Goldman disclosure controversy
Posted by Sada Mosler on November 9th, 2009
Looks like it all comes down to whether Goldman violated the law by not disclosing what it was obligated to disclose.
There is no question the institutional structure that leads to this type of activity is flawed in that it doesn’t work for public purpose.
In fact, large elements of the financial sector do not serve public purpose.
Much of the financial sector is set up, by law to function as a casino, where each bet necessarily has a long and a short, presumably towards so further public purpose to allow public/private partnerships including banks, pension funds, and insurance companies to participate.
Unfortunately it’s never discussed at this fundamental level in the public debate, which is one of the reasons I’m running for President- to bring that debate back to public purpose- the fundamental behind government and the institutional structure:
How Goldman secretly bet on the U.S. housing crash
By Greg Gordon
WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
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November 9th, 2009 at 11:45 am
In fact, large elements of the financial sector do not serve public purpose.
However this can also be said about Washington DC in general?
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November 9th, 2009 at 3:29 pm
Ah, but they’re doing “God’s Work” as Lloyd Blankenfeld recently claimed. Somehow all this time I thought “God’s Work” was administering to the poor and downtrodden. Oh wait, I guess that’s it, if they make us all poor and downtrodden….
On another point, there is an industry that DOES perform a meaningful public purpose, and gets a govt. guarantee that it cannot fail. As a result, the govt. limits the profit it can earn. I am speaking of the defense industry. Our “arsenal of democracy” won WWII in 3.5 years, and the cold war in 8 years (’81-’89), and continues to field products and systems no one else can match, all while operating under a strict auditing and profit margin-limiting regulatory scheme.
I see no reason why the govt. cannot limit the profits earned by its federally regulated “bank holding companies” such as Goldman Sachs.
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