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Goldman Serves One Master Better Than The Others
Authored by Jonathan Weil of Bloomberg (originally appearing on, well, Bloomberg obviously)
April 16 (Bloomberg) -- As Wall Street bombshells go, the lawsuit that the Securities and Exchange Commission filed against Goldman Sachs Group Inc. is about as big as it gets.
Who knew the folks at the SEC still had it in them to accuse a major Wall Street bank of fraud? And who could have guessed that Goldman’s canned explanation for its behavior during the subprime mortgage bubble -- that it simply was serving clients’ needs -- could come so unglued so quickly?
To recap, the SEC’s complaint accuses Goldman and one of its vice presidents of selling subprime mortgage-backed securities to institutional investors, without disclosing that one of its clients, the giant hedge fund Paulson & Co., had paid Goldman to structure these securities so that they would be the world’s perfect short -- at least from Paulson’s point of view.
The securities, called Abacus 2007-AC1, became worthless within months, showing that Paulson had done its homework. The SEC said Paulson paid Goldman a $15 million fee.
The SEC said Goldman’s main infraction was telling investors who bought the securities that an independent company called ACA Management had chosen the assets that were backing them, when it was Paulson that played a major role in the process. The SEC said Goldman duped ACA into believing that Paulson was looking to take a bullish position, though the SEC’s complaint doesn’t try to explain why this somehow would excuse ACA’s decision to bow to Paulson’s influence.
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He's joking, right? Their reputation? Unless you're a total moron, their reputation is that of a mercantile banker which will stop at nothing to maximize their profits and abuse the taxpayer's pocketbooks as their insurance policy so they can whore away investing in anything or creating markets or situations to enhance their bottom line.
The problem is that the American people are blind, dumb, deaf, and stupid and refuse to raise enough hell to build the scaffolds or find the oak trees and rope.
Johnny: that's the next step, Americans are going to storm the Beltway and the military is going to turn on the Administration! That's what it would take to stop this madness!..:-)
That was beautiful. With that last sentence -- thirty simple words -- you have ensnared the truth. Paste a gold star on your forehead, you have done well. Thank you.
My only hope is that GS someday soon wishes that the hedge funds were allowed to take them down.
If they were taken down they would not be as big a target.
We are still waiting to see if they are really are too big to fail. All the kings horses. The plot thickens the story is not yet over.
Did they really own the paper they sold. If the paper has no value what do you own. I have a deed --- a piece of paper --- for the Brooklyn Bridge. If I sell it and you buy it.
What did you buy --- you are a fool
And I am a fraud
Boo-yes they owned an equity tranche for a few minutes. It's the way the deals are done. It means nothing.
No, the problem is that the sheeple's "representatives" have completely sold out to the highest bidder. Whatever. Buy gold, guns and ammo, and food and wait it out.
No waiting it out...he who hesitates is Lunch!!!
don't forget your silver
I only use silver to enjoy my chopped Calamari Salad...:-)
Sad but true. I live in Squidville, a friend of a friend is a Squidder; some douches I know are in awe of this for some reason. "Wow, he makes so much money" Then I scream in their face that, no, he steals YOUR money. This is in Squidville with people that should know better. Ignorant f*ckers. I'll be the one laughing when the squid his the fan!!
Definition of Pure Evil: Cook the books for Greece and dupe the EU... cook the books for JP and dupe some German banks. Is this a way to earn money...?
This is not the behaviour of "a few rogue individuals"... this is the patent behaviour permeating throughout a well trained evil institution.
This evil must come to an end... GS must be taken out of its corrupt misery.
There are such things as "ethical" financial institutions, where money is earned in an honest manner... however, these institutions are smothered and cannot thrive as long as GS is around.
Do all you can to put a stop to this evil.
I do not think that this French fool, Tourre, is what you would call an evil person, but he is blinded by the desperate need to earn a big bonus. He knew that the products he was structuring had a high chance of going wrong, but considered his responsibility was limited to this. None of these guys realized that the whole fucking system was interconnected and once things started to go wrong, they would spread like a wild fire and could not be contained. Nobody was individually responsible for blowing up the world, but collectively their actions made it inevitable.
I worked in the industry for more than a decade and I in the end had to leave for the sake of my sanity. For years, I felt like I was secretly trying to protect my clients and was criticized for not selling more complex products. In fact, I was advising my clients not to go near any of these things, explaining why they would go wrong. Towards the end, the corruption in the markets was spreading to the accounting firms, the ratings agencies, governments and I just could not take the bullshit anymore, so I walked away. I know I would have made a lot more money if I had toed the line, but I can live with myself.
Looking back, what I can see is how many sociopaths thrive inside these firms, they are the dominant personalities and they set the agenda.
One thing that has somehow not received the publicity it should were the enormous bonuses paid to senior execs at Merrill Lynch shortly before they were acquired by BofA. These guys were well aware the firm was screwed and they colluded to overstate the value of assets in order to get one last payday. When BofA realized the real losses, they did nothig about it.
It is theft of a grand order and we have let them get away with it. But, remember this, most of these guys are vain and cowardly and if they knew there was a chance they could go to jail, they would not do it. It is only because they know won't, that they do.
We need to have something along the lines of the "Truth and Reconciliation" systems they had in South Africa, or the process in Rwanda or Nuremberg to address the cultural issues that created this system.
One final point - this could have been stopped after Enron, if it had not been for BushCheneyCo and half of Congress being in the pockets of Enron. The culture at Enron was a foretaste of what was to come.
nuremberg was a farce, more holohoax propaganda courtesy of satan's hatchlings.
http://www.patriot.dk/nurnberg2.html
Non-sequitur much?
Congratulations on your ethical and moral choice all those years ago. Your bravery will be vindicated shortly.
:D
+100 to the previous posters and my 2 cents:
In November 2009, Prechter wrote a sweet little article that Goldman's days were numbered as a shining star. The jig would be up and what Taibbi started with the Vampire Squid article would turn to a mass desacration of the Goldman empire and those in government tentacle positions.
Today is the beginning. Americans are not as stupid as you think. We all talk about the sheeple in the south and midwest, and those that no longer watch the news and are suffering just to get by. But that doesn't mean they aren't angry or so stupid that they don't hear from one source or another that a certain large investment bank has effectively raped them in the ass.
And it also doesn't mean that the younger generation hasn't been highly allerted to the pillaging done through Taibbi's work in Rolling Stone. My son forwarded me the article from his I-phone although I already knew all the stuff since I worked on the street and was an avid ZH reader.
So stop your "it's pointless" bullshit. Oak trees and rope are great for hammocks. Scaffolds really help with reshingling steep roofs. That's not how it is going to go down anyway. It is your kind of attitude that Cognitive Dissonance is trying to sway in not giving up.
Goldman is on the precipace of needing scaffolding. I can't wait for Cuomo to get going on this. And the Connecticut Attorney General is convinced criminal charges are on the way, and so am I.
For a long time since Lehman I've been thinking that GS has promoted itself to the level of its own incompetence. After all those years of increasing success playing MOTU more or less behind the scenes, it doesn't seem to have fully realised that when you become a true household name - when all the dogs in the (main) street have an opinion about you, like 1970s AT&T, or the Catholic Church, or lo, even Sarah Palin - then you're in a completely different arena. If the public turns decisively against you you're in trouble even if you get everything else right. Look at the scale of the efforts that '70s monopolists like AT&T and IBM used to make to appear as basically benign features of the landscape. Even Dimon understands that he has to have a rap for the public.
And don't forget all the feeder funds who did business with Madoff precisely because they thought he was front-running. People do business with Goldman for one reason only: because they are better at stealing and locating patsies than anyone else.
The idea that Goldman's success is built on their pristine ethics and reputation, is laughable.
The problem is that the American people are blind, dumb, deaf, and stupid and refuse to raise enough hell to build the scaffolds or find the oak trees and rope.
Fair enough...
Yet... call me an idealist (or perhaps a traitor or simply a homocidal maniac), but since 2001 we've been sending young men and women into combat and many are back home now with their skills largely intact.
(*SHRUG*)
Perhaps ZeroHedge should start a charity (I'd donate!) dedicated to providing each and every serving member of the United States military along with all veterans (and what the hell... throw in cops, firemen, doctors...) with a copy of Vince Flynn's "Term Limits."
(*HUGE FRIGG'N GRIN*)
Hey... at the very least... IMAGINE THE POLITICAL/MEDIA FIREWORKS SUCH AN EFFORT WOULD SET OFF!
Anyway... just a thought.
(*WINK*)
BILL
Their reputation that they would sell their mother for a bonus?
They would not sell their mother. But you can rent her for one hour for services rendered. Hell, I'm shocked they don't offer that in the fine print of any new offerings.
They couldn't figure out a way to short the transactions.
Maybe not with the real grandmother, but they could draw up covenants for synthetic grandmothers. Then Goldman could swap grandmothers overnight with JPM, and they'd both make a buck.
Sounds like a high tech version of The Sting.
What does a vampire squid care about reputation.
The only thing the beast wants is more of our blood!
Your avatar reminds me of an ink blot psych test...what do you see? I see a pair of nice feet which then morph into camel toes. Love it!
I see lunch.
Can we please not have ZeroHedge sink to the level of a frat-house party, boys?
Will you keep the overt sexuality and innuendo off of the financial pages? There are plenty of other sites to avail yourselves of your "masculinity."
What do you see here? Remember, there are no wrong answers.
Although an encouraging first baby step, I have a feeling not much will come of this long term.
"I have a feeling not much will come of this long term."
Think of the Down Side
If the SEC blows this case and Goldman is acquitted... that will probably be the last fraud case brought against Wall Street in the derivatives mortgage junk bond TBTF fraudster era.
That is What Worries Me... Theater
SEC talks big smack, Goldman vilified and booed. Wrestling fans are foaming at the mouth by the time Goldman and the SEC take the ring... SEC goes down in a bitch heap from watching too much tranny porn instead of preparing as usual. Goldman wins, crowd deflates and goes home with its tail between its legs and Wall Street civil charges are over.. let alone criminal ones...
Betting on the SEC
Betting on the SEC to win this thing is like betting on the Skipper and Gilligan getting that coconut powered radio working....
As I stated in another thread, don't believe that the SEC case is weak. In a civil fraud action, there are only three elements: that the defendant sold a security, that the defendant knew (or ought to have known) a material fact that might have cause buyer not to purchase, defendant failed to disclose that fact.
The fact that Goldman has a long position in the same security is irrelevant. The fact that every one else on the Street was doing the same thing is irrelevant. The fact that the buyer was a sophisicated investor who should have done his homework is irrelevant. (Losses of the victim, sophistication of the victim, and profits and gains of the malefactor will be relevant for calculating damages and framing a remedy, but they are not relevant on the issue of liability.)
In my view, the contents of the civil complaint set forth evidence of actual intent to defraud - scienter - sufficient to support a criminal case. Given the likelihood of many similar class actions and similar private fraud cases that are likely to be filed against GS, and the stuff that comes out in discovery, there is a non-trivial chance that Goldman will ultimately be charged criminally and then be barred from the securities business, causing a liquidation.
This complaint is very serious indeed.
The knowledge of conflicting interests gleaned by the middle man in writing a derivative for one client and then finding another client to take the other side of the trade is laden with remarkable legal peril. It may be possible to navigate these dangerous waters when times are good, but a bear market is bound to bring all the 10-b-5 chickens home to roost.
+1
jumping the gun a little bit? If Madoff could outlive his prison sentence, he would eventually be back on Wall Street.
+1000
Totally agree with your assessment and that criminal charges will eventually (let's give them 15 months, max) reduce Goldman to the next Drexel, Lehman, and Bear. And I also bet Morgan Stanley gets dragged down into the gutter with them. Watch out BAC--you have another trainwreck on your balance sheet. Ken Lewis needs to join Ken Lay real soon. I don't think he can take the stress that's coming.
I don't think I would have much difficulty convincing a judge to attribute the knowledge that the CMO market was toast in early '07, as set forth in the e-mails quoted in the SEC complaint, to the entire Goldman organization - at least for the purpose of getting past a 12-b motion to dismiss or summary judgment.
This is the issue that will determine Goldman's fate, and in my view will open up the floodgates to anyone who purchased any derivative mortgage product from Goldman thereafter.
Once past the motion to dismiss, any litigator worth his or her salt, can then use discovery to go fishing for e-mails concerning Countrywide and Wamu, e-mails about deals at competing firms, and e-mails from friends and acquaintances in other firms that reinforce the claim of scienter on the part of the seller.
At this point, wide swaths of the financial industry will be exposed to similar suits.
So the (legal) sharks are smelling (squid) blood in the water? The blood-funnel runneth over?
yes, they are smelling a billable hour feeding frenzy
"So the (legal) sharks..."
Obama's New Jobs Program
Thousands of new jobs created by the stimulus for Harvard Law attorneys suing Wall Street banks who hire thousands more Harvard Law attorneys...
You've got that right, PI...!!!
Frigg'n lawyers...
(*MUTTERING TO MYSELF*)
BILL
my 1/4 penney
after the lehman review came out and we had zero re-action on the tape i was a bit stunned, then when it was publicized what GS had been doing in Greece and Italy since the late 90's I was pretty sure someone somewhere had had enough, and then when the big article on Magnetar came out last week I was like, hmmmmm, how blind can the SEC be, the whole case of fraud by 4-5 of the big brokers was served up on a platter by some investigative reporter
obviously we will see what happens, yet, if they so desire the letters could spread very easily, if they do not, we will know in the end who does really own who
GS has been in the driver's seat for this entire BS rally, and now that it's more than noticeably overheating, this is just something to cool it off a bit and drive funds into treasury auctions before they unravel again. Blankfein and Bair are somewhere laughing over a few martinis tonight.
i def think the timing was intended to cool down the melt up. the investigation has been going on forever. its been on the radar since this JOKE of a settlement.
http://www.boston.com/business/ticker/2009/05/state_reaches_6.html
Actually Ms. Bair was out taking down eight banks today.
" Blankfein and Bair are somewhere laughing over a few martinis tonight."
Bair is a toady many levels below Lloyd. Blank-dick-fein buys and sells dozens of Sheilas a day...
Martini with the Pope
Blank-dick-fein laughing over a few martinis with pope is more likely... doing God's work... they are of the same moral and ethical fabric... raping the innocent and protecting and hiding those from authorities who rape the innocent...
Except that French guy... under the bus with him. God has spoken.
I lost my job, tapped into all my savings, had to leave a city I loved, and so forth because of this crash, but I'd do it all over again just to see the Goldman's of the world held accountable for their actions. I'd rather go back to riding my bike 5 miles to buy a dollar worth of ramen than see Goldman just carry on about their business. Today was a good day. To borrow a line from a football blog, fuck those fucking fucks with a pick axe named vengeancefucker. Keep it up ZH.
I salute you, BC. May your dreams come true and may you be able to return to your city of love.
Indeed. + 100 and death to The Squid. Volker, please use this moment!!!!
Great perspective/attitude - got an extra pick axe?
Who wants to bet that this will come to a mountain of nothingburger?
We're going to see how much influence GS's hundreds of millions can really buy and how deep in the pocket Obama is
I don't know much about the investment banking world, but I'd assume that it's pretty hard to hedge reputation risk. Surely at some point this will bite them in the ass.
Definition of Pure Evil: Cook the books for Greece and dupe the EU... cook the books for JP and dupe some German banks. Is this a way to earn money...?
This is not the behaviour of "a few rogue individuals"... this is the patent behaviour permeating throughout a well trained evil institution.
This evil must come to an end... GS must be taken out of its corrupt misery.
There are such things as "ethical" financial institutions, where money is earned in an honest manner... however, these institutions are smothered and cannot thrive as long as GS is around.
Do all you can to put a stop to this evil.
BTW, the SEC said that it was an ex-porfolio manager from JP's shop who dropped the "dime" on GS... anybody know who this whistle-blower might have been...?
'twas Paolo Pelligrini.
http://nymag.com/daily/intel/2010/04/paolo_pelligrini.html
SUBPRIME DUMP:
http://williambanzai7.blogspot.com/2010/04/subprime-dump.html
Love how the goldman broker bought thousands of crude puts in the ring yesterday..... Yeah.. they didn't know they were gonna get sued. So blatent and obvious.
The problem isnt the bankers. You can tell a dog not to eat out of the garbage, and punish it if it does, but its in the dogs nature so you can't stop it. Just put a lid on the garbage can.
What I'm saying is, you have to have campaign finance reform and get the money out of politics. If GS falls, another one will just step into its place.
And what do you think the chance is for politicians to pass campaign finance reform and cut themselves off from hundreds of millions of dollars?
The fraud and corruption is systemic and has pushed all non fraudulent behaviour out of the system, as William Black describes in great detail:
http://hammer.ucla.edu/watchlisten/watchlisten/show_id/129363
Hammer time again
** Edited for Content **
Overtextended SP500 / DOW daily charts show more bearish warnings and the next few days will tell us more.
DOW chart :
http://www.zerohedge.com/forum/latest-market-outlook-0