I would have updated my previous post with a link to this story, but that window of opportunity had already closed. So… since this appears to be a much bigger story, with a lot more scope for prosecution, it deserves its own post. (Hopefully, we’ll learn a lot more from emptywheel.)
There are some very good reasons why this story was McClatchy’s number one emailed story today. It is lengthy, and I’m going to have to read it again, since Finance is not my natural language. I have learned one thing, however, in recent weeks about the proper role of hedge funds in our economy. They can act as watch dogs that sniff out the unhealthy and non-viable companies and brokerage houses that can weaken or dilute an economy. No where, though, have I read that a proper role of a hedge fund may be to drive its own umbrella economy to the very brink of disaster. Nor did I read that it may properly drive it over the edge.
I just can’t wait to see how congress deals with this. For now, it seems the FBI is investigating. How poetic! [I must have dreamt that part, since I can't find it now.]
Apparently, Goldman Sachs (aka, the revolving door to the Fed) may have violated securities laws when they promoted risky mortgages as AAA-rated and sold them to various unwitting third parties.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
[...]
For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bubble burst.
[a much longer ...]
COMING TOMORROW …from McClatchy
Since the economic collapse that swept millions of Americans out of their jobs and homes, Goldman Sachs has moved aggressively to recover its losses. The firm is pursuing marginally qualified borrowers into state courts federal and bankruptcy across the country and seeking to seize their homes. McClatchy examines one couple’s multi-year attempt to get Goldman to admit that it had purchased their mortgage.
Frankly, I see a massive Karmic debt looming for Goldman Sachs, and especially for any of its senior management who may have known about this alleged scam. What else can be the proper outcome for applying one set of rules for one’s own "survival," yet a completely opposite set of rules when dealing with others who are far more vulnerable, since most struggling homeowners (the ones I know, anyway) cannot be considered "too big to fail."
Again, Pluto in Capricorn is not a pretty sight, but when we get to the other side, I expect better things.
I hope the length of McClatchy’s story will not discourage others from reading it. A large part of the article is a list or catalogue of possible or potential actions that Goldman Sachs may face, as well as some suits that they have already settled.
Lots of things to discuss here…
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Violated security laws? No doubt. But, recall…
Also…
Dang, Karen… I was waiting for something like this. Maybe McClatchy can take on JPMorgan Chase next. (Too bad they’re the only ones doing it, and on shaky ground themselves…)
Naturally, bystander. We honestly cannot expect much from the SEC, nor from that 29-year-old “plant.”
That is why I was so glad to read that the FBI is investigating, but now I can’t find where I read that. Did I dream it?
This could be the making of McClatchy, if they can figure out how to market the story the way that British paper marketed their story on parliament’s really dodgy expense reports. [fingers crossed]
You bet Your Bippy, and then they had an inside man, to take care of them even more. A congress bought and paid for, and a legal system that would leave them alone.
Al Capone could have taken over the world had He been so lucky.
Goldman Sachs and the other TBTF are all criminal enterprises. They serve no useful market function. They do not produce wealth but rather siphon money out of the markets on a daily basis. In the last quarter, Goldman had only two days where it didn’t make money and it had several days where it made over a hundred million (yes, in a single day). Most of the financial industry as well as those who regulate it belong in jail, plain and simply.
Legalized Extortion while Fox (GOP), guards the hen house. —GWB – Keep labor cheap, mission accomplished.
Let’s get specific – by name.
Goldman Sachs and JP Morgan Chase and Exxon/Mobil and The FED, and the IRS, and the CIA, and the CFR are effectively one. The ONE who benefits the most, and controls their schemes, is ONE DAVID ROCKEFELLER….The head of the beast in the US. He works for the House of Rothschild and Israel and the Crown, while GHW Bush works for him. Insider trading doesn’t even begin to tell the entire story. There is NO MARKET – only the perception of one. They have long ago looted the actual “money.” They are short now for the coming final crash – of their own making.
It’s time to name names and arrest the individuals at the top of the pyramid – returning their ill-gotten gains to the people.
These are not mere “companies.” These entities are used by actual people with actual names to pull off actual conspiracies. There are laws in place to arrest the people responsible at the top.
CALL THEM OUT BY NAME.
It’s just so tragically frustrating that the very people who have created the problems in our economy still are in charge of the infrastructure where they can do more harm. Obama has been a disappointment on so many fronts (failing to prosecute for torture, not restoring the Constitution, not ending the wars, etc.), but his continued enabling of Goldman Sachs as the leading plunderer of our economy is very high on the list.
Perhaps the unifying theme on all those failures is lack of accountability. Here, there is no accountability for those who destroyed our economy. In fact, they are given the tools to destroy it again.
KarenM thanks for the reminder; I’d bookmarked the McClatchy article as ‘catch up on the weekend’ reading, but you’ve definitely whetted my appetite!
And FWIW, Nomi Prins’ “It Takes A Pillage” really needs to be on the ‘must read’ list for most members of Congress ASAP.
I think that anyone who can really explain finance to the American public is performing a critical public service these days. Thanks again for the reminder.
Like JimWhite, it’s the lack of accountability that is really crystallizing the contempt of people like myself who are thoroughly irritated at this point.
The committed appointed by Congress to dig into what happened needs to be very, very good at helping people connect the dots — I want good solutions, not teabaggy loony tunes that are ineffective and irresponsible. We really need to **understand** what happened so it can be completely reworked.
Keep hoping but don’t hold your breath. McClatchy did yeoman’s work on Iraq and no one really listened.
True, but I would have listened. Only my local paper, then a K-R paper, did not carry the Strobel/Landay stories questioning the invasion of Iraq. Now… I have McClatchy as my home page at home and at work.
In any case, I won’t be holding my breath.
The problem is, as Dick Durbin put it so succinctly… Congress is owned by lobbyists and corporate interests.
It is not in congress’s vested interest for us to be in any way knowledgable about finance.
Thanks to everyone for all of your comments and links.
I looked on McClatchy’s website earlier today for the next “upcoming” story, but I didn’t find it, yet.
The WS corporatists know how to work the devil in the details according to this HuffPo article yesterday:
An amendment offered by Rep. Gregory Meeks (D-N.Y.) and unanimously approved by a voice vote in the House Financial Services Committee specifically deletes a provision in the Financial Stability Improvement Act of 2009. The two draft versions of the bill originally called for the proposed overseer of threats to the entire financial system to prepare an annual report to Congress describing, among other things, “significant financial market developments and potential emerging threats to the stability of the financial system.”
But on Thursday, Meeks’ amendment deleted that language and instead compels the council to describe:
“Significant financial and regulatory developments, including insurance and accounting regulations and standards, and assesses the impact of those developments on the stability of the financial system.” Thus, “potential emerging threats” was replaced by “financial and regulatory developments.”
Groups advocating for financial reform criticized the move. “Instead of looking out and actually trying to protect the system, the goal appears to be to make sure we have the regulatory structure that is most amenable to corporate interests of anywhere in the world,” said Heather Slavkin, senior legal and policy adviser at AFL-CIO. “It’s a complete shift in the purpose and goal of the [systemic risk regulator].
Source: New Bill Would Keep Public In The Dark About Threats To Financial System
http://www.huffingtonpost.com/2009/11/06/house-panel-may-keep-publ_n_348685.html
I knew I’d seen this somewhere, but it took awhile to recall…
Goldman Sachs was Barack Obama’s “No. 1 private contributor.”
Thanks, Karen!
Les Leopold when he visited on salon posed the question as to why GS never had windfall profits tax levied when AIG got to pay them back the $13 billion fromt he bailout. that was the LEAST they could have done is pay on that.
Let’s see. Was the government really capable of doing anything about it and has President Obama had the time to do something about it? While neither question absolves anyone, and certainly doesn’t absolve the President for not trying harder, there are some parts of this that were set before he took office.
First off, the takeover hold of economics theory by the Fed under Ayn Rand protegé and smoothed business cycle demi-god Alan Greenspan. Most of the economics journals and all of the fresh PhD’s careers beholden to a single institution that was recruited from the big banks in the first place but was given regulatory powers.
When GWB came into office, the announcement of the Ashcroft Justice Department that it would not pursue punitive measures against convicted monopolist and predator Microsoft, announced to the world that major corporations and billionaires were no longer under the rule of law.
The Supreme Court’s announcement that Dick Cheney’s kitchen cabinet of energy companies had the right to rape the Califoria electricity market meant that further “smartest guys in the room” were beyond the impunity event horizon.
The rewriting of corporate tax law so that corporations could make profits in foreign countries and bring the money into the U.S. at 4-5% tax rates, as opposed to the 30% corporate tax rate for profits made domestically led to most of the corporations establishing as their first concern their foreign offices, with primary loyalty to another country at best, and no one in most cases. In general, moving headquarters and departments to avoid laws became the norm, with AIG moving its scumbag department to Britain, and the credit card companies moving their usury departments to South Dakota.
As I put up on Jim’s post, the government didn’t have sufficient people on its regular payroll and manning positions to fulfill the mandate of the stimulus package. That’s because whole government departments have been gutted, with anti-department political heads having been in charge. But the costs never went down, because the government has been hiring contractors at twice the cost, some of whom, in some departments are so independent they have their own armies and torturers.
Political intelligence is now the newest way of doing financial business. It’s insider trading on the business of the government and isn’t illegal because of narrowly crafted insider trading regulations. There are some who even say the nerve center of the financial world has moved from Wall Street to Washington because it’s so lucrative.
The redirection, under the Department of Homeland Security re-orgs and Intelligence re-orgs, of 50% of the federal agents to international terrorist intelligence and foreign agent surveillance removed 50% of the federal government’s crime fighting abilities, while diversion of 80% of what was left to internet crime, with 50% of those on internet crime dealing solely with child pornography left the FBI with about 10% of its workforce attending traditional duties. The duty that was most scrapped? White Collar Crime.
So I guess just maybe this shows that in the absence of any government regulations, enforcement, or bureaucracy produces panacea.
I’m not surprised that the Obama administration hasn’t fixed it all yet, and shows little interest in doing so. Seen any re-regulation pass the House yet? This stuff didn’t start with Goldman-Sachs.