Chickens beginning to roost?

[DutchmanAZ]

About damned time. Probably too little to late, and what the end impact will be, who knows?


SEC accuses Goldman Sachs of civil fraud
Apr. 16, 2010 08:15 AM
Associated Press
WASHINGTON - The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create - and then bet against - subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion, the SEC noted.

The Goldman client implicated in the fraud is one of the world's largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 10 percent after the SEC announcement.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government's most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

A Goldman Sachs spokesman didn't immediately return a call seeking comment.

The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.

The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre.

"The product was new and complex, but the deception and conflicts are old and simple," SEC Enforcement Director Robert Khuzami said in a statement.

"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

 

[Russ Smith]

So far the impact is what appears will be a huge down day on the markets. Dow is down about 130 as I write this but I would expect that to go down more the volume ratio down to up is huge so the overall drop should be much higher than it is.

GS just released a press release denying all charges and saying they will vigorously defend themselves but I don't think that's going to help the market in the short term. The major impact should be financials since it's probably safe to assume GS wasn't the only one involved in shorting mortgage backed securities.

 

[jefftheshark]

This is a civil filing - it'll be interesting to see if criminal charges are leveled by the Justice Department.

The market has been waiting for some event to start a correction, IMO. This could be it. It's funny if you subscribe to Fibonacci retracement theories that you would have circled 1220 on the S&P as the critical 61.8% retracement level off of the 3/09 lows. This retracement level was the end of the great bear rally off of the stock market crash in '29, too, and interestingly enough, it turned on April 16th also.

JTS

 

[Russ Smith]

So many questions this brings up, is GS the only company that did this? Is this guy Fab the only one at GS who knew what was going on, I'm sure if the SEC can prove their case that will be GS's claim, rogue employee but does anybody believe one guy knew and that was it?

It's probably good it's on a Friday so the market will have a weekend to digest the story but I still suspect we'll see a drop again next week.

The really funny thing is CNBC is still running ads for earnings next week which includes GS, how'd you like to be the saps running that earnings conference next week?

 

[conraddobler]

This is a civil filing - it'll be interesting to see if criminal charges are leveled by the Justice Department.

The market has been waiting for some event to start a correction, IMO. This could be it. It's funny if you subscribe to Fibonacci retracement theories that you would have circled 1220 on the S&P as the critical 61.8% retracement level off of the 3/09 lows. This retracement level was the end of the great bear rally off of the stock market crash in '29, too, and interestingly enough, it turned on April 16th also.

JTS

61.8 is a pretty hardcore number, if it holds and dosen't break other than a minor throwover, it'll reconfirm the bear market IMO.

I've been watching in amazement as the FED / government have pulled amazing amounts of rugs out of the economy all in a very short time, HC passes with new taxes, FED stops buying MBS, new disclosure rules, HVCC on real estate appraisals, end of the home buyers tax credit, FHA raising it's insurance premiums, USDA running out of funding for 100% no money down loans.

Look at that list.

Look at it, then remember you can make money going up, or going down, the key is to KNOW which way it's going and when.

It all made tons more sense when I read a long article about Japan, and how those in the know, the connected few made a killing off the recession there and the collapse there.

It's painfully easy to understand once you are told and it's ingenious really, the MO is very simple.

First you have bankers tell everyone no one can see bubbles blah blah blah, so you blow one on purpose, to historic proportions, knowing full well what you're doing and those in the know make money on the ride up.

Then you pull the rug out, scare everyone senseless, just kick starting what you already knew was comming but the real money is know EXACTLY when it's comming.

You make sure you kick it off big, say letting a certain investment bank that sounds like lee man go down.

This sets the hook and creates chaos, it also is a great diversion and fear creator around too big to fail, it casts doubt which cements the con.

Banks too big to fail look exactly like they are going to fail, their stock plummets, fear grows, you feed it, you jawbone no one will be saved, then when it looks just like it's going to die, you save it.

Your buddies of course know all along you're going to save it, they invest accordingly.

You entrench your regulatory caputre through fear and disorientation, threats etc, OMG the world is ending, then you turn on the monetary jets at the darkest moment, your buds place their long bets and make a killing as it turns back up.

Along the way a few banks get caught in the fear, OMG, saved cycle.

Now that everything looks up, you keep making it look up and up and up, until, you hit a magic fib number for cover, you've already set the stage, planted the charges, time to light them, then you get back on the downside of the ride, again exactly on time, for a mint full of money.

This of course is all in my imagination.

 

[conraddobler]

So many questions this brings up, is GS the only company that did this? Is this guy Fab the only one at GS who knew what was going on, I'm sure if the SEC can prove their case that will be GS's claim, rogue employee but does anybody believe one guy knew and that was it?

It's probably good it's on a Friday so the market will have a weekend to digest the story but I still suspect we'll see a drop again next week.

The really funny thing is CNBC is still running ads for earnings next week which includes GS, how'd you like to be the saps running that earnings conference next week?

It'll be interesting to see what comes of this if anything but IMO it's pretty basic stuff, they of course will treat this as window dressing, see, we get in trouble too kinda stuff.

This is trivial small potato's as to the real games that are played IMO.

 

[Yuma]

Sold off all my shares of Goldman Sachs a few months back when the stock peaked. Hopefully it goes way down, then I'm back in!

 

[conraddobler]

http://finance.yahoo.com/news/Goldm...tml?x=0&sec=topStories&pos=main&asset=&ccode=

Goldman’s Shares Plunge on Inquiries and Downgrade