A world in economic crisis

The walls of Goldman Sachs come tumbling down

Posted in Goldman Sachs by Aussie on April 24, 2010

Goldman Sachs implicated in shorting Lehman shares – Telegraph

Not only is Goldman Sachs facing lawsuits in the USA but it seems that other governments are looking closely at their involvement in the crashes of other businesses. In this case the investigation is associated with the possible of shorting of Lehman shares.

The Telegraph reports:

Goldman has been subpoenaed to hand over documents to Lehman’s Bryan Marsal, the man responsible for winding up the bank’s affairs and repaying creditors. Goldman was named in the court filing along with four other firms, including hedge funds SAC Capital and Citadel. Goldman declined to comment on the Lehman case.

n a further potential legal case, it emerged that AIG is considering suing Goldman over about $2bn (£1.3bn) of losses it incurred from past derivatives instruments. The troubled insurer is understood to be considering action as a result of protection it was forced to pay to buyers of credit-default swaps when collateralised debt obligations (CDOs) in Goldman’s Abacus programme lost their value.

The new worries came as Goldman hit back against the SEC’s charges, which it said are “completely unfounded both in law and fact”.

Questions were last night being asked as to why the bank had not publicly disclosed the regulator’s probe. It is understood Goldman was first contacted by the US financial watchdog over its examination of mis-selling in the mortgage-backed securities industry two years ago, and that it received what is known as a “Wells Notice” – an intention to file charges – as early as July last year.

Goldman has filed 8m documents with the SEC in relation to the investigation, and five of its staff were interviewed as part of an exchange which saw the bank attempt to defend its point of view. Lloyd Blankfein, the bank’s chairman, has been attempting to boost staff morale ahead of today’s first-quarter results, which are expected to show a profit of as much as $3.8bn. “The extensive media coverage on the SEC’s complaint is certainly uncomfortable, but given the anger directed at financial services, not completely surprising,” he said in one voicemail left on an employee’s phone.

Fabrice Tourre, the bond trader at the heart of the SEC’s probe, has begun an undetermined period of absence. The bank maintained that while he has done “nothing wrong” and remains an employee, he had made a “personal decision to take a bit of time off”.

I recognize that the business conducted by Goldman Sachs does involve some risk. However, they have taken the money from clients such as superannuation funds and they have indulged in participating in some very risky business. Personally, I do not blame Goldman Sachs or most other companies for what they have done, because government failed to have the regulations in place to prevent the cowboy behaviour. At the same time the derivatives that were packaged and then sold were known to be high risk by those who were packaging them. I do in fact place the blame on the U.S. Congress and on Obama in particular because he was the one who lobbied to allow these companies to indulge in this kind of risk taking in the first place. I do not believe that we should be fooled into placing the blame on the likes of Godlman Sachs alone. I believe that there are many players involved and that each of the players are to blame for the debacle that has ensued. Millions of people have seen their superannuation funds disappeared. In the USA I believe that this is associated with those 401(k)s that I hear mentioned all of the time. Here in Australia we do in fact have compulsory superannuation, and the funds are responsible for what happens to our money…. we have taken an enormous hit as a result of the shenanigans… and who is behind it?  George Soros, Obama… and a number of other names, some that are known and others that are not so well known. We are the ones that have lost whilst people like Paulson have gained……

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