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Matt Taibbi Hyperbole vs. Goldman Sachs Reality
- Asset-Backed Securities
- Bear Stearns
- Bond
- CDO
- Collateralized Debt Obligations
- Comptroller of the Currency
- Countrywide
- CRAP
- Federal Deposit Insurance Corporation
- goldman sachs
- Goldman Sachs
- Housing Market
- Lehman
- Lehman Brothers
- Matt Taibbi
- Meltdown
- Mortgage Backed Securities
- Office of the Comptroller of the Currency
- Rating Agencies
- Real estate
- Reality
- Washington Mutual
This is from Stone Street Advisors
Matt Taibbi's latest Rolling Stone article “The People vs. Goldman Sachs”
claims, in clever and entertaining prose, that Goldman execs should go
to jail because they: 1) participated in “the most destructive crime
spree in our history…”, 2) sold crappy CDOs to unwary clients, and 3)
lied to congress. I'd like to take this opportunity to add a little bit of what I like to call "reason" to the disucssion.
claims, in clever and entertaining prose, that Goldman execs should go
to jail because they: 1) participated in “the most destructive crime
spree in our history…”, 2) sold crappy CDOs to unwary clients, and 3)
lied to congress. I'd like to take this opportunity to add a little bit of what I like to call "reason" to the disucssion.
Lying to Congress
Let’s
start with simplest charge: Of course Goldman execs lied to Congress.
Everyone lies to Congress. Congress lies to Congress. Who outside of
Charlie Sheen wants to air dirty laundry in front of the whole world?
Yes I believe Goldman lied but not in they way RS thinks they did. Yes,
GS knew these bonds were crappy. Yes, they could have done a better job
disclosing all the risks. But as a former CDO manager and investor, I
know to review, research, and analyze CDOs independently of Rating
Agencies.
Selling Crappy CDOs to Unwary clients
Goldman
sold CDOs they knew to be crappy to investors who took the opposite
side of the bet. Rating Agencies blessed these structures with AAAs. And
why is this a crime? Isn’t the motto on the street “Buyer Beware”? The
deals would perform or underperform based on the underlying bonds making
up the CDOs. Is anyone claiming GS hid which bonds were included? No.
Despite RS’s assertion GS knew these bonds were crap, this does not
constitute a crime or a failure of disclosure. These bonds were not sold
with a guarantee nor did Goldman ever say these bonds had no risk.
Heck, even the rating agencies blessed these structures by allowing 75%
of the cash flow to be rated AAA.
To further the car analogy
favored by RS, imagine you want to buy a fleet of 100 cars from GS
Rental Company. You also have at your disposal the repair (i.e
performance) history of each and every car from a variety of third party
vendors named Intex, Core Logic and Lewtan. However, you rely on
Moody's Auto Rating service to tell you that only 15 cars are likely to
go bad in the worst case scenario. You decided to buy 75 cars with GS
Rental company keeping the first two cars that go bad. Crime or
out-and-out stupidity?
Further, doesn’t anyone remember all the
other products investment banks have sold which blew up shortly after
origination? I do. Ask me someday about 125% Mortgages, Manufactured
Housing, Airplane Lease ABS, Tech Stocks, and so on. Investment banks
only sell what investors are willing to buy. Same with the CDOs. Good
salesmen know how to sell. GS has very, very good salesmen. Frankly, any
investor who trusts a Wall Street salesman and doesn’t ask the tough
questions should go work for a feel-good non-profit. Buying investment
products you don’t understand should be a crime.
Crime Spree and Key Stone Cop Regulators
Lastly,
cutting through RS’s massive hyperbole, I’m trying to figure out what
constituted the biggest crime spree of all time. Fraudulent subprime
mortgage backed securities issuers? CDO managers? Fraudulent mortgage
originators? Fraudulent borrowers? Fraudulent Rating Agencies?
Incompetent and toothless regulators? Lazy investors?
Every part
of the business created the housing meltdown. Borrowers who over levered
or lied to get access to housing they couldn't afford. Real estate
agents over sold housing to drive up commissions. Home appraisers
inflated valuations at the behest of mortgage brokers. Mortgage
brokers, paid on commission, forged or instructed borrowers to lie to
get access to as much money as possible. Loan officers, paid based on
production, ignored problems in loan origination files. MBS issuers
ignored prudent underwriting standards and due diligence with no
regulatory oversight. Regulators didn't have the authority to stop this
train wreck nor the poltical backbone to do so. Rating Agencies relied
on outdated models and Wall Street pressure. Investors didn't do the
work necessary to understand the risks.
This "crime spree" wasn't a drive by a Moriarty-esque criminal mastermind but a Confederacy of Dunces.
RS
says the "banks were closely monitored by a host of federal regulators,
including the Office of the Comptroller of the Currency, the FDIC, and
the Office of Thrift Supervision." I call bullshit. The OTS actively
sought more regulatees by stating to them "we are the kinder gentler
regulator". The biggest blow-ups were OTS governed (Washington Mutual,
Bear Stearns, Lehman Brothers, Indy Mac, and Countrywide). The OCC
wasn't much better and the FDIC was busy laying off personnel because
the world was going well. The Fed's chief drug lord (Greenspan) was
pushing housing as the great engine of the US economy.
Lastly....
I'm
sick of Rolling Stone's hyperbole. If GS had a $6B bet on the housing
market then they were a little more than 1/2 a percent of the total
investors in the market. They were small potatoes, and because they were
small they survived the meltdown like cockroaches in a nuclear winter.
- advertisements -
Government guaranteed investment? Hell no! You are conflating fraud and risk either because you don't get it, or because you are paid not to get it. Ratings agencies hold Government issued charters, they rated junk CDOs as AAA, under pressure from the "seasoned issuers: like GS. GS executives lied to Congress, under oath. I am not even mentioning the complete lack of professional ethics when you sell you client a bunch of worthless junk while gloating about it through e-mail messages. This is nothing but a ponzi scheme and anyone defending it are useless parasites.
I hate to break it to you, but what is good for the goose.....
The TBTF banks got government guaranteed, money back investments. They took massive risks, and got made whole on most of them. They didn't suffer the consequences of their stupidity, why should the "regular investing public" be treated any differently.
I am all good with speculation as long as success isn't guaranteed by the TBTF label. In other words, failure is allowed, not for the small investor but for all.
I don't think there are many whining here. What they are asking for is fairness. Not an edge just the same rules for all players.
When Goldman gets 100 cents on the dollar from the FRBNY for their bets with AIG, why shouldn't everyone else. Shouldn't Goldman have done their homework, realized AIG was insolvent and suffered the loss like you are pontificating about.
Really, ZH shouldn't restrict any comments. You should read them all, you just might learn something.
Cheers.
Not taking issue with you here, but I think the kinds of risks being assumed were precisely because they knew the gov't would step in and give an unconditional bailout if it all fell apart. Two things were at stake that are the pillars of American society and the American Dream: the US Homeowner, and free markets. No way in Hell any gov't on the planet would admit defeat along those two fronts.
If nothing else, the sheer complexity of the transactions more than guaranteed we'd be doing nothing more than throwing money at the problem. I think this was more than known by everyone involved, including the taxpayer.
Lizzy:
Of course the American public knew what was and still is happening. We beat the "the best investment is your home" whore well past room temperature. Finance attained the same mythical status as computer science a generation prior as the deliverer of all things possible. If you want to blame anything, our comfort came from the fact that the smartest people in the world were doing unimaginably smart things, just as they had in decades past, and that if something went wrong, they'd be there to fix it.
If the finance-man won't make something happen, their rich uncle would step in and fix it quick. And he did. The world's a complicated place, we need people like them to lead us out of darkness...
Chum: glad to see you, brotherman. Smearing the blame around like shit on a mop? Absolutely. Granted, though, I'd argue this entire ordeal would have happened almost regardless what framework we had in place, be trench warfare of regulations and credit checks or otherwise. I'd also argue we're in for some serious pain the next few years, regardless of financial or monetary policy. It's just part of a much larger economic cycle started in the 50s and 60s. Enjoy the ride down, brosephus....
Right, spread the blame, everyone is culpable, including the taxpayer.
Still pushing that bullshit line...
I am Chumbawamba.
Oddly in "throwing money" at the problem, they actually did implicitly admit defeat on the American Dream...."Home Ownership" and "Free Markets". Unintended consequences are a bitch.
I don't disagree with your thought process. Except at the juncture of "including the taxpayer". By in large the taxpayer had no clue what happened, is happening..
Lizzy, you obviously are not reasonable and are living in some sort of fantasy world.
I am Chumbawamba.
Finally a reasonable comment from someone who isn't living in some sort of fantasy world, thank you!
My balls. Your chin.
I am Chumbawamba.
Fuck you.
We have got to a point where people do not mind coming out in public and without any hint of shame saying its ok to mislead investors, Congress and the public. All in the name of making a quick buck.
Whats the French word for douche ?
Didn't a coupla' MLB douchebags wind up in jail for lying about steroids in front of Congress? Their mistake was to not also sodomize everyone in their "industry" and Joe Q. Taxpayer too. Then they could have gone scott-free.
An absolutely brilliantly convincing argument by SSA. Oh yeah, just lying to you, like everyone else!
the last few articles our dear author has posted at zh he has joined the discussion to add or rebut various comments. not that i care but where is he today?
I disagree with the author of this crap wholeheartedly. If GS hid behind the technicalities of the law but still conspired to rip people off through deceit, then they are guilty of fraud. Congress lies to everyone and everyone lies to congress...so that makes lying to congress ok? Now I understand why Wall Street is fucked up; the geniuses who run the place have lost their moral compass and replaced it with a situational ethics direction finder...loosely translated it means that more money at stake equates to a lower a level of moral and ethical conduct. Letting the buyer beware is a great rule, if the buyer has his or her own money at stake, but when it is the life savings of the population of a country this should not apply. Lastly, even if GS 'only' bet $6B on the housing market and were 1/2% of the market, $6B is a fuckload of money to the Main Street American, and 1/2% pregnant is still fucking pregnant. Your rhetoric is impressive, your aguments are weak and your moral and ethical values are non-existent. I will issue you a buyer-beware argument...when this shit unwinds, get out of town fast, because a lot of us Main Street dumbshits will be looking for frontier justice with the likes of you.
+1!
And the frontier justice is coming. These fraudsters don't even comprehend what's in the works...
When he says
"I'd like to take this opportunity to add a little bit of what I like to call "reason" to the disucssion"
I guess by what he'd like to call "reason" is what most people call "lying for money"
Future Investment Advisors:
AIG
Merril Lynch
Morgan Stanley
Goldman Sachs
Stone Street Advisors
Magic 8 Ball
I think we have a winner.
At last my magic 8 ball is of use. Fifty years I have kept that sucker and now it will star on Wall Street!
At last my magic 8 ball is of use. Fifty years I have kept that sucker and now it will star on Wall Street!
Too funny, why would anyone do business with Stone Street Advisors if they're willing to commit perjury by lying to Congress?
Then surely, they'd lie to their own customers. The author just inadvertently told the world Stone Street Advisors has no ethics or morals and cannot be trusted.
Hear Hear percolator--
funny that the this "advisor" is trying to argue that you misunderstood...
We can all guarantee one thing, we WILL be judged by our words and deeds....
did you see the movie Gaslight? Looks like the author's responses here are "gaslight" techniques--fortunately, enough people who read ZH will shine sufficient light to clear up the incredible Goldman shill work that this article represents.
If that's what you think than 1. I'm 100% sure you did not read the entire article, and/or 2. understand the article and 3. are not a lawyer.
Translation:
If that's what you think than [sic]:
1. Our customers always fall for our line of bullshit, why didn't you?
2. I'm a sociopath, so I'm never wrong.
3. Our lawyers will always find a loophole for us to slither through.
I understood that you said "Everyone lies to Congress."
So, if you were brought before Congress you've admitted that you'd lie.
You're exactly what's wrong with this country, thinking that everyone lies and that it's perfectly acceptable to do so. You're a disgrace to the human race and your parents completely failed!
Hey Mr. "Former CDO manager".. its called Fiduciary duty - look it up.
Fiduciary duty to whom? Under what regulation(s)/law(s)? Care to enlighten us?
Refreshing to hear a different point of view. The real problem was not Goldman. I am sure Goldman has their moral flaws but I blame the government for not properly regulating them. I abhor fractional reserve banking but I wish the other investment banks were half as good at managing risk as Goldman. All the investments banks are morally bankrupt but Goldman is one of the few that can manage risk well.
Duh,
Luke - Oh yeh...that $10B bailout via AIG was great "risk management". GS was bankrupt and going the way of Lehman and Bear if not for Paulson and the AIG bailout (on the back of taxpayer $ of course...GS would not ave it any other way).
As Stone Street says "Goldman survived like cockroaches after a nuclear blast." GS only survived because they threw bodies in front of them to take the pain. Those bodies were the US taxpayer, but they are expendable..right?
From the SIGTARP report on the AIG bailout:
Explain to me again how Goldman got a $10bn bailout through AIG?
The 10Billion was a direct giveaway from the US treasury coffers to the front door of AIG and out the back door to Goldman...
Additionally, imagine the money made from "letting" Lehman fail when all they wanted was bank holding status and a 6BILLION dollar bridge loan...
You have missed the point that our government sanctioned all of this, from beginning to end--do you think Glass Stegall should have EVER been revoked so that depositors money could be gambled? Do you think any company should be able to leverage their balance sheet 40x then get bailed out with taxpayer money...the TBTF agents of the privately owned Federal Reserve wrote the laws that sanctioned this massive heist---
Which solvent counterparties would have paid Goldman the $1.2 billion owed on the AIG CDS in a credit event that would wipe out the biggest synthetic counterparty in the world... and nobody else?
I am guessing that this is Tyler's out reach for the mentaly disabled?
Great sentence structure for someone with a sub 60 IQ!
hang in there buddy! the sentences are great! next we need to help you with the content!
Stone street - You state that everybody lies, all salespeople are untrustworthy, the Ratings agencies were paid to AAA it, so what if GS shorted the CDO their sales guy was promoting to a pension fund, Blankenstare lied to Congress, it all pales in comparison to the "hyberbole" of Taibbi ?
Seems you are too sensitive to the hyberbole and not the CRIMES.
You Sir have just outed yourself and organization as part of, or at least sympathtic to, illegal activity.
Hoping that this article would get you that juicy Bid on a Tranche that GS is selling?
Pull yourself toward yourself if you have any ethics at all.
Self serving prick.
While I agree that this article is easily the worst I've ever read at ZH, the comment section has to be the best, or at least one of the best. +1!
At first, I thought the article was intended to be a parody. Then I realized it had been written by a charicature of a human being.
Do charicatures know no shame?
Capital and talent will demand accountability (PMs are safe stores of value during transitions because some harvard-trained fuckwad can not create them out of thin air). If one market won't comply and prosecute the fraud it created, talent and capital will go elsewhere, including black markets. Should this article be viewed as a confession by a criminal?
+10
Let's not forget that "lying for God" is what Rahab did at Jericho. And she's refferred to as a "hero of the faith" in Hebrews. However, we need to remeber as well that her lies resulted in all her people being slaughtered. In my former business, lies were known as "counterintelligence" and were needed for national security.
The moral of the story is, in my experience - "Lies are like bullets, only use them on people you want dead. Use them wisely." GS was trying to kill the people who were supposedly "clients"...not a good business model.
Stone Street Advisors? What idiots (or Wall Street shills) run that site?
He calls himself "the analyst". I think "arse licker" would be more appropriate.
...or "the anal cyst" from Stone Street Assfuckers.
Next time this dude gets mugged walking down the street, I'm sure he'll realize he should have known better. That he has a personal responsibility to not go out at night. He'll no doubt realize he should have better examined the risk/reward potential of his actions, done his homework, and stayed inside to watch American Idol. And the guy who mugs him should be excused when he lies to the Police about his crime, because everyone lies to the Police.
Excellent. +1
Good parable.
ROTFL !! Excellent !!
Yeah, it's just too easy to destroy this morons "points."