Monday, April 19, 2010

Goldman Sachs and the “new banking crisis”

As you are all aware now the SEC filed a lawsuit against Goldman Sachs on Friday. Basically the lawsuit alleges that Goldman Sachs sold a derivative that contained mortgage backed products. The problem was that Goldman did not disclose to investors that the hedge fund that picked the mortgages was also betting against the derivative. The allegations are nothing to sneeze at. However, given the size and scope of Goldman Sachs, this lawsuit sets up the appearance of a new major banking crisis

It is the timing of this “new crisis” that some are starting to question. The timing could not be better for the Democrats as they seek to pass sweeping financial regulations and the target, Goldman Sachs, is also something to question. 
New York Times: WASHINGTON — With the Senate scheduled to begin debate on a financial overhaul bill this week, the fraud suit against the Wall Street titan Goldman Sachs has emboldened Democrats to ratchet up pressure on Republicans who oppose the Obama administration’s proposal. 
In a sign of the Democrats’ increasing confidence that they have the better of the argument in an election year defined by voter anger at big banks and bailouts, White House officials said Sunday that President Obamawould take his campaign for a regulatory overhaul on the road in coming weeks.
That campaign will resemble his push that helped the health care bill past its final hurdles.
Mr. Obama in effect has made the measure’s fate a highly personal showdown with the Senate Republican leader,Mitch McConnell of Kentucky. Over the last 15 months, Mr. McConnell has sought to defeat each of the Democratic president’s domestic priorities in turn.
We all know that this administration is crawling with ties to Goldman Sachs. Does anyone doubt that even if found guilty, Goldman Sachs will not pay a heavy price? Democrats are more than willing to play the populist card against banks in order to get their legislation passed. Some Republicans are at least calling out the possibility of a rouse: 
The Hill: [...] Sen. Judd Gregg (R-N.H.), a member of the Senate Banking Committee, warned members on the other side of the aisle from using the charges for political purposes, saying that it's foolish to trump up the allegations that have not yet been tried in court. 
"It's really disingenuous for some people to pursue regulatory reform based off this one instance," he said on MSNBC. "This is a single event, we don't even know what the outcome will be." […] 
"We should not legislate based on anecdotal events," Gregg said. "This is a big piece of legislation, we shouldn't overreact." 
Hopefully all Republicans will remain suspect of the Goldman issue and go over the Democrat’s bill with a fine toothcomb. Paging Paul Ryan!


Samuel Gonzalez said...


I thought the SEC was too busy whacking off to porn, remember that tidbit?

Anyway, Hedge funds are called Hedge funds becausae they play both sides of a trade. So now all of a sudden it's a problem? These charges are clearly politically motivated. The sub prime crises began in Aug of 07, Bernie Madoff got away with his deals for over 15 years with plenty of red flags and the SEC were at the switch. Well, they were quite asleep with all the porn surfing going on.

So now after passing ObamaCare which nobody wanted, the SEC suddenly remembers its job just in time to give Dem some talking points before the mid-term elections?

Yeah, right!
The Last Tradition

Angie Lee said...

And the Dummycraps are too stupid to realize, Glass-Steagall was in place FOR A REASON, so let's just create new legislation that will do nothing but line their pockets rather than repealing the 1999 legislation that initially repealed those provisions of G-S that WOULD HAVE PREVENTED THIS FROM OCCURRING IN THE FIRST PLACE.

And as for the touchy-feely legislation process... Anecdotal events were what helped shove HCR up our collective you-know-what. They know it works, so they will do it again and again and again.

rosewood59 said...

Angie Lee: valid point re Glass-Steagall. But, THEY will have a tough time shoving stuff up our You-Know-Whats now. We are finally awake and angry, and getting more and more educated and vocal. Praise providence for the internet and independent blogs like this and LCR.

Clifton B said...


Damn you nailed that one. I totally forgot about the SEC's porn addiction. What is going on with these Wall Street reforms is that they are trying to remove the risk factor. There is a good reason why you can make so much money on The Street, it is risk. You can make it big or lose your shirt, that is why the payoff is better than a retail bank.

If Dems want real reform what they should do is go back to separating banks from investment houses. This will stop the Too Big To Fail nonsense.

Clifton B said...

Angie Lee:

The Democrats are not really interested in reforming Wall Street. Like HC what they seek is more control.

You are correct that the anecdotal approach will work for the Dems. Many people do not understand the complexities of Wall Street. All they see is the huge sums of money and thing greed.

Clifton B said...



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