Hedge fund manager in Goldman Sachs case is major Dem donor

The billionaire hedge fund manager at the center of an alleged fraud hatched at Goldman Sachs, a leading investment bank, has given tens of thousands of dollars to both parties.

Campaign fundraising records show that John A. Paulson, founder and chairman of the hedge fund Paulson & Co., gave $30,400 to the Democratic Senatorial Campaign Committee in June, qualifying him as a major Democratic donor.

He also gave $2,300 to Senate Majority Leader Harry Reid’s (D-Nev.) reelection campaign in February of last year and $4,800 to Senate Banking Committee Chairman Chris Dodd (D-Conn.) last April, according to records filed at the Federal Election Commission.

But Paulson has also given thousands to Republicans and supported several GOP candidates for president in the 2008 election cycle.

Jim Manley, Reid’s spokesman, accused Republicans of promoting the issue behind the scenes to distract from the need to pass Wall Street reform.

“While I appreciate the fact that Republicans are trying to divert attention by raising this, and kudos to their oppo team for reacting so quickly, but I have one simple question myself,” Manley said. “Are these same Republicans prepared to vote for Wall Street reform next week or not, because Sen. Reid, for one, is going proudly vote to protect consumers instead of the big banks.”

“Needless to say, this goes to show that Sen. Reid does what he thinks is right,” Manley added. “The American people can judge what the effort by Republican to protect Wall Street says about them.”

Paulson’s support of Democrats, however, may give Republicans ammunition when Democrats bring their financial regulatory reform bill to the Senate floor next week, as planned.

But the argument will gain them only so much political traction because Paulson has poured tens of thousands into Republican coffers.

He gave $28,500 to the Republican National Committee in 2008, raising him to the level as major donor. He also gave $4,600 to Sen. John McCain’s (R-Ariz.) 2008 presidential campaign, as well as separate $2,437 checks to the Republican Parties of Minnesota, New Mexico, Colorado and Wisconsin.

These states were expected to be presidential battlegrounds when he made the contributions in the late spring of 2008.

Paulson & Co. was mentioned prominently in a fraud action the Securities and Exchange Commission filed against Goldman on Friday.

The SEC alleged that Paulson & Co. participated in a scheme in which Goldman sold subprime residential mortgage-backed securities to investors, such as foreign banks and pension funds, that were expected to lose value.

Paulson & Co. bet heavily against the value of the fund, named Abacus 2007-AC1, which included mortgage bonds it viewed as overvalued, earning millions at the expense of Goldman clients who invested in it.

Paulson & Co. was not named as a defendant in the suit, which was filed against Goldman and a Goldman vice president, Fabrice Tourre.

GOP aides on Friday were insisting the charges against Goldman were a serious problem for Democrats.

“It’s going to be tough for the president and other Democrats to brand others as they have while the Wall Street behemoth that has lined their pockets with millions is being investigated for fraud without looking like complete hypocrites,” one GOP aide said.

Goldman earned between $15 million and $20 million to create and market the fund to investors who did not know that Paulson helped select its holdings and then bet it would lose value, according to the SEC.

Reid seized on the allegations to argue that the Senate should pass a Democratic Wall Street reform bill.

“This is also why we need to pass strong Wall Street reform this year,” Reid said in a statement responding to the SEC suit against Goldman. “When we clean up Wall Street, we will establish clear rules of the road to help keep Nevada families in their homes while protecting consumers, investors and financial institutions.

“We will stop banks from becoming ‘too big to fail’ and end taxpayer bailouts,” Reid said. “Republicans should stop obstructing our efforts to hold Wall Street accountable so that Main Street can once again prosper.”

Paulson gave thousands to other senior Senate Democrats in previous election cycles. He gave $4,600 to Sen. Carl Levin (D-Mich.) and $4,600 to Sen. Max Baucus (D-Mont.) in 2008, according to FEC records.

Paulson also supported two other Republican candidates for president that cycle.

He gave $2,300 to Rudy Giuliani’s presidential campaign and $2,300 to Mitt Romney’s presidential campaign in 2007.

He gave $5,000 to House Republican Whip Eric Cantor's (R-Va.) leadership PAC in 2009 and a $1,000 contribution to Republican Rep. Virginia Foxx (N.C.) in 2008.

Democrats insisted the charges against Goldman would not make more difficult the effort to move legislation.

“This crackdown is the product of years of Bush administration and congressional Republicans cozying up to Wall Street and ignoring the interests of Main Street,” said Nadeam Elshami, a spokesman for Speaker Nancy Pelosi (D-Calif.). “This is why we need a strong bill to rein in the abuses of Wall Street to protect American jobs and pensions, and Republicans will either stand with the special interests or the American people.”

Goldman Sachs exec named first COO of SEC enforcement

WASHINGTON – A Goldman Sachs executive has been named the first chief operating officer of the Securities and Exchange Commission’s enforcement division.

The market watchdog says Adam Storch, vice president in Goldman Sachs’ Business Intelligence Group, is assuming the new position of managing executive of the SEC division.

http://news.yahoo.com/s/ap/20091016/ap_on_bi_ge/us_sec_enforcement_official;_ylt=AqvWI0_xRBsc9L4981LJnuOs0NUE;_ylu=X3oDMTNkZDJyanBxBGFzc2V0A2FwLzIwMDkxMDE2L3VzX3NlY19lbmZvcmNlbWVudF9vZmZpY2lhbARjcG9zAzUEcG9zAzIEcHQDaG9tZV9jb2tlBHNlYwN5bl9oZWFkbGluZV9saXN0

Adam Storch Named Managing Executive of SEC’s Enforcement Division
FOR IMMEDIATE RELEASE
2009-220

Washington, D.C., Oct. 16, 2009 — The Securities and Exchange Commission today announced that Adam Storch has been named to the newly-created position of Managing Executive of the SEC’s Division of Enforcement.

http://www.sec.gov/news/press/2009/2009-220.htm

More evidence that this is a purely political move (and timing) on the part of SEC, designed to help Obama and Dems push the Financial Reform bill through Senate.

Goldman received Wells Notice 9 months ago, so they had plenty of time to quietly settle the matter, if there was anything to it. Most of these result in consent decree aka negotiated settlement arrangements.

The lawsuit itself is so narrow and requres a "proof of negative" from the government (it's about what GS "misrepresented" to buyers by not telling them about who was on the other side of the trade, which is consistent with the usual practice of private placements by any investment company anyway) that it essentially specifically excludes a counterparty (John A. Palson & Co.) from any liability and is [almost] designed to fail in court. Usually the government likes to make charges as broad as possible, in this case they created an almost destined to fail, narrow "proof of negative" contract law case.

Abacus Let Goldman Shuffle Mortgage Risk Like Beads - BL, 2010 April 17, by Jody Shenn and Bob Ivry

From July 2004 through April 2007, as credit markets boomed, Goldman Sachs Group Inc. created 23 financial transactions called Abacus, the word for a relatively crude counting tool involving the shuffling of beads. .....
The bank used the deals to off-load the risk of mostly subprime home loans and commercial mortgages to investors, either as hedges for similar positions or to bet against securities itself. While the data show New York-based Goldman Sachs issued at least $7.8 billion of Abacus notes, the risk passed to investors was multiples higher.
The Abacus transactions are so-called synthetic collateralized debt obligations, which marry two financial innovations that contributed to the worst collapse in financial markets since the Great Depression.
“Investors needed to ask some questions about synthetics they didn’t need to ask with other CDOs,” Joseph Mason, a finance professor at Louisiana State University in Baton Rouge, said in a telephone interview.
The financial tools, often called technologies, are credit default swaps, used to transfer the risk of losses on debt, and securitization, used to slice the risk in a pool of assets into various new securities.
Abacus deals were filled with default swaps that offered payouts to Goldman Sachs if certain mortgage bonds didn’t pay as promised, in return for regular premiums from the bank. .....

Goldman Sachs Said to Have Been Warned of SEC Suit - BL, 2010 April 17, by Joshua Gallu and David Scheer

Goldman Sachs Group Inc., which fell 13 percent yesterday after U.S. regulators announced fraud accusations, didn’t disclose that it was warned nine months ago that investigators wanted to bring a case, people with direct knowledge of the talks said.
Goldman Sachs responded to the so-called Wells notice from the Securities and Exchange Commission within months and met with the agency officials trying to fend off the civil lawsuit, said the people, who declined to be identified because the talks weren’t public. In March, the New York-based firm said it was cooperating with regulators’ “requests for information.”
“The question is whether a general disclaimer like that is rendered misleading because you left out the specifics,” said Adam Pritchard, a former SEC attorney .....
Goldman Sachs’s annual report for 2009, filed with the SEC in March, recycled a passage the company used in the previous year’s report to describe regulatory probes involving securities linked to subprime mortgages. .....

Democrats Say Goldman Sachs Fraud Suit Bolsters Case for Rules - BL, 2010 April 17, by Alison Vekshin

The Obama administration and congressional Democrats are using the Securities and Exchange Commission lawsuit accusing Goldman Sachs Group Inc. of derivatives-linked fraud to bolster their case for overhauling financial-industry regulations. .....

For Some Investors, Another Reason to Distrust Wall Street - CNBC, 2010 April 16, by Jeff Cox

The tumult Friday over fraud accusations against Goldman Sachs is likely to add to the deep mistrust among investors that the market is rigged against them. How long that sentiment lasts could depend on whether the accusations against the Wall Street banking titan stick, and if they are symptomatic of a larger contagion within the trading practices of major institutions. .....
Yet at least part of the reason investors have grown suspicious is because of the increasingly complex and less transparent products that helped bring about the crash in 2008.
While terms like collateralized debt obligations and credit default swaps have become more common in investor vernacular, many still don't understand how they work. They're likely to become even more befuddled and frustrated when such terms are thrown around in cases like Friday's shocking news regarding Goldman.
Part of the allegations center around whether Goldman packaged securities that were likely to fail and then didn't tell investors that a hedge fund client had made bets — short sales — against those same securities. .....
Indeed, there was a fair share of doubt in the financial community about whether the SEC would be able to prove its case against Goldman, as well as skepticism about whether the government wasn't conveniently setting up the case for the Obama administration's financial reform package in Congress.
As if on cue, the Democratic National Committee released a statement Friday afternoon from President Obama saying "we cannot delay any longer" on the reform bill.
"I'm not sure it's just a slam dunk, SEC-wins Goldman-loses (case)," Lutts said. "You have some very smart people running Goldman and I don't think they made any big mistakes on this particular product." .....

The Obama's Democrats equivalent of the Reichstag fire?

Goldman Sachs Will Be Sitting Pretty With Emanuel in the Obama White House
By: Timothy P. Carney, Examiner Columnist, Nov 21, 2008

Goldman Sachs always has clout in Washington, as evidenced by the firm’s alumni serving as Treasury secretaries under both Presidents Bush and Clinton. Today, in these tumultuous times of bailouts and meltdowns when the investment banking leviathan needs Washington more than ever before, Goldman can leverage its most valuable asset yet—incoming White House chief of staff Rahm Emanuel. Goldman Sachs is the giant of Wall Street, and more than any other investment bank, Goldman is surviving the current financial storm.

Traditionally a Democratic booster, and one of Barack Obama’s top sources of funds in this past election, Goldman has always had some particularly strong allies within government. Emanuel is one such ally. An interesting early chapter in the Goldman-Emanuel relationship took place in the setting of Bill Clinton’s campaign for the White House in 1992. Clinton hired Emanuel as his chief fundraiser.

At the same time, however, Emanuel was on the payroll of Goldman Sachs, receiving $3,000 per month from the firm to “introduce us to people,” in the words of one Goldman partner at the time. This is certainly a noteworthy relationship, but it’s one that has almost entirely escaped scrutiny. (snip)

In his four terms in Congress, Emanuel has raised $74,750 from Goldman, making the firm his number four source of funds. Goldman has helped Emanuel. How has Emanuel helped Goldman? The most obvious answer, as mentioned in this column two weeks ago, is in Emanuel’s lead role in shepherding the “$700 billion” bailout—first proposed by former a Goldman CEO, Bush Treasury Secretary Henry Paulson—through the skeptical House.

Of course, back in the Clinton days, Goldman benefited from NAFTA and the bailout of the Mexican currency, with Emanuel pushing NAFTA through Congress, and Rubin hammering out the peso bailout. Did Goldman improperly funnel money to the Clinton campaign by subsidizing Emanuel’s salary in 1992? Did Goldman’s help to Clinton spur the Democratic president to push NAFTA and the Mexican bailout?

The answers to these questions are opaque, and with Emanuel burrowed deep within the Obama White House, the continued relationship between Goldman Sachs and Obama’s right hand man won’t be easy to follow.

Watch which regulations of Wall Street Obama fights for. Watch where the bailout money goes. And don’t be surprised Goldman soon sitting pretty once again.

http://www.washingtonexaminer.com/opinion/columns/TimothyCarney/

THINGS WE DO NOT KNOW ABOUT RAHM Did Wall Street Rahm reveal all of his ties to financial institutions involved in Obama's trillion dollar federal bailout of financials.......like Goldman Sachs, for instance?

Greece paid Goldman Sachs $300 million in fees for arranging the toxic 2001 transactions, according to several bankers familiar with the deal. Goldman is rotten to the core. And they own the Obama administration. Here's how the G/S Wall Street predators operate.

COMING TO A TOWN NEAR YOU Mother Jones magazine circa Feb 2007 reported on the activities of Mark Florian, Chief Operating Officer of Goldman Sachs' municipal finance division.

According to the report, Florian was traveling to statehouses across the US to convince state officials that selling state assets would be "mutually beneficial." One of the scams involved selling state roads then monetizing them via bonding----which would make billions for G/S til the end of time.

=====================================

REFERENCE Goldman Sachs opened an office in Princeton NJ 2006 when Corzine was elected (the better to loot the NJ Treasury).

Goldman Sachs Hedge Fund Partners
701 Mount Lucas Rd
Princeton, NJ 08540-1911

G/S Hedge Fund Partners advertises it seeks investments in traditional infrastructure sectors including transport infrastructure such as "monetizing" toll roads, airports and ports as well as regulated gas, water and electrical utilities.

Then-Gov Corzine (ex-Goldman head) stationed Goldman Sachs functionaries in state government as the issue of road monetization surfaced. Corzine hired four of his G/S buddies including G/S alumnus Bradley Abelow as state Treasurer. Corzine took a road show across the state to sell the monetization deal. However, monetizing NJ roads hit a large pothole and collapsed like a flat tire---b/c taxpayers were onto the G/S scam.

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