Goldman Sachs

Off Topic Politics & World Issues
21

[quote]AlisaV wrote:
A friend who works in finance told me last year, confidentially, that it’s an open secret that Goldman commits fraud. (He worked at a different firm.) I guess he was right.[/quote]

This was all done so that Obama and the dems can look good going into November. Obama needs to look like a man of the people, someone who represents their interests. They’ll have hearings and accusations, but everything of substance is at least 18 months away. Guess what’ll happen soon after November, when the Dems keep power.

22

[quote]jsbrook wrote:

[quote]thefederalist wrote:
Paragraph 18 of the actual criminal complaint is both shocking and hilarious. [/quote]

Yup. But it’s a civil suit. A 10-b5 violation. There is no criminal law that fits. Nor is there a direct law against shorting the financial instruments you are pushing. Something that many are now campaigning to change. Among them the author of the “Big Short.”[/quote]

In a civil suit, is there not an offended party with standing?
So who is the offended party here? The SEC? Can a government agency be a plaintiff in a civil suit, in which there is no breach, no tort, but only a violation of law or regulation?

23

If you despise all these people, then buy silver and gold. Get yourself out of their system. Let the jackals tear each other apart, though I suspect that this is all a set up for Obama.

Go on strike – buy silver and gold. Don’t let them drain you by inflating away your wealth.

"Pew Study Finds â??Perfect Stormâ?? of Government Discontent

April 19 (Bloomberg) – Americansâ?? confidence in government continues to decline and is likely to be an important factor in the 2010 elections, according to a Pew Research Center survey.

Only 22 percent of survey respondents said they can trust the government in Washington and 30 percent said the federal government is a major threat to their freedom.

â??By almost every conceivable measure Americans are less positive and more critical of government these days,â?? the Pew Research Center for the People and the Press said in a report released yesterday. The survey results depict â??a perfect storm of conditions associated with distrust of government – a dismal economy, an unhappy public, bitter partisan-based backlash, and epic discontent with Congress and elected officials.â??

http://www.bloomberg.com/apps/news?pid=20601070&sid=aMYj4zARt.8Q

24

[quote]pittbulll wrote:
I am curious if I understand this , The Bank part of the financial institution , made the mortgages to public , The banks in turn packaged them together and sold them on wall street as the best rated investments, Then the insurance part of the financial institutions sold insurance to guarantee that the investments would pay off. And because the investments were overrated, they sold at very low prices and it became a good bet that they could buy the insurance and win on the pay outs of people defaulting. So the Financial system is like a bookie playing both ends?[/quote]

PittBull this is a very good question. I used to work at Chase before all this went down. These Bankers not only are smart, but they know how to market this stuff. They are sales people

To answer your question it will take a lot of math and time to explain, but I will try anyway.

A CDO has different layers called tranches. To keep it simple A, B, C, and equity shares. The A shares, 35% of the deal, got paid say 2% on the money they invested, but they were paid first after the administration of the CDO and maybe even had insurance to pay them back. The B shares, 15% of the deal, got paid say 4%, and got paid Second. C shares, 10% of the deal, got paid 8% and got paid third. The Equity shares, 40% of the deal, got everything that was left over.

Where did the money come from you say? All the subprime loans out there. The loans in our hypothetical CDO paid maybe 7% on average. Now you see that we have enough interest coming in to pay back all the different tranches of the CDOs. So when the different loans started to default on their payments the first layer that got hit was the Equity shares, then the C, then the B, then the A shares. Large Institutions, and Banks were purchasing the A shares. When there is not a market for these types of investments, even though the A shares were getting paid you have to mark to market. When there is no market you have to price them really low to worthless. All the bank even though they were still getting paid their 2% on their money the A shares were priced at say $0.10 on the dollar. With all the regulations put upon the banks to start with they had to come up with more money to put in reserves and all the other places the government requires of them.

I am for placing regulations on certain derivatives that are sold to main street, but the banks and institutions know the risks they are playing with, or should know what they are playing with.

Trying to be too cute with engineering a regular Mortgage Loan gets you into trouble in my opinion. The Mortgage loans got more and more sophisticated that the public did not really know what they owned.

I have over simplified this, but I hope that you may understand or have more questions that I might be able to answer.

On the topic of the OP. Goldman Sachs agreed to take a certain half of a trade that Paulson & Co was on the other half. Paulson & Co paid Goldman $15 Million for the trade. Goldman then had to make sure they had a zero sum game on this trade or hedging. They went out and sold their half of the trade to the public. The big question is whether Goldman by law had to tell the public, or were they lying to the public about the securities.

25

[quote]dmaddox wrote:

[quote]pittbulll wrote:
I am curious if I understand this , The Bank part of the financial institution , made the mortgages to public , The banks in turn packaged them together and sold them on wall street as the best rated investments, Then the insurance part of the financial institutions sold insurance to guarantee that the investments would pay off. And because the investments were overrated, they sold at very low prices and it became a good bet that they could buy the insurance and win on the pay outs of people defaulting. So the Financial system is like a bookie playing both ends?[/quote]

PittBull this is a very good question. I used to work at Chase before all this went down. These Bankers not only are smart, but they know how to market this stuff. They are sales people

To answer your question it will take a lot of math and time to explain, but I will try anyway.

A CDO has different layers called tranches. To keep it simple A, B, C, and equity shares. The A shares, 35% of the deal, got paid say 2% on the money they invested, but they were paid first after the administration of the CDO and maybe even had insurance to pay them back. The B shares, 15% of the deal, got paid say 4%, and got paid Second. C shares, 10% of the deal, got paid 8% and got paid third. The Equity shares, 40% of the deal, got everything that was left over.

Where did the money come from you say? All the subprime loans out there. The loans in our hypothetical CDO paid maybe 7% on average. Now you see that we have enough interest coming in to pay back all the different tranches of the CDOs. So when the different loans started to default on their payments the first layer that got hit was the Equity shares, then the C, then the B, then the A shares. Large Institutions, and Banks were purchasing the A shares. When there is not a market for these types of investments, even though the A shares were getting paid you have to mark to market. When there is no market you have to price them really low to worthless. All the bank even though they were still getting paid their 2% on their money the A shares were priced at say $0.10 on the dollar. With all the regulations put upon the banks to start with they had to come up with more money to put in reserves and all the other places the government requires of them.

I am for placing regulations on certain derivatives that are sold to main street, but the banks and institutions know the risks they are playing with, or should know what they are playing with.

Trying to be too cute with engineering a regular Mortgage Loan gets you into trouble in my opinion. The Mortgage loans got more and more sophisticated that the public did not really know what they owned.

I have over simplified this, but I hope that you may understand or have more questions that I might be able to answer.

On the topic of the OP. Goldman Sachs agreed to take a certain half of a trade that Paulson & Co was on the other half. Paulson & Co paid Goldman $15 Million for the trade. Goldman then had to make sure they had a zero sum game on this trade or hedging. They went out and sold their half of the trade to the public. The big question is whether Goldman by law had to tell the public, or were they lying to the public about the securities.
[/quote]

If I understand correctly, you presented a more complex version of what I asked.

For a regulation that would force a smaller version of financial institutions, wouldnâ??t disallowing Banks to sell insurance and disallowing Insurance companies to be Banks, reduce their size of Financial Institutions ?

One of the things that complicated things is that the banks were buying their own insurance, and (IN MY OPINION) shuttling the pay out in insurance out to the employees via bonuses. But because the Banks took such a huge loss, we had to bail them out.

I know I may not have my mind wrapped around it but I want to grasp it.

26

[quote]duffyj2 wrote:
And how exactly are bankers the “smartest people on the planet”? By cocooning themselves in inescapable debt?[/quote]

No, by convincing the stupidest people on the planet – politicians – to let the “taxpayers” pay for it.

27

[quote]pittbulll wrote:

[quote]dmaddox wrote:

[quote]pittbulll wrote:
I am curious if I understand this , The Bank part of the financial institution , made the mortgages to public , The banks in turn packaged them together and sold them on wall street as the best rated investments, Then the insurance part of the financial institutions sold insurance to guarantee that the investments would pay off. And because the investments were overrated, they sold at very low prices and it became a good bet that they could buy the insurance and win on the pay outs of people defaulting. So the Financial system is like a bookie playing both ends?[/quote]

PittBull this is a very good question. I used to work at Chase before all this went down. These Bankers not only are smart, but they know how to market this stuff. They are sales people

To answer your question it will take a lot of math and time to explain, but I will try anyway.

A CDO has different layers called tranches. To keep it simple A, B, C, and equity shares. The A shares, 35% of the deal, got paid say 2% on the money they invested, but they were paid first after the administration of the CDO and maybe even had insurance to pay them back. The B shares, 15% of the deal, got paid say 4%, and got paid Second. C shares, 10% of the deal, got paid 8% and got paid third. The Equity shares, 40% of the deal, got everything that was left over.

Where did the money come from you say? All the subprime loans out there. The loans in our hypothetical CDO paid maybe 7% on average. Now you see that we have enough interest coming in to pay back all the different tranches of the CDOs. So when the different loans started to default on their payments the first layer that got hit was the Equity shares, then the C, then the B, then the A shares. Large Institutions, and Banks were purchasing the A shares. When there is not a market for these types of investments, even though the A shares were getting paid you have to mark to market. When there is no market you have to price them really low to worthless. All the bank even though they were still getting paid their 2% on their money the A shares were priced at say $0.10 on the dollar. With all the regulations put upon the banks to start with they had to come up with more money to put in reserves and all the other places the government requires of them.

I am for placing regulations on certain derivatives that are sold to main street, but the banks and institutions know the risks they are playing with, or should know what they are playing with.

Trying to be too cute with engineering a regular Mortgage Loan gets you into trouble in my opinion. The Mortgage loans got more and more sophisticated that the public did not really know what they owned.

I have over simplified this, but I hope that you may understand or have more questions that I might be able to answer.

On the topic of the OP. Goldman Sachs agreed to take a certain half of a trade that Paulson & Co was on the other half. Paulson & Co paid Goldman $15 Million for the trade. Goldman then had to make sure they had a zero sum game on this trade or hedging. They went out and sold their half of the trade to the public. The big question is whether Goldman by law had to tell the public, or were they lying to the public about the securities.
[/quote]

If I understand correctly, you presented a more complex version of what I asked.

For a regulation that would force a smaller version of financial institutions, wouldnâ??t disallowing Banks to sell insurance and disallowing Insurance companies to be Banks, reduce their size of Financial Institutions ?

One of the things that complicated things is that the banks were buying their own insurance, and (IN MY OPINION) shuttling the pay out in insurance out to the employees via bonuses. But because the Banks took such a huge loss, we had to bail them out.

I know I may not have my mind wrapped around it but I want to grasp it.
[/quote]

The willingness to learn is a begining. I dont have all the answers, but the willingness of the government to bail them out will hurt us in the long run. Until the consequences to take huge amounts of risk are realized the banks will continue to do this. The reform Bill that is trying to be passed should just state.

“The US Federal Government will never again bail out any company for taking on too much risk.”

To my knowledge AIG was really the only one selling Credit Defalt Swaps. They were dumb in thinking that the housing market would continue to go up forever. If they would have been able to calculate the amount of defaults with accuracy then the premium they would have charged would have prohibited all the banks from buying the insurance. They charged a low premium so the banks bought up the credit default swaps like mad men. I think the only large banks that got into trouble were Bank of America and Citigroup. Washington Mutual was a Savings and Loan, and AIG was an insurer so they are not a bank. WAMU acts like a bank, but by definition not a Commercial Bank. If I have missed one someone will let us know.

28

[quote]LIFTICVSMAXIMVS wrote:

[quote]duffyj2 wrote:
And how exactly are bankers the “smartest people on the planet”? By cocooning themselves in inescapable debt?[/quote]

No, by convincing the stupidest people on the planet – politicians – to let the “taxpayers” pay for it.[/quote]

For the Nth time, it does not take a genius to do this. It takes a bit of money, and a Sunday lunch.

Are there people in Finance with properly brilliant minds? Of course, just as there are people in Landscape Gardening with properly brilliant minds. But when the recession came, these people were STILL making money.

29

@ Brother Chris

I won’t say much, other than I completely disagree with your definition of intelligence. Intelligence is the ability to do complex things with your head. Problem solving, visualisation, imagination… I put all these things under the heading “Intelligence”.

Being one of the 100 richest people I put under the heading “wealthy”.

Why anyone would associate riches with smarts is beyond me. I think it’s a very American thing. Most people who get fabulously wealthy use the age old combination of greed and luck. I can’t see why this doesn’t make sense. Those in the quest for cash get rich (normally at the expense of their happiness and health). Those in the quest for knowledge get smart.

What about goal achieving? The goal of most academics is TO BE AN ACADEMIC! Seems like they’re pretty successful to me. And they do a hell of a lot less damage to themselves and everyone else along the way than those in search of El Dorado…

30

[quote]duffyj2 wrote:
@ Brother Chris

I won’t say much, other than I completely disagree with your definition of intelligence. Intelligence is the ability to do complex things with your head. Problem solving, visualisation, imagination… I put all these things under the heading “Intelligence”.

Being one of the 100 richest people I put under the heading “wealthy”.

Why anyone would associate riches with smarts is beyond me. I think it’s a very American thing. Most people who get fabulously wealthy use the age old combination of greed and luck. I can’t see why this doesn’t make sense. Those in the quest for cash get rich (normally at the expense of their happiness and health). Those in the quest for knowledge get smart.

What about goal achieving? The goal of most academics is TO BE AN ACADEMIC! Seems like they’re pretty successful to me. And they do a hell of a lot less damage to themselves and everyone else along the way than those in search of El Dorado…[/quote]

It actually takes a lot of smarts to be in finance at a high level. It takes a lot of intelligence to devise derivative instruments. Wealth is a byproduct because those jobs make a lot of other people a lot of money. Thus, handsome compensation.

31

[quote]jsbrook wrote:

[quote]duffyj2 wrote:
@ Brother Chris

I won’t say much, other than I completely disagree with your definition of intelligence. Intelligence is the ability to do complex things with your head. Problem solving, visualisation, imagination… I put all these things under the heading “Intelligence”.

Being one of the 100 richest people I put under the heading “wealthy”.

Why anyone would associate riches with smarts is beyond me. I think it’s a very American thing. Most people who get fabulously wealthy use the age old combination of greed and luck. I can’t see why this doesn’t make sense. Those in the quest for cash get rich (normally at the expense of their happiness and health). Those in the quest for knowledge get smart.

What about goal achieving? The goal of most academics is TO BE AN ACADEMIC! Seems like they’re pretty successful to me. And they do a hell of a lot less damage to themselves and everyone else along the way than those in search of El Dorado…[/quote]

It actually takes a lot of smarts to be in finance at a high level. It takes a lot of intelligence to devise derivative instruments. Wealth is a byproduct because those jobs make a lot of other people a lot of money. Thus, handsome compensation.
[/quote]

I don’t think he understands how fiercely competitive the financial industry is. And, because it is the most profitable sector of our economy, it draws some of the best minds (at least those who love money).

I think these people, lawyers and politicians, have the intelligence of extremely evolved rats. True, their understanding of philosophical principles or of physics may be low, but they are extrememly intelligent human rats. Being completely unprincipled, they convinced people that laws and Constitutions are ‘flexible’ and that morality is all relative, and that an action is perfectly correct insofar as you can get away with it.

John Dewey (founding father of modern education) would be proud.

32

I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop.

33

SCC had 5 people vote on regulating goldman. 2 republicans voted against, 2 dems voted for, 1 independent voted for. Why, after all the fraud and corruption would repubs vote against? Here comes 1% of America holding 99% of the wealth. Lets give more money to the rich HeadHunter. Billions in bonuses (didnt they get bonuses in january too) for a job horribly done. Great logic.

34

[quote]dmaddox wrote:
I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop. [/quote]

We suspend athletes for taking steroids because it creates an unfair advantage amongst honest athletes. But nothing is done to companies that project higher profits than their competitors, but through fraud accounting. Then those honest businesses go under. Maybe not the best analogy but you understand. HeadHunter would have you believe that you shouldve been the one to come up with the fraud idea first.

35

[quote]SickAbs wrote:

[quote]dmaddox wrote:
I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop. [/quote]

We suspend athletes for taking steroids because it creates an unfair advantage amongst honest athletes. But nothing is done to companies that project higher profits than their competitors, but through fraud accounting. Then those honest businesses go under. Maybe not the best analogy but you understand. HeadHunter would have you believe that you shouldve been the one to come up with the fraud idea first.[/quote]

Remember the scene in the movie ‘Alien’ where Ripley (Sigourney Weaver) is talking to the severed head of Ashe (the robot dude). She remarks about how Ashe seemed to actually like the alien. His response was: “I admire its purity.” That’s how I think of all the people in the upper-echelons of government and finance. They have no conscience, no inkling of right-or-wrong, and use those weaker than themselves to propagate. They are simply human rats – so while I may detest them mightily, I admire their purity.

36

[quote]Headhunter wrote:

[quote]SickAbs wrote:

[quote]dmaddox wrote:
I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop. [/quote]

We suspend athletes for taking steroids because it creates an unfair advantage amongst honest athletes. But nothing is done to companies that project higher profits than their competitors, but through fraud accounting. Then those honest businesses go under. Maybe not the best analogy but you understand. HeadHunter would have you believe that you shouldve been the one to come up with the fraud idea first.[/quote]

Remember the scene in the movie ‘Alien’ where Ripley (Sigourney Weaver) is talking to the severed head of Ashe (the robot dude). She remarks about how Ashe seemed to actually like the alien. His response was: “I admire its purity.” That’s how I think of all the people in the upper-echelons of government and finance. They have no conscience, no inkling of right-or-wrong, and use those weaker than themselves to propagate. They are simply human rats – so while I may detest them mightily, I admire their purity.
[/quote]

I see no purity , unless you are speaking greed, If that is it you are easy to impress :slight_smile:

37

[quote]DrSkeptix wrote:

[quote]jsbrook wrote:

[quote]thefederalist wrote:
Paragraph 18 of the actual criminal complaint is both shocking and hilarious. [/quote]

Yup. But it’s a civil suit. A 10-b5 violation. There is no criminal law that fits. Nor is there a direct law against shorting the financial instruments you are pushing. Something that many are now campaigning to change. Among them the author of the “Big Short.”[/quote]

In a civil suit, is there not an offended party with standing?
So who is the offended party here? The SEC? Can a government agency be a plaintiff in a civil suit, in which there is no breach, no tort, but only a violation of law or regulation?

[/quote]

Yes. Congress can legislate who has standing…the Act provides that the SEC can bring a civil suit for civil penalties.

However, that’s not to say that a private party who was directly injured by this cannot also bring suit.

38

[quote]SickAbs wrote:
SCC had 5 people vote on regulating goldman. 2 republicans voted against, 2 dems voted for, 1 independent voted for. Why, after all the fraud and corruption would repubs vote against? Here comes 1% of America holding 99% of the wealth. Lets give more money to the rich HeadHunter. Billions in bonuses (didnt they get bonuses in january too) for a job horribly done. Great logic.[/quote]

Yeah dude. While we’re at it, how about we have the government turn those wall street crooks into honest farmers. That’ll teach’em.

(FWIW, I do agree America either needs increased regulation, or to remove the moral hazard that is the implicit promise of a bailout)

39

[quote]pittbulll wrote:

[quote]Headhunter wrote:

[quote]SickAbs wrote:

[quote]dmaddox wrote:
I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop. [/quote]

We suspend athletes for taking steroids because it creates an unfair advantage amongst honest athletes. But nothing is done to companies that project higher profits than their competitors, but through fraud accounting. Then those honest businesses go under. Maybe not the best analogy but you understand. HeadHunter would have you believe that you shouldve been the one to come up with the fraud idea first.[/quote]

Remember the scene in the movie ‘Alien’ where Ripley (Sigourney Weaver) is talking to the severed head of Ashe (the robot dude). She remarks about how Ashe seemed to actually like the alien. His response was: “I admire its purity.” That’s how I think of all the people in the upper-echelons of government and finance. They have no conscience, no inkling of right-or-wrong, and use those weaker than themselves to propagate. They are simply human rats – so while I may detest them mightily, I admire their purity.
[/quote]

I see no purity , unless you are speaking greed, If that is it you are easy to impress :)[/quote]

They have the purity of a Great White Shark or a lioness – what is morality to any of those creatures?

We are shocked when Congressman and elites in high finance do something truly evil, such as demagogueing Social Security reform. Yet, in their sheer evil and purity of lust for power, we must stand in awe, much as we would watch a Great White tear apart a whale or a lioness rip apart a gazelle.

No conscience, no troubling questions, just pure intensity of purpose.

40

[quote]Headhunter wrote:

[quote]pittbulll wrote:

[quote]Headhunter wrote:

[quote]SickAbs wrote:

[quote]dmaddox wrote:
I have an idea of what needs to happen. All off balance sheet transactions that hide debt need to be disallowed. If you have debt is goes on your balance sheet. If you hide a debt you serve jail time. This stuff needs to stop. [/quote]

We suspend athletes for taking steroids because it creates an unfair advantage amongst honest athletes. But nothing is done to companies that project higher profits than their competitors, but through fraud accounting. Then those honest businesses go under. Maybe not the best analogy but you understand. HeadHunter would have you believe that you shouldve been the one to come up with the fraud idea first.[/quote]

Remember the scene in the movie ‘Alien’ where Ripley (Sigourney Weaver) is talking to the severed head of Ashe (the robot dude). She remarks about how Ashe seemed to actually like the alien. His response was: “I admire its purity.” That’s how I think of all the people in the upper-echelons of government and finance. They have no conscience, no inkling of right-or-wrong, and use those weaker than themselves to propagate. They are simply human rats – so while I may detest them mightily, I admire their purity.
[/quote]

I see no purity , unless you are speaking greed, If that is it you are easy to impress :)[/quote]

They have the purity of a Great White Shark or a lioness – what is morality to any of those creatures?

We are shocked when Congressman and elites in high finance do something truly evil, such as demagogueing Social Security reform. Yet, in their sheer evil and purity of lust for power, we must stand in awe, much as we would watch a Great White tear apart a whale or a lioness rip apart a gazelle.

No conscience, no troubling questions, just pure intensity of purpose.[/quote]

I personally can not relate the AWE, DISGUST maybe. I do not think these instruments were all that complicated, I think they want us to believe them to be complicated so we do not understand they way they robbed the bank.

Some of the analogies I have heard and liked were it would be like you being allowed to take out fire insurance on your neighborâ??s house. And it is like picking your own team for major league base ball and betting against them