Posts Tagged ‘goldman sachs’

Small Time Crooks Vs. The True Masterminds Of The Economic Collapse

Recently two mortgage brokers and a real estate appraiser in Minneapolis were indicted on fraud charges for allegedly inducing lenders to make more than 1 million dollars in mortgage loans on properties based on false information regarding the properties’ values.

Over and over, we see stories like this play out across the United States, and yet the true criminals, the Wall Street financiers, the orchestrators of the worst economic collapse since the Great Depression, have  gotten away virtually scot-free with their ill gotten gains while the country continues to drown in foreclosures.

Now, I am not saying that the small timers aren’t guilty of fraud nor that they should not be gone after: of course they should. By the same token, Lloyd Blankfein of Goldman Sachs and Jamie Diamond of Chase certainly have dirty hands, and the scope of the fraud these men were involved in numbers in the billions of dollars, if not trillions, at this point.

Every day, I read stories about how the U.S. housing market continues to decline. Every day, I hear about more people losing their homes to foreclosure. Every day, I hear about the millions of unemployed who simply can’t find work because there is none to be had.

Contrast the plight of ordinary Americans with fortunes of the prime Wall Street movers, whose bank accounts are overflowing with cash, mostly owing to their ill-gotten gains made during this time of crisis. How can it be right that the very people who brought down our economy can profit nicely and get away with it?

Sure, some of the small timers, like the guys out in Minneapolis, are getting their just desserts for the crimes they committed, but the true atrocities remain unanswered.

Goldman Sachs Wants To Settle On SEC Fraud Case

According to a New York Times story, it appears that  Goldman Sachs would like to settle the SEC case against it for a lesser charge. It would sill face fines in the hundreds of millions, but it would also maintain the ability to deny any wrong-doing and avoid the charge of fraud.

Such deals are all too common place, and basically, it would wipe the record clean for Goldman.  Settled cases simply disappear because they never went to trial, which is why companies often push for settlements. Given Goldman’s worth, a few hundred million dollars in fines is a relatively cheap way of getting out of a very sticky situation.

I sincerely hope that the SEC does NOT take Goldman’s settlement offer. It is quite obvious fraud was done here and it is about time one of these Wall Street giants was made to pay the piper his due.

The Over-Consumption Myth Is Keeping Us From Enacting Meaningful Financial Services Reform

Despite the persistent rhetoric that people in financial trouble deserve to be there because they made poor choices and now must face the consequences of those choices, the real story behind why so many American families are riding the edge of financial devastation is not as simple as that.

As Elizabeth Warren explains in her paper entitled the Over-Consumption Myth,  the average middle class family carries more debt than it did a generation ago. However, this debt is not due to overspending on frivolous items such as designer clothes, designer foods, or big screen televisions.

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“They Have Become Literal Sociopaths” –William Black On Bank CEOs

William Black,  author of “The Best Way To Rob a Bank Is To Own One” was interviewed by Bill Moyers on April 23 regarding the massive fraud that exists in our financial system and the role it played in the current financial crisis.  Read the transcript here or watch the video here.

Mr Black said that two things created the environment in which the financial crisis occurred:

1: No regulation

According to Mr. Black, this wasn’t a case so much of there being no regulatory authority to deal with the banks, although indeed, more regulations are needed, it was a case of the government being unwilling to act using existing laws, even after it was made aware of the impending crisis in subprime mortgages and the housing bubble.

He mentions former Fed Chairman Alan Greenspan’s refusal to use a 1994 law granting the Fed the ability to regulate all mortgage lenders after being advised that a housing bubble was developing and there was a major problem with sub-prime loans.

2: Compensation

Mr Black on CEOS:

We now have the entitlement generation as CEOs. They just plain feel entitled to being wealthy as Croesus with no responsibility, no accountability. They have become literal sociopaths

Further than that,  Mr. Black said that there are incentives at every level to cheat, to make deals regardless of the ramifications to others and to the economy as a whole.

So, with all of this fraud being uncovered, why aren’t people going to jail, or at the very least, why haven’t there been any criminal indictments handed down? Mr. Black also explained why:

There’s a huge part that is economic ideology. And neoclassical economists don’t believe that fraud can exist. I mean, they just flat out — the leading textbook in corporate law from law and economics perspective by Easterbrook and Fischel, says — I’ll get pretty close to exact quotation. "A rule against fraud is neither necessary nor particularly important." Right?

Notice how extreme that statement is. We don’t need laws. We don’t need an FBI. We don’t need a justice department. We don’t even need rules like the SEC. The markets cleanse themselves automatically and prevent all frauds. This is a spectacularly naïve thing. There is enormous ideological content. And it fits with class. And it fits with political contributions.

Do you want to look at these seemingly respectable huge financial institutions, which are your leading political contributors as crooks?

Watch the video, but not on a full stomach. Again, the link to it is here.

The S.E.C Sues Goldman Sachs For Fraud

The New York Times reports that the Securities and Exchange Commission has filed a lawsuit against Goldman Sachs for securities fraud over actions taken by the bank during the mortgage meltdown.

The lawsuit alleges that in February of 2007, Goldman Sachs created a financial instrument known as Abacus 2007-AC1, along with 25 other similar instruments,  that allowed  the bank and a few investors to wager against the housing market.

Specifically, this instrument was created at the behest of hedge fund manager, John A. Paulson, who had earned billions of dollars in 2007 by correctly guessing that the housing market would crash. While Goldman was telling the investors to whom it sold shares in Abacus that their investments were sound and that they were picked by  an “independent manager,” it had allowed Paulson to choose which bonds would go into Abacus. Paulson, of course, chose the weakest bonds that would certainly fail. Goldman and the other investors who bet against the housing market made billions while the investors that bought into Abacus lost billions, $10.9 billion, to be exact.

Although the mechanics of the matter are complex and hard to understand, the fraud here is very basic. Goldman represented that the shares in Abacus were sound when it knew in fact they weren’t and made money because of this fact.

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