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Germany To Add To Goldman's Headaches, Prepares To Sue Firm
The Pandora's box of the SEC's action against Goldman, which if validated in court will effectively make the issuance of every hybrid CDO product quasi-illegal, will lead to an explosion of lawsuits against virtually any bank that was active in the structured finance space during the housing boom, adding to a fresh round of "non-recurring" charges to bank income statements. Case in point - Welt am Sonntag reports that the German government is considering suing Goldman Sachs, and has asked the SEC for information in its fraud case against the firm. According to the WSJ a spokesman for Angel Merkel said earlier: "First we must ask for the documents, then evaluate [them] and then decide about legal steps." The action stems from the SEC's disclosure the German IKB may have been illegally "taken advantage of" through Abacus, and probably other CDO transactions, leading to losses of $150 million. In 2007 IKB had to be bailed out by the German government, in what some claim was the preamble to banking crisis that is now enveloping Europe (not sure if the sovereign catastrophe facing the EMU can also be blamed on Goldman's CDO transactions, although Goldman will surely also be sued for that sooner or later). We have seen how eager Europe has been to scapegoat "speculators" and other Wall Street actors. We are positive that Germany will surely pursue action against Goldman as it will now provide a vent to pent up popular hatred of how the government has handled the crisis. At the end of the day, even if the SEC's overture is nothing but a pr stunt cleverly orchestrated by Emmanuel Rahm, the unexpected fallout may well be where the real action is.
From the WSJ:
Germany's interest in the case stems from the fact that German lender IKB Deutsche Industriebank AG bought a significant amount of the collateralized debt obligations in question, contributing to IKB's heavy losses on U.S. mortgage-related securities. Those losses led to a €3.5 billion ($4.73 billion) bailout of IKB in mid-2007, with most of the money coming from IKB's major shareholder, German state bank KfW.
IKB's near-failure marked the start of an escalating banking crisis in Germany in 2007, which found that numerous state and private-sector banks in Europe's biggest economy had invested and lost heavily in U.S. mortgage-related securities. The losses undermined German officials' claims that the subprime-mortgage crisis was a U.S. problem, and forced Germany to announce a €500 billion bailout of its banking sector in October 2008.
And with everyone focusing on Goldman, somehow everyone forgot that Greece is ever faster sinking into the sea of ever rising debt spreads: the real first domino to the endspiel is about to topple.
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Would like to see them filing cases against Deschute bank as well since DB is practising the same dirty tricks, and that's their home field. Or is it just me being naive?
Deutsch Bank is unparalleled in the London/ European market for the aggressiveness with which they pedaled toxic shit. They left a trail of destruction from Moscow to London with the so called benign products they rammed down their clients throats. I was involved in trying to help several clients deal with the disaster that befell them as a consequence and I was amazed how DB had not a shred of concern over appropriateness.
Deutsche Bank is far, far too big for Germany to mess with. The assets of DB are something like 84% the size of Germany's GDP. If anything imperiled the viability of DB the Germany government would freak -- they're not going to chance any kind of potentially public proceeding against them.
Check out the chart.
http://www.zerohedge.com/article/presenting-total-bank-assets-percentage...
Heard Merkel temporarily trapped in USA by no-fly. BO also remains here [was scheduled to fly to Poland for State funeral].
Herr President, let's talk about DB making a kleine campaign contrinbution. You interessiert? Vielliect nicht zo kleine?
Coinkydink.
Deutche bank is the distant relative of the rothchilds german arm of banking that fed billions of american dollars into the construction of germany and hitler so the could run him around and use him as a boogy man to scare everybody into doing what they wanted.
Deutche bank has it's own cia type operations and viciously attacks and kills anyone questions their operations too hard.
http://www.fromthewilderness.com/free/ww3/10_09_01_krongard.html
http://www.stewwebb.com/Enron_investment_espionage_and_the_White_House.htm
http://en.wikipedia.org/wiki/Deutsche_Bank
They are probably presently trying to terrify every politician into acting in a most reprehensible manner against humanity. Many terrible polticians will likely get through the next few years a bit humbled but relatively unscathed. Deutche bank however will likely find itself on the wrong side of a rage and hatred trade with humanity.
"Nobody know's the trouble I've seen" will likely be their theme song sooner or later.
Lloyd: the ocean called. They're running out of squid.
The SEC action is like chumming in shark infested waters.The feeding frenzy begins!
my reference was actually seinfeld ("the comeback"), not sure if it got through...
http://www.youtube.com/watch?v=YuszKrl-Xl8
prob my fav episode ever. pretty sure lloyd is the bestseller at the jerkstore these days
James Mason as the SEC/Capt. Nemo, hacking away at the grasping tentacles of the Giant Vampire Squid in "Goldman Sachs: Twenty Thousand Leagues Underwater." One way to think of this is a route for Germany to use to get bailed out by the Federal Reserve, just like nature intended.
Im sure Goldman will do whatever it can to pay off as many poiticians as possible so they can walk. The question is; will it work?
Politicians as history has revealed are easy and cheap to buy... the real challenge is in effectively buying AG's, prosecutors and judges etc. That will cost more.
To kill a 'vampire squid' one must first restrict it's 'food' supply... then bleed it dry by jamming a court-enforced sterling silver blood funnel into it...
Basically we do to it what it did to us...
This is the beginning of the end for Goldman Sachs if the lawsuits spread like wildfire.
Can't say I will miss them....
Enron et duece?
Lloyd you Dumpfbacke!
The German government sues Goldman (U.S. government) on behalf of IKB, will they still expect the IMF, (U.S. taxpayers) to bail out Greece? In one very perverse way it makes sense, half of U.S. taxpayers have gone night night, and our response is to issue more worthless debt, and devalue the dollars in which we pay them. (Can we devalue fast enough) What is that term for rain which never hits the ground, but shows up on the radar? Think of dollars falling out of helicopters which never hit the ground.
Anyway see my Media Guide over at the forum. If this turns into international television drama, the narrative will change, and not for the better. And the Supreme Court opened the door for foreign campaign contributions. Some feigned outrage will be required.
Spain and Portugal also had a housing bubble, and did Goldman wreck that too?
If as you say these CDO's become quasi-illegal does that give the Treasury/ the GSE's, the right to orphan the paper? In order to what, stop the offmarket sale? As I understand it some of these things are trading, at reduced rates, and that makes maintaining the illusion of mark to fantasy asset value more difficult.
I think it's "viagra" - no, wait, I must be thinking about something else...
virga, you weren't too far off. you must be a leo...
Most posts focus on Goldman this weekend. ZH felt this could be a deliberate effort to direct everyone's attention to avoid the real problem of debt levels. I didn't see anyone really talk about it. If what Tyler believed is true, you may see how easy it is to fool everyone sometimes. In any case, those debt levels are pretty fucked up in any measurable way. if the interest rate moves higher even in a small step, we are immediately fucked.
Oh mein Gott. Jetzt sind wir geschraubt.
Pandora's Box: Everyone Sues Everyone
(Reuters) - The case against Goldman Sachs Group Inc (GS.N) over a 2007 mortgage derivatives deal it set up for a hedge fund manager could be just the start of Wall Street's legal troubles stemming from the subprime meltdown.
http://www.reuters.com/article/idUSTRE63G21Z20100417
David Goldman: The Coming Wave Of CDO-Related Lawsuits Is Going To Be Insane
http://www.businessinsider.com/david-goldman-the-coming-wave-of-cdo-related-lawsuits-is-going-to-be-insane-2010-4#ixzz0lP5JNgSTBusiness promises to be brisk!
Green law-shoots anyone?
First Germany...and now Britain.
(Reuters) - Prime Minister Gordon Brown said on Sunday he wanted Britain's financial regulator to conduct a special investigation into U.S. bank Goldman Sachs (GS.N).
It still seems like Goldman has managed to outsmart most everyone else most of the time. If only there were a way for regular investors to buy into Goldman Sachs itself, becoming partial (albeit tiny) owners of this all-powerful firm and thereby have a share in it's growth and profits.
I still don't think full disclose of John Nobody Paulson's role in this syth. CDO's construction would necessarily have scared off bubble enthusiast investors but yes, if Goldman pulled a fast one here...sure, throw the book at them. This is kind of yesterday's news however...we have bigger fish to fry right now. Is the pricing on the SEC's Bloomberg delayed by two years?
And please let's not encourage Europeans, especially Germans to sue over every American asset they've ever overpaid for.
the SEC now has people focued on 3 year old SUBPRIME news and sites like zerohedge are falling for it
you knew by late 2007 the peak was in and subprime was being talked about... i don't feel bad for any of these morons who bought junk paper. stop blaming GS and start blaming the people who were BUYING the junk too. that was excessive risk-taking and greed they took part it which enabled the GS and DB's of the world to make a market in it
No one said they weren't idiots for buying it...but the point is they lied when they sold it to their customers.
They where built to explode. I see your point but its up to the courts now.
It does not bode well for the Synth Lords.
Our two weapons are fear and surprise...and ruthless efficiency...
I think this is a very good move for Germany. I think this helps them with the Greek game being played in the EU. France and Italy forced Germany's hand and events moved at a quickened pace. The pace was faster than Germany wanted.
This Goldman issue can now battle for airwave time with the Greek matter, resulting in a reduced pace for Germany's need to respond to Greek/EU pressure. If the EU is dumb enough to try to force the Greek issue through German parliament, this Goldman issue provides a number of excellent sidetable opportunities that the EU would need to discuss and generate new comprimises on.
You can't go straight to German payment of Greek debt. It's now a little more complicated. Greece can go straight to the IMF for bridge financing, if they can sell it.
What is the date of the next review of the capital reserves exemption for the squid?
Taxpayers are going to get stuck owning this piece of shit.
If the Germans sue Goldman it'll simply be a political move care of Merkel. Their elections are coming up and because it was extremely unpopular for her to essentially 'give' money to a lesser nation (Germans hate that) she will have to make up for it by challenging an American enterprise.
Banks are big boys. Its one thing stealing from retail investors (apparently only the government can do that), but bank-to-bank transactions are basically caveat emptor. Especially when the issue at hand is structured finance.
yep, bank to bank transactions are caveat emptor, always have been. however, that means there has never been a reason for letting a bank manage any other investment than an interest bearing checking account for you.
Overtextended SP500 / DOW daily charts show bearish warnings and the next few days will tell us more.
DOW chart :
http://www.zerohedge.com/forum/latest-market-outlook-0
"At the end of the day, even if the SEC's overture is nothing but a pr stunt cleverly orchestrated by Emmanuel Rahm, the unexpected fallout may well be where the real action is."
+++ to above, and this is just another useless diversion to the real write-offs in CRE, ARMS, and the new wave of foreclosure in mortgages and soveriegn debt crisi. Ntoced how every MSM is earger to say this thing would spread, would be terrible for GS etc etc. Well, since when has the MSM ever got it right throughout this crisis? And now they are all in consensus that this is "big one"?
Besides, as someone remarked that Deutsche Bank was an even bigger menace in selling toxic to allcomers from Asia to Latam. And I hasten to add that every investment bank from Asia to Latam were structuring these synthetic stuff and pushing them down the sales channel. Paulson made $1b, but how many billions were written off? Who srructured those other synthetic CDOs and earned those other billions - you see, derivative is zero-sum, by 2006, even a bunch of $100m hedge funds out of the frontiers of finance were doing what Paulson was doing (and Paulson was only copying it from someone else, whoever heard of Paulson before 2008?). And these hedge funds worked with the likes of their local banks. So yes, one could sue them all, and then bail out the biggest of them while letting the rest fail. It would be an orgy of lawsuits, good for lawyers (hey Obama and Clinton, and most of our politicians are lawyers right, or they advise them right? so time for the politicians to pick up the crumbs right?). And the public would be satiated right? But the global sovereign debt crisis would get worse as would the economic problems from US to Europe to China and Latam. Meanwhile the biggest banks would continue to receive government bailouts and low-interest subsidies and continue to grow as the smaller banks and hedge funds get sued to bankruptcy - hah more consolidation that favors the TBTF. Just like Bear and Lehman died, but Goldman and JPM thrived.
I say do not get distracted: so maybe Goldman will agree to settle for all the lawsuits - paying back the 100 times of the $15m fee, plus agree to a fine maybe $1b, just like the dotcom bust settlement for misleading public with their "Henry Blodget Mary Meeker-type reserach". But how would this change anything? Goldman's investors bear the shit, Goldman would be paying its squidlets $5b this coming quarter alone as bonuses. And they will be stronegr even as more competitors and hedge funds get sued to death.
So I say wake up people, don't get distracted. It is a big lie.
UK right behind..
http://www.guardian.co.uk/business/2010/apr/18/financial-services-author...
Do we have any concensus on the motivations for the SEC's action?
Is it as simple as trying to pass financial reform... Maybe Goldman wouldn't play ball with some squid pro quo on the table that Barney really wanted?
Why the SEC? They're shown absolutely no history of having a spine to stand up to anyone, much less Squidley.
Why now? Has Obama just gotten a populist bug up his ass?
Is it about taking care of the mass tort bar, who are also important D campaign contributors?
Is it a means to fund the states for a while, via clawbacks?
Am I looking at it all wrong and it's about Paulson?
Any concensus emerged on what the actual motivations are?
It seems like a dangerous game to play by the SEC. This charge seemed to come from "out of the blue" and that can cause people / voters to pay attention. If they are paying attention, the political price of failure for the democrats and the financial price of success, also for the democrats are both really high. This represents an interesting trade.
I think people may under estimate the risk of this action to the financial system. Politics, when awoken can destroy anything. The democrats are effectively opening up the patient after surgery to earn political capital.
If this is a show everyone must know their role very well. Setting the wrong precedent can lead to more than lawsuits. The mob might get an idea of how to get back at the bankers and failing that they will get back at their perceived handmaidens.
I for one have no doubt the politician would sacrifice his "banker friend" to stave off political suicide, consequences, including systemic failure be damned.
The Wheels Of Justice Grind Slow, But They Grind Exceeding Fine - Squid frightening to look at but have no backbone
IIRC, the S.E.C. has been on this "trail" for the past two years. In fact, according to this cbsmarketwatch.com story, G.S. has known about it for a while:
http://www.marketwatch.com/story/goldman-had-9-months-warning-from-sec-r...
Doesn't GAAP require a public company to disclose any possible future lawsuits, at least in the Notes or MD&A?
Securities Act and FINRA require disclosure of MATERIAL events involving investingations, future litigation etc. In general service of a Well's Notice is pretty much always disclosed, but GS is arguing that is wasn't material. good luck with that one lil squiddies.
out of the blue to the general public, GS has been responding to requests since late 2007. remember, a Well's Notice is notice that the investigation is completed, and you dun f'd up!
germany will sue
nations states could care less if the act was right or wrong // they just want to get some big dough.
and make the political guy .. the attorney magistrate look good in the pictures and sound bites
Do we have any consensus on the motivations for the SEC's action?
sure ,, Goldman committed fraud
dangerous game .. sure, by enforceing the law
And what about this
UK's Brown calls for Goldman Sachs investigation
http://www.reuters.com/article/idUSTRE63H0L720100418
Jim Sinclair predicted this (lawsuits) over the bailouts and fraud from a couple years back.
It's just one of the many insights Jim Sinclair constantly passes on to his readers.
http://jsmineset.com
I am Chumbawamba.
Calimari anyone???
If the various lawsuits yield negative results for GS, the only people that will be hurt are the public, pension and mutual funds that own GS stock. Management and traders will just leave the firm with all their bonuses intact. This is the problem with what the SEC is doing by only going the civil route - it does nothing to hold accountable the management that either directly approved or tacitly acquiesced to the plans that are now the basis of the investigation.
This is the problem with firms that were former partnerships, they were previously constrained because the owners (partners) were accountable to each other and they each had all their wealth tied to the firm. Now their wealth is portable and they can easily walk away if the risk is too great, or they have bled the golden goose dry. This is the fundamental catalyst for reform, a structure that turns all civil violations into criminal violations with fines that are equal to all the bonuses paid. This is harsh, but when the issue is based on a knowing violation of the law then an ultimate sacrifice must be paid at the altar of market integrity. If it is not, then we have little reason to place faith in anything that we see, hear, or read about the stock market. Why do you think the populous are so cynical of everything - from politicians to car salesmen, we all believe that they are nothing but hustlers and con-men. The politicians have created the Tea Party with their antics and lack of accountability. If we are not careful and correct the deficiencies in market regulation – you could easily create a “Judge Dredd” situation where people themselves determine to be judge, jury, and executioner.