It's all Goldman Sachs' fault says Matt Taibbi

[Jan Klimkowski]

Goldman Sachs and Mammon: a Love Story in which everyone else gets Screwed....

Via Zero Hedge:

Goldman Calls For QE In Europe: "How Far Can The ECB Go In Using Its Balance Sheet. The Short Answer Is: A Lot Further"

Submitted by Tyler Durden on 09/11/2011

Even as the eyes of the world are currently frozen in a spot in time from ten years ago, and Wikileaks is making doubly sure of this by releasing the entire record of Metrocall pager (remember those?) intercepts starting at 9:55 am on 9/11/01, the world itself continues onward, and especially those who determine its global policy of "Prevention of Harm to The Status QuoTM" are busier than ever this weekend. Chief among these is and always has been the one financial firm which has infiltrated "sovereign" decision-making more than anyone in history: Goldman Sachs, whose alumnus, incidentally, is about to replace Jean Claude Trichet at the helm of the world's largest and most undercapitalized central bank (yes, a central bank can be undercapitalized - read on). Which is why the following note just released by Goldman's Dirk Schumacher is of particular attention.

Mere hours after Goldman economist Sven Jari Stehn said that FOMC "easing at the September meeting is very likelyaround 75% according to our model", Goldman is now taking on European monetary policy, and specifically the question of further quantitative easing, across the pond, where printing money has always been a far more touchy subject than in the US, courtesy of the German experience with hyperinflation (when gold soared, but apparently accoding to just released brainstorming by that intellectual titan Paul Krugman, for the completely wrong reasons: see gold is now a deflation hedge according to the Nobelist, and has nothing to do with debasing currencies - the NYT columnist just debunked 2000 years of logic and common sense).

As a result, the key line in the Schumacher note is the following: "How Far Can The ECB Go In Using Its Balance Sheet. The Short Answer Is: A Lot Further." To be sure, this is not surprising: after all Zero Hedge first predicted that following the latest market trouncing on Friday, in the aftermath of the ECB's admission of failure on Thursday (who can forget Ze Price Stabeeleetee), see "ECBCTRL+P: The Next Steps In The European Implosion", but we are nothing but a simple blog, which predicts what will happen but certainly does not set policy for a corrupt and failed regime. That's Goldman's job. And what is stunning is the brazenness with which it does it now. To sum up: to Goldman both the Fed and the ECB have to engage asap in yet another episode of bonus-preserving currency debasement, middle class be damned. And, we have very little doubt, they will.

Amusingly, Goldman is magnanimous enough to let us know that this policy will result in the ultimate end of the ECB either through its terminal loss of credibility as a monetary policy setting venue, or, and this is Zero Hedge's take, Germany's decision to say enough, and reinstate the Bundesbank as the ultimate mechanism of monetary decision-making... Yes, that would be DEM decision-making, not EUR.

Yet following that brief detour, Goldman proceeds to discuss the inevitable outcome of such a concerted approach, with the rhetorical question: "How to recapitalise the ECB and the national central banks (if needed)." (Yes, the ECB's endless viability is not guaranteed, someone please notify Roubini). Alas, it will be more than needed, especially after reading Goldman's conclusion, which makes the strawman of currency, Eurozone failure all too clear, should the ECB not engage down this suicidal path:

Given the capital position of the ECB and the limited possibilities for recapitalisation, one could argue that the SMP cannot be expanded much further. But, as already mentioned, the ECB's implicit exposure with respect to peripheral sovereign debt through the collateral posted by banks is already very large. To be sure, the ECB is marking its collateral to market prices and the losses would be significantly lower than the nominal figures suggest. But it is easy to see how these haircuts would be insufficient in a sovereign default involving any of the bigger countries.

Thus, the argument that the ECB should not increase the SMP further as this may risk its financial health ignores the fact that the ECB is already heavily involved. Moreover, halting the SMP could lead to a similar or even bigger threat to the ECB's financial health if this meant that a potential liquidity crisis for one of the bigger Euro-zone countries could turn into a disorderly default.

And there you have it: while the world is caught in teary-eyed ruminations over the past, the seeds of a far more painful, and certainly tearful future, were just planted by none other than the bank which always ultimately gets what it wants, no matter how disastrous the implications of its policy are for everyone but Goldman.

[Jan Klimkowski]

As Zero Hedge reminds us:

Goldman Sachs International Advisor Mario Monti Is Italy's New Prime Minister

[Peter Lemkin]

As Zero Hedge reminds us:

Goldman Sachs International Advisor Mario Monti Is Italy's New Prime Minister

Funny how the MSM missed that minor point!.....:mexican:

[Magda Hassan]

Greg palast on Greece and Goldman Sachs.

[Magda Hassan]

Goldman Sachs has infiltrated senior positions of power across Europe, says Le Monde's London correspondent, Marc Roche. The Prime Ministers of Greece and Italy as well as the new head of the European Central Bank all have close ties to the bank.
http://tv.globalresearch.ca/2011/11/gold...inside-job

[Jan Klimkowski]

A whistleblowing insider.

These are very similar to the pump and dump tricks that were exposed during the Great Dot Con.

Goldman Sachs director quits 'morally bankrupt' Wall Street bank

Greg Smith resigns as executive director of Goldman's European equity derivatives business after devastating attack


Juliette Garside and Jill Treanor

guardian.co.uk, Wednesday 14 March 2012 13.52 GMT


Wall Street bank Goldman Sachs has suffered a severe blow to its reputation after one of its bankers announced his resignation in the New York Times by declaring his employer "morally bankrupt".

Questions were immediately raised about the relationship between the firm and its clients whom the departing employee, Greg Smith, said were described as "muppets" by his superiors.

Smith, who was based in London, made a savage attack on the culture of Goldman, which only two years ago was damaged by another London-based banker, Fabrice Tourre, who described creating "Frankenstein" products that showed scant regard for the needs of the firm's clients.

Smith's public resignation letter made reference to the Tourre affair, as well as to the infamous description of Goldman in Rolling Stone magazine as "a great vampire squid wrapped around the face of humanity".

Smith said that none of these incidents had taught the firm any humility or integrity. He wrote: "It makes me ill how callously people [at the bank] talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets', sometimes over internal email."

Smith reckoned the fast track to a promotion involved persuading clients to invest in stocks or other products "that we are trying to get rid of because they are not seen as having a lot of potential profit". "Today, if you make enough money for the firm (and are not currently an ax [sic] murderer) you will be promoted into a position of influence," he wrote.

Smith described himself as an executive director and head of the firm's US equity derivatives business in Europe, the Middle East and Africa. He is thought to have been the only person in that department and was a vice-president, which some City sources suggested might be a disappointment after 12 years with the firm.

Goldman wanted to get clients to trade "whatever will bring the biggest profit to Goldman" a strategy referred to as "hunting elephants".

"You don't have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about 'muppets', 'ripping eyeballs out' and 'getting paid' doesn't exactly turn into a model citizen," wrote Smith, who said he had been selected to appear in a recruitment video and in 2006 had managed the summer intern programme in New York for sales and trading.

Goldman Sachs was quick to deny the accusations levelled by Smith, but may face an uphill battle in clearing its name with clients, which range from governments to major international companies and big players on the financial markets.

It was reported that publishers were trying to track down Smith to offer him a book deal.

Lord Oakeshott, the Liberal Democrat peer and his party's former Treasury spokesman in the Lords, said he would table questions to seek clarity on any relationship between the UK government and Goldman.

He said: "We know in the City that Goldman help themselves before their clients. Now here's the proof. Greg Smith says you get promoted there if you make enough money for the firm and you are not an axe murderer - and the people of Greece and the rest of the eurozone are paying the price after Goldmans cooked their books and Greece joined the euro at an unsustainably high exchange rate. Until this culture is stamped out, Goldman are not fit and proper to receive a penny of British taxpayers' money or advise our government in any way."

Goldman advised Labour on the nationalisation of Northern Rock and acts as an official market marker of UK government bonds, known as gilts. Goldman alumni can be found in US political circles: the US Treasury secretary at the time of the banking crisis was Hank Paulson, who quit as boss of Goldman to take up the role in the Bush administration.

Smith reckoned much had changed since Paulson quit, and the current bosses, chief executive Lloyd Blankfein and president Gary Cohn, were appointed. The pair had "lost hold of the firm's culture on their watch", during which time Blankfein once blurted that he was doing "God's work".

Smith yearned for the previous culture "the secret sauce that made this place great" which had been about "teamwork, integrity, a spirit of humility, and always doing right by our clients".

Blankfein and Cohn issued a joint statement from New York, where a new head of public relations, Jake Siewert, a White House press secretary during the Clinton administration, was installed only three days ago.

"In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people," said the statementby the pair, who were told by Smith that he said he wanted his public resignation to be "wake up call".

Smith's own career prospects might now be in doubt despite him boasting of his full scholarship from South Africa to Stanford University, selection as a Rhodes Scholar national finalist, and bronze medal for table tennis at the Maccabiah Games in Israel.

David Way, a headhunter at Marks Sattin, reckoned these anecdotes read like a CV. But, Way noted: "like most of the City's major employers, Goldman Sachs have a strong network of alumni running companies across the world who could be bosses or clients for high-level professionals changing jobs."

[Charles Drago]

Jan,

Just a brief, if overdue, note of appreciation for your seemingly never-ending diligence, insight, and commitments to truth and justice.

In friendship,

Charlie

[Jan Klimkowski]

Charles - thank you.

Back in 2001, I made a film for BBC2 entitled The Great Dot Con about the pumping of shares of tiny internet companies which had no hope of ever making money by Wall Street and City brokers,

We had our own whistleblowing insider.

We also had a key interview with a trader. I was certain that when we exposed the corrupt practices, the interview would be terminated and we would be escorted from the Wall Street premises by security goons.

I also suspected that when the film was finally broadcast, it would get a couple of positive reviews, a smallish audience, and that nothing would change in the financial markets.

And so it came to pass.

Ten years later, the same tricks, the same goons, and the same phoney voices promising to learn the lessons.

For all of ten minutes.....

[Ed Jewett]

"What's the next shocking' headline: Prostitution in Vegas!?'"

March 15th, 2012As many of you noticed, I took a pass on posting the boring op-ed piece about the Goldman Sachs vampire squid.
Oh shock horror, the squid makes fun of blowing up their own customers. I mean, no shit, Sherlock. I wouldn't be surprised if the whole thing turned out to be a frontrunning setup for the short side action that resulted.
But, anyway, this is funny.
Via: Bloomberg:
"The argument that Goldman has become increasingly profit- driven, sometimes at the expense of clients' best interests, and that some employees use vulgar and disrespectful language, is hardly news," Whitney Tilson, founder of hedge fund T2 Partners LLC, wrote in an e-mailed commentary. "What's the next shocking' headline: Prostitution in Vegas!?'"
Posted in Economy, Elite

[Ed Jewett]

SECRET DEALS, FORECLOSURE SETTLEMENTS, STRESS TESTS, AND VAMPIRE SQUID WHISTLE-BLOWERS: YOU JUST CAN'T MAKE THIS STUFF UP

Author: L. Randall Wray · March 15th, 2012 · Comments (9)
No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

1. Bankers make NINJA loans, securitize them, and sell on to government GSEs
   
2. Bankers destroy all the loan documents and begin random and fraudulent foreclosures, throwing millions of innocent victims out on the street
   
3. GSEs sue bankers and force them to take back bad mortgages
   
4. Bankers sell servicing rights for the same bad mortgages back to GSEs, who overpay
   
5. GSEs resell servicing rights to companies run by former GSE officials
   
6. Bankers slapped on wrist with puny foreclosure settlement in return for government promise it will never sue them for past foreclosure fraud
   
7. Government stress test claims banks are healthy
   
8. Bankers get sweet deal, counting mortgage mods for best borrowers toward the settlement
   
9. HUD report released demonstrating massive foreclosure fraud that reached to highest levels of banks
   
10. Vampire Squid Executive Director fires off resignation letter decrying bankster culture
    
11. Banksters walk away scott-free as statute of limitations runs out for criminal behavior
    

This would have to be a fantasy because no one would ever believe it could have been true.
Beginning in the late 1990s the biggest banks and GSEs created MERS to end-run around county recorders so that they would not have to pay fees to properly register sales of mortgages that would be securitized. http://www.huffingtonpost.com/l-randall-...97563.html
They then proceeded to lose or destroy all (or virtually all) the written documents, broke the chain of title, and screwed up even the electronic records. Nobody knows who owes what to whom, so the loan servicing arms of the biggest banks decided to go on a foreclosure frenzy to seize as many homes at random before anyone found out.
And that required the biggest forgery conspiracy the US has ever seen, with individual Robo-signers admitting to falsifying up to 10,000 documents each per month. Burger King floor-moppers and pizza delivery boys were promoted to JPMorgan Chase Vice Presidents to manufacture documents. I am not kidding"the titles were given by Chase for the sole purpose of allowing individuals to sign documents and came with no other duties or authority".http://www.nytimes.com/2012/03/13/busine...-deal.html
A detailed review of 36 of Chase's foreclosures found that the bank was unable to find any documents related to how much the borrowers owed in 32 of them; there were documents in 4 cases, but docs for 3 of those were wrong. In other words, Chase actually had correct documents needed for foreclosure in only one case out of 36. And these were foreclosures it had successfully completed. In 35 out of 36 cases Chase had simply stolen the homeit had no documents showing what the homeowners supposedly owed. Maybe they owed nothing. We will never know. That is the state of home mortgages in Americathanks to Wall Street and MERS.
This is what led to the recent "foreclosure settlement" that let the worst banksters off the hook with a tiny little slap on their dirty hands. It totaled $26 billion, but as is widely reported hardly any of that is real moneysee below. In return for the token payments the banks got to walk scot-free away from lawsuits: 49 state attorneys general as well as the federal authorities have agreed they will not be able to sue the banksters for crimes like robo-signing.
But here is the funny thing about the settlement: the details were not announced at the timeinstead the authorities dragged their feet until the end of last week.
We now know why: it looks like they were waiting for the government's "stress tests" to be readied for damage control. Let me explain.
Last Thursday the details of Bank of America's deal were released. Recall that BofA had taken over Countrywide, queen of the fraudulent mortgages. BofA has the second biggest servicer, and is servicing some of the lowest quality mortgages in the country. Further, Countrywide was notoriously sloppy in its record keeping. Ergo, BofA's foreclosure fraud record was among the worst and it got hit owing $11.8 billion of the $26 billion settlement.http://www.nytimes.com/2012/03/09/busine...using.html
But you know the government is going to cut BofA a sweet dealit is a $2 trillion dollar behemoth that is way too big to fail. Now, the vast majority of the settlement fund is not real moneyit is funny accounting money. The banks agreed to provide about $20 billion of the $26 billion in the form of debt reduction or lower interest rates for just 1 million homeowners.
(Only $1.5 billion will go to the homeowners who already lost their homes to thieving bankswho only have to provide $1,500 to $2000 for each home they foreclosed improperly. Home theft by a bankster is not a serious crime in America, after all.)
The details on BofA's deal stink. BofA is going to provide principal reductions for 200,000 homeowners with mortgages greater than $100,000. None of these can be mortgages owned by Fannie or Freddie, nor can they be backed by the FHA or the VA (our veterans are exempt from mortgage relief?). And those owners getting the deal must have mortgages owned or at least serviced by BofA, they must be underwater, and the must be 60 days or more overdue.
Now think about those conditions. The target is certainly not going to be lower income householdswith smaller mortgages, and who tend to rely on FHA and VA. It looks a lot like the redlining banks used to do (drawing a redline around areas they would not lend to, mostly populated by lower income minorities)by design it will disproportionately help white borrowers.
And the deal says nothing about homeowners most in danger of losing their homesthose already in default. Rather it looks like BofA will be cream-skimming, includingmortgages it probably would have modified anyway! So it will get to count money it would have spent even without the settlement toward the $12 billion or so that it owes.
And here is where the plot thickens. If you go all the way back to last summer there were some reports about BofA playing "hide and seek" with Fannie (http://www.forbes.com/sites/francinemcke...annie-mae/ ). So recall that the banks made toxic NINJA (no income, no job, no asset, no problem) subprime mortgage loans, then packaged them into securities. It sold a lot of these to the GSEs (Fannie and Freddie). After the crisis hit, Fannie sued some of the banks because those securities did not meet the "reps and warranties", forcing BofA to take some of them back. Then last summer BofA's servicing arm sold the servicing rights to some 400,000 rotten mortgages to Fanniewhich had not been happy with the bank's success at squeezing blood out of defaulting homeowners.http://www.americanbanker.com/issues/176...951-1.html
(To be sure there is more to the story than this, because the interests of a servicer are in conflict with the interests of the banks and securities holdersI won't go into this now, but it sometimes makes sense to drag a foreclosure out long enough to eat up the full value of the underlying house in fees due to the servicer.)
At the time, many analysts thought Fannie paid far too much ($500 million) for these servicing rights on mortgages with potentially high default rates. It looked like a government bail-out of BofA, since Fannie could just use government money to pay for the rightsrights that private servicers did not appear to want since none of BofA's competitors was stepping up to bid for them. As Francine McKenna at Forbesrevealed at the time, Countrywide's former auditor (KPMG) was also the auditor of Fannie, and BofA's auditor (PricewaterhouseCoopers) was also the auditor of Freddie (as well as the FHLBs and AIGtwo other institutions that sued BofA to take back bad loans).
McKenna thus speculated that these auditors were in a good position to know which loans had been put back to BofA and also which loans were included in the servicing rights that were sold to Fannie.
If you were a suspicious sort, you might wonder if those same toxic mortgages that BofA had to buy back from Fannie were involved in some sort of "payback" by Fannie to BofA in the form of an overpayment for servicing rights.
Oh, but it gets worse. (Doesn't it always?)
Fannie has continued to buy servicing rights from the biggest servicers (perhaps continuing to overpay for them) and then selling the rights to a handful of favored specialty servicing firms like Nationstar.
Guess who runs Nationstar's parent company? If you guessed Donald Mudd, formerly Fannie's chief business officer you'd be right. And all of this is done in secret.
Nay, top secret. American Banker submitted a Freedom of Information Act request to get documents related to these deals. The Federal Housing Finance Agency uncovered 4000 pages of documents related to the request but said not a single page could be released even in redacted form. This stuff is more secret than Presidentially-ordered assassinations of American citizens.
Heard enough? Not yet. It gets worse.
The foreclosure settlement as well as the bank stress tests were conducted and released before the Department of Housing and Urban Development released its examination of bank foreclosure practices on Monday. That report documented widespread abusive practices at the biggest banks. It shows the potentially illegal activities were not only known by top management, but also encouraged by management. Indeed, when midlevel managers tried to report and stop illegal activity, top management directed them to shut up and get with the program.
Gee do you think it would have been nice to have that report before settling with the banksters?
By releasing the HUD report after the settlement, the state attorneys general were denied material information that could have strengthened their bargaining position. And the timing is certainly unfortunate if not intentional as it came after the government certified that most of the biggest banks had passed the wimpy stress teststo minimize damage to bank stock prices that could have been done by the HUD study. http://www.nytimes.com/2012/03/13/busine...-deal.html
And, finally. I am sure you are as shocked (shocked!) as I am at the kiss-and-tell resignation letter by Goldman Sach's Greg Smith. Did you know that Goldman rewards employees who push the worst toxic waste onto Goldman's own clients? Simply shocking!
Look, as I wrote a long time ago it is a common claim among competitors that when a customer comes to Goldman for financing, Goldman puts together two teams. One tries to convince the customer to take the worst terms possible while the other team creates derivatives to bet on the customer's failure. And given what we know about the deal Goldman cut with hedge fund manager John Paulson, that certainly rings true. But now we've got it straight from the horse's mouth, so to speak. Read it for yourself: http://www.nytimes.com/2012/03/14/opinio...1&emc=eta1
And that statute of limitations clock just keeps on ticking while the Obama Administration keeps on fiddling.
Other reference on the sale of servicing by BofA:
Federal Housing Finance Agency, Office of Inspector General, Semiannual Report to the Congress, April 1, 2011, through September 30, 2011