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Banking Reform's Goldman Moment

Goldman Sachs was in the fraud charges seat on Capitol Hill. We look through the grilling at the struggle over Wall Street reform.

Goldman Sachs employees and ex-employees, from left, Daniel Sparks; Joshua Birnbaum; Michael Swenson; and Fabrice Tourre, are sworn in on Capitol Hill, April 27, 2010, prior to testifying before the Senate Investigations subcommittee. (AP)

Ten hours of grilling yesterday for Goldman Sachs on Capitol Hill.

The kings of Wall Street and the inquisitors of the U.S. Senate going hour after hour over business practices – fraud, says the S.E.C. – that Senators charged turned U.S. markets into a casino and brought the global economy to its knees.

The backdrop to yesterday’s hearing: a Democratic Party push to bring new regulation to Wall Street that Republicans are fighting tooth and nail.

There is damage and anger here. And hot theater, too.

This Hour, On Point: the grilling of Goldman Sachs, and the guts of what’s really going on in the fight over Wall Street.

Guests:

Roger Lowenstein, contributing writer for The New York Times Magazine and former reporter for the Wall Street Journal. His new book is “The End of Wall Street.”

Bethany McLean, contributing editor for Vanity Fair and former editor-at-large for Fortune magazine. She is co-author of “The Smartest Guys in the Room,” about Enron, which helped expose the company’s problems. She wrote an op-ed for Tuesday’s New York Times: “Meet the Real Villain of the Financial Crisis.”

James Hohmann, Congressional reporter for Politico.

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  • wavre

    Don’t believe the Hype! They’re putting up a show to calm down populist anger. It should be agaisnt those corporations that people should say”We want our country back!”

    Only in America can you see homeless people defending wall street.

    Everything in America is a commodity, even Justice can be bought!

    Down goes the Empire!

  • Gary

    @wavre Agreed.

    It is difficult as usual to discuss regulatory bill that seems to be addressing symptoms and not the causes.

    No substantive regulation will be imposed on the golden calf, and all of the systemic risk will remain. Wall Street runs Washington, and they know it. When this bit of theater is over, its back to privatizing the gains and socializing the losses.

    We need a bonsai bill, that will keep the banks from getting too big to fail by trimming the systemic roots as well as the far reaching branches.

    -Reinstate Glass-Steagall to separate investing from banking.

    -Ban Home mortgages as investment instruments at the IB’s, and add that no Home mortgage can leave the state of origin. Or create a new class of mortgages one labeled Investment, and the other Home.

    -End corporate usury. Cap credit card interest rates at no more than 2% over prime. Where is credit regulation?

  • Steve V

    Why did Canada, with several very large banks, avoid this problem? I don’t believe the issue is the size of banks but the regulations and character of the people running them. Obviously we have a lack of both in this country. And while Congress is pointing the finger at Wall Street, should not someone be doing the same to those in Congress who allowed this to occur? I’d pay money to see Congress grilled the same way as Wall Street.

  • Petr

    Questions to be (hopefully) addressed:

    Since, at the height of the crisis, firms like Goldman Sachs and Merrill Lynch (and most large investment banks that survived…) sought and received permission to change from ‘investment banks’ and become ‘bank holding companies’, thus (ostensibly) coming under a more strict regulatory aegis, to what extent is ‘reform’ either moot, toothless or an exercise in running in place? To what extent has the ‘shadow banking system’ already been exploded? To what extent has Goldman, et al, changed their manner of doing business because of this (arguably rather stunning) change in status from ‘investment bank’ to ‘bank holding company’. Is this a case of regulatory enforcement (renovation?) rather then ‘reform’ (innovation? )

    Answers to these questions might illuminate the present undertaking….

  • http://N/A Sasha

    I was in disgust for most of yesterday’s fruitless hearings, really a day-long opportunity for these Masters of the Universe to set us all straight on our “disproportionate treatment” of Goldman Sachs and for the Democrats to shoot footage for their “Taking on Wall Street” campaign ads.

    What I don’t understand is why the Republicans aren’t taking this opportunity to get really tough on Wall Street. It’s becoming common knowledge that Democrats are now funded by Big Banking, so why doesn’t the GOP take the populist path and call for even tougher action to break down “Too Big to Fail” banks? They can’t possibly believe that such a concentrated sector is good for capitalism.

  • Mary

    The one thing I enjoy is watching these public servants make fools of themselves at these type of hearings. They are more guilty than Goldman for creating this housing mess.

  • Steve T

    Do you swear to tell the truth the whole truth, and nothing but the truth so help you God.

    I Do.

    Please answer the question

    Well um ah um I um, What was your question?

    Just more BS.

  • Ellen Dibble

    Competition among the investment banks (now holding companies/securities firms — apparently a big difference, i.e., a window on free Fed funds, at least for Goldman Sachs since September 2008), anyway competition among the big banks is such that they need to excite their clients with Big Profits. And competition among the big banks is such that they have to retain Talent with Big Bonuses.
    But this is casino capitalism, using “synthetic” products (bets), rather than focus on growing the “real” economy (aka Jobs). Some huge part of our GNP is involved in algorithm-driven/computer-driven mathemetical statistical maneuvering. Insofar as “homes” can be considered an investment vehicle, they too can be part of the game and can be made to “appreciate” if expectations are pushed.
    Where is realism? We know that it takes a while for a solar roof to pay for itself. And I think the New Economy is slow to offer profitability, and investors are not patient in this age of quarterly statements.
    So our money is NOT going for great new technologies, your idea and mine, with their chances to let us stand up to China and India. No, our money (investments) is being used to bet that Greece will fail, and if we have a piece of the product that shorted Greece, we will have a piece of the profit. Good-bye Greece.

  • Jason

    The banking reform will not be meaningful without addressing the cause of the problem, ratings agencies & Freddie & Fannie Mae! Goldman sacs was no more than 1% of the responsibility for the crisis.

  • Jason

    If Goldman Sacs is so bad, why are there so many Goldman Sacs employees working in the white house, the fed, and other govt agencies?

  • Chris

    The show hasn’t even started yet, and ALREADY there are so many thoughtful, brilliant, insightful comments on this webpage! I am so happy to be a regular listener to this program, and I just wanted to point out the extraordinary quality of the pieces in this Commentary! Thanks, guys; I’m glad to get to benefit from your contributions, from some of you, on a regular basis! If Washington only listened to its people; I’m glad I do! Even when we sometimes come from different angles (not today, so far, tho), I learn things!

  • Natalie

    It pained me to see how ignorant these Senators were. These are the people responsible for financial regulation and yet they have no grasp of how the system works. They don’t know the difference between an aggregator and a market-maker. They don’t understand how the client expectations of Goldman differ based on which role Goldman is playing.

    It was clear they had been fed questions and had no fundamental understanding about what they were asking. Levin, Collins and McKascal (sp?) were the worst that I saw.

  • ER

    Tom,

    Why isn’t what Goldman was doing considered insider trading on some level?

  • Michael

    Tom, who was buying the Goldman securities (Anderson, Hudson, etc.) cited by Senator Levin yesterday? Corporations, individuals, pension funds …. ? Who was hurt directly by this?

  • Roberto

    We are still only focused on ONE deal; what about the other Abacus funds, or those of Merrill, Morgan, Citi, etc? And once criminal/civil litigation gets underway, let’s focus on re-tooling “carried interest” tax sheltering. Those provisions allow fat cat bankers (hedgers, vc’ers, etc) to avoid ka-jillions in taxes. Oh, wonder if any GS employees/alumni show up on that list of 52,000 tax cheats with private UBS swiss bank accounts? Let’s get to the heart of the matter: criminal activity and the Feds’ failure to prosecute. Any wonder our world is a mess?!

  • Dee

    Take away the electronic means of financial shenanigans and what we have here is the same End of Empire activity that brought down the Roman and all other empires – rot from within, oligarchs who own no loyalty to anything but themselves, and class warfare. Sadly, Congress was playing to the camera and has no intention of really ending this kind of looting of the till – they have been bought and paid for long since by the heavy hitters that are “too big to fail!”

  • Ellen Dibble

    I think of the senate hearings as rehearsals in front of strings of lawsuits, with the public rather than deposing lawyers as the, um, “witnesses.” I have no idea if the SEC has the spine to proceed, let alone the information or the legal fine print.
    But fraud — I know it when I see it. Who selected these bombs (designed to blow up in the face of the investor, because being short — and for good reason) — oh, I know, “who selected the bonds.” But…
    The question on the table for Joe Public is Do We Want This System of Investment to Continue As Is?
    NO NO NO.

  • http://www.filipinoboston.blogspot.com akilez

    Finally these Imeldific/ Madoffic people are getting yelled at by Senators.

    Goldman and Sachs Why Do you bet against your own investment? Clearly that you knew those deals will likely to fail and it did. taking over 25 millions jobs with it.

    You destroyed the Middle Class Americans. those piece of SH–T deals are the cause of the Great Recession.

    How can you do this to the American people?
    Banks are Evil

  • rich4321

    Goldman Sachs is the biggest con artist in the world, No only they brought down the economy in our country, they helped to bring down the economy in Greece, in turn upsetting the entire European and the world financial system. We all suffer from their bogus products, Their CEOs pocketed millions of dollars for themselves. How can a nefarious corporation like this ever exist in the first place? This corporation is pure evil, driven by the insatiable greed of the CEOs. Goldman Sachs should be completely dismantled. And all the CEOs should be jailed for life!!

  • Mark Whitworth

    The bets that Paulsen made… would they have had any value if nobody bet the other way?

  • Murl Aldridge

    I work for a for profit company. We would NEVER sell a known defective product to a customer. Our customers’ best interest is OUR best intererest.

  • Dennis Kerr

    This is a perfect example of why we should not allow capitalism to be reduced to corporate feudalism.

    Sure, rich people get treated better than us poor people. But not even rich people get treated well by corporate governance without public governance.

    If we know that even wealthy and powerful people are being treated unfairly by the corporations, what chance do the rest of us have?

    Would we want to surrender our health care to this kind of corporate feudalism? Would we want to surrender our national defense to this system and their contractors?

  • Andrew

    If a lawnmower dealer was selling machines for a manufacturer that was producing the mowers in such a way that they believed would work for only six months, isn’t that wrong of both the manufacturer and the dealer if the customer didn’t also have this information at the time of purchase?

  • Ellen Dibble

    One other reason the gloves aren’t off, and the good-cop/bad-cop routine of interrogation seems soft: Campaign financing. This is a Show. Pretend to have caught the banks. Just one will do. The Senators point out there are four or five others who do the same thing.
    Just pretend to have caught them. That will do. (Congress thinks.)
    Oh, we have learned to be cynical about the government.

  • ER

    Tom,

    Goldman is creating a product and betting against it after rigging its performance behavior.

    Why isn’t that considered insider trading on some level?

  • jeffe

    This is nothing but smoke and mirrors, a dog and pony show.

    By the way Tim Geithner is in the middle of all of this.
    He should resign, now.

    It’s Congress and their complete lack of control over the regulatory institutions such as the SEC.

    Standard & Poors and the other credit rating companies are just as guilty if not more.

  • Roberto

    To Michael: Is that serious, or sarcastic?

    If the latter, pls. read the front page, sub-story in Boston Globe today — beyond all the 401(k)s nailed by meltdown, or pensions (private and public entities), or Freddie/Fannie bailouts, even sophisticated Harvard took it on the nose (and Lloyd is an alumnus!). Those are the direct hits.

    Indirectly, you and I pay taxes, which transferred to AIG bailout, which paid off GS and J.Paulson bets. Those taxes would be extending unemployment benes for some, or “cleaning” up W.Va Coal Mine safety, or providing more investment tax credits to spur alternative fuel R&D or solar panel production (vs. China getting more and more b/c of cheaper labor…) — or, dare I say, finishing up our little wars and putting countries back working order, like Iraq, Pakistan and Afghanistan?

  • Gwyneth Lee

    With all the talk about the big players winning or losing money, it occurs to me that big investors are generally aware of the risk?

    My question is, has anyone considered the trickle down effect of such losses on high-risk financial products? Corporations will always try to recover their losses by cutting back expenses, namely wage-earners, who are typically the working class. This seems to me the unraveling of the very foundation of our economy, and not necessarily hurting Wall Street.

  • Bill Duncan

    Insider trading rules were originally implemented because of key players manipulating the market for their personal gain – how is what Goldman-Sachs did any different? They had insider preknowledge not available to (and actually actively hidden from) the public and used that information to scam the system.

  • Ellen Dibble

    Remember what banks CAN do. There was Columbus, Magellan, Jamestown, Plymouth Colony. I am not a historian. But government may have financed the moon shot, but private capital has been able to distinguish itself since banking began.

  • http://www.afarkas.com Andrew Farkas

    I think the legal issues are moot at this point: the Goldman execs would do well to consider donating a significant portion of their ill-gotten profits to community charities to try to mitigate the outrage they face from the public. I’m sure they’ll still have plenty of millions to retire on, out of the limelight.

  • http://www.filipinoboston.blogspot.com akilez

    To the Republicans!!!

    Why did you not stop Haliburton and Enron?
    Why did you not stop Goldman and Sachs?
    Why did your beloved George W. Bush allow this to happen
    Well,Because We have a new President Obama to blame.

    Every Negative comments against the Committee are just the same people like Goldman and Sachs.

    Greedy,Corrupt and Arrogant SOBs.

    God Bless We have a Black President!!!

  • George Holoch

    Once it is known, as it should be by now to everyone, that the company does nothing to serve its clients, why would anyone do business with Goldman?

  • George Gonos

    The Goldman Sachs, the executives should be presented with the name of one baseball player who isn’t in the Hall of Fame – Pete Rose. Rose is not there because he famously “bet on baseball.” So why is that so bad? Well, here are guys that bet on (against) their own investors, and the U.S. economy as a whole. But they don’t believe they deserve any punishment.

  • Joe

    Should we blame the sharks for being sharks or should we blame the people who let the sharks out of their cages?

  • Dean

    Goldman Sachs ought to be renamed Bialystock and Bloom. This scam smacks of the one in Mel Brooks’ “The Producers”! Creating and selling a product that can’t possibly succeed in order to make money must surely be illegal.

  • Bernard B

    When Ms. MacClain speaks of mortgage backed instruments, she misleads, unintentionaly. When Levin speaks of synthetic CDOs packed with loans, he is also off. There were no mortgages. These were simply (or coplexlly) bets based on how somebody ELSE’s melded, sliced, and diced mortgages would behave. Pretend mortgages, houses in the air. Non productive and destructive capitalism. One estimate is that there were one quarter of the horrible mortgage instruments, and three quarters of the vacuous things.
    And so far they (the govt who stood around while it happened) are trying to convert the cancer into a benign tumor — still a parasitic growth on the face of capitalism.

  • Ellen Dibble

    Goldman Sachs shorts something like 12.5 billion in 2007 and came out ahead half a billion, if I recall correctly, so there would have been counterparties, people WANTING to buy that junk — as the caller pointed out, they told us all day yesterday; buyers WANT to buy junk; they ask us for it — there would have been 12 billion of junk sold to those eager to have that risk.
    Hmm.

  • Nancy Scariati

    These guys need to be convicted and put in JAIL.
    Three strikes and your out!
    I’m sure these BIG corporations (who now have the rights of an individual), can be found on three counts, stripped of their constitutional rights and sent to jail!!!
    The jails are full of small time career criminals. They should be let out and the GUYS who destroyed our world economy should fill the cells instead.

  • Lisa

    Has there been any investigation of collusion between the institutions creating these “products” and the rating agencies? These questionable products were rated highly? Were the rating agencies incompetant or conspirators?

  • Quincy

    Why is it so difficult for the politicians, regulators and enforcers to understand – millions of people have lost their jobs, their houses, their savings because of the shenanigans and insider actions of a few. We want the bosses of these firms that were responsible for this mess to also lose their jobs, their homes and their savings. Yet, they are still employed. Not only that, they have gotten raises and bonuses. Year on year bonuses that are more money than most people make in their lifetimes!

    I am ready for the populist demagogue to lead a mass revolt against this system.

  • Jason

    If investors read the perspectives of the investements, it clearly stated that Goldman Sacs can bet against these investments at any time.

  • Bryan C. Andregg

    There are stringent rules about inside trading for public companies that produce tangible and sometimes intangible products. If I sell stock before a damaging review, or before a bad quarterly report, or before the announcement of a shipping delay, I am in jeopardy of being charged with insider trading. Goldman Sachs, and Wall Street generally, created products and then traded against those products (shorted) before the public market had the same knowledge. Is this insider trading?

  • Mark Loomis

    Why are you in the media so enthralled by the Kabuki theatre of these “grillings”? Did you see Blankfein smirk to his associates between questions? Does a couple of hours of those on Wall Street squirming uncomfortably on camera equate to the discomfort of us on Main Street losing our jobs and maybe our homes? Please start applying some equivalence…

  • http://www.filipinoboston.blogspot.com akilez

    Now Greece is Broke another recession for the entire world to bare for a long time.

    How can these people who make hundres of thousands can just do these to ordinary people like me.

    I CAN’T even get loan for couple of thousands to buy my daughter clothes,shoes and pay her after school programs. I have to work my ass off because 2 thousands almighty dollar cannot be given to me as a loan by these Greedy,Arrogant and Corrupt banks of the United States of America.

    While Goldman and Sachs is laughing all the way to the Bank.

  • Yar

    Obama could bring the argument to regulate Wall Street full circle by appointing Elizabeth Warren to the Supreme Court. She is the most articulate voice I have heard on the need for a consumer protection agency. This would put the debate front and center through the summer, and maybe all the way to November. In the chess game of politics I would say she is a queen. It would be a bold move. I think the average six-pack Joe will agree with plain talk from Warren. I don’t know anything about her politics but she sure makes a lot of sense when she speaks.

  • elle

    1. as stated, Goldman created these securities specifically at the behest of one favored client specifically in order to find other clients to put in the position of losing money.

    2. More impt: is it not the case that these securities were AAA rated? So should a pension fund realize that they were doomed to fail? Or more to the point, didn’t the conflicts/corruption in point 1. and in the conflicted ratings agency–goldman relationship put Goldman in a position or more responsibility/culpability
    than just an entity who puts two players together?

  • Craig Rodby

    The issue is whether Goldman should be held to SUITABILITY standards or FIDUCIARY standards.

    Right now Goldman is following suitability; i.e. do the buyers have the BACKGROUND AND TRAINING to make an informed decision. This is the standard when you are a market maker because you must take into account the interests of BOTH SIDES; i,e, they are both clients.

    I do not know how a fiduciary standard, which is what the senators seem to want could ever work.

  • Ellen Dibble

    The president wants exchanges and clearinghouses, and I think that will replace the rating agencies. If some deal gets registered as being a deal, it would have to be “cleared” for what it is and daylighted for everyone, and Moody’s et al. will back up somewhat.
    Maybe in future a rating agency can’t be calling me and calling me trying to charge me $500 for checking that I paid my electric and phone bill for the last 40 years. They wanted to know all my regular bills, and thought it was definitely worth that much to me to have them evaluate that. I talked to several levels of management. My business continued without their vote of confidence.

  • Gary

    The caller Sam states that all are equally guilty for the investments they make. This is false because the financial industry has ALL money captured into their vortex of exotic instruments. The average American no longer has a pension plan, but were FORCED into 401k’s. No one wanted their mortgage chopped up and sold into some oblivion.

    Our money (unless we keep it in our mattress) is subjected to the whims of Wall St. in a form of servitude…there is no other place to go with our money where it is out of their reach!

  • Richard Haedrich

    So I need a used car. “It’s beautiful” says the salesman, and it is. Bright and shiny. He doesn’t tell me that the engine’s shot, the fuel tank leaks and the brakes are about to fail. His mechanics say it’s beautiful too, but he suggests I get an independent assessment and recommends a nearby shop. “A good guy” he assures me, “We play golf together”. And that shop says the car is fine. So I buy it, and then I find out the dealer has bought a $100,000 life insurance policy on me! What are the ethics here? Would I have been better off to skip the car and invest the money in Goldman Sachs?

  • ebertozzi

    Tom: I don’t care if Goldman cheated its clients. I care that I and other taxpayers had to bail out Goldman so that Goldman’s partners could continue to get lavish pay. It’s obvious that Geitner et al did not negotiate so as to protect taxpayers’ interests when the deal to support Goldman was made. The new legislation should make it clear that there will be no more giveaways when the next meltdown occurs.

  • Mark

    Your guests are understating the allegations in the SEC complaint. Paragraphs 46 and 47 allege that ACA specifically asked Tourre what Paulson’s equity position was and Tourre emailed back a misleading summary that showed Paulson was actually long by $200 million.

    Yesterday Tourre very carefully avoided any mention of the emails so as not to perjure himself.

    I don’t understand why the allegations of this 22 page complaint have not been more accurately reported.

  • sean

    What are the chances that the Obama administration knows that what Goldman did is technically legal. know that they will loose in court and it is a political move to gather popular support for the wall street reform bill based on the ethics of the case?

  • Felice

    The notion that it’s ok for Goldman to have have sold financial packages that they knew were likely to fail (since their bet against their success)is like Toyota claiming that it’s okay to produce faulty cars because of course all machines have some small percentage of mechanical failure. Customers know some cars have problems, so Toyota should be off the hook? I think not, and the same expectation of quality and transparency should apply to the financial sector. Lives hve been destroyed because of the financial “games”–and they are not GAMES to most pensioners–that were played on Wall Street with real people’s hard-earned money. These guys need a lot of jail time. Society needs to see some justice done here, not a slap on the wrist fine that the fat cats can easily afford.

  • Gail Weston-Roberts

    After listening to coverage and analysis of multiple financial collapses dating back to the Savings and Loan debacle of the late 80s, I am convinced of one thing. We will continue to have “surprising” meltdowns that endanger our society’s welfare as long as 95% of Americans know next to nothing about finance and money. Your observation that the Congressionals and the financiers in the hearings yesterday seemed to be speaking “2 different languages” is an example of this. I’m an intelligent and well-educated adult and yet am at sea whenever a discussion of market behavior is discussed; unfortunately, it’s obvious that most governmentals responsible for regulating the market are also insufficiently educated to really do this vital task. Our democracy will be much safer when we tackle money problems the way we’ve begun to tackle health and nutrition problems: start teaching children how this part of life and the world works, starting in elementary school. Don’t leave such central “infrastructure” education only to those MBAs and stock traders who choose this as their profession–we all need to understand money.

  • http://www.adirondackgoodboat.com mason smith

    Could we hope for the concept that insurance can be bought only by the owner of the thing insured (and of course that insurance companies must keep reserves of a reasonable percentage of their liabilities)? I see that Wall Street is a place to bet for or against various kinds of things; but surely not a place where somebody else can “bet” that my house burns down. When the investment banks started buying insurance (in the above distributed-risk sense) on extremely risky assets, far, far removed from the people’s houses they were based on, I thought there was something already wrong. The bubble was admitted to exist. I would suggest that perhaps it ought not to be possible to buy insurance on as opposed to sell short) stock or bond values. Let the market do its thing without these cynical “products,” CDSs.

  • Dennis Kerr

    Can we, a free people, develop an honest system? Or will we be pushed around by a narrow range of people who want to stay dominant, at the expense of everybody else?

    This question is; Who are we as a people? Are we strong enough to be honest and fair? Or will we cave into dishonest people who use fear and hate to stay on top?

    I want us to be a strong and fair people, who our neighbors with money will trust enough to invest. There is more money out there to make our economy move than most people could ever imagine.

    If we can’t even attain fairness on Wall Street, will we find it at the workplace, or in the hospital room? Will other people from other countries want to cooperate with us, even if we have the military might?

  • Natalie

    What I don’t get is how these guys were able to keep their composure in the face of such incredible ignorance, similar to what’s on display here.

    You fundamentally don’t understand what this business is. As market maker, Goldman’s role is to find a price, the best price they can for their client. It is the client’s responsibility to decide if the investment has value especially since they can see through to the underlying securities.

  • Gina

    I watched the hearing yesterday and applaud Senator Levin and team – they did an excellent job of driving home key points. How Blankfein could state on one hand that “client trust” is key to their success and on the other sell “shi$$y deals” sums it up. They knew exactly what they were doing; they knew what junk they were buying. This is a firm who admitted they perform “extensive research on any financial package they sell” but they “couldn’t recall” the particulars of any package they were questioned on? I don’t buy it. I am also offended with the condescending attitude – that these are “so complex that we ignorant Americans couldn’t figure it out along with the fear rhetoric “if we are regulated, we won’t be able to lend or compete and America will be compromised” is pathetic. That people continue to buy into it just shows how far this has gone. I just wish everyone would focus on Blankfeins comment “we didn’t make a lot of money on that deal” – apparently, 2.5 billion isn’t a lot of money.

  • pw

    I’m really interested, on a day-to-day basis, in the people’s reactions to everything from Goldman to the fake WMD’s. All the way along, it seems to me, we knew to a greater or less extent that we have been investing — money and/or political confidence — in dirty deals.

    We have tended to look the other way, whether that’s because we own a piece of the action via our 401(k) — okay it’s bad and we know it but it affords x percentage of nice income, or because the guys fronting the WMD story are on our political team and we don’t like to admit they’re liars.

    In other words, the “ruling class” of America is supposed to be you and me. If we don’t take the responsibility of constant vigilance and non-partisan cooperation in oversight, we get WMD’s, Goldman, Katrina, and a growing media so corrupted that just getting the facts is nearly impossible whom we — nonetheless — reward with our attention and their sponsors with our bucks.

  • Tork

    The whole conversation has centered on the damage to the “sophisticated” investors. What about the harm done to the rest of the American public by Goldman’s snake oil salesmen? That’s the really egregious aspect of their fraudulent business practices.

  • chris

    Did anyone ever think about the fact that GS was selling toxic products? Just as if a toy company was selling poisonous toys, isn’t GS responsible for the quality of their products? If the purchase of a GS product makes a person lose all their money, and GS sold it to them with bad intentions, GS is responsible, beyond just mere ethics…It is illegal to sell poison if you know the buyer is going to eventually drink.

  • Ellen Dibble

    I’ve got to see what happens when municipal employees and others with guaranteed 8% pensions are living on easy street, and governments are pulling out teeth raising all sorts of taxes to keep up with that guarantee, given the weakness in the instruments involved. And meanwhile on the same “easy street” are those withOUT guaranteed retirements, with 401(k)’s that were used as backstops by in some financial deal, resulting in 20 to 80% loss, rolls of the dice.
    Will the retirees ignore each other, or start to think in terms of fairness.

  • http://www.filipinoboston.blogspot.com akilez

    How can an Investor be Guilty for Buying this piece for crap deal?

    Well, have you read and signed a contract that is 20 pages long. Who will read these contracts not even the smartest lawyer from Harvard cannot undertand the fine print.

    Don’t be so Hyporcrite about your comments. You and I know that No One Ever read a 20 to 50 pages of contract that the bank want you to sign.

    Sub Prime mortgages contract look for one and read it. if you can undertand them.

    The Boston Man who blow the whistle of the Sub Prime mortgages Evil deals said He cannot even understand what the contracts is all about.

  • Natalie

    Sophisticated institutions utilizing Goldman’s market-market capabilities understand what role Goldman is limited to. For example, when you go to Schwab to buy Johnson & Johnson, do you think it should be Schwab’s role to tell you they don’t like it and they are shorting Pfizer because they are long Merck.

  • Tom Greene

    In his opening remarks, Mr. Goldstein mentioned that the “old Goldman” would not be involved in the type of deals that the present day Goldman is doing. Is this a reference to how Wall st. has changed following deregulation and repeal of Glass-Steagal?

    Secondly, the financial collapse started with the failure of subprime mortgages. Please explain Goldman why would be packaging and selling these bad mortgages. It seems to be just making a bad situation worse.

  • Brendan

    Ironic to see senators railing against conflicts of interest while they have no will to attack real campaign finance reform. The reason we have no regulation is wall street like most industry has bought the ear of the government.

  • GMG

    Can we use existing antitrust laws to break up these institutions? If so, does Congress need to do anything, or could the SEC do this on its own?

  • Bernard B

    The too big to fail is partly a bogus business. 5 200 bil cos in trouble are similar to 1 trillion dollar op. In ’32 it was bunches of little banks that brought disaster. Not such a simple question, and partly driven by natural, emotional hatred of most giant corps (which I share).

  • Natalie

    Beauty is in the eye of the beholder. If I think somebody else’s junk has value, then why can’t I buy that junk. Plenty of money has been made buying debt at 20 cents on the dollar (crap) because one sees the potential to sell it at 23 cents.

    None of these instruments was sold to retail investors. And the guys who did buy it, had teams of lawyers go through the deal particulars.

    Name one client of Goldman who has sued the firm because they felt the facts of a deal were misrepresented. Should be easy given all the facts you guys are using to condemn them.

  • http://none E. Stamas

    I agree with everyone advocating reform. Just because lots of people try to cheat the innocent or poorly informed or desperate people by charging extremely high interest rates, selling used cars that are going to soon breakdown, selling homes that are not up to code, or thousands of other scams that occur, that doesn’t make these activities legal. Whoops, in some cases they are legal because legal loopholes are found and used by sneaky, greedy people who love money. But lets look at the larger issues: We NEED REGULATIONS to protect little investors who are forced to invest their IRA or other retirement savings somewhere. We need to protect debtors from usury so they can pay back their debts and not go bankrupt or loose their homes. We need to force banks to do the business of loaning to small businesses so that new jobs can be created instead of creating money out of thin air.We need to realize that for the common good we need to find ways to stop greed and work together for the common good. That’s not socialism it is common sense. Without regulations that are enforced by the government fairly we are in danger of bankrupting our entire economy. This is far more serious than many people realize.

  • Jim in Omaha

    What Goldman and every other “investment bank” did would be considered fraud in every area of our economy EXCEPT Wall Street. Calling what they did “betting” is way too generous. Analogizing it to a horse race, they secretly trained all the horses and employed all the jockeys, then used that private information to place their bets, while at the same time disseminating knowingly false information to the rest of the bettors. We would call that fixing the race. Gamblers throughout history have been shot and killed for a lot less.

  • Martin Field

    When the one Senator was calling these guys bookies, I so wanted them to respond, “Hey if we’re bookies, you’re prostitutes for campaign contributors… just saying.”

  • Bernard B

    The only study I am aware of (industry commissioned) indicated that the great majority of trouble mortgages involved falsehoods by the home buyers. The corruption (greed and stupitity) is not just rotten corporations (corruptorations?) — it is us.

  • Ellen Dibble

    Free money out of the Feds is going to banks who use it for casino capitalism rather than getting it to Main Street. And it is pointed out that it is the taxpayers who are funding the huge surge the banks are enjoying right now. And the employment statistics tell eloquently how well this is working.
    Natalie, if the banks were less diversified, didn’t have so many aspects of business, they would be less capable of being such oligarchs, and less capable of playing one trench of interests off against another.
    But you’ve got a root question there. Goldman Sachs is considered as strong as it is because of the quantity of information it has and its ability to get that information in every corner of its operation. So it’s interesting that they do not consider the effect upon (a) the national economy and (b) the effect on clients, stupid or otherwise.
    I do remember hearing starting about 2001 that there would be no more bubbles, that banking algorithms (or something) meant all deals would even themselves out. Yes, but that was on the appearances side. Things would APPEAR to go steadily up.
    The real economy was not lifted and moved ahead, and that should be a professional mantra akin to “First do no harm,” the physician’s mantra. Maybe citizens need to insist upon that to their money managers, who can relay that up the line.

  • tom shapiro

    The revelation that Goldman was selling securities that it was internally characterizing as a word worse than junk, is particularly inexcusable in light of the analyst conflict of interest scandal of a few years ago in which it was uncovered that securities analysts at major financial institutions were recommending stocks that they disparaged internally, all as part of schemes to curry favor with companies in order to obtain lucrative investment banking business. Given this history, and the substantial regulatory penalties and class action settlements resulting from that deceptive conduct, Goldman can hardly claim it saw nothing wrong in what it was doing.

  • Bernard B

    I think E. Stamas is right in rasing the issue of usery. Congress has failed us in allowing 30% interest rates. Killing usery and eliminating huge classes of derivatives would do a lot of good (although the latter problematic in the context of global competition). Abe Lincoln’s first or second public pronuncimento included a discussion of the desireablility of making usery illegal. Republicans take note!

  • Oh Yeah

    Natalie,
    Get real!

    Lot’s of successful people don’t understand investing.

    They have money and they want to put it to work… Sooo, they hire a financial advisor who they PAY WELL to handle their money and do what’s in THE CLIENT’S BEST INTEREST!

    Goldman Sachs was asking their clients to trust Goldman advisors as people who would put their clients hard earned money to work, and would do it in a way that benefited the client!!!!

    These investors aren’t typically saavy about investing, THAT’S WHY THEY’RE PAYING A BROKERAGE HOUSE LIKE GOLDMAN GOOD MONEY TO HANDLE THEIR INVESTMENTS FOR THEM!!!! THEY BELIEVED GOLDMAN’S BUSINESS PLEDGE!!!

    Natalie,

    you’re point of view would only be valid if the investors were investing on their own… IT IS NOT VALID WHEN ONE CONSIDERS THAT GOLDMAN WAS PAID BY MOST OF THESE INVESTORS TO MAKE WISE INVESTMENTS ON THEIR BEHALF!!!!

    … INSTEAD, GOLDMAN DUPED THEIR OWN CLIENTS, USING THEIR MONEY AS FODDER TO FATTEN THEIR OWN PROFITS!!!

  • Ken Hammer

    My outrage comes from listening to Congressmen piously attacking others to shift blame from themselves. Sure there are bad guys in banking (as in every endeavor). We establish governments to protect the general populus from bad guy activity; not to preach about behavior they were supposed to prohibit.

    Government banking regulation since the ’50′s has directed banks to lend depositor funds to ever-less-creditworthy borrowers. The quality of typical home mortgages has decayed from 6% fixed, 20 year, 20% down for solid wage earners to 3% variable, 40 year, 0% down for anybody with regulatory encouragement. Add to that the activities of Fanny Mae and Freddie Mac as the ultimate purchaser of a lot of that packaged junk. It is no wonder we had a housing crash. Where were the regulators? Why are Fanny Mae and Freddie Mac not high on the list of transgressors?

    Government activity has inspired a general ethic in financial circles best described by President Clinton when he declared “if it’s not against the law, it’s alright”. No it wasn’t. No it isn’t. No it will be.

    We need not only reconstructed financial regulation but restoration of competence in administering the regulation of both Government and the private sector.

  • Natalie

    Banks are also buying a ton of Treasuries keeping interest rates down which helps the Fed’s interest expenses and keeps mortgage rates down. So they are codependents.

    Goldman analysts don’t make calls on issues it makes a market in. I challenge you to find one published report by a Goldman analyst that says this stuff was unworthy of investment. Goldman has a sell on New York Times stock right now, does that mean no one should be able to buy New York Times stock through their Goldman broker or are you responsible for making your own investment decisions?

    Junk refers to the quality, not the potential for profit. I think the New York Times is junk but the stock could be undervalued.

  • http://www.filipinoboston.blogspot.com akilez

    How will the Government help us?

    Give every American $100,000 loans and every month We gather in the Park or City Hall to fall in line to pay our monthly payment to pay off that loan. if the person don’t have cash. He/she can trade cows,chickens or goat to pay off the loan?

    Simple Bank Reform in a primitive way.

    Just like the old Roman ways to collect tax.

  • Richard Jablonski

    Subject: On Point 4/28/10 Show re Regulation of Derivatives

    For your guest’s consideration, I suggest the following be incorporated into the proposed legislation:

    1. Only “second-order” derivatives would be allowed. Second order derivative are defined as packages of primary securities or other investments, both of which have direct material and assessed value. “Third-order” or higher order derivatives would not be allowed.

    2. A risk calculation of second order derivatives must be computed and published by the creator of the derivative. This calculation would be a quantity-weighted sum of each of the primary securities held withiin the second order derivative. The result would be a weighted average rating of the entire second order derivative on a scale such as the one used by rating agencies such as S&P.

    Weight-average calcualtions are widely used within the engineering, scientific, and social science industries.
    There are variations of the formulae used to compute such averages. Other computed descriptions of the dimensions of securities risks could also be required by the legislation. For example, it could be required that the “range” of risk of securities held within the derivative would be published,too, e.g. “the most risky security within this package is CCC and the least risky is B+”. Another descriptive statistic could be the “modal value” [ the most frequently occuring value withn the package ].

    All the above statistics can be quickly and inexpensively computed, due to the power of the computer and its software.

    One complication may need to be considered about which I am insuffciently knowledgible to suggest how it might be addressed. This is the change in risk of a second order derivative after its initial rating. For instance, if such a derivative was an assemblage of individual residential mortgages, how would a investor some time after the initial rating know what the current risk is? What if the values of some of the components of the package go up and a few others go down? What is the current risk and who would be responsible to assess the current risk of the components?

    Food for thought // Richard

  • Natalie

    Oh yeah, you don’t understand what a market maker is, clearly.

    It’s not an investment advisor.

  • Oh Yeah

    Natalie,

    You don’t understand who most of these duped investors were, and how Goldman came to have their money in the first place.

  • Oh Yeah

    The losing investors weren’t Goldman’s “sophisticated” investors, they were the poor suckers who trusted the Goldman financial advisors (who they were paying) to act in their best interest, as promised.

  • Natalie

    Name one duped investor. Name one duped investor that is suing.

    The fact that you think Goldman had their money reveals your lack of comprehension.

  • http://www.filipinoboston.blogspot.com akilez

    Natalie so Emails that the Senators has on file are not true. That Goldman and Sachs were talking about it and
    How it will fail tremendously.

    Yes Banks are buying treasury bills but also the Poor Americans not by Millions or Billions but the amount they can afford a few thousands to invest at the treasury.

    You sounded like you just received a Whopping Bonus from the banks but given by the American people.

    Who side are you? The people that you work for that stole money from the American people or To the people who saved your employer.

  • Oh Yeah

    Good grief Natalie,

    stop arguing about something you are obviously totally ignorant about!

  • http://www.filipinoboston.blogspot.com akilez

    Natalie How can Dupe investor sue Goldman and Sachs
    when that person is totally broke?

    How can a dupe investor sue a Bank with no money while the bank has lawyers they can afford to pay.

    Will you fight a Bank in court? I won’t

    Hypocrite question with a hypocrite answer. “wink”

  • Oh Yeah

    Plenty of fraud suits are being filed against Goldman.

    Pension funds, other banks, the SEC, investor groups… more will come.

    Do a search for “Goldman Sachs sued.”

    Natalie is in LA LA LAND if she thinks it’s hard to find an investor who thinks they’ve been duped… thus her plea to “Name one duped investor. Name one duped investor that is suing.”

    Watch the lawsuits and quiet settlements speak for themselves.

  • Chris K.

    Excellent – & depressingly – ‘on point’ commentary here. Most if not all the commenters have an excellent grasp of what is happening & about to happen as far as REAL regulation is concerned after this current ‘dog & pony’ show is over: nothing.
    Nada.
    Zip. Like the credit card company “reform”….. & health casino “reform”…. there is no realistic hope of actually passing and enforcing checking & balancing regulation of those corporate interests who write the checks which account for the vast majority of balances in campaign & advocacy coffers. Congress cannot and will not fix ANYTHING, including the revolving door between public office & lucrative corporate “consultancies” -
    until WE Fix Congress First. Our corporate-plutocrat-dependent Congress is ‘drunk with unaccountable power and it’s time for an intervention’:
    http://www.fixcongressfirst.org/blog/entry/how-to-sober-up-washington1/

    Congress won’t – they can’t – do it on their own. You want real democratic (small “d”!) representation? Get involved now… or forever hold your peace after the Fall.

  • Natalie

    I’m thinking that getting a lawyer to work on contingency against a defendant with $5 billion in their bonus pool would be a piece of cake, especially with the case being such a slamdunk.

  • Richard

    Natilie, please tell us bloggers if you are employed by a bank, investment house or the like. Or if your spouse,parent or other close relative is an employee of a bank, investment house …. Or if you are a lobbyist or attorney representing one or more such entities. It sounds to me you have a vested interest. Ps. You or a relative could alternatively be an ex-employee … Same qustions apply.

  • What?

    Natalie puts great conviction in her comments:

    In one post:

    “Name one duped investor. Name one duped investor that is suing.”

    In the next post:

    “I’m thinking that getting a lawyer to work on contingency against a defendant with $5 billion in their bonus pool would be a piece of cake, especially with the case being such a slamdunk.”

    … any contradiction in position there?

  • Liz B.

    Our world has become a giant ponzi scheme where the majority of the participants are allowed to pay into it without the hope of getting anything in return. These financiers and the gov’t officials are on top of this structure and are putting up this show on our expense.

    It is preposterous what these financiers got away with!

  • Tyne

    Nancy, You reminded us, “these BIG corporations (… now have the rights of an individual).”

    Then, at the end of the show, it was pointed out that Ben Nelson, the lone Democrat to vote against bringing this info to the next step, gets tons of money from Warren Buffet, who disagrees with what could become some of the legislation. Republicans & Democrats alike already get campaign money from Wall Street. Then the Supreme Court screwed us up SO badly with that ruling you referred to. HOW can we ever get campaign finance reform, essential as it is, because, in all likelihood, neither Repubs not Dems would want to lose their money trees. YET, the unabashed, almost crude fact that Nelson followed what became HIS money, when it is OUR money that is at stake, is…..BElievable! It’s NOT unbelievable; it’s believable!

    Meanwhile, I heard recently that Germany makes all its own steel for its manufacturing. Its citizens get fabulous health care and beautiful vacation time; yet, they are extremely productive…perhaps because there is investment in new technologies, not just in gambling schemes? HOW will this country correct itself without campaign finance reform; yet, how, because of what needs to be corrected, can we GET campaign finance reform?? We are caught in a vicious cycle!

    I was betrayed, on a personal level, in a parallel area of American money matters. I was just selling & buying something many, many Americans buy & sell when this happened. I was not trying to play at anything. I was just moving on in my life when I got targeted and “helped” all the way to my betrayal. I won’t go into details here, in part because it will trigger me; but that is what I want to add to this discussion. When people lose thru betrayal what they’ve spent energy & time & devotion to creating and improving, as I did, or, in the different arena we’re speaking about here, it can literally put you into post-traumatic stress syndrome (I do not use that term lightly. I use the term because of diagnosis). All the counseling in the world can, often, only help you learn to manage your feelings and knowledge about how you got betrayed, scammed, and, ultimately robbed of your life’s work and productivity. I’m sure that many of the non-financial world people who lost money or businesses or jobs, either thru individual investments failing or thru their pension plans failing in these areas we are discussing today, are dealing with the hard-cutting, deep effects of betrayal. Betrayal is constitutionally different than loss alone. The consequences of an unregulated market and of unethical behavior by professionals are vast.

  • Rob

    I agree that Congress should enact many of the reforms outlined by Former Federal Reserve Chair Paul Volcker because depository banks, which have access to the federal reserve’s discount window, are fundamentally not compatible with the operations of investment banks, who are market makers that take on a greater degree of market risk and have proprietary trading operations, private equity, etc…..

    However, the SEC case against Goldman Sachs has nothing to do with “fraud” against the American people, 401k’s, individual investors, and even public policy. This case is about whether Goldman violated the disclosure requirements of the SEC security laws and defrauded ACA Management, which at the time was one of the more sophisticated players in the CDO market and was actually the primary end investor in most of these CDOs. Here are the actual facts of this specific case.

    In 2007, Goldman created a product, a collateralized debt obligation, for a hedge fund client, Paulson & Co., that was extremely bearish on the value of US housing. This product allowed Paulson & Co. to make a bet against the value of US housing. Goldman then sold these CDO’s to investors (primarily ACA). There is nothing illegal about an investment banking firm representing both sides on a transaction. To make sure the product was vetted ahead of its sale, Goldman hired an independent company, ACA Management, to do just that. ACA released a report telling potential buyers exactly what was in there. Did Goldman do something illegal when it vetted the product, letting everyone know what was in it? Or were the buyers of the CDO’s just plain stupid for wanting CDOs backed by deadbeat mortgages in the first place? Investors, particularly more sophisticated ones such as ACA and Paulson and Co., need to be responsible for performing their own due diligence prior to entering on any transaction

    While I know Goldman’s arrogance makes a nice whipping boy for the mindless populist politicians on both the political left and the right, the root causes of the US housing crisis and our current economic problems are far more related to excessive overconsumption relative to income and the lack of any real savings rate in the US to the point where the US is forced to rely on foreign savings (generally from Asia) to fund this excess consumption. A large global market for these exotic financial instruments only emerged due to a tremendous global savings imbalance between the US and Asian economies, where Americans consume everything and save close to nothing.

  • Roberto

    Natalie–Appreciate your comments, but no matter what sophisticated investors were supposed to know/check, it is the little people who paid most of the bill: Jobs lost, savings vanished, tax revs. diverted (into GS pockets), political attention diverted from more pressing legislation, etc. I am just an ignorant citizen, but from my perspective, something stinks, and it needs real fixin’ — Ms. Warren’s straight talkin’ might just be part of the solution!

    Heck, even Harvard losing out (on CDO and its many other investments thanks to the meltdown) ended up chopping about 300 janitors and admin types off the feed bag — no faculty were fired, btw, and I saw neither hide nor hair about salary cuts at the very top of the heap (not even “symbolic PR” efforts like many CEOs who “declined” bonuses or took lower cash salaries (but lots of stock options…)). One could argue that H losses sucked investment income from really important institutional endeavors. Even if H says Financial Aid not cut, other budgets were.

    Exhibit A: postponing a major science facility for 10 years — the lower-income neighborhood it started digging up is now a construction hole (to be capped and turned into a park or skating rink, oh boy!), the businesses supporting that community were forced to move out (and nothing replacing them so residents now go that much further for food, sundries, etc), the delayed hiring (and economic impact) of incremental faculty/grad/technicians and, perhaps, the biotech solutions they would have produced for society.

    Argue all you want on the legalities but I disagree with you on the substance of what has been transacted. I fail to see the “societal benefit” of these crazy CDOs; just what is the “public good” these behemoths provide? Anything of substance has to have been negated by such examples of greed and deception.

    We have a mortgage, waiting until we had saved 15% down, bought reasonable sized place for fam of 6, scrimp to make our monthly payments, but we don’t eat out anymore, sold a car, etc. Nor can we “stimulate GNP” with a new TV, clothing and vacations. Instead, we are saving like mad for four college tuitions. We thot we were middle class but now are not so sure…

  • Natalie

    Rob, except this was a synthetic CDO so the actual underlying securities were only referenced and never changed hands. In addition, ACA was responsible for approving, and had unilateral veto rights, on every security referenced. Both Paulson and ACA had the ability to back out of the deal if they didn’t like the referenced securities. Goldman did not vet the securities except to identify the securities and that they met the criteria stipulated by ACA and Paulson.

  • Rob

    Natalie, Fair point I should have referenced that the underlying product was a synthetic CDO, rather than a CDO. My main point is that this SEC case has nothing to do with public policy, 401K’s, small investors, etc.. It is a very specific civil fraud charge leveled against Goldman by the SEC. By the way,on a day (yesterday) when the S&P 500 declined 2%, Goldman’s stock price increased. I think equity investors might be starting to question the quality of the SEC’s case against Goldman (or perhaps Carl Levin and the rest of the US Senate just looked that bad!!)

  • Roberto

    Natilie–let’s shift focus from blame to avoiding this meltdown again: Beyond better credit process, are you saying “no reform or new regulation is necessary” in the big bank arena? What prevents this from happening again? Can you spell out what you recommend?

  • What?

    … or maybe the market is betting that a business like Goldman, with its nearly bottomless pockets, has nothing to worry about in an election year… after the Supremely-Sold-Out Court ruled they could spend all they want on the next election, that is.

  • tom q

    Hello, just a response to some of these questions/comments on the show today,

    It seems to me that the bankers are going to keep hiding behind the definition of sophisticated investor.

    Which is:

    1) earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.

    2) have a net worth exceeding $1 million, either individually or jointly with his or her spouse.

    3) be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.

    These investors are considered to be fully functional without all the restrictions of the SEC.

    The reality is that many current financial products are designed by PHds in Mathematics and/or computer science. At what point do they become beyond the scope of a “sophisticated investor?” by the above definition, Michael Vick is a sophisticated investor.

    A second point on yesterday’s hearing regarding the Tom Montag email of crappy deal. I believe it was Mr. Sparks who responded that he thought it related to his performance on the deal. If this were the case, the follow up question would be what was he paid that year for such a crappy performance? I’d wager it wasn’t nothing, which happens to be what many Americans have ended up with.

    A third point related to what the bankers are hiding behind, also encompasses the high speed trading issue that has gone by the wayside. Many of these actions taken by plenty of banks don’t fall under the creation of liquidity or the capital market function. They are only ways to game a system. And they aren’t beneficial to society at large that these same bankers live in. While they may not be technically illegal, they certainly seem unethical.

    The bigger picture is that we aren’t seeing all the hurting Americans, factory workers or average people in the same light in America. It is these same CEOs that are taking home millions that are revered on magazines and have glowing profiles on news programs. Personally, I’d take one of their paydays if I had to take a mock trial upbraiding from Carl Levin et al for a day. Big deal, I think Mr. Blankfein’s $68 million payout in 2007 and $9 million for 2009 would allow him to keep a roof over his head and his heat on.

    In fact, there are talks within GS now to switch back to an investment bank format so they don’t have to be beholden to the rules of commercial bank holding companies. Which happens to be what they switched to when they needed a hand, but now want to game the system again to their interests.

  • MARK

    Folks, capitalism is a great system! No doubt! Corrupt capitalism is not!! It’s gotta go! Period!”

  • Tyne

    Natalie, When I realized I’d been betrayed, I searched for a lawyer. Not a single one would take my case to court. They all said, “take that company to court?! Hell, no! We get too much business from them on a regular basis!” I cannot tell you how many attorneys said this!

  • http://www.beccar.wordpress.com Eugenia Renskoff

    Hello, Tom, There has to be reform in the finacial world. Reform in favor of the consumer so that something like my experience in Atlanta, Ga (mortgage fraud, predatory lending and foreclosure) does not ever ever happen again. Eugenia Renskoff

  • Alex

    So what we’ve learned so far in the past 10 years about private enterprise is that corporate CEOs, accountants, bankers, investment bankers, all seem to grasp really well the difference between illegal and unethical.

    They will not hesitate to act unethically to make profit even if puts their client, the economy, and the entire country in danger. How come the population is still afraid of the Government and thinks the private enterprise is infallible?

  • Mary Ann Cantu

    Back in July of 2007, buried in the middle of the Wall Street Journal, was a short article wherein Moody’s claimed that a computer error accidentally rated these investment travesties AAA+. They wrapped themselves in the legally unassailable mantle of the Fair Credit Reporting Act, which states that in the case of an error, the reporting agency has a 90 day window to correct the error with NO civil liability. It is my understanding that the FCRA applies to Credit Reporting Agencies; Moody’s is a bond rating company. How credulous must one be not to smell the collusion all up and down Wall Street in this impeccably Machiavellian dodge?

  • Impeach Obama

    Is Obama going to give back the $900,000+ he took from Goldman Sachs in ’08?

  • Josh C

    On Point,

    Every time you go to commercial you play an electronica trance tune. It’s driving me CRAZY! What is the name of it?

    Thank you,

  • Al

    Given that for some of the products being discussed neither party in the transaction owned the security on which the transaction was based (synthetic)the products do seem to represent gambling. Gambling is a regulated industry. Why don’t gambling laws apply?

  • a democrat

    Once again Republican obstructism and failure to support controls and ensure accountable in the market is more of the same behavior that contributed to the
    market meltdown and spinning out of control to begin with…Plus it threw mill-
    ions of innocent workers out of their jobs and indeed out of their homes.

    No one should rely on Wall Street again or their apologists in the GOP to protect ordinary and honest Americans. They are a disgrace to the “we the people…” and should be sent into retired and put out of bussiness .

    It is terrible the Obama Camp are trying to cut a deal with them. People won’t
    accept his compromises and his bill as representing a moral good and an in-surance policy for the future….He should stick to his guns and allow the Amer-
    ican people to see what a corruption of the system the GOP is in of itself…..

    It’s time for a new party….toss the Mitch Mc Connells and Mc Cains and Joe Leibermans and Greggs overboard.. Disgusted, a democrat

  • ex-banker

    Here’s the problem: Its fine to be a market maker and you may have adverse positions on many sides – that’s part of the game. But when a “market maker” or trader starts to play investment banker and issue securities like CDOs and synthetic CDOs etc they start getting into the new issues business which has been the purview of investment bankers and capital markets professionals. There should be a process where a new issue goes through a “commitments committee” process where proper controls over risk, reputation etc are evaluated. Sounds like this does not exist in the trading culture at GS.

  • Bush Beater

    Impeach Obama,

    Yes he will, shortly after Dubya gives back the thousands of lives he squandered in Iraq pursuing WMD. Mission accomplished, y’all!

  • cory

    Alex at 225pm,

    I absolutely LOVE it! Great comment for the tea baggers and neocon wannabes to contemplate!

  • david

    Let me see if I understand this mess.
    Goldman Sachs had a pile of crap on their books. They knew this crap stank to high heaven, but everybody was into crap. They were making money at it. One day the stink got so back and the smell was really fixing to go sour. Goldman descides to get rid of their crap before the bottom falls out of the crap market. Everybody was into buying crap, so they found somebody to but this crap. I am sure the buyers knew that AAA crap was still crap, but everbody was buying crap and making money at it. The bottom falls out of the crap market because somebody woke up and said this stuff stinks. To late!!!
    I think they all should have had to eat their own crap and not dump this crap on us the taxpayers.
    Yet!!! the big question is this???? Where did they get this crap and who made it???
    The makers of this crappy mess should also be held accountable don’t you think??
    Quess who they are??????

  • Impeach Obama

    Why is Goldman Sachs being singled out by the Obama administration when other Wall Street firms were engadged in the exact same practices? Even today, in this country, Jews are being scapegoated!

  • Natalie

    I don’t get all the whining about big boys making bad bets and yet everybody loves the lottery and OTB, which, let’s be honest, only serve to separate poor people and their money.

  • david

    The SEC is the government agency that is suppose to keep an eye on these types of deals. Where were they?? downloading porn I hear. Nobody got fired either. Now they have a new reform bill on the table that creates a new government agency on top of the one we already have.
    Government is so impotent it cannot enforce the laws that are in place, so they grow government and create more expense for the taxpayers.
    This may be another government takeover in the works, this time they will own the banking system.
    When government enters, freedom leaves.

  • Benjamin Stewart

    Hopefully the new guys will spend their days watching porn also.

  • Moises Leiferman

    To make the Goldman Sachs to a regular person, it was somehow similar to a sports coach, training the team on purpose to lose, betting against the team but asking the fans to cheer and bet for them.
    In the conversations held today there were two key words mentioned by the public and the special guests “their clients”. In this circumstances Goldman was not offering a product to the market, it was servicing its clients, which has implicit provide them the information to allow both profits and not the company taking advantage of their clients.

  • Brian M

    For some reason, this episode also does not seem to have been posted on the podcast. Oversight or technical glitch?

  • Alex

    “I don’t get all the whining about big boys making bad bets and yet everybody loves the lottery and OTB,”

    I play the lottery often, which puts noone in danger. The “big boys” almost tanked this entire economy. Even Bin Laden did not come close.

  • Oh Yeah

    Natalie,

    Why don’t you let me play the lottery with YOUR money, since you see no problem there?

  • aletheia

    wish i could ask ms. mclean, who seems to think the political will does not presently exist to re-create the separation of profit-making from investor-advising corporations, what she thinks of sen. bernie sanders (I-VT) efforts to break up the big banks, etc.:

    http://sanders.senate.gov/newsroom/news/?id=63523db2-5cc8-4e0f-b352-6090e1270810

    and it would be interesting to have bernie on the show. apparently he is getting some media attention at the moment for his financial reform proposals.

  • http://tnns.org/credit walt

    Yep, Goldman knew they were selling junk and did not disclose this to the buyers, but let them believe it was all AAA quality. Then positioned themselves to profit when it came down – knowing that it would come down. That is maximum crime.

  • http://tnns.org/credit walt

    Look for the “Hat Trick Letter” by Jim Willie at “The Golden Jackass” — this guy knows what is going on & tells it like it is.

  • joshua

    look at them in their Nazi uniforms–red and blue ties–I’m so sick of this uniform–this pathetic strategy to tell us how patriotic they are–this includes all aristocrats and politicians.

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Aug 20, 2014
A man holds his hands up in the street after a standoff with police Monday, Aug. 18, 2014, during a protest for Michael Brown, who was killed by a police officer Aug. 9 in Ferguson, Mo. (AP)

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Aug 20, 2014
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