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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

Wednesday, March 3, 2010

Goldman Sachs Links and News - March 3, 2010 - with Larry's Corner

Goldman Sachs Group, Inc.Goldman's Reputation Is Blankfein's Job No. 1: Jonathan Weil
Annals of Goldman Sachs client relations, Michael Lewis edition ...
Dick Bove Bashes Goldman Sachs For Getting Scared Out Of Market By ...
By John Carney 
Randall Blaum's Blog: Goldman Sachs Lists New Risk for Investors ...
By Randall Blaum
Man Utd's Glazers complain to Goldman Sachs boss about Jim O'Neill
Many days of $100 million gains at Goldman Sachs
Wall Street Had 'No Idea' What Subprime CDSs Were, Lewis Writes
New Basel rules could hit synthetic CDOs – Goldman Sachs ...
By Randall Mikkelsen
Lucas van Praag: Goldman Sachs's cult PR man | Business and ...
By Andrew Clark 
FDIC's Bair blasts Wall Street's values on pay
Goldman Sachs Objects to Sawgrass Resort's Plan to Spend Cash

Larry's Corner

The Squid Strikes Again

In the last link above, "GoldmanSachs Objects to Sawgrass Resort's Plan to Spend Cash" which appeared in BusinessWeek, one comment made by GS struck me hard.

The story is about the Sawgrass Marriott Resort in Ponte Vedra Beach in Northern Florida - which is also home to the TCP Sawgrass Golf Club, independently owned by a PGA Tour subsidiary - 

According to the BusinessWeek article, the Resort sufferred a loss of busniness in 2009 yet still operated at a profit.  What we do not know is if that reduced profit was suffiecient to continue to make mortgage payments.  One must assume that it was not or at least that the hotel's owners - RQB - stopped making payments for what ever reasons.  Nevertheless, a foreclosure cannot be initated unless there is a delinquency.  So suffice it to say there was a delinquency which would justify a foreclosure.  But why?  That is the question that remains unanswered.
RQB began negotiating a debt restructuring in March 2009 with Goldman Sachs, which is owed $193 million. But in October, Goldman Sachs informed the partners that it intended to foreclose on the resort instead, according to an RQB court filing.
Those negotiations evidently stopped but the reason given makes me wonder.  I have highlighted the comment in bold type below.
“When asked in early November why the restructuring was no longer an alternative, Goldman Sachs stated that its management had changed its mind and preferred to own the resort,” the filing said. (emphasis added by GS666)
While this article does not disclose all the pertinent information that led to the effort to renegotiate the loan from GS, it is apparent that GS was considering something when "it changed its' mind" because "it preferred to own the resort". 

Wanting to own the property through a costly foreclosure rather then renegotiating terms to the benefit of all involved seems odd to me.  It makes me wonder if this is just another  wealth transfer to the elite.  Just like the residential mortgage market has been a great transfer of wealth for the past few years so too now, is commercial real estate. The bankers would rather own the property then create a win win situation for many by modifying loans.  They simply do not want to do so.  In fact, foreclosures are occurring illegally in many instances at a record pace.  This, I consider to be the execution of the greatest transfer of wealth in the history of the world. 

What is odd about this - and becomes just another example of Goldman Sachs self inflicted negative PR - is how they explained it, "Goldman Sachs stated that its management had changed its mind and preferred to own the resort,"  Why did they change their mind?

It would have been more prudent to say something like, "our attempts to renegotiate this loan reached an impasse and proves not to be viable at this time leaving no other alternative then to proceed with foreclosure action".  This still would not have answered the question "why" but would have left less to imagination and posts like this. 

Now I am certainly not trying to clean up their PR act but it is often how someone makes a statement not what one says.  In this case, a slip of the tongue may just have told the truth and exposed their true intentions.  I take their statement to mean, "we could have renegotiated but our greed overcame us once again and we just want to outright own this beautiful, profitable property to add to our ever increasing portfolio of assets."  "We want to own this country."

Perhaps a harsh and exaggerated statement on my part but that is how I and possibly many others interprate it.

I just find unrealistic that a foreclosure is better then a workout if one is possible.  A workout makes it a win win for all involved.  If GS had securitized this loan - which it might possibly have - then it would be beneficial to the security bond holders.  If they have not securitized the loan and hold it in house, then it would be to the benefit of their corporate shareholders - the true owners of Goldman Sachs.

In my tenure in credit management for a large international corporation and my many years in finance which included restructuring loans, I always found the workout to be more beneficial then the alternative.  Often something is better then nothing and typically that something leads to a full long term solution whereby all are made whole.   This, not to mention the legal costs saved by all parties. 

In all fairness, not having all the details, I could be wrong.  This is just my opinion.  But the statement made and our knowledge of GS actions domestically and around the world lead me to believe that I am not too far off.  Just another example of the "Giant Vampire Squid" grabbing what it can, when it can, however it can with no consideration even to their own (the shareholders).  This is not even a moral issue, it is just simply what is fair and good for all.

The final comment made by GS was simply,
A Goldman Sachs spokesman said Tuesday he could not comment on the matter.
And they (GS) wonder why there is so much negative PR.   

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Kitty said...

They're not even bothering with PR, honestly.

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