TimesOnline.co.uk

Goldman Sachs, the world’s richest investment bank, is facing a potential political storm over how much it pays its chief executive, Lloyd Blankfein.

Bankers in Davos for the World Economic Forum (WEF) told The Times they understood that Mr Blankfein and other top Goldman bankers outside Britain were set to receive some of the bank’s biggest-ever payouts, in defiance of President Obama’s attempt to shame banks into cutting bonuses. “This is Lloyd thumbing his nose at Obama,” said a banker at one of Goldman’s rivals.

Mr Blankfein took home his biggest bonus so far in 2007, when he was paid $67.9 million. Goldman’s profits last year were $1.8 billion higher than in 2007. This leaves the bank with a justification to pay him even more although payouts will be made in shares rather than cash to make them more politically palatable. Some rival bankers claim Mr Blankfein could receive up to $100 million, though even a much lower figure could prove politically explosive.

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Katrin Benhold | NYTimes.com 

France wants to use its presidency of theGroup of 20 next year to create a new international monetary system, President Nicolas Sarkozy said on Wednesday, adding that he believed the dollar should no longer be the primary reserve currency in the global economy.

n an expansive and lofty speech to the business and political leaders gathered here at the annual World Economic Forum, Mr. Sarkozy also called for a “revolution” in international regulation that would make labor, health and environmental standards as enforceable as trade rules.

Like Prime Minister Gordon Brown of Britain, he backed a tax on financial market transactions. But Mr. Sarkozy, pursuing his call for a more moral form of financial capitalism, suggested the proceeds be used to combatclimate change and create a World Environment Organization as powerful as the World Trade Organization.

Mr. Sarkozy also took a hard line on bankers’ bonuses, saying that lavish rewards should be denied to those who destroy wealth and jobs.

But before an audience that contained many Americans and many Chinese, his comments on currencies may have had the greatest resonance.

“We need a new Bretton Woods,” Mr. Sarkozy told a packed auditorium. “We can’t have on the one hand a multipolar world and on the other a single reserve currency on a global level.”

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Hush Son | Bloomberg.com 

The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

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Bob Ivry | Bloomberg.com

Nov. 28 (Bloomberg) – Mark Pittman, the award-winning investigative reporter whose fight to open the Federal Reserve to more scrutiny led Bloomberg News to sue the central bank and win, died Nov. 25 in Yonkers, New York. He was 52.

Pittman suffered from heart-related illnesses. The precise cause of his death wasn’t known, said his friend William Karesh, vice president of the Global Health Program at the Bronx, New York-based Wildlife Conservation Society.

A former police-beat reporter who joined Bloomberg News in 1997, Pittman wrote stories in 2007 predicting the collapse of the banking system. That year, he wonthe Gerald Loeb Award from the UCLA Anderson School of Management, the highest accolade in financial journalism, for “Wall Street’s Faustian Bargain,” a series of articles on the breakdown of the U.S. mortgage industry.

“He was one of the great financial journalists of our time,” said Joseph Stiglitz, a professor at Columbia University in New York and the winner of the 2001 Nobel Prize for economics. “His death is shocking.”

Pittman’s fight to make the Fed more accountable resulted in an Aug. 24 victory in Manhattan Federal Court affirming the public’s right to know about the central bank’s more than $2 trillion in loans to financial firms. He drew the attention of filmmakers Andrew and Leslie Cockburn, who gave him a prominent role in their documentary about subprime mortgages, “American Casino,” which was shown at New York City’s Tribeca Film Festival in May.

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Arthur Max | AP

Developing countries don’t trust wealthy nations’ promises that they will help them meet the challenges of climate change, the U.N.’s top climate official said Monday, adding that means any new global warming deal must have legal force.

The legal status of an agreement and whether nations will be sanctioned for failing to meet their commitments are contentious issues in talks on controlling the world’s emissions of carbon and other heat-raising greenhouse gases.

“We live in a world of broken promises,” said Yvo de Boer, the U.N. climate chief, told The Associated Press. Developing countries are concerned “they will commit to targets and not deliver.”

He spoke as negotiators resumed work Monday on a draft agreement for approval at a major U.N. conference next month in the Danish capital of Copenhagen.

The talks among some 180 countries focus on emissions targets by industrial nations and on actions the developing countries can take to slow the growth of their own emissions without impairing their development. Delegates also must determine how to raise and manage some $150 billion (euro100 billion) a year to help poor countries adapt to climate change.

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Paul Tharp | NYPost.com

Ben Bernanke’s dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.

Over the last three months, banks put 63 percent of their new cash into euros and yen — not the greenbacks — a nearly complete reversal of the dollar’s onetime dominance for reserves, according to Barclays Capital. The dollar’s share of new cash in the central banks was down to 37 percent — compared with two-thirds a decade ago.

Currently, dollars account for about 62 percent of the currency reserve at central banks — the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.

After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy — ravenous inflation on one hand, and a perilous recession on the other.

“He’s in a crisis worse than the meltdown ever was,” said Peter Schiff, president of Euro Pacific Capital. “I fear that he could be the Fed chairman who brought down the whole thing.”

Investors and central banks are snubbing dollars because the greenback is kept too weak by zero interest rates and a flood of greenbacks in the global economy.

They grumble that they’ve loaned the US record amounts to cover its mounting debt, but are getting paid back by a currency that’s worth 10 percent less in the past three months alone. In a decade, it’s down nearly one-third.

Yesterday, the dollar had a mixed performance, falling slightly against the British pound to $1.5801 from $1.5846 Friday, but rising against the euro to $1.4779 from $1.4709 and against the yen to 89.85 yen from 89.78.

Economists believe the market rebellion against the dollar will spread until Bernanke starts raising interest rates from around zero to the high single digits, and pulls back the flood of currency spewed from US printing presses.

“That’s a cure, but it’s also going to stifle any US economic growth,” said Schiff. “The economy is addicted to the cheap interest and liquidity.”

Economists warn that a jump in rates will clobber stocks and cripple the already stalled housing market.

“Bernanke’s other choice is to keep rates at zero, print even more money and sell more debt, but we’ll see triple-digit inflation that could collapse the economy as we know it.

“The stimulus is what’s toxic — we’re poisoning ourselves and the global economy with it.”

* Weaker U.S. dollar is part of global rebalancing

* Certain global currencies will overappreciate (Updates with comments on currencies, emerging markets)

Pav Jordan and Wojtek Dabrowski | Reuters.com

TORONTO, Oct 9 (Reuters) - Mohamed El-Erian, the chief executive of bond giant PIMCO, said on Friday the global economic system will not likely reset to where it was before the financial crisis, and a new world order may shift the hierarchy of currencies.

The U.S. dollar will likely depreciate in a global rebalancing, while the euro, yen, Canadian dollar and certain emerging-economy currencies, like the Brazilian real, will gain in value, likely overappreciating, he said.

“A Weaker U.S. dollar is part of the global rebalancing,” El-Erian told economists and analysts in a speech, “Investing in the New Normal”, in Toronto’s financial district.

“Certain countries are going to overappreciate because they are carrying the burden of appreciation for others,” he said, pointing to currencies like China’s that will not gain value.

El-Erian likened the recovery from the global economic crisis to a roomful of people who, deprived of oxygen, collapse. When oxygen is pumped back into the room, victims regain consciousness and get to their feet at different rates, depending on their levels of physical fitness.

Emerging economies that have fared better in the crisis may take up the reins where U.S. consumers left off, he said.

“They have the wallet to be the consumer of first resort for the global economy, and my hope is that they also have the will to be the consumer of first resort.”

The summer rally in equity markets and recent optimism for an economic recovery in the United States and other economies leveled by the crisis may be short-lived, he cautioned, and could peter out if government stimulus and an inventory cycle are not joined by consumer demand.

He said growth potential in the United States and globally would not soon return to pre-crisis levels. One of the consequences will be much stricter regulation, characterized by increased capitalization requirements — and demand for a much higher level of trust from consumers.

Regime changes at corporations will become more commonplace.

Stress will continue on the U.S. labor market, and labor will not be as flexible as in the past.

“When you disrupt the core, the circuit breakers do not work,” El-Erian said.

“We will not reset to where we were before.” (Reporting by Pav Jordan and Wojtek Dabrowski; writing by Jeffrey Hodgson; editing by Rob Wilson)

BusinessWire.com

The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed’s disclosure came this week in a letter to GATA’s Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA’s administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund’s treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President’s Working Group on Financial Markets, detailed the Fed’s position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

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GlobalResearch.ca

Rockefeller & Co’s CEO committed suicide: report
(Reuters) – James McDonald, chief executive officer of investment management firm Rockefeller & Co, committed suicide on Sunday in Massachusetts, the Wall Street Journal said, citing people familiar with the matter. – Read More

Newport Beach financier Danny Pang dies at 42
(LATimes) – Newport Beach financier Danny Pang died early Saturday at a local hospital, according to the Orange County coroner’s office. The cause of death has not been determined and an autopsy is planned for Sunday, said Larry Esslinger, supervising deputy coroner. – Read More

Financier Finn Casperson dead in apparent suicide
(Inquisitr) – Ex-CEO of Beneficial Corp. Finn H.W. Casperson was found dead in an apparent suicide behind an office building in Westerly, Rhode Island. – Read More

Dying Blagojevich fundraiser said he overdosed, mayor says
(CNN) – Police are investigating the death of the former chief fundraiser for ex-Illinois Gov. Rod Blagojevich as a “death-suicide,” an Illinois mayor said Sunday. – Read More

Jonathan Tirone |bloomberg.com 

The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability.

“There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, said in an interview from Geneva. “An initiative equivalent to Bretton Woods or the European Monetary System is needed.”

The 1944 Bretton Woods agreement created the modern global economic system and institutions including the IMF and World Bank.

Enhanced SDRs

While it would be desirable to strengthen SDRs, a unit of account based on a basket of currencies, it wouldn’t be enough to aid emerging markets most in need of liquidity, said Flassbeck, a former German deputy finance minister who worked in 1997-1998 with then U.S. Deputy Treasury Secretary Lawrence Summers to contain the Asian financial crisis.

Emerging-market countries are underrepresented at the IMF, hindering the effectiveness of enhanced SDR allocations, the UN said. An organization should be created to manage real exchange rates between countries measured by purchasing power and adjusted to inflation differentials and development levels, it said.

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DemocracyNow.org 

Video link from Democracy Now

On the first day of his vacation in Martha’s Vineyard, President Obama spent five hours golfing with UBS executive Robert Wolf, an early financial backer of Obama’s presidential campaign. As the pair teed off, another UBS banker, Bradley Birkenfeld, had just been handed a forty-month prison sentence after pleading guilty to assisting a client evade taxes. It was the first sentence in a wider scandal that has seen UBS admit to helping wealthy Americans dodge their tax obligations. On his own initiative, Birkenfeld blew the whistle on UBS. His disclosure and cooperation with US authorities provided inside information into the bank’s conduct and sparked the massive federal investigation.

JUAN GONZALEZ: On the first day of his vacation in Martha’s Vineyard, President Obama spent five hours golfing with Robert Wolf, the president of UBS Investment Bank and the chairman and CEO of UBS Group Americas. Wolf, an early financial backer of Obama’s presidential campaign, raised $250,000 for him back in 2006 and in February was appointed by Obama to the White House’s Economic Recovery Advisory Board.

While Wolf shared a tee time with the President of the United States, another UBS banker, Bradley Birkenfeld, had just been handed a forty-month prison sentence after pleading guilty to assisting a client at UBS evade taxes. It was the first sentencing of the massive UBS tax case.

Three days earlier, UBS had struck a deal with US tax authorities to disclose the identities of about 4,500 of its American clients who are suspected of hiding assets and evading taxes through secret Swiss accounts. The amounts are said to add up to billions. UBS struck a separate settlement in February to avoid criminal prosecution, admitting to helping wealthy Americans dodge their tax obligations and agreeing to pay $780 million in penalties.

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George Chen | Reuters.com

China’s $200 billion sovereign wealth fund, which lost big on its ill-timed 2007 Morgan Stanley and Blackstone bets, plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, two people with direct knowledge of the matter said Monday.

China Investment Corp plans to soon invest in U.S. taxpayer-subsidized investment funds that will acquire “toxic” mortgage-backed securities from the nation’s banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF), the people with direct knowledge said.

CIC is in talks with nine U.S. Treasury-designated Public-Private Investment Plan managers, the sources said.

They include: AllianceBernstein Holding, with sub-advisers Greenfield Partners LLC and Rialto Capital Management LLC; Angelo, Gordon & Co LP with GE Capital Real Estate, a unit of General Electric Co; BlackRock Inc; Invesco Ltd; Marathon Asset Management LP; Oaktree Capital Management LP; Trust Company of the West, a unit of Legg Mason; RLJ Western Asset Management LP, a venture formed by Legg’s Western Asset Management unit; and Wellington Management Co LLP.

CIC is expected to decide this month which of the nine PPIP managers will handle its investments in mortgage-backed securities under the PPIP plan, the sources said.
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Rolling Stone: The Great American Bubble Machine 1 of 5

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Patrick Goodenough | CNSNews.com

Virtually all changes in global atmospheric temperatures in the late 20th century were the result of nature rather than human activity, according to a new peer-reviewed study, one of whose authors predicted Friday was “sure to cause a stir.”

“It goes against the orthodoxy,” said climate scientist Chris de Freitas of New Zealand’s Auckland University. The new findings called into question the politically-correct, politically-motivated assumptions driving the climate change debate, he said.

De Freitas and Australian scientists John McLean and Bob Carter reported that at least 80 percent of climate variability tracked over the past half a century could be attributed to internal climate-system factors including the El Nino-Southern Oscillation (ENSO) Pacific warming phenomenon and its cooling twin, La Nina.

This left little room for human-caused factors like emissions of carbon dioxide (CO2) and other so-called greenhouse gases. Intermittent volcanic activity, producing significant cooling, was found to have been a factor.

The paper was published Thursday, following a six-month peer review process, in the American Geophysical Union’s Journal of Geophysical Research.
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Paul Joseph Watson | PrisonPlanet.com

Federal Reserve chairman Ben Bernanke was confronted yesterday by Congressman Alan Grayson about which foreign banks were the recipients of Federal Reserve credit swaps, but he was unable to provide an answer as to where over half a trillion dollars had gone.
Asked which European financial institutions received the money, which was handed out by The Federal Open Market Committee (FOMC), a component of the Federal Reserve System, Bernanke responded, “I don’t know.”

“Half a trillion dollars and you don’t know who got the money?” asked Grayson.

As we have previously reported, the destination of trillions in bailout funds remains hidden after the Fed refused to disclose where it had gone despite a lawsuit filed by Bloomberg.

Bernanke said the Fed had a “long standing legal authority” to hand money to foreign banks under section 14 of the Federal Reserve Act, a claim contradicted by Bernanke’s own report, as Grayson soon highlighted.
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White House Taps Hormats for State Post
Jay Solomon | WSJ.com

The Obama administration picked Goldman Sachs Group Inc. Vice Chairman Robert Hormats to be the State Department’s undersecretary for economic, energy and agricultural affairs, the White House announced Friday.

Mr. Hormats, if confirmed by the Senate, will buttress Secretary of State Hillary Clinton’s campaign to use economic, trade and environmental issues to redefine Washington’s relationship with nations such as China, India and Russia, said administration officials.

Mr. Hormats also will play a central role in managing Washington’s “strategic and economic dialogue” with Beijing, a diplomatic exchange overseen by Mrs. Clinton and Treasury Secretary Timothy Geithner. The first Obama administration U.S.-China dialogue is slated for this month in Washington, according to the State Department.

Mr. Hormats “will be key in Secretary Clinton’s efforts to bring more visibility to the work of the department on economic matters,” a senior U.S. official said Friday.

Mr. Hormats said he couldn’t comment — standard practice for nominees before and during the confirmation process.

Before joining Goldman Sachs, Mr. Hormats had a career in public service, holding posts in Republican and Democratic administrations.

He served during the 1970s as an economic adviser in the White House to former national security adviser Zbigniew Brzezinski. Mr. Hormats helped to manage the Nixon administration’s opening of diplomatic relations with China’s communist government.