It's all Goldman Sachs' fault says Matt Taibbi

[Jan Klimkowski]

Matt Taibbi responds to Goldman in an interview:

Damien: Most powerful institutions such as the Federal Reserve and Vatican dismiss most criticisms as “fringe conspiracy theory.” Why should the average citizen not dismiss your claims against Goldman as fringe conspiracies about bankers or Jews?

Matt: That was the tactical criticism I got from Goldman who said to the media, “Next thing you know he’s going to blame us for the Kennedy assassination and say we faked the moon landing.” But if you pay attention to all the criticisms they are leveling, it’s what we call in this business a “non-denial denial.” When people respond by calling names and changing the subject, it means they don’t have any issue with the factual allegations in the article. So, in response to being called a conspiracy theorist, the fact is they are resorting to the rhetorical non-denial denial shows they don’t have any real basis to criticize the facts in the article. The article speaks for itself and the fact they don’t have substantive issues with the piece is highly revealing. In fact, before the article went to print I was extremely nervous we had gotten something wrong and Goldman would come out with a whole list of things they’d say we made mistakes about. But the fact that they didn’t come up with a single thing greatly emboldens me to think we got it right.

http://wallstcheatsheet.com/?p=807

[Peter Lemkin]

Matt Taibbi responds to Goldman in an interview:

Damien: Most powerful institutions such as the Federal Reserve and Vatican dismiss most criticisms as “fringe conspiracy theory.” Why should the average citizen not dismiss your claims against Goldman as fringe conspiracies about bankers or Jews?

Matt: That was the tactical criticism I got from Goldman who said to the media, “Next thing you know he’s going to blame us for the Kennedy assassination and say we faked the moon landing.” But if you pay attention to all the criticisms they are leveling, it’s what we call in this business a “non-denial denial.” When people respond by calling names and changing the subject, it means they don’t have any issue with the factual allegations in the article. So, in response to being called a conspiracy theorist, the fact is they are resorting to the rhetorical non-denial denial shows they don’t have any real basis to criticize the facts in the article. The article speaks for itself and the fact they don’t have substantive issues with the piece is highly revealing. In fact, before the article went to print I was extremely nervous we had gotten something wrong and Goldman would come out with a whole list of things they’d say we made mistakes about. But the fact that they didn’t come up with a single thing greatly emboldens me to think we got it right.

http://wallstcheatsheet.com/?p=807

Taibbi is a marked man - knows too much - sees too clearly. They'll be looking to find a scandal in his personal life, audit his taxes or kill his dog....etc.

[Jan Klimkowski]

Free market capitalism, Goldman Sachs style.

Why was Goldman invited to the AIG bailout party?


During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.

On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s waivers were granted.

I spoke with someone who was in the Fed offices the whole weekend prior to the AIG bailout, a government official, and he poses an interesting question. Aside from the Fed, the Treasury, and the New York State Department of Insurance, the main players involved in the AIG bailout that weekend were AIG (obviously), JP Morgan, Morgan Stanley, and Goldman Sachs. There were swarms of bankers from the latter three banks there that weekend, poring over AIG’s books, trying to figure out if AIG could be rescued without government help.

Now, we know why AIG was there, obviously. Morgan Stanley was there representing the Treasury (it had been hired to advise the Treasury on the bailouts by Paulson during the Fannie/Freddie mess, with the rumor being that it was the only bank willing to give up market positions that would have left it too conflicted to do the work). JP Morgan we know was there because AIG had hired them weeks before to come in and try to clean up its messes. Only Goldman Sachs did not have an official role at these proceedings.

So why was Goldman there? And why was Paulson calling Goldman two dozen times that week? This is one of the other problems with Gasparino’s account (”of course” Blankfein was there that weekend, he says, not telling us why this is so obvious). I’m not sure I’ve ever seen an official explanation for why Goldman was there that weekend; the ostensible explanation that most people seem to accept is that Goldman naturally was there because it was such a large counterparty to AIG.

But I suspect we’re going to find that Paulson was not on the phone two dozen times with executives from Deutsche Bank or Societe Generale or Barclays or Calyon, all of whom were significant counterparties to AIG as well. Goldman was not even AIG’s largest counterparty in the sec-lending wing of its business (Deutsche Bank was, and would eventually receive $7 billion via the bailout as a result), and yet as far as I know there were no Deutsche reps there that weekend at all. So what made Goldman special?

This is a good question, I think.

http://trueslant.com/matttaibbi/2009/08/...times-com/

[Jan Klimkowski]

Goldman was thinking about suing?

A well-connected source tells us that Goldman Sachs has weighed suing journalist Matt Taibbi because of his recent criticisms of the bank, most notably his lengthy piece in Rolling Stone, “Inside The Great American Bubble Machine.”

via SOURCE: Goldman Discussed Suing Taibbi.

This is via Business Insider. Apparently Goldman has weighed suing me for… well, I’m not exactly sure what the grounds would be. Being annoying? Covering finance without a nice enough tie?

I seriously doubt they would do something like this, but if they actually have considered such a step, that says a lot about their mentality. If the bank really wanted to defuse controversy at a time when people are pissed at Wall Street they could have juggled their second-quarter profit numbers to make them look less obscene, or announced even a nominal loan forgiveness program for some of their notorious subsidiary Litton’s struggling customers, something like that. Instead… well, we’ll see if this is true. I doubt it.Goldman was thinking about suing?

A well-connected source tells us that Goldman Sachs has weighed suing journalist Matt Taibbi because of his recent criticisms of the bank, most notably his lengthy piece in Rolling Stone, “Inside The Great American Bubble Machine.”

http://trueslant.com/matttaibbi/2009/08/...ng-taibbi/

There's an olde English word which perfectly describes the Goldman Sachs elite. It begins with 'w' and ends with 'r'.

Here's the smiley version:

[Magda Hassan]

There's an olde English word which perfectly describes the Goldman Sachs elite. It begins with 'w' and ends with 'r'.

Here's the smiley version:

Does it rhyme with 'merchant banker'?
Used to break me up every time some pretentious twit would front up to us and introduce himself and tell us he was a merchant banker.

[Jan Klimkowski]

Did Goldman just lose their "get out of jail free" card?

The 10% loss in Goldman share price suggests Wall Street insiders will be sending for Kroll's goons to protect their looted and laundered "profits".

I predict some more Spitzer-style prosecuting lawyers caught with hooker type incidents. And worse....

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.

The SEC alleges 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 had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."

The SEC alleges that one of the world's largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

The SEC's complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.'s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.

The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. In addition, he misled ACA into believing that Paulson & Co. invested approximately $200 million in the equity of ABACUS, indicating that Paulson & Co.'s interests in the collateral selection process were closely aligned with ACA's interests. In reality, however, their interests were sharply conflicting.

According to the SEC's complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.

Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion.

The SEC's complaint charges Goldman Sachs and Tourre 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.

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

[Jan Klimkowski]

Here's the Market Ticker's Karl Denninger's take:

It's About Damn Time (Goldman)
From the wire:

The Goldman Sachs Group Inc SEC reportedly files fraud charges against company over structures of certain collateralized debt obligations related to subprime.

claims center around omission and mistatement of certain facts tied to subprime mortgages

Hattip rebeltraders

From the complaint:

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

You mean creating CDOs specifically at the request of some hedge fund that wants to short subprime (that is, they believe the underlying reference paper is either worth far less - or actually worthless) without disclosing how that CDO came into existence when selling it on to "investors" presents a problem?

See, I told you so.....

Now let's see the SEC actually press this thing and further, let's see criminal charges and I'll be impressed.

BTW, back in February I said:

In other words Paulson combed through the data available on these subprime mortgage deals and picked out the crappiest of the garbage - the most-rotting of the dead fish, all of which allegedly were "AAA" at the time one would presume but which he was quite sure would soon be either downgraded - or default outright - and then asked Goldman to use those as the references against which it would write the swaps that Paulson wanted to buy.

But remember - Goldman didn't buy the bonds to set up the CDO - they just issued a credit-default swap, which, it appears, Paulson's hedge fund bought.

Goldman then went out and solicited people to buy the tranches of the CDOs, selling what was alleged to be a cash-flow stream that Mr. Hedgie had offered (out of the goodness of his heart, no doubt - ed: yes, that's sarcasm) to fund!

Here's the question:

Did Goldman disclose to the potential buyers in the offering circular that John Paulson had come to them with a laundry list of characteristics he wanted in the CDO and offered to fund the credit-default swaps which would only make him money if those reference bonds blew up, and that he would take large, material losses IF THE SECURITIES - AND THE CDO - PERFORMED AND ACTUALLY GENERATED THE CASH FLOWS PROMISED?

The SEC finally thinks this is important?

Duh.

NOW LET'S SEE ALL THE OTHER ALLEGED FRAUDSTERS GET NAILED, LIKE THE GARBAGE THAT WAS RUN ON JEFFERSON COUNTY, ALABAMA!

If you're a PENSION FUND or other investor who got nailed by this crap here is your opportunity to sue these jackasses to beyond the orbit of Mars.

Link to the SEC complaint

[Jan Klimkowski]

Meanwhile, here's what world class Goldman Sachs insight and astuteness can do for your money. :top:

Goldman Sachs Real Estate Fund Vaporizes 98% Of Client Capital

A Goldman Sachs real-estate fund, Whitehall International, has incinerated almost all of the $1.8 billion invested in it.

Remarkably, it's not just Goldman clients who have gotten hosed: Goldman itself invested $436 million in the fund, 98% of which is now gone.

The culprit?

Highly leveraged bets on international real estate.

(The good news for Goldman is that the fund was launched in 2005, which means the firm probably collected 5 years of asset-management fees on the capital. Assuming a standard 1%-2% fee on invested client capital (call it 1.5%), that's ~$100 million of fees over the life of the fund. So that mitigates the loss somewhat.)

Read more: http://www.businessinsider.com/henry-blo...z0lIHQGIlC

[Jan Klimkowski]

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:

[Magda Hassan]

It is hard to imagine that this is anything other than theater given that they for all intents and purposes own the Federal treasury and the Fed reserve bank. I can't see anything more than a nod and a wink and a severe beating on the wrist with a small feather and lots of money being changed in the back room and business as usual will continue even if one or two sacrificial lambs are offered up to the vengeful mobs. Its not like they are going to march in there and sequester all the computers and paperwork, deregister them, confiscate all the company's assets and those of their executives and throw the lot of them in prison till hell freezes over and rent their children out for medical experiments is it? :elefant: