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Carl Levin Releases New Goldman "Big Short" Related Emails, More Fab Fab Emails Emerge
Carl Levin's Senate Permanent Subcommittee on Investigations released several internal emails that indicate that Goldman, well duh, was actively shorting the mortgage market. Um, we all already knew that. Although what is relevant is that this once again bolsters the case for the Volcker Rule - as Levin points out: “Investment banks such as Goldman Sachs were not simply market-makers,
they were self-interested promoters of risky and complicated financial
schemes that helped trigger the crisis.” In other words, Goldman's traditional defense that all it does is match buyers and sellers while holding some "inventory" is blown out of the window. And this will be magnified substantially during the April 27th grilling of Blankfein (and Tourre). On the other hand didn't the president himself, with great aplomb, say that the Volcker rule is coming thus causing the February correction? So whatever happened to the presidential decree being followed true? Oh yeah, it stopped at the Chris Dodd barrier of corruption which only filters through whatever his Wall Street superiors allow him to.
Separately, the Washington Post released a new batch of Fab Fab emails, which are certain not to get him any fans among the Main Street population.
In one Jan. 27, 2007, e-mail, Tourre suggests he knew he was creating risky securities that were likely to not succeed. "Not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient . . . amazing how good I am in convincing myself!!!"
In March 7, 2007, e-mail, Tourre refers to Dan Sparks, head of Goldman's mortgage business: The "US subprime business situation is that it is not too brilliant. . . . According to Sparks, that business is totally dead, and the poor little subprime borrowers will not last so long!"
Just over a month later, Tourre sold an investment to clients who wanted to bet the housing market would continue to rise.
In a subsequent e-mail, Tourre wrote that he sold the investment "to widows and orphans that I ran into at the airport."
Again, nothing surprising there, but we are wondering if he stole the whole bit about making markets more efficient from the HFT playbook. Too bad Fab didn't realize he was also providing gobs of extra market liquidity in the process.
From the Levin press release:
“They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.” The 2009 Goldman Sachs annual report stated that the firm “did not generate enormous net revenues by betting against residential related products.” Levin said, “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”
The four exhibits released today are Goldman Sachs internal e-mails that address practices involving residential mortgage-backed securities and collateralized debt obligations (CDOs), financial instruments that were key in the financial crisis.
In a third e-mail, Goldman employees discussed the ups and downs of securities that were underwritten and sold by Goldman and tied to mortgages issued by Washington Mutual Bank's subprime lender, Long Beach Mortgage Company. Reporting the “wipeout” of one Long Beach security and the “imminent” collapse of another as “bad news” that would cost the firm $2.5 million, a Goldman Sachs employee then reported the “good news” – that the failure would bring the firm $5 million from a bet it had placed against the very securities it had assembled and sold.
In a fourth e-mail, a Goldman Sachs manager reacted to news that the credit rating agencies had downgraded $32 billion in mortgage related securities – causing losses for many investors – by noting that Goldman had bet against them: “Sounds like we will make some serious money.” His colleague responded: “Yes we are well positioned.”
Goldman Sachs Chairman and Chief Executive Officer Lloyd Blankfein and other current and former company personnel are scheduled to testify at Tuesday's hearing.
In one of the e-mails released today, Mr. Blankfein stated that the firm came out ahead in the mortgage crisis by taking short positions. In an e-mail exchange with other top Goldman Sachs executives, Mr. Blankfein wrote: “Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts.”
In a second e-mail, Goldman Sachs Chief Financial Officer David Viniar, who also will testify on Tuesday, responded to a report on the firm's trading activities, showing that – in one day - the firm netted over $50 million by taking short positions that increased in valued as the mortgage market cratered. Mr. Viniar wrote: “Tells you what might be happening to people who don't have the big short.” Levin said: “There it is, in their own words: Goldman Sachs taking ‘the big short’ against the mortgage market.”
Disclosed emails:
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By the time they make any new laws or regulations, the horse will be long gone. Another reminder of the phrase, "The speed of government."
"The speed of government."
Star trekking across the universe.
Only going forward, 'cause we can't find reverse.
Star Trekking Across The Universe
http://www.youtube.com/watch?v=HhuzjkE65f8
We come in peace, shoot to kill.
"all it does is match buyers and sellers while holding some "inventory" "
Speechless.
Really, that's just plain downright fucking sociopathic.
thank you ZH. I just need to get my thoughts down.
IKB comes to Goldman for HELP.
Goldman supplies them securities that go 100% bad within 1 year.
WTF?
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/23/AR201004...
How Goldman Screwed Ghana
http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=180487
Sociopaths.
They ARE sociopaths and they've got a lot of enablers (ruling political elite) and apologists like that bobblehead Maria Bartiromo. This woman makes a career of giving real or actual blowjobs to the monied class. At least Jenna Jamison is honest about her work.
One wonders if she's ever given "lip service" to Larry the Hutt..
Paulson and Ashanti Gold.
http://www.theglobeandmail.com/report-on-business/article363918.ece
The housing bubble has been inflated and popped. The borrowing capacity of America is kaput. That story is told. Congress does not need to prevent the crisis that has already happened. The current bubble is an equity bubble inflated by cheap money from the Fed, to which only financial elites have access. How 'bout Levin abolishes the Fed and the new central bank raises rates to 5% immediately? Or, the Honorable Congressmen can sit and watch porn with the SEC.
“Those of you who are working night and day to restore the SEC’s credibility deserve better than this,” Schapiro wrote yesterday in a memo to the agency’s staff, according to SEC spokesman John Nester. “I’m angry and frustrated that a very few individuals have demonstrated that they are willing to place the credibility of the SEC at risk.”
Dear Mary, I find it totally ironic and amusing that you speak of restoring something which never existed to begin with.
Funny how the pornography distraction hits the major headlines at a time like this. How dare the depraved SEC levy these slanderous charges of fraud against God's very own workers.
Here's a thought: perhaps GS stock will never close green again.
It has always been the case that the big trading banks go long before anyone else on the way up and go short before anyone else on the way down. They are the house in this financial casino and they are masters at channelling investment flows to meet their purpose. And, in all of this, they really serve no real economic purpose for the real economy. On the contrary, their focus on the wall street casino has pushed compny CEOès to game the system to push up their share prices and get rich in the process. The system is fundamentally flawed and it really saddens me to watch it continue.
Your handle says it all....
not sure if he originated the phrase, but Max Keiser has been using it for months.
NO COUNTRY FOR G-OLDMAN:
http://williambanzai7.blogspot.com/2010/04/no-country-for-goldman.html
A frenchman named Fab Tourre is the "rogue" trader who killed AmeriKa while working at Goldman Sachs??
Reading this post while listening to "Mean Streets" by VH (thanks Rusty http://www.zerohedge.com/comment/reply/117662/315275 )
is great, great stuff.
I was on Fox TV in November 2007. I said on air, "Fannie and Freddie will go belly up this year." The host David Asman nearly crapped his pants. That kind of talks gets you "off air".
I did my homework. I looked at what F/F and the MI companies were doing and said, "this is like shooting ducks in a barrel". So I sold the stock short, (very easy) and bought some out of the money calls to balance some of the risk.
I was both long and short with a negative bias. The etire position was nothing but a big derivative. The same economic results could have been achieved were numerous other strategies.
I am not bragging. You should see my loss column. My point is there is nothing wrong with what i did. And and in many ways it mirrors the fact that big guns like GS and many others have longs and shorts all over the place.
Here is a trading idea. I want to buy 2 units of Greek Bonds with 80% leverage. Against this I want to sell one unit of Spanish bonds (with 80% leverage) and I want to buy one unit worth of CDS against Portugal.
I might win, I might lose. I am betting that the price is in the Greek bonds and it isn't in the others. A spread bet.
That trading idea gets executed for big amounts about 10,000 times a day.It is normal.
If we put a cork on that process a huge sucking noise will follow.
The problem isn't that they were long/short, it was that they were creating and then misleading their clients into purchasing the securities they were also shorting. Their entire business model in 07/08 was the current SEC fraud case on a large scale.
I hear you Jesus. They played a very aggresive game on both offense and defense. They did that in the big leagues and they did at a time when there was the most to win or lose.
You watch pro football or NASCAR? Playing to win has nothing to do with playing nice. If you drive a car at 200mph with four cars within 20 feet you better be a pro. If not you are in the wall.
Wall Street was never nice. You show me where the nice stuff is happening.
So Bruce, is there a "Fraud Line"?
In your opinion were GS and Magnetar on the legal side of the "Fraud Line" on these deals?
Let me expand that a little. There are three arguments you might be making here, Mr. Krasting:
Which one do you have in mind?
(In a way I half-agree with the Abacus apologists, in that the ACA trick seems to be more or less a sideshow to the main issues of the non-prime debacle. In fact an unduly cynical person might feel that arguing over the ACA misrepresentation can be used as a convenient distraction both from the really important non-prime frauds (eg. reps and warranties, credit ratings) and from important contributors to the crisis that may not have involved lawbreaking at all. Nonetheless, for as long as we have to have this argument...)
1) This is not a moral argument. This is about required disclosure. I don't know how far GS will take this. But if you take them on their word so far the are going to fight. If they do I think they will prevail.
2) If a judge were to find GS guilty of fraud they would pay a very big fine (and restitution). I think that when you break the rules you should "pay".
3) If they were found guilty they should suffer and lose all respect.
We created a financial system where we measure things in Trillions. The "skim" on moving these mega trillions around has made GS rich. They are like the Yankees. Because they were financially successful they could pay more for the best players. They had the most capital. That is the ultimate power.
Respect and admiration? Absolutely not. Fear maybe? Loathing possibly? How about rage?
That's up to a judge and a jury. I am not smart enough to answer this complicated question.
For what it is worth my thinking is that GS will walk on this. They are way to smart and have too many smart lawyers. This deal was visable at high levels. I am sure they dotted the legal I's and and crossed the legal T's and the deal probably had enough disclosure in it to pass both compliance and legal review. My guess would be that both in and outside council gave opinions to GS. This was one of those times that you put on both suspenders and a belt. The consequences of the pants falling are too high.
I want to thank you for these comments on comments. You have given me an idea for a story. Now all I have to do is write it. I have not a word written but here is the title:USA VS Goldman - The Pot Calls the Kettle Black?
I will try to address your question about that fraud line. I think it is a very murky line. Look for this piece to appear at Zero hedge tomorrow evening (I hope).
Bruce Krasting
I hear you Bruce... and, since you obviously "played the game" your position makes sense... in that context.
However, if cars started going over the wall at every NASCAR race, taking out paying customers on a regular basis, they would certainly "gut the whole thing" and start over, or society would simply shut them down.
Wall Street was never nice, and they've "taken out" millions of paying customers... so, we "gut the whole thing" and start over, or simply shut them down (soon, I trust)!
Thank you for clarifying.
I can now entrust my life savings to Wall Street, with full confidence I will never see it again.
posted twice. Apologies.
I saw those Torre emails and I confess I had a little different reaction. He comes across as a relatively green, junior guy who is troubled by the social implications of all that was going on. The true heavy hitters - well they dont even think about such mundane things a broader social impact. Cold as ice. Not Touree. The poor guy's concience seems to be bothering him and he was just venting it some buddies. Having watched all the previous congressional hearings though, Iam confident the congresscritters will make much of this guy's emails and give the heavy hitters a free pass.
Just back from a night of partying in Hong Kong...but sober enough to write this...buuuuurp...
SQUIDS IN DENIAL:
http://williambanzai7.blogspot.com/2010/04/squids-in-denial.html
Lan Kwai Fong? Been there last year..amazing
Edit: looked at your post..you need to do something about that font of yours. It hurts my eyes to read red over the pdf. Either write a normal post or just change it up somehow
This is incredible.. business as usual.....
Traitors. These men should be exiled.
The United States Military should invade 200 West Street on suspicion of possession of financial weapons of mass destruction. The evidence is certainly more compelling than Saddam's Iraq. Let Fraudman burn...
The rating agencies are the enemies of the people.
Goldie is greedy until proven guilty.
BRING OUT CRAMER THIS MINUTE!
Lloyd Blankfein, chairman and chief executive of Goldman, told other top executives in a November 2007 email exchange: “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts.”
He then added: “Also, it’s not over, so who knows how it will turn out ultimately.”
Other internal Goldman emails released on Saturday morning by the Senate permanent subcommittee on investigations, which conducted an 18-month-long investigation into the bank, showed that the firm was relieved it had taken short positions as the housing market worsened. When it emerged that the firm had made $50m in one day by taking short positions that gained value as the market for mortgages collapsed, David Viniar, chief financial officer, said in an email: “Tells you what might be happening to people who don’t have the big short.”
Carl is STILL pissed about his corporate campaign bribe gravy train GM getting whacked....
It seems the first criminal case should be against the ratings agencies. Everything was AAA - that means AAA simply had a fee attached to it - pay the money get a AAA
Black, as they say, is beautiful.
this proves it, the guys at the top knew. this wasnt a isolated incident. goldman cud be dismantled.
As a Goldman investor once said, it is only when the tide goes out that you discover who has been wearing the big shorts.
Only once the tide is low do you see who's been swimming naked.
ghana ikb RBS greece and now the uk, Lloyds Bankfein? heh
http://www.dailymail.co.uk/news/article-1268378/Goldman-Sachs-conflict-inflated-Lloyds-bail-costs.html
watch out, if GS are the best at gaming then maybe the game is over.
Blankfein, must think we're idiots. “Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts.” Uhh, that's called being net-short, sounds to me like you lost money on your long hedges. Sadly, I doubt our senators will be able to point out, and cut through the spin.
DOW next important resistance level is 11,250
http://www.zerohedge.com/forum/latest-market-outlook-0
IMO Levin is one of the few, the happy few that shall be remembered as having earned the senatorial title "Honorable" when historians write, in decades hence of our great nations troubled times. They did not fail in the quiet, politically effective pursuit of truth and justice. And Senators, now a-bed with special interests shall think themselves accursed that they did not abandon all to join in the struggle for better legislation and hold their manhoods cheap while they read the histories of the time.
Credit: WS