1. Goldman Sach was willing to deceive it s customers to unload assets that it believe to be tainted.
2. It was willing to deceive it customers about the source of its products.
3. It was willing to unload products to its customers that the owner of those products was betting would go down in value.
4. It would willingly deceive its customers knowing that people who knew more about the products it was selling would buy them if they were in ignorance about the seller of those products.
5. It did this all for a fee and it did not care about the reputation of the companies it hoodwinked into attesting to the provenance its products.
Bottom line. I don’t care what Goldman’s defense is. This is financial sleaze of the highest order affecting the stability of the world’s financial system. These people should not be in civil court, they should be facing criminal charges.
Read the indictment HERE. It's the most egregious thing I have read since Madoff. Anyone who does business with Goldman after this is a fool. It turns out that billionaire John Paulson who was the one who unloaded the toxic assets to the next sucker, then bet on their worthlessness, was a major Obama contributor. Not a surprise.
UPDATE: If you think that Goldman is now opposed to the Obama administration or increased regulation of the financial services industry you would be wrong.
From Powerline:
Scoop Jackson used to be known as the Senator from Boeing; maybe Barack Obama should be called the President from Goldman Sachs. Goldman Sachs executives and employees contributed more money to Obama's 2008 campaign than a single company has raised for any politician since the dawn of campaign finance reform.
Does Goldman regret its unprecedented support for Obama and the Democratic Party? Not at all. Tim Carney explains the facts of life at the Examiner. Notwithstanding the populist Goldman-bashing the Democrats are now engaging in, the company enthusiastically supports heightened federal regulation of its business. A Goldman lobbyist explained: "We're not against regulation. We're for regulation. We partner with regulators." That pretty much says it all. In the meantime, Goldman is partnering with the Democrats to pass a permanent bailout bill.
Government regulation is almost always good for dominant firms like Goldman Sachs. It is smaller competitors, innovators and start-ups who tend to get squashed. That's bad for consumers, but if you're already on top, the government will help you stay there. As Carney notes, "every competitor [of Goldman Sachs] is smaller." Still, companies like Goldman take no chances. When Obama's first White House counsel, Greg Craig--an unreconstructed liberal and Democratic partisan--left the administration, who hired him? Goldman Sachs, of course.
A footnote: we've seen this pattern a thousand times, but it bears noting that one of Goldman's lobbyists is Dick Gephardt, former Presidential contender and for many years organized labor's most reliable spokesman in Washington.
11 comments:
Gee, you make it sound as if Goldman was doing this for the very first time, ever.
I worked on Wall Street for 20+ years, and it's pretty much ALL a fraud. A stockbroker, on a good day, is simply a federally-licensed bookie in a more expensive suit.
I can proimise you Goldman isn't the first -- they're just the latest to get caught.
Matthew,
I call bullshit. I have been in the investment business for a quarter century and during that time I have made lots of mistakes and have seen my share of Wall Street BS, products that don't work and mis-direction. But nothing outside of Madoff is like this.
If you have been part of bilking the public for 20 years, I suggest you are one of the people who have corrupted the sytem. If you have seen this go on and not blown the whistle you are a creep and an enabler. I suspect you don't know what you're talking about.
You don't have pass a Series 7 to know how markets work, nor how a mjor brokerage firm operates. I built and programmed the computer systems that make it possible for you to conduct business, and without which, you'd be begging in the streets.
RE: the information that you make decisions upon, that you show to clients, that you use to formulate strategies, or make spot-trades. and how it's collected/distributed.
There is a manipulation of financial data that goes on all the time in US markets. There is a gap between when info is available to the institutions, and when it's made available to the public. If you're dealing directly with customers you're probably fifth or sixth down the food chain...after the firm, it's officers and their friends have already acted upon this information.
Every brokerage that does business on American markets is hooked into an information clearing house called SIAC (Securities Industry Automation Corporation). SIAC's job is to ensure that financial data coming in from all quarters is recorded and then shared, simultaneously, with all interested parties, so that, theoretically, no one might have an unfair advantage.
However, there is a signifigant gap of time between when SIAC makes information avialable to it's institutional customers and when that information is available to the general public.
Brokerage firms routinely take advantage of this time gap to make trades before the larger community of investors is made aware of it. There is, typically, a 15-20 minute gap between when SIAC distributes info to it's institutional clients, and when that info is made public. For certain categories of info, the lead time before public disclosure can be even longer.
Firms that utilize high-speed, automated trading systems (like the ones that I used to program) are able to automatically set their systems to buy/sell just as soon as the data upon which to make that decision becomes available.
In the blink of an eye, millions of transactions can be made, all done by machines connected to a high-speed network of other machines built for this specific purpose. Barely any human intervention is required, and the computers on this network "talk" only to one another.
By the time YOU, the guy who deals with a customer, gets that data the firm (and it's high-net worth clients) have already used this information to their advantage. There are departments in every major firm to make certain this happens. Every firm takes full advantage of this time lag.
I have built and programmed these systems for Smith-Barney (later Citigroup), Salomon Brothers (prior to, and after, merger with Citi), Nomura Securities, Daiwa Securities, Union Bank of Switzerland, and Brown Brothers-Harriman.
I started doing this stuff in 1985and finally walked away form it in 2004 when my health began to fail.
And the reason I don't "blow the whistle" is because this is all perfectly legal. There's a good reason why the Feds generally never get a conviction on an Insider Trading charge; thanks to that reporting gap (and the computer) every transaction made within that span is, technically, based upon inside information.
Unless you actually work with this stuff, on this level, most people doesn't know it exists or how things are done. But don't be naive. Every day there's at least one major crime committed in every financial instiution in America, most of them of crimes of Omission. But every once in a while...
Sorry to spoil your party Matthew but I, and everyone I know gets a live feed, not a 15 minute delay.
And "guys like me" even though we get real-time quotes are not day traders. That's for suckers. Warren Buffet didn't get to be the richest investor by taking advantage of 15 minute gaps.
But what Goldman did is serious fraud and misrepresentation. I would not be surprised to see some more indictments come down.
You get your Quotes and the Bloomberg-type stuff that's reported by Cavuto, Kramer and Bartiromo in a live feed.
There's other categories of actionable information being passed around that is on a delay. And no, it's not just used for "day trading" and "pump-and-dump" scams.
You should really educate yourself better on the technology your own industry uses. It might make you a better advocate/representiative for your customers.
And Yes, I know what Goldman did was different, and on a greater scale, but the point was that every firm does something like this (tries to pass off s*it as gold) all the time. There isn't a salesman alive who hasn't tried that one before.
The difference this time was that no ene expected $500 billion to simply disappear from the markets one day in September (incidentally, that was also accomplished by automated trading technology, too), otherwise the scam would have gone on a lot longer with no one paying much attention to it.
Matthew,
I don't watch the TV ticker so please don't tell me what I get or don't get.
Thanks for your input.
Matthew,
Just wondering how you could work in the stock market for 20 years and see all of that fraud going on not only be a participant, but an enabler. I think I would have found another line of work. Kind of like I wonder how Barack Obama could sit in a church for 20 years and never hear what the hate mongering Rev Wright spewed.
Just something about that 20 years.
A) don't see it because you're not hands-on with the process -- it's an interior field restricted to those who do it, and those who know about it, and, B) you would like to imagine that your profession is a noble and honest one, and I can understand that.
And true, I don't know what you, personally, get in your feeds; in the grand scheme of things, hwoever, you're not that important when it comes to institutional trading (that, incidentally is not an indictment of you as a human being).
I'm telling you that I have certain knowledge (and thousands of people do, after all, it's how they make their livings!) that access to information is restricted -- by mutual consent and foreknowledge of those who have the most to gain fby withholding it -- and that this information is used to make (and sometimes lose) huge sums of money at other people's expense.
It's not even a secret, so I'm surprised you don't know about it.
Matthew,
You started off by claiming that I was getting a 15-20 minute delayed quote. I told you I get real time quotes. so now you're telling me that there are things I don't see that allow some people to make money at my expense. So tell me specifically what I am not seeing that is causing other people who are "in the know" to take my and my clients money.
Go ahead. Lay it out. Use jargon if you like. But until you do, you're just an internet crank with a medical problem.
To all,
I'm working on a post "Lessons from the Madoff and Goldman scandals."
Matthew's bleats are not part of them. For those who take him seriously, feel free to buy gold coins, stuff your cash under the mattress or in a can in the back yard.
Under no circumstances trust the banks! Boooo!
You guys missed the political import of the indictment.
This is the Administration reminding Wall Street that the Justice Department can and will be used to ensure conformance with the political objectives of the Obama Administration.
So we all suspect that DoJ could do indictments like this until the cows come home. Whether they are true or not is really immaterial. Just defending against a federal indictment usually RUINS any individual so targeted.
How on Wall Street or anywhere in American business wants to be next?
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