Senator Levin: Goldman Sachs Misled Congress After Duping Clients (Bloomberg)
Goldman Sachs misled clients and Congress about the firm’s bets on securities tied to the housing market, the chairman of the U.S. Senate panel that investigated the causes of the financial crisis said. Senator Carl Levin, releasing the findings of a two-year inquiry yesterday, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm would benefit if they fell in value....Much of the blame for the 2008 market collapse belongs to banks that earned billions of dollars in profits creating and selling financial products that imploded along with the housing market, according to the report. The Levin-Coburn panel levied its harshest criticism at investment banks, in particular accusing Goldman Sachs and Deutsche Bank AG of peddling collateralized debt obligations backed by risky loans that the banks’ own traders believed were likely to lose value.
Senate Report Lays Bare Mortgage Mess (WSJ)
"I think I found white elephant, flying pig and unicorn all at once." --Goldman Sachs email describing an Australian client that invested in a souring mortgage structure 4/26/2007
Moody’s, S&P Caved to Goldman, UBS Mortgage Pressure, Levin Says (Bloomberg)
“Investment bankers who complained about rating methodologies, criteria, or decisions were often able to obtain exceptions or other favorable treatment,” according to the Levin report. The decisions appeared to be “concessions made to prevent the loss of business.”
US Probes Libor Dealings (WSJ)
For the past year, law-enforcement officials have been investigating whether the U.S. and European banks understated their own borrowing costs, which are used to calculate the London interbank offered rate, or Libor. The investigators are now looking into whether the banks effectively formed a global cartel and coordinated how to report borrowing costs between 2006 and 2008.
Geithner: We Must Raise Taxes (PBS)
Appearing on the PBS NewsHour Wednesday evening, U.S. Treasury Secretary Timothy Geithner said there is “no plausible way” to cut the deficit without raising taxes. “Unless you're going to cut deeply into commitments we have made to seniors and to the disabled and to the poor, or ask the country to go borrow the money, you can't solve this,” he said.
Raj Keeps Chin Up (NYP)
One reason Rajaratnam has to smile might be the ebullient praise he received yesterday from prominent educator and social activist Geoffrey Canada. Canada, who was called as a character witness, called Rajaratnam a "dear friend" with "a genuine concern for children."
"Raj and I hit it off right away," said Canada, the CEO of charitable group the Harlem Children's Zone. Canada said he approached Rajaratnam earlier this decade to donate to the group and found him eager to help "level the playing field for kids." "I never had to convince Raj" to be a donor, Canada said when asked to respond to the prosecution's allegations that Rajaratnam committed his alleged crimes out of greed. "He's a very generous person," he added.
Deutsche Bank Sold Mortgage-Linked ‘Pigs’ as Market Buckled, Lawmakers Say (Bloomberg)
“Keep your fingers crossed but I think we will price this just before the market falls off a cliff,” Michael Lamont, the group’s co-head, said in a Feb. 8, 2007, e-mail about Deutsche Bank’s Gemstone CDO VII Ltd., according to a report released yesterday by the Permanent Subcommittee on Investigations. The Frankfurt-based firm sold $700 million of the instruments, which lost most of their value within 17 months.
IMF: Banks Face $3.6 Trillion 'Wall' of Maturing Debt (Reuters)
Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report.
Obama Challenges Republicans With Deadline For Deficit Deal (Bloomberg)
The timeline Obama proposed for coming up with an agreement -- beginning talks in early May and completing them by late June -- sets up a negotiation over the nation’s long-term fiscal challenges in parallel with a congressional debate over raising the $14.29 trillion legal debt limit.
Glenore Aims For $8.8 Billion In IPO (WSJ)
The company said it plans to list a 15% to 20% stake, through an offer to raise around $6.8 billion to $8.8 billion in new capital and up to $2.2 billion in existing shares. At the upper level, that would make it London's largest-ever initial public offering, topping Rosneft's $10.6 billion offer in July 2006.
London Retains Lure For Hedge Funds As Banks Demure (Reuters)
Throgmorton's Rubio points to the "Harvey Nicks effect" -- referring to upmarket London department store Harvey Nichols, a magnet for big spenders -- and said he had seen one manager relocate to Barcelona, only to move back to London.