Well that is a surprise. On April 22 2007 Tannin e-mailed Cioffi that the “subprime market looks pretty damn ugly and could be toast” and further suggested that they “should close down the funds immediately” if projections for the CDO Market were anywhere near accurate. Three days later on April 25 Tannin told investors on a conference call “We’re very comfortable with exactly where we are.”

And prosecutors managed to fail to make their case for misleading investors, fraud and securities violations.

The defense witnesses called Glenn Hubbard from Columbia University of Business. In Tannin and Cioffi’s defense, he told jurors that the funds failed because lenders stopped extending credit.  And in a bit of counterfactual testimony, Hubbard added that Cioffi’s and Tannin’s investing strategies “could have returned the funds to profitability…had they continued to operate.”

Wait a minute, let’s back up the truck here. In April Tannin advises Cioffi they ought to shut down the funds because the CDO market was telling him that their investing strategies were toast. Yet, they chose to roll the dice and mislead investors 3 days later about their concerns for their subprime hedge fund strategies viability. The funds continued to operate until mid-June, at which time the hedge fund strategy totally blew up. In July 2007, Tannin and Cioffi told their investors there was little if any money that would be returned to them precisely because their strategy was totally inappropriate for the climate.

To wit, their fund did continue to operate long enough to blow up. Had lenders continued to throw money into their black hole, the losses sustained by the hedge fund would only have worsened. Hubbard, the defense’s expert witness, to be frank, lied in his testimony.

The defense also claimed their e-mails “were more ambiguous than the gov’t alleged.” Of course, less ambiguous was Cioffi’s decision to move $2 million of his personal holdings out of their hedge fund in March 2007.

Defense laywers argued prosecutors “failed” to prove beyond a reasonable doubt that the two “lied or conspired to defraud investors.”

“If AAA bonds are systematically downgraded then there is simply no way for us to make money — ever,” Tannin wrote in the message, sent on a Sunday April 22 2007 morning. “Caution would lead us to conclude the model is right — and we’re in bad shape.”Tannin’s lawyer, Susan Brune, told jurors that Tannin “misunderstood the mathematical model.” That is a laugh Susan, while most models were pro-cyclically biased and flawed, this one was spot on, and Tannin misunderstood it? Maybe the jurors bought your schtick Ms. Brune, but who else do you think you can deceive?

Funny too, that the reason no one could see the crisis coming was because it was understood that the pro-cyclical models informed everyone that such a crisis could not happen. Now, when a model points to a developing risk, defense lawyers claim the model was misunderstood. So I ask Ms. Brune, what did the model really and truly indicate and was the model actually right or wrong? Tannin believed the model was right, what did you believe Ms. Brune? Just curious.

In my estimation, I would say that Tannin did a very reasonable job of proving beyond a reasonable doubt he knew his hedge funds were toast. In the event of a ratings downgrade, there would be “simply no way for us to make money — ever.”

So, what did they do to protect their clients money? What did they do to hedge the fund against the risk of a ratings downgrade? Well, they did nothing but reassure investors that everything was hunky-dory in subprime la-la land!  Their failure to hedge the risks in their subprime portfolios was reprehensible, especially given the foreknowledge of the problems that lie ahead for subprime securities. If the captain of the titanic knew there was an iceberg ahead, wouldn’t he be expected to alter course? Put another way, the captains of this subprime hedge fund said, “Damn the torpedoes, full steam ahead.”  How often do we heard that refrain on Wall Street passing for a risk management strategy?

All he asks is that when you become a successful traders, you share your success with others.

Sign up here.

I swear to [God], you can’t make this stuff up.

Bloomberg Journalists Simon Clark and Caroline Binham report on the latest audacities of banksters. They are now selling their poisonous belief’s to church communities, and it is being sanctioned by the Bishop of London, Richard Chartres, whom it appears they have bought off.

Barclay’s CEO John Varley, preaching from St. Martin-in-the-Field’s wooden lecturn, told the “packed pews” that “profit is not satanic.” Technically speaking, earned profits are not satanic. But the profits that Barclay’s earned this past year, that are derived from extortion, fraud, and other machinations, well those are downright sinister, if not satanic. Varley sees “no conflict between doing business in an ethical and responsible way and making money.” Technically speaking, Varley is right again, but note, he does not make any claim that the profits of the  banking system were derived from behaving in an ethical and responsible manner. Not surprisingly, Varley “didn’t convince everyone in the audience.”

Varley’s cognitive distortions peddled out the worn-out rationalization for ginormous bank executive pay of banks that failed last year: “If we fail to pay competitive rates, then talent will move to another employer.”  The talent that Varley is referencing is the same talent that got us into the financial crisis of 2008, and since policymakers are bent on restoring the flawed banking system as it was pre-crisis, this talent will be needed to create the next financial crisis. Noted.

Varclay is not the only bank executive running around London going to churches making sales pitches to various congregations. Goldman Sachs Intl adviser Brian Griffiths invoked Christianity to defend the banking system. Griffith’s message was that the banking system is just following the moral teachings of Jesus. (I kid you not!).  “The injunction of Jesus to love others as ourselves is an endorsement of self-interest. We have to tolerate the inequality as as way to achieving greater prosperity and opportunity for all.” How Griffith equivocates Jesus’ exhortation to love others with embracing inequality is beyond comprehending. And pushing inequality as  mechanism to achieving greater prosperity is a form of exploitation. Exploitation of others is mutually exclusive from the Christian Doctrine to love others as ourselves.

In the Gospels of Matthew, Mark and John there’s the story of the rich young man asking Jesus questions concerning the way of life which Jesus will guarantee as satisfying God. Griffiths must have missed this passage, even though it can be found in three of the four Gospels.  “Teacher, [said the rich man], what good deeds must I do, to have eternal life? Jesus said to him, ‘If you would be perfect, go, sell what you possess and give to the poor, and you will have treasure in heaven’…When the young man heard this he went away sorrowful, for he had great possessions.”  Matthew 19.16-22.

Give to the poor Jesus says, and abolish inequality, nowhere does Jesus say “tolerate” it, Mr. Griffiths.

“And Jesus said to his disciples, ‘Truly I say to you, it will be hard for a rich man to enter the kingdom of heaven…it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” Matthew 19.23-24. I promise you this, Griffiths’ personal values and beliefs are not pleasing to God.

Bonuses in the “City” are expected to rise 50% to 6 billion pounds this year according to the Center for Economics and Business Research. We already know 2009 will be a banner year for bonuses to the richest. Many financial firms will be doling out record bonuses made only possible through taxpayer funded profits.

At least one person found these messages sacrilegious, Neil Jameson, exec director of London Citizens said, “It’s terrible to say things like that in a church. He should be condemned.” Indeed, Griffiths should. Griffith’s unorthodox utterances amount to no less than heresy, a crime for which you were burned at the stake. Be glad Queen Mary is not on the throne, and mind your forked tongue in the future, lest the citizens of the City take matters into their own hands one day.

And surprising, the Bishop of London, Richard Chartres endorses these men as being “of high moral integrity.”

Chartres, the bishop of St. Paul’s, said he welcomed bankers to debate in church, even though Jesus had thrown money changers out of the temple in Jerusalem.

“The money changers were actually selling sacrifices,” Chartres said in an Oct. 27 interview in St. Paul’s. “It is the idea that you can buy off God.”

Let me suggest to the readers that the Bishop of London has exacted a substantial “tithing”  for the Church of England from these banksters, saying as he left the St. Paul interview that “They have a duty to be extravagantly generous, because to those to whom much has been given much will be required.”

Let me also suggest to the reader that these modern day money-changers have been preaching and selling is nothing but grave distortions of Christian values and beliefs. Their preachings are so left field as to be heretical and in a different era, they could be condemned at the stake.

What is so amazing is that these bankers are experiencing zero cognitive dissonance, you know, that uncomfortable feeling caused by holding two or more contradictory ideas simultaneously together, which in normal people might cause feelings of anxiety, shame, or guilt. Of course, when you think as Griffiths does, you reconcile matters by leaping over the chasms of inherent contradictions.

So, one must wonder as to the depths of their social pathologies. Remember that radical Islamists have found God too, If we are to believe both these bankers and the radical Islamists, God is on both their sides. We should consider how closely aligned the pathologies of financial terrorists are with the pathologies of a radical Islamic terrorist? Maybe, the gov’t ought to divert funding from their war on terror to declaring and funding a war on financial terrorists.

That is the question Allen Meltzer asks.

“How can anyone know that his or her job has been saved?”

So, how does the Obama admin claim that 640,000 jobs have been created or saved.

File this one in the you have got to be kidding me file.

Oh, the double speak is thick today at the Obama administration. Just another day of spin-meistering I suppose.

“The government is going to have to get serious about reducing our debt levels” Obama told Paul Volcker. Obama also recognized that recovery from this Great Recession or Depression will have to be led by the private sector. Acknowledging this is one thing, making it happen is quite another. You can’t force the private sector to expand, ad you can’t force private banks to lend. Bank lending is contracting at 15% annualized rate, while they hoard more than $1.2 trillion treasuries. Why would private banks take on the risk of lending when they can enjoy risk free rates of return north of 3% on treasuries with Fed funds rates at zero and the yield curve steep as it is? Even a flattening of the yield curve won’t help banks lend because too many other shoes have yet to drop, too many bouncing betty’s with their delayed fuses have yet to blow up on. So, this is mere posturing and rhetoric from our commander-in-chief today.

While that meeting with Volcker was taking place Obama’s Commerce Sec’y Gary Locke told Bloomberg

“If there is to be another stimulus — and that’s being hotly discussed and very seriously considered within the administration as well as members of Congress — it needs to be very targeted, very specific and we need to be very mindful of the deficit as well.”

Well, that statement by Gary Locke detonated in the Oval office. Damage control was necessary and the Commerce Dept spokesman Keven Griffis stepped up to intervene and save the day claiming Locke was being “imprecise.” What Locke was referring to, said Griffis, was

“all the different job-creating measures being considered” in Washington rather than a single stimulus measure.

Now, riddle me this, who is going to buy Griffis claim that Locke was being imprecise. If you buy that I have a bridge I’d like to sell ya.

Let us begin by noting that Melissa Bean is a Pro-growth Democrat, like her counterpart Barney Frank. This pernicious group of democrats are a malevolent force against middle class America. With folks like Bena and Frank in charge, the hollowing out of the middle class is assured.

The Rob Johnson testimony in question regards hearings on a bill for regulatory reform drafted by Barney Frank. This reform would essentially codify current market practices and abuses in the OTC derivatives market which were largely responsible for the financial crisis we face. Codifying the same flawed architecture in the OTC derivatives market verually assures the American People that another major financial crisis is coming to a theater near you, even if the timetable for that crisis is unknown.

The point here is that Frank’s bill codifying current OTC market practices that created this financial crisis is a dishonest bill and is falsely-branded as a derivatives reform bill.

From Naked Capitalism

The hearings on the bill had testimony scheduled only from what amounted to industry flacks. Someone apparently realized at the 11th hour that that might not go over with the correctly angry public too well. So less than 24 hours prior to the session before the House Financial Services Committee, an invitation was issued to Rob Johnson, a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee.

So what transpired? As Ken Silverstein recounts:

Johnson, who came last, offered the only serious critical viewpoint… After about five minutes of his testimony, Congresswoman Melissa Bean—another industry-funded committee member who chaired the hearing because Frank was absent—had heard enough. “I’m just going to ask you to wrap up because we’re running out of time,” she told Johnson.

Johnson gamely continued. “When I hear the testimony today that are largely financial institutions and end users, I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said.

“I do need a final comment,” Bean interjected seconds later.

That put an end to Johnson’s testimony. “I was just called to this hearing last night, so I will provide detailed comments on your bill and a statement for the record that will finish my comments,” he concluded.

So what happens next? >The House Financial Services Committee has refused to publish his testimony, offering “the dog ate my homework” level excuses, first that they hadn’t gotten it, then that it was in the wrong format, then that their IT department was experiencing difficulties (always a good one when real reasons are running thin). The last one was pure Catch-22: that he had gotten his written testimony in too late.

In the interest of making Rob Johnson’s detailed statement available for the American Public to access, it can be read here

It is a must read for all American’s.

This morning at 10.30 am, the demonstration of the American people was held demanding banks donate their estimated $23 billion bonus pool to programs dedicated to preventing foreclosures. The demonstration was held in front of Goldman Sachs.  FDIC Sheila Bair was in attendance addressing the crowd.

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