Goldman Sachs under new attack. Despite loosing only one day during the last quarter, Goldman is still getting a lot of beating in the press. Somehow both senators and journalists seem angry. Is Goldman too big to be Attacked? Witch hunt has begun.
The Goldman defense against the Levin report is so late and so pathetic that it looks increasingly evident that the bank is simply hoping to cause confusion and muddy the waters rather than mount a frontal, fact-based rebuttal. Mind you, sniping and innuendo can prove reasonably effective if done persistently and loudly enough. UThe book Agnotology describes how Big Tobacco managed to sow doubt over decades of the link between smoking and lung cancer well after the medical evidence had gone from suggestive to compelling.
The first Goldman salvo was an Andrew Ross Sorkin piece on Monday which we deemed as unpersuasive. While it did point to an error in the Senate report, it failed to make a real dent the report’s findings, and most important, the notion that Goldman staffers, in particular Lloyd Blankfein, were pretty loose with the truth.
The most contested statement is the Blankfein denial that the firm had a “massive short” position; as Matt Taibbi points out today, the only way out on that one is to get into Clintonesque parsings of the word “massive”. Given the overwhelming evidence that Goldman intended to get out of its mortgage risk in late 2006 and its staff DID get the firm short in February 2007, then reversed that position in March to correctly catch a short term bounce (the market recovered from March to May, when it went into its free fall). And in the March-May period, it was still getting as much crap product out the door and lying to clients about its position in the deals, claiming its incentives were aligned when its effective short position in the deals meant the reverse, that it would profit if they tanked, which they did.
But focusing on the “massive short” issue is misdirection pure and simple. Levin sent the entire report over to prosecutors. He didn’t tell them what legal theories to pursue. There are clearly others a prosecutor could pursue, such as misrepresentations Goldman made in selling CDOs like Hudson and Timberwolf, or other questionable statements made by Blankfein and others in Senate testimony (for instance, as we wrote earlier this week, the Blankfein argument that Goldman was merely a market maker is patently untrue, but probably not worth pursuing in isolation).
What is interesting is the Goldman defense reveals how much damage Taibbi has done to the firm. Notice that it is not primarily rebutting the Levin findings; it’s trying to dent its credibility by pointing out errors, but it is not addressing the report’s framing. Instead, it is dealing with Taibbi’s distillation of the report in his article “The People vs. Goldman Sachs,” and specifically, the argument that Taibbi made, that the simplest case was to get the Goldman execs on perjury:
Though many legal experts agree there is a powerful argument that the Levin report supports a criminal charge of fraud, this stuff can keep the lawyers tied up for years. So let’s move on to something much simpler. In the spring of 2010, about a year into his investigation, Sen. Levin hauled all of the principals from these rotten Goldman deals to Washington, made them put their hands on the Bible and take oaths just like normal people, and demanded that they explain themselves. The legal definition of financial fraud may be murky and complex, but everybody knows you can’t lie to Congress.
“Article 18 of the United States Code, Section 1001,” says Loyola University law professor Michael Kaufman. “There are statutes that prohibit perjury and obstruction of justice, but this is the federal statute that explicitly prohibits lying to Congress.”
The law is simple: You’re guilty if you “knowingly and willfully” make a “materially false, fictitious or fraudulent statement or representation.” The punishment is up to five years in federal prison.
When you can’t beat them, join them, or? Juncker fires some harsh words vs USA and Japan, while the elite is busy discussing how to rule the world in Switzerland. Despite Greece, apparently Europe is in much better shape than the USA. Blame game has now officially started. Wsj reports,
BERLIN—Highly indebted Greece needs a “soft, voluntary restructuring” of its debt, said Jean-Claude Juncker, the head of the group of countries using the euro as a common currency, in a radio interview Saturday.
At the same time, he lashed out at the U.S., calling their debt level “disastrous.”
Backing proposals by German Finance Minister Wolfgang Schäuble, Mr. Juncker told Inforadio Berlin Brandenburg that private lenders need to participate in a fresh aid program for Greece, but only on a voluntary basis.
Also, any such move has to be made in a way that credit ratings agencies don’t interpret as a credit default, he said. And it needs to be done without the “danger of infecting” other euro-zone members.
The euro group president didn’t explain what exactly such a voluntary, soft restructuring should look like, but he said there won’t be a full restructuring of Greek debt.
Meanwhile, Michael Kemmer, head of Germany’s BdB banking association, cautiously accepted the participation of private lenders in a rescheduling of Greek debt as proposed by Mr. Schäuble. But, in a radio interview Saturday to Deutschlandfunk broadcaster, he said such a move needs to be done in a voluntary way, so that credit rating agencies don’t see it as a default and financial markets don’t get unsettled. The BdB represents commercial banks such as Deutsche Bank AG and Commerzbank AG.
Mr. Juncker called for an agreement with the European Central Bank on the issue. The ECB so far has rejected any kind of restructuring, be it a “haircut” on the principal of Greek sovereign bonds, or just an involvement of private lenders in an extension of Greek debt maturities via a bond swap, as Mr. Schäuble has suggested.
“We can’t push through a private lender participation without and against the ECB,” Mr. Juncker said.
In exchange for any fresh program, Greece needs to make sure it reaches its 2011 fiscal targets, Mr. Juncker added. “If Greek policies continue as they have in the first six months [of this year], then they won’t reach the budget target,” he said, adding that any additional aid would be linked to very strict conditions.
The euro group head declined to give a possible amount of fresh aid, but said figures circulating in the media were right.
Asked whether that could mean anything between €60 billion and €120 billion ($86 billion and $172 billion), Mr. Juncker said he doesn’t believe that euro-zone countries will have to come up with such a sum.
Not withstanding the euro zone’s problems, Mr. Juncker said that both the deficit and overall debt in the U.S. and Japanese economy are substantially higher than in Europe.
“The debt level of the USA is disastrous,” Mr. Juncker said. “The real problem is that no one can explain well why the euro zone is in the epicenter of a global financial challenge at a moment, at which the fundamental indicators of the euro zone are substantially better than those of the U.S. or Japanese economy.”
An increasing number of Americans live in their homes, but never pay for their mortgage. It just goes on and on. Is the American dream becoming a free lunch, or does somebody need to pay for this? CNN reports;
Charles and Jill Segal have not made a mortgage payment in nearly five years — but they continue to live in their five-bedroom West Palm Beach, Fla. home.
Lynn, from St. Petersburg, Fla., has been living without paying for three years.
In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home.
They’re not alone.
Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics. Of those, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years.
These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the “robo-signing” issue is particularly combative, it’s 807.
If they want to fight evictions hard, borrowers can remain in their homes even longer while their cases are being worked through.
The Segals have been doing that — in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was cratering.
The Segals want the bank to modify the mortgage so payments are affordable, and they think the court will agree that their lender put them into a toxic loan.
“The evidence will show that we were defrauded,” said Jill Segal.
If they lose, of course, they’ll finally have to leave. And, unfortunately, more than 50 months of missed mortgage payments hasn’t translated into big savings.
“It’s very hard to save,” said Jill Segal. “Our company’s billing is 90% off and my husband is only working about four days a week.”
Lynn, who didn’t want her last name used, purchased a two-bedroom on Tampa Bay in 1998 for $135,000.
As the waterfront property’s value skyrocketed, eventually reaching $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.
Living in this foreclosure limbo is “Hell,” Lynn said. “I feel like I’m locked in a box. I work for a financial organization and if this came out, it could cost me my job.”
Doug Casey outlines his 3 possible future cases. Consider the last point, the worst case, is according to some non mainstream media, already being discussed on this weekend’s secret Bilderberg meeting. We also present you the list of who is going to be at the Bilderberg conference, Bilderberg
BEST CASE – FACTS GET FACED
Realizing what a disaster the complete destruction of their currencies would be, most governments decide to endure the pain of allowing interest rates to rise and limiting increases in the money supply. Poorly run corporations and banks are left to fail. Talk of abolishing the Federal Reserve, and using a commodity for money, becomes serious and widespread.
Shaken, the U.S. ends its profligate ways, in part because it lacks the means to continue, and in part because everyone but collectivist ideologues has actually learned something from the brutal ‘10s and ‘20s.
Amidst massive protests, the government closes much of its counterproductive apparatus, eliminates many taxes, and lets 30% of its employees go. It also, albeit reluctantly, liberalizes its regulation of the economy because it has become impossible to deny that the U.S. has been falling behind in all areas.
MIDDLE CASE – FACTS ARE IGNORED
The world’s governments continue under the delusion that printing massive quantities of paper money will solve problems when, in fact, printing lies at the base of the problems. Most currencies lose most of their value. Some lose it all. This destroys the most productive people in society, the middle class, who produce more than they consume and save the difference… in currency.
And it injures successful corporations that have billions, or even tens of billions, in cash. Few of their managers know what to do with such sums other than to hold currency; at best they’ll buy their own and other companies’ stock. The result is a stock market boom in the midst of a grim depression. But only one person in a hundred will be in a position to benefit from it, because most will be living too close to the edge, and the stock market will be the last thing on their minds. The destruction of capital sets technology back quite a bit in the U.S., Japan and Europe. Chindia increases its relative strength.
WORST CASE – WAR
War is the worst thing that can happen to an economy, but it’s also the most likely thing at this point. When the going gets tough, the people in charge like to blame somebody else for the problem. That’s compounded by the foolish – but widely accepted – notion that war is good for the economy and that, for instance, it pulled the U.S. out of the last depression.
Like all wars, this one results in a complete stifling of civil and economic freedoms. If my second scenario is unpleasant, this alternative is grim.
The big conflict has already been teed up – the continuation of the Forever War between Islam and the West. I’ll hazard the major situs will be Europe – which has pretty much always been the case for wars in general for the last 2,000 years. Europe will be the worst place to be over the next two decades. And North America will be locked down like a police compound.
The past week’s correction in the market has brought Investor Sentiment to rather low levels. Thetrader has argued for a correction in the market. We believe the short term target has been reached, and with some of our short term indicators, such as sentiment, we believe the market could get some support here. Otherwise, the big one is around the corner…..