Monday, April 26, 2010

Medium fish should be nervous

Shares of Goldman Sachs dropped another $5 today as the third shareholder lawsuit was filed in Federal Court. As well as accusing Goldman’s management of breaching fiduciary duties for committing fraud in the sale of the worst possible of bad mortgages and then betting that the same mortgages that Goldman no longer owned would fail, this new suit also accuses CEO Lloyd Blankfein of concealing from shareholders the notification from the SEC of its civil case since last July.

Executives of Goldman seem oblivious that they have done anything wrong. Several were quoted repeating the talking point that the fact that they made money shorting these bad investments proved “that they were pretty smart”. They claim that they haven’t lost any investors since the SEC revelation and it appears they haven’t. Part of that is the investors are locked in for the near future and can’t just leave. Also if you still have your money, you might think they have been doing a good job. Locked in a bank and with robbers and taking their side is where the term Stockholm syndrome came from.

Emails have emerged in evidence of Goldman Sachs rolling in profits during the housing collapse when they had claimed under oath that they had lost money. Their profits came from derivatives or bets against (short selling) the very mortgage backed securities they had been selling to their customers. Their response is that they are being victimized by the Senate Committee that released the messages because they are "cherry picking" only four out of thousands of emails. "if you only cherry pick those pictures of me in the bank brandishing a gun while holding the bag with the $ sign on it, then of course I look like a criminal" They did ultimately take mortgage losses but only after the good mortgages started going bad too, they didn‘t think to short those. It never occurred to them that wrecking the economy might be bad for the business in the long run; but they got their bonuses anyway, so who cares.

The Republicans have filibustered the Wall Street reform bill saying if there is no compromise then they will introduce their own bill. The Senate is 59% Democrats, that whole democracy thing seems to be lost on Republicans. They waved around an alternate to Obama’s budget, but it had no numbers. The alternative to health insurance reform; no Federal regulation and make it possible to avoid all state regulation while preserving their anti-trust exemption (to encourage competition of course). After all, in a free market the small fish should expect to be eaten and medium fish should be nervous.


John said...

And the (thousands-4) other emails are what: exchanging great porn sites addresses with their pals at the SEC?