Wall Street, Innocent, Dumb or Dirty

[Rastus]

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.

[twyacht]

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...

[tombogan03884]

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.

[MikeBjerum]

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 

[tombogan03884]

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.

[Sponsor]

[twyacht]

"Greed Is Good"
Gordon Gecko..

[MikeBjerum]

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.

[tombogan03884]

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..  

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.

[twyacht]

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.

[TAB]

there are no innocents on wall street.  Lots of dirty, dumb and  people with blinders on.