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Apr. 29 2010 - 9:02 pm | 2,631 views | 1 recommendation | 30 comments

The Feds vs. Goldman

On the day the Securities and Exchange Commission filed suit against Goldman Sachs for securities fraud, shares in the company plunged 12.8 percent, closing at $160.70. The market, it seemed, was finally passing judgment on a decade of high-stakes Wall Street scammery that left America threatening Nigeria, Indonesia and Belarus on the list of the world's most corrupt economies.

via Politics — Latest News — The Feds vs. Goldman — RollingStone.com.

My new piece on the Goldman story is in the current issue of Rolling Stone — click through to check it out.


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  1. collapse expand

    What a pleasant surprise!

    I look forward to reading McMegan’s explanation

  2. collapse expand

    Matt – The SEC case v. Goldman Sachs is bullshit that will end at most with a slap on the wrist fine. However, what’s really going to be interesting is the new CRIMINAL case by the US Attorneys in SDNY. Now we’re going to get some damn answers!!

    Congrats to you for sticking to this vital issue. The fact that there’s now a criminal investigation into these criminals can be directly traced to the great work you and other journalists have done in bringing their criminality to light!

  3. collapse expand

    I’ve become so distrustful of everything and everyone throughout this (big picture) process that I fear we’re going to end up with nothing but a dog and pony show here. Still, there are so few victories that I, for one, will savor even a minor one, however briefly.

    Personally, I’d have closed the RS article with something like: “The SEC action is a clear warning to investors. Anyone choosing to do business with these crooked dirtbags going forward deserves precisely what they’re going to get.”

    But that’s just me.
    Hit the cocksuckers where they live, I say.

    Great piece. Thanks for sharing.

  4. collapse expand

    Great RS article, Matt.

    But I think there is one point you could have added to underline further how brazen Goldman has been. It is a point that was highlighted in the Zuckerman book about John Paulson, and has somehow slipped under the radar.

    Bear Sterns, and particularly Scott Eichel, who was one of the mortgage hotshots there, turned down the opportunity to put Abacus-type deals together for Paulson. He says this in an on-the-record interview with Zuckerman – if you haven’t the time to read the book, your buddies across the pond at the Guardian have reported on it.

    This, I think, is a big reason why Goldman have plenty to fear. The critical legal issue, the materiality of Paulson’s role, is whether a “reasonable investor” would expect to be informed that someone like a Paulson was designing the deal they’d be buying and shorting it; Scott Eichel, who basically like everyone else at Bear was reasonably bullish on subprime (so the opposite view to that of Goldman), would not put together such a deal. In my opinion, and having worked with tons of structurers like Eichel, there’s only one reason why he’d take this view – because you’d never be able to tell investors everything they ought to know.

    I do a fair bit of training these days on securities laws and regulations – and when you go over the Goldman case with a class drawn from the Santelli-caste, you have a three phase evolution of a seminar.

    Phase 1 is “caveat emptor, bitches”.

    Phase 2 is “okay, so maybe they broke the law, but you’ll never convince a jury”.

    Phase 3, after you tell them about the Eichel position, is “they are so fucked”.

    Every time, they come to the same conclusion. Even Bear, who actually liked subprime, wouldn’t do an Abacus. That’s huge.

  5. collapse expand

    Phoney baloney

    We seem to have forgotten GS was made into a bank, overnight, so they could get billions in TARP money….which was a high crime in its self…and the feds were part of the deal makers….

    You can trust a dishonest GS more than you can trust the feds investigating and bringing charges….who are without a doubt at this very moment passing information to GS and taking bribes…..and arranging GS’ next contribution to BHO and the rest of the democrat crooks in congress

    If you has a billion to invest, who would you invest it with: GS crooks or USA government crooks?

  6. collapse expand

    Matt,

    I wish you hadn’t made the “Haitians” comment. If I were a PR shill for Goldman, I’d seize on that to distract the public from the substance of the article.

    I’m waiting for the next shoe to drop regarding the AIG bailout, i.e., the details of Goldman’s receipt of protection payments on its credit default swaps with AIG.

  7. collapse expand

    Matt, Wow, your best piece of writing yet. Yes, sometimes you have to connect all the dots for people and crow a little bit.

    I have followed the Goldman hearings closely and I was more troubled by Goldman’s officials lack of understanding of what they did wrong. What could be more revealing than watching Lord (Lloyd) Blankfein looking completely miffed when Senator Levin asked if he felt it was unethical to sell something Goldman knew was crap? For those that missed it, it’s worth watching and I will translate his look into an actual verbal answer:

    “Senator, I do not understand your question. Everyone on Wall Street steals. We look for suckers every day and thank God America is full of them.”

    Of course, this all begs the question as to how and why these “bankers, hedge fund managers, etc.” who stole our retirement money can escape any criminal consequences. This whole episode is a very stark reminder of how inept and incompetent our government is – after 9/11, it goes after anything with a turban with a gleeful ruthlessness (i.e., Dick Cheney as the Penguin), yet after the greatest generational theft in the history of the world, all we can muster is 3 tough hours by a bespeckled Senator Levin.

    If no one is going to go to jail then I want my money back. Why doesn’t DOJ confiscate Tourre’s half dozen Ferrari’s and start paying us victims off, one-by-one?

    • collapse expand

      martinbreen, I too watched some of the questioning of Blankfein by Levin and had the same reaction you did. It was both fascinating and sickening to watch the confusion on Blankfein’s face, as in “I wanted money, so we tricked people…hello?”

      Reminds me of conversation I once had with a self-described “player”. “Well, YEAH, I told her I loved her and wanted to marry her. I wanted to have sex with her, duh. Not my fault she believed me.”

      Matt sums it all up in his RS article: “translation: too fucking bad for them if they trusted us. It would be nice to think that the SEC suit is aimed at this twisted worldview as much as at the actual offense.”

      In response to another comment. See in context »
  8. collapse expand

    Thank you for posting the link; I look forward to reading the unabridged version. You’ve displayed the screwed up oversight system in this article as much as Goldman Sachs’s guilt. How many of these articles and interviews must happen before people give Wall Street crooks the boot, the finger, and some serious jail time?

  9. collapse expand

    I dunno what your original intent was but jesus christ, how did you slip in a line comparing haitians to IV drug users with a subtext of prostitution and think it was a good idea? Fix that immediately or else you are going to get raped in the court of public opinion, that’s a Friedman level fuckup.

  10. collapse expand

    Anyone else get the feeling Lloyd will plan an untimely death….only to end up on a beach with Ken Lay laughing their asses off at us all.

  11. collapse expand

    If Cuomo in NY can prosecute some of these scum I think he’s a shoe-in for President. I have no faith in the Obama administration doing anything but a whitewash.

  12. collapse expand

    Matt,
    Read your Rolling Stone piece and caught the name of John Paulson. He was also mentioned in piece in Forbes on newly entered Florida Senate candidate Jeff Greene.

    http://www.forbes.com/forbes/2008/1006/266.html

    Greene apparently learned of the idea to short sell the housing bubble mortgages from Paulson and turned it into an 800 million dollar bonanza. Now he wants to be a Senator. What balls!

  13. collapse expand

    I’m dumbfounded that nobody has linked the G/S response to one of the great quotes in movie history:

    http://www.youtube.com/watch?v=zOXtWxhlsUg

    Animal House, the jovial, genial frat hero telling Flounder, “You Fucked Up! You Trusted Us!”

    The entire point of going to G/S is to avoid “caveat emptor”; you’re paying extra to shop in an exclusive, rich-folks store where you shouldn’t have to check if the Gucci shoes are actually a “Guuchi” label and made of cardboard.

    Blaming the victim at that point is saying “We’re really just a garage sale, not a high-end Saville Row shoppe”.

  14. collapse expand

    Well, I’m gonna have to wait until my library gets that issue of Rolling Stone to read Matt’s latest, which ,I am sure ,will be informative and entertaining, as usual. In the meantime, this interesting item referred to in Simon Johnsons’s “13 Bankers”:

    Inside Obama’s Bank CEO meeting (March 27, 2009)

    The bankers struggled to make themselves clear to the president of the United States.

    Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees — and, by extension, to themselves.

    “These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

    But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

    “My administration,” the president added, “is the only thing between you and the pitchforks.”

    The fresh details of the meeting — some never before revealed — come from an account provided to POLITICO by one of the participants. A second source inside the meeting confirmed the details, and two other sources familiar with the meeting offered additional information.

    The accounts demonstrate that despite the public comments on both sides that the meeting was cordial, the tone in the room was in fact one of mutual wariness. The titans of finance — men used to being the most powerful man in almost any room — sized up a new president who made clear in ways big and small that he expected them to change their ways.

    There were signs from the outset that this was a business event, not a social gathering. At each place around the table sat a single glass of water. No ice. For those who finished their glass, no refills were offered. There was no group photograph taken of the CEOs with the president, which typically happens at ceremonial White House gatherings but not at serious strategy sessions.

    “The only way they could have sent a more Spartan message is if they had served bread along with the water,” says a person who attended the meeting. “The signal from Obama’s body language and demeanor was, ‘I’m the president, and you’re not.’”

    According to the accounts of sources inside the room, President Obama told the CEOs exactly what he expects from them, and pushed back forcefully when they attempted to defend Wall Street’s legendarily high-paying ways. (end of article)

    Considering Obama’s sell-out, one must wonder if this is an accurate portrayal of what really happenned.

    Marco

  15. collapse expand

    jesus, matt. each and every time I read your writing I become exponentially more turned on by you. you have got to have a BSD to confront these guys. keep swinging.

  16. collapse expand

    Matt, your writing on G/S has been nothing short of epic. Keep it coming.

  17. collapse expand

    That was a fun read. You da man, Matt. Please post any responses from the geniuses who ran interference for GS last year.

  18. collapse expand

    Great article, Matt. Great summation of where the case stands at this point and, as always, some very funny lines.

    Watching Blankfein testify this week, it looked to me like he was starting to suggest: They were our customer when we gave them advice, but when we filled orders for them we were simply disinterested middlemen, so if you make that distinction, you can clearly see we did nothing wrong.

    “…no one knows what service they actually provide beyond fraud, gross self-indulgence and the occasional transparently insincere public apology.” Amen. I’m thinking their underlying superfluousness is the reason they have to go for all the complications and scams.

    I have a few questions, maybe someone here can answer:

    First, what is/was the precious metals Ponzi scheme listed with the other scams?

    Second, I recently read a line about how in the U.S. we don’t consider bribery to be bribery if the payoff takes place after the fact. I think Matt wrote that line, but I can’t locate it.

    Third, in the SEC complaint, they quote a Paulson employee speaking of ‘real money’ investors. He meant by this, did he not, the people actually holding the loans via the AAA-rated bonds? And that would mean not even IKB, but pension fund managers holding the debt expecting a basis point or two extra interest?

  19. collapse expand

    Matt,

    Any word on when the case of the hairy backed editor gets solved?

    Karl Malden

  20. collapse expand

    Big Ben is probably offended by your comparison.

  21. collapse expand

    Another incredible piece of journalism, Matt.

    I did not anything about you until I saw you on Maher’s show a few years ago. From that moment, I enjoyed your insight and delivery on so many issues and looked forward to your return visits. Then I found you on True/Slant and signed up as a follower of your pieces on and have been a fan ever since. Your integrity is second to none and I know I am not alone when I say it is appreciated when you post links to other sources of your work.

    Stay the course and keep true to yourself.

  22. collapse expand

    Matt,
    I appreciate a lot your writing on Goldman but I think you need to take better account of the “market making” function that Goldman plays. I watched Charlie Rose just now with Blankfein on it and, while he was clearly self-serving, I think you don’t take enough account of the market-making function of these firms. I personally believe that the problem is with yoking that, as Blankfein was saying, socially valuable function, to proprietary trading and investment banking. What Goldman and other firms have become is a supermarket of financial functions for these major economic entities like governments, big corporations and rich individuals. Goldman wants to hold onto all those functions to make more money…but those functions should be either split up or regulated better. However, to do that, you, Matt Taibbi, and we the public, need to know more about those functions that have happened largely in the dark.

    Thus I think your equation of Lloyd Blankfein and Ayn Rand is unfair to the say the least. Lloyd Blankfein is a functionary of a large financial institution…more of a hydra than a vampire squid maybe. Ayn Rand was an awful ideologist. Blankfein’s firm actual DOES provide liquidity for transactions…some of which our economy needs. Obviously though sometimes it steps out of line.

    • collapse expand

      I too would like to see Matt discuss Blankfein’s constant references to Goldman’s market-making functions. I don’t personally buy that defense because Goldman is creating the instruments. Making a market in Microsoft stock means keeping a few shares on hand in case there is a sudden rush to buy them, and buying the shares offered when there is a rush to sell them. The equities are fungible, and prices are public. Not the case with the instruments Goldman created and placed with a limited number of customers. And what kind of market maker allows his market to come to a standstill?

      Then there is the comparison to wheat farmers, lock in prices to ensure enough profit to plant the next spring even should prices plummet. And the bread makers who lock in prices to ensure they can afford wheat even should prices skyrocket. Somehow Blackfein equates that sensible scenario to Paulson looking to leverage their way to billion-dollar profits because they have a hunch housing prices are about to nosedive.

      Goldman really does come across as a sports book rather than an investment bank. I don’t see the market function for much of what they do. (And they are not the only ones doing it.) They are “creating liquidity” in gambling markets that should not even exist.

      Look, private equity funds that buy companies and split them up, for better or worse, they have an actual business function. But it’s as if our financial system has to provide the opportunity for every high-roller to win HUGE by betting HUGE on any and every hunch about the future direction of any and every bond/equity/commodity/currency market.

      If a person has certain knowledge that the bottom is about to fall out of the cocoa market, is it really necessary (and healthy) that the market mechanism allow him to make $500 billion profit off of it?

      At a minimum, we should do away with the synthetic instruments. If that means stock market indices with no underlying stock have to go away, so be it.

      This comment is pretty disjointed, I know, but I think Blankfein is glossing over many of the problems and using false comparisons, and I find it troubling that some people are saying, “Well, Blankfein really made great points on Charlie Rose,” because he’s trying to equate market making (which serves a clearly defined purpose) with the BS Goldman was doing.

      In response to another comment. See in context »
  23. collapse expand

    “…and this seems funny in retrospect – I foolishly dismissed those tales (of Goldman Sachs’ chicanery) as being too conspiratorial…The notion that the bank would actually go out and create big balls of crap that would be designed to fail seemed too nuts even for my tastes.”

    Don’t be too hard on yourself: what we realized a month ago, a week ago, even yesterday, seems today like the height of naiveté. If we reach back a full year, we seem like veritable Neanderthals compared to our current state of awareness.

    There certainly was a conspiracy, though. It was the conspiracy of the rich needing to get richer, the super-rich needing to go stratospheric, and the wannabe’s playing the chumps, the cheerleaders and the champions.

    Today I am supremely confident that tomorrow will bring fresh, spectacular revelation that our world was not as it appeared yesterday.

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    About Me

    I'm a political reporter for Rolling Stone magazine, a sports columnist for Men's Journal, and I also write books for a Random House imprint called Spiegel and Grau.

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