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Goldman Sachs sued - another hit to US economy? (pg. 4)
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| jester |
Every currency and market has been manipulated for centuries. Its nothing new. even if we went back to bartering, you still have to come up with a system. The only way this will end, is when we as the human race becomes extinct. |
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| mute79 |
| quote: | Originally posted by jester
Every currency and market has been manipulated for centuries. Its nothing new. even if we went back to bartering, you still have to come up with a system. The only way this will end, is when we as the human race becomes extinct. |
omg lol.. what a stellar way to justify your own greed |
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| mute79 |
awesome
source: http://online.wsj.com/article/BT-CO...latestheadlines
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Congressmen Ask SEC About Recovery Of AIG Payments To Goldman
NEW YORK (Dow Jones)--The U.S. Securities and Exchange Commission should force Goldman Sachs Group Inc. (GS) to return funds it got from American International Group Inc. (AIG) if the insurer sold default protection based on fraudulent conduct by Goldman, two Congressmen said.
The securities, part of a group of collateralized debt obligations dubbed Abacus, are tied to home loans, much like the single Abacus CDO that federal regulator has said Goldman misrepresented to potential buyers. AIG, which was bailed out by the federal government, has paid $2 billion to buyers of credit-default swaps that pay out when the Abacus securities lose value.
"It is imperative that the SEC pursue the recovery from Goldman Sachs of any fraudulently obtained AIG payments," Democratic Reps. Elijah Cummings of Maryland and Peter DeFazio of Oregon said in a letter they are circulating on Capital Hill and plan to send to SEC Chairwoman Mary Schapiro. "Should this or any subsequent investigation uncover criminal misconduct, we implore you to refer those matters to the Department of Justice for the appropriate prosecution."
The Abacus security at the heart of the SEC civil-fraud case against Goldman was backed by ACA Capital Holdings Ltd. The SEC has accused Goldman of defrauding investors in the deal because the securities firm didn't warn that the hedge fund Paulson & Co. helped ACA pick some of the mortgage assets and would profit if the underlying mortgages defaulted.
Goldman Sachs has denied the SEC's charges and said it would vigorously defend against them. Paulson and ACA weren't named in the SEC's complaint.
AIG's Financial Products unit played ACA's role--agreeing to pay out if the securities declined in value--on seven additional Abacus CDOs, the congressmen said.
The SEC said Goldman was "responsible for ACA's misimpression" that the Paulson hedge fund would profit if the securities rose in value instead of declining. AIG spokesman Mark Herr declined to comment on whether AIG was aware of Paulson's role or the insurer's interactions with Fabrice Tourre, the Goldman Sachs banker named in the SEC complaint.
The Congressmen's letter was reported previously by the New York Times.
-By Erik Holm, Dow Jones Newswires; 212-416-2892; [email protected]
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| Orko |
| quote: | Originally posted by Nrg2Nfinit
i don't understand how people can throw so much money into an investment that they don't understand. Couldn't they ask the simple question "what kind of mortgages are part of the net asset value?" Do these people just blindly throw their money at a "reputable company". |
It wasn't just 'at a reputable company'. It was reputable companies seeing such insane margins, that they thought they would be stupid not to jump on the same bandwagon.
Then I think when some of them did do some digging, and saw the bases of the 'assets', they just tried to ride it up and pull out just before the crash. |
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| Nrg2Nfinit |
| quote: | Originally posted by Orko
It wasn't just 'at a reputable company'. It was reputable companies seeing such insane margins, that they thought they would be stupid not to jump on the same bandwagon.
Then I think when some of them did do some digging, and saw the bases of the 'assets', they just tried to ride it up and pull out just before the crash. |
Paulson asked for the product, Goldman delivered. They chose which types of mortgages they wanted in the basket and goldman agreed. Nothing wrong with what Paulson did here, the issue is Goldman not disclosing the mortgage types (which should have been inquired from by the original companies).
The problem i have here is that goldman is taking the entire fall and being blamed for ALL economic problems lol. Shouldn't the investors who played the RISK game on these insane margins also be accountable for their own stupidity of not inquiring until it was too late and they lost?
Reminds me of those idiots who trusted Bernie Maddoff. "oh its ok, we dont need to know how these things work, he's jewish and we're jewish."
Also, Lets not forget about those people who accepted those subprime mortgages. They should be accountable too. You don't buy a million dollar house if you only make 20,000 dollars. |
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| Nrg2Nfinit |
| quote: | Originally posted by mute79
omg lol.. what a stellar way to justify your own greed |
not exactly, the opposite is socialism, and we all know that thats worse. |
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| PivotTechno |
| There's always middle ground between two extremes, y'know. Why does it have to be either/or? Are we seriously that myopic as a species? |
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| Nrg2Nfinit |
| quote: | Originally posted by PivotTechno
There's always middle ground between two extremes, y'know. Why does it have to be either/or? Are we seriously that myopic as a species? |
Thats exactly what im saying. |
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| tonybologna |
You are right in saying the focus is a little to much on Goldman. We need to be focused on Wall St as a whole for their practices that have done major damage to this economy. Karl Denninger outlines here quite well:
http://market-ticker.denninger.net/...Skepticism.html |
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| Nrg2Nfinit |
| quote: | Originally posted by tonybologna
You are right in saying the focus is a little to much on Goldman. We need to be focused on Wall St as a whole for their practices that have done major damage to this economy. Karl Denninger outlines here quite well:
http://market-ticker.denninger.net/...Skepticism.html |
Personally, i love derivative products. ETFs are great, you can play commodities, company baskets etc. Disclosure? Yeah we need to work on that. Make the net asset value obvious and what it contains. Other than that i have no real qualms. Shortselling, options and news releases help keep the markets liquid and viable.
Investors need to do their own due diligence and not rely so much on other people handling their money. Most brokerages will simply invest your money in what they see profitable, its all formulaic. If you lose, you lose, deal with that risk. They will always take their percentage management fee and their incentive is to make you gain money so you stick with them. This is the way captialism works and how our free market is driven. |
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| Magnetonium |
Oh, you guys are absolutely gonna love this.
http://news.bbc.co.uk/2/hi/business/8631722.stm
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Goldman Sachs profits top $3bn
US bank Goldman Sachs has seen its profit for the first quarter of 2010 nearly double.
The bank reported net earnings of $3.46bn (£2.25bn) for the three months to March, up from $1.8bn a year ago.
Goldman also revealed that it paid its employees about $5.5bn in compensation, equivalent to 43% of its revenue.
Earlier, the UK's Financial Services Authority (FSA) announced a formal enforcement investigation into the bank regarding recent fraud allegations.
'Spectacular figures'
The results were ahead of Wall Street expectations, with revenue coming in at $12.8bn, up 36% on the year, and beating forecasts of $11bn.
The firm's net earnings were up 92% from a year earlier.
BBC business editor Robert Peston described the results as "another spectacular set of figures".
In light of recent events involving the firm, we appreciate the support of our clients and shareholders
Lloyd Blankfein, Goldman Sachs chief executive
How US media has reacted
Goldman's $5.5bn pay pot is spread across the bank's 33,100 employees, implying an average of $166,000 each.
However, the proportion of compensation to revenues was lower than a year ago, when the bank set aside 50% of revenues for remuneration.
Like other US investment banks that have already reported, Goldman's revenues were dominated by its debt trading business, accounting for 58% of the broker's total revenues.
"In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people," chief executive Lloyd Blankfein said in a statement.
UK inquiry
The FSA's earlier announcement followed claims made by the Securities and Exchange Commission (SEC) in the US that Goldman had defrauded investors during the sub-prime housing crisis.
The FSA's decision to investigate Goldman... is another embarrassment for the world's most successful hedge fund
Robert Peston, BBC business editor
Read Robert's blog
On Friday, the SEC issued civil charges against Goldman, alleging that it failed to disclose conflicts of interest during the marketing of sub-prime mortgages in which investors lost $1bn.
The SEC said Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, had helped to choose which securities were packaged into the mortgage portfolio. These securities were sold to investors in 2007.
Goldman has strongly rejected the SEC's claims as wrong "in fact and law".
The FSA has said it will liaise closely with the SEC in its review. Goldman has said it will co-operate with the FSA.
It is unusual for the FSA to announce the beginning of a formal investigation. It is understood that the investigation process typically takes months, if not years.
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The enforcement division of the FSA will now have powers to demand that Goldman provide it with documentation such as records of transactions and records of telephone calls.
If the watchdog finds Goldman at fault, it could impose a fine on the bank.
Lawsuit 'bandwagon'
Bruce Packard, banking analyst at Seymour Pierce, said: "It seems like it is just starting.
"I've always been slightly surprised that investors haven't gone after the investment banks in the way they did after the internet bubble."
On Sunday, Prime Minister Gordon Brown called for the FSA to launch an inquiry into Goldman Sachs.
"Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened," he said. "I want the Financial Services Authority to investigate it immediately."
In addition to the regulatory actions against Goldman, the German government and insurance company AIG have both said they are considering bringing private legal cases over money they lost on sub-prime debt that the firm sold to them.
"I expect everybody will jump on the bandwagon now," said Richard Bove, equity analyst at Rochdale Securities, who thinks that the cost to Goldman of defending lawsuits could be enormously expensive over the next few years.
Despite this, Goldman seems optimistic about defending these cases, saying it has set aside only $21m of cash to cover the cost of "litigation and regulatory proceedings".
In contrast, rival JP Morgan, who is concerned about possible lawsuits over mortgages it sold to the government agencies Freddie Mac and Fannie Mae, said it had provisioned $2.3bn in the first quarter.
'Incredibly arrogant'
However, Mr Bove says he doubted that the bad publicity would cause Goldman to lose any customers, because in his view, the Wall Street firm is simply too dominant.
"The services it provides in the trading sector are not easy to replicate," he says. "There is no other company that could jump up and take its place."
He added that the firm had "done a horrendously bad job over PR. They have come across as incredibly arrogant… [but] clients still do business with them." |
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