America’s newest sport; hunting the squid: Reports today that the first non-official legal action against Goldman Sachs might come from AIG, the basket case insurer now controlled by the US government. The Financial Times reported that AIG is considering launching legal action over losses of more than $US6 billion incurred on mortgage-backed securities deals between it and Goldmans. AIG took losses of about $US2 billion on those deals. The FT says that AIG hasn’t decided to sue: “If AIG and others discover that their transactions had disclosure issues similar to those alleged in the SEC charges, they would be able to complain to the SEC, file a private lawsuit, or both,” the paper said, quoting an unnamed lawyers. It will be the weight of actions such as these, if launched, on top of the SEC action, that will eventually see Goldman sue for peace and make radical changes in management and its business. We already know that Goldman did not disclose the SEC’s investigations and the nature of those investigations to the market for the best part of nine months. If the SEC wins, there will be avalanche of lawsuits over that bit of non-disclosure. So who are Goldman’s insurers? They may need a transfusion.

Squid fights back: So far no smoking gun on either side of the Goldman Sachs-SEC brawl. The Squid (aka Goldman Sachs) issued its third statement since Friday as it continued to attack the US Securities and Exchange Commission and its fraud charges against the bank. A load of documents released in New York claimed to show there was no fraud. The tone was aggressive because the bank is fighting for its reputation. Fabrice Tourre, the French, self-described “fabulous Fab” , the executive in charge of the controversial Abacus deal has gone on “leave” from his gig in London. And the push to regulate Wall Street continues with a key Bill to be brought into the US Senate later this week. Tonight though, a really big profit from Goldman Sachs and a lot more comment.

Squid 2: Perhaps the bank and a lot of people interested in the case should read this Fortune story on the case and posted on the Cnnmoney website this morning. It raises some pertinent points. “Goldman Sachs has to be asking itself if it was all worth it. The Wall Street powerhouse made just $1.02 billion in fees by selling collateralised debt obligations — the complex debt structures at the centre of a fraud case that now threatens to undermine the bank’s immensely valuable reputation — between 2000 and 2008, according to a note out Monday from ThomsonReuters. A billion dollars isn’t much money to the big Wall Street firm. Goldman made $12 billion last year and is scheduled to disclose Tuesday morning how many additional billions it raked in during the just-completed first quarter. While those fees no doubt padded the bank’s profits and the wallets of many individual bankers, they account for just 13% of the money Goldman made underwriting debt securities over that period. By contrast, Goldman lost $12 billion of its market value after the Securities and Exchange Commission announced its civil suit against the firm and one of its vice-presidents Friday.  So “little” profit, so much damage.

Out of the woods? The Citigroup bears retreated to the woods overnight when the bank reported a better profit than the market had been expecting; $US4.43 billion, compared with $US1.59 billion in the same quarter of 2009, which saw the start of the big rebound in markets, thanks to the Fed’s record low interest rates. Quarterly revenue was $US25.42 billion, compared with $US26.97 billion in the year-ago period. Loan loss provisions fell 16% to a still terrifying $US8.62 billion, but rose 5.3% from the fourth quarter of last year. Net credit losses climbed to  an equally scary $US8.38 billion from $US7.28 billion a year ago.

Good bank, bad bank: Citi is split into two businesses, Citicorp, the “good bank” with all the bits that handle the firm’s core day-to-day business. It made $US5.16 billion in operating income, compared with $7.83 billion a year ago, and $1.84 billion in 2009’s fourth quarter. Citi Holdings is the “bad bank” where all the dross, dodgy assets and other non-core businesses are to be found. It’s loss from continuing operations in the quarter was $US876 million, compared with a massive loss of $US5.49 billion a year ago and a loss of $US2.55 billion in the fourth quarter of 2009. Citi’s securities and banking business its core Wall Street operation, business than doubled revenue to $US8 billion from $US3.3 billion in the fourth quarter of 2009. Excluding the impact of what Citi calls “credit value adjustments,” the firm said revenue increased $US2.5 billion, or 48%, to $US7.7 billion.

The bottom line: Citi didn’t so much as make more money in the quarter, as lose less, especially through the bad bank. And there was that “credit value adjustment” in its securities and banking business: that’s the impact of the improving outlook for the economy, especially loans (even housing) and credit card debt. It was $US2.6 billion for the quarter. It is a paper adjustment, not cash, which was part of the problem for Citi and other banks in the boom. They all booked valuation adjustments created out of the air (even as the housing market was tanking). Up to their old tricks, again? Everyone will turn a blind eye and hope the economic rebound will haul asset prices higher, especially the bank’s biggest shareholder, the US government.

It’s property, not Goldman Sachs: One TV commentator last night wondered why China’s sharemarket fell sharply yesterday, saying that it couldn’t be because of the Goldman Sachs fraud charges. Nope, that was spot on, it was the other big story yesterday, the latest crackdown on China’s hot property market at the weekend. Market commentaries yesterday were full of references to the tightened lending conditions. So it was no wonder that the Chinese market dropped 4.8% yesterday, with much of the damage done to property and bank shares. It was the biggest fall in eight months and takes the decline since the start of the year to more than 9%, against that 11.7% surge in first quarter growth. Who says strong growth is always good for shares?

Now that’s exporting: Meanwhile, the size of the task for countries such as struggling Greece and the eurozone (even Germany) to boost their exports in coming years was underlined by a report issued in China at the weekend. The report called for China to improve the quality of foreign trade sector and to lower import tariffs to promote the nation’s trade balance, all nice and warm stuff. But the core of the report, from the bullish Ministry of Commerce, forecast China’s foreign trade volume would more than double by 2020 to $US5.2 trillion.  China’s foreign trade in 2009 fell almost 14% to a total (for imports and exports) of $US2.2 trillion. Australia will be riding that doubling (and remember it took China the best part of 40 years to reach last year’s reduced total).

Not another one: Attention ASX/ASIC market sleuths, shares in Kimberley Metals (KBL) jumped from 18.5 cents on Monday April 12 to close at 24.5 cents on Thursday April 15. They hit 26 cents yesterday after China’s largest lead producer agreed to buy a 15% stake in Kimberley Metals as well as take a 25% share of the company’s Sorby Hills project in Western Australia. The shares relisted yesterday after a trading halt, announced last Friday, was lifted.  The rise from last Monday to last Thursday was nearly 33%, surely enough to draw a speed ticket from one of the market plods? Was this movement due to well-informed punting or was it another example of the insider-trading ring operating in the market, and reported by the Sydney Morning Herald this morning?