The Financial Landscape: OPEC Quotas, Goldman Subpoenas and 'Too Big to Fail'

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The Financial Landscape: OPEC Quotas, Goldman Subpoenas and 'Too Big to Fail'A roundup of news from around the world of finance:

Citigroup Starts Getting On Board With the Volcker Rule: In a small victory for supporters of former Federal Reserve Chairman Paul Volcker and his eponymous rule, Citigroup has reportedly closed a $400 million "Quantitative Strategies" hedge fund that used the bank's money to play the stock market. Such proprietary trading -- in which banks make speculative investments on their own behalf, not for clients -- was a primary cause of the financial crisis, in Volcker's view.

Volcker was credited with taming inflation when he ran the Fed from 1979-87, but seems to have struggled to wield real influence as chair of President Obama's Economic Recovery Advisory Board. The Volcker rule, which was opposed by banks and some GOP politicians, will soon be implemented by regulators in accordance with the president's stated intention to end the era of "too big to fail." According to Bloomberg, Citigroup (C) -- the country's third largest bank and a product of Clinton-era deregulation -- is still operating proprietary trading funds under its Citi Capital Advisors unit.

A Subpoena for Goldman Sachs
: In other too-big-to-fail news, Bloomberg reports that Goldman Sachs (GS) was served a subpoena Thursday morning by the Manhattan district attorney's office, relating to the firm's involvement in suspected subprime mortgage chicanery. Goldman's stock has been down 17% since Sen. Carl Levin (D-Mich.) accused the firm, essentially, of securities fraud, as well as misleading Congress. The question now is whether any executives will face criminal prosecution. At least one prominent analyst has said no -- not because they did nothing wrong, but because the shock to the financial system would be too great. Meanwhile, the firm continues to cultivate political connections on both sides of the aisle.

Ratings Agency Eyes The End of 'Too Big to Fail': Moody's Investors Service (MCO) may lower its ratings of Bank of America (BAC), Citigroup, and Wells Fargo (WFC). According to Bloomberg, the ratings agency suspects that the U.S. government's commitment to support the banks will diminish as the financial crisis recedes further into the past.

Will OPEC Open the Tap Wider?
OPEC, the cartel of oil-producing countries, is said to be mulling an increase in production quotas for the first time since September 2007. The Financial Times reports that the twelve member-nations will discuss an increase of 1 million to 1.5 million barrels a day when they meet next week at their headquarters in Vienna. For comparison, the last quota boost was about half as much -- 522,000 barrels a day. Reasons cited for the proposed increase include production disruption from the ongoing conflict in Libya and the usual season increase in demand over the summer.

But before you rejoice over a coming decline in gas prices spurred by an increase in the oil supply, consider this: OPEC members are already overproducing their official quotas -- in April, they exceeded them by 1.3 million barrels a day. So OPEC would have to mandate the maximum increase under consideration in order to truly affect the market.

Brent crude was selling for $115.20 a barrel on Thursday, up 44% from last year's average, which explains why gas prices remain painfully high (despite a drop of 20 cents per gallon over the last month). Unfortunately, Forbes columnist Martin Sosnoff advises us to "Get Used to $100 Crude But Nothing Higher" for the next five years.



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caohellsux1978

We at GolDAMN Nut Sachs (aka the defendant) and Exxon/Mobil are proud to be reducing global warming one bankrupt driver at a time.

June 03 2011 at 8:41 AM Report abuse rate up rate down Reply
MyLoanKing

Ask your self Why did Ben raise interest rates the day he got in? 1% to 6.75% For the slow math thinkers/

That is like $22 a gallon gasoline....naaaaa that won't cripple the economy...It will be great ....
Any other problems were spun from Ben....for the benefit of the Fed.
Look into what I said here. Smiles I am happy & content in my 3,000 luxury home....I just worry about you all.
A great solution is Oral Roberts book circa 1970 Miracle of Seed Faith...costs about 8 bucks used on amazon. Worry will vanish,,,,8 bucks but priceless info if you act on it.....Smiles Smiles Smiles

June 02 2011 at 10:10 PM Report abuse -1 rate up rate down Reply
zekandzora

Margo D. Beller
CNBC

Wall Street Baffled by Slowing Economy, Low Yields: Trader

Wall Street is having a hard time figuring out what to do now that the U.S. economy appears to be sputtering and yields are so low, Peter Yastrow, market strategist for Yastrow Origer, told CNBC.

“What we’ve got right now is almost near panic going on with money managers and people who are responsible for money,” he said. “They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.

“We need to find real yield and real returns on these assets. You see bad data, you see Treasurys rally, you see all bonds and all fixed-income rally and then the people who are betting against the U.S. economy start getting bearish on stocks. That’s a huge mistake.”

Stocks extended losses after the manufacturing fell below expectations in May and the private sector added only 38,000 jobs during the month.

“Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything,” Yastrow said.

“We’re on the verge of a great, great depression and The [Federal Reserve] knows it."

The propaganda matrix responds with.............. "Don't worry, be happy!"

June 02 2011 at 8:20 PM Report abuse rate up rate down Reply
actionhero

This is a campaign ad not journalism.

June 02 2011 at 6:15 PM Report abuse rate up rate down Reply
jkennedy806

If OPEC goes to the petrol mark it will only cost 1/2 -- the soverign dollar is over flated from QE 2. The US banksters
yesterday and Timmy Geithner got theirs -- The EU told them either get with the Basal II program, or get out of the European market. The European bankers believe that the US does not adhere to the Basal II restriction it will be an unfair playing field and lets face it europe is still mad at the too big to fail US bankster goons for ripping small countries off with their toxic CDO's. The bankster should go to jail. they broke the law, I read something where one of the reason the NY FEd wants the doc's asked for in the supbeona is because the investors feel defrauded, well how about the homeowner were they not defrauded as well. Don't even go there with that dead beat sheetz cause the only dead beats in this story is the shylocks on Wall Street. If we all played by the rules, there would have never been a credit crisis. If the Underwriters did their jobs instead of waving unqualified people thru, construction would be humming along and the economy probably would have never tanked.

June 02 2011 at 5:32 PM Report abuse +1 rate up rate down Reply
2 replies to jkennedy806's comment
tbbikerdad

My name is T i m ..There is a simple solution to AMERICAN ECONOMY . It will never happen long as most of congress owns stock or a company listed on wall street ..............FIRE THEM ALL , START OVER . ALL POLITICS IS THE SAME ....... MY MONEY IS IN MY POCKET . My retirement and social security is in my pocket . FOR THOSE OF YOU WHO DO NOT KNOW . ...A BARREL OF OIL , is mostly AMERICAN COMMERCE TAXES . IT '' DOES NOT COST $ 1 1 5 . 0 0 . '' That is what we are told . The true measure of a barrel , used to be 5 5 gallons . Today , the barrel measures 4 2 gallons , commerce kept the 5 5 gallon price . LOOK IT UP YOURSELF . ALSO ... AMERICAN price at the pump , HAS NOTHING TO DO WITH PRODUCTION COST . Price per gallon is mostly Commerce taxes . Take out all the taxes except sales tax at the pump , TAKE OUT THE ETHONOL , and its taxes , We should be paying around $ 1 . 5 0 cents , maybe $ 1 . 7 5 cents a gallon . OUR AMERICAN ECONOMY IS BEING HELD BACK , BY CONGRESS ON PURPOSE . HOW LONG DO WE ACT LIKE BIBLICAL SHEEP , AND CONTINUE TO BE BEAT DOWN , BEFORE WE DO SOMETHING ....THERE IS A SIMPLE SOLUTION TO AMERICAN ECONOMY ..............IT IS NOT UP TO GOVERNMENT TO FIX IT . IT IS UP TO US , THE SHEEP . WE ARE BEING LED TO SLAUGHTER , AND DO NOT SEEM TO CARE . .......... FIRST OF ALL .....GET RID OF WELFARE COMPLETELY . ................. GROW A GARDEN . ............ TELL YOUR CAR MAKER TO BUILD YOUR CAR FOR 1 0 0 miles per gallon ......WE HAVE HAD THAT TECHNOLOGY FOR DECADES . It is not in the engine . DETROIT HAS KNOWN THIS FOR DECADES . ..............MY UNDERWEAR IS MADE IN VEIT NAM .........THERE IS A SIMPLE SOLUTION TO AMERICAN ECONOMY .........................MY NAME IS T I M .... My money is in my pocket ...............

June 06 2011 at 8:38 AM Report abuse rate up rate down Reply
tmlbtb

Goldman Sachs, the best, the brightest. Only one small issue. They wouldn't be in business today if their former boss hadn't worked for King Georga and with a swipe of the pen, saved them from going under. How bright are they?

June 02 2011 at 4:12 PM Report abuse -1 rate up rate down Reply