Goldman Sachs had one of its biggest quarters ever by reaping the benefits of the Fed’s currently cheap discount window while still operating with hedge fund levels of risk. That doesn’t even take into consideration the profits they gained from the AIG bailout. From Rolfe Winkler’s blog:

In addition to the federal money it took last fall, it benefited from the government’s bailout of the American International Group, being paid 100 cents on the dollar for its $13 billion counterparty exposure to the insurer, and it has $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation.

They simply should not be allowed to continue doing this. Making record profits by trading with tax payer protection is not going to create the jobs that are needed for the economy. Gasparino has some remarks about the topic in the video below.

Senator Jim DeMint (R-SC) is blocked by Senate Democrat Leadership from having a vote on his amendment to audit the Federal Reserve by Senator Ben Nelson of Nebraska who raised a “point of order” to prevent the vote.

After being blocked, DeMint directly challenges Senate leadership by pointing out the other GAO audits contained in the bill. The Senate president was forced to agree with Senator DeMint.

The bill is based on a bill authored by Congressman Ron Paul (R-Texas) in the House, H.R. 1207, and Senator Bernie Sanders (D-Vermont) in the Senate, S. 604.

While most traders seem to be getting nervous (or even short like TPC) as the S&P tries to touch its 200 day moving average, Tony Caldaro at Unbiased Trading targets a level for the S&P above the 200 day MA:

“Our upside target for this uptrend remains between two OEW pivots: SPX 1041 (50+% rally), and SPX 1107 (50% bear market retracement).”

It’s unrelated (or maybe it is), but Tony also has an interesting tidbit in his outlook for next week:

“Another busy week ahead. On Tuesday the US reports its Trade and Budget deficits. Wednesday we have Retail sales and Inventories. Thursday the weekly Jobless claims and the PPI. Then on Friday the CPI, Industrial production and Options expiration. As for the FED we now enter the twilight zone. On Monday FED chairman Bernanke returns to where the concept of the Federal Reserve System was originated. I quote WTP; “In 1910, a group of the world’s most powerful financiers traveled incognito by train one night from New Jersey to Jekyll Island, Georgia to covertly design the strategic, political and legislative foundation needed to install the privately-owned banking cartel that we now know as the “Federal Reserve System.” Bernanke will address the Atlanta FED that evening in Jekyll Island. Then he, Geithner and/or others will wisk off to Vouliagmeni, Greece for the annual Bilderberg meeting.

In case you are unfamilar with the Bilderberg meetings: This is a secretive (no press coverage) annual event that started in 1954 at the Bilderberg hotel in Holland. It is by invitation only. Around 125 of the most influential people on the planet meet to privately discuss world events and political/economic strategy for the upcoming year. This year the event is being held between May 14th and 16th. Last year it was held in Chantilly Virginia, USA between June 5th and 7th. As an example of the potential market impact. Last year the hot market was Crude oil. Between Thursday June 5th and Friday June 6th 2008 it surged 14% to $138/bbl before topping a few weeks later. We all know what happened next. This year the hot market right now is equities. Personally I find it absolutely incredible that Bernanke/Geithner addressed the CFR in March, and now Bernanke is going to be at Jekyll Island too. Bernanke, then Treasury secretary Paulson, now secretary Geithner, Rockefeller, Kissinger, Rice C., Summers, Daschle, Johnson J., Schultz G., Wolowitz and Rubin were among the attendees of Bilderberg last year. Should be an interesting week. Best to your trading!”

It’s hard not to be a conspiracy theorist these days…where there’s smoke, there’s fire.   Swamp Report adds these two links for the interested reader to enhance Unbiased Trading’s post:  Bilderberg meetings – secret agenda for this May and WTP (We the People Foundation) .

Mike Shedlock comments on the WSJ’s reporting that the Fed Pushes Citi, BofA to Increase Capital:

The most likely ways for the banks to raise capital are via dilution of Treasury owned preferred stock at taxpayer expense and via the Public Private Investment Plan (PPIP). The latter is a scam to heist taxpayers to the tune of hundreds of billions of dollars.

Government officials stated today “that banks directed to raise more capital shouldn’t be viewed as insolvent.

What else can it possibly mean when taxpayers have to pony up hundreds of billions of dollars every other month just to keep the banks running?

However as Rolfe Winkler points out, converting preferred to common will not raise the total amount of capital -just increase TCE.  The government will, as Mike says, have to put more in… unless they can sucker some private investors.

Bloomberg reports

Bank of America Corp. Chief Executive Officer Kenneth D. Lewis may face scrutiny by the U.S. Securities and Exchange Commission for failing to disclose mounting losses at Merrill Lynch & Co. because of pressure from federal regulators to complete the takeover.

Former SEC Chairman Harvey Pitt said he has “no doubt” the agency will investigate. Lewis was obligated to make full disclosure to shareholders even with the regulators’ pressure, Pitt said in a Bloomberg Television interview.

The allegations in Cuomo’s letter suggest Paulson and other policy makers may have resorted to breaking securities laws to protect a fragile financial system, according to Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which has about $13.3 billion under management and doesn’t own stock in Charlotte, North Carolina- based Bank of America.

“Everyone involved knew that was a clear violation, that’s material non-public information, so basically we just closed the rule book during the crisis and said we don’t care, we need to keep the lights on, and we’ll deal with that manana,” Sorrentino said. “Logic went out the window and they were just acting out of fear,” he said. It was “completely panic mode.”

So… the SEC that condones all sorts of illegal activity for years will suddenly turn over a new leaf and enforce against the Treasury?  … not hardly.

From Financial Times:

“The stunning news that [the FED] would buy $300bn (€222bn) in Treasury bonds (and spend a lot more on many other fixed-interest securities) also used another classic military strategy. It had the element of surprise…So why did the Fed do it? The theories are out there. With the AIG bonuses moving public opinion against bail-outs, this may be the only way to pump more public money into credit. Congress will not approve such a thing. Or the Fed may know something about the banking system that others do not.” 

FT’s Krishna Guha  says:

“one way to interpret the Fed decision to expand its balance sheet by $1,150bn at the meeting is that it is a commitment to keep rates at near zero for a long time – possibly up to two years.”

A two year period with zero bank rates….hmmm…..opportunity, crisis or both?

Chairman Bernanke in his 60 Minutes interview suggested that the biggest potential dangers facing the economy now was the potential for a lack of “political will” to solve the financial crisis.  We wonder if that’s political will for making bank bondholders take a haircut…

He did say that the United States has averted the risk of plunging into a depression.  “I think we’ve gotten past that,” he said.  He also said a recovery by the end of this year continues to depend on the plan they have to “stabilize” the banking system.  We, at SwampReport, “hope” it works and that the Plan, when it’s finally carefully described to the public is more than just the “Hope”  often talked about by the administration.   See USA Today

Jamie Dimon CEO of JP Morgan said,

“Failure is fine as long as it’s orderly, controlled, leads to resolution and doesn’t cause systemic failure”

… At a Feb. 3 conference, he said he believed the Federal Reserve should have the authority to regulate all companies within the banking system.  Wonder why he wants the FED to have more regulatory power?  ….maybe because his bank and the other money center banks OWN AND CONTROL THE FED!?

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