Posted on 04/16/2010 8:04:24 AM PDT by quesney
Edited on 04/16/2010 8:18:06 AM PDT by Admin Moderator. [history]
Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.
(Excerpt) Read more at nytimes.com ...
Where some of these banks are responsible is in the marketing of these deals, claiming foolishly to investors that the tranching structure made it virtually impossible for the top tranches to ever experience credit losses. Yep, that's true if homeowner defaults are uncorrelated, the economy were to grow like gangbusters, and the price of crude stayed below $70.
This is partly due to the fact that the largest banks are run by pot-smoking idiots with degrees in marketing, rather than in economics, statistics, etc. So they don't know the first thing about probability, statistics, or even simple arithmetic. But they sure know how to sell, and how to lobby.
As for the particular deal in question, Goldman certainly misrepresented it. That particular package was designed to fail, if NYT is reporting accurately (big "if," I know). But most of the deals were not designed by the banks to fail. They were designed by the government to fail because they had to be structured with garbage credit.
Adam Storch Government: COO of the SEC's Enforcement Division (October 2009-present). He was 29 years old at the time of his appointment.
Goldman: Former Vice President at Goldman Sachs where he worked from 2004-2009.
I didn’t say that it wouldn’t.
Did you read all of my comment? Remember, we have to “keep up appearances” of the “free market” don’t we?
What is happening at cbs? They have recently begun to publish stories they wouldn’t have touched.
Looks to me like they’re just scratching the surface on the orchestrated financial crisis of 2008, the one that got the 0ne elected. Gotta wonder if they’ll just use this as the white wash.
Think about it. Goldman worked with Paulson & Co. to set up subprime instruments, which Paulson & Co. then shorted while Goldman told everybody they were long. Looks like that’s the pin that popped the bubble.
One thing is sure, they’d better get as much swept under the rug before they lose control of Congress.
Yeah, I know. I don’t watch it, so when I searched GS and who works in gov, I got that hit. I was shocked. It’s probably not complete either and if you look, the first one you read has Bush’s name in it.. LOL.
Haha. Indeed. Obama is rapidly moving us to a planned economy, but with the central planners residing in the largest banks in Manhattan, namely Goldman, Citi, etc.
But some on this board seem to think that we need a whole bunch more regulation for the financial industry. The fact is that the big players LOVE more regulation because it creates a huge barrier to entry that protects their position, and they have the lobbying clout, compliance staff, and posh lawyers to skirt the regulations themselves.
Duh..my question was whether they were related, but it has been answered. They are not related. thanks for your reply though.
Evidently he wasn’t very good at his job, or else he would have stayed at Goldman: More power and more money than at the SEC.
I happen to disagree. All bubbles are popped by more than one pin. In addition, this deal is immaterial to the bubble.
There is a single factor (already pushed under the rug) that created the bubble: the Community Reinvestment Act (1998) that MANDATED a percentage of bad loans to be issued to people that could not have possibly repay them. That percentage was increased (by Congress) until it reached 52 in 2007. As a result the 65% homeownership rate --- which was EXTREMELY robust, having remained unchanged for decades through all the booms and crises --- has increased to 69%. This means that 12 million American homeonwers cannot afford their houses.
One should also avoid mixing the housing bubble with the financial crisis.
You are correct.
This was engineered. The ###holes are toying with us. I'm so glad I sold every last share of every last stock sometime ago.
Not if he knew this was coming or was brought in to bring it on. Who knows?
There is the difference between the pin that popped it and the air that blew it up in the first place. And the housing bubble caused the financial crisis.
Precisely! The best regulation, is Natural Selection.
Meddlers Meddle though.
What makes his articles all the more entertaining is they often implicate Zero's squad, Rinos too, and the fact that they are written in one of the most lefty batsh!t crazy publications, Rolling Stone.
But your calling the market manipulation GS and a handful of financial cartel players perform, "capitalism", is equally entertaining.
Cheers!
Soros also said a few months ago that the gold market was a ‘huge bubble about to burst’ and the media repeats his assertion over and over again....then he goes out buys a ‘steamship’ full of gold holdings on the sly.
Soros needs to be indicted too imho. Blatant market manipulation and insider trading is Soro’s mo.
The housing prices are were they were in 2003, that is hardly a destruction of wealth. Unless, of course, you have found some immutable law that predicts monotone increases in prices and wealth.
That is a general symptom: people like you, and the NY SLimes, blame Wall Street, capitalism, etc. for the declines from a recent top, but never credit those same forces with the clime to that top.
Bubbles are a difficult to deal with (predict, control, etc.) precisely because they are caused by human nature. In this particular case, the bubble is a bit simpler to identify: home prices took off right after the Community Reinvestment Act of 1998 because the congress mandated bad loans (thus creating unprecedented demand from those that had previously not expressed it).
Markets are amoral; they facilitate WHATEVER actors' preferences happen to be. Congress demanded that bad loans be issued. The financial markets accommodated that. To blame facilitators in this case is like blaming the car engine for the crashed caused by a drunk driver.
Finally, there may have been cases of fraud, but fraud happens all the time. Fraud does not cause macroeconomic disasters simply because it never reaches the magnitude that is needed to cause them.
You appear to be too close to the trees to see the forest. For instance: "purposefully obtuse contract language." This is silly: both sides on these transactions were sophisticated agents relying on even more sophisticated law firms specializing in that type of transactions. You have to explain, then, why buy-side lawyers are _systematically_ (in the aggregate) more stupid/ignorant/unqualified than their sell-side counterparts. Sorry, but this is total nonsense. The truth is much simpler: as in any bubble, people have rationalized why the prices must go up monotonically. Some rare people (they too always exist in any market crash) have made opposite bets. You and the masses now hate those few for being wise where most were stupid. "Purposefully obtuse" contracting instruments have nothing to do with that.
"But your calling the market manipulation GS and a handful of financial cartel players perform, "capitalism", is equally entertaining."
I am glad to provide entertainment; enjoy. But you did put words in my mouth. Close to 100% of people who bash GS do so (i) without understanding of what the issues are and (ii) by taking sides rather than applying principles. You just did the same.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.