Goldman Sachs's and Blankfein's Unscupulousness Revealed

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.

Goldman Sachs Does NOT Have a "Conflict of Interest" Policy

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?"
"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."

Read the whole article here
Listen to the audio recorded by Segarra here

Want to Know What Goldman Sachs is Doing Now?

Becoming landlords in Spain 

Forced to stop participating in advantageous surveys

Contributing to Bill Dudley's horrific charts

Facing litigation from Libyan Investment Authority

Refreshing The Vampire Squid inventions

A Great Tribute To All Who Served...I SALUTE YOU!

While I have been silent for quite some time, this video dating back to 2010 was one I felt worth sharing to anyone of you that might still be following this blog.

Our crusade against the illegal and immoral actions of our banking system has seen little in the way of change.  The banks are still doing business as was usual.  NOTHING has changed.

More important is the fact that our judicial system has truly failed.  For anyone who believes there is still justice in our courts - think again!  As seen by the 2+ Billion Dollar fine JP Morgan recently paid and the Billions of Dollars GS has paid in the past, they can BUY their way out of criminal prosecution.

In other words, if you have enough money, our justice system disappears.

The foreclosure rampage is still continuing.  Courts turn the other cheek when banks come into their judicial chambers and allow ILLEGAL foreclosures from plaintiffs (banks, their subsidiaries and their servicing companies) who have no LEGAL standing -right- to take the action against the homeowners.

They, IN MOST cases DO NOT own the loan yet when the courts grant them the foreclosure they -the banks- take possession of the property that THEY HAVE NO INVESTMENT IN!

I can continue on this rant for sometime and in fact, would like to reopen this topic.  However, at this point I do not want to detract from the short video you are about to watch.

THIS IS STILL AMERICA and WE ARE STILL AMERICANS.
For those who gave their service, life and limb for OUR country, I SALUTE THEM!

For those who stole from us and violated the very basics of who and what we are all I can say, YOUR DAY WILL COME.

What Did Goldman Sachs Teach Us About the GFC?

Recently there has been a proliferation of articles on what the world has learned about the financial crisis on the anniversary of Lehman's bankruptcy.  What is startling to see is that not many writers even mention the fraud that was the basis of the crisis:  financial fraud, accounting control fraud, mortgage fraud, derivatives fraud, and so on.  L. Randall Wray lists the ways in which fraud defined the whole financial crisis.  The first item is quoted below:

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.dpuf

The 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

The 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

The 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.dpuf

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.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. 

Read the whole article here

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. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf

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. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf

How Many Corrupt Ways Does Goldman Sachs Make Money? Let's Count the Ways!

Here's a listing of Goldman's prowess as a fraudulent bank brought to you by Matt Taibbi:

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).

Read the whole article here

Bill Black: No Senior Executives of Goldman Sachs Were Indicted

Read this article that contradicts a New York Times "puff piece:"

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:

Bank of America: No officers sued

Bear Stearns: No senior officers sued

Citigroup: 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

Read the whole article here

What Are Goldman Sachs's Motives?

See for yourself the answer to that question from a Naked Capitalism post by Rajiv Sethi:

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.”

Read the full article here 

Goldman Sachs Does Not Observe the Rule of Law

What is needed to improve the economy is financial reform, judicial reform AND political reform.  The author below neglects to mention the frauds committed by the banks that brought about the collapse of the financial system.  One has only to read the work of William K. Black to see how much fraud the banks committed and how little was done by the justice system or the political system to bring the frauds to light and to put some executive bankers (like Lloyd Blankfein) in jail.  It is a fail all around:

The Rule of Law is Dead!  Long Live the Rule of the Bankers!

The Rule of Law in the Financial System
By Adam Levitin - Credit Slips
. . . .
  At stake is nothing less than the rule of law. 

Read the article here
Better yet, read William Black here

Goldman Sachs: Profiteering Apace

Both the CFTC and the Federal Reserve regulators are examining the role of Goldman Sachs in manipulating commodity markets through their ownership of storage warehouses for metals.  It is time to make it illegal for banks to control commodity prices through warehousing manipulation.

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. 

Read the full article here

Goldman Sachs and GSAMP Trust 2007 NC1

This blog has discussed other Goldman Sachs products (that contributed to the meltdown of 2008) in the GSAMP Trust categories of 2006 and 2007.  A DealBook article by Peter Eavis describes another Goldman product called GSAMP Trust 2007 NC1:

In One Bundle of Mortgages, the Subprime Crisis Reverberates
By Peter Eavis - DealBook
. . . .

Yet the financial crisis still reverberates for many others, in large part because of the insidious reach of the financial products that Wall Street created. Subprime securities still pose a significant legal risk to the firms that packaged them, and they use up capital that could be deployed elsewhere in the economy.
This is the story of one of those bonds, GSAMP Trust 2007 NC1.

The name is the sort of gobbledygook that is common in the bond market, but it tells a story. The “GS” is derived from Goldman Sachs. The Wall Street firm didn’t actually make mortgages to subprime borrowers that were in the deal. Instead, Goldman bought them from a lender called New Century, the “NC” in the title.

It was New Century that lent to Wendy Fillmore, when she and her husband wanted to buy their house in Las Vegas in 2006. The home cost $276,000. New Century provided two loans, one for a $221,000 loan and a second mortgage for $53,000. Data for the Goldman deal shows that it contains the Fillmores’ larger loan.

Ms. Fillmore’s husband was, and still is, an information technology specialist, and at the time she was working as a transcriber. She recalls the surprise she felt when New Century agreed to the make the mortgages.

Read more of the details here

What Business does Goldman Sachs Have to be Warehousing Aluminum?

Goldman Sachs is facing lawsuits for the way it is warehousing aluminum.  The CFTC has sent out subpoenas and the DOJ is investigating a metals warehousing firm according to Market Place Business. 

Goldman, of course, can explain everything.

Lawsuits claim banks involved in aluminum price fixing
Interview with Sabri Ben-Achour - Market Place Business

Reuters is reporting that the U.S. Commodity Futures Trading Commission has subpoenaed at least one metals warehousing firm, and the Department of Justice is probing another. Separately, aluminum manufacturers have launched class action lawsuits against the London Metals Exchange.

The concern is whether warehouse companies -- many of them owned by Wall Street Banks and trading firms like Goldman Sachs or JP Morgan Chase -- are manipulating prices by controlling how much metal enters and leaves the market.

Coca Cola and beer producers have made these accusations for several years.

The banks and firms that own warehouses only store the metal, they do not own it.

But two points to consider:

Warehouses do control how fast or how slow the metal can be released. Under (recently relaxed) rules of the London Metal Exchange, only 3,000 tons per day of metal are allowed out of a warehouse per day. It can take a year for that metal to leave the warehouse.

Two, some of the owners of metals in warehouses are hedge funds or other speculators who have a vested interest in affecting prices.

Read the article here

Goldman Sachs Prospers When the Financial System is Corrupt

Kaufman:  Why has no banker gone to jail?
By Ted Kaufman - delawareonline
. . . .
 The New York Times summed up the reaction of observers, saying “Still, some critics have questioned why the agency chose to make Mr. Tourre – a midlevel employee who was 28 at the time of the mortgage deal – the face of the crisis. Not one executive at Lehman Brothers, which filed Wall Street’s biggest bankruptcy ever at the height of the crisis, was charged with wrongdoing.”

Exactly. The questions I have been asking for years remain. Why has not one of the bank executives who were running the show even been indicted? Why has no one gone to jail?


In his closing arguments Mr. Martens came up with at least one possible answer to those questions. Mr. Touree, he said, was living in “a Goldman Sachs land of make-believe,” where deceiving investors is not fraudulent.



We have allowed Wall Street banks to operate in that land of make-believe for years. Over and over again, they get away with slap-on-the-wrist money penalties, fines often so small they seem to be regarded as a cost of doing business.

Read the whole article here

Goldman Sachs Seeks Retribution

The legal jujitsu of Goldman Sachs
By Felix Salmon - Reuters
. . . .
 
The big difference between the two cases is that while Tourre was defended by Goldman Sachs, Aleynikov was prosecuted by them: Lewis leaves the reader in no doubt that the decision to prosecute, along with all the supporting arguments, while nominally taken by the FBI, was essentially made by Goldman Sachs itself. The irony is painful: the government, acting against Goldman Sachs, could only manage a civil prosecution. But Goldman Sachs, acting through the government, managed to secure itself a highly-dubious criminal prosecution, complete with an eight-year prison sentence.

Lewis doesn’t delve too deeply into the jurisprudence here. But it’s obvious that the case would never have been brought without Goldman’s aggressive attempt to cause as much personal destruction as possible to Aleynikov — and it’s also obvious that Aleynikov neither meant nor caused any harm to Goldman whatsoever.

Goldman has consistently attempted to paint Aleynikov as a stealer of valuable secrets — but if anything in Goldman’s high-frequency trading code was valuable, it was Goldman’s trading strategies, and Aleynikov had zero interest in those. What’s more, he wasn’t interested in the code itself, a big buggy mess which he was happy to leave behind: his new job was to build an entirely new system from scratch, in a completely different computer language to that used at Goldman. All that Aleynikov did, in substance, was to email to himself a bunch of files which included open-source code he had managed to find, over the years, online. He thought it might come in handy, one day, but it never really did: most of the files, when they were seized, were unopened.

The story of Aleynikov’s prosecution is a depressing one — one of the experts Lewis assembled to judge the coder’s claims was literally nauseated by the bank’s actions. The story is pretty simple: there are smart HFT shops, and then there’s Goldman Sachs. 

Read the entire article here

Goldman Sachs Now a Big Commodities Dealer

How The Financial Crisis Helped Turn Big Banks Into Global Commodities Kings
By Linette Lopez - Business Insider

Wall Street's biggest banks are currently under the gun for their massive role in global commodities markets. But what many don't realize is the vast expansion of that role was, in large part, an unintended consequence of the chaos of the financial crisis.

Should we be shocked that the ramifications of the financial crises are still reverberating years later with unexpected repercussions? Not in the slightest.

Without the financial crisis, Wall Street's legally designated, FDIC insured, bank holding companies (FHCs) would not have had the opportunity to build massive portfolios of oil, natural gas, metals and more. They would not have been able to buy the things that transport and house those commodities either.

Right now, bankers might be daydreaming of an alternate reality where they didn't build the huge, now tenuous, commodities portfolios which are drawing increased scrutiny.

Such scrutiny as the July 20th The New York Times story that accused Goldman Sachs of using its aluminum warehouses to manipulate the price of the commodity — an assertion the bank emphatically denies — costing consumers billions.

Read the whole article here

Why Does Goldman Sachs Need Its Own Economist?

Goldman Sachs has its own economist on staff to advise the executives.  Jan Hatzius joined Goldman in 1997 and became Chief Markets Economist when he succeeded William Dudley in 2005.  (Dudley went on to become President of the Federal Reserve Bank of New York.)  What is the job of an economist who works at Goldman Sachs?  Does he try to see the whole economic picture while focussing on the bank's role?  Does he consult with the CEO about products like subprime mortgages and CDOs and CDSs that Goldman created in order to pump up profits?

Does a Goldman economist worry about anything more than the small economy which surrounds Goldman--the one that can focus only on how to make more and more profits?

Goldman's economist is the public face of Goldman and his role seems to be defined very narrowly around what Goldman does.  Thus, the best that an economist at Goldman can do is suggest (in 2005) that there is a problem with housing in the economy without mentioning the role that Goldman played in using subprime mortgage derivatives.

Goldman was not the least bit chagrined by using the mortgage market to commit fraud--a fraud that made all the executives at Goldman very, very rich in the process.

But when you read what Hatzius has to say about the financial crisis, his gaze is so narrow that we can hardly perceive the reality.

Hatzius understands financial sectoral balances but then does not use this knowledge to apply it to the need for government deficits in a recession.  He speaks in economic generalities and in Goldman specifics.

James Galbraith understands the world in which such economists live and sees economists as refusing to see any criminality in the economy.  There are "conditions that generate epidemics of financial fraud " according to Galbraith.  It is certain that Hatzius would never be able to see fraud because of where he works.

The following excerpt describes where Hatzius, the economist, would fear to tread.

Who Are These Economists, Anyway?
By James Galbraith - NEA
. . . .

In the present crisis, the vapor trails of fraud and corruption are everywhere: from the terms of the original mortgages, to the appraisals of the houses on which they were based, to the ratings of the securities issued against those mortgages, to gross negligence of the regulators, to the notion that the risks could be laid off by credit default swaps, a substitute for insurance that lacked the critical ingredient of a traditional insurance policy, namely loss reserves. None of this was foreseen by mainstream economists, who generally find crime a topic beneath their dignity. In unraveling all this now, it is worth remembering that the resolution of the savings and loan scandal saw over a thousand industry insiders convicted and imprisoned.  Plainly, the intersection of economics and criminology remains a vital field for research going forward.

. . . .

This remains the essential problem. As I have documented—and only in part—there is a considerable, rich, promising body of economics, theory and evidence, entirely suited to the study of the real economy and its enormous problems. This work is significant in ways in which the entire corpus of mainstream economics—including recent fashions like the new “behavioral economics”—simply is not. But where is it inside the economics profession?  Essentially, nowhere.

It is therefore pointless to continue with conversations centered on the conventional economics. The urgent need is instead to expand the academic space and the public visibility of ongoing work that is of actual value when faced with the many deep problems of economic life in our time. It is to make possible careers in those areas, and for people with those perspectives, that have been proven worthy by events. This is—obviously—not a matter to be entrusted to the economics departments themselves. It is an imperative, instead, for university administrators,for funding agencies, for foundations, and for students and perhaps their parents. The point is not to argue endlessly with Tweedledum and Tweedledee. The point is to move past them toward the garden that must be out there, that in fact is out there, somewhere.

Read the paper here

Goldman Sachs Produces "Fictitious Capital"

The financialization of the economy proceeds apace.  The banks committed mortgage fraud in order to create large profits for their companies that in turn gave the executives large bonuses and salaries.  The banks continue to lobby for regulations that they perceive are necessary for their continued profit-making.  So when Goldman Sachs realizes that it has "to have riskier credit derivatives trades take place in a separately capitalized unit so that any trading failure there would not have access to the institution's commercial bank division, which is backed by insured deposits and taxpayers through the Federal Reserve's discount window" (Donald D. Orol, MarketWatch), why, it obtains two more years to comply!

That is the nature of an economy that is based on the success of the financial system at the cost of manufacturing and other productive companies.  Goldman's capital is "fictitious" and "imaginary" as Hudson defines it.  These same credit default swaps that Goldman continues to use were responsible for the huge taxpayer bailouts of 2008 and for the continuing gutting of industry in the economy.

Goldman is a past master at the sterile operation of  "making money from money."

Michael Hudson describes the way financialization has subsumed industry so that the banks and huge corporations now run the insane asylum.

From Marx to Goldman Sachs:  The Fictions of Fictitious Capital
By Michael Hudson - His Blog
. . . .
This self-expanding growth of financial claims, Marx wrote, consists of “imaginary” and “fictitious” capital inasmuch as it cannot be realized over time. When fictitious financial gains are obliged to confront the impossibility of paying off the exponential growth in debt claims – that is, when scheduled debt service exceeds the ability to pay – breaks in the chain of payments cause crises. “The greater portion of the banking capital is, therefore, purely fictitious and consists of certificates of indebtedness (bills of exchange), government securities (which represent spent capital), and stocks (claims on future yields of production).” [10]

A point arrives at which bankers and investors recognize that no society’s productive powers can long support the growth of interest-bearing debt at compound rates. Seeing that the pretense must end, they call in their loans and foreclose on the property of debtors, forcing the sale of property under crisis conditions as the financial system collapses in a convulsion of bankruptcy.
. . . .
  The last few decades have seen the banking and financial sector evolve beyond what Marx or any other 19th-century writer imagined. Corporate raiding, financial fraud, credit default swaps and other derivatives have led to de-industrialization and enormous taxpayer bailouts. And in the political sphere, finance has become the great defender of deregulating monopolies and “freeing” land rent and asset-price gains from taxation, translating its economic power and campaign contributions into the political power to capture control of public financial regulation.
. . . .
Growing independently from tangible production, financial claims for payment represent a financial overhead that eats into industrial profit and cash flow. Today’s financial engineering aims not at industrial engineering to increase output or cut the costs of production, but at the disembodied M-M’ – making money from money itself in a sterile “zero-sum” transfer payment.

As matters have turned out, the expansion of finance capital has taken the form mainly of what Marx called “usury capital”: mortgage lending, personal and credit card loans, government bond financing for war deficits, and debt-leveraged gambling. The development of such credit has added new terms to modern language: “financialization,” debt leveraging (or “gearing” as they say in Britain), corporate raiding, “shareholder activists,” junk bonds, government bailouts and “socialization of risk,” – as well as the “junk economics” that rationalizes debt-leveraged asset-price inflation as “wealth creation” Alan Greenspan-style.

Read the whole article here

Goldman Sachs Profits From Bad Economic Times

Goldman Sachs profits mightily from the so-called "stimulus" of Quantitative Easing (QE) by the Federal Reserve, but Goldman is not interested in helping to create economic growth through lending because it can prosper very nicely in a period of debt-deflation "by riding [the trend].  If they [the banks] withhold loans, prices will fall even further and the asserts can be bought later for even less.  You might call this shorting the entire economic system."

As we know, Goldman always seems to know that right time to make a profit by shorting, first by shorting the housing market and then by shorting the whole economy.

Quantitative easing isn't magic
It is unrealistic to expect central banks like the Fed and the ECB to solve our deep economic problems 
by James K. Galbraith - The Guardian
. . . .
Quantitative easing, the third tranche of which was announced in the US last week (QE3), is just a fancy phrase for buying bonds, notably mortgage-backed-securities, in which operation the Federal Reserve takes assets from the banks and gives them cash. This raises the bond price and lowers the yield. It also tends to boost stock prices – very nice for people who own stock – and it can spur mortgage refinancing, improving the cashflow of solvent homeowners.

And the effect on the economy of all this is? Mostly indirect and quite small. People don't generally spend capital gains as windfalls. Saving on mortgage debt helps to support spending but some of it goes to paying down other debts. People who are already underwater on their mortgages can't refinance anyway, and are not affected. Yes, there is some effect. But powerful stimulus, this is not.
. . . .
As Hyman Minsky used to say: banks are not moneylenders! Banks don't lend reserves, and they don't need reserves in order to lend. Banks create money by lending. They need a client willing to borrow, a project worth lending to, and collateral to protect against risk. If these are lacking, no amount of reserves will turn the trick. And especially not when the government is willing to pay interest on their reserves: the truest form of welfare, income for doing nothing.
. . . .
What we need instead, today, is a candid review of what central banks cannot do. Yes, they can usually forestall panic. Yes, for better or worse they can keep zombie banks alive. No, they cannot bring on economic recovery or solve any of our deeper economic problems, from unemployment and foreclosures in America to unemployment and economic collapse in Greece and elsewhere. The sooner we stop thinking of central bankers as wizards and magicians, the better. 

Read the entire article here

Goldman Sachs was a Lender in the Great Subprime Meltdown

William K. Black writes wonderfully concise and eminently readable articles on all aspects of the financial crisis of 2008.  In the article excerpted below, he tackles the crisis from the point of view of appraisers who were pressured by lenders (read:  "Goldman Sachs") to artificially create higher prices on properties that homeowners sought to own.

The appraisers played a crucial role in the financial crisis--both in bringing attention to the fraudulent requests from lenders and also in becoming captured by the fraud perpetrated by the lenders.  (The comments about the article are worth reading also.)

Two Sentences that Explain the Crisis and How Easy it Was to Avoid
By William K. Black - New Economic Perspectives

Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC).

“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).

Those two sentences tell us more about the crisis’ cause, and how easy it was to prevent, than all the books published about the crisis – combined.  Here are ten key implications.

Please read the rest of the article here 

Goldman Sachs is Still "Too Big to Fail"

We are aware that Goldman Sachs isToo Big To Fail just as its CEO, Lloyd Blankfein, is Too Big To Jail.

As Simon Johnson states in Bloomberg:  "The problem of too-big-to-fail banks is alive and well, and looms over our financial future."  Johnson says that the Federal Reserve (which regulates the TBTF banks) has a mostly positive view of the financial system as it now stands.

However, the banking system enjoys the implied subsidy of having a government guarantee which gives Wall Street banks like Goldman Sachs an unfair advantage (see page 6 of Statement of Committee on Financial Services.)

Fumbling Through the Fog Around Too Big To Fail
By Simon Johnson - Bloomberg View
. . . .

‘Safety Net’

As Tom Hoenig, the current FDIC vice chairman, put it at the hearing: “Short-term depositors and creditors continue to look to governments to assure repayment rather than to the strength of the firms’ balance sheets and capital. As a result, these companies are able to borrow more at lower costs than they otherwise could, and thus they are able increase their leverage far beyond what the market would otherwise permit. Their relative lower cost of capital also enables them to price their products more favorably than firms outside of the safety net can do.”

Unfortunately, the Fed’s Board of Governors seems unable to state the problem as clearly. And without the Fed Board, there is very little chance of progress within the existing Dodd-Frank framework.
In the absence of further legislative instruction, reform is stuck. The regulators could make use of their existing powers to do more, but they won’t. The last three years have taught us this.

Very large financial companies are likely to be rescued in future crises; the credit markets take this into effect when providing funding.

Fisher strongly advises that further steps be taken to make the banks simple enough and small enough to fail. He has some practical suggestions, such as limiting the official safety net to traditional commercial banking, while forcing everyone engaged in lending to higher risk trading or investment banking to acknowledge they have no downside protection from the government. 

See the rest of the article here
Read the report of the Committee on Financial Services here