Wednesday, April 28, 2010

Goldman's Gold: I see the Goldman Sachs' actions as both a CRIMINAL matter AND a civil matter. The SEC, of course, filed only a civil complaint so far. In a civil case we are simply talking about monitory remuneration. A criminal case is really a much more serious matter requiring a proof from the state of, in this case, the breaking of federal laws against most especially fraud by the defendants. I believe what has been perpetrated upon an unsuspecting and largely innocent public is SO serious that not only should Goldman pay monitory damages to their clients commensurate with the perpetration of this fraud but I also believe a criminal case should be brought as well. Goldman’s actions were so heinous and seemingly so illegal that the “I know it when I see it” Supreme Court measure for pornography SHOULD apply to this as well. Someone(s) should pay for these malevolent and destructive acts not only in money but in jail time as well.

We are, I think, talking about billions of investments, securities, derivatives and other very complex investment instruments which were packaged, cut up into pieces unknown to mortgage holders as well as securities purchasers alike and sold by Goldman and others as sterling products. Customers were in essence duped into thinking this investment was a good thing to purchase when, in fact, these securities were toxic garbage and, I believe, Goldman itself KNEW they were garbage and sold them to their unsuspecting clients. Compensation for those fraudulent investments is more than warranted due to the massive quantity sold and the dire effect it had on the country and, indeed, the world.

If Goldman’s acts are not criminal then I do not know what criminal is. In the instant matter a crime of HUMONGOUS proportions was committed against innocent people who lost their hard earned 401Ks, pension funds and other heretofore thought stable investments. I dare say lives were lost often by suicide as jobs and even health insurance were causalities of Wall Street hubris.

I watched four hours of the Goldman Sachs Senate hearing. Goldman testifiers looked SO bad yesterday bobbing and weaving as if they were children being asked if lying about a school yard prank was the wrong thing to do but not really figuring out how to make sure their answer was the right one so they would not be punished. Instead they were asked the serious seemingly simple question should the customer have faith in the investing institution or any institution to which the customer gives its money. Is it a bad thing if an investment firm represents one thing to its customers but in reality knows what they are selling is junk but sell it as if it were gold? Moreover, the firm KNOWING it was selling junk and that the instrument would fail bet against its own sale by taking out insurance (credit default swaps) on those very instruments. The house would win even if they lost. Those sanctimonious immoral jerks before the Senate could NOT give a decisive answer to those simple childlike questions. Goldman was not MERELY a "principle" just acting as a conduit for savvy investors. Goldman sold these junk securities to anyone whether they were savvy or not. That is NOT the point. Goldman’s conduct was shameful, it was immoral and, I believe, it was illegal.

Compounding the matter was the rating companies like Standard & Poors which were hired by the investment firm itself to rate the securities and were paid by the very firm that was selling the securities. That would be as if I hired an evaluator of my home and gave them instructions to rate it high and sold it off to a buyer who took their word for it. Do I see a conflict of interest here? Emphatically, YES!

Goldman actions are an abridgment in tort law and it should be one in criminal law too. It is my opinion that the customer of an investment firm relies on that firm in good faith for advice because one often does not have the expertise to do so oneself. If one buys a product one should have the reasonable certainty and expectation that the product is what the seller SAYS it is. In this case Triple A rated investments which were in reality junk. That is basic in tort law. Goldman did not sell the security thinking it was a good product. They sold it thinking it was a terrible product and in fact a “sh*&^%” product (as a Goldman employee said in his email) and shorted it i.e. bet against it unknown to the ones to whom they sold the rotten product in the first place.

It is NOT the bet here that is the issue. Everyone knows that if you go to a horse track and you bet you COULD lose but not everyone knows IF a horse is lame or doped. If one knew that one would clearly not bet on that horse and, in fact, doping is illegal and if the track bet AGAINST a doped horse well need I say what would happen if found out? If that doesn't move you maybe the Black Sox scandal rings a bell? Betting is bad enough but when you bet against your own team failing when you KNOW they are going to throw a game? Need I say more?

Credit default swaps or insurance taken out on bad securities sold to customers by Goldman as good securities should be both civilly negligent and criminally prosecutable. Their actions and actions by many others caused innocent people HUGE harm, probably forever, and still is affecting the country and even the world adversely.

ALL of those who knew about these fraudulent monstrosities should be indicted, tried, convicted, fined in civil law and tried criminally as well. If there is not good case law AGAINST what these unconscionable excuses for human beings have done then there ought to be BUT I suspect there is. I am hoping the best legal minds that the government can employ FIND it and find it FAST as CLEARLY Goldman’s product was NOT as good as gold!