Its early in the weekend, but we already have a leading candidate for the article that everyone will be discussing Monday morning: Goldman Fueled AIG Gambles

Excerpt:

“Goldman Sachs Group (GS) played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American Insurance Group (AIG).

Goldman was one of 16 banks paid off when the U.S. government last year spent billions closing out soured trades that AIG made with the financial firms. A Wall Street Journal analysis of AIG’s trades, which were on pools of mortgage debt, shows that Goldman was a key player in many of them, even the ones involving other banks.

Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms’ roles in the transactions.

In Goldman’s biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal’s analysis and people familiar with the trades.

The trades yielded Goldman less than $50 million in profits, which were mostly booked from 2004 to 2006, according to a person familiar with the matter. But they piled risks onto AIG’s books, which later came to haunt the insurer and Goldman. The trades also gave Goldman a unique window into AIG’s exposure to losses on securities linked to mortgages.

When the federal government bailed out the insurer, Goldman avoided losses on its trades with AIG covering a total of $22 billion in assets.” (emphasis added)

Now, would someone explain to me why Goldman got 100 cents on the dollar as a counter-party to AIG via the Bailouts?

If Ron Paul wants to show he has balls, why not go after GS? The Fed is a soft target, and I believe there is almost no one in Congress with the testicular fortitude to demand repayment, and/or threaten a lawsuit on behalf of taxpayers.

Any Congress people — Bernie Sanders maybe? Perhaps Senators Schumer or Dodd might forget all of the Finance driven campaign contributions they have gotten over the years and come up with a plan. I would imagine Alan Grayson is one of the few Freshman Congresmen who can think of a way to clawback some of the ill gotten booty Goldman grabbed from Treasury.

Ideas . . . ?

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click for larger image
Goldie in the middle

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Source:
Goldman Fueled AIG Gambles
SERENA NG and CARRICK MOLLENKAMP
WSJ, DECEMBER 12, 2009

http://online.wsj.com/article/SB10001424052748704201404574590453176996032.html

Category: Bailouts

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “WSJ: Goldman Fueled AIG Gambles”

  1. ArifJAA says:

    The House and Senate Finance and Banking Committees need Joe McCarthy and Roy Cohn. And the J. Edgar Hoover equivalent over at SEC, the Fed and Treasury.

    “Are you know or have you ever been employed by Goldman Sachs?”

    Couldn’t happen to a nicer bunch.

  2. doug says:

    enforce existing laws?

  3. Moss says:

    Bring back Spitzer, give him some sort of special prosecutor role. The lies, deceit, corruption, and outright theft must be dealt with in a real democracy. God’s work must be done to them.

  4. henrywads says:

    Not sure if the ad hominem attack on Ron Paul is justified. He has done a lot of heavy lifting. Characterizing the Fed as a “soft target” makes me wonder what a hard target is. It is actually easier for Congress to attack a private company, esp one with as many warts as Goldman, than the august Fed.

    ~~~

    BR: 1) What ad hominem attack? Its a question.
    2) The Fed is a rather hapless target with limited abilities to respond.
    3) The Fed movement is going to succeed in making the Fed less transparent and more politicized, IMO.

  5. Scott F says:

    I like Paul’s position on Iraq, and his anti-inflation stance int her 1990s/early 200s, but he often throws off more heat than light.

    He is a bit of a gadfly, focusing on noisy, meaningless gestures. Almost none of his bills leave committee (i.e., abolishing income tax). His concern about excessive government spending and fiscal responsibility in the 1970/80s was shown to be hypocrisy, as he supported Reagan’s bloated budget, unfunded tax cuts, and massive deficits.

    He was a supporter of Pat Buchanan showing no moral leadership when Buchanan said some amazingly dumb things.

    He must feel strange with the rest of the world catching up with his interesting time wasters.

  6. cewing says:

    As long as Goldman Sachs alumni continue to run key areas of government at all levels, any actions taken will do nothing except maximize Goldman Sach’s gains or minimize Goldman Sach’s losses.

  7. number2son says:

    Barry, didn’t you see the exchange between Tim Geithner and Elizabeth Warren during his appearance last week before her oversight committee? He insisted beyond credulity that he was in no position to get the taxpayer a better deal.

    I agree it is high time someone goes after GS and its cozy relationship with Treasury. A good start would be appointing a special prosecutor who can bring in Geithner, Bernake, Paulson, Blankfein and Dimon in and get them to testify under oath. That’s the only thing that will get results.

    And yes, Elliot Spitzer is ideal for the job.

  8. Steve Barry says:

    If Goldman is truly smarter than everyone else, there is not much we can do…they’ll screw us over and over. If that is a bunch of BS, they will eventually get what is coming to them. Why worry anymore? Am disappointed in Obama though…he was supposed to represent change.

  9. ella says:

    Now, would someone explain to me why Goldman got 100 cents on the dollar as a counter-party to AIG via the Bailouts? Answer: “Treasury Secretary Paulson”

  10. ella says:

    Claw back anyone?

  11. ruetheday says:

    Ron Paul will never go after GS. His libertarian ideology precludes the notion that a private company can somehow be behind an economic crisis and limits the target of blame, a priori, to government action.

  12. Moss says:

    Instead of Paul maybe Grayson would be the better suited to get after the squid.

    Re: His libertarian ideology precludes the notion that a private company can somehow be behind an economic crisis and limits the target of blame, a priori, to government action.

    Well stated, similar to Mish in this regard. I wish people would realize that it is not one or the other but both. Since government action or inaction is so dominated by private interests it is easy to target the former.

  13. hue says:

    our hero Ron Paul will balance out Obama http://bit.ly/1Agfng goldfellas http://bit.ly/4EAMR2

  14. maynardGkeynes says:

    Praise for WSJ for delving into this story. MSM takes a lot of hits these days, so lets be equally quick to praise when they do a great story, like this one. Thanks for spotlighting this BR.

  15. dan10400 says:

    well, from a strategy standpoint, wouldn’t you go after the soft underbelly (the fed) first, and then the head (GS)?

  16. Marcus Aurelius says:

    It no longer matters what GS did or did not do. There will be no reckoning. We know it, they know it, everybody knows it (except the baby Jesus/redneck contingent). The Banking reform bill, in addition to doing pretty much the opposite of what it was supposed to, legitimizes our new corporatist/fascist hybrid, pseudo-government. Having gained access to the controls of the power structure without resistance, the corporatists have moved quickly to consolidate their control of that power by corruption of the legislative process and, more importantly, by establishing themselves at all crucial levels and positions within the bureaucracy. They are now the legitimate government of the United States, and can act without fear of negative consequence. I wouldn’t be surprised if the head of the FBI (who is the head of the FBI, nowadays, BTW?), was a former and/or future GS employee. The silent coup was successful.

    I think I’ll have another cup of coffee.

  17. farmera1 says:

    Careful here you’re messing with God’s work.

  18. davver says:

    BR,

    Ron Paul was against the 100 percent payout to AIG, as well as all federal bailouts in general. Just because he doesn’t have the votes to stop it doesn’t make it his fault.

    As for the Fed becoming more politicized, its actions make have made it so. When the Fed starting turning itself into an off balance sheet funding vehicle for fiscal policy it crossed into congresses domain, now it has to deal with that decision.

  19. Pete from CA says:

    Perhaps I need another cup of coffee but I don’t get what the news is in this article. Yes, GS bought protection from AIG and AIG charged less for that protection than it should have. What’s new?

    I believe the official explanation as to why GS (and everyone else!) got paid 100 cents on the dollar is that anything less would have triggered the default condition of the CDSs against AIG, and that would have started a chain reaction.

    ~~~

    BR: You seem to be missing the main point — The key is that GS also FINANCED the AIG’s activities in question . . .

    All reward without any risk, and no losses despite AIG’s implosion — nice trick !

  20. wally says:

    Ideas?
    Yes: we’ve been robbed and we do not live in a country where we can expect justice. We live in a corrupt country; even the ‘open’ political system which was designed to allow change has now been bought off. There is no will to even put up a pretense of defending the public.

  21. Ducky62 says:

    re: The comments.

    Spitzer? The only government job Spitzer should ever have again is making license plates.

  22. cdrueallen says:

    I had high hopes that the Obama regime would stop the looting of our treasury by a bunch of incompetent pawns of the oil industry. Well, it has. Now the treasury’s being looted by a far more competent (at least in the looting department) bunch of Goldman Sachs ex-executives. It drives me nuts! Is there no way to restore honest government to this country?

    What happens to all of us less-than-fabulously-wealthy citizens when the treasury is empty and we discover that the bank books have been cooked, with the collaboration of the government, by accountants trained in the Enron school?

    Maybe I’ll buy some more gold while the prices are down…. just grateful to Barry for highlighting this article and the earlier one from Rolling Stone on Obama’s economic team.

  23. Scott F.

    Beware fringe characters with questionable judgment; I wonder why he has been taken so seriously for so long . . .

    Angry White Man
    The bigoted past of Ron Paul.

    Ron Paul’s newsletters all had one thing in common: They were published under a banner containing Paul’s name, and the articles (except for one special edition of a newsletter that contained the byline of another writer) seem designed to create the impression that they were written by him–and reflected his views. What they reveal are decades worth of obsession with conspiracies, sympathy for the right-wing militia movement, and deeply held bigotry against blacks, Jews, and gays. In short, they suggest that Ron Paul is not the plain-speaking antiwar activist his supporters believe they are backing–but rather a member in good standing of some of the oldest and ugliest traditions in American politics.

    -Snip-

    Ron Paul’s explosive newsletters
    While the main billing tonight is John McCain vs. Mitt Romney and Hillary Clinton v. Barack Obama, there is an unexpected sideshow breaking open in the Ron Paul campaign.

    In an article published on The New Republic website earlier today, reporter James Kirchick dug up old copies of the Texas congressman’s newsletter and found them filled with attacks on Martin Luther King Jr. as “a world-class adulterer” who “seduced underage girls and boys” and “replaced the evil of forced segregation with the evil of forced integration”; what TNR characterizes as “kind words” for David Duke; praise for anti-government militias; and the following discussion of the 1992 Los Angeles riots “Order was only restored in L.A. when it came time for the blacks to pick up their welfare checks three days after rioting began. … What if the checks had never arrived? No doubt the blacks would have fully privatized the welfare state through continued looting. But they were paid off and the violence subsided.” Etc. etc. The website has links to scans of many of the excerpts.

    -Snip-

    Who Wrote Ron Paul’s Racist Newsletters?
    Libertarian movement veterans, and a Paul campaign staffer, say it was “paleolibertarian” strategist Lew Rockwell
    http://reason.com/archives/2008/01/16/who-wrote-ron-pauls-newsletter

    -Snip-

    Ron Paul ’90s newsletters rant against blacks, gays

    A series of newsletters in the name of GOP presidential hopeful Ron Paul contain several racist remarks — including one that says order was restored to Los Angeles after the 1992 riots when blacks went “to pick up their welfare checks.”

    CNN recently obtained the newsletters — written in the 1990s and one from the late 1980s — after a report was published about their existence in The New Republic.

    None of the newsletters CNN found says who wrote them, but each was published under Paul’s name between his stints as a U.S. congressman from Texas.

    Paul told CNN’s “The Situation Room” Thursday that he didn’t write any of the offensive articles and has “no idea” who did

    http://www.cnn.com/2008/POLITICS/01/10/paul.newsletters/

    -Snip-

    Open Letter To Lew Rockwell

    Dear Lew,

    You have now had three opportunities -1996, 2001, and 2008 – to prove that you are a friend of Ron Paul and freedom, and you have failed to do so each time.

    This week, for the third time, the puerile, racist, and completely un-Pauline comments that all informed people say you have caused to appear in Ron’s newsletters over the course of several years have become an issue in his campaign. This time the stakes are even higher than before. He is seeking nationwide office, the Republican nomination for President, and his campaign is attracting millions of supporters, not tens of thousands.

    Three times you have failed to come forward and admit responsibility for and complicity in the scandals. You have allowed Ron to twist slowly in the wind. Because of your silence, Ron has been forced to issue repeated statements of denial, to answer repeated questions in multiple interviews, and to be embarrassed on national television. Your callous disregard for both Ron and his millions of supporters is unconscionable.

  24. Charlie,

    I’d rather skip the Ron Paul stuff and keep the focus on Goldman Sachs and AIG

    As you and Scott noted, there is a tendency towards fringe conspiracy behavior there, and I would rather not get sidetracked.

    This about returning to Treasury the loot that was ransacked by GS and others, through their minions, corrupt Congress critters and Treasury Secretaries . . .

  25. Blurtman says:

    That is a nice story, but I still do not understand how an AIG bankruptcy would have brought down the world’s financia; system. Can anyone shed light on how this could have worked?

  26. bruerr says:

    Prosecute Mr. Paulson for favoritism, lying to Congress and Corporate espionage: taking corrupt actions against competing firms of Goldman Sachs. He sold what he knew where “toxic assets” to competing firms, knowing it would damage them if certain conditions were met, thereby with less competition, improve his firms position in banking. He stood idle by while the nation said “NO” to bailouts, and routed money to select favorite, at banks he wanted to survive.

    Who else would call an “asset” a toxic thing? It is only a terrorist who does this: A man who is using a “toxic-asset” to leverage against competitor firms and against a nation, while they have troops abroad.

    This man is guilty of being disloyal to the nation and following private yearning, to ruin entire corporations. He is guilty of disloyalty in allowing banks to bid up paper units of oil to accelerate the failure of “toxic-assets” he bundled himself, with intent, that other firms should fail. When he was in a position to help them, he did not, and only worked to save Goldman and friends of Goldman. He steered the Federal reserve into acts of lawless behavior, and some sedition, encouraging them to use Fed authority, to “bazooka,” destroy or dismantle important laws, rapidly and with velocity.

    Laws that if upheld would have served to insulate the people in the United States and hold large bank executives accountable for failure at their own firms.

    If you do not think it was corporate espionage, I invite you to provide the true and accurate definition of what corporate espionage is, and how it occurs, give an example of when it is true, such as during a cold war or at any time in following. If you cannot provide this definition technically, and understand what it is, or give an example of when it occurs, I provide the above as text-book example; the bona fide real thing.

    It is still in process and explains why the Fed is so bent – on secrecy. It has nothing to do with concern for Americans. It has more to do with being caught.

    .

  27. DL says:

    Apart from bribing public officials – - which GS almost certainly did – - it is not at all clear to me what law(s) GS might have broken. If they haven’t broken any laws, how does the government “go after” them?

    As for bribing government officials (including, in one form or another, Hank Paulson himself), that would be very difficult to prove.

  28. Blurtman says:

    @DL
    Re: GScrime, is not the misrepresenting the risk of secutities that you sell simple fraud?

  29. cdrueallen says:

    Upping the pressure to fire Geithner might convince the Obama administration that it needs to give at least the appearance of honesty if Obama wants a second term in office.

  30. Marcus Aurelius says:

    DL Says:

    “. . . it is not at all clear to me what law(s) GS might have broken.”
    __________________

    Let’s try fraud, for starters.

    See those ‘AAA’ rated securities in the chart that accompanies this article? Well, they weren’t ‘AAA’ at all. GS knew it, the ratings agencies knew it, and the insurers knew it (perhaps the insurers knew it best after the fact, but their due diligence should have, and probably did, tip them off early on). The first criminal charge should be for the creation and distribution of fraudulent securities.

  31. bruerr says:

    A text book example is manifest in various stages, and you can see it going in step by step fashion, from corruption of ratings agencies, to giving false assurances, false insurance, gutting of a large insurance corporation, changes in material accounting methods, etc.

    We do not need banking “reform.” We need actual prosecution and deterrent. We already have the law on the books. We simply need prosecution to occur, that it be substantial to last for the next 100 years, and send out a message of what is NOT tolerable.

    In the process, we need to ban the lobby contingent from having access to our elected officials. They are completely destroying our democracy, hording access and eating out our sustenance. They are the root of much confusion, disorientation and maintaining it by constantly changing metrics and making material changes in accounting methods, tweaking things to say what they want, acting in forms of sedition or violation of U.S. Code (encouraging other high officers to violate same) during a crisis or transitional periods.

    Example of U.S. Code violated and actual encouragement to violate or dismantle important laws in such matters: Title 12, Chapter 16, § 1831 o. Prompt Corrective Action (i)(1) and (i)(2)(C)(D)(E) …Restricting activities of critically undercapitalized institutions: … by regulation or order— restrict the activities of any critically undercapitalized insured depository institution; and at a minimum, prohibit any such institution from doing any of the following:

    (C) Amending the institution’s charter or bylaws.
    (D) Making any material change in accounting methods.
    (E) Engaging in covered transactions.

    Such acts of sedition in the above law, or encouragement to suborn these laws, shows forth as favoritism given to banks Paulson choose to preserve, and disloyalty to Americans, by knee-jerk reaction, drawing our senior citizens and veterans who have already served the nation plenty, into a roll of being liable for the sins of executives at large banks.

    This action, of how they treat senior citizens, marks them. It is the beacon indicator of character.

    Why punish the common American when 65-86 percent of us pay our mortgage on time and are never late. Going back some 60+ years, most Americans have been responsible to pay their debts when they are due. Why dismantle so many laws, just so nar-do-well banking associations in Washington or New York can mask their failures and avoid being held liable or accountable?

    They are also depriving bond holders of due process, and usurping power from judicial branch in regulating over bankruptcy proceedings, acting together to defeat legal precedence, and putting bankruptcy proceedings in the hands of the executive branch, creating no transcripts during the hearings or case numbers to show when bond holders are being mis-treated or abused, and providing little formality with regard to honoring the law which is suppose to protect bond holders. One reason they are trying to put this into the hands of the executive branch, is because they have installed themselves as a lobbying contingent around Washington D. C. and invested a lot of money at that branch of government. So drawing that formal process into the executive branch and depriving bond holders of due process, creates an unfair advantage for insiders of that process (those who are near the executive branch – the bank lobby contingent).

    For practical measures in defeating abuse, we need to stop acting like they have won. They have only abused our laws, and there is a difference. Abuse is not victory. Abuse is abuse.

    Again, we need to reclaim our elected officials and ban corporations from having access. We need to strike the head of abuse. We need to ban the lobbying contingent. At first for two year trial period and to work out some refinements. Then ban them permanently.

    It is the most direct way to reclaim our democracy, via peaceful methods that we will not be arrested for. If corporations deprive us of this, our representatives are ours, not theirs, then we will always be screwed, because corporations have more money and they are better organized around Washington. As a group of lobbyists, they also control financial media.

    We need deterrent not “reform.” We need prosecution, not a new set of laws. And we need to ban lobbying groups from monopolizing our elected representatives. They have abused their privilege access and built large banking firms falsely, to be heroins, when in truth, they eat out our sustenance and are not friendly to our senior culture.

    Deterrent will do more than “paper reform.”

    .

  32. kmckellop says:

    Just more evidence that we remain in a Bear market (my emphasis).

    “While [bull market's] practical thinking manifests itself in philosophic defenses of reason, self-providence, individualism, peacemaking and a reverence for science, [bear market's] magical thinking manifests itself in philosophic attacks on reason, self-abnegation, collectivism, WITCH HUNTS, war-making and a reverence for religion.” The broad, society-wide shift from “practical thinking” to “magical thinking” that we’ve seen since 2000 is consistent with the larger Elliott wave patterns in the stock market, social mood’s best-known barometer”.
    Robert Prechter Jr., Wave Principle of Human Social Behavior

  33. The Curmudgeon says:

    There won’t be any reckoning until this all falls apart again. Which it will. And this time all the private risks will have been already socialized (TBTF), and the reckoning will involve the realization that nothing is TBTF, not even the Federal Reserve. Goldman’s government minions won’t be able to save them from themselves twice, because the till will be empty.

  34. mknowles says:

    “Now, would someone explain to me why Goldman got 100 cents on the dollar as a counter-party to AIG via the Bailouts?”
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    How many people in congress would have lost money if they didn’t vote to bail out AIG?

  35. dawase says:

    Someone should write an article that parallels the secret Energy “policy” meetings conducted by Cheney and Co. and the results with the financial crisis meetings conducted by Herr Paulson et al. and the results.

    The people of the United States have been repeatedly bent over and raped over the last nine years and seen NO remuneration for their pain.

    Eight years on… where’s Osama? Well at least we’re still in Afghanistan.
    Six years on… where are the WMD? Well at least we’re still in Iraq.
    Four years on… when will New Orleans be healed? Well at least we castrated FEMA and made them less important.
    Two years on (almost)… where’s the Change? Well at least… hell, I don’t know.

    The continued tolerance of ineffectual and corrupt leaders in the United States needs to come to an end. ASAP
    Policy-makers need to do their jobs instead of letting the lobbyists pre-pay for the industrial-sized crate of K-Y.
    CEOs need to work to actually benefit their companies in the long run, and if they don’t they should be thrown out.
    Board members need to actually represent their shareholders’ interests, if they don’t then they should be replaced.
    Shareholders need to do their jobs and actually vote.

    Or, if watching American Idol is the highest aspiration for this country, then fine…

  36. Wes Schott says:

    “But outsiders say Goldman’s dealings with A.I.G. look more complicated than that. A memo written by Joseph Cassano, the former head of the A.I.G. financial-products division, shows that some of the securities Goldman insured with A.I.G. were created by none other than Goldman itself. Janet Tavakoli, a structured-finance expert who runs her own consulting firm in Chicago and wrote a book on C.D.O.’s in 2003, notes that Goldman’s deals also figure prominently in the list of C.D.O.’s upon which other firms bought insurance. Which is why, she says, “Goldman was responsible for huge systemic risk, and now they’re trying to pretend they weren’t.” Finally, on November 17, as criticism mounted, Blankfein issued a public apology: “We participated in things that were clearly wrong and have reason to regret.”

    http://www.vanityfair.com/business/features/2010/01/goldman-sachs-200101

  37. “Praise for WSJ for delving into this story. MSM takes a lot of hits these days, so lets be equally quick to praise when they do a great story, like this one. Thanks for spotlighting this BR.”

    we might want to hold off on the hosannas , for the WSJ..

    this is, another, story that ~could have been published in ‘008.

    when they, the WSJ, start publishing stories, along this line: “It no longer matters what GS did or did not do. There will be no reckoning. We know it, they know it, everybody knows it (except the baby Jesus/redneck contingent). The Banking reform bill, in addition to doing pretty much the opposite of what it was supposed to, legitimizes our new corporatist/f@scist hybrid, pseudo-government. Having gained access to the controls of the power structure without resistance, the corporatists have moved quickly to consolidate their control of that power by corruption of the legislative process and, more importantly, by establishing themselves at all crucial levels and positions within the bureaucracy. They are now the legitimate government of the United States, and can act without fear of negative consequence. I wouldn’t be surprised if the head of the FBI (who is the head of the FBI, nowadays, BTW?), was a former and/or future GS employee. The silent coup was successful.”–MA, above

    or, “Prosecute Mr. Paulson for favoritism, lying to Congress and Corporate espionage: taking corrupt actions against competing firms of Goldman Sachs. He sold what he knew where “toxic assets” to competing firms, knowing it would damage them if certain conditions were met, thereby with less competition, improve his firms position in banking. He stood idle by while the nation said “NO” to bailouts, and routed money to select favorite, at banks he wanted to survive. ..”–bruerr, above

    than, maybe, we can break out the, well-deserved, Pulitzers.
    http://www.thefreedictionary.com/hosannas

    till then, this type of story is, probably, better viewed as, another, stick-in-the-eye to those who bother to think, as opposed to diving into DWTS..
    ~~
    Past that, re: Rep. Paul and the FedRes..to me, it’s, more than, probable, that, w/o the FedRes in place, these types tricks could not have been played.

    also, the idea, that the FedRes is a ’soft’ target, is a new one on me..

    though, re: “Ron Paul will never go after GS. His libertarian ideology precludes the notion that a private company can somehow be behind an economic crisis and limits the target of blame, a priori, to government action.”–ruetheday, above

    that’s some type of fancy cipherin’, but, for the ‘Gov’t’, all of the these, mentioned, firms would be in their own, self-made, smoldering craters..

    maybe, next, you’ll demonstrate “Gozintas”, for us?
    The GOZINTA award is named after famed pioneer quant Jethro Bodine, who could proudly demonstrate the gozintas upon request.
    http://www.ritholtz.com/blog/2009/02/a-cyclical-look-at-pe-ratios
    –WP edition, with new, and improved, spelling mods..

  38. Clant says:

    @Wes Schott:

    It is a devious game of financial terrorism, really. It works like this:

    1.) Bundle together a bunch of toxic mortgages and other dreck.

    2.) Pay Moodys to slap a triple A rating on this garbage.

    3.) Sell it to the greedy, lazy and naive.

    This is simple fraud. And WTF is Holder doing about it!

    But it gets better.

    4.) As you know what garbage this is, you take out CDS on it, perhaps multiple CDS.

    Where is Holder? Where is the FBI?

  39. wow, total censorship? what was the infraction?

    ~~~

    BR: I have no idea what you are talking about. What censorship Quikdraw McBlamey??

  40. bsneath says:

    Nothing can be done?

    Impose a 90% tax on all investment banking compensation, bonuses and stock options until the taxpayer is made whole.

  41. bsneath says:

    Over $500,000

  42. BR: I have no idea what you are talking about. What censorship Quikdraw McBlamey??

    well, the first post was ‘awaiting moderation’, the 2nd, w/WP mods, the same..
    came back, both gone.. even the one @4:29 ‘disappeared’, when first ‘submitted’.

    Sincerely,

    Q. McB. ~

    ~~~

    BR: WP automatically puts into moderation any comment that looks like spam. That includes those with lots of links, and any that are very long (its a comment, not a blog post), or multiple comments over a short period of time.

    I do not know the specific metrics they use (I would imagine its user definable somewhere) — but if you want to avoid moderation, Use 3 links or less, or go 200 words or less, or post only once every 10 minutes, and the odds are the software wont kick you into moderation.

    MEH, I have no interest in spending my weekends moderating comments

  43. rustum says:

    Fed and GS all are from same side of coin. Otherwise, why don’t fed and treasury fight against GS for saving tax payers.

  44. TakBak04 says:

    C-Span aired Waren’s Commitee’s interview with Geithner this afternoon.

    Frankly…I wish I hadn’t watched it. If Greenspan was a brilliant obfuscater filling folks heads with wandering “models and Fed Speak” then Geithner is “Howdie Doody” explaining Obama and the Powers that Be (told you I hate these damned acronyms) “We Need to Move along…the Past is the Past…we’ve gotten through the CRISIS…and it’s not worth it to dwell on the details of how we got here.”

    The Kitchen TeeVee….is lucky it survived the “meat cleaver” that was tossed it’s way…! The man appears to be a fool and his weird grimacing might be something he can’t control due to his genetic muscle twitches….but OMG…the MAN IS A FOOL who has memorized some kind of Ph.D SPEAK through years of practice who doesn’t know his head from a hole in the wall and has as much connection to the rest of us out here in America as a piece of rock on the side of the roadway of any major highway in America!

    He needs to go! Greenspan could at least pontificate and obfuscate his way out of any situation. Geithner is “Mr. Rote Play”….with NO credibility from his various performances. “Move Along…What’s Done is Done…Country was in Crisis…it was All Collapsing…We did what WE NEEDED TO DO TO SAVE it ALL…No one is at Fault except those ….implied….Americans who Overborrowed…and it was a CRISIS on ALL FRONTS because the SYSTEM COLLAPSED.

    Don’t ask ME…(Tim Says) …..I had to deal with this…and we’ve done EVERYTHING to take care of this. WE MUST LOOK AHEAD….Not Backwards…… YADDA, YADDA!

    It was quite a watch. You can view it on C-Span Archives or the various “You Tube” snips. It’s ugly…

  45. Wes Schott says:

    …don’t know what goes on here somtimes, have noticed screwy time stamps with comments inserted ex post facto in the thread…

    but, Quickdraw has a point…

    …the MEH post @3:25 did not appear until sometime after 5:10, based upon a tab i just happened to have left open…

  46. davossherman@gmail.com says:

    SIMPLE: Do God’s work & thou shall be Blessed.

    Of course if your God is Lucifer it helps.

  47. Blurtman says:

    So I hope it is clear that Obama is a fraud. A milder version of Bush the idiot war criminal, but still a fraud.

    And the USA is a verycorrupt country, where the head of an institution that committed massive financial fraud can become Treasury Secretary.

    A country where the rule of law applies only to the powerless, or those not clever enough to disguise their theft (Madoff). But just as Skilling will be let out early, keep on eye on Bernie in a few years.

  48. bsneath says:

    Not one Republican voted for the financial reform bill. That party is seriously out of touch.

    Will someone please create a third party of uncorrupted moderates?

  49. Michel Delving says:

    @Clant
    You have assembled several parts of the playbook but it gets even better. Somewhere before your # 4) mortgage servicers come on to the field, the majority of which are subsidiaries to investment banks. Goldman bought Litton Loan Service, one of the most egregious servicers on the planet in 2007. Someone high up on this food chain targets specific tranches and servicers go to work doing what they do best – mortgage servicing fraud or fabricating bogus defaults where none exist. Yes, even those in that 65-86 percent who pay their mortgage on time can fall victim to mortgage servicing fraud. It is these fabricated defaults that have been feeding CDS casinos. Every servicer to ABX reference entities has been charged and investigated for mortgage servicing fraud. Here’s federal servicing fraud actions on three of them:
    EMC Mortgage Corp. – http://www.ftc.gov/opa/2008/09/emc.shtm
    Select Portfolio Servicing – http://www.ftc.gov/fairbanks
    Ocwen Federal Bank – http://files.ots.treas.gov/93606.pdf
    This scheme only works when you have complicit servicers doing the dirty work. Without their free flowing servicing data, Goldman and other investment bank proprietary trading desks would not have known where and when to go short and they could not have gamed the system so well. There are no firewalls between trading desk and subsidiary servicers. What we are really looking at here is the biggest insider trading scheme of all time.
    Janet Tavakoli offers more commentary on WSJ piece today:
    http://www.tavakolistructuredfinance.com/wsj28.html
    In it she includes this link – http://www.tavakolistructuredfinance.com/AIGGS.pdf
    which lets you peer into Goldman’s CDOs. Knowing the asset name and issuer you can easily look up who the servicers are on Edgarest. Then you can check out the servicer’s rap sheet and believe me, they all have long rap sheets with plenty of ‘no admission of guilt’ cost of doing business settlements . . . while the band plays on. The real tragedy is that all too many of those common Americans who pay on time have lost their homes to this well oiled proprietary trading scheme.

  50. clawback says:

    Hey, whaddayaknow, my favorite topic: clawback.

    My answer: Brad Sherman. (or Alan Grayson) They’re the ones that would be willing and able to do it.

  51. Hume says:

    Barry Ritholtz, were where your balls when you had an opportunity to testify before Congress?

    ~~~

    BR: I had prior commitments — if they really wanted me, they wouldn’t have called 2 days before.

  52. arthur.i says:

    Will Americans ever wake up and see what a royal screwing they have been subject to?

    Maybe if their lives become even more unbearable. Maybe.

    However, if they do wise up – There Will Be Hell To Pay.

    (Thanks to Mr. Ritholtz for the WSJ link, thanks to ‘Wes Schott’ for the Vanity Fair link and thanks to everyone for their interesting and informative posts.)

  53. [...] Goldman Sachs (GS) helped fuel the engine that was AIG (AIG).  (Big Picture) [...]

  54. MEH, I have no interest in spending my weekends moderating comments

    BR,

    Indubitably, there is, afterall, BRIPTV to launch, among other things..

    http://www.thefreedictionary.com/Indubitably

  55. Clant says:

    @Michel Delving,

    Thanks for the links and info. I have the greatest respect for Janet Tavakoli, but it doesn’t take a rocket scientist to see the outright fraud committed by Goldman Sachs.

    The mystery is why there is no investigation and prosecution of this fraud. Any ideas?

    Personally, I believe that for whatever reason(s), Obama will not move against Wall Street. In a moment of spontaneous repartee between Jay Leno and Barack Obama, when Obama appeared on Leno’s show many months back, Jay brought up Wall Street. Obama was quick to acknowledge how terrible the crisis was, but also quipped that no crimes were committed. This was only a few months after he had taken office, and then and still had not undertaken an inquiry into fraudulent activity. It is a small example, but how could he say that? And why?

  56. Michel Delving says:

    Very difficult to delve deeply into your question without reaching for my tinfoil hat. Suffice it to say that interconnectedness of the overall scheme has offered great protection. On the homefront mortgage servicing fraud victims continue to fight it out in civil and federal courts across the country when they can obtain capable counsel, often appearing pro se when they can not. Now and then a decision comes down demonstrating that ‘the people’ are gaining ground in the courts. McClatchy ran a discouraging piece last week, TBTP – To Big To Punish or Prosecute. http://www.mcclatchydc.com/227/story/80277.html
    For sure, too many Get Out of Jail free cards are being handed out to undeserving perpetrators.

    Research into ABX.HE and other Mark-It indices reveals that “market makers” were not just providing liquidity when they owned and controlled CDOs through conflicted ratings, servicing fraud and CDS. Mark Pittman’s [R.I.P.] Dec. 2007 piece which details Goldman traders’ involvement with creation of the ABX is a fine place to start.
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aA6YC1xKUoek

    It’s clear that Goldman was taking the lead in building this model to bet against housing in 2005. There is also much evidence that these “market makers” were warned of rating downgrades by NRSRO’s in advance, making this a fraudulent hedging operation from the get go. Hopefully the DOJ will get its backfield in motion soon because Lloyd Blankfein’s limp apology isn’t cutting it with the pitchfork crowd.

    http://www.dailykos.com/story/2009/11/17/805462/-CEO-of-Goldman-Sachs-Apologizes-for-Financial-MeltdownWell-Screw-You-Blankfein

  57. bruerr says:

    DL Says:

    “. . . it is not at all clear to me what law(s) GS might have broken.”
    __________________

    Marcus Aurelius Says:

    Let’s try fraud, for starters.

    See those ‘AAA’ rated securities in the chart that accompanies this article? Well, they weren’t ‘AAA’ at all. GS knew it, the ratings agencies knew it … The first criminal charge should be for the creation and distribution of fraudulent securities.

    -=-=-=-

    There are many prima facie offenses that can be prosecuted under RICO statutes or outside of RICO. Basically you have a group acting in a common purpose. Group is two or more persons, or entities. Purpose can be to commit a crime, dismantle important capitalist rules of law, loot homes and business entities during a once in 12 year flood, deceive a group of senior citizens in pre-meditated fashion (confuse/mislead them for financial gain). Common purpose can be distributing toxins or drug, under the nose of local authorities, anything that is disruptive of the peace or endangers the public in some way. Group acting in common purpose to deceive, can be as wide spread as a large corporate mentality; for example Enron was a large corporation engaged in furtive deception in the culture that was disruptive and could have provoked social discord. Common purpose to deceive, includes pattern omission or incident of concealing information officers of the corporation, had obligation to disclose.

    Being a custodian of other people’s money qualifies an obligation to disclose, a lot of information. Custodians of other peoples money cannot deceive or act in pattern omission, without triggering breach of duty clauses.

    Breach of Duty falls under Constructive Fraud. A type of fraud that is prosecutable under criminal statute. Fraud is actual or constructive. Actual fraud consists of deceit, artifice, trick, design, some direct and active operation. Includes cases of successful deployment of any cunning or deceptive act to circumvent law or cheat another (cheat a group of people like senior citizens, trick them into a position of liability for mis-management at banks, they did not manage).

    Constructive fraud consists of BREACH OF DUTY, which in a pattern of behavior can be shown to produce gain or advantage to the dishonest broker or executives at fault. Again, being a custodian of other people’s money qualifies an obligation to disclose. Custodians of other peoples money cannot deceive or act in pattern omission, without triggering injustice @ breach of duty.

    Using RICO statutes are about prosecuting a group of two or more, acting to perpetrate criminal acts. It is not theory. It is a provable fact: There is evidence of a small group being organized, acting in operations, (daily work product, ongoing pattern) brokering mortgaged backed securities, they would call AAA to broker at the premium rate, but later turned out to B-rated or lower; and no refund was given. Provoking social unrest: no regulative authority trying to hold offending executives accountable or liable for having fiduciary duty to make disclosure.

    This is an unacknowledged problem of large banks which operate under the honor principle of self-regulation. They do not acknowledge when they have a fiduciary duty. This is a stain of failure for many self-regulatory agencies in the United States. We recently hear lobbyist behind each President, talk through our President, to Afghans, about controlling corruption, when here at home our Presidents are on sabbatical, taking extended vacations – foundering. With lobbying groups behind them, both Presidents, are like absentee landlords. They travel the world without proper clothing. In other words, all talk and not a step in the right direction in support of deterrent (active prosecution with criminal sentences). …This results in flawed leadership example or non-leadership moonwalk “going forward” … places “reform” ahead of deterrent.

    .

  58. bruerr says:

    Next time the President has a pow-wow with large banking executives, in the White House, maybe Jamie Dimon or one of the others will “advise” him: Mr. President sir, perhaps you should do one of those crotch-grabs when lecturing to foreign nations about cleaning up corruption. To which they can all chuckle, and then Vik Pandit chime in his executive leadership… Maybe wear purple socks and pull your pants up and walk backwards to exemplify what he means. Not that any large bank executives would act furtively to make a laughing stock out of a United States president who wants to clean up corruption 4500-6500 miles away. While here at home he wants “financial reform.” What a sorry excuse for executive leadership (leveraged by a multiple of 10).

  59. bruerr says:

    .

    Meaningful and good leadership places deterrent (action) ahead of paper “reform.” When a nation has good deterrent, it does not need reforms.

    Assurance in our current system is perfected, by laying down meaningful deterrent. Today or last year. Could not do it in 2008? Then do it at any time in 2009? Fail to self-regulate – you get milk white substance of failed leadership … wait for it … “reform.”

    (Incidentally, I support self-regulation. But when self-regulation is used to cover up Breach of Duty ie: Constructive Fraud on massive scale, or high crime against a group of people such as abuse of our elderly, provoking unrest in country which threatens stability in a culture, I think this should be met with stiff criminal prosecution. I call on all financial executives who observe their fiscal responsibilities, and take pride in it, distinguish themselves. You should be the ones pounding fist for prosecution of substantial breach. This will do more to restore public trust than any “reform” ever will.)

    Again I say, we need deterrent not reform. Republicans and democrats alike. Kick these the fraudsters in prison. Cut yourself loose from these behemoths. Let them fall on their own work product and be accountable. Restore trust in our system. Good leadership knows when too much abuse, is too much abuse. NOT heroism. Good leadership knows when our senior culture is being mistreated, called a second time to be in a place of liability for mis-management while wall street is rolling out lobbyist to say how marvelous and sacred is their executive compensation corporate bylaws in the east coast. Fluff. Make determined and sustained outcry. This is more about self-preservation and preserving a small step of integrity when others around you are abusing trust, engaging sedition or acting to destabilize the culture.

    Side note: Self-regulation is not about letting others do their worst. You let that happen and it drags down the industry and threatens national stability. The result is a wave of ridiculous “reform.” You know this already. If the financial services industry and small community bank industry do not care for self-regulation, it will get “reform;” like second hand smoke … breath it in … “reform.”

    You have to be able to PROVE your ability in leadership and KNOW when enough is enough or when too much is too much. Too much abuse is bad for the industry. You have to have a line in your mind. Community bankers who did NOT benefit from TARP or PPIP or TALF, need to do a better job of self-regulation, or they will loose the ability to self-regulate. You need to be the ones from inside, making demands for criminal prosecutions that deterrent rise up in magnitude to send out the message for the next generation, as to what is NOT tolerable. Otherwise you will forfeit all the ground you have made in the last 50 years. All of it.

    .