It would be pretty hard to come up with a number for the amount of pixels that have been expended discussing the impact of increasing budgets and budget deficits on future interest rates, it’s no doubt an astronomical amount. Little did we know that the Fed had already calculated the answer.

The Telegraph reports that Thomas Laubach, the Fed’s senior economist, figured out the answer in 2003:

Bloomberg reports a computer programmer, Sergey Aleynikov, was arrested July 3 on arriving at the Newark, New Jersey, airport and charged with theft of trade secrets. As someone involved in intellectual property litigation, it brings back nightmares, though I am happy to say I've never been arrested.

From Bloomberg, they note that:

I have been reading and hearing a lot about the "too big to fail" ((TBTF)) theory in the mainstream media since the onset of the credit crisis. There is only one fundamental problem: Not one former TBTF-candidate has remained alive very long after the discussion has been started.

Since the South Sea Co. Ltd. was first TBTF, only to come down and take the better part of England in the South Sea Bubble with it, there is not a single grain of proof that would hold me back from officially burying the TBTF-theory for what it really is: an urban myth.

You have heard of Goldman Sachs (GS) but may not know that it is the owner of the biggest casino in the world through its commodities-trading subsidiary J. Aron and Company. No, it does not own an actual casino but it is merely the stomping grounds for high dollar bettors in the world of commodities.

There are no slot machines or other gaming devices anywhere around its sumptuous offices at 85 Broad Street in New York before you start planning to make reservations to fly in on your private plane, be met by a private limousine with a chauffeur, check into your luxury suite and hit the tables. Better yet, it is set up and is connected to every major commodities exchange around the world.

We should remember that capitalism is based on free market principles in which companies compete with each other. If one fails, other and presumably better companies take its place. Thus, the market evolves so as to better meet consumer demands. Companies fail in a free market economy because they are unable to compete with stronger business models. Moreover, they should be allowed to fail in these circumstances so that better business models can take their market share.

By Patrick Watson

People on Fox News Channel and other conservative outlets charge that the government is taking control of private business. Those saying this should know better. The reality is quite the opposite: private businesses, and specifically a few large banks, have taken control of the government.

(Click the Vulcan Paulson (youtube) Image to see Taibbi discussing Goldman)

Rolling Stone political reporter (and Daily Bail reader) Matt Taibbi did a nice little number on the fiefdom of Goldman Sachs in this month's issue. These 3 clips were part of the coverage and were produced by Rolling Stone. You can find the other 2 videos here (they are parts 1 and 2).

In case you’re not aware, there are allegations against Goldman Sachs (GS) by Matt Taibbi in his article, The Great American Bubble Machine, (July 9-23, 2009 in Rolling Stone). Taibbi’s thesis is that in pursuit of its own profit, Goldman Sachs created six major bubbles to the determent of the nation.

Both Citigroup ([[C]], [[C.P]]) and Berkshire Hathaway ([[BRK.A]], [[BRK.B]]) continue to violate the law of one price.

Citigroup

Over the past two weeks many banks issued press releases and opened up the PR spigot to indicate just how stable they all are now that a few have managed to pay down their TARP commitments. This, of course, is nothing but a complete farce, and simply yet another chapter in the "consumer confidence" game played by the administration and its financial underlings.

In order to see just how much the banking system depends on the continued unlimited wallet of taxpayers and Geithner's printing presses, and how much certain law firms continue to depend on the somewhat less limited wallet of Wall Street, I present an October 31, 2008 letter recently obtained by Zero Hedge (pdf file), in which Sullivan & Cromwell, Wall Street's #2 favorite law firm (or is that #1: I am sure Wachtell Lipton would have a few choice words with regard to that particular league table rating, although it may be hard pressed to match S&C's $241,975 in donations to the Democratic National Convention), goes to town to make sure that its well-deserving clients including Bank of America (BAC), Bank of New York Mellon (BK) , Citigroup (C), Goldman Sachs (GS), JP Morgan Chase (JPM), Merrill Lynch, Morgan Stanley (MS), State Street (STT) and Wells Fargo (WFC) get to not only have the taxpayers' cake (in perpetuity), but eat more and more of it each day.

I was nice and relaxed Sunday evening, popped open a few websites to check for evening business news, and came across the latest shitstorm that's circulating with ZeroHedge in the eye of the storm.

Last week Zerohedge wrote a post about Goldman Sachs' (GS) continued dominance of the principal program trading statistics that the NYSE publishes weekly, and about the overall ramp up in program trading volume. Anyone who knows anything about program trading knows that this streetwide increase was due to expiration: large baskets of stock are traded against expiring index futures and options, and the S&P 500 also does a quarterly rebalance on the same day. Thus, the program trading numbers for the 3rd week in June are always large.

Major developing story: Matt Goldstein over at Reuters may have just broken a story that could spell doom for if not the entire Goldman Sachs program trading group, then at least those who deal with "low latency (microseconds) event-driven market data processing, strategy, and order submissions." Visions of swirling, gray storm clouds over Goldman's SLP and hi-fi traders begin to form.

Back-up: This week's NYSE Program Trading report was very odd: not only because program trading hit 48.6% of all NYSE trading, a record high at least since the NYSE has kept tabs on this data, and a datapoint which in itself was startling enough to cause some serious red flags as I jaunt from village to village in what little is left of Europe's bison country, but what was shocking was the disappearance of the #1 mainstay of complete trading domination (i.e., Goldman Sachs) from not just the aforementioned #1 spot, but the entire complete list. In other words: Goldman went from 1st to N/A in one week.

Just when you thought it might be safe to go back in the water, do you see a huge shark fin lurking just offshore? The key to successful resolution of the financial system woes was supposed to be deleveraging. The U.S, and other governments collectively have put up trillions of dollars (the U.S. more than anyone else) to support the process.

I don't think there is a single person who would argue that the job of clearing overleveraging out of the financial system is anywhere near completion. And yet, new securitization schemes are being put forward by Goldman Sachs (GS) and others.

1. It shows how much the SEC is on the side of Wall Street
2. It’s another move that fixes nothing but looks good on paper
3. It further sets us up for a full-blown repeat of 2008’s collapse.

Regarding the first point, the SEC first instated these rules temporarily back in July 2008. At that time, the story presented to the public was that “evil” short sellers are the guys responsible for taking down the market, resulting in Americans losing trillions of dollars.

One of the most astute observers of the financial world, Simon Johnson, has a very good posting which underscores the astounding hubris of the American Bankers Association.

Dear Sirs,

You have slashed rates to the bone and you are now signaling your commitment to keep them there "for as long as it takes". Assuming your aim is to revive credit markets, i.e. generate a "healthy" amount of credit demand and creation for the greater benefit of the economy, what you are doing is mostly wrong.

Oh, I do understand that your actions and statements are in line with academic monetary policy theories. But, they are misplaced when it comes to what happens in financial markets in practice and work against what we are hostage to: our "animal spirits". You know, fear, greed.. the usual day-to-day stuff.

Allow me to explain in more detail.

I assume that everyone in mainstream finance and government now wants to see credit markets back to normal, i.e. a resumption of borrowing and lending, a rebound in housing and retail sales, global trade. (You know, I am not crazy about this Permagrowth model, but the memo is not about me.) For "growth" to happen, credit demand is of paramount importance: people and businesses must want to borrow. It doesn't matter much if lenders are willing to lend, if there are no willing takers for their loans.

As you know, credit demand from the private sector is very low right now. Apart from the economic crisis which reduces demand, another important factor is pricing, i.e. current and future prospects for the direction of interest rates. If a potential borrower is sitting on the fence about taking out a loan, your statements about low rates as far as the eye can see are creating no sense of urgency at all.

There is plenty of time to think it over, you seem to say. Interest rates are low and will stay low, so no need to rush into a decision right away. Stick around, but you're not going to miss the boat, anyway.

How about this message, instead:

Current interest rates being near zero is an unprecedented event that will not last much longer. We are planning to raise rates in the very near future because such loose conditions are unhealthy for monetary stability and the economy in general. So, if you want to borrow, the best time is right now.

In other words, you should immediately start dispelling interest rate complacency.

By Simon Johnson

The banking industry is exceeding all expectations. The biggest players are raking in profits and planning much higher compensation so far this year, on the back of increased market share (wouldn’t you like two of your major competitors to go out of business?). And banks in general are managing to project widely a completely negative attitude towards all attempts to protect consumers.

Manulife Financial Corp. (MFC) was one of the biggest gainers on markets over the past three months, but thanks to a late June slump, the life insurance giant still remains one of the better buying opportunities heading into the third quarter, says Desjardins Securities analyst Michael Goldberg.

"We believe that the recent decline in Manulife's stock price has been an overreaction by investors," Mr. Goldberg said in a note to clients.