David Kirkpatrick

April 16, 2010

SEC hits Goldman Sachs with fraud

I blogged on this very topic back in late December, and now the SEC is cracking down hard. As one  financial industry insider quoted in the second link says, “This is big.”

From the second link:

Goldman Sachs Group Inc was charged with fraud on Friday by U.S. securities regulators in the structuring and marketing of a debt product tied to subprime mortgages.

The Securities and Exchange Commission lawsuit alleges that Paulson & Co, a major hedge fund run by the billionaire John Paulson, worked with Goldman in creating the collateralized debt obligation, and stood to benefit as its value fell, costing investors more than $1 billion.

Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud.

Paulson has not been charged. “Goldman made the representations here to the investors, Paulson did not,” SEC enforcement chief Robert Khuzami said on a conference call.

Goldman said in a press release that the SEC’s charges are completely unfounded in law and fact and it will vigorously contest them.

The lawsuit, filed in Manhattan federal court, marks a dramatic expansion of regulatory efforts to hold people and companies responsible for activity that contributed to the nation’s financial crises. It also comes as lawmakers in Washington debate sweeping reform of financial industry regulation.

March 26, 2009

A.I.G. backlash, the other side of the coin

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:45 pm

An op-ed from the New York Times subtitled, “The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.”

deSantis’ resignation letter offers a little perspective on some misplaced outrage (I’m just as guilty as the next blogger, journalist, concerned citizen) going on and how badly the public relations aspect of the ongoing bailouts is being handled by both the government and the firms receiving taxpayer money.

Of course if no taxpayer money was involved in any of this, there’d be no need for “good” PR or concern about who gets hurt and who doesn’t. We have a free market capitalist system until things go south, which makes it not quite a free market capitalist system. Hmm.

From the link:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.