goldman sachs charged with subprime fraud - Page 2 - Tilted Forum Project Discussion Community

aceventura3 · 04-20-2010, 11:38 AM

Quote:

Originally Posted by roachboy

ace, had you framed it earlier as you did in this last post, i wouldn't have referenced you.

Perhaps, you can simply give this holier-than-thou stuff a rest, I will frame my comments the way I want - if you don't like it, you are free to ignore my posts. There is no need for you to attempt to make your approach appear superior to another.

Tully Mars · 04-20-2010, 12:00 PM

Quote:

Originally Posted by loquitur

So this isn't much of a cut and dried case, and (as legal cases usually do) this will turn on the definition of legal terms like "material."

You're right it's not. Jon Stewart had a segment on the other night (last night?) He pointed out that most of the actions taken by Goldman Sach's in this case are not illegal at all. If what he stated is true I'm kind of shocked to find out how much BS is legal. Much seems like out and out legal robbery. It's seemed from watching and listening to him that only if Paulson's short positions were not disclosed as being short is any of this illegal.

Either that or I misunderstood the whole segment. Which given how complicated this whole thing is is completely possible.

That... Or "The Daily Show" isn't an actual news show and Jon's just being funny.

Anymore it's really hard to tell.

Cimarron29414 · 04-20-2010, 12:08 PM

Seriously? John Stewart?

(Sorry, couldn't resist.)

Tully Mars · 04-20-2010, 12:22 PM

No problem.

Sadly, Stewart makes more sense to me then just about any on MSNBC or FOX.

rahl · 04-20-2010, 12:46 PM

Stewart had a great interview with jim cramer from mad money. He totally called him out about all the bs that went on over the past decade and how people like him and others at cnbc just perpetuate the cycle. click on the link in this article to watch the full video. It's long but worth it. Make sure you watch all three parts.

Jim Cramer On "Daily Show": Jon Stewart Hits Hard (VIDEO)

roachboy · 04-20-2010, 12:46 PM

i didn't imagine that the case would be straightforward and was a little surprised to see the sec---and by extension the administration--play this is such a narrow manner. i think, however, that things may soon take a turn if germany and, as of this afternoon, the uk get on board with going after goldman on their own.

i'm not a lawyer, but what would be the forum in which germany, say, would file suit (or criminal charges) against goldman?

intuitively it seems to me that the way derivatives were traded, the speed with which they moved, the lack of transparency, etc.---and the transnational character of the markets for them---all militate for some transnational regulation, which would require international institutions/law that would be able to prosecute such. at this point, i've been researching the international court and a few other institutions in the context of my day gig, but haven't got a sense of whether that would be a venue, the wto would be one, or if the venue that would (in theory) be in a position to become a platform for transnational regulation of capital had yet to be elaborated.

i suspect that germany (again for example) could file suit in either us or german courts...

loquitur · 04-21-2010, 05:03 AM

Roachboy, Goldman does business pretty much in every money center, so any govt of any clout will have their hooks in to do some sort of enforcement. Once one jumps on board they all clamor.

As for this case, as I understand it what happened went something like this. John Paulson didn't like the mortgage derivatives market and wanted to bet against it, so he went to Goldman and asked them to put together and sell a vehicle he could use that would yield him a gain if the mortgage market tanked. Goldman did that (I don't pretend to understand the ins and outs of how these synthetics work, but so far as I can tell it's a package of contracts that relate to movements in the market for mortgages). Goldman then found a buyer, made full disclosure to the buyer of what was being sold, but didn't tell the buyer that the vehicle was put together at Paulson's request by Goldman.

So the question is: do you consider the fact that Paulson was the seller and had asked Goldman to put the package together to be material to the buyer, or is the material information the actual content of the vehicle that was being sold? Think of it this way: if you're buying a house, and you like the house and you run an engineering report and it's in good shape, should the seller have to tell you that it was custom built for the neighborhood drunkard? It's not an exact analogy, but that's more or less what the fight is about.

aceventura3 · 04-21-2010, 06:54 AM

Quote:

Originally Posted by loquitur

Roachboy, Goldman does business pretty much in every money center, so any govt of any clout will have their hooks in to do some sort of enforcement. Once one jumps on board they all clamor.

As for this case, as I understand it what happened went something like this. John Paulson didn't like the mortgage derivatives market and wanted to bet against it, so he went to Goldman and asked them to put together and sell a vehicle he could use that would yield him a gain if the mortgage market tanked. Goldman did that (I don't pretend to understand the ins and outs of how these synthetics work, but so far as I can tell it's a package of contracts that relate to movements in the market for mortgages). Goldman then found a buyer, made full disclosure to the buyer of what was being sold, but didn't tell the buyer that the vehicle was put together at Paulson's request by Goldman.

So the question is: do you consider the fact that Paulson was the seller and had asked Goldman to put the package together to be material to the buyer, or is the material information the actual content of the vehicle that was being sold? Think of it this way: if you're buying a house, and you like the house and you run an engineering report and it's in good shape, should the seller have to tell you that it was custom built for the neighborhood drunkard? It's not an exact analogy, but that's more or less what the fight is about.

I think a good comparison would be to a professional boxing match. After the fight, the government files a lawsuit against the promoter saying that the promoter did not disclose that the winner of the fight asked the promoter to put together a fight and wanted opponents he thought he could beat. And, also claiming that the promoter misled the loser into thinking he had a chance to win. Again, if we were not talking about professionals on an equal footing I could understand the SEC taking action, but this is looking like a joke more and more each day.

Tully Mars · 04-21-2010, 07:59 AM

Quote:

Originally Posted by loquitur

Roachboy, Goldman does business pretty much in every money center, so any govt of any clout will have their hooks in to do some sort of enforcement. Once one jumps on board they all clamor.

As for this case, as I understand it what happened went something like this. John Paulson didn't like the mortgage derivatives market and wanted to bet against it, so he went to Goldman and asked them to put together and sell a vehicle he could use that would yield him a gain if the mortgage market tanked. Goldman did that (I don't pretend to understand the ins and outs of how these synthetics work, but so far as I can tell it's a package of contracts that relate to movements in the market for mortgages). Goldman then found a buyer, made full disclosure to the buyer of what was being sold, but didn't tell the buyer that the vehicle was put together at Paulson's request by Goldman.

So the question is: do you consider the fact that Paulson was the seller and had asked Goldman to put the package together to be material to the buyer, or is the material information the actual content of the vehicle that was being sold? Think of it this way: if you're buying a house, and you like the house and you run an engineering report and it's in good shape, should the seller have to tell you that it was custom built for the neighborhood drunkard? It's not an exact analogy, but that's more or less what the fight is about.

See I don't think that Paulson's involvement in putting together the likely to fail mortgages and then having Sach's sell an interest in end product bundle is the issue. The problem was they lead other investors to believe Paulson was long on the investment not shorting it.

So basically it's like building a bunches houses out of crappy material, stuff you're pretty sure is going to fail and soon. Then telling potential buyers "these houses are so good even the builder himself owns one.' But failing to mention the builder does indeed own one of the homes but has taken out an insurance policy that pays 1000% of the homes worth if it fails.

aceventura3 · 04-21-2010, 08:18 AM

Quote:

Originally Posted by Tully Mars

See I don't think that Paulson's involvement in putting together the likely to fail mortgages and then having Sach's sell an interest in end product bundle is the issue. The problem was they lead other investors to believe Paulson was long on the investment not shorting it.

I doubt this was true given what we found out today:

Quote:

he government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson's position.

News Headlines

ACA appears to know Paulson was going to short the portfolio and they negotiated what was going to be in it. The very nature of the instrument says that there is a short position and a long position, a sophisticated investor who did not understand their risk and do due diligence - deserved to lose their money.

{added}

I guess I should include this for anyone not aware:

Quote:

ACA Capital Management was both the final clearinghouse of the portfolio of subprime mortgages and the company that took the biggest loss when the loans collapsed, according to the Securities and Exchange Commission's case against the Wall Street behemoth.

http://www.cnbc.com/id/36667165

ACA negotiated what was in the portfolio, knew Paulson was involved, knew Paulson was shorting, and Goldman is guilty of what????

{added}

And let's not forget, Goldamn lost money on their investment in the deal as well.

Tully Mars · 04-21-2010, 09:07 AM

Well your post is a little hard to follow but the link provided is pretty clear. If what Pellegrini is testifying to turns out to be true then there's likely is no case here. I don't find it that unusual to find people involve to make statements and testify contrary to what others have stated. Many involved in Enron stood up and made similar claims. The SEC seems to not put much value on this persons statement, might be a reason for that.

From your link-

Quote:

"We look forward to presenting a complete and accurate evidentiary record in court," SEC spokesman John Nester said in a statement to CNBC.

Plus, Sach's lost money on this? How? Sach's is the house. The house gets a cut win or lose. In fact it appears Paulson paid Sach's a fee of 15M to put the fund together-

Quote:

Paulson allegedly paid Goldmans a fee for putting the CDO together. His firm paid around $15 million. So at the risk of repetition: Paulson pays a fee for Goldman to create an instrument, which fails within a year . His firm makes $1 billion out of this failure.

Whole story here

aceventura3 · 04-21-2010, 11:31 AM

Quote:

Originally Posted by Tully Mars

Plus, Sach's lost money on this? How? Sach's is the house. The house gets a cut win or lose. In fact it appears Paulson paid Sach's a fee of 15M to put the fund together-

I have been reading a lot on this issue, here is one source:

Quote:

Goldman issued a second statement after the market closed saying that the firm had lost money on the deal in the S.E.C. case and that it provided investors with extensive disclosure on the deal. The firm said the losses in the deal came from the overall collapse of the mortgage market, not from the way the deal was structured.

S.E.C. Sues Goldman Over Housing Market Deal - NYTimes.com

Here is the statement from Goldman cited in the article:

Quote:

• Goldman Sachs Lost Money On The Transaction. Goldman Sachs, itself, lost more than $90 million. Our fee was $15 million. We were subject to losses and we did not structure a portfolio that was designed to lose money.

Goldman Sachs | Media - Goldman Sachs Makes Further Comments on SEC Complaint

Seaver · 04-21-2010, 12:44 PM

Ok... it may or may not have been illegal.

However, will you ever trust your money with Goldman Sachs? I sure as fuck won't, and the PR nightmare will probably be 10x worse than any legal action.

Tully Mars · 04-21-2010, 12:47 PM

So your source that Goldman lost money is Goldman? Well, Goldman and the NYT reporting regarding a company released statement?

I'd question them as a credible source. All this stuff has to be accounted for and reported. Anyone besides Sach's stating Sach's lost on the deal?

---------- Post added at 03:47 PM ---------- Previous post was at 03:45 PM ----------

Quote:

Originally Posted by Seaver

Ok... it may or may not have been illegal.

However, will you ever trust your money with Goldman Sachs? I sure as fuck won't, and the PR nightmare will probably be 10x worse than any legal action.

Which is why my guess is they'll settle and pay some fine. Paulson might be screwed though.

loquitur · 04-21-2010, 07:38 PM

nah, Paulson isn't accused of anything, I don't think.

I think people need to realize that the SEC had lots of reasons to feel a need to bring some kind of enforcement action, and to do that now. Not that Goldman is a bunch of angels, but still............

Tully Mars · 04-22-2010, 01:21 AM

I just figure at some point they have to toss someone to the lions.

Honestly Sach's may not have broken the law here. There's a ton of things they did that were perfectly legal that I can't believe are not illegal.

flstf · 04-22-2010, 07:34 AM

"Sounds to me like you guys are a couple of bookies".

YouTube - Billy Ray Valentine learns commodities

loquitur · 04-22-2010, 01:09 PM

Professor Bainbridge (UCLA Law School) speculates that the timing of the SEC complaint against Goldman was driven by a need to bury the Inspector General report on the SEC totally missing the Allen Stanford frauds. Make of this what you will:

Quote:

I agree that there's reason to be concerned about the timing of the suit, but I suspect the suit's not about helping Obama's Wall Street legislation. Instead, I suspect the WSJ got it right:

Last Friday, the same day that the government unexpectedly announced its Goldman lawsuit, the SEC's inspector general released his exhaustive, 151-page report on the agency's failure to investigate alleged fraudster R. Allen Stanford. Mr. Stanford was indicted last June for operating a Ponzi scheme that bilked investors out of $8 billion. He has pleaded not guilty.

Guess which of these two stories was pushed to the back pages? The SEC did its part by publishing the Stanford report so deep in its Web site that more than a few of our readers had trouble finding it. Yesterday, the SEC management's response to the report was available on the agency's homepage, yet it provided no links to the report itself.

Little wonder. The report is damning for an SEC that wants the public to believe it has turned the corner after the Bernie Madoff disaster. The commission has made young Fabrice Tourre of Goldman Sachs a household name for his debatable disclosures to institutional investors. But many individual investors will be more interested in learning the story of Spencer Barasch. He's the SEC enforcement official who sat on various referrals to investigate Allen Stanford and then, after leaving the SEC, performed legal work for . . . Allen Stanford.

In its own way, the Stanford calamity is arguably worse than the SEC's Madoff bungle. In the Madoff case, passionate outsider Harry Markopolos could find no one at the SEC who took the time to understand the scam, cared enough and had enough authority to shut down the fraud. In the Stanford case, we see numerous SEC insiders over many years urging—at times begging—the enforcement staff to take action, to no avail.

Either way, it ain't a pretty picture.

Marvelous Marv · 04-22-2010, 07:08 PM

Quote:

Originally Posted by filtherton

It will be interesting to see whether the congressional republicans can pull off their faux populism now that they've come out against doing anything to prevent this type of thing from happening in the future.

Sorry I got here late. I turn my back, and all of a sudden Harry Reid is a Republican.

Harry Reid dodges questions about Goldman-Sachs fundraiser for him

Quote:

...When news of Reid's Goldman Sachs fundraiser was circulated yesterday, NRSC spokesman Brain Walsh said, "One can only presume that Sen. Reid will be return these donations immediately." Today, Manley said the majority leader plans to keep the money.

Edit: I apologize that NBC employees can't spell.

filtherton · 04-23-2010, 07:31 AM

Quote:

Originally Posted by Marvelous Marv

Sorry I got here late.

I understand. I've heard it can take a while to comb Glenn Beck's semen out of your back hair.

Quote:

I turn my back, and all of a sudden Harry Reid is a Republican.

Is he threatening to filibuster?

roachboy · 04-23-2010, 09:32 AM

play nice, comrades. thanks.

Tully Mars · 04-24-2010, 01:17 AM

I see where Paulson's going to pony up for all the legal fees Sach's will incur-

Quote:

John Paulson told investors that his hedge-fund firm, not investors, will absorb any legal fees related to a complex investment he profited from that's now central to a federal lawsuit.

Mr. Paulson, whose firm hasn't been accused of wrongdoing in the matter, said in a letter to investors that he's "highly confident" his firm won't face "legitimate causes of action."

Story- WJS

What a nice thing to do.

Tully Mars · 04-24-2010, 06:16 AM

This from the NYT today-

Quote:

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.
The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.
In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”
In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president.
The messages were released Saturday ahead of a Congressional hearing on Tuesday in which seven current and former Goldman employees, including Mr. Blankfein, are expected to testify. The hearing follows a recent securities fraud complaint that the Securities and Exchange Commission filed against Goldman and one of its employees, Fabrice Tourre, who will also testify on Tuesday.
Actions taken by Wall Street firms during the housing meltdown have become a major factor in the contentious debate over financial reform. The first test of the administration’s overhaul effort will come Monday when the Senate majority leader, Harry Reid, is to call a procedural vote to try to stop a Republican filibuster.
Republicans have contended that the renewed focus on Goldman stems from Democrats’ desire to use anger at Wall Street to push through a financial reform bill.
Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman’s public statements about its trading results. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products,’ ” Mr. Levin said in a statement Saturday when his office released the documents. “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”
A Goldman spokesman did not immediately respond to a request for comment.

Link here

I think they could argue they lost money on some deals but it's sounds like overall they cashed in big time.

loquitur · 04-24-2010, 05:07 PM

Quote:

Originally Posted by Tully Mars

This from the NYT today-

Link here

I think they could argue they lost money on some deals but it's sounds like overall they cashed in big time.

Yup, and that shows, pretty much, that Goldman tends to be very very good at what it does. They saw what mostly everyone else didn't. Seems to me that is not blameworthy in a free country.

Tully Mars · 04-24-2010, 05:57 PM

Again I'm not sure they broke any law. But if they advised a lot clients to go one way and then went another way themselves at best it sounds very unethical. Then again being ethical and being on Wall St. might not be very profitable.

loquitur · 04-25-2010, 08:27 AM

my guess is -- and this is just a guess, based on having worked at law firms that advise outfits like Goldman -- they were very very careful to make disclosure about the content of the instruments and the deals, and also disclosed that they trade for their own account, that their trades may at any particular time be allied with or opposite the customer, that they are acting for other customers as well who may be taking different positions, that each investor should make its own decisions about what investments to make and when to make them based on the investor's own particular needs and circumstances.

It's stuff like that that enables some of these law firms to make big bucks. Nice work if you can get it, eh? It all happens to be true, but it's also not very useful. However it is wonderfully ass-covering, isn't it?

04-20-2010, 12:08 PM	#43 (permalink)
Cimarron29414 Still Free Location: comfortably perched at the top of the bell curve!	Seriously? John Stewart? (Sorry, couldn't resist.) __________________ Gives a man a halo, does mead. "Here lies The_Jazz: Killed by an ambitious, sparkly, pink butterfly."

04-20-2010, 12:22 PM	#44 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	No problem. Sadly, Stewart makes more sense to me then just about any on MSNBC or FOX. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

04-20-2010, 12:46 PM	#45 (permalink)
rahl Junkie Location: Ohio	Stewart had a great interview with jim cramer from mad money. He totally called him out about all the bs that went on over the past decade and how people like him and others at cnbc just perpetuate the cycle. click on the link in this article to watch the full video. It's long but worth it. Make sure you watch all three parts. Jim Cramer On "Daily Show": Jon Stewart Hits Hard (VIDEO) __________________ "Your life is Yours alone...Rise up and live it" Last edited by rahl; 04-20-2010 at 12:48 PM..

04-20-2010, 12:46 PM	#46 (permalink)
roachboy Super Moderator Location: essex ma	i didn't imagine that the case would be straightforward and was a little surprised to see the sec---and by extension the administration--play this is such a narrow manner. i think, however, that things may soon take a turn if germany and, as of this afternoon, the uk get on board with going after goldman on their own. i'm not a lawyer, but what would be the forum in which germany, say, would file suit (or criminal charges) against goldman? intuitively it seems to me that the way derivatives were traded, the speed with which they moved, the lack of transparency, etc.---and the transnational character of the markets for them---all militate for some transnational regulation, which would require international institutions/law that would be able to prosecute such. at this point, i've been researching the international court and a few other institutions in the context of my day gig, but haven't got a sense of whether that would be a venue, the wto would be one, or if the venue that would (in theory) be in a position to become a platform for transnational regulation of capital had yet to be elaborated. i suspect that germany (again for example) could file suit in either us or german courts... __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

04-21-2010, 12:44 PM	#53 (permalink)
Seaver Junkie Location: Fort Worth, TX	Ok... it may or may not have been illegal. However, will you ever trust your money with Goldman Sachs? I sure as fuck won't, and the PR nightmare will probably be 10x worse than any legal action. __________________ "Smite the rocks with the rod of knowledge, and fountains of unstinted wealth will gush forth." - Ashbel Smith as he laid the first cornerstone of the University of Texas

04-21-2010, 05:03 AM	#47 (permalink)
loquitur Junkie Location: NYC	Roachboy, Goldman does business pretty much in every money center, so any govt of any clout will have their hooks in to do some sort of enforcement. Once one jumps on board they all clamor. As for this case, as I understand it what happened went something like this. John Paulson didn't like the mortgage derivatives market and wanted to bet against it, so he went to Goldman and asked them to put together and sell a vehicle he could use that would yield him a gain if the mortgage market tanked. Goldman did that (I don't pretend to understand the ins and outs of how these synthetics work, but so far as I can tell it's a package of contracts that relate to movements in the market for mortgages). Goldman then found a buyer, made full disclosure to the buyer of what was being sold, but didn't tell the buyer that the vehicle was put together at Paulson's request by Goldman. So the question is: do you consider the fact that Paulson was the seller and had asked Goldman to put the package together to be material to the buyer, or is the material information the actual content of the vehicle that was being sold? Think of it this way: if you're buying a house, and you like the house and you run an engineering report and it's in good shape, should the seller have to tell you that it was custom built for the neighborhood drunkard? It's not an exact analogy, but that's more or less what the fight is about.

04-21-2010, 07:38 PM	#55 (permalink)
loquitur Junkie Location: NYC	nah, Paulson isn't accused of anything, I don't think. I think people need to realize that the SEC had lots of reasons to feel a need to bring some kind of enforcement action, and to do that now. Not that Goldman is a bunch of angels, but still............

04-22-2010, 01:21 AM	#56 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	I just figure at some point they have to toss someone to the lions. Honestly Sach's may not have broken the law here. There's a ton of things they did that were perfectly legal that I can't believe are not illegal. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club Last edited by Tully Mars; 04-22-2010 at 01:30 AM..

04-23-2010, 09:32 AM	#61 (permalink)
roachboy Super Moderator Location: essex ma	play nice, comrades. thanks. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

04-24-2010, 05:57 PM	#65 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	Again I'm not sure they broke any law. But if they advised a lot clients to go one way and then went another way themselves at best it sounds very unethical. Then again being ethical and being on Wall St. might not be very profitable. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

04-25-2010, 08:27 AM	#66 (permalink)
loquitur Junkie Location: NYC	my guess is -- and this is just a guess, based on having worked at law firms that advise outfits like Goldman -- they were very very careful to make disclosure about the content of the instruments and the deals, and also disclosed that they trade for their own account, that their trades may at any particular time be allied with or opposite the customer, that they are acting for other customers as well who may be taking different positions, that each investor should make its own decisions about what investments to make and when to make them based on the investor's own particular needs and circumstances. It's stuff like that that enables some of these law firms to make big bucks. Nice work if you can get it, eh? It all happens to be true, but it's also not very useful. However it is wonderfully ass-covering, isn't it?