Lloyd C. Blankfein | FORECLOSURE FRAUD | by DinSFLA

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HERO Judge Rakoff May Have Goldman Sachs CEO Lloyd Blankfein Testify

HERO Judge Rakoff May Have Goldman Sachs CEO Lloyd Blankfein Testify


Judge Rakoff just keeps wowing us, day after day!

Sure he will do all in his power to squirm out of this one.


REUTERS-

Goldman Sachs Group Inc Chief Executive Officer Lloyd Blankfein may be asked to testify in a market regulator’s insider-trading case against a former director of the Wall Street bank, a judge ruled.

The U.S. Securities and Exchange Commission has accused Rajat Gupta, a former board member at Goldman and Procter & Gamble, of giving inside tips about the two companies to his friend Raj Rajaratnam in 2008 and 2009.

[REUTERS]

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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COMPLAINT | SECURITIES AND EXCHANGE COMMISSION v. RAJAT K. GUPTA and RAJ RAJARATNAM

COMPLAINT | SECURITIES AND EXCHANGE COMMISSION v. RAJAT K. GUPTA and RAJ RAJARATNAM


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff

-against-

RAJAT K. GUPTA and
RAJ RAJARATNAM,

Defendants.

[ipaper docId=70393258 access_key=key-mavjtxlc8hjz46hks63 height=600 width=600 /]

 

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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With Banks Under Fire, Some Expect a Settlement: NYTimes.com

With Banks Under Fire, Some Expect a Settlement: NYTimes.com


From left, Chester Higgins Jr./The New York Times; Andrew Harrer/Bloomberg News; Ramin Talaie for The New York Times

From left, Andrew Cuomo, the New York attorney general; Robert Khuzami, of the S.E.C.; and Preet Bharara, of the United States attorney’s office. The agencies are investigating Wall Street.

By NELSON D. SCHWARTZ and ERIC DASH

Published: May 13, 2010

It is starting to feel as if everyone on Wall Street is under investigation by someone for something.

News on Thursday that New York State prosecutors are examining whether eight banks hoodwinked credit ratings agencies opened yet another front in what is fast becoming the legal battle of a decade for the big names of finance.

Not since the conflicts at the center of Wall Street stock research were laid bare a decade ago, eventually resulting in a $1.4 billion industrywide settlement, have so many investigations swirled across the financial landscape.

Nearly two years after Washington rescued big banks with billions of taxpayer dollars, half a dozen government agencies are still trying, with mixed success, to peel back the layers of the collapse to determine who, if anyone, broke the rules.

The Securities and Exchange Commission, the Justice Department, the United States attorney’s office and more are examining how banks created, rated, sold and traded mortgage securities that turned out to be some of the worst investments ever devised.

Virtually all of the investigations, criminal as well as civil, are in their early stages, and investigators concede that their job is daunting. The S.E.C. has been examining major banks’ mortgage operations since last summer, but so far, it has filed a civil fraud claim against just one big player: Goldman Sachs. Goldman has vowed to fight.

But legal experts are already starting to handicap potential outcomes, not only for Goldman but for the broader industry as well. Many suggest that Wall Street banks may seek a global settlement akin to the 2002 agreement related to stock research. Indeed, Wall Street executives are already discussing among themselves what the broad contours of such a settlement might look like.

“I would be stunned if any of these cases go to trial,” said Frank Partnoy, a professor of law at the University of San Diego. “I think Wall Street needs to put this scandal behind it as quickly as possible and move on.”

As part of the 2002 settlement, 10 banks paid $1.4 billion total and pledged to change the way their analysts and investment bankers interacted to prevent conflicts of interest. This time, the price of any settlement would probably be higher and also come with a series of structural reforms.

David Boies, chairman of the law firm Boies, Schiller & Flexner, represented the government in its case against Microsoft and is now part of a federal challenge to California’s same-sex marriage ban. He said a settlement by banks might be painful but would ultimately be something Wall Street could live with. “The settlement may be bad for everyone, but not disastrous for anyone,” he said.

A settlement also would let the S.E.C. declare victory without having to bring a series of complex cases. The public, however, might never learn what really went wrong.

“The government doesn’t have the personnel to simultaneously prosecute several investment banks,” said John C. Coffee, a Columbia Law School professor.

The latest salvo came on Thursday from Andrew M. Cuomo, the New York attorney general. His office began an investigation into whether banks misled major ratings agencies to inflate the grades of subprime-linked investments.

Many Americans are probably already wondering why this has taken so long. The answer is that these cases are tricky, like the investments at the center of them.

But regulators also concede that they were reluctant to pursue banks aggressively until the financial industry stabilized. The S.E.C., for one, is now eager to prove that it is on its game after failing to spot the global Ponzi scheme orchestrated by Bernard L. Madoff, or head off the Wall Street excesses that nearly sank the entire economy.

The stakes are high for both sides. At a minimum, the failure to secure a civil verdict, or at least a mammoth settlement, would be another humiliation for regulators.

Wall Street wants to put this season of scandal behind it. That is particularly so given the debate over new financial regulations that is under way on Capitol Hill. The steady flow of new allegations could strengthen calls for tougher rules.

Even worse would be a criminal charge, which could put a firm out of business even if that firm were ultimately found not guilty, as was the case with the accounting giant Arthur Andersen after the fraud at Enron.

“No firm in the financial services field has the stomach for a criminal trial,” Mr. Coffee said.

Bankers have been reluctant until now to take their case to the public. But that is changing as Wall Street chieftains like Lloyd C. Blankfein of Goldman take to the airwaves and New York politicians warn that the city’s economy will be endangered by the attack on some of the city’s biggest employers and taxpayers.

“In New York, Wall Street is Main Street,” Gov. David A. Paterson has said. “You don’t hear anybody in New England complaining about clam chowder.”

There are broader political consequences as well. At the top, there is President Obama, who was backed by much of Wall Street in 2008. Many of those supporters now privately say they are disillusioned and frustrated by his attacks on their industry, which remains a vital source of campaign contributions for both parties.

Closer to home, the man who hopes to succeed Mr. Paterson, Mr. Cuomo, is painting himself as the new sheriff of Wall Street. Another attorney general, Eliot Spitzer, rode a series of Wall Street investigations to the governor’s mansion in 2006.

But ultimately, it is what Wall Street does best — making money — that is already on trial in the court of public opinion.

Put simply, the allegations against Wall Street were prompted by evidence that the firms may have devised and sold securities to investors without telling them they were simultaneously betting against them.

Wall Street firms typically play both sides of trades, whether to help buyers and sellers of everything from simple stocks to complicated derivatives complete their transactions, or to make proprietary bets on whether they would rise or fall.

These activities form half of the four-legged stool on which Wall Street’s profits and revenue rest, the others being advising on mergers and acquisitions and helping companies issue stocks, bonds and other securities.

“This case is a huge deal. It has the potential to be the mother of all Wall Street investigations,” said Mr. Partnoy of the University of San Diego. “The worry is that the government will go after dealings that Wall Street thought were insulated from review.”

Even some Wall Street executives concede that all the scrutiny makes proprietary trading a bit dubious. “The 20 guys in the room with the shades drawn are toast,” one senior executive of a major bank said.

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Borrower Bailout?: Goldman Sachs Conveyor Belt

Borrower Bailout?: Goldman Sachs Conveyor Belt


 Via: Livinglies

Borrower Bailout?: Goldman Sachs Conveyor Belt

  • If you have a GSAMP securitized loan you might want to pay particular attention here. In fact, if you ever had a securitized loan of any kind you should be very interested.
  • Hudson Mezzanine: The use of the word “mezzanine” is like the use of the word “Trust.” There is no mezzanine and there is no trust in the legal sense. It is merely meant to convey the fact that a conduit was being used to front multiple transactions — any one of which could be later moved around because the reference to the conduit entity does not specifically incorporate the exhibits to the conduit.
  • The real legal issue here is who owns the profit from these deals? The profit is derived from insurance. The cost of insurance was funded from the securitized chain starting with the sale of securities to investors for money that was pooled.
  • That pool was used in part to fund mortgages and insurance bets that those mortgages would fail. 93% of the sub-prime mortgages rated Triple AAA got marked down to junk level even if they did not fail, and insurance paid off because of the markdown. That means money was paid based upon loans executed by borrowers, whether they were or are default or not.
  • If enough of the pool consisted of sub-prime mortgages, the the entire pool was marked down and insurance paid off. So whether you have a sub-prime mortgage or a conventional mortgage, whether you are up to date or in default, there is HIGH PROBABILITY that a payment has been made from insurance which should be allocated to your loan, whether foreclosed or not.
  • The rest of the proceeds of investments by investors went as fees and profits to middlemen. If you accept the notion that the entire securitization chain was a single transaction in which fraud was the principal ingredient on both ends (homeowners and ivnestors), then BOTH the homeowner borrowers and the investors have a claim to that money.
  • Homeowners have a claim for undisclosed compensation under the Truth in Lending Act and Investors have a claim under the Securities laws.  (That is where these investor lawsuits and settlements come from).
  • What nobody has done YET is file a claim for borrowers. The probable reason for this is that the securities transactions giving rise to these profits seem remote from the loan transaction. But if they arose BECAUSE of the execution of the loan documents by the borrower, then lending laws apply, along with REG Z from the Federal reserve. The payoff to borrowers is huge, potentially involving treble damages, interest, court costs and attorney fees.
  • Under common law fraud and just plain common sense, there is no legal basis for allowing the perpetrator of a fraud to keep the benefits arising out of the the fraud. So who gets the money?
April 26, 2010

Mortgage Deals Under Scrutiny as Goldman Faces Senators

By LOUISE STORY

WASHINGTON — The legal storm buffeting Goldman Sachs continued to rage Tuesday just ahead of what is expected to be a contentious Senate hearing at which bank executives plan to defend their actions during the housing crisis.

Senate investigators on Monday claimed that Goldman Sachs had devised not one but a series of complex deals to profit from the collapse of the home mortgage market. The claims suggested for the first time that the inquiries into Goldman were stretching beyond the sole mortgage deal singled out by the Securities and Exchange Commission. The S.E.C. has accused Goldman of defrauding investors in that single transaction, Abacus 2007-AC1, have thrust the bank into a legal whirlwind.

The stage for Tuesday’s hearing was set with a flurry of new documents from the panel, the Permanent Senate Subcommittee on Investigations. That was preceded by a press briefing in Washington, where the accusations against Goldman have transformed the politics of financial reform.

In the midst of this storm, Lloyd C. Blankfein, Goldman’s chairman and chief executive, plans to sound a conciliatory note on Tuesday.

In a statement prepared for the hearing and released on Monday, Mr. Blankfein said the news 10 days ago that the S.E.C. had filed a civil fraud suit against Goldman had shaken the bank’s employees.

“It was one of the worst days of my professional life, as I know it was for every person at our firm,” Mr. Blankfein said. “We have been a client-centered firm for 140 years, and if our clients believe that we don’t deserve their trust we cannot survive.”

Mr. Blankfein will also testify that Goldman did not have a substantial, consistent short position in the mortgage market.

But at the press briefing in Washington, Carl Levin, the Democrat of Michigan who heads the Senate committee, insisted that Goldman had bet against its clients repeatedly. He held up a binder the size of two breadboxes that he said contained copies of e-mail messages and other documents that showed Goldman had put its own interests first.

“The evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients,” Mr. Levin said.

Mr. Levin’s investigative staff released a summary of those documents, which are to be released in full on Tuesday. The summary included information on Abacus as well as new details about other complex mortgage deals.

On a page titled “The Goldman Sachs Conveyor Belt,” the subcommittee described five other transactions beyond the Abacus investment.

One, called Hudson Mezzanine, was put together in the fall of 2006 expressly as a way to create more short positions for Goldman, the subcommittee claims. The $2 billion deal was one of the first for which Goldman sales staff began to face dubious clients, according to former Goldman employees.

“Here we are selling this, but we think the market is going the other way,” a former Goldman salesman told The New York Times in December.

Hudson, like Goldman’s 25 Abacus deals, was a synthetic collateralized debt obligation, which is a bundle of insurance contracts on mortgage bonds. Like other banks, Goldman turned to synthetic C.D.O.’s to allow it to complete deals faster than the sort of mortgage securities that required actual mortgage bonds. These deals also created a new avenue for Goldman and some of its hedge fund clients to make negative bets on housing.

Goldman also had an unusual and powerful role in the Hudson deal that the Senate committee did not highlight: According to Hudson marketing documents, which were reviewed on Monday by The Times, Goldman was also the liquidation agent in the deal, which is the party that took it apart when it hit trouble.

The Senate subcommittee also studied two deals from early 2007 called Anderson Mezzanine 2007-1 and Timberwolf I. In total, these two deals were worth $1.3 billion, and Goldman held about $380 million of the negative bets associated with the two deals.

The subcommittee pointed to these deals as examples of how Goldman put its own interests ahead of clients. Mr. Levin read from several Goldman documents on Monday to underscore the point, including one in October 2007 that said, “Real bad feeling across European sales about some of the trades we did with clients. The damage this has done to our franchise is very significant.”

As the mortgage market collapsed, Goldman turned its back on clients who came knocking with older Goldman-issued bonds they had bought. One example was a series of mortgage bonds known as Gsamp.

“I said ‘no’ to clients who demanded that GS should ‘support the Gsamp’ program as clients tried to gain leverage over us,” a mortgage trader, Michael Swenson, wrote in his self-evaluation at the end of 2007. “Those were unpopular decisions but they saved the firm hundreds of millions of dollars.”

The Gsamp program was also involved in a dispute in the summer of 2007 that Goldman had with a client, Peleton Partners, a hedge fund founded by former Goldman workers that has since collapsed because of mortgage losses.

According to court documents reviewed by The Times on Monday, in June 2007, Goldman refused to accept a Gsamp bond from Peleton in a dispute over the securities that backed up a mortgage security called Broadwick. A Peleton partner was pointed in his response after Goldman refused the Gsamp bond.

“We do appreciate the unintended irony,” wrote Peter Howard, a partner at Peleton, in an e-mail message about the Gsamp bond.

Bank of America ended up suing Goldman over the Broadwick deal. The parties are awaiting a written ruling in that suit. Broadwick was one of a dozen or so so-called hybrid C.D.O.’s that Goldman created in 2006 and 2007. Such investments were made up of both mortgage bonds and insurance contracts on mortgage bonds.

While such hybrids have received little attention, one mortgage researcher, Gary Kopff of Everest Management, has pointed to a dozen other Goldman C.D.O.’s, including Broadwick, that were mixes of mortgage bonds and insurance policies. Those deals — with names like Fortius I and Altius I — may have been another method for Goldman to obtain negative bets on housing.

“It was like an insurance policy that Goldman stuck in the middle of the sandwich with all the other subprime bonds,” Mr. Kopff said. “And it was an insurance policy designed to protect them.”

An earlier version of this article misidentified Senator Levin’s home state.

Relatated Stories:

Shareholders Sue Goldman, Blankfein Confirming Trusts Do NOT Own the Loans

Posted in cdo, concealment, conspiracy, corruption, foreclosure fraud, goldman sachs, hank paulson, john paulson, livinglies, matt taibbi, neil garfield, S.E.C., securitizationComments (1)


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