Matt Taibbi will be up for a Pulitizer Prize if he keeps writing these excellent exposes on corruption in Wall Street dealings.
People vs. Goldman Sachs by Matt Taibbi, Rolling Stone Magazine, click here
EXCERPT: They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.
Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.
Read entire article or buy in the May 26th issue of Rolling Stone, click here
This is finally coming to light in a more significant way. I have repeatedly reported on the corruption and manipulation as revealed in the Oscar-winning documentary, Inside Job, plus special reports from Frontline, 60 Minutes, and the New York Times.
Bloomberg reports: Goldman Sachs Group Inc. (GS) mortgage traders tried to manipulate prices of derivatives linked to subprime home loans in May 2007 for their own benefit, according to a U.S. Senate report.
Company documents show traders led by Michael J. Swenson sought to encourage a “short squeeze” by putting artificially low prices on derivatives that would gain in value as mortgage securities fell, according to the report yesterday by the Permanent Subcommittee on Investigations. The idea, abandoned after market conditions worsened, was to drive holders of such credit-default swaps to sell and help Goldman Sachs traders buy at reduced prices, according to the report.
“We began to encourage this squeeze, with plans of getting very short again,” Deeb Salem, a trader in the structured product group, said in a 2007 self-evaluation excerpted in the report. Swenson, Salem’s supervisor, sent e-mails in May 2007 urging traders to offer prices that will “cause maximum pain” and “have people totally demoralized.” In interviews with the committee, Salem and Swenson denied attempting a short squeeze, the report said.
The subcommittee cited the episode as an example of how Goldman Sachs traders placed the firm’s interests ahead of its clients’ as the value of mortgage-linked investments tumbled in 2007. The subcommittee, led by Senator Carl M. Levin, a Michigan Democrat and Tom Coburn, Republican of Oklahoma, has called on regulators to craft strict bans on proprietary trading and conflicts of interest to keep the problems from recurring.
‘Poor Quality Investments’
“Conflicts of interests related to proprietary investments led Goldman to conceal its adverse financial interests from potential investors, sell investors poor quality investments, and place its financial interests before those of its clients,” according to the subcommittee.
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BREAKING NEWS: NEW YORK (TheStreet) — Allstate(ALL_) filed a lawsuit on Tuesday against JPMorgan Chase(JPM_), alleging it received false information involving $750 million in mortgage backed securities it purchased between 2005 and 2008.
The complaint was filed in New York state court against JP Morgan, Bear Stearns, and Washington Mutual for, “violations of state fraud and negligent misrepresentation laws and federal securities laws,” according to information provided by Allstate.
I am sure I am on some conservative-wonks list, or worse these guys: the U.S. Chamber of Commerce. The name is such a misnomer as they dress themselves up as patriots “fighting for your business.” Actually, they are a powerful lobbying group hell bent against regulation, progressives, environmentalists, and the Dodd-Frank Financial Reform bill that protects everyday Americans from exploitation from businesses. They support the mega-corporations and promote a right-wing agenda: anti-environment, anti-healthcare, anti-union, smaller government, less regulation, and less taxes.
I read an article last week on Climate Progress on how the U.S. Chamber of Commerce was using “private security contractors to investigate the Chamber’s political opponents [including their families and children]. ” Now, what would be the reason for such a bold move? Hmmm, perhaps it’s because they actually are foxes in our hen house of government. In my opinion, they have crossed the line.
And why was Climate Progress interested in this turn of events?
“According to e-mails obtained by ThinkProgress, the Chamber hired the lobbying firm Hunton and Williams. Attorneys for the firm solicited a set of private security firms — HB Gary Federal, Palantir, and Berico Technologies (collectively called Team Themis) — to develop a sabotage campaign against progressive groups and labor unions, including ThinkProgress, the labor coalition Change to Win, SEIU, US Chamber Watch, and StopTheChamber.com.”
Think Progress reports today:
The law firm, Hunton & Williams LLP, represents the Chamber against campaigns by unions and political activists. In 2009, the Chamber paid Hunton & Williams $1,147,644 for its services. The law firm has represented subprime mortgagers, global warming polluters, and tobacco giant Phillip Morris.
Brad Johnson has the story of how three Hunton & Williams partners engaged the services of Palantir, Berico Technologies, and HBGary Federal to perform the invasions of privacy the Chamber itself now describes as “abhorrent“:
– Richard L. Wyatt Jr., co-head of the firm’s Litigation Group, who is suing the Yes Men on behalf of the Chamber. Wyatt negotiated with the spy firms on pricing and told them he would sell the project to the Chamber.
– Robert T. Quackenboss, a lawyer who handles “the tactical and public communications response to union-coordinated attack campaigns.” In this effort, Quackenboss was the “key client contact operationally” with the U.S. Chamber of Commerce.
– John W. Woods, an expert on “electronic surveillance” and “corporate crimes.” Woods was the “primary point of contact” with the corporate spy contractors.
Where Does their Money Comes From?
NY Times reported October 21, 2010
Prudential Financial sent in a $2 million donation last year as the U.S. Chamber of Commerce kicked off a national advertising campaign to weaken the historic rewrite of the nation’s financial regulations.
Dow Chemical delivered $1.7 million to the chamber last year as the group took a leading role in aggressively fighting proposed rules that would impose tighter security requirements on chemical facilities.
And Goldman Sachs, Chevron Texaco, and Aegon, a multinational insurance company based in the Netherlands, donated more than $8 million in recent years to a chamber foundation that has been critical of growing federal regulation and spending. These large donations — none of which were publicly disclosed by the chamber, a tax-exempt group that keeps its donors secret, as it is allowed by law — offer a glimpse of the chamber’s money-raising efforts, which it has ramped up recently in an orchestrated campaign to become one of the most well-financed critics of the Obama administration and an influential player in this fall’s Congressional elections.
The chamber’s increasingly aggressive role — including record spending in the midterm elections that supports Republicans more than 90 percent of the time — has made it a target of critics, including a few local chamber affiliates who fear it has become too partisan and hard-nosed in its fund-raising.
But others praise its leading role against Democrat-backed initiatives, like health care, financial regulation and climate change, which they argue will hurt American businesses. The Obama administration’s “antibusiness rhetoric” has infuriated executives, making them open to the chamber’s efforts, said John Motley, a former lobbyist for the National Federation of Independent Business, a rival.
News Alert from The Wall Street Journal:
J.P. Morgan Chase & Co. stood “at the very center” of Bernard Madoff’s fraud, according to a lawsuit unsealed Thursday that reveals for the first time how bank employees’ concerns went unheeded and irregularities in his accounts were overlooked.
The $6.4 billion lawsuit filed by Irving Picard says J.P. Morgan only reported its long-held suspicions of Mr. Madoff to British authorities in late October 2008, less than two months before he surrendered and the fraud was exposed.
THIS is why new financial regulation was implemented and must remain to root out the foxes who invaded our financial system and used it illegally.
NY Times reports:
WASHINGTON (AP) — Federal regulators have filed suit against 14 small firms they say illegally sell foreign currency contracts to individuals because the firms aren’t registered with a government agency.
The lawsuits announced Wednesday were the first show of force by the Commodity Futures Trading Commission under new regulations that took effect in October under the financial overhaul law. The suits seek to force the firms to register with the CFTC before they can continue to operate. They also seek civil fines.
When an investor buys a foreign exchange contract, he buys the right to purchase an amount of foreign currency at a fixed price in dollars. Investors hope to profit from ups and downs in currency markets, but they can also suffer losses from sharp price swings.
growing up watching the TV show, I Love Lucy, I loved when Ricky would say to Lucy, ” Lucy, you have some ‘splaining to do.” It was funny and an apt comment to her often hairbrained schemes and his resulting consternation. These days, it is Wall Street banking firms doing the ‘splaining and as the days and weeks go by, more and more is revealed as to how deep the systemic problems are that precipitated the 2008 Global Economic crash. The revelations not only show what was going on then, but what continues to go on now.
I saw the documentary film, Inside Job, this last fall and i would highly recommend it to every single person who shows any interest in what the heck has been happening within our financial sector. It is a must see for economic students and investors.
Where are we at today?
The financial regulation of the Volcker Rule looks to be making some ground in spite of many financial institutions trying to ‘hedge’ their way around it and Republicans branding it as a jobs killer. What they want is business as usual.
The regulators released a study on the Volcker Rule, named after its author, former Federal Reserve Chairman Paul Volcker. The rule is intended to limit big insured banks’ speculative investments in the wake of a financial crisis that took the economy to the brink.
At a meeting on Tuesday, the newly formed Financial Stability Oversight Council, which comprises banking and securities regulators including the Federal Reserve, approved the release of the study. They will consider the study as they write rules, which are due in nine months. Read the study:
The study said firms could be required to perform quantitative analysis to identify prohibited proprietary trading. Inventory, turnover, revenue and holding periods would all be considered.
The statute seeks to be explicit about what types of proprietary trading will be permitted, but the section is open to interpretation by bank regulators. A key issue for regulators is whether they can identify whether a bank made a trade on behalf of a customer, which is permissible, or for its own account, which is not.
Love that word, explicit, for that refers to clear disclosure by the financial banks and institutions of HOW investors money is being invested… in what financial instruments: stocks, bonds, credit default swaps, mortgage backed securities, equities, metals, etc. The main target are the complex derivatives that were used like casino chips and largely contributed to the financial meltdown: Credit Default Swaps, Mortgage Backed Securities, and Collateralized Debt Obligations.
What are they?
A Credit Default Swap (CDS) is a swap contract and agreement in which the protection buyer of the CDS makes a series of payments (often referred to as the CDS “fee” or “spread”) to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) experiences a credit event. It is a form of reverse trading.
In its simplest form, a credit default swap is a bilateral contract between the buyer and seller of protection. The CDS will refer to a “reference entity” or “reference obligor”, usually a corporation or government. The reference entity is not a party to the contract. The protection buyer makes quarterly premium payments—the “spread”—to the protection seller. If the reference entity defaults, the protection seller pays the buyer the par value of the bond in exchange for physical delivery of the bond, although settlement may also be by cash or auction. A default is referred to as a “credit event” and include such events as failure to pay, restructuring and bankruptcy. Most CDSs are in the $10–$20 million range with maturities between one and 10 years.
The unregulated CDS market ballooned to $62 trillion in June of 2008. The crash reduced the market to $38 trillion by end of 2008. Some economists state the number in 2009 around $13 trillion.
Credit default swaps are not traded on an exchange and there is no required reporting of transactions to a government agency.
A Mortgage-backed Security (MBS) is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization. While a residential mortgage-backed security (RMBS) is secured by single-family or two to four family real estate, a commercial mortgage-backed security (CMBS) is secured by commercial and multifamily properties, such as apartment buildings, retail or office properties, hotels, schools, industrial properties and other commercial sites. A CMBS is usually structured as a different type of security than an RMBS.
Collateralized debt obligations (CDOs) are a type of structured asset-backed security. In simple terms, think of a CDO as a promise to pay cash flows to investors in a prescribed sequence, based on how much cash flow the CDO collects from the pool of bonds or other assets it owns. If cash collected by the CDO is insufficient to pay all of its investors, those in the lower layers (tranches) suffer losses first. CDO can be created as long as global investors are willing to provide the money to purchase the pool of bonds the CDO owns. CDO volume grew significantly between 2000-2006, then declined dramatically in the wake of the subprime mortgage crisis, which began in 2007. Many of the assets held by these CDO’s had been subprime mortgage-backed bonds. Global investors began to stop funding CDO’s in 2007, contributing to the collapse of certain structured investments held by major investment banks and the bankruptcy of several subprime lenders.
Want to know how they were misused? Track down Inside Job and you will know. You will be outraged. And you will then know that those politicians who support the bankers and continued unregulated trading are indeed, foxes in the hen house of government.