The Malaysian Scandal Is Starting to Look Dire for Goldman Sachs
By Matt Taibbi
Well, finally Goldman Sachs may have bitten off more than they can chew. How about some justice for the people.
Fraud*
According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia
The Malaysian Scandal Is Starting to Look Dire for Goldman Sachs
By Matt Taibbi
Inside the New York Fed: Secret Recordings and a Culture Crash
By Jake Bernstein, ProPublica
....
In a follow-up email to Segarra, Silva wrote: "In light of your repeated and adamant assertions that Goldman has no written conflicts of interest policy, you can understand why I was surprised to find a "Conflicts of Interests Section" in Goldman's Code of Conduct that seemed to me to define, prohibit and instruct employees what to do about it."
But in Segarra's view, the code fell far short of the Fed's official guidance, which calls for a policy that encompasses the entire bank and provides a framework for "assessing, controlling, measuring, monitoring and reporting" conflicts.
ProPublica sent a copy of Goldman's Code of Conduct to two legal and compliance experts familiar with the Fed's guidance on the topic. Both did not want be quoted by name, either because they were not authorized by their employer or because they did not want to publicly criticize Goldman Sachs. Both have experience as bank examiners in the area of legal and compliance. Each said Goldman's Code of Conduct would not qualify as a firm-wide conflicts of interest policy as set out by the Fed's guidance.
In the recordings, Segarra asks Gwen Libstag, the executive at Goldman who is responsible for managing conflicts, whether the bank has "a definition of a conflict of interest, what that is and what that means?"Read the whole article here
"No," Libstag replied at the meeting in April.
Back in December, according to meeting minutes, a Goldman executive told Segarra and other regulators that Goldman did not have a single policy: "It's probably more than one document – there is no one policy per se."
Five Years After Lehman's: Did We Learn Anything?
By L. Randall Wray - EconoMonitor
phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpufThe catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpufThe catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpufThe catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.. . . .
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpufThe crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
Forbes Calls Goldman CEO Holier Than Mother Teresa
By Matt Taibbi - RollingStone
. . . .
Just for yuks, let's fill Binswanger in on some of the ways Goldman has made its money over the years.
This is just the stuff they've been caught for, by the way.
• Way back in 1999, several eras of corruption ago, Goldman serially engaged in manipulation of the IPO markets, including illegal tactics like "spinning" and "laddering," where insiders and top bank clients would be allowed to buy shares in new companies at severely discounted prices, sometimes in return for investment banking business or for promises that those insiders would jump back into the bidding later to jack up the price artificially. In a famous case involving eToys, Goldman paid a $7.5 million settlement for allowing insiders to buy shares at $20, far below the $75 shares the company traded on opening day. The secret discounts might have cost the company hundreds of millions of dollars. The firm went bankrupt in short order, by the way.
• In the infamous "Abacus" case, Goldman teamed up with a hedge-fund billionaire named John Paulson to create a born-to-lose portfolio of mortgage derviatives, which were then marketed by Goldman to a pair of sucker European banks, IKB and ABN-Amro. When the instruments crashed, Paulson made bank on bets he made against his own loser portfolio. Goldman's peculiar role was in "renting the platform," i.e. allowing IKB and ABN-Amro to think that neutral Goldman, not a hedge funder like Paulson massively betting against the product, had created the portfolio. Goldman only made $15 million in the deal that ended up causing over a billion in losses, meaning this wasn't even just about money – they were just trying to curry favor with a hedge fund client out to screw a bunch of Euros. They were fined $550 million.
• In the even more absurd Hudson deal, Goldman unloaded a billion-plus sized chunk of toxic mortgage-backed crap on Morgan Stanley during a time when Lloyd "Mother Teresa" Blankfein was telling his minions to unload as much of the firm's 'cats and dogs' as possible, ie. its soon-to-explode subprime holdings. In its marketing materials, Goldman represented to Morgan Stanley that its interests were aligned with Morgan, because Goldman owned a $6 million slice of the Hudson deal. It didn't disclose that it had a $2 billion bet against it. Morgan Stanley, which was subsequently bailed out by taxpayers like Harry Binswanger, lost $960 million.
• Goldman bought a series of aluminum warehouses and has apparently been serially delaying the delivery of aluminum in order to artificially inflate the price. Even Binswanger might have heard of this one. The CFTC sent a wave of subpoenas on this score just last month.
• Goldman paid a fine to the SEC in 2010 after it was caught breaking rules governing short-selling on at least 385 occasions – it is currently embroiled in numerous lawsuits that similarly allege that Goldman has engaged in widespread "naked" short selling, a kind of stock counterfeiting that artificially depresses the prices of companies by flooding the market with phantom shares.
• Earlier this year, Goldman and Chase agreed to pay a combined $557 million to settle government claims that the banks and/or their mortgage servicing arms engaged in wholesale abuses in the real estate markets, including (but not limited to) robosigning, the practice of mass-producing fictitious, perjured affidavits for the courts for the purposes of foreclosing on homeowners.
• A VP in Goldman's Boston office was nabbed making improper contributions to the former state Treasurer in Massachusetts, during a time when Goldman was underwriting $9 billion in state bonds. Goldman paid a $14.4 million fine in the pay-for-play scandal.
• In what one former SEC official described to me as "an open-and-shut case of anticompetitive behavior," Goldman took a $3 million payment from J.P. Morgan Chase to bow out of the bidding for a toxic interest rate swap deal Chase wanted to stick to the citizens of Jefferson County, Alabama. Goldman got the payment, a Chase banker joked, "for taking no risk." Chase ended up funneling money to the County Commissioner, who signed off on a deadly deal that put the citizens of the Birmingham, Alabama area into billions of debt (and ultimately bankruptcy), in what is still considered the largest regional financial disaster in American history.
• In 2009, a Goldman programmer named Sergey Aleynikov left his office in possession of a code that contained Goldman's high-frequency trading algorithms. Goldman promptly called the FBI – which up until that point had done exactly zero to prevent crime on Wall Street – to help Mother Teresa's bank recapture its valuable trading code. In court, a federal prosecutor admitted that the code Aleynikov had in his possession could, "in the wrong hands," be used to manipulate markets. Aleynikov just pulled an eight-year sentence. Goldman, incidentally, has gone entire quarters without posting a single day of trading loss – in Q1 2010, the bank made at least $25 million every single day, somehow never once betting wrong in 63 trading days. Imagine that! What foresight! What skill! One can see how Mr. Binswanger could believe that the bank's CEO should be exempt from income taxes.
I could go on – Goldman has been wrapped up in virtually every kind of scandal known to investment banking (and even more that they invented) and was recently at the center of a mysterious and near-catastrophic computer-trading disaster that could have caused massive social damage (more on that in a column coming soon).
Bill Black: Not with a Bang but a Whimper--the SEC Enforcement Team's Propaganda Campaign
By Bill Black - Naked Capitalism
. . . .
“Justice” became an oxymoron in the Bush and Obama administration. It now means that the elite frauds that became wealthy through their crimes that drove our financial crisis should enjoy de facto immunity from prosecution. The NYT, however, pictures the SEC as an ultra-aggressive enforcer that virtually never fails to take on the elite CEOs leading the control frauds. The entire piece is one extended leak by the SEC’s enforcement leadership which has been severely criticized for its failure to recover the fraudulent profits that elite Wall Street bankers obtained by running the control frauds. The puff piece, with no critical examination, presents these key statements.
The S.E.C. … has brought civil cases against 66 senior officers in cases linked to the financial crisis. The agency also extracted nine-figure settlements from banks like Goldman Sachs. According to new research by Stanford University’s Securities Litigation Analytics, the S.E.C. has declined to charge individual employees in only 7 percent of its securities fraud cases.My article is the first installment of a three-part series of articles correcting the NYT propaganda. This installment deals with these three sentences quoted above. Someone carefully constructed them to maximize the misleading nature of the statements. The “66 senior officers in cases linked to the financial crisis” is a phantom number without a source or useful definitions that falls apart as soon one looks at the SEC’s claims.
Here is the SEC source for the claim (note that it is posted on the SEC’s home page as part of the propaganda campaign that enlisted the NYT reporters’ aid).
How many C-suite officers of Wall Street firms were individually sued by the SEC? The SEC says it took action against the following elite financial institutions:Read the whole article here
Bank of America: No officers sued
Bear Stearns: No senior officers suedCitigroup: No officers sued
Countrywide: CEO sued, settled for “record $22.5 million penalty and permanent officer and director bar. (10/15/10)” [WKB: most, perhaps all, of the penalty was paid by Countrywide’s acquirer and insurer. According to the SEC’s complaint, the penalty represents a small percentage of the CEO’s fraudulent gains. The CEO was already retired by the time the SEC sued.]
“Credit Suisse bankers – SEC charged four former veteran investment bankers and traders for their roles in fraudulently overstating subprime bond prices in a complex scheme driven in part by their desire for lavish year-end bonuses. (2/1/12)” [WKB: None of the officers sued was close to being C-suite level.]
Fannie Mae and Freddie Mac: “SEC charged six former top executives of Fannie Mae and Freddie Mac with securities fraud for misleading investors about the extent of each company’s holdings of higher-risk mortgage loans, including subprime loans” [WKB: all six executives are C-suite or very senior.]
Goldman Sachs: No senior officers sued
IndyMac: “SEC charged three executives with misleading investors about the mortgage lender’s deteriorating financial condition. (2/11/11) – IndyMac’s former CEO and chairman of the board Michael Perry agreed to pay an $80,000 penalty.” [WKB: The penalty figure is not a misprint. IndyMac made hundreds of thousands of fraudulent “liar’s” loans and sold them to the secondary market through fraudulent “reps and warranties.” It was the largest “vector” spreading mortgage fraud through the system. The three executives sued were C-suite level.]
J.P. Morgan Securities: No officers sued
UBS Securities: No officers sued
Wachovia Capital Markets: No officers sued
Wells Fargo: No senior officers sued
Rajiv Sethi: The Spider and the Fly
By Rajiv Sethi - Naked Capitalism
. . . .
Aleynikov was hired by Goldman to help improve its relatively weak position in what is rather euphemistically called the market-making business. In principle, this is the business of offering quotes on both sides of an asset market in order that investors wishing to buy or sell will find willing counterparties. It was once a protected oligopoly in which specialists and dealers made money on substantial spreads between bid and ask prices, in return for which they provided some measure of price continuity.
. . . .
Aleynikov relied routinely on open-source code, which he modified and improved to meet the needs of the company. It is customary, if not mandatory, for these improvements to be released back into the public domain for use by others. But his attempts to do so were blocked:
Serge quickly discovered, to his surprise, that Goldman had a one-way relationship with open source. They took huge amounts of free software off the Web, but they did not return it after he had modified it, even when his modifications were very slight and of general rather than financial use. “Once I took some open-source components, repackaged them to come up with a component that was not even used at Goldman Sachs,” he says. “It was basically a way to make two computers look like one, so if one went down the other could jump in and perform the task.” He described the pleasure of his innovation this way: “It created something out of chaos. When you create something out of chaos, essentially, you reduce the entropy in the world.” He went to his boss, a fellow named Adam Schlesinger, and asked if he could release it back into open source, as was his inclination. “He said it was now Goldman’s property,” recalls Serge. “He was quite tense. When I mentioned it, it was very close to bonus time. And he didn’t want any disturbances.”
The Rule of Law in the Financial System
By Adam Levitin - Credit Slips
. . . .
At stake is nothing less than the rule of law.
Investigation of Banks' Role in Price Rigging Escalates With New Subpoenas
By Alan Pyke - ThinkProgress
Regulators have ordered an aluminum company to preserve three years of documents that may be relevant to an investigation into price rigging in the markets for metals, Reuters reported Monday. The Commodity Futures Trading Commission (CFTC) subpoena is the latest signal of heightened regulatory scrutiny of financial firms’ role in the physical commodities markets, three weeks after a New York Times report revealed firms like Goldman Sachs exert control over metal prices that boosts bank profits at the expense of consumers.
. . . .
Those LME rules and fee arrangements have existed for a long time, though, and experts say the market abuses now under investigation stem from the financial sector’s move into the warehousing business. The alleged Goldman scheme hinges on the investment bank’s 2010 purchase of Metro International Trade Services, one of the largest single metal storage companies. Until the deregulation wave of the 1980s and ‘90s, banks were forbidden from such crosspollination of ownership. But years of lobbying eroded the barriers that had restricted financial firms from entering the physical commodities business rather than simply making trades tied to commodity prices. The Federal Reserve has the power to reinstate such barriers, and is reportedly reviewing its past approval of financial industry purchases of warehouses, pipelines, and other physical commodities infrastructure.