US will not prosecute Goldman Sachs for fraud

Discussion in 'Financial Cents' started by TheEconomist, Aug 10, 2012.

  1. TheEconomist

    TheEconomist Creighton Bluejay

    US will not prosecute Goldman Sachs for fraud

    Senate panel investigating 2008-2009 financial crisis decides not to pursue criminal case against Wall Street firm.

    Last Modified: 10 Aug 2012 12:42
    The US Justice Department has said it will not prosecute Wall Street firm Goldman Sachs or its employees in a financial fraud probe.

    In a written statement on Thursday, the department said it conducted an exhaustive investigation of allegations brought to light by a Senate panel investigating the 2008-2009 financial crisis.

    "The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time,'' the department said.

    But the department added that if additional or new evidence were to emerge, it could reach a different conclusion about prosecuting Goldman.

    A Senate subcommittee chaired by Senator Carl Levin in April 2011 found that Goldman marketed four sets of complex mortgage securities to banks and other investors but that the firm failed to tell clients that the securities were
    very risky.
    The Senate panel said Goldman secretly bet against the investors' positions and deceived the investors about its own positions to shift risk from its balance sheet to theirs.
    'Misled Congress'
    The Justice Department's decision capped a good day for Goldman as the Securities and Exchange Commission decided not to file charges against the firm over a $1.3bn subprime mortgage portfolio.
    At the same time, the Justice Department's decision ensured that the Obama administration will continue to feel political heat, particularly from the liberal wing of the president's own party, for not having brought more prosecutions in the
    financial crisis.

    The Senate panel probe turned up company emails showing Goldman employees deriding complex mortgage securities sold to banks and other investors as "junk'' and "crap".

    Levin said during his subcommittee's investigation that he believed that Goldman executives "misled the Congress'' and that Goldman "gained at the expense of their clients and they used abusive practices to do it".

    Levin questioned the accuracy of testimony Goldman Sachs executives gave to Congress about whether the firm steered investors toward mortgage securities it knew likely would fail.

    Goldman CEO Lloyd Blankfein told the Senate panel that the company did not bet against its clients and could not survive without their trust.
    The company lost $1.2bn in the mortgage meltdown in 2007 and 2008 that touched off the financial crisis and the worst recession since the 1930s, Blankfein testified. He also insisted that Goldman wasn't making an aggressive negative
    bet, or short sale, on the mortgage market's slide.
    False information
    In 2010, Goldman agreed to pay $550m to settle civil fraud charges by the SEC of misleading buyers of mortgage-related securities.
    The agreement applied to one of the four deals cited by the Senate subcommittee.

    The Justice Department said it would aggressively pursue investigations of "matters affecting our financial system".

    The department pointed to its probe into the manipulation of the London Interbank Offered Rate. Britain's Barclays bank admitted in June that it had submitted false information to keep the rate low.
    Barclays was fined $453m in settlements with the Justice Department, the US Commodity Futures Trading Commission and British regulators.

  2. Gray Wolf

    Gray Wolf Monkey+++

    In Iceland, they put the crooked bankers in jail.
  3. TheEconomist

    TheEconomist Creighton Bluejay

  4. DKR

    DKR Raconteur of the first stripe

    Why is anyone surprised about the GS guys getting a free pass? Seriously - did anything think the crooks would go to jail or be forced to oive with thier fraud?

    He was the head of the Federal Reserve Bank of New York.

    He reported directly to Alan Greenspan and Ben Bernanke. More importantly than anything else in this world, he carried with him the mystique of Goldman Sachs

    Timothy Geithner was the golden boy of Goldman Sachs. You think for an instant he's going to do anything against HIS homeboys?

    Did we learn nothing from the SAvings and Loan bailout of the 80s - and the damage it caused?

    "The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of about 747 out of the 3,234 savings and loan associations in the United States. A savings and loan or "thrift" is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members—a cooperative venture known in the United Kingdom as a Building Society. "As of December 31, 1995, RTC estimated that the total cost for resolving the 747 failed institutions was $87.9 billion." The remainder of the bailout was paid for by charges on savings and loan accounts—which contributed to the large budget deficits of the early 1990s.
    The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990–91 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, which was at the time the lowest rate since World War II."

    A change in tax code
    Deregulation allowed many many shaky State charter S&L to go Federal.
    High interest rates encouraged lots of real estate loans, some were past shacky.
    Briokered CD deposits - with the middleman making a ton of profit in the process - see the failure of the Icelandic banks
    Final nail in the coffin - inflation cooled off, so the interest rates paid on CDs became ruinous.

    Fraud and insider trading didn't help.

    2009 = the 90s, only writ much larger and the resulting resession suffered much longer.

    Oh, and the looters gathered up more in loot this time around.
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