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
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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.
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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)
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