Goldman Sachs, John Paulson, and the Hedge Funds that Pumped and Dumped Our Economy

    It is perhaps beyond the ability of an innocent public to believe this, but there is a growing body of evidence that a few mad scientists might have engineered the near-destruction of the American financial system. Except they weren’t scientists, per se – they were unscrupulous, market manipulating hedge fund managers, and we can almost hear them cackling with glee as they haul their ill-gotten billions to the bank.

    In a civil suit filed Friday, the Securities and Exchange Commission charged Goldman Sachs with fraud for helping hedge fund manager John Paulson create collateralized debt obligations that he had secretly designed to self destruct. That is, Goldman Sachs, at the direction of Paulson, hand-picked mortgages that were certain to go bad, and stuffed the mortgages (or rather, “synthetic” derivatives of the mortgages) into collateralized debt obligations that temporarily masked the true value of the loans.

    Goldman did this for only one reason: to create instruments against which Paulson and other hedge fund clients could bet with virtually no risk. Meanwhile, Goldman cheerfully sold the CDOs to unwitting customers, knowing full well that those customers would be wiped out when the reference loans inevitably defaulted. Goldman and its hedge fund clients also surely knew that the losses on these synthetic CDOs would crash the overall market for CDOs, hobble competing investment banks that had CDOs on their books, and do serious damage to the financial system.

    Goldman isn’t the only bank that created these CDOs. Deutsche Bank, UBS, and smaller outfits, such as Tricadia Inc., perpetrated similar scams. All told, well over $250 billion worth of these  “synthetic” CDOs were sold into the market in the two years leading up to the financial crisis of 2008. Indeed, there is a distinct possibility that a majority of all the CDOs sold during those two years were deliberately designed to implode by hedge fund managers who were betting against both the CDOs and the financial system as a whole.

    For more than three years, the media has swallowed the hedge fund party line that our economic troubles were solely caused by mortgage companies lending too much money to undeserving home buyers. No doubt, there was over exuberance and fraud in the world of subprime lending, but that is not the full story. It is now clear that the so-called “real estate bubble” was fueled by an expanding market for CDOs. And the market for CDOs was driven, in turn, by fraudulent deals similar to the ones that Goldman did for Paulson. In short, we witnessed a classic pump-and-dump scheme, only this time it was writ large, on the scale of the U.S. financial system.

    I predict that as the details of this doomsday machine come to light, we will see that the hedge funds that profited from it all know each other well. I predict further that it will become apparent that what ties these hedge funds to each other is a common acquaintance with associates of Michael Milken, the famous financial criminal who pioneered the market for CDOs, and whose criminal debt machine nearly brought the economy to ruins in the 1980s.

    John Paulson, who launched his career with the assistance of a host of Milken cronies, including Jerome Kohlberg and Leon Levy, is one of the hedge fund managers in this network. He has been described as a genius by the media, and perhaps that is what he is, but we now know that he abides by the Milken code, which has it that there is virtue in a clever con well-orchestrated. And never in history has there been a more profitable con than Paulson’s. His bets against the CDO market – the market that he helped set up to collapse — earned him more than $3 billion over the course of just a few months in 2007.

    Another hedge fund in this network is Magnetar Capital, whose chairman and senior partner is Michael Gross, formerly a founding partner of Apollo Management, which is run by Milken’s closest crony Leon Black. Magnetar featured prominently in the Milken network’s attack on biotech company Dendreon (see “The Story of Dendreon” for details). This hedge fund is currently under SEC investigation for helping to manufacture and sell doomsday CDOs that it was simultaneously betting against with credit default swaps. Reporter Yves Smith, who has been working on this story from day one, reckons that Magnetar’s bogus CDOs accounted, incredibly, for between 35% and 60% of the total demand for subprime mortgages in 2006.

    Given that the economy was being set up for a collapse by hedge funds in this network, it is not surprising that it was Milken-affiliated hedge fund managers who were most prominently and vigorously shorting Bear Stearns, Lehman Brothers and other big investment banks that were on the receiving end of the fraudulent CDOs. These hedge fund managers include Greenlight Capital’s David Einhorn (who launched his career with the former top partner of Milken crony Carl Icahn, and likely worked in cahoots with Milken to attack a company called Allied Capital); SAC Capital’s Steven Cohen (who was investigated by the SEC for trading on inside information provided by Milken’s shop at Drexel Burnham); and Third Point Capital’s Dan Loeb (who got his start dealing in Drexel Burnham paper alongside Milken’s former employees at Jeffries & Co.).

    It is also important to note that the pump-and-short CDO scam could not have happened without the help of American International Group’s financial products unit, which sold a lot of the credit default swaps that the hedge funds used to bet against the CDOs. That unit at AIG was run by Joseph Cassano, formerly one of Milken’s top lieutenants at Drexel Burnham. Did Cassano know that the CDOs were designed to implode? Perhaps not, but it is safe to assume that his relationships with the hedge funds creating the CDOs influenced his decision to insure them.

    It is also a matter of significant interest that Cassano was ordered to stop selling the credit default swaps in 2007, a sure sign that somebody at AIG saw that a cataclysm was imminent, but he did nothing to protect AIG from the massive losses that the cataclysm was sure to entail. When presented with evidence that the CDOs were rotten, Cassano held on to the CDS positions, rather than sell them off to people who, unlike AIG, would not have the resources to pay the hedge funds in the event of defaults.

    This is not to suggest that these people hatched some kind of dark conspiracy to destroy America. But it is to suggest that relationships matter a great deal in the world of finance, and there is one network of miscreants that has consistently shown itself willing to profit from crookery, financial destruction and the misery of others.

    One thing is certain: we will learn more about this scam in the weeks and months to come. And while news organizations like the New York Times should be commended for bringing bits and pieces of this story to light, their tepid prose fails to convey both the odoriferousness of the short sellers’ misdeeds and the magnitude of a scandal that helped bring the American financial system to its knees.

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    82 Responses to “Goldman Sachs, John Paulson, and the Hedge Funds that Pumped and Dumped Our Economy”

    1. Jim Hall says:

      My only concern is that, while Khuzami’s approach of analyzing firms through the lens of products, such as CDO’s, may yield paydirt, the SEC, or FBI (better yet) must stay ‘on-site’ for enough time to dig vertically as well into the firm’s misdeeds.

      I’d rather see the SEC unearth GS and uncover the likely multiplicity of high crimes and misdemeanors before moving on to the next firm in a cursory way.

    2. Anonymous says:

      Doubt there will be any PERP walks. As much corruption as is confirmed with solid evidence, this is why nothing ever will change.
      Too many politically connected have the goods on Too many politically connected. To turn on one is to turn on oneself.

      http://in.news.yahoo.com/137/20100417/748/tbs-interview-jailed-whistleblower-urges.html

    3. Anonymous says:

      I’m tired of hearing “nothing will ever change”.

      We’re not children. We can make things change and idiots that post that are supporting the crooks.

      Their main tool was control over the media and they’ve lost that. They are scared old men, trying to understand how youtube, sanitycheck and deepcapture passed them by.

      Don’t look to their PR agency for help.

      SEC = Corrupt Organization

      Stop trying to wish the SEC would save us and stop sending them comment letters. They are criminals and need to be disbanded. The FBI, DOJ, etc. needs to take over and arrest the perps. instead of forgiving their fines because they can’t afford it.

      The fastest way to justice is for Obama to declare the SEC defunct and fire them all.

      Talk to Joe or Jane Sixpack. They are looking for blood and this time will be different.

      What you believe will come to pass will come to pass and I believe these 1,000 criminals will be stomped out by the 7 billion people they’ve been ripping off.

      They are out numbered 7 million to 1. For every crook, there are seven million people that want to lead them to the guillotine.

    4. Anonymous says:

      “This time will be different”? Isn’t that the rallying cry for every bubble, scam, scheme and swindle over the past, oh, millenium?

      As for “mad scientists” maybe that’s an accurate description of the mathematicians, physicists and engineers who were hired by all those hedge funds and investment banks to work as “quants”. Remember that kid who Hank Paulson hired to help the Treasury run TARP? – case in point.

    5. Anonymous says:

      Tricadia too has close links with Drexel and the Milken network

    6. Paul says:

      I have been a years-long devoted reader of the sanity check and deep capture. (I really miss the Bunny at Sanity Check. I guess he just got burned out). I am also paying close attention to the tea parties.

      We need the tea parties to come to this party. They have to help us follow the money. These things are all related and this is where the money is. This is the vortex. Our anger should come together at this point where Wall Street meets Washington.

      I guarantee you this. Obama’s SEC lawsuit against GS is not the answer. The lawsuit is simply the hand-slap demonization prior to the rebuilding effort we will see in 6 months with the full-throated assistance of the state-owned media.

      There should be no end to our anger; first we sweep out the imcumbents of both parties then we blast apart the old school money network. It wouldn’t hurt to bankrupt the state-owned press along the way.

      • DCN says:

        My perception is that the Tea Partiers would be incredibly difficult to engage. This is not to say it wouldn’t be worth the effort, but rather I get the impression that the “movement” would be near impossible to focus and direct towards target. I may be wrong about this. Frankly, I just don’t understand what it is they want and are hollering about….perhaps that’s the whole point. What do you propose to engage them?

        No, the SEC suit is not the answer or a panacea. But bitching about the lawsuit and President Obama isn’t either.

        DCN

        • dave g says:

          dcn little hint for all that thinks the tea party is not focused and wont be effective.The hundreds of thousands that you see protesting is just a percentage , small at that because for the ones you see protesting there are 10 right behind them that dont or cant attend rallies.This country will be taken back by the honest hard working and the free ride is over…..in the government and on wall street….God Bless America

          • DCN says:

            @dave g,

            Thank you for illustrating my point.

            Don’t get me wrong saying: “This country will be taken back by the honest hard working and the free ride is over…..in the government and on wall street….God Bless America” makes for a great bumper sticker and is an admirable goal, but it is statement that lacks focus.

            The problem comes in translating that into specific policies, legislation, regulation, and legal action while still maintaining the momentum of the movement. Get what I am trying to say?

            DCN

          • mike w says:

            Hundreds of thousands of teabaggers protesting? You can’t be serious. they get like 200 people, and Faux Snooze pegs the crowd at 10,000, and people believe it. Ever notice they never show an overhead shot, or even one from a distance, so you can’t see that the numbers are drastically overstated.

            Teabaggers are insane racists. That’s it.

    7. bbhindyou says:

      I have been working on a report to investors in the stock market,information and recomendation.
      I would like to find a forum to share my finding and recommendations in.
      If there is somewhere to send it to be looked at by any of your experts here,perhaps Dr. DeCosta, I would like to send it to you and see if you think it could be helpful to the public and could you help me post it somewhere it can get exposure.
      Thank you
      bbhindyou

    8. Diane says:

      Nothing will happen until the majority of Americans leave the banks and join a credit union, pay off their credit cards, stop “investimg” in the stock market that is rigged, get their 401k money out of mutual funds by convincing their employers that the game is rigged, and find out how their tax payer dollars are being used in such schemes as Fund of Funds by their states. STOP NOURISHING THE INSATIABLE BEASTIE BANKSTERS!

    9. clearthinker says:

      We’ll have better luck getting Vegas to change the payouts on slots…look who is the cheerleader for the Dems….Dodd…and how many times did we try to get him to deal with manipulation and he did nothing…is he pushing Kaufman’s legislation?

      I’m sorry, we re counting on people that cannot be counted on….

      • ples says:

        there is no case here. I shocked at deepcapture using the
        internet to publish lies. If the lies are going to be looked
        at, see the governement at work. Goldman Paulson and the
        hedge funds are puny compared to Uncle Sam. Especially to bring
        down the American heart life.

        • Goldman Paulson JPM the rest of Wall Street financial services + a handful of other big money industries (milit. pharma, agra, ins, health ins, oil, etc) own Uncle Sam via campaign contributions and revolving door job$ for pols and regulators. Blaming the govt. is exactly what they want you to do so you won’t blame THEM– and they can keep looting at will.

    10. jmb27 says:

      Predatory Lending is a major contributor to the economic turmoil we are currently experiencing.

      Here is an example of what I am talking about:
      Scott Veerkamp / Predatory Lending (Franklin Township School Board Member.)

      Please review this information from U.S. Senator Jeff Merkley regarding deceptive lending practices:
      “Steering payments were made to brokers who enticed unsuspecting homeowners into deceptive and expensive mortgages. These secret bonus payments, often called Yield Spread Premiums, turned home mortgages into a SCAM.”

      The Center for Responsible Lending says YSP “steals equity from struggling families.”
      1. Scott collected nearly $10,000 on two separate mortgages using YSP and junk fees. 2. This is an average of $5,000 per loan. 3. The median value of the properties was $135,000. 4. Clearly, this type of lending represents a major ripoff for consumers.

      http://merkley.senate.gov/newsroom/press/release/?id=A09C6A80-537A-4EB1-83C5-31925F046B6F

    11. ron doc says:

      Here a stock site writer wakes to just how Deep the Cature might go.

      http://news.goldseek.com/RickAckerman/1271829600.php

    12. Sean says:

      Anyone here remember when Patrick Byrne warned these miscreants that guys with “Guns and Badges” would be coming after them? I do. Michael Miliken, Steveie Cohen , Jim Chanos et al WATCH YOUR BACKS!! There maybe handcuffs placed there for your use!! Sunshine the great disenfectant!!

    13. Jim Hall says:

      A boycott of the market is called for. I agree that all real investors (i.e. longs) should take their money out of the ‘game’ and stick it somewhere with at least some semblance of a level playing field.

      The DJIA can go to hades as far as I’m concerned meantime.

    14. ron doc says:

      This will be quite the trick for the SEC and the Political class.

      How does a crooked agency, loaded to the rafters with dirty handed regulators, go about prosecuting the very ones who a lot of these dirty regulators are counting on to pay them in future times the deferred bribes of 7 figures jobs and big bonuses? That is if they actually go after some of them for activities they have been covering up for all these many years.

      Yep, this is going to be quite the neat trick.We know the Wallstreeters can turn the tables at any time and expose the criminal bribes and cover ups the so called good guys have taken themselves, for so long. It could be fun and revealing, but don’t count on it.The needed disinfectant is just as fatal to the watchers as it is to the supposed Wallstreet watched.

      • Jim Hall says:

        We basically need some therapeutic mutually assured destruction via a hard push on the big red reset button…

        Yes, nihilism and ash gray will be the color of 2011.

        Yes, we’ll lose some limbs,but the gangrene will be gone.

    15. Dr. Jim DeCosta says:

      Today’s official DeepCapture phrase of the day is “SYNTHETIC LONG POSITION” (SLP). In any clearance and settlement system that has been illegally converted to a “fractional reserve” foundation the purchasers of nonexistent securities must not be allowed to learn that what they purchased not only never got delivered but never existed in the first place. To sustain this fraudulent conduct it becomes necessary to credit their brokerage accounts and reflect on their monthly brokerage statements the misrepresentation that what they purchased did indeed get “delivered in good form”.

      These intentionally misrepresentative electronic book entries are referred to as “synthetic long positions”. They were basically “synthesized” out of thin air and in essence represent the ability to resell that which was “delivered in good form” which was nothing whatsoever. Since SLPs are indeed readily sellable and exist over and above the number of legitimate voting shares already “outstanding” then by definition their invisible accumulation in the share structures of corporations under attack results in share price depression. Since there are no tangible property rights involved SLPs have no “owners” and they do not carry voting rights. Instead they have “holders” referred to as “security entitlement holders”.

      In abusive short selling crimes SLPs are not only the product of the fraud they also serve to cover up the fraud. You’ll note that on monthly brokerage statements there is no phraseology citing “legitimate voting shares owned”. Instead you see the intentional misrepresentation citing “securities held long” i.e. “long positions”. Are they truly a “security”? Technically yes because any “evidence of indebtedness” can qualify as a “security” and SLPs are analogous to a readily sellable IOU.

      Legitimate voting shares that were sold and “delivered in good form” also give rise to “long positions”. Thus the “securities held long” on a monthly brokerage statement might represent “legitimate shares owned” or merely SLPs associated with nonexistent shares purchased but never delivered.

      Corrupt custodians utilizing a “fractional reserve” custody system typically hold the “financial assets” in an “anonymously pooled” format. This way whenever anybody buys, sells or transfers “shares” the corrupt custodian can always claim that the transaction involved the “legitimate voting shares owned” instead of the SLPs and how could you prove them wrong?

      • anti_republocrat says:

        Hmm. Now I’m really confused. I always assumed that if I short a stock in my margin account, the broker is supposed to go out and borrow the stock from a legitimate owner (or perhaps is already in possession of shares held “in street name”), then sells it on my behalf. I assumed that the buyer of that stock could be any other party. But your post got me to thinking, if that’s how a legitimate short sale works, who gets to vote those shares even if the short is legitimate? Both the original long and the party I’ve sold to expect to be able to vote those shares.

        Have I had a fundamental misunderstanding of what constitutes a legitimate short sale as well as naked shorting? Perhaps in a legitimate short sale, the broker is supposed to keep the actual stock and never sell it? So if I’m shorting a stock, I’m only selling those shares to the broker, who incidentally happens to be in possession of the actual certificates and there’s no other 3rd party involved in that short sale? So, if the broker sells the shares I short sold to him, would that also constitute a naked short sale?

        I don’t regularly contribute here, so if anyone wants to clarify this for me my email is wjrood at server magnaspeed.net (substitute @ for “at server,” as I don’t want to generate any more spam than I already get).

    16. iStandUp says:

      Dr. Jim DeCosta,

      Thank you for your explanation!

      It seems that the thought that came into my mind this morning while I listened to someone speak lines up with what you have stated here….

      This is what I read someone say this morning:

      “We are not going to sell you something, and then bet against you.”

      This statement was an obvious reference to the current news about how banks and hedge funds create derivatives to sell to others with the purposeful intent to defraud the buying party.

      So what does this have to do with Naked Counterfeit Shorting?

      It dawned on me when I heard this statement that, in fact, Naked Counterfeit Shorting has the same intent as fraudulently created derivatives have — that is:

      “We, the Wall Street Criminals, are not going to sell you Counterfeit Shares, Non-Existent Shares of company XYZ, so we can bet against you your long position to create MORE LIQUIDITY for OUR BANK ACCOUNTS. — And we are doing this with the full knowledge that we are harming your financial interest, your long position, so we can increase our Naked Short Position and thus the amount of money we can add to our Bank Accounts.”

    17. Dr. Jim DeCosta says:

      iStandup,

      Well put, sir! What you have to realize is that the “security entitlements” that result from each and every delivery failure, each and every legitimate “pre-borrow” done in association with an otherwise legal short sale and each and every “faux-borrow” done at the NSCC’s “Stock Borrow Program” are “DERIVATIVES” of legitimate registered “share”. They trade right along side of legitimate “shares” and due to how the DTCC is designed you can’t tell the difference. All investors care about is being able to resell that which they purchased. They should be concerned with hopefully being able to resell that which they purchased but hopefully at a higher price. “Deivatives” prevent this. “Derivatives” give rise to readily sellable “long positions” which induce share price depression.

      “Derivatives” are insanely dangerous. Warren Buffet warned us about these “weapons of mass financial destruction”. Today’s crooks on Wall Street destroy things for a living. “Derivatives” are usually the weapon of choice. “Derivatives” benefit the Wall Street “securities intermediaries” that make fees and commissions buying and selling them. They also benefit those that destroy things for a living. All of these fortunes being made eventually trace back to Main Street “long” investors or Main Street taxpayers.

    18. Dr. Jim DeCosta says:

      iStandup,

      What I find humorous is all of this talk about how insane it is to allow those with no economic interest in a bond to be able to place casino-style “DERIVATIVE” bets (CDS’s) on whether or not the bonds default. Of course the concept seems insane. But what is “short selling”? Isn’t it the ability of those with no economic interest in a U.S. corporation to place bets against the success of the corporation which results in the issuance of share price depressing “security entitlements” which are indeed “DERIVATIVES”?

      In even legal short selling the mere method of placing the bet and the issuance of these “security entitlements” actually enhances the prognosis for the success of the negative bet placed by the party with no economic interest whatsoever in the U.S. corporation. That’s doubly insane! Oh but what about all of that wonderful “liquidity” that short sellers provide? Baloney. I will grant that short selling might allow a Main Street “long” investor to buy in at a slightly lower share price as short selling does tighten the “spreads”. But what about when it’s time to sell? When any buy order surfaces on Wall Street the Main Street “long” investor only has access to sell into those buy orders that the Wall Street short sellers chose not to naked short sell into. The abusive short selling MMs have “first dibs” on reacting to buy orders it has visibility of.

      If this MM has a large preexisting naked short position of course it’s going to exercise its “first dibs” option in order to mute the share price enhancing effect of buy orders in order to keep the share price down. This “first dibs” OPTION is the most valuable OPTION on all of Wall Street.

      From the point of view of the average Main Street “long” investor this “injection of liquidity” argument is a total crock. Since every time the MMs exercise this “first dibs” option results in the issuance of these share price depressing “DERIVATIVES” known as “security entitlements” they’d be insane not to exercise this “option”. Then what are you left with? A “rigged” market in which BOTH buy and sell orders result in share price depression. Abusive short sellers refer to this as the “beneficial injection of liquidity” that they provide. I call it being able to buy discounted tickets onto the Titanic.

      What’s really sad is that the number one benefit of short selling held to be universally irrefutable even by the brightest of the academics is a total crock from the point of view of the Main Street “long” investor that is the only party that has a true economic interest in what he invested in. ALL “DERIVATIVES” ARE GOING TO BE ABUSED BY THOSE WITH A SUPERIOR KNOWLEDGE OF THE COMPLEXITIES OF WALL STREET.

    19. Sean says:

      Off topic. I have been hearing alot of negative stuff about Dave Patch lately and I have ignored it because he was on our side at one point. But of late he seems to have joined the darkside. Dave care to elaborate? What theck is going on with you and this?

      “Short and Distort” Lawsuit Against NY Post, Timothy Sykes
      View the complaint here:

      http://viewer.zoho.com/docs/wCaxs

      • Judd Bagley says:

        Sean, I’ve read much of the complaint and have four things to say in response:
        1.It reads like Gary Weiss wrote it. It’s full of comically florid, un-lawyerly language that tries WAY too hard to provoke outrage.
        2.This is America. Anybody can file a lawsuit against anybody else. It doesn’t necessarily mean one side is right or wrong.
        3.Having seen some truly terrible things from this side of the fight (meaning, from the side opposite the manipulators) it becomes easy to fall into the trap of believing that the issuers are always right. Well, without going into detail, I can assure you that’s not always the case.
        4.I know both Dave Patch and Kaja Whitehouse, and wish to make it 100% clear that if either of them is proven to be involved in a stock manipulation scheme, I will eat my own left kidney. I don’t personally know Tim Sykes, but based on what I’ve seen, there’s no way he’s smart enough to pull something like this off.

        Your opinions are your own, and you’re entitled to them. But from my perspective, Dave Patch is a hero; and based on that fact alone, I’m predicting he’ll be completely vindicated in this case, just as he has been with his criticisms of the SEC.

    20. Sean says:

      Thanks Judd I respect your opinion and it looked like SPNG was going after Dave et al. Please note I did’nt accuse I was asking for some enlightenment which you so kindly and timely provided. I consider this topic closed and back to addressing our friendly neighbourhood miscreants.

    21. Sean says:

      A serious case of the pot calling the kettle black!! He has the nerve to call people out a criminals.

      http://www.huffingtonpost.com/2010/04/22/jim-chanos-on-obamas-spee_n_548449.html

    22. Anonymous says:

      Sean,
      I found this from another site regarding spongetech.

      “There is no such Spongetech filing on the NY Court site. It would seem that the document is the product of some people who made some egregious errors in composing it, and they put it on ZOHO, and then posted the link on IHub.

      Document Info – File Name: spongetechnypostsandc04222010.pdf
      Uploaded date: Apr 22 2010 17:47:53
      Last Accessed date: Apr 23 2010 10:18:56
      Expiry date: No expiry
      No. of views: 4692

      http://viewer.zoho.com/docs/wCaxs

      0 RECORDS FOUND

      Search for:

      http://iapps.courts.state.ny.us/iscroll/index.jsp

      0 RECORDS FOUND
      Advanced Search:
      http://iapps.courts.state.ny.us/iscroll/AdvSearch.html?Submit6=+++Advanced+Search+++

      http://investorshub.advfn.com/boards/read_msg.aspx?message_id=49336240

      SPNG sues NYP Holdings (NY Post), Kaja Whitehouse, Timothy Sykes, Teri Buhl, David Patch and John Does.”

      http://viewer.zoho.com/docs/wCaxs

    23. iStandUp says:

      More and more Wall Street Insiders are coming out to explain that THEY DO NOT SEE ANY FRAUD in the SEC’s suit against Goldman Sachs, which is not a surprise to me.

      —- On the other hand there is a person who does see the FRAUD ——:

      A Message to Wall Street’s Fabulous Fabs
      Goldman will survive, but the expectations have changed

      By Michael Lewis

      If you happen to be sitting on the Goldman Sachs (GS) bond-trading floor, life must feel horribly unfair. You did nothing worse than live by the ethical assumptions of your market—any money-making event short of obviously illegal is admirable—and now your own grandfather thinks you’re some kind of monster. Your world feels upside down. What was right is now wrong, what was good is now bad, what once felt like winning now feels like losing. You’re probably wondering: What next? What will the angry rabble—all those ordinary people who can never really understand your business—now demand that you explain to them, so they can disapprove of you all over again?

      Here, for a start, is what the world beyond Wall Street is entitled to:

      Full knowledge of the inner workings of your proprietary trading desk. In particular, the moment-to-moment dealings of your correlations traders from late 2004, when they first exploited AIG’s (AIG) idiotic willingness to sell cheap insurance on pools of subprime mortgage loans, until the end of 2007, when they would have taken most of their profits from the total collapse of the subprime bond markets.

      Your bosses claim to have lost $100 million or more on the Abacus trade for which your firm is being sued. This seems, to put it mildly, disingenuous. In March 2007, the time of this particular Abacus trade, your prop traders were already short the subprime market. Would they really have taken a naked long position in a deal you helped to construct precisely so that it would fail, without offsetting in some other way on their books?

      Sadly, it will not suffice to offer up Fabrice Tourre as a ritual sacrifice. No one is going to accept a then-27-year-old Frenchman, whose job was apparently to keep sweet the patsies on the other end of your trades, as the world’s authority on your trading positions. His name isn’t even on the top of the list of Goldman traders on the $2 billion Abacus deal for which you are being sued. The name on top of that document is “Jonathan Egol.” Egol appears to have been the bond trader at the center of your Abacus program. The same Jonathan Egol who told fellow traders in 2006—a year before this transaction—that the subprime market was doomed. The public eventually will ask: Who is Jonathan Egol, and what exactly was his game?

      Then there’s the matter of your relations with the inaptly named “CDO manager.” In this case, the manager was ACA but it wasn’t the only one. Others were equally pliable. The Securities & Exchange Commission lawsuit charges you with using ACA as a shill: The investors in these deals assumed that it was ACA’s job to figure out whether the bonds inside the collateralized debt obligations were intelligent investments. But ACA quite clearly had no idea what it was doing—and you quite clearly understood that.

      The telling details here are the e-mails between your French salesman and ACA in which ACA feels it needs to understand exactly what John Paulson’s interests are in this new CDO. Paulson, who had done a great deal of analysis on the underlying bonds, was of course picking the ones he wanted to see inside the CDO. (Hard to understand why it didn’t disturb you that he was even in the conversation, by the way, but that’s another story.) The SEC accuses you of lying to ACA by suggesting that Paulson was a long investor in the deal when he was in fact selling the deal short.

      What’s interesting here is what you appear to take for granted: that ACA has no talent for evaluating the bonds picked by Paulson. After all, if ACA was doing its job it wouldn’t have cared one way or the other what Paulson (then a third-tier hedge fund manager) was up to. ACA would have known which bonds were good and which were bad, and picked the good ones. In their anxiety about Paulson’s motives we can all glimpse their incompetence. They want to know that Paulson has an interest in picking the good ones because they themselves have no clue which ones they are.

      But if a CDO manager had no independent ability to select the bonds inside a CDO, then what, please explain to us, was its financial function? Why did you select ACA to manage your deal?

      Finally, what is the reason for being so unconcerned for so long with the consequences of your actions? The masses deserve to know, for instance, how you became blinded to the very simple difference between right and wrong. The more moralistic among them will ask the question mainly to fuel their own outrage, the more tactical will ask the question because they sense that the financial system doesn’t function unless you have the incentive to think in these terms—and you clearly do not. What begins as an effort to change your business may well end up as an attempt to change your soul.

      Just as there was a time when people could smoke on airplanes, or drive drunk without guilt, there was a time when a Wall Street bond trader could work with a short seller to create a bond to fail, trick and bribe the ratings agencies into blessing the bond, then sell the bond to a slow-witted German without having to worry if anyone would ever know, or care, what he’d just done. That just changed.

      Michael Lewis, a columnist for Bloomberg News, is the author of Liar’s Poker, Moneyball, and The Blind Side. His next book, The Big Short, will be published in March.

    24. Jim Hall says:

      This would be soooooo funny if not quintessentially tragic:

      Madoff Investors’ Suit Against SEC Tossed
      By Richard Vanderford

      Law360, New York (April 22, 2010) — The U.S. Securities and Exchange Commission is entitled to be incompetent in its investigations, a federal judge has ruled, dismissing a case brought by investors who say the commission should have done more to stop Bernard L. Madoff’s Ponzi scheme.

      The conduct of SEC examination and enforcement actions — and whether the commission takes action at all — is at the SEC’s discretion, Judge Stephen V. Wilson of the U.S. District Court for the Central District of California said in a decision issued Tuesday.

      Though he acknowledged that the SEC had displayed “sheer incompetence” in its handling of the Madoff case, Judge Wilson said the investors’ claims against the commission fail because the laws and regulations that allow its investigations use language that is permissive, not mandatory.

      Without a mandatory duty laid out in the law, the commission’s investigating style, or lack thereof, is shielded by the “discretionary function exception” of the Federal Tort Claims Act, Judge Wilson said.

      For an FTCA claim to survive, a law needs to mandate that an agency take certain action, not simply allow it, he said.

      The SEC itself has admitted that the investigation was hardly a high point for the commission. A 2009 report from the SEC’s Office of Inspector General details a host of failures that allowed Madoff’s scheme to flourish unchecked until it finally collapsed in December 2008.

      Though investigators had subjected Madoff to varying levels of scrutiny for years, they failed to uncover his wrongdoing, the report said. One team supervisor pointedly admitted that some of the investigators had been “asinine,” a word the plaintiffs seized on in their filings.

      “’Asinine’ means ‘unintelligent, stupid, silly, or obstinate,” Judge Wilson countered. “’Asinine’ does not mean that a person has violated a nondiscretionary legal duty.”

      Indeed, the SEC could have done nothing at all, Judge Wilson said.

      “Doing nothing may be the most constructive use of the commission’s resources,” he said, quoting the U.S. Court of Appeals for the Seventh Circuit’s decision in 1989′s Board of Trade v. SEC. With limited resources, the commission needs the freedom not to take action in certain cases, that decision said.

      Tuesday’s dismissal, if it stands, leaves California investors Philip Dichter; his wife, Claudia; and Richard Gordon to try to recover their money through the Madoff receiver, as other investors must.

      Judge Wilson denied their request to conduct more discovery to try to find mandatory SEC rules or policies that the SEC investigators on the Madoff case might have violated. He did allow them 30 days to file an amended complaint, however.

      The dismissal may portend a loss for investors in a similar case in the U.S. District Court for the Southern District of New York. Investors led by Phyllis Molchatsky have filed a similar suit there accusing the SEC of negligence. A government motion for dismissal is pending.

    25. Dr. Jim DeCosta says:

      ABUSIVE SHORT SELLING IS SYNONYMOUS WITH THE ABUSE OF “DERIVATIVES”

      1) A “share” is the unit of equity ownership in a manner of doing business known as a “corporation”. The underlying foundation for “corporations” is “one share, one vote”.
      2) A “security entitlement” is a “derivative” of a “share” that is induced to be issued every time the seller of securities fails to deliver that which he sold, every time an otherwise legitimate “pre-borrow” is effected before a short sale and every time the NSCC “cures” a delivery failure via its “Stock Borrow Program” or “SBP”.
      3) Since UCC Article-8 mandates that “security entitlements” be readily sellable in our markets then they increase the “supply” of that which is readily sellable and therefore depress share prices.
      4) Thus the mere refusing to deliver of the securities one sold in our markets causes the “derivative” of this thing we call a “share” to decrease the value of this “share” from which the “derivative” was derived in a tail wagging the dog fashion.
      5) When the “derivative” is allowed to alter the value of that from which it was derived then certain self-fulfilling prophecies will materialize.
      6) Securities fraudsters aware of this paradox realized that they could sell nonexistent share look-alikes all day long and not only establish “naked short positions” but also give them monetary value due to the share price depressing effect of the “security entitlements/derivatives” they induced the issuance of via breaking their contracts to deliver the securities that they sold by T+3. In other words, crime does pay quite handsomely.
      7) Wall Street is essentially handing out “fee money” i.e. that of the unknowing “long” investor that thought that what he purchased did indeed exist and got delivered on or by T+3.
      8) Since the “derivative/security entitlement” represents a negative bet against the value of the underlying “share” as the share price drops the value of the “derivative” goes up. All of this occurs INDEPENDENT OF THE MERITS OF THE CORPORATION WHOSE SHARE PRICE IS BEING MANIPULATED DOWNWARDS. This represents the “disconnect”.
      9) This “disconnect” was induced by a different “disconnect”. This other “disconnect” is associated with the delivery of purchased securities on or by T+3 being “disconnected” from the tendering of the share price on or by T+3. In other words “delivery versus payment” or “DVP” needed to be “disconnected”.
      10) These casino-like bets known as “derivatives” benefit first of all the Wall Street “securities intermediaries” that make commissions, earn fees and gain otherwise unattainable order flow in the absence of these bets being allowed.
      11) They also set up a “Wall Street versus Main Street” mentality as only the Wall Streeters and the hedge funds able and willing to direct Wall Street “securities intermediaries” enormous amounts of order flow can place these bets by refusing to deliver that which they previously contracted to deliver by T+3.
      12) The analogy of Wall Streeters with no economic interest in a U.S. corporation whatsoever being allowed via “derivatives” to take out fire insurance on U.S. corporations and then torch them is very accurate. The question is where is the “insurance commissioner” or “fire marshal” during all of these arsons.
      13) Here’s the problem; the “participants” of the DTCC and the “members” of FINRA congressionally mandated to act as these “insurance commissioners” and “fire marshals” just so happen to be the recipients of the money stolen from U.S. “long” investors as well as the recipients of these otherwise unattainable fees and commissions derived from acting as the “securities intermediaries” involved in the sale of these “derivatives”. OOPS! If I’m not mistaken that’s referred to as a quadrillion dollar “conflict of interest” and conflicted “securities cops” are not a good thing.
      14) The question arises as to whether or not the “prospectus” of an upcoming IPO should warn prospective “long” investors of the existence of these “derivatives” and their ability to provide this “disconnect” between the merits of the corporation whose shares are being advertized for sale and its share price. Or what that be a little embarrassing and perhaps we should just address these “derivative” related abuses on their own?
      15) In the discussions going on now as to how to address these “derivative” abuses that recently nearly brought down our entire financial system we hear about the need for “central clearing” facilities. Wait a minute; we have that now with the DTCC in the equity markets. You don’t need just “central clearing” you need UNCONFLICTED “central clearing” facilities wherein the recipients of the money stolen from Main Street “long” investors and the recipients of all of these otherwise unattainable fees, commissions and order flow don’t own the clearing facility.
      16) ABUSIVE SHORT SELLING IS INDEED SYNONYMOUS WITH THE ABUSE OF “DERIVATIVES”.

    26. iStandUp says:

      Jim and All,

      What the judge stated in the Madoff lawsuit against the SEC confirms in my mind WHY THE SEC ACTS as DEFENSE LAWYERS for their Fraternity Brothers on Wall Street without fear —

      “The conduct of SEC examination and enforcement actions — and whether the commission takes action at all — is at the SEC’s discretion, Judge Stephen V. Wilson of the U.S. District Court for the Central District of California said in a decision issued Tuesday.

      Though he acknowledged that the SEC had displayed “sheer incompetence” in its handling of the Madoff case, Judge Wilson said the investors’ claims against the commission fail because the laws and regulations that allow its investigations use language that is permissive, not mandatory.

      Without a mandatory duty laid out in the law, the commission’s investigating style, or lack thereof, is shielded by the “discretionary function exception” of the Federal Tort Claims Act, Judge Wilson said.

      For an FTCA claim to survive, a law needs to mandate that an agency take certain action, not simply allow it, he said.

      … “Doing nothing may be the most constructive use of the commission’s resources,” he said, quoting the U.S. Court of Appeals for the Seventh Circuit’s decision in 1989’s Board of Trade v. SEC. With limited resources, the commission needs the freedom not to take action in certain cases, that decision said….”

      These statement by the Judge also confirms what Senator Kaufman Stated in a speech a few months ago —

      “CONGRESS – NOT THE REGULATORS – MUST DRAW HARD LINES

      By U.S. Senator Edward E. Kaufman
      February 4, 2010

      Since the financial meltdown in 2008, America and Congress have remained stuck at a crossroads. Not since the Great Depression of the 1930’s have we experienced a financial and economic crisis of such magnitude that it forces us, as a society and lawmaking body, to reconsider the legal and institutional underpinnings of our financial system……

      And we often justify our vagueness by saying the regulators to whom we grant statutory authority are in a better position than we are to write the rules – and then to apply those regulatory rules on a case-by-case basis. But this is not one of those times.

      If Congress fails to draw hard lines that deliver on real systemic reforms, regulators cannot be counted upon to do what is needed. We need brick and mortar, not human judgment, to cleave the banks from investment banking again. We need stone walls – not regulatory oversight – to prevent institutional conflicts of interests that inevitably bring financial disaster to millions of Americans.

      We must create a system, as the saying goes, of laws and not of men. While Congress is by nature a compromiser, we must do better than our usual legislative ambiguity. We must provide these agencies – the Fed, the SEC, the FDIC, the OCC, the CFTC, and others – with the statutory clarity and the bright lines they need to enforce the law.

      ( http://kaufman.senate.gov/imo/media/doc/2-4-10%20Congress,%20Not%20the%20Regulators,%20Must%20Draw%20Hard%20Lines5.pdf )

    27. Dr. Jim DeCosta says:

      It appears that the Federal Tort Claims Act needs to be amended to create a “mandatory” duty for the SEC to investigate abusive short selling crimes. This would bypass the current “discretionary function exception” supporting “regulatory capture”. Likewise the duty for “securities intermediaries” needs to be raised to the level of a “fiduciary duty” so that these NSCC participants must act in accord with the financial interests of the “long” investors they represent.

      It kind of makes you wonder how much of the SEC’s historical refusal to address abusive short selling crimes was backstopped by this “discretionary function exception” of the FTCA.

    28. Anonymous says:

      Is anyone watching the battle for control over the bulletin board market, where large naked short positions likely hide?

      http://www.thelebrechtgroup.com/index.php/blog/35-blog/177-pink-otc-markets-v-finra-round-1

      There’s a lot at stake here for the thieves.

    29. Dr. Jim DeCosta says:

      The Inspector General of the SEC’s recent audit No. 450 revealed that of the over 5,000 formal complaints lodged with the SEC by victimized corporations and victimized investors in regards to abusive short selling crimes NOT ONE led to an “enforcement action”. I guess the “discetionary function exception” of the SEC was put on steroids.

    30. iStandUp says:

      Dr. Jim DeCosta,

      The best thing SEC staff members can do as DEFENSE LAWYERS for their Wall Street Fraternity Brothers is NOTHING!!!

      So your statement about “The Inspector General of the SEC’s recent audit No. 450″ CLEARLY demonstrates that doing NOTHING is the best thing SEC Lawyers can do for their fraternity brothers in their capacity as Defense Lawyers —

      “The Inspector General of the SEC’s recent audit No. 450 revealed that of the over 5,000 formal complaints lodged with the SEC by victimized corporations and victimized investors in regards to abusive short selling crimes NOT ONE led to an “enforcement action”.”

    31. iStandUp says:

      — NEW EXAMPLE of DO NOTHING SEC DEFENSE LAWYER TACTICS —

      April 23, 2010, 4:07 p.m. EDT

      Inspector: SEC staff surfed porn sites during crisis buildup

      SEC regional accountant received 16,000 access denials for porn sites

      By Ronald D. Orol, MarketWatch

      WASHINGTON (MarketWatch) — During the past five years, top Securities and Exchange Commission staff members and contractors used government computers on official time to view pornography, according to an agency inspector general.

      The SEC’s inspector general found that 33 SEC employees or contractors violated commission rules and policies by viewing porn, according to a memo obtained by MarketWatch. The investigation was requested by Sen. Charles Grassley, R-Iowa.

      According to the memo, a regional office supervisory staff accountant admitted he frequently viewed pornography at work on his SEC computer for about a year and accessed pornography on his SEC-issued laptop computer while on official government travel.

      Another regional office supervisory staff accountant admitted that he used an SEC assigned computer to access Websites containing pornography and other sexually explicit material during work hours fairly frequently, sometimes twice a day, according to the memo.

      Another regional office staff accountant received 16,000 access denials for Internet websites classified by the SEC’s Internet filter as “Sex” or “porn” in a one-month period. “In addition, the hard drive of this employee’s SEC laptop contained numerous sexually suggestive and inappropriate images,” the memo said.

      A senior attorney at the SEC’s headquarters in Washington admitted accessing Internet port so frequently that, according to the memo, on some days, he spent eight hours accessing Internet porn.

      “In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office,” the memo said.

      Rep. Darrell Issa , R-Calif., the Ranking Member of the House Committee on Oversight and Government Reform, said he was disturbed by the findings.

      “It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation’s economy to the brink of collapse,” he said in a statement. “This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority. Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions.”

      Ronald D. Orol is a MarketWatch reporter, based in Washington.

      ( http://www.marketwatch.com/story/inspector-sec-staff-watched-porn-during-crisis-2010-04-23?reflink=MW_news_stmp )

      • anti_republocrat says:

        Have these folks been fired? If so, what’s Issa’s beef? I bet the same crap happens in the DoD, or even worse. If they haven’t been fired, that’s the issue that needs to be addressed, not eliminating the SEC.

        There’s obviously a morale problem at SEC that needs to be addressed. It’s largely due to the revolving doors and capture at the top. If the lowly accountants and lawyers at the bottom aren’t allowed to do their jobs, it promotes cynicism and an attitude that the bigwigs at the top are getting theirs, I may as well milk the system for whatever’s available to me.

    32. j davis says:

      Every one of these bastards involved should be dumped in a maximum security prison with all the other predators. They would fit right in. Maybe they would meet the infamous ‘tossed salad man.’ Jelly or syrup fellas? Our laws against economic crimes have no teeth. People really need to go to prison for shenanigans like this!

    33. iStandUp says:

      Mark, there is a NEW EXAMPLE of what SEC staff members do to fill their DO NOTHING times in the office — but the software will NOT allow it to be posted since the word “p0rn” is in it.

      - MarketWatch is reporting this today —

    34. Sean says:

      IStand, Jim et al Goldman has sent out their dogs/shills/reporters to discredit (as if they need any more) humiliate and marginalize any efforts of the SEC, that they have at their disposal to downplay their crimes. We should have all expected this, its what they do protect their own. Later.

    35. ravenseye says:

      http://levin.senate.gov/newsroom/release.cfm?id=324169
      FOR IMMEDIATE RELEASE
      April 24, 2010
      Senate Subcommittee Investigating Financial Crisis Releases Documents on Role of Investment Banks
      WASHINGTON – The Senate Permanent Subcommittee on Investigations released several exhibits that will be among those discussed on Tuesday at the fourth of its hearings on the causes and consequences of the financial crisis.

      The exhibits are available at this link. ….
      http://levin.senate.gov/newsroom/supporting/2010/PSI.Exhibits.pdf

    36. iStandUp says:

      E-mails show Goldman boasting as meltdown unfolds
      In e-mails, Goldman Sachs executives boast of profit-taking as housing market collapses

      Dan Strumpf, AP Business Writer, On Saturday April 24, 2010, 1:30 pm

      NEW YORK (AP) — E-mails released Saturday morning show top executives at Goldman Sachs Group Inc. boasting about the money the firm was making as the national housing market collapsed in 2007.

      The e-mails suggest Goldman benefited from its bets that securities backed by subprime mortgages would lose value. The messages seem to contradict previous statements by the investment bank that it lost money on the securities.

      “Of course we didn’t dodge the mortgage mess,” CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to the e-mails released Saturday by the Senate’s Permanent Subcommittee on Investigations. “We lost money, then made more than we lost because of shorts.”

      Goldman restated its position Saturday that it did not reap huge profit from bets against the market.

      Short positions are bets that the market will go down. As the housing bubble burst, Goldman and a few powerful hedge funds took short positions on the market. Many of those bets required other investors to bet the market would rise.

      When the market went bust, people with short positions cleaned up.

      “We were just smaller in the toxic products,” Goldman’s president, Gary Cohn, writes back to Blankfein that same Sunday evening.

      Critics say their bets added fuel to the financial crisis.

      One of those bets is at the heart of civil fraud charges the Securities and Exchange Commission filed against Goldman this month. The SEC says Goldman let hedge fund Paulson & Co. help select investments for a portfolio that was designed to lose value, then marketed the deal to investors who were betting the portfolio’s value would rise.

      The SEC says Goldman did not tell the investors — mostly European banks — that the deal was created in part by the hedge fund and therefore was designed to fail.

      Separately Saturday, Goldman released a series of e-mails from Fabrice Tourre, the trader at the heart of the SEC charges. In them, Tourre jokes about selling investments to “widows and orphans” when he already expects the market to go bust.

      He writes in an e-mail dated March 7, 2007, that Dan Sparks, leader of Goldman’s U.S. subprime business, said the business “is totally dead, and the poor little subprime borrowers will not last so long!!!”

      That April, he joked about the bonds the SEC charges he misled clients about.

      “I’ve managed to sell a few abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore” the complex investments, Tourre wrote.

      The e-mails are in a mixture of French and English, and are to a woman with whom Tourre appeared to be romantically involved. Goldman provided translations.

      The same e-mails were excerpted in the SEC’s complaint against Goldman, but the full context was not reported previously.

      The subcommittee, whose probe is not connected with the SEC’s, has been investigating the causes of the financial crisis for 18 months. Its fourth and final hearing Tuesday will include testimony from Blankfein and Fabrice Tourre, a trader named in the SEC case.

      Goldman has denied wrongdoing and says it will fight the charges. In a statement Saturday, spokesman Lucas Van Praag said the bank lost $1.2 billion in the residential mortgage market during 2007 and 2008.

      “As a firm, we obviously could not have been significantly net short since we lost money in a declining housing market,” Van Praag said in a statement. He said the Senate panel “cherry-picked” four e-mail threads out of 20 million pages Goldman provided.

      Van Praag is one of the handful of top executives who contributed to the e-mails the Senate committee released Saturday.

      Blankfein’s comment about Goldman making more than it lost was a response to an e-mail from Van Praag in which Van Praag discussed a forthcoming New York Times article about the firm. It would show “how we dodged the mortgage mess,” Van Praag explained.

      In one, Goldman Chief Financial Officer David Viniar says that in one day the firm made more than $50 million on bets that the housing market would collapse, according to a statement from Levin’s office.

      Viniar, also scheduled to testify Tuesday, summed up the position of investors who had not bet against the market:

      “Tells you what might be happening to people who don’t have the big short,” Viniar writes in the message dated July 25, 2007.

      The e-mails were released by subcommittee chair Sen. Carl Levin, D-Mich. In a statement, Levin called banks like Goldman “self-interested promoters of risky and complicated financial schemes that helped trigger the crisis.”

      Goldman said in its 2009 annual report that its short positions sought to offset its long positions in the mortgage market and did not generate large profits. Through 2006, Goldman “generally was long in exposure” in the mortgage-backed securities market, according to the report, and after taking losses on those securities in 2006 it reduced its exposure.

      “Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not ‘a bet against our clients,’” according to the report.

      AP business writers Daniel Wagner in Washington and Stevenson Jacobs in New York contributed to this report.

      http://finance.yahoo.com/news/Emails-show-Goldman-boasting-apf-2180165135.html?x=0&sec=topStories&pos=main&asset=&ccode=

    37. greg says:

      I am presently in litigation with Fremont Reorganizing, Goldman Sachs dba Litton Loan Servicing, et al., (2 different cases) for about 2 years now. The main issue with the complaint is a fraudulent loan originated by Fremont in June 2006. This in turn produced an array of other
      issues: unsigned deed of trust, over billing issues, lost payments, excessive balloon payment, back dated assignments, illegal non-judicial foreclosure documentation, missing documentation, illegally reporting to my credit, falsifying declarations, 6 week TRO’s, court procedures not followed, judges wait until the courtroom is cleared to rule against a TRO (both times); retired (78 year old) judge ruled against a seated judges TRO where the retired judge took 30 minutes to read a 300 page brief. The whole time they have been ignoring my request and failing to give me the required documentation so that I can rescind the loan. Goldman Sachs dba Litton Loan Servicing has been aggressively trying to foreclose on my property. I believe to cash out for insurance reasons. (It’s over a million dollar loan) I have invested over $400,000 into this property for the past 5 years and if I had known about this mortgage meltdown game played by Wall Street I would have never proceeded with this Real Estate transaction. The Media and the Government has not once addressed or helped the borrower, namely me, who also has been damaged by these defaulted CDO’s.

      A Time line of what’s going on with Goldman Sachs to show how they are scheming to pursue foreclosures for the insurance by acquiring distressed, shelled fraudulent companies which will eventually or haven’t already gone BK…

       Oct 26, 2005 Litton Loan Servicing Class Action – mishandling loans, servicing over 400,000 borrowers – case settled Feb 17, 2009 for $537 (limited due to class status)
       Feb 27, 2007 FDIC Cease and Desist – Fremont Reorganizing for illegal loan practices, et al., (largest predatory lenders who heavily solicited brokers for their schemes)
       Oct 16, 2007 Massachusetts Lawsuit vs Fremont and Goldman Sachs – Predatory Lending Practices – settled May 11, 2009 for $60 mil
       Dec 11, 2007 – Goldman Sachs Acquires Litton Loan Servicing
       June 2, 2008 Litton (Goldman Sachs) Acquires Fremont Reorganizing Servicing Rights
       June 19, 2008 Fremont Reorganizing files BK
       Apr 16, 2010 – SEC vs Goldman Sachs – Securities Fraud

      Here is the link to my blog http://bushnellcomplaint.blogspot.com/ if you want to download court documents pertaining to my case.

      Note: My wife is pursuing individuals who are interested in joining her in a class action lawsuit with regards to violation of her community property rights in a wrongful foreclosure. If you are in a community property state and a spouse is not on title you may have grounds for legal action.

    38. bbhindyou says:

      Tsk tsk..

    39. bbhindyou says:

      this is a metaphore/joke only, of course.

      Tsk tsk silly Congress they should not be grilling Goldman.
      The amount of fat running out could catch fire burning down the whole place.
      Unless that is the whole point in it, to burn down the house before it is the cooks turn to be ‘served’.
      If you can’t take the heat, burn down the kitchen.

    40. Daniel Earley says:

      Naked, rigged or otherwise, when Ted Forstmann denounces the overall practice as mere betting masquerading as a counterfeit for productive investing, we should probably listen. When radicals like socialistworker.org begins turning it all as fodder against capitalism itself, the irony is almost unbearable. http://socialistworker.org/2010/04/28/bankruptcy-of-casino-capitalism

      We’ve become our worst enemy and the pejorative Casino Capitalism is probably becoming justified. Real capitalism — putting the “vested” back into investing — needs a revival. To brighten the contrast, perhaps some terms need to be coined like “unvesting” – “shadowvesting” – “spongevesting” – “leechvesting.”

      • Daniel Earley says:

        Given my typos above, I’ll refrain from nominating myself to coin any new terms into our lexicon. That being said, Mark, it really might be worthwhile to see if Patrick, Judd or yourself could check Frank Luntz’s availability for the task. After all, strategically rebranding a behavior is oftentimes nearly as effective as the law.

    41. buybuybuy says:

      When Paulson`s amazing windfall trading results from 2007 ($3.6 billion in personal gains) first became public I remember reading that Greenspan had begun working for him as a consultant after he retired from the FED.. I don`t remember where I saw that and can`t find any more about it. If it is true it seems like it would be a pretty big deal. Anyone else remember reading something like that? I would like to know whether it is true or not. If true it would seem to be a huge conflict of interest. If it is untrue I don`t want to be posting falsehoods. thanx

    42. Anonymous says:

      What lacks in America as in quite all the world today is the lack of understanding that market, in Capitalism, **inevitably** contracts, and that there are many too many “someones” that take profit both on expansion **and** contraction… For, where is it said that, being profit the “god”, you can make it in expansion only?!

      Contractions have alwyas been a mean to pass from the “virtual” to the “real” amounts…

      Stock Exchange is a game in which the ones who quit first at the highest level of titles are the winners of the game…
      And these ones inevitably are the ones who are nearer to the centre of the system and that can have the best informations as soon as possible…

      Ah! Money banks gave never existed as such… They gave far more than what they really owned – as always in Capitalism even if not as such a level as today -, the only thing they need to avoid is that all and everyone asks them the entire sums in brief moments for the easy and understandable reason that that mythic “entire sum” never existed…

    43. at buy buy buy says:

      You remember correctly. When Greenspan left the smoldering wreckage of what his not-Federal reserve had done to our economy, he took up consulting for Paulson and Co. as well as Deutsche Bank. Both firms profited from the ruin.

    44. LBH says:

      I have a hard time viewing GS as bad guys here. Securities are created out of thin air all the time in our financial system because someone believes that they can profit from them.

      This article states that it was inevitable that these securities would default. That’s hind sight. I’m sure that if you could go back in time there would be many who would have argued that default of these securities was not inevitable. I would also bet that if these people had been given all of the disclosures, that many believe they should have been given, most would still have invested.

      Right now we have triple leveraged ETF’s that people will inevitably lose money in. The math is simple and obvious. Yet people still invest in them even after considerable disclosures have been implemented by the brokerage companies.

      I agree with 95 percent plus of what appears on deepcapture, but on this one I will have to disagree.

    45. Mark says:

      I don’t know…. think the crooks got away with it, they each have each others back, the tea partiers is just a calm protest group. Personally I think there’s going to be a change in hands of the wealth in this country. Those that are currently buying and hoarding gold and silver will be the new employers on the block…even be it the corrupt ones are hoarding too. I’m fighting this currency quantitative easing stimulus boondoogle…are you?

    46. aargh says:

      Well looks like neither Paulson nor Magnetar will be prosecuted by the SEC. Behind the WSJ paywall, just google
      Hedge Fund Magnetar Won’t Face Charges Tied to Mortgages

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