GS gets away with Fraud thanks to the SEC

   Late today news broke that the SEC and GS have settled their civil fraud lawsuit one is left to wonder how far gone America is. We truly live in a fascist police state where justice is only for the billionaires and favored corporations (GS big contributor to Obama). We no longer have a real country--instead we are starting to resemble a banana republic where corrupt oligarchs openly loot and pillage the country. They are above the law and can do as they please. All it takes is $550 million which is nothing to GS, which steals billions through their High-Frequency trading programs(which win 95% of the time). Not bad, if your are Loyd Blankfein and company because it is simply a small cost of doing business.

     Some apologetics have argued that Goldman was not guilty of fraud. That is complete nonsense. I have a background in accounting and have found the exact definition of fraud from one of my old textbooks: the misrepresentation in or intentional omission from the financial statements, transactions, or other significant information. According to this definition GS is guilty as charged of committing fraud against investors who purchased notes related to the Abacus transaction. The synthetic CDO reference collateral was set up to fail by choosing mortgages most likely to default (sub prime mortgages from CA, AZ, and FL). The reason for this was so that Paulson & CO and GS could buy credit protection on the CDO tranches, which would profit if the CDO failed due to reduced cash flow from the mortgages. GS went around marketing the transaction as a great opportunity for investors because it would provide steady cash flow. Goldman Sachs intentionally mislead investors by failing to disclose that they were short the CDO notes through credit protection and that the CDO was set up so that Paulson could short the transaction (and Paulson only wanted the worst mortgages included in the transaction). This is fraud plain and simple. But the SEC is in bed with the Wall Street banks so you do not have to worry about pesky things like jail time or criminal charges. All the criminals have to do is pay a fine and admit no guilt. GS only acknowledged that they should have provided more information relating to how the collateral was chosen. That is it, they get to go free when top management should be in prison for the rest of their lives. Ah America the Great!!!! Now lets fight another freedom war in Iran. I am sure GS will be long oil options by mistake and make billions!!!

5 comments:

MadharryJuly 15, 2010 at 10:13 PM
Its nice that you have a background in accounting but your comments lead me to believe that you dont even understand the product that the suit was about. No surprise the sec didnt understand it either. It was a synthetic cdo. there was no real collateral. It was a product made up of phony as if cdos. the who purpose of a synthenic is so that there can be two sides a seller and a buyer, and they are both hoping for different results.

Far from being a fraud the SEC in all likelihood would never have won the case. It was settled for good reason. The SEC did not want to go to court and lose and GS wanted to put this behind them without admitting to doing wrong that would be actionable in court. $550 million was an acceptable price for GS to pay to put this behind them.
UnknownJuly 15, 2010 at 11:02 PM
It makes no difference wether this was a synthetic CDO or not because GS omitted the fact that they were short the security and that Paulson paided Goldman to set up the Abacus transaction. Omitting important facts constitutes fraud.
UnknownJuly 15, 2010 at 11:24 PM
One last thing that--even though it was a synthetic transaction there was still a reference portfolio of mortgages. This is mainly a disclosure issue.
AnonymousJuly 16, 2010 at 9:02 AM
Well, I think the cosumer should know a bit more about investing before they buy anything.