But some bankers would simply list a different servicer, even though the bonds were serviced by the same institution, and thus produce a better rating, former agency employees said. Others relabeled parts of collateralized debt obligations in two ways so they would not be recognized by the computer models as being the same, these people said.

Banks were also able to get more favorable ratings by adding a small amount of commercial real estate loans to a mix of home loans, thus making the entire pool appear safer.

Sometimes agency employees caught and corrected such entries. Checking them all was difficult, however.

http://www.nytimes.com/2010/04/24/business/24rating.html?hp=&pagewanted=print

Goldman Sachs is preparing its most detailed defense yet to allegations that it misled clients in its mortgage securities business, arguing that the firm was unsure whether housing prices would rise or fall and did not take any action at odds with the interests of its clients.

An internal Goldman document, prepared for senior executives and obtained by The Washington Post, addresses the criticism that the bank invested its own money betting against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did.

Those concerns over possible double-dealing spiked a week ago as the Securities and Exchange Commission filed a fraud suit against Goldman, alleging that it misled clients by selling them mortgage-related securities secretly designed to fail.

Goldman prepared the 11-page document to serve as the basis for testimony that chief executive Lloyd Blankfein is scheduled to deliver Tuesday before the Senate Permanent Subcommittee on Investigations.

The Goldman paper describes debates among top executives in 2006 and 2007 over whether the firm should make investment decisions based on the belief that the mortgage market would continue to prosper. The document details meetings and e-mails that ultimately resulted in a decision to reduce the company's exposure to the mortgage market, especially subprime loans, by making new investments that would pay off if housing prices fell.

http://www.washingtonpost.com/wp-dyn/content/article/2010/04/23/AR2010042305183_pf.html

---------------------

see toon at top...

Goldman Sachs' chief executive, Lloyd Blankfein, is being sued by shareholders.

He and other company officials have been named in two new lawsuits filed on Thursday.

The SEC said Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio.

These securities were sold to investors in 2007.

But Goldman did not disclose that Paulson, one of the world's largest hedge funds, had bet that the value of the securities would fall.

Goldman has called those allegations unfounded.

There was no immediate comment on the latest development from Goldman Sachs.

----------------------------

Gus: my bold letters, see toon at top...

By LOUISE STORY and SEWELL CHAN

In late 2007, as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they would make “some serious money” betting against the housing markets.

The messages, released Saturday by the Senate Permanent Subcommittee on Investigations, appear to contradict statements by Goldman that left the impression that the firm lost money on mortgage-related investments.

In the messages, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November 2007 that the firm had lost money initially. But it later recovered by making negative bets, known as short positions, to profit as housing prices plummeted. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”

He added, “It’s not over, so who knows how it will turn out ultimately.”

In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, reacted to figures that said the company had made a $51 million profit from bets that housing securities would drop in value. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president.

Actions taken by Wall Street firms during the housing collapse have become a major factor in the contentious debate over financial reform. In his weekly radio address on Saturday, President Obama said Wall Street had “hurt just about every sector of our economy” and again pressed the case for tighter regulation. On Monday, Senate Democrats will try to prevent a Republican filibuster in the first major test of the administration’s effort to push through legislation.

Goldman on Saturday denied it made a significant profit on mortgage-related products in 2007 and 2008. It said the subcommittee had “cherry-picked” e-mail messages from the nearly 20 million pages of documents it provided.

----------------------

Gus: as I wrote about a couple of years ago, one of the tricks for those making oodles of money on "a sure bet" is to loose a bit on some other "ventures", thus not appearing to have loaded the dice... Another trick is to have massive amount of information, most of it irrelevant, as to keep the trails of deceit, should there be deceit, hidden — not behind a wall of secrecy but amongst a heap o' crap..

The emails also include love letters written by Fabrice Tourre, a young Goldman trader who has personally been charged with fraud, to his girlfriend, in which he describes his work as "intellectual masturbation" and jokes about selling toxic mortgage bonds to "widows and orphans" – Wall Street's traditional euphemism for unsuspecting investors.

The revelations come at the start of a dangerous week for Goldman Sachs, when Mr Blankfein and other executives will be called to account for their activities in the mortgage market in front of a Senate investigation into the credit crisis. Carl Levin, the Senator in charge of the grilling, said the emails showed that Goldman Sachs had been lying to the public by claiming it did not make significant income from betting against the housing market.

"Investment banks such as Goldman Sachs were not simply market-makers; they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," he said.

Goldman Sachs denies all charges and by releasing almost 100 pages of internal correspondence, the firm is hoping to win the battle if not for hearts, then at least for minds. Its emails show that it was not always betting against the mortgage market, and even considered buying a subprime mortgage lender. The bank's executives say it started 2007 with heavy exposure to the mortgage market and was prudently trying to reduce its risk of losses.

Specifically, it points out that its profits from mortgage trading in 2007, when the meltdown began, were more than wiped out in 2008 as the credit crisis went into its critical phase. In all, it lost $1.7bn (£1.1bn) in 2008.

In November 2007, though, the picture was much better because Goldman Sachs had been moving aggressively all year to clear out its exposure to the mortgage market, following an internal debate that concluded it was headed for crisis. Mr Blankfein wrote that month: "Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts."

In a second email, Goldman's chief financial officer, David Viniar, responded to a report on the firm's trading activities, showing that – in one day – the firm netted over $50m (£32.5m) by taking short positions. Mr Viniar wrote: "Tells you what might be happening to people who don't have the big short".

Goldman Sachs was not the biggest Wall Street player in the mortgage market. High street banks that had big mortgage lending operations tended to be more deeply involved in the business of packaging these mortgages into toxic securities for sale to investors across the world.

However, Goldman was quicker than those rivals to spot the possible effects of a crash in the US housing market. All the exotic derivatives built on the back of subprime mortgages cratered in value in 2007, and the rest of the mortgage market collapsed in 2008, bringing chaos to Wall Street. Even Goldman had to be bailed out by US taxpayers.

Fraud charges laid against Goldman and Mr Tourre earlier this month suggest that they duped investors in a mortgage derivative called Abacus, by not telling them that the derivative had been created on behalf of a hedge-fund client that was betting on a coming crash. Mr Tourre himself appears in no doubt that a crash is coming, according to his emails, and is already discussing his next career move with his girlfriend in the weeks before he sold the controversial bonds to investors.

--------------------------

"Widows and orphans"... Here the previous Howard government called them "mums and dads" when selling Telstra to the "public" when the public ALREADY owned the telco, since it was a government asset.... At least when the NRMA was "demutuelised" (thrown to the wolves), the members were given shares in the sale...

"I think it's clear that credit standards got loose, too loose," Daniel L. Sparks, the former head of Goldman's mortgage department, said later in response to questions. "I don't have regrets about doing things that I think were improper, but we were a participant in an industry that got loose."

He said, "We made mistakes in our business, like I think any business does, and we made some poor business decisions in hindsight."

Michael J. Swenson, the current managing director of Goldman's Structured Products Group Trading department, told the panel, "We did not cause the financial crisis. . . . I do not think we did anything wrong." He added, however, that "there were things that we wish we could have done better in hindsight."

Fabrice P. Tourre, a 31-year-old Goldman Sachs executive from France, said, "I am saddened and humbled by what happened in the market in 2007 and 2008 . . . but I believe my conduct was proper."

Tourre expressed regret for writing e-mails that he said "reflect very badly on the firm and on myself." The e-mails, which characterized transactions he promoted in unflattering terms, were uncovered by investigators. In one of them, he called himself "the fabulous Fab."

In opening the hearing, Levin said Goldman "helped spread toxic mortgages throughout the financial system . . . and when the system finally collapsed, Goldman profited from the collapse" by placing large bets against the very investments that the firm was selling to clients.

Goldman executives maintained they had acted to minimize risks and denied that they bet against their own clients. They described the firm as a "market maker" as opposed to an investment adviser, and they rejected senators' comparisons of their actions to those of Las Vegas bookies.

----------------------

See greed on credit... and toon at top, of course...

Goldman Sachs' chief executive has denied his bank contributed to the US financial crisis by betting some of its own investment products would fail.

Lloyd Blankfein and other executives at the Wall Street giant were accused by a US Senate panel of acting unethically, while Americans lost jobs and homes.

Mr Blankfein said clients came looking for risk "and that's what they got".

The hearing comes as the US Congress considers the most sweeping reform of the financial industry since the 1930s.

During hours of hostile questioning on Tuesday, Goldman executives were accused of marketing some investments that the bank's own staff dismissed as "junk".

From Dowd

“I think most people in Las Vegas would take offense at having Wall Street compared to Las Vegas. Because in Las Vegas, actually people know that the odds are against them. They play anyway,” said the righteous Ensign. “On Wall Street, they manipulate the odds while you’re playing the game. And I would say that it’s actually much more dishonest.”

There was a bipartisan jackpot in casino metaphors.

“How does that differ from going out to Caesar’s Palace, the sports book, and making a wager on the outcome of an athletic contest?” Senator John McCain of Arizona asked C.E.O. Lloyd Blankfein.

But the Republicans’ whacking of Wall Street’s wise guys lost a little of its punch when you knew that they were ducking out to the Senate floor, trying to thwart Democrats’ efforts to pass a bill tightening regulation of Wall Street. Republicans ignored the contradiction in this, the same way Goldman Sachs ignored the conflict in betting against the product it sold to clients.

--------------------

Gus: see my metaphor at top.

Goldman Sachs executives have long been among the most richly paid on Wall Street in the best of times. They are now poised to reap a windfall that was sown in the dark days of the financial crisis in 2008.

Nearly 36 million stock options were granted to employees in December 2008 — 10 times the amount issued the previous year — when the stock was trading at $78.78. Since those uncertain days, Goldman’s business has roared back and its share price has more than doubled, closing on Tuesday at nearly $175.

The options grant is among the many details that emerge from a study of regulatory filings and internal partnership documents by The New York Times and Footnoted.com, a division of Morningstar that scrutinizes corporate disclosures. These filings provide a much fuller picture of both Goldman’s compensation and its elite partnership of 475 people who run the firm.

http://dealbook.nytimes.com/2011/01/18/study-points-to-windfall-for-goldman-partners/?hp

see toon at top...

Intent on fixing a banking system that contributed heavily to the recent financial crisis, lawmakers and regulators pushed Wall Street to overhaul its pay practices. Big banks responded by shifting more compensation into stock, a move intended to align employees’ interests more closely with those of investors and discourage excessive risk-taking.

But it turns out that executives have a way to get around those best-laid plans. Using complex investment transactions, they can limit the downside on their holdings, or even profit, as other shareholders are suffering.

More than a quarter of Goldman Sachs’s partners, a highly influential group of around 475 top executives, used these hedging strategies from July 2007 through November 2010, according to a New York Times analysis of regulatory filings. The arrangements were intended to protect their personal portfolios when the firm’s stock was highly volatile, especially at the height of the crisis.

http://dealbook.nytimes.com/2011/02/05/stock-hedging-lets-bankers-skirt-efforts-to-overhaul-pay/?hp

see toon at top...

After umpteen calls for restraint by ministers, weighing the public relations impact, and consulting colleagues and advisers, Barclays chief executive Bob Diamond has made his most difficult decision. The multi-millionaire is set to accept a £9m bonus, one of the largest in the world, and will be followed by the bosses of the other major banks. This shows that they are all in something together, even if it's not what the rest of us are in.

Mr Diamond canvassed close City friends before deciding to take the bumper bonus which he fears will reignite the row over bankers pay. Sources close to him said: "Bob's been in a real dilemma as he can't stand this country's culture of banker-bashing and finds our attitude to bonuses extraordinary. But he is also aware of public opinion, so sounded out people about whether he should turn down his bonus again for the third year, take less or give some to charity."

Despite rising public anger about the scale of City payouts, David Cameron insisted last night that he was not interested in "headlines satisfying people today and tomorrow that I've given the banks a good kick in the pants. Can we do more on bonuses, particularly on those banks we own? Yes we can, and yes we will," he told The Sunday Telegraph. "But look, we've just been talking about growth. I don't believe actually in the long run, you can deliver the enterprise-growth agenda while having a running war with the British banking industry at the same time."

http://www.independent.co.uk/news/business/news/millionaire-bankers-message-to-britain-were-all-right-jack-2205848.html

see banks' backside at top...

Hi Gus,

I'm surprised that David Cameron didn't suggest that we should all lay-off poor Bob, as if the little banking battler came under too much stress trying to figure-out what to do with his ill-gotten gains, he might actually quit banking & take-up something less demanding, like politics. And then where would we be Gus?

Imagine how hard we'd have to struggle to find a replacement for Bob?

How many greedy, immoral thieves would step-up to the plate, knowing that they'd have to endure so much abuse & ingratitude for all the tough work they have to do & all the sacrifices they have to make, just to try & help us mere mortals to 'get a life' .... & then all they get for their trouble is ameasily ten million pounds a year!!

I've got a message for Bob & his mates but I wouldn't offend our readers or posterity by using such language on the hallowed pages of YD.

Suffice to say: a pox on all the bastards, including their political enablers.

Cheers Mate,

John.

Another Inside Job

By PAUL KRUGMAN

Count me among those who were glad to see the documentary “Inside Job” win an Oscar. The film reminded us that the financial crisis of 2008, whose aftereffects are still blighting the lives of millions of Americans, didn’t just happen — it was made possible by bad behavior on the part of bankers, regulators and, yes, economists.

What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses.

The immediate flashpoint is a proposed settlement between state attorneys general and the mortgage servicing industry. That settlement is a “shakedown,” says Senator Richard Shelby of Alabama. The money banks would be required to allot to mortgage modification would be “extorted,” declares The Wall Street Journal. And the bankers themselves warn that any action against them would place economic recovery at risk.

All of which goes to confirm that the rich are different from you and me: when they break the law, it’s the prosecutors who find themselves on trial.

To get an idea of what we’re talking about here, look at the complaint filed by Nevada’s attorney general against Bank of America. The complaint charges the bank with luring families into its loan-modification program — supposedly to help them keep their homes — under false pretenses; with giving false information about the program’s requirements (for example, telling them that they had to default on their mortgages before receiving a modification); with stringing families along with promises of action, then “sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions”; and, in general, with exploiting the program to enrich itself at those families’ expense.

The end result, the complaint charges, was that “many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds, or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes.”    

...

In the days and weeks ahead, we’ll see pro-banker politicians denounce the proposed settlement, asserting that it’s all about defending the rule of law. But what they’re actually defending is the exact opposite — a system in which only the little people have to obey the law, while the rich, and bankers especially, can cheat and defraud without consequences.

http://www.nytimes.com/2011/03/14/opinion/14krugman.html?_r=1&hp=&pagewanted=print

Almost half of America's millionaires do not feel rich enough despite their out-sized savings, while almost two-thirds fret over the chance that rising taxes might further erode their enviable nest eggs, according to a new survey.

Fidelity Investments, a Boston-based financial services company, polled US households with assets to invest - excluding workplace retirement accounts and real estate - of at least $US1 million.

Of the more than 1,000 millionaires who responded, 42 per cent said they do not feel all that well off.

Fidelity then asked the unsatisfied cohort of millionaires what it would take to make them feel better about their net worth. The answer: assets to invest of at least $US7.5 million.

For comparison's sake, the average US household has a net worth - including retirement assets and real estate holdings - of $US86,000, according to the Federal Reserve.

Sixty-four per cent of the millionaires who participated in the Fidelity survey said they were "extremely or very concerned" about the impact of potential tax changes on their investments, and were talking with investment advisers to minimise the impact.

http://www.abc.net.au/news/stories/2011/03/15/3164202.htm?section=justin

Paul, the minimalist tax advisor, is rubbing his hands in glee... He will save tax to his millionaire customers for FEES... and invest the lot in the Bahamas...

AN ERA of bonus ''restraint'' at Goldman Sachs came to a shuddering halt as the Wall Street bank almost doubled the pay package of its chief executive, Lloyd Blankfein, to $US18.6 million for last year despite a 38 per cent slump in profits.

Mr Blankfein, 56, who once quipped that his firm does ''God's work'', received share awards of $12.6 million on top of a $5.4 million performance-related cash bonus, and a salary of $600,000. He also received additional benefits worth $464,000, a filing by Goldman at the US Securities and Exchange Commission shows.

The postal worker's son from Brooklyn became a lightning rod for controversy over the banking industry's excesses during the financial crisis. Goldman was obliged to pay $550 million in July to settle fraud charges laid by US prosecutors over the alleged mis-selling of toxic mortgage-related derivatives. Mr Blankfein described being hit by the charges as ''one of the worst days in my professional life''.

Blankfein's pay was still far below the record $68 million that he got for 2007, before the credit crunch began to bite. But his earnings are almost double last year's $9.8 million when Goldman declared it was exercising ''restraint'' in response to public and political pressure over the size of bonuses.

http://www.smh.com.au/business/goldman-sachs-chief-reaps-18m-bounty-despite-fallen-profits-20110403-1ct4b.html

Dimon's remuneration package, disclosed by the bank on Thursday night, is the latest sign that pay on Wall Street is returning to pre-crash levels as its biggest players post higher profits.

The 55-year-old chief executive was awarded stock options worth $17m and a "cash incentive" of $5m in 2010, on top of his basic salary of $1m. The previous year he had received no cash bonus and stock awards of just above $14.1m. In 2008, the year of the financial crisis and the collapse of Lehman Brothers, Dimon received just his base salary.

Dimon has run JP Morgan since December 2005. The bank fared much better than its Wall Street rivals during the financial crisis, acquiring Bear Stearns in 2007 and Washington Mutual a year later. The bank made a net profit of $17.4bn in 2010, almost 50% higher than a year ago.

Documents filed with the US Securities and Exchange Commission also show JP Morgan paid Dimon $421,458 in moving expenses, $95,293 to cover "personal use of aircraft" and $45,730 for "personal use of car".

JP Morgan explained the Dimon family had moved from Chicago to New York in 2007 after their children finished high school, but only found a buyer for their old house in 2010. The moving expenses include more than $300,000 in real estate agency commission and fees, but do not cover the likely fall in the value of the house due to the slump in the US housing market.

"It is not the firm's policy to reimburse employees for losses incurred on the sale of a home in connection with a relocation and no such reimbursement is included in the amounts listed as moving expense," JP Morgan said.

The details of Dimon's pay package came just a week after it emerged that Goldman Sachs had almost doubled the pay of its CEO, Lloyd Blankfein, to $18.6m. That included a $5.4m performance-related cash bonus.

http://www.guardian.co.uk/business/2011/apr/08/jp-morgan-head-jamie-dimon-pay

In August 2006, Nichols Smith, an investment banker at now-defunct Bear Stearns e-mailed a colleague, Keith Lind, who was busy selling the firm's mortgage bond deals to clients. Smith was supposed to be the manager supervising these deals, and the e-mail was to tell Lind what he thought of the latest deal Lind was trying to pitch to the firm's clients. In two words: Not much. Smith called the bond named SACO 2006-8 a "sack of s**t," and wrote, "I hope your [sic] making a lot of money off this trade."

For investigators looking for smoking guns that show Wall Street bankers at the height of the bubble knew the mortgage bonds they were pushing on clients were worthless junk, these e-mails seem about as good as you can get. And yet, nearly five years later after these e-mails were written, and months after they became public this year as part of case brought by mortgage insurer Ambac against Bear and J.P. Morgan Chase nothing has happened. Neither Lind nor Smith have been charged with any wrong-doing over the deal, nor has anyone else at Bear. Other Wall Street firms did similar deals, with similar risky bonds. No one has been prosecuted there either. What's going on?

Earlier this week, the New York Times reported that the New York Attorney General's office has been requesting information from Bank of America, Goldman Sachs and Morgan Stanley on how they created and structured mortgage bonds at the height of the credit boom. That investigation has reignited questions about why, nearly three years after the financial crisis, no Wall Streeter has yet to face criminal charges directly related to the mortgage bonds and other toxic deals that lead to the financial crisis. No one really knows the answer, but there are a number of theories out there. Here are the best ones:

Theory No. 1: Prosecutors have been told to back off.

-------------------

see toon at top...

Federal prosecutors are expected to file criminal charges on Wednesday against Rajat K. Gupta, the most prominent business executive ensnared in an aggressive insider trading investigation, according to people briefed on the case.

The case against Mr. Gupta, 62, who is expected to surrender to F.B.I. agents on Wednesday, would extend the reach of the government’s inquiry into America’s most prestigious corporate boardrooms. Most of the defendants charged with insider trading over the last two years have plied their trade exclusively on Wall Street.

The charges would also mean a stunning fall from grace of a trusted adviser to political leaders and chief executives of the world’s most celebrated companies.

A former director of Goldman Sachs and Procter & Gamble and the longtime head of McKinsey & Company, the elite consulting firm, Mr. Gupta has been under investigation over whether he leaked corporate secrets to Raj Rajaratnam, the hedge fund manager who was sentenced this month to 11 years in prison for trading on illegal stock tips.

http://dealbook.nytimes.com/2011/10/25/gupta-faces-criminal-charges/?hp

The indictment claimed to have telephone records showing that Gupta called Rajaratnam to give him privileged information, sometimes within minutes of learning it himself in the boardrooms of Goldman and P&G.

"Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders," said Manhattan US Attorney Preet Bharara.

"As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr Gupta's breach of duty.

"Today, we allege that the corruption we have seen in the trading cubicles, investment firms, law firms, expert consulting firms, medical labs and corporate suites also insinuated itself into the boardrooms of elite companies."

Goldman Sachs made more than a quarter of a billion pounds last year by speculating on food staples, reigniting the controversy over banks profiting from the global food crisis.

Less than a week after the Bank of England Governor, Sir Mervyn King, slapped Goldman Sachs on the wrist for attempting to save its UK employees millions of pounds in tax by delaying bonus payments, the investment bank faces fresh accusations that it is contributing to rising food prices.

Goldman made about $400m (£251m) in 2012 from investing its clients' money in a range of "soft commodities", from wheat and maize to coffee and sugar, according to an analysis for The Independent by the World Development Movement (WDM).

This contributed to the 68 per cent jump in profits for 2012 Goldman announced last week, allowing it to push up the average pay and bonus package of its bankers to £250,000.

The extent of Goldman's food speculation can be revealed after the UN warned that the world could face a major hunger crisis in 2013, after failed harvests in the US and Ukraine. Food prices surged last summer, with cereal prices hitting a record high in September.

read more: http://www.independent.co.uk/news/business/news/goldman-bankers-get-rich-betting-on-food-prices-as-millions-starve-8459207.html

Former banker backs claim that drug use led City of London workers to take crazy risks

FORGET arrogance, greed or idiocy – it was cocaine that caused the financial crash in 2008.

That's the verdict of ex-City worker Geraint Anderson, who has backed former drug tsar Professor David Nutt's claim that use of the Class A drug by bankers sparked global economic turmoil. He writes in The Guardian: "It would be foolish not to see the role that the drug played in creating the bubble."

His intervention came after Nutt, who was sacked from the government's Advisory Council on the Misuse of Drugs in 2009 for claiming horse-riding was more dangerous than taking Ecstasy, told the Sunday Times: "Bankers use cocaine and got us into this terrible mess." He said they became "over-confident" and "took more risks", leading to the meltdown.

Anderson, a former utilities sector analyst, quotes accident and emergency specialist Dr Chris Luke as saying: "Prominent figures in financial and political circles made irrational decisions as a result of megalomania brought on by cocaine usage."

Big bucks for what?

What does $80 million in liquidators' and lawyers' fees buy you? Answer: Nothing.
The settlement, which was supposed to have been struck this very week, after five years, between Lehman Brothers Australia and the councils, churches and charities, has collapsed in a smoking ruin.
As if the sheer magnitude of the fees to the insolvency privateers from PPB were not grotesque enough, the deal collapsed due to the most extraordinary turn of events.
Even the lawyers themselves were calling it shameless. An operative from Lehman Brothers in New York, one Abhishek Kalra, had quietly bought some proofs of debt from another Lehman entity in Hong Kong a couple of weeks ago. These debts made Kalra a Lehman Australia creditor to the tune of $130 million, more than enough to derail the deal with the councils, churches and charities, which had toasted hundreds of millions buying Lehman's financial products.
Here's the catch: Abhishek Kalra was one of the Lehman investment bankers who concocted this toxic rubbish in the first place; including the infamous Federation CDO (collateralised debt obligation), which blew up in short order. Having been responsible for the losses of the not-for-profits, he has now scuttled their settlement in a sneaky bid to get a piece of it himself.
What did his lawyer, Philip Hoser from Jones Day, think about the ethics of this?
''There is no question of our client, Lehman Brothers Holdings Inc, or our firm, acting unethically or improperly in any way.''
Why didn't PPB and its $30 million worth of legal advice see this coming? The councils, churches and charities bought more than $1 billion in toxics from Lehman during the boom, and quickly incurred huge losses.
Lehman bit the dust in September 2008, PPB was appointed liquidator of Lehman Australia.
Instead of doing a deal with the creditors they fought them all the way to the High Court. By last August they'd racked up $62 million in fees, of which $28 million went to law firms. The fees ratcheted up another $20 million as they prepared the scheme settlement.

Read more: http://www.smh.com.au/business/bringing-the-new-news-in-a-brave-new-world-20130621-2oo98.html#ixzz2X2I80UyB

(Reuters) - JPMorgan Chase & Co is in talks with government officials to settle federal and state mortgage probes for $11 billion, two people familiar with the matter said on Wednesday.

The sum could include $7 billion in cash and $4 billion for consumers, said the sources, who asked not to be identified because the negotiations are private.

The talks are fluid and the $11 billion amount could change, the people familiar with the matter said. The discussions include the U.S. Department of Justice, the Securities and Exchange Commission, the U.S. Department of Housing and Urban Development and the New York State Attorney General, the sources said.

read more: http://www.reuters.com/article/2013/09/26/us-jpmorgan-probes-idUSBRE98O12O20130926