Chillin' out till it needs to be funded
Tradin gprofits and their consistency made one helluva masquerade on wall street press yesterday…First NY Times dot Com updated how the rich Goldman Sachs was in trouble for being the rich boy with more than 41 days of $100 million trading and all 62 days of the quarter in the green ( maybe 61 with a holiday inbetween) . Then they upped that to two banks outsmart everyone else when JP Morgan reported the same from their war room. Then the journos and barry (ritholtz, Bailout nation) updated it to 4 with Citi and Bank Am adding their names to the roster of profit.
The result: When banks woke up to the next day Wall street having ended steady in equities and all trades going the same way in Debt..instead of rating agencies being regulated for having been lethargic, dumb partners with no updates and frequent misinformation, the misinformation charge stck to the 8 banks… Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch are being probed for providing “misleading information to rating agencies in order to inflate the grades of certain mortgage securities.”
That all the 8 banks provide the same information to the rating agencies is a pretty good start. That ths was a new product and no one no CDOs in 2001 is a act most have not factored in yet in news on SEC/Department of Justice. That the banks deserve the harangue even if the obvious reason isn’t fair – the fact that we make profits is no fault of ours..nevertheless it was a limited entry gentlemen’s club and thus likely wrong..However by giving rating agencies the leeway to remain weak and dependent on strategums devised by the banks thus avoiding factoring in market information even when or especially when it is detrimental to the rating of the securities is no longer a tenable defence or a tenable long term point of view..that war rooms traditionally listen to no one else outside is a given however and no one ever made sense by regulating a war room and similarily trading. Also the up and coming Vockers and GS law restrictions will likely not affect the profitability of these traders but only shift attention from new devices with the overly burdened Fed continuing as the only straw and TBTF hanging out for everyone, this crisis defencese is like one of the rating actions during IMF era, See no Evil, Hear no Evil, You couldn’t have done any evil…