William K. Black exklusiv zu Goldman Sachs. Der erfahrene Bankenregulierer William K. Black („The Best Way To Rob A Bank Is To Own One“) äußert sich in exklusivem MMNews-Interview zu den Anschuldigungen der SEC gegen Goldman Sachs.
By William K. Black
We have learned from the SEC charges related to Goldman Sachs that it should be added to the list of elite financial frauds. It is a tale of two (unrelated)Paulsons. Hank Paulson, while Goldman’sCEO, had Goldman buy large amounts of collateralized debt obligations (CDOs)backed by largely fraudulent “liar’s loans.” He then became U.S. Treasury Secretary and launched a successful waragainst securities and banking regulation. His successors at Goldman realized the disaster and began to “short”CDOs. Mr. Blankfein, Goldman’s CEO, recentlysaid Goldman was doing “God’s work.” Iftrue, then we know that God wanted Goldman to blow up its customers.
Goldman designed a rigged trifecta: (1) it turned a massive loss into a materialprofit by selling deeply underwater, toxic CDOs it owned, (2) helped make JohnPaulson (CEO of a huge hedge fund that Goldman would love to have as an ally) amassive profit – in a “profession” where reciprocal favors are key, and (3)blew up its customers that purchased the CDOs. Paulson and Goldman were shorting because they believed that the liar’sloans were greatly overrated by the rating agencies. Goldman let John Paulson design a CDO inwhich he was able to pick the nonprime packages that were most badly overrated(and, therefore, overpriced). Paulsoncreated a CDO “most likely to fail.” Goldman constructed, at John Paulson’s request, a “synthetic” CDO thathad a credit default component (CDS). The CDS allowed John Paulson to bet that the CDO he had constructed(with Goldman) to be “most likely to fail” would in fact fail – in which caseJohn Paulson would be become even wealthier because of the profit he would makeon the CDS.
Now, any purchaser of the “most likely to fail”CDO would obviously consider it “material information” that the investment wasstructured for the sole purpose of increasing the risk of failure (and gettingrid of Hank Paulson’s worst investments). The SEC complaint says that Goldman therefore defrauded its owncustomers by representing to them that the CDO was “selectedby ACA Management.” ACA was supposed tobe an independent group of experts that would “select” nonprime loans “mostlikely to succeed” rather than “most likely to fail.” The SEC complaint alleges that therepresentations about ACA were false.
The obvious question is: did John Paulson and ACA know that Goldmanwas making these false disclosures to the CDO purchasers? Did they “aid and abet” what the SEC allegeswas Goldman’s fraud? Why have there beenno criminal charges? Why did the SEConly name a relatively low-level Goldman officer in its complaint? Where are the prosecutors?
And there is the key question thatwe (Eliot Spitzer, Frank Partnoy and I) asked in our December 19, 2009 op ed inthe New York Times – why haven’t theAIG emails and key deal documents been made public so that we can investigatethe elite control frauds? (I have calledfor the same disclosures of Fannie and Freddie’s key documents. ) Goldman used AIG to provide the CDS on thesesynthetic CDO deals and Hank Paulson used our money to bail out Goldman whenAIG’s scams drove it to failure.
William K. Black Interview /Goldman Sachs:
