The Great American Bubble Machine

Cap and trade is passed here http://www.examiner.com/x-14783-Law...assed-cap-and-trade-but-is-it-worth-the-price

GS keeps on keepin on with no let ups

 

Goldman's Lucas Van Praag Responds To Matt Taibbi's Allegations

Having read your piece about Matt Taibbi’s article in Rolling Stone, I wanted to set the record straight, particularly about “regulatory capture”.

Background: Under the Commodity Exchange Act, the CFTC (for agricultural futures) or exchanges (for energy/metals futures) established speculative position limits. As much as anything else, the limits are intended to prevent market imbalances that would result in failures of the ultimate settlement of the futures contracts.

The CFTC rules exempt “bona fide hedging” transactions from these spec limits. A bona fide hedging transaction was originally understood to be an actual producer/consumer who was selling or buying the underlying commodity and wanted to hedge risk of the price moving up or down. In 1991, J. Aron wanted to enter into one of its first commodity index swap transactions with a pension fund. In order to hedge our exposure on the swap, we wanted to buy futures on the commodities in the index. We applied to the CFTC for exemption from position limits on the theory that even if we weren’t buying the commodity, we had offsetting exposure (in our swap) that put us in a balanced/price neutral position. The CFTC agreed with our argument and granted exemption. By the way, each of the then Commissioners signed off, so it was hardly a secret…

The CFTC published a report in August 2008, indicating that there were few instances when entities would have exceeded spec limits, had they applied to OTC positions.

Yesterday, as you probably know, the Senate Permanent Sub-Committee on Investigations issued a report on wheat futures in which they concluded that divergence between prices for actual wheat v. wheat futures is being caused solely by index investment. The Committee’s recommendation is that hedge exemptions which support indices should be phased out.

Not quite so recently, the elimination of Glass Steagall doesn’t exactly provide a robust argument for regulatory capture. And Taibbi’s bubble case doesn’t stand up to serious scrutiny either. To give just two examples, even with the worst will in the world, the blame for creating the internet bubble cannot credibly be laid at our door, and we could hardly be described as having been a major player in the mortgage market, unlike so many of our current and former competitors.

Taibbi’s article is a compilation of just about every conspiracy theory ever dreamed up about Goldman Sachs, but what real substance is there to support the theories?

We reject the assertion that we are inflators of bubbles and profiteers in busts, and we are painfully conscious of the importance of being a force for good.

http://zerohedge.blogspot.com/2009/06/goldmans-lucas-van-praag-retorts-to.html

 

Goldman Sachs IS the Govt., and, just like the IRS, is totally and irretrievably unaccountable, even to Congress.

 

It's interesting how the GS rebuttal debaser posted did not address the fines the SEC made them pay or all the pending lawsuits. Oh well...

 

"Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again"

This strikes me as a ludicrous exaggeration and not something any serious journalist would ever write. Does anyone know much about the article's author? It is possible that Goldman has engineered at least one major market manipulation, but *every single one* since the 1930s?

This writer comes across as either an amateur, or a deliberately distorting propaganda artist.

 

These are interesting and valid questions. One thing that jumps out at me is the lack of citations. Where does all the data come from? Whatever the case, the author's claims should not be immediately discredited. The simple make-up of the government's officials gives this article a great deal of credibility. Obama and Co. is littered with former GS executives.

 

Mr. Taibbi is being far too gentle with Mister Goldman's and Mister Sach's fine Wall Street Establishment. Does anyone besides me recall Goldman's manipulation of gasoline prices with impeccable timing prior to the 2003 election. A clever ploy to help keep GWB in the White House. What a coincidence that they should happen to change the weighting of gasoline in the GSCI shortly after Paulson moved from Wall Street to the Treasury Department!

 

Def a worthy read, there is an on going discussing between Goldman (Van Pragg) and Taibbi regarding this.

 

Man alive, what a load of shit. 'Good' for nothing maybe.

 

Oops. the election would have been in Nov 2004, not 2003, right? Anyway, GS manipulated gas prices right after Paulson went to Treasury to help George get re-elected by changing weighting of Gasoline in the GSCI.
This did get briefly into the press but got hushed very quickly. Average person wouldn't have understood it anyway.