Goldman: We've had the verdict; now for the trial
We may have had the verdict, but that won't stop the trial being a good show.
The man in charge of the Senate's investigation into Goldman Sachs has already announced that the company is guilty. Democratic Senator Carl Levin says that the "evidence shows that Goldman repeatedly put its own interest and profits ahead of the interest of its clients," adding that the firm had deceived its clients and was now deceiving the country by protesting its innocence.
I suspect the trick for Goldman chief executive Lloyd Blankfein will be to keep it ever-so humble. Wealth and power are not exactly divorced in the States; even here, though, politicians revel in the chance to scrutinise those who not only have more money than themselves, but more power - and power not hedged with rules and elections.
So Mr Blankfein is wise to sound a conciliatory note in his opening statement [10.62Kb PDF]. While fiercely defending his firm against the charges of fraud, he will agree that there should be more control of the derivatives market and say that he understands how the case looks to the people on Main Street:
"To them, it is confirmation of how out of control they believe Wall Street has become, no matter how sophisticated the parties or what disclosures were made. We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky."
Today, the "masters of the universe" would be wise to curb their arrogance and not vent their frustration by making wisecracks. More as we get it.
I’m Mark Mardell, the BBC's North America editor. These are my reflections on American politics, some thoughts on being a Brit living in the USA, and who knows what else? My 
~RS~q~RS~~RS~z~RS~08~RS~)
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Mark:
Of course, the verdict was handed in already because of there actions...And, now is for the Trial that will commense in many different places in the nearby future....
I think that Lloyd Blankfein needs to be "repented" for his involvement in his organisation during the recent downturn (recession) in the United States and around the world....
(D)
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The Senate is not part of the Judiciary, so Sen. Levin is permitted to say anything he wishes about his perception of Goldman-Sachs' guilt or innocence. It will have no bearing in the civil trial.
And regardless of how much humility and sympathy Blankfein projects, the trial isn't about that. It's about deliberate fraud to mislead investors, knowingly setting up an instrument to invest in high-risk mortgages, marketing it to its investors, all the while betting against that same fund yourself. Goldman-Sachs will have a very difficult time proving its case, especially because in a civil trial the burden of proof is much lower.
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Mark:
Lloyd Blankfein, needs to be combative regarding the company (Goldman Sachs) situation on the many issues they had there wildly hands involved...with!
(D)
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More regulation, yes. A levy on the profits created by an implied taxpayer bailout, yes. But seeking punishment/redress for misleading investors???
Please- don't make me laugh! Anyone who bought a Goldman Abacus investment CDO was well advised- these were not joe the plumber types. And as anyone knows...
'The value of investments can go down as well as up...'
I agree with the aim, to bring Wall St. down a peg or two, but not necessarily the means. I'll be very surprised if the charges are proven. What would be far more effective would be if an administration/government or regulator internationally, would stand up and say - screw the rules. You benefitted from the implied bailout/'too big to fail' insurance provided by taxpayers- now you must pay us an insurance premium for that insurance. A one off tax, a continuing tax premium. Whatever, however, it should be big it should be without restriction, it would send a signal.
The moral argument is far more appealing than the technical one and is a lot harder to defeat.
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The banks have become more powerful than governments and that is the problem. The bankers have been dishonest at every opportunity and they diminished the retirements and investments in the sum of trillions without any liability or punishment. If the banks are not down-sized all policy will be determined by these unethical and vile men. They parade the halls of congress, because vermin perfer the company of other vermin, when they should be in jail..them and the handmaidens in congress who made this all happen. Corruption of business meets corruption in government....hope for anything that will benefit or protect the people is highly unlikely.
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Goldman has a point they have been presumed guilt by the Democrats.
And when is Carl Levin going to call chris dodd and Barney Frank to testify before the commitee?
That is a rhetorical questions
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The larger issue is that even if Goldman Sachs is found guilty and fined, they are just one bank and without financial regulation in place they - and all other banks - can do whatever they wish within the boundaries of existing regulatory standards.
Considering the fact that short trades are legal, I doubt Goldman has anything to worry about other than a slap on the hand for being naughty.
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This comment was removed because the moderators found it broke the House Rules.
"...what the public believes is overly complex and risky."
So now we're too stupid/and or ignorant see that a spade is a spade no matter what you call it?
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The prostitutes are negotiating with their pimps.
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Osama bin Laden would have been absolutely delighted to do what these banksters have done to the US and world economy. They should be incarcerated for a long time.
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Why is it that Mr. Mardell may link to a pdf file and we may not?
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The witch hunt starts. Goldman Sachs deserve kudos for avoiding the mess before it hit and it was avoidable. They were one of the few competent ones on wall street. They got out of CDOs the moment they figured out what they were. The rest didn't bother trying and traded on 'faith', a misplaced faith. Now, a Senator wants to tarnish them just to make a name for himself, American politics as usual.
Mardell, you are correct, the verdict is already registered and now comes the trial. But you are wrong in another way, Goldman might as well push the arrogance because the schedule for the crucifiction has already been set and is not going to change one iota. Goldman knows this. If you're going to get burnt at a stake then you might as well go out laughing like a madman. Goldman Sachs will survive, they are just too good.
One clue, there is absolutely no evidence that Goldman duped clients. To put it another way, if there is evidence than it was manufactured in time tested American political tradition.
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Guilty by the Democrats. Guilty by the Republicans.
Finally an issue behind which both parties can unite!
Goldman-Sachs execs have run into a bipartisan wall of wrath.
Democratic Sen. Carl Levin of Michigan accused Goldman of making risky financial bets that "became the chips in a giant casino."
Fabrice Tourre testified that he didn’t recall telling investors that a Goldman hedge fund had bought into a short.
Federal regulators said Tourre marketed an investment designed to lose value. In a January 2007 e-mail, Tourre called himself "The fabulous Fab ... standing in the middle of all these complex ... exotic trades that I created."
Levin, Committee Chairman, said actions by Goldman Sachs wreaked havoc on the economy. Its conduct brings into question the whole system of Wall Street.
The hearing comes as the Senate grapples with Democratic-sponsored legislation to overhaul the nation's financial regulation system and prevent another meltdown. But the so-called Volcker rule doesn’t seem very regulatory to me. Maybe in this crack-down environment, the Senators might actually vote the Volcker's Rule through, but for the life of me, I can’t see why they just don’t re-activate the Glass-Steagall Act (Banking Act of 1933).
Levin accused Wall Street firms of selling securities to clients that they wouldn't invest in themselves. (not quite true. They simply invested on the other side, the failure side.)
Goldman was getting beat up from both sides of the aisle. Sen. Susan Collins (R.Maine)said Goldman officials were "celebrating the collapse of the housing market" when Americans were losing their homes and jobs. Collins felt there was something "unseemly" about Goldman betting against the housing market at the same time as it was selling mortgage-backed securities of toxic loans. (If there was non-disclosure, forget unseemly. Call it illegal.)
Sen. John McCain (R.Ariz.) said that reading e-mails from Goldman officials bragging about profiting from bets against the housing market showed Goldman's behavior was unethical and that people would surely render their own judgment.
Goldman is accused of reaping billions at the expense of clients.
Goldman executives misled investors in complex mortgage securities that turned bad. The accusers pointed to a trove of some 2 million e-mails and other Goldman documents (18-month investigation). Excerpts from the documents were released yesterday - just before CEO Lloyd Blankfein was scheduled to appear before the Senate.
Blankfein said in his prepared testimony that Goldman didn't bet against its clients.
The SEC says Goldman concocted mortgage investments without telling buyers they had been put together with help from a hedge fund client, Paulson & Co. There was betting on the investments to fail. Goldman disputes the charges and says it will contest them in court. Blankfein repeated the company's assertion that it lost $1.2B in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession. He also contended that Goldman wasn't making an aggressive short on the mortgage market's meltdown. Blankfein said that he believed that Goldman managed its risk as our shareholders and our regulators would expect.
Levin contended: "I think they're misleading the country."
Goldman’s stock has yet to recover from the fall that followed the SEC lawsuit on April 16. Yet shares in Goldman Sachs were up slightly today, as current and former executives of the firm testify before a Senate Panel. Goldman shares were trading at about $15.72 by late morning, after having opened lower earlier in the day. What on earth does this stock rise mean? Is it manipulation of the market to show support for Goldman? Is it for real? I sure would like to know who's upping those stocks.
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For the people who have, or WILL have posted comments on "regulations", "deregulations", "Freddy Mac", "Fannie Mae", the stock market, or any other aspect of the economy in respect to the recent economic catastrophe are really doing the following:
Consider this analogy.
#1). Let's use the Titanic to represent the economy.
#2). Let's use the coal-driven steam engines to represent certain aspects of the economy (Freddy Mac, Fannie Mae, the stock market, small banks, etc...).
#3). Let's use the Federal Reserve Bank and its fractional lending policies to represent the iceberg.
Talking about the regulations or deregulations of the stock market and those of real estate giants such as Freddy Mac or Fannie Mae is like talking about how to fix the engines within the bowels of the Titanic, after hitting the iceberg, while the iceberg (the Federal Reserve Bank)gently floats off unscathed.
If you people don't understand that, then all is lost. That is why I send you to the following website:
http://video.google.com/videoplay?docid=-515319560256183936#docid=-3685478902935835175
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Dear Mark,
The problem with our "gone mad" world is that it is too big an arena for government, business & finance. Why do you think that as we make larger and larger confederations we find that local cultures become more active for fear of losing our special identities? Who bothered with Welsh, Gaelic and Manx when I was a kid in the 50s? Now as the EU grows groups are tenaciously hanging on to their cultural heritages.
As for Goldman Sachs & others like them. We will need courage from real leaders to make them pay for their arrogance. I say let them fail. there are so many ordinary people suffering while we "save" banks etc. What happened to the phrase - "don't throw good money after bad"? now we see banks take homes away from people and then sell them to their
"cronies" at cents on the dollar. There is a massive transfer of wealth into the hands of a few happening as we speak and our leaders are doing nothing about it.
Commercial banks should only be allowed to operate within state boundaries and their ownership only by state residents.
In general we need to return to where we provide health care and education to all and make the state governments responsible to making sure corruption is controlled. Our elected officials will be judged on their attention to making these services efficient.
Sorry for rambling on Mark but there are simple solutions to our problems if we can only keep our elected officials honest.
KEEP GOVERNMENT LOCAL and taxes STAY IN LOCAL COFFERS. This way we can go to regular meetings and face them off physically about how they govern and manage our tax dollars.
The USA is too big to govern from Washington. The EU will find out that as they consolidate power in Brussels the same experience will be repeated. I hope the UK continues to maintain some semblance of independence.
Thanks for your blog and the opportunity to chat. Keep your opinion coming. Cheers, Mark
Gordon Rossiter
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Sadly, ignorance of how financial markets operate is not in short supply either in the US or here. Nobody thinks a bookmaker is acting illegally by reducing his risk on a certain race by laying off his position and so balancing his books. All market makers do this, and Goldman Sachs was no different in laying off some of the risk generated by its position in the US mortgage market. I find it impossible to believe that Goldman Sachs is lying when it states that it lost approximately $1.2 billion from its activities in the US residential housing market (as that statement would be easily verifiable by any enquiry). If it acted fraudulently in shorting the market and still suffered that loss, is Golman Sachs both criminal and incompetent - not a very likely combination!
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There may never be a trial, other than this kangaroo court in the Senate. The SEC knows perfectly well that Goldman Sachs will claim that their clients were "sophisticated" and had their eyes wide open when they signed on the dotted line. The SEC knows the Goldman Sachs can say, look, we actually lost a tiny fraction of our massive earnings in the mortgage game. The SEC knows that Goldman Sachs can have the jury in tears if only by BLOWING SO MUCH SMOKE INTO THEIR EYES! Goldman Sachs execs could walk out of a trial with 200 hours of community service!
This is all a bit of political drama, and the Senate denunciation IS the climax.
Goldman Sachs is playing along saying that they are all for reform and more regulation. Other investment banks have taken note and will trim their sails to the new wind....and that is all this amounts to.
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8. At 4:21pm on 27 Apr 2010, Orphe wrote:
Politically driven or not, the US government couldn’t have picked a worst time to bring accusations against Goldman. Has anyone stopped to think that if in fact we are at the beginning of a recovery from the worst recession since the Great Depression, this assault on Goldman will hurt and slow down our economic recovery? What does an assault on Goldman do? It erodes investor confidence and brings down the entire financial sector.
And what would be the right time to prosecute a criminal or civil action against a wrongdoer? After the statute of limitations has passed and they've robbed a few billion more from clients around the world? If investors lose confidence in GS, perhaps it's because GS never deserved that confidence and investors are just realizing that they have been duped by a group of well dressed con artists. And if prosecuting GS brings with it the possibility of damaging the economy, then GS should not be part of the economy and it is time for GS to close its books and shut its doors.
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The link in post #8 appears to be to a libertarian screed. The libertarians got us into this mess. Are we now supposed to ignore apparent fraud for some imagined reasons of protecting "investor confidence"?
Investor confidence is best protected by vigorously prosecuting fraud in our financial institutions, wherever found and at whatever level.
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Well, whatever one's opinions of Goldman Sachs, the fact remains that they were not innocent bystanders ... and they were clearly not part of the solution ... therefore they were part of the problem.
And the penalty for that? Confiscation of future profits as a fine on the profits made during the "mad years" until the taxpayer is made whole ... ditto with all the other banks. That should solve the immediate problem.
Then let's put in some sensible regulators to enforce a modernized Glass-Steagall.
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Ref 2, Via-Media
What Blankfeim and the institution he represents did is reprehensible and sickening, but if his defense is focused on accepted - and legal - practices governing short transactions he and his bank are off the hook. It is up to the buyer to do his/her homework and make sure they invest wisely, if they don't they are out of luck and crying foul is not going to get them very far.
I agree with the poster that said the moral aspect of this case is much more powerful, and potentially more damaging, than the legal one but considering the people we are dealing with I doubt moral considerations will hinder them from doing the same thing again in the future.
I feel sorry for the senators conducting this hearing. Some are sacrificial lambs about to get gored like that famous matador did in Mexico a few days ago, the others are pathetic and obedient servants obliged to get their benefactor off the hook.
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Think they'll make fabulous Fab a scapegoat? Having released his emails today, it definitely reflects badly upon his intentions.
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There seems to be a good deal of confusion around as to what exactly Goldman Sachs have done wrong. Contrary to popular belief, it is not illegal to sell CDOs to others that are willing to buy them - even if those CDOs are worthless. If a buyer is willing to buy a worthless CDO for lots of money ...
But what IS illegal is when Goldman Sachs deliberately misleads the buyer when they make enquiries as to the makeup of the CDOs.
The buyer needs to have enough information to make a judgement of the value of the CDOs - but it looks as though Goldman Sachs fed false information instead.
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Ultimately of course the real verdict will be handed down not by a judge in a courtroom but by investors. If they think Goldman Sachs put it's interests ahead of theirs they'll take their business elsewhere, a far worse punishment for the firm than any fine or jail time for executives.
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If an automobile company would sell a car with a broken plastic break on it, would it be accepted as natural that it was the client's fault of not being intelligent enough of not having broken the car and looked at all the small components before purchasing it?
Whilst it may be difficult to accept that moral values can change with time, the gap with what we deem acceptable for banking or industry seems large enough to stop pretending that financial transactions are and should be that of two condescending parties: if one party has privileged, non-accessible information, and a market position to control it - or in the worst case, only wishful information, about the product, a buyer can not be held fully and solely accountable for any potential losses. Where is the manufacturer's guarantee on financial products?
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"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive people of their property until their children wake up homeless on the continent their father's conquered"
Thomas Jefferson
We NEED to abolish the Federal Reserve system NOW!
"The modern political power structure has its roots in the hidden manipulation and accumulation of gold and other forms of money. The development of fractional reserve banking practices in the 17th century brought to a cunning sophistication the secret techniques initially used by goldsmiths fraudulently to accumulate wealth. With the formation of the privately-owned Bank of England in 1694, the yoke of economic slavery to a privately-owned "central" bank was first forced upon the backs of an entire nation, not removed but only made heavier with the passing of the three centuries to our day. Nation after nation, including America, has fallen prey to this cabal of international central bankers."
Please go to the following link to find out more about the Federal Reserve Bank. Remember, Goldman Sachs is part owner of the Federal Reserve Bank.
http://www.youtube.com/watch?v=WjGy9gjcoIo&feature=related
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Goldman Sachs made quite a profit off the tax payers as they were partly the cause of the economic collapse. When I clicked on to the B.B.C. website just now, the first thing that I noticed was this:
"Goldman Sachs executives boasted about the money the bank made while the US housing was collapsing, emails show"
Goldman Sachs is part owner of the Federal Reserve. The other owners of the Federal Reserve are as follows:
#1). Rothschild Bank. (London, England)
#2). Warburg Bank. (Hamburg, Germany)
#3). Rothschild Bank. (Berlin, Germany)
#4). Lehman Brothers. (New York, New York)
#5). Lazard Brothers. (Paris, France)
#6). Kuhn Loeb Bank. (New York, New York)
#7). Israel Moses Seif. (Italy)
#8). Goldman Sachs. (New York, New York)
#9). Warburg Bank. (Amsterdam, Holland)
#10). Chase Manhattan Bank. (New York, New York)
The owners of these institutions are DIRECTLY responsible for the recent economic chaos. It is time to abolish the Federal Reserve before they bring down the entire country through their fractional lending practices.
To learn more about why it is SO important to get rid of this institution, please go to this website:
http://www.youtube.com/watch?v=WjGy9gjcoIo&feature=related
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This is very much like the heads of the Catholic Church questioning the pediophile priests after they have covered up for them and the harm has already been done. The bankers are too arrogant to apologize and cetainly the congress is. This is a sham for the public, it has no relationship to reality or the truth. Congress pretending that it didn't know, when the records of their own committee meetings show they did and the bankers stealing trillions of dollars and creating havoc in employment and national debts basically saying "what are you going to do about it....we own you."
Welcome to the democratic ideal---plus 250 years.
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"....no matter how sophisticated the parties or what disclosures were made. We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky..."
Pure Obfuscation BS....they cheated - a little disclosure at the bottom of the invoice that says "nothing herein contained warranties that this may not be cheating..." doesn't make cheating OK.
For petes sake do these people have a molecule of honor or integrity in them? Or is their DNA in the shape of $$
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"We're going to stay here as long as it takes to get this information," Mr Levin warned the executives.
What - you're not going to rest until you get the answer you want/Ja mein, Fuhrer!
As this correspondent suggested this is not a fair review/trial.
I don't work in the industry but it seems I have read far more thoroughly than the guy chairing this hearing. GS were long for ages as were LB and MS. GS are generally thought to be in denial about until what point they were long - they totally misjudged it and it embarrassed them.
In short - Goldman Sachs were stupid and misjudged the CDO/CDS situation but got lucky and limited some of their losses.
Now some guy who probably has no idea what he's talking about has decided they're guilty and stated it pre investigation?
Mr Levin is the Mr McCarthy of the 2010's.
It is just a pity we don't have a current day Arthur Miller to portray the idiocy of Levin and his politically biased ilk.
Although Blankfein may be equally deluded; Senate investigations are by their nature headed by people in the U.S. Senate. This is hardly the brain pool I would like to pick a seven year old's art prize - let alone something requiring critical analysis above 10th grade.
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The charge is civil fraud, not criminal, so there is no question of jail time for anyone.
I don't know how anybody can judge the sufficiency of the case based on news accounts or Senate testimony, as some posters here have done. I expect that the SEC knows something about what they are doing. In order to bring a charge of fraud, they must have cause to believe that fraud has occurred, and that they can prove it in court. That doesn't mean that they will succeed in doing so, but I don't see how the case can be dismissed as merely political. Some people may be complete cynics, but I am not.
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Mark: '"Wealth and power are not exactly divorced in the States; even here, though, politicians revel in the chance to scrutinise those who not only have more money than themselves, but more power - and power not hedged with rules and elections."
Yeah. Well if our political system were changed so that those politicans weren't beholden to their wealthy campaign donors then may be, just may be, we could get some real regulation through.
PS. Who, in any country, doesn't like to gauck at and/or deride, and who isn't envious of those who are wealthyer and more powerful than they are? America was founded on the principle that those with nothing can potencially achieve their dreams. It has nothing to do with a culturally inharrent feeling of contempt and disdain for wealth and power.
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Does this crank in posts nos. 28 and 29 really think that posting in a blog is going to cause the United States to close its central bank? What "world" is he a citizen of? Mars?
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Careful Mark. You run the risk of showing your elitist backside. So the verdict is IN, yet the hearings has just BEGUN?? C
A quote from the astute and wise John Kenneth Galbraith:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
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GH1618 (#35)
Several postings back I attempted to engage said crank regarding some unusual unsubstantiated claims about pedophilia. When I lost patience and suggested it was time to break out the tinfoil hats, (and that at least MAII usually kept on topic) I was savagely attacked, and (sniff) told that they would no longer respond to my messages.
So you might have just done yourself a favor.
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30. At 7:38pm on 27 Apr 2010, ghostofsichuan wrote:
"This is very much like the heads of the Catholic Church questioning the pedophile priests after they have covered up for them and the harm has already been done."
Almost.
With the Catholic Church, the children were getting it in the end. With the Federal Reserve Bank (Goldman Sachs is part owner), we are ALL getting it in the end.
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If the U.S. government were a company (a firm), it'd be the biggest in the world, the most bankrupt in the world (over ten trillion in admitted debt and tens of trillions--U.S. trillions, as in the sequence thousand, million,billion, trillion--in "unfunded liabilities," promises not arranged to be paid for), the most powerful in the world. A lot of firms are more corrupt, but USA Inc. (Ltd.) isn't squeaky clean...And it's putting the squeeze on little Goldman Sachs. We can't really trust either of them.
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I find this whole kangeroo court that is going on very interesting. This shows that people are always interested in castigating the successful people and businesses for seeing a problem and then trying to correct it.
You must remember the addage "Fool me once, Shame on you. Fool me twice, Shame on Me". this is true as people took advice from some people in boiler rooms selling something to them without any investigation by the person who is putting his/her money on the line. Blind faith begets many blunders.
I think that if these people had researched these vehicles ( their own term), they would not have bought them as you could do the research very easily about how the market was overblown and was heading for a downfall. I advised my son-in-law about the inadvisable position of the types of investment that he was offered. He did take my advice and is in a far better shape than many of his friends because he did the research first.
The people are more to blame then the people at Goldman Sachs and the people running this witch hunt are just looking for ratings as they are in trouble with the people for the wanten disreguard for their tax dollars that have been spent against the concepts of the Constitution or any of the miriad laws that say the Government is not supposed to take over the private sector as they have in the Banking, Pharmacutical, and Automotive industries. this is a case of is the United States going to follow Marx, or is ti going to follow the Constitution that it is founded on.
People like Levn seem to think that Marxism is the Constitution. the leadership of the United States seems to follow this idea despite the population not wanting to go down this road. This will be shown in the next election in November as many people who are "Proffesional Politicians" instead of "Citizen Legislators" as the Constitution states will be out of their Ivory Towers and brought to earth. the new people will have to show the wishes of the people or they will also be thrown out on their ears.
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35. At 8:16pm on 27 Apr 2010, GH1618 wrote:
"Does this crank in posts nos. 28 and 29 really think that posting in a blog is going to cause the United States to close its central bank? What "world" is he a citizen of? Mars?"
I have read your posts on this subject. You have posted nothing that is in any way relevant to anything close to the problem in regards to the Federal Reserve Bank. In the first place, you assumed incorrectly that the United State's Government OWNED the Federal Reserve Bank when you wrote: "close ITS Central Bank".
The Federal Reserve Bank is NOT owned by the U.S. Government. It is a privately owned company. Another thing: there ARE politicians who are trying to do just that. Ron Paul (R-Texas) is one of them. There will be more in the future. I assure you.
Why don't you check the facts out before making such absurd claims?
Why do I post these things in this forum? Because people read this forum from all over the world. The more people KNOW about the Federal Reserve, the more support people, such as Ron Paul, will have backing him. There are MILLIONS of educated people all over the world who want the Federal Reserve Bank, with its fractional lending practices, to simply VANISH!
Eventually, it will. It has no choice but too. Ponzi schemes can not last for the SAME exact reason that the Federal Reserve Bank can not last. It is not POSSIBLE. I would like it to end BEFORE we all lose everything thing we own. Apparently, that does not bother you in the least.
It does me.
If people like me do not complain, nothing will get done. If getting to the BASE of the problem offends you SO much, why are you in a DEBATE forum in the first place?
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GH1618 wrote:
"The charge is civil fraud, not criminal, so there is no question of jail time for anyone."
With respect, for I do understand the point you wish to make, there is no such distinction between "civil fraud" and "criminal fraud". Fraud is simply fraud. It is a crime, and a civil action may also be brought for damages.
Thus, the correct way to describe what is occurring is to say that the government have evidence of a crime but are choosing not to pursue the criminals with legal sanctions. However, they are pursuing the criminals for damages via the civil suit.
This is not well understood, so please tolerate what might seem like the splitting of hairs.
The thing is, I must absolutely disagree that there is not the question of jail time for anyone. The question of jail time for those who have evidently committed crimes and yet who are not prosecuted for them by the government is a very large and significant question indeed. It is a large unanswered question, screaming "Why not?"
This is a fundamental issue, so basic that it forms the basis for what we call "the rule of law". The rule of law requires that all are equal before the law. If the King of England commits murder, he must be brought before the law. If the owner of a factory commits rape, he must be brought before the law. If a policeman steals, he must be brought before the law. This is the rule of law.
It is the foundation of our western civilization. It is what prevents a caste system developing where life is cheap and human rights but a dream.
Of course, you may wonder why the goldman sachs fellows are beyond the rule of law. Why, if there is sufficient evidence for the crime of fraud to be proved, are these gentlemen not being brought before the criminal law?
Mardell has access to numerous excellent lawyers. Perhaps he will find out and edify us. In the past he has professed a curiosity regarding the rule of law.
Elsewhere "investor" wrote:
"If an automobile company would sell a car with a broken plastic break on it, would it be accepted as natural that it was the client's fault of not being intelligent enough of not having broken the car and looked at all the small components before purchasing it?"
That is not a fair analogy of what happened. A much better analogy would be to ask the following: If a man went to several car dealers and asked them for all the broken parts they had in their yards, and then assembled a car from these broken pieces, knowing and indeed planning the the car would be worthless once assembled, and that man then went out to an ignorant member of the public and sold him that car with the advice that there was nothing wrong with the car, and if that man then took the proceeds of his deception back to the dealers and gave them a share in the spoils, would that man have committed a crime?
The answer is that he would. If he was living in a country where the rule of law applied, he would be charged with fraud in the criminal courts and, if the above could be proved with evidence, convicted and sent to jail.
This is not a show trial. It is a distraction.
It is also the breakdown of the rule of law for all to see.
Right now in the USA there are thousands of young adults being brutalized and harassed for their choice of recreational stupefier.
Imagine how they must respect the society into which they have been brought.
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democracythreat (#42) "With respect, for I do understand the point you wish to make, there is no such distinction between "civil fraud" and "criminal fraud"."
There is in the US. The SEC filed a civil action under Title 15 of US Code Commerce and Trade, not under Title 18 Crimes and Criminal Procedure. It has not been alleged that Goldman Sachs (or any person associated with GS) has committed a crime under Title 18. Title 15 does use the term "fraud" in places, but not in a criminal context.
Whether the federal government has evidence of a crime, as you state, is purely speculative. I don't know how you could be privy to what information the SEC (or Justice Department) has. A civil complaint does not preclude separate criminal charges being brought, but in order to file criminal charges the Justics Department must not only have evidence that a crime has been committed, but must believe that the evidence is sufficient to sustain the charges. The standard of proof for criminal conduct is greater than that for civil offenses, such as (in this case) alleged violations of the Securities and Exchange Act. I expect the decision whether to bring a criminal charge is based entirely on whether the Justice Department believes that they can prove a crime has been committed. Unless they can and do prove criminal conduct, Goldman Sachs is entitled to the benefit of the doubt.
In post #26, Scott0962 wrote: ". . . a far worse punishment for the firm than any fine or jail time for executives."
"Jail time" is a possible penalty for criminal fraud, but not for civil fraud. The SEC has made a civil complaint. I should have referred to this post, but I thought it obvious. It's a minor point, anyway. I guess I'm a nit-picker.
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37. At 8:53pm on 27 Apr 2010, Via-Media wrote:
GH1618 (#35)
"Several postings back I attempted to engage said crank regarding some unusual unsubstantiated claims about pedophilia. When I lost patience and suggested it was time to break out the tinfoil hats, (and that at least MAII usually kept on topic) I was savagely attacked, and (sniff) told that they would no longer respond to my messages.
So you might have just done yourself a favor."
Via:
You wrote that children were not harmed or homosexualized after being molosted by a member of their own sex and that children who go gay do so because that is in their genes. I do not want to change the meaning of this forum but you left me no choice but to respond.
There are many reasons why a child could go gay. Being molested by ones own sex IS one of them whether you want to choose to believe that or not. When that happens, the child is MOST certainly DAMAGED! How do you think the gay gene starts? True, there are some people who will naturally be gay. That is fine and I don't have a thing against them or ANY other gay man or woman.
I don't want to go into this on this forum. Wait 'till there is another forum where it can be changed a little to include such a debate. THIS forum is not the right one.
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Let's get the facts correct:
1. Over the past forty years, Congress and several Presidents removed or modified Banking laws which were passed in the 1930's to avoid another Depression, because they thought they knew better. Or were they just greedier?
2. Congress passes the Fair Housing Act and it is signed into law, enabling people to buy properties they could not afford and strong arms the banking industry into making loans that they knew were a very bad investment.
3. Bankers try to insulate themselves by spreading the losses.
4. The bubble breaks and almost a trillion dollars is pumped into the system without any hearings or detailed explanations.
5. Goldman Sachs makes billions in campaign donations with the largest amount going to the Democrats and is Obama's second largest contributor.
6. Hearings to determine who is at fault. The foxes who set up the situation are investigating the foxes who raided the hen house.
7. Chances of anyone getting any jail time - Nil.
8. Chances of the taxpayers getting screwed again - Bet on it!
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
@Bluesberry
GS shares are trading higher for a few simple reasons
1) All this is demonstrating is that they understand their product, the legal environment and the banking landscape; while the US Senate understands none of these things. As a corollary it isn't really clear what punishment can be meted out to GS specifically (as opposed to as part of an industry-wide measure).
2) Their clients are still confident in them to be the best at what they do, to make appropriate disclosures and to do right by their clients. Remember, the clients they have now are the clients who were smart enough to not make toxic illiquid mortgage bets at the high point of the market - and draw your own conclusions from this.
Meanwhile the Bill is dead in the water. Good use of everyone's time, this.
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Jon P (#48) "Meanwhile the Bill is dead in the water. Good use of everyone's time, this."
No, it is not. It has moved to the floor of the Senate.
If debating policy is not good use of the Senate's time, what is it you think they should be doing instead?
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35. At 8:16pm on 27 Apr 2010, GH1618 wrote:
"Does this crank in posts nos. 28 and 29 really think that posting in a blog is going to cause the United States to close its central bank? What "world" is he a citizen of? Mars?"
For the people like you and the others who have posted comments on "regulations", "deregulations", "Freddy Mac", "Fannie Mae", or any other aspect of the economy in respect to the recent economic catastrophe are really doing the following:
Consider this analogy.
#1). Let's use the Titanic to represent the economy.
#2). Let's use the coal-driven steam engines to represent certain aspects of the economy (Freddy Mac, Fannie Mae, the stock market, small banks, etc...).
#3). Let's use the Federal Reserve Bank and its fractional lending policies to represent the iceberg.
Talking about the regulations or deregulations of the stock market and those of real estate giants such as Freddy Mac or Fannie Mae is like talking about how to fix the engines within the bowels of the Titanic, after hitting the iceberg, while the iceberg (the Federal Reserve Bank)gently floats off unscathed.
If you people don't understand that, then all is lost. That is why I send you to the following website:
http://www.youtube.com/watch?v=Ta7q1amDAN4&feature=related
Before you use the term "crank", you should really investigate further.
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I believe what Goldman Sachs was an intentional tactic to hurt investors. What bothers me most is how Goldman Sachs was able to "repackage" bad investments and get the ratings moved up to "excellent" status. Not only is Goldman Sachs to blame for this mess; the fact that they paid the ratings firms money to upgrade the ratings is criminal. I want to hear what these ratings firms have to say. Obviously, they paid a large role, too.
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GH1618 wrote:
"democracythreat (#42) "With respect, for I do understand the point you wish to make, there is no such distinction between "civil fraud" and "criminal fraud"."
There is in the US. The SEC filed a civil action under Title 15 of US Code Commerce and Trade, not under Title 18 Crimes and Criminal Procedure. It has not been alleged that Goldman Sachs (or any person associated with GS) has committed a crime under Title 18. Title 15 does use the term "fraud" in places, but not in a criminal context."
It seems events follow our discussion, GH1618. How we make the world spin.
The points you make are well stated. I agree with your reasoning.
However, my point was mainly that a civil action does not preclude a criminal action based upon the same facts. There is no double jeopardy issue involved. And, of course, I was basing my argument on the common law, in ignorance of the vast array of statue law in the USA.
Mea culpa, I don't know US law. But are you sure about the statutory basis for the charges you have cited?
My own subsequent research indicated that the pertinent SEC law would be:
"Rule 10b-5: Employment of Manipulative and Deceptive Practices:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security."
It's found at 17 C.F.R § 240.
So this seems to be one of those situations, at (c) above particularly, where a statutory regulation is invoked for something which is a common law crime in any case.
It makes me wonder why they don't just enforce the common law, rather than repeating it in statute. I suppose the dreadfully cynical could argue that by setting it out in specific statute, one can reduce the penalties and make criminal behaviour civil for the corporate community.
The notorious Eliot Spitzer recently made the comment that the financial markets do not need further regulation, they simply need the regulations which already exist to be enforced. Nevertheless, I'd expect to see a whole raft of new regulations being formulated.
Apparently the background to Rule 10b-5 is that in 1942 a corporate executive was publicly denigrating the value of the company stock whilst simultaneously buying it for himself. Now the Securities Act 1933 specifically prohibited the sale of stock in fraudulent circumstances, but didn't bother to list the purchase as an offense. So the commission create Rule 10-b with the sole commentary "Well, we're against fraud, aren't we?"
And you see, that would be my question. Are we (they), meaning government regulators, really against fraud? Because the 1933 act did not displace the common law of fraud, either criminal or civil remedies. And so technically Rule 10-b could be considered redundant, as could much of the 1933 act. As Spitzer argues, the laws already exist, they were just not enforced. Then the fraudulent activities in the market grew so vast, you ended up with the stock market rash and the depression.
So what I am saying is that it seems to me that the reason we have this "thing" called "civil fraud" is precisely because government prosecutors are unwilling to enforce the existing laws of criminal fraud.
Even now, that could be said to be the case. The crime of fraud still exists, and I understand that in theory the crime could still be made out against those who are guilty of it, regardless of the SEC rules or other statutory instruments.
Thus it seems to me that a huge amount of corporate regulation is not only redundant, it is a kind of historical "admission" of fault. It is an admission that the criminal law was not applied by government, resulting the widespread propagation of crime in the market, resulting in massive market failure and social catastrophe.
And to me that speaks to a breakdown in the rule of law itself. Is it not fundamental to the rule of law that everyone, no matter what their social status, be brought before the authorities if and when the evidence exists that they have committed a crime?
The issue would be perfectly clear if we were talking about rape or violent crime, or even outright theft. If wealthy folks were allowed to carry on raping and murdering and stealing with abandon, because the authorities simply failed to apply criminal laws, we'd call that a breakdown in the rule of law. But when we are talking about fraud, this seems to be a case where "some animals are more equal than others", to use the classic Orwellian euphemism for the breakdown of the rule of law.
Having said that, I am delighted that the US authorities are now treating Goldman Sachs with the criminal stigma the facts imply. I am delighted that there are still some government prosecutors in the world who believe in the rule of law.
It would never happen in the UK or Europe.
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DemocracyThreat (#53) "However, my point was mainly that a civil action does not preclude a criminal action . . . "
We agree on that, and we know now that there is a separate inquiry to determine whether a criminal charge will be brought.
"But are you sure about the statutory basis for the charges you have cited?"
I am not an attorney, but I know that the basis for charges, whether civil or criminal, is stated in a formal document called a "complaint." The SEC complaint alleging violations of the Securities and Exchange Act is available online. I did not link to it because I did not think it would get past the mods filter. The complaint specifies which sections of US Code are alleged to have been violated, and why.
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DemocracyThreat (#53) "So what I am saying is that it seems to me that the reason we have this "thing" called "civil fraud" is precisely because government prosecutors are unwilling to enforce the existing laws of criminal fraud."
You seem to be thinking of this as merely a political matter rather than a legal one. A difference between a civil charge and a criminal one in the US is the standard of proof required. For civil, it is "preponderance of the evidence"; for criminal, it is "beyond reasonable doubt." A criminal conviction is what puts individual people in jail, but requires that the criminal culpability of the individual be proven. Sometimes this is done (ask Bernard Madoff or Michael Milken), but it's much more difficult than proving a civil charge against the company. I'm saying that it's a legal and practical consideration, not a political one, not that there can't be a political aspect to it.
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7. At 4:14pm on 27 Apr 2010, SaintDominick wrote:
"The larger issue is that even if Goldman Sachs is found guilty and fined, they are just one bank and without financial regulation in place they - and all other banks - can do whatever they wish within the boundaries of existing regulatory standards.
Considering the fact that short trades are legal, I doubt Goldman has anything to worry about other than a slap on the hand for being naughty."
At the very least, Goldman, any affiliate of Goldman, and any bank continuing consortium with or sharing directors with or having cross-investment with Goldman should be expelled, permanently, from the Fed.
That would probably give "malefactors of great wealth" something to contemplate before going to bed at night. It might also prompt investors and stockholders to be more careful about who they support.
Of course there should also be fines and other punishment for the real [as opposed to unreal but "legal"] persons involved in malfeasance and fiduciary irresponsibility.
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To GH1618,
Thanks for the heads up on where to find the detail. I checked it out and at point six it lists the applicable laws:
"By engaging in the misconduct described herein, GS&Co and Tourre directly or
indirectly engaged in transactions, acts, practices and a course of business that violated Section
17(a) of the Securities Act of 1933, 15 U.S.C. §77q(a) ("the Securities Act"), Section 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. §78j(b) ("the Exchange Act") and Exchange Act
Rule 10b-5, 17 C.F.R. §240.10b-5. "
So I'm prepared to say we were both right on the statue (you being a nit picker and all).
By the way, I take the point about the standard of proof, but therein lies an interesting problem.
If the facts allow the prosecutor to bring an action likely to succeed "on the balance of probabilities" (forgive me, this is how english law phrases the civil burden), then why not allow the jury to decide whether it also meets the stricter "beyond a reasonable doubt" criminal burden?
To my thinking, there is a very fine line between the two standards, and I question whether social preconceptions about criminality determine prosecutors motives in allowing cases to go forward as either criminal or civil.
I feel that perhaps criminal fraud ought to be argued whenever civil fraud is made out, as a means of properly stigmatizing the behaviour. Even if it may not succeed, I mean.
Proof is such a hazy concept, at the end of the day. Even things which are true can be proved!
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democracythreat (#57) "I feel that perhaps criminal fraud ought to be argued whenever civil fraud is made out, as a means of properly stigmatizing the behaviour. Even if it may not succeed, I mean."
For one thing, the SEC is empowered to bring civil charges under the Securities and Exchange Act, while possible criminal charges are referred by them to the Justice Department. It's a matter of the advantages of specialization. It would be too cumbersome to merge the SEC into the Justice Department, and redundant to have a criminal division in the SEC.
It also may be that any criminal charges which are brought would be under different statutes. I don;t think civil and criminal violations are lumped together in a way that a jury could choose either.
It works well enough the way it is structured now, I think.
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58. At 02:14am on 03 May 2010, GH1618 wrote:
"For one thing, the SEC is empowered to bring civil charges under the Securities and Exchange Act, while possible criminal charges are referred by them to the Justice Department."
Really?
When?
When they are not looking at pornography while at work or allowing Bernie Madoff to pilfer BILLIONS of dollars in a giant ponzi scheme that was second only to the Federal Reserve Bank's ponzi scheme?
They are the newest JOKE and stooges for the Federal Reserve Bank who basically controls the stock market by setting interest rates that effect it.
See it all at this site:
http://www.youtube.com/watch?v=KV9yDLhKbjg
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