Time for the media circus to go nuts. The AP reports that the Feds have just opened a criminal probe into Goldman: now it is getting interesting. And everyone was thinking that Eric Holder is a toothless puppet (well, that still has to be refuted).
In light of the fact that Goldman Sachs actively trades against its clients, it is now high time for the U.S. federal prosecutors probe into Goldman’s trading practice of Baidu IPOs as well.
For those who have forgotten the implications of the highly leveraged and opaque financial holdings (the true value of which rests at the mercy of market sentiment) and can turn blind eye to the highly volatile nature of the trading revenues combined with a literal tsunami of regulatory pressure and potential litigious onslaught (all issues which we have repetitively brought up in the past as what appears to be the sole voice of contrarian reason), Goldman Sachs holds a strong investment proposition. However, if fundamental considerations such as the company’s solvency, true economic profit (not the accounting earnings you hear preached from your brokerage’s sell side marketing propaganda cum research reports) and the sustainability of income are to be considered, GS should NOT appear among the preferred lot.
Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs. There was an audible gasp in court when the leader of the pirates announced, "We are doing God's work. We work for Lloyd Blankfein. We were functioning as investment bankers, only every day was casual Friday," the pirate said.
Long-term subsidies, like the Fed holding who-knows-what to maturity, equals soviet communism, as every hooligan knows. Short-term subsidies transfer credit risk, and they leverage parasitic behavior. Positive valuations assigned by shareholders to equities arise solely from anticipation of value transfer from firm debt-holders or resource transfers from US taxpayers. Debt-holder get a piece of this action too if governments overpay for “toxic” assets backing up their claims. But “everybody” receives more than fair value for their investments.
That is why the fat lady has sung and the SEC has acted. It is not that Goldman is the ogre that has broken the rules. Everyone has followed this same path, and there weren’t any rules either. There is only one critical difference between Goldman and the others: Goldman is the best, the most efficient. Because it is the best of the breed, the political focus will fall on them. The others will be tried only in the shadow of Goldman, after the show trial is over. Although the public relations team of Goldman came out with a very well reasoned document making their case to those of us who use the firm’s services. Of course, this has gotten great play in the financial press, but it is all beside the point. The issue is not the actual case brought up by the SEC but the entire structure of Wall Street – the fact that a 31 year old derivatives salesman is sometimes paid more than 100 times more than a manufacturing executive in Peoria. The inequality of the system is the issue or, putting it another way, the jealousy of the lunch-pail voter is the political dynamite that cannot be ignored.
Goldman Sachs claims great risk management skills, while it shirks responsibility for its role in the near collapse of the U.S. economy. The former is a myth, and the latter is a dodge.  As taxpayer wealth was destroyed, Goldman exploited the financial crisis it helped cause, while the U.S. was (and remains) at war.
Goldman Sachs released its 2009 annual report today showing it made net revenues of $45.17 billion with net earnings of $13.39 billion. In its shareholder letter, Goldman says it repaid TARP money, but did not mention the massive new taxpayer subsidies it continues to enjoy.
"Goldman did not and does not operate or manage our risk with any expectation of outside assistance."
Yet due to the influence of highly placed Goldman Sachs former officers, Goldman received--and continues to receive--enormous assistance from taxpayers.
Dear Attorney General Holder:
While the SEC lacks the authority to act beyond civil actions, the U.S. Department of Justice (DOJ) has the power to file criminal actions against those who commit financial fraud. We ask assurance from you that the U.S. Department of Justice is closely looking at this case and similar cases to further investigate and prosecute the criminals involved in this, and other financially fraudulent acts. Furthermore, if the DOJ is not currently looking into this particular case, we respectfully ask you to ensure that the U.S. Department of Justice immediately open a case on this matter and investigate it with the full authority and power that your agency holds. The American people both demand and deserve justice in the matter of Wall Street banks whom the American taxpayers bailed out, only to see unemployment and housing foreclosures rise.
April 19 (Bloomberg) -- Lehman Brothers Holdings Inc., which has been investigating whether any companies may have contributed to its bankruptcy, issued at least five subpoenas to investment firms and hedge funds including Goldman Sachs Group Inc., SAC Capital Advisors LP, Greenlight Capital Inc. and Citadel Investment Group LLC, according to court filings. Bankrupt Lehman is conducting its own probes separately from the 2,200-page report by examiner Anton Valukas that was published on March 11.
Don't be Left Behind.
Although it would seem that the Goldman-linked SEC case single-handedly killed the price of gold, it was only a catalyst to a technical correction that was overdue. Furthermore, gold’s long term outlook is further solidified by a couple of new “China factors.”
GS&Co marketing materials for ABACUS 2007-AC1 – including the term sheet, flip book and offering memorandum for the CDO – all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management LLC (“ACA”), a third-party
with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure. Given its financial short interest, Paulson had an economic incentive to choose RMBS that it expected to experience credit events in the near future. GS&Co did not disclose Paulson’s adverse economic interests or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials provided to investors...The deal closed on April 26, 2007. Paulson paid GS&Co approximately $15 million for structuring and marketing ABACUS 2007-AC1. By October 24, 2007, 83% of the RMBS in the ABACUS 2007-AC1 portfolio had been downgraded and 17% were on negative watch. By January 29, 2008, 99% of the portfolio had been downgraded. As a result, investors in the ABACUS 2007-AC1 CDO lost over $1 billion. Paulson’s opposite CDS positions yielded a profit of approximately $1 billion for Paulson.By engaging in the misconduct described herein, GS&Co and Tourre directly or indirectly engaged in transactions, acts, practices and a course of business that violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. §77q(a) ("the Securities Act"), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78j(b) ("the Exchange Act") and Exchange Act Rule 10b-5, 17 C.F.R. §240.10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, civil penalties and other appropriate and necessary equitable relief from both defendants.
I have warned my readers about following myths and legends versus reality and facts several times in the past, particularly as it applies to Goldman Sachs and what I have coined "Name Brand Investing". Very recent developments from Senator Kaufman of Delaware will be putting the spit-shined patina of Wall Street's most powerful bank to the test, as it appears he ain't playin'. Here's the speech from the esteemed Senator from Delaware (yes, the most corporate friendly state in this country), complete with an analysis that you will NEVER see in the mainstream media!!!
The euro could be in an over-sold situation, says Goldman Sachs and Dr. Feldstein. However, a potential correction can not disguise the elephant in the champagne room - the political and structural weakness in the single currency union.
Labor Unions Preparing To Take Goldman Sachs To Task, Push For Transaction Tax In Upcoming Widespread RalliesSubmitted by Tyler Durden on 03/11/2010 10:58 -0400
America's labor unions are finally waking up from their deep slumber and noticing the vast schism in American society between the haves and the have nots. The catalyst: Wall Street's $16.2 billion bonus pay day. As a result Richard Trumka, head of the AFL-CIO, the nation's largest union organization, and a firm supporter of the transaction tax which was proposed in late 2009 and then promptly buried after some serious lobbying by Wall Street, will announce today "two weeks of protests aimed at Goldman Sachs Group Inc., the most profitable securities firm in U.S. history, and the country’s five other largest banks. The AFL-CIO says it plans 200 events covering all 50 states, starting March 15." Summarizing the mood of increasing populist aggression across the nation against Wall Street's uber-wealthy is labor professor at UC Berkley Harley Shaiken: “Wall Street has become a symbol of greed run amok, and what labor is doing here is seeking to demonstrate that it is speaking for working families generally, union member or non- union member.” Strikes in Greece have already paralyzed the country. Will America soon follow?