Goldman Sachs's New Business Standards

So Goldman Sachs has revamped its standards of doing business.  That is very interesting and is worth a word or two.  Let's take the new standard toward Client Relationships and Responsibilities on page 3.

We would be a lot clearer about what these new standards meant if we were just reminded of what the old standards were.  Under the old standards we find the following description from Carl Levin as reported in Forbes magazine by Halah Touryalai in 2012:

“Using emails, memos and other internal documents, this report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses, and markets,” said Levin. “High risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest, contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets.  Using their own words in documents subpoenaed by the Subcommittee, the report discloses how financial firms deliberately took advantage of their clients and investors, how credit rating agencies assigned AAA ratings to high risk securities, and how regulators sat on their hands instead of reining in the unsafe and unsound practices all around them.  Rampant conflicts of interest are the threads that run through every chapter of this sordid story.” (quotation from Carl Levin in The Real problem At Goldman Sachs?  You, The Muppet Client by Halah Touryalai in Forbes)

We could believe that Goldman Sachs is now taking on new ethical standards if they even mentioned how they would change the old unethical standards used before the financial crisis.  When a bank does not have to even admit wrongdoing, why in the world would they stop doing wrong ?  The whole effort by Goldman is really a public relations exercise that investors will probably believe but we don't.

Let's examine another new standard toward Conflicts of Interest also listed on page 3. We would need a whole book to just list the conflicts of interest that Goldman has subsumed into its dealings.  For every Goldman Sachs guy that is or has been in government service, there is a potential for conflict of interest because what Goldman Sachs strives for (big profit) is not what is best for the public.  Every person from Goldman serving in government is potentially in a conflict of interest starting with Robert Rubin, Mark Carney, Jon Corzine, Hank Paulson, Bill Dudley, Stephen Friedman, Gary Gensler, Robert Hormats, Neel Kashkari, Mark Patterson, etc.  See other names listed here.

How can conflicts of interest be dealt with when the conflict lies with real people doing real things in the service of the public when their own standards are at variance with the needs of the public?

What Goldman Sachs Does Not Know

The following UK article deals with what bankers did not know about finance when the system failed everyone else but not the bankers.  We can conclude that the whole banking system is "malformed" and flourishes for the rich only because it is so corrupt.  A corrupt system plays into the hands of "morally stunted people."

The odd fact is that the bankers at Goldman Sachs knew the subprime mortgage market would collapse because they helped it become toxic with securitizations and, just before the collapse destroyed the savings and pensions of others, Goldman shorted the whole mortgage market that they had just perverted and  profited mightily.

So Goldman Sachs now pretends not to know that TBTF banks like themselves will be bailed out again if they fail once more.  It is the lie that they tell themselves and tell others along with all the other lies.

What Bankers don't know
By Golem XIV 
. . . .
They no doubt felt that while there would be a disaster for some, there would still be money to be made for a few of the, luckier or ‘smarter’, ones. I suspect they would still count themselves as among the ‘smarter’ and acted accordingly.

What’s more, no matter how massive the losses that would be inflicted, I suspect our loathsome twosome also thought there had to be someone who had to take the risks and suffer the losses, in order that the system itself be preserved to profit another day. Only they wanted to make sure that that ‘someone’ was not them personally. On this, the rest of the Global Financial class agreed with them.

Today, five years in to the cataclysm, it is clear that that ‘someone’ was only ever going to be you and me. Someone had to be frogmarched up to ‘save’ the system but it was never going to be the wealthy. Those senior bond holders are oh so sacrosanct. Whereas depositors, well they can be bailed in can’t they.

Read the whole article here
 

Goldman Sachs, Like the Leopard, Cannot Change Its Spots

In case you thought that Goldman Sachs actually does make sure that its clients come first, then read the following article to disenchant yourself:

GMAMX:  Goldman Sach[s]'s Muppet Fund of Funds
By Barry Ritholtz - The Big Picture

In our day job, we have a Fiduciary relationship with our clients. A Fiduciary has a legal obligation where all actions are performed for the benefit of the client. It is a much higher duty of care than the typical “Suitability” standard, which essentially says you cannot sell Facebook IPO shares to Grandma. We sit on the same side of the table as our investors, as opposed to adversaries looking to “monetize” clients.

So you can imagine our amusement when the prospectus for this fund made its way to our attention yesterday:

Goldman Sachs Multi-Manager Alternatives Fund (GMAMX)

It is a mutual fund of hedge funds, with all the layers of fees costs and taxes you might imagine.
. . . .
As Fiduciaries, we are always seeking ways to reduce cost and risk for clients’ without compromising performance. That means making sure that muppet investments like this will not be finding its way into any of our portfolios . . .

Read the entire article here

Goldman Sachs: Criminal Bankers

Goldman Sachs has paid many fines for fraud, the largest being $550 million to the SEC in 2012.  Goldman  sets aside a few billion each year for payments of such fines--it is part of doing their business.

Senator Elizabeth Warren is a lone voice crying in the wilderness asking why no full-scale investigations or criminal prosecutions have been brought against the banks.  Instead, Goldman Sachs and their ilk pay a fine, do not admit wrongdoing and continue their corrupt business practices.

Sen Warren demands to know why criminal bankers aren't being locked up
By Stephen C. Webster - The Raw Story
. . . .
In her letter sent Tuesday, she went on to add:

…I believe very strongly that if a regulator reveals itself to be unwilling to take large financial institutions all the way to trial — either because it is too timid or because it lacks resources — the regulator has a lot less leverage in settlement negotiations and will be forced to settle on terms that are much more favorable to the wrongdoer.

The consequence can be insufficient compensation to those who are harmed by illegal activity and inadequate deterrence of future violations. If large financial institutions can break the law and accumulate millions in profits and, if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law.

Read the rest of the letter here
Read Webster's article here

The Foul Expertise of Goldman Sachs

Goldman Sachs knows every game in town:  They know how to juice up fees; they know how to avoid taxes; they know how to speculate on gold and oil; they know how to lobby for weak financial regulations; they know how to securitize sub-prime mortgages; they know how to defraud pension and savings funds; they know how to never have to admit to wrongdoing (even when they do wrong!); they know how to pay numerous fines that barely dint their profits; they know how to warehouse aluminum in order to jack up their fees; they know how to trade on insider information; they know how to use HFT to make profits trading and, finally, they know how to take advantage of tax havens. 

And, of course, Goldman Sachs does not know wrongdoing when it works for its clients!

Now whistleblowers are revealing how Goldman Sachs takes advantage of tax havens.  It is even possible that governments do not view such tax havens as illegal, such is the moral laxity surrounding financial and government institutions.

TV presenters, bankers and government advisers among 1,000 Britons linked to tax havens
By Daily Mail Reporter - Mail Online
. . . .
A source at Goldman Sachs told the paper it may have appeared because it had acted [o]n instructions from a client to move assets into an offshore trust and said it had not been contacted by HRMC.

Read the whole article here

A Shoutout for Goldman Sachs's Leave-taking

At this time in the history of our economic times, governments are competing with each other to lower corporate taxes and to keep regulation lax in order to entice companies to set up shop in their countries.  There is a "race to the bottom" mentality that will not be good news to the citizens who meanwhile are "enjoying" austerity to benefit the payment of debt to fraudulent banks.

Below is an Irish contrarian's point of view of the worth of banks like Goldman Sachs:

Where will we be without the bankers?
It's time to trust the banks after all they have done for this little country of ours, writes Gene Kerrigan
By Gene Kerrigan - Irish Independent

IT'S not all bad news. Sometimes, it's like the country is on a downward spiral into permanent stagnation. But, occasionally there's some really good news. For instance, have you heard that Goldman Sachs, the controversial cabal of international bankers, is pulling out of the International Financial Services Centre? Reliable sources say Goldman Sachs doesn't want to do business in this country anymore. Whoopee!
 . . . .
During the Celtic Bubble, bankers had a free hand. They acted with disregard for anything except their own interests. That's not because they're bad people – though some of them had the morals of jackals and the brains of peat briquettes. It's because people who are paid massively, lauded as geniuses and given the run of the country will act accordingly.

Now, the pleas are mounting for lighter regulation and bigger salaries for bankers. And there's no sign that this Government strongly disagrees.
. . . .

The fact that Goldman Sachs and others are leaving the IFSC – well, an active, concerned government would have ministers fanning out across the globe, gleefully welcoming this news. Yell it from the pages of the Financial Times and the Wall Street Journal.

Take a bunch of Reuters and AP reporters to dinner, send Michael Noonan into the Bloomberg TV studios with a big grin on his face.

"We're glad to see the back of those bastards," he would say.

 Read the full article here 

Goldman Sachs's Predations Redux

"The clear theme is that Goldman Sachs loves its clients with the same lip-smacking love that any predator has for incautious prey.  If Blankfein is right that Goldman Sachs is doing God’s work it follows logically that God hates Goldman’s clients."  (quoted from William K. Black, New Economic Perspectives)

What kind of predation does Goldman Sachs engage in?  Here's a brief list from Black's article:

 1. Goldman used derivatives to help the Greek government hide its deficit;
 2.  Goldman was sued for assisting in Enron's control frauds which helped Enron avoid paying taxes;
 3.  Goldman helped spread the subprime mortgages fraud (under Hank Paulson's leadership) that led to the 2008 financial crisis and The Great Recession;
 4.  Goldman has had numerous regulatory actions and investigations that culminated in their paying $550 million to settle SEC charges in 2010;
 5.  Goldman settled with regulators and paid fines for illegal foreclosures and robo-signing forgery;
 6.  The FHFA had evidence of "pervasive" appraisal fraud by Goldman during its securitiations of subprime mortgages;
 7.  Goldman disregarded underwriting guidelines in order to increase profits;
 8.  Goldman purchased fraudulent mortgage originators' loans and resold them to Fannie and Freddie;
 9.  Goldman leveraged information in its warehouse lending business to increase its profits;
10.  Goldman forced lenders to repurchase defective loans that were still on Goldman's books;
11.  Goldman realized that the securitizations they had helped create were no longer safe and began to "short" the "junk" mortgages;
12.  By shorting the market, Goldman profited from its clients' losses;
13.  Goldman knew about the devastation that its securitizations would inflict on the economy but, rather than warn everyone against the coming crisis in the mortgage market, it stayed quiet and profited enormously by shorting the market!

Goldman Sachs Proof that God hates its Customers
By William K. Black - New Economic Perspectives
. . . .
 Senate PSI Report at 516 (footnotes omitted). Goldman’s shorting of GSAMP 2007-FM2 was emblematic of its approach to the Securitizations it marketed and sold to the GSEs. As a recent magazine article explained, “Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars.” Matt Taibbi, The People vs. Goldman Sachs, Rolling Stone, May 26, 2011.

Goldman’s shorting led to it taking enormous bets against its clients’ interests.
. . . .
Indeed, this discussion understates Goldman’s culpability because Goldman’s executives were principal architects of the crisis.  Its former CEO, Robert Rubin, led the disastrous deregulation in the Clinton administration and was a leader in pushing Citicorp to become a major contributor to the hyper-inflation of the bubble.  Henry Paulson, when he was Goldman’s CEO, made Goldman a leading “vector” spreading fraudulent mortgages through the global financial system (and creating Goldman’s holdings of toxic mortgages that produced huge, fictional, accounting income in the short-term – making Paulson’s already large compensation massive).  

As President Bush’s Treasury Secretary, Paulson was an important obstruction to efforts to adopt vital regulations and provide effective supervision.  The Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC) are bureaus of Treasury.  Paulson took no action to prevent the OTS’ and the OCC’s tragic “competition in regulatory laxity” that produced the inevitable “race to the bottom.”  Their race was particularly destructive because the agencies competed to be the most aggressive in “preempting” state efforts to regulate the accounting control frauds that were hyper-inflating the bubble that would soon cause the Great Recession. 

Paulson could have stopped that race to the bottom with two one-minute telephone calls.  Paulson never did so.  He was too busy working on his personal priority – emasculating the Sarbanes-Oxley Act (the reform legislation adopted in response to the Enron-era reforms).  Paulson’s effort to emasculate the Act would have further enriched Goldman.  (my paragraphing)

Read the whole article here 

Even When Goldman Sachs Wins a Lawsuit, It Still Looks Bad

Recently, Goldman Sachs has won a couple of rounds with the law, but it didn't look very admirable while so doing.  First, in UK Uncut's bid for a judicial review of HM Revenue & Customs deal with Goldman Sachs, the actions were declared not illegal which allowed Goldman to avoid paying about £20 million in taxes.

Goldman threatened to withdraw from the UK government's "bank code of practice" which would have embarrassed the Chancellor of the Exchequer.   So for the sake of a Goldman hissy fit that would have embarrassed the Chancellor, Goldman avoids paying taxes while the UK citizens "enjoy" austerity.  This avoidance of a tax payment by Goldman is described as "not a glorious episode in the history of the Revenue." 

Second, we have a New York state appeals court dismissing ACA's lawsuit against Goldman here.

Goldman Sachs Wins Even When Muzzled by the Feds
By Jonathan Weil - Bloomberg
. . . .
The case captures perfectly why much of the public detests “neither admit nor deny” regulatory settlements. We don’t know whose facts to believe. Without trials or admissions of liability, the government’s allegations remain unproven. Sure, Goldman paid a big fine. That doesn’t establish anything. For all we know it paid the money just to make the SEC go away.

The result is surreal: Goldman still isn’t allowed to deny the agency’s claims that it misled ACA. However, a court has thrown out ACA’s claims that Goldman did, in fact, mislead it.

To make matters more confusing, there may not be anything factually inconsistent between this week’s court ruling and the SEC’s earlier allegations. To win a fraud suit as a private litigant, ACA needed to show that it justifiably relied on Goldman’s misrepresentations. (The court said the insurer failed this test.) The SEC, by contrast, doesn’t have to prove that an investor relied on a defendant’s misstatements. Plus, the SEC said Goldman defrauded multiple parties, not just ACA. 

Read the whole article here

Goldman Sachs Loses in Arbitration Award

Goldman Sachs has been ordered by a securities arbitration panel to pay $2.5 million to Tracy Landow, an investor who says that Goldman "recommended an unsuitable investment in a private equity fund." 

Information regarding this ruling is not available to the public because Goldman has requested the expunging of any disclosures about the case.

Goldman ordered to pay investor $2.5 mln by arbitrators
By Suzanne Barlyn - Reuters
. . . .

The investor, Tracy Landow, filed the case against Goldman Sachs, a unit of Goldman Sachs Group Inc, and her broker in 2011, according to a Financial Industry Regulatory Authority arbitration panel ruling. Landow also alleged the firm made unauthorized trades in her account, among other things.

A FINRA arbitration panel found Goldman, but not the broker, liable and ordered the firm to pay Landow $1.6 million and roughly $1 million in interest, and other fees, according to a ruling. The facts surrounding the case are unclear. The FINRA panel, as is customary, did not include reasons for its decisions.

Read the whole article here
 

Goldman Sachs Wins Some and Loses Other Lawsuits

A New York state appeals court ordered the dismissal of a complaint in ACA Financial Guaranty Corp.'s  lawsuit against Goldman Sachs for "fraudulent inducement and fraudulent concealment."  Three out of five judges made the ruling which can be appealed to a higher court.  These judges believed Goldman's favorite argument that sophisticated investors should know what they are buying.

Thus the Rule by the Banks continues apace.

Goldman Sachs Wins Dismissal of Abacus CDO Suit on Appeal
By David McLaughlin & Chris Dolmetsch - Bloomberg

Goldman Sachs Group Inc. (GS) won dismissal of bond insurer ACA Financial Guaranty Corp.’s fraud lawsuit over a collateralized debt obligation known as Abacus.

A New York state appeals court in Manhattan today ordered the complaint against Goldman Sachs dismissed, overturning a lower-court ruling that had allowed the case to proceed.

ACA claimed that New York-based Goldman Sachs and hedge-fund firm Paulson & Co. conspired to induce ACA to provide financial guaranty insurance for the Abacus transaction and deceived the insurer into believing Paulson was a long investor when in fact it was taking a short position.

The appeals court said ACA could have uncovered Paulson’s actual position, “but apparently chose not to.” 

Read the rest of the article here
Read another article here