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Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

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Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#81

Post by wavefunction »

gadders wrote: post #51
suprgeek wrote: post #30

So the company that was one of lead bad actors in a global crisis that wiped out lots of little folks gets - No execs (or anybody else) go to Jail Continues to do business as usual Pays a small fraction of its profits in fines (but gets to keep the multi-billions of tax-payer money under various govt. programs) Admits to no wrong doing Basically a speeding-ticket that gets dismissed when you pony up the cash after be…

What about the government people that encouraged "Ninja" loans to people who couldn't afford to repay them?

Nobody forced anyone to make any loans, and I will note that the folks working in the finance industry are supposed to be finance professionals well-versed in risk assessment and a strong inclination to make smart investments. Or they're supposed to be.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#82

Post by forgetsusername »

mtgx wrote: post #72
forgetsusername wrote: post #64

Earlier quoted context omitted.

> There should really be some way to punish the individuals responsible Honest question: do reasonable really look at the The Great Recession and think that there are "individuals" wholly responsible for what happened?

I think the problem is not "we can't find anyone who did wrong here", but "there are so many who cheated people that we wouldn't know where to start, or we'd have to arrest thousands - so we might as well do nothing about it". Regardless of punishing those guilty or not (which I think they should be), it's absolutely criminal that virtually nothing has changed in how these companies operate, and that the "too big to…

>it's absolutely criminal that virtually nothing has changed in how these companies operate

Except that this is simply not true if you've been paying attention beyond the populist headlines.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#83

Post by appleflaxen »

tim333 wrote: post #12
ksar wrote: post #8

As a quick refresher, these guys sold CDOs that they knew weren't priced correctly, obfuscated the mispricing, and then profited on short positions against the securities. Took 7 years to settle for being straight up crooks. Still the Wild West out there.

There should really be some way to punish the individuals responsible, even just a fine comparable to the bonuses they made, rather than just having their employer pay compensation while those responsible continue to get richer.

> comparable to the bonuses they made

I realize this might be what you are saying already, but to be clear: tt should be /multiples/ of the bonuses they made, if you want to discourage this kind of behavior.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#84

Post by RobertoG »

saiya-jin wrote: post #61
suprgeek wrote: post #30

So the company that was one of lead bad actors in a global crisis that wiped out lots of little folks gets - No execs (or anybody else) go to Jail Continues to do business as usual Pays a small fraction of its profits in fines (but gets to keep the multi-billions of tax-payer money under various govt. programs) Admits to no wrong doing Basically a speeding-ticket that gets dismissed when you pony up the cash after be…

1) government encourages by all means available to them (=plenty) cheap, affordable loans to everybody, reasonable or not. 2) banks jump on the wagon, just as any other business would do having similar chance in their field 3) plenty of folks are plain math-stupid, lending as much as they can and trying even more for outright stupid reasons (ie TV, cars etc.) on top of other loans they already have, usually for housi…

I don't get it.

How government encouraging something free a business of their responsibility of lending money following good business practices?

How is derivatives another topic? Is not this the real problem?

The money could be paid back, but, as in any investment we should take into account the opportunity cost of that investment. Instead of helping people they are saving banks. Is not there a very strong moral hazard?

Instead of saving big private entities because their fall would crash the world, what if we follow the fashion and start implementing micro-services?

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#85

Post by forgetsusername »

nl wrote: post #69
forgetsusername wrote: post #65

Earlier quoted context omitted.

> They were hiding the risk Please explain how they were "hiding" the risk. Risk is unknown ex ante. Nobody knows the value of it. It is the responsibility of those buying the risk to have an estimate and price the security accordingly, ahead of time.

Please explain how they were "hiding" the risk. They mixed mortgages which were extremely unlikely to be repaid into packages with enough AAA rated mortgages so that they would meet the credit-rating agencies policy of rating mixed packages as AAA if a certain proportion were AAA. However, these bonds would be valueless if any of the securities that made them up defaulted. They sold the packaged bonds a AAA-rated sec…

>They mixed mortgages which were extremely unlikely to be repaid

This is an easy claim to make after the fact.

>However, these bonds would be valueless if any of the securities that made them up defaulted.

Not true at all. The bonds didn't become valueless. In fact, many of these bonds were purchased by the Fed, who made money off them. The issue was CDS' being triggered on defaulting mortgage bonds.

>They sold the packaged bonds a AAA-rated securities without disclosing the likelihood that they would default.

Did they not? Have you read the prospectus'?

Look, I'm sure there were many criminal actions here. But the uninformed, populist overreaction to the financial crisis by people who are unwilling to take personal responsibility is sad.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#86

Post by will_brown »

rayiner wrote: post #74
suprgeek wrote: post #30

So the company that was one of lead bad actors in a global crisis that wiped out lots of little folks gets - No execs (or anybody else) go to Jail Continues to do business as usual Pays a small fraction of its profits in fines (but gets to keep the multi-billions of tax-payer money under various govt. programs) Admits to no wrong doing Basically a speeding-ticket that gets dismissed when you pony up the cash after be…

My dad was heavily invested in NASDAQ-listed stocks and lost half his 401k in the 2000 crash. Who on Sand Hill Road should be in prison right now?

I think most investors w defrauded by Goldman would believe "mid level" individuals like Fabrice Tourre. He was convicted of fraud by the SEC, for selling toxic mortgages to clients that he and a major fund were secretly betting against, costing his clients $1B in loses.

It's quite tacky to name individuals who "should be in prison" without the benefit of all the facts that Gov investigators have. But it's safe to say if a "mid level" guy like Tourre was found guilty, that he was just an actor (w/knowledge) but there must be others more responsible for the fraud.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#87

Post by lhopki01 »

forgetsusername wrote: post #60
oceanstone wrote: post #41

Earlier quoted context omitted.

Bernie Sanders wants to break up the banks that took bailout money, creating smaller banks that are no longer "too big to fail." What are people's thoughts on this proposal?

> What are people's thoughts on this proposal? Have fun competing in the global financial business with massive institutions from other countries.

Is it necessarily a bad thing to have a smaller finance sector? The talent won't really do nothing but would go to other sectors. "Winning" finance just means that you're more exposed to the financial crashes. IE compare how Germany fared during the financial crisis compared to the UK.

Edit: removed a unintended global

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#88

Post by chrisbennet »

Suppose I buy something(1) and collude with an appraiser(2) to value it much higher than its actual worth and then get it insured (3). Now suppose the market discovers the true value of that it and massively devalues it. Consequently, I collect on the insurance.

Why isn't this insurance fraud?

(1) home loans (2) rating agencies like Moodies (3) AIG

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#89

Post by duncanawoods »

rayiner wrote: post #74
suprgeek wrote: post #30

So the company that was one of lead bad actors in a global crisis that wiped out lots of little folks gets - No execs (or anybody else) go to Jail Continues to do business as usual Pays a small fraction of its profits in fines (but gets to keep the multi-billions of tax-payer money under various govt. programs) Admits to no wrong doing Basically a speeding-ticket that gets dismissed when you pony up the cash after be…

My dad was heavily invested in NASDAQ-listed stocks and lost half his 401k in the 2000 crash. Who on Sand Hill Road should be in prison right now?

The 2000 IPO process was pretty much a pump and dump for both the VCs and IBs. There were legal consequences for bad investment advice and misuse of shareholder money.

According to wikipedia, Citi and Merrill were both fined for this. I don't know who was held legally accountable for misusing shareholder money but there was the worldcom fraud which ended in jail sentences.

Re: Goldman Sachs Will Pay $5B to Settle Financial-Crisis Claims

#90

Post by Lazare »

nl wrote: post #71
Lazare wrote: post #67

Earlier quoted context omitted.

> the company who has triggered a global financial crisis I'm hardly a defender of Goldman, but that's a bizarre characterization. What do you think Goldman did to cause RBS's failures, exactly?

RBS bought subprime mortgage backed securities - the same ones that were (mostly) created by Goldman[1]. RBS (along with most buyers) didn't realize that the AAA-rated securities they bought were actually subprime-backed (because of completely stupid rules by the ratings agencies, which Goldman exploited) When people suddenly discovered what a disaster these were, RBS wrote down £5.9bn, and was forced to seek additio…

Goldman did not invent CDOs, and they did not create the CDOs RBS purchased. (Also, what actually doomed RBS was overpaying for ABN Amro, but that's neither here nor there.)

> But Goldman sure made money out of it.

How? Exactly?

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