Criminal Charges Against Goldman

Fri, 04/30/2010 - 00:35

As the saying goes, "You can beat the rap, but you can't beat the ride." These things follow a scripted pattern. The point is to punish Goldman by putting the firm, its people and its reputation through hell until the firm is desperate enough to settle. The government is plenty mad at Goldman and they are going to make an example out of it and try to deter others by punishing the people. Part of the point is to intimidate other firms that will be named shortly. You cannot imagine how miserable and disruptive it is to go through one of these investigations. Vast amounts of time spent being interviewed, deposed, having your hard drive searched, answering the same questions over and over, going home at night and taking Ambien because you can't sleep out of fear. I feel for Fabrice Tourre because it appears Goldman may be throwing him to the wolves in a desperate attempt to save other people. People who are not involved are scared in fear the investigation will broaden. As one person from another firm put it to me, "everyone on Wall Street has done something at least once in their career that wouldn't pass muster in the light of day, so this kind of thing is frightening because it cuts close to home."

In the end, probably nothing will happen except a fine and an SEC consent decree. The company will fight over who is named in the consent decree. By the time it is issued (which could be a year or more from now), the whole thing will be virtually forgotten by investors or overshadowed by other things in terms of the stock. At least, that's my prediction.

I haven't felt much sympathy for Goldman Sachs so far, but for the first time I really do feel for their people. They are going to go through hell and mostly as a form of theater. That doesn't excuse the Abacus deal, but the process is nightmarish beyond all comprehension in proportion to the offense. To be clear, people who commit violent felonies also suffer from a system that is harsh relative to what most of us would consider due process (in my opinion) yet white collar criminals also suffer extremities in a protracted investigation that many of us do not recognize. For the most part their very identities are ripped apart and irrevocably destroyed. Some of these people experience a spiritual awakening. You have the occasional Martha Stewart who embraces her fate and forges forward without resisting mentally. That is rare, and I feel compassion for the others who are not so fortunate.

  • ""
Wed, 05/12/2010 - 12:07 — Anonymous

Michael Lewis

He has a new article on Goldman that is pretty good. Point #2 is right on the money. Smart people are starting to catch on.

Sun, 05/02/2010 - 03:10 — Anonymous

Blue Chip, not S&H, Stamps.

Blue Chip, not S&H, Stamps.

Sat, 05/01/2010 - 09:36 — aliceschroeder

SEC Negotiation

Friend of mine (can't take credit for this) outlined the sixty-second negotiation that should take place with the SEC, but probably won't.

Blankfein: Ms Shapiro, what would you like us to do?

Shapiro: (long list)

Blankfein: Anything else?

Shapiro: (another item or two)

Blankfein: We'll get right on it. Thank you for your generosity. We apologize to the American taxpayers.

----------------- THE END ------------------------------------------

Fri, 04/30/2010 - 14:06 — Tom

Do you think anyone is ever

Do you think anyone is ever going to have the crust to publicly observe that Buffett's large investment in Moody's (which misrated MBS securities for nice fees) constitutes profiteering in the subprime debacle? No better than Goldman or Lehman or Wamu or Countrywide. Just a different link in the chain.

Fri, 04/30/2010 - 02:16 — Anonymous

Highly Insightful

You are spot on. Although I too have no real love lost for Goldman, the fallout in human terms is broad and permanent to those the SEC chooses to destroy. I have been through this very process. What I did was so non-criminal that it would make Buffett's brush with the SEC back in the S&H Green Stamps days look like capital murder.

All it takes is a Wells Notice to begin the unravelling process. Then, in a violation of due process, the SEC issues publicly a Litigation Release that is effectively non-rebuttable.

Then what happens? Clients pull and adopt a "wait and see" attitude, meaning they never come back. You lose your reputation long before your side of the story comes out. Most marriages, including mine, get destroyed. They have access to all your personal and business financial records, so they either fine you down to zero or you spend millions on legal fees. And, yes, one's ability to sleep almost always disappears -- but not for the length of the ordeal. For good, long after the ordeal is over (P.S. ambien is not as good as lunesta, but it has gone generic so is cheaper).

And where are these SEC bureaucrats now? The head of the branch of the SEC office that came after me was gently pushed out after being unmasked as having pursued for years only easy targets and mostly smaller RIAs with minor dificiencies. Ah, but they did not have a 100-person in house legal staff. This SEC branch office head is the same guy who ignored the Madoff warning (and famous 19-page detailed letter). His minions are mostly now in the private sector. After bungling the mutual fund market timing scandal in a city with some of the largest mutual fund companies in the world, he was forced out and is now pushing paper somewhere. Do he and his minions understand or care about the lives they have ruined? I don't see it. They care about how good their conviction or censure percentage is, since that can lead to a promotion, or, better, a lucrative job in the private sector.

The only true regulation can be self-regulation. By that I mean BOTH personal self-restraint AND a corporate culture that places the client's interest first. In a speech many years ago in England, Lord Moulton called that quality of personal integrity "obedience to the unenforceable." There can be no substitute for obeying the moral law that is an essential part of what makes us humans human.

I therefore appreciate perhaps more than others how much understanding and compassion you show for the individuals involved.

Post new comment

If you wish to make a comment, please enter your valid email address. A verification message will be sent to your address to ensure it is real. Comments from people with unverified email addresses will not be published. Thanks for your cooperation.
The content of this field is kept private and will not be shown publicly.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em><i> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd><img><p><h1><h2><h3><h4><form><textarea><input>
  • Lines and paragraphs break automatically.

  • Links to specified hosts will have a rel="nofollow" added to them.

  • You may use <swf file="song.mp3"> to display Flash files inline

More information about formatting options

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.