Recess is Over.

I gave Goug'em Sachs a day off yesterday from the regular flogging that I've been giving them lately. But now, fresh news arrives.

***various quotes follow***

WSJ: The subcommittee said Goldman's strategy of "shorting" the mortgage market—betting on its decline—was so extensive that, at one point in mid-2007, its mortgage business made up more than half its value at risk, a measure of the firm's overall exposure. "By early 2007 the company blew right past a neutral position and began betting heavily on [the market's] decline," Mr. Levin said. Goldman was "not hedging but betting heavily against the market," he added, accusing the firm of being "misleading to the country...and not fair to their customers." ...

The subcommittee released excerpts from a raft of internal Goldman emails and other materials providing further insight into what some Goldman executives called a "big short" strategy.
"I concluded that we should not only get flat, but get VERY short," executive Joshua Birnbaum wrote in reviewing his own performance in 2007. "Much of the plan began working by February ...and our very profitable year was underway." ...

One transaction called Timberwolf was a $1 billion package of complex securities rated AAA. The head of Goldman's mortgage department sent a mass email promising the sales force "ginormous credits" for selling it. The package was downgraded to junk status in just over a year.
"[B]oy, that timberwo[l]f was one s— deal," an unnamed Goldman official wrote in June 2007, according to documents released by the subcommittee.

Goldman "sold to its clients products that it clearly no longer believed in," said Mr. Levin ...

In early 2007, Mr. Blankfein referred dismissively to Goldman products being readied for sale. "[Y]ou refer to losses stemming from residual positions in old deals," he wrote in an email. "Could/should we have cleaned up these books before and are we doing enough right now to sell off cats and dogs in other books throughout the division."

The subcommittee released excerpts of emails and performance reviews where executives boasted about their prowess in making money on short positions, and overriding customer objections when Goldman allowed some securities to sink in value without pumping in more cash.

One, Michael Swenson, described 2007 as the year "that I am most proud of to date" because of his efforts to steer the firm off the subprime rocks through "efficient shorts."
Mr. Swenson also noted that he "said 'no' to clients" who wanted Goldman to shore up some of the failing securities it had marketed.

Another message from an unnamed executive says that some of Goldman's aggressive shorting left hard feelings among clients in October 2007. "Real bad feeling across European sales about some of the trades we did with clients," the email says. "The damage this has done to our franchise is very significant. Aggregate loss of our clients on just these 5 trades along [sic] is 1bln+."

*** end of quotes ***

I guess this is plenty of proof that Goug'em Sach guts its own clients and feeds off them. This is no surprise to me or to anyone paying attention. ANY investment bank with a large proprietary trading operation or large principal investment book does that. We saw this in the 1980s at Saloman Bros. Doubters: read Liar's Poker.

I personally saw disgustingly corrupt behavior of this sort when I was working at a large investment bank in the early 1990s.

And now we see proof of this despicable behavior at Goug'em Sachs. But it should be no surprise to anyone, except the gullible who believe the self-serving lies that Wall Street executives put out.

I hope the Democrats will negotiate in good faith with the Republicans to get financial reform moving again. They are electioneering now, but need to put the good of the common man to the forefront.

Word of the Day

"Maquillage" - noun [$10] French, used in "The First Man in Rome"
Maquillage means 1. make-up, cosmetics; 2. the application of make-up.
Sentence: A sophisticate at Goug'em Sachs might say, "Let's put maquillage on this pig", but that's just a fancy way of saying "Let's put lipstick on this pig" as they sell garbage bonds to their own clients.