{"id":10580,"date":"2010-04-22T22:50:04","date_gmt":"2010-04-23T02:50:04","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=10580"},"modified":"2010-04-22T22:50:04","modified_gmt":"2010-04-23T02:50:04","slug":"april-22-2010","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=10580","title":{"rendered":"April 22, 2010"},"content":{"rendered":"

Moody’s has downgraded Greece one notch<\/a>:<\/p>\n

Greece had its credit rating cut one step by Moody\u2019s Investors Service as the government\u2019s debt servicing costs surge on concern that the country will struggle to reduce its budget deficit.<\/p>\n

Moody\u2019s lowered the rating to A3 from A2, four grades above junk, the company said in a statement today. Moody\u2019s also put a \u201cnegative\u201d outlook on Greek debt, indicating it\u2019s more likely to cut it again than raise it or leave it unchanged.<\/p>\n

\u201cThis decision is based on Moody\u2019s view that there is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated,\u201d a team led by Pierre Cailleteau in London said in the statement.<\/p><\/blockquote>\n

The Bank of Canada has released its April 2010 Monetary Policy Report<\/a>:<\/p>\n

Core infl ation has been firmer than projected in January, the result of both transitory and more fundamental factors. Although core infl ation was expected to remain relatively stable over the near term, it rose from 1.5 per cent in November to 2.1 per cent in February (Chart 13). This upward movement partly refl ects transitory factors, such as the unusual pricing pattern for new passenger vehicles since the introduction of the 2010 models into the CPI in November, and the surge in the price of travel accommodation associated with the 2010 Winter Olympics in Vancouver.<\/p>\n

More broadly, the firmness of core inflation over the past year, despite the large amount of excess supply in the economy, refl ects the resilience in the prices of some components of core services, including a significant rise income regulated prices (e.g., communications, tuition fees, and cable services). This resilience refl ects the slower-than-anticipated deceleration in wages, since labour costs represent a large portion of total production costs in core services. Shelter prices have also increased at a faster-than-expected rate, refl ecting the more rapid rebound in housing demand as households pulled forward some of their expenditures.<\/p><\/blockquote>\n

\"\"<\/a><\/div>\n

SEC boss Mary Schapiro has denied the Goldman charges are politically motivated<\/a>:<\/p>\n

“The SEC is an independent law enforcement agency. We do not coordinate our enforcement actions with the White House, Congress or political committees. We do not time our cases around political events or the legislative calendar.<\/p>\n

“The fact is that regulatory reform has been pending for over a year. We have brought many cases related to the financial crisis over that period.<\/p>\n

“On a personal level, I am disappointed by the rhetoric.<\/p><\/blockquote>\n

Goldman disagrees<\/a>:<\/p>\n

\nYesterday, Lloyd Blankfein attacked the SEC’s fraud suit in calls to Goldman clients–describing it as a political hit job that will ultimately hurt the country.<\/p>\n

He also brought up the exculpatory evidence that the SEC left out of its complaint, saying that a staffer of the supposedly swindled ACA knew that Paulson & Co. was planning to go short the Abacus CDO.<\/p><\/blockquote>\n

This case might even go to trial<\/a>!<\/p>\n

[The Financial Times] said that in conversations with private equity executives and others, Blankfein left clients with an impression he is eager to fight the case in court.<\/p><\/blockquote>\n

I hope so – it would be marvellous to see a rebuff of regulatory extortion. But given the highly unequal risks experienced by the two parties, a settlement of some kind seems more likely – that’s why regulatory extortion works in the first place, right?<\/p>\n

Former (Republican<\/a>) SEC boss Harvey Pitt thinks the SEC is taking a big risk<\/a>:<\/p>\n

this SEC litigation takes it places it hasn\u2019t been before\u2014<\/p>\n

\u2022 challenging the premier firm of Goldman Sachs,
\n\u2022 about a synthetic derivative transaction,
\n\u2022 on which Goldman lost millions of dollars,
\n\u2022 where the parties were sophisticated and not in obvious need of SEC protection,
\n\u2022 after a year-and-a-half investigation,
\n\u2022 filed immediately after the President threatened vetoing financial reform legislation that doesn\u2019t strongly regulate derivatives,
\n\u2022 and a few hours before release of the Inspector General\u2019s Report on SEC inadequacies in attacking Alan Stanford\u2019s Ponzi scheme,
\n\u2022 but apparently without giving Goldman advance notice of the filing,
\n\u2022 or exploring possible settlement, and
\n\u2022 splitting 3-2 along political lines in a major enforcement action.<\/p><\/blockquote>\n

What do I think? It can hardly have been something so overt as a call from Comrade Peace Prize ordering Schapiro to take down Goldman. That would be sufficiently unethical that neither party would have anything to do with such a thing (maybe<\/a>). But a lot can be done with nods and winks … the SEC desperately needs a scalp … and Goldman – as the sole major investment bank to get through the crisis without blowing up – is the most luxuriant one out there.<\/p>\n

There’s more commentary on the BNN Blog<\/a> (hat tip: Assiduous Reader MS):<\/p>\n

But after trillions of dollars in destroyed value, the near collapse of the global financial markets, millions in lost jobs and the deepest recession since the Second World War, is this the best the chief law enforcement agent on Wall Street can muster? That Goldman let a then little-known hedge fund pick some mortgage bonds and put them into a pedestrian-sized CDO?<\/p>\n

It’s hardly the plot of an Oliver Stone movie. But it serves a purpose. Especially when the suit was filed four days before Goldman released its first quarter earnings, and published what it plans to set aside for bonuses.<\/p>\n

It also doesn’t hurt if your objective is to gather support in Congress for a far-reaching financial services bill that was expected to hit the floor of the Senate this week.<\/p><\/blockquote>\n

Julie Dickson, Superintendent of Financial Institutions, has delivered a speech to the Empire Club<\/a>. No new OSFI initiatives were announced, nor were there any hints regarding policy.<\/p>\n

The International Monetary Fund has released<\/a> the April 2010 Global Financial Stability Report, with chapters:<\/p>\n