The Goldman defense against the Levin report is so late and so pathetic that it looks increasingly evident that the bank is simply hoping to cause confusion and muddy the waters rather than mount a frontal, fact-based rebuttal. Mind you, sniping and innuendo can prove reasonably effective if done persistently and loudly enough. The book Agnotology describes how Big Tobacco managed to sow doubt over decades of the link between smoking and lung cancer well after the medical evidence had gone from suggestive to compelling.
The first Goldman salvo was an Andrew Ross Sorkin piece on Monday which we deemed as unpersuasive. While it did point to an error in the Senate report, it failed to make a real dent the report’s findings, and most important, the notion that Goldman staffers, in particular Lloyd Blankfein, were pretty loose with the truth.
The most contested statement is the Blankfein denial that the firm had a “massive short” position; as Matt Taibbi points out today, the only way out on that one is to get into Clintonesque parsings of the word “massive”. Given the overwhelming evidence that Goldman intended to get out of its mortgage risk in late 2006 and its staff DID get the firm short in February 2007, then reversed that position in March to correctly catch a short term bounce (the market recovered from March to May, when it went into its free fall). And in the March-May period, it was still getting as much crap product out the door and lying to clients about its position in the deals, claiming its incentives were aligned when its effective short position in the deals meant the reverse, that it would profit if they tanked, which they did.
But focusing on the “massive short” issue is misdirection pure and simple. Levin sent the entire report over to prosecutors. He didn’t tell them what legal theories to pursue. There are clearly others a prosecutor could pursue, such as misrepresentations Goldman made in selling CDOs like Hudson and Timberwolf, or other questionable statements made by Blankfein and others in Senate testimony (for instance, as we wrote earlier this week, the Blankfein argument that Goldman was merely a market maker is patently untrue, but probably not worth pursuing in isolation).
What is interesting is the Goldman defense reveals how much damage Taibbi has done to the firm. Notice that it is not primarily rebutting the Levin findings; it’s trying to dent its credibility by pointing out errors, but it is not addressing the report’s framing. Instead, it is dealing with Taibbi’s distillation of the report in his article “The People vs. Goldman Sachs,” and specifically, the argument that Taibbi made, that the simplest case was to get the Goldman execs on perjury:
Though many legal experts agree there is a powerful argument that the Levin report supports a criminal charge of fraud, this stuff can keep the lawyers tied up for years. So let’s move on to something much simpler. In the spring of 2010, about a year into his investigation, Sen. Levin hauled all of the principals from these rotten Goldman deals to Washington, made them put their hands on the Bible and take oaths just like normal people, and demanded that they explain themselves. The legal definition of financial fraud may be murky and complex, but everybody knows you can’t lie to Congress.
“Article 18 of the United States Code, Section 1001,” says Loyola University law professor Michael Kaufman. “There are statutes that prohibit perjury and obstruction of justice, but this is the federal statute that explicitly prohibits lying to Congress.”
The law is simple: You’re guilty if you “knowingly and willfully” make a “materially false, fictitious or fraudulent statement or representation.” The punishment is up to five years in federal prison
By contrast, Levin said to the Financial Times in May:
The senator said Goldman’s payment of $550m to settle fraud allegations from the Securities and Exchange Commission in connection with the marketing of one structured debt product did not preclude other allegations. He said Goldman executives misled his committee but suggested they might have stopped short of lies with “wiggle words”.
“They obviously spent a lot of time parsing words,” he said, adding he was “not going to judge whether they committed perjury”
Let me state this again: the Goldman defenders are attributing Taibbi’s legal theory to Levin when Levin left that up to the prosecutors. Slick, no?
Now let’s deal with the latest Goldman-prompted rebuttals. One was e-mailed by Goldman alumni relations, which hardly ever sends anything other than infrequently touting select research pieces:
The Jenkins piece, once you edit out the invective and ad hominem attacks, has remarkably little in the way of substance. It’s a classic example of the old saw, “If the law is on your side, pound on the law; if the facts are on your side, pound on the facts; if neither is on your side, pound on the table.”
He calls Levin a whole bunch of names, falsely claims that he is “now backtracking” on perjury accusations Levin never made (when the report was released, he used the word “misled” and has stuck with that formulation) and accuses him of opportunism (on what grounds, exactly? Attacking a famous representative of a powerful donor group like bankers is hardly a pro-survival strategy for a Congressman these days). And he straw mans big time, depicting the report as a witch hunt on Blankfein. Huh? That remark just makes it blindingly obvious that Jenkins didn’t read the report.
He also reveals that he understands nothing about trading or the role of CDOs and credit default swaps in the crisis As we’ve said repeatedly, short sellers via CDS bear no resemblance to short sellers in other markets, and go through the math in long form in Chapter 9 of ECONNED as to how the subprime shorts played a direct role in stoking the subprime bubble and turning what would otherwise have been a contained subprime crisis into a global financial criss. If Jenkins would like to avoid so visibly putting his foot in mouth and chewing in public, he might educate himself rather than take Goldman PR as gospel.
And it also, contrary to multiple source of evidence in the Levin report, tries to depict the firm as dumb and lucky, when it was clear it made a strategic decision to dump as much mortgage risk as possible in late 2006, chose to get net short in February 2007, and then successfully caught a short-term bottom and went long.
Jenkins also bizarrely claims that the failure of Goldman to ride a short position to the market bottom represents some sort of exoneration of Goldman. That’s so barmy I don’t know where to begin. No trader expects to catch peaks and troughs; the pros I know say if you get 50% of a market move, you’ve done very well. And if you read Michael Lewis’ The Big Short, the people who really understood this trade, namely Steve Eisman and the hippie hedgies of Cornwall Capital recognized that if it worked out, it could well represent the end of the financial system, which proved to be a valid concern. The Cornwall folks were very worried about counterparty risk and closed out their trades early.
There is an equally bizarre rebuttal-by-innuendo at the Goldman PR annex over at the New York Times’ Dealbook. In fairness, it reports on the issuance of a Goldman-favoring one-page note by bank stock tout Dick Bove, who seems to have appointed himself a one-man vigilante effort to impede prosecution of his meal tickets (he accused New York attorney general Eric Schneiderman, who seems to be systematically investigating mortgage fraud, of being on a “witch hunt” and “out to make a name for himself”. Since it was the banks that leaked work of Schneiderman’s probes, it’s backwards and uninformed for Bove to accuse Schneiderman of grandstanding).
The problem is there is nothing of substance in the piece, save that Goldman had a little chat with Bove and he is now a true believer:
But now, having gone through the report with Goldman and looked at the supporting documents, he doesn’t believe the allegations that have been levied against the firm. He said he is “perplexed” why Goldman didn’t come forward earlier with their objections to the report.
So we are supposed to trust Goldman via Bove. If the evidence is so persuasive, why is Goldman keeping it so close to the vest? Attorney and structured credit expert Tom Adams said via e-mail:
Apparently unembarrassed by Matt Taibbi’s stinging attack on Dealbook’s shilling for their financial partner, Goldman Sachs, Dealbook continues to due the bidding of their master again today. This time, they interview Dick Bove, of Rochdale Securities, regarding his just published surprising “about face” on Goldman. The report cleverly takes the passive voice, saying that “evidence is now mounting” that a terrible wrong has been done to Goldman because they really didn’t have a net short position, as cited by Senator Levin’s report.
Where is this evidence? Who is it mounting with? In his interview with Goldman, Bove reveals that Goldman themselves walked Bove through their “evidence,’ just as they did for Andrew Ross Sorkin earlier this week, prompting him to echo the new Goldman line that the Senate report was wrong. In his one page note, Bove does not trouble readers with any of the details of the evidence – thus providing no ammunition for potential critics to challenge his conclusion. But Goldman’s hand holding was sufficient to allow Bove to conclude that the Senate committee “misread” the numbers.
Normally, one might expect someone making such an argument – accusing a Senate Committee of lying, basically – to provide some support for such a bold conclusion. Not Bove, though. Perhaps, however, Mr. Bove wasn’t really able to accurately read or understand what Goldman put in front of him. In his interview with Dealbook, he goes even further than what Sorkin argued (that Goldman’s net short position was smaller than what the Senate report claimed because of supposed “offsetting” long positions in mortgage loans elsewhere in their portfolio), and Bove concludes that he doesn’t believe the Senate’s allegations at all and he has “completely changed my attitude about whether they did something wrong”. Instead, he believes Goldman is being unfairly scapegoated.
Taibbi noted when critiquing Sorkin’s article, the more important theme for Goldman’s PR effort appears to be an attempt to undermine the motion that Goldman CEO Lloyd Blankfein lied to the Senate under oath when Blankfein denied that Goldman was “massively short”. Bove dutifully trots out an attempt to defend Blankfein, as well. Comically, Bove compares Blankfein to Andrew Mellon who was subjected to a tax investigation by the Roosevelt administration but ultimately exonerated. This apparently proves to Bove, that rich powerful bankers are commonly the targets of unfair investigations and “scapegoating” and that this is grave miscarriage of justice.
Even an ardent bank defender such as Bove is not persuaded completely. He concedes that Goldman may have done things that “were not correct”, but that the Levin report did not uncover them. Not exactly a firm vote of confidence, in reality, and quite a bit less of a newsworthy story than the Dealbook headline (“Richard Bove Does an About Face on Goldman”) trumpets.
Why has Goldman taken this unconvincing approach to defending itself through the use of bank friendly analysts or reporters? What do they hope to gain from this? Why haven’t they released real numbers and analysis to back up their supposed claims, as reports suggested they might do? This manipulative approach to selectively revealing contradictory evidence, without the courage of a true public defense, seems to a poor solution to their problems. It exposes both the shilly quality of their defenders and a lack of confidence in their counter-attack.
Indeed, there would be some comparatively simple ways to shut up critics and the failure of Goldman to use them raises red flags about their rebuttals. For instance, my understanding is Goldman calculates value at risk (VAR) down to the level of fairly small units within the firm. VAR has its defects, but for this purpose, it would not be a bad first order approximation for contending they were not net short in a meaningful way in the relevant instruments.
The failure of Goldman to provide any metrics over the time frame analyzed in the Levin report, when it clearly depicts strategic decisions of a number of individuals, both at senior levels and on the relevant desks, and then in advance, when trades were being executed, and after the fact, presents an evidentiary hurdle that the firm must surmount. Nothing it has provided even remotely meets that standard.
And it needs to put the arguments and backup before people who can judge it, not reporters or equity analysts. They may be generally intelligent but don’t know the risk characteristics of the various instruments that Goldman would use in establishing and reversing positions in the mortgage market and thus can easily be misled. Goldman’s soliciting votes of approval from people utterly unable to judge the evidence is a sign of weakness, not strength.
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One can certainly argue that bank regulators and legal authorities were criminally negligent to permit the existence of credit default swaps on mortgage backed securities. Anyone familiar with Frank Partnoy’s work (e.g. FIASCO, 1997) understands the amorality of Wall Street investment banks and their willingness to ‘rip clients’ faces off’ in any trade. Perhaps you can explain in a sentence or two why “short sellers via CDS bear no resemblance to short sellers in other markets”.
Dick Bove? This guy still gets face time and ink from MSM why? Nothing made my jaw drop faster than watching Bove trotted out on TV, and on the phone reiterating a buy on GS last year, this, within [5 mins] of last years fraud charges hitting the wire. Bove was on the phone as the news was hitting the wire?
It is disturbing that people have to be reminded Bove is a shill. I am sure Thomas Ferguson could write a paper on how financial analysts, and those in the financial media, “Never Bowl Alone” either.
April 16,2010
http://video.cnbc.com/gallery/?video=1470603264
Minor modification: in the sentence “Since it was the banks that leaked work of Schneiderman’s probes, it’s backwards and uninformed for Rove to accuse Schneiderman of grandstanding).”, “Rove” should be “Bove”. Freudian slip, eh? :)
Yves,
Excellent work. There are so many voices on the payroll for bank PR, their strategy is obviously to drown rational discourse in the water cannon of propaganda. For everyone who is trying to mount resistance to the attempted take over of government by finance your quick analysis and clarity of articulation are invaluable.
on another subject – That 15.7 bil bid for maiden lane assets is looking pretty good right now…
Blowing smoke to muddy the waters?
I think it’s extremely boneheaded at this point to talk about net long or net short positions in mortgage instruments without mentioning which types and the credit/underwriting quality that make up your long and short positions.
The world is not as dumb as it was in 2006 and now even casual observers of the mortgage credit market know that things can range from high quality GSE MBS all the way down to CDO Squared dreck.
So it wouldn’t surprise me at all if Goldman had a GSE MBS trading desk long on “mortgages” while it was shorting the hell out “liars loan” based products.
existEnt. (Even Homer …)
Earth to Sorkin, Bove, and Dealbook: “Shitty. Deal.”
No amount of PR on the planet is going to undo the damage that came out of that Senate hearing and its revelations.
It appears that GS is in denial about this simple fact, and will continue to behave delusionally in trying to obliterate its traces, but that simply begs the question of how many formerly-decent, formerly-credible reporters and sources they’re going to take down with them.
At this point, they’re becoming a comedy act: the more they try to bleat about their so-called ‘integrity’ the more clueless they appear. And their whole ad campaign, which is designed to make us all believe that without GS ‘investment’ not a single meal is cooked in America, is just rubbing salt in the wound.
I recall an interview that Dylan Ratigan did with Michael Lewis: basically, Lewis said that he was getting calls from senators’ offices to explain The Big Short, because the senators didn’t trust the bankers to explain it. That, to me, was an encouraging sign.
This post makes me really hopeful.
If GS is sinking this low, and operating at this level of disinformation, they are in very, very big trouble ;-)
… oh, and did I mention “shitty deals”…?
;-)
Good work. The parasitical GS don’t belong in the future.
Thanks for typo/style policing. I did read this a second time before posting, but the headline misspelling wraps beyond the window view (I really need to be more careful re that….) and as readers know, I’m just not all that good at proofreading. Aargh.
I read most of the Jenkins piece. I was particularly
struck by the attack on Sen. Carl Levin in the
sentence beginning with: “To be fair, […] “.
Yves Smith speaks of a rebuttal-by-innuendo, which to
me has the ring of truth. My main question is simply:
What drives Jenkins and the people YS calls the
“Goldman PR annex” ?
Money couldn’t be it, I don’t suppose. Or not understanding something because your job depends on it? Same thing, I guess.
אורי פרייס, משרד עורכי דין
Uri Praiss, Law Offices
רחוב אחוזה 17, רעננה 43208 טל’ 050-5573697, 054-7569760 פקס למייל
17 AHUZA ST. RA’ANANA43208 TEL (972)-54-7569760, 50-5573697 FAX-MAIL
praiss.uri@gmail.coml; praisuri@netvision.net.i E- mail:
June 10, 2011 U r g e n t!!
Dear N.Y.T. Opinion / OP – ED Editors,
I am honored to file my Updated full version
as follows:
Re: From Crisis 2007 Banks’ Criminal Indictments to Weiner – Alleged Lies, Honesty, Perjury and Fraud
Author: Uri Praiss, Attorney at law (Israel, since 1990)
Law & Economics lecturer
I believe neither Perjury nor Lies are the Issues on 2007’s Crisis or any other Criminal or S.E.C. Investigations. It is just a distractive topic. It can lead us, even spin-deliberately, to a “dead-end-back-street-alley”. The same is true on general and even for those piping and gossipy Weiner’s chats. More important to know what those suspects did, than how they tried to cover up later. Lies are almost self-defense. We are already highly distracted by Wealth, Beauty, clothes, accent, calculation and spelling mistakes. Give us the substance, the raw facts and documents, with the unpleasant uncertainty.
Andrew (“Too Big to Fail”) Sorkin and many others ask lately (Sorkin, N.Y.T., June 7th) whether it is possible that “Lloyd C. Blankfein, Goldman Sachs’s chief executive, could have perjured himself — as Senator Carl Levin has suggested — when he testified last year in front of the Senate’s Permanent Subcommittee on Investigations.
According to Sorkin, “Blankfein declared (actually read, what sounds clearly, I believe, as some brilliant expensive lawyers helped him defining, dealing with some tough questions about Paulson and “The Big Short”, see below–U.P.) – “I didn’t have sex with this woman”, sorry, “We didn’t have a massive short against the housing market” as well as saying that “the firm was
“not consistently or significantly net ‘short the market’ in residential mortgage-related products in 2007 and 2008”
As I understood (saw and heard on T.V.) at least Sen. Carl Levin and Matt Taibbi do not believe him. Sorkin’s report starts with the words “The vampire squid haters won’t like this column.” (if any American missed it, this is Taibbi’s nickname for GS, which became very popular, on daily sad jokes, frequently shortened to “Squid”, with some matching pictures. I’ll save here the full Taibbi’s definition)
Further Sorkin explains why “I (Sorkin) have come to a different and perhaps unsatisfying conclusion for those readers looking for a big scalp: Mr. Blankfein wasn’t lying.”
Few days later, on June 10th Francine McKenna sharpened on Forbes: “Goldman Sachs Executives May Have Lied But Not About Anything “Massive”
Both of them attached some matching pictures as well:
On the other hand, John Carney, C.N.B.C., on “Goldman Stung by its own Secrecy”, June 6th, adds that “The report (Levin’s Committee) claimed that Goldman was “net short”—that is, positioned to profit from a decline in mortgages—in 2007. Several internal documents submitted by Goldman support that position.
For instance, here’s a quote from one document prepared by risk managers of Goldman Sachs explaining the firm’s position, apparently to the firm’s tax department:
“A quick word on our own market and credit risk performance in this regard. In market risk – you saw in our 2nd and 3rd qtr results that we made money despite our inherently long cash positions.—because starting early in ’07 our mortgage trading desk started putting on big short positions, mostly using the ABX index, which is a family of indices designed to replicate cash bonds. And did so in enough quantity that we were net short, and made money (substantial $$ in the 3rd quarter) as the subprime market weakened. (This remains our position today)”
There are lots of other instances of people inside of Goldman insisting that the firm was “net short”.”
During the S.E.C.’s investigation we first met this secret “Investment” banking code – “L.D.L.” When Fabrice Tourre defined (by e-mail) those mortgage “investments” (“bombs”) as “a way to distribute junk that nobody was dumb enough to take first time around”, to his team-mate, one Jonathan Egol, Before the manipulative criminal “Big Short”, coordinated with Rating companies’ downgrade, he was answered at once: “LDL.”(“Shut Up!!” in French). Usually security rules of GS are stricter than an Iranian Nuclear Station. Young Tourre wrote and talked a lot. I wonder how come N.Y.A.G. and N.Y.D.A. haven’t started interrogating and negotiating Tourre, as a start.
So maybe the “Massive Short Positions” were in favor of “The Firm”‘ (GS) Nostro, whatever, and dear Alibi-“Client”-Partner-Paulson (by the way, watch them in an interesting and very suspicious Disclosure Multi-Fight on the late, for now, Lehman Bros.’s “Inheritance”, at Bankruptcy Court. I bet we can find some amazing Skeletons and Corpses there, excuse me)
On the other (bloody) hand, “The Criminal Triangle” – “Insider Trade –Manipulation-Fraud” was to “distribute junk that nobody was dumb enough to take first time around”, meaning “Clients” (not dear Paulson and “The Firm”).
It is much more criminal than “Bet against their clients” or “Lie to their Clients”, as good old Levin called these facts. “The Big Short” is a Multi-$ Billions-Fraud that caused a Multi-$Trillions-Economic Loss. That is only the last Satanic episode. First they created and “distributed” the “double-loans bombs” and Fraud “securities”, trafficked viciously across the U.S. and the Globe.
Other e-mails attached by April 13th Levin Report, were the bankers’ urgent and tough “negotiations” (I call it a fatal threat) with the Rating Agencies, Moody’s and S&P, to postpone the date of “The Big Short” – “The Re-scale or Downgrade Day”.
Senators’ Carl Levin – Tom Coburn Committee Filed their 635 pages comprehensive final report and thousands of attached documents, Testimonies etc., of 2007 Financial disaster, where GS and Mr. B. are leading actors. The respectable Committee sent just a few weeks ago its severe report to D.O.J., N.Y.A.G. and S.E.C., recommending many examinations and investigations of events and conclusions (I think they should’ve written “Indictments”) as follows:
“The Report concludes that the most immediate cause of the financial crisis was the July 2007 mass ratings downgrades by Moody’s and Standard & Poor’s that exposed the risky nature of mortgage-related investments that, just months before, the same firms had deemed to be as safe as Treasury bills. The result was a collapse in the value of mortgage related securities that devastated investors. Internal emails show that credit rating agency personnel knew their ratings would not “hold” and delayed imposing tougher ratings criteria to “massage the … numbers to preserve market share.” Even after they finally adjusted their risk models to reflect the higher risk mortgages being issued, the firms often failed to apply the revised models to existing securities, and helped investment banks rush risky investments to market before tougher rating criteria took effect. They also continued to pull in lucrative fees of up to $135,000 to rate a mortgage backed security and up to $750,000 to rate a collateralized debt obligation (CDO) – fees that might have been lost if they angered issuers by providing lower ratings. The mass rating downgrades they finally initiated were not an effort to come clean, but were necessitated by skyrocketing mortgage delinquencies and securities plummeting in value. In the end, over 90% of the AAA ratings given to mortgage-backed securities in 2006 and 2007 were downgraded to junk status, including 75 out of 75 AAA-rated Long Beach securities issued in 2006. When sound credit ratings conflicted with collecting profitable fees, credit rating agencies chose the fees.”
Legal Tools Exist. This is the “Tip of the Iceberg”. N.Y.A.G., N.Y.D.A., S.E.C, F.B.I. and Police, can, at last, Investigate, interrogate separately, confront and arrest, yes, definitely. They respected the Senate Investigation, and waited. There is a need for some special team – tons of documents, disinformation, spins. Levin’s Committee issued a very professional public report, a compass and basic conclusions. They do not have police’s and S.E.C. tools. That is a good start. Levin deserves a medal.
It is not a matter of Perjury or lies at all. The real issues are Manipulations, Insider Trade and Fraud, that caused $ Trillions of loss and waste, millions of homeless, jobless and hopeless families, for these greedy Bombs’-1st & 2nd Loans’-Securities’ Manipulative Fraud.
Rajaratnam’s Insider Trade did not cause almost any victim any damage. We just envy. This is also a back-street-gossip-alley. He was not an Insider, maybe neither the bankers-traders all along the stairway to hell – from the “Explosive Loans” to “The Big Short”. It is all Inside Trade, but look at the horrible “Industrial Scam” and unbelievable damages. How dare this Dimon to interrupt Bernanke’s efforts. Jamie is sweating. He saw what happened live to DSK.
Perjury Indictments are very rare, for good reasons. Sorry to say but after practicing Law as an active Attorney for 21 years, and serving 2 Supreme Court’s Chief Justices, I’ve seen some research lately that affirmed my learned guess: “Everybody lies everyday, some even all day long.”
It doesn’t really matter (another dead-end-back-street-alley) if it is a “Massive” or Skinny lie, neither the legally used Dichotomy of “Active” or “Passive” lie (or behaviors in general). Some concealment, cover up or spin of facts can be a Mega-Mass-Fraud or even deadly. I don’t think it is getting us anywhere (alley, etc) to talk about a “White”, “Black”, “Yellow”, “Small” or big lie.
I don’t want to judge, tag, decide or find any lie. Many times I prefer to stay with my healthy and painful uncertainty. Professionally I might tell my client: “Don’t tell me anything, otherwise it might sabotage our defense. Just answer my questions.” But sometimes I must warn him: “I need to know this and that. It is safe and privileged. A lie on that matter can kill our case in court.”
So don’t take yourself or anybody else too seriously. It is scientific. “Homo Economicus” is a Rational, more or less (see below), Utility Maximizer by definition. He always tends, built in, to tell you, conceal and spin anything that serve his conscientious, sub-conscientious, illusional or delusional utility, not the truth at all.
That is why I am very suspicious towards any fish or other, waiter’s (not to mention trader-banker-advisor-or-any) recommendation. I might lie when you ask me “How are you” or what I really think about your new hair cut. To be honest with myself is even harder, but more basic.
By Law, the accused can plea “Not guilty” even if 2 minutes later he admit or proved guilty. That is not Perjury. Constitutional rights, Privileges (as against self-incrimination) and practical common-sense Judicial Policies, make Perjury Indictment almost theoretic.
Experienced and/or wise judges might know, you cannot be sure if this fluent, charming and learned $ 10,000 suit lies, conceal or spin, and the other confused sweating bum tells the peculiar real truth.
Even theatrical Anglo – American Cross – examinations lost their importance, follows Continental (European) Judicial system. Most important and fruitful witnesses might lie somewhere, few times. That is life. “Hard cases make bad Law”. We just want to try to understand what really happened, what shouldn’t be legal and try to deter the next financial greed crisis.
It is already here. Watch algorithmic HFT daily net $ Hundreds of Millions net trade profit Manipulations, learned pessimistic fears and some “Flash Crash”. Lately we’ve become aware (and panicked) of “Splash Crash” as well. S.E.C. and Exchanged are put to deep sleep, for too many years, by the Robber Barons.
So $10 Million fine for those “Research Huddles” faked cover for Criminal heavy daily Insider Trade and Anti – Trust (cartelistic) Securities Manipulations, as well as other S.E.C. and states cheap deals tickle Trading –”Investment Banks” to laugh. It is not about lies or Semi – Ethics. Prison sentences might work, even for Royal Robber Barons and Huns, “Jamie and Lloyds”.
We can be used, tricked and bored to death with this “Frank-Dodd”‘s Muppets Show. Only total Separation (including ownership) between Banks, Trade, “Investments”, Advisors, Underwriting, IPO’s, etc. Overhaul revolution of S.E.C. and Exchanges is needed urgently. Those were the main lessons of The Great Depression. Even Martin Act, 1921 was forgotten. It is not a matter of Perjury or lies, neither any of many other spins.
Sincerely yours,
Uri Praiss, Attorney at law
Law & Economics Lecturer
אורי פרייס, משרד עורכי דין
Uri Praiss, Law Offices
רחוב אחוזה 17, רעננה 43208 טל’ 050-5573697, 054-7569760 פקס למייל
17 AHUZA ST. RA’ANANA43208 TEL (972)-54-7569760, 50-5573697 FAX-MAIL
praiss.uri@gmail.coml; praisuri@netvision.net.i E- mail:
June 9, 2011 U r g e n t!!
Dear Opinion / OP – ED Editors,
I am honored to file my Updated full version as follows:
Re: A very Sick S.E.C. needs E.R. – Poisoned by a Squid
Author: Uri Praiss, Attorney at law (Israel, since 1990)
law & Economics lecturer
On 4th June morning I’ve started feeling sick myself already in the morning, when I saw on T.V. former S.E.C. Chairman, Arthur Levitt, now “Policy adviser for Goldman” (and, I guess, Hill’s traveler like their new “International Advisor”, Ex-Sen. JSD Att. Judd Gregg. Fly together? Private?)
Levitt discussed the reports Goldman has been subpoenaed by Manhattan District Attorney’s office ,the 2nd last American White Knight, Cyrus Vance Jr., opening a fresh legal front, after GS subpoenaed recently by N.Y. A.G., Eric Schneiderman, as well. Levitt Said “These Subpoenas Mean Nothing for Goldman.”
Is that legal? He should be indicted too, for allowing this crisis, these bombs’ “securities” trade, that cost $ Trillions, including millions of families losing homes, jobs and hope. I guess if Mary Schapiro or N.Y.A.G asked Levitt, just theoretically, how much Goldman pays for his services, he shall be permitted by Goldman to answer.
S.E.C. was founded as one of the most important lessons of The Great Depression .We forgot the other most important lesson – Total Separation between Banks, Trade so called “Investment”, Consultancy, IPOs, etc. Even basic New York Martin Act, 1921 was almost forgotten.
The S.E.C. was created, as a rearmed special force, to defend us against the Robber Barons, or Huns, after they caused, stretched for 6 years and used that horrible national disaster, caused by financial crisis (and Manipulative panic / pessimist Short Selling, but not advanced like nowadays’ Algorithmic “Nuclear” HFTs)
But sooner than later they found out the handsome Huns’ generous attitude (like the wolf after swallowing Red Riding Hood’s Granny) as Mr. Levitt, not to mention the Exchanges, orthodox and modern biased scholars, “experts”, bankers, conservative politicians and officials, research budgets, presentations, conservative parties and rich contributors.
So the Exchanges and S.E.C. went to sleep many years before 2007, allowing the Huns to create and traffic those bombs or drugs “securities”, “Big Short”, “Regular daily shorts”, you name it. Look the other way. Tell the S.E.C. and Exchanges “Liquidity, bigger trade volume, market diversification”, count the fees, etc.
So the S.E.C.’s Investigations focus mostly on “Fishing under the Lamppost”, that gossipy piping Insider Trade Offences, by big billionare Rajaratnam or even this miserable Nelson Obus, hunted for 10 years (and 2 obsessive appeals) because of that “Investi-Mad-Dog”.
Then they can harass him with all kinda tickets, to avoid fair expenses and punitive damages’ compensation. Remind me Kafka’s “Trial” of poor Joseph K.
By the way, did you know that “Insider Trading” offences were pushed and demonized by Wall Street’s Traders and Analysts’ Lobbyist Cartels? That is not even theft. Just populist over -reacting. There is no victim except some righteous vague envy.
In most civilized Securities (Non U.S.) Laws, Manipulations, Fraud, Attempt of Affecting Rates by Short and /or concerted / HFT “Selling Efforts” are much “heavier” offences than famous and juicy “Insider Trade”. The Anti – social and economic damages as well as risks (!!) are much heavier. So is the “Mens Rea” and the punishment is more severe.
Meanwhile, S.E.C. and Exchanges try, maybe they can’t refuse, to rescue Goldman Trading “Bank”, by $ 550 Million’s S.E.C. selective “plea – bargain” fine. That appears Ex – Post as a gift – their “Gold Mine Windfall” – approximately 1 day’s total income, and let’s pretend It’s over. Nothing happened (!!) GS report $100 Million daily net trade profits easily (how exactly?!) They were just tickled to laugh by those twisted secret highly – organized, 15 or so, $1 Million State – fines. “Partial-but-final rehabilitation-immunity-bargains'” ridiculous fines (as lately urged in New Jersey and Massachusetts) which N.Y.A.G. Schneiderman refused to accept, as was reported here.
S.E.C. and GS would help also Moody’s and S&P. Remember classic “Prisoners’ Dilemma”, maybe most popular Economics’ Game Theory? Let’s invent 500 pages of new Rating Rules’ wasteful cover up, so maybe they won’t face Criminal and Civil Fraud and Conspiracy charges plus (Gross) Negligence huge law suits.
.”One for all and all for one” Musketeers meet at “Robin Hood”‘s Lady Gaga’s Charity Tax Deductable evening. Till N.Y.A.G. and N.Y.D.A. shall come between you.
Pardon April 13th Senators’ Carl Levin – Tom Coburn Committee 635 pages comprehensive final report and thousands of attached documents, Testimonies etc., of 2007 Financial disaster, where GS and Mr. B. are leading actors. The respectable Committee recommends many examinations (and investigations) of events and conclusions, as follows:
“The Report concludes that the most immediate cause of the financial crisis was the July 2007 mass ratings downgrades by Moody’s and Standard & Poor’s that exposed the risky nature of mortgage-related investments that, just months before, the same firms had deemed to be as safe as Treasury bills. The result was a collapse in the value of mortgage related securities that devastated investors. Internal emails show that credit rating agency personnel knew their ratings would not “hold” and delayed imposing tougher ratings criteria to “massage the … numbers to preserve market share.” Even after they finally adjusted their risk models to reflect the higher risk mortgages being issued, the firms often failed to apply the revised models to existing securities, and helped investment banks rush risky investments to market before tougher rating criteria took effect. They also continued to pull in lucrative fees of up to $135,000 to rate a mortgage backed security and up to $750,000 to rate a collateralized debt obligation (CDO) – fees that might have been lost if they angered issuers by providing lower ratings. The mass rating downgrades they finally initiated were not an effort to come clean, but were necessitated by skyrocketing mortgage delinquencies and securities plummeting in value. In the end, over 90% of the AAA ratings given to mortgage-backed securities in 2006 and 2007 were downgraded to junk status, including 75 out of 75 AAA-rated Long Beach securities issued in 2006. When sound credit ratings conflicted with collecting profitable fees, credit rating agencies chose the fees.”
Sorry, but the very bad news and the unhappy end (for now) is that neither S.E.C. nor Robber Barons haven’t learned anything yet. Vice Versa, the Huns have already found, use (on a daily basis) and develop their new “nuclear” arms, at least a year. Almost all financial and real markets, firms and households suffer daily doldrums, stagnation, waste and loss of potential growth and employment.
These are caused mainly by manipulative advanced Hi-Tech and Algorithmic HFT daily trade (by whatever “machines”?!), including Short selling, combined with endless fearful, false and as if professional daily negative economic excuses (Greece’s Debts? Portugal?) Not to mention serial scary “Flash Crashes” S.E.C. and Exchanges don’t want to see.
Europe has already decided to limit Short trade and other advanced manipulations. Goldman’s and others’ “agents” try to stop these important suggestions there. But here, S.E.C. and Exchanges, as before, left the doors open, let the Robbers in and went to sleep on the beach. Send Mary to be some Judge, fast as you can. Good night.
Sincerely yours,
Uri Praiss, Attorney at law
Law & Economics Lecturer
Well done Yves!
I am going to add my reply to Sorkin’s story, being Dealbook didn’t care for my negative post:
So, what you are saying is, “We didn’t have a massive short against the housing market.” can be equated with “I didn’t have sexual relations with…”?
The “everybody was doing it” defense does not make it all OK. Yes Goldman is being picked on when other banks also made the same bets. Hopefully other banks are also going to get some comeuppance. (but we won’t hold our breath)
Goldman knows that trust is a must when it comes to reputation so they will defend themselves to the bitter end. Do you really think what you have written here trumps what they have actually done?
There was widespread mortgage fraud and Goldman made shitty CDO deals even as they knew the subprime market was collapsing and even bought their own servicer so they could get in the action with inside information. That they have now covered their tracks, sold off entities, throw #1 lackey FAB fab under the bus and buried AIG, while denying they knew anything, is still ludicrous in spite of your cherry picking. (or were you fed this info from your Goldman friends?)
The problem here is there is not just a stained dress to hang as evidence; you have a whole house of prostitutes. You have MERS masking the underlying securities fraud; the Fed secrecy dealing with TARP and AIG; CDOs with chopped up securities that are difficult to trace, fraudulent servicers, broker, banks; coverups by revolving door players between politics, SEC and Goldman/Banks; AG’s and judges whose heads are spinning and who mostly seem quite happy to just call it a mess and go home…
What a childish and petty first line. You do not have to be a “vampire squid hater” to be upset that Goldman and banks played the mortgage market like their own personal casino. Perhaps you and those who would defend the collusion and unethical and greedy behaviour should come to face those who lost their homes and jobs. (and remember it is possible you will… as the market is still sinking rapidly)