Goldman Sachs

[Bruce551]

The Financial Crisis Inquiry Commission Chairman Phil Angelides put it to Goldman Sachs chief executive Lloyd Blankfein during a public hearing in January:

"Your firm sold a significant amount of subprime mortgage-related securities. And it appears, at least according to public documents and other reports, that you may have simultaneously betted against the securities you sold to clients.

According to the reports, you sold about $40 billion in 2006, 2007. In December 2006, I think, you came to the conclusion the mortgage market was heading south and you began to reduce your own positions.

And many of the securities that you sold to institutional investors, other folks went bad within months of issuance. Now, one expert in structured financing said, 'The simultaneous selling of securities to customers and shorting them because they believe they are going to default is the most cynical use of credit information that I've seen.'

Do you believe that was a proper legal, ethical practice? And would the firm continue to do that practice?

Or do you believe that's the kind of practice that undermines confidence in the marketplace?"

After Blankfein explained that Goldman sells these positions to investors who want them, and then takes contrary positions to protect itself against that risk, Angelides distilled it to its most elemental form:

"It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."

Criminals!!!!!!

:twisted:

[eagle]

check out Matt Taibbi on the US bank bailout

http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

you got it right Bruce ,,criminals !!

[Hobbes]

"Ethical practice...."???? WTF?! :shock: :?

Since when has economic activity in capitalism employed 'ethical practices'? Gosh those commission members must have smoked some of the good stuff but I liked that distillation at the end nonetheless.

And yes, bunch'o criminals (Apologies to any Scouser if you think that it would tarnish your hard earned reputation :wink: ).

[Stramash]

oh dear. I suspect VBroker will have something to say about you pathetic pinko commie dope smoking tie dye wearing liberals...

:roll:

[Bruce551]

"fraud and potential criminal conduct were at the heart of the financial crisis"

Senator Kaufman: Fraud Still at the Heart of Wall Street

http://www.huffingtonpost.com/simon-johnson/senator-kaufman-fraud-sti_b_500146.html?view=screen

Last week, Senator Ted Kaufman (D., DE) gave a devastating speech in the Senate on "too big to fail" and all it entails. A long public silence from our political class was broken -- and to great effect. Today's Dodd reform proposals stand in pale comparison to the principles outlined by Senator Kaufman. And yes, DE stands for Delaware -- corporate America has finally decided that its largest financial offspring are way out of line and must be reined in.

Now, the Senator has gone one better, putting many private criticisms of the financial sector -- the kind you hear whispered with conviction on the Upper East Side and in Midtown -- firmly and articulately on the public record in a Senate floor speech to be delivered tomorrow (this is a direct link to speech). He pulls no punches:

"fraud and potential criminal conduct were at the heart of the financial crisis"

He goes after Lehman -- with its infamous Repo 105 -- as well as the other entities potentially implicated in those transactions, including Ernst and Young (Lehman's auditors). This is the low hanging fruit -- but have you heard even a squeak from the White House or anyone else in the country's putative leadership on this issue?

And then he goes for the twin jugulars of Wall Street as it still stands: The idea that we saved something, at great expense in 2008-09, that was actually worth saving; and Goldman Sachs.

"this is not about retribution. This is about addressing the continuum of behavior that took place -- some of it fraudulent and illegal -- and in the process addressing what Wall Street and the legal and regulatory system underlying its behavior have become."

Our system has long been imperfect, but it used to work much better:

"When crimes happened in the past (as in the case of Enron, when aided and abetted by, among others, Merrill Lynch, and not prevented by the supposed gatekeepers at Arthur Andersen), there were criminal convictions."

Here's the most intriguing bit -- he challenges the moral authority of those who think they are doing "God's work" in finance.

"If we uncover bad behavior that was nonetheless lawful, or that we cannot prove to be unlawful (as may be exemplified by the recent reports of actions by Goldman Sachs with respect to the debt of Greece), then we should review our legal rules in the US and perhaps change them so that certain misleading behavior cannot go unpunished again."

But that's not all -- he actually lays out the parameters of what should be, if our legal institutions still functioned, a compelling case against Goldman.

"Following these transactions, Goldman Sachs and other investment banks underwrote billions of Euros in bonds for Greece.

The questions being raised include whether some of these bond offering documents disclosed the true nature of these swaps to investors, and, if not, whether the failure to do so was material."

"These bonds were issued under Greek law, and there is nothing necessarily illegal about not disclosing this information to bond investors in Europe. At least some of these bonds, however, were likely sold to American investors, so they may therefore still be subject to applicable U.S. securities law. While "qualified institutional buyers" (QIBs) in the U.S. are able to purchase bonds (like the ones issued by Greece) and other securities not registered with the SEC under Securities Act of 1933, the sale of these bonds would still be governed by other requirements of U.S. law.

Specifically, they presumably would be subject to the prohibition against the sale of securities to U.S. investors while deliberately withholding material adverse information."

This sounds like a potential violation of Rule 10b-5 -- you are simply not allowed to sell securities in the United States while withholding material adverse information, i.e., what any reasonable investor would want to know (like the true indebtedness of a government, when you are being pitched on a sovereign debt issue). In fact, such actions are frequently considered serious fraud -- at least when the people involved aren't as powerful as Goldman Sachs.

And after having just spent a considerable amount of time with Hank Paulson's memoir, On the Brink, I have to ask: What did Hank Paulson know (as CEO of Goldman at the time), and when did he know it -- regarding the potential misleading sale of Greek government securities to US entities?

Goldman reportedly netted $300m from its Greek "swaps" and presumably more from managing subsequent Greek debt issues; this is the same order of magnitude as Mr. Paulson's payout when he left Goldman (around $500m, tax-free). ARGGGGG!!!!!!!

Who is Senator Kaufman and what power does he have in this situation? He is not a member of the Senate Banking Committee -- and if you think this is a regulatory issue, that reduces the weight of his voice.

But he is a member of the Senate Judiciary Committee and we are discussing here potential crimes -- or what should be crimes if the legal system still functioned. He was also a cosponsor of the Fraud Enforcement and Recovery Act (FERA) -- which was right on topic -- and is an experienced Capitol Hill insider who has studied these issues long and hard. He has also worked closely, over many years, with Vice President Biden.

The tide is turning, but not primarily through the actions of Senator Dodd and his Banking colleagues. Rather the biggest and most unruly players in our financial system have behaved in such an egregious manner that they will be brought down by the law -- either that, or they will further bring down the law.

I wanta see these Goldman Sachs Mo-fo's get some jail time!!!!!

[PiAnt]

Unfortunately mate, the system has shot itself in the foot.

It now finds itself in the unenviable position of needing these criminals to survive.

Som nam na.