Uri Praiss, Att.'s  Instablog

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June 6, 2011                                                                           U r g e n t!!

,Dear News / OP - ED Editors

I am honored to file my Updated full version as follows.

Please inform back by e-mail.

Re: Wall Street Rating Agencies and Goldman's Criminal Deductive and Inductive Profiling Ex Post Facto: 2007 crisis Criminal investigations and some Hot Stuff
 

Author: Uri Praiss, Attorney at law (Israel, since 1990)

 Law & Economics lecturer

Excuse me, but I hope last American White Knights, N.Y.A.G. Eric Schneiderman, as well as Cyrus Vance Jr., the Manhattan district attorney whose jurisdiction includes Wall Street, would read this article.

Maybe they will write back: “LDL”.  If Intellectual Property rights were possible for "LDL", Goldman Sachs would own them for “let’s discuss live” (No legal rights. It is Generic, like that Donald's "You're Fired!" application denied). During the S.E.C.’s investigation we first met this secret code.  

When Fabrice Tourre defined (by e-mail) those mortgage "investments" ("bombs") as “a way to distribute junk that nobody was dumb enough to take first time around,” to his boss / team-mate, one Jonathan Egol, Before the manipulative criminal "Big Short", he was answered at once: “LDL.”("Shut Up!!" in French). Goldman's security rules are stricter than an Iranian Nuclear Station.

 So on June 2^nd, morning, we found out that Goldman's executives were subpoenaed by Cyrus Vance Jr., the Manhattan district new attorney, whose prosecutors seek details on GS' conduct during the financial crisis, opening a fresh legal  front, after GS recently subpoenaed also by the N.Y. A.G.    

Within half an hour or so,  fearfulMoody's issued a rating downgrade for 3 banks – BOFA, City and WFC (but not GS or JPM) – "I'm not their friend". Next hour – Moody's shoots again – now against the U.S. Administration – down grade the Treasury Bonds.

Then I recalled: We've already seen this very bad movie, exactly a month and a half ago. Moody's and S&P got another panic attack. They both spin together with Goldman.

S.E.C. and GS would help also Moody's and S&P. Remember classic "Prisoners' Dilemma", maybe most popular Economics' Game Theory? Let's invent 500 pages of new Rating Rules' wasteful cover up, so maybe they won't face Criminal and Civil Fraud and Conspiracy charges plus (Gross) Negligence huge law suits.

"One for all and all for one" Musketeers meet at "Robin Hood"'s Lady Gaga's Charity Tax Deductable evening, till N.Y.A.G. and N.Y.D.A. shall come between you.

On Monday morning, 18, April, 4:02 am, "The New York Times" published a nice article, by Louise Story and Graham Bowley named "Seeking Clues in Goldman's Succession Plan" - on famous CEO, Mr. Lloyd C. Blankfein. I hope none of the "Candidates" had bought new $ 10,000 suit. It was just a spin – balloon.

A few hours later started "Stormy ("Short Selling") Monday". Wall Street's trade week started by a paralyzing "Knock – Out" - a "Short" "Selling Effort" (and cheap buy back, slow collecting later).

That was an unexpected shock. Futures were green. Within few minutes, Dow – Jones dropped sharply 2 %, from less than 12,350 (last Friday, 15th,"finish" effort) to 12,100.That's "Signalling" daily manipulation. Nobel Prize winner, Michael Spence, never meant that horrible manipulation. At least from last May "Sell, stupid and fade away". It opened the 2nd week of a well - concerted fearful uncertainty for the new Quarterly Financial Reports' Season.

The HFT Algorithmic Speedy manipulators made a fortune that day (April 18^th). Just GS, JPM, MS – each made much more than the usual $ 100 Million Net daily Trade Profit that each of them show most trade days. Didn't you know? That is the new crisis – "Hair Cut" Markets and Economy both to hell, concerted by a 1000 learned pessimist excuses. What about Greece's debts and bailout plan and DSK? Portugal? Poland?

"Stormy Monday", April 18^th was the morning the bomb was dropped by S&P, about considering a lower rate than AAA to the U.S. Treasury Bonds, due to the national debt, deficit, etc. Have you noticed the timing?

Two days before that weekend, April 13^th, Senators' Carl Levin - Tom Coburn Committee Filed their 635 pages comprehensive final report and thousands of attached documents, Testimonies etc., of 2007 Financial disaster, where GS and Mr. B. are leading actors. The respectable Committee recommends many examinations (and investigations) of events and conclusions, as follows:

                         "The Report concludes that the most immediate cause of the financial crisis was the July 2007 mass ratings downgrades by Moody’s and Standard & Poor’s that exposed the risky nature of mortgage-related investments that, just months before, the same firms had deemed to be as safe as Treasury bills.  The result was a collapse in the value of mortgage related securities that devastated investors.  Internal emails show that credit rating agency personnel knew their ratings would not “hold” and delayed imposing tougher ratings criteria to “massage the … numbers to preserve market share.”  Even after they finally adjusted their risk models to reflect the higher risk mortgages being issued, the firms often failed to apply the revised models to existing securities, and helped investment banks rush risky investments to market before tougher rating criteria took effect.  They also continued to pull in lucrative fees of up to $135,000 to rate a mortgage backed security and up to $750,000 to rate a collateralized debt obligation (CDO) – fees that might have been lost if they angered issuers by providing lower ratings.  The mass rating downgrades they finally initiated were not an effort to come clean, but were necessitated by skyrocketing mortgage delinquencies and securities plummeting in value.  In the end, over 90% of the AAA ratings given to mortgage-backed securities in 2006 and 2007 were downgraded to junk status, including 75 out of 75 AAA-rated Long Beach securities issued in 2006.  When sound credit ratings conflicted with collecting profitable fees, credit rating agencies chose the fees."

Let us go back, a few days after the report, to this April 18^th. HFT and "short" selling manipulators, riding all the way to greed, on S & P's AAA downgrade's warning to the U.S. as a whole, the Government and everyone.

Some Intervewed Manager explained that he assumes the other firm, Moody's, would announce the same soon (!!) Wow. Correct me if I am mistaken, but if it walks like a threat, and talks like a threat: "Take Levin and the Authorities out of my hair!!".  Scary. How would Tony react in such a movie? ("Make my day."? No way)

Levin Committee's Report shows briefly and clearly S&P's and Moody's Criminal Fraud and Civil (Gross) Negligence, At least. What about S&P's and Moody's insurance?

If you don't believe me, ask Prof. Bill Black, even though I didn't check with him or read it. Sorry, I adore him but I've never heard him. He was the Chief Litigator of former crises.

He could really help our White Knights, N.Y.A.G. Eric Schneiderman, as well as Cyrus Vance, the Manhattan district attorney's minimal teams (hardly 0.01 pro mille of the suspects' budgets, resources, equipment, biased professionals, etc) that should "scan" and check tons of documents and details. The fines should finance them.

Timing.  The next morning, Tuesday, April 19^th, Mr. B.'s GS filed Quarterly Reports. They are smart: "Don't Lead with the Chin". Just spin and move. So exactly the day before, they had returned 5.5 Billions' Loan to good old Warren Buffett, who rescued them at the crisis, when they couldn't breathe, like the late Lehman Bros., Bear, Merrill, etc. They didn't miss an opportunity to "Crowd Out", at the midst of hell.

That is why G.S.'s Revenues and Profit in their updated report, dropped half, but are still much higher than the Annalists' expectations.

It is not Japan, where managers commit Hara-kiri, or at least resign, after such Levin's committee report.

The financial reports show they hide profit – "not to lead with the chin." Just spin and move on. Throw carefully these Rajaratnam and Tourre to the sea, play the victim, cry and complain. 

Mr. B. said (Testified!) GS is operating God's will. Someone asked Prof. Albert Einstein, if he believed in God. He answered: "What do you mean "believe" – I see him in action every day!!" So I see, I know these are "Laundering profits" (!!) of manipulative HFT actual trade. This is the new crisis.

$8 Billion "Receivables" - That is the explanation why Goldman Sach's latest quarterly report reveals that the firm has over $8 billion assets it lists as "receivables from customers and counterparties." A year ago, it reported it had just $1.8 billion of these kind of assets. What's going on here?

When you "postpone" or cover cash income of $6 billion as if "receivables" – that's what happen.

$100 Billion US Treasuries - The same explanation relates to another question, big time, why "Goldman Sachs dramatically increased (by $15 billion – to $100 billion – even Pimco's Bill Gross sold them all and short them heavily!!!!) its exposure to debt issued by the US government and government-sponsored agencies like Fannie Mae and Freddie Mac in the first quarter of this year, apparently bucking the trend of some of the biggest bond traders to short US Treasuries"

Lately we learned suddenly about those 15 or so,  silent and highly – organized, States' and S.E.C. "partial-but-final rehabilitation-immunity-bargains'" ridiculous fines (as lately urged in New Jersey and Massachusetts) which N.Y.A.G. Schneiderman refused to accept, as was reported here.

      Legally those cheap bargains should be delayed or canceled at once, given April 13^th Levin's report as followed by this first criminal official "clean house" investigation that started. They didn't see Levin – Coburn Committee's horror report. They were misled. New York was the Central Scene of Crime. It is even a matter of Legal Jurisdiction and "Convenience's Forum" – The Origin of Cancer.  I wonder how come nobody attacked those bargains' sales in courts yet.

       Those Trading "Banks", each reporting $100 Million daily net trade profits easily (how exactly?!) were just tickled to laugh by those $1 Million State – fines.

      Even $ 550 Million's S.E.C. selective "plea – bargain" fine appears now as a gift - their "Gold Mine Windfall" – approximately 1 day's total income, and let's pretend It's over. Nothing happened (!!) Kafka couldn't write it better. 

      Finally, I must say that I miss the one and only Judge Louis Brandeis ("Other People's Money and How the Bankers Use It")  

I guess he rolls over in his big seat at Heaven while watching this show. How I wish Brandeis' social, economic and legal Legacies were used now. He fought the first rounds, with the original JPMorgan and the Robber Barons. They did everything to sabotage his nomination but Roosevelt refused to give up.

            Sincerely yours,

            Uri Praiss, Attorney at law

            Law & Economics Lecturer