Goldman Sachs

Ready to Rumble - The Goldman Sachs Congressional Hearing Preview Game

Ready to Rumble, Senator Carl Levin is on a roll. In preparation for the Goldman Sachs hearing on Tuesday, Levin released Goldman Sachs emails (pdf). From Senator Levin's press release:

“Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis,” said Sen. Levin. “They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.” The 2009 Goldman Sachs annual report stated that the firm “did not generate enormous net revenues by betting against residential related products.” Levin said, “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”

Goldman CDOs at the Caymans

Did you know CDOs are actually issued by Special Purpose Vehicles, often incorporated in tax havens like the Cayman Islands?

Tax Justice wrote up a great overview post:

In the much-publicised fraud case involving a lawsuit filed by the Securities and Exchange Commission against Goldman Sachs, it is absolutely no surprise to us to find that this deal, known as Abacus 2007-AC1, involves:

Issuer: Abacus 2007-AC1, Ltd., Incorporated with limited liability in the Cayman Islands
Co-Issuer: Abacus 2007-AC1, Ltd., Incorporated with limited liability in Delaware.

Were you aware that special purpose vehicles (SPV) were routinely created in the Caymans?

S**t Hitting the Fan on SEC Probes and Criminal Charges

I am shocked at this moral bankruptcy. This is probably one of the worst cases that we have seen. - U.K. Prime Minster Gordon Brown

Really? You're shocked now? We've not shocked, we're shell shocked.

From the BBC:

"Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened. I want the Financial Services Authority to investigate it immediately. - Gordon Brown

Germany's Prime Minster is also taking about taking legal steps against Goldman Sachs.

Details on Abacus, Synthetic CDOs at the Heart of the Goldman Sachs Fraud Case

Now the world is awash in Goldman Sachs stories. If you have no idea what they are talking about. Credit Slips explains an Abacus CDO in English (semi):

A CDO is more or less a hedge fund. It's an actively managed, unregulated investment fund. The assets can be anything. In the case of the Abacus 2007-ACA deal, the assets were a portfolio of credit default swaps (CDS). The Abacus CDO was the securitization of a bunch of CDS positions (if it has cash flow, it can be securitized).

Goldman Sachs Charged with Fraud!

Finally! The golden boys finally aren't going to get away with something. The actual SEC complaint is online here. First:

The Players are Goldman Sachs, Paulson & Co. (a hedge fund run by John Paulson) and one Goldman Sachs VP, Fabrice Tourre.

The fictional investment vehicle in question is ABACUS 2007-AC1.

The Victims are IKB Deutsche Industriebank, Royal Bank of Scotland.

The Money is $1 billion in rigged profits to Paulson, $1 billion in losses to the victims, $15 million to Goldman Sachs for rigging the CDO.

Here is the entire SEC press release:

SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages

Goldman Sachs Made $55.7 million on Build America Bond Fees

Remember how the latest Jobs bill had yet another bail out for Goldman Sachs? How Senator Chuck Grassley was digging around on those Build American bond underwriting fees? Well Goldman Sach responded to Senator Chuck Grassley and made $54 million in fees from selling Build America Bonds, 1/3 to municipalities, and then an additional $1.7 million on adviser fees.

Bloomberg has more:

Stimulus Build America Bonds yet another gift for Goldman Sachs

Hey everybody, let's have Build America bonds to help everybody get a job! Right? Oops, guess who makes big bucks for underwriting fees? Wall Street, especially Goldman Sachs.

Sen. Chuck Grassley, ranking member of the Committee on Finance, today asked Goldman Sachs whether it would collect double-digit underwriting fees for participating in a newly expanded Build America Bonds program, as included in the “jobs” bill promoted by the Senate Democratic leaders and passed by the Senate today.

Here is Senator letter to Goldman Sachs, in which he notes Goldman Sachs put out a full page ad promoting these bonds.

February 24, 2010

Mr. Lloyd C. Blankfein
Chairman and Chief Executive Officer
The Goldman Sachs Group, Inc.
85 Broad Street
New York, NY 10004

Dear Mr. Blankfein:

Destabilizing a country by derivatives is "counter productive" - Bernanke

It is counter productive to destabilize or destroy a nation through derivatives according to Federal Reserve Chair Ben Bernanke.

Counter productive. Hmmmm, if it was a military weapon I do believe it would be called something else but as long as it's financial....well, ain't thems just fightin' words.

Obviously, using these instruments in a way that intentionally destabilizes a company or a country is -- is counterproductive, and I’m sure the SEC will be looking into that. We’ll certainly be evaluating what we can learn from the activities of the holding companies.

The SEC? Like Madloff? Bernanke said this during testimony before the Senate Banking Committee.

Chris Dodd asks:

Should there be limits on the use of credit default swaps to prevent “runs against governments?

Greece and Swaps, the saga widens

Earlier we posted derivatives at the heart of the Greek crisis. Now the story widens and the saga continues.

First, Bloomberg reports Goldman Sachs, Greece Didn’t Disclose Swap. In other words Goldman Sachs helped Greece hide it's debt, mortgaging it's future in the process and also didn't tell anyone they had done so.

Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.

PBS News Hour video investigation on how Goldman Sachs makes their record profits

The PBS Newshour investigates whether Goldman Sachs is making money with taxpayer money, their front loading, are they really a hedge fund and how they used taxpayer money to make profits in a two part video series, 20 minutes, embedded below.

Inside Goldman Sachs, Record Profits, Part I