The Goldman Sack's Mafia

[Danny]

We have a new Mafia in town, its Goldman Sack's. Their organized crime, luring investors to accept sub-prime mortages of each and every last house and building in America and not telling them that the property has no value. Here's is the proof:

http://www.startribune.com/business/...PQLanchO7DiUss

Those plutomonists must go. Congress both Democrat and Republican need to propose on the Dodd Economic Reform Bill right away. Goldman Sack's is also responsible for the 2007 housing collapse that lead to the bailout money from most corporate banks and American Car Companies. So that's why our nation is still under a Great Recession.

WORD FROM THE STREET PROPHET

Wall Street, GIVE US BACK OUR MONEY!

In Memoriam: Neda Soltani

[Papasito]

Wall Street, GIVE US BACK OUR MONEY!

You lose money to Goldman Sacks personally? How much?

[3WC]

Danny, even though you have only a superficial understanding of the issue, you should at least spell the company's name correctly.

[oladub]

We have a new Mafia in town, its Goldman Sack's. Their organized crime, luring investors to accept sub-prime mortages of each and every last house and building in America and not telling them that the property has no value. Here's is the proof:

http://www.startribune.com/business/...PQLanchO7DiUss

Those plutomonists must go. Congress both Democrat and Republican need to propose on the Dodd Economic Reform Bill right away. Goldman Sack's is also responsible for the 2007 housing collapse that lead to the bailout money from most corporate banks and American Car Companies. So that's why our nation is still under a Great Recession.

WORD FROM THE STREET PROPHET

Wall Street, GIVE US BACK OUR MONEY!

In Memoriam: Neda Soltani

Danny, There is already a thread titled, "The best way to rob a bank" which deals with this. You didn't mention that Goldman Sachs was President Obama's second largest campaign contributor having given something like $947,000 to his campaign not including money for the inaugeration. Nor did you mention that President Obama's office has declined to return this contribution given the controversy. Nor did you mention that as a Congressman, now White House Chief of Staff Rahm Emmanuel was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry" and that Obama hired former investment bankers Summers, Rubin, Gensler, Geithner, Kashkari, and who knows how many other Goldman and/or general inventment banking alums to work in his administration. Good luck in depending upon Chris Dodd to be your point man to do anything to reign in the bankers. It will be a first.

Over on the "best way to rob a bank thread I posted some related comments which I will refrain from re-posting except for the link to the Alan Grayson article.
Alan Grayson Discloses That Dodd Bill Covertly Eliminates Already Passed Legislation Requiring Full Fed Audit

It seems that you were taken in by the talking points caption and now find yourself on the same side as Dodd and opposed to Grayson, Kucinich, Conyers, Kaptur, Paul, and Bernie Sanders. Don't forget the role of Housing Secretary Cuomo who expanded Fannie and Freddie loans to all sorts of unqualified people for a $500 downpayment. He even went over the head of Fannie CEO Frank Raines to 'accomplish' this. While I agree with you that GS's executives are as crooked as can be, there are a bunch of bought out politicians, both D&R, who should be flushed with them.

[Retroit]

The corruption by the bankers was facilitated by the government-backed Freddie Mae, Freddie Mac, FDIC and FSLIC.

If I told you that you could gamble all you want and I would cover your losses, how much would you gamble?

[rb336]

ah, so good to see the old, discredited "it's fannie and freddie's fault" and blaming programs for low-income people aguments trotted out one last time. nostalgia in stupidity is a wonderfully humorous thing

[Retroit]

ah, so good to see the old, discredited "it's fannie and freddie's fault" and blaming programs for low-income people aguments trotted out one last time. nostalgia in stupidity is a wonderfully humorous thing

Discredited by whom? Certainly not by the bankers who have utilized the system for their own benefit [[and for the benefit of those politicians who maintain that system for them).

[rb336]

discredited by the vast majority of economists, including those on the reactionary side

[Retroit]

The majority of economists don't know what they are talking about because they are the products of a few misguided schools of thought.

[East Detroit]

Danny, There is already a thread titled, "The best way to rob a bank" which deals with this. You didn't mention that Goldman Sachs was President Obama's second largest campaign contributor having given something like $947,000 to his campaign not including money for the inaugeration.

Maybe Danny wanted to stick to his topic rather than turning it into yet another partisan bullshit match? [[Sorry, Retroit, but it's obvious here) I'll bet that like many corporations and people, they gave generously to both parties.... due to.... uh... civic minded generosity or something.

Anyway. Goldman Sachs played the old 'shorting' game with our economy. Was that their job? In a way, I can see that it actually is. If shorting is allowed, then they should be allowed to do it. On the other hand, I think shorting is a bunch of crap and shouldn't be allowed. It makes Wall Street a clown circus of Vegas proportions rather than a financial center.

[3WC]

Shorting is legal and its legality is not an issue re: the claims against GS.

Anyone seeking a better understanding of the whole debacle should read "The Big Short" by Michael Lewis. It would help to have a much better understanding of the mortgage business [[and Fannie and Freddie) than rb336 does but the book is very informative even if one does not have a degree in real estate finance.

There is an excellent history of Goldman Sachs published in 2007 and revised/updated in late 2008: "The Partnership" by Charles D. Ellis [[himself a heavy hitter.) It's a 750 page turner. GS is certainly the premier firm on Wall Street, which makes more money in more ways than any other firm. But as Danny pointed out, crooked as a corkscrew when it suits their purposes. I hope they get tagged big time by the SEC and the plaintiffs in a class action lawsuit filed this week [[for failure to disclose SEC issued Wells Notices, warnings to GS that it was under investigation for the conduct for which it has been charged.)

By the way, although not publicized much to date, GS was the prime advisor to Greece in structuring a series of off-balance sheet transactions which concealed for years Greece's impermissible deviations from EU financial regulations.

[Detroitej72]

I'll bet that like many corporations and people, they gave generously to both parties.... due to.... uh... civic minded generosity or something.

And now, thanks to the activist right wing judges on the Supreme Court, these corporations can give as much money to the politicians, in the spirit of civic minded generosity.

[oladub]

Maybe Danny wanted to stick to his topic rather than turning it into yet another partisan bullshit match? .

It really isn't so partisan. Both parties are being amply provided for by Golman Sachs and its peers.

Financial interests among McCain's top 20 contributors:

Merrill Lynch$373,595Citigroup Inc$322,051Morgan Stanley$273,452Goldman Sachs$230,095JPMorgan Chase & Co$228,107, Wachovia Corp$195,063UBS AG$192,493Credit Suisse Group$183,353Bank of

America $166,026, Bear Stearns$117,498Lehman Brothers$114,357

Financial interests among Obama's top 20 contribubutors:

Goldman Sachs $994,795, Citigroup Inc $701,290, JPMorgan Chase & Co$695,132, UBS AG $543,219, Morgan Stanley

$514,881

[East Detroit]

Dear <East Detroit>:

I thought you might be interested to know that, on Tuesday, the Senate Permanent Subcommittee on Investigations, which I chair, concluded the fourth in a series of hearings to explore some of the causes and consequences of the recent financial crisis. These hearings are the culmination of a year and a half long investigation by the Subcommittee.

As I mentioned at the onset of these hearings two weeks ago, the goal of this investigation has been to bring to light the policies, procedures, incentives, compensation structures, and regulatory failures that collectively led to the meltdown of the financial services sector. This man-made economic catastrophe put our economy into a tailspin, costing millions of jobs, depleting retirement savings, closing businesses, and necessitating drastic and unprecedented federal intervention to stave off a second Great Depression. This federal intervention was a bitter pill for Congress and the American people to swallow and made it clear that our country’s financial regulatory system was in need of broad evaluation and overhaul.

The Subcommittee’s first hearing on April 13th explored the role of high-risk mortgage lending. The hearing focused on a case study of Washington Mutual Bank, known as WaMu, whose reckless strategy to pursue higher profits by emphasizing high-risk exotic loans not only created hardship for borrowers, but also added excessive risk to the bank’s balance sheet. WaMu would then sell off these high-risk loans as mortgage-backed securities, building a conveyor belt that dumped toxic assets into the financial system.

Our second hearing looked at how federal regulators were aware of WaMu’s risky and reckless policies, yet completely failed to rein them in. Instead of exercising prudent regulatory oversight, the Office of Thrift Supervision [[OTS) repeatedly failed to act on major shortcomings it observed, and it thwarted other agencies from stepping in.

The third hearing dealt with credit rating agencies, specifically case studies of Standard & Poor’s and Moody’s, the nation’s two largest credit raters. While WaMu and other lenders dumped their bad loans and regulators failed to stop their behavior, the credit rating agencies rubber stamped these high-risk financial products with AAA ratings. These credit rating agencies operate with an inherent conflict of interest – their revenue comes from the same firms whose products they are supposed to critically analyze, and those firms exert pressure on rating agencies who too often put market share ahead of analytical rigor.

Finally, Tuesday’s hearing explored the role of investment banks in the development of the crisis. We focused on the activities during 2007 of Goldman Sachs, one of the oldest and most successful firms on Wall Street. Goldman Sachs was an active player in building the mortgage machinery that contributed to the economic collapse the following year. During the period leading up to 2008, Goldman made a lot of money packaging mortgages, getting AAA ratings, and selling securities backed by loans from notoriously poor-quality lenders, such as WaMu, Fremont and New Century.

The Subcommittee investigation found that in 2007, Goldman Sachs was betting heavily that the housing market would decline while it was selling investments in that market to its clients. It sold those clients high-risk mortgage-backed securities that it wanted to get off its books in transactions that created a conflict of interest between Goldman’s bottom line and its clients’ interests.

The Subcommittee’s extensive work has shown that at every stage of the game, the rules must be changed. This only further highlights the urgent and pressing need for comprehensive reform of our financial industry. I am disappointed that the full Senate has yet again failed to bring legislation to the floor intended to do just that. I am hopeful that the information brought to light as a result of these hearings will help persuade my colleagues of the dire need for reform of our financial services sector.

My opening statement from Tuesday’s hearing contains more information on the Subcommittee’s investigation and is available on my Senate website at [http://www.levin.senate.gov/newsroom....cfm?id=324210.

Sincerely,
Carl Levin

[rb336]

Shorting is legal and its legality is not an issue re: the claims against GS.

It's not about the shorting, it's about allegedly designing an offering to fail, selling it hard and putting big bucks up to bet against its success and not disclosing to your clients what you are doing.

Anyone seeking a better understanding of the whole debacle should read "The Big Short" by Michael Lewis. It would help to have a much better understanding of the mortgage business [[and Fannie and Freddie) than rb336 does.

first, the big short is a good read. second, yes, freddie and fannie were/are problems, but they were FAR from the cause of the financial meltdown, which the vast majority of conservative and liberal economists alike trace to, among other things, the various derivatives around the subprime market [[the creation of all those mortgage-backed securities by the investment banks). F&F's problem started when they were allowed into the subprime market [[in other words, they were a symptom). The rush to subprime lending was a result of speculation, drive for higher returns on loans and the unwillingness to recognize that the housing boom was a massive speculative bubble. Throw in the dderivatves like credit default swaps and you have a perfect witches brew for disaster

[jiminnm]

A question. I suspect that many, if not all, of the buyers of the suspect CDOs were hedge funds, mutual funds and other sophisticated investors. Has anyone heard any complaints from any Goldman clients who bought those CDOs?

[Jimaz]

... yes, freddie and fannie were/are problems, but they were FAR from the cause of the financial meltdown, which the vast majority of conservative and liberal economists alike trace to, among other things, ...

Perhaps I'm stating the obvious, but if we're looking for one general cause, would it not be over-deregulation? That seems to be the conspicuous elephant in the room that many people would like to ignore. And it's not just the financial meltdown that was caused by over-deregulation. What about all the poisoned imports and food safety problems we had around the same time the financial meltdown was brewing? The pattern is there right out in the open.

[3WC]

rb336: You state: "It's not about shorting, it's about allegedly designing an offering to fail, selling it hard, and putting big bucks up to bet against its success and not disclosing to your clients what you were doing."

Wrong, simply wrong. You don't understand what it's all about. [[I know it's not about shorting but I was commenting on another posters comment.)

First, GS had little input into designing the derivitive, That was done by ACA with substantial input from Paulson and Company, a GS client which paid GS a $15MM fee for its services. The derivitive was believed by most, because of the nature and quality of the loans involved, to be at risk of imminent default. Paulson bought insurance on the issue and when it failed made about a billion dollars on the transaction.

The SEC has alleged in its Complaint that GS preferred one client [[Paulson) over others by failing to disclose to the purchasers of the derivitive that Paulson participated in the selection of the mortgages which made up the issue. It's that simple. GS, by the way lost money on the deal because it was not able to sell out the issue and was stuck with some of the risk.

There is no evidence that the purchasers would have changed their investment decision had they known of GS's involvement. They were simply purchasing a derivitive which was rated AAA by the ratings agencies [[the real villains.) If you have ever seen an offering circular, as I have, the purchasers of the derivitives [[very sophisticated) were able to read every aspect of every loan in the package. They decided to buy because based on the pricing they stood to make maybe 85 basis points on the deal. [[Turns out they are very stupid even though large institutions with considerable experience in buying these types of investments.)

GS did not put up "big bucks" betting against the deal. Paulson did.

Most commentators believe the SEC's case is very weak.

Fannie and Freddie created hundreds more CDO's derivitives, interest rate swaps, etc than "Wall Street" ever did. Theirs failed just as bad. The main reason there wasn't a lot of betting against Fannie/Freddie created CDO's and CMO's was the perception that they were insured by the federal government. F & F were not the cause of the mortgage meltdown, as you correctly point out. [[neither was Wall Street.) The cause started in concept with Congress' and prior administration's social engineering of the hosing/mortgage market, starting in the '70s with the passage of the CRA and the various housing programs created by Congress to stimulate the housing market and the incentives to loan huge amounts of money to people who had no reasonable ability to pay it back. These policies were used by many middle income and affluent people as well to speculate or to live beyond their means. Barney Frank and Christopher Dodd should have been on the firing line with the GS people who appeared before Levin the other day. Both parties and several administrations are almost equally to blame for the mess we're in.

[rb336]

Perhaps I'm stating the obvious, but if we're looking for one general cause, would it not be over-deregulation? That seems to be the conspicuous elephant in the room that many people would like to ignore. And it's not just the financial meltdown that was caused by over-deregulation. What about all the poisoned imports and food safety problems we had around the same time the financial meltdown was brewing? The pattern is there right out in the open.

yes, you are exactly right

rb336: You state: "It's not about shorting, it's about allegedly designing an offering to fail, selling it hard, and putting big bucks up to bet against its success and not disclosing to your clients what you were doing."

Wrong, simply wrong. You don't understand what it's all about. [[I know it's not about shorting but I was commenting on another posters comment.)

First, GS had little input into designing the derivitive

no, they didn't, but they knew how weak it was from the start, made billions betting against it [[yes, according to their own testamony they did. and made at least a billion more than they lost.) they, at the very least, misled their clients. whether it is, under current law, unlawful is highly questionable. probably not. which is exactly WHY the derivatives market needs to be made fully transparent and require full disclosure.

[Retroit]

Well said, 3WC. Very knowledgeable. You're raising the bar.

I think that until we are willing to allow financial institutions to fail, no matter ho big they are, we are going to continue having problems with them pushing the limits of legality and ethics because they know that the generous taxpayers, via Washington, D.C. will keep bailing them out.

Imagine how much accountability would be built into the system if even an small investor was cautious about which bank to open a account with because the good 'ol government is not going to insure their deposit. Or how an institutional investor might think twice about buying sub-prime mortgage securities if they knew they were not insured by F & F.

There will be no accountability until we get rid of the "nanny state". Everyone should know by now that the economy goes in cycles: several years of prosperity, followed by a couple years of recession. Every time the government steps in to try and prevent it from happening again, and every time it happens again. It's NORMAL people! If people would accept it, they would learn to profit from it by saving during boom times and buying during bust times. But NOoooo! We want eternal prosperity and, dammit, our government must provide it!

[Jimaz]

Nope. No elephant in this room.

[3WC]

rb, GS is not accused of misleading its clients. It did not.

It did lose money on the Abacus deal involved in the SEC Complaint and the senate hearings. There were several Abacus deals. It did bet heavily against many such deals, mostlyones created by others, and did make a net gain on its mortgage derivative trades.

The Manhattan District Attorney's office will announce tomorrow that it is investigating whether GS committed securities fraud. Such action would necessarily be an alleged 10 [[b)5 [[1934 Act) violation which is fraudulent in connection with the purchase or sale of securities. The fraud may be either by omission or commission. That's my guess. My belief is the Govt will lose if such charges are brought.

Re: Fann. As you stated it was not the cause of the mortgage meltdown. However, during this period Fannie was extremely corrupt [[Franklin Raines) and as a result cost the taxpayers billions of dollars. Fannie cooked its books and issued fraudulent financial statements. Raines [[a protege of Dodd and Frank) skated with $90 million which he's never paid back. I don't recall he was even charged.

[rb336]

rb, GS is not accused of misleading its clients. It did not.

Really? did you WATCH the subcommittee questioning?

[3WC]

Actually, rb, I took the day off and watched the entire hearing gavel to gavel. I have a dog in the hunt.

GS is accused by the SEC of FAILING to disclose the involvement of Paulson. It is not accused of disseminating, thereby misleading, inaccurate, false, information. Big difference. You better try to understand the facts of this situation as I'm weary of educating you on every basic point nuance.

Now, the criminal investigation allegedly commenced [[see my post yesterday), if it's an alleged 10b [[5) violation, could tag GS for the crime of failing to disclose Paulson's involvement, IF that information satisfied the criterion [[scienter, materiality etc) which required that disclosure [[doubtful) and GS intended to mislead the purchasers of the derivative. The govt has an uphill battle on the SEC and Justice Department levels in my opinion.

[Sstashmoo]

Sounds like Paulson will take one for the team.