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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 -
I hope your clients will read your little disclosure to code of conduct of your Great Firm!
Code of conduct for Stone Street Advisors, in only five words:
"pay us to buttfuck you"
+1M
No joke.
"Yes, come and be our client. We will likely screw you. Everybody's doing it. And if it happens, well, you have nobody to blame but yourself for trusting us."
If this asshole actually paid the Tylers to post this POS he/she needs to have their head examined.
Please disclose in your article if you worked for GS, before you post something like this.
Neither the author nor anyone else on the Stone Street Advisors team has worked for GS.
Can anyone else laugh at the warning in bold: this is from Stoned Street Advisors
these guys give every pot smoker in the world an aura of stupidity
Take a look at how the Zodiac Killer started all his letters ;-)
The "buyer beware" admonition does not fit and this WAS the biggest theft in world history.
Tell this shit to a guy needing his 401k money in a couple of years only to find that his "guaranteed" investment choice was really a bushell of toxic assets papered over with an AIG credit default swap and rated AAA to capture his money via Wall Street crony fund mangers. On top of if all the banksters used their political domination to change the accounting rules so that he would not have to be informed of the tehft before he retired.
Taibbi is a hero. Stone Street will be stoned when this all becomes manifest to the average Joe.
what is "this" theft to which you refer? Can you prove, legally or otherwise it 1. occurred, 2. how?
I sincerely doubt it. Just because you don't like how something sounds does not make it 1. illegal, or 2. wrong. Sorry, bub.
--The Analyst
The SIGTARP report references the highly invested status of stable value funds within 401k's in wrapped MBS as being the reason that AIG was bailed out. Had these MBS lost the CDS wrappings, the market would quickly reveal their true value as 5 to 30 cents on the dollar.
Then FASB changed accounting rules to allow these worthless "assets" to continue to be marked at stated value rather than the slashed market values.
What this means is that your typical 401k stable value fund, in which many fled to protect their savings from the market casino, are instead now in Ponzi status, with the real, gutted values being hidden as long as inflows exceed redemptions.
Hidden theft is THEFT, the power of the thief to hide it nothwithstanding.
Ok, The Anal-yst, what do you say to a guy with a gun and an angry trigger finger who just lost his retirement because some self-important finance douche needed it to buy some hookers and blow for Friday night?
If I placed my balls on your chin, is that a crime? Just because you don't like how that sounds does not make it 1. illegal or 2. wrong. I simply want to lay my balls on your chin.
I am Chumbawamba.
Very sporting of ZH to let Lloyd Blankfein post here. If the system is corrpt, then no one is culpable (their are no bad boys...). A classic liberal argument by God's Work. It's also a variation of the Nazi soldier defense (just following orders, ya), but those suckers got hanged. Times have changed, though, and Americans are so much more sophisticated. Now we are like the Inspector in Casablanca.....
I am familiar with Mr. Tiabbi's work. Some is admirable.
For those who are following this historical drama, I recommend reading past page 350 of the FCIC Final report, where the "Dissenting" opinion starts. Very illuminating discourse on the "Community Reinvestment Act".
Personally, I am currently digging into the Senate report Mr. Tiabbi refers to. It appears he read the executive summary.
I call bullshit on any effort to blame CRA for the mortgage meltdown. It worked well for years untill it was watered down and banks created subsidiaries to circumvent it entirely to make "liar loans".
When it worked well, only minor underwriting changes were made to allow low to moderate income people to qualify for a "CRA Loan". Those loans required documentation just like any "conventional loan"...not like the "no doc" and "low doc" crap loans bank subsidiary "mortgage cos. foisted on people or securitized into WMD for sale.
http://www.businessweek.com/investing/insights/blog/archives/2008/09/com...
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here).
Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years.
I think he may have gone so far as to read the summary/intro to chapter 6, and then stopped.
--The Analyst
This post sucks rancid donkey nuts lathered in smegma juices.
Just refer to the "Bankers Lying for for Bankers" section of your local newspaper for more commentary.
It will take more than some thin gruel from a slack jawed Goldman apologist to change my mind that they are the worst of the greed kings on the street. As a former bank treasurer I dealt with them and many others who try, but can't equal them, in their quest for your financial ransom. They would rape their mother for an extra 1/8th....
Everyone seems to be of the mindset (probably since they didn't read the article) that the author is defending Goldman. Such is simply not the case. The article is simply pointing out that Taibbi's accusations are baseless and devoid of any understanding of finance, economics, and law.
Is Goldman a deeply arrogant firm that's been pushing its luck for far too long? Absolutely. We fully expect this will come back to bite them in the ass in the near-to-intermediate future.
Fixed it for you.
Law, and all that is overseen by law, is supposed to be rooted in human morality and common law. When 'law' has been so subverted by the powers-that-be that its only purpose is to protect the powers-that-be it ceases to be 'law' in any form that should be respected by the people.
By the same token, anyone who declares that the raping and pillaging is within the law or lawful is simply another enabler of those who destroy while using the law to protect themselves from the people. And based upon the comments left so far I am not alone in this view.
I welcome his colorful metaphors and hyperbole. Without it the brain dead MSM gets pick pocketed by the swindlers day in and day out leaving the public in a blissful state of unknowingness.
Until the Vampire Squid article people were very happy to drink Blankfeins kool aid while a minority of us stood by screaming.
Oh the Goldman model works fine. Oh we didn't need the bailout. Oh we are financial intermediaries. Yadda, bullshit yadda.
I didn't need a Hearing Report to tell me those guys were lying. I watched the hearing and saw it for myself.
As for T's background, he is a political writer. I give him a great deal of credit for spending as much time as he has trying to understand this subject. Frankly, his political analytics have brought a much needed dimension.
His book paints a deep rooted and very troubling big picture.
if ever there has been an article on ZH that merited the ability to rate it with zero (if not negative) stars...it's this piece of shit.
While I completely disagree with Stone Street, I still find the article useful as a reminder of how people rationalize allowing corruption to continue in order to preserve the status quo. If we asked the author, he may say that he/she actually is against the corruption and isn't for the status quo but isn't for doing something radical about it. The author's subconscious may have been threatened by Taibbi's piece because if things are this bad (and they are), something radical (starting with peaceful protest) should be done (I keep telling myself that I shouldn't do anything because it will be ineffective and if the system is as fucked up as I think it is, it will fail on its own without my involvement). I'm experiencing a lot of cognitive dissonance myself. Tabbi probably does too. The evidence he has shown should provoke any average, normal, non-radical reader to radical action, but it doesn't. We read it, either get pissed off at Taibbi (the messenger) like Stone Street does or get pissed off at the bankers and government buddies like most Zero Hedgers, and then we do nothing.
Au contraire....
A first hand real time, breath taking inexcusable look into the Heart of Darkness.
One of the most pure crossbreeds of psychopathy and sociopathy that I've even seen.
Tommy does it so why can't I, Mommy?
I'll quit drinking tomorrow.
I was just doing my job.
I was just following orders.
Of the nine major delusional categories outlined in the significant works upon human behavior, only seven are shared equally (the greatest count for any pathology) by paranoid schizophrenics and alcoholic psychotics.
Go figure.
Author needs some serious professional help or a solid 12 Step program.
Sure this wasn't written by van Praag?
Throw this assbag out, along with MHFT and "100% FREE SPECIAL REPORT" Phoenix Capital.
If you are "doing God's work", I guess anything goes.
"Lying for God": The ultimate rationalization for the corrupt when they're cornered.
Worst. Article. Ever.
Just.....wow.
"Of course Goldman execs lied to Congress. Everyone lies to Congress."
With the above comment you exposed yourself as the sycophantic scumbags you are.
You guys are fucking pathetic.
Hey, cut the dude some slack..he just sent a resume to Squidman Sack and has an interview next week. Gotta stick up for the homies.
Squidman Suck & Co
The old "everyone else does it so why can't I" defense. Clearly early childhood moral development was overlooked here. It's never too late for a good spanking.
CD: "spanking?"
Surely Madame La Guillotine would be more "fitting".
+1
we could at least take their dessert away
Your comment compels me to post WilliamBanzai7's superb image from yesterday.
http://www.flickr.com/photos/expd/5731262442/
great film, great band. I saw The Wall in concert in Los Angeles. Amazing performance - a rock concert, theater, and very large joint rolled into one. That said, many things remind me of Dark Side of the Moon these days. There's a british documentary floating out there on the making of that album. I think it's on Netflix. Great stuff.
Do you mean this one?
http://movies.netflix.com/WiMovie/Pink_Floyd_The_Dark_Side_of_the_Moon/60030169?trkid=2361637#height1468
yup
Careful with that Axe Eugene...
+1
This reads like an addict rationalizing addictive behavior.
Which, I strongly suspect, it is.
I got as far as everyone lies to Congress and stopped reading.
Since lying to Congress is a criminal offence.
Title 18, United States Code, Section 1001.
That's where I stopped as well. When lying becomes a normal course of business then it's time to put a price tag on it, such as 5 years jail time. It would be entertaining to see Blankfein and Dimon share a cell at a comfy federal facility.
§ 1001. Statements or entries generally
a Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully—
1 falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
2 makes any materially false, fictitious, or fraudulent statement or representation; or
3 makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;
shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism as defined in section 2331, imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A, 109B, 110, or 117, or section 1591, then the term of imprisonment imposed under this section shall be not more than 8 years.
via United States Code: Title 18,1001. Statements or entries generally | LII / Legal Information Institute.
Ballplayers have been accused of lying to Congress, but the most crooked scammers in the nation, the bankers, are considered to important or connected to punish.
Jesus H Fucking Christ on a Crutch!
Of course everything Tiabbi wrote about Goldman was right says the author (the bottom line, pure clean and simple).
But fuck it, since everybody does the same, it's everybody harmed by everybody else, so no foul.
So, it's not a matter of ethics, morals, civility, legal obligations or responsibilities, it's all about the matter of degree to which such actions are effected.
So if we take the argument far enough, which is in essence presented herein, there are no grounds for anybody to be taken to task, to be held responsible for Anything Whatsofuckingever.
Which isthe whole Goddamned root of the whole Goddamned problem which we as a society and world are dealing with in this and all other actions, whether economic, social or political.
In essence, it's OK that the whole world is corrupt, and since everybody else is, I can be, too.
What the fuck is wrong with people these days?
No shit Sherlock, the end is really and truly near. No wonder those that can pilfer the system are doing so, tremendous votes of non approval, of thumbs down upon a system corrupt from top to bottom.
Who gives a shit what a CDO manager thinks? I want to find out what a jury thinks.
+100
If I've said it once, I've said it 1000 times.
Jump! You Fuckers!
I hereby revoke my generous single star.
You got farther than me, brother. Reckless, drunken slime mold is very easy to identify. I stopped after he claimed to want to add "reason" to the disuccsion. Now, it would be one thing if writing "disuccsion" was an attempt at cleverness, but it wasn't. It was simply a disregard for meaning, a show of disrespect to the reader, to zerohedge.com, and was followed by disingenuous disinformation which really sucked. I cannot, for the life of me, understand what the value is of letting this slime-throwing, irresponsible idiot post this crap.