Lloyd Blankfein Gets a Pass in Rajaratnam Testimony

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This court room sketch shows US Judge Michael Howell, with witness Lloyd Blankfein (left) and defendant ex-hedge fund tycoon Raj Rajaratnam (right) on March 23, 2011 in New York SHIRLEY SHEPARD/AFP/Getty

Just a quick note or two...

Lloyd Blankfein testified in court yesterday, in the Raj Rajaratnam insider trading case and unfortunately it turned out to be less of a big deal than I might have hoped. Blankfein agreed only to testify in exchange for guarantees that they wouldn't "dredge up any pending investigations" of Goldman's activities.

I had fantasies of Lloyd being broken on the stand and frantically sobbing out all sorts of hysterical confessions, but I guess it's not to be.

In other news, Goldman has done an analysis of the 2008 commodities spike and concluded that speculators added some $9.50 to oil prices on average during the 2008 bubble. This is interesting and very telling because Goldman's analysis excludes so-called "passive" index speculators -- i.e. pension funds who buy commodity futures as investments. Since there was nearly $300 billion of this sort of passive "long-only" money (meaning that all of this was money betting on prices to rise) in the commodities markets in 2008, it stands to reason that Goldman is wildly underestimating the effect of commodities speculation.

Piggybacking on Goldman's math, Energy Intelligence Finance did its own analysis and concluded that speculation more likely added a $60 premium to oil prices in 2008. With oil prices again soaring well past $100 a barrel, we appear to be in a virtual repeat of the 2008 scenario, although there are obviously other factors involved this time around. But be prepared for all sorts of "analysis" papers of this sort that underestimate the effect of speculation on the current food and energy price spikes -- I will be shocked if they don't manage to keep commodity speculation from being an issue in the next presidential campaign, no matter how high gas prices end up going.