We knew what Goldman Sachs did shorting the housing market was criminal, the only question was whether it was actually against the law. Apparently, the S.E.C. thinks so, and they have filed a fraud suit against them. Shares of Goldman Sachs are down sharply. One would hope that this decision was taken independently by investigators at the S.E.C., but I’m sure President Obama and congressional Democrats are ecstatic. Finally, someone beyond the common folk are going to pay.
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BooMan
Martin Longman a contributing editor at the Washington Monthly. He is also the founder of Booman Tribune and Progress Pond. He has a degree in philosophy from Western Michigan University.
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Pretty weak if you ask me. I still don’t see how any of this was actually illegal. I’ll wait for more info, but as of right now I don’t see this gaining any traction; and not because of Goldman’s lobbying, just in general.
Since it’s a CIvil suit, I’d be looking more for liabilities than culpabilities….Guilt is determined for criminal proceedings, so I doubt you’ll be seeing anything there–as you say, it’s likely no laws were broken, so there won’t be anybody going to Jail from this…
Rather, I’m hoping to see a lot of dirt seeing the light of day, which otherwise would have remained buried and hidden away, that might later lead to criminal prosecutions. Here, though, I want to see big damages-awards…big money means big publicity, and these roaches really don’t like Daylight…and, I’d find some satisfaction in driving more than one of these bozos into bankruptcy…
Yeah we’ll see, but right now I’m not sure who this embarrasses more: the SEC, or Goldman.
The ones who should be embarrassed are Bush, Greenspan, and the Congress members who used the “free market” line to justify their own corruption.
Well I’m not disagreeing with that lol. I’ve been liking their attitudes with the financial reform bill lately.
I don’t see how it’s not illegal. Fraud is illegal. What they did was as fraudulent as any con game David Mamet ever wrote about. What I don’t see is what makes Goldman and the rest any different in kind than Madoff.
As I once said about Madoff:
Poor Bernie Madoff. He just didn’t know how to join the right fraternity. If only he’d been a senior executive at an investment bank, he could have retired in peace to his country estate, while little people cleaned up the mess his firm made.
Marketing a product as a 4 star, triple A rated, INSURED, gang-buster (the fetid swamp collection of sub prime mortgages) and selling it to unions, municipalities, smaller banks, retirement funds was bad enough.
knowing that your PR and sales promotion was a pack of lies, and that you bet large on that same product losing money is fraud. The process of legally dealing with Civil Fraud depends on the state. Some have explicit statutes, others rely on common law, and still others combine both.
Plainly put, this was intentional fraud. They profited once, by selling products as Triple A, that they knew were crap. That was the first fraud. They secretly bet against the Triple A product they marketed and sold. That’s the second fraud. They insured (heh) the product through AIG, using and abusing the AIG size and name, knowing that AIG kept no reserves, did no underwriting, and simply relied on MS for describing it as Triple A. That was the third fraud.
We’ll see what happens, or rather as I doubt anything will happen I’ll wait for the future details. Right now I don’t see anything illegal. Criminal? Yes. Illegal? No.
Oh, something I forgot.
Even though I don’t see anything illegal (yet), I still recommend the Democrats and the president to rail against Goldman over this. Even if nothing illegal was done, we can all agree that it was immoral and criminal. This should be used as a rallying cry for financial reform. Maybe that’s why the SEC took this up? Iunno how prevalent a president telling his regulating authorities how to do their jobs is, but I imagine it’s like the DOJ; independent, but really the president can extend a lot of pressure into how they operate.
Either way, the Democrats need to pounce on this, fast and hard, and bash the GOP over the head with it.
I guess I miss the difference between criminal and illegal.
Unless you are using “criminal” in its moral sense, and not within a statutory set of rules which define criminal activity.
The stories call the charge “civil fraud”. Anybody know if that’s a criminal charge — or if the SEC can even bring criminal charges? Or is this just some regulatory fine-type thing where they’ll have to pay a few mil and that’s that? If justice is to be done, Goldman and a whole bunch of others would be shut down and a lot of execs would be facing jailable criminal prosecutions.
It’s a civil fraud suit. It is very serious for Goldman. Goldman hid losses and that’s what got them into trouble.
Does the consequence for conviction go beyond a few million-dollar fine?
I heard on Bloomberg that the damages asked for are a little over a billion, with maximum penalties it could go as high as 5 billion. For reference, last year Goldman’s profit was 47 billion. Hence the 13% stock market drop.
My guess is that this is triage. Goldman will settle out of court without admitting guilt and getting in return that the settlement provides “complete settlement for any and all claims”. That insulates them from further suit.
Too low. Way too low. That doesn’t even cover their bonuses this year, much less, their profit sharing and highly excessive salaries for the past 6 years.
A fig leaf, so they can say Goldman was punished.
Goldman has deep roots in both major parties.
SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages; 2010-59; April 16, 2010
This sounds like the scam This American Life exposed last weekend. It was yet another of their amazing investigations that go where the “MSM” mostly fears to tread. They left no doubt in my mind that what we’ve got here is out-and-out crime that must be prosecuted.
Wasn’t there a disclaimer to the effect that they might be long or short on it? Is that their fig-leaf?
Read the next to last paragraph again. GS sold bundles of bad mortgages, claiming they contained mortgages picked by a third party with expertise in analyzing credit risk in RMBS when they were really picked by a hedge fund betting heavily against them. What investors got was toxic waste marketed as organic fertilizer and GS did the
lyingmarketing. If you or I did that it would be fraud, pure and simple.Sweet, now Obama has grabbed onto another good fight to add to the talking point tool belt leaving the Rep in the dust.
And McConnell’s talking point is already biting him in the butt big time.
Poor Rep, nothing to talk about.
And we thought after the election there’d be nothing to talk about anymore.
GS wasn’t the only financial enterprise engaged in this scheme. Here’s a link to a story about Magnetar. This story was the basis of a 40 minute segment on the April 11 edition of This American Life. These captains of capitalism engineered this fiasco and walked away with billions of our dollars. Talk about an entitlement program!