Today's Headlines

Bloomberg:

• Goldman Sachs(GS) Sued by SEC for Fraud Tied to CDOs. Goldman Sachs Group Inc. was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The firm’s shares tumbled as much as 16 percent and financial stocks slumped. Goldman Sachs created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them, the Securities and Exchange Commission said in a statement today. Billionaire John Paulson’s firm earned $1 billion on the trade and wasn’t accused of wrongdoing. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president who helped created the CDOs. “The product was new and complex but the deception and conflicts are old and simple,” SEC Enforcement Director Robert Khuzami said. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.” “Civil charges and the disgorgement are not the issue -- the threat to Goldman is reputational,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. The danger is to “ultimately its market share with its prized institutional and corporate clients.” According to the SEC’s complaint, Tourre sent an e-mail to a friend in January 2007 saying, “The whole building is about to collapse” in reference to CDOs tied to subprime mortgages. “Only potential survivor, the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrousities!!!,” Tourre wrote in the e-mail, according to the SEC. The agency didn’t identify the recipient of the note. Goldman Sachs and Tourre knew it would be difficult, if not impossible, to place the liabilities of a synthetic CDO if they disclosed to investors that Paulson played a significant role in selecting the collateral and was also betting against it, the SEC said.The bank also knew that at least one potential investor, Dusseldorf, Germany-based IKB Deutsche Industriebank AG wasn’t likely to invest in a CDO that didn’t have a collateral manager to analyze and select the portfolio, according to the complaint. In January 2007 Goldman approached ACA Management LLC, a firm that analyzes credit risk, to select the portfolio for a CDO transaction sponsored by Paulson. In an internal memo on March 12, 2007, Goldman said it would “leverage ACA’s credibility and franchise” to help distribute the transaction, the SEC said. Paulson, Tourre and a representative from ACA met in February 2007 to discuss assets that would be included in the residential-mortgage backed security, the SEC said. While Paulson and Tourre knew Paulson intended to short the security by entering into credit-default swap transactions with Goldman, ACA wasn’t in the loop.“I am at this ACA meeting,” Tourre wrote in an e-mail to an unidentified Goldman Sachs employee during the meeting. “This is surreal.”
• GE(GE) Faces SEC Review After Paulson's Account of Talks. The U.S. Securities and Exchange Commission is reviewing General Electric Co.’s 2008 disclosures after ex-Treasury Secretary Henry Paulson said the firm told him at the peak of the financial crisis it struggled to sell debt. “The SEC has requested information about our September 2008 statements,” GE spokeswoman Anne Eisele said yesterday, responding in an e-mail to questions from Bloomberg News. “We are fully cooperating with them and are entirely confident our disclosures were accurate.” In his book “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,” Paulson says he discussed GE’s problems selling commercial paper with Chief Executive Officer Jeffrey Immelt during a phone call on Sept. 8, 2008, and in person on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy. GE said in a Sept. 14 memo to investors that its corporate debt programs “remain robust.” The SEC is responsible for making sure companies adequately disclose material information to investors and has the authority to sanction firms for violations.
• U.S. Michigan Consumer Sentiment Unexpectedly Fell. Confidence among U.S. consumers unexpectedly fell in April to the lowest level in five months as Americans fretted about the labor market and health care. The Reuters/University of Michigan preliminary index of consumer sentiment dropped to 69.5 from a reading of 73.6 in March. The gauge was projected to rise to 75, according to the median forecast in a Bloomberg News survey of 69 economists. Consumers in the survey anticipated financial conditions will worsen, partly due to the new health care legislation, and said the recovery may be too slow to bring about bigger declines in the jobless rate. “This raises doubts about the consumer and leaves one feeling uncertain about the pace of the recovery,” said Rob Carnell, chief international economist at ING Financial Markets in London. “We’re not seeing much in the way of labor market progress. People are still worried about home prices.” When asked to evaluate government economic policies, 45 percent of the survey respondents rated them unfavorably, up from 40 percent last month. Thirty-eight percent thought the new health care law would weaken their personal finances, compared with 8 percent who said it would improve them. The gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, dropped to 80.7, the lowest level this year, from 82.4. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, slumped to 62.3, the weakest reading since March 2009, from 67.9.
• EU Tells Greece to Brace for IMF's Bailout Terms. European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions for granting a bailout package for the debt- strapped nation.George Papandreou yesterday asked for a meeting with Greek Prime Minister the EU, the IMF and the European Central Bank, which agreed to back a 45 billion-euro ($61 billion) loan package for Greece this week. Talks will begin in Athens on April 19.
• U.S. Treasury Seeks to Ease Path for Bank Seizures in Dodd Bill. U.S. Treasury Department officials are seeking to change provisions in the Senate’s proposed financial-rules overhaul that they say might hamper regulators’ ability to seize a large bank and prevent a financial panic. Treasury officials say part of the Senate proposal would restrict the amount of money regulators could use to operate a failing firm after it has been seized. They also say a provision requiring bankruptcy judges to sign off on the seizure of a systemically important firm could prevent fast action. Senate Minority Leader Mitch McConnell said this week that big financial firms ought to turn to bankruptcy, not government assistance, when they run into trouble. Geithner has said banks are different from other companies and need extra help with ensuring emergency liquidity.
• China Copper Stockpiles Extend Climb to Highest Since 2003. Copper stockpiles monitored by the Shanghai Futures Exchange rose for a second week, extending a climb to the highest since at least 2003. Stockpiles of the metal jumped 16,357 metric tons, or 9.6 percent, to 185,895 metric tons, based on a survey of six warehouses in Shanghai, the exchange said. That’s the highest level since at least 2003, according to Bloomberg data. Inventories of aluminum rose by 12,564 tons to 425,572 tons, based on a survey of 11 warehouses in Shanghai, Guangdong, Jiangsu and Zhejiang, the exchange said in a statement today on its Web site. That’s the highest level since at least 2003, according to data compiled by Bloomberg. Holdings have risen every week since Dec. 3, excluding periods when the exchange was closed for holidays. Zinc stockpiles grew 2,931 tons to 251,371 tons, based on a survey of eight warehouses in Shanghai, Guangdong and Zhejiang, the exchange said. That’s the highest level since April 2007, when the contract was launched.
• The improvement in developing-nation creditworthiness that sent spreads on the countries' credit default swaps lower this year has "temporarily stalled," Goldman Sachs Group Inc. said. Spreads on emerging-market credit default swaps may rise as a result, Goldman said.
• Oil Falls Below $85 on Slow U.S. Recovery; Dollar Damps Demand. Oil declined for a second day on speculation that economic recovery may be stalling in the U.S., the world’s largest energy consumer. Oil slipped below $85 a barrel in New York as the U.S. currency strengthened against the euro amid speculation Greece will struggle to curb its budget deficit. U.S. weekly jobless claims unexpectedly climbed to a two-month high and industrial output in March rose 0.1 percent, less than analysts forecast. Oil declined for a second day on speculation that economic recovery may be stalling in the U.S., the world’s largest energy consumer. Oil slipped below $85 a barrel in New York as the U.S. currency strengthened against the euro amid speculation Greece will struggle to curb its budget deficit. U.S. weekly jobless claims unexpectedly climbed to a two-month high and industrial output in March rose 0.1 percent, less than analysts forecast.
• California Climate Fight May Break Campaign Spending Record. A dispute between environmental groups and refiners Tesoro Corp. and Valero Energy Corp. over global warming laws in California may flare into a political campaign with a price tag exceeding $150 million. The Texas-based companies want California voters to decide in November whether the state’s program for cutting greenhouse gases should be delayed until the economy dramatically improves. Environmental groups say the pollution controls will create jobs and should start in 2012 as planned.

Wall Street Journal:

• Goldman(GS) Is Charged With Subprime Fraud.
  
• Goldman Sachs(GS) SEC Charges: Translated for Humans.

zerohedge:

• GOP Leader Calls Goldman(GS) "Obama's Top Wall Street Ally" Asks "Just Whose Side Is President Obama On?" House Republican Leader John Boehner (R-OH) issued the following statement after the U.S. Securities & Exchanges Commission (SEC) announced it was charging Wall Street giant Goldman Sachs – which has been supportive of President Obama’s bill to create a permanent bailout fund – with defrauding investors: “These are very serious charges against a key supporter of President Obama’s bill to create a permanent Wall Street bailout fund. Despite President Obama’s rhetoric, his permanent bailout bill gives Goldman Sachs and other big Wall Street banks a permanent, taxpayer-funded safety net by designating them ‘too big to fail.’ Just whose side is President Obama on? “Instead of permanent bailouts for President Obama’s Wall Street allies, Republicans believe the best way to protect taxpayers is by reforming Fannie Mae and Freddie Mac, the government-sponsored companies that sparked the meltdown by giving high-risk loans to people who couldn’t afford it.” NOTE: Goldman Sachs was President Obama’s top Wall Street contributor during the 2008 election cycle, donating nearly $1 million to his campaign.

Washington Post:

• On Main Street, Wall Street's Big Profits Seem Like Bad Manners.

Lloyd's List:

• Panamax Surplus Forecast to Send Rates Crashing to 2002 Levels. PANAMAX freight rates are forecast to be “similar” to 2002 average rates of $13,000 per day when the near-record numbers of new ships being delivered in 2010 and 2011 outstrip dry bulk demand for this ship type.

Huffington Post:

• GOP Warms To Breaking Up The Big Banks.

Insurance & Technology:

• Goldman(GS) CDS Cost Jump on SEC Fraud Charges. The cost to insure Goldman Sachs debt in the credit default swap market jumped Friday after the Securities and Exchange Commission said it has charged the bank with fraud in relation to risky subprime mortgage debt the bank sold.Goldman's credit default swaps jumped 20 basis points to 110 basis points, or $110,000 per year to insure $10 million in debt for five years, according to data by CMA DataVision.

BigGovernment.com:

• CFPA Czar or Fox in the Hen House? You Decide. The activity surrounding the controversial Consumer Financial Protection Agency (CFPA) in the financial reform legislation is really picking up these days. But many Americans would never know it. It seems Democrats may have learned something from the experience of the health care bill after all. In their efforts to avert a repeat disaster of losing control of the message, they appear to be taking every step necessary to ensure that the public engages as little as possible in this debate. But I assure you, this is a debate that the American public should engage in, pronto.

imweekly.com:

• Ohio SERS Continues Push to Hedgies. Over the past two months, the School Employees Retirement System of Ohio (SERS) Board of Trustees has committed nearly $400 million to the hedge fund strategy. A new decision this week burgeons that total to nearly a half billion dollars, SERS Communications Coordinator Tim Barbour told IMW.

AppleInsider:

• Apple(AAPL) in Advanced Discussions to Adopt AMD Chips.

The Truth About Cars:

• Chrysler Zombie Watch 10: Might As Well Jump.

Politico:

• A Tale of Two Obamas: Up in D.C., Down in U.S. The cover of The Atlantic this month shows a shirt-sleeved President Barack Obama and the headline, “WHY HE’S RIGHT.” It reflects the Washington conventional wisdom that Obama is on a roll, bolstered by his long-delayed victory on health reform. Someone should tell the rest of the country.

Reuters:

• US Solar Capacity Surges in '09 on Incentives. Installed solar capacity in the United States jumped 37 percent in 2009 as state and federal incentive programs helped prop up demand during a downturn, solar advocates said in a report on Thursday.

Telegraph:

• ECB Heavyweight Stark Skeptical of IMF's Role in Greece Bail-Out. "It is sensible to fall back on the experience of the IMF But, like before, I am sceptical regarding its possible financial contribution," Mr Stark, one of the ECB's six-strong Executive Board, told German magazine Capital. "The IMF has to accept the rules of the euro zone." He said many governments could face financing troubles if there was an across-the-board rise in interest rates, and that it was "dangerous" for central banks to keep interest rates low for too long. "We must, and will, act in a timely manner (on interest rates)," he said.

To Vima:

• Greece's social security reform measures will include pension cuts of as much as 30% after 35 years of work, raising the retirement age to 65 and additional dues on pensions over 1,400 euros a month of as much as 5% starting this year.

Ta Nea:

• Greek elementary and high-school teachers plan strikes to protest pension and pay cuts and plans to change how teachers are appointed.

DigiTimes:

• TSMC Alarmed by Rising Inventory Levels, Say Sources. Taiwan Semiconductor Manufacturing Company (TSMC), alarmed by its rising inventory level, has demanded IC design houses take delivery of their ordered wafer starts before placing new orders, according to industry sources. The foundry chipmaker, which has seen its fabless IC customers pick up their wafers at a slow pace since the beginning of the second quarter, is alarmed by the possibility that the clients might have been overbooking, indicated the sources. TSMC's inventory of analog ICs is currently 50% higher than its safe level, while inventories of both network- and consumer-related IC segments have also exceeded their safe levels by about 20%, which has sent TSMC undertaking inventory control measures, the sources claimed.