“Depart from me, you accursed. For I was hungry and you gave me no food, thirsty and you gave me no drink, a stranger and you did not welcome me, naked and you did not clothe me, sick and in prison and you did not comfort me.' They answer, 'Lord, when was it that we saw you hungry or thirsty or a stranger or naked or sick or in prison, and did not care for you?' He answered, 'Truly I tell you, as you did not do it to one of the least of these, you did not do it for me.’” Matthew 25:40-46
"Don't believe them, don't fear them, don't ask anything of them." Alexander Solzhenitsyn
The pom poms and nearly everything else was swinging wildly in the breeze this morning as the American financial press was wildly cheering the earnings news from Bank of America and their brilliant acquisition of Merrill Lynch.
Does anyone bother to notice that none of these banks are making any money from traditional banking activity? You know, the kind that is supposed to be supporting the capital allocation process and growth in the real economy? Its as if all the carpenters, plumbers, engineers and teachers left their real work and became carnies and professional gamblers, or even worse, politicians. We're celebrating that as a sign of a rensaissance and economic recovery.
I wonder if Sir Alan provided any counsel to the Paulson fund on that Abacus deal with Goldman Sachs that just blew up in their faces. Greenspan is one of their advisors, after all.
The Michigan Sentiment number came in at a very disappointing 69.0 versus expectations in the 75 range. What is wrong with the public, don't they see that the stock market is hitting new highs almost every day? This is what the anchorperson asked this morning on Bloomberg TV. But she was obviously not chosen for her analytical skills.
The news on the Goldman fraud took the wind out of their sails, at least temporarily. I thought it was cute that the SEC chose to announce this on a stock option expiration day.
The spin maachine is working overtime to digest this latest scandal, and turn it into something more palatable for the folks at home. But really, it looks pretty grim here. What happens when you are in the middle of a crowded con game, and someone yells, "Fraud!"
Here is a video interview on France 24 television with Max Keiser speaking on Goldman Sachs from almost one year ago.
By the way, NO ONE who is a serious player on Wall Street is legitimately surprised by this, and probably no one in regulatory bodies are either, unless they are just showing up to collect a paycheck and obtain free Internet access.
The antics of Goldman Sachs have been getting by on a 'wink and a nod' from the regulators and the market for some time. Why? Because they are powerful, and because like Lehman and their off balance sheet frauds, they are almost ALL doing it on Wall Street as part of the franchise. Goldman has just been a pig about it, and probably burned some insiders and powerful investors in their fraudulent Abacus trade.
The excuses being made for Goldman by some on Bloomberg Television and CNBC are setting new lows in journalism. It was just a simple failure to disclosure Paulson's involvement right? Almost a technicality. No one forced the customers to buy those fraudulently packaged and labeled assets or stocks (this was a favorite excuse from Joe Kernan during the Internet/tech bubble collapse). No involvement from the Ratings Agencies in the purposeful crafting of a fraudulent financial instrument. Guest Calls Cramer a 'PR Man for Goldman Sachs' and is ejected from the show by the resident money honey.
As you may recall, Mr. Cramer represents himself as highly experienced in manipulating stocks using CNBC reporters from his days as a hedge fund manager. So it might not be so outre to inquire if he is working the other side of that Wall Street scam these days.
Why, these derivatives were SO complex that the poor Goldman management barely understood them themselves. They were tricked by Paulson. Tourre is a rogue trader. Bernie Madoff ate their Series 7 cheatsheets. Compliance was seconded to the Riviera. Lloyd was busy doing missionary work in Bangkok. More regulation will just hurt the recovery.
Don't just regulate them. Break them up. And audit the Fed.
I am glad the professor is from HEC. I did my international business MBA sequence (an extended field trip for adults, but the refreshments were good) at the 'other' business school in Paris at La Defense, ESSEC.
“Only fraud and falsehood dread examination. Truth invites it.” Dr. Samuel Johnson
The SEC is formally charging Goldman Sachs with fraud in the derivatives markets, specifically with regard to Collateralized Debt Obligations related to subprime mortgages.
Investors in Goldman's Abacus CDO lost one billion dollars.
In addition to the company, an individual VP in Goldman's international group is being charged, Fabrice Tourre.
Paulson and Company, a major hedge fund, paid Goldman to structure a CDO based on mortgages that Paulson selected, so that they could bet against it.
"The product was new and complex, but the deception and conflicts are old and simple. Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, director of the division of enforcement.
This could be construed as a deft way of throwing red meat to the angry mob, nailing a specific individual at Goldman while limiting the criminal charges against the company although there will be significant civil cases, and dealing with the billionaire hedge fund owner Paulson who made a fortune betting against the subprime market.
This could be more damaging if this includes other Goldman bets against its customers on products it represented and created, and it shows an overall intent to create fraudulent products for the purpose of shorting them. For now the SEC will not say if this fraud is a singular event or more systemic.
Goldman will almost certainly attempt to spin this as the actions of a 'rogue trader' who was an aggressive exception.
Last week the White House asked Jamie Dimon and Lloyd Blankfein to 'cool it' on their intense lobbying efforts against derivatives and financial reform.
Perhaps this will help them in their decision.
This is just the tip of the iceberg. The Wall Street Banks are knee deep in fraud.
No one can obtain the kind of consistently odds defying returns that Goldman was producing without either cooking the books or engaging in some type of gaming the system, which is a polite word for fraud. That is the same 'tell' as the steady and outsized returns that Madoff is producing.
Let's see if this goes any deeper, and if serious punishments and reforms result.
The SEC can only enforce the Securities Laws, but cannot bring criminal charges. Since Paulson is not being charged, since he made no representations regarding the products, only Goldman is being sued by the SEC. Their alleged gain in this is $15 million dollars, the fees it obtained from Goldman. And Goldman will say that they were only serving their customer, Paulson.
Certainly Goldman will be subject to civil lawsuits and discovery. But the real test of the Obama government will be any role that the Justice Department does or does not take in this. They could of course defer, using the show trials of the Financial Crisis Inquiry Commission as a rationale to take no action.
This is blatant fraud and white collar crime being conducted by an organization that is paying contributions to half the Congress and the Administration, and staffing key positions in the government with its employees. Do you really think it will be brought to full disclosure and equal justice?
In a statement Goldman says that "The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation." Fabrice Tourre was last seen being thrown under a bus, and could not be reached for comment.
Watch the Justice Department and the Obama Administration to see what they do or do not do, and you will be able to know their character and intents. But in fairness the big Broker-Dealers in the US are RARELY indicted for anything. They virtually own the country's political and justice system.
"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." Barack Obama to CBS News.
Time do something besides talk the US to death about what you are going to do, and how the Republicans and lobbyists are getting in your way, and how great it will be when you finally do it. The SEC is relatively toothless, and probably by design. The FCIC will be tramping in the weeds for the rest of the year.
You do not need the Republicans, and you do not need the Congress, to fully engage the Justice Department and the FBI in investigating this fraud, Mr. Obama.
The most likely outcome will be a disgorgement of profits and a wristslap, and a promise by Goldman to change its business practices, while admitting no wrong. That will be the 'business as usual' outcome, and a sign that reform is an illusion.
Meanwhile, the market manipulation continues. I thought it was cute the way in which the metals bears used this news to sell the market in an attempt to sustian their huge naked short positions. "Never waste a crisis."
The US Congress reacts to the scandalous news.
Breaking news on breaking the rules, more to follow.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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