Goldman Sachs & Stonewall Jackson

The Consensus on Big Banks Starts To Move

 By Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

The ideology of unfettered finance is crumbling.  Whatever you think of the merits of the Goldman case from a legal or short-term perspective, the SEC’s allegation – and Goldman’s response – have further moved the mainstream consensus away from “finance is generally good” to “big banks are frequently scary.”
Senator Ted Kaufman should get a great deal of credit for his well timed charge on this issue – as I argue in BusinessWeek/Bloomberg.  But Lloyd Blankfein also gets an inadvertent assist, quoted in the Financial Times yesterday as saying that the SEC case against Goldman would “hurt America.”
Mr. Blankfein is starting to sound – and act – a lot like Nicolas Biddle, head of the Second Bank of the United States (by far the most powerful commercial bank of the day), during his confrontation with President Andrew Jackson in the early 1830s.

.....

Read the rest here

Goldman Sachs Hearing Highlight

Goldman Sachs Links and News - April 27 , 2010 - Early Edition

 Hearing Update:  Senators blast "fat cats".
The testimony from each panel including the final testimony from Lloyd Blankfein has been very interesting.  What they did not say is more important then what they were trying not to say when they were talking.  There were those occasional slips when they all said things that I am sure made their attorneys shudder.

It is 7:15 and Lloyd Blankfein is still testifying.  His statements are all very guarded and evasisve except for his occasional slip.  Frankly I am getting tired of listening to him hem and haw and never answer a question directly.  Moreover, he appears to be anything but knowledgeable and one must wonder how he got his job.  What will be interesting will be how long he and some of the others keep their jobs.

What we are learning is that there very definitely are issues with conflicts of interest, disclosure and transparency as Sen. Claire McCaskill (D-MS) summed up.  But even more then that, ethics becomes a real issues as does absolute wrong doing with knowledge.

What also was brought out is the fact that the problems and causes of the economic crisis are not exclusive to GS.  McCaskill said at one point that Blankfein should have been joined by other bank CEO's as well.  My hope is that this investigation expands and that more charges come as a result as the entire banking system is exposed. 

The media and blogs will be humming tonight and tomorrow and for aggregaters like us their should be enough material to last weeks.  I also will be offering my comments and opinions.

TAKE-A-LOOK-Goldman Sachs faces fraud charges
Reuters
Goldman Sachs on Capitol Hill: Testimony of David Viniar
CBS News
Costs to insure Goldman Sachs debt rise-Phoenix
Reuters
Goldman Sachs Grilled in Senate Hearing Over Mortgage Business
BusinessWeek
Goldman Sachs Investors Sue Over Abacus Disclosures
BusinessWeek
Sen. McCaskill zings Goldman Sachs execs
Washington Post
Goldman Sachs' German Problem
Forbes (blog)
Goldman Sachs's Tourre to 'Categorically' Deny SEC's Claims
Bloomberg
Alwaleed Says He'll Go on Working With Goldman Sachs
BusinessWeek
Goldman Sachs's Blankfein Says Firm Didn't Bet Against Clients ...
(Bloomberg)
Goldman Sachs Bet Against Its Own Deals, Senate's Levin Says ...
(Bloomberg)
Goldman Sachs Abacus E-mails Show Hunt for 'Easiest' Asset Firm ...
(Bloomberg)

A Few Questions for Goldman Sachs New York Times  Goldman Turns to New Lobbying Playbook for Washington Battle BusinessWeek  Goldman shouldn't be judged as "evil empire" Reuters  Here's How Spitzer Might Handle Fabulous Goldman: Susan Antilla BusinessWeek  Here's How Spitzer Might Handle Fabulous Goldman: Susan Antilla BusinessWeek  Goldman Sachs CDO Labeled 'Shi**y Deal' by Montag BusinessWeek

Senate Hearings on Goldman Sachs

  Hearings

   

...click here to go to Senate Committee on  Homeland Security and Government Affairs

Wall Street and the Financial Crisis: The Role of Investment Banks

Permanent Subcommittee on Investigations

Watch this hearing live!

Tuesday, April 27, 2010
10:00 AM
Dirksen Senate Office Building, room 106

The Permanent Subcommittee on Investigations has scheduled a hearing, "Wall Street and the Financial Crisis: The Role of Investment Banks," on Tuesday, April 27, 2010, at 10:00 a.m., in Room 106 of the Dirksen Senate Office Building. This hearing will be the fourth in a series of Subcommittee hearings examining some of the causes and consequences of the recent financial crisis. The fourth hearing will focus on the role of investment banks in the securitization of residential mortgage related products, and the development, marketing, and trading of residential mortgage related structured financial products such as collateralized debt obligations (CDOs) and credit default swaps (CDS). The hearing will also review certain investment and trading activities of investment banks that involve residential mortgage based securities and related products. A witness list will be available Thursday, April 22, 2010.
Exhibits This is a large file and may take some time to download depending on your connection speed.

Witnesses

Panel 1

• DANIEL L. SPARKS [view testimony]
  Former Partner, Head of Mortgages Department
  The Goldman Sachs Group, Inc.
• JOSHUA S. BIRNBAUM [view testimony]
  Former Managing Director, Structured Products Group Trading
  The Goldman Sachs Group, Inc.
• MICHAEL J. SWENSON [view testimony]
  Managing Director, Structured Products Group Trading
  The Goldman Sachs Group, Inc.
• FABRICE P. TOURRE [view testimony]
  Executive Director, Structured Products Group Trading
  The Goldman Sachs Group, Inc.

Panel 2

• DAVID A. VINIAR [view testimony]
  Executive Vice President and Chief Financial Officer
  The Goldman Sachs Group, Inc.
• CRAIG W. BRODERICK [view testimony]
  Chief Risk Officer
  The Goldman Sachs Group, Inc.

Panel 3

• LLOYD C. BLANKFEIN [view testimony]
  Chairman and Chief Executive Officer
  The Goldman Sachs Group, Inc.

Goldman Worms Squirm

Live on C-SPAN 3: Goldman execs questioned about fraud.
Watch it live here

====================
Update @ 1:30 PM EST
So far, it's been comedy gold.

Goldman Screws the World

How Goldman Sachs Screwed Ghana

Goldman Sachs, the global financial institution, with fraud allegations levied against it has a long history of setting up its clients for a fall...and making handsome profits. This is a story of how this global investment banking and securities firm screwed Ghana In 1998, Ashanti Gold was the 3rd largest Gold Mining company in the world. The first "black" company on the London Stock Exchange, Ashanti had just purchased the Geita mine in Tanzania, positioning Ashanti to become even larger. But in May 1999, the Treasury of the United Kingdom decided to sell off 415 tons of its gold reserves. With all that gold flooding the world market, the price of gold began to decline. By August 1999, the price of gold had fallen to $252/ounce, the lowest it had been in 20 years.

Ashanti turned to its Financial Advisors - Goldman Sachs - for advice. Goldman Sachs recommeded that Ashanti purchase enormous hedge contracts - "bets" on the price of gold. Simplifying this somewhat, it was similar to when a homeowner 'locks in' a price for heating oil months in advance. Goldman recommended that Ashanti enter agreements to sell gold at a 'locked-in' price, and suggested that the price of gold would continue to fall. But Goldman was more than just Ashanti's advisors. They were also sellers of these Hedge contracts, and stood to make money simply by selling them. And they were also world-wide sellers of Gold itself.

In September 1999 (one month later), 15 European Banks with whom Goldman had professional relationships made a unanimous surprise announcement that all 15 would stop selling gold on world markets for 5 years. The announcement immediately drove up gold prices to $307/ounce, and by October 6, it had risen to $362/ounce. Ashanti was in trouble. At Goldman's advice, they had bet that gold prices would continue to drop, and had entered into contracts to sell gold at lower prices. These contracts were held by a group of 17 other world banks. Ashanti found themselves being forced to buy gold at high world prices and sell it at the low contract prices to make good on the contracts. The result? In a few weeks time, Ashanti found itself with 570 million dollars worth of losses. It had to beg the 17 banks not to force the execution of the contracts.

Who served as the negotiator for the 17 banks and Ashanti? Goldman Sachs. The same company that designed the contracts for Ashanti (making a profit in their sale). The basic bankruptcy of Ashanti drove its stock price from an all time high of $25 per share to a paltry $4.62 per share. Thousands of investors - your blogger among them - lost their investments almost overnight as Ashanti was declared insolvent. In the end (2003), Ashanti was purchased by their largest African competitor, AngloGold, a British company headquartered in South Africa, who bought them for a song. The Financial Advisors to AngloGold? You guessed it: Goldman Sachs.

The destruction of Ashanti Gold by Goldman Sachs was saturated with fraud and conflicts of interest: Goldman Sachs served as Ashanti's Financial Advisors; profitted form the contracts they designed and marketed for Ashanti; was involved in the manipulation of the gold prices on which the contracts depended; represented Ashanti's creditors when the contracts went bad; and profitted as the Financial Advisors to the company that picked up the Ashanti corpse for pennies on the dollar.