Kill The Squid

[Chizzang]

Even though there isn't a dime's bit of difference and he is very knowledgeable, would you want Bernie Madoff running the Social Security Administration?

The number of Goldman Sachs alumni working for this and past Presidents is rather disturbing. On the surface, it looks great, but when you look at the ugly underbelly of the relationship and where it's heading, it's pretty scary.
I haven't looked at Bush #1 too much, but Clinton, Dubya, and Obama has had the Oval Office stacked with GS alumni, and when you think about it...it is all starting to make more and more sense.

Baldy,
I believe it's a problem - an old problem - unfortunately I don't really understand the roles and actions / circumstances as they play out...that's not my strength economy / finance / accounting all that stuff put me to sleep

[houndawg]

Re: previous and current administration's ties to GS.

GS makes a concerted effort and pays top dollar to the best and brightest financial minds in the world. There's a reason that most of the top earners in the financial industry are within GS and are GS alumni.

That's also a pretty darn good reason to have them working in and for the government isn't it??

Evidently not.

[danefan]

Re: previous and current administration's ties to GS.

GS makes a concerted effort and pays top dollar to the best and brightest financial minds in the world. There's a reason that most of the top earners in the financial industry are within GS and are GS alumni.

That's also a pretty darn good reason to have them working in and for the government isn't it?

Even though there isn't a dime's bit of difference and he is very knowledgeable, would you want Bernie Madoff running the Social Security Administration?

The number of Goldman Sachs alumni working for this and past Presidents is rather disturbing. On the surface, it looks great, but when you look at the ugly underbelly of the relationship and where it's heading, it's pretty scary.
I haven't looked at Bush #1 too much, but Clinton, Dubya, and Obama has had the Oval Office stacked with GS alumni, and when you think about it...it is all starting to make more and more sense.

Comparing Bernie Madoff to these guys is an overstatment and a typical scare tactic from the anti-government movement.

The conspiracy theories make me laugh. You mean that the career path of Harvard/Stanford/Wharton MBA --> Goldman Sachs --> Federal government is some kind of a conspiracy?

The Presidents of the past 20 years have been training these guys at the world's best business schools, putting them to work in the training grounds of GS and then eventually hiring them in the Federal Gov't just to they could all make money off the American people? Do you really believe that?

[GannonFan]

Again though, what did GS do wrong in this case? They set up a fund where you could bet for or against the fall of the housing market. Some people bet for the housing market to fail, and fewer people bet for it to be fine (hence why GS lost money on this deal - there weren't enough people who really thought the housing market was okay). So basically, GS, to use the Vegas analogy, set up a line on a game with a bad team, the line was too far in one direction and more people bet for that bad team to lose, and lo and behold, they were right. There will always be winners and losers in transactions like these, just like in gambling. If you don't want the risk, don't play. But GS didn't cause the housing market to collapse, setting off this recent recession - that was done without their help.

[danefan]

Again though, what did GS do wrong in this case? They set up a fund where you could bet for or against the fall of the housing market. Some people bet for the housing market to fail, and fewer people bet for it to be fine (hence why GS lost money on this deal - there weren't enough people who really thought the housing market was okay). So basically, GS, to use the Vegas analogy, set up a line on a game with a bad team, the line was too far in one direction and more people bet for that bad team to lose, and lo and behold, they were right. There will always be winners and losers in transactions like these, just like in gambling. If you don't want the risk, don't play. But GS didn't cause the housing market to collapse, setting off this recent recession - that was done without their help.

That could very well be the case.

But the way its being portrayed by the SEC is that GS sold 3rd party products (which is developled) to its clients that were a bet on the housing market at the very least maintaining. At the same time, they, as an institution, made a bet that the housing market was going to tank. The issue is whether GS actively defrauded their clients by giving an institutional positon that the housing market was going to do well and they should take that bet.

If you want to use an gambling example, think of what would happen if the MGM knew that Kobe had a secret and complex knee problem. Some doctors close to the team knew, but were sworn to secrecy by Kobe. No one else knew. The MGM set the line with the Lakers as the favorites anyway and actively told people that Kobe was fine. In the back room though, the MGM put a $1 billion bet at the Wynn against the Lakers knowing that Kobe wouldn't last anymore than 1 quarter before his knee gave out.

I'm not saying this happened, but that is essentially what the SEC is saying GS did. They knew there was a problem with these mortgage-backed securities. This problem wasn't visible to the general public or their clients. They bet against them. They just told all of their clients to bet for them.

[GannonFan]

Again though, what did GS do wrong in this case? They set up a fund where you could bet for or against the fall of the housing market. Some people bet for the housing market to fail, and fewer people bet for it to be fine (hence why GS lost money on this deal - there weren't enough people who really thought the housing market was okay). So basically, GS, to use the Vegas analogy, set up a line on a game with a bad team, the line was too far in one direction and more people bet for that bad team to lose, and lo and behold, they were right. There will always be winners and losers in transactions like these, just like in gambling. If you don't want the risk, don't play. But GS didn't cause the housing market to collapse, setting off this recent recession - that was done without their help.

That could very well be the case.

But the way its being portrayed by the SEC is that GS sold 3rd party products (which is developled) to its clients that were a bet on the housing market at the very least maintaining. At the same time, they, as an institution, made a bet that the housing market was going to tank. The issue is whether GS actively defrauded their clients by giving an institutional positon that the housing market was going to do well and they should take that bet.

If you want to use an gambling example, think of what would happen if the MGM knew that Kobe had a secret and complex knee problem. Some doctors close to the team knew, but were sworn to secrecy by Kobe. No one else knew. The MGM set the line with the Lakers as the favorites anyway and actively told people that Kobe was fine. In the back room though, the MGM put a $1 billion bet at the Wynn against the Lakers knowing that Kobe wouldn't last anymore than 1 quarter before his knee gave out.

I'm not saying this happened, but that is essentially what the SEC is saying GS did. They knew there was a problem with these mortgage-backed securities. This problem wasn't visible to the general public or their clients. They bet against them. They just told all of their clients to bet for them.

That analogy would only work if there was no knowledge of Kobe's injury. However, the truer analogy would be that Kobe was hurt 4 years ago and the injury was getting worse and ESPN reported on it everyday and it was common knowledge that at some point, the injury could blow up on him and sink the Lakers. And then, one day, it did.

The housing market's decline was discussed over and over again for years leading up to the popping of the bubble. The only question was timing - when was it going to happen, not if it was going to happen. As with any bubble, some people just stayed too long and they were the ones burned. GS didn't have perfect knowledge of when the bubble was going to burst nor did they make it burst. Other investors gambling on the same thing should have been more aware and more cautious. Trying to litigate people for other's bad gambles is good for press coverage, but doesn't really do much else.

[danefan]

That could very well be the case.

But the way its being portrayed by the SEC is that GS sold 3rd party products (which is developled) to its clients that were a bet on the housing market at the very least maintaining. At the same time, they, as an institution, made a bet that the housing market was going to tank. The issue is whether GS actively defrauded their clients by giving an institutional positon that the housing market was going to do well and they should take that bet.

If you want to use an gambling example, think of what would happen if the MGM knew that Kobe had a secret and complex knee problem. Some doctors close to the team knew, but were sworn to secrecy by Kobe. No one else knew. The MGM set the line with the Lakers as the favorites anyway and actively told people that Kobe was fine. In the back room though, the MGM put a $1 billion bet at the Wynn against the Lakers knowing that Kobe wouldn't last anymore than 1 quarter before his knee gave out.

I'm not saying this happened, but that is essentially what the SEC is saying GS did. They knew there was a problem with these mortgage-backed securities. This problem wasn't visible to the general public or their clients. They bet against them. They just told all of their clients to bet for them.

That analogy would only work if there was no knowledge of Kobe's injury. However, the truer analogy would be that Kobe was hurt 4 years ago and the injury was getting worse and ESPN reported on it everyday and it was common knowledge that at some point, the injury could blow up on him and sink the Lakers. And then, one day, it did.

The housing market's decline was discussed over and over again for years leading up to the popping of the bubble. The only question was timing - when was it going to happen, not if it was going to happen. As with any bubble, some people just stayed too long and they were the ones burned. GS didn't have perfect knowledge of when the bubble was going to burst nor did they make it burst. Other investors gambling on the same thing should have been more aware and more cautious. Trying to litigate people for other's bad gambles is good for press coverage, but doesn't really do much else.

Valid points. And I'm sure that's exactly what they'll argue in court.

[Baldy]

Comparing Bernie Madoff to these guys is an overstatment and a typical scare tactic from the anti-government movement.

The conspiracy theories make me laugh. You mean that the career path of Harvard/Stanford/Wharton MBA --> Goldman Sachs --> Federal government is some kind of a conspiracy?

The Presidents of the past 20 years have been training these guys at the world's best business schools, putting them to work in the training grounds of GS and then eventually hiring them in the Federal Gov't just to they could all make money off the American people? Do you really believe that?

If it walks like a duck...talks like a duck...

Dubya's last Treasury Secretary was Henry Paulson--former CEO of Goldman Sachs. When the whole financial crisis began and the government started bailing out the banks, guess who had the final decision...Henry Paulson. As luck would have it, Goldman was granted a bailout to the tune of $10 Billion from the US Treasury. On the other hand, one of Goldman's biggest competitors on Wall St. was Bear-Stearns...Paulson didn't bail them out and were 'allowed' to fail into a subsidiary of JP Morgan. As luck would have it, and I'm sure a total coincidence in that Goldman's BIGGEST competitor on Wall Street, Lehman Brothers, wasn't bailed out either and now sits in bankruptcy.

If it doesn't smell fishy to you, that's fine, but when you have the former CEO of Goldman Sachs sitting as the Secretary of the Treasury with the power to kill two of Goldman Sachs' biggest competitors, and he actually does it???? Something is wrong.

Why do you think Paulson bailed out AIG? Are you aware that Goldman Sachs was AIG's largest debtor? AIG was given $85 Billion in the bailout...$13Billion of that went to Goldman Sachs.

You know I am the first in line to defend the "greedy" Wall Street bankers, but this entire scenario just smells of collusion and backdoor dirty deals.

[danefan]

Here's a pretty good description of the facts and the issues in the case. I know its the Huffington Post and I usually do try to avoid columns from blatantly partisan news outlets (Huff Post, Fox News, etc...), this one provides a pretty good description of the facts and issues in this case.

http://www.huffingtonpost.com/ray-bresc ... 44919.html" onclick="window.open(this.href);return false;

The "Pigeon Drop" is a classic con game. Typically, two con men and their mark appear to find a stash of stolen money. The grifters and the mark presume the money is unlikely to be claimed by the thief who lost it. The three confer about what to do about the loot. One of the grifters comes up with an idea: take the money to a friend who will know what to do with it. But the grifters claim they can't all go to see the friend, so only one of them should go, and they choose the mark to be the one to do it. As a show of good faith, the grifters put their own money into the pot of "found" money, and ask the mark to do the same before he or she heads off to take the money to the "friend." The mark does so, and, without the mark's knowledge, the package with all of the money is switched with a worthless pile of paper. As the three part ways, the mark follows sham directions in an effort to visit the fictitious friend, taking what is believed is the large sum of money; in reality, the mark is left holding the bag and the grifters walk off with all the cash.

The Securities and Exchange Commission (SEC) has now sued Goldman Sachs & Co., alleging that it engaged in what may amount to no more than a billion dollar pigeon drop. According to the SEC's complaint, Goldman, at the behest of hedge fund manager John Paulson, allowed Paulson to select a roster of mortgage-backed securities that he believed would perform poorly, so that he could bet on them doing just that. Goldman did Paulson's bidding, finding marks that would pour money into the investments. The investors did not know the motivating force behind the creation of the investment: that is, that an outside party had essentially created an investment it wanted to fail. Goldman hawked the investment to parties who trusted the firm to promote only solid investments. And the con was on. The investments performed exactly as planned, and Paulson and Goldman walked away richer.

Of course, Goldman has its defenses, and the SEC has a long way to go before it proves essential elements of its case. One critical issue is whether Goldman's failure to mention to investors that Paulson was not only involved in the selection of many of the securities in the investment pool but also that he intended to bet against it were "material" omissions, which would make the transaction illegal under securities laws. From a layperson's view, it is hard to see how such a key fact would not be material. Before playing a game of pickup basketball in the park, letting alone betting on one's own team to win, wouldn't one want to know whether the team was (1) made up of a bunch of short and slow players with no rebounding, dribbling or shooting skills and (2) selected by one's opponent precisely because of those qualities?

[GannonFan]

Here's a pretty good description of the facts and the issues in the case. I know its the Huffington Post and I usually do try to avoid columns from blatantly partisan news outlets (Huff Post, Fox News, etc...), this one provides a pretty good description of the facts and issues in this case.

http://www.huffingtonpost.com/ray-bresc ... 44919.html" onclick="window.open(this.href);return false;

The "Pigeon Drop" is a classic con game. Typically, two con men and their mark appear to find a stash of stolen money. The grifters and the mark presume the money is unlikely to be claimed by the thief who lost it. The three confer about what to do about the loot. One of the grifters comes up with an idea: take the money to a friend who will know what to do with it. But the grifters claim they can't all go to see the friend, so only one of them should go, and they choose the mark to be the one to do it. As a show of good faith, the grifters put their own money into the pot of "found" money, and ask the mark to do the same before he or she heads off to take the money to the "friend." The mark does so, and, without the mark's knowledge, the package with all of the money is switched with a worthless pile of paper. As the three part ways, the mark follows sham directions in an effort to visit the fictitious friend, taking what is believed is the large sum of money; in reality, the mark is left holding the bag and the grifters walk off with all the cash.

The Securities and Exchange Commission (SEC) has now sued Goldman Sachs & Co., alleging that it engaged in what may amount to no more than a billion dollar pigeon drop. According to the SEC's complaint, Goldman, at the behest of hedge fund manager John Paulson, allowed Paulson to select a roster of mortgage-backed securities that he believed would perform poorly, so that he could bet on them doing just that. Goldman did Paulson's bidding, finding marks that would pour money into the investments. The investors did not know the motivating force behind the creation of the investment: that is, that an outside party had essentially created an investment it wanted to fail. Goldman hawked the investment to parties who trusted the firm to promote only solid investments. And the con was on. The investments performed exactly as planned, and Paulson and Goldman walked away richer.

Of course, Goldman has its defenses, and the SEC has a long way to go before it proves essential elements of its case. One critical issue is whether Goldman's failure to mention to investors that Paulson was not only involved in the selection of many of the securities in the investment pool but also that he intended to bet against it were "material" omissions, which would make the transaction illegal under securities laws. From a layperson's view, it is hard to see how such a key fact would not be material. Before playing a game of pickup basketball in the park, letting alone betting on one's own team to win, wouldn't one want to know whether the team was (1) made up of a bunch of short and slow players with no rebounding, dribbling or shooting skills and (2) selected by one's opponent precisely because of those qualities?

And their analogy only works if the people buying the side that housing wasn't going to fail didn't know what they were buying (i.e. if they really didn't know the makeup of the guys on the basketball team). However, they should've been able to, on their own, verify if those funds were worth betting on (akin to scouting the basketball team prior to playing it - to carry the pickup analogy, often you play the "winners" of the previous game, so you actually do get a chance to see them play and judge whether they are a bunch of ringers or a bunch of duds - makes you wonder if anyone at the Huffington Post really does play pickup basketball games or if they're only exposure to them is through watching "White Men Can't Jump".).

[danefan]

And their analogy only works if the people buying the side that housing wasn't going to fail didn't know what they were buying (i.e. if they really didn't know the makeup of the guys on the basketball team). However, they should've been able to, on their own, verify if those funds were worth betting on (akin to scouting the basketball team prior to playing it - to carry the pickup analogy, often you play the "winners" of the previous game, so you actually do get a chance to see them play and judge whether they are a bunch of ringers or a bunch of duds - makes you wonder if anyone at the Huffington Post really does play pickup basketball games or if they're only exposure to them is through watching "White Men Can't Jump".).

I can tell you for certain that Prof. Brescia is not playing any pickup games in the Albany Law gym (where believe it or not, a very good game of pick-up basketball is known to break out in between classes).

[kalm]

Putting greed on trail:

Published on Saturday, April 24, 2010 by the Guardian/UK
Will Goldman Sachs Prove Greed is God?
The investment bank's cult of self-interest is on trial against the whole idea of civilization – the collective decision by all of us not to screw each other over even if we can
by Matt Taibbi
"Morally, however, the Goldman Sachs case may turn into a final referendum on the greed-is-good ethos that conquered America sometime in the 80s - and in the years since has aped other horrifying American trends such as boybands and reality shows in spreading across the western world like a venereal disease."

"When Britain and other countries were engulfed in the flood of defaults and derivative losses that emerged from the collapse of the American housing bubble two years ago, few people understood that the crash had its roots in the lunatic greed-centered objectivist religion, fostered back in the 50s and 60s by ponderous emigre novelist Ayn Rand."

"In the Randian ethos, called objectivism, the only real morality is self-interest, and society is divided into groups who are efficiently self-interested (ie, the rich) and the "parasites" and "moochers" who wish to take their earnings through taxes, which are an unjust use of force in Randian politics. Rand believed government had virtually no natural role in society. She conceded that police were necessary, but was such a fervent believer in laissez-faire capitalism she refused to accept any need for economic regulation - which is a fancy way of saying we only need law enforcement for unsophisticated criminals."

"People have to understand this Randian mindset is now ingrained in the American character. You have to live here to see it. There's a hatred toward "moochers" and "parasites" - the Tea Party movement, which is mainly a bunch of pissed off suburban white people whining about minorities consuming social services, describes the battle as being between "water-carriers" and "water-drinkers". And regulation of any kind is deeply resisted, even after a disaster as sweeping as the 2008 crash."
http://www.commondreams.org/view/2010/04/24" onclick="window.open(this.href);return false;

[Chizzang]

Nothing is more exciting to a bunch of billionaires than watching a bunch of middle class puppets fight their battle for them and confuse the facts and dilute the issues into swirling murky mess... all the while



The greatest trick ever pulled over the eyes of the imperialist world believers is the trick of turning the middle class against the poor... and thus creating an imaginary battle ground forever taking the eye off of the problem

Pure genius

[JohnStOnge]

Nothing is more exciting to a bunch of billionaires than watching a bunch of middle class puppets fight their battle for them and confuse the facts and dilute the issues into swirling murky mess... all the while



The greatest trick ever pulled over the eyes of the imperialist world believers is the trick of turning the middle class against the poor... and thus creating an imaginary battle ground forever taking the eye off of the problem

Pure genius

The "poor" ARE more of a problem for the "middle class" than the rich are. It's not taking one's eye off the problem at all to recognize that. And the insistence on having government programs to attempt to insure indivdual well-being (i.e., help the "poor") is a far bigger problem than anything having to do with the "rich" is.

We DO have a problem in that a critical mass of the population is now composed of functional parasites.

[kalm]

Nothing is more exciting to a bunch of billionaires than watching a bunch of middle class puppets fight their battle for them and confuse the facts and dilute the issues into swirling murky mess... all the while



The greatest trick ever pulled over the eyes of the imperialist world believers is the trick of turning the middle class against the poor... and thus creating an imaginary battle ground forever taking the eye off of the problem

Pure genius

The "poor" ARE more of a problem for the "middle class" than the rich are. It's not taking one's eye off the problem at all to recognize that. And the insistence on having government programs to attempt to insure indivdual well-being (i.e., help the "poor") is a far bigger problem than anything having to do with the "rich" is.

We DO have a problem in that a critical mass of the population is now composed of functional parasites.

I think the rich should help the middle class by employing the poor with sustainable wages that prevent them from needing government programs in the first place.