SEC charges GS with fraud

"What stood out the most in the article was Moody’s willingness – under the direction of Brian Clarkson, who joined the firm in 1991 and became president and chief operating officer – to bend over backwards to accommodate issuers of mortgage-backed and structured finance paper. Clarkson was willing to switch analysts if clients complained, which several did, including Credit Suisse Group AG (ADR: CS), UBS AG (UBS), and Goldman Sachs Group Inc. (GS)."


" By 2006, the company was rating $9 out of every $10 raised in mortgage securities."


"And in 2007 it was estimated that the firm rated 94% of the approximately $190 billion in mortgage and structured-finance CDOs floated during the year."

http://moneymorning.com/2008/12/18/debt-rating-agencies/
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Ok, the big investment banks (complain) about ratings, and get new analyst to play the game with them. So they know this is toxic/junk/shit , but want to sell that with the good rating
 
Quote from ElCubano:

Either they lied, looked the other way or Wall Street was actually the dumb money this time around.
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Sounds like all of the above.

As early as 2004, the FBI was warning about mortgage fraud.

http://www.cnn.com/2004/LAW/09/17/mortgage.fraud/

"WASHINGTON (CNN) -- Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an "epidemic" of financial crimes which, if not curtailed, could become "the next S&L crisis.""

When you have an epidemic of fraud and you are leveraging up into it with derivatives, it's hard to think of it as "productive growth".

Probably the money was too good all around. Free money for signing a liars loan, free money to pass it up to be packaged, free money for the ratings agencies who were paid to rate the CDOs highly, free money in commissions for the originators who hired raters away from agencies and could game the ratings formulas, free money in big bonuses based on paper profits.

Supposedly the Fed Reserve was made aware of the spike in fraudulent loans, but Greenspan chose to look the other way.
 
financial firms are diversifying internationally to escape onerous regulations. the losers will be new york and london.
 
you exactly prove my point and probably do not even realize it. ;-)



Quote from wmb:

Saturday, December 12, 2009
|

POLITICSDECEMBER 12, 2009.Goldman Fueled AIG Gambles
Wall Street Titan's Role Shown in Journal Analysis; Firm Says Problems Hidden .

Goldman Sachs Group Inc. played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American International Group Inc.

Goldman was one of 16 banks paid off when the U.S. government last year spent billions closing out soured trades that AIG made with the financial firms.


.Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms' roles in the transactions.


When Goldman didn't get as much collateral as it wanted from AIG, in 2007 and 2008 it bought protection against a default of AIG itself from other banks.

AIG officials were skeptical of the prices Goldman presented, according to the minutes of a February 2008 AIG audit committee meeting, which noted that Goldman was "unwilling or unable to provide any sources for their determination of market prices."

Additional calls for collateral from Goldman and other banks eventually led to AIG's September 2008 bailout and led the New York Federal Reserve two months later to fully cover $62 billion of insurance contracts Goldman and 15 other banks had with the financial products unit of AIG.



Goldman received $14 billion for its trades that were torn up, including $8.4 billion in collateral from AIG.

t. r the Troubled Asset Relief Program, which recently reviewed the New York Fed's effort to stanch collateral calls last year, said Goldman officials said the company believed it would have been fully protected had AIG been allowed to fail because of collateral it had amassed and the additional insurance it had bought against an AIG default.

The auditor, however, questioned that conclusion. The report said Goldman would have had a difficult time selling the collateral and that the firm might have been unable to actually collect on the additional insurance.

—Amir Efrati
contributed to this article.
Write to Serena Ng at serena.ng@wsj.com and Carrick Mollenkamp at carrick.mollenkamp@wsj.com

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
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Quote from asiaprop:

you exactly prove my point and probably do not even realize it. ;-)
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You are talking about Goldman Sachs buy protection for AIG default on the swaps goldman buy from them? And make alot of money when AIG become high risk and take bailout money?
 
I am talking about the exact time frame when it was decided that GS will be paid 100 cents on the dollar on the obligations AIG had to GS. At that time GS was in no danger whatsoever to go under, with or without this arrangement.

Quote from trendlover:

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You are talking about Goldman Sachs buy protection for AIG default on the swaps goldman buy from them? And make alot of money when AIG become high risk and take bailout money?
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Quote from asiaprop:

I am talking about the exact time frame when it was decided that GS will be paid 100 cents on the dollar on the obligations AIG had to GS. At that time GS was in no danger whatsoever to go under, with or without this arrangement. [/QUOTE------------------------------------------------------------------------------------------------

"Of course, notwithstanding the additional credit protection it received in the market, Goldman Sachs (as well as the market as a whole) received a benefit from Maiden Lane III and the continued viability of AIG. First, in light of the illiquid state of the market in November 2008 (an illiquidity that likely would have been exacerbated by AIG’s failure), it is far from certain that the underlying CDOs could have easily been liquidated, even at the discounted price of $4.3 billion. Second, had AIG collapsed, the systemic implications on other market participants might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default, although Goldman Sachs stated that it had received collateral from its counterparties in those transactions. Finally, if AIG had defaulted, Goldman Sachs would have been forced to bear the risk of further declines in the market value of the approximately $4.3 billion in CDOs that it transferred to the Maiden Lane III portfolio as well as approximately $5.5 billion24 for its credit default swaps that were not part of the Maiden Lane III portfolio; Maiden Lane III removed any risk for the $4.3 billion within that portfolio, and continued Government backing of AIG provided Goldman Sachs with ongoing protection against an AIG default on the remaining $5.5 billion."

http://www2.goldmansachs.com/our-firm/on-the-issues/viewpoint/archive/sigtarp-folder/section.html
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you are not getting the point I made. I mentioned that GS would not have gone under even if it did not receive a single penny from AIG when it was decided AIG would pay up 100 cents on the dollar to GS due to its obligations.

Quote from trendlover:

Quote from asiaprop:

I am talking about the exact time frame when it was decided that GS will be paid 100 cents on the dollar on the obligations AIG had to GS. At that time GS was in no danger whatsoever to go under, with or without this arrangement. [/QUOTE------------------------------------------------------------------------------------------------

"Of course, notwithstanding the additional credit protection it received in the market, Goldman Sachs (as well as the market as a whole) received a benefit from Maiden Lane III and the continued viability of AIG. First, in light of the illiquid state of the market in November 2008 (an illiquidity that likely would have been exacerbated by AIG’s failure), it is far from certain that the underlying CDOs could have easily been liquidated, even at the discounted price of $4.3 billion. Second, had AIG collapsed, the systemic implications on other market participants might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default, although Goldman Sachs stated that it had received collateral from its counterparties in those transactions. Finally, if AIG had defaulted, Goldman Sachs would have been forced to bear the risk of further declines in the market value of the approximately $4.3 billion in CDOs that it transferred to the Maiden Lane III portfolio as well as approximately $5.5 billion24 for its credit default swaps that were not part of the Maiden Lane III portfolio; Maiden Lane III removed any risk for the $4.3 billion within that portfolio, and continued Government backing of AIG provided Goldman Sachs with ongoing protection against an AIG default on the remaining $5.5 billion."

http://www2.goldmansachs.com/our-firm/on-the-issues/viewpoint/archive/sigtarp-folder/section.html
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Quote from asiaprop:

you exactly prove my point and probably do not even realize it. ;-)
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If your point is that GS received money from the taxpayers than you and I agree!
If your point is that Gs wouldnt have survived had it not been for taxpayers to come in and support AIG than you and I agree.
If your point is that GS was knowingly and willinly betting on the demise of the housing market than you and I agree.
If your point is that GS risk management department is irresponsible and boneheads than you and i agree.
But if your point is that Aig needed help and GS was a white knight your goofy!

The consultants disagree with GS assesment that they would have survived without help from the government. Only GS thinks they would have survived. But fuld thought he would survive, but he did not have as many freinds as he thought. GS would have perished If the government had not come in and bailed out AIG.

THE END!
 
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