THE WORSE THINGS GET FOR GOLDMAN THE BETTER PROSPECTS ARE FOR THE COUNTRY
EDITOR’S NOTE: Looks like the divine right of banks is being challenged. See THE DIVINE RIGHT OF BANKS We have a tendency to look at things the way way they are rather than the way they might be in the future. We formulate plans and beliefs around the reality of the moment, instead of viewing it as a process. This process is an evolving judicial and administrative process in which the banks have tried to insert themselves by going to legislators who are less and less willing to get themselves portrayed as in bed with bankers. Goldman looked like it was above the law, unreachable by anyone, and now it is being brought to justice.
If the economy is ever going to be restored to anything resembling its former luster, and if the debt and currency of the United States is going to survive as the envy of the world, we need to start dealing with the truth. Moody’s is getting ready to downgrade, U.S. debt, the consequences of which at this time could be tragic. Of course that is the same Moody’s that gave AAA ratings to mortgage bonds with nothing in them, let alone mortgages.
And the truth is that the mortgage bonds were empty and so were the mortgages. There is no actual asset in the pools or trusts, and there never was, nor was any such asset planned, because the real asset was diverted from the investors as the true creditors and owner of the asset to the benefit of the entities and people involved in the illusion of securitization. The result was a feeding frenzy where the reported revenues and profits of Wall Street trading the same paper back and forth multiple times is now reported as half of our GDP. It’s a lie, and everyone knows it. The onyl reson it is perpetuated is because everyone is afraid of what will happen if we all agree it’s a lie and start using real facts and figures.
Our acceptance of the lie is only the obvious thing that we can do, and it is the only thing we can do. As to the worry warts who believe the sky will fall of we admit that our GDP is horrifically misstated, my answer is that by restoring the wealth that Wall Street took to the core population of America, the correction downward will be more than offset by the anticipated returns for forward looking earnings, new business, innovation and new employment. The sooner the better. So the worse things look for Goldman and the other megabanks, the better our prospects look for the future.
Goldman Said to Get Subpoena Over Its Role in CrisisBy ANDREW ROSS SORKIN and SUSANNE CRAIG
9:21 p.m. | Updated
The bad news just keeps coming for Goldman Sachs.
The Wall Street investment bank has received a subpoena from the office of the Manhattan district attorney, which is investigating Goldman’s role in the financial crisis, said one person familiar with the subpoena.
It comes amid increased enforcement scrutiny of the company, which has faced blistering criticism that it shorted — or bet against — the mortgage market before it collapsed and that it knowingly sold bundles of bad mortgages to its clients. Goldman denies these accusations.
The inquiry stems from a 650-page Senate report from the Permanent Subcommittee on Investigations that indicated Goldman had misled clients and Congress about its practices related to mortgage-linked securities.
Senator Carl Levin, Democrat of Michigan, who led the Congressional inquiry, had sent his findings to the Justice Department to figure out whether executives broke the law. The agency said it was reviewing the report.
The subpoena means several government agencies may be running parallel, and possibly competing, investigations. The subpoena arrived Friday and is limited to ground covered in the Senate report, said the person familiar with it, who was not authorized to speak on the record. Subpoenas are requests for information and do not necessarily mean charges against Goldman or individuals at the company are inevitable.
Still, the development of a subpoena from the Manhattan district attorney, Cyrus R. Vance Jr., did not seem to surprise investors.
“This news is not unexpected,” Christopher Maimone, an analyst at Standard & Poor’s Equity Research, wrote in a note to clients, explaining that Senator Levin’s referral had made continued investigations a near certainty.
Still, shares of Goldman fell $1.79, or 1.3 percent, to close at $134.38, though earlier in the day, before investors digested the news, its shares fell as much as 3.5 percent. Goldman shares traded above $170 at the beginning of the year.
Goldman’s chief executive, Lloyd C. Blankfein, who has run the company since 2006, has privately told people recently that he has no plans to leave the company and wants to see it through this difficult period. Still, the recent subpoenas are sure to resurrect calls for a change at the top.
“You would have to think that the more these types of headlines persist, the greater pressure there will be for change,” said William Tanona, an analyst at the investment bank UBS. He has previously worked at Goldman Sachs.
Whatever the outcome of the investigations, investors do not expect Goldman itself to be indicted. No firm has ever survived such a blow. E. F. Hutton & Company and Drexel Burnham Lambert collapsed after being indicted in the 1980s before the cases even went to trial.
Brad Hintz, an analyst at Sanford C. Bernstein & Company, said in a note to investors on Tuesday that he believed that the government might seek to reach a settlement with Goldman.
“In a worst case environment, we would expect a ‘too big to fail’ bank such as Goldman to be offered a deferred-prosecution agreement, pay a significant fine and submit to a federal monitor in lieu of a criminal charge,” he wrote.
The subpoena came almost two weeks after lawyers for Goldman Sachs met with the office of the attorney general of New York for an “exploratory” meeting about the Senate report, the people said.
In a statement, Goldman Sachs said: “We don’t comment on specific regulatory or legal issues, but subpoenas are a normal part of the information request process and, of course, when we receive them we cooperate fully.”
Goldman was one of the survivors of the financial crisis. But it has come under fire from the public and Washington since then. It was first attacked for its outsize pay packages, which came at a time when most of America was still reeling from the crisis. Then, in April 2010, the Securities and Exchange Commission filed a civil fraud suit against the company. Goldman was accused of creating a mortgage product that was intended to fail. The company settled with the S.E.C., agreeing to pay $550 million without admitting or denying guilt.
It was one of the darkest chapters in the company’s 142-year history, and it catapulted Goldman into the public spotlight, a place the secretive company was unaccustomed to. Rolling Stone magazine, hardly a first read on Wall Street, began writing regularly about the firm, calling it a “vampire squid.”