Posted by Karl Denninger
Jan. 13 (Bloomberg) — Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein testified today that he was never asked to accept a discount on investment contracts his firm had with American International Group Inc.
The New York Fed said it had to make the payments after banks refused to accept so-called haircuts, according to a November audit from Neil Barofsky, the special inspector of the U.S. Troubled Asset Relief Program.
Had to eh? And they had to…. why?
Banks refused to take less? Lloyd testified this morning that Goldman was never asked!
How can you “refuse” something you’re not asked to do?
Someone’s full of it here.
The people have had it with the lies, theft and fraud. Lloyd also said in testimony that Goldman “might have participated in the froth in MBS”, implying of course that it was “inadvertent.”
Well, I disagree that it was “inadvertent.”
The question is not one of whether someone intentionally, at the outset, set out to screw people. It is whether banks and others intentionally and willfully derogated credit standards and lending requirements and then failed to disclose in a full and fair manner to the buyers of the securities what they had done, what they were omitting and what they knew – and when they knew it.
Is that illegal? Whether it is or not it damn well should be to push securities to investors while in constructive or actual possession of knowledge that you’re intentionally omitting – and that would impact their value.
As early as the spring of 2007 this information was in the press – that “stated income” loans were predominantly fraudulent. That is, the majority of them were made with the borrower’s income not matching what they “stated”, with first warnings appearing in mainstream print media in 2006!
One lender recently compared 100 stated-income loans with the borrowers’ tax returns and found that only 10 of the borrowers were telling the truth about their wages, according to Mortgage Asset Research Institute, a division of data firm ChoicePoint Inc.
Sixty of the borrowers had exaggerated their incomes by more than 50%, according to the institute, which didn’t identify the lender. (September 29th, 2006)
For two years longer the band played on, the banksters and government officials, including The NY Fed and Federal Reserve itself ignored the issue, and took no enforcement action of any material sort.
“The politics on this is really quite easy,” said Doug Elliott, a fellow at the Brookings Institution in Washington and a former managing director at JPMorgan Chase & Co. “The public would be supportive of anything up to shooting and burning the bankers.”
Damn straight the public would and should. We put Tim McVeigh to death for blowing up a building and killing 168 people while shattering hundreds of lives. These banksters and their accomplices have destroyed the economic lives and futures of tens of millions of Americans and yet they are all, to date, walking free among us and enjoying billions in bonuses!
I’ll settle for hard prison time and the break-up of ALL of these institutions given the admitted and indisputable facts:
Henry Paulson, before becoming Treasury Secretary and while running Goldman Sachs, lobbied for and received a removal of the former 14:1 leverage limit for investment banks in 2004. Every firm that subsequently failed, including Lehman and Bear (which were previously subject to this limit) racked up more than double that amount of leverage in less than the subsequent four years.
We had hard research as early as 2006 that stated income and other “alternative” financing programs were rife with fraud – that in fact half or more of all mortgages under these programs were being made to people who overstated their incomes by 50% or more. The banks knew it, the ratings agencies knew it and the government knew it. Yet none of these institutions applied a proper haircut to borrower incomes when they ran their rating and performance models. This was not an accident – it was an intentional act as that knowledge was in the marketplace!
Some investment banks not only failed to disclose this clearly in their offering prospectuses they pretty clearly knew it and were making trading decisions based on it, given that they were shorting the very instruments they were assembling and selling to customers, representing to those customers that these were “good product.” Arguments that this was “simple hedging” flies in the face of the fact that one who is actually distributing product (as opposed to taking a position for or against that product) has no real reason to be long or short, do they? Indeed, find me just one offering prospectus from 2006 or 2007 that disclosed that these studies had shown that half or more of the “stated income” loans in these securities were made to someone who had intentionally overstated their income by 50% or more. I’ve not been able to find even one offering prospectus in which this was properly disclosed.
These investment banks, in addition to selling these securities to investors around the world, also marketed these products to PENSION AND MUTUAL FUNDS that Americans rely on for their retirement. These Americans were SEVERELY damaged and will NEVER recover the value of these so-called “securities” that were in many cases worth essentially NOTHING.
The above fraud in the lending and securitization marketplace harmed most Americans by creating false upward price pressure on every home in America. Each and every American who did not lie during the 2003-2007 period when they purchased a home was harmed by overpaying for a house. Each and every American who was falsely led to believe that their home value had in fact appreciated when it had not, and acted on that belief (taking a HELOC or refinancing) and now finds themselves underwater, was harmed. And each and every American who was unable to buy a home due to insane price “appreciation” that was in fact false was harmed. These harms are real, they are material, they can be reduced to a money amount and in aggregate amount to trillions of dollars.
Americans were then further harmed by the bailouts and now-outrageous budget deficits that have come from the process of attempting to unwind this mess. The job loss that has resulted has resulted in not nine million Americans being jobless but 34 million, or more than one in ten of all Americans including those not in the workforce, and more than sixteen percent of all working-age non-institutional persons. This is on top of the “residual” level of unemployment that tends to be impossible to eradicate (about 5%) which means twenty one percent of all working-age adults is currently without a job, an increase of some 300% over the last 18 months.
Americans are damn tired of the lies, the misdirection and the utter failure of The Obama Administration to do what they promised to do – that is, to not be an administration catering to the banksters.
“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street,” Mr. Obama said in an interview on CBS’s “60 Minutes” program on Sunday.
YOU ARE A LIAR MR. PRESIDENT.
You will, as of January 20th, have had one full year to start issuing indictments for the clearly-fraudulent practices that harmed virtually every American and are at the root of the economic mess we are in today.
YOU HAVE REFUSED despite the record and facts being clear and indisputable. The above points are not conjecture, supposition or belief – they are all hard facts.
The harm done to ordinary Americans can be measured in the trillions of dollars and yet you, Mr. President, along with Congress, simply do not give a damn.
If you will not act then we the people must.
We have lawful actions available to us, including organizing mass-removals of funds from the “too big to fail” banks by ALL honest Americans and national strikes.
THE FIRST we’re already doing. Seen http://moveyourmoney.info yet? Some of the biggest Democratic supporters out there ARE DIRECTLY AND PERSONALLY BEHIND THIS EXPRESSION OF DISPLEASURE WITH YOUR ADMINISTRATION.
National strikes are the next logical thing for we the people to start organizing. Hit the government where it hurts – in the tax base. Those who work less pay fewer taxes and that’s all entirely within the law. We don’t have to work as hard and as long as we can.
We can also decide we won’t pay debts that are owed these banks, declaring that we’ll recover our part of the trillions of dollars these institutions stole unilaterally through offsets. Done en-masse there isn’t a thing the banks and credit agencies could do about it, and if done in sufficient numbers as an act of mass protest FICO scores would become meaningless as well.
And finally, we have a say on this outrage come November, and you can bet we’re going to exercise it in earnest unless we see action, right here and now.
As things stand today I assert that your party, who you are the head of, spoke nothing more than campaign LIES intended to convince people to vote for not Democrats but KLEPTOCRATS of which you are both The Commander and Thief in Chief.