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Goldman Cracks
Given the tremendous water pressure involved, even a small crack in a huge dam can lead to catastrophic failure.
Similarly, even a small breach in a seemingly invincible army's defenses can lead to defeat.
The SEC's fraud action against Goldman Sachs is really small potatoes. It alleges only civil - not criminal - fraud.
And it is against only one small player, not against his bosses or top management.
(And Goldman has done a lot worse.)
But Goldman has suffered a crack in its veneer of respectability.
More importantly, the SEC action may represent a crack in the company's armor.
Before
the SEC announced the charges, Goldman seemed unstoppable. It seemed
like even countless tons of water pressure or scores of invading armies
could not touch Goldman.
Now, there is a crack ...
Even if the timing of the SEC's announcement was wholly political (some commentators have called it bread and circuses or kabuki theater),
and even if (as some writers have alleged) Goldman CEO Lloyd Blankfein
himself approved the action as a way to diffuse pressure for bigger,
criminal prosecutions against bigger players, tons of public pressure
and hordes of lawyers are probably on their way.
Or perhaps
Goldman is like the warlord hated - but feared - by all. If there is
ever a crack in the warlord's veneer of invincibility, the locals might
realize that he is only human after all ... and decide they can -
together as a group - take him on.
of Goldman's respectability.
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Here is another good article at TAE that follows up on the theme of this one - http://theautomaticearth.blogspot.com/2010/04/april-19-2010-did-sec-plant-goldman.html
People need to wake up and take advantage of this "goldman" opportunity!
According to Art Cashin there have been a series of powerful sun spots lately. I think GS got on the wrong side of a solar "perfect storm."
So far, the key points are that Abacus was not only a CDO, but a synthetic CDO, which by definition means that anyone long must understand that there is a corresponding short. It is a zero sum vehicle.
The counter-point is Coffee's point which is the standard in a civil case differs from a criminal case. Goldman has been caught in a web normally reserved for small fish. (If anything has got them angry its this.) This is the kind of attack that houses routinely beat as they generally hang their employee out to dry, write a check and go on with life.
GS is going to fight; that's for sure. And given the fact that they are going to announce monstor earnings tomorrow, they've got the money. If they don't spend it on legal fees, they will pay it out in bonuses, which will get Team Obama even angrier.
And I wouldn't be sure that other domino's are going to fall. In fact, I fully expect the squid to take on all parties no matter who they are, or where they are. Has anyone read the disclosure language in that doc? I think GS could have burned down houses with people in them and still walked away from this deal clean.
In the securities bar this is seen as a regulation through enforcement case. There is virtually no case law on CDO's and other exotic housing product. The SEC knows this and wants to advance a concept where their own regulations are not clear based on what should have been, not what was. This strategy normally works on small fish, not on the super squid.
As for questions about whether people will work with GS again? Are you guys kidding? What's the alternative? Lehman? Bear Stearns? Mother Merrill? There is huge business out there and only a few banks that can handle it.
Bush/Cheney and MCcain did the Bailout with mr hanky paulson !!!!!!!! mr hanky paulson says in his new book no tarp without john MCcain !!!!!!!!!!!!!!!!!!! TARP = John MCcain and G.W. Bush !!!!!!!!!!!!!!!!!!!!!!!!!
from the sinclair web site
the SEC (sex) will be right on this lol.. on top (as in on the top) of all corruption
What’s really interesting, as always, is the story that no one is telling. The SEC is either stupid or corrupt for announcing their suit on options expiration Friday, the most volatile day of the month.
April 170 Goldman Sachs puts, which would have expired worthless had the SEC waited until today, rose 140,000% on Friday.
Anyone with an extra thousand bucks and some insider info on Friday morning could have made just shy of a million and a half by Friday afternoon.
There was surprisingly large volume in these “out of the money” puts the days before. Who in their right mind would bet on such a large fall for such a typically stable company? Someone who knew what was coming.
ok ... I'm really not very familiar with these things, the derivatives and swaps and such. But in listening to legal advisor today, CDO's are not securities, but private placement contracts. CDO's are not issued under securities law. So how does one file a civil suit of securities fraud when no securities were involved? The whole disclosure thing seems to me to pretty shaky. A trade, any trade has two sides. What's to disclose?
None of this changes my mind that the typical behaviour of these folks - namely - creating an entity, finding a seller, and finding a buyer, all with the sole purpose to bet against it - well its just plain wrong in my book. Hope some reader has some insight into the thoughts above.
Sylvain Raynes interview: http://www.youtube.com/watch?v=sCey_2eEj5Y
Purely POLITICAL posturing, for the Benefit of the NEED reforms......yeah, like the Health Care Scam.
There is always an ulterior motive, since this was announced ONE day after the announcement that REFORM had to happen.
It will be a political tool, and if the GOP fights it, the Dems use it in Nov.
Some of us were not born yesterday.Few Billion/million in fines, and a SEC slap on the wrist.
best to stop all the analysis trying to cover all the branches and leaves . going here there ,, its all the same, a distraction while the leech sucks the host dry.
probably the real answer is that most like to be conned . serves the purpose of something for nothing , inbred in to the Keynesian ideal a car in every garage , a chicken in every pot. a continual belief of the idea that the next ring to be grabbed on the Ferris wheel of life will be me
so keep it going
how does the top dog sue its self ,,
the sewer runs deep ,, the suers are the sewer
the black pot has blown steam out of its own crocked pot,
the seam the crack is around it all, who can see from the inside the outside crack when the outside is the inside.
Without major personnel changes in SEC and the government, it's hard to believe long term buddies all of a sudden turn against each other. If systemic corruptions are so easily rooted, there would've never been any revolution in human history. Individual corruption can be cleansed through legal action, systemic corruption can not be addressed by the corrupt system itself.
My reading of the event is part of a pr strategy, to be stretched over the November elections, so that when people vote they have hope the current party in power will address their grievances. (false) Hope is being used as a psychological manipulation tool. Judging by reactions in blogosphere, it will be successful.
An argument can be made that a crack in the armor can lead to unexpected total collapse. The ruling elite of course understand this. The fact they are going ahead anyway shows their confidence and total command of the system to such an extent that all possible outcomes are well within their control. Instead of jumping with joy at such news, we should come to the realization that real reform of the system is still remote.
...and GS closes 163.22. What crisis?
1994:Over 4 billion dollars suddenly leaves Mexico,20 days later the peso collapses, 6 months later this same money had twice the purchasing power. When Mexican banks ran out of dollars to pay off their creditors (US banks)the US gov. stepped in with tax dollars and bailed them out! This bailout was engineered by Robert Rubin head of GS. The money never made it to Mexico it went straight to GS and MS and other banks with risky loans on the line.
The PIGS are getting ready to sue Goldman...everyone jump on the bandwagon!
Agree that there is a history of shaky shit with GS, no doubt, right down to the most glamorous 'time-out' call of all time, emerging as a bank holding company. Nice. Bet on their legal team to do well against the govt, like a knife to a gun fight.
The fault, dear Blankfein, is not in our stars, but in ourselves...
good perspective quotes noticed so far from our fine media (bloomberg, etc)
1. was Poulson's undisclosed role MATERIAL? well, I'd certainly think that having a moster short *in the least way involved* in picking the holdings would be material, especially when you're holding out a 3rd party (ACA, in this case) as the builder.
2. John Coffee (Columbia Univ) says SEC doesn't need to prove intent of fraud, just "a false statement or a material omission that made statements materially misleading." Yeah, I think we got that here...
3. James Cox (Duke Univ) says "If you're creating a dangerous product, you can't insulate yourself by bringing in an innocent party (ACA?) that dilutes the danger of that product, if you know it's still dangerous." hmmm.
4. "Absolutely. Yup, yup." --Sarah Palin
The SEC rats are on the ship now, which will be a long, distracting and expensive experience for GS, Deutsche, et al. And the rats are slow to leave until the boat takes on some serious water. Can't help the franchise much - won't stop it, but will exert some serious drag. Imagine those folks in the phone-tape room today, listening to every inch of recording from those days, the email reviews, looking over every single archived media that may be pulled in deposition. fun fun fun...
THE UNTRUSTABLES:
http://williambanzai7.blogspot.com/2010/04/untrustables.html
As a former trader, I know they were planning on a mortgage market blow up since 2003.
As a former pension fund analyst, I know they were long these products in early 2006. Kind of throws a kink in your theory.
Clearly they got to Bloomberg, nothing since five this morning but...its not so bad, its a one-off, no we don't intend to stop doing business with Goldman.
ah, the joys of owning the regulators and the media.
"It is better to ask forgiveness than permission." Well, maybe not this time.
DATU (an old saying by a former boss), doesn't apply to us
I am just waiting in anticipation of the cracks to appear in JP Morgan's armour. Goldman may be sinister but JP is pure evil.....imho
Thank God they saved the markets from her predatory exploits.
Let's see, the only person they have gone after in last five years, is Martha Stewart, Correct?
Martha, please design a "GS signature" collection for the future Goldman Sachs prisoners.
GS signature pillow cases, bed-sheets, pajamas, gentlemen's undergarments, and apres-shower booties.
Signature toiletries embossed with the GS logo: saddle soap, stock market bubble bath, eau de Abacus toilette, pension fund bath soaks, massaging grandma's-life-savings oil, client shower gel.
The sudden attack on Goldman Sachs is orchestrated to support the "financial reform". The financial reform efforts will lead to more power to the Federal Reserve Bank and the IMF. This will allow the fascist (government/private industry collusion) oligarchs more power to support those of their tribe and to eliminate others - a' la Bear Stearns. This has everything to do with power and corruption of the oligarchs
I agree with you 100%. These guys are illusionists of the highest degree. The financial reform will be the prime objective which will further their control. A gambit.
That makes sense "according to plan". And they do execute oh so well don't they?
Barney came out today and said that the GS issue will help pass finance reform. Now we know its not going to be in our best interest.
http://www.facebook.com/wgpitts?ref=profile#!/note.php?note_id=385633773339
They never disclosed that Wells Notice the recieved back in June 2009 in an 8-k or subsequent SEC filing. They just put in a general disclaimer. The stock rose 30% since that date and record bonuses were paid out. The securities class-action bar is going to have a field day with this one. The only thing that would benefit GS going forward is more SEC suits against other banks. Which will likely happen.
Also, Fabulous Fab was promoted for his good works. He is not some rogue employee.
A whole lot of strenuous wishing going on in these GS threads.
A lot of shorts wanting "fair" valuations of the SP500 and for Goldman to actually get prosecuted.
WTF does fair have to do with anything these days and let's see if the market plunges first before declaring everything well on its way.
Goldman Sachs reminds me of the doctor that performed my prostate biopsy. I was owed a duty of full and fair disclosure up front. I should not have to guess the right questions. Why is the lab fee in another state 200% of your fee? Who is reading the results? Someone in India?
Goldman Sachs reminds me of the once upon a time when the #1 partner in a DC firm hung up on me on a Sunday morning -- saying it was too early in the morning to be lectured on ethics. He was in DC and I was in CA.
What goes around comes around big time. I am one angry piss ant since I know how much money I have lost in interest income, courtesy of Greenspan and Bernanke, to protect Goldman Sachs et. al. I smell tobacco lawsuits. I smell asbestos lawsuits. I smell big fees for hungry lawyers.
Where have you been?
It 'suffered' that small respectability crack 3 years ago and the partners are richer than ever, shoveling money at each other at a record pace.
The Goldamn Sucks' veneer has long been gone, and anyone who cares already knows the zionists like Rubin,Summers,Greenspan and the rest care about reputation about as much as they care about the price of milk.
There are a group of men and some wimmin from one tribe only interested in one thing: amassing all the money in the world to give them all the power in the world. And a country free of anything but Israelis.
I need some help here guys.
A while ago, and I believe it was here at ZH, I read something to the effect that Goldman, after passing off MBS' to clients, turned around and bought derivatives that paid against losses on the very same securities that they sold. I know I read this somewhere.
I'm in a huge disagreement on another site with a member that thinks that Goldman is not criminal, that they bought CDS' late in the game because they "figured out" that the market was turning, and merely did the "prudent thing".
He claims that if they were pimping the housing bubble for profit and the market started to turn south, that all they were doing was adjusting to conditions and it was reasonable for them to flip their positions. So, he's asking me the following questions:
When did they flip their positions and how much did they pay? (I know, he's in the demand impossible proof mode).
Anyone have any links to the articles that cover this?
He's convinced that Goldman are good guys. No, shit. I'm serious.
Smells like a show trial just to keep the mob happy and pretend to clean things up.
In the meantime, the effects on the market are no doubt creating some fine opportunities for somebody, undoubtedly including GS who must be shocked - yes shocked I tell you - by this surprising news.
Obama is a circus. This is the latest act.
Don't you get it! This is about control. GS thought that they had the Bamsta in their pocket for a puny mil, but they got out-shysted by the shyster! GS never saw it coming. Now they're gonna kneel at the Bamsta's feet!
"Obama is a circus. This is the latest act."
Uh, having the SEC pursue fraud charges against your biggest contributor is a 'circus'? Wake up.
http://www.ritholtz.com/blog/2010/04/sec-kiss-of-death/
from sinclairs mine set
another case for the corrupt SEC
yes wide shut
What’s really interesting, as always, is the story that no one is telling. The SEC is either stupid or corrupt for announcing their suit on options expiration Friday, the most volatile day of the month.
April 170 Goldman Sachs puts, which would have expired worthless had the SEC waited until today, rose 140,000% on Friday.
Anyone with an extra thousand bucks and some insider info on Friday morning could have made just shy of a million and a half by Friday afternoon.
There was surprisingly large volume in these “out of the money” puts the days before. Who in their right mind would bet on such a large fall for such a typically stable company? Someone who knew what was coming.
There’s no doubt the SEC has their own reputation to look out for, and this lawsuit is not fundamentally very different from the populist witch hunt currently underway on Capital Hill.
I’m not going to try to make a call, regarding the response of big Goldman clients, because I don’t know what it feels like to be sitting in the belly of the beast. However, the allegations cite non-disclosure of the fact that Paulson was even involved in the pricing and distribution of these bundled MBS. It’s not illegal for Goldman to be on the right end of an otherwise abysmal trade by it’s clients, but it is illegal to keep those clients in the dark when the “technologies” they’re purchasing have been designed by a third party with conflicted interests.
Kudos on crucifying the Regulatory agencies. I can’t believe that Moody’s and S&P have dodged this thing so far. However, it’s also necessary to point out the other prominant Paulson of late, first name Hank, who designed the initial TARP package and began the ball rolling of this entire bailout-friendly new normal. Hank Paulson was a recent CEO of Goldman Sachs, and that perhaps some of the regulatory / feduciary institution failures are the result of Goldman-esque board members serving as feeder pools to those very governing/rating bodies.
Only this weeks earnings and time will tell how deep the pullback which began Friday ultimately becomes.
+1
1998: Goldman peddles toxic Russian bonds to LTCM. Bonds are of the lowest quality with little chance of repayment. Goldman goes short. LTCM blows up. A systemic crisis ensues. Goldman uses Washington connections to pressure the Fed to engineer a taxpayer bailout which makes Goldman whole. Payday for Goldman.
2008: Goldman peddles toxic synthetic subprime CDOs (Davis Square) to AIG. Underlying bonds are of the lowest quality with little hope of repayment. Goldman goes short. AIG blows up. A systemic crisis ensues. Goldman uses Washington connections to pressure the Fed to engineer a taxpayer bailout which makes Goldman whole. Payday for Goldman.
2007: Goldman peddles toxic synthetic subprime CDOs (Abacus) to ABN Amro and IKB Bank. Underlying bonds are of the lowest quality with little hope of repayment. Goldman goes short. Payday for Goldman.
Goldman played the classic shell game and is trying to play the game with the SEC: did Goldman go long or short? Guess which way Goldman is betting and you can win, sucker! Now they're using a shell game defense : "They knew the game! They knew there was a chance they were getting rooked!"
The key to understanding both the success AND the unraveling of Goldman in the Abacus case with Paulson is CONfidence. A confidence game is played when the mark (or patsy) is convinced to have confidence in the perp. That is the structure of the fraud. When America's premiere banks start defrauding by abusing their credibility, they have crossed a line irrevocably. Because they can so easily tarnish the Wall Street brand and endanger the entire economy. Such is the case right now. Regardless of what they said or didn't say in their prospectus, they made a side deal with Paulson in which they charged him vig for the right to engineer a thrown fight.
Goldman will use the obfuscation defense. Like Enron's maze of special purpose vehicles they think that nobody will possibly ever be able to figure out where the money went, or in this case, was Goldman long or short? We didn't do it, Paulson did! That's typical con artist thinking.
yes, but the real patsy was "THE FABULOUS FAB"
LTCM was illiquid in terms of reacting to a crisis, they were not divested and had no real exit strategy. So the exposure to the Russian "default" was not hedged in any way. LTCM should have been continually testing the waters, their risk models were incomplete. The real reason was they got greedy. There would have been no shame is shifting some profits into a hedge.
When you are the market, the exit has to be planned, and it takes time, or else you surrender control to the market. A similar thing can be seen at BAC for example. Obviously if they were to recognize all of their loan loses they would be insolvent, but more interesting is the fact that they pronounced to the world that a bank can make money on investing, loans are so old fashioned. If BAC gets greedy and not divest out of their equity positions in time to keep their returns, they will not be able to respond in time to remain solvent if equities drop 20%. A lot is riding on over priced equities not having a sell off. What model is telling BAC to let it ride? A run for the exits will have the NYSE halt trading by noon.
Mark Beck
Goldman and all of Wall Street hasn’t been respectable since the days of private partnerships with INDIVIDUAL RESPONSIBILITY. Say, 1965 maybe. The complete end came when Billy Salomon sold out and Susan Gutfreund’s husband took a whirl at ‘managing’. Some of this suit is pussy whipping by RahmObama ding dong for getting stood up a few months ago when the bankers refused to meet with him in DC.
What's his name again?
Gilles de la Tourette or something?
"What's his name again?"
Le casse-vitesse pour le bus Goldman...
Speed bump for the Goldman bus....
They were Obama's biggest campaign contributor........
Evidently, they didn't contribute enough.
+1
Not any more... unless it was all staged from the start.