The Feds vs. Goldman
The government's case against Goldman Sachs barely begins to target the depths of Wall Street's criminal sleaze
By Matt Taibbi
Apr 26, 2010 5:30 PM EDT
This article originally appeared in RS 1104 from May 13, 2010. This issue and the rest of the Rolling Stone archives are available via All Access, Rolling Stone's premium subscription plan.
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.
A few days later, Goldman announced its first-quarter numbers. Profits were up 91 percent, to a staggering $3.4 billion.
Compensation and bonuses soared to $5.5 billion, up from $4.7 billion in the first quarter of 2009. Battered in the press, Goldman was raking up on the bottom line. So investors once again leapt into Goldman's arms, pushing the stock as high as $166.50, not far from where it was even before news of the SEC suit broke. more
What Would A Criminal Charge Really Do To Goldman Sachs?
Craig Pirrong, The Streetwise Professor | May. 2, 2010, 9:42 PM
It has been reported that Federal prosecutors are considering the possibility of a criminal indictment of Goldman Sachs. It is early yet, but it’s worthwhile to contemplate what the consequences of this action would be.
In 1988, Drexel Burnham Lambert faced the prospect of RICO charges arising from the Milken issues that would have effectively destroyed the firm. The company plead nolo to avoid that death sentence, but it was mortally wounded and imploded months later, with moderately unpleasant consequences for the financial markets (including the derivatives markets). The mere prospect of a Treasury Department ban on its participation in Treasury auctions due to one of its traders having squeezed the T-note markets (arguably a less severe sanction than anything associated with criminal charges) caused a run on Salomon Brothers that almost destroyed the firm; only Buffett’s frantic efforts saved the firm. (That article is an interesting read. I smiled at the part where Buffett was talking on a payphone. Was it that long ago?)
Goldman’s stock was down hard on the news, and its CDS spread widened.
Criminal charges against the firm raises a significant risk of a run (specifically, a withdrawal of short term credit) that could threaten the firm. Goldman is well-capitalized, and in a decent liquidity situation, but not so soundly financed that it is inconceivable that it could fail. Similarly, Buffett’s connection to the firm provides an economic cushion, and perhaps just as importantly, a political one. more
Was It A Crime? Will Any Exec At Goldman Sachs Go To Jail?
by Danny Schechter | May 2, 2010
Will Goldman survive the assault? Will the threat of criminal charges being pursued against the world's leading investment bank spill over onto others on Wall Street? Is the criminalization of the crisis underway, or is all this just a maneuver?
For the last two years, I have felt lonely and isolated with my calls for a jail-out, and insistence that theft, fraud and crime are at the heart of the economic disaster that has befallen us. I have written two books documenting my contention and just released the film Plunder The Crime of Our Time treating the economy as crime scene.
There are a few other voices out there making a similar claim---Bill Black, the former Bank regulator, US Senator Ted Kauffman, and even billionaire investor Jim Chanos, among them. Most politicians of both parties and media pundits have dismissed the suggestion, preferring to believe that virtually everyone was to blame and, hence, no one was to blame. more