naked capitalism

Richard Kline says:

I have long felt that the best odds for tipping the zombie banks onto the the slope down tot he fire pit lie not with any branch of government but in the courts. The gears grind slow there, but once they snag on material facts they can snack off falsehood from fact. Also in the courts, the public via the media gets to see actual victims and actual practices, unlike in legislatures where one witnesses hirelings spinjacking with bloviators; the public just doesn’t get exercised about the sausage of law.

More yegss in the docket, that’s the ticket. Sez I. (Before motoring off for a vacation far, far away from the most of it all for a few days. I love a northern summer.)

lambert strether says:

So, the settlement is a win for the public because the government gave them ammo for their own law suits?

Sounds like another bank shot from The Big O to me. Once, just once, it would be nice to see the administration go in for the kill on something, instead of “nudge,” “nudge,” “nudge.”

And no CEOs in orange jumpsuits doing the perp walk for accounting control fraud? Total win for Goldman.

Jackrabbit says:

Other interesting things about this settlement:

1) The SEC can still go after the Fabrice. What might they dig up about Goldman or others?

2) Goldman has a permanent injunction. They will not be able to plead to a simple “mistake” again.

readerOfTeaLeaves says:

Random observation: this covers Goldman’s refusal to come clean, reliance on secrecy, and apparent sleazy conduct, no matter what the lawyers and pr spinners want to claim.

I happened to click on over to the UK Guardian, where, lo and behold they are live-blogging Apple’s CEO Steve Jobs answering questions about problems with the iPhone, and how Apple plans to address the problem: http://www.guardian.co.uk/technology/blog/2010/jul/16/apple-iphone-4-press-conference

Personally, I can’t even imagine Lloyd Blankfein saying anything remotely like this:

7.02pm: Jobs: “We were stunned and upset and embarrassed by the Consumer Reports stuff that came out this week, but we didn’t need that to tell us to take care of our customers.

“If we’d have done this [press conference] a week and a half ago, we wouldn’t have had half the data that we shared with you today.”

Not to say that Apple doesn’t have secrets, or encounter problems.
But the contrast between Goldman’s adament denial and appearance of sanctity in both FCIC and Senate hearings is a stupifying contrast with the way Apple is approaching a problem with its customers.

I realize that Apple isn’t in finance and (arguably) GS doesn’t make software. But on a human level, Apple’s showing a lot more guts.

Blurtman says:

Is Rahm Emmanuel going down next?

Booer says:

[Quote]…”the SEC didn’t hit them with something more severe, such as a multi-year ban from the sector. However, Goldman’s settlement appears to be a loss for CDO banks and issuers and a potential gain for investors and plaintiffs in future actions. In fact, it is hard to see how anything in the settlement, if affirmed, would be negative for private parties considering lawsuits against sellers of CDOs.”[/Quote]

It would have been better had GS been given a multi-year ban and that all parties involved were recommended for public censure (in the least). That would have been a true victory for the SEC and one not subject to the usual BS or petty manipulations in language.

The SEC collected a lot of evidence and information, about other cases than ABACUS that were managed by this department inside Goldman Sachs Group, and or other departments. ABACUS was a cookie-cutter type activity that was being replicated. There were variations and different levels of severity of the fraud or omission; this one ABACUS-labeled-product happened to have a misleading cover page or promotional materials whereas others than Fabrice may have relied upon verbal deceptions. The end result was the same to misguide “knowledgeable” buyers. This is sometimes called Fraud in the Inducement.

I express genuine concern similar gambits or exactly identical activities occurred under different names, involving different “talent” or securities brokers, under the similar overseers and likely involved different outside third party hedge fund personalities.

This settlement does not go far enough because a lot of other evidence, involving Goldman is being held down or concealed, trying to “save” Goldman further pr-damage, heart ache and loss to its reputation. No offense to Jesuit or Catholics believers, but if GS was a Muslim financier, the SEC would surely horse-collar and drag the firm down – suspend or ban the company from activity in U.S. markets, and we would be reading the media rally around it, denouncing the firm and its bad faith practices in U.S. markets – fomenting false demand in real estate markets and oil trading. The firm would not have been spared, but rather would have been seized and investigated by the CIA, Department of Justice, Homeland Security and FBI jointly. As it is these many bad faith practices during a war time economy are kosher.

Take note of the feeder-activity. This is where lending standards are reduced in order to feed Wall Streets appetite for brokering the loans in securitization markets.

When supply ran dry and demand was still being measured and fomented by Wall Street, the lending standards mysterious went lower and lower. At the same time, to incorporate many of these bad loans into the bundles created by firms like Goldman Sachs Group and Morgan Stanley, Lehman and JPMorgan – rating agencies were corrupted in parallel fashion. …There was no other way for corrupt firms like GS to include these bad sub-prime loans, unless the ratings agencies played a key role.

So to feed demand, Wall Street and Goldman too, ushered in a time of reduced lending standards, encouraged same an propped up the demand for these instruments with bad loans and paper it knew would be eventually “insured” by AIG and then backstopped by the U.S. government, FDIC or Treasury.

They even compromised and sabotaged John Snow’s tour at Treasury, along side the compromise in lending standards and assuring ratings agencies were corrupt. This opened the door for Henry Paulson who then was in a position to MAKE sure the bad faith deceptions and falsified triple AAA ratings would be insured or taken into the Treasury, FDIC or Federal reserve.

Make no mistake: Goldman was operating in a black-operational business model. This was as black as any enemy of the United States could have been if it was allowed to do business here in the United States, while the country was at war no less.

The SEC has all the leverage in the world, and could have stacked many more instances of ABACUS-like activity, like boxes, one after another to show the pattern abuse and patterns, multi-layers of fraud. This “stacking” of many counts would have set the SEC Enforcer as a tower on top of all executives and the CEO and CFO of Goldman. He would have had so much leverage they could be made to shine his shoes and kiss his hand.

Goldman Sachs – powned.

And a menace to society removed once and for all.

If the lead chair really wanted to serve out a correct measure of deterrent, she or he would have pressed further to get more concessions.

I saw an interview with Chris Whalen on tech ticker (financedotyahoo) and he half jokingly said he would have gone for another zero. ($5,550,000,000.00 five point five billion instead of 550m). This was said lightly and was not meant to tarnish the efforts of the SEC, but Whalen is right here. And this is why:

The feeder-activity and compromise occurring in the background, in efforts to get Goldman Sachs fed with steady stream of bad loans to bundle and securitize with good. There is a “menace to society” factor, in creating hardships for people, generally, other than direct victims of ABACUS.

There was a reduction in lending standards that started and accelerated in 2004-2006; this goes to the background of ABACUS products. By the time the voodoo-loans were harvested by large brokerage firms, the turpitude and ill effects to society (of feverish lending) was being reduced, marginalized and converted into a high-brow brokerage fee with false-prestige given to firms like GS, for having sold the voodoo-chile-mix, for the best margin over cost (price mark-up). What I heard in an interview recently, Tavakoli imply was the “pride of wall street or pride in the history” and other BS because if the firms really had pride in their history they would not have been encouraging the reduction in lending standards during a war time economy, in order to feed the ABACUS-alike activity nor foment a real estate boom with demand for partially falsified product. Goldman knew would the reduced lending and foment in demand, would result in a bust, because they installed Paulson in Treasury for the sole purpose of offloading its bad loan portfolio on people who did not sign for those loans, nor speculate in real estate (the other 68 to 86 percent of Americans New York media is shy to write about – did not speculate in real estate – PERIOD – DID NOT).

Dramatic reduction in lending standards did occur, in the same period on a time line as when ratings agencies where corrupted. Some ratings agencies were sold and repurchased to help shelter or possibly conceal the corruption and make important documents more difficult to obtain. But it cannot be denied the two affronts in lending and ratings agencies were simultaneous. This again goes to background feeding ABACUS its core-essential product.

This background is better emphasized and FULLY denounced by a larger agency such as the SEC or Justice Department. Many public and some private corporations may not be willing to focus their resources to expose the severity and detriment to society overall (and even if they did, it would not get as much media as it would if properly developed by the SEC – in conjunction with the Department of Justice).

From the Mission Statement of the SEC:
“Mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly and efficient markets… The SEC oversees the key (emphasis added) participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.”

The SEC in this settlement is actually NOT going far enough in its mission to protect the markets and hold key market makers who perpetrate egregious layers of fraud, accountable.

The fomenting or frenzy of bad lending standards, to feed bad loans up to Wall Street’s largest banks, does qualify as “important market-related information … toward maintaining a fair market environment and protecting folks against high market frauds.” (and the burden such frauds impose on the greater society).

It would not hurt the reputation of the SEC to further develop this background in this case dealing with Goldman, exclusively or for the purpose of handing off this part (knowledge and evidence of feeder activity) to the Department of Justice or to the U.S. Attorney General’s Office, for criminal prosecutions (prosecuting beneficiary firms of the feeding-crazed-activity, bad-loans placating the appetite of high securitization markets and executives who are shown in the ABACUS case to have turned lemons into “complex financial products” that were falsely presented to buyers for a premium triple AAA rated fee).

In conclusion, I am concerned the SEC has a tether on its enforcer. The SEC should be swinging an aluminum plated bat, so the public does not have to.

Think about it, who would financiers in Wall Street rather have with a bat in their hands. The SEC or the public filled with indignation over this back ground activity?

The SEC needs to turn its Enforcer loose. He looks like he could make a much stronger case and I am left amazed and dumbfounded he would come up so short as if GS is short-selling and making side bets against his competence and workmanship.

The guy looks like a powerful prosecutor. He should be let out further and allowed to crush the mouth of Goldman as they are smiling all the way to the back and mixing words in the media to make it out like they are “victors”

Let Tavakoli take a full swing when he comes up to the plate. I vote one in support remove from him the ties that restrain him and let him smash the bigger vermin which is GS.

A true menace to society – during a war time economy. They should be given no quarter!! Put Henry Paulson in prison for his high up treason, sedition and fraud.

= = = =

End note: figure of speech with the bat. Lets not condone violence against bad faith operators. Prison is reserved for such as these.

It is more at the metaphor the President uses to describe “athleticism” of high-market manipulators and fraudulent actors whom he apparently adores like his baseball players. (Poor Obama did not have a father figure and mistakes purveyors of fraud as his “athletic” role model.)

Brooer says:

End note: Lets not condone violence against bad faith operators. Prison is reserved for such as these. Please no retaliations let the Justice Department handle it if SEC continues to double dribbler here. I am serious you guys who are correctly moved to indignation. We cannot have our towns being over-run with bad faith eye-for-an-eye avenger moods. No violence toward bankers. Let the authorities get off their thumbs first, and then if THEY are negligent then yes, we have just cause if they are negligent. At that point, we will have a duty to take back our country from menacing firms like Goldman Sachs who create trouble for us here at home, by how they treat the lower and middle class badly and also bring trouble to our shores by how they treat others in foreign markets as badly. as they treat us (probably worse over there).

Okay I ramble. Sorry. No violence you all. Try to think of it as more a lampooning of the President’s metaphor, the one he used to describe “athleticism” of high-market criminal actors in fraud He apparently adores them like his baseball players, or he was picked for being naive about who they really are. (Poor Obama did not have a father figure and mistakes purveyors of fraud as “athletic” role models for American children and man-children alike.)