The Goldman Goose?

Leo Kolivakis's picture

Please read my latest entry and posts your comments here:

http://pensionpulse.blogspot.com/2010/04/goldman-goose.html

Thank you,

Leo Kolivakis

 

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earnyermoney's picture

OT: Leo, how bout the Habs! As a Hurricanes fan, I really enjoyed this result. LOL

Otherspeoplesmoney's picture

Hey Leo, thanks for the suggestion to fill my boots with Greek bonds, it's working out great.  I'm sure they still eat and drink there so all must be fine so with that and the fact that you were a buyer too I sleep well.

Leo Kolivakis's picture

Err, you sound like one of those Goldmanites I chastised in my post. Fabulous Fab, is that you? Merde!!!!!

Panafrican Funktron Robot's picture

I don't really give a shit about the moral/ethical arguments, that's really just a shroud to cover the reality that the government creates perverse incentives when they intervene in the market. 

As an example, the corn subsidy led us down a path to a nation of fat diabetics.  Apply said analogy to the government subsidizing banking and investment activity.  Fits like a glove.

twotraps's picture

Well said, very unfortunate but true, simple as that.  Much like the parade of auto execs, where legislation fueled the fire as well.

lins216's picture

I listened to most of the testimony.  This was nothing more than election soundbites.  Fugget said it best, what brought us to this point was malinvestment, a direct result of low interest rates for far too long. 

I thought most of the testimony missed the point entirely. 

 

 

 

kaiserhoff's picture

+1

That and government mandates to Fannie and Freddie to go lower and lower on the credit risk food chain.

MarketFox's picture

Let's simplify this....

 

a) No derivatives...NONE

Just vanilla stocks and bonds

 

b) ALL transactions on one singular defragmented electronic exchange....BATS model....

 

c) 10:1 margin 

 

d) No short sell rules.....total limited by total outstanding shares....just a number....no locates...no uptick rule....

 

e) maximum size restrictions

 

f) no account minimum

 

g) electronic regulation....easy to monitor

 

h) wiki style fact based reporting....

 

i) boiler plate market entry rules

 

j) no taxation of any securities

 

k) worldwide

kaiserhoff's picture

k) won't happen because:

l) all trading moves to Canada within 24 hours.

RockyRacoon's picture

Fine!  Then let Canada's citizens childrens' futures be burdened with bailout costs.

twotraps's picture

Except that there may be a few exceptions....by the time the govt it done!

k) Worldwide:  except accounts origninated before      12/1/1986 in Delaware filed under Smarty Pants Trust, they will be free of all Worldwide restrictions.

j) no taxation:  except for accounts or activities where the govt deems the 20% rule will apply in cases both persuant and subsequent here-to-fore dealing with any dealings self-directed or otherwise bla bla bla.

get the picture

 

Ruffcut's picture

I really wish someone had a copy of the testimony agreement.

Ron Paul, said he could not ask Benny Beenut, certain questions.

You can't say; fraud, malfeasance, misrepresentation, fudiciary responsibility, front running, flash trading,etc.

Or we plead the fifth. "1,2,3 ,4 FIF!"

Levin did a great job doing the best dance he could. Time for grand juries, and the DOJ.

anony's picture

Why do I have to disclose the water damage in my basement when I sell my house? Why do I have to disclose unpaid taxes and liens when I go to sell my house?

With only a few hundred thousands at stake, my must I adhere to a different rule for disclosure than a company involved in trillions of far more damaging faults with their products?

 

Johnny Bravo's picture

The product itself wasn't the problem.  The people purchasing the CDOs wanted higher yield, and to take it they had to speculate in the riskiest of loans.

The problem was the greed of the person asking for the CDO, and their lack of risk avoidance, common sense, and due diligence.

Goldman did absolutely nothing wrong.  This is just a show so that Obama appears "strong."

RockyRacoon's picture

The house sale analogy was a fine one.  Just because the client wanted better yield doesn't relieve the Squid (off the hook) for omitting material facts.  I bought my house knowing of the problems, but I chose to accept the problems in view of the sales price.  Leaving out the fact that the basement floods would allow a buyer to terminate a sale, or allow for legal action after the purchase.  Ya just don't do that.   How could a client have evaluated the "risk", and the subsequent "yield" , without knowing all the pertinent facts?  Ain't no way outta this argument.  Hide and watch how the Squid gets drawn and quartered.

kaiserhoff's picture

So much hype and arm waving, so little substance.  If Levin wants to hang a bad guy, he should go after the banking queen, Bonnie Fwank.  There is more abuse of power in the government than in the private sector, always.

What is the real adjenda?  Certainly not reform because nothing of substance will change.  These crooks need each other too much.  The real adjenda is:

1 Distract attention from Obama's failed presidency and the growing public contempt for the government.

2 Serve as an excuse for the 331 billion in new financial fees on the TBTF crowd. 

The only "change" these kleptomaniacs are interested in, is stealing more money.

Johnny Bravo's picture

I think that there are some banks that should be on the hook, just not Goldman Sachs.

What about all the companies making fraudulent loans?  Or the appraisers making fraudulent appraisals?  What about the mortgage brokers selling unsustainable mortgages without doing due diligence?

Those are the real culprits in this mess, not Goldman Sachs.

It's okay though, cause Bonnie Fwank and the Dumbocrats are nothing more than modern day whores.  Anything for a few more votes.
If they have their way, they're about to get 11 million more votes.  Who cares if granting amnesty to criminals is bad for the country?
It's 11 MILLION more votes!  That should get them by for a few more years.

RockyRacoon's picture

Hey, MB.  The situation of dragging the other culprits before Congress -- and NOT Goldman -- would lead to screams of going after the little guy, but leaving the Squid off the hook.  (Sorry for all the maritime mixed metaphors (and the piss-poor alliteration).)  So, there is no way to win in the view of the general public.  Besides, if they dragged the whole guilty mess before Congress they'd have to hold hearing in a stadium just to hold the "guilty".  By going after the head of the Squid they put the fear o' de Lord in the remaining culprits.  Like the fuzz arresting one guy in a whole herd of speeders -- it slows down the pace of traffic.   Hey, you gotta start somewhere, and you'll have to hand it to the SEC for having the stones to take on the most visible, and publicly reviled, culprit.  I'm saying that the gov't has to start someplace, and this is as good as any, and better than most.

amanfromMars's picture

"The scumbag bankers have become invulnerable because of our cowardly ineptitude. We deserve all that we get, out in the case of the bankers - all they can take." ....[Sam] brinksman wrote: Wednesday, 28 April 2010 at 08:04 am (UTC) .... http://www.independent.co.uk/news/business/news/the-world-says-they-are-...

Sam,

They, ie scumbag bankers, do have a major problem which they richly deserve, whenever they are not confronted or aided by cowardly ineptitude. And if the banking system is a corrupt fantasy Ponzi, with its core generator, Quantitatively Eased Credit Supply, is the problem squared in its difficulty to avoid catastrophic collapse without a fundamental reappraisal and restructuring to Currency Supply rather than Currency Control ...... and that requires not require Investment into Banking and Captivating Vaults but Credit Flows throughs Pickup Outlets for Lucrative Lucre Exchanges.

The problem is the atificial creation of vast Wealth in a few hands rather than the sharing of all wealth to and through all hands. And as all and/or any amount of artificial wealth is easily almost immediately transferred nowadays and apportioned by electronic credit transfers to any connected destination and to any linked account in any connected destination on the globe, is the problem of continuing slave poverty to money controllers, not a technical one to surmount, for that is already beaten and resolved, but a moral one to define the nature of Man, for it is just a matter of an intelligent willingness to see that all are wealthy and are to have what they need to purchase whatever is available, rather than all are poor and have to work till they drop and /or are rich with a quantitatively eased artificial product, which is so easily immediately supplied to any and all.

That surely means that the Banking System as it is today is a Slave Control Scam which Enriches just a Few with Riches they cannot Spend  and Imprisons the Many to a Life of Toil and Bondage with no Opportunity to Purchase what they Need.

In days of Yore, you would have quickly lost your head for that and the world would have been a better place for the bad blood letting ...the Purge Surge.

dcb's picture

good comments. soros is right on. all about alignment of interests.

I'm going to paste some of your stuff, but this is along the lines of things I havebeen saying a while:

But these hearings aren't just about Goldman; they are about a Wall Street model that is fraught with conflicts of interest. I was surprised to see Citadel Investment Group founder Ken Griffin coming to Goldman's defense when he knows that investment banks are fraught with conflicts of interest.

Go back to read Soros' thoughts on alignment of interests. When investors allocate to funds managed by George Soros, Bruce Kovner, Ken Griffin, Steve Cohen, Ray Dalio, Paul Tudor Jones, John Paulson, Jim Simmons, Louis Bacon, David Shaw, or any other elite hedge fund manager, they'll pay hefty performance fees, but at least they know that those managers have skin in the game. Their net worth is tied up in the funds they're managing. They're is an alignment of interest.

That alignment of interest does not exist in the current investment banking model. It might exist (loosely) between Goldman and say, Citadel or other big hedge funds, because Citadel and those hedge funds do a lot of business with them, but I'll bet your bottom dollar it doesn't exist between Goldman and their dumb public pension fund clients. The latter are as sophisticated as grandma Jones.

Alignment of interests. That was the key point senator Levin was trying to make towards the end of the hearings when he grilled Lloyd Blankfein. Soros knows all about this point. He thinks risk-takers should start a hedge fund and take risks with their own capital:

“That would push the risk-takers who are good at taking risks out of Goldman Sachs into hedge funds, where they actually belong, because hedge funds take risks with their own capital, not with deposits and not with government guarantees,” he said.

Johnny Bravo's picture

Does a casino make bets on an obviously favorable book for them? 

They know what the odds are... against the gambler every time.  EVERY time.
If you go to a casino to make bets, you NEVER have more than a 50/50 chance of winning, and often times it is much less than that.  The casino sells you a bet, and then takes the other side of the bet.  Hell, they don't even disclose the odds of their games.
They sell you a bet where you are destined to lose and then take the other side of it.  Nobody cares, because "you're an adult, and it's your money, you can make your own decisions."

Goldman did the same thing.  There's nothing wrong with that. 

These congresspeople just want something to cry about in between selling out the country so that they can look like they actually care about America.

Then they'll be back to the amnesty push for illegal immigrants once the novelty wears off.  Our government is fucking whores, all of them.  Anything for a campaign contribution or a few votes.  They don't care what they do to the country in the process.

RockyRacoon's picture

The casino analogy really does not hold water.  You know that, right?

The Alarmist's picture

Say what you will about the Squid, but their actions did not cause the risky borrowers to start defaulting on their loans in 2007, so I am surprised that the wizzes fromt he Squid, who have been doing God's work all along, didn't place the blame where it squarely belongs, which is on the poor.

 

dark pools of soros's picture

for the quadrillionth time

 

IF IT WAS SO FAIR WHY DID THEY NEED TAXPAYERS MONEY TO KEEP THE GAME GOING???

 

all your points are mute when you dont even have enough chalk to finish the math

The Alarmist's picture

Well, I was trying to be funny, but now that you mention it, why did the duly elected representatives of the taxpayers and their lawfully appointed advisors and officials all seem to believe the game needed to be kept going on those terms?  There were a number of comments that suggested that some banks (apparently not the Squid) were forced to take the money.  Others (like the Squid) gleefully partook in the taxpayer-funded grog bowl ... heck, I would have if it had been offered to me.

I don't fault the poor (or corporations) for taking welfare when it is on offer, since there is only so much accounting for character. 

I do fault those who consider themselves so wise that they should endeavour to lead us for 30+ years for appealing to the basest instincts to keep their grip on those positions of power by betraying the trust of the public.

The problem is not the banks, evil though they may be ... the problem is the political class.

 

Johnny Bravo's picture

"The problem is not the banks, evil though they may be ... the problem is the political class."

I agree.  Although I only watched the Blankfein testimony yesterday, it seemed like the Senators, especially McCaskill, were way out of their league, asking questions that I would have strung them up on if I was Blankfein.

Also, did you notice how "subdued" John McCain was?  He knew that he'd be back with his hands out, so he was UBER careful on what he said to Goldman.

The way I look at it, Goldman sold products to companies that wanted a higher yield.  After they sold the MBS CDOs to greedy people that wanted every side of the up bet that they could get, they shorted the product because anybody with half a brain knew that the housing market was fucked back in 2007.

To me, it's two separate transactions.  First, they supplied the CDO that the market asked for.  Then, they knew that the CDO was a bad bet, and went short against it.

If I'm about to buy a bad stock, bond, or other financial product, the company doesn't contact me and tell me I'm making a mistake.  As far as I'm concerned, the CDO was not set up to fail any more than any other CDO at the time, and the purchasing parties should have known this.
It's not up to Goldman to tell them that they're making a bad bet.  Goldman has to be as impartial as possible when selling these products.  Besides, what if they told them it was a bad bet, and were wrong?  They'd still be on the hook.

I really am on Goldman's side on this one. 

Plus, did you see all the grandstanding by members of the Senate?
"What do you think, that so many community banks are failing, when Goldman Sachs came out okay?"

(what I would have said)
"Well, it's our JOB to make money.  We cannot affect the decisions of greedy regional banks that made poor loan choices and helped perpetuate the fraud of the mortgage crisis."

I mean really.  Where is a company like Countrywide on the stand?  Where are the banks that were complicit in issuing loans for obvious faulty appraisals that were light years too high?

If anything, I'd say that people are just jealous that Goldman didn't make fucking retarded decisions like everybody else.  And why should they?

If anybody should be on Capitol Hill, it should be the Wamus, and the Countrywides, and the Fannie and Freddies of the world.  THEY caused the crisis.
Goldman sold bets to somebody that was asking them for a bet.  There's nothing wrong or illegal with that.  The companies coming to them wanted higher yields, and asked for junky products to get it.

If I'm a fat guy and I want a hamburger, and then I have a heart attack when I leave McDonalds, is it McDonalds' fault that they sold me the hamburger that pushed my heart over the edge?  Or is it my fault for being a fat lard ass prone to a heart attack?
The people asking for riskier products got what they asked for.  Goldman made the market for them.  It's not up to Goldman to tell supposed "adult" investors what they are investing in.  Besides, they even told them that the products were riskier than normal, to get higher yields.  What do these Senators want?  Goldman to stop selling things that people ask to buy?
What if the CDO went up?  Would Goldman be on the stand?

It's not Goldman's fault that their clients were ASKING to bet long on a shitty product.  (notice how many times the questioner used the word shitty?  What a douche.)  It's not Goldman's fault for having the common sense to know to go short on the housing market either.

Anybody who is against Goldman here is severely misguided.

RockyRacoon's picture

The problem will come close to being solved when the "fiduciary responsibility" question is answered:  Who has it and how should they execute it.  GS says they had none for their clients.  That is legally true.  Some would argue that they should have a fiduciary responsibility to tell clients that what they are buying has a very short fuse.  That, I believe, will help alleviate further problems in the contested area of the the SEC complaint.

Kreditanstalt's picture

That, I'm afraid, is unalterably True...no matter how politically unsayable it may be...

Problem Is's picture

Ugly From the Backside

Jesus Christ,  Lloyd B. God... buy a toupee. Lord knows you can afford it...

Boy, if God ever wanted to zap a mort... there would be a dead bunch of camera men right there...

Kreditanstalt's picture

How much Goldman cares about their clients is for them to decide; too little and they will lose clients, too much and they lose money.

There's nothing wrong with shorting the housing market.  That pig deserved to be shorted all the way down.  Any buyer silly enough to buy what was on offer without doing their own research, DD and investigation should pay the price.  Isn't it about time that just A LITTLE personal responsibility was placed where it belongs: on the buyer?

Or is the whole game for show?  Is this just another desperate attempt to seek punishment?  To play the victim?  To avoid responsibility?

Responsibility avoidance seems to be the name of the game worldwide for any money-loser.  

Thus, anyone and everyone is bailed out: ARM-holding idiots, Fannie & Freddie, AIG, GM, the GM UAW union, the unemployed 10-20%, indeed anyone with FDIC-"insured" deposits...

Claiming the Goldman had some kind of role as a financial advisory service is getting greedy...even IF the firm was openly acting in this role, there was nothing to stop it from setting up arms-length subsidiaries or other firms to short the same stuff.  Unethical?  Maybe, but...

Since when has every investment choice supposed to pay off - guaranteed - and since when has financial decision-making failure vanished?

 

dark pools of soros's picture

since when are busted casinos the tab for the taxpayers...  let it all burn if you must but shove all that live and let be if you cant live without the safety net

Kreditanstalt's picture

Oh, those innocent & well-meaning politicians!  It was YOUR beloved governments which voted YOUR money to bail out the TBTFs...were I GS, I would take the offered payout, be it government money, insurance money or whatever...

Kina's picture

If you are a well known and respected flower shop and package a bucket of shit to look like a flower, then sell it as a flower to a client who has come to you asking for flowers.It is fraudulent and criminal.

Betting against it just proves you knew it was a bucket of shit, confirms your fraud.

Amazed that so many have become so familiar with fraudulent activity that they accept it as the normal state of affairs, and want to protect it. It only shows how low the bar has been lowered and that maybe a few people should be imprisoned and standards reinstated.

 

 

bretondog's picture

"Amazed that so many have become so familiar with fraudulent activity that they accept it as the normal state of affairs, and want to protect it."

 

It is just THAT simple.

Not amazing just the reality of what passes for ordinary activity at these Firms...watch the "apologists" on ZH; they have it down pat and their own delusional obfuscation is symptomatic of a corporate and societal immorality that is epidemic in the Financial Culture of yesterday and STILL today

 

It was laughable to watch the first group of 4 boys from GS today.....stunningly DEAD inside; seared consciences.

30 somethings!!!???

"ZOMBIES" fed and nurtured as stalking boys for their seniors!

Show Trial or Carnival?

Matters NOT what these Senators had in mind.

The real story is the responses of these Goldmanites.

Bankers" are now down with the shills of the Used Car Buy Here Pay Here assemblages all across America.

These guys simply destroyed Hundred Year Old Companies.

Just destroyed them.

Hang your heads Investment Bankers.

Augustus's picture

My take on the first group was a little different.  They are younger and less experienced.  Their testimony was pretty constrained by the prospect of the SEC matter and it is all under Oath.  ANY slight mistatement can be groujds for bringing a perjury charge.  Since the whole thing was a show trial and Levin convicted them in his opening remarks, why participate and make it worse.  They would have been wise to not have testified at all.  Maybe I would have read my own opening statement saying essentially F Y for the nonsense that you created and are trying to hang on me in this visit with the Politbureau, then shut up.

Augustus's picture

Both customers came to GS looking to trade low quality.  The Abacas deal only had three customers involved.  Paulson, IKB, and ACA.  Goldman was only the middleman in the deal but ended up with a piece of it.  IKB was whoring for higher yields and were noted for doing that.  Same with ACA.  It wern't their first rodeo and they had no interest in roses for virgins.

What is amazing to me is that so many who are without facts seem to be able to reach a conclusion that there was fraud.  Hang them first, then rape the widow, I suppose that must be the new game.

Augustus's picture

When Levin kept hammering on the low quality of the loans backing the MBS and then the CDO I thought the GS folks really missed a chance to put it to Levin.

All they had to do was to state that they did not underwrite or process any of the individual mortgage loans.  However they expected the loans to be of good quality as they were underwritten by institutions that were directly supervised by the Federal govt.  Wachovia and WaMu were both highly regarded institutions which only used the highest standards that were the equal of those of FNM and FRE so what could have been better.  All of them were regularly examined and GS had not read of any reports that the Feds had generated that questioned their loan standards.  Negative amortization and interest only loans were available from many Federally regulated institutions and had not caused any regulator to question the soundness of the practice.  GS was simply packaging loans from high quality Federally approved institutions which were serving their customers by offering attractive loan products as required by Federal Regulations and the Community Reinvestment Act.

Was it "shit" Senator?  You required it and regulated it.  We did not set the rules for that.  You did.

Commander Cody's picture

Why turn the gun on yourself?  The government was complicit in these frauds and deflects blame to the banksters they enabled to keep the heat off themselves.  Regulators?  What regulators?  They are part of the contrived show.  Nobody really gets hurt here and the banksters know this.  Need mark to fantasy?  The FASB will take care of that little problem.  That is why banksters have no remorse, no conscience and no morals.  They can smugly sit there knowing full well Glass-Steagal and the bullshit Volcker Rule are nevermore to impede their greed.  Congress is too well bought and paid for and the criminals there will not cut off the source of their campaign funding.  The problem with our fascist oligarchy is that the government and big business are one.  Financial fraud is legal and there is little we can do about it as long as politicians are bought by special interests.

Common_Cents22's picture

Precisely, who wants to take on the government? Especially these days with growing centralized power and no respect for private business or the constitution.  Just put on a good show, defend yourself, do not attack back, take your lumps, pay your fine and do the best you can to stay off the radar in the future(more campaign contributions is a good start)

Hillbillyfreak's picture

"You can't be selling products to clients that you're actively shorting in your proprietary trading books." 

Isn't that's how wall street has worked for 100+ years.  Doesn't everyone who works there know that's how it works?  Besides, what difference would that make.  No one put a gun to anybody's head to buy shitty products.       

fuggetaboutit's picture

The thing I find fascinating and amazing here is this -- we are at the front end of a giant sovereign debt problem, which we are entering thanks to a decade (and counting) of moronoic 0% interest rate monetary policy and the ability of governments to mask the true net of their indebtedness thanks to schemes like the one Goldman pulled with the Greek government (and it aint just Greece, obviously)

So, question is this -- why are we so stupid as to be holding hearings about the thing that has already happened, instead of forcing Bernake, Geithner, Blankfein and whoever else to disclose the true depths of what is ABOUT TO HAPPEN?

Why isn't Bernake being forced to disclose exactly what he is doing in various asset markets? Why isnt Blankfein being forced to disclose exactly what other countries globally are actually in much deeper debt than the books show?

If anyone had taken the time to ask these questions while Greenspan was out cowboying around in markets 10 years ago, dont you think we'd be in a slightly more healthy situation than we sit today?

But hey the retail index is back to its highs I guess there really is no problem I'm probably worrying about nothing as usual

Common_Cents22's picture

Why would they want to incite a panic with the truth?  You can't handle the truth!!! ;)

 

The current system will be propelled and work until it doesn't.  

 

Plus it gives the elite more time to make some money and buy their getaway doomstead.

Ripped Chunk's picture

If the depth of what is about to happen is disclosed in a public forum such as this one, everyone in the room will shit themselves and die.

twotraps's picture

Awesome point.  We need an entire discussion on what we're facing now and stop the circus immediately.  Its a pathetic distraction from reality.

Augustus's picture

Will that mean the Buffett will not be able to delay his filings when he buys or sells?  Just wondering.  What about if XXXX hot trader is on the other side of selling AAPL or GOOG.  Do I have the right to know?

Those Senators are idiots.  At least we did not have Burris to listen to today.