from Reuters Soccer Blog:

Nothing ‘meaningless’ about U.S. defeat

May 26, 2010

SOCCER-WORLD/

USA 2 Czech Republic 4 was hardly a morale boosting result for American fans as their team prepares for the World Cup finals, which begin for the U.S against England on June 12.

from Financial Regulatory Forum:

Goldman Getting Ahead of Bad News?

May 5, 2010

Goldman Sachs’s disclosure pendulum appears to have now sharply swung in the other direction, Matthew Merrin of Thomson Reuters Westlaw Business Currents writes.

from Financial Regulatory Forum:

US revises anti-money laundering manual

May 4, 2010

Bank regulators revised an anti-money laundering examination manual. But government watchdogs said financial regulators are still not doing enough outreach to local law enforcement agencies to aid in the battle against terrorist funding and drug smuggling, reports Thomson Reuters WG&L Accounting & Compliance Alert.
Bank regulators on April 29, 2010, issued the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examination manual.
The manual provides guidance to safeguard banks and other financial companies from money laundering and terrorist financing.
The last time it was updated was August 24, 2007.
The Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the State Liaison Committee revised the manual in collaboration with the Financial Crimes Enforcement Network (FinCEN), the administrator of the Bank Secrecy Act (BSA), and the Treasury Department's Office of Foreign Assets Control.
The manual can be found on the Federal Financial Institutions Examination Council website.
Separately, the Government Accountability Office looked into the efficacy of suspicious activity reports (SAR) that banks need to file to inform regulators of suspicious transactions. They determined that FinCEN needs to do a better job of developing its process to revise SAR forms.
Banks have long been concerned about the resources required to file SARs and the extent to which SARs are used.
From 2000 to 2008, total SAR filings increased from 163,000 to 732,000 per year, according to the GAO report released on April 28, 2010.
Automated monitoring systems that flag multiple indicators of suspicious activities increased the filings. Also, several public enforcement actions against a few banks prompted other banks to look more closely at clients and their accounts.
The USA Patriot Act, passed in response to the September 11 terrorist attacks, expanded the scope of SAR filings to include most nonbank financial companies.
After a 2006 revision of the SAR form that could not be used because of technology limitations, FinCEN in 2008 developed a new process making revisions intended to increase its collaboration with law enforcement groups. The agency said it is taking other steps to work with law enforcement agencies, but the GAO said it is too soon to determine whether the steps have been effective.
In a separate report also dated April 28, the congressional watchdog recommended that FinCEN step up its communication efforts about the data it gathers and how it analyzes it to better support law enforcement agencies in catching money launderers.
Some law enforcement agencies complained that FinCEN does not provide enough information about the types of analysis it does.

from Financial Regulatory Forum:

Goldman Sachs’ soul search – sincere or strategy?

April 29, 2010

   By Steve Eder and Rachelle Younglai
   NEW YORK/WASHINGTON, April 28 (Reuters) - Contrary to popular belief, Goldman Sachs Group Inc <GS.N> has a soul - and it is even spending time searching it.
   In the closing hours of Goldman's marathon showdown with a Senate panel in Washington on Tuesday, Chief Executive Lloyd Blankfein shared that the Wall Street giant is in the midst of an internal cleansing in which a top executive is leading a business practices committee and "going over everything."
   A day after the hearing, some were questioning whether the reflective side of Blankfein was a sincere revelation that foretold a settlement of Securities and Exchange Commission charges against the firm, or if it was just a strategy.
   "There is not a thing that will arise here and elsewhere that won't be the subject of some big soul-search and some tightening up of standards," Blankfein testified during a particularly introspective moment late in the roughly 11-hour hearing in which a Senate panel grilled past and present Goldman executives about whether the firm put its own profits ahead of its clients' interests.
   Goldman officials - still confronting imagery left behind by a Rolling Stone article last year that labeled the firm a "giant vampire squid wrapped around the face of humanity" - declined to elaborate on the firm's soul-search.
   Former New York Governor Eliot Spitzer, no stranger to negative publicity himself, said Blankfein had a delicate balance to strike during the hearing.
   "He didn't want an article that said there was no self reflection," Spitzer said at the Reuters Global Financial Regulation Summit in New York on Wednesday. "He didn't say we acted in a way that didn't comport with our ethical obligations."
   Blankfein was quick to point out that the soul-searching was not part of a legal requirement or ordered by the SEC, but something that the firm was doing on its own. Although he added that "everything that's been the subject of criticism will be tightened up."
  
   NOT BACKING DOWN
   Despite Blankfein's inward look, Spitzer doubted that Goldman would seek a quick settlement with the SEC, which has accused the firm of fraud for failing to tell clients that the debt securities they were buying had input from hedge fund Paulson & Co, which stood to benefit if the securities lost value.
   "To settle now is to wave the white flag," Spitzer said. "That would do real harm to the brand of the firm."
   Blankfein, who left one of his trademark voicemail messages for the firm's employees late Tuesday night, did not appear to be backing down.
   "The questioning during the hearing was rigorous, but we tried to remain focused on providing a complete context of our business, how we manage our risk, and the value we provide for our clients and to the broader system," Blankfein said.
   He said Goldman took seriously the ethical concerns raised during the hearings, but he steered clear of admitting the firm had done anything wrong.
  
   TO SETTLE OR NOT?
   A former SEC official agreed that Goldman would not settle quickly given that the bank has already born the brunt of the bad publicity that can sometimes be avoided upon settlement.
   "I see no necessary correlation between that statement by Blankfein and the likelihood of settlement," former SEC chairman Harvey Pitt said of Blankfein's comment that the firm is reexamining its business practices.
   However, he said "neither Goldman nor the SEC can afford to take this case to trial."
   Goldman is expected to file a motion to dismiss the case on legal grounds, but is not expected to go to war with the SEC. Too much is at stake for Goldman, which has had a good relationship with the SEC and will have to deal with the regulator on other issues.
   "Given the combative posture Goldman has taken, I assume they will try to get the case dismissed and or move for summary judgment before attempting to settle," Pitt said.
   Ohio Attorney General Richard Cordray told the Reuters Global Financial Regulation Summit that how Goldman proceeds could be influenced not only by the merits of the SEC's case, but by pressure from the public or clients, reputational damage, and whether additional charges are expected.
   "I certainly think they will begin to realize that the landscape for them is much worse than they originally thought," Cordray said. (Reporting by Steve Eder in New York and Rachelle Younglai and Karey Wutkowski in Washington; Editing by Tim Dobbyn, Dave Zimmerman) ((Reuters email: steve.eder@reuters.com; +1 646 223 6069)) Keywords: GOLDMAN/SOULSEARCH 
  
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 Thursday, 29 April 2010 15:41:18RTRS [nN28138911] {EN}ENDS

from Financial Regulatory Forum:

What are the odds on a three-legged horse?

April 28, 2010

Senators quizzing Goldman Sachs executives yesterday seemed at least as concerned about the wider ethical issues of investment banking as they did about the actual charges that the SEC has laid against Goldman, writes John Manley.
Senators forcefully argued that bankers should place the interests of their clients – and even perhaps the national interest – above their own interests.
One senator even cited an earlier senate committee report on the Great Crash of 1929 to press the case that clients come first. “Investors must believe,” he quoted, “that their investment bankers would not offer them the bonds unless the banker believed they would succeed.”
 That sounds fair. It’s the rule that governs the sale of consumer goods. If the store sells you a lawn mower, it should do so in the belief that it will cut your grass. And if it doesn’t work, the store has to sort out the problem.
But can this doctrine really extend to modern derivative markets where investors are trading risk, rather than the underlying assets? 
Instruments like the synthetic CDO in the Goldman case are designed to attract investors to both sides of the deal. Some will short the instrument, some will go long. They will all invest at a price that reflects the risk they think they’re taking.
If the price goes up, investors who went long will cash in. If the price falls, the short sellers will win.
But what is the investment bank in the middle of this see-saw meant to do? Whichever way the price moves, one bunch of investors is going to see the issue as a success, and the other bunch will see it as a failure. Do the senators think the losing side should be able to sue the issuing bank for selling them an instrument that was designed to fail?
Senator Claire McCaskill was not trying to compliment the Goldman Sachs executives when she likened them to bookmakers. And the guys from Goldman clearly felt the slight. Obviously unamused, one of them said he preferred “bid offer spread” to McCaskill's gambling term, “the vig”.
But in this case, despite the blow to their self-esteem, it is a simile that the Goldman guys should welcome. 
If I tried to bet on a three legged horse, and the bookie offered me odds of 10-1; I’d think it a bit expensive, and refuse the bet.
But if he offered me odds of 500-1, I’d take the bet – after all, there’s a slim chance that all the other horses in the race could fall, leaving my hopalong nag to limp home alone.
What I wouldn’t do is complain that the bookie had sold me a bet on a horse he knew was going to fail.

from Financial Regulatory Forum:

Reid wages war of attrition on financial reform bill: John Kemp

April 28, 2010

Senate Majority Leader Harry Reid has scheduled another vote on financial reform later today, the fourth such vote in three days, as he tries to grind down opposition from Senate Republicans, writes Reuters columnist John Kemp.
Reid is making good on his threat to keep the financial reform bill (S 3217) on the floor of the Senate, and at the forefront of media attention, for as long as it takes to get movement on the bill. He is daring the Republicans to continue obstructing it and risk being tied in the public mind to a deeply unpopular Wall Street ahead of mid-term congressional elections in November [ID:nLDE63J0XH].
Whether the gamble by the senator from Nevada is worth taking depends on how the issue plays out in the media and opinion surveys. No one in the Senate wants the chamber to be permanently gridlocked discussing financial reform, unable to move on to other business.
The Democratic leader is betting that Republicans will not, in the end, risk being blamed for the bill’s failure and supporting an unpopular status quo. Polls published by the Washington Post newspaper earlier this week showed voters support financial reform by a margin of 2:1.
But there is less agreement on exactly what form the overhaul should take. On derivatives, which is a high priority for Wall Street, the public is split, and shows relatively little interest. In other areas, the public seems keen on ensuring banks are never ever bailed out again, a tough position not even the administration supports.

from Financial Regulatory Forum:

Goldman Sachs: Shareholder Revolt Spreads Where the SEC Has Yet to Tread

April 28, 2010

Where the SEC goes, plaintiffs' lawyers are sure to follow. But in the case of Goldman Sachs, they’ve charged ahead straight into the C-suite, alleging far broader levels of misdeed than the SEC’s limited charges surrounding an individual transaction, writes Erik Krusch of Thomson Reuters Westlaw Business Currents. (Click here for further details.) 
Goldman Sachs was charged by the Commission in the case of SEC v. Goldman Sachs and Fabrice Tourre with fraudulently structuring and selling a synthetic collateral debt obligation (CDO). Now plaintiffs’ lawyers are angling for a piece of the Goldman pie, but unlike the SEC, these shareholder suits sport an entirely different caliber of co-defendants.
The SEC’s pursuit of Goldman has topped the headlines for the past week. Goldman has been dogged by disclosure issues on at least two fronts: the ABACUS 2007-AC1 transaction and a Wells Notice regarding ABACUS that the bank later received. The SEC’s case against Goldman turns on the way that the bank disclosed the involvement of hedge fund in the ABACUS 2007-AC1 structuring to other deal parties. The SEC alleges that the deal’s market materials crossed the line for fraud. Considering how popular shorting subprime mortgages and synthetic CDOs became, it remains to be seen if Goldman is the only bank that the SEC is eyeing for fraudulent CDO disclosure. For additional information on the case of SEC v. Goldman, Sachs & Co. and Fabrice Tourre and Paulson & Co.’s role, please see the previous Westlaw Business Currents article CDO Litigation: The SEC, Goldman, and its Courtroom Cousins.
Similarly, questions revolve around Goldman’s decision not to disclose the Wells Notice it received regarding ABACUS 2007 AC-1. A Wells Notice informs a company or individual that the SEC is considering civil charges. Public companies often disclose when they or one of their employees receives a Wells Notice, but Goldman didn’t disclose the notice it received on Abacus. For additional information Goldman’s Wells Notice and other banks disclosure of subprime related Wells Notice please see the previous Westlaw Business Currents article Hot Topic: Disclosing Wells Notices and Goldman.
As of this week, the SEC isn’t alone at taking aim at Goldman’s disclosure. The recently filed Richman v. Goldman Sachs Group Inc et al. is a shareholder class action suit led by named plaintiff class representative Ilene Richman, filed in the Southern District of New York. The complaint takes aim squarely at the bank’s decision to not disclose the ABACUS Wells Notice. The suit alleges that Goldman and co-defendants Lloyd C. Blankfein (Chairman and CEO), David A. Viniar (CFO), and Gary D. Cohn (President and COO) violated federal securities law by issuing materially false and misleading statements during the class period – between October 15, 2009 and the time it was publicly revealed on April 16, 2010 that the SEC had sued Goldman. The complaint asserts, among other things, that updates the bank made to its 10-Q and 10-K legal proceeding sections were false and materially misleading because they made no mention of the Wells Notice and ongoing investigation into ABACUS 2007-AC1. Robbins Geller Rudman & Dowd is representing the plaintiffs in the matter.
Ilene Richman is not the only irate shareholder. Rosinek v. Blankfein et al. is a shareholder derivative suit filed in New York State Supreme Court. The suit alleges breach of fiduciary duty against Goldman Sachs and names each member of the board of directors, including CEO and Chairman Lloyd Blankfein, as co-defendants. The complaint in this case alleges that the board breached its fiduciary duty by failing to institute adequate internal controls on the 23 ABACUS transactions, one of which is the focus of the SEC complaint. The suit claims:
As a direct and legal result of the Individual Defendants' wrongful conduct, Goldman Sachs has been significantly and materially damaged, faces billions of dollars of liability, has incurred and will continue to incur millions of dollars of expense in defending the claims against the SEC and investors, and has suffered serious damage to its reputation and image.
The suit is seeking maintenance as a derivative action, compensatory damages, court costs, and any further compensation the court deems appropriate. Farqui & Farqui is representing the plaintiffs.
Spiegel v. Blankfein et al. is yet another shareholder derivative suit that has been filed in New York State Supreme Court. The complaint is a carbon copy of the complaint in Rosinek v. Blankfein et al. Farqui & Farqui and Gardy & Notis are representing the plaintiffs.
It remains to be seen if the SEC or shareholders will have any luck cowing a defiant Goldman Sachs in court. The shareholder actions, however, are aiming much higher in the corporate food chain than the SEC’s target, Vice President Fabrice Tourre. It seems shareholders think that disclosure problems swirling around ABACUS 2007-AC1 and the Wells Notice reside in the boardroom and at C-suite level.

from Global Investing:

Investors wary of BP oil spill cost estimates

April 27, 2010

BP logo

BP’s CEO Tony Hayward reckons the $100 million cost of drilling a well to divert the flow from a leaking oil well in the Gulf of Mexico  is the biggest hit the oil major will take in the Deepwater Horizon tragedy.

from Financial Regulatory Forum:

Will Goldman Complaint Repair the Damage from Madoff Fiasco?

April 23, 2010

Some former government prosecutors are cheering the SEC's case against Goldman Sachs. Some even called it a watershed event that might rehabilitate the SEC's image, which has been tarnished in the fallout from the financial crisis and the failure to catch financial fraudsters like Bernard Madoff. Now all the SEC has to do is win its trial against Goldman, which is vowing to fight the charges, reports WG&L, from Thomson Reuters tax and accounting specialists.Some lawyers called the SEC’s civil complaint against Goldman Sachs Group Inc.'s brokerage unit a “watershed” moment, in which the agency will be once again looked at as a tough regulator.

from Financial Regulatory Forum:

Democrats press advantage on financial reform

April 22, 2010

   By Andy Sullivan and Kevin Drawbaugh
   WASHINGTON, April 21 (Reuters) - Democrats in the U.S. Senate pressed forward on a sweeping regulation overhaul on Wednesday, backing a measure to drive banks from the lucrative derivatives market at the heart of the financial crisis.
   As President Barack Obama prepared to call on Wall Street to get behind reforms, Democrats sought to ride widespread public anger at the financial industry to a legislative victory in Congress. Bank stocks were mixed in broadly flat trading.
   Democratic Senator Christopher Dodd, who is heading up the overhaul effort, said he would present legislation to the Senate within hours, but aides cautioned that a pivotal procedural vote could not come until early next week.
   The overhaul will likely include a crackdown on the unregulated $450 trillion derivatives market, which could drive Wall Street behemoths like Goldman Sachs <GS.N> and Morgan Stanley <MS.N> to restructure or spin off derivatives trading.
   "If banks want to be banks, they can remain banks, but they're going to need to spin off that activity," Senate Agriculture Committee Chairman Blanche Lincoln said after her panel voted to advance the measure on derivatives.
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ COLUMN: GOP in dilemma on financial reform     [ID:nLDE63J0XH] FACTBOX: Major financial reform proposals      [ID:nLDE63D217] NEWSMAKER-Farmer's daughter takes on Wall St   [ID:nN16132985] TAKE A LOOK: U.S. Financial Regulation         [ID:nN16148428] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
   Lincoln's hard-hitting bill, in whole or in part, was expected to be folded into a broader measure already approved by the Senate Banking Committee. Debate on it could begin next week. The Senate is not slated to cast any votes on Friday.
   Democrats see Wall Street reform as a chance to harness voter anger at big banks for their role in the 2007-2009 economic crisis ahead of November's congressional elections.
   Fraud charges brought last week against Goldman Sachs have given the overhaul more momentum. "It just reinforces the perception that people have about some of these Wall Street investment banks," Senator John Thune told reporters.
   After meeting with other Republicans on the status of negotiations with Democrats over reform proposals, Thune said it was still possible to hammer out a bipartisan measure.
   "I think we're going to end up with a bipartisan bill," said Republican Senator Bob Corker on the Senate floor.
   Senate Banking Committee Chairman Christopher Dodd is negotiating with Republican Richard Shelby, who told reporters after the briefing that the two sides were still talking.
   Democrats need at least one Republican vote to advance the broader reform measure in a procedural vote. Key Republican moderates like Susan Collins have said they will withhold their support until Dodd and Shelby have reached a deal.
   Asked if he was confident all 41 Republicans could hold together and block the Democratic bill, if it came to that, Thune said, "I'm not entirely confident, but I'm hopeful."
  
   OBAMA URGES TIGHT RULES
   The Democrats' reform bill would cut the U.S. budget deficit by $21 billion over the next 10 years, according to Congressional Budget Office estimate obtained by Reuters.
   The estimated reduction in the budget deficit over the 2011-2020 period stems largely from charging the financial industry assessments for a fund to liquidate large, troubled financial firms, the office said.
   Obama called for tighter rules against Wall Street excess.
   "We have gotten into one of those places where we need to update those rules of the road," Obama said in an interview with CNBC on the eve of a financial speech in New York.
   In his speech on Thursday, Obama will tell Wall Street to "join him in the effort to reform the financial system -- not fight it" and urge lawmakers to pass the legislation under consideration now by the Senate, a White House official said .
   Republican Charles Grassley voted with Democrats to advance the derivatives bill, although he said he might still vote against the wider bill on the Senate floor. [nN21197740]
   Any proposal that clears the Senate would have to be reconciled with an overhaul passed by the House of Representatives last December.
   Lincoln shocked markets last week by proposing banks participating in the swaps market should give up protections like access to the Federal Reserve discount window -- which could force them to sell off swaps trading desks.
   Derivatives, which are based on underlying assets like bonds or commodities, have been blamed for exacerbating the credit crisis and contributing to the sort of run on assets that downed Lehman Brothers.
   Swaps transactions also helped trigger insurer American International Group's <AIG.N> massive government bailout.
   The bill would require most derivatives to trade on exchanges and pass through clearing houses.
   The head of the Securities and Exchange Commission criticized the bill for removing certain securities options, exchange-traded funds and securities forwards from the agency's oversight. [nN21197408]
   Lincoln's bill is the latest salvo in a barrage of tough measures meant to crack down on Wall Street for the excessive risk-taking that precipitated the recession.
   A congressional panel investigating the origins of the crisis said it has issued a subpoena to Moody's Corp <MCO.N>, a major credit rating agency, because it has not complied with voluntary requests for information. [nWBT013821] (Additional reporting by Christopher Doering, Roberta Rampton and David Lawder; editing by Carol Bishopric) ((andy.sullivan@thomsonreuters.com; +1 202 898 8391; Reuters Messaging: andy.sullivan.reuters.com@reuters.net)) Keywords: FINANCIAL REGULATION/ 
  
Thursday, 22 April 2010 00:35:22RTRS [nN21479339] {C}ENDS