John Paulson – more crooked than clever, says The Big Money:
“What emerges from the SEC’s charges against Goldman Sachs (which, it should be noted, the investment bank is strenuously denying) isn’t a story of Paulson seeing a crisis coming when others are still happily buying up housing derivatives. No, it’s a story of reluctant buyers manipulated into buying more collateralized debt obligations when it was already clear that the market was falling apart.”
Update 1(April 17)
Glad to see that Simon Johnson is making the same point I make here, that charges should also be brought against John Paulson, or the system is broken beyond repair.
“SAN FRANCISCO (MarketWatch) — The Securities and Exchange Commission on Friday charged Goldman Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product related to subprime mortgages.
The SEC alleged in a lawsuit that Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 158.38, -25.89, -14.05%) structured and marketed a collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities. However, it failed to disclose the role that a major hedge fund, Paulson & Co., played in the portfolio selection process as well as the fact that the hedge fund had taken a short position against the CDO.”
This hit the FTSE, which fell 100 points, and the DJIA, 120 points and caused a tumble in GS’s share value, down by about (GS 165.40) 18% this morning. Investment banks and brokerages are down 7.6%.
This is likely to start a sell-off in the financial sector as a whole (down 3.1%) and possibly the much waited next leg down of the great correction that began in 2007-08.
Michael Roston points out the obvious. The amount in question in the Abacus deal is $15 million bucks, which is chump change.
Point two. No one’s saying anything about John Paulson, who made $1 billion out of it.
[Or, to take another instance, what about the Greek government, which is also getting bailed out….by tax-payers of another country? No culpability for the governments who get into these kinds of deals?]
You’ll also notice, as I blogged earlier, that George Soros, another speculator, has also called for the IB’s to be broken up (using the same argument, “too big to fail means too big to exist” – something also pushed by David Einhorn and the left-liberals). Now, I can see the sense in the “too big to fail, too big to exist” mantra, especially, if it had been used against the banks before they helped themselves to tax-payer money. But I wonder why it’s being repeated now, after the fact….and not then..
I didn’t hear these same critics of size pipe up at that crucial time.
Why?
Now, we don´t want to read too much into this announcement, but, really, promoting Paulson´s book? What´s Buffett going to say?
I really really like that chapter where Hank had to take over the US government.…you know, after he pushed Bear Stearns and Lehman over with the help of his hedge-fund buddies…and all but nationalized housing.
Or
Gee, Hank´s into that cap-and-trade collectivist boondoggle that just got outed as a total rip-off and a fraud made up by climate change fanatics but hey, give the guy a break, will ya? We´re all capitalists here…..you know, like, state capitalists..wazza big deal?
Or
Yeah, I know. Vanity Fair, that bastion of free markets and free minds, already did its bit for Hank´s place in history when it got down on its knees and..um.. blew…up.. the guy into some kind of I´m-taking-on-the-slings-and-arrows-for-the-greater-good-profile-in-courage long before me, and yeah, Bethany did her bit for Hank too.. but every little effort counts…
I´ve had my doubts about Buffett´s involvement in the bail-out.
This doesn´t make them go away…
The Telegraph reports that China warns of a gold bubble:
“Experts say that China is putting a floor under the gold price but does not chase rallies once they are under way.
There is also a double-edged twist to news that Barrick Gold, the world’s biggest gold mining company, has closed the final 3m ounces of its notorious hedge book ahead of schedule. While the move is a bet that prices will continue to rise, it also means that Barrick has been a big buyer of gold lately. These purchases have now stopped. One of the key drivers behind the spike this autumn has been removed.”
This article is one of the few out there that takes into account the time lag between an announcement and an action. Many of the events that reporters tout as proof that the gold price will spike much higher right way are actually events that have taken place in the past – for eg., purchases at lower prices – or are hedges that have a more complex function than the usual retail investor has in mind, with the siren call of “gold´s going to the moon, jump in now or you´ve lost it forever” sounding in his ears.
Take trader John Paulson´gold purchase. It took place in January, apparently. And remember that it was a position taken by his hedge-fund, with his clients money. Paulson gets his fee no matter how that trade turns out long term, and if his fee is a percentage of the assets under management, a purchase when the price is high is better than one at rock bottom, even if his clients´profits are not maximized that way. (sorry: thoughtless blunder there)
Notice finally that Paulson´s own fortune is in gold to a much lesser extent – only about $250 million of his reported $6 billion net worth. That comes to about 4% of his assets….(Correction: that´s 6.8 billion and less than 4%)
Not an earth shaking proportion by any means.
So, what gives?
Or Argentina, or Brazil, or Thailand, or Ireland…or..
Check out EconomPic for a nice chart.
How about a little less grilling of Sarah Palin and a little more of Hank Paulson? Notice how much Paulson stammers..
From Casey Research:
“On April 23, 2009, New York Attorney General Andrew Cuomo sent a letter to Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs Chris Dodd; Chairman of the House Financial Services Committee Barney Frank; SEC Chairwoman Mary Schapiro; and Chairwoman of the Congressional Oversight Panel Elizabeth Warren.
The letter outlined how former Treasury Secretary Paulson and Fed Chairman Ben Bernanke forced Bank of America’s acquisition of Merrill Lynch – even though Bank of America CEO Ken Lewis and the board of directors tried to pull the plug on the deal after it turned out that Merrill Lynch was far deeper in debt than it had admitted……….
…the part of the story that could really break Al Paulson and Don Bernanke’s necks is the failure to inform the Securities and Exchange Commission, as well as Bank of America’s shareholders, of the extent of toxic waste Bank of America was forced to accept. That’s fraud, pure and simple.“
My Comment:
The only problem is – who will bell the cat? Goldman Sachs’ reach is vast. And I doubt that Goldman is acting alone or purely out of its own interests, although its own interests are no doubt paramount.
Think about it.
How was this bank’s reach and corruption not noticed before? Even Lisa Endlich’s very staid history of the firm in 1999 couldn’t conceal the slime.
So what gives?
More evidence of behind-the-scenes string-pulling in the banking crisis:
NEW YORK (Reuters) –
Bank of America Corp CEO Kenneth Lewis testified under oath that Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressured him to keep quiet about losses at Merrill Lynch & Co, which the bank was buying, the Wall Street Journal reported.
Testifying before New York Attorney General Andrew Cuomo in February, Lewis said “it wasn’t up to me” to reveal Merrill’s fourth-quarter losses as they were becoming apparent in December, the newspaper said, citing a deposition transcript.
Shareholders of Merrill and Bank of America voted to approve the merger on December 5, and the transaction closed on January 1. Bank of America subsequently reported that Merrill lost $15.84 billion in the fourth quarter.
At Bank of America’s April 29 annual meeting, shareholders will vote on whether to force Lewis to step down as chairman of the largest U.S. bank or leave its board, because of Merrill and a falling share price…”
Read more at Reuters
My Comment
Why do people think nationalization will improve matters?
We’ve nationalized already…. unofficially.
Making it official won’t improve anything. It will just get people to accept what’s going on and legitimize the swindle.
We’re like bystanders at a mugging fighting over who ought to get the money the mugger left behind when he fled.
No. See mugging, call cops.
That’s how it’s supposed to go.