I’ve been racking my brain for the easiest way to get people to understand what GS did.

The best I could come up with was Mel Brook’s “The Producers.” They purposefully tried to create the worst play ever, lose their investors money and pocket the proceeds.

Its not much of a stretch to suggest that Abacus 2007 was Goldman Sachs’ “Springtime for Hitler.”

~~~

Here’s how I would cast this:

Nathan Lane …….. Max Bialystock …. Fabrice Tourre (GS)
Matthew Broderick.. Leo Bloom ……. Lloyd Blankfein (GS CEO)
Will Ferrell ……. Franz Liebkind ……. John Paulson (Paulson & Co)

Category: Derivatives, Legal, Regulation

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.

50 Responses to “Goldman Sachs Presents “The Producers” (Abacus 2007)”

  1. bostonkevin says:

    Last weekend’s “This American Life” about Magnetar made the same analogy – they even had some Broadway guys make up a funny little Max Bialystock-song about it.

    http://www.thisamericanlife.org/radio-archives/episode/405/inside-job

    ~~~

    BR:

    covered it this weekend
    http://www.ritholtz.com/blog/2010/04/video-bet-against-the-american-dream/

    http://www.ritholtz.com/blog/2010/04/bet-against-the-american-dream/

  2. jpm says:

    bursts into song
    It’s springtime, for Blankfein, in goldman sachs.

  3. Transor Z says:

    “You can’t kill the investors, Lloyd! They’re human beings.”

    “Human beings? Have you ever seen them eat?”

  4. george matkov says:

    This reminds me of a few years ago when GM sold (cadilacs?) with chevy engines and were clobbered by it. Listening to CNBC today, it is apparently perfectly legal to sell garbage financial products as AAA and if the client finds out its their fault – they should have verified everything!!

    Isn’t capitalism great?

  5. montebel says:

    This American Life is a few steps ahead of you on this one
    Magnetar Springtime for Hitler: Huff Po
    Magnetar radio show:
    ~~~

    BR: Way ahead of them:
    http://www.ritholtz.com/blog/2010/04/video-bet-against-the-american-dream/

    http://www.ritholtz.com/blog/2010/04/bet-against-the-american-dream/

  6. [...] most succinct summation of the whole scandal, however, comes from Barry Ritholtz: Goldman Sachs was producing a play called “Springtime for [...]

  7. VennData says:

    Strangelove: Yes, but the… whole point of the doomsday machine… is lost… if you keep it a secret! Why didn’t you tell the world, eh?

  8. radioman says:

    @george matkov the odd thing is Cadillacs and Chevrolets are practically the same thing, but junk bonds and AAA are [supposedly] opposites!

  9. mathman says:

    “Aww, shucks. Ya CAUGHT us.” L. Blankfein

    This suit will open the door to all the other fraud going on, like:

    http://susiemadrak.com/?p=1732

  10. subir says:

    It’s a high-stakes poker game. Goldman’s the dealer and neglects to tell everyone Paulson shuffled the deck and dealt himself.

  11. flipspiceland says:

    With the exception that, “The Producers”, couldn’t short themselves. Didn’t possess inside information to profit on this seeming lawsuit.

    This is more akin to, “Wag the Dog”, with Lord Blankfein played by D. Hoffman.

  12. scharfy says:

    The republicans are playing this all wrong. They just walked into a trap. The political tone in America in decidedly populist.

    If they fight this, and it looks like they will, they just made the 2010 midterms a horserace again. They should have one-upped the Dems and said that this was window dressing and the Dems are the party of the bankers.

    Not smart politics. Just when I thought the Dems were the dumb ones for their less than stylistic healthcare bill, my repubs just called their stupidity and raised them one.

    The Dems are on firm ground (with this issue) and the repubs are about to get excoriated on this issue.

    Walk away republicans, walk away – choose your battles.

  13. Pat G. says:

    In a couple of months the Dow will be at 12K, the S&P at 1300 and GS will have “did a little dance, made a little love and got down tonight”- Sunshine Band. All will be forgiven and forgotten. The average citizen has no attention span, is way too gullible and is not too bright.. Can anyone tell me why precious metals got hammered today? Flight to Treasuries? USD? Oh yeah, there’s the definition of a safe haven. People are rubes.

  14. KidDynamite says:

    this is actually a pretty darn near perfect analogy… love it

  15. The Curmudgeon says:

    I was thinking more along the lines of “The Taking of Pelham 123″. No, wait…that’ll be the sequel, when Lloyd Blankfein, after getting out of the pen for his financial chicanery, plays the part John Travolta played in the movie, and simultaneously shorts and crashes the markets through a brazen act of terrorism as he goes out in a blaze of glory because, “…everyone owes God a death.”

  16. WFTA says:

    This is great. It is genius. Given the honor among thieves, the SEC can probably bring a similar case every other day until Sen. Shelby gets his ass on board. I wish Dodd had built a better boat.

    I lost a lot of money today and it’s the best I’ve felt in months.

  17. noilifcram says:

    I can hardly wait to see this upcoming Broadway success!

  18. MorticiaA says:

    @Mannwich: Great link. I’m glad someone else watches CNBC so I don’t have to.

  19. cheese says:

    I don’t think there’s any doubt whether or not this particular charge is politically motivated. That said….does it have merit? Absolutely! Question is, and I really don’t have the particulars in front of me…….is if Goldman pulled a Magnetar in Abacus…….ala buying a tiny sliver of the equity tranche – that could, and I stress could…….be their defense. Now, obviously……..if the equity tranche they invested in only amounted to $10-$50 mil….and they put “hedges” on for $100+ million………that will be the critical question in a trial……Why hedge over and above your investment? Naturally, hedging is speculative………but a farmer doesn’t hedge for 1000 bushels of corn when he can only bring 500 to market.

    What will be interesting is who else will be charged to a similar suit?

    Burry intimated that Deutsche Bank began to follow his lead……….did they fund their positions like Magnetar?

    How will any financial regulation legislation passage or failure affect more charges? Is the administration merely “bolstering” their case for the legislation? Or are they really gonna investigate other firms and bring charges regardless of the success of the legislation?

    Since I imagine the legislative battle will take place well before the GS trial……..we should definitely have that answer by the time that trial begins.

  20. Machiavelli999 says:

    I thought this would be a good time to remind people that markets are perfect and we don’t need Obama to impose any of his communist/socialist/death panels regulations on our wonderful finance industry.

  21. cheese says:

    ok scratch the above………

    I don’t see how the SEC doesn’t specifically target the Magnetar deals now.

    If not this purely a show trial………and I wouldn’t even expect GS to even go to trial.

  22. Myr says:

    This was simply the first headline of many to come. We are certain to see loads of ugly emails from the bowels of the finance industry. I’m looking forward to the outrage. Hell, we might even see Congress spurred to action…yeah right. The only thing that would ever get Congress to act would be an even more devastating and lasting repeat of ’08.

  23. Fred says:

    Goldman Sachs shorts its own stock, tanks market, makes billions off SEC
    fraud charge news

    April 16, 2010, iTulip

    SAN FRANCISCO (MarketWatch) ‹ The Securities and Exchange Commission on
    Friday charged Goldman Sachs & Co. (GS 161.00, -23.27, -12.62%) and one of
    its vice presidents for defrauding investors by misstating and omitting key
    facts about a financial product related to subprime mortgages.

    AntiSpin: Okay, so we made up the part about Goldman shorting its own stock
    today, but we wouldn¹t put it past them. The SEC is suing Goldman in civil
    court for shorting its own clients by selling subprime mortgages while at
    the same time shorting the CDOs through another client.

  24. TakBak04 says:

    @cheese Says:
    April 16th, 2010 at 5:26 pm

    ok scratch the above………

    I don’t see how the SEC doesn’t specifically target the Magnetar deals now.

    If not this purely a show trial………and I wouldn’t even expect GS to even go to trial.

    ———-

    That “guy” from Reuter’s might agree with you!

    Analysis: SEC tries to ride Goldman back to credibility

    By James Pethokoukis

    The all-points bulletin went out not long ago. Under the leadership of a new chairman and enforcement director, the SEC’s Obama years have marked a hard switch from the laissez-faire enforcement posture of the Bush administration. In 2009, the regulator opened twice as many investigations as in 2008, with fines up 35 percent. The new assertiveness helped tamp down talk on Capitol Hill that the SEC should be merged with the Commodity Futures Trading Commission or subsumed into a giant super-regulator.

    But aggression can also lead to unforced errors. The regulator was impatient with the New York attorney general’s office during its tag-team litigation effort against Bank of America. So it dumped its legal partner and went it alone. The result: A judge threw out a $33 million SEC fine against BofA regarding bonuses paid to Merrill Lynch employees. And the judge called a later $150 million settlement between the two sides “half-baked justice at best”.

    The SEC also failed to execute in its case against Cohmad Securities and the firm’s involvement with Bernard Madoff. In February, a federal court dismissed the SEC’s “flimsy” charges that Cohmad helped enable the notorious Ponzi schemer. And little has transpired in the more than nine months since the agency filed an insider trading complaint against former Countrywide boss Angelo Mozilo.
    So a failed case against Goldman for alleged securities fraud might leave the SEC in worse shape. It would also open the watchdog to charges that the timing of its charges, right in the middle of a debate over financial reform, was merely an attempt by the Obama administration to intimidate Wall Street into supporting its get-tough legislation. But in the meantime, the financial industry will be looking hard over its shoulder for the first time in years.

  25. TakBak04 says:

    Sorry…here’s link to above article. He has a new one out…but the above article is on the site.

    Apr 16, 2010 14:09 EDT
    James Pethokoukis
    Obama’s SEC war against Goldman Sachs
    http://blogs.reuters.com/james-pethokoukis/

  26. [...] The Big Picture – ‘Its not much of a stretch to suggest that Abacus 2007 was Goldman Sachs’ “Springtime for Hitler.”’ [...]

  27. cheese says:

    @TakBak04…..

    I think Goldman will plead out. I’d love to see them fight this. But, I really don’t know.

    Thing about all this is………you copy and paste the charges……..change GS and Paulson names to JPM and Magnetar………and probably a whole host of others………..

    I mean Paulson banked what? $3 bln in 08? All from Goldman? Or all w/ Goldman? I don’t buy it……..I’m sure he did very similar deals with other banks as well.

    Where are their charges? What is the worst that could happen? The Fed have to back stop a couple more hundred million on the balance sheets? Please………The stocks are back up……….They have practically an iron-clad guarantee from the fed…………if ever there were time to bring the hammer down………you could do a lot worse than now.

    GS is so vilified now……..it would be particularly egregious if the SEC couldn’t sink this 3 ft. put. So why not link all the banks together in these charges? This kind of deal wasn’t unique.

    Hell the SEC probably drew up the charges monday morning after reading the Pro Publica piece. Sure it didn’t mention GS by name……or implicate them in any way…….Regardless……….everyone who even pays slight attention to markets and finance knew GS did this deal as early as late 08…….if not sooner….

    GS is, politically speaking……….the weakest target. By that, I mean………they, of all the investment banks have probably earned the most “badwill” if you will. Everyone wants to commit GS. And, the administration needs a patsy for its upcoming legislative battle on financial reform.

    I will be very, very surprised if JPM is brought up on charges in the Magnetar deal.

    Yes, I’m that cynical.

  28. bsneath says:

    This is a movie the middle class will thoroughly enjoy. What is left of them that is….

  29. TakBak04 says:

    cheese Says:
    April 16th, 2010 at 7:00 pm

    @TakBak04…..

    I think Goldman will plead out. I’d love to see them fight this. But, I really don’t know.

    ——–

    Sad to say…I think what you say might be what happens to this lawsuit by SEC…

    What you say has much merit…as much as many of us want them to “go down.” This SEC Case doesn’t really seem to be the one that will do it when there was so much criminality all across the board.

    :-(

  30. philipat says:

    IMHO, Danny DeVito would be the perfect Blankfein (To the tune of “OPM”)

  31. TakBak04 says:

    BTW….any of you BP Posters remember the Saga of “Sir Allen Stanford?” They guy who bought out the politicians in that Carribean Island and the UK Cricket Team? The guy who had his own Private Plane Force flying all over South America? REMEMBER HIM?

    Latest NEWS!

    ———-

    SEC knew of Stanford scheme since 1997, inspector general says
    By Associated Press business staff
    April 16, 2010, 3:11PM

    Updated at 4:44 p.m.

    WASHINGTON — The Securities and Exchange Commission knew since 1997 that R. Allen Stanford likely was operating a Ponzi scheme and an agency enforcement official who helped quash investigations of his business later represented the billionaire, according to a new report by the SEC inspector general.

    The SEC didn’t bring charges against Stanford until February 2009, when it alleged a $7 billion fraud. The SEC inspector general also said in a report released Friday that “institutional influence” in the enforcement division was a factor in the agency’s repeated decisions not to conduct a full investigation.

    Complex cases like Stanford’s that couldn’t be quickly resolved were discouraged by enforcement higher-ups, the IG’s report said.

    The report by Inspector General David Kotz said his office’s examination didn’t find that the reluctance of the SEC’s Fort Worth enforcement attorneys to investigate Stanford was tied to “any improper professional, social or financial relationship on the part of any former or current SEC employee.”

    The IG’s office did find evidence, however, that “institutional influence” within the enforcement division contributed to the repeated decisions not to conduct a thorough investigation of Stanford, the report says. Senior agency officials in the Fort Worth office believed they were being judged on the number of cases they brought, and told their enforcement staff that novel or complex cases — as opposed to “quick-hit” cases — were discouraged, the IG’s inquiry found.

    The SEC’s Fort Worth office in 1997 began conducting examinations of sales of certificates of deposit by Antigua-based Stanford International Bank, which promised outsized returns, the inquiry found. It said the examiners made numerous efforts after each exam to convince the Fort Worth enforcement officials to open a full investigation of Stanford, but “no meaningful effort” was made until late 2005.

    Kotz’s investigation also found that a former head of enforcement in the Fort Worth office played “a significant role in multiple decisions over the years to quash investigations of Stanford.”

    The former official, who wasn’t named, sought to legally represent Stanford on three occasions after the official left the agency and went into private law practice. The official did represent Stanford briefly in 2006, the report says.

    The SEC’s civil fraud charges filed last year against Stanford accused the brash billionaire, a larger-than-life figure in the Caribbean, of luring investors with promises of improbable high returns on the CDs and other investments.

    Last June, Stanford was indicted and jailed on Justice Department charges that his international banking empire was really a pyramid scheme built on lies, bluster and bribery. Stanford is disputing the charges, which in the criminal case could send him to prison for up to 250 years if convicted.

    : http://www.cleveland.com/business/index.ssf/2010/04/sec

  32. cheese says:

    @ philipat………great suggestion……….I nominate Wallace Shawn ………you’ll see……

    @TakBak04………seems I’m not the only cynical one….

    http://trueslant.com/level/2010/04/16/did-goldman-sachs-fraud-suit-help-sec-bury-the-lede-of-the-day/

  33. mitchn says:

    @TakBak04

    What are the implications of the report for Bill Clinton’s legacy? It was Clinton’s SEC — and Bob Rubin (he of the Nero-esque $100 million payout from the house on fire known as Citigroup) was his Treasury Secretary. Slick Willie, indeed.

  34. mitchn says:

    @TakBak04

    Let’s try again. The SEC’s ineptitude goes back to the Clinton admin (at least). And Clinton’s TreasSec and financial majo domo was Bob Rubin — he of the Nero-esque $100 million payout from the financial blak hole known as Citigroup). It truly is a one-party country.

  35. TakBak04 says:

    @mitchn Says:
    April 16th, 2010 at 8:52 pm

    @TakBak04

    Let’s try again. The SEC’s ineptitude goes back to the Clinton admin (at least). And Clinton’s TreasSec and financial majo domo was Bob Rubin — he of the Nero-esque $100 million payout from the financial blak hole known as Citigroup). It truly is a one-party country.

    ———-

    One Party? It does appear to be so. It’s becoming more apparent as we go along.

    No disagreement there. But…there is dissention much on the Left and some on the Right…although the Right has Big Interests..Religious/Libertarian funding……. The Left has really NOTHING… We shot our wad supporting the change too many times……..and what did we end up with?

    So…it’s a conundrum…….

  36. TakBak04 says:

    ———-

    One Party? It does appear to be so. It’s becoming more apparent as we go along.

    No disagreement there. But…there is dissention much on the Left and some on the Right…although the Right has Big Interests..Religious/Libertarian funding……. The Left has really NOTHING… We shot our wad supporting the change too many times……..and what did we end up with?

    So…it’s a conundrum…….

  37. mitchn says:

    @Takbak04

    Interesting times, no? The MSM only has the hots for us-them, left-right, welfare statist-social darwiniast dichotomies. Easy, doesn’t require much thinking, and drives ratings among the sheeple. But I think we may be in the second inning of a major realignment in American politics. No idea how it will shake out, but would not be surprised to see a viable third party — or the collapse of the Dems or Repubs — by 2020. Just mu .02…

  38. TakBak04 says:

    @cheese Says:
    April 16th, 2010 at 8:45 pm

    @TakBak04………seems I’m not the only cynical one….

    http://trueslant.com/level/2010/04/16/did-goldman-sachs-fraud-suit-help-sec-bury-the-lede-of-the-day/

    ——-
    “Cheese”…….THANKS FOR THIS LINK! VERY INTERESTING….Takes it beyond where I’d found!

    Did Goldman Sachs fraud suit help SEC bury the lede of the day?
    By MICHAEL ROSTON
    Three Card Monty.jpg

    Image by vaticanus via Flickr

    Today the Internet is all excited about the SEC bringing a civil fraud case against a single Goldman Sachs mortgage-backed security that was allegedly set up in the hopes that it would fail, earning beaucoup credit default swap bucks for a hedge fund, Paulson & Co., that invested in it.

    This all is alleged to have happened in 2007; it’s 2010, and the Securities and Exchange Commission is finally getting around to filing charges against these fraudulent acts. The long arm of justice, indeed.

    But while Goldman is getting ready to dig in its heels and stating that they broke no laws, the SEC is probably happy that Goldman Sachs’s stumbling stock price is the big story of the day. That’s because the SEC’s Inspector General just released a report stating that in the case of accused ponzi schemer ‘Sir’ Allen Stanford, the SEC was aware of what his Stanford Financial Group was up to as far back as 1997, and didn’t get around to arresting the guy until 2009.

    MORE of this read about “Sir Allen” and what broke today about him but was instead diverted to Goldman and SEC’s weak case about them:

    READ HERE:

    http://trueslant.com/level/2010/04/16/did-goldman-sachs-fraud-suit-help-sec-bury-the-lede-of-the-day/

  39. TakBak04 says:

    @mitchn Says:
    April 16th, 2010 at 9:28 pm

    @Takbak04

    Interesting times, no? The MSM only has the hots for us-them, left-right, welfare statist-social darwiniast dichotomies. Easy, doesn’t require much thinking, and drives ratings among the sheeple. But I think we may be in the second inning of a major realignment in American politics. No idea how it will shake out, but would not be surprised to see a viable third party — or the collapse of the Dems or Repubs — by 2020. Just mu .02…

    ——-

    It’s truly time for “Third Party.” But, it’s very difficult as has been seen with so many attempts in the past.

    The consensus seems to be we must work with in one of the two parties for change. I know we Dems have tried very hard and gotten nowhere as the party drifts more to Glenn Beck/Palin.

    Perhaps the Left will be the ones? (although I fear for Palin as the ONE as I did when Pat Buchanan was the “One.”

    Who knows. So many of us have bits of both parties but the Right has become so bizarre it’s cringing to even think of an identity with them these days. Who knows. Just try to follow conscience…..

  40. TakBak04 says:

    Sorry …meant perhaps the “Right will be the ones? (although I fear for Palin as the One…etc.)

    The left is where we are hoping that OB will finally see the light he promised us… But, we’ve been promised so many times…..who can believe anymore in either of the parties.

  41. mitchn says:

    @TakBak04

    Palin is to presidential politics what ‘American Idol’ is to good music. Fake, inauthentic, and gone tomorrow.

    Here’s my stab at an analogy for GS’s actions with respect to Abacus (an who knows what else):

    JPaulson: I just passed a huge raging fire on the corner of Broad and Main. Can you help?

    GS: Sure. You want the ten-gallon container of kerosene or twenty?

  42. fully diluted says:

    hmmm, is it wise to bet against a vampire squid? paulson might be stoned for this.

  43. rustum says:

    Is it similar to Toyota selling cars with issues knowingly and insuring on those cars to get the money when people die riding them.

  44. alfred e says:

    I’m starting to feel like I have absolutely nothing else to contribute. And I love that feeling.

    But I really, really like the notion that blogs like BR’s can make a difference.

    And I truly believe that they are.

    The politicians should be shaking in their boots, because re-election sound-bites just got a lot less believable.

    Republicrats (republocrats?) is an appropriate term. Because motivationally, they are no different.

    They all want the power.

  45. beaufou says:

    Isn’t this whole story a hurricane in a water-glass?

    A civil suit that will cost GS a tiny part of what they made out of it and will be used for years to come as a day of reckoning. ” The day America stood up to Wall Street”

    Sorry but I can’t buy this bubblegum lawsuit as a genuine attempt to fix what has become a highway robbery designed to impoverish Americans.

    And why is Wall Street over-reacting to the news?
    We all know this a bunch of dizzy distracting bullshit.

  46. engineerd1 says:

    funny analogy, but seriously….anybody who invested in “Springtime, with Hitler in Germany” was either looking for a tax dodge, or got what he deserved…..what, am I supposed to shed a tear for this kind of greater fool?

  47. Vermont Trader says:

    Imagine that Paulson & co. paid and all their buddies Toyota $15mil to install faulty accelerators on their cars and then took life insurance out on all the new owners.

    Is Toyota guilty of fraud for knowingly selling killer cars under this scheme?

  48. Vermont Trader says:

    corrected

    Imagine that Paulson & co. and all their buddies paid Toyota $15mil to install faulty accelerators on their cars and then took life insurance out on all the new owners.

    Is Toyota guilty of fraud for knowingly selling killer cars under this scheme?

  49. [...] peddle. But the outline of this case is pretty easy to understand, indeed Ritholtz compared it to The Producers. It can be summed up in a sentence, which is key for swaying public opinion: Wall Street bet [...]