OOHHHHHHHHH YEAAAAAAAA YAAAAAHHHHHHH!
By Colin Barr, senior writerApril 16, 2010: 12:59 PM ET


(Fortune) -- The Securities and Exchange Commission on Friday charged Wall Street's most gilded firm, Goldman Sachs, with defrauding investors in a sale of securities tied to subprime mortgages.

The SEC said it charged New York-based Goldman (GS, Fortune 500) and a vice president, Fabrice Tourre, for their failure to disclose conflicts in a 2007 sale of a so-called collateralized debt obligation. Investors in the CDO ultimately lost $1 billion, the SEC said.

Hedge fund manger John Paulson.
The SEC's civil fraud complaint alleges that Goldman allowed hedge fund Paulson & Co. -- run by John Paulson, who made billions of dollars betting on the subprime collapse -- to help select securities in the CDO.

Goldman didn't tell investors that Paulson was shorting the CDO, or betting its value would fall. When the CDO's value plunged within months of its issuance, Paulson walked off with $1 billion, the SEC said.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, director of the Division of Enforcement for the SEC.

A Goldman spokesman didn't immediately return a call seeking comment, but in a statement the bank said that "the SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."

Goldman shares tumbled 13% following the midmorning announcement, wiping out $12 billion of shareholder value. Shares of Deutsche Bank (DB), another big player in the structured securities markets of the bubble era, slid 8%.

The shares of JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Morgan Stanley (MS, Fortune 500) and other big banks declined between 3% and 5%, as investors all over Wall Street heard the footsteps of an apparently revitalized federal law enforcement apparatus.

"This litigation exposes the cynical, savage culture of Wall Street that allows a dealer to commit fraud on one customer to benefit another," Chris Whalen, a bank analyst at Institutional Risk Analytics, said in a note to clients Friday.

Khuzami said the case was the first brought by a new SEC division investigating the abuses of so-called structured products such as CDOs in the credit crisis. He said the investigation continues but declined to comment further.

"We continue to examine structured products that played a role in the financial crisis," Khuzami said in a phone call with reporters. "We are moving across the entire spectrum of products, entities and investors that might have been involved."

The SEC alleged that Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing the deal, known as Abacus 2007-AC1. Paulson & Co. wasn't immediately available for comment.

A CDO is a financial instrument backed by pool of assets, typically loans or bonds. In this case, the instrument in question is a so-called synthetic CDO -- which is backed not by actual loans but by a portfolio of credit default swaps referencing residential mortgage-backed securities.

While many CDO deals performed poorly, particularly in the latter stages of the housing bubble, the Abacus CDO at the center of this case blew up particularly quickly.

Within six months of the deal's closing, 83% of the residential mortgage-backed securities in the portfolio had been downgraded, the SEC said. Within nine months, 99% had been downgraded.

Khuzami said the SEC is entitled to disgorgement of ill-gotten gains as well as penalties that will be considered "at the appropriate time."

But it's early yet to say whether Goldman will end up with any liability in the case, said Ron Geffner, a former SEC enforcement attorney who is now a partner with Sadis & Goldberg in New York.

He said the case would hinge on variables including the objectivity of the portfolio designer, what was communicated to investors, what fiduciary duties Goldman may have had and how sophisticated the investors were.

"There is some meat on the bone, but it's too early to determine guilt," he said.

http://money.cnn.com/2010/04/16/news/companies/sec.goldman.fortune/index.htm?hpt=T1

Well this certainly is a great start no th equestion is will anything become of this, IE Criminal Charges

JMHO, but anything you see in the news is there because we are supposed to see it. Look behind and beyond it. Could this be a step forward in the plan to crash the economy? I read in more than one place a while ago that the stock market would take one more dazzling rise, and then - **BOOM** - the house of cards will come tumbling down. If so, with the stock market reaching dizzying heights last week, I expect the crash very soon. We shall see, won't we?

Did anyone see Obamas speach in Florida this week, that man looks STRESSED OUT to the max, wonder what he knows

Maybe this is why the man looks so stressed, L!

Goldman Sachs Bonuses: Bank Paying Staff Over $5 Billion For Just Three Months Work

GREGORY KATZ and GEIR MOULSON | 04/18/10 03:41 PM |

LONDON — Goldman Sachs is facing a potential backlash in Europe over the fraud case brought against it in the United States, with Britain's Prime Minister Gordon Brown calling for authorities there to investigate and accusing the investment bank of "moral bankruptcy."

Germany also said it would ask for detailed information about the case.

Both governments had to bail out banks that lost hundreds of millions of dollars on investments marketed by Goldman, according to the fraud suit brought by the U.S. Securities and Exchange Commission, in Britain's case Royal Bank of Scotland through its acquisition of parts of ABN Amro.

The SEC said the Royal Bank of Scotland paid Goldman $841 million to unwind ABN Amro transactions. Royal Bank of Scotland is now 84 percent owned by British taxpayers after being partly nationalized by the government.

Germany's IKB Deutsche Industriebank AG, an early victim of the credit crunch, lost nearly all its $150 million investment, the SEC said.

Brown on Sunday called for a full inquiry by Britain's Financial Services Authority in conjunction with the SEC. Britain would join Germany, where government officials said they would seek information about the bank's activities.

Brown, currently facing a tough re-election battle, seemed additionally angry at Goldman Sachs' plan to pay 3.5 billion pounds ($5.4 billion) in bonuses as reported in British newspapers.

"I am shocked at this moral bankruptcy," he said on BBC TV. "This is probably one of the worst cases that we have seen."

Brown called for a "new global constitution for the banking system" that would, among other things, ban bonus packages like the ones planned by Goldman Sachs.

The U.S. charges against Goldman Sachs relate to a complex investment tied to the performance of pools of risky mortgages. In a complaint filed Friday, the Securities and Exchange Commission alleged that Goldman marketed the package to investors without disclosing that the pools were picked by another client, a prominent hedge fund that wanted to bet the U.S. housing bubble would burst. Within months, most of the mortgages had been downgraded as the U.S. housing boom went into reverse and the securities fell sharply in value.

The company denies it did anything wrong, saying investor losses came from the deterioration of the whole sector, not regarding which securities were in the pool.

Goldman Sachs already is facing an EU investigation into a 2002 swap deal it carried out with Greece that may have helped hide the extent of the country's financial troubles.

Brown said strict reform of the banking sector is needed. He was responding to British Sunday press reports about the billions in bonus payments planned for Goldman employees worldwide.

"Everything I find out convinces me that we have got to go in deeper, and I believe that I am the man to deal with these problems of the banks and to challenge them about the way they behave in the future," said Brown, who faces a difficult challenge from both the Conservative Party and the Liberal Democrats in the May 6 election.

The Goldman Sachs case also may spur legal action in Germany. The Welt am Sonntag newspaper quoted Chancellor Angela Merkel's spokesman, UIrich Wilhelm, as saying that German regulator BaFin will ask the U.S. Securities and Exchange Commission for detailed information.

"After a careful evaluation of the documents, we will examine legal steps," he said, according to the report. The government later confirmed Wilhelm made the statement.

IKB issued a profit warning on July 30, 2007, saying that it had "felt the impact of the crisis in the U.S. subprime mortgage market" and that then-chief executive Stefan Ortseifen had resigned.

IKB's problems sprang from its Rhineland Funding investment vehicle's apparent inability to cover its funding needs because of exposure to U.S. subprime loans.

The lender's biggest shareholder at the time, Germany's state-owned KfW development bank, and the banking industry put together multibillion-euro (dollar) rescue packages for IKB. IKB was sold in 2008 to Dallas-based Lone Star Funds.

Ortseifen went on trial in Duesseldorf in March, charged with share price manipulation and four counts of breach of trust. He said that he carries "no guilt."

German prosecutors accuse Ortseifen of misleading markets over the extent of its exposure to the financial crisis. They said that, 10 days before the profit warning, he issued a statement in which the economic impact on IKB from the looming financial crisis was deliberately portrayed too positively.

Ortseifen maintains that the market for mortgage backed securities was still functioning at the time of his statement and denies manipulating share prices.

He said when his trial opened that, from today's point of view, the assessment of subprime market risk was a "collective misjudgment," but that on the basis of the financial world's knowledge at the time he gave correct information.

The trial is scheduled through the end of May.

http://www.huffingtonpost.com/2010/04/18/goldman-sachs-bonuses-ban_n_542006.html

WOW, uterly shocking

Well lets hope this ball is just at the top of the hill and by the time it makes it to the bottom these greedy bastartds are made to pay back every dime and are all in jail!!!!!!

========================

WHAT DID THEY KNOW?



It was late 2006, and an argument had broken out inside the Wall Street bank’s prized mortgage unit — a dispute that would reach all the way up to the executive suite.

One camp of traders was insisting that the American housing market was safe. Another thought it was poised for collapse.

Among those who saw disaster looming were an effusive young Frenchman, Fabrice P. Tourre, and his quiet colleague, Jonathan M. Egol, the mastermind behind a series of mortgage deals known as the Abacus investments.

Their elite mortgage unit is now at the center of allegations that Goldman and Mr. Tourre, 31, defrauded investors with one of those complex deals.

The Securities and Exchange Commission filed a civil fraud suit on Friday that essentially says that Goldman built the financial equivalent of a time bomb and then sold it to unwitting investors. Mr. Egol, 40, was not named in the S.E.C.’s suit.

Goldman has vowed to fight the S.E.C. But the allegations have left many on Wall Street wondering how far the investigation might spread inside Goldman and perhaps beyond.

Pressure on Goldman mounted on Sunday as two members of Congress and Gordon Brown, Britain’s prime minister, called for investigations into the bank’s role in the mortgage market. Germany also said it was considering legal action against the bank.

Mr. Tourre was the only person named in the S.E.C. suit. But according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street.

According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.

Lucas van Praag, a Goldman spokesman, said that senior executives were not involved in approving the Abacus deals. He said that the executives had sought to balance Goldman’s positive bets on the mortgage market, rather than take an overall negative view.

Mr. Tourre, who now works for Goldman in London, declined to comment, as did Mr. Egol, Mr. van Praag said.

Mortgage specialists like those at Goldman were, in a sense, the mad scientists of the subprime era. They devised investments by bundling together bonds backed by home loans, a process that enabled mortgage lenders to make even more loans.

While this sort of financing helped make loans available, the most exotic creations also spread the growing risks inside the American housing market throughout the financial world. When the boom went bust, the results were disastrous.

By early 2007, Goldman’s mortgage unit had become a hive of intense activity. By then, the business had captured the attention of senior management. In addition to Mr. Blankfein, Gary D. Cohn, Goldman’s president, and David A. Viniar, the chief financial officer, visited the mortgage unit frequently, often for hours at a time.

Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies.

The decision to get rid of positive bets on mortgages turned out to be prescient. Unlike most other Wall Street banks, Goldman profited from its mortgage business as the housing bubble was inflating and then again when the bubble burst.

At the heart of all of this is the mortgage trading unit that, at its peak, employed several hundred people. As recently as 2007, Goldman’s mortgage division was split into 11 subgroups, each with a specialty, according to an internal Goldman document that was provided to The New York Times by a former employee.


http://www.nytimes.com/2010/04/19/busin ... an.html?hp

Fraud at Last

The SEC's fraud case against Goldman Sachs could represent a turning point in the public understanding of the great financial collapse, its politics and its remedies. Or not.

Far-seeing critics such as Bill Black, Jamie Galbraith, and Tom Ferguson, have long maintained that at the root of this crisis was not just regulatory failure or mistaken financial strategies but deliberate fraud. The SEC's suit is a civil one, not a criminal charge, but it's a start. Before this is over, senior financial executives need to be brought before the bar of justice and the existing system and its biggest players need to be broken up.

Consider the behavior that was at the very center of the collapse. At the retail level, mortgage companies backed by Wall Street's largest financial behemoths encouraged naïve customers to submit what the trade called "liar loans." Often the loan officers helped them fill out the application. In other words, the basic business model was built on fraudulent misrepresentations.

The retail mortgage companies could unload this paper because credit rating agencies colluded with them to turn very high risk loans into triple-A securities. This is also fraudulent. But none of the credit rating companies (which are regulated by the SEC) has yet been charged with fraud.

Then, further down the line, outfits like Goldman Sachs both turned these dubious loans into securities, and bet against the securities and helped hedge funds make even more complex bets, collecting both trading profits and fees. This, says the SEC in the complaint, is fraudulent. It took nearly two years for what has been documented in more than a dozen books and innumerable articles about the crash to be turned into a formal government enforcement action.

The SEC's suit should be just the beginning. Between what we learned in the special examiner's report on Lehman Brothers, and what will come out in the Goldman suit (if the SEC is not stampeded into a premature settlement) we should be able to document that fraud was at the core of the entire business model.

That's why the Obama-Dodd-Frank legislation, though a decent beginning, is far too weak to achieve the reforms that the system needs. Meanwhile, the very same banks that exist only thanks to the Administration's largesse, and which are paying record bonuses while the rest of the economy still suffers, are putting on a full court press to kill even the modest reforms. The Republicans and some Democrats have been working with bank lobbyists to weaken the bill even as GOP leaders like Mitch McConnell attack the measure for inviting future bailouts.

Politically, though Obama is entirely right to slam the Republican hypocrisy, Obama and Dodd have given the Republicans ammunition. The measures to limit abuses in derivatives trading are far too weak; "resolution" of failed banks would not necessarily break them up; too-big-to-fail is a bigger problem than ever; and the Administration is not fighting hard to get investment bankers like Goldman out of the conflicted business of trading for their own accounts.

President Obama has pumped up the rhetoric somewhat, but his willingness to take on the banking industry is still far from Rooseveltian. No wonder the voters are still confused by Mitch McConnell about which is the party of Wall Street.

Paul Volcker was right when he quipped that the last useful innovation produced by the banking system was the ATM machine. For something like three decades, the financial part of our economy has become a world unto itself, consuming over 40 percent of all corporate profits by 2006, the last year before the crash.

During the postwar boom, when the economy grew at nearly four percent a year for almost three decades and America became a more equal society, banks really were close to public utilities. Commercial banks made modest profits by evaluating the creditworthiness of corporate customers and making loans; thrift institutions provided safe places for savings and sources of mortgage borrowing; and investment bankers and true venture capitalists underwrote stock and bond issues, taking risks only with their own money. There were no hedge funds, no private equity--and no spectacular collapses. Securitization was unknown, and derivatives were a small, specialized and well-regulated corner of the financial system used mainly by farmers and others who dealt in primary products and need to hedge against price swings.

We need a drastic, radical simplification of the financial system. That means breaking up large institutions that are too big to fail, and breaking the rice bowl of ones that add nothing to broad economic welfare and efficiency other than an opportunity for the own enrichment at the general expense. To get there politically, we first need to expose the full extent of the fraud, and we need a Democratic Party that reverts to its New Deal role as the party of regular people rather than its Clintonian role as a second party of Wall Street.

Charming as it was to see former President Clinton admit that mistakes were made on his watch when it came to de-regulation of derivatives, that is only the beginning of redemption. Clinton's people did not take dive on this and on kindred issues because they made technical errors, but because the whole administration was in bed with Wall Street.

Happily, the politics of this epic struggle are starting to move in a more progressive direction. Senator Blanche Lincoln, chair of the Senate Agricultural Committee (which shares jurisdiction over derivatives regulation) is now taking a tougher line on regulation. It doesn't hurt that she faces a tough re-election as well as primary opposition from the left.

After the great collapse, the smart politics as well as the right thing to do is to root out the fraud that is the essence of Wall Street's business model--and dare the Republicans to oppose it. The deeper problem is not the Republicans but the fact that much of the Democratic Party is not sure that it wants to drastically simplify the financial system. President Obama has lately been finding his voice as a progressive. Let's see if he truly rises to the occasion.

http://www.huffingtonpost.com/robert-ku ... 42163.html

Senior Goldman Exec Is Married to Former Head of ACA

Friday, as news of the allegations of fraud at Goldman Sachs spread, I got a call from someone who works in the insurance business.

"Check out the former head of ACA" he said referring to the now-defunct and formerly down-graded bond insurer who asked the-not-so-omniscient hedge fund manager John Paulson to choose which securities to put into the CDO, Abacus, that Goldman Sachs subsequently sold to two big clients, the German bank IKB and the Royal Bank of Scotland -- without disclosing that Paulson would be shorting his own hand-picked stocks on the other side of the trade.

Now the SEC's complaint states that ACA had no idea that Paulson was shorting the stocks he'd been asked to select, yet my deepthroat was not so convinced.

"ACA had a horrible reputation," he told me, which led me to ask the obvious question so why would Goldman want ACA's stamp as selection manager on the CDO they were marketing? Fabrice Tourre, the 31-year-old named as the architect of Abacus, is quoted as insisting that Goldman wanted ACA's brand name and "credibility" on the CDO.

My source told me to check out who the head of ACA was married to. "I think you'll find it's a senior woman at Goldman Sachs," he said.

Well, yep, it is.

Alan S. Rosenman took over ACA Capital as president and CEO in 2004 - because -- wait for it -- his predecessor Michael Satz had "personal income tax issues" -- (how murky is this story going to get you must be asking?)

According to a Business Week article dated April 3 by David Henry and Matthew Goldstein, Rosenman "immediately began to push ACA into CDO insurance, an area his predecessor, Satz, had only begun to explore."

Rosenman's wife, or at least partner -- they are listed as sharing a house together for which they paid $6.1 million in 2005 in New York -- is Frances "Fran" R. Bermanzohn, who is managing director and deputy general counsel at ... Goldman Sachs.

Hmmmn.

I called Mr. Rosenman who gave me the illuminating statement: "I am not offering any comment at this time."

I asked him, did he ever disclose their relationship to buyers of Abacus? Did she? And Could ACA really therefore not have known about Paulson's activities?

"No comment."

One thing that is certainly puzzling is that if ACA did know, then why on earth would it have issued protection on the so-called "superior senior tranche" which turned out to be of course anything but 'super senior," thanks to Paulson betting against it -- and ACA went bust in December last year?

But, just as much as the SEC is claiming Goldman should have disclosed that John Paulson had hand-picked stocks he was choosing to short (which means, by the way, in case anyone has missed this point, that Mr. "supposed-good-guy " Paulson just made one billion dollars off the back of the German tax payer who had to bail out the German bank IKB on the back of its collapse) so too this relationship should have been disclosed. That it is not mentioned in the SEC's complaint strikes me as being very odd.

I was still waiting for Goldman Sachs to respond as this article went to press.

When I named my recent book on Lehman Brothers, The Devil's Casino, I knew that Wall Street was rigged and that everyone on it was playing with loaded dice. Lehmanites told me they were no different from anyone else on the Street and just as Goldman is saying there is no fraud here with the rigged CDO (and they may be right -- legally) so Lehmanites believe there was no fraud connected with Repo 105.

The conundrum is that weak accounting rules enabled both Goldman and Lehman and no doubt every other gambler out there to get away with what they did legally. (I, for one, do not believe will the SEC will win their suit against Goldman because the law protects Goldman). That their actions were arguably immoral? Well, that's a question no one on Wall Street wants to ask of themselves.

Watch closely what happens Tuesday when former Lehman CEO Dick Fuld goes before Harry Reid's committee to explain Repo 105. He will insist he did not break the law, just as Goldman will insist the same - and the problem is that technically they may be right.

The bigger question is: how do we stop immoral acts that are technically legal? We need to change the law -- and fast, but carefully. Things that are hidden need to be brought to light, and contorted complex accounting rules about disclosure needs to become far simpler.

And people who are married and whose respective firms are doing business together need to disclose it to any third parties.

http://www.huffingtonpost.com/vicky-war ... 42154.html

Goldman Sachs Fraud Case Is a Distraction From the Real Issue of Substantial Financial Reform

Goldman Sachs is robustly protesting their innocence. The SEC accusations--that Goldman is guilt of fraud and duplicity--are "completely unfounded in law and in fact."

But even if Goldman is proven right, that does not make the SEC wrong.

As the old saw goes,

When the law is against you, pound the facts.

When the facts are against you, pound the law.

When both the law and the facts are against you, pound the table.


It is table pounding time.

In essence, the SEC is raising the question as to whether Goldman created synthetic collateralized debt obligations (CDOs) for the purpose of allowing one group of investors to short the subprime market, while not disclosing this activity to other clients holding or purchasing those same bonds. The SEC is asking whether Goldman benefitted from both sides in a manner that violated their fiduciary obligation to their clients.

And the simple answer is, of course they were.

This is not a legal conclusion, but rather a systemic one. Given the size and scale of its operations, Goldman--like the rest of the financial Goliaths that have emerged from the global financial crisis--cannot help but be on both sides of almost any trade, and ultimately be in a position of advising different clients in opposite directions. But most importantly, Goldman is a trading firm, whose activities inevitably lead them to be putting their own considerable capital to bear against their client's own interests.

Trading has become the most profitable activity in banking institutions, and derivatives trading--including synthetic CDOs and credit default swaps--has magnified potential profitability by allowing firms to realize nearly unlimited leverage as they position their bets in the global markets. While in years past, Goldman had a far smaller share of the market and prospered through a client-centric culture, that was then and this is now. Today, in a world of previously unimaginable trading profits and bonus payouts, concerns for clients and firm culture have been rendered quaint.

The blinding allure of trading profits has replaced raising and lending capital for the real economy as the singular focus of banking industry. This was evident last month when RBS--Royal Bank of Scotland, the largest bank in the world before the crisis that is now 84% owned by the British taxpayers--decried any limits on its trading activities. Trading profits, RBS asserted, were the key to rebuilding its balance sheet.

That RBS would publicly embrace the view that it intended to trade its way to prosperity begged the question of whether there aren't any losing sides of any of these trades. Barely a year has passed since the low moments of the financial collapse--a collapse characterized by highly leveraged bets gone wrong--and dementia has truly set in.

As Congress considers major financial system reform, it is increasingly apparent that what emerges will be far from a stringent restructuring of the financial system that is warranted. Wall Street leaders have made no bones over the fact that they intend to protect their own interests in any legislation that emerges, and in particular will fight any efforts to curtail the highly profitable derivatives trading.

That we have reached a table-pounding moment should have been evident to all on February 7th when, in a front page story in the New York Times, Wall Street publicly expressed its "buyer's remorse" with the Democrats, and now looked to shift their political contributions to Republicans, who eagerly sought to offer Wall Street contributors a more appreciative home for their largesse.

Back in the day, political contributions in exchange for governmental action was viewed as the essence of corruption, and contributors and recipients went to great lengths to deny linkages between the money and legislative outcomes. But apparently there is no longer any shame in--or prohibition against--the buying and selling of political influence.

Today, regulatory reform is being debated publicly between the two largest recipients of banker largesse: Senators Christopher Dodd and Mitch McConnell. Accordingly, instead of focusing on issues of the size and capitalization of banks, the role of deposit insurance, and limitations on derivatives that provide no social utility, debate has focused on consumer protection and the locus of dissolution authority for failed institutions. These may be important questions, but they are predicated on doing nothing to curtail the massive aggregation of financial and political power within the banking sector. Wall Street, it would appear, has spent its money well.

While the debate among Wall Street and Congress continues, others suggest that the issues are not so complicated. One week after the story about Wall Street's buyer's remorse, a clique of octogenarians gathered around former Fed Chairman Paul Volker to support his call for more stringent restrictions on the trading activities of commercial banks.

Standing with Volker were former Citigroup chairman John Reed, Bush 41 Treasury Secretary and Dillon Read Chairman Nicholas Brady, Wall Street legend and former SEC Chairman Bill Donaldson, Vanguard founder John Bogle, among others. For these men, whose days in the trading pits and positions of power were behind them, the answers were simple. As Nick Brady intoned: "If you are a commercial bank and you wish the government to guarantee your deposits and bail you out if necessary, then you can't be involved in speculative activity."

Arguing that the lure of excessive profits and bonuses had undermined the core values of the banking system, Brady pushed back on those who argued that trading and derivatives were important to the banking system and dismissed self-serving the arguments for preserving the status quo. "You draw a line that is too tight, that doesn't bother me a bit."

Volker and his old friends were sending a simple message: Like it or not, we have not yet come close to a real discussion of effective, systemic financial reform. Self-interest--of bankers and politicians alike--stands firmly in the way.

The SEC charges against Goldman may or may not stick, but it should be clear to all that, as Jack Bogle observed, the system has gone badly awry and needs massive reform. That Goldman Sachs has become the poster child for all that ails us is its own fault. Like its banker brethren, Goldman has used the global financial crisis to its own advantage--gathering tens of billions of public dollars as AIG was unwound and gaining access to the Fed window--and has made effective use of political money and influence to perpetuate a system that assures Wall Street freedom to pursue massive profits, while the public continues to bear the risk.

Shame on Goldman Sachs if they have committed fraud. But shame on us if we do nothing to change the rules of the game.

http://www.huffingtonpost.com/david-pau ... 42033.html

Goldman from the beginning
Goldman, Sachs & Co. rose from humble roots to become one of the most successful and envied firms on Wall Street. But now it faces questions about whether its success during the financial crisis came at the expense of its clients and the American economy.

1885 -- Goldman, Sachs & Co. general partnership created.

1956 -- Goldman helps run the initial public offering of Ford Motor Co. stock.

1995 -- Robert Rubin, former Goldman co-chairman, named Treasury secretary.

1999 -- Goldman goes public on the New York Stock Exchange.

May 2006 -- Henry M. Paulson resigns as Goldman chairman to become Treasury secretary.

April 2007 -- Goldman Vice President Fabrice Tourre creates ABACUS 2007-AC1, a security based on high-risk subprime mortgages.

2007 -- Goldman traders begin betting against the mortgage market.

2007 -- Goldman Chairman Lloyd Blankfein receives a $68-million compensation package.

September 2008 -- Hit by the financial downturn, Goldman becomes a bank holding company so it can access federal funds more easily.

October 2008 -- Goldman receives a $10-billion taxpayer bailout from the government's Troubled Asset Relief Program.

June 2009 -- Goldman pays back the TARP money plus 23% interest.

November -- Blankfein says in an interview that he is doing "God's work."

January -- Goldman announces a record quarterly profit of

$4.9 billion.

April -- The Securities and Exchange Commission sues Goldman and Tourre, alleging fraud in the marketing of the firm's ABACUS 2007-AC1 securities.

Source: Times research

Copyright © 2010, The Los Angeles Times
Related stories
From the L.A. Times

* Pointless deals line Wall Street pockets, Goldman Sachs suit shows
* Goldman Sachs case likely to increase calls for Wall Street reform
* SEC accuses Goldman Sachs of fraud as Obama presses for tough new regulations

From other L.A. sources
_________________

This is a must see Video, why we are not hanging these pricks from every light post on Wall Street is beyond me

Vicky Ward Contributing editor, Vanity Fair

Senior Goldman Exec Is Married to Former Head of ACA

Friday, as news of the allegations of fraud at Goldman Sachs spread, I got a call from someone who works in the insurance business.

"Check out the former head of ACA" he said referring to the now-defunct and formerly down-graded bond insurer who asked the-not-so-omniscient hedge fund manager John Paulson to choose which securities to put into the CDO, Abacus, that Goldman Sachs subsequently sold to two big clients, the German bank IKB and the Royal Bank of Scotland -- without disclosing that Paulson would be shorting his own hand-picked stocks on the other side of the trade.

Now the SEC's complaint states that ACA had no idea that Paulson was shorting the stocks he'd been asked to select, yet my deepthroat was not so convinced.

"ACA had a horrible reputation," he told me, which led me to ask the obvious question so why would Goldman want ACA's stamp as selection manager on the CDO they were marketing? Fabrice Tourre, the 31-year-old named as the architect of Abacus, is quoted as insisting that Goldman wanted ACA's brand name and "credibility" on the CDO.

My source told me to check out who the head of ACA was married to. "I think you'll find it's a senior woman at Goldman Sachs," he said.

Well, yep, it is.

Alan S. Rosenman took over ACA Capital as president and CEO in 2004 - because -- wait for it -- his predecessor Michael Satz had "personal income tax issues" -- (how murky is this story going to get you must be asking?)

According to a Business Week article dated April 3 by David Henry and Matthew Goldstein, Rosenman "immediately began to push ACA into CDO insurance, an area his predecessor, Satz, had only begun to explore."

Rosenman's wife, or at least partner -- they are listed as sharing a house together for which they paid $6.1 million in 2005 in New York -- is Frances "Fran" R. Bermanzohn, who is managing director and deputy general counsel at ... Goldman Sachs.

Hmmmn.

I called Mr. Rosenman who gave me the illuminating statement: "I am not offering any comment at this time."

I asked him, did he ever disclose their relationship to buyers of Abacus? Did she? And Could ACA really therefore not have known about Paulson's activities?

"No comment."

One thing that is certainly puzzling is that if ACA did know, then why on earth would it have issued protection on the so-called "superior senior tranche" which turned out to be of course anything but 'super senior," thanks to Paulson betting against it -- and ACA went bust in December last year?

But, just as much as the SEC is claiming Goldman should have disclosed that John Paulson had hand-picked stocks he was choosing to short (which means, by the way, in case anyone has missed this point, that Mr. "supposed-good-guy " Paulson just made one billion dollars off the back of the German tax payer who had to bail out the German bank IKB on the back of its collapse) so too this relationship should have been disclosed. That it is not mentioned in the SEC's complaint strikes me as being very odd.

I was still waiting for Goldman Sachs to respond as this article went to press.

When I named my recent book on Lehman Brothers, The Devil's Casino, I knew that Wall Street was rigged and that everyone on it was playing with loaded dice. Lehmanites told me they were no different from anyone else on the Street and just as Goldman is saying there is no fraud here with the rigged CDO (and they may be right -- legally) so Lehmanites believe there was no fraud connected with Repo 105.

The conundrum is that weak accounting rules enabled both Goldman and Lehman and no doubt every other gambler out there to get away with what they did legally. (I, for one, do not believe will the SEC will win their suit against Goldman because the law protects Goldman). That their actions were arguably immoral? Well, that's a question no one on Wall Street wants to ask of themselves.

Watch closely what happens Tuesday when former Lehman CEO Dick Fuld goes before Harry Reid's committee to explain Repo 105. He will insist he did not break the law, just as Goldman will insist the same - and the problem is that technically they may be right.

The bigger question is: how do we stop immoral acts that are technically legal? We need to change the law -- and fast, but carefully. Things that are hidden need to be brought to light, and contorted complex accounting rules about disclosure needs to become far simpler.

And people who are married and whose respective firms are doing business together need to disclose it to any third parties.

http://www.huffingtonpost.com/vicky-ward/senior-goldman-exec-is-ma_b_542154.html

What you did not like the exact same post I posted above Blue





Too funny

Sorry, L! Didn't see yours!

Goldman Sachs Shareholder Lawsuit Accuses CEO Lloyd Blankfein, Board Of 'Systematic Failure'



NEW YORK — Goldman Sachs's CEO and other top officers are accused in a pair of shareholder lawsuits of lax oversight in deals involving risky mortage-backed securities that later went bad.

The lawsuits filed Thursday in New York State Supreme Court name Lloyd Blankfein and the firm's entire board of directors as defendants.

The suits follow civil fraud charges filed last week by the Securities and Exchange Commission over the same investments.

The SEC says Goldman committed fraud by failing to disclose important information about the securities that might have scared off investors.

The two suits, filed by shareholders Robert Rosinek and Morton Spiegel, accuse Blankfein and other officers of "systematic failure" over 3 1/2 years for not properly vetting 23 mortgage-linked deals at the center of the SEC suit. Those deals, called Abacus, led to $1 billion in losses.

A Goldman spokesman declined to comment.

The suits appear to be the first shareholder cases related to the Abacus deals. If so, they may mark the start of what legal experts expect will be a flood of shareholder cases against Goldman Sachs.

The plaintiffs seek unspecified monetary damages.

The mortgage-backed securities at the heart of the lawsuits are widely blamed for worsening the financial system's troubles by allowing investors to place massive bets on the direction of the housing market. That triggered major losses at a number of financial institutions after the housing market started to crumble.

Story continues below As in the SEC case, the shareholders allege that Goldman should have noted in marketing the Abacus securities that a hedge fund betting they would fall in value had helped choose the mortgages on which they were based.

Within a few months of being sold to investors, the value of the Abacus securities fell fast. The hedge fund, Paulson & Co., run by billionaire John Paulson, pocketed $1 billion in profits, the suits says.

Paulson has not been accused of wrongdoing by SEC, and is not as a defendant in the shareholder cases.

http://www.huffingtonpost.com/2010/04/2 ... 50478.html

FRY YOU BASTARDS FRY


Goldman Hearing: Execs Called Before Congress

WASHINGTON — Defending his company under blistering criticism, the CEO of Goldman Sachs testily told skeptical senators Tuesday that customers who bought securities from the Wall Street giant in the run-up to a national financial crisis came looking for risk "and that's what they got."

Lloyd Blankfein and other Goldman executives were lambasted by lawmakers for "unbridled greed" in an often-electric daylong showdown between Wall Street and Congress – with expletives frequently undeleted. Unrepentant, five present and two past Goldman officials unflinchingly stood by their conduct before a Senate investigatory panel and denied helping to cause the financial near-meltdown that turned into the worst recession since the Great Depression.

"Unfortunately, the housing market went south very quickly," Blankfein told skeptical senators. "So people lost money in it."

Democrats hoped the hearing would build momentum for legislation, now before the Senate, to increase regulation of the nation's financial system. That legislation would crack down on the kind of lightly regulated housing market investments that helped set off the crisis in 2007.

Elsewhere at the Capitol, Republicans succeeded for a second day in blocking efforts to move toward debate and a vote on that bill. At the same time, they floated a partial alternative that they said could lead to election-year compromise on an issue that commands strong public support.

Both sides are trying to harness voter anger toward Wall Street. Unlike with the health care debate, both Democrats and Republicans say they want tighter regulations passed – but they disagree on timing and significant details.

At the hearing, there was hour upon hour – nearly 11 hours in all, winding up just before 9 p.m. EDT – of combative exchanges, occasional humor and long stretches of senators and Wall Street insiders speaking past each other. There was talk of ethical obligations versus financial transactions so complex they all but defy explanation. And there were a half dozen protesters dressed head to toe in prison stripes with Goldman officials' names around their necks.

Senators from both parties verbally pounded the Goldman executives, accusing them of a financial version of rigged casino gambling that they said endangered the entire U.S. economy.

That drew a protest from Sen. John Ensign, a Nevada Republican. In Las Vegas, he said, "people know the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you're playing the game."

Story continues belowOutside the hearing room, analysts and investors suggested the firm was surviving the hearing with its reputation intact, something its stock performance for the day may have underscored. Goldman's stock rose $1.01 per share, to $153.04, on Tuesday, a day in which the Dow Jones industrials had their worst drop in nearly three months, down 213 points.

Blankfein was the final witness in a daylong hearing on Goldman conduct that resulted in a Securities and Exchange Commission civil fraud charge earlier this month against the firm and one of its traders.

Sen. Carl Levin, D-Mich., the panel's chairman cited a "fundamental conflict" in Goldman's selling to clients home-loan securities that company e-mails showed its own employees had derided as "junk" and "crap" – and then betting against the same securities and not telling the buyers.

"They're buying something from you, and you are betting against it. And you want people to trust you. I wouldn't trust you," Levin told Blankfein.

Blankfein denied such a conflict in a combative exchange. "We do hundreds of thousands, if not millions of transactions a day, as a market maker," he said, noting that behind every transaction there was a buyer and a seller, creating both winners and losers.

Levin vigorously pressed about an e-mail between Goldman executives describing one product called Timberwolf as "one s----y deal."

"Your top priority is to sell that s----y deal," Levin said. "Should Goldman Sachs be trying to sell a s----y deal?"

I didn't use that term, the executive responded.

Other senators repeated the language in their questioning.

Goldman's chief said the company didn't bet against its clients – and can't survive without their trust. He repeated the company's assertion that it lost $1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession. He also argued that Goldman wasn't making an aggressive negative bet – or short – on the mortgage market's slide.

He and other officials described their use of complex trading tools as a way to reduce risks for the company and its clients.

Earlier, Levin said that financial industry lobbyists "fill the halls of Congress, hoping to weaken or kill legislation" to increase regulation. He accused Wall Street firms of selling securities they wouldn't invest in themselves. That's "unbridled greed in the absence of the cop on the beat to control it," he said.

Whether Tuesday's hearing would help Democrats win Republican converts on the legislation remained an open question. "It's too soon to tell," Levin said in a brief interview outside the hearing. "We'll have to wait until the dust settles."

The Goldman witnesses strongly denied that the firm intentionally cashed in on the housing crash by crafting a strategy to bet against home loan securities while misleading its own investors.

"I will defend myself in court against this false claim," said Fabrice Tourre, a French-born 31-year-old Goldman trader who was the only individual named in the SEC suit. "I deny – categorically – the SEC's allegation."

The SEC says Tourre marketed securities without telling buyers they had been chosen with help from a Goldman hedge fund client that was betting the investments would fail. The commission alleged that Tourre told investors the hedge fund, Paulson & Co., actually bought into the investments. Tourre said he didn't recall telling investors that.

Tourre said: "I am saddened and humbled by what happened in the market in 2007 and 2008. ... But I believe my conduct was proper."

Was Goldman harmed by the hearing?

"Despite the interrogation, the Goldman team hasn't really provided any new information," market analyst Edward Yardeni said. "And the (senators) aren't creating a more damaging view than already existed."

"Right now, it looks like the PR battle has been fought to a draw," Yardeni added.

Sen. John McCain, R-Ariz., said that while there may not be proof that Goldman did anything illegal, "there's no doubt their behavior was unethical and the people will render a judgment as well as courts."

Sen. Tom Coburn, R-Okla., said the blame doesn't fall on Goldman alone. "There's numerous causes to the financial crisis, not just one." He said the blame must be shared by federal regulatory agencies who didn't use the powers they already have and by Congress. "In truth, we all took turns in inflating the housing bubble," he said.

http://www.huffingtonpost.com/2010/04/2 ... 53443.html

Oooooh stand back for that lightning bolt! Big liar!

Go ahead Republicans stand pat and block financial reform.

We'll see you in November!

Feds begin criminal probe into Goldman - reports
By Blake Ellis, staff reporterApril 30, 2010: 7:09 AM ET

NEW YORK (CNNMoney.com) -- Federal prosecutors are reportedly looking into whether Goldman Sachs has committed securities fraud.

The Securities and Exchange Committee referred its investigation of Goldman to The Justice Department for possible criminal prosecution, according to several media reports, including one by the Wall Street Journal, Thursday night. The reports cited sources familiar with the situation.

"Given the recent focus on the firm, we are not surprised by the report of an inquiry," said Samuel Robinson, a spokesperson for Goldman. "We would fully cooperate with any requests for information."

The SEC, the Justice Department and the U.S. Attorney's office all declined to comment.

Shares of Goldman Sachs (GS, Fortune 500) fell about 3% in pre-market trading Friday.

Earlier this month, the SEC charged Goldman with securities fraud for failing to tell investors that hedge fund Paulson & Co. helped select securities for a portfolio it was also betting against. Goldman has denied the allegations.

On Tuesday, seven current and former Goldman Sachs executives, including CEO Lloyd Blankfein, faced a blistering cross-examination from lawmakers about the firm's role in the financial crisis in a hearing that lasted more than ten hours.

"[Goldman Sachs'] conduct brings into question the whole function of Wall Street," said Sen. Carl Levin, D-Mich., who chairs the Permanent Subcommittee on Investigations, which hosted Tuesday's hearing.

Goldman has been accused by Levin's committee of betting aggressively against the nation's housing market, making as much as $3.7 billion in the process.

Documents released by the committee this week also demonstrated that Goldman may have been engaging in other questionable practices.

Goldman has maintained that it too got hit when the U.S. housing market collapsed, losing some $1.2 billion in 2007 and 2008. It has also rejected charges that it bet against American homeowners or against its own clients.

Rather, the company has maintained it merely was trying to insulate itself from other large bets it made on residential real estate.

"We didn't have a massive short against the housing market and we certainly did not bet against our clients," said Blankfein at the hearing Tuesday.

Fabrice Tourre, the 31-year-old French trader who allegedly helped broker the investment deal that is the subject of the SEC's civil lawsuit, also appeared Tuesday. He said he planned to fight the charges brought by the federal government.

Goldman has placed the London-based Tourre on paid leave indefinitely and stripped him of some of his credentials with British regulators, however.

Shares of Goldman Sachs rose in regular trading Thursday before the reports of the criminal probe, but fell 2.6% in after hours trading. The stock has actually gained ground in each of the past three days, but remains well below where it traded earlier this month.

http://money.cnn.com/2010/04/29/news/companies/SEC_goldman_prosecutors/index.htm?hpt=T2

Goldman Sachs Seeks Bigger Share of U.S. Retirement Savings
By Amy Feldman

May 18 (Bloomberg) -- Goldman Sachs Group Inc., facing a fraud lawsuit from U.S. regulators who accuse the company of misleading investors, is trying to convince more Americans to trust the firm with their retirement funds.

The New York-based company is promoting alternative asset funds and designing target-date funds that provide guaranteed income to grab a bigger piece of the $2.7 trillion 401(k) market, said Bill McDermott, a managing director at Goldman Sachs Asset Management and head of its defined-contribution business.

“We understand risk and we understand asset allocation,” said McDermott, who joined the firm in February to strengthen its retirement-plan products and marketing. “We’re looking to leverage that for the 401(k) market.”

Goldman’s 401(k) plan assets totaled $17.5 billion as of March 31, according to the company. Fidelity Investments, the largest 401(k) asset manager, had $347.8 billion as of December 31. Assets in 401(k) plans are estimated to increase 41 percent, to $3.8 trillion, by the end of 2014, according to data from Cerulli Associates in Boston.

Goldman and BlackRock Inc., the world’s largest asset manager, don’t administer retirement plans and have been seeking more 401(k) business. The business has been dominated by firms such as Boston-based Fidelity and Vanguard Group, based in Valley Forge, Pennsylvania, which administer plans as well as manage assets.

‘Writing on the Wall’

“A lot of investment-only managers are trying to get in,” said Lori Lucas, defined contribution practice leader at San Francisco-based Callan Associates, an investment consulting firm. “They see the writing on the wall,” as traditional pensions are replaced by 401(k) plans.

Goldman’s move comes after an April 16 lawsuit brought by the U.S. Securities and Exchange Commission that accuses the firm of misleading investors in a mortgage-linked investment. Goldman denies those allegations and said it will fight the charges. A Senate panel grilled executives, including Chief Executive Officer Lloyd Blankfein, on April 27 about the case.

“Having issues certainly isn’t going to help. But all the signs so far are telling us that clients are sitting tight,” said Teresa Epperson, a partner at Mercatus, a Boston-based financial consulting firm. “Goldman’s capabilities are in trading strategies and hedging risks. The extension of those absolute-return strategies could be attractive to plan sponsors.”

Fiduciary Duty

The asset management division that McDermott works in is separate from the mortgage unit that sold the securities at the center of the SEC’s fraud suit against Goldman. A key difference between the two businesses is that the asset management division operates under a fiduciary duty to its clients, whereas the sales and trading division doesn’t.

“When a client gives us their money and their assets to manage, we are 100 percent their fiduciary, we must manage their money in the most prudent fashion possible using our best judgment possible,” Goldman Sachs President Gary Cohn said on May 11 at an investor conference in New York. “The rest of Goldman Sachs is not in the fiduciary business.”

Goldman’s total assets under management at the end of the first quarter were $840 billion. Asset management is a smaller department at Goldman than investment banking or trading, representing 8.8 percent of the firm’s 2009 revenue of $45.2 billion, according to company reports.

Alternative assets, such as commodities and real estate, can increase a portfolio’s overall return and lower risk. They’re gaining in 401(k) plans because more companies are creating their own custom target-date funds, said Callan’s Lucas. Target-date funds move money from riskier investments such as stocks to more conservative alternatives like bonds as an investor approaches retirement.

No Safe Havens

The market drop of 2008, when the Standard & Poor’s 500 Index declined 38 percent, showed that “there were very, very, very few safe havens,” said Bud Pernoll, senior managing director of Santa Monica, California-based Bay Mutual Financial LLC, which advises corporate retirement plans on their investment options and works with Goldman. “You’re starting to see plan sponsors look outside the traditional asset classes.”

Pernoll has added Goldman’s Satellite Strategies Portfolio, a mutual fund with a portfolio of other mutual funds invested in assets such as real estate, commodities and emerging markets, to more than a dozen 401(k) plans he advises since the start of the year. The fund, with $585 million in assets, returned 28.6 percent in the last 12 months, according to data compiled by Bloomberg.

Large-Company Sales

Goldman already has sold its funds to the 401(k) plans of companies including Intel Corp., Sun Microsystems Inc., and Sysco Corp., according to data compiled by BrightScope Inc., the San Diego-based 401(k) research firm.

The most popular Goldman funds for 401(k) plans are Goldman Sachs Mid Cap Value Fund and Goldman Sachs Small Cap Value Fund, according to BrightScope. The mid-cap fund returned 42.9 percent for the last 12 months, and the small-cap fund returned 45.2 percent in the same period, according to data compiled by Bloomberg.

Goldman is developing target-date offerings that include guaranteed income during retirement, McDermott said. That puts it in competition with BlackRock and AllianceBernstein L.P., the money management unit of AXA Group, in developing target-date funds that include annuities.

“There’s a lot of interest in product development, but not a lot of plan sponsor usage,” Callan’s Lucas said. That may be because big corporate plan sponsors are waiting for guidance from regulators. The Department of Labor has been studying annuities in retirement plans, and the Senate’s Special Committee on Aging is scheduled to hold hearings on lifetime income June 16.

‘Major Player’

“We want to be a major player,” said Goldman’s McDermott, who previously worked in the corporate retirement divisions of AXA Equitable and Fidelity. He said he expects to increase the number of people on his team to 30 from 20 by yearend.

Goldman’s alternative asset push “is ahead of the curve right now, so they see an opportunity to dominate that niche,” said Steven Dimitriou, managing partner of Mayflower Advisors LLC, a Boston-based retirement plan consultant. “As soon as these funds start gaining traction, they’re going to get copy- catted.”

To contact the reporter on this story: Amy Feldman in New York at afeldman16@bloomberg.net.

Last Updated: May 18, 2010 00:01 EDT

http://www.bloomberg.com/apps/news?pid=20603037&sid=aleNSNidU4Ms#

You have GOT to be kidding me

Goldman Sachs faces massive fine in U.K.

LONDON — Goldman Sachs is facing a massive fine from the UK's City watchdog following an investigation into the U.S. investment bank's international business, the Financial Times said on its website on Wednesday.

The Wall Street giant will be fined $31 million (or £20 million), according to the BBC.

A formal announcement by the Financial Services Authority (FSA) could be made as early as Thursday morning, the newspaper said.

The FSA launched an investigation into the bank in April after the U.S. Securities and Exchange Commission charged Goldman misleading investors in a mortgage-backed security known as Abacus, according to the FT.

Citing people familiar with the FSA's fine, the FT said it is not based on the Abacus transaction, but is the result of its investigation into the bank's business practices in London sparked by the SEC allegations.

Read more here: http://www.msnbc.msn.com/id/39065747/ns/business-world_business/