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Guest Post: A Goldman Rebuttal

Tyler Durden's picture




 

Submitted by Dylan Ratigan

The following includes questions and commentary for Goldman Sachs as the company defends itself against charges of fraud:

Dear Lucas,

Since I haven't been able to get you or anyone from Goldman Sachs to
appear on my show in months, perhaps we can just try corresponding in
writing. Thank you for your press release. I have submitted my follow-up questions in bold:

Press release:
Goldman Sachs Makes Further Comments on SEC Complaint
April 16, 2010

The Goldman Sachs Group, Inc. (NYSE: GS) said today: We are
disappointed that the SEC would bring this action related to a single
transaction in the face of an extensive record which establishes that
the accusations are unfounded in law and fact. We want to emphasize the
following four critical points which were missing from the SEC's
complaint.

-- Goldman Sachs Lost Money On The Transaction.
Goldman Sachs, itself, lost more than $90 million. Our fee was $15
million. We were subject to losses and we did not structure a portfolio
that was designed to lose money.

But what about the other "transactions"...
You know, the one where you may have potentially shorted this exact
transaction with AIG for a lot more than $90 million? You remember AIG,
right? It's where the taxpayers paid you 100 cents on the dollar for a company that you helped blow up.

-- Extensive Disclosure Was Provided. IKB,
a large German Bank and sophisticated CDO market participant and ACA
Capital Management, the two investors, were provided extensive
information about the underlying mortgage securities. The risk
associated with the securities was known to these investors, who were
among the most sophisticated mortgage investors in the world. These
investors also understood that a synthetic CDO transaction necessarily
included both a long and short side.

There must be a big difference between "extensive
disclosure" and "complete disclosure," because if you provided
"complete disclosure," you probably would have mentioned to your
customers that the entire product was funded and selected by someone who was betting on it to fail. You know, kind of like you did for your coworkers at Goldman Sachs, but forgot to do for your customers!

-- ACA, the Largest Investor, Selected The Portfolio.
The portfolio of mortgage backed securities in this investment was
selected by an independent and experienced portfolio selection agent
after a series of discussions, including with Paulson & Co., which
were entirely typical of these types of transactions. ACA had the
largest exposure to the transaction, investing $951 million. It had an
obligation and every incentive to select appropriate securities.

Not to mention their incentive to be Goldman and Paulson's unwitting patsy...

-- Goldman Sachs Never Represented to ACA That Paulson Was Going To Be A Long Investor.
The SEC's complaint accuses the firm of fraud because it didn't
disclose to one party of the transaction who was on the other side of
that transaction. As normal business practice, market makers do not
disclose the identities of a buyer to a seller and vice versa. Goldman
Sachs never represented to ACA that Paulson was going to be a long
investor.

True, but Goldman also never represented to ACA that Paulson
was planning on shorting the same product that Paulson & Co.
created in the first place!

Background: In 2006, Paulson & Co. indicated its
interest in positioning itself for a decline in housing prices. The
firm structured a synthetic CDO through which Paulson benefited from a
decline in the value of the underlying securities. Those on the other
side of the transaction, IKB and ACA Capital Management, the portfolio
selection agent, would benefit from an increase in the value of the
securities. ACA had a long established track record as a CDO manager,
having 26 separate transactions before the transaction. Goldman Sachs
retained a significant residual long risk position in the transaction.

IKB, ACA and Paulson all provided their input regarding the composition
of the underlying securities. ACA ultimately and independently approved
the selection of 90 Residential Mortgage Backed Securities, which it
stood behind as the portfolio selection agent and the largest investor
in the transaction.

The offering documents for the transaction included every underlying
mortgage security. The offering documents for each of these RMBS in
turn disclosed the various categories of information required by the
SEC, including detailed information concerning the mortgages held by
the trust that issued the RMBS.

Any investor losses result from the overall negative performance of
the entire sector, not because of which particular securities ended in
the reference portfolio or how they were selected.

The transaction was not created as a way for Goldman Sachs to short
the subprime market. To the contrary, Goldman Sachs's substantial long
position in the transaction lost money for the firm.

No, it was created as a way for Paulson & Co. (and maybe
you), to short your customers... you know, the same customers that you
apparently forgot to mention that little fact to...

The Goldman Sachs Group, Inc. is a leading global
investment banking, securities and investment management firm that
provides a wide range of financial services to a substantial and
diversified client base that includes corporations, financial
institutions, governments and high-net-worth individuals. Founded in
1869, the firm is headquartered in New York and maintains offices in
London, Frankfurt, Tokyo, Hong Kong and other major financial centers
around the world.

And you're welcome for that. Sincerely, the U.S. taxpayers.

Media Contact:
Lucas van Praag
Tel: 212-902-5400

Investor Contact:
Dane Holmes
Tel: 212-902-0300

Thanks Lucas, hope we can chat again soon. Maybe next time
about exactly how a then-28-year-old Goldman Sachs junior executive did
this with no apparent supervision?

Dylan

 
 

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Sat, 04/17/2010 - 17:17 | 305974 tip e. canoe
tip e. canoe's picture

tyler's (no) trademark snark seems to be rubbing off nicely.

Sat, 04/17/2010 - 18:28 | 306039 Howard_Beale
Howard_Beale's picture

Oh, Dylan and Tyler have been near equally snarky for some time, athough Tyler will remain Headline of the Year writer for years to come.

Thanks for sharing Dylan. And thanks for posting this Tyler.

Sat, 04/17/2010 - 18:32 | 306042 damage
damage's picture

Howard, please check my comment in response to yours here:

http://www.zerohedge.com/article/goldman-thing#comment-306028

Sat, 04/17/2010 - 19:33 | 306101 Eally Ucked
Eally Ucked's picture

Don't you think Howard that you are kissing everybody too much?

Sat, 04/17/2010 - 22:12 | 306267 Cookie
Cookie's picture

+1

RESPECT Dylan

Sat, 04/17/2010 - 19:30 | 306097 spekulatn
spekulatn's picture

Respectfully disagree. TD, Marla, and Co are in a whole nother level.

Sat, 04/17/2010 - 21:52 | 306242 tip e. canoe
tip e. canoe's picture

but they say that imitation is the sincerest form of flattery

Sat, 04/17/2010 - 20:10 | 305978 velobabe
velobabe's picture

damn your hot‡

 

chinthe called it: IKB Deutsche Industriebank AG German Bank.

 

why do i get junked? mean

Sat, 04/17/2010 - 20:21 | 306141 Pure Evil
Pure Evil's picture

Being junked is the equivalent of having your name printed in the phone book. Remember the movie starring Steve Martin, "The Jerk"?

What we really need is something I saw on another web page that had thumbs up and thumbs down votes.

If you received a specific percentage of more thumbs down than thumbs up you really got junked and your comment was made to disappear. Although there was a link that allowed you to view the junked comment if you wished.

So, buck up my boy you're finally somebody now. Some ineffectual moron actually took the time to take offense to your comment.

ineffectual:

1. not effectual; without satisfactory or decisive effect: an ineffectual remedy. 2. unavailing; futile: His efforts to sell the house were ineffectual. 3. powerless; impotent. (I think this is the proper definition.)
Sat, 04/17/2010 - 22:23 | 306264 velobabe
velobabe's picture

So, buck up my boy

not a boy, am a girl. and a sensitive one, at that†

but thanks for the pep talk.

we definitely need more satisfaction in our lives, especially at this junkture!

Sun, 04/18/2010 - 05:44 | 306469 squid_pro_quo
squid_pro_quo's picture

possible troll: you are not a girl. This is teh Internets, where men are men, women are men, and children are FBI agents.

Sun, 04/18/2010 - 15:46 | 306885 Problem Is
Problem Is's picture

Hilarious...

And FBI agents are surfing pedophile porn to keep corporations free from copyright infringement, truth justice and the Amerikan way!

Actually women are fat balding Russian men after your credit card number to meet the above skinny Ukrainian blond in the picture...

Sat, 04/17/2010 - 17:28 | 305979 Budd Fox
Budd Fox's picture

"These investors also understood that a synthetic CDO transaction necessarily included both a long and short side"

False, utterly false, misleading and a plain lie. This transaction was among the first and few purposely created for someone to take a short side. It is even mentioned in "The Greatest Trade" book....by Paulson's Italian analyst, that was one of the few to see the MBS crash and burning well in advance, and was lamenting than not even through the CDS markets was possible to get to the short side in big sizes. Goldman did this to cash fees BOTH sides...but if the DID NOT, SPECIFICALLY WARNED the counterparty who took the long side that there will even be a short side...THEY HAVE TO BURN IN HELL!!

Jail the bastards....as up in the echelons as you can go!! A CRIMINAL investigation is perfectly warranted!!!

Sat, 04/17/2010 - 17:33 | 305984 rubearish10
rubearish10's picture

Cuomo has to be licking his chops on this one, hey? Wouldn't it be sweet if NY AG swoops in with that criminal charge next week?? Talk about ripe and ready for the KILL!!

Sat, 04/17/2010 - 17:40 | 305993 tip e. canoe
tip e. canoe's picture

"sweet if NY AG swoops in with that criminal charge next week?"

not so sweet for NY residents who will have to live under him as the next governor.

Sat, 04/17/2010 - 17:49 | 306004 rubearish10
rubearish10's picture

Maybe worth it if GS has to liquidate....Hey, I remember Abrams, Lindsay and Koch for the city. That was hell on wheels!

Sat, 04/17/2010 - 18:14 | 306027 tip e. canoe
tip e. canoe's picture

i know amigo, i just have a particular distaste for the new sheriff in town  and who knows, maybe clif high will discover the 'word' that reveals what's really behind Mr. HUD's slimy smile just in time for his inauguration. ;~)

http://www.halfpasthuman.com/theword.html

Sun, 04/18/2010 - 06:00 | 306471 tip e. canoe
tip e. canoe's picture

junk?  perhaps, we'll find out soon enough, won't we?  either way, tell Dandy Andy if he includes cannabis legalization in his platform, he's got my vote (not that i trust him to keep his promise).

Sun, 04/18/2010 - 12:54 | 306703 Alienated Serf
Alienated Serf's picture

fellow squidville resident, you know the city and state prison industrial complex requires large quantities of small time pot dealers/smokers to be profitable.  i'm sure the unions will make sure that never happens.  our state SUCKS.

Sun, 04/18/2010 - 13:35 | 306738 tip e. canoe
tip e. canoe's picture

i know i know serf.  but again, when you're broke, something's gotta give.   speaking of unions, i heard recently from a vendor that the teamsters wanted to charge her $300/hr to work on the weekends at the Javitts at a trade show.    yes that's right, $300 an hour.  wonder how much of that time is spent in a hidden corner takin spliff breaks, cuz most of those guys move as slow as turtles.

Sun, 04/18/2010 - 14:44 | 306801 Alienated Serf
Alienated Serf's picture

oh, no doubt about that.  the javitts center has been a pit of mob/union corruption for years.  lots of investigations, no progress.  of course the teamsters have nothing on the rigging biz, so many bribes and crane collapses. good times.

 

Sun, 04/18/2010 - 15:53 | 306893 Problem Is
Problem Is's picture

"Cuomo has to be licking his chops on this one, hey"

Cuomo already said GS into a microphone three times while clicking his heels together to receive campaign bribes in return for going away...

I think Cuomo has to sit this round out by the "Schmucky Schumer Madoff Campaign Bribe Taking" rule...

it's proper etiquette you know...

Sat, 04/17/2010 - 22:06 | 306255 Carl Spackler
Carl Spackler's picture

Bud, while I agree with you on the pursuit of criminal charges, I believe the initial pursuit of civil charges and the lower burden of proof was a brilliant stroke by the Obama Crime Syndicate. 

 

Get a little thing to stick, and the dam bursts open and becomes uncontainable.

GS has a LOT of enemies on the Street, and what goes around comes around.

 

Checkmate, Lloyd.

Sun, 04/18/2010 - 09:52 | 306538 SteveNYC
SteveNYC's picture

Yes, this is like the moment in a boxing match where you open a small cut on your oponents eyelid. At the moment, the blood is just a trickle, but if you have the guts to get in and out, and the accuracy, along with the will to take out your opponent, you will continue to bang away at that little cut until it becomes a gash.

If the ref does not say "no mas" then you'll surely hit that fucker until the eyelid comes off. We need some predators of this nature to (legally) go after the squid, it's very slightly injured, but the injury if targeted could kill it.

Sun, 04/18/2010 - 13:30 | 306734 tip e. canoe
tip e. canoe's picture

nice analogy steve.

Sat, 04/17/2010 - 17:30 | 305981 rubearish10
rubearish10's picture

Well, if anyone reads these token rebuttals the right way, GS should trade even lower on Monday since GS traded up on these very remarks after the close yesterday.

Sat, 04/17/2010 - 17:36 | 305989 doublethink
doublethink's picture

AP BERLIN — The German government may consider taking legal action in a case in which Goldman Sachs & Co. is accused of defrauding investors, a newspaper reported Saturday.

Read more: http://www.businessinsider.com/now-germany-may-go-after-goldman-sachs-for-duping-one-of-its-banks-2010-4#ixzz0lOTC9Ko0
Sat, 04/17/2010 - 17:37 | 305990 DosZap
DosZap's picture

http://www.reuters.com/article/idUSN1614841320100416?type=marketsNews

 

Unlikely any criminal charges will be brought.

Does this mean we can rob 7-11's?.

Sat, 04/17/2010 - 17:45 | 305999 rubearish10
rubearish10's picture

Based on what....? Actually, I think SEC and Cuomo have this all planned out. SEC first files civil suit as a federal agency "for the people" and Cuomo gets the collar on the criminal side. 

Sat, 04/17/2010 - 22:20 | 306276 tip e. canoe
tip e. canoe's picture

if your hypothesis is correct, then this article on Rick Lazio (Cuomo's potential opponent in the NYLuvGuv race) may help shed some more light on the why it goes down in the way that it does:

http://www.villagevoice.com/2010-04-13/news/rick-lazio-s-fingerprints-ar...

Sun, 04/18/2010 - 20:51 | 307180 rubearish10
rubearish10's picture

This could really get interesting (for lack of a better word), fucking exciting!

Sat, 04/17/2010 - 17:38 | 305992 lawton
lawton's picture

People should be brought up on criminal charges for this and other actions also by the big banks not just GS. Cuomo is the only chance of that happening but I dont think he will quite pull the trigger on anything but Civil charges which is a joke with all that took place.

Sat, 04/17/2010 - 17:46 | 306000 rawsienna
rawsienna's picture

ACA largest shareholder was Bear. The firm was set up to be a patsy for the street. Why would ACA not put Paulson in comp to get the assets at best price? It is because they were being paid to be the streets bitch.  Seems to me if Paulson knew its "deal" was beiing marketed with false reps, they are a party to the fraud?

Sat, 04/17/2010 - 19:07 | 306075 jm
jm's picture

I think some Italian loan-words need to be imported to adequately describe this arrangement. 

Dialect of Sicily, of course.

Sat, 04/17/2010 - 22:26 | 306282 SWRichmond
SWRichmond's picture

Yeah when I saw that ACA Capital was in on this one I laughed my ass off.  As I recall, Bear owned 38% of ACA.

Sat, 04/17/2010 - 23:03 | 306310 Orly
Orly's picture

Of course.  It was all one big circle-jerk.

'Round and 'round it goes.  Where it stops, nobody knows.

Sat, 04/17/2010 - 17:47 | 306002 Unscarred
Unscarred's picture

Tyler, Marla...  Travis...  Bueller...

What happened to the "Zero Hedge Premium" concept?  Don't tell me it got Sached.

Sat, 04/17/2010 - 17:48 | 306003 boooyaaaah
boooyaaaah's picture

As usually happens the small fry --  28 going on 31---- before they are fried usually turn states evidence

And then the whole enchilada

The whole pandoras box

The hole can of worms

Comes un-done

 

Sat, 04/17/2010 - 17:56 | 306009 Mentaliusanything
Mentaliusanything's picture

Is it possible GS could, if proven guilty, lose their Licence to operate as a bucket shop.

Certainly it leaves a large gap in this can of worms for others to peak. Then would come Litigation after litigation until there is little left of the carcass. Certainly AIG and the other insurance patsies will have the first bite and just as certain this was not an isolated case (This is THE Question prosecutors will ask hoping for a yes and then lifting the curtain for the World to see the dirty laundry)   

Then its on to the others, JMP comes to mind.... Yes this fuse is attached to a very big Bunker Buster 

Sat, 04/17/2010 - 17:57 | 306012 Amsterdammer
Amsterdammer's picture

A view from Europe:

 

Liar's statement from Liar's investment bank:

Even CNBC doesn't buy it, they will ne left with

Fox-News and have opened a new funnel for

Wikileaks

Thanks you ZH for covering all the angles on this story, hat tip, I feel as proud as when reading

the Pro-publica seven-months investigation

on the Magnetar Trade.

Very fortunately the mainstream media passed

on  this press-release. It would now be

greatly time that the British FSA started to

investigate GSI London, the Squid's offices

in London, an investigation that should have

been started after the disclosure of the "Titlos"

transaction with Greece, a well-known European

think tamk LEAP-GEAB having hinted that GS had

been also instrumental in helping  another European country

to cook its debts books...

And I have the strong suspricion it is the British debt

which is at stake.Let's see if this gives

Adair Turner and the FSA the balls to start an investigation

that may well wipe out Toryism off the map, in the memory

that the country is "run" by a former Finance minister.

and that, very surprisingly, all U.S ratings agencies

are reserving their review of the rating of the

UK's sovereign debt till after the elections (

unheard of this side of the pond ), while it

it widely blatant that none of the 2 (3) candidates

has the slightest proposal for cutting the

expenses and thus the all-time high deficit

Sat, 04/17/2010 - 23:54 | 306348 A_MacLaren
A_MacLaren's picture

Speaking of E2020 LEAP, Interesting report / forecast that has been put out in the most recent GEAB public announcement.

http://www.europe2020.org/spip.php?article638&lang=en

Global systemic crisis / USA-UK - The explosive duo of the second half of 2010: Summer 2010 - The Bank of England battle / Winter 2010 - The Fed at risk of bankruptcy Public announcement GEAB N°44 (April 16, 2010) 16/04/2010

 

So then, LEAP/E2020 asks two simple questions:

. who will be able/want to help the United Kingdom after the 6th May when its political chaos will inevitably expose the advanced meltdown of all its budget, economic and financial parameters?
. who will be able/want to back the United States once the British fuse has started burning, causing panic in the sovereign debt market in which the United States is, by far, the largest issuer?
Not so different a question that what Sprott asked, and the Cinese MOF have asked. Who has so much money to buy all this debt?
Sat, 04/17/2010 - 18:01 | 306017 M31Capital
M31Capital's picture

They love stressing the sophistication of the people they are ripping off.

Sun, 04/18/2010 - 01:25 | 306414 Temporalist
Temporalist's picture

I completely agree.  And those same people should then be sophisticated enough to realize there is blood in the water and either be greedy and prey on the wounded or want to save their own asses/losses any way possible including throwing anyone under the bus. 

Sat, 04/17/2010 - 18:03 | 306018 non-anon
non-anon's picture

Since 1869, GS has had some time to hone their "skills".

Sat, 04/17/2010 - 18:05 | 306021 Yossarian
Yossarian's picture

I am surprised that ZH is so outraged by this.  I know they want GS blood and so do I, but I don't think this is that damning.  Who cares- is this different than what anyone else was doing?  Did they misrepresent the underlying collateral? Did anyone here know who John Paulson was pre-crisis?  So the counter-party wasn't a natural hedger- did he have the only working Chrystal Ball in the world?  He didn't KNOW anything was going to fail- he took a bet and wanted the highest yielding, most risky assets included in the bet.  Maybe it crosses the bounds of legality but I am not "outraged."  This is merely a smokescreen to distract us from the big issues.  

Sat, 04/17/2010 - 18:49 | 306059 Implicit simplicit
Implicit simplicit's picture

This is all timing. The real issue is obtaning control over this uncontolled cowboy market. The obvious conflict of interest lies with GS policing themselves in a market that should be on an exchange, or not exist at all. Thus the timing of the SEC lawsuit with the Obama anouncemnt of tighter controls over these ungegulated markets will allow this issue to linger on. The lawyers will have a field day. 

Sat, 04/17/2010 - 18:53 | 306061 rawsienna
rawsienna's picture

the fraud was in the presentation - claiming the assets were selected by a "indpendent" CDO manager.

Sat, 04/17/2010 - 19:42 | 306106 Fish Gone Bad
Fish Gone Bad's picture

This might just turn into a tobacco-type of circus with everyone piling on.  The tobacco companies knew they were making a product that hurt people.  There was all kinds of evidence, memos, and company research.  Now substitute MBS for tobacco.  This could end up being a real political windfall.  States could collect damages against the fraudsters, and everyone (historically) will be able to point a finger at the "bad guys" who caused the greatest financial disaster ever.

Sat, 04/17/2010 - 20:54 | 306182 The Merchant of...
The Merchant of Venice's picture

What is the big issue?

It's too late for GS to fail.  With bank holding status they can kill the whole system.  They'll get slapped on the wrist.  They'll take a monster fine.  Some will lose their licenses.  GS will live on.

Bernanke and Geithner need to go to jail.  First objective is to get them out of the President's protectorate.

What is the quickest route to making Bernanke and Geithner public citizens again?  In their current seats no prosecutor can touch them.

Sat, 04/17/2010 - 23:40 | 306338 Double down
Double down's picture

"Stupidity" trumps reason at the damnedest of times.

Sun, 04/18/2010 - 00:24 | 306370 A_MacLaren
A_MacLaren's picture

Perhaps Timmy crossing the line in the FRBNY/AIG transaction?

And do not the FedResBrdGov oversee the FRBNY?

Presentation By David Yerushalmi Suing The Fed On Grounds AIG Takeover Was Illegal Money Laundering Scheme

http://www.zerohedge.com/article/presentation-david-yerushalmi-suing-fed...

 

 

Sun, 04/18/2010 - 08:21 | 306493 Ned Zeppelin
Ned Zeppelin's picture

Yossarian: all of what you say would be true had Goldman disclosed it to the purchasers of ABACUS.

Read the complaint and you just might be outraged.

Sat, 04/17/2010 - 18:32 | 306034 Nihilarian
Nihilarian's picture

Funny because this is a drop in the bucket compared to the BaC/Merrill debacle. Did any heads roll over BaC? Will any over this? I hope so, but breath holding will not be partaken by moi. Blowing up clients has been the rule, not the exception. I believe Liar's Poker, Monkey Business, and many other insiders have accounted these types of activities as business as usual with investment banks.

Sat, 04/17/2010 - 18:55 | 306063 rawsienna
rawsienna's picture

Actually, the accounting fraud surrounding MER Q2 2007 earnings should be investigated.  As indicated by the Goldman case, CDO market was falling apart in the 1st quarter of 07 yet MER had its 40bb or so CDO marked at around 99c (were trading around 80-85 at the time) and reported record profit.  Much worse than the GOldman Fraud

Sun, 04/18/2010 - 06:21 | 306475 A Man without Q...
A Man without Qualities's picture

The ML bonus scandal defies belief.  Not only did they award these bonuses based on blatantly wrong valuations, but they actually accelerated them, so they were paid in December, not January, so to beat the deadline.  Add to that, something like 60% of the pool was split between the top 700, the very people who most likely knew it was all about to collapse. 

http://broadcatching.wordpress.com/2009/02/12/merrill-lynch-made-700-peo...

Sat, 04/17/2010 - 18:37 | 306046 non-anon
non-anon's picture

I believe the biggest crime against the US Citizen is the FEDRES and the funny money they "compel" us to use and have deceived the un-educated, on purpose, for generations to keep their fraud on this Republic in play!

Sat, 04/17/2010 - 18:41 | 306051 P-K4
P-K4's picture

Shades of Joseph Jett, Batman !  GS has too many low friends in high places for this to break the Teflon shields. Like FNM & FRE, the Friends of Angelo will come to the rescue. If they could only jail one person in the Madoff scheme, proportionately this may get two. OTOH, if they're not careful here, they could send a message to the masses that "investing" really means taking the little guy's /pension fund / 401K / etc.  money,  to help pay the taxes for the super rich.

 

Sat, 04/17/2010 - 19:01 | 306070 faustian bargain
faustian bargain's picture

What are the chances that GS really takes a big hit for this? Given their connections to the Fed, the Treasury, and the White House, it doesn't seem likely. Has the SEC gone rogue, or is this a ploy to defuse public outrage? The latter seems more likely, although it does seem like a risky play if GS is instigating it.

In my dreams, the corrosive connections between GS (and the other big banks) and the Fed/Treasury will be laid bare for all to see, and the government - Federal Reserve especially - will finally be implicated as the architect for the economic collapse we're experiencing.

It's clear to me that our own federal government has gone rogue from its charter and is working counter to the rights and liberties of the citizens. It would be wonderful to presume that the SEC is not part of that miscreance (apologies to MsCreant), but I don't have any reason not to be skeptical.

I feel that muckraking sites such as ZH (especially ZH) represent our only hope.

Sat, 04/17/2010 - 19:54 | 306117 Fish Gone Bad
Fish Gone Bad's picture

You are probably correct in that Goldman will skate in the US.  However, they did not just piss the US's punchbowl, they pissed in quite a few other countries punchbowls as well, countries that had to bail out their banks.  Remember in Jurrasic Park when the little dinosaurs (compies) were biting that guy?  Eventually the compies killed him.  Perhaps enough entities will want some form of pay back that Goldman will end up getting a real beating. 

Sat, 04/17/2010 - 19:27 | 306092 kwvrad
kwvrad's picture

We are witnessing the "CLASH OF THE TITANS " , theres a struggle here for who gets to run the world amongst TPTB , they took it this far together but their alliance seems to have come apart.. hence they are fighting amongst themselves to be the LEADER..

at least thats how I'm seeing the "BIG PICTURE", trouble is we are the ones getting trampled in the process.

 

Sat, 04/17/2010 - 19:57 | 306119 sushi
sushi's picture

In six months Turbo Timmy will be holding Congress to ransom for 6 gadzillion whorebucks. If they don't immediately pay up the GS carcass will suffer a complete melt down and drag what is left of western capitalism along with it.

There is a plan here, it is deep, and once I find the other side of the action I'm taking it.

Sat, 04/17/2010 - 19:58 | 306121 Tripps
Tripps's picture

you guys are ALL nuts. SEC has no case! neither do any one who has done business with GS. i hate GS's tactics too but you guys are way off in this. Lawyers signed off on goldman deals from BOTH SIDES. All sides have billions in funds and research. Personally, I am TIRED of ANYONE thinking they deserve a bailout right now. SUBPRIME losses is a 3 year old story. yup, 3 years. You're dumping GS stock over OLD OLD NEWS. these cocksuckers have no case against GS beyond normal wall st behaviour. They were the ones that went long SUBPRIME LOANS at the peak of the market.....F them. and even GS had exposure long as part of the deal. MAN UP and stop using GS as a whipping boy because the SEC is the greatest scam of all time itself! they allowed Alan Stanford to contoinue a ponzi scheme after KNOWING about it in 1997

 

i don't want to DEFEND GS but I have to aftering seeing the VENOM spread all over messsage boards this weekend

 

 

Sat, 04/17/2010 - 20:27 | 306147 banksterhater
banksterhater's picture

And since Madoff was at Nasdaq, apparently every trader on the floor knew

it was a Ponzi, and kept their mouth shut. Wow, they protect their clan.

Sun, 04/18/2010 - 08:23 | 306495 Ned Zeppelin
Ned Zeppelin's picture

You are a Goldman apologist.  Argue from the facts. and F Goldman.

Sat, 04/17/2010 - 20:44 | 306170 banksterhater
banksterhater's picture

This from:    http://seminal.firedoglake.com/diary/41645

In seven of Goldman’s Abacus deals, the bank went to the American International Group for insurance on the bonds. Those deals have led to billions of dollars in losses at A.I.G., which received a $180 billion taxpayer rescue. The Abacus deal in the S.E.C. complaint was not one of them.

That deal was managed by ACA Management, a part of ACA Capital Holdings, which changed its name in 2008 to Manifold Capital.

So, shouldn’t we be asking whether AIG was used in the same way that ACA Management was used? Were the Credit Default Swaps for which AIG was on the hook — and which taxpayers would eventually pay off at 100 percent — also influenced by Goldman directly or through John Paulson or other hedge funds intending to create investments that, while sanctioned by AIG, were bound to fail and make the secret creators rich?

Sat, 04/17/2010 - 21:02 | 306190 The Merchant of...
The Merchant of Venice's picture

Get ready for the "state secrets" option.  Dressing the GS wounds is too risky.  Geithner and Bernanke's extraordinary, and likely illegal, transfers to own AIG put the story in the Fed's vault.

GS is going to pay a massive fine to make this story go away.  They'll play up their defense, but they know they're going to pay.

Sun, 04/18/2010 - 08:27 | 306497 Ned Zeppelin
Ned Zeppelin's picture

The answer is yes.  The question is whether any laws were broken in that scenario. Maybe, maybe not.  But in this instance they used the issuance of securities to fund a deal for which GS was paid handsomely, and, if you read the complaint, at several junctures they made sure not to disclose key information to understanding how the reference securities were chosen and the genesis of the deal (Paulson's hand selected basket of reference MBSs). The information was material, and it was intentionally withheld. The reason? Arrogance, greed, ego, and no fear of the consequences of fraudulent behavior. 

Sat, 04/17/2010 - 21:16 | 306201 Grand Supercycle
Grand Supercycle's picture

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

Sat, 04/17/2010 - 23:24 | 306327 Orly
Orly's picture

SPX bounces off of 1176 and rebounds to 1228.

That will be the top of this current market.

Sat, 04/17/2010 - 21:43 | 306229 zeroman
zeroman's picture

unfortunately, the boys at gs are pretty damn sharp and my just weasel out with minimal damage.  i hope not.

Sat, 04/17/2010 - 22:01 | 306245 chindit13
chindit13's picture

A few points.

The case may be a battle between the legality of Goldman's Disclaimer vs. the failure to accurately note who chose the portfolio for the synthetic.  The pitchbook devotes several pages to championing ACA and its utilization of "proprietary models to stress and confirm the adequacy of cash flows", when in fact the CDO elements were (allegedly) selected by Paulson/Pellegrini using bonds PP had already decided were dogmeat (and which they were probably already owners of CDS' against, and which gave PP a chance to get paid multiple times for the same failure/default).  Does this obviate or render irrelevant the Disclaimer? (which said in non-legalese terms that Goldman may know material information related to the instrument that would make your hair stand on end, but we feel no fiduciary responsibility to tell you, sucker).

Second, this may open a can of worms where regulators/legislators will then examine the entire process of how the system can be, and is, gamed.  For example, funds purchased pieces of Chrysler debt, then loaded up on CDS, far in excess of their bond position, that allowed them a say in forcing a "default event" that would make their CDS' pay off.  While perhaps legal, we have to decide if we want such opportunities to exist, even if they are the bread and butter of the IB's/Hedge Funds.

Third, if in fact Goldman laid off its risk via CDS written by AIG on this exact transaction, is that material information which should have been disclosed to IKB and ABN Amro, especially if the CDS purchase was planned or even executed concurrent with the deal?  Incidentally, the carcass of IKB is now owned by John Grayken's Lone Star Funds.  I would not want to give that man any opening to come at me, though he may have one against Goldman.

Contrary to many commenters on this issue, and despite a pathological cynicism, I think Goldman is in a heap of trouble here.  They are going to have to justify their "business model" to regulators and the judiciary (i.e., using their customer base for front running and playing the fool).  They are also going to lose customers, which will impact their ability to use their "business model".  They are probably going to lose key staff, too, who may fear their nest eggs going the way of former LEH and BSC staff.

What is the size of political contributions that can quiet the drums of vengeance in this election year?

Oh, and to Dylan Ratigan:  thanks for making a good career choice.  You have become more of a public servant than our public servants.

Sat, 04/17/2010 - 23:37 | 306335 Orly
Orly's picture

Excellent points above.  Thank you for that.

I would contend that it is not the "business model" as you presume that should be studied for criminality.  The terms there are too vague, as you point out; all legalese.

I would say that such obfuscation was the "business model" and everone who had a hand in it was looking the other way.  It is almost like that scene in Trading Places, where all the members of the club were asked to look to their left and put their right hand in the pocket of the man next to him.  Instead of doping a marked benny on some stooge, these methods and techniques- the "business model," if you will- allowed them all plausible deniablity to their machinations.

Nobody really saw anyting or did anything completely out of the ordiniary. Everyone reached into the other's pocket and pulled out a bone.  No harm, no foul.  The government was doing it with JPMorgan/Chase, they were doing it with Merrill, who was doing it with CountryWide, who was doing it with everybody at the behest of the government.  (See Greenspan saying that low-fi mortgages were the bomb...)

If you're going to question business methods, I am afraid that this one won't stop until Paulson's third grade teacher is indictd for conspiracy to defraud.

Does anyone really expect that to happen?

Sun, 04/18/2010 - 00:05 | 306357 FischerBlack
FischerBlack's picture

Mark my words: This will settle with Goldman neither confirming nor denying the charges. What they did was perverse and it will have lasting effects on their reputation. But, as to legality, it just doesn't seem they were acting as fiduciary in this transaction. And the buyers should have known that the rules are quite a bit different when you're not wearing your fiduciary hat.   

Sun, 04/18/2010 - 08:30 | 306499 Ned Zeppelin
Ned Zeppelin's picture

Well said Chindit. This certainly has the potential to be the first rock falling in what becomes an avalanche for GS.  

Sat, 04/17/2010 - 23:48 | 306345 FischerBlack
FischerBlack's picture

Never, ever, ever buy anything Goldman Sachs is willing to sell you. Seriously. There is no better advice an investor can take to heart. If what they're selling is any good, it won't be offered to you. It will go into one or more of their private funds.

The problem is, these forked-tongued Goldman scumbags are consummate salespeople.

Sun, 04/18/2010 - 05:26 | 306465 Rick64
Rick64's picture

I am wondering how the SEC is already bringing a case against GS when in the past they have purposely missed Madoff, Stanford, and a number of other big scams. Whats the game? I mean this is the agency that wouldn't bring a case against Madoff when it was handed to them at least twice. Is this just a spanking for public appeasment or a preplanned takedown for transferring GS wealth elsewhere.

Sun, 04/18/2010 - 07:17 | 306480 HEHEHE
HEHEHE's picture

Yes.  He did all this with no supervision.  Of course it was a one of a kind instance.  This young man obviously went rogue.  There's no way your typical Goldman employee would engage in such behavior.  Of course he was promoted to Executive Director, but I am sure there's other reasons for that move.

Sun, 04/18/2010 - 08:40 | 306501 kujiranoai
kujiranoai's picture

When you read about Goldman Sachs saying that everything they were doing was legal and they only think about their clients you should remember that the Goldman Sachs organization itself show traits of the very troubling mental illness of psychopathy, as defined clinically in the Hare Psychopathy Checklist-revised used in hospitals around the country (and reproduced in full with a background to the clinical diagnosis on Wikipedia).

The Hare Psychopathy Checklist revised includes the some of the following diagnostic traits for psychopathy:Lack of empathy (e.g. for the unemployed and dispossessed American people when Goldman Sachs pay themselves billions in bonuses taken out of the same peoples retirement fund), failure to take responsibility for own actions (e.g, creating and selling toxic securities to the point the financial system is destroyed and then saying it was completely legal), cunning, manipulative (selling complex swaps to hide debt to Greece), grandiose sense of self worth (doing Gods work).

Remembering the Goldman Sachs is a psychopathic organisation under the above clinical definition will greatly help you put their press statements in context and understand their motivations in the current case launched by the SEC.

Sun, 04/18/2010 - 10:25 | 306560 hooligan2009
hooligan2009's picture

Don't forget that Paulson handpicked the securities that ACA then stress tested. With Bear Sterns owning 38% of ACA, we should ask which Bear Sterns employees currently employed by JPM are still employed. If this Abacus deal was exceptional then GS can expect to pay a "no admission of guilt" fine of around what $25 billion? $25 million? $2.5 million?

Every player is an adult, caveat emptor must remain intact, but what also must pass is that simply putting in 25 pages of disclaimers does not abrogate fiduciary resposnibility, or more importantly to me at any rate, the principal of not cheating to make money.

If a crook sends me a disclaimer through the mail saying he might steal from my house and then he steals something from my house, he/she is still a thief and should go to jail. Similarly, a fence who is included in the disclaimer is still fencing stolen goods taken from my house, so Paulson or GS may have to answer this point too.

If this is allowed to stand then we know who the fifth columnists are. Who was it who said "All property is theft"?

Sun, 04/18/2010 - 11:16 | 306592 tom a taxpayer
tom a taxpayer's picture

Dylan unleashed!

Dylan you are a pent-up volcano that can blow the lid off Wall Street crimes.

Go Dylan!

Sun, 04/18/2010 - 11:18 | 306595 Madcow
Madcow's picture

Singling out GS is absurd.

Enron, AIG, FNM, JPM, the IRS, and all the rest of it ... is ONE GIANT MATHEMATICAL IMPOSSIBILITY protected by lies, deceit, political intervention, and intellectual delusion.

 

Sun, 04/18/2010 - 17:57 | 307035 Ned Zeppelin
Ned Zeppelin's picture

http://www.businessinsider.com/henry-blodget-wow-is-this-why-the-sec-announced-the-goldman-fraud-charges-friday-morning-2010-4

wow boldget working hard to get someone to look the other way, although this does sound like another perfectly good example of SEC incompetence. . . is that supposd to be big news? . . . still, even it were timed that way, it doesn't mean the GS suit is not perfectly valid.

Did Henry formerly work for the Squid or something? Man, he's rowing with both oars, with Cramer and Burnett on the same crew team.

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