Originally written by Jacek K. on October 16, 2009 12:49 PM There's an insanity here that's almost beyond analysis.  Wall Street can spark an economic slowdown that misses destroying the planet and causing a second Great Depression only by a hair's breadth — said hair being an 11th hour emergency infusion of trillions of taxpayer dollars — and then turn around and use those trillions to return to bubble levels of profitability within a year.  And they can do it even though the rest of the economy is still suffering through the worst recession since World War II.  It's mind boggling.

You've said it better than I can. I feel a sort of 'oh...so...what's new?' a terrible form of lazy do-I-want-to know-complacency every time I read about a new money wizard and his/her financial finagling. So if you've made more than $20 million in charitable donations it's always okay to cheat and therefore a valid excuse for obtaining leniency in the courts? WHAT!

For those of you with an ounce of mind still capable of being boggled...

Wall Street wake-up call: Hedge fund boss, 5 others charged in $25M-plus insider trading case

By Larry Neumeister, Ap

October 16th, 2009

Billionaire among 6 nabbed in inside trading case

NEW YORK — One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that authorities say generated more than $25 million in illegal profits and was a wake-up call for Wall Street.

Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.

U.S. Magistrate Judge Douglas F. Eaton set bail at $100 million to be secured by $20 million in collateral despite a request by prosecutors to deny bail. He also ordered Rajaratnam, who has both U.S. and Sri Lankan citizenship, to stay within 110 miles of New York City. The judge gave prosecutors until shortly after 6 p.m. to consider appealing his bail ruling.

U.S. Attorney Preet Bharara told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case.

He said the case should cause financial professionals considering insider trades in the future to wonder whether law enforcement is listening.

“Greed is not good,” Bharara said. “This case should be a wake-up call for Wall Street.”

Joseph Demarest Jr., the head of the New York FBI office, said it was clear that “the 20 million dollars in illicit profits come at the expense of the average public investor.”

The Securities and Exchange Commission, which brought separate civil charges, said the scheme generated more than $25 million in illegal profits.

Robert Khuzami, director of enforcement at the SEC, said the charges show Rajaratnam’s “secret of success was not genius trading strategies.”

“He is not the master of the universe. He is a master of the Rolodex,” Khuzami said.

Galleon Group LLP said in a statement it was shocked to learn of Rajaratnam’s arrest at his apartment. “We had no knowledge of the investigation before it was made public and we intend to cooperate fully with the relevant authorities,” the statement said.

The firm added that Galleon “continues to operate and is highly liquid.”

Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world’s wealthiest billionaires, with a $1.3 billion net worth.

According to the Federal Election Commission, he is a generous contributor to Democratic candidates and causes. The FEC said he made over $87,000 in contributions to President Barack Obama’s campaign, the Democratic National Committee and various campaigns on behalf of Hillary Rodham Clinton, U.S. Sen. Charles Schumer and New Jersey U.S. Sen. Robert Menendez in the past five years. The Center for Responsive Politics, a watchdog group, said he has given a total of $118,000 since 2004 — all but one contribution, for $5,000, to Democrats.

The Associated Press has learned that even before his arrest, Rajaratnam was under scrutiny for helping bankroll Sri Lankan militants notorious for suicide bombings.

Papers filed in U.S. District Court in Brooklyn allege that Rajaratnam worked closely with a phony charity that channeled funds to the Tamil Tiger terrorist organization. Those papers refer to him only as “Individual B.” But U.S. law enforcement and government officials familiar with the case have confirmed that the individual is Rajaratnam.

At an initial court appearance in U.S. District Court in Manhattan, Assistant U.S. Attorney Josh Klein sought detention for Rajaratnam, saying there was “a grave concern about flight risk” given Rajaratnam’s wealth and his frequent travels around the world.

His lawyer, Jim Walden, called his client a “citizen of the world,” who has made more than $20 million in charitable donations … "

http://blog.taragana.com/law/2009/10/16/wall-street-wake-up-call-hedge-fund-boss-5-others-charged-in-25m-plus-insider-trading-case-14561/

via http://www.business.dk/article/20091017/borsnyt/91017006/ (Danish)

Insiderskandale ryster Wall Street

Originally written by Jacek K. on October 16, 2009 7:49 PM The Wall Street Journal reports that the good times are rolling again: Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture.

Since the "top one-third" of the graduating class, who otherwise would have been "physics postgrads", are now into the roaring financials, we can't expect them to be easily satisfied when they can see that they are possibly still much poorer and can't even afford to own an Airbus 380 equipped with sauna on board. With that threshold in compensation where the exponential (almost J-shaped) reward kicks in only the more the fund performs above the benchmark, you can probably expect more of the V-shaped type of boom and bust as the incentives are all there.

How can you have a mushroom going up without reaching a critical mass? The physicists know that.

Originally written by Nanna Mercer on October 17, 2009 11:43 AM One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case

Frankly, I don't know how you can possibly be a profitable hedge fund manager and one of America’s wealthiest men without relying on inside information...

Originally written by Jacek K. on October 17, 2009 2:15 PM Originally written by Nanna Mercer on October 17, 2009 11:43 AM One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case Frankly, I don't know how you can possibly be a profitable hedge fund manager and one of America’s wealthiest men without relying on inside information...

I see! Would you say that 'profitable hedge fund manager' is an oxymoron?

Originally written by Nanna Mercer on October 17, 2009 2:48 PM Would you say that 'profitable hedge fund manager' is an oxymoron?

Not at all if you look beyond the meaning

'profitable hedge fund manager' = the manager of a profitable hedge fund (here, you are right, since that hedge fund will not be profitable for you as customer, it is an oxymoron  )

How about

'profitable hedge fund manager' = a profitable manager of a hedge fund (here, the hedge fund is just a cover for replenishing the management's coffers which is what this game is all about anyway so it cannot be called an oxymoron   ) 

Originally written by Nanna Mercer on October 17, 2009 11:43 AM So if you've made more than $20 million in charitable donations it's always okay to cheat and therefore a valid excuse for obtaining leniency in the courts?

No, the price of that is $200 million. From the relevant commentary at http://www.nytimes.com/2009/10/18/opinion/18rich.html?em:


 

Goldman is this century’s octopus — almost literally so. The most-quoted sentence in financial journalism this year, by Matt Taibbi of Rolling Stone, describes the company as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” ...

It seems to me that there is an unhealthy preoccupation with the number of zeros whenever something happens. Zeros are dying and zeros are being born almost continuously. Isn't it time to stop making a big deal about the tenuous association between a particular event and the number of zeros that evaporated coincidentally? The bad news is that a lot of zeros died, the good news is that there are plenty more available just like them.

So now, optimistically looking to the future:

Who Will Be the Next Carlos Slim?

First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat. The weakness of other big banks is further icing on their cake. GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.

Second, the surviving big hedge funds will do very well (partial list). They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated. Their access to credit runs through the biggest banks and this can be a double-edged sword--expect more instability in the future from hedge fund-bank dynamics (as Morgan Stanley found out last fall). http://www.tnr.com/blog/the-plank/who-will-be-the-next-carlos-slim

And that's the good news for today, folks. You just carry on.

Jacek

Originally written by Jacek K. on October 21, 2009 12:22 PM So now, optimistically looking to the future: First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat.  And that's the good news for today, folks. You just carry on.

Thanks, and to help celebrate the carrying on just mosey on over to Post #187337 where the piper ...

Originally written by Jacek K. on October 20, 2009 3:31 PM “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

 

The Vampire Squid from Hell is Coming

From http://www.nytimes.com/2009/10/20/opinion/20herbert.html?em:

[snip] Call it déjà voodoo. I wrote a column that ran three days before Christmas in 2007 that focused on the deeply disturbing disconnect between Wall Streeters harvesting a record crop of bonuses — billions on top of billions — while working families were having a very hard time making ends meet.

We would later learn that December 2007 was the very month that the Great Recession began. I wrote in that column: “Even as the Wall Streeters are high-fiving and ordering up record shipments of Champagne and caviar, the American dream is on life support.”

So we had an orgy of bonuses just as the recession was taking hold and now another orgy (with taxpayers as the enablers) that is nothing short of an arrogantly pointed finger in the eye of everyone who suffered, and continues to suffer, in this downturn. ...

We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.

That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it.