Goldman admits 'improper' actions in sales of securities

[cory777]

Source: McClatchy Newspapers

By Greg Gordon and Kevin G. Hall | McClatchy Newspapers

WASHINGTON — Goldman Sachs' chief acknowledged Wednesday that the investment bank engaged in "improper" behavior in 2006 and 2007 when it made huge bets on a housing downturn while peddling as safe more than $40 billion in securities backed by risky U.S. home loans.

Lloyd Blankfein, Goldman's chairman and chief executive, made the surprising concession at the opening hearing of the Financial Crisis Inquiry Commission, a 10-member panel that Congress created to investigate and lay out for the public the causes of the worst financial crisis since the Great Depression.

Blankfein and senior officers of three other of the nation's most prominent banks told the panel that serious flaws in their risk models and business practices contributed to Wall Street's meltdown and the massive taxpayer bailouts that followed. The commission also heard testimony that the banks and quasi-government mortgage giant Fannie Mae recklessly took on as much as 95 times more risk than they could cover, and that Wall Street excels "at pulling the wool over the eyes of the American people."

Read more: http://www.mcclatchydc.com/homepage/story/82270.html

[TheWatcher]

1. That's a bit like John Wayne Gacy or Jeffrey Dahmer admitting their crimes

were "acts of poor judgment that should have been thought through a little better."

Unbelievable.

Off With Their Fucking Heads.

They think we are stupid. They think we are cattle.

And they are going to keep destroying lives and economies until they are PHYSICALLY stopped from doing so.

Throw Away the Key.

[CynicalObserver]

29. Goldman is apparently the most connected, influential financial

entity in the United States, and for that matter worldwide. The number of their senior exec's who end up in senior positions in the Executive branch (this is from appointments from both parties, btw, if anyone wants to try to ignore this as a GOP thing. Just ask Larry summers) or positions at the fed is in itself very alarming. The various acts of policy under these secretaries (once again, from both parties, don't forget Rubin and Mexico) have invariably been very beneficial to goldman, often in flagrantly direct ways (the AIG counterparty payouts come to mind also). Goldman was to be /will be a major player in the carbon trading market once they finally get it put together.

They are a major player in the ongoing looting of the US treasury we have seen and continue to see since late 2008. As the dollar is systematically devalued, goldman is certain to profit, while nearly every poster on this board sees a loss of the value of their wages and savings. Given the proportion of their earnings which end up being paid as bonuses, you could argue they are screwing their own shareholders as well.

This transcends party politics. Goldman has both parties.

[inthebrain]

2. That ain't stopping these pigs from giving themselves huge bonuses

In the midst of the greatest economic and social crisis since the Great Depression, the major US banks are about to announce multimillion-dollar year-end bonuses for their top executives and traders. Bankers are able to resume full tilt their mad pursuit of personal enrichment due to the plundering of the treasury carried out for the sole purpose of bailing out the “financial wizards” whose speculative practices precipitated the crisis.



This is a global phenomenon. In all the major centers of world capitalism, the financial elites are emerging from the economic wreckage stronger and more powerful than ever, and are dictating the terms of their own enrichment to servile governments.



In the US, Goldman Sachs is expected to announce bonuses totaling more than $20 billion, about the same amount as California’s state budget deficit. One analyst estimates that the average Goldman bonus will approach $600,000, and that some executives may take home more than $10 million. It is anticipated that Goldman Sachs, Bank of America, Citibank, JPMorgan Chase and Morgan Stanley will together pay out $90 billion in 2009 executive compensation, with more than half in the form of bonuses.
http://www.wsws.org/articles/2010/jan2010/pers-j14.shtml

[smalll]

3. "Improper" -- that sounds so civilized --

makes you think all they did was to wear white after Labor Day, or indulge in the occasional Pimms and Ginger ale in the wintertime.

:shrug:

[Mithreal]

4. Now can we let them get back to doing god's work, please?

[DeSwiss]

5. Best line from the article:

Commission Chairman Phil Angelides, a former California state treasurer, warned Blankfein that he'd be "brutally honest" in his questioning. He asked why Goldman thought it was necessary to take out protection against investment-grade mortgage securities it was selling by purchasing insurance-like contracts known as credit-default swaps. Angelides likened it to selling a car with knowledge it had faulty brakes and then taking out an insurance policy on the buyer. "I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it," Blankfein told Angelides.

- Funny, this doesn't look like the face of regret. More like greed or avarice......

K&R

[Hubert Flottz]

11. "we regret . . . the consequence that people have lost money"

Good, give it all back then...then go to jail like any other criminal that steals billions.

[dixiegrrrrl]

23. 2nd best line:

"All the executives, including J.P. Morgan Chase Chief Executive Jamie Dimon, Morgan Stanley Chairman John Mack and Bank of America President and Chief Executive Brian Moynihan,........

acknowledged that they'd paid a huge price for failing to build the possibility of declines in home prices into their risk-management models."

THEY had paid a huge price?????????
My god, they got our money in TARP, spent it on bonuses,
( did you know Goldman spent 50% of its profit on executive pay????)
they paid less than 1% of their profit in taxes,
were given the right to borrow money from the FED at ZERO interest so they could make MORE money in market speculation.
What f&^$!#*^!1 price did they pay???

[eridani]

6. Pitchforks, torches, tumbrils......when, oh when? n/t

[Solly Mack]

7. How gracious of him to deign us such a "concession"

[Selena Harris]

26. So, does this admission of guilt......

open the door to legal action against Old Man's Sacks?

[midnight]

8. Yes, but they "learned" by this mistake, so no problem.... Let's move on.....

[NecklyTyler]

9. They proceeded with a wink and a nod from the Bush Administration

The big banksters knew they had the Republicans in their pockets, and all those campaign donations were there as insurance to keep the financial institutions profitable. And more importantly, those millions in donations were to keep the CEOs out of jail if things went wrong

[CynicalObserver]

30. you are willfully self-deluded if you for a second think this

is about the GOP. They have as much of a hold on the DNC (and for that matter obama, just look where summers is) as the GOP. GS doesn't care about ideology, they care about policy as it impacts them, and both parties work to assist them.

[Enthusiast]

10. The point is

what they did remains legal. And because of the corrupting influence of these banks on REFORM EFFORTS this will likely remain legal. Ask yourselves, what has been done? Not a fucking thing. Are these people going to prison? Fuck no, they are reaping even more rewards.

What they did remains legal! Next time they will exercise better judgment. The kid arrested on the street corner for selling drugs should try telling the cop "Sorry officer, next time I'll exercise better judgment."

Many DUers are really angry because the Obama Administration was not a strong enough advocate for the public option. I share their anger but I'm even more pissed off at his close alliance with these fucking thieves. This is certainly not the president I thought I voted for.

[Hubert Flottz]

12. "This is certainly not the president I thought I voted for."

Not the one I expected either. Exactly what has "Changed"

Nobody went to jail for torture or war crimes either.

If criminals never pay a price for their crimes they will be back to pull bigger capers next chance they get.

These guys wouldn't be getting a bonus if they were where they belonged. Instead they are probably dreaming up their next attack designed to bleed the last drop of wealth out of every American they can bleed.

[Enthusiast]

17. Like this caper?

http://www.thenation.com/doc/20100111/greider

[Hubert Flottz]

28. "Kent Conrad of South Dakota and Judd Gregg of New Hampshire-"

Thanks for the link...

Looting Social Security, Part 2

Snip...

But the assault on Society Security, we knew, would come back sooner or later because many of Obama's lieutenants are devoted to Peterson's fiscal logic. Budget director Peter Orszag once co-authored a "reform" plan that would raise the payroll tax on young workers and cut benefits for older people near retirement. Isn't that clever? Pinhead economists evidently think that workers won't notice. Now the billionaire is cranking up another fight. We should finger him again, big-time, and all those who willingly collaborate in his plot.

As a candidate, Barack Obama said all the right things about Social Security and described the modest adjustments that would solve any long-term problems. But we learned during the last year not to trust fuzzy expressions of good intentions. We need to bang on the president right now and demand explicit commitment to oppose the sleight-of-hand proferred by Peterson, Conrad, Gregg and others.

Likewise, people need to confront Harry Reid and Nancy Pelosi immediately. It has been reported the two Congressional leaders are prepared to go along with this ugly ploy. I find that hard to believe, but we need to find out--now--because Conrad and Gregg and their rich friend intend to demand the "commission" legislation be included later this month when Congress votes to raise the federal debt ceiling. That's clever timing designed to stampede members of Congress since, if the debt-ceiling measure is not enacted, government in theory might be shut down.

Maybe progressives should recruit some Democratic senators who will stage a progressive filibuster. Let's see how Harry Reid deals with that. Or maybe progressives in the House can recruit some bipartisan support in Republican ranks. Above all, people need to make a lot of noise, because this issue represents one more fleecing for people already struggling. If the Democratic party and the Democratic president decide to go down this road, arm-in-arm with the billionaire and the Washington Post, they may find themselves in a civil war much like the one tearing up the Republicans. Read More...

http://www.thenation.com/doc/20100111/greider

[sabrina 1]

33. The Privatization of SS was one of Bush's failures.

He did so well on all the rest, but he failed on that. I remember his 50 state tour, but he found out that he couldn't sell the idea of interfering with SS as easily as he sold two wars.

But it's never been 'off the table'. I believe it will be Obama's next big move. Wall St. has wanted to get their hands on all that money for so long.

They won't start until after the 2010 election. Pushing that along with the Health Insurance Bailout would be too risky. But I'm willing to bet that starting in December we'll begin to hear how important it is to 'overhaul' Social Security, and right here on this board, people will support it.

Presidents appear to be nothing more than powerful salespeople for whoever really runs this country. They have an agenda and it's mostly about money and even more power.

I think all candidates for Congress should be asked how they will vote on privatizing SS after they get to DC. Because it is not going to go away. It's been difficult for them, but if they sell it right, the way Obama was able to sell, (to some people anyhow) that a Public Option wasn't that important. I can't believe people bought it, but they did.

[Enthusiast]

38. Sabrina, so right you are. nt

[Joe Chi Minh]

32. Could not the case be made in the courts that they behaved fraudulently?

Risk models? It's as if Distillers had blamed a faulty bunsen burner in one of their laboratories for the Thalidomide tragedy.

And why do you contend that its putative formal legality is 'the point'? Surely, the point is that it was actually criminal in an historic way and to an historic degree, in that it appears to be leading to a world-wide economic cataclysm, even before Peak Oil fully kicks in.

[fasttense]

13. Wall Street had become one giant casino.

"Until Wednesday, Goldman had insisted that it was merely managing its risks when it placed "hedges," in the form of wagers against the housing market, various venues including in secret offshore deals, with insurance giant American International Group and on a private London exchange.

In November, McClatchy reported exclusively that Goldman failed to tell investors about its contrary bets while selling $39 billion in risky mortgage securities it had issued, and another $18 billion in similar bonds issued by other firms. The Securities and Exchange Commission and Congress are investigating Goldman's swap dealings, said knowledgeable people who asked not to be identified because of the sensitivity of the issue.

While conceding that its contrary bets were improper, Blankfein said that in most cases Goldman took those positions to offset bets it had underwritten for clients seeking to wager on a housing downturn."

These financial firms were making book. They were taking bets on both sides to offset their losses against each other. Just like a good bookie does. The problems was that when the bets came due, AIG and other players couldn't pay up.

Don't tell me Wall Street is any better than any casino. The difference is that they are playing with other people's money and now they are playing with our tax dollars.

For being bad bookies, the CEOs now want their cut.

[aquart]

15. Nuh uh. The casino lets you go broke and shoot yourself.

[dixiegrrrrl]

24. You are right.

Goldman has also been accused of "front-running": getting a peek at the cards before they bet.

"A senior Goldman Sachs executive sent an e-mail message to clients on Tuesday disclosing that the firm’s Fundamental Strategies Group might have shared investment ideas with the firm’s proprietary trading group or some clients before sharing them with others."
As Denninger phrased it:
"That is, they reserve the right to tell their own internal trading group that they're about to recommend that you buy or sell something before they tell you.
"exactly why is it that Goldman (and I presume other big trading houses) share these "trading ideas" in the first place? Is it to make you money, or are they undertaking all this "work" to provide their prop desk with the ability to get in front of you and gain (yet another) advantage?"

[Roland99]

14. What? How can God have been wrong?

[stuart68]

16. Goldman is too well connected

into the administration, so nothing will happen. This was the mea culpa, so now we can move along. Got to get the to the carbon trading scam next to cover the next round of bonuses.

[barbtries]

18. prosecutions, please

[No Elephants]

19. Oh, dear. I find this so terribly hard to believe. Whodda thunk it?

Everyone who dealt with derivatives and sub prime mortgages did something improper, and most knew it.

Thanks, Reagan, Clinton, Dummay and Congresses of both parties for making the stripping of America by banks and Wall Street possible. And good luck with your encore, giving whatever is left to Big Health.

Of course, big Military Spending has been around since before Eisenhower tried to warn us about the "military industrial complex..

Wake up, America.

On second thought, never mind. It's probably too late. Just leave the financial, ecological and Constitutional disasters for your kids, grandkids and great-grandkids to deal with, if they possible can.

Let's just focus on whatever trivia they want us to focus on and do nothing. It's so much easier. And the stitching on the Emperor's new clothes is beautiful, no matter how many fools try to tell us there are no clothes.

[Joe Chi Minh]

34. Very far from the truth. It's called, 'subprime' because they knew they were

selling their mortgages to people who do not have a financial clue; in fact, it was the reason why they were poor - and are, now, doubtless, very much poorer, thanks to the reptilian predators, such as Goldman Sachs. Harry Lime, thou shouldst be living now.

[mbperrin]

20. Gosh, whoda thunk that selling someone a house, then taking out

an insurance policy on it and the owner and arranging for it to burn down with the owner it and collecting the proceeds for yourself was wrong?

Hmmmmmm......

[DiverDave]

21. Of course they broke the law

they KNEW nothing would happen to them.
And looky here, they ADMIT IT!

You know we are screwed when the rich fucks rub our noses in their criminal actions, because if they turn off the spigots of cash, well so long senator, congressman...

[Bluenorthwest]

22. Great crimes that nearly destroyed the country

and he calls it 'improper'? They should be in prison.

[The Backlash Cometh]

25. What was Sach's penalty for admitting the crime?

Nothing. That's how the system works. Fucking crooks.

[formercia]

27. So, we did something improper.....

There's nothing you pissants can do about it, because we own you and the mule you rode in on.

[Joe Chi Minh]

31. How could Blankfein not have 'made the surprising concession?' There must be

vast documentation on the subject.

'Blankfein and senior officers of three other of the nation's most prominent banks told the panel that serious flaws in their risk models and business practices.'

A nice conflation of a technical flaw with the matter of a massive character flaw. And no they didn't contribute to the breakdown; the latter, alone, caused it.

'.... when it made huge bets on a housing downturn while peddling as safe more than $40 billion in securities backed by risky U.S. home loans.'

Huge bets to nothing, knowing what they knew. No risk involved. To them. Neither does 'risky' come anywhere near describing the doomed reality.

[Smashcut]

35. Yeah, it's called FRAUD.

And if the financial "industry" were treated like any other business sector in the country, that's how it would be punished at law.

[pleah]

36. Banksters to Commission:

Yeah, we did it. What ya gonna do about it?

Commission: Probably nothing.



:(

[unkachuck]

37. "...made huge bets on a housing downturn...

...while peddling as safe more than $40 billion in securities backed by risky U.S. home loans."

....so they profited from creating a bubble, then crashed the bubble so they could profit from the crash....

....to my untrained eye, I believe we have a 'planned econmy'....an economy planned by organized crime....tell Adam Smith to stick his 'invisible finger' up his ass....