Friday, April 16, 2010

The loose thread on the pin stripe suit

The first loose thread of the tapestry of Wall Street fraud was given a good tug today as the SEC filed a civil suit against Goldman Sachs. The details of this scheme are such clear cut organized crime that it would make a good script for the Sopranos. The response from Goldman Crime Family is just to say “Heey, forget about it”, but this time the G-men aren’t going to do that.

Over the past thirty years when a Wall Street crime family actually got caught running a scam like this they would just enter into a Consent Decree with the SEC. They would pay a little money, blame on some over zealous associate (they’d promise to have him whacked) and declare it would never happen again. The boss of bosses would not be touched and the SEC would not reveal any detail of the operation the street crew had been running so they could run it again and again.

Today was different, instead letting them beat the rap, the SEC is planning to go to trial. They’ve got themselves a no nonsense judge who used to be a prosecutor. The deposisition of Goldman’s employees and subpoena of their records was apparently very interesting. It seems that “Fab” Fabrice Tourre liked to refer to himself in emails in the third person as “Fab” and recount his crimes and the “take” in much detail. “Fab” was given a promotion or was “made” on this two billion dollar boost.

Oh and flat-foot at the SEC was always good experience to become a mouth piece (I mean high paid lawyer) on Wall Street. The corporate media trotted out a couple of these Wall Street mouth pieces today and they were “experts” because they used to work for the SEC. The same SEC that never really enforced the law in the past. It was their informed opinion that the SEC would have a real-hard-time proving their case. The reason was that if it was an “easy” case to prove than Goldman would have taken a settlement. There is no indication that the SEC ever offered a settlement and fraud watchers are saying this is the just tip of the iceberg. You should expect many more civil suits from the SEC. The DOJ is mum of course, but AG Holder did tell the Senate earlier this week that they might see more fraud trials.

Goldman Sachs’s stock was down 13% today and dragged the DOW down 125 points even though Goldman is not a DOW 30 component. JPMorgan which is a DOW 30 stock, dropped 5% on the news that the days of organized crime (I mean free-market capitalism) may be over. The only fly in my “hopey, changey” optimism ointment stuff is that the Obama Adm is rife with former bosses from the Goldman Sachs family.


John said...

Now that's a fly the size of a Buick!!

SanMigMike said...

If something actually happens and there is real reform I might have some hope for the future. But I don't think we are any where near the bottom. I see no reason at this time to think that there have been any fundamental changes in the way America operates. Until that happens there is no reason to think we have a clue to just where "bottom" is really located.

No push to have real jobs, not just the "service" jobs and the passing around money and a few getting to run the game so they get to make their phony money into real bucks when the rest of us are just along for the ride. No real change to actually save money in health care, no real support of education and on and on and on.

All I see so far is just a quick coat of cheap paint, a little scrub down and some cheap wall paper when the whole house is rotten, foundation to roof is ready to collapse.

John said...

It's not clear what type of insect to metaphorically use for this news:

"Goldman Sachs is launching an aggressive response to its political and legal challenges with an unlikely ally at its side — President Barack Obama’s former White House counsel, Gregory Craig."

Read more:

John said...

Sorry, that link is:

Ronmac said...

Goldman Sachs has so many tentacles in and out of gov't now. The White House cleaning staff probably have GS connections.

Funny story: I was reading a National Post columnist the other day (one on Canada's National newspapers started by financier and convicted felon Conrad Black) and he was busy defending Goldman Sachs.

And then all of a sudden it hit me. The national Post is in part now controlled by Goldman Sachs via a receivership arrangement of its parent company the Canwest Global media company that filed for bankruptcy last year.