It amazes me that even with e-mails, Goldman-Sachs denies any wrong doing. I think they should be held accountable.
It also appears that Congress apparently is just going through the motions for the public and really cares little about how the crisis has affected everyone in a negative way while companies like Goldman and other may have been raking in billions at our expense. Greed is rampant in Washington and Wall Street.
Take for example just one congressman, Alan Mollohan. He became a multi-millionaire during his congressional tenure and ethics investigations turned up nothing and was dismissed. It makes one wonder if this was brushed aside in exchange for his YES vote on the health care bill.
Of course, with all of the Wall Street lobbyists, I’m sure our “leaders” will offer up a do nothing reform that will expand government while doing basically nothing other than allowing more government employees surf the net for porn.
Our government is in a sad state and it appears it continues to decline and it is “we the people” who are paying for it in many ways.
It will be interesting to see what unfolds with the entire financial situation in our country and how Greece and other European countries nearing financial collapse will affect us.
Below are the articles regarding Goldman.
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Not us: Goldman execs deny wrongdoing in crisis
Marcy Gordon and Tom Raum, Associated Press Writers, On Tuesday April 27, 2010, 9:42 pm EDT
WASHINGTON (AP) — Defending his company under blistering criticism, the CEO of Goldman Sachs testily told skeptical senators Tuesday that customers who bought securities from the Wall Street giant in the run-up to a national financial crisis came looking for risk “and that’s what they got.”
Lloyd Blankfein and other Goldman executives were lambasted by lawmakers for “unbridled greed” in an often-electric daylong showdown between Wall Street and Congress — with expletives frequently undeleted. Unrepentant, five present and two past Goldman officials unflinchingly stood by their conduct before a Senate investigatory panel and denied helping to cause the financial near-meltdown that turned into the worst recession since the Great Depression.
“Unfortunately, the housing market went south very quickly,” Blankfein told skeptical senators. “So people lost money in it.”
Democrats hoped the hearing would build momentum for legislation, now before the Senate, to increase regulation of the nation’s financial system. That legislation would crack down on the kind of lightly regulated housing market investments that helped set off the crisis in 2007.
Elsewhere at the Capitol, Republicans succeeded for a second day in blocking efforts to move toward debate and a vote on that bill. At the same time, they floated a partial alternative that they said could lead to election-year compromise on an issue that commands strong public support.
Both sides are trying to harness voter anger toward Wall Street. Unlike with the health care debate, both Democrats and Republicans say they want tighter regulations passed — but they disagree on timing and significant details.
At the hearing, there was hour upon hour — nearly 11 hours in all, winding up just before 9 p.m. EDT — of combative exchanges, occasional humor and long stretches of senators and Wall Street insiders speaking past each other. There was talk of ethical obligations versus financial transactions so complex they all but defy explanation. And there were a half dozen protesters dressed head to toe in prison stripes with Goldman officials’ names around their necks.
Senators from both parties verbally pounded the Goldman executives, accusing them of a financial version of rigged casino gambling that they said endangered the entire U.S. economy.
That drew a protest from Sen. John Ensign, a Nevada Republican. In Las Vegas, he said, “people know the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you’re playing the game.”
Outside the hearing room, analysts and investors suggested the firm was surviving the hearing with its reputation intact, something its stock performance for the day may have underscored. Goldman’s stock rose $1.01 per share, to $153.04, on Tuesday, a day in which the Dow Jones industrials had their worst drop in nearly three months, down 213 points.
Blankfein was the final witness in a daylong hearing on Goldman conduct that resulted in a Securities and Exchange Commission civil fraud charge earlier this month against the firm and one of its traders.
Sen. Carl Levin, D-Mich., the panel’s chairman cited a “fundamental conflict” in Goldman’s selling to clients home-loan securities that company e-mails showed its own employees had derided as “junk” and “crap” — and then betting against the same securities and not telling the buyers.
“They’re buying something from you, and you are betting against it. And you want people to trust you. I wouldn’t trust you,” Levin told Blankfein.
Blankfein denied such a conflict in a combative exchange. “We do hundreds of thousands, if not millions of transactions a day, as a market maker,” he said, noting that behind every transaction there was a buyer and a seller, creating both winners and losers.
Levin vigorously pressed about an e-mail between Goldman executives describing one product called Timberwolf as “one s—-y deal.”
“Your top priority is to sell that s—-y deal,” Levin said. “Should Goldman Sachs be trying to sell a s—-y deal?”
I didn’t use that term, the executive responded.
Other senators repeated the language in their questioning.
Goldman’s chief said the company didn’t bet against its clients — and can’t survive without their trust. He repeated the company’s assertion that it lost $1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession. He also argued that Goldman wasn’t making an aggressive negative bet — or short — on the mortgage market’s slide.
He and other officials described their use of complex trading tools as a way to reduce risks for the company and its clients.
Earlier, Levin said that financial industry lobbyists “fill the halls of Congress, hoping to weaken or kill legislation” to increase regulation. He accused Wall Street firms of selling securities they wouldn’t invest in themselves. That’s “unbridled greed in the absence of the cop on the beat to control it,” he said.
Whether Tuesday’s hearing would help Democrats win Republican converts on the legislation remained an open question. “It’s too soon to tell,” Levin said in a brief interview outside the hearing. “We’ll have to wait until the dust settles.”
The Goldman witnesses strongly denied that the firm intentionally cashed in on the housing crash by crafting a strategy to bet against home loan securities while misleading its own investors.
“I will defend myself in court against this false claim,” said Fabrice Tourre, a French-born 31-year-old Goldman trader who was the only individual named in the SEC suit. “I deny — categorically — the SEC’s allegation.”
The SEC says Tourre marketed securities without telling buyers they had been chosen with help from a Goldman hedge fund client that was betting the investments would fail. The commission alleged that Tourre told investors the hedge fund, Paulson & Co., actually bought into the investments. Tourre said he didn’t recall telling investors that.
Tourre said: “I am saddened and humbled by what happened in the market in 2007 and 2008. … But I believe my conduct was proper.”
Was Goldman harmed by the hearing?
“Despite the interrogation, the Goldman team hasn’t really provided any new information,” market analyst Edward Yardeni said. “And the (senators) aren’t creating a more damaging view than already existed.”
“Right now, it looks like the PR battle has been fought to a draw,” Yardeni added.
Sen. John McCain, R-Ariz., said that while there may not be proof that Goldman did anything illegal, “there’s no doubt their behavior was unethical and the people will render a judgment as well as courts.”
Sen. Tom Coburn, R-Okla., said the blame doesn’t fall on Goldman alone. “There’s numerous causes to the financial crisis, not just one.” He said the blame must be shared by federal regulatory agencies who didn’t use the powers they already have and by Congress. “In truth, we all took turns in inflating the housing bubble,” he said.
Associated Press writers Stevenson Jacobs in New York and Jim Kuhnhenn and Michael Sandler in Washington contributed to this report.
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Goldman Sachs Messages Show It Thrived as Economy Fell
By LOUISE STORY, SEWELL CHAN and GRETCHEN MORGENSON
Published: April 24, 2010
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In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.
Related
The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.
In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”
In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president.
The messages were released Saturday ahead of a Congressional hearing on Tuesday in which seven current and former Goldman employees, including Mr. Blankfein, are expected to testify. The hearing follows a recent securities fraud complaint that the Securities and Exchange Commission filed against Goldman and one of its employees, Fabrice Tourre, who will also testify on Tuesday.
Actions taken by Wall Street firms during the housing meltdown have become a major factor in the contentious debate over financial reform. The first test of the administration’s overhaul effort will come Monday when the Senate majority leader, Harry Reid, is to call a procedural vote to try to stop a Republican filibuster.
Republicans have contended that the renewed focus on Goldman stems from Democrats’ desire to use anger at Wall Street to push through a financial reform bill.
Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman’s public statements about its trading results. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products,’ ” Mr. Levin said in a statement Saturday when his office released the documents. “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”
A Goldman spokesman did not immediately respond to a request for comment.
The Goldman messages connect some of the dots at a crucial moment of Goldman history. They show that in 2007, as most other banks hemorrhaged losses from plummeting mortgage holdings, Goldman prospered.
At first, Goldman openly discussed its prescience in calling the housing downfall. In the third quarter of 2007, the investment bank reported publicly that it had made big profits on its negative bet on mortgages.
But by the end of that year, the firm curtailed disclosures about its mortgage trading results. Its chief financial officer told analysts at the end of 2007 that they should not expect Goldman to reveal whether it was long or short on the housing market. By late 2008, Goldman was emphasizing its losses, rather than its profits, pointing regularly to write-downs of $1.7 billion on mortgage assets and leaving out the amount it made on its negative bets.
Goldman and other firms often take positions on both sides of an investment. Some are long, which are bets that the investment will do well, and some are shorts, which are bets the investment will do poorly. If an investor’s positions are balanced — or hedged, in industry parlance — then the combination of the longs and shorts comes out to zero.
Goldman has said that it added shorts to balance its mortgage book, not to make a directional bet that the market would collapse. But the messages released Saturday appear to show that in 2007, at least, Goldman’s short bets were eclipsing the losses on its long positions. In May 2007, for instance, Goldman workers e-mailed one another about losses on a bundle of mortgages issued by Long Beach Mortgage Securities. Though the firm lost money on those, a worker wrote, there was “good news”: “we own 10 mm in protection.” That meant Goldman had enough of a bet against the bond that, over all, it profited by $5 million.
Documents released by the Senate committee appear to indicate that in July 2007, Goldman’s daily accounting showed losses of $322 million on positive mortgage positions, but its negative bet — what Mr. Viniar called “the big short” — came in $51 million higher.
As recently as a week ago, a Goldman spokesman emphasized that the firm had tried only to hedge its mortgage holdings in 2007 and said the firm had not been net short in that market.
The firm said in its annual report this month that it did not know back then where housing was headed, a sentiment expressed by Mr. Blankfein the last time he appeared before Congress.
“We did not know at any minute what would happen next, even though there was a lot of writing,” he told the Financial Crisis Inquiry Commission in January.
It is not known how much money in total Goldman made on its negative housing bets. Only a handful of e-mail messages were released Saturday, and they do not reflect the complete record.
The Senate subcommittee began its investigation in November 2008, but its work attracted little attention until a series of hearings in the last month. The first focused on lending practices at Washington Mutual, which collapsed in 2008, the largest bank failure in American history; another scrutinized deficiencies at several regulatory agencies, including the Office of Thrift Supervision and the Federal Deposit Insurance Corporation.
A third hearing, on Friday, centered on the role that the credit rating agencies — Moody’s, Standard & Poor’s and Fitch — played in the financial crisis. At the end of the hearing, Mr. Levin offered a preview of the Goldman hearing scheduled for Tuesday.
“Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients,” Mr. Levin said, referring to testimony given by Mr. Blankfein in January. “They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis. They bundled toxic and dubious mortgages into complex financial instruments, got the credit-rating agencies to label them as AAA safe securities, sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the financial instruments that they sold, and profiting at the expense of their clients.”
The transaction at the center of the S.E.C.’s case against Goldman also came up at the hearings on Friday, when Mr. Levin discussed it with Eric Kolchinsky, a former managing director at Moody’s. The mortgage-related security was known as Abacus 2007-AC1, and while it was created by Goldman, the S.E.C. contends that the firm misled investors by not disclosing that it had allowed a hedge fund manager, John A. Paulson, to select mortgage bonds for the portfolio that would be most likely to fail. That charge is at the core of the civil suit it filed against Goldman.
Moody’s was hired by Goldman to rate the Abacus security. Mr. Levin asked Mr. Kolchinsky, who for most of 2007 oversaw the ratings of collateralized debt obligations backed by subprime mortgages, if he had known of Mr. Paulson’s involvement in the Abacus deal.
“I did not know, and I suspect — I’m fairly sure that my staff did not know either,” Mr. Kolchinsky said.
Mr. Levin asked whether details of Mr. Paulson’s involvement were “facts that you or your staff would have wanted to know before rating Abacus.” Mr. Kolchinsky replied: “Yes, that’s something that I would have personally wanted to know.”
Mr. Kolchinsky added: “It just changes the whole dynamic of the structure, where the person who’s putting it together, choosing it, wants it to blow up.”
The Senate announced that it would convene a hearing on Goldman Sachs within a week of the S.E.C.’s fraud suit. Some members of Congress questioned whether the two investigations had been coordinated or linked.
Mr. Levin’s staff said there was no connection between the two investigations. They pointed out that the subcommittee requested the appearance of the Goldman executives and employees well before the S.E.C. filed its case.
