Fraud* According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain *As defined in Wikipedia
It's going to take more than Dawn dish soap and a scrub brush to scrape the stench off of Goldman Sachs. It would be easier for a leopard to change its spots than it would be for Goldman to stop being an economic cannibal.
The New York Times' Timely Whitewash of Goldman Sachs
At this critical moment, while the House and Senate are merging the final measure of the most significant changes to financial regulation since the Great Depression, Goldman Sachs is fighting tooth and nail to water down Congress' Financial Regulatory Reform Bill before it comes to a vote in the next days. It is a moment for the 'old boy' network to go into high gear.
Goldman's objective is to protect its massive proprietary trading desks, the source of much of its profits and the focus of the new bill. The bill reportedly incorporates a tough 'Volcker Rule' prohibiting banks engaged in commercial lending -- and thereby having access to federally insured deposits, access to myriad federal programs and bountiful Federal Reserve funds at the Fed window -- to engage in naked trading (placing bets on commodities and financial instruments in which they or their clients have no business interest, i.e. taking out fire insurance on someone elses house, as a grim hypothetical).
It is what Goldman, once having been a classic investment bank helping to finance businesses and grow the economy, now does most profitably. In other realms it's known as playing casino with the house's money, and the Volcker Rule would bring it to a stop. It would cause them to move their 'proprietary' trading activities to other entities where they no longer have preferred access to the banking system and implied federal guarantees, thereby placing the entire system at risk, as was the case with much of Wall Street during the recent meltdown.
So just this week, along comes a great whitewash orchestrated by the New York Times and their star financial reporter, Andrew Ross Sorkin.....
We all remember how in late 2008, staggering losses on risky derivatives nearly brought down our entire financial system.
With 43 members of the House and the Senate hammering out a final version of the financial-reform bill, one of the biggest contentions remains what to do about the mind-boggling, vast, and opaque derivatives market owned by the nation's too-big-to-fail megabanks.
The problem is getting worse. Notional amounts of derivatives held by federally insuredbanks have risen to more than $200 trillion.
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No matter how you measure it, this is a ton of risk, and it's concentrated in five hands: JPMorgan Chase, Bank of America, Goldman Sachs , Citigroup, and Wells Fargo.
There are at least three problems with this picture:
1. This is crazy.
At 14 times the size of the U.S.'s gross domestic product, if even a fraction of these opaque and convoluted instruments blow up, as they did in 1998 and again in 2008, it would be bad news bears for everyone who doesn't live on roots and berries.
2. They're too big to fail.
The chief selling point of the financial-overhaul bill is that it somehow reduces the problem of too big to fail. Whether or not you believe that it does (it does not), one thing is for certain: The liquidation authority that is supposed to restore discipline and end moral hazard in financial markets is unlikely to work so long as derivatives traders continue to use American families' deposits as human shields. Derivatives collateral gets paid out before deposits, so the next time a megabank melts down, the Federal Deposit Insurance Corp. could be left holding the bag in liquidation.
3. We're subsidizing them.
Market-making can sometimes be socially useful, while gambling billions of dollars on interest-rate movements is probably less so, and given the dangers, may be socially detrimental. But none of these risky activities needs to be subsidized by our FDIC-insured deposits, 0% Federal Reserve liquidity guarantees, and the prospect of future bailouts. Continuing to do so will only encourage the market to grow larger and more dangerous, and siphon capital away from more legitimate activities like, say, lending money to support an economic recovery.
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What you can do about it
One section of the financial-reform bill being debated now would end subsidies for derivatives trading.
Section 716, "Prohibition Against Federal Bailouts of Swaps Entities," is a flat ban on federal assistance to derivatives casinos. Banks could still use derivatives to hedge their own risk, but they would have to fund derivatives trading operations with their own money instead of ours.
Wall Street is furious. It apparently feels entitled to gamble with our savings.
Editor's Note: After my short absence from this site, I am happy to report that I am back to work here at GS666.com. The Daily Links feature will again be available to you.
I, again, would like to thank all of you who took the time to email me during my absence offering your well wishes. I am pretty much fully recovered and am doing remarkably well.
One Crowd Still Loyal to Goldman Sachs
Lots of people are talking about what is happening at Goldman Sachs. This is a column about what is not happening at Goldman.
Despite all the bad headlines — the accusations of fraud, the talk of a big settlement, the risk, however remote, of criminal charges — there’s an inconvenient truth that’s been largely ignored: Most of Goldman’s big customers are not bolting.
To the contrary, nearly all of them are standing by Goldman, despite come-hither looks from Goldman’s rivals.
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For its part, Goldman keeps insisting that it plays fair. To which its critics say, come on. Are you really sticking to that story, after all the public outrage? Who do you think believes you?
As unsatisfying as this may be to the firm’s detractors, the people who seem to believe in Goldman are the ones who pay its bills.
“We trust them,” Jeffrey R. Immelt, the chief executive of General Electric, told an audience at the 92nd Street Y in New York last month. “People need to tone down the rhetoric around financial services and stop the populism and be adults.”
In recent weeks, BP went looking for advisers to help it think through the liabilities of the spill. Considering BP’s own public relations problems, you might think it would stay far away from Goldman. But no, Goldman is now one of those advisers. (Goldman, it should be noted, happens to also be an adviser to the New York Times Company.)
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Read the rest here
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And here's Damon's latest piece on the macroeconomy
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BP Develops Technology to Convert Lies into Energy
‘Totally Renewable Resource,’ Says CEO
LONDON (The Borowitz Report) – In what is being called a game-changer for the embattled oil company, British Petroleum announced today that it has developed a new technology to convert lies into energy.
At a press conference at corporate headquarters in London, BP CEO Tony Hayward said that environmentalists would embrace the new technology “because lies are a totally renewable resource.”
Illustrating the impact of BP’s new technology, Mr. Hayward told reporters, “Over the past month alone, my words could power the city of London for a year.”
But the new technology has its skeptics, including the University of Minnesota’s Davis Logsdon, who warns of the dangers of “lie spills.”
“We have learned from recent BP press conferences that once the lie flow starts, it can be very hard to stop,” he says. More here.
The Los Angeles Times says Andy Borowitz has "one of the funniest Twitter feeds around." Follow Andy on Twitter here.
Wanna hear something funny? Goldman, yes That Goldman, has an ethics code! Hahahaha
Perhaps we all owe Goldman Sachs an apology. Everyone heaped outrage and ridicule the April spectacle of its executives going before the U.S. Senate and asserting under oath that they saw nothing at all unethical about intentionally selling “crappy” investment products to their trusting customers, then making money for their own firm by betting that the products would fail. Many were reminded of the tobacco executives, in the famous AP photo, all raising their hands to swear that they did not believe nicotine was addictive. After all, Goldman Sachs’s own website pledged openness, honesty, trustworthiness and integrity, saying.....
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Now it seems that we were lacking a crucial document: the firm’s internal Code of Ethics, which Goldman Sachs recently made public. Under the provisions of this remarkable Code, what Goldman Sachs did to its clients wasn’t unethical at all; deceptive, conflicted, and unfair, yes…but not unethical, in the sense that it didn’t violate the Ethics Code itself. “Impossible!” you say? Ah, you underestimate the firm’s cleverness.
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SECTION III Waivers of This Code
From time to time, the firm may waive certain provisions of this Code. Any employee or director who believes that a waiver may be called for should discuss the matter with an Appropriate Ethics Contact. Waivers for executive officers (including Senior Financial Officers) or directors of the firm may be made only by the Board of Directors or a committee of the Board...
Brilliant! Any time conduct prohibited by the Code of Ethics is inconvenient, as in “it stops us from making more money,” Goldman Sachs can “waive” it. This means, in their eyes, that activities like deceiving clients, operating with significant conflicts of interest, and breaches of confidentiality are generally unethical and prohibited by their Code of Ethics, but since the same Code lays out a procedure to temporarily “waive” any of these provisions “from time to time,” the firm can lie to clients and undermine the interests of investors for the firm’s own profit without violating its Ethics Code. Applying a strict compliance standard, as most businesses do, Goldman Sachs can do almost anything (“from time to time”) without technically violating its Code—unless it does so without getting those ethics “waivers”. Now that would be, in the culture of Goldman Sachs, unethical.
Goldman Sachs has a reputation all right, not a good one either.
Goldman's Stonewall Is Bad Business By hiding information from regulators and customers, the bank is hurting its already-damaged reputation.
Goldman Sachs (GS) has always had a reputation for being above the fray, aloof from the concerns of mere mortals. This reputation has served the bank splendidly as it fends off the pleas, hearings, and subpoenas of federal regulators. To the experienced (or simply jaded), it appeared that the 141-year-old Wall Street stalwart is just, well, being Goldman.
This reputation has, unfortunately, served the bank a little too well. There is a point at which Goldman's stubborn refusal to descend from Mount Olympus is no longer just "Goldman being Goldman," but an actual sign of pathology in its operations. The bank has failed to realize that the world has changed, and it has a different, necessarily more accountable role now in the wider financial culture in the United States, which has had the leveling effect of wiping out Goldman's longtime exceptionalism. Rather than appearing aloof, Goldman's refusal to communicate with the rest of society now looks furtive and guilty—a fact easily ascertained by the stock's new dip to a 52-week low on Thursday. The only way for the bank to repair this is by genuinely embracing transparency and accepting the questions of Congress and the public with good faith rather than open contempt.
William Cohan talks about morality, BP and Goldman
BP’s Mess, and Wall Street’s
Just because you can do something, does that mean you should? It’s a question that might have saved us a lot of pain in recent months if both Goldman Sachs and British Petroleum had asked it of themselves during the last decade.
Sure, Goldman, and other Wall Street firms, could — and did — create “synthetic C.D.O.s” to allow consenting investors, including Goldman itself, to gamble on the risk in the U.S. housing market. Sure, Goldman and others could — and did — package up mortgages that should never have been issued into mortgage-backed securities and sold them to investors around the world who, in turn, abdicated their responsibility to investigate the soundness of the investment because some rating agency — paid by the underwriters — had slapped a AAA-rating on them. That technology existed, and Goldman and others just availed themselves of it, right? Besides, they were simply supplying the demands of the marketplace, right?
Apparently, Goldman employees are high on meth or suffer from some sort of retardation that makes them think we don't understand them.
We understand you quite well, thank you very much. And we're not just mad at you, we're mad about a lot of things. We're mad about a government that has been corrupted to the core by the Wall Street lobbyists and other bottom feeders. We're mad at people that promise us change and then continue to kowtow to corporations. We're mad about companies like Goldman that continue to screw the public. We're mad about companies like BP, that through their greed and negligence kill people, defenseless animals and the American way of life.
Personally, I'm irate at the Ponzi schemecalled fractional reserve lending that has given banks the license to leach off the backs of hard working Americans for almost 100 years. If you don't understand why people are mad at Goldman, then you need to get out of your cushy offices and take a better look at what you think 'investing' is all about. People used to invest in a company because they believed in that company and wanted to support that company. Wall Street today has become a playground for spoiled psychopaths to extract unearned income from the average American.
FORTUNE -- With all the public fury aimed at Goldman Sachs these days, it should come as no surprise that an employee or two of the storied investment bank wishes that things were somehow ... different.
But how much different? If you believe backyard barbecue conversations, at least some of them wish they were -- and this is no joke -- a retail bank.
You heard that right. The uber-wealthy swashbucklers of finance wish that they had themselves a pair of modest green eyeshades. This is clearly schizophrenia of the highest order.
Let us back up a moment and explain. Last weekend, my editor was told by a couple of Goldman employees that the reason the public ire toward Goldman was so intense was that to most people, Goldman's business (proprietary trading, investment banking, etc.) was an abstract concept that they didn't really understand.
As a result, it was easily reduced to caricature -- a soulless money-making machine, a bloodsucking squid on the economy -- and it was equally easy for the mind of the man on the street to convert that abstraction into another, even simpler one called "evil."
Things would be different, the Goldman folks said, if the company happened to own a good old American bank. You know, the kind that Goldman's rivals J.P. Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) own. The kind with an ATM on the street corner.
People are mad at their banks, sure, but they also know that a bank is just a bank, and not the evil dark force of international finance that is Goldman Sachs (GS, Fortune 500). Or so the thinking of the Goldman people goes. Their problem, in other words, isn't what they do, it's what they don't do.
The brighter the light, the more the cockroaches scurry:
SEC Investigation of Goldman Trading Against Its Clients Widens
The latest shoe to drop on the Goldman front is the report on Wednesday that the SEC was investigating yet another one of its synthetic CDOs, this one a $2 billion confection called Hudson. It isn’t clear whether the SEC will file charges, but this one has the potential to be particularly damaging in the court of public opinion, since this CDO was created solely as a proprietary trading position to help the firm get short subprime risk in late 2006, when the market was clearly on its last legs.
By way of background, the assets in a synthetic CDOs are credit default swaps. In the case of Hudson, they referenced $800 million of BBB subprime bonds, 2005 and 2006 vintage, and $1.2 billion of the ABX. The deal was a wipeout.
What makes Hudson different from the Abacus CDO that is the subject of an SEC lawsuit is that it was not even arguably intermediated between customers. Goldman was not only the initial short counterparty (as was indicated in the contract as standard verbiage), it was every and always intended to be the ultimate short counterparty. Why does this matter?
Synthetic CDOs were sold to investors as the economic equivalent of cash CDOs, ones whose assets were subprime bonds rather than credit default swaps. That was always more than a bit disingenuous. Cash CDOs had for some time been the way that underwriters would dispose of the pieces of subprime bonds they were unable to sell, namely the riskier tranches. Conceptually, it was like taking unwanted parts from (presumably) healthy pigs, grinding it up with a little bit of better meat plus some spices and turning it into sausage.
But the short players like Goldman set out to create sausage from pigs known to be sick because that would be more profitable for them, and this was a zero sum game: their profit came at the expense of their customers. Note that this is NOT inherent to investing, that the dealer’s gain is necessarily the customer’s loss. A dealer might exit a trade that he sees as unprofitable because he expect the price to fall in the next few days. The customer may have a completely different time horizon, and the success of his investment will not be affected much by what would be for him trading “noise” over the next few days.
Let’s put it more simply: how many of you would knowingly choose to be on the other side of a Goldman prop trade, particularly if you knew Goldman had designed the instrument to enable it to go short? Answer: probably zero.
FCIC says Goldman Sachs is playing the American people for 'chumps'
The Federal Crisis Inquiry Commission is pretty pissed at Goldman Sachs. Actually, make that really pissed. “We’re not going to let the American people be played for chumps here,” said co-chair Phil Angelides. His colleague Bill Thomas added that Goldman is attempting a "very deliberate effort to run out the clock.” Felix Salmon offers the back story:
One party you don’t want to be when BP's bankruptcy lands square squash on the table is a Louisiana fisherman or a Florida tourist operator. British pensioners first! Sure, Obama has declared that BP is liable for all damages yada yada, but there’s a long list as we speak of Gulf Coast residents who can’t hardly squeeze a penny out of the company even now, and that’s before any serious litigation has started.
It’s all just posturing. By the time the real claims arrive, BP will likely be very deeply mired in interminable Chapter 11 and/or subsequent proceedings, and the little man will be dead broke and waiting for years to see if he may ever get a single penny for what he worked long and hard to build up, whether he’s Forrest Gump in Terrebonne Parish or Mr. Bean in Coventry.
Don’t help the little man, help BP, says the British government. And that will be the political stance, though certainly not the public message, going forward, on both sides of the pond. Nothing has changed as of yet and nothing will until Gump and Bean reach for their pitchforks.
Goldman Sachs or BP, the politicians’ reaction remains the same. Screw whoever’s not in your circle, and use (your power over) their money to pay off who is. Corporations rule this planet, not the people that live on it.
This article was sent to us by a reader. We thank you and appreciate the information. We welcome your participation.
An Updated List of Goldman Sachs Ties to the Obama Government Including Elena Kagan By: fflambeau Saturday May 8, 2010 9:13 pm
I. Introduction.
This essay shows the pervasive influence of Goldman Sachs and its units (like the Goldman-Robert Rubin-funded Hamilton Project embedded in the Brookings Institution) in the Obama government. These names are in addition to those compiled on an older such list and published here at FDL. In the future, I will combine the names here and those on the earlier article but I urge readers to look at the earlier list too (links below). Combined, this is the largest and most comprehensive list of such ties yet published.
Note too that I have intentionally used the words, "Obama government" rather than "Obama administration" because some of these connections are not technically within his administration. These would include ambassadorial appointments and Supreme Court appointments (like that anticipated for Elena Kagan). This also includes lobbyists like Dick Gephardt who has multiple connections/input to Obama and to Goldman Sachs and the Hamilton Project.
In a similar vein, I use a broader definition than just Goldman Sachs (GS) because GS has funded, along with its ex-leader Robert Rubin, a right-leaning think tank called the Hamilton Project and embedded it within the Brookings Institution. Some of its activities thus also spill over into Brookings Institution projects which doubtlessly was one of the clever reasons Rubin and GS did this, along with providing their essentially neo-con/neo-liberal think tank with camouflage. This has worked beautifully for GS and Rubin as most writers–even critical ones like Matt Taibbi–seem unaware of the important doings of the Hamilton Project. The Hamilton Project has 32 people sitting on its Advisory Council and many have ties to Goldman Sachs, Rubin and the Obama government. Of the first four Directors of the Hamilton Project, three work in the Obama administration. Meanwhile, the most recent Director of the Hamilton Project came from academia and from a position as economic adviser to the Obama administration to Hamilton in the sort of "revolving door" that Washington is famous for.
The Hamilton Project (named after Alexander Hamilton whose most famous dictum was "The People are a Great Beast") is essentially pushing for cuts in entitlements (like social security), outsourcing American jobs, and for more NAFTA-type agreements. This is essentially the game plan for the Obama administration, not surprising since Barack Obama was the inaugural speaker at the Hamilton Project (and Joe Biden spoke there just weeks ago).
NOTE: This diary and its predecessor are the result of a lot of painstaking work. I am sure there are other Goldies out there in the Obama administration who I have missed. If so, PLEASE let me know by dropping their name in a comment below.
Read the full article and list of people...click here
To be fair, Goldmanites have been infiltrating our government for many years and through many administrations. It would be interesting to have someone research just how far back this infiltration of our federal government by Goldmanites began. Even more interesting would be research on why so many GS employees have served in government. Are there any other companies out there who have as many employees or ex employees serve? Is this just unique to Goldman Sachs and if so WHY?
Of course, the answers to the questions I pose could and most probably would lead to conspiracy theories which in turn would have to be further researched. It sure seems like this topic would be ripe for some political science professor to obtain a grant and do the study. In fact, I could enjoy delving into this topic myself given the proper resources.
At some point in our existence - be it in my life time or not - the truth will surface and the veil of mystery surrounding our government will be lifted.
Those of you old enough might remember an album from the Talking Heads called "Stop Making Sense". I imagine that's what Goldman is going to think about this article:
Stiglitz Calls for ‘Goldman Sachs Amendment’
Joseph E. Stiglitz, the Nobel Prize-winning economist, wants the financial regulatory bill to bar financial firms that give up their government-backed bank charters from ever being able to seek government assistance again.
The proposed rule, which Mr. Stiglitz said should be called the “Goldman Sachs Amendment,” would require these companies to choose whether they want to be regulated banks, with all the government protections and restrictions, or unregulated investment banks, allowed to trade as they wish without a safety net.
Mr. Stiglitz is concerned that banks like Goldman Sachs and Morgan Stanley, which do not have large retail banking operations, could switch back and forth, giving up their charters as bank holding companies to partake in risky activity on one day and then reapplying for it the next if things go wrong and they need government help.
“That kind of charade should not be allowed,” Mr. Stiglitz said on a conference call on Wednesday to discuss the financial regulatory bill being completed by Congress.
Reggie Middleton has more detailed analysis of Goldman Sachs.
Telling it like it is.
The Brown Stinky Stuff is Splattering Off the Fan Blades and Landing on That Shiny New Building on the West Side Highway.
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The blind following of Wall Street marketing research, and the abject worshipping of Goldman marketing,inventory dumping,sales research allows them to rake billions of dollars off of their clients backs, yet clients still come back for more pain. A fascinating, Pavlov’s dog’s/Stockholm Syndrome style phenomena. Have you, as a Goldman client, performed as well as their employees receiving $19 billion in bonuses? Don’t get me wrong. I’m not hating Goldman, but now they are actually raping raking billions of dollars off of the tax payers backs as well. I do not do business with them, hence I do not want get my back raked – but it appears that as a US taxpayer I have no choice. A company that nearly collapsed a year ago, receives mysteriously generous government assistance (AIG full payout during its near collapse as an insolvent company) with the help of highly ranked government officials (many of which are ex-Goldman employees) and then pays out record bonuses on top of so many tens of billions of dollars of taxpayer aid with taxpayers facing high unemployment and sparse credit is not necessarily a company that should be looked upon as a scion of Wall Street. There is no operational excellence here. The only reason such an aura exists is because main street and Wall Street clients have an amazingly short memory, as I will demonstrate in the paragraphs below.
Goldman's Hudson Mezz CDO Is Now Focus Of Brand New SEC Probe
Abacus, Timberwolf, and now Hudson, pretty soon there won't be a CDO underwritten by Goldman that is not the object of some civil or criminal legal battle. The FT is reports that the SEC has launched a brand new investigation into Goldman Sachs, this time into its $2 billion Hudson Mezzanine Funding CDO. According to the FT: "People familiar with the matter said that in recent weeks the SEC had been gathering information on Hudson Mezzanine, which featured prominently in an 11-hour grilling of Goldman’s executives in the US Senate in April. The SEC and Goldman declined to comment." It is unclear if Goldman has received a separate Wells Notice for this second probing iteration, but since as Goldman notified its shareholders, these things are immaterial, we won't hold our breath to find out. As was repeatedly hammered during the Congressional grilling of Blankfein and his henchmen two months ago, Hudson is precisely the "junk" deal that AIB was “too smart to buy"which in turn forced Tourre and the other salespeople to keep pushing Eastward to Taiwan and Korea (Marc Faber beware).
Sorry for the lack of posting lately. Between the oil volcano (I live on the Gulf) and storms keeping me busy at work, I haven't felt much like thumping on the blood-funnel Goldman has jammed into the heart of America. When Larry returns, I'll be taking a break.
Goldman Sachs Sued By Australian Hedge Fund Over 'Sh--ty Deal'
In addition to generating some laughs and populist outrage during a contentious Senate hearing in April, Goldman Sachs's infamous "shitty deal" is also turning into a major headache for the embattled firm.
Today, Goldman was sued for securities fraud by an Australian hedge fund, which claims that it was suckered into buying $81 million of toxic subprime mortgage securities, which led to the collapse of the fund, according to a lawsuit obtained by Huffington Post.
Basis Yield Alpha Fund claims that Goldman engaged in a "series of fraudulent and deceitful acts or practices" and "put profits before integrity," according to its complaint filed in Manhattan federal court. The fund is seeking to recover more than $1 billion in total damages.
The Timberwolf deal is also the focus of a probe by the Manhattan U.S. Attorney's office, which has reached out to interview one of the fund's former outside directors, David Mapley, as first reported by Huffington Post. Mapley described Timberwolf as a "fraudulent concoction," saying that it was one of the most egregious cases in his decades working in finance.
Ellen Brown has another excellent piece up- "Banks Profit from Near-zero Interest Rates". The resistance from the banking community is growing as the following piece in the LA Times points out. The more people find out that all this pain is unnecessary and are educated about the nature of money and who controls it, the more the banks will fight it. Their biggest problem is the economy is crashing and people are getting angry. The people want REAL reform, not the baby puke coming out of Washington.
Goldman Sachs stonewalling, federal panel says The Financial Crisis Inquiry Commission subpoenas the firm, demanding information about its role during the mortgage meltdown and credit crunch.
Goldman Sachs Group Inc., already under fire for its actions leading up to the financial crisis, came under attack from a federal commission that accused it of refusing to divulge information, including documents detailing its controversial bets on the mortgage market.
Saying it had been stonewalled, the federal commission investigating the financial crisis on Monday took the unusual step of issuing a subpoena to Goldman that demanded information about the investment bank's role before and during the mortgage meltdown and credit crunch.
The panel, formally called the Financial Crisis Inquiry Commission, said it resorted to the subpoena after Goldman responded to an initial request by sending a massive amount of electronic documents — the equivalent of 2.5 billion pages — without saying where in those documents the answers to the commission's specific questions might lie.
The Greek Debt Crisis popped up near April as news mentioned of a potential default by the European country. I remember the first news about the problem linked Greece to Goldman Sachs. For years Greece has been masking up its true amount of debt holdings. Since the European Central Bank strictly requires its member states to hold a deficit under 3% of their GDP, big spenders like Greece finds itself in a troubled situation.
To get sneaky and make something smelly smell tasty, Greece struck a deal with Goldman Sachs. The deal used the derivative instrument called Cross-Currency Swaps (CCS). In a nutshell, these CCS are used between two parties that hope to switch currencies that involve both the principal loan and the interest payment associated with it. The swap simply exchanges a loan’s principle payment and its interest for another one of the same value but in different currency. In the case of Greece, Goldman Sachs fabricated a highly specialized swap that instead of exchanging for a same valued loan in a different currency, it exchanged Greeks debt for a higher valued one which means additional funding for the country. With this transaction between Greece and Goldman Sachs, the resulting CCS did not show up on the balance sheet of Greece. For the country, it was like borrowing without having to report to shareholdings.
A high profile panel investigating the causes of the financial crisis announced Monday it had subpoenaed Goldman Sachs for failing to cooperate with the probe.
"The Financial Crisis Inquiry Commission has issued a subpoena to Goldman Sachs & Co. for failing to comply with a request for documents and interviews in a timely manner," the body said in a statement.
It is the latest controversy for the New York-based bank, which is facing civil and potentially criminal charges for misleading investors.
"The Commission has made it clear that it is committed to using its subpoena power if there is a lack of, or delay in, compliance," the commission's chair Phil Angelides said in statement.
"Failure to comply with a Commission request is viewed with the utmost seriousness, as the Commission will not be deterred from getting desired information."
Always eager to jump at anything suggesting foreign conspiracy, the Chinese press leapt at accusations of fraud made against Goldman Sachs by the American regulatory authorities.
Particularly decried were the exceptional results of Goldman Sachs in China. They would prove that the dice are loaded:
And you thought Goldman had it bad in the US. The FT reports: "Many people believe Goldman Sachs, which goes around the Chinese market slurping gold and sucking silver, may have, using all kinds of deals, created even bigger losses for Chinese companies and investors than it did with its fraudulent actions in the US,” read the opening lines of an article in the China Youth Daily, a state-owned daily newspaper, last week." Matt Taibbi - you have met your match, and the outcome is picturesque indeed - a vampire squid that slurps and sucks its way to every loose ounce of gold and silver. But fear not, all those millions of ounces in GLD are perfectly safe and sound.
Is there anybody out there that still thinks the market is NOT rigged?
Goldman Sachs May Explain PPT’s Vanishing Act: Caroline Baum
Where are they? What’s keeping them? Stock markets across the globe are getting hammered, and there’s no sign of the Plunge Protection Team.
Sure, there were some sightings of the bond vigilantes in places like Greece over the past month. But a worldwide equity meltdown is a job for real men, for the PPT.
Otherwise known as the President’s Working Group on Financial Markets, the PPT was established after the 1987 stock- market crash to ensure the financial markets have adequate liquidity to function. Members include the U.S. Treasury secretary, the chairman of the Federal Reserve, the chairman of the Securities and Exchange Commission and the chairman of the Commodity Futures Trading Commission.
Somehow this group morphed into a government/private-sector cabal -- Goldman Sachs always figures prominently -- that secretly intervenes to prop up the stock market.
You know those gut-wrenching dives in the Standard and Poor’s 500 Index that are miraculously erased and turn into gains by the end of the day? The PPT.
.... for those closely following the role of the credit raters in the financial crisis, the more-interesting testimony may come from a little-known former Moody’s executive named Gary Witt.
In Witt’s written testimony submitted to the commission, Witt says: “concerns that rating analysts and investment banking analysts worked too closely together prior to the issuance of securitized debt is a legitimate concern.” In particular, he describes a situation involving one of his staffers, a lawyer named Rick Michalek, who was removed from rating Goldman Sachs Group CDOs because the investment bank requested that he be taken off their deals.
“In my opinion, Rick Michalek was an exceptionally thorough legal analyst. His zealous document reviews were an added expense for investment banks who hired top law firms as transaction counsel with high hourly fees. It was my understanding that this behavior (exceptionally thorough document reviews that resulted in high legal fees being charged to investment banks) had led to a personal reprimand from Brian Clarkson, then head of structured finance.”
Witt adds:
“To the best of my recollection, in late 2004 or early 2005, I received a request from a CDO structurer at Goldman Sachs that Rick not be assigned to further Goldman Sachs CDOs for the next year. I was told that failure to comply with their request would result in a phone call to one of my superiors. I was concerned that this could possibly result in Rick’s dismissal.”
What's a few lies when you're facing fraud charges?
Did Goldman Lie To Calpers When Seeking Consulting Mandate?
Remember long ago in late April when people actually discussed Goldman Sachs and its criminal charges of CDO fraud? Not really? Now may be a good time to remember what some said was the biggest fraud investigation in history, because according to new developments not only is Goldman still in very hot water (Fox Business disclosed earlier that the SEC added veteran litigator David Gottesman to its group of attorney trying the Goldman case), but according to a new report by Reuters' Matt Goldstein, the firm lied to Calpers in March, when it was seeking a consulting mandate from the pension giant, claiming it was not "the target of a formal investigation." Calpers apparently is not too happy about this: "Calpers spokesman Brad Pacheco told Reuters the pension fund's investment staff "will be reaching out to Goldman for an explanation on their response." The investment staff is finalizing contracts for Calpers' consultant pool, which will be effective July 1." Needless to say, Goldman's chances of taking a slice out of Leon Black's pie are looking bad to quite bad.
Commentary: Obama backs status quo, helping Wall Street skim hundreds of billions
Yes, I am mad as hell again. Wall Street's soulless, immoral, greedy bankers really believe that the vast majority of America's 95 million investors are not only "predictably irrational" but "stupid," as J.P. Morgan Chase's chief investment officer put it in Forbes a while back.
Worse, Main Street investors are losers for continuing to trust Wall Street after they lost 20% of our retirement money the last decade. Now, worst of all, Wall Street's traders have profiled Main Street investors in their algorithms: Yes, investors are "predictably stupid losers," what Vegas croupiers call a mark, a dumb gambler that can be easily conned out of his money.
Why so blunt? Listen: Recently I explained why the Wall Street banks must kill financial reform, to preserve their multibillion dollar bonus pool. One reader commented: "I worked at the Bear Sterns ... every word written here is true. Fact is, bankers regard themselves as wolves and the public as prey, and speak about it openly, among themselves." Then he added a sucker punch: "What is extraordinary to me is how willingly the sheep submit to this."
Yes, folks, Wall Street is certain that America's 95 million investors are clueless sheep headed for the slaughterhouse.
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And it'll get worse, thanks to Bernanke, Obama and Goldman's lobbyists. Greenspan's deeply flawed Reaganomics remains anchored deep in America's brain and DNA. So every promise made in every behavioral-economics book ever written about the principles originally defined by Kahneman will continue to mislead America's 95 million Main Street investors ... and fail.
Why? Because the insatiable greed driving the Goldman Conspiracy of Wall Street banks is so addictive, so powerful, so overwhelming, so much in control of the political process that nothing, absolutely nothing, can change the next inevitable mega-crash dead ahead.
Goldman Sachs may have found a way to compromise with the Securities and Exchange Commission that will allow both sides to declare victory.
The clock is ticking on the SEC’s case against Goldman Sachs. Sometime in the next few weeks, Goldman will either go to federal court with a substantive denial of the SEC’s allegations or agree to a settlement.
The two sides are still far apart. Goldman Sachs is unwilling to enter into the typical Wall Street settlement—paying a fine and agreeing not to commit further violations, while neither admitting nor denying the accusations—because it insists on denying that it intentionally committed fraud, sources familiar with the matter say. The SEC has accused Goldman of fraud under both the Securities Act of 1933 and Exchange Act of 1934 and is unwilling to abandon those claims for lesser offenses, those sources say.
Why did Jefferson said “banking institutions are more dangerous than standing armies?” This very good article by Damon Vrabel shows why banks (and pretend banks like Goldman Sachs) are dangerous and why our system MUST be changed if we are to survive as a free nation.
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The Ben Bernanke Survey
I’m curious for your opinion about why Ben is doing this. Reply in the comments below with your answer to this multiple choice question: Who is Ben Bernanke?
1. Honest – he actually believes what he says. He’s still a Harvard kid getting gold stars on his homework as he repeats the fraudulent load of crap known as neoclassical economics.
2. Dishonest – he knows he’s just protecting the powers behind the Fed system and furthering their global restructuring plan by threatening the politicians with more boom-busts if they try to serve the people.
3. Insane – he’s not in touch with reality.
Folks like Jim Rogers, Marc Faber, and Peter Schiff promote #1, the idea that he’s a clueless theoretician repeatedly making mistakes. No doubt there was a time when he was just a bright-eyed overachiever being pumped full of theory disconnected from reality. But these guys ignore Ben’s comments in Japan. He makes it clear that he knows exaggerated low interest rate policies cause major problems, i.e. he’s not ignorant, but he engages in them anyway! So again I ask what’s really going on?
Feel free to disagree, but #2 is my answer, which means we need to stop believing Rogers, Faber, and Schiff that he’s a pedantic bureaucrat. That’s pure spin that reinforces the idea there’s no strategic plan behind what the G20, IMF, BIS, and Fed are doing in response to the coordinated actions of Rubin, Summers, Paulson, Geithner, Greenspan, AIG, JP Morgan Chase, Goldman Sachs, etc.
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...the first con of the Fed’s form of central banking—it puts currency control in private hands. Rather than the Fed having power over the banks, its structure actually gives the primary dealer banks (mega firms like JP Morgan Chase, Goldman Sachs, and many foreign banks) significant power to tell it what to do.
The revolving door goes round 'n round, round 'n round....all day long.
The name of Republican gubernatorial candidate Meg Whitman, a billionaire who has been defending her ties to embattled investment banking giant Goldman Sachs throughout her campaign, appears in the federal investigation of another Wall Street firm tarnished by scandal.
Court documents filed by prosecutors in the aftermath of the dot-com bust show Whitman, then chief executive of EBay, listed among about 200 executives who were to receive gifts of deeply discounted stock from Frank Quattrone, then a banker at Credit Suisse First Boston.
A star dealmaker during the late 1990s, Quattrone was twice indicted on obstruction-of-justice charges stemming from a federal investigation of such gifts and other business practices. Regulators charged that the gifts were used as incentives or kickbacks for corporate investment-banking business.
The regulators said the documents suggested that each of the executives listed could steer business to Quattrone's firm. They show ratings, on a scale of one to four, of the business leaders' potential to produce such business. Alongside Whitman's name and an account number is the numeral 2.
Authorities accused Credit Suisse of allocating shares of prime initial public offerings to clients on the list, which became known as "Friends of Frank," practically guaranteeing them a fortune when the price of the stock soared. The practice became a symbol of the way Wall Street firms rewarded friends and clients at the expense of smaller investors, whose only chance to buy the offerings was after the companies had gone public.
