Out the Kleptocracy: Author Michael Lewis on Punishing the Big Players

Continued public and government outrage over the lack of accountability from the rogue Wall Street financial advisors and their management is called for. Please, please, please don't become complacent or forget what happened, why, and most importantly, who should be held accountable.

Financial "gamesters" engineered novel ways to cheat as the means to transfer billions of dollars from American's pockets into their own accounts.

Losing investors' money the old-fashioned way -- due to legitimate risk from honest investments is one thing -- inventing quasi-legal loophole systems to game the system -- so as transfer this vast wealth to themselves, through manipulative "hedging" and "shorting" is beyond heinous.

This means you -- John Paulson and Lloyd Blankfein -- and those who withheld ethical disclosures about Abacus so as to mislead investors.

These and other willful schemes should be deemed financial crimes -- punishable breaches of industry ethical standards that should be massively fined (all the profits, and then some -- not merely a lesser percentage).

The parties involved should be publicly and socially disgraced and b banned from any future employment in the financial industry.

These financially engineered schemes should not just be fined and "settled without an admission of guilt or wrongdoing." To do so will "incentivize" them to become "business as usual," "worth the risk," and promote the "do whatever I can to get an edge" mentality.

Anyway, here's the link to the Michael Lewis article:

http://www.huffingtonpost.com/2013/08/03/michael-lewis-authorities-financial-crisis_n_3701353.html

Sleazebag Smirk: Goldman Sachs' Lloyd Blankfein

Looks a bit like Dr. Evil, doesn't he?

A smarmy smirk courtesy of Lloyd Blankfein the Financial Times 2009 Person of the Year.

Oh, so? The Big Picture blog quotes one insider summing up a Goldman Sachs practice:

"When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Here's some social accountability from the Follow the Money blog:

http://seeker401.wordpress.com/2009/12/30/lloyd-blankfein-financial-times-person-of-the-year/

Out the Kleptocracy: On the Blogs: Mark Gongloff: Goldman Sachs CEO Lloyd Blankfein Gets 75 Percent Raise: Report

Blog by Mark Gongloff, chief financial writer, The Huffington Post

Angry about your paycheck shrinking this year because the payroll tax cut expired? Well, this should cheer you right up: Goldman Sachs's CEO got a 75 percent raise this year.

Lloyd Blankfein made $21 million last year, including a $2 million salary and a $19 million bonus, CNN/Money reports. That bonus includes $5.6 million in cash. Bloomberg pegs the total pay at $19 million, but what's a couple of million dollars, really?

Blankfein's haul represents a 75 percent pay increase from the year before, CNN/Money notes. It is also nearly double the paltry $11.5 million that Jamie Dimon, CEO of the nation's biggest bank, JPMorgan Chase, took home.

Unlike Dimon, Blankfein's bank did not nightmarishly botch up a massive credit-derivatives trade that cost it $6 billion, as JPMorgan did (although JPMorgan still managed to turn in a record profit). Goldman Sachs's profit nearly doubled last year, and its stock price jumped 49 percent. And as we all know, Goldman Sachs does God's work, which apparently consists mainly of trading stuff as much as possible, notes CNBC's John Carney.

We know what you're thinking: Grrrr!! You may think that your job -- educating children, say, or fighting fires -- is maybe more valuable to society than Blankfein's job of fleecing muppets and moving money around until it magically turns into more money. It's not fair, you're thinking.

In fact, some of you might be thinking, maybe it's corrosive to pay so much money to people for doing nothing much more than magically turning money into more money. It might incentivize them at some point down the road to, I don't know, cram derivatives full of toxic mortgage assets and foist them on unsuspecting muppets. You know, God's work.

Can't argue with you.

Taking It In The Big Shorts




What, Me Short?

  Excerpted from Matt Taibbi's scathing May 26, 2011 Rolling Stone article The People vs. Goldman Sachs:

"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 ... lied about.

We know exactly how they ... 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."

"How did Goldman sell off its 'cats and dogs'? Easy: It assembled new batches of risky mortgage bonds and dumped them on their clients, who took Goldman's word that they were buying a product the bank believed in. The names of the deals Goldman used to clean its books – chief among them Hudson and Timberwolf – are now notorious on Wall Street."

Goldman specifically designed the Hudson deal to reduce its exposure to the very types of mortgages it was selling. One of its creators, trading chief Michael Swenson, later bragged about the "extraordinary profits" he made shorting the housing market. Goldman dumped $1.2 billion of its own "cats and dogs" into the deal – and then told clients that the assets had come not from its own inventory, but had been "sourced from the Street."

Hudson quickly lost a ton of money. Goldman's biggest client, Morgan Stanley, alone lost nearly $960 million on the Hudson deal, which the bank turned around and dumped on taxpayers, who within a year were spending $10 billion bailing out the bank through the TARP program.

Goldman clients who bought into the deal had no idea they were being sold the "cats and dogs" that the bank was "cleaning" off its books. An Australian hedge fund called Basis Capital sank $100 million into the Timberwolf deal on June 18th, 2007, writes Taibbi, "and almost immediately found itself in a full-blown death spiral."

In February 2007, Goldman mortgage chief Daniel Sparks and senior executive Thomas Montag exchanged e-mails about Timberwolf.

MONTAG: "CDO-squared – how big and how dangerous?"
SPARKS: "Roughly $2 billion, and they are the deals to worry about."

In a conference call on May 20th that included Viniar, Sparks oversaw a PowerPoint presentation spelling out Goldman's concern about Timberwolf. In a later e-mail, he wrote: "There is real market-meltdown potential."

Four days after Goldman sold $100 million of Timberwolf to Basis. "Boy," Montag wrote, "that timeberwof [sic] was one shitty deal."

In the spring of 2010, about a year in to his investigation, Senator Levin hauled Goldman execs to Washington, made them take oaths, and demanded that they explain themselves.
Goldman execs lied under oath

• David Viniar insisted that Goldman's massive bet against mortgages was "not a large short." At work, he'd written an email in which he called Goldman's bet "the big short."

• Daniel Sparks claimed that Goldman expected deadly mortgage deals like Timberwolf "to perform." At work, he'd approved an internal document warning that Goldman expected such deals "to underperform."

• Michael Swenson said Goldman had forfeited profits by refusing to bet against mortgages: "We left money on the table." At work, he had bragged about the "extraordinary profits" he made while betting against mortgages.

"Before the hearing, even some of Senator Levin's allies worried privately about his taking on Goldman and other powerful interests. The job, they said, was best left to professional prosecutors, people with experience building cases. ... But in the case of this particular senator, that concern turned out to be misplaced. A Harvard-educated lawyer, Levin has a long record of using his subcommittee to spend a year or more carefully building cases that lead to criminal prosecutions."

"[The] questioning of the bank's executives was not one of those for-the-cameras-only events where congressmen wing ad-libbed questions in search of sound bites. In the weeks leading up to the hearing, Levin's team carefully rehearsed the moment with committee members. They knew the possible answers that Goldman might give, and they were ready with specific counterquestions. What ensued looked more like a good old-fashioned courtroom grilling than a photo-op for grinning congressmen."

"When it came time for Goldman CEO Lloyd Blankfein to testify, the banker hedged and stammered like a brain-addled boxer who couldn't quite follow the questions. ... But Blankfein also testified unequivocally to the following: 'Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is, we were not consistently or significantly net-short the market in residential mortgage-related products in 2007 and 2008. We didn't have a massive short against the housing market, and we certainly did not bet against our clients.'

"Levin couldn't believe what he was hearing. 'Heck, yes, I was offended,' he says. 'Goldman's CEO claimed the firm didn't have a massive short, when the opposite was true.' First of all, in Goldman's own internal memoranda, the bank calls its giant, $13 billion bet against mortgages "the big short."

Second, by the time Sparks and Co. were unloading the Timberwolves of the world on [unsuspecting clients] in the summer of 2007, Goldman's mortgage department accounted for 54 percent of the bank's risk. That means more than half of all the bank's risk was wrapped up in its bet against the mortgage market – a 'massive short' by any definition."

After releasing his report, Levin sent all of this material to the Justice Department. His conclusion was simple. "In my judgment," he declared, "Goldman clearly misled their clients, and they misled the Congress."

http://www.rollingstone.com/politics/pictures/how-goldman-execs-screwed-their-clients-and-lied-to-congress-20110511

Greg Smith’s ‘Why I Left Goldman Sachs’: A Coming of Age Tale, Not a Goldman Exposé



Shameless Goldman Sachs CEO Lloyd Blankfein tesifies before the Senate in April 2010.

Here's Greg Smith's Why I Left Goldman Sachs 
http://finance.yahoo.com/blogs/the-exchange/book-review-greg-smith-why-left-goldman-sachs-195604181.html


And here's Matt Taibbi's Rolling Stone article:

The People vs. Goldman Sachs

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

by Matt Taibbi, May 11, 2011

"...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....

... To date, there has been only one successful prosecution of a financial big fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was just convicted on a smorgasbord of fraud charges and now faces life in prison.

But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff, his comically excessive crime spree (which involved such lunacies as kiting checks to his own bank and selling loans that didn't exist) was almost completely unconnected to the systematic corruption that led to the crisis.

What's more, many of the earlier criminals in the chain of corruption — from subprime lenders like Countrywide, who herded old ladies and ghetto families into bad loans, to rapacious banks like Washington Mutual, who pawned off fraudulent mortgages on investors — wound up going belly up, sunk by their own greed....."

Read the entire nauseating article at:

http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511

They Earn Their Money the Old Fashioned Way -- They Cheat Dept.: Rajat Gupta

 

 

 

Gupta Sentenced to Two Years in Prison

by Michael Rothfeld and Dan Strumpf, The WSJ
Former Goldman Sachs Group Inc. director Rajat Gupta was sentenced to two years in federal prison for leaking corporate secrets about the investment bank to a hedge-fund manager at the height of the financial crisis.

The prison term imposed by U.S. District Judge Jed Rakoff in Manhattan was a capstone to the fall of Mr. Gupta, a once-revered business leader who became the most prominent figure caught in the push against insider trading by U.S. prosecutors and the Federal Bureau of Investigation.

"I think the record, which the government really doesn't dispute, bears out that he is a good man," said Judge Rakoff during the hearing. "But the history of this country and the history of the world, I'm afraid, is full of examples of good men who do bad things."

The judge also ordered Mr. Gupta to pay a $5 million fine and said he would face one year of supervised release after finishing his prison term. The defense plans an appeal.

Mr. Gupta, who was accompanied to court by his wife and four daughters, apologized to his friends, family and the charitable institutions that he helped to found. "The last 18 months have been the most challenging period of my life since I lost my parents as a teenager," he told the judge before sentencing. "I lost my reputation that I built over a lifetime.

"Much of the first year seemed surreal to me. However, since the trial I've come to accept the reality of my life going forward," he said.

Mr. Gupta, 63 years old, the former head of McKinsey & Co., the global consulting firm, was implicated in 2010 in the investigation of Raj Rajaratnam, his friend and business associate who headed hedge fund Galleon Group.

He was criminally charged late last year with divulging information about Goldman Sachs and Procter & Gamble Co., where he was also a director, several months after Mr. Rajaratnam was convicted at a trial of insider trading and sentenced to 11 years in prison.

In June, after Mr. Gupta fought the case at trial, a jury found him guilty of three counts of securities fraud and one count of conspiracy for giving Mr. Rajaratnam tips about Goldman during the financial crisis, sometimes just moments after he learned them, including that Berkshire Hathaway Inc. would invest $5 billion in the bank in 2008.

Mr. Rajaratnam used the tips to earn millions of dollars for Galleon, prosecutors said, though Mr. Gupta didn't trade on them himself or profit directly at all. Mr. Gupta was acquitted of two securities-fraud charges.

Prosecutors had argued that Mr. Gupta should receive up to 10 years in prison under the federal sentencing guidelines, which in insider-trading cases are largely based on profits, or losses avoided, because of the illegal tips. But the guidelines are advisory and Judge Rakoff often sentences below them.

Judge Rakoff received letters of support for Mr. Gupta from hundreds of prominent supporters, including Microsoft Corp. founder Bill Gates, the Indian doctor Deepak Chopra, and former United Nations leader Kofi Annan, not to mention Mr. Gupta's wife, four daughters, and scores of other relatives and friends.

Their contentions that Mr. Gupta deserved leniency because he had lived an otherwise impeccable life and given many years to health care, poverty, education and other philanthropic causes, were set against the legal requirement that a judge issue a sentence that will discourage others from similar crimes.

Manhattan U.S. Attorney Preet Bharara said in an emailed statement: "With today's sentence, Rajat Gupta now must face the grave consequences of his crime—a term of imprisonment. His conduct has forever tarnished a once-sterling reputation that took years to cultivate. We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr. Gupta's footsteps."

They Earn Their Money the Old Fashioned Way -- They Cheat Dept.: Abacus:

Another outrage. The conflict of interest seems so obvious -- what am I missing? The law nails Martha Stewart for lying about her insider trading and then just lets this gigantic Abacus fraud fly?


Carl Levin: Goldman Sachs Decision Shows Either 'Weak Laws Or Weak Enforcement'
Reuters, 08/11/2012

* US Senator Levin asked for Goldman criminal probe in 2011
* Justice Department was 'thorough and impartial' - Goldman

Washington, Aug 10 (Reuters) - The U.S. Justice Department's decision not to prosecute Goldman Sachs Group Inc for its subprime mortgage trades resulted from either "weak laws or weak enforcement," the senator who asked for a criminal investigation of the firm said on Friday.

A day after the department announced its decision, Democratic Senator Carl Levin reiterated in a written statement the criticisms he lodged against Goldman beginning more than two years ago. He called the firm's actions "deceptive and immoral."

Goldman said it did nothing wrong in its marketing of mortgage securities, including one known as Abacus that was the subject of televised hearings before Levin's investigative subcommittee in 2010. The hearings focused on whether Goldman was wrong to sell products that it disparaged internally.

Levin said he is still convinced Goldman was in the wrong.

"It misled investors by claiming its interests in those securities were 'aligned' with theirs while at the same time it was betting heavily against those same securities, and therefore against its own clients, to its own substantial profit," he said on Friday.

Goldman settled a related civil investigation by the U.S. Securities and Exchange Commission for $550 million in July 2010 without admitting wrongdoing.

On Friday, Goldman spokesman Andrew Williams said the firm continues to stand by its actions.

"As the DOJ stated, it has 'not hesitated to investigate and take enforcement action when the evidence and facts support doing so.' We believe that their examination has been thorough and impartial," Williams said in a statement.


DODD-FRANK AND 'VIGOR'

In April 2011, Levin asked for a criminal probe on the day that he and Republican Senator Tom Coburn released a 639-page report on the financial crisis.

The unsigned Justice Department statement on Thursday on its decision not to prosecute said that "the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time."

To critics, the department's decision was another example of the inability of prosecutors to pinpoint blame for a financial crisis that pushed the United States into a severe recession from which the economy is still recovering only slowly.

Levin said the 2010 banking and Wall Street regulation overhaul known as Dodd-Frank is part of a solution if regulators "do not water it down" and "enforce those rules with vigor."