All Roads Lead to Goldman Sachs
Feb. 16, 2010
by Rob Kirby
HIGH-PROFILE GOLDMAN SACHS ASSOCIATES INCLUDE:
John Whitehead
Robert Rubin
Henry Paulson
John Thain
Robert Steel
Edward Liddy
Stephen Friedman
William Dudley
Josh Bolten
Reuben Jeffrey
Arthur Levitt Jr.
Rahm Emanuel
Gavyn Davies
Gerald Corrigan
Duncan Niederauer
Lawrence Summers
Jon Corzine
Gary Gensler
Robert Zoellick
Neel Kashkari
Mario Draghi
Mark Carney
Guys like Pedro didn't care how they got their money. As long he was able to get some money to cruise around the world like a playboy, that's all he cared about. Heck, I bet that members of Pedro's crowd wouldn't mind a return to slavery if it meant more money for them.
In fact, Goldman Sachs, who Pedro works for, has been caught funding projects that invest in slavery in Sudan. Goldman Sachs handled the IPO of PetroChina, the parent company of which was using forced labor in Sudan.
One time when I was in Brazil, Pedro took me to his family's massive plantation several hours outside of Rio de Janeiro. Picture the modern-day version of the plantation from "Gone with Wind," except bigger and with a full gym, sauna, steam room, two pools, satellite TV, Wi-Fi and a man-made lake full of jet skis.
While the plantation might have been a more high-tech version of Tara, the antiquated mentality of the 19th century plantation capitalism was very much alive. The type of capitalism that said some people were meant to be poor and powerless and others like Pedro to be the rulers of society. One or two of the dozen or so servants that lived on the plantation were direct descendants of the slaves that had lived there a few generations earlier.
Pedro showed me pictures of what the plantation used to look like in the good old days when it was an actual plantation full of slaves rather than a pleasure resort. He even showed off the old slave chains. As an advocate for workers' rights, I didn't share his enthusiasm for this particular historic relic. It was about one of the most awkward experiences of my life, until we had dinner.
McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met "every definition of a Ponzi scheme." READ MORE
The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps....
Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.
Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses.
Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.
Step 4: Collect the profits - Goldman Sachs is having their "most successful year" and will end up reporting approximately $50 billion in revenue for 2009.
So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?
You see, when you are talking about a financial giant the size of Goldman Sachs, the line between "betting that something will happen" and "making something happen" gets blurred very quickly.
Not that Goldman Sachs was the only one betting against the housing market.
According to the New York Times, firms like Deutsche Bank and Morgan Stanley also created mortgage-related securities and then bet that they would fail.....
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.
But certainly Goldman Sachs was the most prominent financial player involved in this type of activity.
In fact, without mentioning specifics, Goldman has even admitted publicly to wrongdoing. On November 17th, 2008 Goldman Sachs CEO Lloyd Blankfein even issued a public apology....
"We participated in things that were clearly wrong and have reason to regret."
But complicated financial transactions are something that most Americans simply do not understand, so the public outrage towards Goldman Sachs and others has been somewhat limited. But that does not change the very serious nature of the activities that Goldman was involved in....
"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen," Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, recently told The New York Times. "When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson."
The Economic Collapse
December 30, 2009
Investment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America. The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything “illegal” about it (although they are now being investigated by the SEC among others).
Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.
Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses.
Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.
Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.
So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?
You see, when you are talking about a financial giant the size of Goldman Sachs, the line between “betting that something will happen” and “making something happen” gets blurred very quickly.
Washington, DC—On Monday, SEIU President Andy Stern and hundreds of taxpayers will converge on the Washington headquarters of Goldman Sachs to demand an end to multi-billion dollar bonuses and the Too Big To Fail Doctrine and call for immediate Congressional action on real financial reform. This is the latest in a national mobilization launched last month as 5,000 taxpayers from 20 states converged on the American Bankers Association convention in Chicago to demand Wall Street and big banks stop fighting reforms that will protect our families from the next crisis.............
ALTERNATIVE TRADING PLATFORMS AND THEIR EFFECT ON LIQUIDITY
The equity markets provide perhaps the best example of a highly evolved complex ecosystem, where care must be taken to preserve the benefits that have evolved from competition and innovation…
Crucially, liquidity is what helps to solve this mismatch problem. Market makers that see large volumes are best positioned to match differing size transactions. In traditional exchange trading, bids and offers are public, and this transparency helps buyers and sellers to achieve the best price.
For some market participants, however, the openness and transparency of the equity market actually mean they are unlikely to achieve the best price. The risk, particularly for large transactions such as those undertaken by pension funds or large mutual funds (where most small investors have most of their equity exposure), is that other market participants will use this transparency to undercut the intended transactions.
From a Goldman Sachs lobbying document (emphasis mine)
This is from a lobbying document Goldman has been passing around the Senate on financial regulatory reform in general.
There is a lot of crazy stuff in this document, but the most notable is probably this passage, in which Goldman pooh-poohs the notion that complete transparency in markets creates accurate prices.
Instead, the bank argues that an over-the-counter market in which big traders like Goldman get to do deals in the shadows in “dark pools” without the retail investor having any knowledge of what the hell is going on is somehow better for everybody, that this somehow produces better prices. Of course the reality is that the two-tiered system creates one pool of fools whose every movement is visible to every animal on the Serengeti, and another pool of giant bloodthirsty carnivores who get to walk around invisible, picking off the dik-diks one by one.
Everyone I showed this to had the same reaction — “I can’t believe they said this out loud.”
One friend of mine put it this way: say Goldman buys a big block of stock from a pension fund in a dark pool. Now they have shares they want to get out of and flatten out their risk. So where do they sell? Well, a big chunk of it might go to the retail schmuck who has no idea what’s going on. He’s buying 1000 shares of whatever at $28, not knowing that Goldman has another 50,000 shares to go. Next thing you know, the schmuck’s shares are at $27.
Goldman salutes this process, noting the magic of so-called “non-displayed liquidity.” What the rest of us would describe as “hiding shit from the rabble,” Goldman calls “separating liquidity from information about the transaction.” You almost have to admire the sheer balls of this sort of propaganda:
Alternative trading platforms – so-called “dark pools” of liquidity – have evolved to address this problem. They work by separating liquidity from information about the transaction – the participants, lot sizes and transaction prices. Through the process of “non-displayed liquidity”, information does become available to both regulators and the public market – but not until the transaction is complete.
God bless this company. They’re never boring, that’s for sure.
This could be a sign that they believe dollar weakness has run its course, or at least that it has become too crowded in the near term.
MetalMiner: The change is reflected in two ways, first, a reduction of 32% in their VaR (value at risk – the sum of money a bank is willing to lose in one day of trades) to $27 million and a reduction in hirings for the commodity department. Of course their change of approach does not preclude them from coming back into the market next year but it supports our own position this last two months that further price increases are unlikely and the fourth quarter could see a drop back in prices as demand fails to materialize as hoped.
NEW YORK, Sept 30 (Reuters) - Goldman Sachs on Tuesday advised investors to shy away from banks and insurance companies that are heavily focused on commercial real estate, saying that the downturn in commercial real estate was more severe than Goldman had expected.
"Prices have yet to stabilize and thus are likely to overshoot our original estimates further," Goldman analysts said in a report.
Appraisal values have fallen 25 percent. Goldman expects a decline from peak levels in 2007 of 40 percent to 42 percent, a much steeper declined than the 28 percent it expected.
Sales prices have plunged 39 percent from their peak prices verses Goldman's prior estimate 24 percent.
At the same time, vacancy rates have risen 35 percent versus the 17 percent Goldman had expected. Rents have fallen by 9 percent, translating into fundamentals that have deteriorated by more than twice the rate Goldman anticipated.
Goldman expects $287 billion of losses on commercial real estate and construction loans.
BREAKING 10:08 AM ET:Vanity Fair will report in the next issue of the magazine that US Treasury Secretary Henry Paulson — a former head of the investment bank Goldman Sachs — tried to orchestrate secretive deals in the midst of the financial crisis but got blowback from prominent investor Warren Buffett. The following press release was obtained by Raw Story; the magazine appears today on newsstands in New York and Los Angeles.
NEW YORK, N.Y.—The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair.
In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman’s current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department. FULL STORY
SO, is this how Goldman Sachs does it?
"It," of course, is making gobs of money even when nobody else on Wall Street can.
And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street.
You've heard the old saying, "it's not what you know, but who you know."
Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions.
But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want.Today's column is about Thursday, Sept. 18, 2008.
It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson, whose mission -- according to his own words -- was to bring Wall Street and market regulators (not to mention decision makers) together, so that they were "seeing the same issues, the same problems and working toward the same solutions." On Wednesday, Sept. 17, 2008 -- the day before the one I am writing about -- the stock market performed horribly.
By the end of the session the Dow Jones industrial average tumbled 449 points as investors worried about the nation's financial system. The next morning, Sept. 18, Paulson placed his first call of the day at 6:55 a.m., to Lloyd Blankfein, who succeeded Paulson as CEO of Goldman. It's unclear whether the two connected because Blankfein called Paulson minutes later.
And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.
After that Paulson called Christopher Cox, Securities & Exchange Commission Chairman twice; British Chancellor Ali
SO, is this how Goldman Sachs does it?
"It," of course, is making gobs of money even when nobody else on Wall Street can.
And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street.
You've heard the old saying, "it's not what you know, but who you know."
Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions.
But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want. Today's column is about Thursday, Sept. 18, 2008.
It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson, whose mission -- according to his own words -- was to bring Wall Street and market regulators (not to mention decision makers) together, so that they were "seeing the same issues, the same problems and working toward the same solutions." On Wednesday, Sept. 17, 2008 -- the day before the one I am writing about -- the stock market performed horribly.
By the end of the session the Dow Jones industrial average tumbled 449 points as investors worried about the nation's financial system. The next morning, Sept. 18, Paulson placed his first call of the day at 6:55 a.m., to Lloyd Blankfein, who succeeded Paulson as CEO of Goldman. It's unclear whether the two connected because Blankfein called Paulson minutes later.
And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.
After that Paulson called Christopher Cox, Securities & Exchange Commission Chairman twice; British Chancellor Alistair Darling and New York Federal ReserveTim Geithner two times. head (and now Treasury Secretary)
Then Paulson took another call from Goldman's Blankfein.
It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to open -- and Paulson and Blankfein had already exchanged three phone calls.
This wasn't particularly unusual.
stair Darling and New York Federal Reserve head (and now Treasury Secretary) Tim Geithner two times.
Then Paulson took another call from Goldman's Blankfein.
It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to open -- and Paulson and Blankfein had already exchanged three phone calls.
This wasn't particularly unusual. FULL STORY