Goldman Sachs accused of fraud by US regulator SEC

Goldman Sachs: Your tax dollars, their big bonuses

Goldman Sachs is having a banner year, and is getting a big boost from government programs:

Porter Stansberry: This is one of the biggest Wall Street frauds ever…

Wall Street’s Bailout Hustle

Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy – they’re re-creating the conditions for another crash

Goldman’s Golden Fleece


Keep in mind that US support for Israel’s brutal oppression of the Palestinians which was the primary motivation for 9/11 played a role with the following as well because FBI agents were diverted away from prosecuting these bankster crooks to prosecuting in association with ‘War on Terror’ after 9/11 took place (listen to what is mentioned in the following ‘Democracy Now’ segment):

As Foreclosures Hit All-Time High, Wall Street on Pace to Hand Out Record $140B in Employee Bonuses

In Goldman Sachs ‘We Trust’

Mik wrote:

Israel is bankrupting our nation, and sending us to war for their benefit, not ours. We have to pull this octopus off our backs or we will be driven into the ground. I was looking at Goldman Sachs Israel branch….you are so right, about this Tel Aviv-London-New York Axis of evil:

The Warning:

Goldman Sachs running Obama regime regarding financial matters:


  • Patriot says:


    Well, now its “official” in every sense of the word! Compare this one, with the “admission” by the Fed yesterday, of criminal violations of the SEC. This one PROVES beyond any doubt, that Wall Street (JP Morgan) & our own “government”(CFTC) have been working together to rob us all blind!! And they have been at this little “game” for a very long time! Its time to break out the torches & pitch forks!

    Incredible fraud at JP Morgan uncovered. Trader turned whistleblower Andrew Maguire demonstrates how they are manipulating the silver market, a position Ted Butler and GATA have maintained for a decade. Following his disclosures, Maguire and his wife were nearly run over by a hit man who was luckily captured, and is being held by authorities. This reads out of a spy vs. spy novel but it’s entirely true.

    Max Keiser and others have reported on the fraud, which has been covered up by the MSM.

    Read all about it in the links provided here too:

    100 to 1 leverage employed by JPM. This is huge news. It’s the first smoking gun. Silver has been under tremendous manipulation for years, even though the fundamentals have been excellent.

    Jim Azzola

  • Patriot says:

    Goldman fraud charges trigger possible wider crackdown
    by P. Parameswaran P. Parameswaran
    2 hrs 29 mins ago

    .WASHINGTON (AFP) – Top Wall Street giant Goldman Sachs faced charges of financial fraud Saturday as US financial firms eyed the prospect of a wider crackdown on those that bet on the collapse of the housing market.

    A civil suit filed by the Securities and Exchange Commission Friday accused Goldman of “defrauding investors by misstating and omitting key facts” about a financial product based on subprime mortgage-backed securities.

    The securities were a key contributor to the financial crisis that peaked in 2008 because many contained risky mortgages.

    The charges are believed to be the first brought against a Wall Street firm for speculating on the collapse of the housing market, which is still struggling to emerge from the worst financial crisis in decades.

    Underlining persistent concerns about the unfettered trade, US President Barack Obama said Friday he would veto a Wall Street reform bill that lacked tough rules for complex financial instruments.

    “I will veto legislation that does not bring the derivatives market under control and some sort of regulatory framework assures that we don’t have the same sort of crisis we have seen in the past,” Obama said.

    The SEC said Goldman failed to tell investors that a major hedge fund had helped put together the controversial financial product known as collateralized debt obligation (CDO) and was at the same time betting against it.

    Paulson & Co, one of the world’s largest hedge funds, paid Goldman Sachs to structure a transaction in which it could take speculative positions against mortgage securities chosen by the fund, the commission said in a statement.

    The deal, which took place during a massive mortgage meltdown in 2007 and as the country was about to fall into a brutal recession, was said to have cost investors around one billion dollars.

    Goldman claimed that it lost 90 million dollars from its own investment in the security.

    “We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact,” the company said.

    The firm said it would “vigorously contest them and defend the firm and its reputation.”

    Paulson & Co. founder John Paulson said he had no role in choosing the mortgages.

    The lawsuit also named Fabrice Tourre, then a vice-president at Goldman. He was said to be the creator and salesman of the product, which caused investors to lose about one billion dollars.

    “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, SEC’s director of the enforcement division in a statement.

    Analysts said a long courtroom battle could now be expected.

    The authorities have not ruled out the possibility of others involved in the alleged fraud or other similar types of fraud.

    “The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the US housing market as it was beginning to show signs of distress,” said Kenneth Lench, head of the SEC’s structured and new products unit.

    It not known whether the SEC might refer the case to the Department of Justice for criminal prosecution.

    “The fact that the only individual charged here, after what was presumably a very thorough investigation, was a vice president rather than a managing director or higher, is relatively reassuring news for Goldman,” said Bank of America-Merrill Lynch research analyst Guy Moszkowski.

    He said it seemed most likely that the potential for more serious charges rose dramatically the higher up the management chain the charges went.

    Among investors of Goldman’s controversial product were German commercial bank IKB.

    Paulson was not charged because it was not obligated to disclose any conflict of interest to investors, Khuzami said.

    “Goldman made representations to investors, and Paulson did not.”

    The firm reportedly made billions of dollars by betting against the housing market in the years before its collapse.

    “Paulson did not sponsor or initiate” Goldman’s product, the Paulson firm said in a statement.

    Goldman shares dived 12.79 percent Friday to 160.70 dollars, after falling as much as 15 percent when news of the fraud charges first hit the market.

    The Dow Jones Industrial Average tumbled 125.91 points or 1.13 percent to end the week at 11,018.66 points, snapping a six-session winning streak that had driven the blue-chip index to a fresh 18-month high.

    Oil prices also fell sharply, with New York’s main contract, light sweet crude for delivery in May, slipping 2.27 dollars to 83.24 dollars a barrel.

  • Patriot says:

    ‘Looting Main Street’:-Matt Taibbi on How the Nation’s Biggest Banks Are Ripping Off American Cities with Predatory Deals

  • Patriot says:

    Simon Johnson and James Kwak discuss their ’13 Bankers’ book with Bill Moyers

  • Patriot says:

    Fraud charge deals big blow to Goldman’s image

    Fraud charge deals big blow to Goldman’s image
    By STEVENSON JACOBS, AP Business Writer Stevenson Jacobs, Ap Business Writer
    Sun Apr 18, 5:28 pm ET

    .NEW YORK – While Goldman Sachs contends with the government’s civil fraud charges, an equally serious problem looms: a damaged reputation that may cost it clients.

    The Securities and Exchange Commission’s bombshell civil fraud charge against Goldman has tarnished the Wall Street bank’s already bruised image, analysts say. It could also hurt its ability to do business in an industry based largely on trust.

    Damage from the case could hit other big banks as well. The SEC charges are expected to help the Obama administration as it seeks to more tightly police lucrative investment banking activities.

    Goldman has denied the SEC’s allegation that it sold risky mortgage investments without telling buyers that the securities were crafted in part by a billionaire hedge fund manager who was betting on them to fail. A 31-year-old Goldman employee is also accused in the civil suit that was announced Friday.

    The charges could result in fines and restitution of more than $700 million, predicted Brad Hintz, an analyst at Sanford Bernstein. Yet, even if Goldman beats the charge, the hit to its reputation could carry a greater cost.

    The company, founded in 1869, grew from a one-man outfit trading promissory notes in New York to the world’s most powerful, most profitable and arguably most envied securities and investment firm. From its 43-story glass-and-steel headquarters in Lower Manhattan, Goldman oversees a financial empire that spans more than 30 countries and includes more than 30,000 employees.

    It has long attracted some of the world’s best and brightest. Some have gone on to lofty careers in public life, enhancing the firm’s aura of mystique and influence. Goldman alumni include former Treasury Secretaries Henry Paulson and Robert Rubin and former New Jersey Gov. Jon Corzine.

    In its corporate profile, the company says its culture distinguishes it from other firms and “helps to make us a magnet for talent.” That culture is summed up in the firm’s “14 Business Principles,” which preach an almost militant philosophy of putting the client before the firm.

    Now, it’s that very philosophy that has been questioned by the government.

    So far, no Goldman clients have publicly condemned the bank’s alleged actions. But the negative publicity and regulatory scrutiny could cause some to distance themselves, said Mark T. Williams, a professor of finance and economics at Boston University.

    Goldman earned a record $4.79 billion during the fourth quarter of last year and is expected to report blowout first-quarter results on Tuesday. A big chunk of its profits are from fee-based client businesses, such as investment advising, underwriting securities and brokering billion-dollar mergers.

    “Goldman can really only truly be effective in the marketplace if it maintains a strong reputation,” Williams said.

    Morgan Stanley, the No. 2 U.S. investment bank after Goldman, could be in a position to poach some Goldman clients, which include hedge funds, pension funds and other big institutional investors. Overseas, European rivals such as Deutsche Bank AG and UBS could benefit.

    Investors are already betting the legal troubles will hurt Goldman’s finances. The company’s shares plunged 13 percent after the charges were announced Friday, erasing a staggering $12.5 billion in market value.

    “Reputation risk is the biggest issue in our view,” Citigroup analyst Keith Horowitz wrote in a note to clients. He predicted the fraud case won’t be a “life-threatening issue” but that it “clearly seems like a black eye for Goldman.”

    It’s not the first. The company came under criticism for receiving billions in bailout money that the government funneled into crippled insurer American International Group Inc. at the height of the financial crisis in 2008. Goldman was owed the money, but critics argued it should’ve been treated like other creditors and be forced to accept less.

    Goldman CEO Lloyd Blankfein angered the bank’s critics last year after The Times of London quoted him as saying he was “doing God’s work” running the firm and handing out big employee bonuses. Blankfein himself got a $9 million stock bonus for 2009.

    Mishaps like those have been surprising given how much attention Goldman pays to its image. “Our clients’ interests always come first,” the company says on its website under the heading, “Goldman Sachs Business Principle No. 1.”

    It’s a sales pitch that few Wall Street firms always live up to. Some analysts blame that on a shift in the industry’s business model from traditional investment banking to one that focuses on making big bets for itself or clients.

    That shift culminated in the rise of Blankfein, a former commodities trader, to the position of CEO in 2003. Today, trading accounts for nearly 70 percent of Goldman’s revenue. Most of that trading is done on behalf of clients, though Goldman generates about 10 percent of its revenue by trading for itself.

    The heavy reliance on trading and Goldman’s peerless performance have left the firm open to criticism that it uses its market knowledge to game the system to benefit itself and a select group of clients.

    The SEC charges seemingly support that assertion. Fabrice Tourre, the 31-year-old Goldman executive accused of shepherding the deal in question, boasted about the “exotic trades” he created “without necessarily understanding all of the implications of those monstrosities!!!,” according to the SEC complaint.

    In another e-mail, he describes as “surreal” a meeting between his hedge fund client and another firm that allegedly wasn’t told that the bundle of securities it was buying were chosen with input from a third party who was betting they would fail.

    “Once upon a time, Wall Street firm protected clients,” said Christopher Whalen, managing director of financial research firm Institutional Risk Analytics. “This litigation exposes the cynical, savage culture of Wall Street that allows a dealer to commit fraud on one customer to benefit another.”

    In a lengthy rebuttal to the SEC charges Friday, Goldman insisted it was a middleman in the transaction and did nothing wrong by not disclosing bearish bets against the pool by Paulson & Co., a major hedge fund led by billionaire investor John Paulson. Goldman said it lost $90 million on the deal.

    The SEC said Goldman had a duty to inform buyers of the mortgage investments that Paulson had played a major role in choosing the securities that went into the derivatives product and then bet that they would go bust.

    Derivatives are complex financial products whose value is based on an underlying asset like mortgages or other types of debt. They’re not traded on a public exchange, allowing firms like Goldman to generate fees by brokering deals between buyers and sellers.

    The charges strengthen the government’s case for increased regulation of derivatives like those Goldman is accused of using, analysts said.

    Regardless, Goldman’s ability to weather the storm should not be discounted, said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm.

    “The benefits of the crisis have so far swamped the reputation risks for Goldman,” she said.

    “If anything,” she added, “they may wind up getting more customers if people can’t avoid doing business with them.”


    AP Business Writer Chip Cutter contributed to this report from New York.

  • Patriot says:

    Goldman earns $3.3B in 1Q as fraud case looms
    By STEVENSON JACOBS, AP Business Writer Stevenson Jacobs, Ap Business Writer
    10 mins ago

    .NEW YORK – Goldman Sachs Group Inc. said Tuesday its first-quarter earnings almost doubled to $3.3 billion as its trading business again surpassed the rest of the financial industry. It was a bit of good news for the bank as it faces a government civil fraud charge.

    Goldman Sachs earned $5.59 a share on revenue of $12.78 billion as bond, commodities and currency trading buoyed its profits for yet another quarter. That was well above expectations of analysts surveyed by Thomson Reuters. In the fourth quarter, Goldman Sachs earned a record $4.79 billion.

    Goldman Sachs also reported sharply higher fees from underwriting stock and debt offerings.

    Even as it reported another strong quarter, the bank is facing a major challenge after being charged Friday in a civil fraud lawsuit by the Securities and Exchange and Commission. The SEC alleges that Goldman Sachs and one of its vice presidents misled investors who bought complex financial products that were expected to fail.

    CEO Lloyd Blankfein in a statement thanked the bank’s supporters without specifically mentioning the SEC case.

    “In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people,” he said.

    The company said it set aside $5.5 billion in the first three months of the year to pay employee salaries and bonuses, up 17 percent from last year. However, Goldman Sachs said the percentage of revenue set aside for compensation in the quarter fell from 50 percent to 43 percent year-over-year.

    Banks’ high levels of compensation, including bonuses, have come under heavy criticism since the financial crisis that began in 2008. Lawmakers and the public have complained that the banks were rewarding the same employees whose risky trading practices helped plunge the country into recession. Goldman Sachs, because of its great success in trading, has come under particular sharp criticism.

    The bank’s stock rose 1.7 percent in pre-opening trading.

    Goldman’s trading of risky assets once again generated the bulk of its profits. Revenue from trading of bonds, currencies and commodities rose 13 percent in the quarter to $7.39 billion.

    Investment banking revenue, considered the foundation of the company’s business, rose to $1.18 billion, up 44 percent from last year. Investment banking includes advising on corporate deals and raising capital for stock and bond issues.

    Goldman Sachs, which has outperformed other financial companies for years, has been the strongest bank throughout the financial crisis. It had less exposure to toxic mortgage-related securities than other companies and also has been more aggressive in its trading.

    Goldman Sachs also said Tuesday that the executive at the center of the civil fraud case is voluntarily taking some time off from work.

    Fabrice Tourre, who was named in the SEC lawsuit against the firm, is taking a break from his position at the firm’s London offices, Goldman Sachs spokesman Michael Duvally said.

    “It is voluntary. He decided to take some time off,” Duvally said.

    Tourre was a vice president in his late 20s when the alleged fraud was orchestrated in 2007. Tourre, the SEC said, boasted to a friend that he was able to put such deals together as the mortgage market was unraveling in early 2007.

    Tourre, 31, has since been promoted to executive director of Goldman Sachs International in London.

  • Gini says:

    In case you thought that our vote mattered in electing Barack Obama.

    Goldman’s connections to White House raise eyebrows – Yahoo! News

    Goldman’s White House connections raise eyebrows
    By Greg Gordon, McClatchy Newspapers Greg Gordon, Mcclatchy Newspapers
    Wed Apr 21, 7:20 pm ET

    WASHINGTON — While Goldman Sachs’ lawyers negotiated with the Securities and Exchange Commission over potentially explosive civil fraud charges, Goldman’s chief executive visited the White House at least four times.

    White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama , whose 2008 presidential campaign received $994,795 in donations from Goldman’s employees and their relatives. He also met twice with Obama’s top economic adviser, Larry Summers .

    No evidence has surfaced to suggest that Blankfein or any other Goldman executive raised the SEC case with the president or his aides. SEC Chairwoman Mary Schapiro said in a statement Wednesday that the SEC doesn’t coordinate enforcement actions with the White House or other political bodies.

    Meanwhile, however, Goldman is retaining former Obama White House counsel Gregory Craig as a member of its legal team. In addition, when he worked as an investment banker in Chicago a decade ago, White House Chief of Staff Rahm Emanuel advised one client who also retained Goldman as an adviser on the same $8.2 billion deal.

    Goldman’s connections to the White House and the Obama administration are raising eyebrows at a time when Washington and Wall Street are dueling over how to overhaul regulation of the financial world.

    Lawrence Jacobs , a University of Minnesota political scientist, said that “almost everything that the White House has done has been haunted by the personnel and the money of Goldman . . . as well as the suspicion that the White House , particularly early on, was pulling its punches out of deference to Goldman and its war chest.

    “There’s now kind of a magnifying glass on the administration for any sign of interference or conversations with the regulators and the judiciary,” Jacobs said.

    The SEC investigation of Goldman’s dealings lasted 18 months and culminated with the SEC filing civil fraud charges against the investment bank last week.

    According to White House visitor logs, Blankfein was among the business leaders who attended an Obama speech on Feb. 13, 2009 , and he also joined more than a dozen bank CEOs in a meeting with Obama on March 27, 2009 .

    Blankfein also was supposed be among the CEOs who met with Obama in December, but he and two others phoned in from New York , blaming inclement weather.

    He and his wife, Laura, were listed on the logs among 438 presidential guests at the Kennedy Center Honors the previous week.

    The logs also indicate that Blankfein met twice in 2009, on Feb. 4 and Sept. 30 , with Summers, who was undersecretary of the Treasury Department during the Clinton administration when it was headed by Robert Rubin , a former Goldman CEO.

    Asked whether Goldman executives had talked to administration officials about the SEC inquiry, Goldman spokesman Michael DuVally said that the firm doesn’t discuss “what conversations we may or may not have had with government officials.”

    Schapiro’s statement said that she’s “disappointed” by Republican rhetoric suggesting that the SEC case against Goldman might have been timed to boost legislative prospects for a financial regulation overhaul bill, which Obama plans to pitch in a speech in New York Thursday.

    “We do not coordinate our enforcement actions with the White House , Congress or political committees,” Schapiro said. “We do not time our cases around political events or the legislative calendar . . . We will neither bring cases, nor refrain from bringing them, because of the political consequences.”

    Obama dismissed any such suggestion as “completely false” Wednesday, saying in a CNBC television interview that the SEC “never discussed with us anything with respect to the charges that would be brought.”

    While describing Craig, his former counsel, as “one of the top lawyers in the country,” Obama also said that he’d imposed “the toughest ethics rules that any president’s ever had.”

    “One thing he (Craig) knows is that he cannot talk to the White House ,” Obama said. “He cannot lobby the White House . He cannot in any way use his former position to have any influence on us.”

    Goldman’s chief spokesman, Lucas van Praag , said the firm “wanted Craig . . . for his wisdom and insight.”

    Craig, now an attorney with the Washington law firm of Skadden, Arps, Slate, Meagre & Flom, said: “I am a lawyer, not a lobbyist. Goldman Sachs has hired me to provide legal advice and to assist in its legal representation.”

    Goldman’s nearly $1 million in campaign contributions to Obama’s presidential campaign were the most from any single employer except the University of California . Still, they represented only a fraction of the more than $700 million that the campaign raised.

    “The vast majority of the money I got was from small donors all across the country,” Obama told CNBC. “Moreover, anybody who gave me money during the course of my campaign knew that I was on record in 2007 and 2008 pushing very strongly that we needed to reform how Wall Street did business.”

    One White House insider who knows something about how Wall Street does business is chief of staff Emanuel, who earned millions of dollars in investment banking after he left the Clinton White House. His work for the Chicago -based financial services firm Wasserstein Perella & Co. intersected with Goldman in at least one deal.

    In 1999, Emanuel was a key player representing Unicom Corp. , the parent of Commonwealth Edison, in forging its merger with Peco Energy Co. to create utility giant Exelon Corp. Goldman was also advising Unicom .

    The White House declined immediate comment on that connection.

    Several former Goldman executives hold senior positions in the Obama administration, including Gary Gensler , the chairman of the Commodity Futures Trading Commission ; Mark Patterson , a former Goldman lobbyist who is chief of staff to Treasury Secretary Timothy Geithner ; and Robert Hormats , the undersecretary of state for economic, energy and agricultural affairs.

    Jacobs of the University of Minnesota said that the administration now risks “kind of a feeding frenzy.”

    “The administration has to be very careful,” he said, “because . . . they’re seen as the ones who bailed out Wall Street . If there are indications that the administration was talking to regulators or to Justice Department people about when and how Goldman or other firms would be investigated, I think that’s going to create almost a mob scene.”

    ( Margaret Talev , Steven Thomma and Tish Wells contributed to this article.)


    Statement on the Independence of the Securities and Exchange Commission


  • Patriot says:

    The financial meltdown wasn’t a mistake. It was a con.

    Now we know the truth. The financial meltdown wasn’t a mistake – it was a con

    Now we know the truth. The financial meltdown wasn’t a mistake – it was a conHiding behind the complexities of our financial system, banks and other institutions are being accused of fraud and deception, with Goldman Sachs just the latest in the spotlight. This has become the most pressing election issue of all

    Will Hutton The Observer, Sunday 18 April 2010 larger | smaller Article history

    Goldman Sachs was in the spotlight last November when demonstrators protested outside its Washington offices against executive bonuses. Photograph: Andrew Harrer/Bloomberg via Getty Images

    The global financial crisis, it is now clear, was caused not just by the bankers’ colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday’s announcement that the world’s most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we’ve seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

    Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US’s Internal Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

    Beneath the complexity, the charges are all rooted in the same phenomenon – deception. Somebody, somewhere, was knowingly fooled by banks and bankers – sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman’s case, by creating a scheme to enrich one favoured investor at the expense of others – including, via RBS, the British taxpayer. Along the way there is a long list of so-called “entrepreneurs” and “innovators” who were offered loans that should never have been made. Lloyd Blankfein, Goldman’s CEO, remarked only semi-ironically that his bank was doing God’s work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

    For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission’s case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman’s vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were “among the most sophisticated mortgage investors” in the world. But this is a used car salesman flogging a broken car he’s got from some wide-boy pal to some driver who can’t get access to the log-book. Except it was lionised as financial innovation.

    The investors who bought the collateralised debt obligation (CDO) were not complete innocents. They had asked for the bond to be validated by an independent expert into residential mortgage-backed securities – a company called ACA management. ACA gave the bond the thumbs-up on the understanding from Fabrice Tourre that the hedge fund Paulson were investing in it. But the SEC says Tourre misled them, a pivotal claim that Goldman denies. The reality was that Paulson was frantically buying credit default swaps in the CDO that would go up in price the more valueless it became – a trade that would make more than $1 billion. Worse, Paulson had identified some of the dud sub-prime mortgages that he wanted Tourre to put into the CDO. If the SEC case is true, this was a scam – nothing more, nothing less.

    Tourre could see what was coming. In one email in January 2007 he wrote: “More and more leverage in the system. The whole building is about to collapse anytime now… only potential survivor, the fabulous Fab[rice Tourre] .. standing in the middle of all these complex highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities”. Fabulous Fab, like his boss, will not be feeling very fab today.

    The cases not only have a lot in common – using financial complexity allegedly to deceive and then using so-called independent experts to validate the deception (lawyers, accountants, credit rating agencies, “portfolio selection agents,” etc etc ) – but they also show how interconnected the financial system is. In Iceland Citigroup and Deutsche Bank covered the margin calls of distressed Icelandic business borrowers, deepening the crisis. Lehman uses the lightly regulated London markets and two independent British experts to validate that their “Repo 105s” were “genuine” trades and not their own in-house liability. The American authorities pursued a Swiss bank over aiding and abetting US nationals to evade tax.

    Bankers will complain these cases all involve one or two misguided individuals, but that most banking is above board and was just the victim of irrational exuberance, misguided belief in free market economics and faulty risk management techniques. Obviously that is true – but, sadly, there is much more to the crisis. Andrew Haldane, executive director of the Bank of England, highlights the remarkable reduction in the risk weighting of bank assets between 1997 and 2007. Put simply, Europe’s and the US’s large banks exploited the weak international agreement on bank capital requirements in the so-called Basel agreement in 2004 to reclassify the risk of their loans and trading instruments. They did not just reduce the risk by 5 or 10%. Breathtakingly, they claimed their new risk management techniques were so wonderful that the riskiness of their assets was up to half of what it had been – despite property and share prices cresting to new all-time highs.

    Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations. The banks were gaming the regulators and investors alike – and they knew full well what they were doing. Simon Johnson’s 13 Bankers shows how the major American banks deployed vast political lobbying power and money to create the relaxed regulatory environment in which all this could take place. In Britain no money changed hands. Gordon Brown offered light-touch regulation for free – egged on by the Tories, who wanted to go further.

    This was the context in which Goldman’s Fabulous Fab created the disputed CDOs, Sean FitzPatrick allegedly moved loans between banks and Lehman created its Repo 105s along with the entire “debt mule” structure revealed this weekend of inter-related companies to shuffle debt around its empire. London and New York had become the centre of an international financial system in which the purpose of banking became making money from money – and where the complexity of the “innovations” allowed extensive fraud and deception.

    Now it has all collapsed, to be bailed out by western taxpayers. The banks are resisting reform – and want to cling on to the business practices and business model that has so appallingly failed. It is obvious why: it makes them very rich. The politicians tread carefully, only proposing what the bankers say is congruent with their definition of what banking should be. Labour and Tories alike are united in opposing improved EU regulation of hedge funds, buying the propaganda those operations had nothing to do with the crisis. Perhaps Paulson’s trades at Goldman, and the hedge funds’ appetite for speculating in credit default swaps, may disabuse them.

    It is time to reframe the question. Banks and financial institutions should do what economy and society want them to do – support enterprise, direct credit to where it is needed and be part of the system that generates investment and innovation. Andrew Haldane – and the governor of the Bank of England – are right. We need to break up our banks, limit their capacity to speculate and bring them back to earth. Britain should also launch an official investigation into what went wrong – and hand the findings to the Serious Fraud Office. This needs to become this election campaign’s number one issue – not one which either a compromised Labour party or a temporising Conservative party will relish. The Lib Dems, the fiercest critics of the banks, have begun to get very lucky.

    Crisis timetable
    September 2007 Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.

    April 2008 Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.

    September 2008 Lehman Brothers files for bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.

    December 2008 Bernard Madoff arrested for operating the largest Ponzi scheme in history.

    January 2009 The Bank of England launches £200bn quantitative easing.

    March 2010 Former chairman of Anglo Irish bank Sean Fitzpatrick is arrested in Dublin after failing to disclose details of loans worth millions from the bank.

    April 2010 Northern Rock former directors, David Baker and Richard Barclay, are fined £504,000 and £140,000 for deliberately misleading analysts prior to nationalisation.

    April 2010 The US Securities and Exchange Commission accuses Goldman Sachs of “defrauding investors by misstating and omitting key facts”.

    Joanna Aniel Bidar

    • This article was amended on Monday 19 April and Tuesday 20 April. A reference to Anglo Irish looking after the Post Office’s financial services was removed. Bank of Ireland is the Post Office’s financial services provider. The original also referred to the US Inland Revenue Service. This has been corrected.
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  • Patriot says:

    ———- Forwarded message ———-

    Date: Sat, Apr 24, 2010 at 2:30 AM
    Subject: What does Goldman Sachs, Sen. Dodd, and Audit the Fed have in common?

    Good article on Goldman Sachs fraud:

    It is no coincidence that Obama gave a speech to Wall Street at the time the SEC is bringing fraud charges against Goldman Sachs — all to gain support for Sen. Dodd’s banking reform bill. What’s in Dodd’s bill? A watered down version of the Audit the Fed bill. Do you remember how Mel Watt modified Ron Paul’s bill in the House? Well, here we go again in the Senate. Read here:

    Of course for real regulation how about putting Glass-Steagall back in place and enforcing regulations we already have?

    To get Ron Paul’s original Audit the Fed language in the bill go here to sign a petition:

    But there’s more: Former Obama White House Counsel Greg Craig has gone to work for Goldman Sachs to help them fight off the fraud charges ( He’s a piece of work. He defended: John Hinckley (attempted assassination of Reagan), Clinton in his impeachment, UN Secretary Kofi Annan in scandals involving oil for food programs, a Panamanian lawmaker (Pedro Miguel González Pinzón) wanted for the murder of a US soldier, Bolivian officials in the killing of 67 protesters, FBI agent John Kearney on illegal wiretapping and breaking and entering, CIA Director Richard Helms for Senate hearing perjury, and wealthy businessman Victor Posner for tax evasion. This guy is clearly Un-American; as well as counsel, campaigner, and friend of Obama.
    This article ( brags about his “accomplishments.”


  • Patriot says:

    E-mails show Goldman boasting as meltdown unfolds

    By DAN STRUMPF, AP Business Writer Dan Strumpf, Ap Business Writer
    1 hr 54 mins ago

    .NEW YORK – E-mails released Saturday morning show top executives at Goldman Sachs Group Inc. boasting about the money the firm was making as the national housing market collapsed in 2007.

    The e-mails suggest Goldman benefited from its bets that securities backed by subprime mortgages would lose value.

    “Of course we didn’t dodge the mortgage mess,” CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to the e-mails released Saturday by the Senate’s Permanent Subcommittee on Investigations. “We lost money, then made more than we lost because of shorts.”

    Goldman restated its position Saturday that it did not reap huge profit from bets against the market.

    Short positions are bets that the market will go down. As the housing bubble burst, Goldman and a few powerful hedge funds took short positions on the market. Many of those bets required other investors to bet the market would rise.

    When the market went bust, people with short positions cleaned up.

    “We were just smaller in the toxic products,” Goldman’s president, Gary Cohn, writes back to Blankfein that same Sunday evening.

    Critics say their bets added fuel to the financial crisis.

    One of those bets is at the heart of civil fraud charges the Securities and Exchange Commission filed against Goldman this month.

    The SEC alleges Goldman misled two investors who bought a complex mortgage-related product that was crafted in part by Paulson & Co., a New York hedge fund led by billionaire John Paulson. The hedge fund manager was betting the product would fail.

    The agency says Goldman didn’t disclose Paulson’s role in creating the deal or his negative bet to the investors, IKB Deutsche Industriebank AG, a German bank, and ACA Management LLC, a U.S. bond insurance company.

    Separately Saturday, Goldman released a series of e-mails from Fabrice Tourre, the trader at the heart of the SEC charges. In them, Tourre jokes about selling investments to “widows and orphans” when he already expects the market to go bust.

    He writes in an e-mail dated March 7, 2007, that Dan Sparks, leader of Goldman’s U.S. subprime business, said the business “is totally dead, and the poor little subprime borrowers will not last so long!!!”

    That April, he joked about the bonds the SEC charges he misled clients about.

    “I’ve managed to sell a few abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore” the complex investments, Tourre wrote.

    The e-mails are in a mixture of French and English, and are to a woman with whom Tourre appeared to be romantically involved. Goldman provided translations.

    The same e-mails were excerpted in the SEC’s complaint against Goldman, but the full context was not reported previously.

    The subcommittee, whose probe is not connected with the SEC’s, has been investigating the causes of the financial crisis for 18 months. Its fourth and final hearing Tuesday will include testimony from Blankfein and Fabrice Tourre, a trader named in the SEC case.

    Goldman has denied wrongdoing and says it will fight the charges. In a statement Saturday, spokesman Lucas Van Praag said the bank lost $1.2 billion in the residential mortgage market during 2007 and 2008.

    “As a firm, we obviously could not have been significantly net short since we lost money in a declining housing market,” Van Praag said in a statement. He said the Senate panel “cherry-picked” four e-mail threads out of 20 million pages Goldman provided.

    Van Praag is one of the handful of top executives who contributed to the e-mails the Senate committee released Saturday.

    Blankfein’s comment about Goldman making more than it lost was a response to an e-mail from Van Praag in which Van Praag discussed a forthcoming New York Times article about the firm. It would show “how we dodged the mortgage mess,” Van Praag explained.

    In one, Goldman Chief Financial Officer David Viniar says that in one day the firm made more than $50 million on bets that the housing market would collapse, according to a statement from Levin’s office.

    Viniar, also scheduled to testify Tuesday, summed up the position of investors who had not bet against the market:

    “Tells you what might be happening to people who don’t have the big short,” Viniar writes in the message dated July 25, 2007.

    The e-mails were released by subcommittee chair Sen. Carl Levin, D-Mich. In a statement, Levin called banks like Goldman “self-interested promoters of risky and complicated financial schemes that helped trigger the crisis.”

    Goldman said in its 2009 annual report that its short positions sought to offset its long positions in the mortgage market and did not generate large profits. Through 2006, Goldman “generally was long in exposure” in the mortgage-backed securities market, according to the report, and after taking losses on those securities in 2006 it reduced its exposure.

    “Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not ‘a bet against our clients,'” according to the report.


    AP business writers Daniel Wagner in Washington and Stevenson Jacobs in New York contributed to this report.

  • Patriot says:

    Goldman developed strategy to profit from housing meltdown

    Senate probe: Goldman planned to profit from bust

    By MARCY GORDON and ALAN ZIBEL, AP Business Writers Marcy Gordon And Alan Zibel, Ap Business Writers
    23 mins ago

    .WASHINGTON – Goldman Sachs developed a strategy to profit from the housing meltdown and reaped billions at the expense of clients, a Senate investigation has found.

    Top Goldman executives misled investors in complex mortgage securities that became toxic, investigators for a Senate panel allege. They point to e-mails and other Goldman documents obtained in an 18-month investigation. Excerpts from the documents were released Monday, a day before a hearing that will bring CEO Lloyd Blankfein and other top Goldman executives before Congress.

    Blankfein says in his own prepared remarks that Goldman didn’t bet against its clients and can’t survive without their trust.

    The Securities and Exchange Commission this month filed a civil fraud case against the bank, saying it misled investors about securities tied to home loans. The SEC says Goldman concocted mortgage investments without telling buyers they had been put together with help from a hedge fund client, Paulson & Co., that was betting on the investments to fail.

    Goldman disputes the charges and says it will contest them in court.

    At the hearing, Blankfein will repeat the company’s argument that it lost $1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession.

    He also will argue that Goldman wasn’t making an aggressive negative bet — or short — on the mortgage market’s meltdown.

    “We didn’t have a massive short against the housing market, and we certainly did not bet against our clients,” Blankfein says in the prepared remarks released by Goldman. “Rather, we believe that we managed our risk as our shareholders and our regulators would expect.”

    But Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, said Monday: “I think they’re misleading the country. … There’s no doubt they made huge money betting against the (mortgage) market.”

    Goldman “knew of Paulson’s involvement in the selection” of securities, Levin told reporters. “They knew Paulson was going short.”

    “Need to decide if we want to do 1-3 (billion) of these trades for our book or engage customers,” a December 2006 e-mail exchange between two Goldman executives says.

    On one group of securities, “I’d say we definitely keep for ourselves. On (another), I’m open to sharing to the extent that it keeps these customers engaged with us.”

    Goldman has fought back against the fraud charges with a public relations blitz aimed at discrediting the SEC’s case and repairing the bank’s reputation. Some big clients are publicly backing the firm. But its stock has yet to recover from the fall that followed the SEC lawsuit on April 16.

    The firm’s public relations efforts will be on display Tuesday when the Senate panel hears from Blankfein and Fabrice Tourre, a Goldman trader who the SEC says marketed an investment designed to lose value. The SEC charged Tourre along with Goldman.

    Some experts say damage to Goldman’s reputation has already been done and might be long-lasting.

    Regardless of the outcome of the SEC’s case, “Goldman Sachs has lost,” said James Cox, a Duke University law professor and securities law expert. “It’s lost in the arena of public opinion.”

    The subcommittee, which is investigating Goldman’s role in the financial crisis, provided excerpts of e-mails showing a progression from late 2006 through the full-blown mortgage crisis a year later. Levin said they show Goldman shifted in early 2007 from neutral to a short position, betting that the mortgage market was likely to collapse.

    “That directional change is mighty clear,” Levin said. “They decided to go gangbusters selling those securities” while knowing they were toxic.

    The issue of how much Goldman executives pushed such policies and were aware of the mortgage trading department’s practices is a key one emerging before the Senate hearing.

    The 140-year-old investment house’s trading strategy in recent years enabled it to weather the financial crisis better than most other big banks. It earned a blowout $3.3 billion in the first quarter.

    Even before the SEC filed its fraud charges, Goldman denied that it bet against clients by selling them mortgage-backed securities while reducing its own exposure to them by taking short positions.

    By the Senate subcommittee’s reckoning, Goldman made about $3.7 billion from its short positions in several complex mortgage securities called collateralized debt obligations in 2006-2007. The short positions made up about 56 percent of its total risk during the period, the investigators found.

    But the company says it lost $1.2 billion when it sold home mortgage securities in 2007 and 2008.

    In addition to the $2 billion collateralized debt obligation that’s the focus of the SEC’s charges against Goldman, the subcommittee analyzed five other such transactions, totaling around $4.5 billion. All told, they formed a “Goldman Sachs conveyor belt,” the Senate panel said, that dumped toxic mortgage securities into the financial system.

    The firm’s correspondence to the SEC dated Oct. 4, 2007, includes this: “During most of 2007, we maintained a net short subprime (mortgage) position and therefore stood to benefit from declining prices in the mortgage market.”

    In his prepared remarks, Blankfein acknowledges, “We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky.”

    He adds, “If our clients believe that we don’t deserve their trust, we cannot survive.”

    Charles Elson, chairman of the University of Delaware’s Weinberg Center for Corporate Governance, questioned the panel’s decision to publish results of its inquiry just as lawmakers start to vote on sweeping financial overhaul legislation.

    “It becomes political theater,” Elson said. “The issues are worth raising, but the timing is the trouble.”

  • Patriot says:

    Goldman Sachs’ Lloyd Blankfein under fire at hearing

  • Patriot says:

    Max Keiser On the Edge Guest Karl Denninger: 4/23/2010

  • Patriot says:

    Obama Administration: Goldman Sachs from Top to Bottom
    Kurt Nimmo
    May 15, 2010

    Two articles on the FDL website detail the intimate and incestuous relationship between the Barry Obama administration and Goldman Sachs. FDL names names and provides expansive detail on the Goldie administration.

    Photo: Lloyd Blankfein, Goldman Sachs CEO: the man who may as well be president.

    “At a time when Congressional hearings are set to call testimony from some Goldman Sachs employees, it is vital to understand how widespread that institution’s ties are to the Obama administration. This diary shows the pervasive influence of Goldman Sachs and Goldman created institutions (like the Hamilton Project embedded in the Brookings Institution) , employees and influence peddlers in the Obama administration,” FDL wrote on April 27.

    It is not simply Larry Summers, Timothy Geithner, Rahm Emanuel, Gary Gensler and Mark Patterson who are Goldies, but a long list of others. “But that’s just the tip of the Goldman Sachs iceberg. Here you will find, I believe, the most comprehensive list of people-groups yet available to show how Obama’s administration has really become the Goldman Sachs administration.”

    Elena Kagan is merely the latest addition, although her ties to Goldman are downplayed if not completely ignored by the corporate media.

    FDL notes that the “Obama administration is not the first administration that Goldman has infiltrated, although it is perhaps the one that has been most completely co-opted from top to bottom. Recall that former Secretary of the Treasury Paulson in the George W. Bush era came from — Goldman Sachs where he was its chief. Recall too that the brilliant, late economist John K. Galbraith has written an entire chapter of a book devoted to the Great Depression and the economic collapse of Wall St. that accompanied it to the role of Goldman Sachs.”

    Goldman had sponsored trusts such as Blue Ridge and Shenandoah, speculative Ponzi schemes that made the market collapse of October 1929 possible. Goldman and others “whip(ped) up a speculative fever in shares, reaping (highly leveraged) capital gains with other people’s money.” They were fraudulent pyramid schemes, a “Charles Ponzi-Bernie Madoff scam,” writes L. Randall Wray.

    It was not mere greed and short sightedness that created the Great Depression. “To think that the scientifically engineered Crash of ‘29 was an accident or the result of stupidity defies all logic. The international bankers who promoted the inflationary policies and pushed the propaganda which pumped up the stock market represented too many generations of accumulated expertise to have blundered into ‘the great depression,’” writes the late Gary Allen.

    “The international bankers sought to bring about a condition of despair here so that they might emerge as the rulers of us all,” lamented Congressman Louis McFadden, Chairman of the House Banking and Currency Committee at the time.

    Goldman is now strategically placed in the White House as the Greatest Depression inexplicably unfolds all around us. McFadden was on the right track — the banksters are positioned to emerge as rulers of us all… and most of us, thanks to the corporate media, are completely unaware.

    Here are the FDL articles: A List of Goldman Sachs People in the Obama Government: Names Attached to the Giant Squid’s Tentacles and An Updated List of Goldman Sachs Ties to the Obama Government Including Elena Kagan.

  • Jae Briglia says:

    While I agree with the content in THE FED / GOLDMAN SACHS SHELL GAME EXPOSED , I think the buoyant sentiment around today is a result of a false set of circumstances. The demand for consumer credit is still poor and there is no significant improvement in the housing sector. The developed countries are surviving on their governments ability to just borrow and spend into their economies which is difficult to maintain. Regards, Jae Briglia.

  • While I agree with the content in THE FED / GOLDMAN SACHS SHELL GAME EXPOSED , I think the positive sentiment around today is a concequence of a false set of circumstances. The demand for consumer loans is still weak and there is no significant improvement in the housing sector. The developed countries are surviving on their politicians ability to just borrow and spend into their countries which is difficult to maintain. Regards, Silas Ruzbasan.

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