Goldman Sachs' Bloody Nose by Mike Whitney

[Crewleader]

April 19, 2010

But Why Now?

Goldman Sachs' Bloody Nose

By MIKE WHITNEY

There's something fishy about the SEC's suit against Goldman Sachs. The timing seems particularly odd. Why did the SEC decide to drop this bombshell on a Friday, just when the market had reached a 12-month high and the economy was showing signs of improvement? Was it because they thought they might need the weekend to change course if the market suddenly plummeted 400 points? And why was Goldman picked over the other Wall Street banks? Was it because Obama knew that by targeting the most hated bank on Wall Street he could garner support for his reform agenda? The whole affair smacks of a political maneuver. Yes, the momentum IS building for regulatory reform, but the congress is still stuck in the mud, which makes the SEC suit look particularly suspicious, like a clever public relations ploy designed to push Obama's toothless bill over the finish line.

There's little doubt that Goldman is guilty of fraud. According to the SEC filing, they failed to make material disclosures about the synthetic collateralized debt obligations (CDO) they sold to their clients. These kamikaze CDOs were designed to blow up just months after they were constructed (which they did). According to former regulator William Black, "Goldman did not just withhold information, they told people, 'Hey, the investment decisions are being made by experts who would only choose good quality stuff', when in fact, the stuff that was put in was chosen because it was considered the most likely to suffer near-term downgrades." So they deliberately misled investors. That's fraud. They also never told investors that the securities were selected (in part) by a prominent hedge fund manager, John Paulson, who planned to bet against the same CDO. That's another no-no. So the suit looks reasonably straightforward. As SEC Director Division of Enforcement Robert Khuzami said, "The product was new and complex, but the deception and conflicts are old and simple." Indeed. What's most shocking, is that Goldman was caught shafting its own clients to make a buck, which will no doubt haunt them for a very long time. Their reputation has suffered a major hit.

http://www.counterpunch.org/whitney04192010.html

[DJ13]

1. There's little doubt that Goldman is guilty of fraud.

I believe thats true, so why hasnt the DOJ indicted Goldman executives?

[Vinnie From Indy]

2. If one is a cynic, the answer is becoming more clear

The fact is that the Obama White House may simply be pulling the same stunts they did with HCR. They work with the titans of Wall Street in secret to craft a bill that will, by design, do nothing to truly reign in the worst practices while at the same time throwing a few unlucky, insignificant, lower level SOBs to the wolves to satisfy public opinion and push through the sham bill.