Goldman Sachs And Casinos

Andrew Ross Sorkin of the Times surely knows the textbook answer to this:

When Wall Street Deals Resemble Casino Wagers

...But if there is a larger question, it is this: Why was Goldman, or any regulated bank, allowed to create and sell a product like the synthetic collateralized debt obligation at the center of this case? What purpose does a synthetic C.D.O., which contains no actual mortgage bonds, serve for the capital markets, and for society?

That may be a larger question, but Mr. Sorkin never answers it.  Instead, we get this explanation of derivatives:

One side bets the value will rise, and the other side bets it will fall. It is no different than betting on the New York Yankees vs. the Oakland Athletics, except that if a sports bet goes bad, American taxpayers don’t pay the bookie.

“With a synthetic C.D.O., it’s a pure bet,” said Erik F. Gerding, a former securities lawyer at Cleary Gottlieb Steen & Hamilton who is now a law professor at the University of New Mexico. “It is hard to see what the social value is — it’s hard to see why you’d want to encourage these bets.”

Hard to see the social value?  Let me help - speculators and short sellers aid in the process of price discovery, so that market participants can use "real" prices (and I emphasize the airquotes here for reasons explained below) to make decisions.  [What, was 'Casino Royale' on television recently?  Here is a NY Times op-ed that also leans on the flawed casino analogy.]

So for example - imagine it is 2007, there is something Alan Greenspan is calling a global savings glut, and all around the world investors have become persuaded that they must own US residential mortgage-backed securities ('RMBS').

In a world with no synthetic CDOs, would-be investors would have to bid for the existing supply of mortgages, driving up prices and encouraging every builder in America to build more houses and every mortgage originator in America to make new loans.  If and when that bubble pops, the result will be huge over-building in the housing market and a serious unemployment problem as people who thought they could make a career in construction or mortgage origination migrate to new professions.

But suppose we allow the creation of synthetic CDO's.  By itself, that does nothing.  But suppose there also exists a large group of well-financed investors who are prepared to put big money behind the notion that US residential mortgage-backed securities are over-priced and bound to fall in value.

Ah hah!  Now the RMBS bulls and bears can slug it out in a virtual world.  Investors who feel they must own these bonds can buy synthetic versions from bears who are happy to sell to them.  Actual prices may not change and neither real-world builders nor mortgage originators will get a price signal exhorting them to expand the nation's housing stock. 

Then, when the bubble bursts, all that happens is that large sums are transferred from the bulls to the bears (had the bubble not burst, the opposite would have occurred).  The wholesale layoffs in construction and the massive overbuilding of the housing stock don't occur.  And if no bank bet too much (If!), there would be no bailouts.

I exaggerate for effect, of course - in reality, the huge demand for RMBS would fuel both the creation of a synthetic market and expanded real-world construction.  However, to the extent that the bears were able to put their money to work to hold down prices, the magnitude of the overbuilding should have been mitigated.  Put another way, prices are more likely to float above their "correct" value when bears have no mechanism that lets them express their opinion with cash.

So, is the use of synthetic CDO's different from betting on the Yankees or the A's?  Well, the value of the price signal that the Yankees have a more powerful team than the A's is far from clear to me.  I'd hate to say it is useless, but I can't think of a use. 

But here is gambling question I am sure I can answer.  Consider a casino (as alluded to in the headline) where bettors are putting their money or the red or black of the roulette wheel.  I am confident that (assuming it is a fair, properly balanced wheel) the price signal conveys no socially useful information. 

(That said, I will indulge my inner pedant and add that if there is a flaw in the roulette wheel that prompts it to favor a particular color, there is an excellent chance that the price action will deliver that signal to the casino operator, as sharp bettors discover the flaw and put their money down on the winning side.)

So - housing market side-bets can provide a useful guide to real world behavior in a way that does not translate to baseball betting or casino wheel.

Mr. Sorkin presses on with two more dubious but related points.

The Securities and Exchange Commission, in its suit, says that Mr. Paulson asked Goldman to help create a synthetic C.D.O. of lousy mortgage loans that he selected so he could bet that they would go down and then profit on their fall.

That's what they say.  But part of Goldman's response is that hindsight is 20/20.  In 2007 Paulson was a guy with an opinion about housing bonds, just as Nouriel Roubini was a guy with an opinion about the financial system.  So what?  With the passage of time, their opinions were vindicated and others were not.  But who knew events would play that way in 2007?  Sophisticated investors who believed that RMBS represented good value also understood that other market participants disagreed and that the nature of a synthetic CDO required both bears and bulls in the deal. 

Paulson might look at a particular bond with a bearish slant and persuade himself that since it hadn't fallen much yet, it had a lot longer to drop.  A bullish investor might look at the same bond and convince himself that since it hadn't fallen much yet, it would lead the way in the next rally.  After the fact, they won't both be vindicated, but that doesn't mean that the bull should credit Paulson with prescience from the outset.

Put another way, after tonight's game between the Yankees and the Athletics, it will be perfectly obvious that one side bet correctly and the other side did not.  But if the A's go on to win (heaven forbid!), that will hardly prove that everyone who bet on the Yankees was an idiot.

One last gasp from Mr. Sorkin:

Try this mental exercise: Imagine if, a few years ago, an influential investor like Warren Buffett, bullish on real estate, had asked Goldman to develop a synthetic C.D.O. made up of undervalued mortgages.

Now, imagine if Goldman had found John Paulson to take the opposite side of the trade and, lo and behold, a year later Mr. Buffett turned out to be right and Mr. Paulson lost his shirt. Would you call that fraud? Would you be very upset?

Maybe not, but Mr. Paulson sure would be. And he might be inclined to sue over it, especially if he found out that his bet had been rigged against him from the start. Which brings us back to the financial legislation being debated in Washington.

First of all, Warren Buffet has been a legendary investor for decades, so his involvement in the deal would clearly be material.  Paulson was a legend in the making who is now famous for having called the housing turn; back in 2007, he was one more housing bear no one had heard of.

As to the notion that the bet "was rigged from the start", well, that is tricky.  Mr. Paulson (or Mr. Buffet in the hypothetical above) is not, for example, a Cisco insider structuring a short sale of Cisco to dupe some outsiders.  The bears have an opinion, but they have no material inside information unavailable to the bulls.

A synthetic CDO must, by its nature, have bulls and bears.  Saying to one of the bulls, "by the way, do you fully understand that someone is selling what you are buying?" would not have added to their understanding of the deal.  Telling them that the buyer was someone they had never heard of would not have expanded their useful data set either.  On the third hand, telling them that the other side was being taken by the legendary Warren Buffet would have given many people pause (at a minimum, an investor would pause long enough to figure out how to explain to his boss that he is smarter than Buffet.)

Well, that is the Goldman side.  I should add this - if the SEC can establish that Goldman made a deliberate effort to mislead the investors about Paulson's role, it would certainly suggest that Goldman thought there was something worth hiding.  But that evidence is a bit thin.

"REAL" AND "CORRECT" PRICES:  I used the quotes up above because of a common mis-apprehension of the nature of market prices.  The notion of efficient markets is not that prices are always right - it is that prices are wrong in ways that cannot reliably be predicted in advance.

Just for example, tonight, some people will study the rosters and starting pitchers and bet on the Yankees; others will do the same thing and bet on the A's.  Just now, the "right" price might show the Yankees with a 60% chance of winning; by about 4AM ET tomorrow, that price will be absurdly wrong, since the Yankees will have either won or lost.  But at this moment in time, it is a perfectly reasonable price and tomorrow morning it would be unfair to say the losing bettors were buffoons who were duped by the winners (We save "buffoons" for Red Sox fans).

Similarly, back in 2007 different people had theories about the likely developments in the US housing market.  Obviously, some were right and others wrong.  Paulson was right, and good for him.

Comments

[bgates]

What purpose does a synthetic C.D.O., which contains no actual mortgage bonds, serve for the capital markets, and for society?

What purpose do those regulations on Goldman which somehow tie my financial health to theirs serve for society?

[Danube of Thought]

One man's take on the judge in the case:

Tyler Durden Zero Hedge April 20, 2010

The recent legal case against Ken Lewis and Bank of America proved just how critical the Judge selection in these SEC-spearheaded cases can be. The case of the Securities and Exchange Commission v. Goldman Sachs & Co. et al (Southern New York District, 10-3229), has been assigned to Judge Barbara S. Jones. The Temple University JD grad’s career revolves around Organized Crime & Racketeering (two specialties that will be particularly appropriate); she also served as Assistant US attorney for the NY Southern from 1977 to 1987. Most importantly, she was assigned to the Southern District Court in 1995 on the nomination of one William Jefferson Clinton, following the recommendation of Daniel Patrick Moynihan, both certainly not of Republican persuasion. Following today’s disclosure that the SEC vote was executed along party lines with Democrats voting against the squid, it is not too surprising that Judge Jones seems to have Democratic roots. We are currently tracking down Judge Jones’ donation record. We don’t think we will be surprised.

Full career of Judge Jones according to the Federal Judiciary Center.

* Special attorney, Organized Crime & Racketeering, Criminal Division, U.S. Dept. of Justice, 1973
* Special attorney, Manhattan Strike Force Against Organized Crime and Racketeering, U.S. Dept. of Justice, 1973-1977
* Assistant U.S. attorney, Southern District of New York, 1977-1987
* Chief, General Crimes Unit, 1983-1984
* Chief, Organized Crime Unit, 1984-1987
* Adjunct associate professor of law, Fordham Law School, 1985-1995
* First assistant district attorney, New York County District Attorney’s Office, NY, 1987-1995

We refuse to comment on the name of the lead SEC attorney in the case, Andrew Matthew Calamari.

[Jeff]

as usual the liberal belief that every transaction is a zero sum game is at odds with the real world ...
the investor shorting the CDO may very well own a huge portfolio of mortgages that they cannot sell for various reasons but they are uncomfortable being exposed to. So they short the CDO to "hedge" their risk. So winning in the CDO trade offsets their loss in the actual mortgages.
The buyer of the CDO may not want to go out and buy 100's of mortgage pools to invest their money. It costs alot to manage trading and settling those securities that they bypass by trading the CDO.
Take a look at a mutual fund prospectus sometime. It often REQUIRES that a fund be 90-95% invested at ALL times and may also give clear instructions as to what the fund MUST be invested in, say 5-10 year mortgage backed securities.
The trade we hear about is seldom the "trade" in total. Players on both sides may have different movtives and reasons for trading and often both sides get exactly what they want out of the trade. The hedger (the shorter) gets his risk reduced and the buyer wins in a up market trade. Remember the hedger is not trying to make money on the market movement so much as hedging risk.
Its not what they did but why they did it that tells you what they expect the trade to deliver for them.

[jimmyk]

Solid point, Jeff. I'm not sure that there was much hedging going on this particular deal, but it can't be stressed enough when you try to banish "speculation" you end up throwing out the baby with the bathwater.

[Jack is Back!]

Since Gregg Craig couldn't shut down Gitmo maybe he can help Goldman Sachs out of this mess by helping the Feds find a way not to do something.

[bunky]

Goldman can buy Gitmo!! I get jokes.

[nathan hale]

"It's a Trap" paging Admiral Ackbar to the white courtesy phone

[Charlie (Colorado)]

Here's Henry Blodget on this stuff. Since he seems to largely agree with me, I think he's brilliant.

[sbw]

TM, an entertaining read. Thank you.

[anduril]

Charlie, I definitely found Blodget helpful, but I'm still having a problem understanding how all this gambling provided a societal benefit in some quantifiable way. My concern is that all this gambling undermined the stability of our financial system. If so, I'm for reform. Now, I'm heading back to Tavakoli.

BTW, Blodget seems to show that you may as well have had blind monkeys handling these transactions. Obviously, right? all the players were smart, sophisticated. Just as obviously lots of these smart people look very stupid right now. If you decide that you're gonna go with the smart people, that doesn't help much before the results are in. At least not for unsophisticated investors, which gets kind of question begging. Back to social utility.

[anduril]

Well, according to Janet Tavakoli, blind monkeys might have been an improvement:

Janet Tavakoli: This wasn't just an unfortunate mathematical error. And there are people who are talking about flawed models, as I have. I talked about it in my 1999 credit derivatives book and this book on CDOs. Yes, the models have issues, and we've always known that, but the problem here was deeper and more worrisome.

And that was that I'm only holding people to the standard that I hold myself. And I'm not saying I'm any smarter than they are. I'm saying they are as smart as I am. And they knew--or should have known--that at the outset, the collateral was compromised and the ratings were overrepresent[ing] the safety, and the deals were therefore overpriced. Now, if I knew that, I'm saying they knew or should have known. And I'm not just saying this after the fact, Steve. I said this in real time.

[nathan hale]

The problem lies with the issuance of real stock market offerings that SarBox the last big fix made harder, And why was that necessary, because firms weren't following
the rules in the first place, when you manipulate numbers without any relation to actual value, and then you short the stock
what good have you done. Genuine stock issues
were crowded out with this other product, following Gresham's law, and we saw the result

[helpusordie\America's Promise Alliance for Health Resources and Services Administration]

NGOs get lots of money and foreign aid has tripled the last few years each year. China is doing more foreign aid outside of their area and the US says it's okay.

The nice Chinese offset their guaranteed loss, O's mortgages, with foreign aid we do. Those leaders are real nice and have been there as long as Kennedy.

[Greg Q]

Tom,

I think you're right about the social utility of CDOs, but wrong about the quality of Goldman's defense.

If a company is putting together a CDO on mortgages, and going long on the CDO, then I, as an investor, have the reasonable expectation that they have researched the individual bonds, and expect the bonds to do well. So I may go long on the CDO because I think the company does good research, or I may just go long on it because I think the housing market will continue to go up.

If a company randomly selects mortgages for their CDO, then if I'm bullish on the housing market in general, I can go long on their CDOs, and if I'm bearish I can go short.

But if a company puts together a CDO that they are going to short, then the only reason for me to go long on it is if I think they are incompetent buffoons. Otherwise, if I'm bullish on the market I want to go somewhere else (since I expect the hand picked mortgages to underperform the market as a whole).

Was there reason to believe in 2007 that Paulson was an incompetent boob? No? Then there is no reason for people to want to bet against him, on ground he has specifically chosen. Which means that if GS kept from people the fact that

1: He was picking the bonds that would make up the CDO, and
2: He was going short on the bonds

they absolutely did cheat the other investors. Because unless people thought that Paulson, specifically, was a dufus there would be no reason for them to buy that particular CDO.

[Melinda Romanoff]

anybody got a heatgun handy?

I gotta peel up this astroturf before the glue sets up...(eyes rolling up)

[anduril]

Greg, I like that argument.

[matt]

Wall Street is built upon the edifice of outsmarting the other side.Caveat emptor.

[steve sturm]

I thought synthetic CDOs were created primarily for the purpose of unloading the lower rated tranches of mortgage bonds by packaging the dregs of the bonds into a new instrument (that according to Michael Lewis, somehow got rated higher than the underlying bonds) that could be sold to investors... and not for the purpose of speculating on the direction of the mortgage market. wrong?

Bears such as Paulson bet against real estate by buying CDSs on the bonds and the CDOs, synthetic or otherwise. The sellers of the CDSs (also known as the losers in this case) figured they couldn't lose taking insurance money... the same way, plenty of individual investors figured they couldn't lose back in 87 when they were selling naked put options.

[Tom Maguire]

Re:

Was there reason to believe in 2007 that Paulson was an incompetent boob? No? Then there is no reason for people to want to bet against him...

I kind of agree. Goldman will have a problem when the SEC delivers the Animal House rule - "Knowledge is Good".

Would an investor definitely be influenced by the news that a guy he had never heard of was keen to short these bonds? Maybe, maybe not. But it is hard to imagine an investor who wouldn't even want to be informed of that tidbit.

Now, Goldman will say they have a duty to keep all of their clients confidential, but they could still have been more explicit that the portfolio advisor and the major CDO short seller had consulted on the portfolio (Bulls lying down with bears...)

I am firmly waffling on this.

[steve sturm]

Yes, back in 2007 plenty of people thought the likes of Paulson were boobs. Why else would they continue to underwrite billions of dollars in insurance and at such a low price but for their thinking that Paulson and the other bears were way, way out of their mind?

And by the way, I am pissed that Paulson and the others figured out a way of betting against the mortgage market... and that they didn't invite me in. There didn't exist a market for shorting bonds, they pretty much had to convince Wall Street to devise and market instruments that allowed them to make their play.

[Clarice]

Usually, I confine my thefts to Rick's violet prose but "firmly waffling" fits so many situations I'm vacuuming it up for future use.

[Carol]

"driving up prices and encouraging every builder in America to build more houses and every mortgage originator in America to make new loans. If and when that bubble pops, the result will be huge over-building in the housing market and a serious unemployment problem"

uh, I thought that is exactly what happened..?

[matt]

and now for a completely different subject: The Union of Concerned Scientists informs us that spring came 10 days early, or will come 10 days early, or something.....Of course since the permafrost below Chicago is still thawing, they have not taken that effect into their calculations just yet.

[Thomas Esmond Knox]

Did the buyer ask "Who is the seller?"

No.

Therefore, it was immaterial. Therefore, it is immaterial.

[anduril]

Henry Blodget offers these "fun facts." OUCH! If I'm Goldman I don't want a jury puzzling over this timeline:

In case you weren't focused on the Goldman-Abacus-housing collapse timeline, here are some fun facts, courtesy of Steven Davidoff and Peter Henning at DealBook and the SEC's fraud allegations:

Early December 2006: After making money hand over fist for years betting on the housing bubble, Goldman Sachs suddenly starts losing money on its mortgage trades. For 10 straight days in early December, 2006, the firm's mortgage desk loses money. Alarm bells go off.

December 14, 2006: Goldman's CFO David Viniar and other executives decide to stop losing money. Goldman repositions its portfolio and begins to go short the housing market.

Early January, 2007: Goldman client Paulson & Co. asks Goldman to construct a CDO that allows Paulson to go short the housing market, too (subprime mortgages, anyway). Goldman VP Fabrice Tourre begins assembling the transaction.

January 23, 2007: Goldman employee Tourre, a VP on the "structured product correlation trading desk", expresses his view in an email that the housing-related CDO market is about to collapse: "More and more leverage in the system, The whole building is about to collapse anytime now.... Only potential survivor, the fabulous Fab[rice Tourre]...standing in the middle of all these complex, highly leveraged trades he created..."

February 7, 2007: Goldman's Tourre emphasizes the need to have a firm named ACA's "name" on the the Paulson-short vehicle, which will be called Abacus--otherwise no one will buy it.

February 11, 2007: Fabrice Tourre's boss on the structured product trading desk tells him to hurry up because the market is beginning to collapse and time is running out: "the cdo biz is dead and we don't have a lot of time left."

February 26: After six weeks of negotiation, Abacus, Paulson, and Goldman agree on a portfolio of securities to be included in Abacus.

March 12: Goldman begins marketing Abacus.

April 26, 2007: The Abacus deal closes. The market is collapsing, so Goldman has been unable to unload all of Abacus. (Good thing they've also bet billions on the market collapsing, or they might have lost money).

By January, 2008: 99% of the securities in Abacus have been downgraded and the CDO has lost $1 billion. Goldman and its client Paulson & Co. have cashed in. Fabrice Tourre gets a $2 million bonus.

[Danube of Thought]

Therefore, it was immaterial. Therefore, it is immaterial.

That's not true if it was understood between the buyer and Goldman that the seller would not be disclosed even if the buyer asked. In any event, there are duties to disclose things in the sale of securities that go way beyond the questions a buyer might or might not ask. It is simply not a defense to a suit for fraudulent omission to prove that the defrauded party never asked.

[Charlie (Colorado)]

Anduril, there are a whole lot of financial transactions for which some people might have trouble seeing the "social utility", but who is to judge. As we've talked about before, CDOs and other derivative have economic value because they transmit information about what people think the values are.

Greg O, in every stock transaction, the buyer is betting they're smarter than the seller, or alternatively that the person on the other side is the doofus.

[Charlie (Colorado)]

Would an investor definitely be influenced by the news that a guy he had never heard of was keen to short these bonds? Maybe, maybe not. But it is hard to imagine an investor who wouldn't even want to be informed of that tidbit.

Tom, can this transaction even occur without there being someone who wants the short side? Isn't it like my over/under bet, ie, without people on both sides you don't want to have much of a book on it?

[Extraneus]

Which hand does the magician want us to be looking at right now? Oh, this one?

[anduril]

CDOs and other derivative have economic value because they transmit information about what people think the values are.

It seems in this case, though, that the information was pretty worthless. Some people, it seems, thought the housing bubble would expand indefinitely while others thought it would pop. However, if you read the timeline above, it seems that Goldman was pushing out CDOs in the firm conviction that:

the housing-related CDO market is about to collapse: "More and more leverage in the system, The whole building is about to collapse anytime now

need to have a firm named ACA's "name" on the the Paulson-short vehicle, which will be called Abacus--otherwise no one will buy it.

"the cdo biz is dead and we don't have a lot of time left."

Now, I call THAT potentially valuable economic information. Much more valuable than: some think it'll go up, some think it'll go down. If Goldman had pushed that info out the door along with the Abacus CDO, I'm guessing that would have affected some buyers' decision. Yeah, I think so.

[bunkerbuster]

I can't wait to hear how the buyers of Abacus attempt to excuse their unwillingness or inability to rely on their own independent assessment of the value of assets they purchased, most likely with other people's money.
As for "synthetic" CDOs, the problem isn't that they generate no price signal, but that the signal is far too blunt to be useful.
The "synthetic" part should be taken at its word. This is an asset made up of pooled credit default swaps written on mortgage bonds. It is not pooled mortgage bonds themselves.
While a CDS spread reflects the risk of a given asset, a pool of CDS has reapportioned the risk into tranches, deliberately, irretrievably adulterating the relationship between the CDS itself and the risk of the underlying asset.
True enough, a synthetic CDO puts a price on the very broad appetite for gambling-level risk, but it tells almost nothing about the supply or demand for housing.

[jimmyk]

Now, I call THAT potentially valuable economic information.

I hereby nominate Anduril to render judgment on which of the billions of financial transactions that take place each day are "socially useful." Not to mention all the millions of random opinions generated in casual e-mail comments. If nothing else, that should make his posts here a bit shorter.

[Ignatz]

I posed the question on another thread that since it is proposed that derivatives like synthetic CDOs provide liquidity and other benefits to the economy what was beneficial to the economy about this transaction.

TM answers here with In a world with no synthetic CDOs, would-be investors would have to bid for the existing supply of mortgages, driving up prices and encouraging every builder in America to build more houses and every mortgage originator in America to make new loans. If and when that bubble pops, the result will be huge over-building in the housing market and a serious unemployment problem as people who thought they could make a career in construction or mortgage origination migrate to new professions.

Besides the fact that that is precisely what we did get anyway, MBSs were already being traded on markets all over the world. In 2005 and 2006 I had no knowledge of MBSs or CDOs but as a participant in the real estate market I could see that a bubble had formed and that things could not continue as they were. By mid 2007 it was clear to most people in real estate at the retail end that I knew, that the end was nigh, but apparently less so on Wall Street where the CDOs and MBSs were still being bought long by the likes of ACA and others.
Lord knows the market certainly had no shortage of liquidity in the oughts. Is there also a limit to the utility of instruments providing price discovery and do they at some point instead provide market opacity?

[anduril]

jimmyk, that was an exceptionally ignorant post. I was referring--as of course you knew--to classes of transactions, not individual transactions. Moreover, those Goldman emails were hardly random or casual--Goldman was scrambling to avoid losing billions of dollars and the people writing the emails were in charge of that effort.

[Danube of Thought]

Darrell Issa smells a political rat and propounded a nice little set of interrogatories and document requests to the SEC.

[anduril]

jimmyk, I'll transfer your nomination to Ignatz. He expressed my own reservations very well. Take a bow, Ignatz--you're in my corner now. LOL.

[bunkerbuster]

``In a world with no synthetic CDOs, would-be investors would have to bid for the existing supply of mortgages.''

This is not accurate. Investors can buy or sell credit default swaps on mortgage debt. Those CDS will represent the market price for risk on the mortgage debt itself and allow investors to take a position on that without having to hold the mortgage note itself.
The reason an investor would choose to buy a synthetic CDO over a CDS, is that the synthetic CDO has reconfigured cash flows -- deliberately isolating the risk -- to produce a "risk free" AAA and/or "super senior" tranch that can be credibly purchased with institutional money like pension funds, ie other people's money.
ACA and others were buying these "super senior" and AAA tranches, even though they knew there was a housing bubble, because they believed that the cash flows from the pooled CDS had been restructured in a way that would guarantee payment on the top tranch -- thus the credit ratings. That in itself is a case-closing demonstration that synthetic CDOs send no effective price signal on housing demand.

[bunkerbuster]

I mean ACA's customers were buying the tranches...

[Clarice]

DoT I think Issa has a point.

And here's some other evidence that this had a political purpose to it.
From Rush today:

"EMANUEL: No, when it hit the news, it is -- the SEC is an independent agency, operates independently. Nobody at the White House knew anything ahead of anybody else.

RUSH: All right, now, as you digest that from the regime, "It's an independent agency, we had no idea what was going on here." "Well, how did New York Times get it before you did?" "I don't have any idea. It's an independent agency." New York Post today: "President Obama is bringing his war on Wall Street to the enemy's turf.
He'll make his pitch for financial reform in the heart of lower Manhattan Thursday - even as his team make hay of the Goldman Sachs fiasco with a tech savvy appeal to Democratic donors." Now listen to this. "Internet surfers who entered 'Goldman Sachs SEC'" as a search term, Goldman Sachs, Securities Exchange Commission, "were directed to the president's campaign website via a sponsored link titled 'Help Change Wall Street.' The White House's political arm paid for the keywords -- but would not say how much."

So this is pure Alinsky on steroids. This guy is incompetent to run the private sector but, boy, does he know how to agitate and community organize. They had no advance knowledge this was happening, but they happened to get hold of Google and they said, "Look, we want to buy the search terms 'Goldman Sachs SEC,' we want you to direct the first hit to our website where we are going to raise campaign funds and awareness of the effort to demonize Wall Street." Meanwhile, the White House continues to deny that there's any link between the timing of the SEC suit and its push for regulatory reform. Here's the smartest regime spokesman that we have ever had, Robert Gibbs yesterday afternoon in the White House, reporters said, "Can you talk about the Goldman Sachs story? Do you think the charges will galvanize the push for reform?""

[Heordie]

Carbon tax credits a casino?

IMF is imposing this tax/credit as countries skip a tax on corporations for bailouts.

[anduril]

bunkerbuster, thanks for the excellent clarification.

[Tom Maguire]

``In a world with no synthetic CDOs, would-be investors would have to bid for the existing supply of mortgages.''

This is not accurate. Investors can buy or sell credit default swaps on mortgage debt. Those CDS will represent the market price for risk on the mortgage debt itself and allow investors to take a position on that without having to hold the mortgage note itself.

You have to work with me here - credit default swaps, like synthetic debt securities, are casino-like side-bets in SorkinWorld, and consequently lack social utility. My presumption is that if he is opposed to one he is opposed to the other.

ACA and others were buying these "super senior" and AAA tranches, even though they knew there was a housing bubble, because they believed that the cash flows from the pooled CDS had been restructured in a way that would guarantee payment on the top tranch -- thus the credit ratings. That in itself is a case-closing demonstration that synthetic CDOs send no effective price signal on housing demand.

As to whether the price signal was effective, well, after the fact it appears not to have been.

But remember, *all* the tranches have to be sold (or swallowed by the underwriter as part of the overall profitability.)

Tom, can this transaction even occur without there being someone who wants the short side? Isn't it like my over/under bet, ie, without people on both sides you don't want to have much of a book on it?

I would say yes, but...

Suppose (on some other deal) Goldman went back to the longs and said "We put together a portfolio of bonds we L-U-V. The short is a guy who hates the market and told us he would short anything we brought him."

That would probably be more uplifting that the actual situation here, which is that Goldman put together a shit list compiled by a guy who hates the market.

Now, maybe Paulson was brilliant at market-timing but a dunce at bond-picking (it happens.) His porfolio would still drop,since he called the market, but maybe it didn't under-perform the market as he might have expected it to. Maybe this portfolio actually outperformed (from a conventional bullish perspective) the market.

That, BTW, is a key piece of info Goldman almost included in their second response. They mention that the initial portfolio proposed by ACA also got crushed, as did the actual ACA/Paulson collaboration, but they don't tell us which portfolio did worse and by how much.

From the back of the first Goldman response we see that the relevant bond index was at about 82 when Abacus closed in June. By December the index was around 20, and at 7 the following June.

Maybe (MAYBE!) the Paulson portfolio fell from 82 to 10 while the actual ACA portfolio fell from 82 to 5. But I sort of think that would have come out in the Goldman response of it were true.

Eventually, one side or the other will produce the price performance figures for the two portfolios and we will see if Paulson's success was due to market timing, bond selection, or both. Ad if bond selection is neutral in this case, Goldman should trumpet that.

[stevesturm]

The GOP is STUPID if they think that going after the SEC/White House connection is going to help.

Right or wrong, the public sees the SEC as a cop, and just like city cops report to the mayor, the public thinks the SEC reports to the President... and if the President orders the cops to go after one of the villains who caused all this turmoil, then the public isn't going to go all technical and say 'but aren't the cops supposed to decide on their own?".

And the GOP screaming about the impropriety of the mayor siccing the cops on the bad guys? Just how is this supposed to play in Peoria?

memo to Issa: you can be both right and very wrong... and this is one of those times, so please drop it.

[jimmyk]

Anduril, opinions aren't information, especially opinions of some 29-year-old trying to put a deal together. My point was that you're using 20-20 hindsight to call that stuff, as well as Paulson's identity, "information." What about all the other millions of hunches and guesses and intuitions that turned out to be dead wrong?

[nathan hale]

i got it Steve, facts don't matter, that why
we had to do something on health care, no matter how ill considered. The administration
is going after small fry in the big scheme of things, "Your Winnings Sir"

[PaulV]

So does anyone else see this as a CYA operation to blame GS for the sins of Big Government? Are they pretending that GS caused crash? When did speculation by the big boys become a federal case? Why should anyone have sympathy for te losing speculators?

[Old Lurker]

Has anybody heard the GOP explain what they don't like about the financial regulation bill? (other than the $50B bailout fund)

A little leadership would be helpful guys.

[Cecil Turner]

Right or wrong, the public sees the SEC as a cop, and just like city cops report to the mayor, the public thinks the SEC reports to the President...

I think you're completely off-base here. Most people can't even spell SEC, and most people are concerned about executive abuse of power. Moreover, if it comes out that the SEC chief was coordinating with Dems to create a favorable environment for the new legislation, especially after the health care shenanigans, I think this thing'll turn on 'em in a heartbeat.

Bottom line: Ms Schapiro better not answer "yes" to any of the questions in paragraph 1. (Though I don't really see why she'd have to answer at all . . . and if she can't say "no" I bet she doesn't.)

[daddy]

If one was to rely solely on BBC Coverage of GS, you'd come away thinking the Republican's are the ones worried about re-election problems come November, and that Moderate Repub's are under enormous pressure now to defy the GOP and vote for Obama's sensible Legislative reforms, which is what the American public wants.

[Ignatz]

--Has anybody heard the GOP explain what they don't like about the financial regulation bill?--

OL,
I did see a couple of stories that I can't relocate of Reps pointing out that in fact with or without the $50b fund this Dodd mess gives the Feds essentially unlimited bailout authority. Since the bailouts are the single most unpopular thing that was done you'd think that would be a pretty useful position to take.
I did link a Larry Lindsey piece on a different thread.

[Old Lurker]

Great link, thanks Iggy.

In short: it sucks.

What a surprise.

[Danube of Thought]

even though they knew there was a housing bubble,

They didn't know it. They believed it, and others disbelieved it (including plenty of heavy hitters). In hindsight we know that those who believed it was a bubble were correct, but that's an entirely different matter.

[anduril]

Anduril, opinions aren't information, especially opinions of some 29-year-old trying to put a deal together. My point was that you're using 20-20 hindsight to call that stuff, as well as Paulson's identity, "information." What about all the other millions of hunches and guesses and intuitions that turned out to be dead wrong?

It's a point of view kinda thing. You might say that the opinions of GS are exactly that--opinions that are worth no more than anduril's opinions. Someone else might say: the FACT that an outfit like GS is scrambling to reposition itself in the mortgage market, the FACT that GS thinks the CDO market is about to go off a cliff, is information--grist for the mill. My opinion on that would have been information, too, but nobody would have paid for it, least of all myself. But I'm betting that people would have paid for the opinions that were being expressed internally at GS-- the FACT that such opinions were being expressed is definitely information.

The other side of it is this. If these were just the opinions of Tourre (the "29 year old"?), that might be one thing--say if he were sending those emails to himself or to subordinates. But that wasn't the case. He was E-corresponding with his bosses, and they in turn (and maybe Tourre) had been in touch with the Goldman CFO on the subject. There are opinions and opinions, and the opinion of the Goldman CFO (who was presumably at the top of the information chain) would likely be of more interest than Tourre's or mine. Those opinions are information for the investor to evaluate.

[Jim Miller]

Daddy - Off topic, but you are in a better place to answer this than most of us: Have you seen a BBC story on the New Orleans attack on Allee Bautsch and her boyfriend Joe Brown?

[Danube of Thought]

I think the general GOP objection is that the bill gives unfettered control to the executive branch over deciding who is systemically risky, and deciding who is so big tnat he will be bailed out. No congressional input at all, and enormous opportunities for political mischief. Loads of moral hazard as well.

I agree that neither McConnell nor anyone else has shown the way here.

[Jane says obamasucks]

Did you guys see the story about the guy the SEC failed to find who costs the public billions? Someone (on Fox I think) speculated that the SEC brought the case against Goldman to cover up what a bad job they did on the other matter.

[Ignatz]

OT but interesting immigration post by Doc Zero at Hotair.
I especially enjoyed this excerpt:

Mass migrations are nothing new. In previous eras, they were generally conducted all at once, with brightly-colored banners fluttering proudly overhead. The receiving country would send a few thousand lads to meet the new occupants at the border, carrying banners of their own, and a lively exchange of cutlery would ensue.

[fdcol63]

The problem is not usually a lack of regulation but lax enforcement of existing regulations.

[anduril]

Interesting article at Daily Beast: Goldman's Shell Game. It's by Roger Martin, who is dean at the Rotman School of Management at the University of Toronto. He's not at all impressed with the supposed sophistication of so-called sophisticated investors.

Who then is the optimal trading partner in this zero-sum game? He (I use 'he' because they mainly are 'he's') has three characteristics. First, he should be particularly clueless. Conveniently for traders, cluelessness is contextual: A partner can be smart about traditional products but clueless about a crazy new one that you create. Second, he should be deep-pocketed—that is, able to lose lots and lots of money because the amount of money that you cause him to lose defines the amount of money that you can make. Third, he shouldn't take losses too seriously.

How could the latter be? Doesn't everybody take losing money seriously? No, not really. People generally take seriously the thought of losing their own money, but not so much losing other peoples' money. So optimally the partner should be managing someone else's money—a so-called fiduciary institution, preferably a big pension fund. And if we want to get particular, there is a further preference on this front. The money manager hired by the fiduciary institution should be on a "2-and-20" compensation formula, which pays the manager 2 percent of assets under management regardless of how terribly he performs, plus 20 percent of the upside in case he does well. This payoff structure encourages managers to swing for the fences with their clients' money rather than actually take care of it—i.e. hit a home run and you are mega-rich; strike out and you are merely very rich.

So it was pretty simple, the Goldman traders needed clueless, deep-pocketed fiduciary institutions managed by folks swinging for the fences on the other side of their trades in order for Goldman to make maximal money.

Goldman created a product, ABACUS, which was attractive to clueless, deep-pocketed fiduciary institutions that were managed by folks swinging for the fences and then merrily traded with those partners and made gobs of money. This is not rocket science. It is tantalizingly simple.

...

First, we need to impose stiff taxes on short-term trading profits to shift the balance away from trading as the single most profitable activity in America. And second, every pensioner needs to be given a choice in who manages their pension because monopolists operate for their own benefit, not their 'clients'.

[Old Lurker]

Sanford, Jane.

[Ignatz]

And here is a nice spot on CA's dismal public union death spiral.

[Old Lurker]

Thanks DoT. What it looks like is a retroactive legal basis for what they did to Chrysler and GM. Hugo Chavez would marvel at the reach this thing has to take over any widget factory (financial or NON financial...) they want and run roughshod over the rights of owners and creditors as they see fit.

Pretty disgusting that no one complains and even the Fox roundtable thinks the GOP should just roll over and move along.

Can we spell "banana republic"?

[Pasadena Phil]

Tom, I think you need to read Michael Lewis' "The Big Short". You give Goldman Sachs far too much credit. Lewis makes a pretty strong case that those who put together the various "alternative structured investments", Goldman and elsewhere, are the dumbest people on Wall Street.

Do you not understand that Goldman Sachs is in a unique situation to use inside information only available to them? They collect it from clients when structuring deals and then use it to place bets on the deals with their own house money. It is why no one dares step in front of their deals. Do you not have a problem with that?

The blatant corruption is made even worse because of their special government relationships and that they are by far the biggest player on the street. You don't have to be a particularly good poker player if you bring limitless money to the table, play by your own rules, and can see everyone else's cards. Nothing wrong with that right?

Solution? Just have more regulators standing around the table doing.....what? Thanks to the brain dead Republicans, that is what we are about to have.

Now that the Republicans have fumbled this issue too, bring on Lindsay Graham and his Cap and Trade and then McCain can re-introduce his latest Shamnesty bill.

[fdcol63]

Can we spell "banana republic"?

O-b-a-m-a-'-s A-m-e-r-i-c-a

[daddy]

"Have you seen a BBC story on the New Orleans attack on Allee Bautsch and her boyfriend Joe Brown?"

Jim,

I have not but will keep my eyes open. Its hard for me to watch too much BBC at a time. I can handle the volcano stuff and sports, but everything else has such a pronounced PC sneer about it I have to switch often.

Day 5 stranded in Delhi. Local News says 41,500 passengers still stuck at Mumbai and Delhi airports. Best stories in the papers these last few days are that mothers milk applied to the cheeks will cure acne, and that in the Philippines coffee experts have discovered that some of those very expensive coffee beans run through the digestive track of a civet are actually fake, and that folks have been amorally gluing civet turds to coffee beans and passing it of as the Real Mccoy.

Its stuff like that thats keeping me sane:)

[rse]

Jane, are you talking about the Stanford story and how the SEC dropped the ball?

It also came out on Friday.

[Clarice]

I am growing increasingly suspicious of this suit by the minute.
I can't quite put my finger on it, but there's a stench...

Speaking of stench, the UN is up to the same old tricks, per Fox
By George Russell - FOXNews.com
The United Nations has quietly upped this year's peacekeeping budget for earthquake-shattered Haiti to $732.4 million, with two-thirds of that amount going for the salary, perks and upkeep of its own personnel, not residents of the devastated island.

(I suppose in a couple of weeks we;ll learn these well paid personnel have been raping and molesting the orphaned Haitian kids.

[Pasadena Phil]

And Tom, that Red Sox jibe... feelings...hurt. Low blow dude.

[Cecil Turner]

I agree that neither McConnell nor anyone else has shown the way here.

Well, it's not like you'd see it on the news if they were. Via Drudge, here's the GOP leadership position. Money graf:

While President Obama and congressional Democrats push job-killing legislation that gives permanent bailouts to their top campaign contributors, Republicans are fighting to end the bailouts and create jobs for families and small businesses. Republicans believe the best way to protect taxpayers is by reforming Fannie Mae and Freddie Mac, the government-sponsored companies that sparked the meltdown by giving high-risk loans to people who couldn’t afford it. For more information on the House Republican plan, click here.

And yeah, that's pandering, but less so than the Dem stuff.

[Extraneus]

Here's Boehner's take on the financial regulation bailout bill.

While President Obama and congressional Democrats push job-killing legislation that gives permanent bailouts to their top campaign contributors, Republicans are fighting to end the bailouts and create jobs for families and small businesses. Republicans believe the best way to protect taxpayers is by reforming Fannie Mae and Freddie Mac, the government-sponsored companies that sparked the meltdown by giving high-risk loans to people who couldn’t afford it.

[Pasadena Phil]

The GOP shouldn't be trying to reform Fannie and Freddie but insisting on phasing them out of existence. THIS Republican party is not much different from the Democrats because all roads lead to the same place. Only the songs on the radio while they drive us there are different.

[rebl]

Sports analogy don't work for CDO(s). These are people who are betting on mortgages they don't have any money in. They are neither the borrower nor the lender. What business do they have betting on the borrowers paying back the loan? If they (Paulson) are betting and they (GS) KNOW that there are liar loans out there and deliberately placing all those liar loans in one basket, because Paulson asked them to, and telling everyone else who wants to bet that they are Grade AAA loans, then there is fraud. Especially when one side (Paulson) knows the liar loans in the basket are the worst of the worst. It doesn't matter whether he is a known or unknown in the investment world. What matters is he knows what's in the basket. The argument that fake, virtual you say, helps keep the real market more real defies common sense. It makes more sense that if insurance (bets) are based on the underlying asset and the asset blows up, then those who are on the wrong side of the bet, are out of luck. Once again this all presupposes that one side of the bet isn't told more of the truth about the underlying asset than the other side.

[Jane says obamasucks]

Jane, are you talking about the Stanford story and how the SEC dropped the ball?

It also came out on Friday.

Yeah, and the speculation is that the Goldman suit was brought that day to hide how they blew it.

[Extraneus]

Ooops. Learning by repetition?

[Janet]

reforming Fannie Mae and Freddie Mac

There was a caller on Rush today talking about the ongoing rural loans with no down payments and such. It made me mindful of Barney Frank's old boyfriend Herb Moses that went from the Dept. of Ag. to Fannie. He "thought up" new types of rural loans. LUN

From the article - " Moses was the assistant director for product initiatives at Fannie Mae and had been at the forefront of relaxing lending restrictions at the company for rural customers, according to the Feb. 23, 1998, issue of National Mortgage News (NMN)."

[Clarice]

Could be but I think an even bigger incentive was the pending "finance reform" legislation and the need for a pretend bad guy for the two minute hate.

[Danube of Thought]

Solution? Just have more regulators standing around the table doing.....what? Thanks to the brain dead Republicans, that is what we are about to have.

Here's a solution: take your cuckoo diatribes about Republicans and shove them up your ass.

THIS Republican party is not much different from the Democrats because all roads lead to the same place.

Was this moron alive when the healthcare legislation was debated and passed?

[Pagar]

Well Said, DOT!

[Old Lurker]

I'm sorry, but Boehner is off the mark here. Sure Fannie & Freddie should be part of it, and sure the $50B is big...but that's inside baseball and has yet to resonate with the public. What WILL resonate is giving the President (sorry, assuming his committee agrees) near police power to take over private non financial firms bypassing bankruptcy courts and the usual safeguards, and being able to treat owners and creditors as they see fit. If the story that is driving Obama down in the polls is the fact that he is a raging socialist, don't you think asking for the power to do just that is a big story?

[nathan hale]

There are some like "Charmin Charlie" and "Snarlin Arlen" but which that description fits, mostly folks that the NRSC jumped into
endorsing, why is their no furor to fire Cornyn, Scott Brown's victory really shouldn't
save them.

Now this is much a Kirschnerista play, in the name of that NeoPeronist wannabe power couple
in Sarmiento's homeland

[rse]

Excellent OL.

You left off the expletive at the end but we can tell it was there.

[Clarice]

narciso, If it's not too much trouble would you mind translating that into English?

[nathan hale]

The Kirschners, came into power, in the aftermath of a economic collapse, in part occasioned by the default on IMF loans they don't represent the moderate faction, like
Menem, but more the ones associated with Montoneros like Gelman, Firmenich, Verbitzky
(the allusions to the weather underground
here are intentional) they have maintained strong ties to Chavez, and a very neutral stance toward us. Interesting the neo liberal opposition seems to be gaining some ground, but it will be hard to reverse all
of their counterproductive agendas

[Clarice]

Thank you so much.

[en]

O's birth certificate, his CIA informant dad and the pals he has.

[nathan hale]

"For the love of pete" Barack Sr. was not a CIA informant, if anything with his facility
with Russian, and the attitudes he displayed
in that African Affairs article, he most likely was a KGB contact, but that was in the
years after Barack jr. was born, after he married Ruth Wisenant, while he was in the planning ministry

[daddy]

Since somebody mentioned Baseball...

Here in India, the IPL (India Premier Cricket League) is very much based along US Baseball lines. The League was created 3 years back and was given rules that allow a match to be played in just about 4 hours like Baseball. Its called Twenty20, and allows 20 "Overs" of 6 balls each, thus 20 x 6 = 120 pitches.

Basically its 1 big Inning---following a coin toss 1 team bats for 2 hours (120 pitches) then takes the field while the other side bats, and tries to score more runs than the team that batted first. That's about it.

Its got flashy uniforms, gaudy colors, bodacious cheerleaders in skimpy outfits with pom-poms, blaring electronic scoreboards at the stadiums, and larger than life Bollywood movie star team owners. It is a perfect venue for television, hero-worship, and corruption.

Corruption wise, nothing on Indian news is of consequence these last few days than the IPL. Its exceptionally popular and different Indian States are demanding a Team Franchise as the League expands. This ">http://www.telegraph.co.uk/sport/cricket/twenty20/ipl/7607549/Indian-minister-resigns-over-IPL-cricket-scandal.html"> former under-secretary general at the United Nations, Shashi Tharoor was caught red-handed accepting bribes in the franchise hunt, and has just had to resign his government post. The corruption scandal is increasing, seemingly uncovering other crooked politicians and league managers every hour. A Congressmen has started a "Ban the IPL" Cricket movement and made a fiery speech in Parliament yesterday denouncing the League, yet the Playoff's start tonight in Mumbai (Bombay), and the pubic and bartenders and cities still in the Playoffs are completely nuts over it.

So its a very fun time to be stuck in India. Two teams have stayed at the hotel this week and they are good looking athletes, very happy to sign autographs for adoring fans, and their girl friends and hangers-onner's surrounding the swimming pool and cocktail lobbies are very welcome eye candy. At least the 1st third of every 30 minute News Broadcast is all about the breaking Cricket scandals and the cricket stadium being bombed, and then comes the volcano stuff. Thats followed by sports (the IPL Playoffs naturally) then Bollywood, and then every half hour it all starts over again.

And FWIW, the game is easily understandable and very fun to watch, especially in an old Brit Pub with the locals all cheering and the bartenders in team Jerseys. The Baseball fans among us would love it. So thats whats going on in India and here's some ">http://www.hindustantimes.com/photos-news/photo-story-news/IPL2020kicksofftoday/Article4.aspx"> glamour shots of the action.

[nathan hale]

Oh. I see that insufferable stuffed shirt has had a bit of a comeuppance, and I really need
to start following more cricket. You are the
Twain/Steinbeck with a touch of Michener to
this social network, daddy

[Extraneus]

Are all the cheerleaders imported?

[Clarice]

So much fun, daddy . I love India..well, not the heat.

[nathan hale]

I um, kind of suspected that, from last night's link

[Clarice]

Michael Barone calls this gangster govt and like me is very suspicious of the SEC suit.
http://www.washingtonexaminer.com/politics/Gangster-Government-becomes-a-long-running-series-91656284.html#ixzz0lhB2FYNq>Something stinks at the SEC

[daddy]

"Are all the cheerleaders imported?"

I would have thought so Extraneus, having perused these photos of ">http://newiplnews.blogspot.com/2010/03/ipl-3-hot-cheerleaders-exclusive-photos.html"> The HyderaBabes, but then looking at this pic of a workout by the ">http://www.flickr.com/photos/25216108@N07/2433355657/in/photostream/"> The Bangalorettes it is obvious I need to do a little more research before I answer that question.

[Old Lurker]

I said this morning, Clarice, that this all stinks big time.

[Clarice]

Well, we are smelling the same thing, OL. Let's hope this time Hope and Change overplayed his hand and gets nabbed. enough is enough.

[Old Lurker]

yep

[Melinda Romanoff]

The difference between regulated and OTC securities is the same as buying at Walgreens versus buying in the alley behind Walgreens. The other item left out of any of the ad nauseum discussions is the concept of proprietary desk's P&L and "net-net" trade reconciliation. Until you get your hands around those two concepts, you aren't even on the playing field.

This subject is complicated and not so simple to pigeon hole. Anybody who thinks it is, didn't lose enough money the first time around.

I'll be back Thursday.

[Clarice]

The Post suggests the white toga Reps are already backing away from a fight on the financial regs as soon as the Dems yammer they are protecting the big Wall Street crooks by fighting. YUCK, Damn..We need Breitbart to crack this.

Niters.

[Ann says Obama Sucks!]

I was looking for something today in the archives and came upon a comment from PUK on AIG that he could of posted today:

"Where on earth does the idea that there is a "free market" come from? There is politically motivated intervention,sovereign wealth funds,hedge funds run by those with ulterior motives as well as downright spivvery*".

Posted by: PeterUK 9.21.08

:)

* In the United Kingdom, a spiv is a particular type of petty criminal, who deals in stolen or black market goods of questionable authenticity, especially a slickly-dressed man offering goods at bargain prices. The goods are generally not what they seem or have been obtained illegally.

[Army of Davids]

Obama contributors:

Look who's number two.

University of California $1,591,395
Goldman Sachs $994,795
Harvard University $854,747
Microsoft Corp $833,617
Google Inc $803,436
Citigroup Inc $701,290
JPMorgan Chase & Co $695,132
Time Warner $590,084
Sidley Austin LLP $588,598
Stanford University $586,557
National Amusements Inc $551,683
UBS AG $543,219
Wilmerhale Llp $542,618
Skadden, Arps et al $530,839
IBM Corp $528,822
Columbia University $528,302
Morgan Stanley $514,881
General Electric $499,130
US Government $494,820
Latham & Watkins $493,835