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Investigations Launched on Wrongdoing Despite “Settlements”
EDITOR’S ANALYSIS: Maybe there actually is some understanding starting to surface at U.S. regulator’s offices. Certainly the activity in EURO-land shows that our friends across the pond don’t buy the excuses or spin that Goldman and others have been spitting out through their control of key government figures and the media. It is unusual for a case to get “settled” and then still be the subject of investigations. It indicates that regulators are coming into information from whistle-blowers and old-style investigation work that indicates that Goldman’s wrongdoing was not just a civil matter.
Anyone who can get a copy of these subpoenas should send them in to this blog as it will assist everyone in discovery and analysis of their own situation.
The inevitable conclusion here is that the moment pen was put to paper, and the moment that investors transferred funds to the investment bank for purchase of bogus mortgage bonds both the investment and the “loan” were absolutely intended to fail — it was the only way they could make the ungodly amounts of money that were drained out of the U.S. economy.
By process of elimination and recruiting whistle-blowers, the agencies are recognizing the signs of an intentional act, where the loan was intentionally created in defective and deceptive ways, and where the investor’s money was lost the moment he parted with it. The real parties in interest here are the investor-lenders and the homeowner-borrowers. They ALL lost money while the intermediary investment banks mysteriously made tons of money while claiming losses from bad mortgages.
Simple logic tells us that Wall Street’s story can’t be true. If the investment banks lost money from holding toxic assets then there was no securitization — i.e.., the loans were never actually sold, which is what we have been saying here. If that is true, then the investment banks were the lenders, which is exactly opposite from the truth, since we know the money came from investors. If the money came from investors then the investment banks were not the lenders and therefore could not have suffered any loss from unpaid mortgages.
The problem is compounded by the fact that the pools were never filled with assets because transfers were never made. And the transfers were never made because the paper was bad to begin with — the original loans documents described a loan transaction that never took place. And the original loan transaction that DID take place was undocumented in which the borrower was shown one set of documents while the lender was shown a completely different set of documents, neither of which actually described the relationship between the investor-lender and the homeowner-borrower.
As this unravels, Goldman, BOA, Citi, JPM, Chase et al are going to face some tough, unanswerable questions. Where’s the beef?
Goldman Discloses More Subpoenas
By SUSANNE CRAIG7:02 p.m. | Updated
Goldman Sachs’s mortgage problems are far from over.
The Wall Street investment bank paid $550 million last year to settle a civil fraud suit brought by the Securities and Exchange Commission, which accused Goldman Sachs of creating a mortgage product that was intended to fail.
On Tuesday, the firm disclosed in a regulatory filing that it had received more subpoenas related to that mortgage product, Abacus 2007-AC1, and other collateralized debt obligations that it made during the housing boom.
Goldman has previously revealed that the Financial Industry Regulatory Authority and the Financial Services Authority in Britain are looking into Abacus. The firm said on Tuesday that it had received subpoenas from other unnamed regulators in connection to Abacus and other C.D.O.’s. In a filing in late March, the firm disclosed only that it had received requests for information from unnamed regulators. A subpoena is a more serious step.
The Abacus matter is one of the darkest chapters in Goldman’s 142-year history — the first time that the firm has been accused of fraud. Last July, the bank settled the S.E.C. charges without admitting or denying guilt.
News of the subpoena came in a quarterly filing in which Goldman cut its estimated losses from legal claims by 21 percent. The bank said its “reasonably possible” losses from lawsuits were $2.7 billion at the end of March, down from $3.4 billion at the end of 2010.
This number declined after a handful of major settlements. In one such case, Goldman was among several underwriters of securities offerings by Washington Mutual that were sued in 2008, accused of failing to accurately describe the bank’s exposure to the mortgage market.
Federal regulators seized Washington Mutual in September 2008, making it the biggest bank failure in American history.
Goldman also disclosed on Tuesday that the Commodity Futures Trading Commission was investigating the firm’s role as clearing broker for an unnamed S.E.C.-registered broker-dealer. The firm said it had been “orally advised” that regulators intended to “recommend that the C.F.T.C. bring aiding and abetting, civil fraud and supervision-related charges” against the Goldman unit related to its provision of clearing services to this broker-dealer.
According to the filing, the commission said Goldman knew or should have known that the client’s subaccounts maintained at the firm’s unit “were actually accounts belonging to customers of the broker-dealer client and not the client’s proprietary accounts.”
Neither Goldman nor the Commodity Futures Trading Commission would comment on the case.
Wall Street clearing businesses often find themselves in the sights of regulators. The firms handle billions of dollars in trades and sometimes the clients turn out to be swindlers. Defrauded investors often demand that firms that clear trades for these companies be held accountable. The Wall Street banks assert that their job is simply to clear trades, not police the clients.
In its regulatory filing, Goldman also disclosed that it lost money on just one trading day in the first quarter. And the firm had 32 days when it posted trading revenue of more than $100 million, the filing shows. It is not known on which day Goldman lost money, but the loss was $25 million to $50 million.
After difficult markets took a bite out of profit in the fourth quarter, the first quarter was one of Goldman’s best for trading in a while.
In terms of trading days, it was the best since the first quarter of 2010, when there were no days where Goldman posted a negative trading day. In the period a year earlier, Goldman recorded 35 days when trading revenue exceeded $100 million and it had no day when trading revenue dipped below $25 million.
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