Goldman Sachs Could Face A New Kind Of Risk: ANGRY INVESTORS

[Segami]

" The public outcry against the bank bailouts was driven in part by suspicions that a heads-we-win, tails-you-lose ethos pervades the financial industry. To many, that Goldman and others are once again minting money — and paying big bonuses to their employees — is evidence that Wall Street got a sweet deal at taxpayers’ expense. The accusations against Goldman may only further those suspicions.


“The S.E.C. suit against Goldman, if proven true, will confirm to people their suspicions about the total selfishness of these financial institutions,” said Steve Fraser, a Wall Street historian and author of “Wall Street: America’s Dream Palace.” “There’s nothing more damaging than that. This is way beyond recklessness. This is way beyond incompetence. This is cynical, selfish exploiting.”


Still, Wall Street analysts said Goldman and other banks, having navigated the financial crisis, might now face a new kind of risk: angry investors. Most major Wall Street banks also created collateralized debt obligations, which are at the heart of the Goldman case. C.D.O.’s, which are essentially bundles of securities backed by mortgages or other debt securities, turned out to be among the most toxic investments ever devised.


“Any investor who bought these C.D.O.’s and lost a significant amount of money is probably looking at their investment and wanting to know: what were the details behind the sale?” said William Tanona, an analyst at Collins Stewart. “Will they contact the S.E.C. and say, ‘Here’s the transaction we participated in, and we’d love to know who is on the other side of it?’ ”


The S.E.C. complaint named just one Goldman employee: Fabrice Tourre, a vice president in the bank’s mortgage operation who worked on the questionable transaction.


But securities lawyers say Mr. Tourre appears to be a small fish. Federal investigators may try to gain his cooperation and extend their investigation to other Goldman employees. On Friday, Mr. Tourre’s lawyer did not provide a comment on the complaint.


A big question is how far up this might go. The S.E.C. said the deal in its complaint had been approved by a panel at Goldman, the Mortgage Capital Committee.


“It’s typical that they’d start with someone lower down on the chain and try to exert pressure on that person,” said Bradley D. Simon of Simon & Partners, a white-collar defense lawyer in New York. “Is it really conceivable that no one else was involved in this?”


more

http://www.nytimes.com/2010/04/18/business/18goldman.html

[northernlights]

1. this just in from AP

Germany's looking to go after them.
http://start.localnet.com/article.php?article=D9F50C5O1.html

[Segami]

3. Its mentioned briefly in the NYT article also.

The biggest victim among investors, the S.E.C. complaint said, was the Royal Bank of Scotland, which inherited a loss of $841 million after it took over the Dutch bank ABN Amro. According to a person briefed on the matter, the Royal Bank, now controlled by the British government, is studying the documents but is not ready to decide whether to try to recoup money from Goldman.


The German bank IKB Deutsche Industriebank, as well as the German government, which in 2007 put up billions to prevent IKB from collapsing, still seemed to be sorting out who might have legal standing to pursue a possible claim.

[glitch]

13. Delicious. nt

[Warpy]

2. Stockholders are rebelling all over the place

You can tell that by some of the questions on proxy votes, the ones marked by the Board of Directors "against." Anyone who complies with this request is an idiot.

As for Goldman, this is long overdue. They sold a product they knew to be faulty without disclosing what it was, never mind that it was a ticking financial time bomb, and they sold it all over the world.

They need to go after Moody's, too. Without those AAA ratings, those financial instruments could never have been peddled so far and wide. It was fraud from all sides.

People need to go to prison for this. The world really is watching this time.

[northernlights]

5. they didn't just know it was faulty

the rat bastards deliberately designed it to blow up.

[Warpy]

12. I doubt that was the case in the very beginning

but as it started to play out, you bet your ass they did.

[northernlights]

15. re-read "Fab's" email

I think they did design it to be faulty. I do believe that was their intent from the start.

Guess I have even less faith in humanity than you, lol. :evilfrown:

[truedelphi]

11. I too hope they go after the ratings industry.

But who knows?

The whole culture on Wall Street is permeated with entitlements. And this happens to be the first Wall Street Presidency. These people can do no wrong. They were given oodles of money from the git go - and you can say "It was Bush's Bailout" but it happened during a point in time when the Dems had control of Congress.

Di Feinstein re-wrote the ethics rules on Senatorial "conflicts of interest" precisely so that she could vote for a war that allowed her husband to immediately garner some 27 million bucks in contracts. So so much for "conflict of interest."

Then you go back a little further in history and you see how involved the Repugs were with regards to getting the financial industry de-regulated.

We basically need to replace everyone in Washington - but that is what most of us thought we were doing in Nov 2008. It has gotten to the point that our household just clicks off the TV when the news comes on.

And the SCOTUS decision on Corporations and their right to "free speech" means more of the same.

The old computer techie canard of "Garbage in = garbage Out" comes to mind when I think of Wall Street, and the elected officials in charge of our financial lives.

[DJ13]

4. start with someone lower down.. and try to exert pressure

If this had been a criminal indictment, yes, but civil court no.

Why cant the DOJ file fraud charges against key executives?

[femrap]

9. Because they gave

lots of $$$$$ to the current administration to get elected.

I think it's hilarious that they're blaming a 31 year-old French dude! Blame the French!:rofl: :rofl:

I hope all of these derivatives simply blow up...that'll humble Goldboyz Suck and make them dissolve into smaller parts like Glass-Stegall intended.

[elias7]

6. Reality check. Who here knows how to invest in synthetic CDO's?

Look, you and I couldn't have invested in abacus through etrade or tdameritrade or any other investment vehicle that the average person uses. And so it wasn't the average joe who was screwed here. These high risk synthetic collateral debt obligations are invested in buy hedge funds and other high rolling professional traders who are going for gold. not saying a crime wasn't committed, but no one really has spent any time on who the victims were.

[femrap]

10. How about Pension Funds?????

Or Municipalities invested in them. That affects YOU.

[elias7]

16. I rreally don't think that they would invest in such high risk securities

I'm not defending Goldman, I'm just saying that those investing in synthetic CDO's are not your ordinary investors. Those investing in these are high rollers and risk takers and hedgies, and certainly could have investigated prior to investing just what strata of mortgage risk loans were being bunched in these tranches.

I really can't imagine that most mutual funds or any pension funds would have been involved, so I think you and I were not affected by this one.

[Demeter]

7. If the Investors Are Sovereign States, That IS a Problem

The pension funds and municipalities will have to go hang.

[girl gone mad]

8. Yes, but..

they are still "Too Big to Fail"

which means they can only profit, while you and I will feel their pain.

[depakid]

14. Angry investors are what's driving this particular action

not concern for the public interest.