xjo direction, page-47

I think it is reasonably clear the timing of the Goldman Sachs announcement is no coincidence, given the congress vote on financial reform later this week. Puts a lot of pressure on any congressmen who is sitting on the fence at present.

Having worked in trading structured products in one of these organisations, what Goldman have been alleged to have done is by no means an isolated incident - i think they would find far worse if they dug a little deeper.

My question is, do you think the investment banks would consider engineering a fierce sell off to scare the bejeezus out of everyone and make people have second thoughts on whether status quo should be altered?

Given how overbought the market is, i would be very surprised the likes of Goldmans, Morgans and JP are long anyway, so wouldnt be that difficult to achieve.

The banks, and especially the ones with large investment banking and trading presences have a lot riding on this. By separating their prop and derivative trading units into more transparent and separately capitalised entities they stand lose a lot of power they currently wield. For starters they wont have access to cheap fed funds to punt on trading, and their capital requirements will be significantly increased. All points to less market power, lower returns and most importantly lower bonuses.

They are going to fight this to the death, and i wouldnt be surprised if they try scaring the markets out of any change. Should be an interesting week or two