Guest Post: Goldman's Blueprint For Dumping Toxic Assets: How These CDOs Were Designed To Fail

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Sun, 04/18/2010 - 21:04 | 307193 anynonmous
anynonmous's picture

"Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a 'bet against our clients.'"

 

No, Honest, we weren't betting against out clients... we weren't betting against anyone.. we never bet

Sun, 04/18/2010 - 21:07 | 307200 bad craziness
bad craziness's picture

Fried squid (fried calamari, calamari) is a dish in Mediterranean cuisine. It consists of batter-coated, deep fried squid, fried for less than two minutes to prevent toughness. It is served plain, with salt and lemon on the side.

I'm hungry for calamari.

Sun, 04/18/2010 - 21:20 | 307207 anynonmous
anynonmous's picture

Two good links on the AirTravel Volcano situation

 

http://www.eurocontrol.int/corporate/public/subsite_homepage/index.html

 

and their Twitter feed (which ironically is down)

http://twitter.com/eurocontrol

 

Twitter blackout until 09.00 CET 19APR thanks for following + details at https://www.cfmu.eurocontrol.int/PUBPORTAL/gateway/spec/index.html # having a bug with our website so complete press update not live yet - but most of it was posted here about 4 hours ago via web

Sun, 04/18/2010 - 21:29 | 307214 putbuyer
putbuyer's picture

Great job putting this together. Well written too

Sun, 04/18/2010 - 23:32 | 307330 Amish Hacker
Amish Hacker's picture

I'll second that. It reads like one of those mystery stories where you already know who dunnit, but now you find out, to your horror, that it was with the candlestick in the library. I'm not sure I'll be able to sleep tonight after reading that.

Sun, 04/18/2010 - 21:34 | 307216 DollrZar
DollrZar's picture

I heart goldman sachs

Sun, 04/18/2010 - 22:00 | 307235 three chord sloth
three chord sloth's picture

I heart red-hot pokers up my ass.

Sun, 04/18/2010 - 22:12 | 307248 Pure Evil
Pure Evil's picture

Ok, I think you're looking for the Huffington Post.

Sun, 04/18/2010 - 22:16 | 307252 three chord sloth
three chord sloth's picture

Nah... there's a limit to what even I can bear...

Sun, 04/18/2010 - 22:02 | 307237 Pure Evil
Pure Evil's picture

You definitely have to give GS a AAA rating for ingenuity on how to fleece its clients.

Sun, 04/18/2010 - 21:40 | 307219 parallaxview
parallaxview's picture

unbelievable. well done.

Sun, 04/18/2010 - 21:48 | 307225 Jack H Barnes
Jack H Barnes's picture

Thanks for spending the time to write that and sharing it here. 

Here is too some deep fried Calimari in the coming days...

Life is a deep fryer, Karma is the oil...

Sun, 04/18/2010 - 21:56 | 307231 SayTabserb
SayTabserb's picture

Tony Soprano:  Black leather jacket.

Lloyd Blankfein: YSL chalk stripe suit.

Tony:  Open collar.

Blanfein:  Hermes necktie.

Tony:  Territory, Jersey.

Lloyd:  Lower Manhattan.

Tony:  Bribery & Extortion.

Lloyd:  Fraud & deception.

Tony:  Harassed by feds.

Lloyd:  Owns the feds.

 

Mon, 04/19/2010 - 10:52 | 307969 Lux Fiat
Lux Fiat's picture

The footage on Bloomberg of Blankfein walking down the street with a trenchcoat and baseball cap on - his attire was eerily reminiscent of the attire worn by Madoff when he was unsuccessfully trying to dodge the press after the news of his fraud broke.  No swarms of press around Blankfein - yet.

Sun, 04/18/2010 - 22:02 | 307234 JW n FL
JW n FL's picture

Is it only me or does this Fraud... that is in the multiples of $100's of millions... and in Multiples of deals which I can safely assume add up to multiples of Billions... sound a little more like a criminal case than a civil case?

 

I sold someone a Bomb... that I built... so that the Bomb could be re-sold, by a fellow bomb maker... and then insured that the bomb would go off after I sold it, to a reseller who also insured the bomb yet again to go off.

 

A.I.G. the insurance company for Bomb makers everywhere... Thank God (or Goldman) that A.I.G. did not care about insuring Bombs... and why would A.I.G. care what they insure? they made their quarterly bonuses and chapter 7 -11... is a shareholder issue... dumb shareholders. I mean tax payers... I mean both! but lucky us all, we now own all this and more trash, we... the tax payers own everything that didn’t make money. Why would Goldman write down losses when they can dump the non-winners into the tax payer par window? No wonder profits are up and no monies where put aside for settlement(s)... they are doing God's work.. why would they need to build a war chest to pay out for the known Fraud(s) committed.

 

Criminal or Civil? I really feel very strongly about Goldman being a Criminal ongoing enterprise with the support of a very well financed lobby (thru tax payer dollars) and thusly the everlasting support of the American Tax Payer!

 

Lobbying

Goldman Sachs


Client Profile: Summary, 2007
Major Political Contributor

Top of Form

 
Bottom of Form

Issues

Issue

Specific Issues

No. of Reports*

Energy & Nuclear Power

11

12

Banking

10

11

Taxes

8

9

Finance

7

8

Trade

4

4

Retirement

3

3

Copyright, Patent & Trademark

3

3

Fed Budget & Appropriations

2

2

Insurance

2

2

Government Issues

2

2

Immigration

1

1

Transportation

1

1

Agriculture

1

1

Gaming, Gambling & Casinos

1

1

Environment & Superfund

1

1

 

Lobbying

Goldman Sachs


Client Profile: Summary, 2008
Major Political Contributor

Top of Form

https://opensecrets.org/lobby/clientissues.php?year=2008&lname=Goldman+Sachs&id=

 


The Banks are using profits to pay for their Lobby? not the 0% Fed Window?

http://www.wired.com/threatlevel/2009/08/bank-lobbyists/


**** "In the first three months of 2009, the financial sector spent $104.7 million to lobby Congress and the administration, down 8% from the same period last year" ****

http://online.wsj.com/article/SB124640640747376775.html

So that I am clear... 2008 was a vintage year for Banks? they made soooooooooooooooooooooo much money on 2008 that in the first 3 months of 2009... they could drop $104.7 MILLION DOLLARS?

http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

 

Is it legal for Goldman (and others) to use Tax Payer Bailout Dollars to Lobby? with against the same Tax Payers that Bailed them out?

Sun, 04/18/2010 - 22:25 | 307260 Alienated Serf
Alienated Serf's picture

fwiw, the criminal conviction standard (beyond a shadow of a doubt) is MUCH harder to prove then civil (preponderance of th evidence).  the feds NEVER go criminal unless they know thye can win.  they have a 95% conviction rate...  hopefully enough info comes out to upgrade to criminal. 

Sun, 04/18/2010 - 22:03 | 307242 JW n FL
JW n FL's picture

William... you are brilliant and the art work over on your site makes me cry laughing... keep up the Great / Fantastic Work!

Thank You! William!

Sincerely, JW

Sun, 04/18/2010 - 22:09 | 307244 JW n FL
JW n FL's picture

Here are our Tax Dollars hard at work...

 

Report Content of Specific Issue field

H. R. 1424, Emergency Economic Stabilization Act of 2008.

 

 

H.R. 3221, Foreclosure Prevention Act of 2008, all sections; credit default swaps clearing; covered bonds; bond market liquidity; credit rating agencies; sovereign wealth funds; general economic conditions; P.L. 110-227, Ensuring Continued Access to Student Loans Act of 2008, all sections; H.R. 5914, Student Loan Access Act of 2008, all sections; active financing; investment banking issues; over-the-counter derivatives; S. 1356, Industrial Bank Holding Company Act of 2007, all sections; rules on specialists; financial reform.

 

 

Regulation of U.S. securities markets, including market structure and exchange-traded funds. Securitization of mortgages, including H.R.3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007," S.2452, the "Home Ownership Preservation and Protection Act of 2007," and HR 3221, the "American Housing Rescue and Foreclosure Prevention Act of 2008." Financial system stability and liquidity, including HR 1424, the "Emergency Economic Stabilization Act of 2008."

 

 

Regulation of U.S. securities markets, including market structure and exchange-traded funds. Securitization of mortgages, including H.R.3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007," S.2452, the "Home Ownership Preservation and Protection Act of 2007," and HR 3221, the "American Housing Rescue and Foreclosure Prevention Act of 2008."

 

 

Regulation of U.S. securities markets, including market structure and exchange-traded funds. Securitization of mortgages, including H.R.3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007" and S.2452, the "Home Ownership Preservation and Protection Act of 2007."

 

 

H. R. 3997/H.R. 1424, Emergency Economic Stabilization Act of 2008.

 

 

H.R. 3221, Foreclosure Prevention Act of 2008, all sections; sovereign wealth funds; general economic conditions; P.L. 110-227, Ensuring Continued Access to Student Loans Act of 2008, all sections; H.R. 5914, Student Loan Access Act of 2008, all sections; S. 1356, Industrial Bank Holding Company Act of 2007, all sections; financial reform; H.R. 1424, Emergency Economic Stabalization Act, all sections; US-Australia Mutual Recognition Agreement.

 

 

Regulation of U.S. securities markets, including market structure and exchange-traded funds. Securitization of mortgages, including H.R.3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007," S.2452, the "Home Ownership Preservation and Protection Act of 2007," and HR 3221, the "American Housing Rescue and Foreclosure Prevention Act of 2008." Financial system stability and liquidity, including HR 1424, the "Emergency Economic Stabilization Act of 2008."

 

 

Financial services legislation

 

 

H.R. 3221, Foreclosure Prevention Act of 2008, all sections; sovereign wealth funds; general economic conditions; P.L. 110-227, Ensuring Continued Access to Student Loans Act of 2008, all sections; H.R. 5914, Student Loan Access Act of 2008, all sections; S. 1356, Industrial Bank Holding Company Act of 2007, all sections; financial reform; H.R. 1424, Emergency Economic Stabalization Act, all sections; US-Australia Mutual Recognition Agreement.

 

 

Financial services legislation

 

 

Financial services legislation

 

 

CFTC oversight - Congressional review of this issue. Credit swaps - Congressional review of this issue; Executive Branch action concerning this issue. Auto bailout - HR 7005, Alternative Minimum Tax Relief Act of 2008; HR 7321, Auto Industry Financing and Restructuring Act; Executive Branch action concerning this issue. Financial economic package - HR 1424, To provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy.

 

 

CFTC fees provision - HCon Res 312, Concurrent resolution on the budget for fiscal year 2009; SCon Res 70, Setting forth the congressional budget for the United States Government for fiscal year 2009.

 

 

Financial economic package - HR 3997, Heroes Earnings Assistance and Relief Tax Act of 2007; HR 1424, To amend section 712 of the Employee Retirement Income Security Act of 1974, section 2705 of the Public Health Service Act, section 9812 of the Internal Revenue Code of 1986.

 

 

Commodity Exchange Act - HR 2419, Farm Bill Extension Act of 2007; HR 6124, Food, Conservation, and Energy Act of 2008. Investment bank proposals - Executive Branch actions re this issue.

 

 

Financial services legislation

 

 

H.R. 698, Industrial Bank Holding Company Act of 2007, all sections; S. 1356, Industrial Bank Holding Company Act of 2007, all sections; exchange traded notes; covered bonds; credit markets; market structure; credit rating agencies; sovereign wealth funds; auction rate securities; S. 1926, National Infrastructure Bank Act of 2007, all sections; H.R. 3896, National Infrastructure Development Act of 2007, all sections; securities law issues; rules on specialists.

 

 

TARP

 

I guess you could say that these pushes by Goldman could be seen as a much broader market manipulation?

Sun, 04/18/2010 - 22:16 | 307251 jg
jg's picture

Great job laying this out, guys.

Seems incriminating to me, that the collateral was worth 70% on day one, while it was sold at par.

SEC:  fry 'em.

Sun, 04/18/2010 - 22:21 | 307256 SayTabserb
SayTabserb's picture

The SEC is a good start. But as JW asks up above, isn't this a RICO rap?  Does Obama have a Department of Justice? An Attorney General? If so, do they ever do anything at all?

Sun, 04/18/2010 - 22:21 | 307258 chindit13
chindit13's picture

Some people are born to be customers.

While perhaps legal, all of this is of questionable morality.  Or maybe it's not.

In the WS pecking order, there are the big HF's and the big IB's, and then there's everyone else.  The Ratings Agencies and Monolines exist merely to allow the top level of the pecking order to legally abuse those for whom the top tier has nothing but contempt.

Making things as convoluted as possible, bullying the ratings agencies, and stuffing the system with more deals than it has the time to address properly reduces "bets" to pretty much sure things.

The system allows it.  Do we want it to continue or not?

Sun, 04/18/2010 - 22:23 | 307259 Implicit simplicit
Implicit simplicit's picture

 The sec must have thought this through very thoroughly and ran the possible counter arguments that gs will use. They probably have some communicated indictment of guilt that is irrefutable as the law is stated or prescidented.  

Paulson and the rating agency need to be indicted also. The whole system is so corrupt.

Sun, 04/18/2010 - 22:30 | 307268 Ned Zeppelin
Ned Zeppelin's picture

It is long past time for the prosecutors.  I'm long rope, tall trees and lamp posts.

Sun, 04/18/2010 - 23:16 | 307314 kennard
kennard's picture

Caveat emptor for all of this.

The cause of the crisis was politically-motivated bad lending practises. The rest was just people being people.

Mon, 04/19/2010 - 09:38 | 307707 IE
IE's picture

If you mean encouraging undeserved access to credit and pumping markets with overly low interest rates by whichever party has been in power, in order to sustain the ponzi - then I totally agree with you.

If you're meaining that this all falls on Barney Frank & the Dems only - then you're wrong.

Sun, 04/18/2010 - 23:23 | 307319 Madhouse
Madhouse's picture

Hi quality post. Thank you.

TO GS: Not hoping you go out of biz but give us the AIG $12 billion back. That was your counterparty risk, not my kids bill. And put a leash on your people. AIG, Greece, now Paulsen, ..the list is disgustingy long..

Mon, 04/19/2010 - 00:41 | 307343 hamurobby
hamurobby's picture


 

Some minor observations while zipping through the document, which  by the way, was waaay over my head.

This would have worried me a bit.


THE NOTES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED

STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.

FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR

DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE

CONTRARY IS A CRIMINAL OFFENSE.

 

 

This too, considering they were being issued in the Caymans, not in the US. (in other words, you can issue them from here, but not to anyone who lives here?)


____________________

No invitation may be made to the public in the Cayman Islands to subscribe for the Notes.

____________________


 

 

This first sentence here on page 37 ( I think ) would have had me a bit worried, but maybe I am reading it wrong. I really have no interest in bonds, but these seem pretty risky to me by the nature of the wording. I know greed is blinding, but when its MY money, I would at least get a second opinion?  I need a lawyer to esplain all this to me, or, does anyone have the english version for the layman? :-) 

 

          CDS Transactions generally have

probability of default, recovery upon default and expected loss characteristics, which are closely correlated to the

corresponding Reference Obligation, but may have different maturity dates, coupons, payment dates or other non

credit characteristics than the corresponding Reference Obligation. In addition to the credit risks associated with

holding the Reference Obligation, with respect to CDS Transactions, the Issuer will usually have a contractual

relationship only with the related Credit Protection Buyer, and not with the Reference Obligor of the Reference

Obligation. Due to the fact that a CDS Transaction may be illiquid or may not be terminable on demand (or

terminable on demand only upon payment of a substantial fee by the Issuer), the Issuer’s ability to dispose of a CDS

Transaction, if circumstances arise permitting such disposal, may be limited. Any settlement payments and

termination payments payable by the Issuer (net of any termination payments owing by the Credit Protection Buyer)

to the Credit Protection Buyer will reduce the amount available to pay the Holders of the Income Notes and the

Secured Notes in inverse order of seniority. The Issuer generally will have no right to directly enforce compliance

by the Reference Obligor with the terms of the Reference Obligation nor any rights of set off against the Reference

Obligor, nor have any voting rights with respect to the Reference Obligation. The Issuer will not directly benefit

from the collateral supporting the Reference Obligation and will not have the benefit of the remedies that would

normally be available to a holder of such Reference Obligation.

 

I guess I would think that in 07 that mostly AAA and aaa investments wouldnt be a bad thing to insure, considering the money being made in real estate at the time, I would believe that, coupled with GS having skin in the game and that GS makes lots of money,  that I could overlook the scary launguage in the document. Yep GS is shiot, but dam, I would have been a little skeptical,...maybe, hindsight is 20-20.

 

 

 

Mon, 04/19/2010 - 00:08 | 307365 andy55
andy55's picture

A skillfully crafted writeup! Amazing work!!

Mon, 04/19/2010 - 06:52 | 307501 exportbank
exportbank's picture

In the struggle between Yield and Morality - Yield always wins. 

Mon, 04/19/2010 - 14:37 | 308317 jules from aus
jules from aus's picture

so... just a few politicians will have to start some serious reflection into this whole GS house of cards that is slowly but surely coming apart

those politicians will need to search their church manufactured souls as to whether they get in behind the populous rage against GS and "it's fraud, stupid" and start assisting with the momentum game for pushing this GS pile of shit through every investigation and court room in the land

for many a politician i think their relfections will go something like this"

"I wouldn't mind so much, except I never got a penny out of everything they did, so they can be damned..."

so keep an eye on which politicians have had a history of their pockets being lined and those that haven't - the latter will get in with the rage first - the former will be the last to jump, and only after they are pretty certain their well has run dry with GS

 

good luck

Mon, 04/19/2010 - 14:45 | 308337 jules from aus
jules from aus's picture

as the the Ratings Agencies...

i'm personally sick and tired of hearing them represented as being manipulated by the big banks

as professional organisations they had duties and responsibilities to just be damn honest - to tell the truth

this whole 'oh, there was so much pressure being placed on us by the banks' is a load of horse crap

the more the banks needed stuff rated, the more fees the RAs earnt, and the bigger the bonuses to senior management of those RAs

quite simply the RAs started to cut so many corners they created holes to simply dump this toxic crap immediately through as soon as it appeared on their doorsteps

in the process they became unreliable to point of being criminally negligent - and it's that simple

their complicity then should be seen as accessories to ongoing money laundering and fraud

how much simpler does anyone need to say it?

 

good luck

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