Gold Man Walking
I recall the first time I saw Dead Man Walking. I can’t stand Sean Penn or Susan Sarandon. They just about stand for everything I despise. In spite of these glaring prejudices; I was moved. Penn’s character’s redemption, Sarandon’s sacrificial humility and love really is the stuff of celluloid masterpieces.
Unfortunately for Goldman Sachs, its employees and its shareholders, the slow bop to the execution chamber will be nowhere as poignant and redemptive. I have watched a generation of the young and ambitious break their back to mark themselves with the Goldman name. It will take that same generation (and others) longer to remove the stigma of that name from their skin.
Even though I was a foremost critic of the Federal Government’s prized pupil treatment of Goldman Sachs and its executives, I am reluctantly beginning to change my tune. Whether by dumb luck accident or via methodical, sly-as-a-fox purpose the government is slowly, but surely proving that Goldman Sachs intended to defraud investors out of billions of dollars.
Continuing on the theme Eddie and I touched upon in this past weekend’s episode of NSFW, the internet and data compilation continue to be a successful (if painfully slow) method of catching deniers of all shapes and sizes in a bind when their own words/deeds come back to paint them into a corner.
Just a few excerpts from the article foreshadow the sort of situation Goldman’s collective greed and arrogance have created for its increasingly bleak future.
At the hearing, CEO Lloyd Blankfein and CFO David Viniar both said that the short position was simply an attempt to reduce risk. Goldman "didn't have a massive short against the housing market, and we certainly didn't bet against our clients," said Blankfein. "Rather, we believe that we managed our risk as our shareholders and our regulators would expect." Vinair said: "We were primarily, although not consistently, short, and it was not a large short."Yet emails the subcommittee released made it clear that individual traders at Goldman were quite bearish on the housing market and were seeking to profit from a downturn. In January 2007, a trader named Jonathan Egol wrote: "the mkt is dead." Two other Goldman traders, Michael Swenson and Joshua Birnbaum, bragged in performance reviews about the "extraordinary profits" they'd made and about a plan to not just "get flat, but get VERY short." In late 2007, Birnbaum wrote in a draft presentation (which argued that the mortgage traders should be compensated even more richly than Goldman traders usually are) that "the shorts were not a hedge." Yet another Goldman trader described the position as an "enormous directional short."
This atop the easily accessible 639 page report detailing how the Goldman Structured Products group banked over $3.7 billion in revenues in 2007 following twice amassing and profiting from large net short positions in mortgage related securities.
Though none of this info is breaking news and even though Goldman apologists will mistakenly continue to equate free market capitalism with the theft and robbery of those who show us any faith and trust… this is a watershed moment.
Since the wheels of justice move at a snail’s pace it is unlikely that punitive reality will set in any time soon. That said, however, we are slowly but surely moving in the direction of a world where Goldman Sachs is either no longer in existence or greatly diminished in its role as the world’s premier investment bank. The more and more we move away from the crisis the more it looks like Morgan Stanley is likely to come out the big winner…unless of course… they are just next on the hit list…
Less than 3% of the firms total profit in a government best case scenario...Lloyd, not guily
The thing is Midas, Goldman has already paid a huge fine and has a number of former employees in very high levels of government. I realize the evidence keeps mounting and it's getting harder and harder to maintain that Goldmanesque cockiness, but there's a reason that that bank keeps surviving.
Even when it came out that Jon Corzine nearly sabotaged the LTCM rescue at the last second (the economy was on the line then too), nothing came of it.
It still won't stop people from trading Goldman's stock and making money on it whether they are long or short! That's the best revenge.
Exactly..and that's why Goldman will forever be "draining" money from the layman's pocket - who's going to stop them if all the regulators are still on the payroll?
Looking forward to see who takes their spot as premier IB going forward
I'm well aware of Goldman's influence, but all of the things you listed (and a ton of others) eventually pile up. It may only take a straw to break a camel's back, but that camel's gotta get the shit ridden out of it first. Goldman's been riding a long time...
The Corzine thing's not an adequate comparison, because:
1) Corzine was not capable of sabotaging that bailout (if anything Jimmy Cayne would have been the guy and he wound up paying for his attitude when Bear was allowed to fail).
2) LTCM was a failure of arrogance, not of avarice. Intent is a huge part in determining the weight of a transgression. The more time goes by, the more we learn about the details the more obvious Goldman's guilt becomes.
This will eventually lead to civil litigation as (I presume) none of this information will be sealed. Think about how many individual and institutional investors may have a possible case against Goldman? It doesn't matter if Lloyd's President by then. There will be nothing to stop every single counter party that Goldman jerked from taking them to court and if just one wins...
Arrogance was definitely a large part of LTCM, on the part of the professors who came up with the theories and models, but a majority of it was definitely avarice by the quant traders in the front office as well. You can't make that much money in such a short period of time and not get greedy. Haghani, Hillebrand, and all those guys got addicted to those high returns and wanted that same money indefinitely.
As one of the major players in the consortium, literally any bank could have sabotaged the operation if they tried hard enough. Yes, Bear was clearing LTCM's trades, but all the other banks had gotten in on some of LTCM's money at some point, which was why they were all there. Corzine did in fact, almost pull GS out at the last minute; it's well-documented that he thought everyone else was trying to stick his bank with the bill and he had an IPO to try to figure out. Avarice. Arrogance too, definitely, but more avarice.
midas you put actual effort into your titles, i appreciate that
I refuse to respond while you are outside of the top 1 most active monkeys, you unambitious bastard.
Since when is MS considered a top tier firm in S&T? It was destroyed over the past 3 years and its FICC unit is in terrible shape aside from commodities.
Knew a guy in the Corps who was corporate counsel for Goldman. One day pulled me into the office and showed me GS broker access. It showed all the buy/sell recc's for its clients. Then he goes: "you wanna see something cool?" He puts in a password and accesses a completely different site. Tells me it is for super high net worth clients. The recc's were completely different. I something about GS being the devil and he just laughed and said "different strokes for different folks." Strange guy but was one of the who seemed to always no more then he was letting on. That's a lawyer for you.
yadda yadda, buyer beware. Banks are usually on all sides of an issue in various proportions. If Goldman's the only one smart enough to do their research on mortgage backed securities, then bully for them. Everybody tries to make as much money from their customers, and customers are usually smart about what they're buying. Goldman doesn't have a legal obligation to make their customers rich, nor does any other company. They weren't defrauding their own investors.
As to the different recommendations for high/low worth investors, people of different wealth profiles have different risk appetites. And the basic principle is: if you weren't happy with your money's performance at Goldman, you're free to pull your money out- those customers make the choice to stay there. Maybe the super rich get 15% return, the less rich get 9%, Goldman isn't making people keep their money in.
ummm yeah....they actually were defrauding their own investors by taking the opposite side of the trade secretly....and even though they are far from obligated to guarantee returns every single fiduciary is legally and morally bound to give their client/customer/investor the benefit of their expertise...in other words, Goldman was beyond obligated to let every single Abacus buyer know that they were short the housing market, as the conflict of interest is clear and huge...what Goldman did amounts to front running also known as that shit that will get you lead off the floor in handcuffs...there simply wasn't enough regulation in place at the time in this particular market for them to be properly punished and this is where their aforementioned political clout is keeping them afloat and more than a few guys out of a different sort of pinstriped suit.
However, the case being made now is for FRAUD. Another bank just settled in the $150MM range for not disclosing that the fund designing the product did so with the intention of making the bulk of their profit shorting it.
....hmmmmmm, that sounds very familiar.
@expenseaccounts:
You strike me as someone who hasn't actually delved into the details of the case against Goldman. It's sad to see someone make such juvenile arguments to defend Goldman without understanding what they're talking about. Do they pay you to shill for them? Or, are you just ignorant?
Anyone who has been following the matter closely knows Goldman Sachs intentionally deceived their investors/clients and profited from their deception. Down the line someone will pay for it whether that means more fines, jail time, or much stricter regulation.
My main concern has been and always will be when did Goldman Sachs and any other company who shorted realize the market was going to fail? At some point their obligation to their investors and stockholders should be superseded by an obligation to the people. I know certain people blew the whistle, Peter Schiff amongst others, but I didn't see any big company come out and say if we want to avoid a recession we need to do X, Y, and Z.
Lloyd's claim that the shorts simply served the purpose of reducing risk is clearly bullshit. Goldman may have been defrauding investors left and right, but they weren't the only shop engaged in this kind of behavior. It seems to me that everyone on the street was playing the same game when the housing market began its plunge. Am I wrong?
Why is the media, the government, etc,. all over JP Morgan's pregnant ass? The institutional clients they were screwing were non-profit credit unions and non-profit Lutheran-run life insurance companies. And they settled at $153 M? Maybe this settlement will be a blow to JD's cred in Washington, but my guess is he'll walk away from this deal unscathed:
http://online.wsj.com/article/SB100014240527023039706045764022305459475…
http://dealbook.nytimes.com/2011/06/06/the-fine-print-of-goldmans-subpr…
Truth is just never simple enough...
Forgive me if I'm focusing on the wrong issue here but do all of the aforementioned issues really matter at the end of the day?
By that, I mean, all of the big companies will keep going to Goldman for advisory (#1 in Global and US M&A league tables YTD) because they know that the hardest working, usually most intelligent monkeys will come to Goldman. This same logic can be applied to the S&T guys. I know this is more of a S&T issue and I honestly don't know much about that side, but that is just my general impression. All of the big clients, HFs (Paulson et al) will keep coming to Goldman for business. Former Goldmanites stick together and stick with Goldman. As long as the top talent keeps going to Goldman (which they all still aspire to do) then they will stay on top.
I may be looking at this from too micro of a perspective, so if someone can tell me why the macro matters so much more here then please let me know.
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