Goldman Sachs is accused of fraud

Generali

I worked with Goldmans as a contractor and got quite an insight into their culture and also the way it was changing.

Goldman Sachs used to pride themselves on being 'long term greedy'. They'd set up very long term relationships with companies and, at least according to company lore, had occasionally refunded companies if they gave advice that ended in a loss for the client.

There was a bit of a kerfuffle when Blankfein took on the task of running Goldmans as he was from the trading side rather than the banking side of the company and there was concern that he'd neglect the long term greedy in favour of trading profits. This story indicates that there may have been something in those concerns.

From experience as a client of Goldmans I can say that they regularly set up structured products of one sort or another as they set up a shares based product for me, albeit one that wouldn't have been marketed to the broader investment community. We often used to use the product as a vehicle to short sell though as appears to have been the case here.

The difference between what we did and what has happened according to the prosecutors on the face of it at least is that in this case effective Goldmans have helped a client set up a product that is a piece of sh it and then sold it as a decent product to other clients, not a very nice thing to do.

It is worth remembering that these clients weren't the likes of you and me, they were hedge funds and other investment vehicles run by professional investors that were being very handsomely paid to invest money on behalf of their clients. If they didn't understand the product they shouldn't have invested. If they were lied to about the product, Goldmans should be shut down IMO.

mbga9pgf

Shut Down Gen? thats a bit harsh surely, this was perhaps one or two offices, not the entire company.

I would like to see something populist like all Goldman employees to lose their bonuses, or a fine equivalent to 1 years profits, they would learn from that surely?

MrEnglish

purch wrote: »

This is only the start.

The start of what?

Generali

mbga9pgf wrote: »

Shut Down Gen? thats a bit harsh surely, this was perhaps one or two offices, not the entire company.

I would like to see something populist like all Goldman employees to lose their bonuses, or a fine equivalent to 1 years profits, they would learn from that surely?

Well IMO this goes to the heart of what banking should be about. You can't collude with a client to the detriment of other clients! If it's a local thing connected to a couple of offices then it would be harsh for Goldmans to be shut down but certainly those offices should lose their banking licences.

Citibank lost their Japanese banking licence a few years back for shady practices IIRC. So should Goldmans if they've been up to no good.

Banks are meant to be honest in their dealings. It's about time regulators grew a pair and actually started regulating rather than getting more and more CYA documentation out of financial institutions.

mbga9pgf

For what its worth Gen, I agree. Just playing devils advocate. I am guessing goldman pays a shedload of corporation tax thats all.

Generali

mbga9pgf wrote: »

For what its worth Gen, I agree. Just playing devils advocate. I am guessing goldman pays a shedload of corporation tax thats all.

True but if you shut down Goldmans, much of what they do could just as easily be done by JP Morgan, UBS or Deutsche Bank and they'd pay the Corporation Tax instead.

As any parent knows, if you let people get away with bad behaviour they'll behave badly. You need to get tough with this stuff, if it turns out to be true, pour encourages les autres.

worldtraveller

U.K. Prime Minister Gordon Brown said Sunday he is pushing for a special Financial Services Authority investigation into the actions of Goldman Sachs Group Inc. (GS) over the alleged misleading of clients.

"There is a moral bankcruptcy reflected in what I am reading about and hearing about," Brown told the BBC's Andrew Marr show.

"I want a special investigation done into what has been happening at Goldman Sachs. I want a special investigation done into the entanglement of Goldman Sachs and the companies there with other banks and what happened."

Brown said hundreds of millions of pounds were traded, and "it looks as if people were misled about what happened."

He said he wants the FSA to start its investigation immediatly and said U.K. authorities will work with the U.S. Securities and Exchange Commission on the probe.

Federal officials Friday charged Goldman Sachs and one of its executives of defrauding investors by peddling a financial product it knew was doomed to fail as the housing market collapsed.

Brown also said he believes "the banks themselves will be considering legal action" over what happened. The case showed that "banks are still an issue, they are a risk to the economy," the prime minister said.

An FSA spokesman wouldn't comment on the prime minister's remarks, saying "the FSA would never confirm of deny we are investigating a person or a firm." However, it is understood that the regulator is keeping a close eye on the SEC investigation and is cooperating with its U.S. counterpart.

The Wall Street Journal

nearlynew

F*cking crooks the lot of them.

What has taken place is the greatest bank robbery in histrory - but it's the bank that has done the robbing.

Kohoutek

http://www.ft.com/cms/s/0/eaf9448c-4b14-11df-a7ff-00144feab49a.html

British premier Gordon Brown attacked the “moral bankruptcy” of Goldman Sachs after the US Securities and Exchange Commission accused the world’s most famous bank of fraud.

Campaigning for re-election, he demanded that the UK’s Financial Services Authority should also investigate the allegations. “The banks are still an issue. They are a risk to the economy,” he said.

No innocent until proven guilty in Britain eh Gordon? Scraping the bottom of the barrel for anything to help him against Clegg obviously.

If the banks are a risk to the economy, why hasn't he done anything to reform them for the last 18 months? Maybe it's because Gordon the globalist won't accept anything but a glooooobal solution with glooobal regulation.

worldtraveller

Bank of America Merrill Lynch cut its stock-investment rating on Goldman Sachs Group Inc. (GS) Friday, citing the overhang of a federal criminal probe and helping send shares sharply lower.

The firm, which lowered its rating on Goldman to neutral from buy, said that while The Wall Street Journal report that federal prosecutors are looking into Goldman has yet to be confirmed, "It is very difficult to see the shares making further progress until the matter has been resolved."

Goldman shares slid 7.7% to $147.83 in recent trading. The stock is down almost 20% from where it was trading prior to the fraud charges filed by the U.S. Securities and Exchange Commission two weeks ago, though it had recovered somewhat, closing above $160 on Thursday.

Also Friday, Standard & Poor's equity analysts cut their rating ton Goldman to sell from hold.

"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," the analysts wrote.

Meanwhile, the cost of buying protection on Goldman Sachs debt rose in the credit default swap market; for $10 million of Goldman Sachs bonds, 5 years of insurance protection cost $158,000 Friday morning, compared with $130,000 yesterday.

The Wall Street Journal