Via TAC, another reason for Goldman Sachs to feel sorry for themselves.
Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.
Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov.
Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.
It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”
The only possible conclusion to take from this story is that nobody at Goldman Sachs could have possibly known how to use this program, which they wrote, because that would imply that they “manipulate markets in unfair ways.” Matt Taibbi must feel ashamed for unfairly slandering the firm’s credibiltiy.
demimondian
This smells bad to me. When a senior developer leaves a firm for a competitor, the first firm often resorts to legal chicanery, often involving inflated claims of theft of intellectual property, to make the job change expensive. This one sounds a lot like that to me.
Comrade Stuck
Reminds me of another stupid criminal
Keith
Not to mention the fact that because the guy uploaded the file to Germany, it only reinforces the fact that he’s anti-semitic.
Dennis-SGMM
I’m shocked, shocked to find that gambling is going on in here!
Jasper
Clearly when GS does it, it is fair. When some rogue trader does it, it’s a crime. The difference is GS is not a criminal enterprise, therefore.
And therefore it was totally fair when GS’s trading revenue exceeded $100 million on 34 separate days in the first quarter 2009.
And it’s going to be even fairer when GS pays out all time records to its employees this year, nearly $700,000 per employee.
Thanks to the Fed, and FDIC guarantees of their debt, a firm like GS on the brink of collapse just a few months ago gets to borrow at an average rate of about 2%. It’s easy to gamble when taxpayers take the downside risk of catastrophic loss, I suppose.
Martin
I think some are missing the message put out here. What GS does with the software probably isn’t illegal (it probably should be, however) but it’s not in GSs best interests to wreck the markets.
Give the software to North Korea and you would see it used in entirely different ways, however. Of course, with proper regulation, that wouldn’t be a problem either.
Eric
No worries. Goldman will use these powers only for good.
srv
@Comrade Stuck: It’s only OK if they’re DEA.
srv
There’s a link there… Does link text not show up as blue if you use all caps?
D0n Camillo
Unfortunately, that seems to be the missing ingredient that keeps causing all our financial souffles to go flat.
Calming Influence
edit:
Self censored. It was lame.
2th&nayle
@Comrade Stuck: As my old partner Bobby B. once told me, “Ya know Dawg, you don’t have to be a genius, to be a criminal.” Truer words were never spoken.
Maus
It’s not in most peoples’ interest to wreck the markets, but yet here we are.
Martin
Then consider how easy it would be if that was your intent.
MikeJ
It seems as if people think that the program is designed to manipulate markets illegally. It seems far, far more likely to me that the program is a set of rules for when to when to make perfectly normal, legal trades. Intimate knowledge of what triggers a major trader has set could allow other people to illegally manipulate trades to cause automated procedures as GS to kick in.
An analogy: if Wall Street were the MLB the program would full of rules for a coach like, “if there’s a left handed batter against a right handed pitcher and there’s a man on base whose base stealing percentage is over %x then do y.” There’s nothing the least bit unscrupulous about having those rules codified. But if the opposing team always knew when you were going to bunt or steal or hit behind the runner or go for the fences they would have an unfair advantage.
asiangrrlMN
@srv: Nor if you italicize, as I recently found out.
Is IOKIYAGSE (Goldman Sachs employee) the new IOKIYAR?
Perry Como
It gets better.
Chuck Butcher
So it’s a news flash that the major players game the system? Since the system is built for those players…um.
inkadu
@MikeJ: Damnit, Mike, you’re killing our buzz.
Unfortunately, I have no reason to trust those bastards, and I also have no reason to trust the government’s ability (or willingness) to investigate it thoroughly. So I will remain smugly but insecurely outraged for the remainder of the decade.
inkadu
@Martin:
Next time your wife/girlfriend is worried if you are going to cheat on her, look at her with a serious expression and say,”Honey, dear, I would not be in my best interests to cheat on you.” See how that goes.
I remember reading a defense of Halliburton in the Economist magazine a while back. It said that Halliburton couldn’t possibly be engaged in shenanigans because it would hurt the long-term interests of the company. Bollocks, I thought; if you are guaranteed a 300% return over 4 years, that very well could outweigh an interest in 10% return over a longer period.
It’s also a mistake because corporations are not people, and if people can suck a lot of money out of a corporation and leave it to die as a husk, they will. In fact, one of the problems of hyper capitalism is that the parasitic wasp CEO’s can do this repeatedly without any repercussions.
And if “other people are doing it,” as is likely the case, they will feel both justified in doing so and compelled to do so. It’s a competitive market, very competitive, and the only thing that matters is doing better than the next guy. Nobody gives a shit if you made a solid 6% return on the money by playing it safe and following the rules. If someone else gives a 6.5% return people will go there — even if that .5% is gotten through shdy means, or, doesn’t actually exist.
Finally, if the market software is manipulating the market without crashing the market, there is no enlightened self-interest to keep them from running it. &
(Note: This post is coming through as a big blue hyper link without the blockquote I inserted. I refuse to do anything about it. I am done. Damn the word press Tyrant-Edit-Box-Preview-Window Programmers. Damn them to hell.)
Dennis-SGMM
Having read the other articles about GS’ long history of manipulating the markets without any sort of penalty or even opprobrium this comes as no surprise. Hell we even bailed them out to the tune of several billions of dollars. In view of that I am confident that what GS is doing with this software is not only legal but that our Congress will move heaven and earth to assure that it remains so.
DougL (frmrly: Conservatively Liberal)
@MikeJ:
We have absolutely no idea what data they plug into their algorithms so we don’t know if this is on the up and up. We DO have the US Attorney making a claim that “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”. If I was in government, I sure as hell would want to know about some financial nuclear bomb floating around out there.
IMO, that admission opens GS up to questions such as if the data could be misused to manipulate the markets, in light of the current financial position of our markets, did GS ‘misuse’ this? Was this person who was arrested involved in anything like ‘misusing’ this? If this code was so dangerous then why did the company not secure it better? That’s just a few of the questions I would have.
Just about every major financial entity is in trouble except GS, and they are making record profits while just about every other major player is losing their ass. They have become the majority player in program trading and I bet this data is right up that alley. If I was in Congress, I sure as hell would want to look into this matter a bit further. For one thing, I sure would be interested in the data that needs to be input for the program to work. We don’t need the specific data, just the type of data necessary for the program to give effective output. Our congresscritters are sworn to secrecy, let them look it over.
Maybe have Bernie Sanders head the investigation. ;)
harlana pepper
OT, but I see the Pammy haters won out but I am still visited by the horrific visage of MAnn. At least Pammy cares about the suffering of innocent creatures. MAnn doesn’t give a damn about anybody but her fucking self, brandishing that cross between her boobies, what a joke. She’s such a fucking anorexic stick, I bet those little boobies are as fake as Pammy’s. They prolly looked like fried eggs b4. Ah well, carry on.
harlana pepper
And before anyone chimes in, “If you love Pam Anderson so much, why don’t you marry her?” — I would, but she has a thing for male rock stars gone to seed.
harlana pepper
And also, I just had to buy a new laptop and BJ on Firefox is unbelievably slow — I wonder if all the pre-loaded junk is slowing it down that much, it’s weird.
harlana pepper
One more thing b4 I leave you all with your erudite observations, last nite I dreamed I was in prison — it was awful! Too many Snapped episodes, methinks. I never in a ga-billion years thought I would watch more of the Oxygen channel than Keith Olbermann or Rachel Maddow, but such is my level of outrage fatigue and visceral need to escape, these days.
Even so, I still visit BJ for the bestest, snarkiest snark (posts & comments) on the planet. All of you good, caring folk, carry on and have a beautiful day.
bago
DougJ, should have gone with the proper Bloodhound Gang reference.
Redhand
Just a thought. GS is like Standard Oil in the 19th Century, ya know, the predatory monster Trust that TR went after and eventually broke up. However, in the enlightened, post progressive 21st Century, our presidents from both parties kiss the Trust’s ass and do its bidding.
Robert Sneddon
Goldman Sachs runs the computerised “post office” for the new York Stock Exchange, controlling the servers and routers on which they can run their own programs if they so wish. They have absolute access to all the data that flows between traders including the computer-mediated bids and trade executions. They can examine all this financial data, if they care to look — it’s not encrypted, believe it or not, just plain text — and jump in a few milliseconds before a legitimate trade is executed to buy or sell themselves, or delay a given trade by a few tens of milliseconds (network latency can be tuned by the operators) to give their sniper-programs a chance to get a shot in somewhere else. It’s automated insider-trading, if you like.
Whether they were actually doing this is another matter, but in the Bad Times at the end of last year the financial returns of such an operation could well have meant the difference between survival and collapse for Goldman Sachs.
The big question is can the US Government afford to investigate this rigorously? The possible loss of confidence in NYSE’s core legitimacy as a level playing field for investors is potentially devastating.
The Grand Panjandrum
Front running is not illegal but when you clients find out you’ve been doing it to them, they can get irritated. Look for large institutional investor clients of GS to start asking questions. Zero hedge has this clip of Weil talking about his article in Bloomberg. Well worth the time to watch it.
As all these pieces come together you can see why Taibbi’s RS piece is so important and should be read by anyone who gives a shit about this country’s financial markets.
bago
@Robert Sneddon: Not encrypted and double timestambed / double transacted acked (once inside and once outside the bubble)? Seriously?
Why does anyone give these people money again?
inkadu
@harlana pepper: Harlana, yes, the crap they load onto new laptops is crippling. There are about 100 different programs, all with trial periods, and all wanting to remind you that they are there and that your trial period is about to expire and did you know that there are several new features, etc.
Did they give the Windows CD? If so, I would recommend reinstalling windows and starting fresh. Trying to uninstall all those stubborn bitchy little programs is hopeless.
After that, run spybot, adaware and AVG antivirus. Those are all free programs that do an acceptable job of keeping out the baddies.
Of course, it may be something else that is slowing down firefox. But I’m against pre-loaded software on principle, so like David Kristol telling us we need to bomb Iran, you need to reinstall windows.
inkadu
I can’t see the ads. Drat. Maybe it’s because I’m in a foreign country? I had NoScript allow all, and still nothing but a Hertz ad under the banner. In Spanish.
I feel discriminated against which makes me angry and sad.
bago
Run something like an http proxy to trace your resource calls, and then examine them one by one. Alternately, load up your active processes in task manager, find the cpu hogs, and break into their host process with a debugger. Then analyze the performance metrics and find out where your culprit is. Computers aren’t magic.
Tim F.
@demimondian: You’re speaking in general, right?
@Martin:
Some friendly advice from someone who has plenty of experience saying stupid things: this is not an opportune time to make a priori arguments about the stabilizing influence of the Invisible Hand.
inkadu
@bago: Bago, great parody of a response for help on Linux.
inkadu
@harlana pepper: I can top your dream, Harlana.
I dreamt that El Cid had written me a post on BJ that began, “I find your anxiety about fascism coming to America somewhat unfounded…”
bago
@inkadu: Technically the Task Manager reference was a dead give away to windows, but yeah, that was a bit of an Onanistic response. Still, it seemed that someone should provide an alternative to “Nuke it from orbit, it’s the only way to be sure”.
OriGuy
Fiddler2 does this, and it’s not hard to set up.
inkadu
@bago: I know it was to windows, but, yeah, it was a little abstruse for someone who probably doesn’t know her taskbar from a desktop. And it’s a new laptop, so it’s just good practice to wipe and restart with a clean system; if it was an established PC, I would go with what you recommended.
Harlana, if you are still listening, a great little program is hijackthis. It will scan your system and tell you everything that’s running. I don’t recommend you muck about with it, but you can submit a log onto a forum somewhere and someone can see what you have.
Origuy-Thanks for the tip! I will try Fiddler. It has always bothered me that I couldn’t monitor my own traffic.
Maude
Harlana
Don’t use AVG. It leaves alot of crap on the computer.
Adaware has a 10th anniversary edition that’s free. I’ve used this program for years. It doesn’t hurt the computer. Spybot does pop ups and drives one crazy.
Look on add/remove programs. If there are a lot of junkers, you can remove them.
A great app is Ultradefrag. It is free. It is fast .
Let us know if any of this helps. I do volunteer computer tech and am now having issues with Uncle Bill over usb devices.
Raka
I reckon what GS meant by “manipulate the markets” was “exract our algorithms and play games specifically designed to trigger automated behavior from GS and client businesses”. I’m not saying they don’t play plenty of illegal and/or radically unethical games of manipulation themselves, or that they lack the hutzpah to pretty much announce it publicly. But this isn’t how they’d do either.
Also, outside of movies there isn’t a piece of software that can “manipulate the market”. What would it be doing? The best bet is learning how other big actors’ software works and (assuming you have the necessarily-massive resources to do so) setting up the environment to make that behavior benefit you.