Leave Goldman Sachs Alone (Just what does the public gain from this federal inquisition?)

Forbes ^ | 05/04/2010 | Richard Epstein

[SeekAndFind]

For the past two weeks, Goldman Sachs, the now-humbled Wall Street titan, has been battered by a potent troika of government assaults. The Securities and Exchange Commission has filed its civil fraud action. Senate hearings have had the riotous feel of a Soviet show trial. And the Manhattan office of the United States Department of Justice has recently announced its ongoing criminal investigation.

To its sorrow, Goldman has learned that its market clout is ever more vulnerable to these combined legal threats. Billions in wealth and legions of lobbyists and lawyers can't block these unilateral government initiatives. Yet they can easily fuel charges of the firm's persistent abuse of its powerful financial position. No wonder that Goldman stock has been downgraded by the Bank of America.

But now this pesky question: Just what does the public gain from three-prong federal inquisition? Those are hard to quantify, but it is easy to tote up the losses. Start with the disappearance of over $20 billion in market capitalization for Goldman shareholders. Next add the billions decline in value of other bank stocks that could easily become targets of similar investigations, simply because Goldman's now notorious transaction with Paulson & Co., Goldman, ACA and IKB followed a standard template for collateralized debt obligations (CDOs). Put any one of those other transactions under a legal microscope after the fact, and its imperfections will soon leap out. Only the grace of God for the time being spares other banks a Goldman-like hosing. Wise investors bid down share prices before the other shoe drops.

I fear, however, that the biggest loss from this three-front government campaign against Goldman lies in the declining role of American capital markets in fierce global competition. Financial capital can move across borders with the speed of light.

[Redleg Duke]

Bread and Circuses

[Tarpon]

what is gained is hiding the real cause, Freddie and Fannie and the donks in Congress.

Show trials are made for this purpose.

[GeronL]

If they broke the law they should pay up.

They get no sympathy from me because they support leftist causes and candidates with MILLIONS of dollars.

[ilovesarah2012]

Didn’t several of Nobama’s cabinet/czars come from GS?

[STONEWALLS]

“Show trials are made for this purpose.”

...exactly!...that, plus the Dems can keep the sheeple whipped up with envy...get’em to go along with soak-the-rich tax schemes.

...my plan is to watch as Obama drives down shares of GS even more, then buy...don’t be surprised if Dem insiders load up on shares themselves...they know that Goldman execs are still the smartest guys in the room.

[SeekAndFind]

If they broke the law they should pay up.

I have no love for Goldman Sachs, but every single item I read about this ABACUS transaction with ACA, IKB and John Paulson's hedge fund tells me that it was thoroughly LEGAL.

The guys who agreed to this trade were big guns in the business and KNEW that a CDO by definition, is a bet on a portfolio going up or down. Someone will win and someone will lose.

I don't see where a law has been broken unless someone can come up with something.

[cricket]

This has nothing to do with 'public gain'. It has only to do with Obama,Inc. Agenda and getting Bills passed to facilitate implementation.

Everyone knows this; and treating this as 'anything' other than what it is; only further degrades Media information; and adds to the toxic level of ignorance already shared. Of course and as well; it enables the malevolent Gov forces at work against America.

Cheers for truth; when and where we find it!

[GeronL]

Sort of like those militia people?

Or the “white male” bomber??

[Gen-X-Dad]

Forbes circles the wagons for the Goldman Sachs guys because they know that GS could be the first domino for hauling all of the Wall St. fraudsters into jail. AIG was bailed out the day after Lehman Brothers was deep sixed because GS CEO Blankfein met behind closed doors with their former employee Hank Paulson to make sure they got their $20B in bad bets from AIG covered. GS is the poster child for insider manipulation of government (Congress, SEC, FED, Treasury Dept., Presidents Economic Working Group, etc.) that has allowed them to transfer large sums of taxpayer money into their pockets.

[SeekAndFind]

GS is the poster child for insider manipulation of government (Congress, SEC, FED, Treasury Dept., Presidents Economic Working Group, etc.) that has allowed them to transfer large sums of taxpayer money into their pockets.

If this is the case, then they should be charges with Influence Peddling ( Hank Paulson should be hauled to court for this as well any insider on this deal ).

But do I see any lawsuit regarding the above AIG Credit Default Swap deal ? NOOOOO.... what we have is an ENTIRELY DIFFERENT matter --- a lawsuit from the SEC over what is supposed to be a LEGAL transaction that does not involve widows or orphans but PROFESSIONALS who entered a trade willingly KNOWING the risks involved.

So, ig GS deserves to be charged, charge them with the correct and rightful lawsuit, not this one.

[Gen-X-Dad]

So, ig GS deserves to be charged, charge them with the correct and rightful lawsuit, not this one.

---

You are 100% correct. That is why the current appoach to GS appears to be political theater for the angry masses vs. serious investigation to hold them and all involved parties accountable.

[Jack Black]

Goldman deserves every bit of investigation they are getting. In fact an excellent outcome would see the bank dissolved, just like Arther Anderson, as a hopelessly corrupt organization. This would allow the huge amounts of money that flow through Goldman to go somewhere else, and the Goldman Boys would no longer siphon off their millions. If we could succeed in putting five or six of their top execs in prison that would be great, too.

I can tell you that Enron made many CEOs stop playing nonsense games like "hide the loss in the subsidary".

[supercat]

The guys who agreed to this trade were big guns in the business and KNEW that a CDO by definition, is a bet on a portfolio going up or down. Someone will win and someone will lose.

Sorry to resurrect an old thread. My understanding is that the major problem with CDS/CDO transactions is that many agencies wrote bets they couldn't cover. There's nothing wrong with an agency writing bets whose total value exceeds its assets, if the bets are for mutually exclusive events and it has assets sufficient to cover the worst-case combination of events. There's nothing right, however, with an agency writing strongly-correlated bets whose value exceeds its assets.

The apparent financial meltdown didn't result from honest mistakes. Without knowing what was represented to whom, it's hard to tell exactly who committed fraud, but there was almost certain fraud committed, on a very large scale.