Goldman Sachs

[seafoid]

http://www.nybooks.com/daily/2016/04/12/hillary-clinton-goldman-sachs-why-it-matters/

In July 2010 the Securities and Exchange Commission fined Goldman $550 million for the fraudulent marketing of its Abacus CDO; the bank had allowed its client John Paulson to stuff the CDO with toxic ingredients, mostly in the form of mortgage-backed securities (MBSs), and then to bet against the CDO when it was marketed by taking a short position. Paulson earned around $1 billion when the CDO lost value as it was designed to do. In August 2011 the Federal Housing Finance Agency sued Goldman for "negligent misrepresentation, securities laws violations and common fraud" in its dealings with the semi-public mortgage banks Fannie Mae and Freddie Mac. In August 2014 Goldman agreed as restitution to buy back $3.15 billion worth of securities it had sold to the two banks for $1.2 billion more than they were currently worth.

In July 2012 Goldman agreed to pay $25.6 million to settle a suit brought by the Public Employees Retirement System of Mississippi accusing the bank of defrauding investors in a 2006 offering of MBSs. In January 2013, the Federal Reserve announced that Goldman would pay $330 million to settle allegations of foreclosure abuse by its mortgage loan servicing operations. Finally, in January of this year, Goldman announced that it would pay $5 billion to settle multiple lawsuits brought by official agencies against the bank, mainly for fraudulent marketing of CDOs; the final terms of the settlement were released on April 11. (Through the availability of tax credits and allowances, Goldman may end up paying less.) Among the plaintiffs were the Department of Justice, the New York and Illinois Attorneys General, the National Credit Union Administration, and the Federal Home Loan Banks of Chicago and Seattle.

These are summary descriptions of Goldman transgressions, which do no more than point to a pattern of deceptive and often fraudulent trading in derivatives. To get a more detailed sense of what exactly the bank was doing with these trades, we have to look at Goldman's own record of its behavior during the crash. This record, which is now in the public domain, provides a stark backdrop to Clinton's recent dealings with Goldman. The story begins on December 14, 2006 when David Viniar, Chief Financial Officer at Goldman and thus number four in the Goldman hierarchy, convened a meeting on the thirtieth floor of Goldman's Manhattan headquarters. This was the seat of power where, along with Viniar, the bank's Big Three had their offices: CEO Lloyd Blankfein, and co-vice presidents Gary Cohn and Jon Winkelried.

At the meeting Viniar called for an in-depth review of Goldman's holdings of mortgage backed securities because its "position in subprime mortgage related assets was too long, and its risk exposure was too great." The next day Viniar emailed a subordinate about the deteriorating housing markets, its effect on mortgage-backed securities, and not only the risks but also the opportunities this opened up. In his email Viniar alerted his subordinates to the possibility that the bank could profit from the deterioration of its own assets: "My basic message was let's be aggressive distributing things because there will be very good opportunities as the markets [go] into what is likely to be even greater distress and we want to be in a position to take advantage of them."   

By February 11, 2007, Goldman CEO Lloyd Blankfein himself was urging Goldman's mortgage department to get rid of deteriorating assets: "Could/should we have cleaned up these books before and are we doing enough right now to sell off cats and dogs in other books throughout the division"? But this was no easy task. In 2006 and 2007 Goldman created 120 complex financial derivatives, relying heavily on subprime mortgages grouped together in MBSs and CDOs with a total value of around $100 billion.

The problem was that the derivatives Goldman was busy creating were clogged with assets that were rapidly losing value. Faced with what it saw as a collapsing market, especially in MBSs, Goldman abandoned some derivatives that were still "under construction" while liquidating others that were fully formed, selling off their components in the markets. If this is all Goldman had done—anticipating where the market was going and unloading its bad assets—it would not have been the target of multiple lawsuits, and Blankfein might rightly be esteemed on Wall Street as the great survivor of the crash.

But Goldman also persisted with the creation of new CDOs and MBSs and continued marketing its existing ones so that they too could become part of new CDOs. Although the trading strategies involved in these maneuvers were sometimes highly complex, the motive underlying them was not. The bank's executives believed that they could make more money by repackaging their collapsing assets into new CDOs and MBSs, which they could still market to clients as investment opportunities. Crucially, in doing this, Goldman was not simply acting as a "market maker," an institutional trader that simply buys and sells securities at publicly posted prices. By marketing these new financial products, Goldman was also acting as underwriter and placement agent for them, and as such was subject to additional rules on fair disclosure.

On multiple occasions, as the Federal Housing Finance Agency's 2011 lawsuit alleged, Goldman failed to disclose to its own clients how risky many of its derivatives were and that the bank itself was betting against them by taking the short position. At a hearing in April 2010 before the Senate Permanent Subcommittee on Investigations, Senator Carl Levin of Michigan confronted Blankfein about these practices:


Senator Levin: Is there not a conflict when you sell something to somebody and then are determined to bet against that same security and you don't disclose that to the person you are selling it to? Do you see a problem?

Blankfein: In the context of market making, that is not a conflict. What clients are buying, or customers are buying, is they are buying an exposure. The thing that we are selling to them is supposed to give them the risk they want. ...

Senator Levin: How about [if] you are investing in these securities. This isn't a market making deal. This is where you have a decision to bet against, to take the short side of a security that you are selling, and you don't think that there is any moral obligation here? ...

Blankfein: Every transaction Senator, and that is—and I think it is important, and again, I am not trying to be resistant but to make sure your terminology—when as a market maker, we are buying from sellers and selling to buyers. ...

Levin:  You are betting against that same security you are out selling. I have just got to keep repeating this. I am not talking about generally in the market. I am saying you have got a short bet against that security. You don't think the client would care?

Blankfein: I don't—Senator, I can't speak to what people would care. I would say that the obligations of a market maker are to make sure your clients are suitable and to make sure they understand it. But we are a part of a market process. We do hundreds of thousands, if not millions of transactions a day as a market maker.

As the force behind the 2010 Senate hearings and report, Senator Levin performed a great public service by bringing to light so much revealing information about the role of Goldman Sachs and other banks in the crash of 2007–2008. But at this critical moment in the hearing, Levin missed the crucial flaw in Blankfein's defense: in marketing CDOs and MBSs to its clients, Goldman was not simply a market maker. It was an underwriter and placement agent that had manifestly violated rules of disclosure about the suitability of its products for its clients. This explains why Blankfein, in his exchanges with Levin, clung so desperately to the claims that he and Goldman were never more than humble market makers.

[muppet]

Anyone go to jail for that?

[J70]

Lowlifes.

Part of the problem is this stuff is so arcane and abstract that most people don't know what the f**k is going on. Murder, terrorism etc. are clear, black and white acts, whereas most of us wouldn't even know what the hell a derivative is.

[seafoid]

Anyone go to jail for that?

Not AFAIK

[armaghniac]

Lowlifes.

Part of the problem is this stuff is so arcane and abstract that most people don't know what the f**k is going on. Murder, terrorism etc. are clear, black and white acts, whereas most of us wouldn't even know what the hell a derivative is.

I was reading a book about this whose name escapes me. But essentially they were bundling up crap mortgages and AIG were insuring these for 0.5%, which was utterly ridiculous. Now you or I might not have a clue, but the likes of AIG were well able to hire someone with a clue, and only gross negligence meant that they did not do so.

[muppet]

Lowlifes.

Part of the problem is this stuff is so arcane and abstract that most people don't know what the f**k is going on. Murder, terrorism etc. are clear, black and white acts, whereas most of us wouldn't even know what the hell a derivative is.

I was reading a book about this whose name escapes me. But essentially they were bundling up crap mortgages and AIG were insuring these for 0.5%, which was utterly ridiculous. Now you or I might not have a clue, but the likes of AIG were well able to hire someone with a clue, and only gross negligence meant that they did not do so.

The Big Short or Too Big to Fail?

AIG were on the hook but so was Deutsche Bank, which should be borne in mind when Merkel and co start lecturing us.

They all relied on the rating agencies. Meanwhile we in Ireland relied on the regulator. The whole thing was a farce really.

[seafoid]

It is still a farce. The only point of the system is to further enrich the richest 1% who do not give a shit about growth or anyone else.

[ashman]

Someone had to pay for the trailer thrash taking on sub prime !!!

[J70]

Lowlifes.

Part of the problem is this stuff is so arcane and abstract that most people don't know what the f**k is going on. Murder, terrorism etc. are clear, black and white acts, whereas most of us wouldn't even know what the hell a derivative is.

I was reading a book about this whose name escapes me. But essentially they were bundling up crap mortgages and AIG were insuring these for 0.5%, which was utterly ridiculous. Now you or I might not have a clue, but the likes of AIG were well able to hire someone with a clue, and only gross negligence meant that they did not do so.

Of course, but I'm more talking about it as a political issue and the ignorance of the general population. Not as easy to base a campaign on holding these banks accountable given the complexities. Especially when one side of the political spectrum completely dismisses their role and blames it all on Barney Frank and making it easier for low income people to get a mortgage.

[gallsman]

Someone had to pay for the trailer thrash taking on sub prime !!!

If you said that about an Irish bin man taking out a 200% interest only mortgage on a 5 bed in Carrick on Shannon the shinners on the board would be up in arms.

[redzone]

Its at this point were another interesting thread gets hijacked by shite talk by someone

[mikehunt]

Another worrying by product of Golden Sack is where the top brass go after. Draghi being one. A few in the US Fed. Our own Sutherland is doing trojan work for the asylum seekers. Why an ex GS banker would have the slightest interest in the welfare of the Syrian migrants has puzzled no one. A dangerous breed these ex Goldman Sachs employees. 

[muppet]

http://www.reuters.com/article/us-aig-goldmansachs-sb-idUSTRE52H0B520090318

Another Goldman old boy, who was there for the massive CDO/CDS bets build up, then introduced https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program to bail out the system.

I didn't realise how big TARP was until recently. AS you can see below, it was almost equal to all the of the US Dollars in circulation at the time:



I love this quote from Goldman though. This is a classic example of language triumphing over reality.

"Asked why Goldman Sachs took $12.9 billion of taxpayer money if it was collateralized and hedged on its AIG positions, DuVally said it was because AIG was not allowed to fail, so Goldman did not get money from hedges that would have paid out if the insurer had collapsed. And, he said, under the terms of its contracts with AIG, Goldman was entitled to collateral."

The collateral was worthless.

If AIG had collapsed, it would have pulled the entire financial system down and in the ensuing chaos there would have been no one left to pay out on the hedges that GS (or anyone else) had. There would be no one able to pay out on all the CDSs, of which a huge number were held by AIG. The guys who made the big money in The Big Short knew this and some of them started cashing in before the collapse, afraid that they were going to win so big that the system wouldn't be able to pay up (It wouldn't have been able without TARP). GS joined in on the Big Short later but if TARP hadn't happened, they there would have been no way for them to cash in their collateral.

The worst thing about all of that, from an Irish POV, is that after the whole financial world woke up to reality and scrambled to get into short positions on property and the banks, our Government went into the ultimate long position, and bet our economy on it.

[seafoid]

GS profits are down 50% this quarter. The financial system is probably even more dangerous now than it was in 2008. Global QE of 9 trillion  blew up a bubble of 35tn. Share prices are insane. Sales are stagnant. There is no way an awful lot of debt will ever be repaid. Bad debts in Italy are 20% of GDP. The Eurozone has no bank resolution system. There is no growth. Pactum sunt servanda won't work second time around.

[stew]

Killory refuses to release her speeches were she fawns over these f**kers, in 60 speeches she gave, 30 companies landed giant government contracts when she held office, this aul rich bitch is as corrupt but the sheep among you still support this corporate whose, disgraceful really but to be expected