WE DEMAND BANK REGULATION
With the news of the SEC’s civil fraud lawsuit against Goldman Sachs it’s now plain as day that we need to pass a bank regulatory bill. I challenge anyone to read these emails from Goldman Sachs and explain to me or the rest of the American public why we should not demand that these banks be reigned in. The emails are truly vomit inducing. This is a fraud perpetrated on the entire American public. We bailed this company out and then they went on a PR campaign saying they did nothing wrong. The SEC claims to have evidence that Goldman knew the housing market was going to crash and still sold billions in CDO’s to their clients. Goldman is denying the charges, but the accusations look pretty cut and dry. In an email Goldman employee Fabrice “The Fabulous Fab” Tourre warned about the coming collapse of the market:
“More and more leverage in the system. The whole building is about to collapse anytime now… Only potential survivor, the fabulous Fab[rice Tourre]… standing in the middle of all these complex, highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”
George Soros says we should break up the banking oligopoly. I couldn’t agree more. This banking oligopoly helped cause this banking crisis and for some reason we remain in an unchanged environment. Why has this been allowed to happen? Why have we allowed the bank lobbyists to strong-arm our politicians? Is there any doubt now that the Volcker rule is a necessity to contain these institutions from potentially destroying the economy? The Enron banking system lives on for now. Hopefully this lawsuit opens some eyes and gets people mobilized. The American public should not put up with this….
Read the full complaint with emails herein.
Amen TPC. You have been so right about this. Thanks for pressing on the banks all these months when everyone was ready to give them the benefit of the doubt.
TPC, Yes, the need for regulation comes as no news. Goldman and Paulson, aside, it would also be most interesting to find out why on Earth it took the SEC until now to launch this investigation, even more so as billions of taxpayer money were put on the firing line at the height of the crisis and Goldman outsized prop trading profits on CDO “hedges” were no secret. Or did anybody by chance think that is the stock market and financials were too weak to withstand a similar investigation ? I am not into conspiracy theories but the general public deserves to know.
Agree wholeheartedly BUT reality is that the fatcat banks have their tentacles all over Washington and WH. Dodd will leave his job with a heck of a joke regulation gift in preparation for his lucrative lobbyist job.
More regulation? And you have the gall (read: brazen boldness coupled with impudent assurance and insolence) to self proclaim yourselves as capitalist?
Yes, because capitalism means there should be no laws or regulations. Nice try.
Well, I must have missed it in my post, but I am pretty sure I did not call for the renouncing of all laws and all regulation. One thing is for certain, more regulation is not the answer to the problems that plague our society, and as an extension the financial markets
Regardless, please consider the following from a man who can show you the path to enlightenment:
“State interference in economic life, which calls itself economic policy, has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness.” -Ludwig von Mises (Socialism pg. 424)
Don’t be stupid. A “free” market does not mean a completely unregulated market. I suppose you’re opposed to things like speed limits, stop signs & red lights as well?
Reasonable regulation — like requiring your investment advisor to act in your best interest — will not impede capitalism. It will foster it.
Any time you call a fellow debater/commenter “stupid”, you are in fact projecting your own feelings of inadequacy onto others.
Your post would have been much more effective without it.
wait, you agree with soros? the biggest self-loathing marxist alive? did someone hack pragcap?
There’s nothing at all capitalist about an oligopoly that is formed thru a series of bank bailouts.
Had the market been allowed to work we would have a much smaller and diverse banking system. I could care less for Soros’s politics, but he is right in this aspect.
I completely agree. End the fed, reinstate a gold-backed dollar.
Everyone’s focusing on the symptoms and ignoring the problem.
if you want the market to work, you need a legitimate monetary system. fiat currencies give central banks and the street all the power and disgustingly skew “market” outcomes. If you want to collar the street, you need “hard” currency.
I for one don’t find what GS did in this particular case as anything egregiously wrong. They were selling CDO tranches backed by mezzanine MBS which in turn was backed by sub prime mortgages to sophisticated investors who relied on the rating agencies to buy them (technically, they sold protection on the synthetic tranches and were long these tranches credit, and as in any CDS, there is a counterparty who bought protection and therefore were short these tranches credit).
But, why blame GS or Paulson for this, if there are idiots willing to be long credit risk based purely on ratings e/o doing any diligence, then I would sell them this garbage too. Even if I knew it was garbage.
I’d say it was a brilliant trade by Paulson to exploit the system, which is 90% idiots. If you want to blame anyone, blame the rating agencies for stamping the CDO tranches anywhere from AAA to BB, while they should all have been either NR or CCC/CC.
This is not to excuse the bank bailout and free money (not just the TARP, that’s peanuts, look at the steep yield curve and then you will see what free bailout has meant for these banks!) or that these banks shouldn’t be regulated or split up. They all should be treated as utilities.
But this particular example, god bless GS and Paulson for coming up with a way to make idiots and fools out of people who just didn’t know that they were idiots and fools.
Caveat emptor.
The key here is that this is just one small example of a massively unregulated market where the big boys are able to game the system. Is it really okay that they nearly bring down the system as long as they do it in the name of making a profit? Furthermore, how legit was Paulson’s profit? I get it. The counterparty is equally to blame, but this doesn’t happen in a properly regulated market.
The end does not justify the mean.
I think people give the banks a free pass because they “make money”. I think most underestimate how destructive their operations are in the long-term.
Big boys were able to game the system because there were countless others who pretended to know what they were doing but had no clue and greedily bought anyway. And this isn’t an uneducated janitor who you could truly scam by shoving a lot of papers whi he didn’t understand, get him to sign it and put a mortgage on your books – that is FRAUD and that should be prosecuted.
CDO tranches – the buyers represented that they were qualified, tough luck. You didn’t do your diligence (rather you were stupid and didn’t know how to conduct diligence and relied wholly on agencies) and bought (hey, I get 200bps extra yield on similarly rated credit risk, look, I am a genius!).
GS and Paulson walk away free, this lawsuit is w/o merit. At best, there will be a fine, maybe Fabrice will be sacrificed.
This particular situation – government 0, GS 1.
I think you’re justifying their actions just because this market isn’t regulated. And that misses the whole point here. This market should be regulated so that these billion dollar wild wild west gamblers are more appropriately overseen.
You’re basically saying that it’s okay if I kick someone’s ass out on the street so long as he’s as big and strong as I am.
TPC,
Not to drag this along too much, but here is GS’s defense.
http://www.businessinsider.com/goldman-releases-second-statement-2010-4
I would focus on this particular statement below – this lawsuit is going to be thrown out very quickly….its really a sham unfortunately. Instead of focusing on the real stuff, the SEC has weakened its hand by throwing this nonsense out there.
Extensive Disclosure Was Provided. IKB, a large German Bank and sophisticated CDO market participant and ACA Capital Management, the two investors, were provided extensive information about the underlying mortgage securities. The risk associated with the securities was known to these investors, who were among the most sophisticated mortgage investors in the world. These investors also understood that a synthetic CDO transaction necessarily included both a long and short side.
I wonder why on Option Exp. day?
Why not charge GS with oil manipulations which broke our back?
The answer:
Mich. Sentiment down, high unemployment, high outflow of money from U.S. markets and people losing faith in the system. Well, they have to do something to make people believe in the system. I bet GS will benefit from this as always.
A simple cover for GS recent multi-billion dollar profit from the market.
They jacked up the premiums for May PUT options. Markets will recover and all the PUT options will go worthless. Do you know a better way to scam the small investors out of their money.
Nothing will happen GS and Paulson will go free.
TPC,
Are you aware that the biggest investment managers of these CDOs were begging the short sellers to short them more paper, so they could profit at the short seller’s expense?
This fact is thoroughly documented in numerous books about the meltdown, including “The Greatest Short,” and “Too Big to Fail.”
I can only conclude that you are wholly ignorant of this fact, or else I can’t believe you would be mouthing off about this the way you are. You clearly don’t have a right to an opinion here.
That is entirely immaterial. The problem here is not that there was demand or not for this paper, but too much of this unregulated leverage sloshing around in the system. These banks were only able to leverage themselves up this much because it was an unregulated market. Your ad hominem attacks have you walking on thin ice here John.
I have yet to read one single fact based comment from you.
Its very difficult to be non cynical and yet objective about the banks run wild . I believe the suit against GS is purely politically motivated , to lull those whom have stood up for reform back to sleep , and to buy “confidence” (ha!!) for the elections in November . J6P and JQP are being psychologically manipulated again by Washington , another in a long line of opinion manipulation , all to keep the current banking and political positions and system secure. Still holding up the lamp to find an honest man on Wall St or in D.C.