Friday, May 14, 2010

New York Said to Be Investigating Banks' Influence on Ratings Agencies

By Phasma Scriptor

Is there a new sheriff in town? Is the ex-NY AG Eliot Spitzer the model for current NY AG Andrew Cuomo?
Cuomo has more than a clue, something that Spitzer didn't have when he first started ripping into Wall Street fraud.
Insider trading is gaming-the-system (and, oh, yeah, a crime). Hi-frequency trading is (gaming-the-system)squared. Front-running, as practiced by Goldman Sachs, leader of the Wall St. Gang of 4 (GS, CitiBank, JP Morgan, Bank of America), is (gaming-the-system)cubed. That's why the Gang of 4 were all able to "Record No Net Loss Trading Days During Q1"; in other words, by utilizing the ultra-hi-speed computers utilized by the G4, their trading groups could guaranty winning trades on every single trade by shoving their buy and sell orders in front of a tidal wave of orders from other hi-frequency traders whose computers aren't fast enough to front-run, the nec-plus-ultra (last word) in insider trading.
This super-tech-on-killer-steroids capability is the reason why auditing the Fed (as proposed in the Senate amendment to the finreg bill, approved 96-0) is a barn-door-closure too tardy. The max-gamers of the G4 move the markets (see the spiky charts of the major averages + the charts of the sovereign debt markets from Thursday of last week to Monday of this week); for months, pronouncements from the Fed have had effects that look pretty lame by comparison.
Cuomo, if he's serious, will have way more work to have to have cut out for him since the G4 learned from the not-so-smart smartest guys in the Enron room to not be so stupid; agents of the G4, disguised and scattered across the G4 global maze, will have to be tracked down with the help of the super-de-duper, crack-any-code artificial intelligence systems of NSA, the actual smartest guys on Earth in the Puzzle Palace (more on this in a later post).


New York Said to Be Investigating Banks' Influence on Ratings Agencies

The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation.

The agencies themselves have been widely criticized for overstating the quality of many mortgage securities that ended up losing money once the housing market collapsed. The inquiry by the attorney general of New York, Andrew M. Cuomo, suggests that he thinks the agencies may have been duped by one or more of the targets of his investigation.

Those targets are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch, which is now owned by Bank of America.

The companies that rated the mortgage deals are Standard & Poor's, Fitch Ratings and Moody's Investors Service. Investors used their ratings to decide whether to buy mortgage securities.

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