Big Investment Banks Need Another 250 Billion: Bloomberg

April 29 (Bloomberg) -- JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among U.S. investment banks that may be forced to raise an additional $250 billion in capital, cut executive pay and divest some of their most lucrative assets under a bill on the U.S. Senate floor today, analysts say. (By Dawn Kopecki) Entire Story

Goldman's Defense

Goldman definitely designed products which took the other side of the bull market in real estate, but that is the way markets work. If you are a market maker, whether in the pits of Chicago, or in the offices of Goldman Sachs, you are at risk each time you put on a position. In defense of Goldman, they positioned themselves to profit from a potential break in the real estate market, the fact that they sold CDOs to anyone, including their clients, may be greasy, but well within their right to trade a given market. Their unique position to profit from the transaction as well as the trade grinds on all of us a bit, but they were ultimately at the mercy of the direction of the markets. In trading you are always a hero or a goat. Could the real estate market have continued or even accelerated its rally? Unlikely, but none of us knew the timing of the break and certainly Goldman, despite the hype, is not as smart as they would have all of us believe. Collectively it is a company of transactors, not traders, but their opportunity to profit from macro moves in the economy is a part of the financial factory they have built and our economy promotes. The fact that the market was the final arbiter of their actual trading positions is their defense.

Goldman, What A Shock

Goldman, what a shock. I guess if a Republican had been in the White House they would have seen this coming, but one would think Goldman has enough friends even in the current Administration not to have been cold cocked by the SEC announcement on Friday. The smokey intentions of possibly setting up clients to take the downside of a trade is almost inevitable when you are in the financial transaction business as Goldman is and so the great outrage displayed in the media is once again part of the performance art of today's business news industry. Goldman did what Goldman does, hiding in the middle allowing the big dogs eat while collecting fees often times when market conditions are exceptionally dangerous. They have that right. But the long tail of structured products linked from investment firms to rating agencies and finally to wake up stupid clients will certainly reveal a culpability that will be shared by all those who were seeking to stretch financial performance ultimately at the expense of taxpayers.

Greater transparency is clearly an issue which easy to talk about and hard to create. Investment firms do not want it, the Fed and Treasury have told the courts not to reveal their intervention actions, and the banks have recently stated they will take the fight to hide to what extent any of them received bail out funds all the way to the Supreme Court.

This Goldman event will guarantee passage of financial reform but with enough loop holes to allow the creative shadows to hide the next financial disaster.

Greenanke

Listening to Greenspan's testimony today provided clear evidence that the guy is clueless of how markets actually work. The Peter Principal, that people tend to rise to the level of their own incompetence, certainly can be said about the Fed. Likewise for Bernanke, who like Greenspan, has never seen an economic event that did not need economic intervention simply on the grounds that all equity market slides should be avoided. The current financial dilemma has occurred on his watch which is bad timing for him but good for all the hand outs to his genius banking buddies. Fixing this current economic mess is going to be a bit trickier than when Greenspan was running the emergency cash spuing machine each time any event looked like it might impede climbing stock markets. Greenspan is a dope and his successor is proving there is only one way to go, keep on making the same mistakes by relying on the same players to profit from the interventions while changing nothing.