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Sunday, June 21, 2009

Goldman Sachs Again; Worse, Worser, Worst, and Proud of Themselves!
Posted by Melina | 11:51 PM

I try to get out and they pull me right back in again.
Its really the fault of my Google Reader, which used to start with the tech blogs, but for some reason turned itself around and is feeding me the dreaded news instead of restaurant reviews round my town, or chicken keeping, or the new liver in Steve Jobs (medical meets tech!) I'm trying to get off of this thing, really I am, but here I am again at Goldman Sachs via Taibbi from the end of last week. This is just more that you gotta know, because the truth about Goldman Sachs is gonna come out...or maybe not in any way that people will actually take it in....but you still need to know. So, Taibblog pointed me to an article in the NY Times Business section this past week, and then Matt explained it to me like this:

Apparently Goldman is repaying it's 10 bil in bailout money (does that include, by the way, the money funneled to it by AIG?) and the Chief Executive, Lloyd Blankfein, felt that he should say a few words to "leading Congressional lawmakers."

Honestly, Some people just don't know when to just shut up and accept their biggest bonus in the history of time! Here is the beef of what Blankfein said:

Goldman had “an explicit contract with our shareholders to be responsible stewards of their capital.”

“While we regret that we participated in the market euphoria and failed to raise a responsible voice, we are proud of the way our firm managed the risk it assumed on behalf of our clients before and during the financial crisis,” ....


To which Taibbi replies:

Really, Lloyd? You “participated” in the market euphoria? You didn’t, I don’t know, cause the market euphoria? By almost any measurement, Goldman was a central, leading player in the subprime housing bubble story.


-snip- in which its clear that Goldman dealt in and encouraged every bit as much of the same shit as AIG and the rest...


Let’s be clear about what that meant. These crap/sham mortgages, a lot of them adjustable-rate deals with teaser rates that featured sudden rate hikes two or three years after closing, they would never have been possible had not someone devised a method for selling them off to secondary buyers. No local bank is going to keep millions of dollars worth of Alt-A mortgages on its books, because no sensible company lends out money to very risky customers and actually keeps those loans on its balance sheet.

So this system depended almost entirely on banks like Goldman finding ways to securitize these instruments, ie chop the mortgages up into little bits, repackage them as mortgage-backed securities like CDOs and CMOs, and sell them to unsuspecting customers on the secondary market, most of them large institutional buyers like pensions and insurance companies and workers’ unions, many of them foreigners. Most of those customers were snookered into buying this stuff because they had no idea what it was: in the case of pensions and unions particularly, a lot of these customers only bought this crap because the peculiar alchemy banks like Goldman used in devising their mortgage-backed securities made radioactive mortgages look like AAA-rated investments.


So, they created, pumped up and sold the same bundled bad debts as the others did, and on the name of Goldman, but there is a difference that Taibbi points out about the part where Blankfein is proud of how the firm handled it's customer's investments:

...what is particularly obnoxious about this phrase is that Goldman is bragging about the fact that it actually made money while it was pumping the economy full of explosive leverage. While companies like Lehman and Bear were dumb enough to actually eat their own rat meat, Goldman knew what it was doing and was careful to bet against the same stuff it was selling, which makes its behavior many times worse than that of other banks, not better.


He then goes on to let slip that he goes into this more in the upcoming issue of Rolling Stone. I don't have to say here that I will be waiting for that one in my mailbox and that I know what I'm gonna be reading 2 or 3 times in the upcoming weeks! Thanks Matt!

RIP Coco

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