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Showing posts with the label Goldman Sachs

The Real Superpredators

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The Real SuperpredatorsThursday, April 14, 2016
Recently, the Department of Justice announced that Goldman Sachs “agreed to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities.” Close scrutiny reveals that Goldman will actually pay, for a number of reasons, $0.

Goldman’s Track Record:

We note that:

On April 28, 2003, Goldman Sachs was found to have aided and abetted efforts to defraud investors.

On September 4, 2003, Goldman Sachs admitted that it had misused material, nonpublic information that the US Treasury would suspend issuance of the 30-year bond.

On April 28, 2003, Goldman Sachs was found to have "issued research reports that were not based on principles of fair dealing and good faith .. contained exaggerated or unwarranted claims.. and/or contained opinions for which there were no reasonable bases ". .

On January 25, 2005, "the Securities and Exchange Commission announced settled civil injunctive actions agains…

What Poor People Want

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I was at the IMF yesterday with a bunch of rich white people (@Lagarde@HelenClarkUNDP) when the subject of poor people came up.

Of course, as they do with Black people, rich white people claim to know everything there is to know about the poor. I think their main fear is that poor people will want the same deal that Goldman Sachs got, or the deal JP Morgan got, or the deal the "London Whale" or the LIBOR manipulators got. This fear is borne of a certain selfishness and greed.

It is, also, completely wrong, so I took the time to tell them what I think.

Here is what we want:

1. Water. Not privatized water systems. Access to clean water.
2. Food. Not GMO degraded, just clean food.
3. Shelter. Not subprime loans, but shelter.
4. Peace. Not the opportunity to be shot in the back by a racist cop, or a racist Israeli soldier or a Muslim extremist.

If you think about it, these are the same things that rich white people want.

'Minority' Bank Designation Has Become Meaningless

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We note with interest the designation of Urban Partnership Bank as a Minority Depository Institution. According to Crain’s Chicago Business, “The $1 billion-asset bank based on Chicago's South Side (formerly South Shore Bank) is officially a minority lender despite an ownership dominated by Wall Street giants like Goldman Sachs Group Inc. and J.P. Morgan Chase & Co.” (http://www.chicagobusiness.com/article/20130611/NEWS01/130619972/wall-street-owned-urban-partnership-bank-officially-a-minority-bank)
A Minority Depository Institution, as defined by Section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), used to be a bank in which 51% or more of the common stock was owned by one or more members of the following groups: Black American, Asian American, Hispanic American, or Native American.
The threshold now for MDI designation is a bank that meets one or more of the following standards: 1.51% or more of the common stock was ow…

Goldman..to Disclose NYC Workers’ Race, Gender Data

From the New York Times,"At the behest of New York City’s public pension funds, two of the biggest financial companies with headquarters in the city, Goldman Sachs and MetLife, have agreed to publicly disclose information about the racial and gender breakdowns of their staffs."

Also see: http://www.nytimes.com/2012/04/16/nyregion/goldman-sachs-and-metlife-to-disclose-staff-diversity-data.html

Also see: http://www.americanbanker.com/bankthink/goldman-has-some-gall-seeking-profit-in-housing-1048229-1.html

Goldman and the Housing Market

I recently wrote an opinion piece for the American Banker Newspaper website. The article is on Goldman's new housing fund.

It was Goldman's mark to market on the Bear Housing Fund that triggered the liquidity part of the housing crisis. They then went into the Fed to become a bank. Subsequently, they got $2 trillion in funding. Now, they are playing the upside, this after denying any meaningful role in the financial crisis (God's work) and after multiple severe securities market violations. My point is that, given this track record, they are lucky to be around, much less raising money for a mega housing fund.

One would be justified in being concerned that their actions with respect to the new Fund, despite what they might say, will not help the market and country work it's way out of the housing crisis, just when we are beginning to recover.

It's like letting someone with the flu in your house just after you got over pneumonia. Not a good idea.

The point is to a…

Socially Responsible Goldman Sachs - NOT

An article in today's New York Times written by a soon to be former employee of Goldman Sachs starts with the admission that.."after almost 12 years at the firm..the trajectory of (the firm) is as toxic and destructive as I have ever seen it."

The author goes on to state what many have long known, that "the interests of the client continue to be sidelined in the way the firm operates and thinks about making money."

This is news?

The writer blames Goldman's "current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn" for a "decline in the firm’s moral fiber.."

What moral fiber is he referring to? The fiber evident in multiple lawsuits and "S.E.C. investigations, Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids?" Read Money and Power: How Goldman Sachs Came to Rule the World if you really want to know.

The author then goes on to brag that "Over the course of my career I have had the p…

Carver Federal Raises $55 million

In a stunning development, Carver Federal today revealed they have raised $55 million in new equity capital. This amount exceeds, by almost three times, "regulatory capital requirements set by the Office of Thrift Supervision (OTS)."

According to the bank, investors include:

The Goldman Sachs Group, Inc., $15 million.
Morgan Stanley, $15 million.
Citigroup Inc., $10 million.
The Prudential Insurance Company of America, $10 million.
American Express Company, $2 million.
First Republic Bank, $2 million.
National Community Investment Fund, $1 million.

Prudential and American Express (full disclosure: former clients) have a 20 year track record of making these types of investments. National Community Investment Fund is a Creative Investment clone, and a bad one at that (we started seven years before they did.)

Which brings us to Goldman, who today "notified the New York State Department of Labor that the investment bank (might) lay off 230 employees." We'll see if they act…

Punishing Goldman Sachs

According to news reports, most prominently a report by Charles Gasparino, Goldman Sachs is looking to settle SEC charges that the firm willfully mislead and defrauded investors in selling an investment product based on subprime mortgages. This is, of course, the smart thing for them to do, if they can. I am not sure that the SEC will let them off the hook lightly. Even a billion dollar fine would be of little consequence to the firm. What to do? Here is what I said in 2005:

"One thing I would note about the (Global Research Analyst) settlement itself is our belief that the penalties should have been income based. I know that's a settled point, but our suggestion would have been that the settling firms be stripped of all income for a 12-month period as a way of ensuring that they would not engage in these egregious actions again. What you do is let the firms run themselves for a 12-month period, you take a look back at how much money they made, and you take all of that money o…

OK, maybe they landed a glove or two....

According to the Washington Post, "The Securities and Exchange Commission has referred its investigation of Goldman Sachs to the Justice Department for possible criminal prosecution, less than two weeks after filing a civil securities fraud case against the firm, according to a source familiar with the matter.

The Wall Street Journal and Bloomberg News reported Thursday night that the U.S. Attorney's Office in Manhattan had followed up on the request and opened a criminal probe. The office declined to comment.

It is very rare for the government to indict a firm, and the mere threat of criminal prosecution can destroy a company. A criminal investigation destroyed the infamous Wall Street firm Drexel Burnham Lambert in the 1980s even though the firm settled with authorities."

Never laid a glove on them

I attended part of Senator Carl Levin's Permanent Subcommittee on Investigations hearing concerning Goldman Sachs. Bottom line: they never laid a glove on them. As one report noted, "By day’s end, the investment bank’s market value had risen by $549 million." My comments follow.

1. When questioned about most matters, Goldman's CEO simply misdirected the questioner to an irrelevant portion of the inquiry. Specifically asked a direct question about the firm's short position (a position that benefits from a fall in prices, in this case, housing prices) in the mortgage market, the CEO referred to Goldman's 140 year history (this was a misdirection), and characterized the firm's position as a hedge (this was false). A key factor relates to relative position size. A $1 million dollar long position offset by a $1 million dollar short position is a hedge. A $1 million dollar long position offset by a $10 million dollar short position is a directional bet on the ma…

SEC accuses Goldman Sachs of civil fraud

According to the Washington Post, "The Securities and Exchange Commission filed charges Friday against Goldman Sachs, one of the most successful but vilified banks on Wall Street, for misleading and defrauding investors in selling a financial product based on subprime mortgages.

In filing the civil suit against Goldman Sachs, the agency is targeting one of the banks that largely escaped the wreckage of the financial crisis and, with the help of various forms of government aid, emerged stronger."

We believe this may be the first in a series of actions targeting Goldman. An examination of Goldman's transactions with AIG will probably reveal similar questionable practices. As we noted on July 9, 2009, the US lost 53% supporting Goldman.

As we noted on March 5, 2009, Goldman was one of several firms accused of systematically cheating customers.

And, finally, as noted on July 19, 2007,

"From an ethical standpoint, (Goldman) has repeatedly engaged in behavior that would cau…

Hearing on the link between Fed Policy and Bank Supervision (Frank Hung, Intern)

We attended the hearing held by House Financial Services Committee on Wednesday March 17, 2010. Among the speakers:

The Honorable Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve

The Honorable Paul Volcker, Chairman of the President’s Economic Recovery Advisory Board, Former Chairman of the Federal Reserve

Their testimony focused on interest rates and government guarantees, such as those granted Fannie Mae and Freddie Mac. One Congressman asked if holding rates too low for too long causes inflation? Bernanke indicated he is watching economic trends closely will move rates up or down in order to avoid future economic problems. He stated that arbitrage opportunities still happened and that, based on current reports and research, demand is still lower than the full employment level. He noted that low interest rates can stimulate consumer expenditures and alleviate the unemployment problem.

He also stated that the Fed cooperates with other regulatory agencies in superv…

Wall Street banks get swine flu vaccine....

According to The Hill, "Now we learn that while many kids, hospitals and pregnant women cannot get enough of the swine flu vaccine, the major banks and Wall Street firms were given a private allocation. At best, this is a ridiculous distribution strategy; at worst, these firms gave some vaccines not to high-risk people but to high-profit traders and senior managers."

And you were wondering where your $700 billion went. Pitchforks, anyone?

U.S. lost 53% supporting Goldman Sachs

According to MarketWatch.com, "The U.S. government made a 23% return supporting Goldman Sachs during the global financial crisis, the investment bank said Wednesday as it unwound one of the last taxpayer-funded investments it received last year." This is incorrect. If you include the $13 Billion that Goldman received through AIG (to make Goldman whole on Credit Default Swap transactions) we lost around 53%.

"For Minority Firms, Crisis Opens Doors"

Wall Street Journal, May 22, 2009.

NEW YORK -- The financial turmoil that has weakened or
destroyed some of Wall Street's most prominent companies
is presenting an opportunity for some lesser-known firms,
especially those owned by women and minorities.

One company that is benefiting is Williams Capital Group
LP, an African-American-owned broker-dealer and asset
manager in New York. Earlier this week, Goldman Sachs
Group Inc. said it will invest $1 billion in a
money-market fund managed by Williams Capital, more
than doubling the amount of funds the firm has under
management and pushing it over a critical size
threshold that could help it attract additional
institutional investors.

Last month, Williams Capital was named as part of a
team assembled by Invesco Ltd. that applied to participate
in the Treasury Department's Public-Private Investment
Program, or PPIP, an effort to relieve banks of
toxic assets. Invesco, and its affiliate WL Ross & Co.,
which is controlled by money manager Wilbur Ro…

What happened. What now.

Commercial and investment banks used their size and money to make campaign contributions that allowed them to evade any meaningful effort to impose common sense and transparent risk controls in the public interest, known as regulation. One of the first regulations attacked dated from the Great Depression. This was the Glass-Steagall Banking Act, a law designed to separate commercial and industrial banking. Banks, commercial and industrial (the latter known as investment banks) could now combine operations to create products in fundamentally unstable ways.

Markets are ruled by two emotions: fear and greed, and these institutions got greedy, very greedy. They created financial products that served no real purpose, other than to generate profit for the bank. To keep customers (their only regulator) from understanding the bank’s true intent, they made these products horribly complicated. These products were, in part, simple bets. These bets were layered on top of each other until only th…

Relationship Map: Goldman Sachs and Treasury

See: http://muckety.com/Query

Who will profit from PPIP?

According to CBS MarketWatch,

"Representatives of Pimco, BlackRock Inc. and Colony Capital all told MarketWatch that their companies intend to offer their services to work on the effort." Other firms lining up at the trough:

Goldman Sachs
Wellington Management Co.
Och-Ziff Capital Management
Fortress Investment Group
Avenue Capital Group
Marathon Asset Management
King Street Capital
Blackstone Group

What is needed is new perspective, new ideas, new ethics. Sadly, these are all in short supply at the firms listed above.

One thing is certain. You will not profit. You will, however, be left with the bill.

Why the market failed

For those of you wanting more of an explanation, read this.

"There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used (financial bets) to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when (hedge funds) bought a credit-default swap, (they) enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets (hedge funds) and others made with firms like Goldman Sachs and AIG. (Hedge Funds), in effect, were paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all."

“They weren’t satisfied getting lots of unqualified borrowers to borrow money …

Summary of House Committee on Financial Services Hearing (Tian Weng, Debby Su)

1. Topic: TARP Accountability: Use of Federal Assistance by the First TARP Recipients
2. Date and Time: Feb 11, 2009, 10:00 am – 1:00 pm
3. Place: 2128 and 2172 Rayburn House Office Building
4. Chairman: Mr. Barney Frank, Chairman of the House Financial Services Committee
5. Witness List:
Mr. Lloyd C. Blankfein, Chief Executive Officer and Chairman, Goldman Sachs and Co.
Mr. James Dimon, Chief Executive Officer, JPMorgan Chase and Co.
Mr. Robert P. Kelly, Chairman and Chief Executive Officer, Bank of New York Mellon
Mr. Ken Lewis, Chairman and Chief Executive Officer, Bank of America
Mr. Ronald E. Logue, Chairman and Chief Executive Officer, State Street Corporation
Mr. John J. Mack, Chairman and Chief Executive Officer, Morgan Stanley
Mr. Vikram Pandit, Chief Executive Officer, Citigroup
Mr. John Stumpf, President and Chief Executive Officer, Wells Fargo and Co.

Eight bank CEOs from companies receiving the first TARP funds testified before the House Financial Services Committee. All testi…