Receiving Wide Coverage ...
Warehouse Probe: The Commodity Futures Trading Commission is examining the warehouse operations used by Goldman Sachs and others for the storage of aluminum that has inflated prices to consumers, the New York Times reports Tuesday. The operations were the subject of a Times story Sunday. The CFTC has told Goldman and other firms to hold on to internal documents and emails, hardly a good sign. The Journal weighs in, claiming banks have retreated from physical commodities markets even as Goldman, JPMorgan Chase and Morgan Stanley are cited for buying up oil pipelines, metal warehouses and power plants. A Senate committee is holding a hearing Tuesday on bank ownership of commodity assets, raising concerns that loose regulations have allowed banks to control the storage and shipment of commodities. The question is whether such activities pose a risk to the financial system. Senior officials at the Federal Reserve have discussed with bank executives whether to bar them outright from owning physical commodity assets, the Financial Times says.
Tourre Trial: The first day of the civil fraud trial against the onetime Goldman Sachs trader accused of defrauding investors in a mortgage deal focused on the contradictory testimony of a former Goldman managing director Gail Kreitman. The SEC is seeking to show that Fabrice P. Tourre misled investors about the role of hedge fund Paulson & Co., which bet against the mortgage deal. Wall Street Journal, New York Times
Wall Street Journal
Private investment firms have piled into asset-based lending even as commercial banks retreat from what the paper calls "the shadow lending system," of making loans to struggling companies. Hedge funds see plenty of opportunity in providing capital to businesses that can't borrow from banks. The deals often trigger big fees if loan covenants are broken, but are raising concerns that hedge funds are jumping to the front of the line as creditors if the companies end up in bankruptcy.
Goldman Sachs may have been the "poster child for Wall Street's excesses," a Journal blog notes, weighing in on how Goldman appears to have weathered a difficult trading environment and doubled its profit in the second quarter from a year earlier.
New York Times
A former enforcement chief at the Securities and Exchange Commission has accepted a job at law firm Kirkland & Ellis that pays $5 million a year, further proof of the revolving door between government insiders and Wall Street.
Dealbook's Andrew Ross Sorkin reflects on the $616 million fine that hedge fund manager Steven A. Cohen of SAC Capital Advisors was willing to pay four months ago to settle insider trading charges. But the SEC "having been shamed by critics for what seemed like a deferential deal" returned with a new civil action against Cohen, seeking to bar him from the industry.
A real estate developer, Thomas Arney, was sentenced to more than two years in prison and must forfeit more than $7 million for his role in a fraud scheme that led to the collapse of the Bank of the Commonwealth, in Norfolk, Va.