Yesterday JPMorgan, today Goldman (again) and Deutsche Bank. Following the completion of a two-year report by the Senate Permanent Subcommittee of Investigations into the role of Goldman and other banks in the housing collapse, the FT reports that "US Senate investigators probing the financial crisis will refer evidence about Wall Street institutions including Goldman Sachs and Deutsche Bank to the justice department for possible criminal investigations, officials said on Wednesday." According to Carl "Shitty Deal" Levin, head of the subcommittee, "banks mis-sold mortgage-backed securities and misled investors and lawmakers. “We will be referring this matter to the justice department and to the SEC [Securities and Exchange Commission],” he said. “In my judgment, Goldman clearly misled their clients and they misled Congress.” Bloomberg further clarifies: "At a briefing today, Levin said he believed Goldman Sachs executives weren’t truthful about the company’s transactions in testimony before the subcommittee at an April 2010 hearing. He said he would refer the testimony to the Justice Department for possible perjury charges...In my judgment, Goldman clearly misled their clients and they misled the Congress.” Levin said. And Deutsche Bank's Greg "I am short your house" Lippmann was not spared either: "Republicans and Democrats signed off on the report, which said Greg Lippmann, Deutsche’s top CDO trader, referred to assets underlying the securities as “crap” and “pigs” at the same time as his bank was selling them to clients. Prior to the crisis, Mr Lippmann built a short position in CDOs, betting that they would fall in value, even though Deutsche had a large long position on the securities." Just more smoke and mirrors? Or are we getting to a critical mass where even the very corrupt judicial system will have to respond?
Mr Levin said that, despite Goldman’s assertions it had no grand strategy to bet against the US mortgage market, there was a “big short” not disclosed to its clients. The omission, he said, misled customers who were not aware of the financial incentives Goldman had when creating and marketing CDOs.
Goldman said: “We did not have a massive net short position because our short positions were largely offset by our long positions, and our financial results clearly demonstrate this point.”
The report is the last major congressional probe into the crisis that forced governments to spend billions of dollars to rescue banks.
“The report tells the inside story of an economic assault that cost millions of Americans their jobs and their homes while wiping out investors, good businesses and markets,” said Mr Levin. “The threads that run through all the chapters in the sordid story are conflicts of interest and extreme greed.”
And from Bloomberg:
In a statement, Goldman Sachs denied that it had misled anyone about its business.
‘Truthful and Accurate’
“The testimony we gave was truthful and accurate and this is confirmed by the Subcommittee’s own report,” said Lucas Van Praag, a company spokesman. “The report references testimony from Goldman Sachs witnesses who repeatedly and consistently acknowledged that we were intermittently net short during 2007. We did not have a massive net short position because our short positions were largely offset by our long positions, and our financial results clearly demonstrate this point.”
With today’s release, the Senate panel completes a two-year investigation of mortgage firms, federal regulators and Wall Street banks highlighted by the expletive-laden interrogation of Goldman Sachs executives including Chairman and Chief Executive Officer Lloyd Blankfein a year ago this month.
“Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing,” Levin told reporters today.
Will Goldman's $550 million settlement have been in vain? Hardly. After all the ball is now back in the SEC's court. And as everyone knows the SEC is merely a stepping stone for incompetent prosecution lawyers before they find much better paying jobs where they can continue their careers as incomponent defense lawyers on Wall Street.
The report comes less than a year after Goldman Sachs paid $550 million to resolve Securities and Exchange Commission claims that it misled investors in a collateralized debt obligation and its executives were called to testify before two congressional panels and a commission formed to investigate the worst financial crisis since the Great Depression. A committee of Goldman Sachs employees led by E. Gerald Corrigan and J. Michael Evans released 39 recommendations on Jan. 11 for the company to reform its business practices.
The subcommittee urged regulators to “identify any violations of law” in the investment-bank transactions described in the report.
We are not holding our breath for regulators to find anything that a bribe here and there won't confirm was perfectly in line with the law.
Full Senate report (link):
Senate Report GS