Massive Insider Trading Probe?

In the United States? Possibly featuring Goldman (the Vampire Squid) Sachs? And featuring health care providers?

Whodathunkit?

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say...

...In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

"Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information," the email said. "(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."

The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

SAC, Wellington and MFS declined to comment; Janus and Citadel didn't immediately comment. It isn't known whether clients are under investigation for their business with Mr. Kinnucan.

You know what I love about that email? It isn't the smarmy, supercilious tone. That goes without saying.

It's the fact that (granting presumption of innocence and all that) it's very possible that he believes what he's saying. The tone of the thing doesn't imply shocked innocence, but that he believes this whole thing is a complete joke. And how could he not? Insider trading laws are for other people. Little people. The government is for keeping THEM slapped down; the real Heroes doing real Trading are to be left alone by the "dead hand of government".

It's the idea that the government has forgotten who it really serves.

So how does all this (allegedly) work? In a word, experts.

The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a "top criminal priority" for his office, adding: "Illegal insider trading is rampant and may even be on the rise." Mr. Bharara declined to comment.

Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.

The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.

Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets' shares rise in value.

Nice gig, if you can get it. Why make chump change working for a company that actually does things and makes things? That's for suckers. The smart players stay there just long enough to absorb everything they need to know, and then skip on down to Wall Street and (allegedly!) sell their insider knowledge to the highest bidder. THEY get fat stacks. YOU get fat stacks. Everybody wins!

(Except, of course, the people that might have benefited from experts actually doing things. Like with all those physicists, mathematicians, engineers and other "quants" going to Wall Street to rig virtual casinos instead of making the world a better place. Why do something useful when horrible useless bullshit is so much more lucrative?)

Anyway, read the story. Yes, it's in the WSJ, but it treats the subject relatively fairly. Sure, it's no Taibbi, but it'll do a good job of reminding you why America's going downhill. It isn't because of immigration, or crime, or media violence. It sure as hell isn't enough kids doing math in school: what does it matter now that all the mathy kids end up doing something so pointlessly destructive?

Nope, what's bringing down America, and arguably the rest of the world, is the Wall Street Titans who draw away everything productive in the economy and exploit it to keep on gambling. The ones that think that laws and government are to protect them from you. The TRUE "elitists". The Wealthiest One Percent.

Wall Street's Pathologies

While I'm KrugPostin', here's a KrugLink to a piece in the NY Observer about, well, just what kind of asshats are working on Wall Street these days.

"The first thing that needs to happen, I think, is to get these people out of their homes," a man wearing a bespoke blue-striped shirt, a Hermés tie patterned with elephants and Ferragamo loafers said recently. "Correct! I'll explain," the veteran member of a bank restructuring and advisory team said.

Amid evidence of sham documents and widespread paperwork gaffes, if not systemic fraud that increasingly looks like it may be terrifically deep, Bank of America recently halted all foreclosure proceedings around the country. That followed similar announcements from the home-loan giants JPMorgan Chase and GMAC.

But Wall Street does not sympathize. "You had people putting zero down to get massive houses they couldn't afford to be in," he said Monday morning, "but now they want to stay. And the government wants to let them stay, because they're voters." A few hours later, the Goldman Sachs arm Litton Loan Servicing said it had suspended certain foreclosure proceedings, too. "Talk about a financial scandal," a Wall Street Journal editorial this weekend joked. "A consumer borrows money to buy a house, doesn't make the mortgage payments and then loses the house in foreclosure—only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine?"

"The problem is they don't deserve to be in that place. They probably deserve to be there less than they used to," the source continued, referring to incomes lower now than they'd been when the loans were made in the first place. "You do need to foreclose, and you need to go back to people living in houses that are consistent with their income levels."

At this point, I'd like to remind readers that there are reports all over the place about people getting foreclosed upon that paid in full and paid in cash. Including in the Observer. Moving on...

In order to understand Wall Street's shrug during this foreclosure crisis, which as many as 40 attorneys general are expected to announce an investigation into this week, the key is to appreciate just how deeply connected the gesture is to Wall Street's view of who's to blame for the financial crisis.

The feeling, the idea at the bottom of all the others, is that even if Wall Street aggravated the crisis by bundling and betting on mortgage-backed securities that turned out not to live up to high ratings, it was not a matter of, as Citi chairman Richard D. Parsons told The Observer this summer, "bad people trying to do bad things." The loans wouldn't have been there in the first place if American home buyers, driven by what The Weekly Standard calls immediate gratification without personal responsibility, hadn't overstepped their bounds.

So when Ken Bentsen, the executive vice president for public policy and advocacy at Wall Street's largest trade group, the Securities Industry and Financial Markets Association, talks about this foreclosure fraud crisis, he points out that the homeowners arguing about administrative problems are the ones who've gotten themselves tied up in the foreclosure route in the first place, regrettably. "No one has raised the question that anyone who's going through this process shouldn't have been in the foreclosure process," said Mr. Bentsen, who, as a congressman from Texas, helped write the Sarbanes-Oxley and Gramm-Leach-Bliley acts.

"Look, I think it's just human nature. People want to have a bogeyman," Ralph Cioffi, the former Bear Stearns hedge fund manager, who was found not guilty of fraud, said in a recent Observer profile about anger at banks and bankers. "People don't want to take responsibility for their own actions."

Apparently not.

So, the Wall Street titans, having screwed up so badly that they needed to be rescued from their own financial crapulence by the American people, are right back to blaming absolutely everything on poor people. Let the borrowers suffer. I have a tee time to get to!

Never mind that the wealthy are more likely to play the "jingle-mail" card than the poor are. Never mind that the professionals involved all signed off on this nonsense. And never mind that everybody said that the crash couldn't happen, that home prices couldn't go down, and that anybody who said otherwise was a crank. And never mind that the institutions that these guys work for were more precariously leveraged than a thousand insolvent homeowners. No, it all comes back to the OTHER guy.

And why?

"Because people don't want to take responsibility for their own actions".