Be afraid.

Be very afraid.

Homeland Security used a confidential informant, based in Maryland, to conduct the investigation. The informant simply created accounts with Dwolla and Mt. Gox, bought bitcoins, and then changed them back into dollars. Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.

The problem is that Mt. Gox specifically declared that they are not a firm involved in money services.

Uh, yeah, ok.

Dealing in such without a license is a crime punishable by up to five years in prison (and/or a big fat fine.) 

There are those who claim that this is no big deal and that it doesn't reach into the realm of what is to come.  I disagree.  The entire premise of a fungible means of exchange requires exactly that -- fungibility.  If I am subject to having my funds seized because of what someone else did then I have custody and control of nothing.

There are those who argue (and rightly so) that one can keep all their "bitcoins" in their own personal wallet and deal with all that is required to do so.  This is true but immaterial if most of the exchanges of said "currency" happen while under the control of a handful of such intermediaries as Mt. Gox and the "miners" who both look for and validate such exchanges.  If the latter is the case (and it is) then you have once again a centrally-controlled system that is subject to destruction by outside forces.

The ultimate problem for Bitcoin (and other similar crypto-currencies) is that they are not self-validating. A dollar bill, with reasonable certainty, is.  I can accept one from you and know with a reasonable degree of certainty that it is unique and valid, rather than printed off your color printer the same morning (that is, counterfeit.)  The need for self-validation is very high in face-to-face transaction use.  It is very desireable in many uses as well; if I must refer to some online source for validation (or worse, must wait any material amount of time beyond a few seconds for that validation) then friction is placed into the economic transaction stream and to the extent a third party is involved the transaction becomes subject to discovery and tracking.  

This goes directly to what many of the proponents of Bitcoin claim -- "anonymous" transactions.  In point of fact Bitcoin provides no such thing since transactions must be validated by external parties and the transaction stream going all the way back to the origin of any given coin is irrefutably and indelibly recorded in the block chain.

In this particular case the information necessary to "bust" Mt. Gox didn't reach into there, but if there is a debate over whether the alleged transactions took place there will be no ability to claim otherwise, since once again the block chain will prove that to be the case.  As soon as either the recipient or sender of a given transaction "out" themselves (e.g. one is an informant) you are cooked.

You're probably going to be surprised that I take this position, but that's ok -- I'm known for calling them as I see 'em, and this is no exception.

The uproar is over S&P asserting a "puffery" defense to fraud claims by the government in relationship to its ratings.

The problem with the outrage is that it's directed in the wrong place -- S&P is right.

Now, lawyers defending the company against the Justice Department's recent civil lawsuit say that statements about independence and objectivity are "puffery" and were never meant to be taken at face value by investors.

You don't watch TV, do you?  

"Time to get in the game!" -- local commercial on TV by Realtors.

"It's a great time to buy a car!" -- statement made by every car dealer, ever, anywhere.

"This is the best cellphone eva!" -- Apple.

"Siri knows" -- ibid.

And on and on and on.

Nowhere have you ever heard:

"It's a terrible time to buy condos; that $200,000 price is at least 50% overinflated and your operating costs are ridiculous with maintenance and common area expenses." -- Never said by a Realtor, ever, anywhere.

So why is S&P different from anyone else?  Of course they are going to represent that they're great people in their public statements and advertising.  Of course they're going to sell themselves.

But unless you have a material, knowing misrepresentation of fact made by them and relied upon by others then their "general" statements of "integrity" and "business reputation" are in fact puffery.

So where's the fraud?

That's simple: It's in the government that has put forward laws and regulations demanding that various entities only buy things rated by firms that have an inherent conflict of interest.  

The Government knew damn well that its demand through these regulations were predicated on a fraudulent premise.

In other words it is the government that has defrauded people by elevating commercial puffery to statements of fact, not S&P.

If you want to hang someone for what happened start with your Congressman.

No, really, banks rigging markets?

Banks are leaving the panel that sets ISDAFix, the benchmark for the $379 trillion swaps market, as regulators probe suspected manipulation of the rate.

HSBC Holdings Plc (HSBA), Europe’s largest bank by assets, and Japan’s Mizuho Financial Group (8411) stopped contributing to the ISDAFix dollar rate between November and January, and haven’t been replaced, documents on the International Swaps and Derivatives Association’s website show. The industry group didn’t give any reason for the lenders’ departure.

Oops.

There's no reason for banks to rig such a market, right?  I mean, it's only the size of the global economy 100x or so over in notional value, with literal billions riding on a single basis point.

The allegation?

The CFTC is probing whether ICAP brokers delayed updating rate-swaps prices on the so-called 19901 screen, which displays swaps prices, after they facilitated a trade between banks, according to one person familiar with the matter and a former broker in ICAP’s Jersey City rate-swaps group who both asked not to be identified because of the investigation.

Yeah, nothing like holding back a price for profit.  

This sort of crap, incidentally, is why allowing "bespoke" execution of these things is an outrage.  We're talking about contracts where the solvency of the side that's short (and thus may have to pay) is open to question yet unable to be proved up since there are no public posted margins (where everyone can see them -- or your failure to deliver them) and the size of the transactions dwarf the economy of the nation in which you operate.

I have long held that there is only one way to stop the BS that goes on these markets, and that's by forcing all derivative contracts onto public exchanges where bid, offer and trade prices are independently posted as the transaction takes place, visible to everyone, and in addition public compliance with published and known margin requirements can be ascertained.

That would put an instant stop to the games. 

But those games make banks billions at the expense of their customers every single year.  There is no argument in terms of market fairness or anything else for that matter, other than the game of "screw you" that banks run on their customers and hiding the true state of a financial firm's balance sheet, that can be raised for not forcing all of these contracts onto public exchanges.  

What we need to see, in addition to public exchanges for these (and all other) contracts, is this:

I know, Bernie Sanders is a socialist.

Call him what you want, he has a nice, single-subject, simple bill.

It reads 30 lines.

It achieves exactly one goal.

And it does so with surgical precision.

I like it and support it.

A BILL
To address the concept of ‘‘Too Big To Fail’’ with respect to certain financial entities.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 SECTION 1. SHORT TITLE.
4 This Act may be cited as the ‘‘Too Big to Fail, Too
5 Big to Exist Act’’.
6 SEC. 2. REPORT TO CONGRESS ON INSTITUTIONS THAT
7 ARE TOO BIG TO FAIL.
8 Notwithstanding any other provision of law, not later
9 than 90 days after the date of enactment of this Act, the
10 Secretary of the Treasury shall submit to Congress a list 2
GRA13102 S.L.C.
1 of all commercial banks, investment banks, hedge funds,
2 and insurance companies that the Secretary believes are
3 too big to fail, which shall include, but is not limited to,
4 any United States bank holding companies that have been
5 identified as systemically important banks by the Finan-
6 cial Stability Board (in this Act referred to as the ‘‘Too
7 Big to Fail List’’).
8 SEC. 3. BREAKING-UP TOO BIG TO FAIL INSTITUTIONS.
9 Notwithstanding any other provision of law, begin-
10 ning 1 year after the date of enactment of this Act, the
11 Secretary of the Treasury shall break up entities included
12 on the Too Big To Fail List, so that their failure would
13 no longer cause a catastrophic effect on the United States
14 or global economy without a taxpayer bailout.
15 SEC. 4. DEFINITION.
16 For purposes of this Act, the term ‘‘Too Big to Fail’’
17 means any entity that has grown so large that its failure
18 would have a catastrophic effect on the stability of either
19 the financial system or the United States economy without
20 substantial Government assistance.

My evidence is here:

Note who it's from, their position and the letterhead.  There's only one question: Is the letter real or is it a spoof?  Note that the question that led to it is real, as it was published in the FT.

More the point, if this sort of nonsense continues to go unpunished and the acts stand, we do know that Cypriot politicians did rule out confiscation of deposits shortly before they did so,  and you continue believe a word that comes out of Bernanke's mouth -- or that of the FDIC, OTS, OCC or any other US Federal regulatory agency on a similar matter the case is closed.

YOU ARE A FOOL AND WILL SOON BE BROKE