Opening Bell: 05.05.10

Citadel's Griffin Pledges to Pursue Investment Bank After CEO Departures (Bloomberg)
Ken Griffin vowed to press ahead with his plan to graft an investment bank onto his $12 billion hedge- fund firm even though he hasn’t been able to find the right executive to run the business. “We did not embark on this initiative to be a middle-tier player,” Griffin, founder of Chicago-based Citadel Investment Group LLC, said in an internal memo yesterday.

What-Ifs For Goldman Sachs (WSJ)
In one possibility being discussed, Henry Paulson, who stepped down as Goldman's chief executive in 2006 to become Treasury secretary, would take the chairman job, these people said. But one person familiar with Mr. Paulson's thinking said he would never return to Goldman. Goldman declined to comment on the internal conversations.

Ex-Bear Stearns Heads Say Firm's Collapse Unavoidable (CNBC)
And Bear was awash with liquidity, don't forget that.

SEC Investigates Firms Doing Business in Terror Hubs (WSJ)
The SEC's enforcement division has sent letters to several companies in the pharmaceutical and energy industries, these people said. The State Department currently designates four countries—Cuba, Iran, Sudan and Syria—as state sponsors of terrorism. The letters, which were sent within the past two months, are part of an investigation by the SEC division that looks into potential violations of the Foreign Corrupt Practices Act. It isn't clear which companies received the letters.

PIMCO Investment Outlook May 2010 (PIMCO)
Bill Gross: In all of the hullabaloo over Goldman Sachs, a CQ analysis of the rating services – Moody’s, Standard and Poor’s and Fitch – has escaped front-page headlines. Not that a number of observers haven’t been on to them for a few years now, including yours truly. Back in July of 2007 some of you will remember my description of their role in the subprime crisis. “Many of these good-looking girls are not high-class assets worth 100 cents on the dollar. You were wooed, Mr. Moody’s and Mr. Poor’s, by the makeup, those six-inch hooker heels and a ‘tramp stamp.’”

Now, it seems, I was a little long on humour and a little short on the reality. Tramp stamp and hooker heels do not begin to describe the sordid, nonsensical role that the rating services performed in perpetrating and perpetuating the subprime craze, as well as reflecting the general deterioration of investment common sense during the past several decades. Their warnings were more than tardy when it came to the Enrons and the Worldcoms of ten years past, and most recently their blind faith in sovereign solvency has led to egregious excess in Greece and their southern neighbours. The result has been the foisting of AAA ratings on an unsuspecting (and ignorant) investment public who bought the rating service Kool-Aid that housing prices could never really go down or that countries don’t go bankrupt. Their quantitative models appeared to have a Mensa-like IQ of at least 160, but their common sense rating was closer to 60, resembling an idiot savant with a full command of the mathematics, but no idea of how to apply them. But I come not to bury the rating services, but to dismiss them.