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Simon Johnson: "If John Paulson Avoids Charges, It Shows How Broken Our System Is"
"[Goldman] designed something intentionally complex that's basically a mechanism of transferring money from you to John Paulson. John Paulson, it is true, has not been charged with anything. But he was involved in designing the security. For all we know right now it was probably his idea and if he walks away without being charged, it shows how broken our system is." This is Simon Johnson discussing the Goldman fraud charges on Friday night with Bill Maher. Could the public's attention now be shifting ever more toward those top performing hedge fund managers who year after year made billions, and instead of praising them for their acumen, are now seeing a sentiment shift toward one of wealth merely as a result of massive criminal collusion between the hedge funds and the big banks... well big bank, cause Goldman is really all that's left of the traditional broker/dealer complex. Which once again invokes our long-standing point: the DOJ should immediately break up Goldman Sachs into many smaller entities, due to the firm's unquestionable (allegedly) criminal monopolistic impact on the marketplace. Christine Varney - wake the #&$* up! And whatever happened to that FBI investigation into SAC? Will Stevie Cohen be next as the mid-term elections approach and the public demands blood from someone?
Watch the Simon Johnson interview on Bill Maher 7 minutes into the clip below. The entire 10 minute clip is worthy of your attention.
Below is the full Q&A following the show, in which the case for accelerated action against Goldman by the administration is made.
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and address the issue of conflict of interest!
Ah it's all whitemen's bigotry against a black president. Yeah right. How did these guys managed to speak while having democrooks' %!$&^ in their mouth?
Thank God for ZH
No Thanks. This is lame of ZH.
That's it, I can't take it anymore. If these fools want Goldman and (especially) Paulson to swing so badly that argument can't possibly have any merit. Sorry.
Get a load of this stupid bitch: Waaaaahhh Waaaahh they popped our bubble!!
Give Paulson the Presidential Medal of Freedom. He deserves it.
I mean stop with this bullshit already. What, are we now supposed to make a law outlawing all investments and securities that Bill Maher doesn't understand? Is there to be a Fox-chicken-henhouse regulation to prevent firms from being outsmarted by their own clients or is that Fox-enablement-chicken-endangerment-by-means-of-henhouse? (I had trouble following that argument). How about a safety lock on all financial instruments over a notional $100mil value that prevents the holder from shoting himself in the fucking foot with it?
If Goldman did something wrong, charge them and let's see it play out in court. Break them up? -it's not the firm it's the people that make the money. They'll just go and start a new firm: Goldman Sachs II (just to piss off 'Tyler'...rrrrr....<pencil snap>...). How about we pass a law that says if you are too smart or work too hard you aren't allowed to leverage that into financial gain at the expense of others?...I mean, that would be more fair...right?
Get your eyes off the gold medallion swinging on the chain. The government is riding a unicorn and spending us into the fucking Stone Age. Wake up!
Are there any adults at home? Who the hell is in charge here?
Maaaaaaaaaar-laaaaaaaaaaaaaa !!
If you refuse to see that Lord Blankfein and Hank Paulson were in collusion, which is not only fraud but racketeering, along with AIPAC rooting from the sidelines, then then you are a fool.
"Any man who admits to nothing but which can be plainly demonstrated may be sure of nothing but perishing quickly". Locke
No, you are a fool.
The Paulson in question here isn't Hank Paulson the former Secretary of the Treasury it's John Paulson the hedge fund manager.
This isn't the beginner's corner.
+3.
Can't believe this comment was "flagged as junk."
Smackdown! ouch
Except for having the wrong Paulson, you're right. Just a misunderstanding here.
Great comment. Outlaw hard work and research
Excellent comment.
I think the base issue with coverage on this issue is that people do not understand there are two sides to a derivatives trade. If GS covers the other side of the CDO trade with Paulson, it is now labelled "fraud" (but if John Q Public sells stock to a broker, he doesn't expect his name to be broadcast to the world as having sold). Why does the governmenet demand a derivatives clearing house on one hand and say one should disclose on the other hand? If GS shorts the hedge itself, it is "betting against its customers" and that too must be fraud (but any store which sells a widget out of inventory which is funded by a distributor or manufacturer doesn't get labelled as such). If any customer loses money in a zero-sum bet with both sides at risk, GS is obviously a crook (though casinos are not seen the same way at a poker table where they take a table charge for other people to bet money against each other).
I guess the question is whether or not investors can be trusted when they say "I understand." Would the investors (including ACA who as "selector" would probably at least have looked at the contents) have been less inclined to buy the product if the hedge came from a different source than GS?
Eventually, the government will probably have to license investors/savers the way heavy equipment operators require a license (then we get an issue of whether that is a State's job or a federal job). People will get licenses to invest a certain way in certain products. They will have to keep those licenses on file with their broker and bank. By getting the license, they will be giving a waiver which says noone else is to blame for my losses due to non-fraud).
No. This is not why GS's behaviour in this case has been labelled 'fraud'. Bluntly, you are in a poor position to criticise others' understanding of the situation if you cannot or will not give an accurate account of it yourself.
I have been wondering why Paulson & Co. wasn't a defendant. Everything I read says that they weren't charged because they didn't make any misleading statements about Abacus to investors. It still seems to me that they were co-conspirators. Maybe TPTB just need GS to throw P&C under the bus first?
They were not a co-conspirator, not at all. Unless there is evidence that Paulson participated in marketing the product they have no case against him. All he did was say he wanted to short these bonds. GS said OK pay us X amount per year for 5 years, or whatever. Instead of GS holding the risk themselves or AIG buying it, they stopped doing major CDS deals in late 2006 I guess, they sold it to other institutions under the guise that ths ABA firm picked and managed the CDO, which was fraudulent. Paulson did nothing wrong and that economics professor is a complete moron. Got to HBO on Demand and wathc the whole show and you will see what I am talking about.
No matter what Paulson's only crime was that he was right and made billions for himself and his investors. It is not his fault that GS sold them CDS's for 12 basis points a year, that is .12%/year. It is not his fault that GS offloaded their risk to other investors. It is not his fault that GS did not fully understand the risk involved... see a trend here? GS did the wrong, not Paulson.
In America, being short and wrong makes you a laughingstock. Being short and right makes you a criminal.
Damn straight, dimwitsco!
I mean, quit picking on those poor, unfortunate hedge fund guys.
In 2009, the top 25 hedge fund managers ONLY averaged a paltry $1 billion in salary.
Thank the gods, those hedge funds are registered offshore so they can avoid those nasty, nasty taxes everyone else has to pay.
And thank the gods, those poor hedge fund fellows can defer those paltry incomes, so they can avoid paying any tax forever one them.
Wow....maybe there is actually some fairness in the universe after all, dimwitsco?
I agree with you demsco. I think the rating agencies who rated the trash "AAA", from which Paulson chose, are more to blame. The rating agencies were part of this fraud.
Here is a better question (or at least as good)
Who was among the early advocates of bank stocks and of giant accumulation of risk? Paulson & Co. He was the guy back in mid 2009 indicating he was "asking prime brokerages to extend as much leverage as they could so he could buy anything" (this isnt his exact quote, but its awfully close - and everyone out there spare me their "I bought stocks at the exact bottom story", by my latest tally 1% of the world saw a problem coming yet 99% of the world spotted the end of the problem almost to the minute)
Post the dot com crash it took the S&P 500 about 3 years to climb from ~ 750 or so to 1200. And during that time, interest rates were 1%, not too far off the .25% they are now. And during that time, the economy was at the front end of massive credit and housing bubble AND international economies were booming AND IT STILL took ~ 3 years for the S&P to climb those 500 points.
Post the credit collapse, it has taken the S&P LESS THAN 18 months to climb MORE in absolute point terms to reach the same 1200 level...???? While credit contracts? While housing remains in recession? While the Small business sector remains in severe recession? While consumer confidence remains in recession???
So getting back to paulson - why was he SO confident in not just a recovery, but a basically unprecedented risk boom? Was it just amazing luck that he happened to divine that banks stocks that were a few months ago totally insolvent would triple in a year? Yes, I understand that when you borrow at 0% and lend at whatever its "good" - that doesnt mean the value of your equity should triple (in some cases, much more)
Bigger point is this -- it seems very, very likely that the "recovery" has been full of as much selective dissemination of information, selective access to policy choices, targeting policies at specific entities (ie, the $1.25 TRILLION thrown at the MBS market, who exactly got that money, why, and what did they do with it??)
I have been pretty clear on only one point since 2008 - the idea that the EXACT CROWD of people that created this entire mess can be expected to then turn around and fix it is absurd. The derivates market imploded SPECIFICALLY because Larry Summers allowed it to be unregulated. This then led to Larry Summers single handedly blowing the Harvard endowment to pieces. And now THIS is the guy who is the top economic policy maker for our country????? WHO ELECTED THIS IDIOT, I SURE DIDNT.
This isnt a recovery, its a mirage. How do I know that? Because we didnt have a housing boom, we had a mirage. We didnt have a wealth boom, we had a mirage. We didnt have a tech boom, we had a mirage. That covers the decade or so of the policies enacted by the exact crowd right now patting you on the head, urging you to head to the mall immediately, and assuring you we are in the midst of a recovery.
Excellent rant. Excellent rant, indeed.
I'll go one up and a little further on you...
The PPT can't do it by itself. Too traceable, too much confusion...that damned Caribbean accent...
So, they turn their heads to the left and reach into the pocket of the man to their right and pretty soon, major, major hedge funds are getting marching orders, directions and timelines from none other than the FRBNY (and...guess who...). Everything is orchestrated, timed and policed (in the true "policy" sense of the word...) to rake in maximum profit for all those in the loop and hardship and monetary losses for those that aren't. Maybe we should start a list of possible suspects in the Daisy Chain:
Blackstone (yeah, didn't they just show some crazy report to the SEC- a 10-K, I think- that showed enormous holdings in an enormous span of companies...)
Carlyle Group
just to suppose two names.
Everyone didn't know what everyone didn't want to know...but everybody was doing it. No one knew what everybody was doing. 'Splain it to me, Loosie!
As we have seen over this week-end, opening this can of worms will lead down an incredibly sordid path of inbred govocorporate criminality (read: fascism...) never before seen in the history of the world.
Interesting, Orly, that you should mention Blackstone Group (and its little sibling Carlyle Group).
They should be paying 35% corporate insurance rate, yet thanks to those crooks in congress, they somehow are still getting away with that 10% capital gains rate.
Now go figure......
Tip o' the iceberg, Sergeant. Tip o'the iceberg.
Always enjoy your posts, Orly. I've thought for years that the overriding purpose of all these financial shenanigans and deceptions is just to legally steal whatever pots of gold still exist. These guys have a nose for where the money is and they saw that the biggest pot of gold was the pensions of the middle class. How to get your hands on all that money in a non-obvious way. Well they found a way that guarantees that they can grab it without any worries about getting caught. Defined contribution plans, such as 401k plans were probably designed with that eventual wealth transfer in mind. I paid my dues with my IRA. I would have preferred to just write a check to a needy billionaire. It's time the 1040 had a line item to replace the dollar to the presidential election campaign fund that would allow this transfer of say 90% of our defined contribution plan to a designated billionaire on a pull down list.
Note to demasco below. I suspect Paulson's been reading your posts and you can probably expect a job offer real soon.
Full disclosure, I used my calculator for the captcha.
Now just one second there, fuggetaboutit!!!!
Are you suggesting just because Robert Rubin didn't know anything about finance (according to his testimony the other week, he can't be reponsible for liquidity puts and CDOs and stuff, only picking up his $120 million paychecks), and Hanky Paulson left Goldman Sachs $20 billion in debt when it was only $2 billion in debt when he took over, and that little Timmy Geithner can't do his income taxes, and that Larry Summers' head is eternally up his fat butt, that they should not be allowed to hold the highest economic positions in the land?????
Wow, big guy, you have made an awesome case in that regard!!!!!
(Of course, it is mathematically impossible for there to be a recovery, since one would first have to have an economy!)
Great comments, fuggetaboutit!!!
I have been wondering why Paulson & Co. wasn't a defendant.
Fresh chum for the scum in DC. GS is an a$$ tapped too many times by too many playas, imo. She knows where bodies are buried (pillow talk). Mr. P must join the party and get "trained" by the pols in power(on both sides of the isle)!! He better be greased properly cuz when DC runs the train, it takes no prisoners.
Buy vaseline bitches ;)
And Janet Does CBS
http://www.youtube.com/watch?v=WiwZ2LfOO-c&feature=player_embedded
Any time I hear that an agreement or bill is x,000+ pages long, I know it is full of crap. There is no agreement that anyone needs to make that has to be over a few pages long. If it is overly long, then it is stuffed with weasle words, escape clauses, and a whole lot of just plain bad faith. If I can't read it in a few hours, then the deal is shit canned.
+1
http://en.wikipedia.org/wiki/United_States_Bill_of_Rights
http://zerohedge.blogspot.com/2009/02/full-text-of-tim-geithner-speech.html
I agree.
Money was transferred from OUR pensions to John paulson - Boo Hoo. Well - first of all where is the anger against the real gatekeepers, all those highly paid money managers with fiduciary responsibilities? What do those bozos do to earn their keep - if they fall for every scam that is presented to them? In a capitalist system the clever will take money from the stupid - and as long as no laws are broken that is the nature of the system. So - I say get better fiduciaries. Make those pension fund managers earn their excessive pay!!
Real Gatekeepers?
Um. That would be Congress. Everything that happened was BY DEFINITION securities fraud and election fraud. The mere fact that "no laws are broken" means only that the crime was decriminalized.
BUT...there still is a conspiracy. And by definition a violation of ONLY 2 out of 35 crimes triggers the RICO Act.
Dealing in obscene matter is one. Relating to embezzlement from union funds is another. The list is broad and long. It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity.
RICO Act is for gangsters and banksters alike.
I couldn't watch this video for more than the first 2 minutes due to crap like this:
So, it's official ... Arguing for any adherence to the principles this country was actually founded on, or any degree of fiscal sanity is officially "racist."
45% of Americans say the amount of taxes they pay is "about right."
47% of Americans pay no federal income tax! http://news.yahoo.com/s/ap/20100407/ap_on_bi_ge/us_no_taxes
Coincidence?
Ummm ... No. The tea parties are a non-partisan movement despite the best attempts of the media to paint them as otherwise.
I wish I could have watched the rest of the video but the amount of shallow leftist partisan slander and ignorance in the first 2 minutes made it impossible for me to watch any more of this.
Bill Maher is an idiot, I stopped watching when he introduced a guest not too long ago who had in their credentials "Council on Foreign Relations" and the jackass Maher had to ask "what is that"? He's a fucking doofus.
How can you have an informed opinion about politics and not know the power that the CFR wields? An absolute fucking moron.
He knows what the CFR is. He is playing along for the benefit of his audience, many of whom probably have no clue about the CFR.
PS Colbert brought up the Bildgerberger group on his show the other night.
His ignorance was not feigned.
Concur. But bringing John Paulson to the forefront is a good thing.
File this under "Broken clocks are honest twice a day"
Ugh, typical right-wing thought process... as soon as you hear anything that sounds even remotely liberal, decide everything they might ever say is worthless whether they are right or not.
You are wrong if you think a LOT of the tea-baggers are not nostalgic for the good old days when blacks "knew their place", you never saw a Hispanic, and all gays were in the closet. Their random anger that things change is what subverts their more relevant message about debt and spending.
You are a clueless peice of shit. I am sorry for being crass but by referring to dissenting Americans as "tea-baggers" , apparently a reference to placing ones mouth around a scrotum, you are not worthy of a polite or even well thought out reply.
Fuck you.
You obviously don't have a clue what you are talking about.
So - if folks insist on sticking dinner forks in their eyes and then go crying to the govt about the evil dinnerware manufacturers - they are doubly stupid. Asking the govt for protection is like asking Vito Corleone for protection - heh heh. Either folks take responsibility for their own safety/security/money etc - or Vito will handle it for them and they will be reduced to a permanent state of infantile, thumb-sucking semi-adult with no freedoms at all. Not exactly the Clint Eastwood image folks would like to identify with!
the fact that this is a civil and not criminal case shows how broken the system is
burden of proof is much higher in criminal cases.
getting a jury to understand these concepts let alone convict beyond a resonable doubt would be damn near impossible.
you mean like Enron?
yeh, they Bill Maher crowd will go into deeper shit when the market tanks, and it's then when they realize that Obama is NOT Messiah.
I despise GS like any other red-blooded American, but after reading up on everything, I'm not convinced that anyone did anything necessarily fraudulent.
What about Fischer Black and the Valueline S&P 500 futures, back in the 80s?
http://www.fma.org/FinMgmt/fmwinter96black2.pdf
A bunch of professors had a way where they were making money playing the Turn-Of-The-Year effect on the Value Line futures. However, Fischer Black of Goldman Sachs figured out that the mathematical model they were using was wrong, and royally fucked them for millions.
The best line in the article is: "In May, I received a phone call from my friend Jeremy Siegel at Wharton. He told me that someone was willing to offer a large position if we wanted to go long the March 1987 Value Line Futures and short the December 1986 contract. [snip] Visions of large profits danced in my head." Famous last words.
Later on in the article: "Years later, I found out who was on the other side of the trades in the summer of 1986. It was Goldman Sachs, with Fischer Black advising the traders, that took me to the cleaners as the market moved from one pricing regime to another."
If one counter-party trades with another, if one counter-party has superior information and knows that the other counter-party is trading with wrong information, is that necessarily fraudulent? It sounds like that is exactly what Wall Street is all about, ie. fuck the stupid and poor people.
"fuck the stupid and poor people"
america does this. not just wall street.
it doesn't have to be like this.
peace.
Capitalism is the problem. Nothing will change until people realize this.
not true. you need to set up capitalism so that it works for everybody.
and you need to control utter greed.
I disagree. Capitalism is an inherently time-limited system. It requires perpetual exponential growth and in a planet if finite resources that is impossible.
What we are now seeing is the natural result of the end stages of a capitalist system. Standard means for growth were exhausted (starting with the US becoming a net importer of energy). So we turned to credit growth as a substitute for organic growth. Once that hit the wall we turned to "financial innovation" to find new ways to grow debt. We also turned to outsourcing of labor to the 3rd world to keep growth going.
We have reached the end of the line. The ponzi scheme's limited lifespan is ending, and as with all ponzi schemes, those at the bottom will get hosed.
i agree we are at the end. i am trying to propose what comes next.
it isn't perfect, that's for sure.
p.s. fuck the arrogant twats the rule the world right now. we are going to bring you down.
Well-known communist philosophy is that the inherent flaw of capitalism is that you require continuing expanding demand for capitalism to continue growing.
Once demand dries up, it's in capitalism's best interest to cause a form of catastrophe, like a war, so that supply is destroyed and demand increases again. This is why communists believe that capitalist countries purposefully start wars, in order to stimulate demand and reset capitalism for another round.
What fucking capitalism? Hmmm?
I've never seen capitalism in my lifetime. In fact I would venture to argue that no American alive today has any idea what capitalism really is, first hand anyway.
What most people call capitalism today is what Smith called mercantilism, or a modified fascistic version of it. (ie corporatist oligopoly)
"Capitalism is an inherently time-limited system. It requires perpetual exponential growth and in a planet if finite resources that is impossible."
What bs. Actual Capitalism is based on the natural law of supply and demand. Imbalances are always corrected. However the Fed, and other central banks have spent several generations perfecting the stretching of imbalances.... and there will be hell to pay.
+10
The "capitalism" that the US has known during my lifetime (and quite a bit longer) is, as you say, mercantilism; the "democracy" that I have known is similarly just a condescending syndicated oligopoly.
Unfortunatly, the war for the Republic was lost over a century ago -- it may have been inevitable, given the pressures of industrialization and consequent population explosion -- and the only stable alternative is an oligarchy.
It appears the bankers have won for now. I'm taking bets on what global syndicate can take on the task of toppling them.
don't get me started on the "communist" chinese.
on Sun, 04/18/2010 - 13:27
#306776
Capitalism is the problem. Nothing will change until people realize this.
stoverny,
The Lobby that controls our elected officials... thru the milking of the Tax Payers dollars... I offer http://www.opensecrets.org/ . Capitalism is not the problem our law makers and the monies that move them, is the problem.
Sincerely, JW
Agreed! What has long been needed is economic democracy:
http://www.ied.info/
It is amazing that there are still Americans who can read but still don't understand what is going on:
The wholly-owned bankster subsidiary, the US government, subsidizes the banksters who control those credit derivatives (which makes them insolvent since they are thousands of times the liabilities as their real assets) which allows the banksters to rig and manipulate the markets, then speculate from insider knowledge (from their rigging and manipulation) on those same markets, thus profiting and getting gigantic bonuses which they then use (along with free government monies and bailout funds) to continue paying the salaries of all those crooked politicians on their payrolls.
What a country!!! What a Ponzi-Tontine schema!!!!
"Economic Democracy?"
HAHAHAHAH...
Please go spam someplace else
stoverny,
Let me see if I got your socialist ideaology correct.
The seed or acorn of this case is subprime loans...a socialist endeavor or a social engineering project created by the equivalent of "your" politburo.
A capitalist see's the inherent flaw in this structure...bets against it's success and is correct and yet somehow it's capitalism's fault that the social engineering project was unsuccessful and we need MORE of what got us here instead of less.
Is that about right???
No, the seed or acorn of this case is unfettered greed brought on by a system that constantly requires more, and never has enough.
Subprime loans were not a socialist endeavor. They were a product created by the financial elite to provide the growth their shareholders demand, since they had exhausted standard ways to peddle mortgages and had millions of empty houses to fill.
Subprime was no different than any other financial innovation... it was a way for the banks to continue to suck money out of a system that is nearing its end point of expansion. In socialism we'd have nationalized banks and rational home prices instead of bubbles designed to enrich those at the top of the ponzi pyramid.
You can compare the recent glut of "financial innovation" to an oil company that needs to invent new technologies in order to reach the oil that is ever more difficult to extract. The technologies may delay the inevitable point when the well runs completely dry, but they do not eliminate it. Every financial product recently created was simply a means to keep debt expanding past its natural limits.
48.
On January 12, 2007, Tourre spoke by telephone with ACA about the proposed transaction. Following that conversation, on January 14, 2007, ACA sent an email to the GS&Co sales representative raising questions about the proposed transaction and referring to Paulson’s equity interest. The email, which had the subject line “Call with Fabrice [Tourre] on Friday,” read in pertinent part:
“I certainly hope I didn’t come across too antagonistic on the call with Fabrice [Tourre] last week but the structure looks difficult from a debt investor perspective. I can understand Paulson’s equity perspective but for us to put our name on something, we have to be sure it enhances our reputation.”
49.
On January 16, 2007, the GS&Co sales representative forwarded that email to Tourre. As of that date, Tourre knew, or was reckless in not knowing, that ACA had been misled into believing Paulson intended to invest in the equity of ABACUS 2007-AC1.
Sounds like ACA was a little light on their due dilly. They still knew of and vetted every security in the portfolio did they not? Is there a section in the written CDO prospectus/agreement that lays out which investors will be investing in which parts of the CDO and any other related derivatives or is ACA essentially claiming that Goldman used their serious voice when we discussed who else would be in on the deal ??
If this rises to the level of fraud on Goldman's part and/or they did violate written terms than I hope they pay the price but I still see no evidence that Paulson is at fault. Should he have flown to Germany and given his short bias RMBS Powerpoint presentation to DumbASSenBanken too?
It's also worth mentioning here that after the deal closed Goldman, who knew everything about this deal, was cool with writing approx. $1bil of insurance (CDS) on it for Paulson. So unless you believe that the German bank would have been significantly more savvy about the risks of the deal than Goldman was and would have backed out had they known the whole picture, all this arm flapping about money lost by the innocent patsy is purely academic.
You are a purposeful idiot. No one is saying trading on information that shows the counterparty has it wrong is fraud. What is wrong is to deliberately create a deficient product, to purposely short it and to hide that information from the prospectus.
Not all poor people are stupid and to fuck them only for being poor and for being ripped off by jerks like you is demonstrative of why our system is broken.
One day they'll be coming for you.
It may take a while and if you are old you may not see it in your lifetime, but they are coming.
I was in an area yesterday with really differing ecoomic classes. Lots of maserattis, new cool looking jags, convertible Beemers & MBZ - oh and lots of Land or Range Rovers. People crusing through the desert town with wind blowing in the convertibles, while a guy is pushing his belongings in a shopping cart and I was thinking - "Before long, its gonna be smarter to be rich on the down-low." The picture was just too stark.
Paulson did nothing wrong, period, end of story. He went to GS and said I want to short the sub-prime market. GS allowed him to pick bonds that he wanted to short and built the synthetic CDO. This was common among firms that allowed hedge funds to short the market. Mike Burry did it, Cronwell Capital did it and Steve Eisman did it. Not to mention the firms themselves. How can hedge funds be guilty of being right and asking for a product to short??
It was up to the banks to say this is illegal or we cannot do that, not the person asking for the product. To charge Paulson with something would be a dangerous precedent. That means anyone who is short something could be charged for being right. There is a reason MIT is NOT known for their economics department, just for math and science. This jackass in the video later said a VAT is perfect for America because it works so well in Europe, yeah right. He also said a VAT can be made progressive so the poor can have relief, bullshit. My point is this guy is a douche bag moron.
Paulson did nothing wrong, how many times can I say this. Prove that Paulson said to misrepresent these securities to GS's clients and you have a case, but he did not. This is a case, the Bill Maher thing, of these people hating the rich, yet they were $1,000 suit and are looking to push their books, can you say hypocrites? You cannot punish someone for being right. Be very careful what you wish for.
Agreed about Paulson doing nothing technically wrong... however my assumption is that he knew the knew the dog**** bonds would need to get the fake stamp of approval from the rating agencies, in order to be marketable to some sucker on the other side of the trade. So in that respect, the entire system was set up to be a fraud, with Paulson a knowing participant.
Probably not enough for an indictment but let's face it he was playing a rigged game and he knew it.
Let's not forget all the Madoff feeder funds who only invested with him because they thought he was illegally front-running trades. The entire system was fraudulent, and everyone was complicit.
Guys like you, dmiwitsco, make me believe that if they ever legalize murder, you will quickly go about on a huge thrill kill spree, proclaiming that "it's legal."
Yes, today they have legalized much of what was once illegal, amoral and unethical.
That is why there is only one surefire remedy today.
Anyone care to guess (hint: reread my name).
Gee, I wonder why there isn't a peep about the biggest culprits in this mess - the Government enforced "Ratings" cartel. Yeah, Paulson must be hanged for having the temerity to try to profit from the IDIOCY imposed by the governments on the market and the serial bubble blowing of the Fed. Most investors are expected to sit down and TAKE IT while the banksters and the Fed inflate away the currency into oblivion.
THE BIGGEST CULPRIT IN THIS ENTIRE MESS IS THE GOVERNMENT AND THE FEDERAL RESERVE. F**KING PERIOD.
+1000000
I am fairly sure you remember that some Moodys analyst said that if they get paid enough money they would rubber-stamp AAA on a duck, or something like that. I can not find the exact quote but i know it caused a lot of stir at the time it was publicly said.
Rating agencies are economic equivalent of a mob racket and can make or brake any economic entity and they did so; case in point, AIG which was brought down with constant over-the-night downgrades and thus, naturally, needed to send more collateral [which it didn't have due to the stupidity which is best presented in Joe Cassano and AIGFP as a whole] to the counterparties. Maybe that is not the best example of the criminality that is the business model of the rating agencies but it gives you some foresight into the power to make-or-brake those rating agencies have. If they are, by their own admission, willing to rubber stamp an AAA rating on some POS security/derivative what says that they can not [or are not doing it already] downgrade something if they get paid enough. As i said; the whole financial system rests in the hands of some semi-literate Wall Street apparatchik who thinks of himself like he is Gordon Gekko or George Soros. God forbid if they start suffering from the "God complex" and go apeshit insane and disregard any due process and due diligence and just upgrade and downgrade shit as they feel like for their own benefit or benefit of some large hedge fund or IB.
Thanks Cheeky. I 'm getting the feeling that this whole "SEC/Govt. takes on evil Goldman' thing is nothing but a big dog and pony show with an eye on the coming elections. Perhaps TPTB felt sufficiently threatened by the rise of an independent third party (ala the "Tea Party") as well as an awakening public increasingly realizing that the government IS the criminal.
Its just a show for the upcoming elections in November. This dog and pony bullshit will continue until the elections pass. I expect to be the main story in the summer with a buildup right until the elections. Then it will be swept under the rug with a 100-200 million fine and business will continue as usual. Either some people who are up for re-election need serious money so they concocted this little scheme or was it was DNCs strategic decision. Government as whole is nothing more than mechanism of control. No matter what political system it preaches, no matter what laws it enacts or does not enact; the underlying role of any government is control. Some only exercise the minimum amount of control while others go all in and then you get something to the like of North Korea or Stalin's USSR. I am afraid that the US and especially UK government are seriously flirting with some form of "totalitarianism light" version of governance which may escalate to a full blown totalitarianism if/when a significant percentage of the general populace becomes aware of all the irregularities, double plays and blatant unlawfulness propagated by the said governments. I am afraid that the day is nearing and the boiling point can not be more than a few scandals/passages or retarded laws/one new war away.
+10000
I have a similar view.
The more corrupt and unfair the government, the greater the need for a police state with police state tactics.
You need a police state to enforce a corrupt system. In a fair and just system where laws and enforcement are applied equally regardless of circumstances, there is little need for police state tactics because the people know the rules and the consequences for disobeying just laws.
If for example, legislators, regulators, bankers, and MNC's conspired to steal from their fellow Americans through the public treasury (a treasonous act outlined in the constitution as punishable by death in the coinage act), you would find a more paranoid governing system seeking to protect itself from vindication. They would build a security aparatus to protect themselves while telling the public at large that it is to protect the public - and blaming some other entity that it is claiming to protect the public from - hypothetically speaking.
I presume you know of a sociological concept of unifying threat. By creating some universal threat [in the original literature universal was understood as encompassing of something] various societal sub-structures[groups] or even whole societies can be unforcefully forced to reconcile their differences and unite with the goal of surpassing the threat with their coordinated actions and unique methodology. This method was used in many societies, such as Nazi Germany [Jews, Masons, Bolsheviks etc etc], Stalins USSR [Khazars, Chechen's, Jews[later period]] and yielded short/long-term success. While that is taking the concept of unifying threat into the extreme the concept is prevalent if not paradigmatic for many of todays nation-states and political structures such as the EU[the threat of potential conflict which lays in every Difference with the highest potential for conflict lying in sovereignty and cultural identity of a particular sovereign nation-state], USA [the phantasm of domestic terrorism, terrorism in general, WMDs, Iran, Iraq, radical Islam]. While those are just some of the applications of the aforementioned concept the same can be applied when one wishes to re-enforce its position [which position is irrelevant]. UK managed to transform itself into a closed society, monitored 24/7/365 during the Labourist reign starting in 1997. USA managed to close itself not to foreign individuals but its own citizens with the enaction of USA PATRIOT Act and structuring of Department of Homeland Security [which is in itself structured very much like KGB, meaning that it very own nature is paranoid and the reason for DHS existence is paranoia itself]. What im trying to say with this little introduction is when circumstances require so it is very easy to "manufacture an enemy" which will further whatever cause you need. So this action being undertaken by the SEC can be all a matter of a great circumstance which occurred naturally trough the chaos of 2007,2008 and it is now exploited by those who see that they can benefit from pursuing the question in matter or it can be completely manufactured to achieve the same. I am almost certain that DNC and Obama will try to pitch this as their "fight against the corruption on Wall Street which has long gone unpunished during the two mandates under George Bush" or "it is now clear that the new financial reform bill must pass to prevent any such thing occurring in the future, no matter what the GOP representatives say about the extreme regulation which is the heart of this bill.". I mean there is a lot of ways he/they can spin this and win the upcoming elections. I mean if i could figure it out, then their machine made of immoral spin-doctors can also figure it out.
Whether you believe in the validity of it or not "climate change" is the ultimate unifying threat - the "management" of which can be used to justify control over just about every and any thing.
Dog and pony show - yes. But there is a distinct whiff of desperation. Despite all of the wonderfully staged and eloquent rhetorical moments, this is a White House that is still green. Not dumb, but green. Things are starting to spin out of their control. Most politicians' strongest instinct is that of survival. They will throw over anyone they need to to address that need. The President and Congress are looking for their scapegoats. As Ratigan's puppets and other approaches make the more accurate message of 2007-2008 accessible to a broader audience, I expect that we wil start to see real [political] blood-letting commence, as the pillars of crony capitalism turn on each other.
A more experienced team might have been able to keep this thing contained, but I don't think this one can. You know it's getting bad when former Pres. Clinton starts bad-mouthing Rubin and Summers in a cannibalistic attempt to save what shreds of his presidential legacy, and wife's political ambitions, remain. And he obviously agreed to play Brutus so that the Obama administration could keep its hands clean.
Correct. And for god's sake the corruption of the ratings cartel was exposed back in the mid-90s by Frank Partnoy in "Fiasco". He describes in detail how he just calls up S&P et al and they TELL HIM how to game the system until they can find an excuse to slap an AAA label on the crap bonds his bank is issuing. There's no excuse for not knowing this when you have 8+ figures of capital to deploy.
And even if you somehow missed that, try sitting down and thinking for five minutes. Let's see, rating agencies are paid, not by me, but by the banks who issue this crap. Gosh, do you think there could be a conflict of interest there?
And what is this CDO I'm buying made of? Good loans? No, it appears to be crap loans made to losers who'll never pay it back at the height of the biggest credit bubble in history, which is somehow apparent even to a dumbshit like me. Hmmm...am I somehow "safer" because I'll be the last one in line to get the bullet in the back of the head after the rest of this garbage defaults? If I just stack enough piles of shit together will a pony appear in there?
We now need to put two Paulsons in jail.
Let's end the War on Drugs, and free up some space for the mf'ers on Wall St, and in DC.
Sounds like a plan to me, anyway.
If justice isn't done soon, something in the psyche of the average hard working person is going to break. Then the result won't involve prison bars, but rope and lamp posts.
Where are the damn cops? Time for a posse.
why aren't they ending the war on drugs? do you think the few states that have medical marijuana will open up this dialogue? i live in a state that passed MM 10 years ago. only recently the store fronts have exploded, one on every corner. it is huge business. the state just now put a tax on it. but it is still considered a federal offense. constant bickering between state/federal. i think you have to register your name so that counts me out. the gov wants to get lists with names so to criminalize anyone if ever want to or watch you.
Is Goldman the "scapegoat" for global politicians?
Love Simon, Hate Bill. Regardless, thanks for posting ZH.
Ok, so it appears that John Paulson saw that the emperor wasn't wearing any clothes. Let's say it was a cold day. JP says to himself, "Man, the emperor's pecker is going to be practically inverted due to the temperature. With the Viagra market mentality, everyone else thinks the opposite. There's gotta be someone out there that will take the other side of this bet." Yup, clearly it's criminal to see things as they are and profit from them. Anyone else see John Paulson being painted as a scapegoat here?
No. He was part-and-parcel to the whole kit-and-kaboodle.
This is what you're saying: Little Jimmy Paulson knew that the store owner was an alcoholic. He talked his older brother into getting a bottle of booze and dropping it off at the store. Gratis, of course.
Later that day, Little Jmmy walked into the store while the store owner was in the back, snoring and drooling over the break-room table.
Little Jimmy smiled, rubbed his hands together in anticipation of the spoils for his brilliant "plan." Little Jimmy is a pretty smart lad, isn't he?
So the ratings agencies were asleep at the switch. Does that somehow make it okay to collude with Golden Slacks to steal from firefighters, teachers, nurses, civil servants and tons of pensioners worldwide? There is a discrepancy between what you know to be the truth and what the gate-keepers of the truth know to be the truth. You also know that the reason the ratings agencies were compromised was because they were bribed by the very bank you're doing business with. Is that really okay with you, hidingfromhelis?
Please, take your, "It was just good business to take advantage," stuff out of here. It was unethical, to say the least.
Please, take your, "It was just good business to take advantage," stuff out of here.
Please don't put words into my mouth or assume intentions on my part. From what I've read, Paulson saw financial instruments that he thought were crap but everyone else loved. Kool-Aid was flowing freely at the time. He approached Goldman Sachs and specified which financial instruments he wanted to bet against and paid them for putting that package together. GS then marketed and sold that package to someone that expected to make money on those financial instruments. Unless I'm missing some action taken on Paulson's part, I fail to see his actions as being unethical.
Paulson wanted to bet against garbage and specified exactly which garbage. GS put that garbage portfolio together for a fee and marketed it as Grade AAA, and someone bought the Grade AAA garbage without due diligence. Well, maybe due diligence at the time only consisted of checking the published rating and assuming that real estate values could only go to the moon.
If I had followed through on my gut instinct to short Wamu at around $20 (while you still could) after selling all of mine in the mid $30's, would I then have been taking advantage of the ...firefighters, teachers, nurses, civil servants and tons of pensioners worldwide... that had investments in funds that contained Wamu? Even just my act of selling it meant that there was a buyer. Do I owe the end buyers because I made money and they lost money? I knew it was going down and I sold it as fast as I could. Is that unethical?
The alcoholic argument above makes no sense, because Paulson didn't approach the end buyer and attempt to influence or manipulate them. He simply bet against something that someone else assumed could only go up.
Whoever thinks anything will come out of this dog and pony show needs to have their head examined. Goldman IS the Government.
Agreed. This will be lost in the court system and people will forget it even happened.
Jesus is coming back too. So don't take any action. The authorities have it all well in hand. You don't have to lift a finger. ;)
Bogus financial reform to pass, SEC will appear to have some integrity, Obama will look like he is taking on the TBTFs, ect.. Like gold plated tungsten, looks good on the outside. Appearance of change without real change. Appeasement.
whoever simon johnson is, i guess he thinks our system is designed to lynch every successful person he resents
Ding ding ding.
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
Gentlemen, Simon is worth taking a listen to...
this is not the whole story. Paulson was a GS client and was perhaps asked to participate in the deal. He was not an originator if you read between the lines here, he was a coat tail rider.
http://www.ritholtz.com/blog/2010/04/profiting-from-investments-designed-to-implode/
would the property market have imploded without certain wall street players having a vested interest in making it do so, knowing it could game the government and the Fed?
I post this from a previous:
Paulson handpicked the securities that ACA then stress tested. Bear Sterns owned 38% of ACA didn't it, 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?
I agree that 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 responsibility, 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, ACA or GS may have to answer this point too.
Also, I am not a betting man (well ok I am) but I am also betting that GS took a hit on this deal even after making 15-20 million in fees from both sides, but (along with Paulson) made several hundered million our of buying CDS protection to over off-load it risk, pretty close to immediately afterwards.
I also think that IFK and ABN taking pieces of this deal may have been part of other deals that ABN and IFK (or KFW) may have done with GS that made a lot more money for each of these parties. But then whatis the point on betting on a rce that is over. Who is going to short GS to zero and watch it also get taken over by who, BAC or C or JPM?
Maybe I'm just too cynical but fiduciary responsibility means nothing in the past, now, or ever.
Case in point: VXX. This product was designed flawed... the 1-2 month roll-over guarantees it sucks. But I see millions of shares traded every day.
Is see a bankrupt company's stock trade for weeks after trading should be halted.
I could go on but I won't. Indigestion.
"DOJ should immediately break up Goldman Sachs into many smaller entities, due to the firm's unquestionable (allegedly) criminal monopolistic impact on the marketplace."
To: Mr. Tyler Durden
From: DOJ Office of Public Affairs
Dear Mr. Durden,
In response to your above request for a DOJ investigation, Mr. Holder is out of town this week. Mr. Holder is honored to receive the "Empty Suit of the Year" Award from his Alma mater Columbia Law School.
The DOJ would like to remind you, Mr. Holder has yet to be sworn into his position as AG. Once sworn in, we expect AG Holder to report to work sometime on or before November 2012. At which time the AG shall review your request in the order it was received.
Thank you for your continued interest in AG Holder's career.
Sincerely,
Jack A. S.Staff
Faceless Bureaucrat
US Department of Justice
***Security Clearance Only***
Forward: NSA--FBI--**ACTIVE BLOGGER ALERT** *Durden, Tyler*
** Possible Domestic Terrorist** ***Elevate Code Orange***
10!
CC: Acting AG "Place" Holder
Best of the day LOL>
Cynicism is understandable. But on 4/14/10, a Rasmussen poll showed RP in a tie with BO for the White House.
Something big is happening here. The tide has turned.
The Great Unravelling is beginning.
Dog and pony show deceptions will not do.
Yes, I saw that poll on the Drudgereport and was very surprised there was no mention of it here as an article on ZH? Inconsistent with previous coverage of RP here, as he is clearly not an insider and politics & money go hand in hand.
I completely agree, it shows an awakening with tea parties and Ron Paul.
On GS:
BIGGEST QUESTIONS:
AN -- I can't find a way to send a non-broadcast msg direct to you, so I'll compliment you here, that over the past year+ your contributions have been unusually cogent and perceptive. Thanks, & please stay active here.
(excised dup)
Sorry, right now I think cynicism is unavoidable.
Even if RP won the election, the daily grinding he would get in the MSM would have those who let the TV do their thinking believing that he was the source of the problem, not the solution, after the first few months.
They would highlight every gaff or mistake with extended coverage for weeks while ignoring the message and any successes. Scandals and allegations would arise in timely fashion to knock good news out of the headlines. Gridlock would abound since congress (minus any tea-party or libertarian-types) would not rock the boat or stand up to those who funded their campaigns. Since every tough decision has a downside, those adversely effected would be on TV 24/7, and the necessary pain required to fix things would be laid fully on RP rather than those who created the situation. And Paul is not known for his charisma and way with people.
People tend to acknowledge that candidates who spend the most on advertising during the campaign almost always win. However, I think people underestimate the value of 'advertising' when it comes during the newscast, and not during the breaks in between stories. If the press is on your side, you are much more likely to win. Some would say that the current administration is evidence of this. And who, exactly, owns the press?
The only hope I could foresee from his election would be that it was an indication that a majority of people were learning that they need to get their information from a variety of sources, and treat each source with some skepticism. People can judge for themselves how likely that is in our current society.
Just more babbling without saying anything of substance. When you stop watching t.v. for a period of time you realize what a waste of time it was and how it reduces your intelligence.
The mainstream media, mainstream political pundits, and the two major political parties themselves have no clue about the "base" of the tea party movement. It doesn't belong to EITHER the Dems or Repubs. The base of the tea party movement is fed up with BOTH major political parties, because when it comes to the really important things like war and the economic genocide being waged on the middle class W-2 wage earner and his/her kids, there is NO difference between the two major parties.
Steal $50.- from my mother with gun - you're a criminal. Clean out every pension in the country and leave them destitute - you're a hero.
It may well take a third party to overpower the corruption, but I still maintain that the Great Unravelling has begun.
( I don't watch television ).
*sigh*
And it was such a nice Chumbawamba-esque rant.
Too bad you deleted it.
A shame.
Actually I cut/pasted it into a response I was posting to another comment way up near the top of this section. It seemed more appropriate in that context and I deleted this one so as not to be redundant. I should have put <see above> or something.
"And whatever happened to that FBI investigation into SAC?"
I believe they filed in the same spot they put that file on BCCI and its connections to one George H.W. Bush.
Now let me see....who was in charge of that investigation. Oh yeah...it was the head of the Justice Department's criminal division, one Robert Mueller -- oddly enought appointed by one George H.W. Bush.
Hmmmmm....now let me see....what position does Robert Mueller hold today?
Oddly enough, he is the present director of the FBI.
Funny how that works out.....
"And whatever happened to that FBI investigation into SAC?"
All Available FBI Manpower is Currently Tied Up
Chasing 3 Cuban used mortgage salesman in Florida over a $300k mortgage scam...
You know the BIG FISH...
The FBI will be all over Florida, Phoenix and San Diego for penny ante mortgage application frauds... But NEVER look on Wall Street...
I long for the good old days when the "other" Mafia controlled Wall St. At least union and municipal pensions lost less and the payoffs were cheaper than a Portfolio manager's fees. Hell, even those guys didn't mess with Grandma's little bank CD.
maximum fine: $1bn. then back to theft, i mean buisness.
As underwriter of Abacus, Goldman had a legal responsibility to disclose all material issues in the prospectus. They didn't.
Paulson had no such duty. Period.
We all may disagree on what's ethical. I think it's easier for us to agree on what's illegal.
PAULSON HELPED TAKE DOWN RBS(ABN)
from Mish's blog
"British taxpayers have a direct material interest in the outcome of the fraud case brought against Goldman Sachs by the US financial watchdog, the Securities and Exchange Commission.
Because the bulk of the loss on the transaction at the heart of the charge against Goldman ended up with Royal Bank of Scotland, the bank where British taxpayers have an 84% stake.
The material fact to dwell on for now is that on 7 August 2008, just before Royal Bank was semi-nationalised, it paid out $841m to Goldman Sachs to settle a claim on credit insurance provided by ABN, the Dutch bank which Royal Bank had acquired (or to be more precise, it had bought a big bad chunk of ABN in the autumn of 2007).
Goldman then passed this $841m to the ultimate beneficiary of the insurance contract, the giant US hedge fund, Paulson & Co.
Now the SEC claims that the insurance contract would never have been written, and therefore the loss would never have fallen on RBS, if Goldman had told the truth about certain financially important elements of the investment product that was being insured."
WTF
Has Mish been asleep for the past 4 years. This is old news FFS.
It is a nice try to divert the attention from GS but this is a no-go.
Paulson's short positions in British banks were perfectly legal and in accordance with FSA regulation. No naked shorts were employed in taking the said position. Mish is like a little attention needing bitch who wishes to capitalize on the controversy du jour and bring itself back to into the spotlight from the depths of hell in which he has fallen by the guilt of his own stupidity.
as the markets have rallied life in the blogosphere has become very competitive with ZH and CR and perhaps a couple of others weathering the storm and growing. Ritholtz, Mish, Blodget, Salmon etc. appear to be suffering big time and it shows in the style and quality of their blogs. Roubini who had a great blog fell back to earth 10 months ago and continues his descent into obscurity.
yeah me thinks so too.
i really like max keiser RT? report. about 25 minutes long. but the commenter's never comment on the content. i don't understand. the tread seems like what twitter would be like. documenting your day or something.
i use to enjoy naked capitalism but some commenter told me to go interview for an ann coulter opening on fox news. i dissed soros. fuck you NC.
stupid Home Box Office inc removed the video...
This is simple. If the administration is serious about this, they'll appoint someone of the caliber of William Black to head up the investigation and prosecutions.
Anything less, and it's just political ploy to manage and massage the national psyche for their own ends.
That would be like winning the Lotto. Odds Millions to 1 . Black would not lay down or put on a charade.
Quote: [If he wants to attack the moral bankruptcy in finance, he should be as much concerned about those who bought the shit without understanding it, because they didn't really care if it blew up at a later date.]
It is her fault for looking so sexy, she can't complain.
The problem is that the SEC is rolling this one, and they are lightweights.
Obama should unleash the FBI and the Justice Department using the RICO statutes.
But he probably won't IF this is just for show.
The FBI is only good for sending the likes of Bradley Birkenfeld and Thomas Drake to jail.
Got that!!!
wow sgt, why hasn't ZH touched on these two. whistleblowers and obstructing justice. WTF, this is what really scares me about this place.
I realize that some subjects are too complicated for many Americans -- such as arithmetic and economics -- so please allow me to explain this stuff.
The other week the national media reported the testimony of Robert Rubin, former Secretary of the US Treasury, who walked away from Citigroup with hundreds of millions of dollars after having sold DEBT to various investors.
This DEBT that Rubin sold was structured such that if it lost value, the buyers could sell it back to Citigroup at its original price.
Amazing!
Of course, the federal government (the taxpayers) had to rush in and buy it back, since Citigroup didn't have the money.
Why would they? After all, they were selling DEBT.
The national media would have us believe that all was proper.
This past week it was reported that the S.E.C. has FINALLY filed a legal action against Goldman Sachs. Now Goldman Sachs, together with one of the largest hedge funds, John Paulson & Co. (the hedge fund which employed the former Federal Reserve chairman, Alan Greenspan), created financial instruments (they sold DEBT) which were designed to make them a colossal fortune while destroying a large segment of the American economy.
In other words, they sold DEBT to destroy the economy!
There were many, many such deals of this nature which the national media would have us believe were proper.
This was why the federal government (the taxpayers) rescued AIG, Goldman Sachs, JP Morgan Chase, Morgan Stanley and General Electric (GE).
It was also reported this past week by the national media that GE paid no federal taxes for 2009. GE was rescued - by the taxpayers - for selling DEBT, but of course, GE isn't one of those taxpayers.
The national media would have us believe this was proper.
In 2009, the top 25 hedge fund managers averaged $1 billion in salary. Now these hedge funds are normally registered offshore, so they pay no taxes.
And these hedge fund managers can defer their incomes -- so they pay no taxes. (They draw humongous living expenses through their hedge fund as business expenses -- so no need to worry about their survival. The tax laws do not allow us bottomfeeders to defer our incomes, of course!)
These hedge funds principally peddle....DEBT.
I have now explained why the national debt is so large, and why there is so much deficit spending. The US government sells DEBT, to pay for all the other DEBT, sold by all those DEBT-financed billionaires.
Understand now?????
We'll see how this plays out over time in the courts. There is legal, there is moral, and there is what actually happens. The latter may or may not, in the end, have anything to do with either of the former.
Read the pitchbook and Goldman comes out unctious and morally bankrupt, but the hard part---illegal or not---will be decided by the courts. It could go either way. One thing it will NOT be is a jury trial. There are not enough "peers" out there, who can follow the deal, to fill the jury box. When the deal's structure flow chart is posted at trial, even the judge's head is going to explode.
ACA is (was) idiots, as they put their stamp of approval on what Goldman was shoving in front of them (which was allegedly at the behest of Pellegrini and Paulson). Goldman stuffed the pitchbook with pages and pages of drivel championing the "proprietary models" used by "never had a CDO not perform" ACA in vetting the selected portfolio. Nowhere is it mentioned that the portfolio was not originally selected by ACA, in fact, the opposite.
As for the Ratings Agencies, I think by 2007 only the most hopeless put any credence in what they said; their seal of approval is just backstopping for funds that want certain products and cannot have them unless this useless rating is applied by people who everyone on WS thinks are vastly mentally inferior to any major IB'er. Stanford, Harvard and Wharton do not send too many of their MBA's to the Rating Agencies. Nor to the monolines. Fair or not, that is the view.
Maybe Goldman's lawyers are smarter than what the SEC can put up against them in court. Maybe the judge will have a political agenda. Maybe in future civil actions a fair fight will result if the buyer of one of the "victims" (IKB)---who is John Grayken of Lone Star Funds---decides to try to bleed Goldman. All will be revealed.
As for Paulson, nothing much there unless he specifically asked to be kept anonymous and his reasoning secret (though even then ABN and IKB had to know that their was a counterparty to a synthetic CDO who was betting on failure). He probably made multiple bets against the same securities (saves time on research if one has already found a pile of RMBS formed from the mortgages of illegal immigrants and fruit pickers who got zero-down, million dollar loans). Those mortgages should never have been originated, right Angelo? That is not Paulson's fault.
There's a pecking order on Wall Street and each level has nothing but contempt for those below it. It's a more sophisticated and higher paid form of school bullying. Goldman's staff must have split a gut during Blankfein's Congressional hearing when he kept calling ALL of his customers "the most sophisticated investors in the world". Paulson might be aptly described, but IKB?
There's enough stink in this for anyone or everyone to come out smelling bad. In the end it will just depend on what message those in charge decide they want to send, which is to say which message best suits those in charge in this, an election year. Simon Johnson and Bill Maher, by their comments, suggest the prevailing mood GS and Paulson are going to face, especially if the economy turns south again. As I said, there is legal and moral, and then there is what actually happens.
This is the system we have. This is what it leads to and allows. Change it or live with it, those are the only two choices.
UP, are ya!
thought you were math not law? by†
Up? It's 9am Monday, and markets are (so far) on fire.
Not law, just trying to look at this in a practical manner, which is to say with the jaded eye of a cynic, but with a hopeless streak of romanticism and a child's desire to think that just once, the universe will pretend it's fair.
hell, i spend my days with men looking for your balls. literally, usually white (the ball).
the sheriff is coming into town tomorrow, for a few days. got to accommodate†
though you take my breath away.
fantasy
tripping on nothing.
we ALL... have just been raped by these fuckers. i spent my whole life avoiding being raped, physically. guess what kath.
+ 100
I am getting sick of these first-post trolls saying Paulson (or whoever) did nothing wrong. OK Paulson did nothing wrong - in fact - nobody did anything wrong, it was just the old invisible hand of the market that screwed 97% of the American public and rewarded 3% of them, for doing nothing other than shuffling electronic paper to the Cayman Islands and back a few times. And don't go quoting your laws to me, you're almost as bad as these Bible thumpers quoting Matthew 5:7 or whatever doggerel.
Look you cockholes, for once a big fish might get fried, and you can't even ignore some slightly irritating Democrat snark? Christ, you'd exonerate the murderer of your own mother to justify some profit-stealing scheme. Heck, if you weren't such whiny morons, you could probably figure out how to make a buck off all of this, if you would just STFU.
The point is, most of these scam artists should suffer a fate far WORSE than "$20 million SEC fine". They should have their ball-sacks stretched to the moon and back. They should be locked away in a barrel and be ass-raped on the hour. They should be dragged behind a speeding vehicle locked inside a full Port-a-John. Not that they did anything wrong...
It seems to me that John Paulson joined in a conspiracy to defraud a party to a transaction. If indeed Paulson helped construct the portfolio, filling it with trash that he intended to short, he was a party to the fraud as he knew that someone had to be long if he was going short. He knew that GS would be selling this entity to someone long. I am sure it would be very difficult to prove intent to defraud, so Paulson may get away with this. If the long position buyer had been informed that the short investor had picked the portfolio, I don't think anyone would take a long position, so the only way GS could sell a long posi16tion was to hide Paulson's involvement. Paulson had to know this or there would be no long side to the deal.
"If the long position buyer had been informed that the short investor had picked the portfolio, I don't think anyone would take a long position, so the only way GS could sell a long posi16tion was to hide Paulson's involvement."
Good point. Some might argue, and argue successfully, that in any zero sum transaction the two sides hold opposite views, but in this transaction that argument does not pass the smell test. Even a moron at a bank trust desk, if told that a major hedge fund had personally selected the worst dross he could find because he wanted to bet as much as possible against it, might have passed on the deal. At the very least they would have done additional due diligence.
In reality, back then everyone was just chasing yield, and anything that seemed to promise a better-than-market rate of return was being scoffed up with absolute minimal DD. All the origination desks knew this, and all knew they could sell shit-in-a-bottle and pass it off as Estee Lauder Beautiful. Yes, it's caveat emptor, but in this instance the lack of disclosure may seem material to a sitting judge. For the sake of a better system, I certainly hope so.
Paulson managed money for Goldman.
Dont be fooled by the "sacrafical lamb" that Goldman Sachs will be offering up as a result of
fraud charges pending against them.
This is pure "theatre" at it's best. The real "crime" is that Goldman Sachs "cornered" the
real estate market and then crashed it with the help of hedge fund manager Paulson.
This explains why Paulson, hedge fund trader was in the winners circle with Goldman Sachs
with the trade of a lifetime. Profiting almost 10 billion from shorting subprime.
A few months later, Paulson is again in the winners circle again with Goldman Sachs,
this time betting against Greece.
It is as if Paulson, is colluding with Goldman Sachs on these trades. Paulson is getting "inside"
information from Goldman, about Goldman's intent to crash the real estate market?
Is it possible that Paulson, is actually trading Goldman's money for them, so Goldman would not have to
show a 20 billion dollar profit betting against subprime, and sparking the liquidity crisis?
The idea is not that far fetched. Months before the credit crisis, Goldman Sachs unloaded
a bunch of AIG goodies to Deutch Bank and Gerneral Society in order to knock themselves down from
the number 3 spot from number one in terms of the AIG payouts as this post at zerohedge reveals.
Right on Simon!