The Down Range Forum
Member Section => Politics & RKBA => Topic started by: Rastus on April 17, 2010, 07:34:32 PM
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I hope that the big guys lose theirs and the little guys are compensated for their losses.
SEC accuses Goldman Sachs of civil fraud
Apr 16 12:22 PM US/Eastern
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) - The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.
The Securities and Exchange Commission said in a civil complaint Friday that Goldman failed to disclose that one of its clients helped create—and then bet against—subprime mortgage securities that Goldman sold to investors.
Investors in the mortgage securities lost more than $1 billion, the SEC said. The agency is seeking to recoup profits reaped on the deal.
Goldman Sachs denied the allegations. In a statement, it called the SEC's charges "completely unfounded in law and fact" and said it will contest them.
The charges come as lawmakers seek to crack down on Wall Street practices that helped cause the financial crisis. Among proposals Congress is weighing are tougher rules for complex investments like those involved in the alleged Goldman fraud.
The Goldman client implicated in the fraud is one of the world's largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.
Goldman Sachs shares fell more than 13 percent after the SEC announcement, which also caused shares of other financial companies to sink. The Dow Jones industrial average fell more than 140 points in midday trading.
The civil lawsuit filed by the SEC in federal court in Manhattan was the government's most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession. The SEC's enforcement chief said the agency is investigating a broad range of practices related to the crisis.
The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.
The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre.
Asked why the SEC did not also pursue a case against Paulson, Enforcement Director Robert Khuzami said: "It was Goldman that made the representations to investors. Paulson did not."
Goldman told investors that a third party, ACA Management LLC, had selected the underlying mortgages in the investment. But, the SEC alleges, Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgages and stood to profit from their decline in value.
"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party," Khuzami said in a statement.
The SEC charges come after Goldman Sachs denied last week it bet against clients by selling them mortgage-backed securities while reducing its own exposure to them.
In an annual letter to shareholders, Goldman said it began reducing its exposure to the U.S. mortgage market in late 2006. It said it did so by selling mortgage investments or buying credit default swaps. The swaps are a form of insurance that pays out if the value of the underlying asset declines.
Those hedges, also known as short positions, served Goldman well. As the housing market began cratering and losses piled up for other big banks, Goldman suffered less damage. That led to criticism that the bank benefited at the expense of clients who bought mortgage-backed securities that became toxic. Goldman denied that.
"Our short positions were not a 'bet against our clients,'" Goldman said in the letter. "Rather, they served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits."
In the letter, Goldman also rejected claims that it profited from the mortgage market meltdown.
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Dirty, but if given the chance to do it, they did, And a whole lot of "small investors" did as well.
It's called loopholes.
Give me $10,000 and I'll turn it into $50,000 in six months. It's legalized casino gambling, and we did not write the rules, and now when it goes belly up, we pay for it.
Now the re-election campaign for BHO, will be hell bent on making sure that those evil investors will be held accountable, as capitalism dies.
Just ask Hugo Chavez...
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I voted innocent because while they are crooks they could not have done it with out Govt. meddling . Meddling which perverts the laws of supply and demand.
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I would like the opportunity to vote "no contest." They did some stuff that is in the gray areas created by what tombogan referred to as Govt. Meddling. Not legal, but not really illegal all the time either. Just not always right, but what they were encouraged to do by those making the rules and playing in the system.
We need a law that takes the automated computer trading out of the picture. No more electronic triggers that automatically start selling or buying at certain points. And, no more day traders! Everybody out here that I see having market troubles are the ones duped by day traders. $X per trade whether they make money or lose (I know this is as much "buyer beware" as anything, but the laws allow it and we get sucked in by greed). Eats up profits and compounds losses, and gives the markets a false view of what is happening.
Rant off on money grubbing weasels posing as investors >:(
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Those "money grubbing weasels posing as investors" are actually you and every one else with a retirement account.
Finance is not my thing but "Wall St." is simply selling a service of connecting people who have extra money with people who need financing for some ( presumably ) job creating project.
By participating in the economic machine we all benefit when things are good, but we all lose when they don't.
I don't recall any calls for heads to roll or new laws to be passed when homes were doubling in value and retirement accounts were going up.
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"Greed Is Good"
Gordon Gecko..
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tom, you missed my point ... unless you are a day trader or impulsive "auto trader." The markets are for investment in business to provide economic base for business to operate, and to allow investors to profit with them. However, they are not intended to be used as a game of blackjack by cardcounters as a way to beat the system.
That is what I was referring to. There is a difference between invest and speculate, and milk the investor and twist the actual numbers.
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tom, you missed my point ... unless you are a day trader or impulsive "auto trader." The markets are for investment in business to provide economic base for business to operate, and to allow investors to profit with them. However, they are not intended to be used as a game of blackjack by cardcounters as a way to beat the system.
That is what I was referring to. There is a difference between invest and speculate, and milk the investor and twist the actual numbers.
I got your point about the day traders, I just wanted to get that comment out. I remember when gas was so high, they released the profit numbers for the top 3 oil companies, I was talking with some one who was complaining about the "Obscene profits" until they found their 401 plan included all 3 companies.. ;D
No one twists numbers like politicians, the reason finance and everything else ha to become more complex is so that Govt. bookkeeping doesn't look quite so crooked.
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Remember the "Wall Street Speculators" are playing the futures market, and predicting $4 a gallon gas. They release this info deliberately to increase demand, ergo, increase price, same with gold, orange juice, and copper, ( I know the wiring prices),....
Either way, they play the game to THEIR benefit, within the confines of the SEC, and when it blows up in their face, a company becomes "too big to fail"
That's BS. You play with fire,.....you will eventually get burned.
Now long term moderate retirement investing has it's place, but when I see the Ferrari on Las Olas Blvd. with a vanity plate that reads
1DAYTRD,....... those are the go getters that take capitalism to the degree that allows them to do so.
If I had the chance to do so, the odds are better than my local casino.
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there are no innocents on wall street. Lots of dirty, dumb and people with blinders on.
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there are no innocents on wall street. Lots of dirty, dumb and people with blinders on.
They're job is beating the system to their advantage. How different is that to your business plan?
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They're job is beating the system to their advantage. How different is that to your business plan?
I won't lie to make money.
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I won't lie to make money.
Neither did Merril Lynch, or even Lehman Bros. they didn't lie at all, they took bundles of other folks money and sold them for a profit.
and than it was like a Faberge commercial,...two friends, and they told two friends,......etc,....
It was all within the SEC guidelines.
Car salesman, insurance, power companies, lawyers, and politicians, LIE to make money. Good for you that you don't.
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there are no innocents on wall street. Lots of dirty, dumb and people with blinders on.
Sorry I have to disagree with you there.
I voted innocent because while they are crooks they could not have done it with out Govt. meddling . Meddling which perverts the laws of supply and demand.
If you look at the housing bubble it was caused by new regulations written by Harry Reid and Bawny Fwank. That allowed people who had no business buying a house to take out 200,000 dollar loans to do just that. The banks had to give it to them, with no credit check, no verified income, just a signature. These banks knew exactly who they were lending to, and that it was suicide to do it. Congress however in all it's benevolence forced the rules, and said go ahead, we'll absorb all your bad lending with Freddie and Fannie. When they realized that you
Investors simply saw an opportunity with the markets moving and jumped on it. You can't really blame them for doing what they are paid to do. Which is make money for their clients. They are blamed for crashing the market, but when all you do is study the markets you know when to get out. They saw it coming and bailed. I would have too! So would you. No one wants to lose money like that, but have you ever listened to investment firm commercials? Half of a 30 second spot is telling to that there is SERIOUS risk involved in investing. With the potential to lose ALOT of money.
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I would like the opportunity to vote "no contest." They did some stuff that is in the gray areas created by what tombogan referred to as Govt. Meddling. Not legal, but not really illegal all the time either. Just not always right, but what they were encouraged to do by those making the rules and playing in the system.
We need a law that takes the automated computer trading out of the picture. No more electronic triggers that automatically start selling or buying at certain points. And, no more day traders! Everybody out here that I see having market troubles are the ones duped by day traders. $X per trade whether they make money or lose (I know this is as much "buyer beware" as anything, but the laws allow it and we get sucked in by greed). Eats up profits and compounds losses, and gives the markets a false view of what is happening.
Rant off on money grubbing weasels posing as investors >:(
Before you start going off too harshly on day traders, I invite you to spend a day with me. I am one of those money grubbing day traders. But what you fail to realize is that the stocks being traded by day traders are probably ones you have never even heard of. Most of the buy points are under $1 and usually never trade for more than $5. Day trading is done with very volatile penny stocks. These are not that stocks that are picked up in your 401K. Yes there is potential for huge gains. 200-300% My personal best is 760% in three days. But they are high risk, and I have lost my butt a few times. And don't get me started about what Uncle Sam does to anyone making money like that. My checkbook is still reeling from 15 April.
Day traders are not the problem. Investors in general are not the problem. The real problem is the true value of our currency. Blame for that lies squarely on the shoulders of government, not wall street.
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Your falling right into BHO's trap. They (investors) are not the root of the problem. What?.....Too many capitalists working within the confines of GOV'T regulations, are making too much money??? Oh crap we better get the gov't in there to stop that madness.
How many former Goldman Employees work in the BHO admin, this is a ploy, a scam, and not a coincidence that the proposed Financial Reform Act (which eats away at a little more capitalism), was announced a day after the Goldman indictment.
Yes there are/were abuses, look into your local DOT, or County Commissioners, or Labor Unions, etc,.......bad apples everywhere.
The existing laws/regs. are enough to prosecute adequately, I don't want the gov't to be the solution for every F%*&% thing.