It's all Goldman Sachs' fault says Matt Taibbi

[Jan Klimkowski]

In the movie Wall Street, Gordon Gekko sez:

"The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much."

And now we see the logical consequence of this bastard philosophy.

From Market Ticker's Karl Denninger, my emphasis in bold:

Posted by Karl Denninger in Editorial at 09:07

Goldman's "Interlocking" Relationships
One has to wonder...

Goldman, of course, will say it still cares about reputation. Tell that to IKB Deutsche Industriebank AG. In 2006, the German bank specifically told Goldman it was no longer comfortable investing in CDOs that didn’t “utilize a collateral manager, meaning an independent third-party,” according to the SEC’s complaint. Goldman told IKB it had such a manager -- ACA. It didn’t mention Paulson. IKB lost almost all of its $150 million investment.

Ah, ACA. The much-vaunted and claimed "selection agent." An independent expert. Really? "Independent" eh?

"ACA had a horrible reputation," he told me, which led me to ask the obvious question so why would Goldman want ACA's stamp as selection manager on the CDO they were marketing? Fabrice Tourre, the 31-year-old named as the architect of Abacus, is quoted as insisting that Goldman wanted ACA's brand name and "credibility" on the CDO.

My source told me to check out who the head of ACA was married to. "I think you'll find it's a senior woman at Goldman Sachs," he said.

Well, yep, it is.

Alan S. Rosenman took over ACA Capital as president and CEO in 2004 - because -- wait for it -- his predecessor Michael Satz had "personal income tax issues" -- (how murky is this story going to get you must be asking?)

Oh.

Well gee, we knew there was more incest between government and Goldman than you'd find in a caveman society, but what we didn't know is that the so-called "independent" managers that were performing collateral selection were fucking - literally - the senior management of the firms that were paying them!

Separate and independent firms eh?

Not from where this guy sits.

That gives a whole new meaning to "interlocking" firms, doesn't it?

http://market-ticker.org/archives/2215-G...ships.html

[Magda Hassan]

SEC Charges Goldman Sachs With Fraud On Subprime Mortgages, Paulson & Co. Implicated

Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

http://www.zerohedge.com/article/breakin...-mortgages

Comments at Zero Hedge suggest that this is all theatre.

Essentially, the claim is that Goldman Sachs and their alumni, who do after all dominate Obama's "financial" team, tipped the wink early and GS traders have made enough money on the change in GS shareprice to have covered any potential fine and made a tidy profit.

:call2:

This would of course be insider trading, but that's never stopped them. After all, They ARE the cops... :thefinger:

Going After Goldman: A Crackdown on Financial Crime or a Kabuki Play Maneuvre to Avoid Bringing Criminal Charges

by Danny Schechter

Global Research, April 18, 2010



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Fox Business News was engrossed in interviewing a blonder than thou reality TV bimbo when the news that the Securities And Exchange Commission was filing fraud charges against Goldman Sachs broke on Friday afternoon.

The breaking news bulletins were already flying through cyberspace before the Fox Means Business network got around to moving from a snickering interview with a starlet confessing to commodifying and monetizing her appeal to the biggest story in months on the Street beat. Corporate fraud allegations seem to make free market boosters nervous.

At last, the mightiest of investment bank, described as a “giant squid on the face of humanity” by Matt Taibbi in a much-read diatribe, appeared to be in deep trouble. Taibbi himself was not convinced that the Government has the goods on Goldman.

He commented, “…What’s interesting is that I heard whiffs of this story going back as far as a year and you know I’m one of the harshest critics of Goldman Sachs and I actually backed off the story because I didn’t really believe it. I thought it was too outlandish. So that tells you exactly how crazy this story is coming out now.”

The Timing

The timing of the story was suspicious, he said. “This story has been out there for awhile. The [NEW YORK] Times first broke it really in December. So why are they doing this now? Cleary it could have been because this bill is about to hit, crucial period in Washington, this financial regulatory reform bill, maybe this, you can look at this as a shot across Wall St’s bow during that period.”

Federal prosecutions of white-collar criminals has not been a growth industry, or very successful, in recent years.

AP predicts there will be a flood of lawsuits to come and that “the fraud charges against Goldman Sachs & Co. that rocked financial markets Friday are no slam dunk, as hazy evidence and strategic pitfalls could easily trip up government lawyers”. A former dot.com millionaire told me that Goldman has the best lawyers and would most likely beat the rap. Publicly Goldman denied all charges and vowed to restore their “reputation.

The Republicans who know about how to politicize everything were quick to point out that Goldman and its employees had been among President Obama’s biggest backers. At the same time, Politico reported out that taking on Goldman gives the White House a big propaganda asset in the coming fight over financial reform.

“Charges of fraud against one of the most storied firms on Wall Street come at a time when the Obama administration is seeking to pass significant new regulation of the financial sector. A reform bill is expected to hit the Senate floor next week, and observers said Friday that the Goldman charges would likely give new momentum to the administration’s efforts to put tougher regulations on the banking sector.”

The Legal Issue

The Volatility website, explains, “The case centers on Goldman’s 2007 ABACUS CDO, which it manufactured at the behest of hedge fund predator John Paulson. The scam was for Paulson to cobble together a toxic mess of MBS he expected would blow up, find suckers to buy this CDO, and then short it. Goldman’s role was to launder the CDO …

(Barry Ritholz compares it to The Producers, who try to defraud their investors by putting on a crappy play they expect to quickly close while embezzling much of the loot.)

Typical of this feckless government, it’s only a civil and not a criminal indictment. Even if the SEC is serious this time (which I won’t assume until I see it), Goldman would still get off easy for capital fraud.”

It now turns out that Goldman was notified in advance about the government’s complaint. Business Week revealed. “Sources now say that Goldman Sachs was warned about a pending civil suit months ago and failed to disclose its legal problems—despite the standard practice of revealing legal issues like regulatory probes in quarterly and annual reports. Websites like Ml-Implode insisted, “Other Major Banks Did Deals Similar to Goldman.”

Financial journalist Gary Weiss disagrees, suggesting that, if successful, this could bring the firm down. “This is devastating. The Wall Street Journal says "Goldman Sachs, which in a statement called the accusations 'completely unfounded in law and fact,' could face steep fines and be on the hook to repay nearly $1 billion of investor losses." MIT’s Simon Johnson calls the SEC’s action a “Pecora Moment,“ invoking the memory of FDR’s long gone investigation of depression-era corporate larceny.

Is This Complaint More Bread and Circuses?

I am not so sure. Could this all be a well-orchestrated Kabuki play intended for public consumption and political advantage. Could Goldman even be playing along here to buy time for reforms even as they have taken losses? Financial Analyst Tyler Durden thinks so, arguing, “This has many wondering if the whole SEC action against Goldman (which some have already pointed out is a rather weak case) is nothing but smoke and mirrors to distract the broader public for a few weeks until anger once again dies down.”

Beating down this high profile suit would restore the firm’s credibility, and leave enough time to pass some financial reforms before it even goes to Court where it could be thrown out. Hedge fund mastermind John Paulson was not even named in the charges which is a civil complain, not a criminal charge,

One of my angry readers, despite writing in All Caps and misspelling Tim Geithner’s name, smells a rat, “

“THE CRIME IS STILL GOING ON DANNY. HUNDREDS OF TRILLIONS OF DOLLARS IN DERIVATIVE POSITIONS ARE STILL BEING CREATED BY WALL STREET GANGSTERS AND RECENTLY DURING A CONGRESSIONAL SUB COMMITTEE HEARING ENCOURAGED BY WILLIAM GITNER AND BARNIE FRANK. THE OBAMA ADMINISTRATION SUPPORTS THE USE OF DERIVATIVES SO ONE OF THE MAIN CULPRITS IN THE DESTRUCTION OF THE SUBPRIME HOUSING MARKET IS ALIVE AND WELL THANKS TO THE OBAMA ADMINISTRATION AND HIS STOOGES LIKE GITNER, BARNIE FRANK AND MANY OTHER SOCIALIST MARXIST CONGRESSMAN DEMOCRATS AND REPUBLICANS. THE OBAMA ADMINISTRATION IS A PUPPET OF THE WALL STREET GANGSTERS.”

Was It A Crime--Or Should It be?

This may become the Tea Party view. A deeper question is: is this civil suit a substitute for or a maneuver to avoid bringing criminal charges? There are even progressive writers like James Kwak of Baseline Scenario.com who doesn’t believe crimes have been committed.

“One of the things I say now and then that most annoys people is that the financial crisis was not caused by criminal behavior. (Note: The “Prayer for the Relief” at the end of the complaint only asks for civil penalties, but I suppose this does not preclude a criminal action — someone who’s a real lawyer could answer that.) My general line is that I’m sure there was some bad behavior that rose to the level of criminal liability — like lying in disclosure documents — but that it wasn’t necessary for the crisis, and we could have had the crisis without any criminal activity at all.”

The problem with this thinking is that it defines financial crime very narrowly, and in terms of securities laws that exist only to protect investors. It forgets that the most harshly abused victims of the crisis occurred on the consumer side of the equation in the rip off of citizens as workers and homeowners.

In my film <a href=http://www.plunderthecrimeofourtime.com>Plunder The Crime Of Our Time</a> I report on a finding in Massachusetts that Goldman deliberately designed thousands of mortgages to fail. They settled, paying the state $60 million without admitting guilt.

Those who argue these abuses were legal rarely admit that the financial institutions spent nearly a billion dollars to erode regulations and change rules. They used their ill-gotten gains to buy up ‘politricians’ who passed one-sided and unjust laws to allow them to get away with whatever benefited their bottom lines no matter who was hurt.

This well-documented history of political manipulation qualifies them as avaricious manipulators, not law biding companies. Their legal and moral defense is bogus. The Congress and the Courts have been "captured" by Wall Street for years.

Unjust Laws?

Why won’t the financial media cop to this blatant immorality as they treat “the law” as sacrosanct? Would they have recognized lynching and racism as legal because Deep South legislatures passed laws allowing segregation? How are the laws bought by Wall Street any different?

The housing bubble was built on bedrock of deception and fraud linking shady subprime brokers and appraisers to a whole industry that structured financial products and then resold them with misrepresented values with the complicity of unethical ratings agencies.

The FBI has been denouncing, investigating and indicting those what they call a “fraud epidemic.” The selling and reselling of worthless asset-backed securities is a centerpiece of the larger crime, as was the practice of overleveraging these schemes, insuring and even betting against them by companies like AIG with swaps, CDO’s etc. etc.

We are not talking about a handful of executives like the 25 people Time Magazine listed as responsible for the crisis. We are dealing with a criminal enterprise of tens of thousands who benefited.

Martin Wolf of the Financial Times explained that three industries came together with thousands of employees to run the FIRE economy—Finance, Insurance and Real Estate. Their infrastructure was big, ““In between the ultimate borrowers and the risk takers were loan originators, designers and packagers of securitized assts, ratings agencies, sales staff, managers of banks and SIVs (structured investment vehicles) and managers of pension and other funds”

They all worked together like a cabal to perpetuate what I call the crime of our time.

Will these people ever face justice?

News Dissector Danny Schechter directed Plunder The Crime Of our time and wrote the companion book. For info: plunderthecrimeofourtime.com. Comments to dissector@mediachannel.org
[EMAIL="dissector@mediachannel.org"]http://www.globalresearch.ca/index.php?context=va&aid=18720
[/EMAIL]

[Ed Jewett]

Where's Rico?

By James Howard Kunstler
on April 19, 2010 6:36 AM


It's interesting and instructive to read The New York Times' lead story this morning, Top Goldman Leaders Said to Have Overseen Mortgage Unit. While it pretends to report all the particulars of the huge scandal growing out of Friday's SEC action against Goldman Sachs, the story really comes off as an attempt to create an alibi for the so-called "bank." It pretends that some kind of an intellectual struggle was going on among GS executives as to whether the housing market was doing just fine or poised to tank -- therefore muddling the company's intent in setting up investment deals based on sketchy mortgages designed to blow up so that a favored big customer, John Paulson, could collect on the deal insurance known as credit default swaps.
The truth is that anyone with half a brain could see the securitized mortgage fiasco coming from ten-thousand miles away. I said as much in Chapter Six ("Running on Fumes: the Hallucinated Economy") of my book The Long Emergency, which was published in 2005 but written well before that in 2002-4. And I had had no work experience whatsoever in banking generally or Wall Street investment banking in particular.
One week before the SEC action against GS, the Pro Publica website published a story about virtually the same kind of mischief being run out of the Chicago-based hedge fund Magnetar led by a clever young fellow named Alec Litowitz. Like Goldman Sachs, Magnetar deliberately constructed investments (bundles of bundled mortgage-backed securities called collateralized debt obligations) that were certain to fail so that Magnetar could collect on credit default swaps that amounted to a bet against products they themselves had participated in creating. There was no question that Litowitz and his employees did this absolutely on purpose. Nor is there any question that they aggressively sold positions in these CDOs to credulous investors like Thrivent Financial for Lutherans and others.
The question that now begs to be answered is: why is this activity not being investigated and prosecuted under the federal RICO statutes against racketeering? The Racketeer Influenced and Corrupt Organizations Act was designed to punish exactly this kind of behavior, whether the defendant's name ended in a vowel or not. How is it not a racket to deliberately and systematically construct investments designed to fail so you can collect what amounts to insurance against them -- and then to sell those financial instruments to customers without telling them that these investments were engineered to blow up? At the very least it amounts to a failure to disclose material information, which is the basis for distinguishing illegality. More to the point, it almost certainly amounts to prosecutable criminal fraud and insider trading.
Dylan Ratigan at MSNBC asked pretty much this question on Friday when interviewing Connecticut attorney general Richard Blumenthal (because the AIG company, headquartered in his state, sold gobs of credit default swaps to Goldman Sachs for dodgy CDOs, leading to a giant government bailout and incidental huge payoffs to Goldman Sachs). Blumenthal's answer was lame, to put it mildly -- that recent federal rules tied his hands, he claimed. He could have at least publicly protested his hand-tying and applied pressure to the US Department of Justice to enforce the anti-racketeering law.
So where is the DOJ's criminal division in all this? The Goldman Sachs racket has been publicly known, in one form or another, for several years. I wrote in this space several times at least as far back as 2007 that Goldman was essentially shorting it's own issued securities, and I'm neither a lawyer or a finance professional. Anyone could see this from just reading the news. Magnetar's activity was so notorious that the very business of engineering dodgy CDO investments to collect insurance on their failure became known throughout the industry as "the Magnetar Play."
The feigned cluelessness among some the highest-profile figures in these rackets is something to behold. For instance Citibank was among the companies that helped Magnetar put together their CDOs-designed-to-fail. Citi's chairman at the time, former US Treasury Secretary Robert Rubin, testifying before the new Financial Crisis Inquiry Commission said, "Almost all of us, including me, who were involved in the financial system -- that is to say financial firms, regulators, rating agencies, analysts and commentators -- missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis." Bank of America's CEO, Brian Moynihan, told a congressional hearing, "No one involved in the housing system -- lenders, rating agencies, investors, insurers, consumers, regulators, and policy-makers -- foresaw a dramatic and rapid depreciation in home prices" [and therefore in investment instruments based on mortgages].
Either they lie or they are profoundly stupid and incompetent. If the former, then they might be induced to spend some time talking to federal prosecutors; if the latter then the US financial system is too hopeless to survive and we will all soon be bartering hand tools and designer shoes for food. Evidence of the latter is ample, for instance, in Citigroup's loss of 70 percent share value during Robert Rubin's chairmanship -- for which, in the crash year of 2008 alone, he was paid $17 million plus $33 million in stock options.
The Goldman Sachs SEC action and the related Magnetar story seems to be a pretty big deal and appear to be dragging public opinion to a crossroads where we acknowledge the deep structural corruption of the financial system or watch the legitimacy of both banking and government dissolve. At least, it throws gouts of gasoline on the political fires lit by Tea Partiers and even more extreme political factions. I don't see how President Obama can keep Robert Rubin at his elbow or the hosts of other Goldman Sachs alumni in their federal jobs. The whole episode is disgusting in the purest sense of the word. If Obama doesn't shake these people loose, and if he doesn't pick up the phone and direct his attorney general to execute the laws -- including the RICO law -- then all the moonbeams issuing from his renowned smile will not avail to keep him in office, or keep the financial underpinning of the USA from collapse.

http://kunstler.com/blog/2010/04/wheres-rico.html

[David Guyatt]

Let me see... will Goldman's get hammered, or will it get a gentle finger-slap on its powdered botty (which will be portrayed as "severe").

I'm longing talc.

And always will.

Wall Street runs the whole show, whereas Main Street demands justice for the cost of the crock bailout. The solution to this dichotomy is a mock trial, mock punishment and the perception (but not reality) that things have really changed and the government has got tough, tough, tough.

The political class owe their allegiance to their corporate masters.

Everything else is a shadow play.

[Ed Jewett]

Goldman Sachs: Master of the Universe

by Stephen Lendman / April 20th, 2010
The status applies to all Wall Street giants, none, however, the equal of Goldman, the Grand Master. Like the fabled comic book Superman hero, it’s faster than its competitors, thanks to its proprietary software ability to front run markets (illegal, but no matter); more powerful than the government it controls; and able to leap past competitors, given its special status.
Founded in 1869, GS calls itself “a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide.”
Since going public in 1999, the same year Glass-Steagall ended letting banks, insurers and securities companies combine, GS became a giant hedge fund trading against the advice given clients with the full faith and blessing of Washington – the same thing other Street giants did and profited handsomely.
In his April 17 article headlined, “Goldman Sachs Vampire Squid Gets Handcuffed,” L. Randall Wray noted SEC laxity for years, “managing to sleep through every bubble and bust in recent memory,” and saying Goldman acts above the law “since it took over Washington during the Clinton years.” Their criminal behavior is nothing new. It’s their established business model, the reason it’s been immersed in nearly all financial scandals since the 19th century.
Wray notes that John Kenneth Galbraith’s famous 1954 book, The Great Crash, had a chapter titled “In Goldman We Trust” on its contribution to the Great Depression through risky investment trusts (an early mutual fund cum Ponzi scheme) sold to unwary buyers.
Goldman and others “whip(ped) up a speculative fever in shares, reaping (highly leveraged) capital gains with other people’s money.” They were fraudulent pyramid schemes, a “Charles Ponzi-Bernie Madoff scam.” Then and today, they collapsed, the way they always do when insiders pull the plug at the same time, cashing out to let their customers take the pain.
At the end of his Goldman chapter, Galbraith recounted this years after the crash encounter before a Senate committee:
“Senator Couzens. Did Goldman, Sachs and Company organize the Goldman Sachs Trading Corporation (to sell junk trusts to unwary buyers)?
Mr. Sachs: Yes, sir.
Senator Couzens: And it sold its stock to the public?
Mr. Sachs: A portion of it. The firm invested originally in 10 per cent of the entire issue for the sum of $10,000,000.
Senator Couzens: And the other 90 per cent was sold to the public?
Mr. Sachs: Yes, sir.
Senator Couzens: At what price?
Mr. Sachs: At 104. That is the old stock… the stock was split two for one.
Senator Couzens: And what is the price of the stock now?
Mr. Sachs: Approximately 1 and 3/4.
Buyers then and now lost their shirt, not knowing that betting against Goldman is a sure way to get fleeced. Yet even sophisticated lambs volunteer to be slaughtered, thinking they’re as smart, will get out in time, then learning otherwise and discovering Goldman cheats all its clients, even nation states like Greece, by hiding its debt and shorting it. Around a dozen US states as well, including California, the same way. Wall Street’s culture encourages this and rewards it greatly, the price for getting caught usually fines too small to matter.
Will this time be different? No matter the cost to others, like Enron and Savings and Loan crooks, don’t ever bet against Goldman, especially given the SEC’s shoddy crime fighting record, picking off small fry but barely slowing big ones, and hardly up to a serious tangle with the Grand Master, regardless of the extent of its sleaze.
So what to make of April 16’s breaking news, headlined by New York Times writers Louise Story and Gretchen Morgenson saying the “SEC Accuses Goldman of Fraud in Housing Deal.”
The SEC filed civil, not criminal, suit named Fabrice Tourre, “the fabulous Fab,” (GS’s 31-year old VP involved in creating junk investments), charging fraud. GS, in turn, called the accusations “completely unfounded in law and fact (and would) vigorously contest them and defend the firm and its reputation” – indeed so with all the legal talent billions in ready assets can buy, and no shortage of top tort attorneys willing to line up and take it.
Watch for more suits to follow, but is Goldman sacked? Don’t bet on it in what for sure will be long drawn out proceedings, including appeals that will drag on for years.
Case in point, among others — the notorious Exxon Valdez incident after the March 24, 1989 spill, ravaging Alaska’s Prince William Sound and Lower Cook Inlet, ruining the livelihoods of area fishermen and residents. Lawsuits followed:
– In September 1994, $287 million in compensatory damages and $5 billion in punitive ones were awarded;
– In December 2002, the Ninth US Circuit Court of Appeals reduced the latter to $4 billion.
– In December 2006, after more appeals, the same court cut another $1.5 billion; and
– In June 2008, the US Supreme Court reduced punitive damages to $500 million – the equivalent of about 1.5 days profit from ExxonMobil’s first quarter 2008 operations. No company executive went to jail for perhaps the worst environmental crime in history. It was whitewashed for 10 cents on the dollar after nearly 20 years of litigation.
SEC Charges
On April 16, the SEC “charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the US housing market was beginning to falter.”
Allegations are:

“that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund (Paulson & Co.) played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO” – junk assets its president, John Paulson, made $4 billion on in 2007 by correctly betting on the housing collapse he and GS helped initiate.

The SEC’s complaint charges Goldman Sachs and Touree with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties.

Fabrice Touree was “principally responsible” for the fraud and sent an email before they were sold saying:
“the whole building is about to collapse anytime now,” calling himself the “Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those ‘monstruosities!!!’ ”
According to the SEC, he wasn’t alone as senior GS executives signed off on them. Likely, but unnamed, they include CEO Lloyd Blankfein — profiled on November 8, 2009 in the London Sunday Times saying “I’m doing ‘God’s work,’ ” the height of audacity matching the firm’s history of criminality and getting away with it.
In their April 17, 2010 article headlined, “Goldman Sachs Charged With Fraud,” Wall Street Journal writers Gregory Zukerman, Susanne Craig and Serena NG called GS Wall Street’s most profitable firm, “emerg(ing) as a symbol of excess, (having) paid out about $16 billion in compensation to employees in 2009,” the firm’s most profitable ever year.
In her April 18 article headlined, “Top Goldman Leaders Said to Have Overseen Mortgage Unit,” Louise Story said:

…according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman….
According to these people, executives up to, and including, Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy.

A top level decision was made — short the market at the same time advising clients to buy. Around 99% of the mortgage securities sold went sour. In her April 18 articled headlined “Savage Truth: Goldman Tarnished America,” financial writer Terry Savage put it this way:
It was “as if the dealer in a card game had purposely handed all the players the low cards, while dealing himself all the aces and picture cards from the bottom of the deck. Those (in the game) were bound to get fleeced.”
One of Goldman’s board members, Rajat Gupta, is also being investigated about whether he shared inside information with Galleon Group hedge fund founder, Raj Rajaratnam, he then used to initiate trades from June-October 2008. Thus far, no charges have been filed. Gupta said he did nothing wrong, and Rajaratnam had no comment, despite last October being charged with insider trading to which he pled not guilty. For years, Goldman executed Galleon trades. The relationship is close, and Gupta and Rajartnam were former business partners.
The Goldman suit involves an investment vehicle called Abacus 2007-AC1, one of two dozen or more like it for the firm and select clients to bet against the housing market.
The scheme was to sell toxic asset-backed securities (ABSs) to unwary customers (including foreign banks, pension funds, insurance companies and others), then apparently use credit default swaps (CDSs) to profit when they defaulted, or, in other words, the equivalent of buying life insurance on an undisclosed terminally ill patient. More still, given Paulson & Co.’s role in helping to structure and select assets, then buying CDSs to short them, betting they’ll decline. Paulson thus far faces no charges. Goldman’s so far are civil. If criminal ones are filed, prosecutors will have to prove intent, perhaps coming given enough evidence to proceed.
On April 19, Wall Street Journal writers Carrick Mollenkamp, Serena NG, Gregory Zukerman, and Scott Patterson headlined, “SEC Investigating Other Soured Deals,” saying:
Besides Goldman, the SEC “is investigating whether other mortgage deals arranged by some of Wall Street’s biggest firms may have crossed the line into misleading investors.”
Definition of Fraud
Black’s Law Dictionary, 5th edition, 1979 defines fraud as follows:

All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.

The legal-dictionary thefreedictionary.com/fraud calls it:

A false representation of a matter of fact — whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed — that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.

Criminal and civil frauds differ in the level of proof required — the former needs a “preponderance of evidence;” the latter must prove intent and be “beyond a reasonable doubt.”
Times writers Story and Morgenson call the SEC action “a sign (it may be) revitalized.” Don’t “bet” on it given the agency’s deplorable history of being a facilitator, not a regulator, now run by Mary Schapiro, a high level industry insider, revolving door into her position before returning to another top spot.
Before being appointed, she was CEO of the Financial Industry Regulatory Authority (FINRA), served as president of NASD Regulation (National Association of Securities Dealers, then was NASD’s chairman and CEO. Earlier she was an SEC commissioner, and in 2008, George Bush appointed her to the newly established President’s Advisory Council on Financial Literacy, focusing on economic empowerment issues. She was also chairperson of the IOSCO SRO Consultative Committee under Bush, another body supposedly “promot(ing) high standards of regulation in order to maintain just, efficient and sound markets,” the same ones manipulated to collapse, while the SEC and other watchdogs stayed silent and watched.
Will SEC go the limit on Goldman, add criminal to civil charges, lodge them against board members and other top officials, then take on other guilty firms? Goldman is the most prominent, but there’s plenty of culpability to go around among the major banks and their complicit hedge fund and other trading partners.
According to Karl Denninger:

The real problem is with these so-called ‘complex securities’ that are in fact nothing more than a gambling contract designed and constructed in such a fashion as to make proper due diligence impossible. Some of these synthetics had literally 100,000 pages of referenced documentation related to them – how can anyone reasonably expect to read and understand that sort of paperwork?

Even worse, they’re “abusive (because) someone believes that the reference security or securities in question will decline….”
In other words, they’re structured to fail — clear evidence of criminal intent by companies and complicit employees, but will SEC officials charge it? Will the Justice Department pursue RICO violations involving the largest financial fraud in history with plenty of guilt to go around? Don’t bet on it!
The Power of Goldman
On October 17, 2008, New York Times writers Julie Creswell and Ben White’s article headlined, “The Guys from ‘Government Sachs,’ ” showing how embedded they are in Washington — so much so that competitors call them “Government Sachs.”
Long regarded as Wall Street savviest firm, “The power and influence that Goldman wields at the nexus of politics and finance is no accident.” It has a history and culture of “encouraging its partners to take leadership roles in public service,” for the obvious benefit to the firm.
Among insiders, it’s widely acknowledged that “no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere.” According to some, it’s a conflict of interest, since the decisions they make directly benefit the firm.
Former Treasury Secretary Henry Paulson was appointed because of Joshua B. Bolten, former GS alum and GW Bush chief of staff. “And if there is one thing Goldman has, it is an imposing army of top-of-their-class, up-before-dawn uber-achievers.”
Other Paulson Treasury stalwarts included:
– Neel Kashkari – originally ran a $700 billion fund buying toxic assets before becoming Interim Assistant Treasury Secretary for Financial Stability under Paulson, his “right-hand man,” according to The Times, playing a major role in selling Bear Stearns to JP Morgan;
– Dan Jester, former GS strategic officer involved in 2008 Treasury initiatives, especially the Fannie and Freddie takeovers and bailing out his former employer;
– Steve Shafran, formerly a GS Asian executive involved in Treasury’s guarantee of money market funds among other activities;
– Kendrick Wilson III, “a seasoned adviser to chief executives of the nation’s biggest banks;” unpaid, he worked on apprising them of possible Treasury plans to get their reaction;
– Edward Forst, a former Paulson adviser on setting up the bailout fund, then returned to his position as Harvard executive vice president; and
– Robert K. Steel, Goldman’s former vice chairman, hired to shore up Fannie and Freddie.
Other prominent alumni include:
– Robert Rubin, former co-chairman and Treasury Secretary;
– John Corzine, former CEO and chairman, US senator and New Jersey governor;
– Robert Zoellick, former managing director, Deputy Secretary of State and US Trade Representative, and current World Bank president;
– Jeffrey Reuben III, former European managing partner and Under Secretary of State;
– Mark Patterson, former Goldman lobbyist and current Treasury chief of staff;
– Ed Liddy, former GS board member and Paulson-appointed AIG CEO;
– Gene Sperling, former Goldman consultant and Deputy Treasury Secretary under Robert Rubin;
– Robert Hormats, former vice chairman GS International and Under Secretary of State;
– Stephen Friedman, former Bush National Economic Council director, New York Fed board chairman, and Goldman chairman, now a Goldman board member;
– George Herbert Walker IV, former Goldman managing director, current mutual fund manager, and Bush family member;
– John Thain, former GS mortgage desk chief, CEO of the New York Stock Exchange, and Merrill Lynch chairman and CEO;
– and numerous other prominent GS alums with ties to Washington, the New York Fed, and other institutions of power, including currently under Treasury Secretary Geithner.
Institutional Risk Analytics managing partner Christopher Whalen called Goldman’s ties to the New York Fed “grotesque, (giving) the appearance of conflict of interest….everywhere” – under Paulson, unconstrained as Treasury Secretary to stack the agency with his cronies and run it like a GS subsidiary.
A Brief History of Goldman Sachs, Courtesy of the Wall Street Journal
– founded by Marcus Goldman in 1869;
– in 1906, became a major player in the IPO (initial public offering) business;
– in 1929, Goldman involved in the market crash, suffers big losses like others on the Street;
– in 1930, Sidney Weinberg (aka “Mr. Wall Street”) becomes CEO;
– in 1956, GS is Ford’s lead underwriter;
– in 1969, Gus Levy succeeds Weinberg;
– in 1976, John Weinberg (Sidney’s son) succeeds Levy;
– in 1981, Goldman acquires J. Arons & Co., a commodities trading firm;
– in 1990, Robert Rubin and Stephen Friedman succeed J. Weinberg, expanding the company globally;
– in 1999, CEO and chairman Jon Corzine resigns as co-head, leaving Henry Paulson in charge;
– in 2006, Paulson becomes Treasury Secretary; Blankfein succeeds him;
– in 2008, Goldman becomes a bank holding company to have easier access to liquidity and funding;
– in 2009, Goldman has its most profitable ever year;
What’s Next
Goldman stands civilly charged. Will criminal ones follow? One executive only was named. The firm’s loyalty to clients has before been questioned. It calls the accusations “unfounded” and claims no responsibility for the credit crisis. So far, its public image alone is tarnished as the symbol of popular outrage, but its profits are the highest ever.
Will key top executives be hung out to dry? Will those from other top firms follow? If past is prologue, look for modest fines to be levied, appealed and lowered; perhaps a few prosecutions below the top; pleas to be copped for light (later reduced) sentences; and so-called “financial reform” to become law, the kind this writer addressed in an article titled, “Bogus Washington-Proposed Financial Reform,” amounting to “show,” but little “dough” to assuage public anger.
It will leave business as usual unchecked, so ordinary people will remain “sitting ducks to be scammed again with the full faith and blessing of Washington” – where everything changes but stays the same, and each party is as corrupt as the other.
Stephen Lendman lives in Chicago. Contact him at: lendmanstephen@sbcglobal.net. Also visit his blog site and listen to The Global Research News Hour on RepublicBroadcasting.org Mondays from 11AM-1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening. Read other articles by Stephen.
This article was posted on Tuesday, April 20th, 2010 at 8:59am and is filed under Corruption, Finance, Justice.

http://dissidentvoice.org/2010/04/goldma...-universe/

[Peter Lemkin]

(Reuters) - Goldman Sachs Group Inc's top executive boasted in late 2007 about the money the investment bank was making from betting against risky mortgages, according to a collection of e-mails released by a Senate panel on Saturday.

The emails were released ahead of a hearing on Tuesday by the Senate Permanent Subcommittee on Investigations into the origins of the financial crisis and come as the bank battles a fraud suit by the Securities and Exchange Commission.

The emails could also help bolster support for financial regulation legislation that is due to come to the floor of the Senate on Monday.

"Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts," Goldman Sachs Chief Executive Lloyd Blankfein said in an e-mail dating from November 2007.

"Sounds like we will make some serious money," said Goldman Sachs executive Donald Mullen in a separate group of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralized debt obligation, or CDO.

The SEC suit charges Goldman hid vital information from investors about a subprime mortgage-linked security.

The subcommittee is due to hear from Blankfein and other Goldman executives about the role of investment banks in the financial crisis.

Senator Carl Levin, the chairman of the subcommittee, said the emails showed Goldman "made a lot of money by betting against the mortgage market."

"Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," Levin said in a statement.

Lucas van Praag, a spokesman for Goldman, said Levin's subcommittee had "cherry-picked just four e-mails from almost 20 million pages of documents and e-mails provided to it by Goldman Sachs. It is concerning that the subcommittee seems to have reached its conclusion even before holding a hearing."

Van Praag said that Goldman's profit and loss statements for 2007 and 2008 demonstrated "conclusively" that the firm did not make a "significant amount of money" in the mortgage market.

"What it does show," he said, "is that we had net losses of over $1.2 billion in residential mortgage-related products in the period. As a firm, we obviously could not have been significantly net short since we lost money in a declining housing market."

FORETELLING THE CRASH

Goldman says it did not act against its clients' interests.

An internal briefing paper prepared by Goldman for Tuesday's hearing says there was debate among Goldman executives in the spring of 2007 about the direction of the subprime residential market.

But some at Goldman were certain the subprime mortgage market was going to crash.

The Wall Street Journal quoted a March 2007 email from Fabrice Tourre, a bond trader and the only individual defendant in the SEC suit, as saying subprime borrowers would not last long.

"According to Sparks, that business is totally dead, and the poor little subprime borrowers will not last so long!!!" Tourre wrote to his girlfriend, the journal said.

Daniel Sparks, a former head of the mortgages department at Goldman, and Tourre, are among those due to testify to Levin's subcommittee.

The SEC's April 16 lawsuit accuses Goldman of fraud for failing to tell clients that the debt securities they were buying had input from hedge fund Paulson & Co, which stood to benefit if the securities lost value.

John Paulson said his firm, not investors, will pay any legal fees related to the SEC lawsuit, the journal reported.

Five senior executives at Goldman sold company stock after the firm received notice from the SEC in July of possible fraud charges, the journal also reported.

The sales, totaling $65.4 million between October 2009 and February 2010, were made by co-general counsel Esta Stecher, vice chairmen Michael Evans and Michael Sherwood, principal accounting officer Sarah Smith and board member John Bryan, it said.

The emails in the attachment as a pdf

[Jan Klimkowski]

This is entirely analogous to the scam of the Great DotCon when Wall Street investment banks would hype an internet company to the moon, even when it was one of their own commercial bank's IPOs, sucking in the life savings of small investors, whilst emailing their mates that it was a crock of shit which would crash and burn.

It's easy to be a Master of the Universe when the game is crooked and the cops are busy elsewhere, arresting people for dime bags of MaryJane.

We all know what happened to those hyped dotcoms.

Now the next bubble has burst.

Earlier this year, the people of Iceland were given a vote, and revolted near unanimously against the economic Shock Therapy of global capital.

The Greeks haven't been given a vote, but they're starting to revolt anyway.

Bring it on.

[Ed Jewett]

The old "pump and dump" game has been brought into the new millennium with the help of sophisticated software that enables faster speed in microseconds that other systems have. It, as described elsewhere, is as if someone installed 9" cables in their connections to the world's systems but forced the rest of the world to use the same old 11" cables; cumulatively, it adds up. I think of the movie starring Sean Connery and that svelte lady robbing the banks high atop the towers in Malaysia on the eve of the millennium. Same concept...

It is also greatly ties in to PROmis-like software, prior related crimes of 9/11 and elsewhere, the old Iran-Contra games, the OODA loop and its application in the cyber-world, and other shenanigans. Understanding the capability of that technology is enlightening.

Indira Singh, the EMT on "the pile" who alerted us to so much, including PROmis and its role that day, was an IT specialist in computer technology and risk management for JPMorganChase. That path in the great labyrinth of 9/11 and finance is worthy of the trip.

[Ed Jewett]

AIG Will Be Paying for Legal Defense of Goldman Sachs’ Top Executives; They Have Insurance Underwritten by AIG

April 25th, 2010 Unless the AIG imbroglio is untangled, the rest of this is nonsense.
—Elliot Spitzer: “There are no coincidences in this world. None.”
Who bailed out AIG?
The U.S. Taxpayer.
So, who’s actually going to pick up the tabs to both prosecute and defend Blankfein and the gang?
The U.S. Taxpayer.
I don’t understand the significance of this Kabuki theater production, but for sheer batshit insanity points, this somehow feels different; like it’s going to be a tough one to top anytime soon.

Via: Bloomberg / Business Week:
American International Group Inc. may be required to pay to defend lawsuits against Goldman Sachs Group Inc.’s top executives, including Chairman and Chief Executive Officer Lloyd Blankfein, under directors and officers insurance policies held by the company.
AIG, which was rescued from collapse by the U.S. government, sold so-called Side A directors and officers’ coverage to New York-based Goldman Sachs, according to a person with knowledge of the policy. Goldman Sachs was sued last week by the U.S. Securities and Exchange Commission, which claimed it misled investors about collateralized debt obligations tied to subprime mortgages in 2007.
“If it were a derivative suit against Goldman, defense costs would be covered, and I’d prefer not to be a primary on the policy,” said John Degnan, vice chairman and chief operating officer of AIG competitor Chubb Corp., while answering a question about Goldman Sachs on an April 22 earnings call.

[David Guyatt]

What a lovely game this is.

The taxpayer insures AIG who insure Goldman who fleeced the taxpayer to begin with.

The depth of cynicism and cronyism involved in staggering.

You really couldn't make this up.