Photo: Billionaire John Paulson Acquires an Alan Greenspan. Next Paulson Is Planning On Getting A Ben Bernanke. He Already Has A Timothy Geithner
God help us to survive these unholy unions.
Here Is Why We Need Financial Reform Today
What Goldman's accused of in plain English
Today’s WSJ has a fantastic, plain English explanation of what this whole John Paulson, Goldman fraud fiasco is about. Here’s my even more plain-er English explanation of their explanation:
1. Paulson and Goldman team up with ACA to create worthless mortgage securities to sell to other investors.
2. Paulson buys worthless insurance from Goldman.
3. Goldman buys worthless insurance from ACA.
4. ACA buys worthless insurance from RBS.
5, RBS got $45 billion from UK taxpayer in bailouts of which about $1BB apparently went to ACA to give to GS to give to Paulson.
This is the exact same scenario that I’ve long been railing about- the US taxpayer gave AIG $160 billion of which it gave $13 billion to Goldman because Goldman still had that much worthless insurance that AIG had promised to pay on…and then Goldman, of course, had to give almost all of that money to other billionaire hedge fund investors like Paulson that had bought other worthless insurance on other worthless mortgage securities that Goldman had packaged and sold them.
Remember a long, long time ago, when I answered the question “Where’s my money” from all these bailouts going to and I said, “To billionaire hedge fund managers like George Soros.”
Well, John Paulson is exactly who you bailed out since he placed a levered-up bet at a corrupt casino called Goldman that was never going to be able to pay out all the bets it was taking on.
On a somewhat related note, I’ve been waiting to see these cracks finally start to develop and for the tide to start to turn formally against all this bank welfare and towards bank prosecution…we’re now here. These giant Wall Street welfare banks are cracked now. I’ve got a short idea or two from that sector that I’m adding to the Revolution Investing model portfolio in tomorrow’s edition.
Ex- Greenwich Time Investigative Business
Reporter Teri Buhl Filed This Report
Maria Bartiromo: Forget About The Fraud Charges, Is Goldman Morally Bankrupt?
Maria Bartiromo wants to know if Lloyd Blankfien, CEO of Goldman Sachs (GS), is the head of a bank guilt of fraud, or merely one that's morally bankrupt.
Yesterday in front of a packed room of New Canaanites, Bartiromo, who was there to pump her new book The 10 Laws of Enduring Success, instead was forced to first answer questions about what she thought of the fraud charges the SEC brought against Goldman Sachs on Friday.
Bartiromo told the Connecticut crowd, that smelled a little of old money privilege that, “This case is a very big deal and will open a can of worms.” The wide-eyed silent crowd then listened to her extol a simplified version of the case where she lays out it’s important to remember this is all alleged “right now it’s a he said she said set of accusations”. Then she gives them that glistening smile and says, “The question is where’s the fraud? On the face of the case I don’t see it yet.”
Henry Blodget, Editor In Chief of Business Insider, posed a similar argument, detailing the legal merits of how the tainted CDO transaction was set up and reminds the reader that much of what Goldman did by allowing a hedgie to help build a CDO he thought would fail and then sending him off to work with a third party marketer to create the CDO while misleading the marketer about the hedgie’s role in it – isn’t really illegal – yet.
I asked Maria during the Q&A of her book talk, if she were interviewing Blankfien right now and had only one question she could ask him, what the most important thing she wants to know is. Bartiromo said, “Let’s just take out the fraud allegations because they haven’t been proven yet. I’d ask if he thought what he allowed his firm to do was appropriate behavior towards their investor clients and was it morally ethical?”
The crowd gave a cheer from that response. [And Lloyd if your reading it’s a question many observers also want to know so please we welcome your comments here.]
Bartiromo also told this reporter after the talk “I’m also questioning the timing of the SEC announcing fraud charges against Goldman. Why did they do this during market hours, which would of course dictate trading and market activity- so the entire industry gets tainted?”
Good Question. It’s clear the new SEC, run by Mary Shapiro, is trying to regain investor confidence and acting harsher than we’ve seen in the last decade. Some might call it actually doing their job. But as Blodget wrote today, there might not be harsh enough securities laws created yet to get a hefty settlement from Goldman. This leaves us with the question how will the public court of opinion react. Will pension funds allow their managers to buy financial products from a bank they don’t know if they can trust what they’re putting into them? Will endowment funds choose not to invest with Goldman because they’ve now seen behavior they consider morally bankrupt? We don’t know yet, but it sure is going to be interesting to watch.
Bartiromo left her New Canaan audience with this thought, “This case is going to be critical to perception of our markets. Main Street already thinks Wall Street and business is the villain in our economic crisis. So what comes out of these charges will be very important to how they think and buy financial products.”
The SEC might not win this case but they sure look like they’ve made a huge dent one banks reputation. And as we’ve seen before reputational risk can cost a lot to rebuild.
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