Oh, wait, criminal charges may be filed against BP, but the crooks and liars from Wall Street are just fine. Is it me or do you see the supreme hypocrisy around this whole situation? BP is doing everything under the sun to correct its wrong, I know, it is not enough, but nevertheless they are paying people who lost their livelihood, paying for the cleanup and doing everything in their power to stop the flow of crude from the well and they may face civil and criminal charges. However, the banks, ratings agencies and other related crooks who bilked trillions in bailouts from governments, i.e. the taxpayer, that is you and I, on fraudulent loans and bonds are getting bonuses.
What is going on? What is the difference between BP and Goldman Sachs? Well, for one thing it is the money. Wall Street, collectively, gave Obama $23M in campaign contributions in 2008, the most out of any candidate running in the series that year. Compare that towards the oil and gas industry and it really just does not compare at all, Wall Street has the cash and if you think that has nothing to do with it you are naïve or blind to the hard facts of life. I am not saying BP, which as of yesterday I am a shareholder of, did nothing wrong, but they hardly blew up the financial system and drove millions out of jobs, their homes, blew up retirement plans and the list goes on, but Wall Street did all of that.
Where are the kangaroo trials for Wall Street? Where is that change I can believe in? I do not see it. I see the green lobby getting their kangaroo trials, but not the American people who lost trillions. We got Bernie Madoff which is not exactly a shining example of government efficiency as a whistle blower tried to turn him in 10 years ago, but other than that we got nothing other than an exploding deficit. The bankers got their bonuses last year, actually, if you think about it, they got their bonuses in 2008 as well and were really not impacted at all by the financial crisis in the least. Sure, some lost their jobs, lower level people, but not the main players who made it happen and they are still making millions a year.
The ratings agencies are still doing what they always do, rating paper on fantasyland assumptions which are far from reality and there is zero reform going on there. Goldman is going whatever Goldman does, perfect trading days for all of 2010, how does that happen? Citi is getting right back into the game of packaging and selling CLO’s again, more garbage to go into your mutual fund, how exciting! Yet, Chuck Prince still has his millions, John Mack still has his millions, all the executives at Lehman are still wealthy, same at Bear Sterns, but what about their bond holders and shareholders? What about Repo 105?
Give us 1 freaking show trial! Instead we are getting BP under investigation, great. I am sure the granola kids will love that show trial, but for those of us who actually pay taxes, work and actually show up to vote, well, we are mad and want some Wall Street heads on a platter still. Preferably Lloyd’s, but I will take John Mack’s just the same, I am not picky.
We all know the answer to that question, but he really has taken the cake today. As Goldman defends itself against this lawsuit Cramer had a piece on CNBC titled “Cramer: Goldman Invested Own Money in CDO.” In this article he cites an unnamed source, which is the first red flag, that stated Goldman did not short this CDO. Well, who cares as that is not the allegation. The allegation is that Goldman allowed Paulson to pick out lousy mortgages to short, in order to create the synthetic CDO, and did not disclose to investors that this CDO was created by a guy who wanted to short the market. The charges claim that the marketing of this CDO was said to have been picked by an “independent” third party which is patently false, unless Paulson & Co. wanted to lose money. As an aside, this is right about the time Goldman started to short the sub-prime market according to my sources, you know, publically available information.
The question is about whether Goldman did this, I think they did, and what other banks might have done the same thing, they all copy each other and the synthetic CDO market was a very esoteric vehicle to invest in. The CDO market was also controlled by a few main banks, Goldman, Morgan, BoA, Deutsche Bank, Citi and a few others. These banks kept the prices of the CDS swaps low, meaning the buyers, i.e. Paulson, was not making any money, as the market was collapsing which shows that the banks were deluding themselves about the reality of the market. Most CDO’s only needed a 5% default rate to blow up, banks did not move the prices of the CDS’s in the buyers favor until well after that 5% default rate, read The Big Short to verify. In other words, these guys controlled the market, created a product they knew was crap (the short sellers picked what they wanted to short!) and then sold these synthetic products to unwitting clients, they had to invest in some of them because by 2007 all the suckers were less likely to buy synthetic products.
My point is simple, no one claimed Goldman shorted this specific CDO, but misled investors to buy it by distorting the facts about it. Are they guilty? More than likely, but I am sure the case will be settled with admission of guilt. Does this mean AIG and other investors might have a claim? Yup, so go buy some GS Cramer, I am sure he will tell you that later tonight. Did other banks do the same thing? More than likely. It is hard to believe GS was the only bank that did this when they were a relatively small player in that business, compared to Citi, Merrill Lynch and others. Does Cramer grasp those facts or thoughts? I don’t think so.
After all, this is the guy who thinks the market going up every day for a month and a half is a good thing. Then again, Cramer, whose selective memory will omit this in a week or tonight, did this on his show last night:
I guess Cramer never made money shorting stocks… yeah right. I respect Cramer the hedge fund manager, but this other guy, what he turned into, is disingenuous.
It only took 2 years for the SEC to get off their butt and do something, but these charges are not telling the whole story. The complaint alleges that Paulson & Co. constructed a synthetic CDO through Goldman, Paulson picked the worst mortgages to bet against. Goldman, in turn, sold them to investors, they need someone long to buy what Paulson was short, they apparently pitched them as good investment products that were handpicked by a independent third party. They lied to investors, shocking. Paulson did nothing wrong that I can see, but since he is a big bad hedge fund we will see what will happen.
What is interesting is that this should not be the only charge against the firm. After reading several books it was clear that Goldman was long sub-prime until June, or so, of 2007 when the market started to crash. They in turn went short the market, buying CDS’s on the synthetic CDO’s they helped create. They are hiding their culpability by claiming, “we were only marking a market and had nothing to do with creating this mess.” That is pure bull. It was clear that the firm worked with the first person who created the CDS on sub-prime, Mike Burry in California. While they only brokered the deal between AIG and the hedge fund, Scion, Goldman did know that this guy picked the worst sub-prime to bet against. They let him handpick the worst of the lot to short. They knew the synthetic CDO’s were garbage.
Clearly, I only have public information and this is a complicated mess, but from what I have read I believe Goldman had a much larger role in creating and facilitating the problem that nearly collapsed the financial system as we know it. At first they brokered the deals and then they bet with the hedge funds that the market would collapse. However, the real issue is that Goldman and other firms, Goldman is not alone in this, knew that these managers were hand picking the worst mortgages of the group, they sent these guys a list of junk to pick from. Goldman had to then broker the deal to some other party, AIG was the biggest, obviously, so what did they tell AIG? Did they tell them that this guy picked the worst mortgages to bet against and insuring them is risky to you? I doubt it. What they did was fool the ratings agencies to give them a AAA rating and then told AIG to insure them because it is a riskless proposition.
That is the problem with Goldman, they knew what they were creating was bad, kept that information to themselves and then passed the risk on to other parties telling them whatever they wanted to tell them. Other firms will be brought in on charges as well, perhaps Morgan Stanley, Deutsche Bank and who knows who else. Obviously I have simplified what they did and added what I think they did, I have no proof other than what I have read, but it makes sense based on the info we all have. What will come out of these charges? Nothing. The SEC will offer a settlement fine and Goldman will accept it and not admit or deny responsibility. The SEC is corrupt.
In a story from the New York Times Goldman Sachs is at the heart of yet another financial crisis, Greece and some of the other PIIGS. The firm, apparently, helped Greece raise a substantial amount of money secretly in order to avoid the EU from knowing the country was violating the debt to GDP ratio. While I am not a regulator and my opinion is worth whatever the reader thinks, in my opinion Goldman, the Vampire Squid, is guilty of several EU rules and should be banned from doing business in the Euro Zone. The firm should also disgorge all fees paid to them for helping Greece bamboozle the world.
Goldman clearly suffers from a lack of a conscience and needs to attend business ethics training, although if you need to learn about ethics chances are you simply have none, as they clearly would sell their soul for a few million in fees. I agree that Goldman Sachs probably has the best f the best working for them, but that does not excuse the fact that, apparently, the firm helped a country violate rules and hide their reckless spending. At the core of the problem is also another familiar financial product, derivatives.
Apparently Greece, in order to keep spending, also sold their rights to airport landing fees, roads and lottery revenue in return for short-term money upfront which lowered their deficits in the near-term. Many of these deals were done in the early 2000’s which begs the question, what else is Greece and, apparently, Italy hiding? It also begs the question of what else has Goldman been up to? We know that Goldman went to Greece to help with a solution to their problems, which means kick the can down the road while sucking the remainder of Greece’s blood, but Greece said no to their plans.
Unfortunately, the story about Greece seems to be getting worse and worse as more details come out. As more of the story comes out I have a feeling we will learn more about Goldman’s and JP Morgan’s involvement in this deceitful tale. One also wonders if the US has also participated in such shenanigans as well. At this stage of the game, with the close ties Goldman has with Treasury, would it really surprise anyone if the US engaged in idiocy like the Greece government?
What is most disturbing about this whole story is the fact that Greece basically sold off their public entities to a firm like Goldman and JP Morgan. Essentially, those public utilities, which is the best description of what Greece gave as collateral, revenues would go to these banks. Along with that disturbing piece of financing news we also find out that if Greece takes a bailout the population will be forced to give up part of its sovereignty as well. How would you like to be a citizen of Greece knowing your Politian’s sold your sovereignty out in secret to private banks and now to the EU.
If there is a moral to this story it is why is Goldman allowed to exist at all? They clearly provide no real value to society or even governments as they made it so Greece could sell worthless bonds to foreign governments. This is also the second time the world is witnessing a credit crisis with a major US bank, Wall Street if you will, creating the mess or at least adding to it. Goldman and JP Morgan literally threw gasoline onto the fire in the case of Greece and, perhaps, Italy as well. How can we trust a firm who consistently knows how to make money for themselves, but screw everyone else? At the end of the day, why should Goldman exist at all?
We are all a little biased towards ourselves and most people are likely to not judge themselves harshly. Even mass murderers tend to justify or view their actions as moral or for the greater good, well many of them anyhow. My point is that when we are faced with a question about our performance we tend to spin it in the best possible light, another great example is Goldman Sachs spinning their huge bonuses as God’s work. The reason why I bring this up is because our President was asked to grade himself during an interview a few weeks ago and he gave himself a “solid B+” which is absurd.
The reason why he should have avoided the question altogether is because he has not completed one campaign promise to the people, except for higher taxes. Health care was done behind closed doors, Gitmo is open, Iraq is still somewhere, Afghanistan is getting more involved 9a big mistake I might add), and unemployment is sky high (add back in those “marginally attached” people and we are pushing 11%). Let us not forget that the annual deficit is 4 times what it was under the last President, who was certainly no peach, and we are quickly approaching 100% debt to GDP, not good.
All of this while Democrats keep blaming Bush for everything and the Republicans accept that argument, what? Oh, how quickly we forget the recent past. Before I go any further I did not like Bush, at all, and firmly believe he was one of the worst President’s of all time, so save the hate mail. However, Democrats are just as guilty of where we are today as the Republicans as they were ushered into power in 2006 in congress, the real power in politics. They rebuffed any attempt to rein in the GSE’s and they rubber stamped all of bush’s policies for 2 years. So, to say “we inherited this problem” is utter nonsense and has to stop.
When you have the power to say no and stop crazy spending and you do not you are just as guilty as the person who proposed it. That is exactly what the Democrats did for 2 years and to make matters worse, they simply allowed things to continue the way they were without a peep. Don’t believe me, check YouTube.com for the GSE hearing meetings or go check Democrat voting records for raising the debt ceiling, 7 times. They did not inherit anything, they helped create it, end of story.
If you actually believe that they inherited all these messes and did nothing to create them then you have a poor knowledge of politics, history or simply are blinded by partisan politics. I, on the other hand, do not care as I see all politicians for what they are, parasites on the backs of the American people who care about 2 things, reelection and power, not necessarily in that order. To sit here now and say that the stimulus is working is simply crazy, babbling, rabid partisan bickering because it is clear that it did not. If it did work GDP would not be at 2.2% in 3Q09, I know we will get an initial estimate of 4 or 5% for 4Q09, but that to will be adjusted lower and will be all government heroin.
Never before had the US government spent $787B in any stimulus plan and not seen any results. Instead the best argument Democrats can muster is that it stopped us from going over the abyss, oh really? Are these the same Democrats who said that not all the money has come into the system yet so we don’t know how well the stimulus is working? So, how can you say that on one hand it stopped us from falling off a cliff, but on the other hand say we don’t know how well it is going to work? You can’t because that is political double talk for we spent a bunch of money on stuff and we made many mistakes, but will not admit it. Instead, they decide to lie to us and then launch secret stimulus packages, i.e. the jobs bill passed at the dead of night.
What no one ever talks about is this, what would have happened if the stimulus was not enacted? I am willing to bet that things would have probably followed about the same track it is following now. Well, I think there would have been an exception to that, employment would have bottomed sooner and we would be seeing real recovery a lot sooner. Considering even Jim Cramer has admitted that the CEO’s he has spoken to have not seen one dime of stimulus I am pretty sure that the stimulus did not work at all. I mean, even the government is not adding tons of jobs, yet, until the census begins. Of course we do have more government employees making over 100K than ever before in history, but who cares, right?
If the original stimulus saved us and is going to get us back to growth then why in the world do we need a second stimulus? Simple, the first one was the greatest fleecing of America next to TARP in the history of the world. However, never fear because it is all Bush’s fault, a year later. I absolutely hated it when Bush blamed Clinton for the recession in 2000 just as much as I hate Obama blaming Bush now for one simple reason, the President has very little to do with the economy. I say that with a caveat, unless they implement policies that impact the economy like ridiculous stimulus packages, unpaid for tax cuts or Medicare advantage plans and things like that. What I mean is that the last 2 administrations, in my opinion, have had a greater impact on the economy than previous administrations mostly because of their lackeys in Congress happen to be in power at the same time.
Because of the absurdity of what is going on, even though I cannot stand the hypocritical Republicans, I am praying the Republicans take all of Congress in November and grid lock this thing for the next couple of years. Why would I want that to happen? Simple, I do not want my currency to be toilet paper around the world and I certainly do not want more spending. I also do not want more unionization of government employees, we need more firings in government, not hiring’s or raises. What I am trying to say is that we need balance restored back in Washington, it worked in 1994 and perhaps it could work again.
In the meantime, our President should not be issuing any grades for himself as he certainly did not earn a “solid B+” as I am pretty sure his math teacher would have flunked based on his estimates on health care costs and budget deficits. I am fairly sure a big “I” is what the President should have given himself for incomplete since he has not even kept the transparency promise he made. When C-SPAN says what is going on, you got an image issue Mr. President. So, keep some promises, fire some government workers, starting with all of you Czars, and let’s really figure out the deficit before the dollar does crash.
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