Article of the week (28/2009): Goldman Trading-Code Investment Put at Risk by Theft

No comments // Jul 14th, 2009 // Finance

This week is a mix of news articles, blog posts and a magazine articles as the biggest shock this week has been the admission from an Assistant US Attorney about the theft of Goldman’s proprietary trading codes, that anyone with the codes could manipulate markets. As a follow up it seems that Goldman makes up to $100 million with the trades. The reading is a bit of a read through but worth looking into. Bring on the conspiracy nuts:

- Goldman Trading-Code Investment Put at Risk by Theft (Bloomberg)
- Sergio Posts Bond As Toxic Code Percolates In Cyberspace And Allows “Market Manipulation” (Zero Hedge)
- Breaking: FBI Arrest Opens Goldman-Sachs’ Pandora’s Box (Daily Kos)
- Goldman Code Theft BOMBSHELL? (Karl Denninger)
- Intraday Observations (Zero Hedge)
- “Incredibly Shrinking Liquidity” as Goldman Flushed Quant Trading (Daily Kos)
- The Goldman Sachs Tax (The Big Picture)

What is the inference of potentially illegality here?

FROM THE BIG PICTURE

“That Goldman Sachs may just possibly have used security access codes and built a system to acquire trading information PRIOR to transaction commit time points at NYSE.

The profitability of this split-second information advantage would have been and could have been extraordinary. Observed yielding profits at $100,000,000 a day. [summary to address complaints with respect to complexity.]

GS has special access inside the system from its status assisting the Working Group on Financial Markets (colloquially the Plunge Protection Team) created by Presidential Order two decades ago. GC also acts as Special Liquidity Provider for NYSE.

With 60% dominance of NYSE program trading, what’s good for Goldman defines what shows as overall market performance.”

This week I also wanted to share Michael Lewis’s article on AIG’s (AIG FP’s) Joseph Cassano in the latest issue of Vanity Fair titled: “The Man Who Crashed The World” [PDF via The Big Picture]. I’ve previously pointed out Tim Rayment’s article on Joseph Cassano but just to stress his importance to the current financial crisis I’d like to share this one as well. Following is a small excerpt:

Six months ago, I received an odd phone call from a man named Jake DeSantis at A.I.G. Financial Products—the infamous unit of the doomed insurance company, staffed by expensively educated, highly paid traders, whose financial ineptitude is widely suspected of costing the U.S. taxpayer $182.5 billion and counting. At the time A.I.G. F.P.’s losses were reported, it became known that a handful of traders in this curious unit had sold trillions of dollars of credit-default swaps (essentially unregulated insurance policies) on piles of U.S. subprime mortgages, but its employees hadn’t yet become the leading examples of Wall Street greed. And so this was before Jake DeSantis and his colleagues found themselves suburban-Connecticut outcasts, before their first death threats, before the House of Representatives passed a bill because of them (taxing 90 percent of their large bonuses), before New York attorney general Andrew Cuomo announced he was going after their paychecks, and before Iowa senator Charles Grassley said that A.I.G.’s leaders should follow the Japanese example and “either do one of two things, resign or go commit suicide.”

……

[READ THE REST]

Runner-ups:
- Mass grave of skeletons spewing forth from Kaupthing’s closet
- What if the Fed were a Bank?
- Ron Paul Is Right! We Should Audit the Fed
- The Wall Street White House
- How Iceland’s Lawyers Enabled Fraud