Taming the Vampire Squid: Take back our banks

[dolanbaker]

Journalist Matt Taibbi wrote that a big investment bank is like a giant vampire squid. A new animation from The Great Transition asks what banking is for? and whether vampire squid can ever be tamed?

https://www.youtube.com/watch?v=QoUWgI-c9g4

[dowtchaboy]

There has to be a sick squid joke in there someplace…

[BoyRacer]

The People vs. Goldman Sachs - Matt Taibbi -> rollingstone.com/politics/ne … s-20110511

A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges

They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.

there is more

[yoganmahew]

Great article.

[tulip]

He’s fairly nailed them with that article.

[What_Goes_Up]

The congressional report he refers to:

WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse
hsgac.senate.gov/public/_files/F … Report.pdf - PDF

[bokonon]

He’s fairly nailed them with that article.

He sure did. The Senate report that Taibbi based his article on has been out a while and was pretty much ignored.

But now his article has drawn attention to it…

Wow, Goldman Gets A Downgrade BECAUSE Of The Matt Taibbi Article
…
The rating on Goldman Sachs stock is being lowered to Sell from Neutral. The price target is being cut to $120 per share from $163 per share. It now appears that the pressure on the Justice Department to bring a criminal lawsuit against Goldman is building to a high pitch. The new Matt Taibbi article in Rolling Stone Magazine is another all-out attack on the company. However, this time the attack is backed by a 650 page Senate report signed by both a Democrat and a Republican.
…
businessinsider.com/wow-gold … cle-2011-5

[What_Goes_Up]

He’s fairly nailed them with that article.

He sure did. The Senate report that Taibbi based his article on has been out a while and was pretty much ignored.

But now his article has drawn attention to it…
…

My money - and everyone else’s apparent disinterest - is on nothing happening.

How insane is it that a Rolling Stone article gets more traction than a Senate report?

[BottomsUp]

’great vampire squid wrapped around the face of humanity relentlessly jamming its blood funnel into anything that smells like money.'

That one made me laugh out loud.

[grumpy]

While the CDO valuation project was underway, Goldman senior executive Thomas
Montag asked Daniel Sparks for an estimate of how much the firm would need to write down the
value of its CDO assets. Mr. Sparks responded that “the base case from traders is down $]382
[million].” He also wrote: “I think we should take the write-down, but market [the CDO
securities] at much higher levels.” Another Goldman senior executive, Harvey Schwartz,
expressed concern about selling clients CDO securities at one price and then immediately
devaluing them: “[D]on’t think we can trade this with our clients andf [sic] then mark them down
dramatically the next day.” At the same time, Goldman’s Chief Credit Risk Officer Craig
Broderick told his staff to anticipate deep markdowns and highlighted the need to identify clients
that might suffer financial difficulty if Goldman devalued their CDO securities and demanded
they post more cash collateral.

P396 of the report.

It’s stonking reading. Not that anything will happen. Maybe a few sacrificial bloodlettings.

[grumpy]

How insane is it that a Rolling Stone article gets more traction than a Senate report?

It’s over 600 pages long. Jesus, far easier to cut and paste from press releases.

[What_Goes_Up]

How insane is it that a Rolling Stone article gets more traction than a Senate report?

It’s over 600 pages long. Jesus, far easier to cut and paste from press releases.

I forgot how journalism worked!

Guess that’s why no one saw the GFC coming - no press release.

[grumpy]

Sure our man would be wise to that time of tomfoolery.

https://media.tribune.ie/site_media/photologue/photos/2009/Feb/21/cache/patrick_neary_2_display.jpg

[ps200306]

The People vs. Goldman Sachs - Matt Taibbi -> rollingstone.com/politics/ne … s-20110511

An alternate view:

WALL STREET: NOT GUILTY

The claim that it was “caused by financial fraud” is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme.

More…

[grumpy]

The People vs. Goldman Sachs - Matt Taibbi -> rollingstone.com/politics/ne … s-20110511

An alternate view:

WALL STREET: NOT GUILTY

The claim that it was “caused by financial fraud” is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme.

More…

Horseshit response. That is one damning bagful of shite that the committee uncovered.

I cant decide whether its more depressing that:

1. The open excessive misrepresentations will largely go unpunished
2. We’ll never even get to the stage of setting out in such graphic detail the clarity of management’s knowledge of their fucked positions that our banks found themselves in in 2007 never mind prosecuting the fuckers.
3. Lenihan and Cowan were in charge. Jesus when you think about it…

GS doesnt need to be tamed, rather thrown off the bridge in a bag.

[dirtysquatter]

The People vs. Goldman Sachs - Matt Taibbi -> rollingstone.com/politics/ne … s-20110511

An alternate view:

WALL STREET: NOT GUILTY

The claim that it was “caused by financial fraud” is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme.

More…

As you say “an alternative view”. However it doesn’t rebut any of the specific instances of skullduggery by Goldman’s referenced in the Senate report and is therefore not all that pertinent to the question of whether they have a case to answer in court or not.

It is perfectly possible to argue that while the financial crisis was not ultimately caused by financial fraud, Goldman Sachs nonetheless did things for which they should be held accountable by the law.

[grumpy]

Goldman’s Market-Implied Credit Rating Declining, Moody’s Says

Goldman Sachs Group Inc. (GS), the U.S. bank that gets most of its revenue from trading, is facing a widening gap between its assigned credit rating and that implied by market performance, Moody’s Capital Markets Research said in a note to clients.

The ratings implied by the performance of Goldman Sachs’s securities in the stock, bond and credit-default swap markets are each at least four grades below the firm’s credit rating of A1, analyst Allerton Smith said today. Moody’s Capital Markets Research is separate from the Moody’s ratings company that has assigned Goldman an A1 rating and negative outlook.

Goldman’s equity-implied rating has fallen two grades to Ba2, below investment grade, and seven grades below its actual rating, as its shares have dropped 19 percent this year. Investors are concerned about the firm’s reputation after investigations into its collateralized debt obligations business, Smith wrote.

“Given Goldman’s current franchise issues and reputational challenges, as well as its negative rating outlook, investors should be wary of additional headline driven spread deterioration and the company’s continued decline in market- implied ratings, which signal underperformance in the credit markets,” Smith said in the note.

CDS contracts on Goldman Sachs have widened the most of any major U.S. bank this year, leading to its CDS-implied rating dropping one grade to Baa3, according to the note. The firm’s bond-implied rating also has dropped one grade this year to Baa2. Those implied ratings were the same as Citigroup Inc. ©, Bank of America Corp. (BAC) and Morgan Stanley (MS) as of May 18, according to the note.

bloomberg.com/news/2011-05-2 … -says.html

Goldman’s Big Short Is Levin’s Big Target

May 25 (Bloomberg) – William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” and a Bloomberg View columnist, discusses Goldman Sachs Group Inc.'s disclosures about its investments tied to the U.S. mortgage market. Cohan speaks with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

It has been almost a year since Goldman Sachs Group Inc. (GS) agreed to pay $550 million in a settlement with the Securities and Exchange Commission relating to the creation and sale of Abacus 2007-AC1, a squirrelly synthetic collateralized-debt obligation that could only have been designed in the first decade of the new millennium. Now the firm is facing a whole new round of litigation.

This is potentially troubling not just for Goldman Sachs, but for all of Wall Street.

On May 10, Goldman Sachs said it had received subpoenas from unidentified regulators relating to the infamous Abacus deal and other CDOs the firm manufactured and sold during the housing bubble, which began to deflate in the last quarter of 2005. Goldman Sachs also said the Commodity Futures Trading Commission, the chairman of which is former Goldman Sachs partner Gary Gensler, is investigating the firm’s role in acting as a clearing broker for an unidentified broker-dealer and intends to “bring aiding and abetting, civil fraud and supervision-related charges” against the Goldman Sachs unit.

And on May 16, New York State’s attorney general, Eric Schneiderman, said he was investigating Goldman Sachs, Morgan Stanley and Bank of America Corp. over mortgage-securitization transactions completed before the financial crisis of 2008.
Unwelcome News

None of this is welcome news, of course, to the executives at Goldman Sachs’s new $2.4 billion headquarters in Lower Manhattan. They are still grappling with a wave of negative publicity –- a Bloomberg News poll on May 12 found that 54 percent of financial professionals had a negative view of the firm – while the new Dodd-Frank law threatens some of the firm’s traditional free-wheeling, hugely profitable ways.

But the most potentially damaging recent threat to Goldman Sachs came in a May 3 letter from Democratic Senator Carl Levin of Michigan and Republican Senator Tom Coburn of Oklahoma to the Justice Department and the SEC. While the text of the letter hasn’t been made public, one can assume that it refers the two cops on the securities beat to the April 13 report that Levin’s Permanent Subcommittee on Investigations compiled on the causes of the financial crisis. Nearly 250 pages of the 640-page document are concerned with Goldman Sachs.

bloomberg.com/news/2011-05-2 … arget.html

How an Inquiry of Goldman Sachs Might Play Out

Goldman Sachs has already received subpoenas from unnamed regulators investigating its mortgage securities operations. Now, federal prosecutors appear to be interested in those operations as well, and subpoenas could follow.

If so, this would signal a new and potentially more threatening inquiry into its conduct during the financial crisis.

Goldman paid $550 million last year to settle civil charges by the Securities and Exchange Commission over its structuring of a collateralized debt obligation known as Abacus that regulators said was designed to fail. But the size of that settlement may pale in comparison if federal prosecutors find sufficient evidence to pursue criminal charges.

The Senate Permanent Subcommittee on Investigations recently sent a referral to the Justice Department about Goldman’s conduct, a move that appears to have set the stage for a criminal investigation. The Wall Street Journal reported on Friday that Goldman Sachs executives were soon expecting the firm to receive subpoenas.

Goldman’s mortgage securities operation is fairly well-trod ground, having been dissected by the S.E.C., the Financial Crisis Inquiry Commission and Congress over the last two years. The firm has produced millions of pages of documents in connection with these earlier investigations, so it is not clear what is left to be learned about its conduct.

If Goldman does receive Justice Department subpoenas, that would indicate that prosecutors have found enough information about potential criminal conduct in the subcommittee’s report — and perhaps elsewhere — to take the case to the next level by requiring the production of even more documents.

Subpoenas alone would not mean that the Justice Department is poised to file any charges against Goldman or its executives, but the specter of the agency taking such action would certainly weigh on the firm.

dealbook.nytimes.com/2011/05/23/ … -play-out/

[BottomsUp]

bloomberg.com/news/2011-06-0 … eport.html

Goldman Sachs Said to Get Subpoena From New York Prosecutor

Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, received a subpoena from the Manhattan District Attorney’s office seeking information on the firm’s activities leading into the credit crisis, according to two people familiar with the matter.

“We don’t comment on specific regulatory or legal issues, but subpoenas are a normal part of the information request process and, of course, when we receive them we cooperate fully,” said David Wells, a company spokesman.

There is more.

[slasher]

gawker.com/5808567/couple-attemp … -furniture

Couple Attempts to Seize Bank of America’s Furniture, Computers

Max Read — Florida homeowners Maurenn Nyergers and her husband paid for their home in cash, and never took out a mortgage, so when Bank of America filed foreclosure papers on the house, they took the bank to court, and won. And when Bank of America wouldn’t pay their legal fees — as it was ordered to by the court — their attorney, Todd Allen, decided to seize its assets, in person, with movers and sheriff’s deputies in tow

[yoganmahew]

rollingstone.com/politics/bl … n-20110607
(Courtesy of Naked Capitalism)

I’ve been trying not to say anything bad about Andrew Ross Sorkin. I even made a point of not watching Too Big To Fail so as not to get upset – and when I heard from friends that the film turned Hank Paulson into Joan of Arc, that decision seemed to have been validated.

Now I’m bummed to see that Sorkin has written an elaborate defense of Goldman in the New York Times “Dealbook” section, arguing among other things that Lloyd Blankfein probably did not commit perjury and that the bank did not have a huge directional bet against mortgages in 2007. As evidence, Sorkin cites unsubstantiated Goldman documents and Goldman sources who claim, among other things, that the bank had $5 billion worth of long bets on MBS “in other parts of the company,” offsetting the now-notorious “Big Short.”

The Sorkin piece reads like it was written by the bank’s marketing department, which may not be an accident. In November of last year, the New York Times announced that “Dealbook” was entering into a sponsorship agreement with a variety of companies, including … Goldman, Sachs. This is from that announcement last year: