Stocks fell hard overseas following the Goldman Sachs Fraud Charges to begin the week. Here at home stocks enter the final hour mixed. Hot on the heels of the SEC Fraud filing against Goldman Sachs the AG’s of Connecticut and NY are also investigating the bank. Over in Europe Germany and England are also taking a hard look at Goldman Sachs and considering their own charges.
I can’t say as I’m really surprised by this as for years now the banks have made it clear that its profits first, no matter what. Ethics, honesty, morality and other pleasantries may be the concern of Main Street but Wall Street clearly believes that it is beyond such trivial matters. What does surprise me is that it took this long for a regulator to go after one of the big banks and that the charges are civil in nature and not criminal.
A detailed look at this issue by the folks at ProPublica found that similar things occurred at Merrill Lynch, JP Morgan Chase, Citigroup, Deutsche Bank, UBS and others. Goldman is being sued over just one deal, Abacus, of which a total of 25 were syndicated totaling 10.9 billion. Magnetar on the other hand involving the other banks mentioned runs some 40 billion, technically not illegal, this deal remains highly questionable and will be, or certainly should be, subject to a thorough and detailed review.
The Goldman SEC action follows a series of subpoenas issued in December of 2009 to Goldman Sachs, Credit Suisse, Citigroup, Bank of America/Merrill Lynch, Deutsche Bank, UBS, Morgan Stanley and Barclays Capital, FINRA or the Financial Industry Regulatory Authority also sent those named requests for information.
Merrill Lynch and Countrywide Finance now part of B of A, the dumb and dumber deals as I pointed out in 2008 both feature prominently in these investigations due to their extensive sub-prime and derivatives involvement. Countrywide Finance was one of the more reckless lenders. Recklessness that was instrumental in almost completely destroying the franchise’s value that B of A paid a cool 7 billion for.
Stan O’Neill former Merrill Lynch CEO is making the rounds trying to convince everyone that he had no idea things were going to go south like they did. Claiming that the CDO’s were far more complex than he realized and that precious few really understood them. Following his firing of Jeff Kronthal and his colleagues at Merrill, the banks and Mr O’Neill’s understanding of these products sank even lower. Instrumental in the failure of the firm and a hasty coerced shotgun marriage to B of A and a 161 million dollar severance package for Mr O’Neill.
Another 8 banks went to the receivers Friday; City Bank, Lynnwood, WA; Tamalpais Bank, San Rafael, CA; Innovative Bank, Oakland, CA; Butler Bank, Lowell, MA; Riverside National Bank of Florida, Fort Pierce, FL; AmericanFirst Bank, Clermont, FL; First Federal Bank of North Florida, Palatka, FL and Lakeside Community Bank, Sterling MI which brings the 2010 total to an even 50.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
