Matt Taibbi: The People vs. Goldman Sachs

[redskins59]

Did Goldman try to get rid of the bad assets? It is certainly possible. There are all kinds of investors out there. For example, some specialize in distress situations. Now, these people could have been interested in these CDOs. I dont buy for a second that the sophisticated investors did not know what they were doing.

The fact of the matter is Goldman was not as big a player in the cdo maket as merrill lynch or citigroup. My belief is that the bigger the player you are the bigger the fraud you commited. So merrill and citi imho lied more than goldman ever did. Its just like in the mortgage market where countrtwide the biggest mortgage compay was the biggest fraud. Goldman has always been good at managing risk. Just look at their capital ratios, which should show to you how conservative they are. It is unfortunate for goldman that being conservative has caused people to question their business model.

[HOF44]

To me the bottom line is they abdicated their fiduciary responsibility when they knowingly marketed bad investments to their investors. That's just illegal any way you cut it. To say otherwise is to allow con men to all be free to do as they please, after all their marks should have known better.

[Fresh8686]

Did Goldman try to get rid of the bad assets? It is certainly possible. There are all kinds of investors out there. For example, some specialize in distress situations. Now, these people could have been interested in these CDOs. I dont buy for a second that the sophisticated investors did not know what they were doing.

The fact of the matter is Goldman was not as big a player in the cdo maket as merrill lynch or citigroup. My belief is that the bigger the player you are the bigger the fraud you commited. So merrill and citi imho lied more than goldman ever did. Its just like in the mortgage market where countrtwide the biggest mortgage compay was the biggest fraud. Goldman has always been good at managing risk. Just look at their capital ratios, which should show to you how conservative they are. It is unfortunate for goldman that being conservative has caused people to question their business model.

These guys are not as intelligent as you think they are. Most of these investors were relying on completely invalid data for the housing crisis, basically they were relying on historical trends for an event that had no historical comparison. Furthermore, GS wasn't just managing risk they willfully and knowingly bet against they're own assets that they knew were toxic and lied about they're quality to their own investors. Often times barring these same investors from dumping these toxic assets to increase the windfall and ultimately collect more money. That wasn't conservative that was down-right dirty and illegal.

[Hubbs]

^^Hubbs got me interested in this topic, about which i have now read a lot.

Really? Cool. :cool: When did that happen?

The entire system is broken. I don't trust any of the big banks further thai can throw them, and will not do business with them if i can help it. You are correct that GS was smarter than everybody else, but forgot to mention they lied more and were more devious as well. That doesn't make them a scapegoat, it makes them crooks.

Taibbi put it well. It's not that GS is the only financial institution to do these things. They're just the worst of the bunch. Like I said earlier in the thread, they're the Al Capone in this lineup.

[SkinsHokieFan]

So when will Eric Holder and the Justice Department start to drop the hammer on these guys?

[boofMcboof]

So when will Eric Holder and the Justice Department start to drop the hammer on these guys?

:rotflmao::rotflmao::rotflmao::rotflmao::rotflmao:

Neoliberalism, or Chicago school economics, has infected every branch of our government. It'll probably take another disaster to force real change.

[zoony]

Asbury: you are normally a smart guy, but you really should consider a few other sources for what happened other than a movie. EspeciaLy if you are going to take such a strong position. A lot of what you say has some element of truth but is covered in layers of misunderstanding and falsehoods that sell DVDs.

[Fergasun]

How many people still put their money into 401(k) and stock market? Yeah, even with all the fraud and BS out there people still want to go to Wall St and get rich.

The best narrative of the crisis I've heard is Elizabeth Warren's interview with the FCIC. She tells a tale that goes all the way back to when usury laws were pre-empted at the state level by the Federal level; and talks about how the notion of "home ownership" changed over time. That is to say; there was a time when home ownership meant financial security because the banks would not lend to folks who were a risk. But at some time the banks figured out how to make money loaning to marginal home owners and changed what home-ownership meant (I'm sure the home builders also encouraged this). There was a barn door that opened in the 90s and early 2000s and by the time it got to be 2007 the problems were huge... its easy to see how even Fannie and Freddie got into the mix as they still had to put shareholders first and attempt to turn a profit.

Mrs. Warren can do it far better justice than me. I blame the regulators because ideologically they didn't want to stop the private market or get blamed for causing a crash; additionally we had 9/11 and huge pressures in the financial markets. That hot money went into housing and the way to keep the housing ponzi going was to sell risky CDOs but understate the risk. "These things are getting a 10% return per year!" Add things like the AIG scam and it created major counterparty risk.

I still doubt the solvency of the banks; however they are getting cheap loans from the Federal Reserve to stay afloat...

[GibbsFactor]

How many people still put their money into 401(k) and stock market? Yeah, even with all the fraud and BS out there people still want to go to Wall St and get rich.

The best narrative of the crisis I've heard is Elizabeth Warren's interview with the FCIC. She tells a tale that goes all the way back to when usury laws were pre-empted at the state level by the Federal level; and talks about how the notion of "home ownership" changed over time. That is to say; there was a time when home ownership meant financial security because the banks would not lend to folks who were a risk. But at some time the banks figured out how to make money loaning to marginal home owners and changed what home-ownership meant (I'm sure the home builders also encouraged this). There was a barn door that opened in the 90s and early 2000s and by the time it got to be 2007 the problems were huge... its easy to see how even Fannie and Freddie got into the mix as they still had to put shareholders first and attempt to turn a profit.

Mrs. Warren can do it far better justice than me. I blame the regulators because ideologically they didn't want to stop the private market or get blamed for causing a crash; additionally we had 9/11 and huge pressures in the financial markets. That hot money went into housing and the way to keep the housing ponzi going was to sell risky CDOs but understate the risk. "These things are getting a 10% return per year!" Add things like the AIG scam and it created major counterparty risk.

I still doubt the solvency of the banks; however they are getting cheap loans from the Federal Reserve to stay afloat...

Back in 07/08 I when I was preaching on this forum the horrors of Lehman and GS, most ignored me. I took out a sizable MF and invested it in gold. My son's College paid in 3 years. I do still have a diversified portfollio but that one move gave me incredible gains. I've since sold the gold and put it in conservative vehicles.

[zoony]

How many people still put their money into 401(k) and stock market? Yeah, even with all the fraud and BS out there people still want to go to Wall St and get rich.

The best narrative of the crisis I've heard is Elizabeth Warren's interview with the FCIC. She tells a tale that goes all the way back to when usury laws were pre-empted at the state level by the Federal level; and talks about how the notion of "home ownership" changed over time. That is to say; there was a time when home ownership meant financial security because the banks would not lend to folks who were a risk. But at some time the banks figured out how to make money loaning to marginal home owners and changed what home-ownership meant (I'm sure the home builders also encouraged this). There was a barn door that opened in the 90s and early 2000s and by the time it got to be 2007 the problems were huge... its easy to see how even Fannie and Freddie got into the mix as they still had to put shareholders first and attempt to turn a profit.

It started with predatory lending practices by small financial companies in the poorest sections of America in the 1990s. The very birth of "subprime". What caught the large banks' attention was the absolute monster profits these smaller institutions were generating. Soon they were swallowed up by larger banks, while other banks created subprime branches. The problem grew from there exponentially.

I too blame the regulators. Markets were just doing what they do. Making a profit at any cost. People were doing what they do... taking advantage of easy offers. I'll be honest, I'm torn whether GS is truly criminal. I see some arguments for both sides. I think more likely, they were guilty of being incompetent.

The secret of Wall Street is that financial institution CEO's and executives do not understand their own businesses. Nobody could. It's just too complicated. The same is true for the majority of bond traders and rating agencies. If you want to sell DVD's it's much better to make the case that they were fraudulent and deceptive. 5 idiots in a room doesn't make a very interesting plot.

A couple of general points to this thread.

-Blaming the ratings agencies (S&P, Moodys) and saying they were deceptive is like blaming your dog for not mowing the lawn properly.

-Wall Street Firms were conflicted right up to the end. GS, Deutsche, Merrill, Lehman... they all had departments that were getting rich off peddling CDO's and simultaneously had other departments who thought they would fail and were buying default swaps against them. Again, I'm not convinced that is fraud so much as it is cluelessness.

-Fergusan, you need to be careful about using what happened on the Bond Markets as proof that the Stock Market is corrupt. Two entirely different things, from the way they are regulated to the players that play in them.

-To me, when discussing who is at fault, it's easy to get lost in the details. When you take a step back and look at the big picture, the bottom line is simply that the major Wal Street players were over-leveraged (courtesy of Paulson). IIRC, Obama's financial reform Act doesn't even address leveraging. (somebody correct me if I'm wrong)

[Stillers6SB]

Wall Street: Not Guilty

Why have no executives gone to jail for their roles in the financial crisis? Perhaps because risk-taking and stupidity aren't criminal

http://www.businessweek.com/magazine/content/11_21/b4229060222515.htm

[zoony]

http://www.businessweek.com/magazine/content/11_21/b4229060222515.htm

excellent read, thanks for posting. In line with my thoughts, but articulated so much better than I ever could.

I thought these two paragraphs were not only well written, but very important for all to read.

Taken from the top, these sentiments imply that the financial crisis was caused by fraud; that people who take big risks should be subject to a criminal investigation; that executives of large financial firms should be criminal suspects after a crash; that public revulsion indicates likely culpability; that it is inconceivable (to Madoff, anyway) that people could lose so much money absent a conspiracy; and that Wall Street bears collective guilt for which a large part of it should be incarcerated.

These assumptions do violence to our system of justice and hinder our understanding of the crisis. The claim that it was "caused by financial fraud" is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme.

[Stillers6SB]

excellent read, thanks for posting. In line with my thoughts, but articulated so much better than I ever could.

I thought these two paragraphs were not only well written, but very important for all to read.

yw....hopefully the rest of the article gets read, also. Taibbi is a very colorful writer, but he tends to bend the facts to fit his thesis.

[AsburySkinsFan]

Asbury: you are normally a smart guy, but you really should consider a few other sources for what happened other than a movie. EspeciaLy if you are going to take such a strong position. A lot of what you say has some element of truth but is covered in layers of misunderstanding and falsehoods that sell DVDs.

I guess I get frustrated by comments like this, because behind them is the idea that you know something that I don't but you aren't willing to say what it is, it's like when I asked for a rundown of the book you mentioned, I got nothing. What is it that I need to understand? Give me your own rundown of the problem and who was at fault. I pretty much laid the blame across the board, but apparently I'm wrong somewhere, but you won't tell me where.

I got this same type of stonewalling when I asked a group of pastors a serious theological question one time before I went to seminary, the response was "That's a seminary level question." In other words you're not smart enough to understand what I'm about to say, I took it as "I don't know the answer so I'm going to punt this away from you."

If you know then surely you can bullet point it in summary.

[zoony]

I guess I get frustrated by comments like this, because behind them is the idea that you know something that I don't but you aren't willing to say what it is, it's like when I asked for a rundown of the book you mentioned, I got nothing. What is it that I need to understand? Give me your own rundown of the problem and who was at fault. I pretty much laid the blame across the board, but apparently I'm wrong somewhere, but you won't tell me where.

Yah that's fair, a few paragraph essay summarizing what you need to know out of a book. And btw, keep reading the thread. I'd start with the business week article.

[AsburySkinsFan]

Yah that's fair, a few paragraph essay summarizing what you need to know out of a book.

sarcasm? :whoknows: If so, then all I have to say is that we were required in school to take 800 page books and work through them in two page responses.

And btw, keep reading the thread. I'd start with the business week article.

Will do.

[China]

Op-Ed Contributor

Why I Am Leaving Goldman Sachs

By GREG SMITH

Published: March 14, 2012

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

...

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Click on the link for the rest

[Jumbo]

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Click on the link for the rest

Greed in all its forms has come to wreak more havoc on all things socially than any other human trait, IMO.

Wait. Is that communist/socialist? :pfft:

[USS Redskins]

Op-Ed Contributor

Why I Am Leaving Goldman Sachs

By GREG SMITH

Published: March 14, 2012

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

...

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Click on the link for the rest

good for this guy... I cannot believe that ANYONE on the planet would do business with these scam artists after everything they did.

[gbear]

To me the bottom line is they abdicated their fiduciary responsibility when they knowingly marketed bad investments to their investors. That's just illegal any way you cut it. To say otherwise is to allow con men to all be free to do as they please, after all their marks should have known better.

Oh, how right you were/are. This latest letter, the comments st the end, and subsequent letters show how wide spread the cancer has become.

[gbear]

One more follow up from today:

http://www.washingtonpost.com/business/goldman-sachs-loses-market-value-after-searing-greg-smith-essay/2012/03/15/gIQAn686DS_story.html?hpid=z6

The letter in the NYTimes OP Ed section caused Goldman Sachs to lose $2.15 billion in market value. Ouch! For any who think newspapers no longer have power to change the world because of spreading social media now driving society, I would say printing this causing the company to lose so much is a crazy demonstration of how much power conventional media still has.

[China]

What's more, many of the earlier criminals in the chain of corruption — from subprime lenders like Countrywide, who herded old ladies and ghetto families into bad loans, to rapacious banks like Washington Mutual, who pawned off fraudulent mortgages on investors — wound up going belly up, sunk by their own greed.

But Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences. Thus, while much of the Levin report describes past history, the Goldman section describes an ongoing? crime — a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.

Apparently GS wasn't the only one influencing Congress, Countrywide was as well:

Report: Countrywide won influence with discounts

The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.

The report, obtained by The Associated Press, said the discounts - from January 1996 to June 2008 - were not only aimed at gaining influence for the company but to help Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.

Fannie Mae was responsible for purchasing a large volume of Countrywide's subprime mortgages. Countrywide was taken over by Bank of America in January 2008, relieving the financial services industry and regulators from the messy task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion at a time when the nation faced a widening credit crisis, massive foreclosures and an economic downturn.

The House Oversight and Government Reform Committee also named six current and former members of Congress who received discount loans, but all of their names had surfaced previously. Other previously mentioned names included former top executive branch officials and three chief executives of Fannie Mae.

"Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company," the report said. "In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie" and its rival Freddie Mac, the committee said.

Some of the discounts were ordered personally by former Countrywide chief executive Angelo Mozilo. Those recipients were known as "Friends of Angelo."

"The Committee's investigation found Countrywide lobbyists and CEO Angelo Mozilo used discounted loans as a tool to ingratiate itself with policymakers in an effort to benefit the company's business interests," said Rep. Darrell Issa, a California Republican who heads the committee. "This preferential treatment — that varied depending on the influence of the borrower — was not routinely offered to the public."

Click on the link for the full article

[Thiebear]

I have a 401k still and its been stalled for quite some time even though i put money into it monthly, but hey, what else can i do as a working computer slub already doing 16hours a day.

I count on things being right, when i hear a company is selling itself short and the 2 billion lost is 4 billion or 12 billion they are numbers that to me mean the death penalty is back on...

I shouldn't have to be an expert on this to get by, and I shouldn't suspect the Administration for having so many people in "on it" whatever that is.

I'd guess only .05% of the people even know whats going on let alone how/what happened.

Just from this thread it seems like we pointed out straight up bribes for years.

but they are above the law

which ruins everything when the Justice department sits on its hands

[Koolblue13]

Our government is so obviously bought and sold, but to call it out distracts far to much from the warm and fuzzies we get from the electionbowl. Idiocracy indeed.

Let's pretend it's partisan, so we can really argue or even better, let's call it all a conspiracy theory and really dismiss it.