Two years into a bi-partisan Senate probe, the Senate panel has determined the Goldman Sachs Group Inc. not only bet billions against the subprime mortgage market but then “clearly mislead their clients and they mislead the Congress,” announced Senator Carl Levin (D-MI) yesterday evening[1]. Levin added that “Goldman was, I think, the only major bank that did well during the recession…. The tactics that they used…were disgraceful. And sticking it to their own clients violates their claim that the clients come first.”
Not surprisingly, Goldman has announced it disagrees with many of the findings and firmly denies that its executives misled Congress. The firm has already agreed to settle an SEC civil fraud case by paying $550 million. The company’s traders stand accused of encouraging a “short squeeze” in the market that would “cause maximum pain” to holders of credit-default swaps and drive then to sell, enabling Goldman Sachs to buy at reduced prices[2]. Later, the employee who described the process in this manner somewhat lamely protested that it “put too much emphasis on words.” Ultimately, however, it seemed apparent to the Senate panel that Goldman Sachs had, at minimum, massive conflicts of interest that not only exacerbated the financial crisis but actually hurt its clients in the process.
Do you believe that Goldman Sachs should be undergoing this investigation? If they are as guilty as Levin and others clearly believe, what should be done?
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[1] http://www.latimes.com/business/la-fi-crisis-probe-20110414,0,6709903.story
[2] http://www.bloomberg.com/news/2011-04-14/goldman-traders-tried-to-manipulate-market-in-2007-report-says.html
It’s ridiculous that Senator Carl Levin doesn’t understand the role of a market maker! If Goldman sells me a CDO tied to mortgages of any class, it’s obvious if I have half a brain in the first place, that any credit product I’m buying is being sold by someone else. Maybe that someone else is hedging that trade in other ways, but maybe not. Maybe net-net it’s a trade against the value of the subprime bonds. What difference does it make!? I’m the one who wants to buy, so Goldman does well if I lose. That’s the way it works Carl!!! There can’t be winners without losers, and Goldman had no fiduciary duty to tell Landesbank or anyone else that as a market maker, it was trading against the clients position! DUH!! That’s what a market maker does! It’s sad really, when these Senators open their mouths on anything relating to sophisticated financial products.
@ JT duh, the reason is because they purposefully and intentionally caused a huge housing bubble that they created in order to profit from it when it collapsed, all to the detriment of the homebuyers (unwitting suckers). The Homeowners signature was all that was traded and in many cases it was simply made up numbers on a spread sheet passed off to the SEC. It’s the same as if Goldman SUCKS took out fire insurance on everyones house knowing they were going to burn them all down. They avoided paying the IRS taxes on all these homes too by reporting to the SEC that the Notes were in secure REMIC tax free flow through Trusts when in fact they were were not, and simply hidden behind the banks created MERS. Then they claim MERS is the beneficiary or nominee benficiary when in fact, they were not. They are simply an electronic registry and hence are not a real party of interest even if it says so on the Deed of Trust. It’s like if you and I had a contract agreeing the sky is green. Having a contract that says it is green doesn’t make it so. It is fraud, and it caused major damages to our country. That is the problem JT. That is not a “free market”. It is a a criminal enterprise. It is not investing in the market, or even betting on the market, it was setting up the market to fail and profiting off their fraudulent scheme.