http://www.punkeconomics.com

Even more interesting was how Goldman made money by shorting subprime MBS. Prop was long, like the rest of the street, but a special group under top management was short.

Prop trading with clients to move prices in the right direction would be manipulation.

I have no love lost for Goldman, but in this case I think the outrage is misplaced.

no opposition to free market and taking a negative position, but when you take a position and then manipulate price to the downside that is not free market

rules not the same for everyone, dumbass analysts cannot win without cheating, no better than next guy

glad to see GS is getting what it deserves, send them all to the unemployment line

Cash-Strapped Companies Grow to Record, Moody's Says (Update1)

http://www.bloomberg.com/apps/news?pid=20601087&sid=an3g4Ho1kD98&refer=home

Companies are increasing capital reserves as banks tighten access to credit following more than $966 billion in writedowns and losses since the start of 2007. What began as a cash crunch for small companies with limited amounts of debt has spread to major U.S. companies, with “tens of billions'' of dollars in rated debt being downgraded, Moody's said.

“This is a sign of how things are worsening in the second year of the credit crunch,'' wrote Puchalla, who is based in New York.

As of October, 28 percent of the 72 issuers with an SGL-4 rating had more than $1 billion of rated debt on their balance sheets, totaling $128 billion. That compares with 18 percent of the 39 borrowers in that category at the end of 2007, representing $21 billion of debt, the report said.

this is precisely the point, aggravated to a much larger degree with the demise of Glass-Steagall and the access to cheap fed funds by the banks.

Think of the way this market is set up in terms of a poker game, and the absurdity of it becomes obvious.

As the financial sector grows more outsized relative to a shrinking GDP and real economy it will have to become more aggressive in its more parasitical activities, or diminish. Do you think it will do so voluntarily? More likely it will try to feed off other hosts. Look for foreign bank acquisitions in the developing world.

When I was at GS in the 1980s the prop desks ALWAYS traded against the client order flows and the PM (perception management) teams worked very hard to generate the order flows to trade against.

The entire operation (or set of interrelated operations) is far more perfected these days, I will wager.

To watch a perception management operation gone awry (or perhaps just gone nuts) one need only follow the Paulson follies over the past few weeks.

(I suspect that Paulson realizes that he and his too-clever-by-half plutocratic buddies have blown up the world and is attempting to reassemble it using only bullshit.)

It is all quite amusing, actually, even if it will eventually cost me much of my net worth.

Consolidated balance sheet

Explanation and reconciliation of the Firm’s use of non-GAAP financial measures on pages 32–33 of this Annual Report. Managed results exclude the impact of credit card securitizations on Total net revenue, the Provision for credit losses, net charge-offs and loan receivables. Securitization does not change reported Net income; however, it does affect the classification of items on the Consolidated statements of income and Consolidated balance sheets.

That is brought to you by, J P MORGAN CHASE & CO:: Profit in its credit-card business fell to $35 million from $202 million last year because of Target's lower investment in the portfolio, a decline in its overall performance because of higher bad-debt expenses and lower interest rates.

The company sold 47 percent of its credit card receivables to JPMorgan Chase in May.

>> Let's review:

1. Securitization does not change reported Net income

2. … however, it does affect the classification of items on the Consolidated statements of income