Goldman Sachs Faces New Accusations

 

WASHINGTON – More evidence has been found that the investment bank Goldman Sachs developed a strategy to profit from the housing meltdown at the expense of clients, US senate investigators say.

blankfein smiles Goldman Sachs Faces New Accusations Why is this man smiling? Blankfein, facing a congress hearing, said the bank ‘certainly did not bet against (its) clients.’ (Reuters)

The revelations come as the CEO and other executives of Goldman Sachs are set to appear in a congress hearing, facing allegations of harming the US economy.

“The ultimate harm here is not just to clients that were not well served by their investment bank. The harm here is to all of us,” Carl Levin, the chairman of the Senate Permanent Subcommittee on Investigations, said on Tuesday.

“The toxins that Goldman Sachs and others helped inject into the system have done incalculable harm.”

Levin accuses the firm of making a fortune by selling securities based on risky mortgages to its clients while betting against the US housing market.

‘Not making a bet’

At the hearing, Lloyd Blankfein, Goldman’s CEO, will repeat the company’s argument that it lost $1.2bn in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession.

He also will argue that Goldman was not making an aggressive negative bet – or short – on the mortgage market’s meltdown.

Blankfein said in prepared testimony that his bank “didn’t have a massive short against the housing market and we certainly did not bet against our clients.

“We believe that we managed our risk as our shareholders and our regulators would expect”.

The senate panel has obtained about two million emails and other Goldman documents during an 18-month investigation.

In one November 2007 message from Blankfein, he says “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts”, referring to bets that the market will drop.

Fabrice Tourre, a Goldman trading executive who federal regulators say marketed an investment designed to lose value, was also to appear in Tuesday’s hearing.

‘Fabulous Fab’

Tourre famously wrote in a January 2007 email that he was “The fabulous Fab … standing in the middle of all these complex, … exotic trades he created.”

“We have a big short on … ,” Tourre wrote in a December 2006 email.

Daniel Sparks, a former head of Goldman’s mortgages department, wrote to other executives in March 2007: “We are trying to close everything down, but stay on the short side.”

The Securities and Exchange Commission earlier this month filed a civil fraud case against Goldman.

It says Goldman concocted mortgage investments without telling buyers they had been put together with help from a hedge fund client, Paulson & Co, that was betting on the investments to fail.

Source: http://english.aljazeera.net/news/americas/2010/04/201042754456514885.html

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Comments
Tom Degan says:

As Jimmy Paige once wrote -- or was it Robert Plant? -- "It makes me wonder". I wonder what defect it is in the psychological makeup of a group of human beings that would have them putting the health and well being of millions of other human beings behind the private profit of a very few. Most of these lawmakers who live in the pockets of the Plutocracy call themselves "Christians". Have they ever made a serious study of the books? You know! -- Matthew, Mark, Luke and John? -- Those guys! How do they justify their actions? How do they sleep at night? We're talkin' major hypocrisy here! That's what makes them so much fun to watch! I always get a certain twisted delight in watching their fake piety. Imagine Wendy O. Williams being cast as Bernadette of Lourdes; or Marilyn Manson as Mahatma Gandhi. It's kind of the same thing.

Sooner or later our right wing friends, within the Congress and without, are going to be forced to admit that the era of anything goes deregulation was a really stupid idea. You can only sit calmly in a burning house, ignoring the flames all about you, for just so long. Sooner or later you'll be forced to flee for your life. After making your escape, if you still refuse to acknowledge that the house is indeed on fire, you're beyond the point where you can make rational decisions on your own. You've entered Librium Country, hombre!
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Tom Degan