Dreaming of Recession

Well, here’s something rather unusual… Appearing earlier today on BBC, Alessio Rastani, an independent stock trader, confessed to a stunned interviewer that, like most of his colleagues on Wall Street (or in the City of London), they “don’t really care that much” how world leaders claim they’re going to fix the economy as their job is simply to make money from the situation. Quite to the contrary, Rastani admitted that he’d been dreaming of a market collapse for three years. “I go to bed every night, I dream of another recession,” he said.

As if that bit of candour wasn’t sufficiently amazing, Rastani went on to claim that Goldman Sachs rules the world not governments and that Goldman Sachs “don’t care about this rescue package” (i.e., the proposed plan to leverage the EU’s €440bn bail-out fund to €2 trillion to cope with the impending debt crisis in Italy and Spain) because they know “the market is toast… the stock market is finished.”

Rastani dryly concluded by warning viewers to act quickly because “In less than twelve months, my prediction is, the savings of millions of people are going to vanish.”

Update: Is Rastani a fake or a legitimate asshole? Debate and links about this in the comments.


Going Rogue?

Matt Taibbi talks to David Shushter about the latest banking scandal.

Swiss financial services company UBS has admitted that a “rogue” trader has run up a loss of $2 billion dollars in unauthorized risky trades. The 31 year old trader Kweku Adoboli who worked in the bank’s London exchange as director of the now ironically named Global Synthetic Equities Trading team, was arrested yesterday morning at his apartment.

It seems Adoboli has since retained the law firm of Kingsley Napley, which previously advised Nick Leeson, the hot shot derivatives broker whose fraudulent, unauthorized speculative trading caused the collapse of Barings Bank in the 90’s.

Taibbi takes issue with the characterization of a “rogue trader” as a reason for this latest crisis, arguing that it’s indicative of a systemic problem. According to Taibbi, “`rogue traders’ are treated like bad accidents… But rogue companies are protected at every level of the regulatory structure and continually empowered by deregulatory legislation giving them access to our bank accounts.”

The root of the problem, he explains in Rolling Stone, is that investment banker’s brains are not wired for dull commercial bank business of taking consumer deposits and making conservative investments.

In fact, investment bankers by nature have huge appetites for risk, and most of them take pride in being able to sleep at night even when their bets are going the wrong way. If you’re not a person who can doze through a two-hour foot massage while your client (which might be your own bank) is losing ten thousand dollars a minute on some exotic trade you’ve cooked up, then you won’t make it on today’s Wall Street.

At one time commercial banks and investment banks had to remain separate entities as mandated by the Glass-Steagall Act of 1933. Today, however, because of Gramm-Leach-Bliley Act of 1998 they can be combined. In Taibbi’s view, this marriage of investment banks and commercial banks has proven to be nothing short of disastrous.

“The influx of i-banking types into the once-boring worlds of commercial bank accounts, home mortgages, and consumer credit has helped turn every part of the financial universe into a casino,” he writes.

Market Craps on Debt Ceiling Deal

Funny that shortly after the U.S. Congress passed the largest – and arguably most catastrophically stupid – deficit reduction package in history, the market promptly reacted by taking a nosedive.

Apparently, the ugly, job-killing “compromise” hastily cobbled together by U.S. lawmakers before fleeing Washington for a month-long vacation wasn’t sufficiently draconian or austere enough to placate the leading rating agencies on Wall Street. Which is rather curious when one considers that these same rating agencies are the very same firms that readily gave their triple-A imprimatur to the collateralized junk and other toxic inventions fabricated by their double-dealing investment banking clients before the whole egregious scam they were intimately complicit in collapsed like a house of cards back in 2008.

So why is anyone listening to them now? Indeed, why are they even still in the business of proffering their demonstrably worthless approvals?

Saving the Top

Elizabeth Warren, the chair of the Congressional Oversight Panel created to oversee the U.S. bank sector bailout (TARP) discussing how the elite financial echelon has been rescued from their own folly while those workers at the bottom tier of the economy have been mercilessly thrown under the bus…

“The way I think of it is: they say something like ‘Give me your money, investors and I’m going to Las Vegas and put it all on red 22. And if red 22 comes in — Woo! We are RICH! If red 22 doesn’t come in, don’t worry because the taxpayers will pay you back the money you invested.”

Interesting to see Sir Harold Evans popping up here … More about him in due course.

Too Big to Fail… Or Just Too Big?

“It’s over — we’re officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far…”

“The Big Takeover” is Matt Taibbi’s lengthy, righteously furious and necessarily profane article in Rolling Stone; a must read that lays bare the perfidies of Wall Street and the antics of its corrupt malefactors in Washington. Depressingly, it also explains why almost no one responsible is getting what they deserve.

Here’s some gems from the piece. First, the game that the insurance giant AIG was playing.

“Liddy conveniently forgot to mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the after dawn light, it owed money all over town. Or that this was a casino where middle-class taxpayers cover the bets of billionaires.”

Next, here’s Matt Taibbi on the consequences of letting Hank Paulson, the man who once led Goldman Sachs, dictate the terms for preventing economic meltdown.

“The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d’état… the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.”

And finally, here’s the worst rub of the story…

“But wait a minute,” you (the taxpayer) say to the Wall Street types… “Why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?” Yet these are the people in whose hands our entire political future now rests.”

Update: While many people have seen their investments, retirement funds or entire life savings obliterated in the economic meltdown, according to Alpha Magazine, the world’s 25 top-earning hedge fund managers raked in a staggering $11.6 billion last year — the third-best haul on record since the industry magazine began compiling its rankings eight years ago.

Madoff: “Just One Big Lie”

Bernard Madoff, former NASDAQ chairman and head of an exclusive Wall Street investment firm that claimed to trade more than $1 trillion a year, has been implicated in an elaborate “Ponzi scheme” that allegedly bilked well-heeled investors out of an estimated $50 billion, supposedly leaving some of America’s wealthiest socialites “destitute” according to news reports (I suppose that’s a relative term). More info on this at the NYP and NYT.

Now, enjoy the pure comedy of seeing this swindler (together with Josh Stampfli, the wiz-kid head of Madoff’s automated market-making group) pontificating at a 2007 roundtable discussion about fear, greed, regulation, automation, the psychology of “herd mentality” and so on. Hilarious.