, perhaps diminishing as it extends toward the future. It is also possible that this ability can be concentrated from a group or collection of human minds in way that we have not yet tested.

Spiritualists value collective prayer and meditation as an effective force to change nature or petition higher powers. Until now the ability to see the future has been considered mystical or paranormal. Now, with the recognition that this ability is innate to humanity, perhaps we can develop and refine it to make a better world and a more pleasing future for our species.

Bulls going insane

recommend to read this good research

http://www.zerohedge.com/article/americas-back

especially with this very bearish sentiment - rather extremely bullish which makes it bearish

Date	NAV Adjusted N/U Ratio
4/23/2010	1.564
4/22/2010	1.272
4/21/2010	1.162
4/20/2010	1.185
4/19/2010	1.202
4/16/2010	1.174
4/15/2010	0.856
4/14/2010	0.845
4/13/2010	0.837
4/12/2010	0.926

part 2

3. The foreclosure storm is gathering but still ignored by the market as we still have a go to hell with the reality attitude by the performance driven trap the manipulators have fabricated. 1.1 mio foreclosures executed and close to 5 mio 60 days behind ( make the math 5 mio with a minimum average 1000 Dollar per month payment behind matches 5 billion per month which will explain part of the consumer purchases adding up to 60 bil per year). These are new records and add up to the losses banks will have to write down by a multiple factor of those 60 bil as the market value of the house or condo will rather be down by 4-5 times that amount plus CRE losses - hence we are talking 500 bil in losses banks have to absorb. ın Europe that will be burdened with huge sovereign bond losses with Greece just a warm up as Italy and other PIIGS are at the brink to follow swiftly.

From The Daily Capitalist

In a piece from the Wall Street Journal on Saturday, LPS Applied Analytics estimated that foreclosures would create so much market supply that it would take 103 months to liquidate it.

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years.

The HAMP (Home Affordable Modification Program) program started by the Obama Administration is trying to modify loans so that lenders will not foreclose:

According to Goldman Sachs, HAMP started less than 80,000 trial modifications in March, less than half the number in the peak month of October 2009. At the same time, a growing number of modifications are being canceled as borrowers prove unable to pay. By Goldman’s count, about 68,000 were canceled in March.

All this means that little can stop banks’ inventory of distressed homes from growing. Too many people owe too much more on their homes than they can afford. For the housing market, that could mean a long-lasting hangover.

4. One of my favorite sentiment instruments are the ISEE MAs who can max out to 150 levels for the 10 and even 20 day MA but such levels would rather mark ultimate turning points for 30-50 percent declines. which might not happen right away as the manipulators want to unload their hundreds of billions to the public which is called distribution and will take months to accomplish but for now around the 200 week MA of the SPX at 1220 we should enter a correction mode with a 1050 target max. to the downside. only an attack of Israel on Iran would alter that scenario but ı doubt they do that before the mid term elections since that would jeopardize the whole bull-campaign manipulation

Time Calls Puts Total ISEE 12:10 306599 176037 482636 174 11:50 289011 153897 442908 188 11:30 270123 136039 406162 199 11:10 245090 114191 359281 215 10:50 197054 103776 300830 190 10:30 154647 92654 247301 167 10:10 128936 78239 207175 165 09:50 74875 54266 129141 138	All Equities Only Calls Puts Total ISEE 249067 102839 351906 242 234579 91426 326005 257 218241 82234 300475 265 199359 62717 262076 318 163364 56024 219388 292 124184 47576 171760 261 103521 39515 143036 262 58045 24391 82436 238	All Indices & ETFs Only Calls Puts Total ISEE 57468 73173 130641 79 54390 62446 116836 87 51852 53781 105633 96 45701 51451 97152 89 33660 47729 81389 71 30445 45061 75506 68 25397 38707 64104 66 16817 29860 46677 56
Note: All times are 24-hour Eastern Standard Time
Historical
ISEE Date Previous Trading Day 144 04/23/2010 10-Day Moving Average 136 04/12/2010 - 04/23/2010 20-Day Moving Average 134 03/26/2010 - 04/23/2010 50-Day Moving Average 125 02/11/2010 - 04/23/2010 52-Week High 185 04/15/2010 52-Week Low 67 01/26/2010

Must read -Goldman 'playing' the mortgage market

The below presented evidence shows also how crucial it was for Goldman to get a 100% payout on the AIG CDS bets it had made and or placed through Deutsche and SOCGEN which it unloaded parts of its positions on with the hedges placed at AIG to cover up strategy. Therefor it was crucial that Secretary Paulson ex Goldman CEO got that done which he did since the counterpart risk was the only base Goldman could not cover on its own and the only way was to hook up taxpayers for that.

excellent research from zerohedge

A Detailed Look At Goldman's Mortgage Trading Strategy In Late 2006 And 2007; The Goldman "Directive"

One of the key topics over the next week will be just what was Goldman's exposure to the mortgage industry in 2006 and 2007, and was the firm actively short mortgage exposure or was it merely, as it claims, just a market maker without any active positions on its prop desk. Courtesy of Carl Levin's recently declassified Goldman emails and presentations we get an extensive glimpse into Goldman's net exposure, its DV01, its counterparties, as well as how the firm was planning on interfering with the market when it needed liquidity to offload legacy positions. We also get a rare glimpse into the contributions from Tourre's mentor, Jonathan Egol. Let's dig in.

The first question of whether the firm was short mortgages is answered clearly and definitely by the following table included in its September 17, 2007 presentation to the Goldman Sachs Board of Directors, updating the firm on its Residential Mortgage Business. The table is particularly useful because it provides a snapshot of the firm's risk exposure to mortgages on November 11, 2006, long before Abacus was conceived. It also shows the firm's bias on the mortgage crisis from a prop trading perspective.

The implications of the data in the table above are obvious, but first, here is the commentary associated with the DV01, with a focus on Goldman's VaR change between Q4 2006 and Q1 2007.

Daily Mortgage VaR increased from $13 mm to $85 mm between 11/24/06 and 2/23/08 largely driven by an increase in SPG [Structured Products Group] Trading desk. The risk increase in SPG Trading desk was primarily driven by a combination of increased volatility in ABX market and the desk increasing their net short in RMBS subprime sector.

Translation: the firm's SPG prop trading desk (no, not its client facing flow exposure, its prop operations) which likely held the bulk of prop capital around the end of 2006 and beginning of 2007, was already net short, and only got net shorter in the three months from November 2006 (before Abacus) into February 2007 (around the time Abacus was being marketed and the term sheet was being concluded).

As the first table indicates, Goldman Sachs' associated DV01 with mortgage exposure was net short by just over $1 million per basis point change, that number nearly tripled to a $2.8 million DV01 by the end of February 2007. So much for Goldman being confused about whether it is long or short the mortgage market.

Another way to visualize this is the firm's disclosed Daily VaR, which also exploded over the period in question. This can be seen on the table below:

Translation: Goldman went against the grain, and in a time when everyone was trying to at least superficially reduce their risk exposure by going with the flow, Goldman took a risky bet (and yes, they had already done so in November 2006 if not sooner), and increased their mortgage VaR from 13 to 85 in three short months.

And the way they did it was by going all in: whereas previously the firm had been hedging its exposure in mortgage by holding on to a long credit position in the BBB- tranche of the ABX index in November, soon thereafter, the firm rotated its exposure drastically by boosting both its single name mortgage exposure in lower rated tranches (A and below), while covering some of its senior and supersenior ABX tranches (AAA DV01 went down from short $816,000 to just $11,000). However, the BBB- long credit position was whacked massively, and DV01 declined from $1.8 million to just $479,000. As Goldman itself describes it:

SPG Trading desk started the off the quarter with long ABX "BBB-" risk to the tune of $1.8 mm/bp, hedged with "AAA/A" rated ABX indices and single name CDS. Over the quarter, desk reduced its long ABX "BBB-" risk by $1.3 mm/bp and increased their single name CDS hedges.

Bottom line: Goldman was very much net short mortgages in November 2006 (it would make $1 million for every bp change lower in absolute terms), and went all in to over $2.8 million by the end of February 2007. This should end all discussions on how the firm was positioned around the time the Abacus was being constructed and marketed.

What happened next: in order to determine the firm's mortgage exposure between early 2007 (March) and late in the year (late August), we use the following table which points out that March 2007 was in fact the time the firm had the highest net short exposure in mortgage securities (cash, derivative and structured), and as everyone else was gradually becoming bearish on housing, Goldman in fact became much more bullish. An email from Richard Ruzika from March 14, 2007 captures the prevailing mood: "Four weeks ago you couldn't find a bear in the market period. Now it feels like its all doom and gloom as the longs get out." Indeed, everyone who was nimble, was scrambling to go short.

As the table below indicates, the bulk of Goldman's bet on mortgages can be seen in its "Residential Mortgages" and "Structured Products Trading" verticals. Needless to say again, these are pure prop exposures, and have nothing to do with market making: the firm was actively betting one way or another on its view of housing. As the table below shows, Goldman went from a net short ABX position of $5 billion in Res Mortgages, and $7.7 billion short in RMBS CDS ($3.5), CDO CDS ($2.0) (hello AIG), and $2.2 billion ABX, for total $12.7 billion net short (not apple to apples) in March 2007, to $1.8 billion short ABX and $0.3 billion short RMBS CDS in Res Mortgages, and $4.9 billion RMBS and $3.3 billion CDO CDS (at this point the firm was using AIG as the dumbest people in the room to buy protection on RMBS and CDOs, even as other banks were starting to finally derisk). Concurrently, the long side in Structured Products Trading was ballooning, going from $5.6 billion to $8 billion, with the bulk of the difference occurring due to a shift of ABX, moving from a short to a long position ($3.6 Bn). Also, the firm was consistently long Cash CDO and RMBS, hedging it by being short matched CDS. Oddly, in the 6 month interval, the firm had managed to accumulate an additional $1.5 billion in cash CDO exposure, presumably because it was unable to offload origination. As a result, it had to buy protection more and more from idiots like AIG and anyone else who would sell it protection (more on this later).

Was the strategy successful? Certainly, as we can see from the following annual and quarterly revenue breakdown of Goldman's mortgage business.

In summary, Goldman was making money from mortgages all along 2007: Lloyd's disingenuous defense of his profitability, as seen in an email from November 18, 2007, is hilarious. "Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts. Also, it's not over, so who knows how it will turn out ultimately." Lloyd's statement would be completely acceptable if he was, as he obviously thought, dealing with idiots: indeed the gross long book tumbled, however the net hedge book more than made up for the gross exposure. To say that the firm lost money because of one or two, we dumb this down for the benefit of Steve Liesman and Jim Cramer, long positions, even as it made more than double on the hedging shorts is an insult to the intellect of anyone who still listens to these people.

Yet Lloyd was more prophetic than even he could imagine with his last sentence. The problem was that even Goldman did not anticipate just how bad it was about to get. Recall, the firm was rerisking in Q3 and likely onward. The problem is that even Goldman did not anticipate that in 6 short months Bear Stearns was implode to be followed by Lehman. The collapse in the housing market would be untenable even for Goldman, whose traders had explicit orders from Winkelreid and Cohn to minimize their trading exposure. Had the government not stepped in, Goldman would have been toast - no question about it.

Another good perspective on Goldman's thinking from March 2007 is the following email from Dan Sparks, which in addition to everything else, provides a unique glimpse into how terrified of a blocked CDO pipeline Goldman was at the time (this is concurrent with Abacus):

Aside from counterparty risks [a topic all to its own: Goldman was actively shorting all firms it knew had mortgage exposure, we presume using CDS: AIG, Bear and Lehman most certainly at the fore - in fact we have discussed why we believe Goldman's profit on its AIG CDS position should be investigated for insider trading by the SEC], the large risks I worry about are listed below:

(1) CDO and Residential loan securitization stoppage - either via buyer strike or dramatic rating agency change.

On the CDO front, we have been locking people at various parts of the capital structure (with a primary focus on the super-seniors top 50% of the deal), and rushing to get deals rated. We have liquidated a few deals and could liquidate a couple more, and we are not adding risk (we had slowed down our business dramatically in the past 4 months). Our deals break down into 2 $1BB CDOs of A-CDOs (most risky, but good progress), 2 $1BB AA- diversified deals (less downside, less progress), and 4 other various smaller deals [Abacus is certainly one of these]. We have various risk sharing arrangements [hello John Paulson], but deal unwinds are very painful....

(3) Covering our shorts. We have longs against them, but we are still net short.

$4 BB single name subprime split evenly between A, BBB, BBB- and $1.3BB of A-rated CDOs.

ABX index - overall the department has significant shorts against loan books and the CDO warehouse. The bulk of these shorts ($9BB) are on the AAA index, so the downside is limited as the index trades at 99.

Our shorts in (3) above have provided significant protection so far, and should be helpful for (1) and (2) in very bad times. However, there is real risk that in medium moves we get hurt in all 3 areas.

Therefore, we are trying to close everything down, but stay on the short side. But it takes time as liquidity is tough. And we will likely do some other things like buying puts on companies with exposure to mortgages.

Ah yes, buying puts, or buying protection, on companies like AIG. No, shorting mortgages directly was not enough for Goldman, it took the derivative play as well, of shorting anyone else who was stupid enough to be long mortgages, using its impressive flow book as the basis of knowing who was trading what.

And here is how Goldman compared itself vis-a-vis other players in the business:

Goldman was fully aware its key financial competitors were axed massively the wrong way, even as it was gloating its net short exposure. This was certainly the case as of November 2, 2007. We are confident that it had been the case all along.

And while its competitors is one thing, for the first time we also get a unique glimpse of how Goldman was trading on the opposite side of its key clients: MS Prop, Peloton, BSAM, ACA and Harvard (where Larry Summers was teaching courses on the benefits of monopolies in communist societies). Enter Jonathan Egol.

In February 21, 2007 email from Jonathan Egol who at that time was likely busy cultivating the Paulson relationship, we read the following. Incidentally, the subject of the email is: "Block size tranche protection for Paulson or others"

Summary of ABX-related tranches we could offer protection on if we want to close down shorts:

• $2.4bn notional 40-100 super senior tranche off of ABX "Quadrant" trade (25% each of 06-1/06-2 BBB and BBB-), could potentially offer NC4 [non-call 4] (we did $1.8bn NC3 with MS Prop and $600mm NC4 with Peloton)
• $200mm notional 20-30 tranche off of 06-1 BBB- (open risk vs ACA w/CIBC intermediation, NC5)
• $500mm notional 40-100 super senior tranche off of 06-1/06-2 BBB- (open risk vs Harvard, non-callable)

We are currently managing ABX deltas against all of these tranches.

In other words, Egol, like every other fastidious banker, knew full well who the firm had bought protection from, in this case on ABX, but on virtually all other single name, and index products too. It would therefore know who to wring when the market ripped in either direction, and who to demand accelerated margin calls from. Too bad for the firms named above: Peloton, MS Prop, Harvard and, oops, ACA. These were counterparties that were facing Goldman on its short trades. That ACA had been selling protection on ABX 20-30 before February 2007 does not lead much credibility to the CNBC promoted thesis that ACA was fully aware of the troubles in the housing market.

Yet what is the essence of this email? Just prior to February 21 Goldman decided to cover their shorts en masse (they would subsequently reshort again. This was the profit taking trade). And here is where we get what in our opinion is the most incriminating email from Dan Sparks, which details just how Goldman mobilizes its troops when it is profit-taking time:

Thursday.

We need to buy back $1 billion single names and $2 billion of the stuff below - today. [referring to the Egol email] I know this sounds huge, but you can do it - spend bid/offer, pay through the market, whatever to get it done. It is a great time to do it - bad news on HPA, originators pulling out, recent upticks in unemployment, originator pain...I will not want us to trade property derivatives until we get much closer to home as it will be a significant distraction from our goal.

This is a time to just do it, show respect for risk, and show the ability to listen and execute firm directives.

You call the trade right, now monetize a lof of it.

You guys are doing really well.

The guys in question are Josh Birnbaum, Michael Swenson, and David Lehman. Birnbaum and Swenson are largely acknowledged as being the guys responsible for the firm's $4 billion in mortgage-related profits:

Mr. Swenson, known as Swenny on the trading desk, is a former Williams College hockey player with four children and an acid wit. A veteran trader of asset-backed securities, he joined Goldman in 2000. In late 2005, he helped persuade Mr. Birnbaum, a Goldman veteran, to join the group. Mr. Birnbaum had developed and traded a new security tied to mortgage rates.

Mr. Swenson and Mr. Sparks, then No. 2 in the mortgage department, wanted Mr. Birnbaum to try his hand at trading related to the first ABX index, which was scheduled to launch in January 2006. Because securities backed by subprime mortgages trade privately and infrequently, their values are hard to determine. The ABX family of indexes was designed to reflect their values based on instruments called credit-default swaps. These swaps, in essence, are insurance contracts that pay out if the securities backed by subprime mortgages decline in value. Such swaps trade more actively, with their values rising and falling based on market sentiments about subprime default risk.

Messrs. Swenson and Sparks told Mr. Birnbaum the ABX was going to be a hot product, according to people with knowledge of their pitch.

They were right. On the first day of trading, Goldman netted $1 million in trading profits, people familiar with the matter say. But the index was tough to trade. In comparison to huge markets like Treasury bonds, there wasn't much buying and selling. That meant that Mr. Swenson's team nearly always had to use Goldman's capital to complete trades for clients looking to buy or sell.

Ah yes, so much for the "market making" defense.

What is most notable is learning just how Goldman goes about scrambling when a "firm directive" is at stake: show no mercy when executing, regardless of how many clients get destroyed in the process. Another firm that suffered the wrath of Goldman's directive to fill trading axes as required by the executive team: Stanfield. Note the following exchange between Dan Sparks, Tom Montag and Lloyd Blankfein.

Ah yes, the Goldman trader "development" approach: kill, maim and extort. Good client, bad client - no matter. Money must be made when a "firm directive" is at stake.

There is much more, but here are the key observations:

• Goldman was net short housing all the way back in November 2006, when it had a DV01 of ($1) million.
• Goldman was already covering its shorts for the first time in February and March 2007, when the HSBC and New Century news were only just getting everyone else's attention.
• Jonathan Egol and his traders were actively looking for dumb money on which to offload "Paulson" like open axes. Alternatively, if the firm needed to cover shorts, they knew who had sold protection and could be persuaded to covering losing positions.
• "A firm directive" had emerged in February to cover short positions. Surely a directive had originated these short positions in the first place. For Lloyd to claim the firm was still long mortgages in early 2007 is disingenuous.
• Goldman was shorting not just mortgages and subprime, but all entities who it knew had exposure. This includes Merrill, Citi and UBS.
• Goldman would increase its net long housing exposure going into H2 2007. The firm thought the worst was over. It wasn't. Goldman had nearly $8 billion in RMBS and CDO CDS with firms like AIG who would get annihilated when the eye of the hurricane finally passed. While the firm had bet correctly, it was so far ahead of its time, all its negative counterparty bets would have been worthless had these same counterparties not been bailed out.
• Goldman is a monopoly.
• Goldman always wins.

Bloomberg is a propaganda machine and part of the cabal

In the following article confusion is created ans statistics are massaged so the pathetic bull drum argument forced out that markets are even cheap. First of all the earnings of now are not comparable to the ones of 2007 anymore since the accounting standards have been changed actually in a criminal way. Marking to the market has been canceled and Banks can legally cheat now who generate around 25% of all earnings in the SPX. If Bloomberg lived up to the minimum standard of journalism they could not dare to write such a bullshit story.
The basis of all earnings is a healthy economy with a sound and prudent government otherwise just creating another bubble in criminal intend misleading investors who rely on informations since 401 accounts are not speculation vehicles but that is what the Obama admin is turning this whole thing into a huge ponzi scheme rib off operation. The difference between Greece and America is that USA can run its own printing machine and the critical mass to force China and Arabs to finance their debt since they are (were) their biggest customers ( China makes in the meantime more trade with EU). Basically both are bankrupt but the printing press is the crucial drug which does not put America into the emergency room yet.
The earnings out up to now were the 'goodie' part with the big Wallstreet cheaters who also stole money from taypayers with the help of the FED but that is a limited robbery as the tolerance will end with the midterm elections on the one hand. The other hand is that the hidden model of Mainstreet aid program of not paid mortgages of up to 200 bil which temporarily increased the consumer spending facility can not survive for much longer as banks will us the tax threshold they owe due to the presents from the FED gives them incentives to write off faster than last year as they were making losses to clean off balance cheats. since the upcoming financial regulation will to some degree reduce that potential. these is not good news for regular corporations except the special situations like APPLE or INTEL who have a boom due out of the order reasons.
Comparing fictive PEs of 2011 earnings in April 2010 is close to buying lottery tickets in this overall situation and conparing it to the 90ies is moron-cly stupid to say the least as we are in best case in the situation of the 70ies and worst case 30ies are rather my observations. Markets can still carry on their insane path though to push prices even higher - that has happened before and that the market is always right only refers to your position not that the state of the economy is where it is supposed to be according to fundamentals - which you can read about in the great research in belows link from Jeremy Granthan

http://www.zerohedge.com/article/jeremy-grantham-playing-fire-possible-race-old-highs

excerpt

U.S. Stocks Cheapest Since 1990 on Analyst Estimates

By Lynn Thomasson, Whitney Kisling and Rita Nazareth

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

Earnings estimates for Standard & Poor’s 500 Index companies from Apple Inc. to Intel Corp. and CSX Corp. climbed 9.1 percent on average in April, twice the gain in their prices and the largest monthly increase since at least 2006, data compiled by Bloomberg show. The benchmark gauge for American equities is trading at 14.2 times forecasts for its companies’ profits, lower than any time since 1990, except for the six months after Lehman Brothers Holdings Inc. collapsed.

Income is beating analysts’ estimates by 22 percent in the first quarter, making investors even more bullish that the rally will continue after the index climbed 80 percent since March 2009. While bears say the economy’s recovery is too weak for earnings to keep up the momentum, Fisher Investments and BlackRock Inc. are snapping up companies whose results are most tied to economic expansion.

“The stock market is incredibly inexpensive,” said Kevin Rendino, who manages $11 billion in Plainsboro, New Jersey, for BlackRock, the world’s largest asset manager. “I don’t know how the bears can argue against how well corporations are doing.”

S&P 500 companies may earn $85.96 a share in the next year, according to data from equity analysts compiled by Bloomberg. That compares with the index’s record combined profits of $89.93 a share from the prior 12 months in September 2007, when the S&P 500 was 19 percent higher than today.

Record Pace

The earnings upgrades come as income beats Wall Street estimates at the fastest rate ever for the third time in four quarters. More than 80 percent of the 173 companies in the S&P 500 that reported results have topped estimates, compared with 79.5 percent in the third quarter and 72.3 percent in the three- month period before that, Bloomberg data show.

Futures on the S&P 500 rose 0.1 percent to 1,214 as of 5:22 a.m. in New York. The gauge increased 2.1 percent last week to 1,217.28 as new-home sales surged the most since 1963, recovering from the April 16 rout when the Securities and Exchange Commission said it was suing New York-based Goldman Sachs Group Inc. for fraud. The index is up 9.2 percent for 2010, the largest gain in the world’s 15 biggest equity markets, Bloomberg data show.

While analysts are raising estimates, they’re not boosting investment ratings. Companies ranked “buy” make up 30 percent of all U.S. equities, the data show. That compares with 45 percent in September 2007, a month before the S&P 500 reached its record high of 1,565.15 and began a 17-month plunge that erased $11 trillion from the value U.S. shares.

Easier to Adjust

“It’s been easier for analysts to adjust their earnings estimates than to aggressively put forth strong ‘buy’ recommendations,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “It may be a reflection of concern about the resilience of earnings in 2011 and beyond.”

Companies are losing the benefit of a weaker dollar after the currency appreciated 9.5 percent since November against a basket of six trading partners, according to the Dollar Index from Atlanta-based IntercontinentalExchange Inc. A rising currency cuts demand for American exports and reduces overseas revenue when converted back to dollars.

Abercrombie & Fitch Co., the New Albany, Ohio-based teen retailer, warned the rally may weaken its profitability, according to a March 10 conference call. Westport, Connecticut- based Terex Corp., the world’s third-biggest maker of construction equipment, said in an April 21 earnings release that currency swings may reduce revenue. Terex got 75 percent of 2009 sales outside the U.S., Bloomberg data show.

Alternate Valuation

David Rosenberg, chief economist of Gluskin Sheff & Associates Inc., says U.S. stocks are poised for losses because they’ve become too expensive. The S&P 500 is valued at 22.1 times annual earnings from the past 10 years, according to inflation-adjusted data since 1871 tracked by Yale University Professor Robert Shiller.

Economic growth will slow and stocks retreat as governments around the world reduce spending after supporting their economies through the worst recession since the 1930s, said Komal Sri-Kumar, who helps manage more than $100 billion as chief global strategist at TCW Group Inc. The U.S. budget shortfall may reach $1.6 trillion in the fiscal year ending Sept. 30, according to figures from the Washington-based Treasury Department.

“The correction is going to come,” Sri-Kumar said in an interview with Bloomberg Television in New York on April 21. “You now have a debt bubble growing in the sovereign side, and we’re slow to recognize how negative that could be.”

Deficit Spending

The European Union deficit tripled to 6.3 percent of gross domestic product last year, from 2 percent in 2008, the EU’s Luxembourg-based statistics office said on April 22. Moody’s Investors Service cut Greece’s credit rating the same day on concern its debt load will be higher and more costly than previously estimated, spurring a drop of 1.1 percent in the Stoxx Europe 600 Index.

The S&P 500 posted a 0.2 percent gain that day after initially falling 1.3 percent, helped by an advance in PNC Financial Services Group Inc. The fifth-largest U.S. bank by deposits said profit rose 28 percent on higher net interest income and less reserves for bad loans.

PNC, based in Pittsburgh, is one of 38 financial services companies in the S&P 500 reporting an average first-quarter earnings increase of 175 percent after banks and brokerages racked up $1.78 trillion of losses and writedowns linked to the collapse of the U.S. subprime mortgage market.

Mobile Devices

Intel, the world’s biggest semiconductor maker, spurred the S&P 500’s biggest rally in a month after reporting earnings on April 13 that topped Wall Street estimates and predicted data centers and the shift to mobile devices will drive growth. The results prompted at least 20 of the 31 firms covering the Santa Clara, California-based company to raise their 2010 forecasts.

Analysts lifted the average 2010 prediction by 10 percent to $1.88 a share, Bloomberg data show. Intel trades at 12.8 times projected annual income, about half the average using trailing profits since 1991. The shares are up 18 percent in 2010, the Dow Jones Industrial Average’s eighth-biggest gain.

Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from a year earlier, when the recession dragged down shipments almost 7 percent -- the worst performance since 2001, according to market research firm IDC.

Concerns Are Past

“We’re in a time period where the concerns we had in 2007 and 2008 have been taken care of or are past,” Kenneth Fisher, who oversees about $40 billion as chairman of Fisher Investments in Woodside, California, said in a April 20 Bloomberg Television interview. “If you’re waiting for a market pullback or individual stock pullbacks, you could be waiting a long time.”

CSX, the third-largest U.S. railroad, rallied the most in two months on April 14 after saying it hauled more goods and charged more for each carload. Analysts say the Jacksonville, Florida-based company will earn $3.48 a share in 2010, a 6.2 percent increase since the firm released quarterly results.

Profit estimates for energy producers and industrial companies have climbed more than 10 percent in the past month, the most among the 10 largest groups in the S&P 500, data compiled by Bloomberg show. Gross domestic product in the U.S. is forecast to increase 3 percent this year and 2.95 percent in 2011 after contracting 2.4 percent last year, according to the median estimates of 64 economists surveyed by Bloomberg.

Apple Earnings

Apple’s profit almost doubled last quarter as consumers snapped up iPhones and Macintosh personal computers, the Cupertino, California-based company said on April 20. The results sent its stock up 9.5 percent to an all-time high of $270.83 last week and boosted projections for annual income by 7.7 percent to $13 a share.

Apple, the third-biggest company in the U.S., with a market value of $246.4 billion, is 30 percent cheaper than the average of the past five years with a multiple of 20.8 times estimated 2010 profit, Bloomberg data show.

U.S. retail sales increased 1.6 percent in March, more than anticipated and the biggest gain in four months, according to figures from the Commerce Department issued April 14 in Washington. Consumer spending and manufacturing helped the economy expand across most of the U.S. in March, according to the Federal Reserve’s Beige Book of regional economic activity issued April 14.

The S&P 500 rallied 92 percent in the five years after reaching a valuation in November 1990 of 14.1 times profit, about the multiple indicated by earnings forecasts for next year, according to Bloomberg data. The index last traded that cheaply in June 2009, near the start of the biggest rally in seven decades and nine months after New York-based Lehman filed the world’s biggest bankruptcy.

“The earnings story is very supportive of the market even after the rally over the last year,” said Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., which oversees $1.4 trillion in client assets from San Francisco. “The recovery is real, it’s V-shaped and it’s got legs.”

Brainstorming Monday - part 1

Warren Buffett does exactely what Wallstreet is blamed to do lobbying against financial reforms as they will harm him (and Wallstreet) severely carrying a 63 bil portfolio of derivatives. The evil part is it proves that is talk does not match his walk since the rollback he looks for is what he criticized about Wallstreet.

excerpt

Berkshire Presses Lawmakers to Roll Back Proposed Curbs, Avoiding Potential Hit

WASHINGTON—Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives.

Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say.

Associated Press

Warren Buffett

Sunday night's deal, hammered out by Senate Banking Chairman Chris Dodd (D., Conn.) and Senate Agriculture Chairwoman Blanche Lincoln (D., Ark.) reflects the populist, anti-bank sentiments simmering on Capitol Hill. A Senate Democratic official said the two have "worked out a deal," which is expected to be folded into a broader Democratic measure that revamps the U.S. system of financial regulation in the wake of the catastrophic financial collapse that occurred in 2008. The agreement includes a proposal that could force banks to spin off their lucrative derivative trading operations, reshaping Wall Street.

The fate of Berkshire's effort to influence the legislation remains uncertain. Senate officials said Sunday night that most of the details of the agreement haven't yet been finalized.

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."

The White House has been trying to kill the Berkshire provision on the grounds that it would weaken the government's ability to regulate the enormous market for derivatives. Berkshire Hathaway argued that it shouldn't be made to redo existing contracts and that it is already healthy enough to cover its obligations. The battle over the provision shows how lobbying by businesses and lawmakers to insert just a few words into a complex bill can have a major impact on the country's biggest companies.

2. Goldman and Tourre mails pretty much confirm their criminal agenda and some excellent research from zerohedge posted later today proves that Goldman executives are lying bluntly about their risk exposure or overall trading strategy involving their clients. The point is how much justice can we expect from a government who does exactly the same.

excerpt

Goldman’s Tourre E-Mail Describes ‘’ Derivatives

• STORY
• PHOTO
• VIDEO
• 
  

Goldman’s Tourre E-Mail Describes ‘Frankenstein’ Derivatives

Share Business ExchangeTwitterFacebook| Email | Print | A A A

By Christine Harper

April 25 (Bloomberg) -- Fabrice Tourre, a Goldman Sachs Group Inc. executive director facing a fraud lawsuit in the sale of a mortgage-linked investment, said an index that facilitated derivatives trading in the market was “like Frankenstein.”

The so-called ABX index is “the type of thing which you invent telling yourself: ‘Well, what if we created a ‘thing,’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?’” Tourre said in a Jan. 29, 2007, e-mail released yesterday by Goldman Sachs. Watching the index fall is “a little like Frankenstein turning against his own inventor.”

Goldman Sachs, the most profitable securities firm in Wall Street history, released more than 70 pages of e-mail and other documents yesterday ahead of a U.S. Senate subcommittee hearing on the firm’s actions throughout the mortgage meltdown. The firm disputes the U.S. Securities and Exchange Commission’s claim that Goldman Sachs and Tourre, now 31, misled investors in a 2007 collateralized debt obligation about the role played by hedge fund Paulson & Co., which bet the CDO would collapse.

The ABX index enabled investors to trade derivatives known as credit default swaps on different portions of the subprime mortgage market without actually owning loans or securities.

Widows and Orphans

In a March 7, 2007, e-mail Tourre describes the U.S. subprime mortgage market as “not too brilliant” and says that “according to Sparks,” an apparent reference to Daniel Sparks who ran Goldman Sachs’s mortgage business at the time, “that business is totally dead, and the poor little subprime borrowers will not last too long!!!”

The timing of the e-mails overlaps with his work on the Abacus 2007-AC1 bond that is at the center of the SEC’s lawsuit. The Abacus deal was sold to IKB Deutsche Industriebank AG and ACA Management LLC between January and April 2007.

A few months later, a June 13, 2007, e-mail shows Tourre claiming, “I’ve managed to sell a few Abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore synthetic ABS CDO2,” using short-hand for asset- backed collateralized debt obligations squared, or CDOs made up of tranches of CDOs containing asset-backed securities.

Pamela Chepiga, an attorney at Allen & Overy LLP in New York who represents Tourre, didn’t reply to a voicemail seeking comment.

‘Trigger the Crisis’

Tourre and Sparks are among seven current and former Goldman Sachs executives who are scheduled to face questioning by the Senate’s Permanent Subcommittee on Investigations, led by Michigan Democrat Carl Levin, on April 27. Levin, 75, issued a statement yesterday saying his panel’s investigation shows that Goldman Sachs and other investment banks “were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis.”

One of Goldman Sachs’s legal advisers is K. Lee Blalack II, a partner at the law firm of O’Melveny & Myers LLP in Washington and a former chief counsel and staff director of the Permanent Subcommittee on Investigations, according to his biography on the firm’s Web site. Blalack fired off a letter to Levin on April 23 after Levin made similar comments about Goldman at a hearing.

“The statement suggests that you and the subcommittee have already drawn conclusions about the conduct of Goldman Sachs,” the letter said. “We strongly disagree with your statement at today’s hearing and believe that, if we were provided an opportunity to respond to your specific findings, Goldman Sachs could produce to you information that establishes that your findings are incorrect.”

Uncertain About Market

Goldman Sachs also released e-mails yesterday that supported its argument that senior executives at the company didn’t have a uniform view of the mortgage market’s direction in 2007. The e-mails show that the firm adopted a cautious position on the subprime mortgage market in early 2007 and had more trades that would benefit from a decline in the market than from an increase in prices.

“Of course we didn’t dodge the mortgage mess,” Goldman Sachs Chairman and Chief Executive Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, that was also among eight pages of documents made public by the Senate’s Permanent Subcommittee on Investigations. “We lost money, then made more than we lost because of shorts. Also, it’s not over, so who knows how it will turn out ultimately.”

Some e-mails indicate that selling securities to customers was part of the firm’s effort to get rid of its mortgage risk and take a negative stance on the market.

“My basic message is let’s be aggressive distributing things because there will be very good opportunities as the markets goes (sic) into what is likely to be even greater distress and we want to be in a position to take advantage of them,” Chief Financial Officer David Viniar wrote in a Dec. 15, 2006, e-mail to a colleague.

SPX weekly update

Last weeks reversal did not do trick yet but we have a reliable excuse for the timing matter. We are in a cluster of an Astro pattern which brakes down to 5 events due to technicalities I have explained earlier. The ongoing Uranus Saturn opposition will enter 4th exact position on 26th. The last 3 had all one effect markets rose into this day tolerance about a week and dropped thereafter in the first 2 instances by 25-30% the lat was 15th Sep 09 which had only a 6% decline as a consequence due to the fact that we were in a benign other pattern which is gone now. So its save to say a correction of some sort will follow within a few days adding all the sentiment and the fact that we have reached the 61.8 retracement level and the 200 week MA by challenging the trendline resistance improves the outlook for a bigger correction with 1050-75 is a likely target for the first wave.

part 2

3. The sentiment reaches extremes on the RYDEX

Date	NAV Adjusted N/U Ratio
4/22/2010	1.272
4/21/2010	1.162
4/20/2010	1.185
4/19/2010	1.202
4/16/2010	1.174
4/15/2010	0.856
4/14/2010	0.845
4/13/2010	0.837
4/12/2010	0.926
4/9/2010	0.945

4. We all know the SOB ratio in DC is rather 90% plus but some gentleman make it into the hall of shame - Dodd, Shelby Frank and Schumer do clearly belong into the Allstar team of DC with the scam about the new regulation of Wallstreet. It is unbelievable how reluctant they are in keeping up the lies and fraud in face of all the mess they have produced since they share no less than Wallstreet in destroying the Mainstreet wealth.

Alan Grayson Discloses That Dodd Bill Covertly Eliminates Already Passed Legislation Requiring Full Fed Audit

Once again we get confirmation that Chris Dodd is nothing but a paid manservant for his Federal Reserve masters, in addition to being a lame duck, whose last days in office are meant to do everything to allow the old-school Wall Street ways of endless secrecy and Fed bailouts to continue in perpetuity. As Ryan Grim points out "Alan Grayson and co-author Rep. Ron Paul passed legislation through the House that would allow the Government Accountability Office (GAO) to audit the Federal Reserve and, after a delay, release the information to Congress. It was a remarkable victory, with a populist coalition beating back the combined lobbying efforts of the Treasury Department, the Fed and Wall Street banks. The Senate has been more hostile territory for the Fed audit provision. Banking Committee Chairman Chris Dodd (D-Conn.) opposes the Grayson-Paul version, but allowed a much more restrictive audit proposal from Sen. Jeff Merkley (D-Oregon) into his bill." Why and how Dodd believes he can stand against this critical issue, that over 80% of America supports by demanding Fed transparency, is beyond any rational attempts at explanation. How he hopes to get away with it is even more mindboggling.

From the Huffington Post:

The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate.

"The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn't do anything of the sort. I'm going to run down the details for you, and reprint the legislative language so you can read it yourself," writes Rep. Alan Grayson (D-Fla.).

Grayson's summary of the bill's shortcomings, presented below, indicate that the "Seante bill would allow an audit of the TALF program and slightly expands authority to audit emergency lending conducted under section 13(3) of the Federal Reserve Act, but restricts it to very specific purposes. Meanwhile, it would not allow the GAO to look into the Fed's massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions."

Jeff Merkley, whose language was used instead of the passed Grayson-Paul version, has this to say:

"I appreciate Representative Grayson's concerns over accountability at the Federal Reserve. I have been a strong proponent of Fed reform and voted against the re-confirmation of Ben Bernanke because the Fed has been so lax in using its regulatory powers. Moreover, I felt strongly that we need to act now to empower the GAO to audit the extraordinary emergency programs created by the Fed and I succeeded in getting that power into the Senate bill. Rep. Grayson points out, fairly in my mind, that we need to go even further to audit the Fed's standing programs. I agree. While we need to protect the Fed's independence to implement monetary policy, I think the structure and use of their standard programs should be transparent."

There can be no compromise on this issue. Congress and America have spoken. If Dodd believes he can usurp the democratic process in this most critical of issues, which allows the entity in charge of money printing with practically the same liberties as it had when it bailed out in full secrecy every bank in the US and threw countless generations of working-class Americans in a debt-induced coma, it is one thing. If he manages to get away with, it either shows that the degree of apathy demonstrated by US citizens is indicative that nothing can save this country, or that any pretense of democracy in America has been trampled in our accelerating conversion to an autocratic state.

Grayson's memo which confirms just how useless Dodd's "Fed audit" provisions are:

Memo to the Senate: Stop Secret Bailouts by the Fed

Sometimes, you just know that you've struck a nerve. I knew it early last year, when a clip of my questioning the Inspector General of the Federal Reserve over the Fed's balance sheet became the most viewed Congressional hearing in YouTube history. The Fed had lent out around $1 trillion, and I wanted to know what happened to the people's money. So did the people.

They were angry at the Fed, and they showed it. And because of that righteous anger, the financial reform bill in the House contains a provision to audit the Federal Reserve fully. If it passes the Senate, we will finally know to whom the Fed lent our money, how much, and what little we got in return.

So it's up to the Senate. The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn't do anything of the sort. I'm going to run down the details for you, and reprint the legislative language so you can read it yourself. But the story is simple; if the House version of a Fed audit passes, we will finally know to whom the Fed lent our money. If the Senate version passes, the Fed can continue to make sweetheart loans to whomever it wants, without telling Congress or the public.

The way Congress oversees complicated government agencies is through the Congressional audit arm, the Government Accountability Office (GAO). The GAO does the actual auditing, and gives that information to Congress, which then holds hearings and makes policy. The House bill grants the GAO the authority to audit the Fed, and then releases that information to Congress with a six-month delay, to prevent traders from gaming the system.

The Senate version only allows the GAO to audit a certain part of the Federal Reserve, its emergency lending facilities. The GAO already has some of that authority. Amazingly, the Senate version forces the GAO to withhold this information from the public, and Congress, for as long as the Federal Reserve chooses.

The details, and the specific legislative language, are below.

Limited Audit Authority

What the Senate bill allows:
- The Senate language slightly expands existing authority to the GAO to audit only the emergency lending authority in section 13(3) of the Federal Reserve Act, but only for specific purposes.
- The Senate language would grant the GAO authority to audit the TALF program.

What the bill does NOT allow:
- The Senate language does not allow audits of the mortgage backed security purchase program, a $1.25 trillion program that at this point comprises the bulk of the Fed's balance sheet. This program includes Freddie and Fannie backed debt.
- The Senate language does not allow audits of possible losses on foreign currency swap lines, of which there were more than $500 billion at the height of the crisis. This includes unlimited credit lines granted to central banks all over the world, solely through at the discretion of Federal Reserve and without the input of any elected official or the State Department.
- The Senate language does not allow audits of open market operations, where there is ample room for errors, market manipulation, and insider trading violations.
- The Senate language does not allow audits of possible losses on securities acquired through non-section 13(3) facilities. This includes looking for possible losses, seigniorage, political conflicts and costs to the Treasury.

Federal Reserve Secrecy
- In the Senate version, all audits must remain redacted. The GAO can't even tell Congress to whom the Fed is lending money, the amounts it is lending, or any details about collateral or assets held in connection with any credit facility.
- The GAO can never release a full version of any audit unless the Federal Reserve first chooses to shut down the audited credit facility.
- Once the Federal Reserve shuts down the authority for the credit facility, the GAO still has to wait a year before it can release details about that facility. If the Fed simply chooses to stop making loans, but does not eliminate the authority to make loans, the GAO has to wait three years before it can release a full report. The Fed can at any point during this period choose to restart the facility, and thereby prevent the release of a full report.

See for yourself. The legislative language in the Senate draft is here.

Sec. 714. Audit of Financial Institutions Examination Council,

Federal Reserve Board, Federal Reserve banks, Federal Deposit Insurance Corporation, and Office of Comptroller of the Currency

(a) In this section, "agency" means the Financial Institutions Examination Council, the Board of Governors of the Federal Reserve System (in this section referred to as the `Board'), Federal Reserve Banks, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.
(b) Under regulations of the Comptroller General, the Comptroller General shall audit an agency, but may carry out an onsite examination of an open insured bank or bank holding company only if the appropriate agency has consented in writing. Audits of the Board and Federal reserve banks may not include -
(1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; or
(4) a part of a discussion or communication among or between members of the Board and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection.
(c)(1) Except as provided in this subsection, an officer or employee of the Government Accountability Office may not disclose information identifying an open bank, an open bank holding company, or a customer of an open or closed bank or bank holding company. The Comptroller General may disclose information related to the affairs of a closed bank or closed bank holding company identifying a customer of the closed bank or closed bank holding company only if the Comptroller General believes the customer had a controlling influence in the management of the closed bank or closed bank holding company or was related to or affiliated with a person or group having a controlling influence.
(2) An officer or employee of the Office may discuss a customer, bank, or bank holding company with an official of an agency and may report an apparent criminal violation to an appropriate law enforcement authority of the United States Government or a State.
(3) Except as provided under paragraph (4), an officer or employee of the Government Accountability Office may not disclose to any person outside the Government Accountability Office information obtained in audits or examinations conducted under subsection (e) and maintained as confidential by the Board or the Federal Reserve banks.
(4) This subsection shall not--
(A) authorize an officer or employee of an agency to withhold information from any committee or subcommittee of jurisdiction of Congress, or any member of such committee or subcommittee; or
(B) limit any disclosure by the Government Accountability Office to any committee or subcommittee of jurisdiction of Congress, or any member of such committee or subcommittee.
(d)(1) To carry out this section, all records and property of or used by an agency, including samples of reports of examinations of a bank or bank holding company the Comptroller General considers statistically meaningful and workpapers and correspondence related to the reports shall be made available to the Comptroller General. The Comptroller General shall have access to the officers, employees, contractors, and other agents and representatives of an agency and any entity established by an agency at any reasonable time as the Comptroller General may request. The Comptroller General may make and retain copies of such books, accounts, and other records as the Comptroller General determines appropriate. The Comptroller General shall give an agency a current list of officers and employees to whom, with proper identification, records and property may be made available, and who may make notes or copies necessary to carry out an audit.
(2) The Comptroller General shall prevent unauthorized access to Records, copies of any Record, or property of or used by an agency that the Comptroller General obtains during an audit.
(3)(A) For purposes of conducting audits and examinations under subsection (e), the Comptroller General shall have access, upon request, to any information, data, schedules, books, accounts, financial records, reports, files, electronic communications, or other papers, things or property belonging to or in use by--
"(i) any entity established by any action taken by the Board described under subsection (e);
"(ii) any entity receiving assistance from any action taken by the Board described under subsection (e), to the extent that the access and request relates to that assistance; and
(iii) the officers, directors, employees, independent public accountants, financial advisors and any and all representatives of any entity described under clause (i) or (ii); to the extent that the access and request relates to that assistance;
(B) The Comptroller General shall have access as provided under subparagraph (A) at such time as the Comptroller General may request.
(C) Each contract, term sheet, or other agreement between the Board or any Federal reserve bank (or any entity established by the Board or any Federal reserve bank) and an entity receiving assistance from any action taken by the Board described under subsection (e) shall provide for access by the Comptroller General in accordance with this paragraph.

(e) Notwithstanding subsection (b), the Comptroller General may conduct audits, including onsite examinations when the Comptroller General determines such audits and examinations are appropriate, of any action taken by the Board under the third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343); with respect to a single and specific partnership or corporation.'
(f) REVIEWS OF CREDIT FACILITIES OF THE FEDERAL RESERVE SYSTEM.--
(1) DEFINITION.--In this subsection, the term 'credit facility' means any utility, facility, or program authorized by the Board of Governors of the Federal Reserve System under the third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343), including any special purpose vehicle or other entity established by or on behalf of the Board of Governors or a Federal reserve bank, that is not subject to audit under subsection (e), including--
(A) the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility;
(B) the Term Asset-Backed Securities Loan Facility;
(C) the Primary Dealer Credit Facility;
(D) the Commercial Paper Funding Facility; and
(E) the Term Securities Lending Facility.
(2) AUTHORITY FOR REVIEWS AND EXAMINATIONS.--Subject to paragraph (3), and notwithstanding any limitation in subsection (b) on the auditing and oversight of certain functions of the Board of Governors of the Federal Reserve System or any Federal reserve bank, the Comptroller General of the United States may conduct reviews, including onsite examinations, of the Board of Governors, a Federal reserve bank, or a credit facility, if the Comptroller General determines that such reviews are appropriate, solely for the purposes of assessing, with respect to a credit facility--
(A) the operational integrity, accounting, financial reporting, and internal controls of the credit facility;
(B) the effectiveness of the collateral policies established for the facility in mitigating risk to the relevant Federal reserve bank and taxpayers;
(C) whether the credit facility inappropriately favors one or more specific participants over other institutions eligible to utilize the facility; and
(D) the policies governing the use, selection, or payment of third-party contractors by or for any credit facility.
(3) REPORTS AND DELAYED DISCLOSURE.--
(A) REPORTS REQUIRED.--A report on each review conducted under paragraph shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such review is completed.
(B) CONTENTS.--The report under subparagraph (A) shall include a detailed description of the findings and conclusions of the Comptroller General with respect to the matters described in paragraph (2) that were reviewed and are the subject of the report, together with such recommendations for legislative or administrative action relating to such matters as the Comptroller General may determine to be appropriate.
(C) DELAYED RELEASE OF CERTAIN INFORMATION.--
(i) IN GENERAL.--The Comptroller General shall not disclose to any person or entity, including to Congress, the names or identifying details of specific participants in any credit facility, the amounts borrowed by specific participants in any credit facility, or identifying details regarding assets or collateral held by, under, or in connection with any credit facility, and any report provided under subparagraph (A) shall be redacted to ensure that such names and details are not disclosed.
(ii) DELAYED RELEASE.--The non-disclosure obligation under clause (i) shall expire with respect to any participant on the date on which the Board of Governors, directly or through a Federal reserve bank, publicly discloses the identity of the subject participant or the identifying details of the subject assets or collateral.
(iii) GENERAL RELEASE.--The Comptroller General shall release a non redacted version of any report on a credit facility 1 year after the effective date of the termination by the Board of Governors of the authorization for the credit facility. For purposes of this clause, a credit facility shall be deemed to have terminated 24 months after the date on which the credit facility ceases to make extensions of credit and loans, unless the credit facility is otherwise terminated by the Board of Governors.
(iv) EXCEPTIONS.--The nondisclosure obligation under clause (i) shall not apply to the credit facilities Maiden Lane, Maiden Lane II, and Maiden Lane III.