Criminal Charges Next? Barofsky To Coordinate With DOJ To See If US Taxpayers Were Victims Of Goldman Fraud

Tyler Durden's picture

Earlier we disclosed that finally someone with more than just 4 neurons is going to pursue Goldman; Reuters now confirms that indeed Neil Barofsky is on the case, and, unlike the SEC, may collaborate with the Department of Justice "to see if there are cases of fraud and if AIG and as a result, the American taxpayers, were victims of similar types of fraud." Should he find fraud, and let's not forget that Goldman bought protection on all parties that bought Abacus exposure from it, with a special place in its heart saved for AIG, whose bailout by the US kinda makes all claims that Goldman lost money on its Abacus exposure moot: can someone finally ask Blankfein or Viniar or whoever, how much money Goldman made on its CDS over AIG's exposure in all Goldman underwritten and AIG purchased CDOs? Be it on a total or pro-rata basis. Anyway, we are tempted to believe there may yet be hope that some justice could after all be served: the SigTarp, whose $40 million budget to date, has uncovered more dirt on the US financial system, than the SEC has in its entire history, with its $1 billion a year moneyhole. What is also notable, is Barofsky's disclosure that he is considering an audit of the role of BlackRock in TARP. Dear SIGTARP, while you are doing that, please also investigate why the Federal Reserve is actively managing its Maiden Lane portfolio, presumably via BlackRock, and whether BlackRock is also advising the Fed on managing its $2.5 trillion SOMA holdings, which as was discussed yesterday has a DV01 of $1.5 billion, and is the biggest ticking time bomb at the heart of the US banking system, and just how much any such off-balance sheet hedging costs the US taxpayer.

More from Reuters:

The special inspector general for the government's bailout program said he would probe whether securities sold by Goldman Sachs Group Inc GS.N led to losses at AIG and if the American taxpayer was a victim of fraud.

There are seven deals similar to Abacus for which AIG wrote credit default swaps, according to Neil Barofsky, the special inspector general for the Troubled Asset Relief Program. 

Barofsky said he is in touch with the SEC and will possibly coordinate with the Department of Justice "to see if there are cases of fraud and if AIG and as a result, the American taxpayers, were victims of similar types of fraud."

Barofsky made the comments in response to questions from the ranking Republican on the Senate Finance Committee, Charles Grassley, at a hearing examining the TARP.

Separately, but also in response to questions, Barofsky said he is considering a broader audit of the role of BlackRock Inc BLK.N in TARP.

"We are doing a number of audits that touch on Blackrock's role. And it is an extensive role throughout this financial crisis," Barofsky said.

For example, current audits, including one on Citigroup Inc's C.N asset guarantee program, touch on Blackrock, he said.

"We are considering doing a more overarching audit report on their role throughout the financial crisis."

So yes, something may happen... after about 10 years. In the meantime, Goldman et al will continue to make record profits, representing an ever increasing portion of total S&P Net Income, thanks only to the yield curve, its monopoly in the fixed income derivative market, and its comprehensive REDI suite which every hedge fund manager uses and signs off on some very peculiar "information sharing" waivers. Yet who cares what happens in 2020: by then America will certainly be insolvent.

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Hugh Janus's picture

can someone also please ask if GS is still in possesion of/using that market manipulating software that they were so worried about after it was stolen last year.  or did they just lend it to the fed so that no charges would be pursued there?

ratava's picture

is it possible for Goldman prop desk to short their own stock during the day and buy it back before close? because thats what seems to be going on atm.

John McCloy's picture

Good news and a rally for banks indeed

buzzsaw99's picture

The lower manhattan bank cabal has hundreds of thousands of current and former employees. They have an equal number of powerful shareholders. They have further bribed many in state and federal gubbermint. There is zero chance that this goes anywhere. If the Jefferson County ripoff didn't sink JPM then GS has even less to worry about.

meagain's picture

Barofsky, you're on the right trail.  Let's qui tam the former Treasury Secretary while we're at it.  Obviously his hundreds of millions came from the long, slow buildup of the fraud ("no, honestly, these things are going to pay off in the future so pay me my share NOW!"), which he closed the loop on by getting a chump to ask for $700 billion, said chump later saying the figure was just made up cause it sounded better than a whole trillion (better for fraud to ask for a little at the time), and begging the Speaker on bended knee to get the NEXT Treasury Secretary, the one who cheats on his taxes, to enforce MY taxes to pay for it all.

if's picture

Well put.  Hank Paulson's role at GS and later in the bailout of GS via AIG requires much more thorough investigation.  It's ironic that it may happen because GS is now the Dem sacrificial lamb despite generous GS donations to the Dems but at this point any form of justice would be a welcome change.   

Pladizow's picture

A class action suit should be filed against Goldman, on behalf of the US population!

bchbum's picture

Love the avatar dude!  The govt' should run these guys out of town, like they've done so well with toyota.

williambanzai7's picture

There is a BIG PICTURE here, and it ai'nt pretty. "Connecting the dots" does not only apply to Al Qaeda...

Blankfein's head is not going to be enough when it all comes out...


Cognitive Dissonance's picture

"Criminal Charges Next? Barofsky To Coordinate With DOJ To See If US Taxpayers Were Victims Of Goldman Fraud"


Shirley you jest? Oh......sorry, I forget.

Tyler you jest? :>)

DavidC's picture

Neil Barofsky and Elizabeth Warren, both great people.


agrotera's picture

Elizabeth Warren is a true American hero. 

But i worry that Neil Barofsky may be more like an undertaker with a dead bodies as far as the eye can see and by the time he tries to do any autopsies,  the bodies, they will be so decomposed, there is nothing left to examine or bury and all evidence of the crime washed away...I feel very sorry for him.

Nonconformist's picture

The fraud in all this is that the Fed bailed out private companies that were, in effect, trying to game each other. The Fed had no business wiping out the AIG shareholders and paying off the bad bets. The Fed also did not have the authority to turn GS into a bank overnight. If anyone should be prosecuted it should be Bernanke, Geithner and Hank Paulson. I would like to see Barofsky and Holder investigate these three and bring charges. The whole mess should have been dealt with in bankruptcy court and through private civil suits. The most telling thing about this is that Obama continues to protect Bernanke and Geithner. The system is still alive and well, this SEC suit is just window dressing for the November election. If the SEC wants to bring fraud charges, it should look at the products that were sold to local governments who are not "sophisticated investors" and relied on the investment banks for advise. That clearly was a breach of fiduciary duty.

hamurobby's picture

Can anyone clue me in to the date that the GS/SEC hearing will begin? I want to be well short GS before then, but not too far ahead of time.

Rainman's picture

Fuggitabout the hearing. Keep an eye on CalPers. They sit on 1.8 million shares of the Squid......and are getting nervous. Wouldn't be surprised if CalPers got chewed up in some form of Abacus-type sweating their other "attachments".

Public pension funds are #1 targets for the WS boyz.

There's more than one way to skin a taxpayer....federal, state, muni, etc. 

hamurobby's picture

Thanks, after hearing Jim Rickards take on things, I think I will just buy the puts now.

Orly's picture

About time they went after this guy BlackRock.

See if they have real huevos and include Carlyle Group, too.

I need more asshats's picture

There was no fraud, they was no illegal activity. Goldman will lose some trust among their small accounts. Those accounts will divest about 60% of assets. But in 6-9 months they will be back like pigs at the dinnertime feeding trough.

Enough Goldman shit, OK?

verum quod lies's picture

Even Goldman admits there was fraud (e.g., the pep talk memo to employees from Blankfein). The big question now is the extent this mostly politically motivated suit snowballs into other suits from other entities (political or otherwise). We must remember, that once politics enters the equation, all bets are off and history begins to twist and turn. "Enough Goldman shit", ah, whether we like or it not there will be a great deal of "Goldman shit" over the coming months and possibly years. Try to enjoy the show.


BlackBeard's picture

woo woo woo somebody pulleeease kick blackrock in the nutz! it's about time!

bluewarrior's picture

Goldman has been under increasing pressure over past few weeks and it might eventually end up getting penalized as well. However, one key point that will be forgotten in this entire debate is that companies are what employees and people make them to be. One Goldman may go down but other like it will keep on coming up as long as the perverse incentive system in the industry continues. The employess will simply move elsewhere and continue to do what they have been doing.

To solve a problem, you need to identify and treat the root cause and not the symptom. Goldman is a symptom of the system; not the cause.

RockyRacoon's picture

Ding, ding, ding!  Give the man a cigar.

Crony capitalism is the cause (dare we say Fascism?).

Grand Supercycle's picture


EURO continues to get a lot of support ...

But USD index weekly chart continues to give bullish warnings.

Euro chart:

polizeros's picture

Those who think the investigation will go nowhere overlook an important point. The political climate has changed. It is now advantageous for politicians to kick Goldman in the nuts rather than defend them.