Depraved Indifference

At it's core Wall Street is a criminal enterprise where the scam generating engine drives the shameless in their singular purpose, the amoral pursuit of profit, that engine honed during the bubble years hums now in the twilight of ponzi finance, generating new scams and devouring the public wealth with depraved indifference.

This week 20 of the worlds biggest banks thumped their chest loudly, proclaiming their profitability for the past two months. It's no surprise that the surprise profits of the big banks during the first two months of 2009 are the result of gifting and graft, but this level of hypocrisy is criminal.

Socetie Generale France’s third-largest bank, expects further asset writedowns in the first quarter related to “indices and spread levels” at the end of March as well as bond insurers.

“You can expect that we will have some further writedowns on assets in the first quarter, but it will be at a manageable level,” Chief Financial Officer Didier Valet said at a Morgan Stanley banking conference in London today.

There will be further writedowns you can bank on it, and the fact that the damage to the upcoming quarter would be devastating were it not for the $12 billion big the bank got on the sly. See Didier that nonchalance is actually being stealthily funded by the US taxpayer whose toil is taxed and funneled to the big banks courtesy of AIG's criminality the proportions of which render an exhausted and outrage fatigued public and blogosphere slack jaw speechless.

Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.

Trust me you don't want to get too close, so the overview goes like this: In a move reminiscent of Ambac and MBIA, AIG sold insurance against credit defaults, which it could not hope to cover in the event of default, to the 20 big banks Soc Gen, JP Morgan, Bank of America, and Citigroup among them. When the inevitible defaults began rolling in AIG should have begun folding up, paying the banks penny's on the dollar which they owe to insurance purchaser, or nothing at all when that's what AIG had left .

A person familiar with the New York state probe compared the winding down of AIG’s contracts with those of a company such as Lehman Brothers Holdings Inc., where a firm in distress doesn’t pay out 100 cents on the dollar. Lehman declared bankruptcy in September. On the other hand, AIG’s payouts appear to have been 100 cents on the dollar, the person said. Cuomo is also looking into the negotiations that led to the winding down of the contracts, the person said.

The person said there’s a possibility that AIG is becoming a portal through which the federal government is pouring money to capitalize banks in the U.S. and overseas.

Instead at Goldman Sachs refusal to accept anything less than full value AIG coughed up blood.

Goldman Sachs Chief Financial Officer David Viniar said March 20 that because the New York-based bank had collateral on swaps and hedges against AIG, the company wasn’t willing to accept anything less than full payment from the insurer.

As we said that is exactly like beating blood from a stone, but when you re as plugged in as Goldman Sachs the stone may as well be hooked up to a blood mobile, Goldman and the banks got their billions you got stiffed.

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).

What this all means is that the statements by major banks, i.e. JPM, Citi, and BofA, regarding abnormal profitability in January and February were true, however these profits were a) one-time in nature due to wholesale unwinds of AIG portfolios, b) entirely at the expense of AIG, and thus taxpayers, c) executed with Tim Geithner's (and thus the administration's) full knowledge and intent, d) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.

For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this "one time profit", which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), also funded by taxpayers' money flows into the market. If the administration is truly aware of all these events (and if Zero Hedge knows about it, it is safe to say Tim Geithner also got the memo), then the potential fallout would be staggering once this information makes the light of day.

There it is, the same ole MO again, "... using AIG as an intermediary." i.e. a conduit.", so the pipe works build, even as Andrew Cuomo expands his investigation.

New York Attorney General Andrew Cuomo, building on his investigation of American International Group Inc.’s bonuses, subpoenaed data on credit derivatives to determine whether Goldman Sachs Group Inc., Deutsche Bank AG and other banks improperly received taxpayer funds.

It is a virtual certainty that the banks improperly received taxpayer funds, which is why Cuomo is expanding his investigation to the wrong places, and cannot be taken seriously, until he seriously attempts to determine who is "using AIG as an intermediary".

Just in case you're incline to think that the wording "whether Goldman Sachs Group Inc., Deutsche Bank AG and other banks improperly received taxpayer funds." vs "who is "using AIG as an intermediary" is merely word play keep in mind, that we have seen this type of cover up by omission from Cuomo before.

It would not be surprising to see his investigation reveal exactly that, what we already know that Goldman and the other big banks did improperly received taxpayer funds. Cuomo will probably put a few hapless underlings in jail, then pop a champagne cork, one step closer to the white house, while Joe six pack will be glad to see someone get something, though he won't know who got what, certain only that once again he feels the shaft.