The four Musketeers of Goldman Sachs testified in a subcommittee hearing in the Senate today. I only got to see a small part of the show because I had to run off to the dentist for root canal work. OUCH. Well, trying to get a straight answer from those GS con men was harder than doing root canal work without pain killers, in the dark. Maybe that would be the only way to get information from these guys: pull their teeth.
ΩΩFirst, the news media verdict: Blankfein, Tourre and other Goldman execs defend themselves – Apr. 27, 2010
Goldman execs: We didn’t do anything wrong
ΩΩHAHAHA. Just doing business! Of course, this business involved swindling investors who trusted GS promises. And the pile of emails referred to by the subcommittee filled two huge binders, a thousand and one pages of vapid but very indictable, juicy chit chat about ‘sh*tty deals’ by top GS staff. The GOP continues to filibuster any attempt at doing anything to stop this madness. The hearings are taking a toll on another Wall Street institution, too.
CNNMoney.com Market Report – Apr. 27, 2010
Dow plunges 213 points, breaks 11K The slide was the Dow’s biggest one-day point drop since July 15, 2009 when it lost 257 points.
ΩΩAnother gravy train wreck. Like in all Great Depressions, this one featured the swift comeback of many of the con artists who wrecked economies. Then, one by one, they are taken down, step by step. Cleaning up a gigantic credit bubble always takes at least 5 years due to the process of tracking down, trapping and then arresting the offenders. That is, we are no where near the end of this process. It is just beginning.
ΩΩJust several months ago, Goldman Sachs was boasting about how it came out of the mess it helped create, richer than before! Whoopee. Of course, they did this via tapping into our wallets and stealing public capital to recapitalize their screwy business.
ΩΩToday, before going off to have my teeth tapped and drilled, I watched an hour of the Senate hearings. Below are a few things I heard and some random comments. I am sorry, I couldn’t watch the entire thing, it was rather entertaining, sort of like watching cockroaches scurry about a kitchen at night when the light is turned on:
ΩΩWhen I turned on CNN, Senator Levin was busy reaming out the head of sales at GS over the Timberwolf deals. Levin read from one of a thousand emails, one of the men sitting before him wrote about how the Timberwolf deals were ‘a sh*tty deal’. Even after they emailed that this was a ‘Shitty deal’, the GS staff was told by their superiors on the upper floors to continue selling these deals. So they all got on the phone and called up chumps to cheat. Sell this crap, now! And they did sell it. While knowing full well, these were very toilet-class crap.
ΩΩSenator Levin tried again and again to get the Goldman Sachs quartet to explain how they could sell ‘sh*tty deals’ and still call themselves ‘investment advisors’. The answer from these GS gnomes was, they were not advisors at all! All they did was ‘quote prices’! Huh? What was this, CDO Walmart? New, lower prices every day? No sales pitches? HAHAHA.
ΩΩ‘We were market makers’ rather than working in the ‘best interests of the clients’, insisted one of the GS gnomes,. ‘Clients are important’ continues this GS con man, meanwhile, he steadfastly refused to answer the question about ‘The duty to act in best interests of the CLIENTS. ‘I understand that the investment banks are paid for judgement not just to sell,’ said Senator Levin. Of course, this is the whole crux of the crime: all the GS propaganda I see, all the justifications of their incredible percentage cuts and high bonuses were supposedly because they were astute ADVISORS to investors which should be trusted to look after the clients, not fleece the clients!
ΩΩ‘We offer them LIQUIDITY NOT INVESTMENT ADVICE’ says GS Tourre. ‘We show them PRICES’ (and that is all)’ insisted this idiot. So, Tourre believes that this fictional ‘liquidity’ was like a bartender selling drinks with no regard as to if the drinks were booze or antifreeze? If anyone sells any liquids that are poison and tells the victims, ‘This is a great drink! It will make you healthy and strong!’ Then this is not just mere fraud but MURDER.
ΩΩDuring the entire segment of these hearings I saw, the GS crew constantly demanded to know what emails were being quoted and then wasted valuable time, trying to look up these emails and then yapping about ‘context’ while at the same time, providing zero context, no memories of anything. A crew of Anastasias would have had better memory recall!
ΩΩ When asked about who was running the damn joint, this is what they said: ‘We worked for years together and we share views’ but he wouldn’t answer the question about ‘fudiciary duty to act in the best interest of the clients.’ GS executive, Birnbaum: ‘That CONCEPTUALLY doesn’t seem an issue, it is an interesting IDEA.’ HAHAHA. That is, after stonewalling quite a spell, no one could tell the Senators, who was in charge of their unit. Talk about disorganized!
ΩΩHAHAHAHA. Would any sane person invest or go for advice to an organization that is this cruddy? I would love to see their flow charts! HAHAHA. Or rather, toilet flush charts! They would far rather look like the Keystone Kops of Finance than admit someone was in charge of this con operation.
ΩΩ Senator Collins got her chance to whack these do nothing diddly doodles. She read one the the emails: ‘List the least sophistocated investors, the ones who are on the same page as us can see through us…a strategy that makes more money by selling to less sophisticated investors…’ this was sent to the sales staff to get those ‘sh*tty deals’ moving. The GS executive, Tourres hemmed and hawed and said, ‘Hedge funds…in respect as a market maker…I was expressing…the ratings based clients argue LESS than HEDGE FUNDS…all clients…were highly sophisticated institutions..’
ΩΩThat is, the hedge funds knew these CDOs were ‘sh*tty deals’ and thus, refused to buy them. So more trusting, less savvy chumps had to be dug up. Again: who on earth would EVER do business with Goldman Sachs after hearing about these emails?
ΩΩCollins: ‘This isnt’ how it reads to ME…you knew exactly how this worked and hoped to make more money by selling to less sophisticated investors…rife with conflicts of interest here’. That is, the GS executives made it sound as if it is OK to snooker ‘less sophisticated investors’ rather than WARN or PROTECT investors. Next, the Big Short was discussed: a number of emails are about how GS was smug about selling CDOs while running a ‘big short’ against them.
ΩΩAgain, the hemming and hawing and requests to find the emails being read to them and the delays. This so irritated the chair, Senator Levin warned GS that if they constantly delay, the hearings will not stop for lunch but will continue until they cease stonewalling the Senate. It was amusing to see the faces of the Quartet. They ground their teeth and then resumed…hemming and hawing.
ΩΩAt one point, these GS boys carted out the excuse used by every naughty child since the dawn of time: ‘Why are you picking on us? Everyone is doing this!’ ‘Everyone’s doing it isn’t going to hold up well,’ snapped Senator Kaufman. He then asked them about the entire system of goofy no-document loans (washington mutual, no one knew at Moody’s and no one knew at Goldman Sachs the premier group’…talking about 2005, anyone could walk in and get a home equity loans 90% were no document loans which is unusual and amazing).
ΩΩThe GS executives said: ‘A lot of investors had a lot of appetite for these (no document) loans’. HAHAHA. This is like a drug dealer claiming, he broke no laws, the addicts needed the crack and he merely delivered it to them and told them how much it would cost. He didn’t PRODUCE the crack! He was just a middle man! HAHAHA.
ΩΩThis brought up the topic of all the housing lending crack being funneled by GS to unwary investors. As the GS guys claimed they only passed on ‘sh*itty deals’, Senator Kaufman asked them, ‘Did you ever eliminate originators of these bad loans? What was the criterion?’
ΩΩGS replied after a lot of hemming, hawing and chewing on the email binders: ‘We did DUE DILIGENCE on them and looked at their capital…’ which has to be the funniest thing they said so far. Since they already emailed each other about how sh*tty these deals were, where is the ‘due diligence’?
ΩΩSenator K: ‘And you did Long Beach, one of the main players in undocumented income? Ever hear about ‘thin files?’ Note: “Thin file” is a term used in the credit scoring world to describe a brief credit history. Traditionally, credit bureaus would not lend to people with thin files because they displayed too little experience in handling loans. However, more credit bureaus are considering alternate data — such as the history of utility payments or rent — in making lending decisions.
ΩΩAs per usual, the Quartet of gnomes pretended to not know what a ‘thin file’ was! HAHAHA. Their collective ignorance is astounding, of course. And they are financial geniuses? Oh well, Madoff tried to pretend he was a stupid jerk, too. When caught with the hand in the till, best to pretend one is an idiot! Next, Senator Kaufman went after the issue of ‘bar belling fico scores to average them out with high credit scores so that a group of loans would look better’.
ΩΩOnce again, group stupidity was the only defense. So they pretended they had never heard of the term ‘bar bell’ nor did they understand complex financial stuff like stuffing a CDO like a toxic e-coli turkey and then serving it to clients on Thanksgiving.
ΩΩNoticing that everyone was looking at these gnomes as if they were the Village Idiots, the executives of GS said: ‘Our employees had to work hard to rating these CDO bonds. They attempted to do their job and were honest!’ HAHAHA. I will accept their ‘village idiot’ gambit and then say, who in their right mind would go to a bunch of very stupid people for rating complex bonds???? Absolutely not. Another torpedo hits the Goldman Sachs Titanic.
ΩΩSenator Kaufman resumes the interrogation of both Levin and Collins: ‘Who led the team???’ They could not answer! Finally, they said, ‘Mr Sparks’ (sounds like a devil). HAHAHA. I love this! So, Mr. Sparks is the manipulator here! I hope they bring this satanic creature tomorrow and grill him. I suppose, he won’t mind being grilled, he is a demon, after all.
ΩΩAfter this demonic admission, the grilling continued. At one point, Kaufman read various things from ‘self assessments’ written by these four village idiots where they boast about their triumphs and financial skills. But in these self boastings, are many criminal actions. So, the ‘too stupid to remember or understand’ gambit was used again. One GS guy couldn’t remember what he wrote in his OWN ‘self assessment’ HAHAHA written in 2007. He seems puzzled about what is in his own document. So more time was wasted while he read his own stuff and then…he refused to answer any of the questions, anyway!
ΩΩSenator McCaskill calls GS bookies dealing in bets. Calls CDOs ‘bets’ which is correct. Risk free trades have guaranteed cut for the bookies. I really wanted to see this part of the hearings but I had to leave to go to the dentist. Rats. The main point here is, any belief anyone has that Goldman Sachs is run by clever, smart, savvy people has been cut down, burned, shot dead and buried 100 feet below. Corner drug dealers are smarter! End of story. I would suggest to any other groups like JP Morgan, for example, to not use the ‘I am stupider than a squirrel run over by a truck and eaten by crows,’ defense.
16 responses to “Boy, That Is One Sh*tty Deal”
I thought one of the money quotes was by Tourre who admitted “without a protection buyer, there is no deal”. Proves CDS are not being used to hedge risk, as they claim ad infinitum, but rather to profit from creating a synthetic that will fail”. “Investors” (the foreigners who bought the synthetic CDOs are already considering lawsuits. their lawyers gotta be loving watching this.) As I see it, this is a frank admission that the tail is wagging the dog and CDS are only about hedging 25-30% of the time, the rest are naked bets.
ELAINE: I agree.
Actually the real estate deals were done by the morons at GS. The yet to be uncovered heavy theft comes from advising fees on about two and a half tril worth of bankrupcy bound mergers and acquisitions and private equity takeouts. After we get done retelling our version of the past, we have to project ourselves into the evanescent and ever expanding future of unencumbered cash flows. Did Hertz just buy Dollar Thrifty for 1.2 billion? A company that was worth twenty million last Spring. The felony continues.
btw Coryphaeus , since you were expounding the multi-cultural cohesiveness of Belgium, their government did collapse, right along the Flemish/French divide. And not a word about the massive and continuing oil spill that is creeping ever closer to the great Mississippi delta estuary/rookery? I have spoken about the wasteland of the Tar Sands – this is more acute because it is uncontained! It has the potential to poison the entire Gulf, until it exhausts its pressure. I would say something smug here, but there is nothing to joke about here at all. This is not Goldturd felonies but an ecological disaster growing by the day.
You really should find a dentist who is willing to buy a bottle of nitrous oxide for the comfort of his patients.
Actually, I usually meditate while being worked on (sort of like the ‘close your eyes and think of the empire’ type of Victorian sex!) so dentists don’t bother me much. But boy, does my tooth hurt tonight! It is very painful. So I am a bit goofy on pain killers.
You have the wrong guy/gal doing your root canal work.
I have had 4 done by the same endodontist and he has rarely if ever caused me any pain and that was at the outset when he placed an ice cube on the spot to determine if I needed one. And I am pain intolerant.
My first one was an unmitigated disaster and caused great pain.
Find someone more competent, unless of course, you really really like the pain killers.
ELAINE; The pain wasn’t caused by the surgery, it was caused by the massive infection.
This show “hearing” was NOT even entertaining..but it was profane! GS no doubt gamed the system with their shi&ty deals, but these senators (dem senators in particular) are clearly using Goldman to promote their TBTF-friendly banker bill. Goldman will not be prosecuted by the SEC or any other federal agency….because the Federal Reserve, enabled by the government is even more at fault than Goldman.
See astute comment from Zero Hedge:
“The thing I find fascinating and amazing here is this — we are at the front end of a giant sovereign debt problem, which we are entering thanks to a decade (and counting) of moronoic 0% interest rate monetary policy and the ability of governments to mask the true net of their indebtedness thanks to schemes like the one Goldman pulled with the Greek government (and it aint just Greece, obviously)
So, question is this — why are we so stupid as to be holding hearings about the thing that has already happened, instead of forcing Bernake, Geithner, Blankfein and whoever else to disclose the true depths of what is ABOUT TO HAPPEN?
Why isn’t Bernake being forced to disclose exactly what he is doing in various asset markets? Why isnt Blankfein being forced to disclose exactly what other countries globally are actually in much deeper debt than the books show?
If anyone had taken the time to ask these questions while Greenspan was out cowboying around in markets 10 years ago, dont you think we’d be in a slightly more healthy situation than we sit today?”
Instead of scolding Goldman, these senators should be proposing a bill that includes auditing the FED.
The bill does include parts of Ron Paul’s audit the Fed. Secondly, you can’t go into the future without first going back into the past. Zerohedge often jumps the gun on many things and his lack of maturity shows. But is very popular!
Why bother with a government? This is the pressing question. There are many people who imagine, we don’t need one or that we need one that cuts through everything like a knife…aka, a dictatorship. Democracies are messy!
ON THE OTHER HAND….corruption must be dealt with and we must start at the core and that is, stopping the flood of ‘campaign donations’ that is corrupting Congress in the first place. And do I see pushes to reform this system?
Nope. Not at all. I belonged to Common Cause for many years and then left the organization after trying to take over it because the organization headquarters in DC ended up doing nothing but fundraising and no community organization at all. This was a bitter feud and Common Cause had a newsletter which refused to print my rebuttals of the board of directors.
The fate of many reform groups is that they end up being holes in the ground unless the populace demands change. The news media owners all lobby Congress and many are part of AIPAC so we never see much of campaign finance reform talk in say, the NYT. Even after the Supreme Court killed previous legislation, the topic was dropped. Occasionally the news media notes that this law or that law trying to go through Congress causes a flood of money to flow into campaign coffers but there is now big interest in how to stop this.
Goldman Sachs got tons of money to lobby Congress via tax cuts. The Reagan/Bush cuts to the very rich have made them filthy rich and we are now in an oligarchy. The oligarchs have shot themselves in the foot.
The sight of ‘smart’ Wall Street suits pretending to be stupid is a knife in Goldman Sach’s chest far worse than passing any laws: they look like fools and who goes to fools for deals? HAHAHA. The downside is not apparent to GS yet but will be over time.
By the way, the legislative push forwards is very much like in the Great Depression: many, many set backs and resistances which have to be overcome relentlessly. Few of us are alive today who were full adults in 1930. My former father in law was an adult back then. He told me many stories about NY politics back then (he worked for FDR). It was not a walk in the park. It was very hard pushing for change. Very, very hard.
For example, my own grandfather was adamantly against FDR and his sort who were influential, dug in their heels, big time. The changes were incremental indeed.
So it is this time around. Of course, Obama has a problem at the top: too many architects of the mess are running things still. We must keep pressing to get rid of them.
Elaine writes, “The bill does include parts of Ron Paul’s audit the Fed.”
Um no it doesn’t…
From Ron Paul’s blog:
“A handful of Fed-loving U.S. senators led by Chris Dodd rewrote the Senate version of the Financial Reform Bill to strip out Ron Paul’s Audit the Fed amendment and actually expand the Fed’s power over banks, lending and money.
On Monday, April 26, 2010, the Senate will “test” vote on Chris Dodd’s financial reform bill. As Alan Grayson points out here, and Ron Paul comments on here, the Dodd bill completely eliminates legislation to audit the Federal Reserve, which already passed in the House.”
The bill failed to pass twice, but Senate will try again today. Supposedly there are GOP senators ready to sign on….
Secondly, the zerohedge comment came not from “tyler durden” but from a reader open thread. Agreed that zerohedge is often too zealous with guilty pronouncements, but in spite of that, it has brought attention to many financial issues. And it is fun to read.
ELAINE: I’m sorry, you are right.
And how would I know the Zerohedge comment was not the author of the blog? Good thing you clarified this. And yes, he is ‘fun to read’. But analysis? This is important not to get too ‘fun’ while making up stuff.
Elaine, I would also add that while I’m all for legislation, where is today’s Pecora Commission? I don’t view these show hearings as anything near the independent Pecora Commission.
No, this is a purely political and, so far, tootless event chaired by the very politicans/political parties that have benefited from the corrupting financial influences on our government that you describe.
As I pointed out in my article, Goldman Sachs got a big fat black eye yesterday. They had to play stupid! This doesn’t make them look good, does it? The public anger in the US is no where near where it is in say, Europe. We have a ways to go.
Start throwing the Goldman guys in jail until they give straight answers. They’ll stop fipping off the Committee members soon enough. To add zest to the penalties for not answering Committee questions, start making the Goldman execs PERSONALLY liable for any and all fines for not speaking honestly with Congress. Hit the gnomes the only place it will hurt: their bank accounts. Make them have to sell one of their Lamborghini’s to get out of jail. Make the fines very steep, so even a Goldman exec will feel it.
As I’ve mentioned before, the place to undertake federal election reform is as the state level. The individual states have certain controls over their federal representatives. Banning various forms, or all forms, of campaign contributions may be more successfully accomplished one state at a time. This circumvents the show circus of having great blowhards make great speeches to the end result of nothing getting done. There are state reps who don’t aspire to national office and won’t be afraid of angering the bribers.
I think states could start by forbidding out of state money in elections. I have a relative in Texas who gets much of her campaign money from AIPAC and the NE.
Goldmans hasty attempt to create a wall of Synthetic ABX indexes with CDS used as a pricing mechanism to levitate all the SIVs which were beyond the view of the public (because they were off-balance sheet) WAS ALMOST THE PERFECT CRIME. THE EVIDENCE OF THE CRIME IS IN THEIR INABILITY TO FIND ENOUGH BUYERS OF PROTECTION so they let in Paulson, and he made 2 bill(s). If they had been able to trust more folks to keep the fraud on the down -low they would have spread their CDS protection more widely. But, hey, they new they would need the xtra dough, incase they ruined their reputaton. In came Buffet and the 5bill preferreds. the whole thing has been orchestrated rom the get-go. They all knew the mark-to market rules were comng (since 2005) And they also knew that the consolidation for SIVs assets back onto on-balance sheet status was coming at the nearly the same time. Hell the real crroks are the FASB! Because thy would have had to be deaf,dumb, and blind, to not see the mess theat was being created by the NY Feds banks, via Mark-it/Goldman/JPM
Synthetic ABX indexes with CDS used as a pricing mechanism to levitate all the SIVs which were beyond the view of the public .
they also have different opinion.
I check it before.