SEC charges GS with fraud

Quote from nitro:

GS was payed $1.00 on every dollar (par) it was owed by AIG, a company that was clearly in a dire situation and could have easily not payed that money if it were allowed to implode:

"..The New York Fed urged AIG to limit disclosure of its deal to buy out derivative trading partners at 100 cents on the dollar..."

http://online.wsj.com/article/SB10001424052748704130904574644623457242200.html


In fact, it was not AIG that payed it. It was tax payers, through the grace of Hank Paulson and Tim Geithner that bailed AIG out and indirectly GS. If it were really AIG that was doing the paying, it would have been more like .50 on the dollar, if that.

Why tax payers aren't going after at least .50 of this money is beyond me.
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Howie Hubler a MS trader who bought $16billion in CDO's lost $9billion...it was the biggest loss from a trader in the history of wall street i believe and he hit the bid eventually...AIG didn't hit the bid although they did stop buying in early 07' ( i think )..oh yeah and he got a $25million bonus to boot....de pinga
 
All the GS hate aside, the fact that the SEC decision was not unanimous and it seems to correlate with the members political preference(plus the timing to go along with the Financial reform bill) might make quite unlikely there is an winnable case behind the SEC allegation. It wasn't nice behavior by GS but it might not be illegal either(specially with all the lawyer inserted footnotes), its not a slam dunk by any means, if it was the SEC vote wouldn't have been so close
 
What a minute. Isn't lying, cheating and stealing what Goldman is supposed to be doing? Their business model is based on that, right?
 
It seems strange that 40% of the commissioners voted against prosecution. If it was a case worth prosecuting shouldn't there have been a unanimous vote?

There must be more egregious cases of misconduct in the bubble years than this incidence. One gets the impression Goldman are being singled out for political reasons only. But they are not Enron, they are not Worldcom, they are not even Countrywide Financial. The authorities risk derailing the whole reform effort if they cry wolf over non-crimes and end up with egg on their faces when the prosecution collapses.
 
Quote from nitro:

Well again, you make a good point.

In the cases of shorting a stock you are temporarily hurting many people, in some cases tens of thousands of shareholders that together hold that stock. Still, it is very likely a very small portion of their livelihood. In the case of ENE, or say more recently LEH and BSC, that is on a much grander scale since tens of thousands of people lost their jobs, many of them middle aged with no other skills.

I will point out that I too am disgusted by utilitarian views on things. If five people are to die, unless you sacrifice this one person to save the other four, what do you do?

In the case of this crisis, millions of people have been affected tragically. Are you suggesting that I am being utilitarian in my assessment simply by citing numbers of people hurt horribly? Am I insensitive to the people who get hurt because we short their stocks even though their log-wealth is trivial by comparison to what they experienced in this subprime crisis? Perhaps, but I can only tell you that I am more horrified by "The Holocaust" or "911" than by other small skirmishes that lead to people dying. That is probably a natural state of being human.

But it is more than just numbers. Perhaps the lesson is that we should not gamble with money we cannot afford to lose. The high road is for traders not to take the other side of a person gambling on their house, or a casino to ask a person that has been dropping huge sums of money to stop and come back another day, or a bar to ask client that has had too many to go home and call her a taxi. In all these situations the business is hurting itself by not executing it's business, but it is doing the right thing in the long term for the sake of its community and integrity, imo.
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Absolute poppycock.

Shorting a stock does not hurt anyone. If the stock is going to go down, it is going to go down regardless of whether you short it, buy it, or do nothing. Your actions aren't going to affect the price once you have filled your position. No one's life got ruined by a stock moving down a tick or two. Stocks go down meaningful amounts because either the fundamentals suck, or the valuation was too high. Not because people short them. Look at the leading stocks in the market - they often have large short interest, despite being at record highs.

Second, if someone's "life is ruined" because a stock goes down, that is their own damn fault for greedily gambling their future for the hope of a fat profit. No conservative investor ever got their life ruined because of a bear market or a bad stock pick - they diversified between stocks and bonds, and diversified between companies. A conservative investor 50% in stocks 50% in bonds from 2007 highs to 2009 lows barely lost money. The only investors whose lives get ruined are those who are greedy cunts gambling to try and make money without actually having to work for it. They DESERVE to lose money, they deserve to have their noses rubbed in it, they deserve to get beaten by the harder working and more intelligent people on the other side of their trades, just like a fat untrained uncoordinated boxer deserves to get knocked out by an athletic well-trained talented boxer.

Third, a true investor actually benefits from the price going down, because they can buy cheaper. So even if short-selling drove prices down (most shorts would *love* that because it would mean they can make free money just by shorting more. Alas, if only trading were that simple), this would help, not harm investors. It would be improving their lives not ruining them.

Fourth, why the asymmetric sympathy? What about the shorts who get ruined when a bunch of clueless mom & pop investors pay 150 times earnings for some fad stock? When did I ever see someone shed a tear for them, guys who did their homework and who were *right* about the crazy overvaluation, but got screwed because idiots created a bubble out of pure greed. You feel sorry for bubble-blowing greedy retail speculator-plungers who pay insane prices for stock, distorting markets and fair value; but you attack sound pros who try to keep markets in line.

Finally, since when has collecting a profit been "gloating"? Gloating is when you do much better than most, then go up to them and laugh in their faces, tell them how much better you are, how much they suck. But people have not been doing that. They have just been earning high incomes or profits. Simply collecting a % of the value one creates for an employer, or taking 100% of profits that you earned by your own hard work, is in no way gloating. Complaining about people doing well when you do badly is called envy. There is definitely more envy than gloating at the moment. Gloating is morally superior to envy, because it encourages ambition and hard work, and generally requires one to have achieved some success before you can get away with it. Someone who has achieved something worthwhile and brags about it, is superior to someone who has achieved jack shit then whines at people who didn't join in the loser pity party.

Let's face it - most average punters who got burned in the crash deserves everything they suffered. They took reckless risk in stocks out of pure greed. They wouldn't have been complaining if the S&P had gone on another bubble and went to 2500 in 2007 would they? They want the upside when they win, but whine about the downside when they lose. Pure BS greedy gambling retarded hypocrisy. They took even more insane risk in housing. Thanks to Joe Sixpack, the housing market went insane worldwide and greated the biggest crash for 75 years. And we're supposed to feel sorry for these avaricious sharks? They only want sympathy because they were LONG AND WRONG and got totally fucking hosed. Well, tough shit. If you gamble and fuck up the world financial system, housing market, and economy all at once by your collective actions, you deserve every damn thing you get.

So they are angry about it. So effing what? I'm sure John Gotti was angry when he got arrested, I'm sure Hitler was angry when he lost WWII. I couldn't give two hoots if millions of morons are angry that their dumb harebrained schemes fucked themselves up - it's the innocent 3rd parties I am concerned about. The people who had to rent for years because homes got too expensive, for example. The non-gambling taxpayer who now has to pay for all this mess.

Let's be clear about the responsibility here - sure, some wall street sharks dined on the minnows. Caveat Emptor. But the main driver of this bubble was the homeowner, and the politicians who encouraged home ownership without limit or any restraint from common sense. The businesses were just catering to a demand that the public and politicians *insisted* be met. Businesses and executives who refused to go along for the crazy ride were pilloried in public for denying the working man a shot at his dream of owning a house.

So spare me the class war nonsense. The people who got screwed were greedy clueless fools who quite rightly have been returned to where they belong. What bugs me is that no politician has been impeached, resigned, let alone jailed, for any of this. No condo flipper or homeowner has been raked over the coals for their stupidity. Why is it business that gets picked on?

And let's see who the juciest, most under-fire targets of all are? Amazingly, the people getting the most criticism are the ones who saw it coming - the hedge funds and shorts! What a joke - you get punished for being right, warning people, and taking steps to protect your clients. You get off scot free for being asleep at the wheel and fiddling as Rome burned. And you get to impose authoritarian power on everyone else if you were responsible for creating the whole mess. That is a truly fucked up state of affairs.
 
Quote from Daal:

All the GS hate aside, the fact that the SEC decision was not unanimous and it seems to correlate with the members political preference(plus the timing to go along with the Financial reform bill) might make quite unlikely there is an winnable case behind the SEC allegation. It wasn't nice behavior by GS but it might not be illegal either(specially with all the lawyer inserted footnotes), its not a slam dunk by any means, if it was the SEC vote wouldn't have been so close
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My experience at this level is that the SEC case is weak and as is often the case the charges make allegations that seem highly damaging and very compelling. They are of course heavily slanted.

The portfolio of mortgage securites either met or did not meet ACA's independent criteria. That is the question? But ACA would not vouch for a portfolio that did not meet their own independent criteria. Paulson shorting it by buying corresponding credit default swaps is irrelevant. Paulsons at the time were taking a small minority view that a big housing bust was coming up.

Tacticly the SEC has already done the damage to Goldman Sachs. And it would appear to have been intentional tactics. Media, commentators and so-called experts are supporting the SEC charges. So GS may eventially settle it rather than fight it. Sometimes when you are not guilty you can choose to settle such charges because of the advantage gained in bringing the matter to an end.
:)
 
Quote from Ghost of Cutten:

It seems strange that 40% of the commissioners voted against prosecution. If it was a case worth prosecuting shouldn't there have been a unanimous vote?

There must be more egregious cases of misconduct in the bubble years than this incidence. One gets the impression Goldman are being singled out for political reasons only. But they are not Enron, they are not Worldcom, they are not even Countrywide Financial. The authorities risk derailing the whole reform effort if they cry wolf over non-crimes and end up with egg on their faces when the prosecution collapses.
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SEC loses, "See, I told ya, we need more rules, more funding, more staff".

On the flip side, GS agrees to senstivity training, community service.
 
Quote from Gabfly1:

I think there's a difference between shorting crap and creating a ball of crap to sell to others and then short. Arguably, the ball of crap was intentionally created with the end in mind.
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What you are forgetting is that at the time, it was only considered a ball of crap by about 0.1% of society. The rest thought it was gold dust.

If someone desperately wants to buy something they think is gold dust, and someone else takes a hugely controversial and risky view that it's a ball of crap, why shouldn't they be allowed to trade against each other? One is a bull, one is a bear, they disagree, they trade. That's what makes a market.

Perhaps you can suggest what is wrong about having a different opinion to someone? Or supply what they desperately ask you to supply? Next thing you'll be saying it's fraud for a richly valued company to issue stock.

I'm starting to think this site should be renamed elitist-socialist.
 
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