Organizations
Goldman Sachs

Goldman Sachs Facing $15.8 Billion in Lawsuits Over Sub-Prime Mortgage Hocus Pocus

COMMENTARY
On the article I made this comment:

It is not so long ago that Goldman Sachs was a private partnership and it was the partner's capital that was at risk. They made themselves into a public traded company only about 10 years ago ... and only became a 'bank' in the run-up to the 2008 meltdown, and as a 'bank' qualified for bail-out assistance. Compared to CitiGroup, Bank of America, JPMorgan Chase and the like, Goldman Sachs is a simple organization. Also simple rlative to the big British based banks and the big Swiss based banks, not to mention other big players in the global banking and financial services space. Banking and financial services is incredibly competitive, with most of the organization simply having the purpose to make profit. Nothing wrong with taking risks to make profit, but please do it with your own money, and not the money of either taxpayers, depositors, insurance policy holders or even investors who are unaware of what is going on. All the activities that are merely associated with markets ... trading, speculating, market making, etc .... should be separated from the money and banking that are needed to run a prudent real economy. Essentially this is what Glass-Seagall was all about, and something like it needs to come back. But there also is a need to ensure that there is no co-mingling of funds between the risk taking segment of the sector and the prudent banking and financial services sector. If or when there is an accounting of the performance of these banking system organizations over the past several years, my guess is that there are of missing money wealth ... which is not that bad in real economic terms because it was 'phony' wealth in the first place. The sad thing is that quite a good number of people have become millionaires simply by making millions of people less well-off and in many cases homeless. The clever white collar banking crooks are several steps ahead of the law and lawyers, the regulators and so on ... but they are going to have a much more difficult task to explain themselves to an activist 99% who now want some answers not based on law and regulations but on ethics, morality and what is right not wrong. The 1% versus the 99% is now a public dialog, a not one that can be ignored with total impunity.

I learned about the structure of the financial sector about 50 years ago when the various 'pieces' were all in different firms. It was complicated, but relatively transparent because all the entities did their own thing and did their accounting about what they did. When all these different activities got merged into a few banking and financial services conglomerates, all semblance of transparency, accountability and capacity for regulation went by the board. The repeal of Glass-Seagall was the last straw, and everyone implicated in that move should be held to account ... not in law which would be merely a slap on the wrist, if that ... but in terms of societal reputation. Since most law in the financial sector has been compromised by self-serving loopholes it is not much use, but the #OWS movement is not about law as such but about ethics, morality, right and wrong which may or may not be congruent with banking and financial sector law, regulation and practice.

Goldman Sachs Facing $15.8 Billion in Lawsuits Over Sub-Prime Mortgage Hocus Pocus What a pleasure it is to see Bank of America running from its fees program and everyone’s favorite investment bankers facing $15.8 billion in lawsuits over the sub-prime mortgage hocus pocus they helped pioneer and from which they derived great wealth even after the 2008 implosion. Goldman Sachs Group Inc submitted a regulatory filing that states the bank is facing lawsuits to the tune of $15.8 billion related to their sub-prime mortgage machinations. In 2007, with the sub-prime mortgage crisis not long off, Goldman Sachs and hedge funder manager John Paulson teamed up to bundle 3,000,000 sub-prime mortgage loans together into a collateralized debt obligation called ABACUS 2007-AC1, and then shorted mortgages to unwitting investors. John Paulson made $1 billion (Goldman took a $15 million cut) and investors lost $1 billion. A new SEC proposal would ban these sort of financial instruments, but Goldman Sachs, once triumphant in the spoils of the sup-prime mortgage bonanza, is looking more and more impotent every day. Aside from an SEC assault, they are being hit by investors and foreign banks. According to Reuters, “Goldman said HSH Nordbank, Norges Bank Investment Management and IKB Deutsche Industriebank AG have threatened to assert claims related to mortgage offerings, in addition to insurance giant American International Group Inc and Manulife Financial Corp’s John Hancock unit, whose legal threats it disclosed last quarter.” $11.1 billion of the $15.8 billion figure stems from lawsuit filed in September by the Federal Housing Finance Agency, which accused Goldman of misrepresenting the quality of $11.1 billion worth of mortgage-backed securities. Capitalists eating their own. Priceless. And for a bank that deals in a great deal of illusion, Goldman Sachs is getting one hell of a dose of reality.