Once again the Obama Department of Justice has reached a settlement with a To Big To Fail Bank for pennies on the dollar and let the perpetrators walk away without criminal sanctions or penalties. Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. …
Tag: Goldman Sachs
A Goldman Sachs executive resigned in a lengthly and scathing op-ed in the New York Times. Greg Smith worked at Goldman Sachs for 12 years, rising to executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa. His latter shreds Goldman Sachs policies and employees:
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for […]
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients – some of whom are sophisticated, and some of whom aren’t – to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Smith lays the blame for this climate of greed at the feet Goldman’s CRO, Lloyd Blankfein and the company’s president, Gary Cohn.:
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
Banking, and finance, is a business that has to be first and foremost about trust. The reason you’re paying your broker/money manager such exorbitant sums is because that’s the value of integrity and honesty: You’re paying for the comfort of knowing he has your best interests at heart.
But what we’ve found out in the last years is that these Too-Big-To-Fail megabanks like Goldman no longer see the margin in being truly trustworthy. The game now is about getting paid as much as possible and as quickly as possible, and if your client doesn’t like the way you managed his money, well, fuck him – let him try to find someone else on the market to deal him straight.
These guys have lost the fear of going out of business, because they can’t go out of business. After all, our government won’t let them. Beyond the bailouts, they’re all subsisting daily on massive loads of free cash from the Fed. No one can touch them, and sadly, most of the biggest institutional clients see getting clipped for a few points by Goldman or Chase as the cost of doing business.
Speaking at the Atlantic Economy Summet in Washington, DC, former Federal Reserve Chairman, Paul Volker, said that Smith’s letter proves the need for the his rule
“[Trading] is a business that leads to a lot of conflicts of interest. You’re promised compensation when you’re doing well, and that’s very attractive to young people. All these firms can attract the best of American graduates, whether they’re philosophy majors or financial engineers, it didn’t make any difference,” Volcker said.
“A lot of that talent was siphoned off onto Wall Street. But now we have the question of how much of that activity is really constructive, in terms of improving productivity in the GDP,” Volcker said. “These were brilliant years for Wall Street by one perspective, but were they brilliant years for the economy? There’s no evidence of that. The rate of economic growth did not pick up, the rate of productivity did not pick up, the average household had no increase in their income over this period, or virtually no increase.”
Volcker noted that commercial banks hold the money of average Americans, and are insured by the federal government. “Should the government be subsidizing or protecting institutions that…are essentially engaged in speculative activities, often at the expense of customer relations?”
Yves Smith at naked capitalism, who also has been at the Atlantic conference weighed in that those good old days of the ’90’s weren’t as “rosy” as Smith remembers:
Earth to Greg: the old days were not quite as rosy as you suggest, but it is true that Goldman once cared about the value of its franchise, and that constrained its behavior. So it was “long term greedy,” eager to grab any profit opportunity but concerned about its reputation. I knew someone who was senior in what Goldman called human capital management, and even though, in classic old Goldman style, he was loath to say anything bad about anyone, he was clearly disgusted of Lloyd Blankfein and the crew that took over leadership after Hank Paulson, John Thain and John Thornton departed. Before the firm before had gone to some lengths to preserve its culture and was thoughtful about how to operate the firm. One head of a well respected investment bank told me in the mid 1990s: “It isn’t that Goldman has better people. All the top firms have good people. It’s that they make the effort to manage themselves better than anyone else.” That apparently went out the window when Blankfein came in. My contact said all his cohort cared about was how much money they could make in the current year.
The shares dropped 3.4 percent in New York trading yesterday, the third-biggest decline in the 81-company Standard & Poor’s 500 Financials Index, after London-based Greg Smith made the accusations in a New York Times op-ed piece.
Stephen Colbert “disapproves” of Greg Smith, after all Lloyd Blankfeid said Goldman was just doing “God’s work.”
(Cross-dressed from The Free Speech Zone)
Goldman Sachs Group Inc. is wasting no time fighting back against a disgruntled executive who lit up the Internet Wednesday morning by tendering his resignation via the op-ed pages of the New York Times.
The executive, Greg Smith, blasted Goldman for betraying its historic culture and putting profits ahead of client interests. He said Goldman executives talk openly about ripping off their clients, who sometimes are referred to internally as “muppets.” His incendiary take on Goldman culture quickly became a flashpoint on Twitter and elsewhere. It doesn’t exactly jibe with doing “God’s work.”
A Goldman official confirmed that Mr. Smith, who worked for the Wall Street firm for nearly 12 years, most recently in London, resigned from Goldman this morning.
Sometimes a person or organization becomes so powerful and Evil that they appear cartoonish.
It might seem impossible to find a similar character outside of a James Bond movie. After all, who really wants to take over the world and has a plan to do it, right?
So attributing truly Evil intentions to a public organization, and voicing those concerns, automatically puts one into the land of tinfoil-hat, konspiracy lunatics.
And yet there is an ongoing theft taking place in global finance on such a scale that is threatening the concept of democracy itself, and Goldman Sachs has their fingerprints all over the crime scene.
At what point do we suspend our disbelief and embrace reality? These guys really are Evil.
“We are doing God’s work.”
– Lloyd Blankfein, CEO Goldman Sachs
The Independent had a great graphic recently that displayed the New Reality in Europe.
As the financial crisis has deepened in Europe, Goldman Sachs has taken over the halls of power.
After receiving a $10 billion of tax payer money in the financial crisis bailout and making a record $2.7 billion profit in the first quarter of 2011, Goldman Sachs will lay off 1,000 American workers and out source their jobs to Singapore.
The jobs in Singapore are likely to be “high-paying, skilled positions in sales and investment banking,” the same types that are likely to be cut in the firm’s domestic operations, according to one person with knowledge of the matter. This person added that the firm has recently briefed people in Washington about the new overseas jobs because it “is afraid of the fallout” as it plans to slash $1 billion in costs over the next year — a move that will mean a significant, though still undetermined number of layoffs across its operations, though people close to the firm expect the biggest hit to come from the US. Goldman also plans a much smaller expansion in its Brazil unit and in India.
Last year, the Republicans in the Senate, aided by Sen Joe Lieberman and four Democrats, blocked a bill that would have ended tax breaks for companies that shift American jobs overseas. Over the last decade these mega corporations have laid off nearly 3 million American while hiring 2.4 million overseas. These jobs are not low tech jobs as these companies claim but but jobs held by highly educated workers who never expected to find themselves among the unemployed.
Leave it to the District Attorney of Manhattan to do what the Obama DOJ failed to do, investigate properly the fraud that led to the economic crisis.
Goldman Receives Subpoena Over Financial Crisis
By Andrew Ross Sorkin and Susanne Craig
Goldman Sachs has received a subpoena from the office of the Manhattan district attorney, which is investigating the investment bank’s role in the financial crisis, according to people with knowledge of the matter.
The inquiry stems from a 650-page Senate report from the Permanent Subcommittee on Investigations that indicated Goldman had misled clients and Congress about its practices related to mortgage-linked securities.
Senator Carl Levin, Democrat of Michigan, who headed up the Congressional inquiry, had sent his findings to the Justice Department to figure out whether executives broke the law. The agency said it was reviewing the report.
The subpoena come two weeks after lawyers for Goldman Sachs met with the attorney general of New York’s office for an “exploratory” meeting about the Senate report, the people said.
From Talking Points Memo:
The subpoena is apparently based on information contained in a Senate Permanent Subcommittee on Investigations report on Wall Street’s role in the housing market collapse. The report was critical of Goldman Sachs, and accused the bank of misleading buyers of mortgage-linked investments.
Former New York governor and attorney general general, now CNN talk show host Eliot Spitzer appeared on Anderson Cooper’s “360” with “Rolling Stone” editor and blogger, Matt Taibbi discussing the two year investigation of the financial institutions that “plunged the U.S. economy into a painful recession”. The Senate subcommittee’s 650 page report that was released on April 13th is a scathing indictment of cover-ups, lies, the conflict of interest of regulators and the cozy relationship with ratings agencies. During the discussion, Spitzer challenged Attorney General Eric Holder to either prosecute Goldman Sachs or resign:
SPITZER: Senator, I’m going to take a leap. I’m going to say it out loud. Very directly.
Goldman Sachs, you lied to the public. You lied to your clients. You’ve got a problem. You come on the show. Sue me. I don’t care. You lied to the public, you should be prosecuted.
I’m going to say it right now. And I hope they are.
It isn’t surprising that the “powers that be” went after Spitzer because this is the man who should be the US Attorney General.
For all those who had been hoping for swift but fair judicial treatment for criminal bank actions … dont hold your breath. “The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision have spent the past few days completing the settlements with some of the largest U.S. banks, including Bank of America Corp, Wells Fargo & Co, JPMorgan Chase and Citigroup Inc. The pacts would resolve only part of a large probe involving a group of 50 state attorneys general and about a dozen federal agencies.” But don’t worry, banks won’t actually have to part with even one dollar:
For all the “investigations” into criminal behavior by the largest Wall Street banks it is Main Street that has felt the pain. According to the NYT some 6.7 million homes have already been lost in the housing bust, and another 3.3 million will be lost through 2012. According to Zillow a staggering $9 trillion in home equity has been lost since the real estate market peaked in June 2006.
Caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the savings and loan crises in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.
A lawsuit filed against the SEC over the Madoff ponzi scheme was ruled on Tuesday. The suit alleged that the SEC had been repeatedly tipped off to the Madoff situation and flat-out failed to address it.
In any event, a federal judge on Tuesday dismissed the suit, which alleged the SEC had acted with “gross negligence.” U.S. District Judge Laura Swain ruled that the plaintiffs had failed to “identify any specific, mandatory duty that the SEC violated.”
Nevertheless, Swain excoriated the SEC, calling its behavior “sloppy,” “uninformed,” and “irresponsible.” That said, continued Swain, “that the conduct in question defied common sense and reeked of incompetency does not indicate that any formal, specific, mandatory policy was ‘likely’ violated.”
It has become all to apparent that in todays Washington, Wall Street environment that being a bumbling idiot, even to the point of criminal will only get you a “strongly” worded reprimand and, quite possibly, a promotion.
Oh, wouldn’t this be lovely? Now lets see if Timmy and Bill can convince Eric that there is nothing to see here.
Goldman Sachs Group Inc. (GS) misled clients and Congress about the firm’s bets on securities tied to the housing market, the chairman of the U.S. Senate panel that investigated the causes of the financial crisis said.
Senator Carl Levin, releasing the findings of a two-year inquiry yesterday, said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought the complex securities known as collateralized debt obligations without knowing the firm would benefit if they fell in value.
The Michigan Democrat also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs Chief Executive Officer Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.
Goldman criticised in US Senate report
By Tom Braithwaite in Washington and Francesco Guerrera and Justin Baer in New York,
April 14 2011 00:15 | Last updated: April 14 2011 00:15
US Senate investigators probing the financial crisis will refer evidence about Wall Street institutions including Goldman Sachs and Deutsche Bank to the justice department for possible criminal investigations, officials said on Wednesday.
Carl Levin, Democratic chairman of the powerful Senate permanent subcommittee on investigations, said a two-year probe found that banks mis-sold mortgage-backed securities and misled investors and lawmakers.
“We will be referring this matter to the justice department and to the SEC (Securities and Exchange Commission),” he said. “In my judgment, Goldman clearly misled their clients and they misled Congress.”
Last year, Goldman paid $550m to settle SEC allegations that it defrauded investors in Abacus, a complex security linked to subprime mortgages.
Naming Culprits in the Financial Crisis
By Gretchen Morgenson and Louise Story
New York Times
A voluminous report on the financial crisis by the United States Senate – citing internal documents and private communications of bank executives, regulators, credit ratings agencies and investors – describes business practices that were rife with conflicts during the mortgage mania and reckless activities that were ignored inside the banks and among their federal regulators.
The 650-page report, “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” was released Wednesday by the Senate Permanent Subcommittee on Investigations…
…The result of two years’ work, the report focuses on an array of institutions with central roles in the mortgage crisis: Washington Mutual, an aggressive mortgage lender that collapsed in 2008; the Office of Thrift Supervision, a regulator; the credit ratings agencies Standard & Poor’s and Moody’s Investors Service; and the investment banks Goldman Sachs and Deutsche Bank.
“The report pulls back the curtain on shoddy, risky, deceptive practices on the part of a lot of major financial institutions,” Mr. Levin said in an interview. “The overwhelming evidence is that those institutions deceived their clients and deceived the public, and they were aided and abetted by deferential regulators and credit ratings agencies who had conflicts of interest.”
Music was Curtis “50 Cent” Jackson’s second career. News reports say he began dealing crack at the age of twelve, after the murder of his coke-dealer mother. Early tracks like “Ghetto Quran” and “How to Rob” reflect a brutal, street-hustling life, and Jackson has the bullet wounds to match. He’s talented, wildly successful, and I sure wouldn’t mess with him.
But when he starts mixing social media with pumped-up investment pitches, 50 Cent is moving into Goldman Sachs territory. “Fitty” reportedly earned millions for touting a stock on Twitter, without disclosing that he owned shares in the company. How does that stack up against Goldman’s own social media deal with Facebook? When you move into the stock market, you’re going where the real gangstas roll. . . . . .
“Ok ok ok my friends just told me stop tweeting about HNHI so that we can get all the money. Hahaha check it out its the real deal.”
50 Cent about a marginal stock all weekend and into early Monday, calling it “BIG MONEY” and saying “you can double your money right now.” The effect was mindblowing.
Jackson’s credited with moving the stock of a company called HNHI by $50 million dollars in one day, even though its own auditor reportedly “expressed concerns about its financial future.” Fitty didn’t mention that he held 30 million shares of the stock, which he picked up for $750,000 last fall. Yesterday’s surge reportedly netted him somewhere between $8.7 million and $10 million. No wonder so many news accounts repeated the name of his hit album, Get Rich or Die Tryin’.
HNHI increased in value by about 200%. Even after it dropped more than 23% today, Jackson was way ahead of the game. Fitty’s attorneys presumably got a little worried, because the disclaimers started appearing late Monday: “HNHI is the right investment for me it might not be for u! Do ur homework,” “I own HNHI stocks thoughts on it are my opinion. Talk to your financial advisor …”
You think Americans out of work and losing their homes are having problems? Just read about how tough times are for our “friend” on Wall Street. Susanne Craig at the New York Times writes ‘Goldman Wrestles With a Weak Quarter‘.
Goldman posted net revenue, or revenue minus interest expense, in its investment bank of $1.1 billion, up 24 percent from the period a year earlier. Trading, however, was another story. Net revenue in its powerful fixed-income, currency and commodities unit dropped 37 percent, to $3.8 billion. And net revenue from equities trading and commissions fell 33 percent, to $1.9 billion.
The slowdown in trading comes at a difficult juncture for Goldman. It has been the target of criticism from Washington and Main Street over its quick return to huge profits and big bonuses months after the financial crisis, when financial firms, including Goldman, were forced to accept government help.
No firm returned to profitability faster than Goldman, which set aside $3.8 billion in compensation in the third quarter quarter. It will not decide what it will pay out until the fourth quarter, but so far this year it has put aside $13.1 billion in pay for its 35,000 employees.
The banksters have sucked dry much of the American economy. When a parasite totally consumes its host, it needs to find a new host or die. Obviously, there is still is American economic blood left to suck, as demonstrated by Goldman’s looting of $1.9 billion in the 3rd quarter of 2010. But billions of dollars in profits and a concern that $13,100,000,000 won’t be enough to keep 35,000 employees in caviar come New Year’s 2011 do not constitute a “difficult juncture”.
Crossposted at Daily Kos
THE WEEK IN EDITORIAL CARTOONS
This weekly diary takes a look at the past week’s important news stories from the perspective of our leading editorial cartoonists (including a few foreign ones) with analysis and commentary added in by me.
When evaluating a cartoon, ask yourself these questions:
1. Does a cartoon add to my existing knowledge base and help crystallize my thinking about the issue depicted?
2. Does the cartoonist have any obvious biases that distort reality?
3. Is the cartoonist reflecting prevailing public opinion or trying to shape it?
The answers will help determine the effectiveness of the cartoonist’s message.
Clean Up Crew by Cam Cardow, Ottawa Citizen, Buy this cartoon