Now we know the truth. The financial meltdown wasn't a mistake – it was a con

[CHIMO]

The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank – a bank which looks after the Post Office's financial services – was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

Beneath the complexity, the charges are all rooted in the same phenomenon – deception. Somebody, somewhere, was knowingly fooled by banks and bankers – sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman's case, by creating a scheme to enrich one favoured investor at the expense of others – including, via RBS, the British taxpayer. Along the way there is a long list of so-called "entrepreneurs" and "innovators" who were offered loans that should never have been made. Lloyd Blankfein, Goldman's CEO, remarked only semi-ironically that his bank was doing God's work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation.

http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges

Wow! Such big paragraphs!

[gateley]

1. Despicable. nt

[tavalon]

2. That's a duh!

However, more people need to see this so I recommended it.

[bvar22]

3. Paulson with Co-Conspirators

NOW we have Your Children’s Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is “Bi-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!

[femrap]

4. I much prefer

the British newspapers to ours....they still have a bit of Journalism over there.

Blankfein is a turd....all the Goldboyz Suck suck.

[inna]

5. Huge K&R

Now, prosecute the bastards.

[DemReadingDU]

6. It's not over

Expect another meltdown, much worse than 2008
:(

[Little Star]

11. That's the sad part! They will not stop until they have it all.

[northernlights]

17. now they will be stopped

ours is sadly in bed with them totally, so it may take other governments to bring the criminal charges, fine them billions to get back some of what they stole, and throw their asses in jail. But now that the other governments have awakened to the depth of the evil...and are themselves on the brink of financial collapse...they will go after them.

In fact, I've rethought our government's situation. As more and more of the financial crimes surface, the democratics will see their opportunity in going after them ahead of the next election. They can force the rethugs into a corner defending the criminals, and in so doing simultaneously separate themselves from the financial thugs and help their re-election prospects.

It's come down to the rats eating their own. The dems still control the military and the prisons. Once it's in their best interest to bring the financial thugs who think they are masters of the universe to heel, they will do so. Whichever way the wind blows, ya know?

[Andy823]

26. Hope you are right.

I think the whole thing was a master plan for a handful of big banks to take over the banking system, and the same with wall street, the big companies take it all. This has already been done with the media pretty much, and with the oil industry. Those who control the money, the media, the energy sectors and food will control the world, the new world order that daddy Bush was always talking about. Yes it can be stopped, and yes it would really help the democrats if they did it come election time, but the problem is will they have the guts to do it, or will they cave in? Of course even if they do it, will it be a "real" change, or will it just go back to the same things, but with a new group of crooks paying off the democrats instead of the republicans?

We need take them on, make it so it can't happen again, and stop the big money from buying off politicians on both sides of the isle! Can the democrats do all of that? I just don't know. I hope so, but I won't believe it till I see it with my own eyes.

[formercia]

28. Another Meltdown to create more confusion and disarray.

..and people wonder why the WTC was the target........just another Meltdown in a whole series of Meltdowns.

[catzies]

38. Yes! Confusion...disarray...then, when we're in "shock," they swoop in like vultures

(Shock in quotes to refer to Naomi Klein's "The shock Doctrine.")

Even though we know what's going to happen, ad we have seen it before, I feel we are powerless to stop it from happening. :(

[jgraz]

7. Including the bailout

One last looting of the Treasury on the way out the door.

[snagglepuss]

8. k & r. nt

[Mr_Jefferson_24]

9. Most certainly was a con, and a transparent one at that....

[Major Hogwash]

10. Are you going to invest your toppin's suh?

Mary Poppins was NOT a financial advisor, but everything I learned about cheating banks came from that movie.

[Pharlo]

42. 'tuppence' I believe

'Are you going to invest your tuppence, Suh?' Shortened version of 'two pennies'

[WVRICK13]

12. Don't Forget

the huge wholesale transfer of wealth after the collapse. The wealthy have benefited greatly by purchasing properties for pennies on the dollar. The only people suffering are the working people. The top 1% are gaining wealth during this time.

[Bluenorthwest]

13. Dear Obama,

Not going to turn the page for you on this one.
Thanks,
America

[AllyCat]

14. Matt Taibbi has been talking about this for months too. Good to see someone

else writing about it.

[Joe Chi Minh]

19. Here is another one, from October 2009. Doesn't seem to pull any punches.

http://market-ticker.denninger.net/archives/1514-Tying-It-Together-Massive,-Pernicious-Fraud.html

[lonestarnot]

15. Was anyone saying that it was a mistake?

[tiny elvis]

36. besides the banks, the 'news' agencies and the congress?

and the bushes and the federal reserve and the only two political parties allowed on tv and their candidates and the ten or twelve persons on this board who fully endorse the party line?

[Ikonoklast]

16. When only I can tell you the value of the thing I sell to you,

and only I can determine that number, you must take it on faith that I am not lying to you.

When I later re-purchase that vastly over-priced asset for pennies on the dollar, it was because you didn't use 'due diligence' in determining that I mis-lead you, even though there was no way on Earth to determine if I was lying or not.

Even when I already knew that what I was peddling was worthless, and was actively moving to destroy any value of the asset I just sold you, it is your fault you believed me to be an honest broker in the transaction.


Might as well invest in the outcome of a crap game.

[varelse]

18. Most Americans at least guessed at this back in November 08 (nt)

[JDPriestly]

25. No! Most Americans still don't understand what happened.

I have a friend who is losing her business and probably her home. In spite of my attempts to explain what happened, she blamed herself and other Americans like herself. That was until last week -- when her real estate agent explained derivatives to her.

I had already explained them to her, but then I'm an old friend. What would I know?

Anyway, I am relieved to say that my friend is now angry at the right people -- not herself, not others who were caught in the lending game by dishonest mortgage brokers.

Here on the streets of Los Angeles, the fact that the housing market would fail was evident by 2004 if not earlier at least to those of us who had bought our homes before the last housing market crash in the early 1990s.

We knew that wages had not risen anywhere near as fast as housing prices. That is a sure sign of an unsustainable boom. Don't believe for a minute that the big guys in the and investment mortgage companies and in the banks didn't know. They study the charts. They had to know. If my neighbor and I knew just based on putting our fingers in the air and feeling the wind, the experts had to know. They simply lied because their lies were making them rich. But then, all the top guys lied during the Bush years.

If Obama wants to be remembered as a great president, he needs to both end and disclose the lies. The SEC's action is the first sign that Obama is going to do what needs to be done about the lies.

[Fire1]

20. Ya think?

[DesertDiamond]

21. I think it is more than just fraud. I think it is an attempt to subjugate the rest of us.

There, I said it. I've been thinking it since the 1980s.

[DesertDiamond]

22. No need for despair. We can still defeat this attempt. We only need to defeat our own darkness

When we defeat our darkness, we will defeat the darkness of the world. So, don't worry. We have work to do, but we can do it.

[Techn0Girl]

23. And in Other News...

Santa Clause is not real.
The Easter Bunny isn't either.
Billionaires didn't get their wealth by being nice or moral people.

[Mike K]

32. Behind every great fortrune -

- lies a great crime. (Honore de Balzac)

[notesdev]

24. Now you know

why I've been calling for the Marines to storm Wall Street. Goldman Sachs is a terrorist organization, and not in any metaphorical sense.

[Mike K]

31. The Marines storming Wall Street -

- is a strikingly appropriate metaphor which clearly expresses the kind of response that must be directed at a menacing internal enemy before we end up chained to a mill wheel. What has happened to America during the past ten years calls for an inquisition, firing squads and a guillotine.

Nothing less.

[BrklynLiberal]

27. From start to finish..and like any successful con, the perpetrators walked away, rich and free.

[valerief]

29. It ALWAYS is fraud. It's NEVER a 'whoops!' However, they ALWAYS say their fraud is a 'whoops'. nt

[underpants]

30. And what is the first thing ever local and state government cuts? Education

it appears as though it is a "market based" stripping of Brown v. Board

[mrdmk]

33. That seems to lay most of it out...

Of course, we still have a free for all economic plan still in place.

K & R

edit: missing words

[McCamy Taylor]

34. Many of us knew years ago. All the signs were there.

[ThomThom]

35. The Stock Market is a con that runs every day

but the same principle operates on the bigger con that happened at the end of GWB's administration. They push prices up and up and up. Sell off then sell short and rake all the money in. Then buy back, drive the prices up, sell off, then sell short. This is not an economy this is a con game. And still it goes on day in and day out. It is time to get back to investment that creates something not just higher stock prices. And selling short or beating on failure is just completely the wrong approach. Does anyone believe me yet?

[sendero]

44. And most folks here..

.. have not figured it out. The stock market is rigged. It is a game designed to suck money from the stupid.

[Odin2005]

37. THANK GOD IT PASSED!!!

:sarcasm:

Re Paragraphs: Obviously the Brits read at a higher level then most Americans. Our "News" articles are written at a 5th Grade level.

[sam sarrha]

39. a big ponzi game by OCD wealth hoarders

[RoccoR5955]

40. K & R

Everyone should know this, and we should get to a point where the huge banks are broken up.

[patrice]

41. They've known for a long time that it was coming. It's also a rational explanation for the Invasion

and Occupation of Iraq.

As our "War President" told his biographer, Mickey Herskowitz, having a nice little war would result in his also having a "successful presidency", read that a popular "War President" would have the political capital to

Privatize Social Security so that it could be held hostage to protect the banks and guarantee completely laissez faire bailouts when the crash that they knew was coming actually happened

[TheWatcher]

43. Again, where are the "All Is Well" Brown Shirts to spin this away for us?

Didn't their God, "Goofy" Geithner just tell us that everything is steadily getting better?

Maybe they just don't have enough of a Propaganda Cache to Copy/Paste right now.

Or perhaps their employer hasn't paid them for the previous week's Posts, so we don't get any new material until the Direct Deposit goes through.

[ixion]

45. It was a daylight robbery, pure and simple

the execution of which was aided -- made possible, in fact -- by Congress.

[econoclast]

46. A bit if important detail ...

Every story I read about this deal says that the Abacus CDO was "packed with Bbb subprime bonds". ....which is technically NOT the case.

It was packed with Credit Default Swaps written against a reference portfolio of Bbb subprime bonds.

The difference between the two makes a big difference overall.

There are - by definition - two sides to every credit default swap. One side benefits if things go well. One side benefits if things turn to shit. The GS "flip book" (which is all over the web, look for yourself ) makes it abundantly clear that the Abacus CDO is composed of credit default swaps on a very specific list of Bbb subprime bonds and that the CDO is populated by the end of the swaps that benefit if things go well. The inversors KNOW beyond a shadow of a doubt that SOMEBODY owns the end of those swaps that benefits if things turn to shit. If they know what a credit default swap is, then they know that. And IKB and ABN Amro - the two investors - know what a credit default swap is. Would it have made a difference if they KNEW WHO that somebody was? I don't know. Maybe. Maybe not. Now, in 20/20 hindsight, Paulson looks like a genius for calling the demise of subprime. But back in 2006 2007 none of his bets had paid off yet and he looked like an idiot for making them. But it is beyond doubt that the investors knew that Somebody was short the things they were long.

What are the specific disclosure rules? Again I'm not absolutely certain. But I know that if I place a buy order with a broker for 100 shares of stock the broker does not tell me, and is under no obligation to tell me, whether or not the shares I'm buying come from someone else who is selling the shares short. I'm buying the shares because I think they'll go up. I understand that others in the market may think otherwise and may act of those beliefs. But I know that when I buy the shares.

So things are not as clear cut for me as they were Friday.

[OllieLotte]

47. How can someone write such a long piece and leave out so much?

It started with cheap money. The US was in a recession and Greenspan lowered interest rates. He kept them low for far too long. Housing prices were increasing. The government encouraged borrowers who had little or no money to purchase homes (nothing down). The government (Fannie Mae & Freddy Mac) said it would purchase mortgages that banks were selling. The banks wrote tons of really bad mortgages that they knew the government would buy...and the government did. Then the banks figured out a way to sell bad mortgages to other groups of "savvy" investors using derivatives (you and I weren't allowed to buy them...you had to be smart). Guys like AIG would, of course, guarantee repayment since real estate always goes up in value. Let's not forget that people were treating their house like a giant piggy bank. Yep, worked great until the music stopped.

There isn't one group to blame in this mess.