Subject:  Financial News/Economic Crisis

The big financial news last week was that the investment firm of Goldman-Sachs was been accused, that is the key word, accused, of financial fraud….the anger by Main Street makes this an interesting turn of events and does not hurt the battle for financial reform either…….unless you are an ardent investor or an economic junkie you probably have NO idea what all the crap is about….true?

Let me help……

The SEC’s submission to New York’s Southern District Court provides a devastating glimpse into the criminal activities of a financial oligarchy that was not only indifferent to the destructive social consequences of its operations, but eager to profit from a crisis precipitated by its own speculative activities.

In April of 2007, just prior to the sub-prime mortgage collapse, Goldman Sachs received $15 million from hedge fund operator John Paulson to help put together a package of securitised home loans—a collateralised debt obligation (CDO)—and market it to Goldman’s clients. According to the SEC, Paulson and Goldman knew that the CDO, called ABACUS 2007-AC1, was comprised of junk assets, but they led the public to believe that a sound investment was being offered.

Paulson had staked the fortunes of his hedge fund betting on a market collapse. He therefore selected the worst sub-prime mortgage securities on the market for the Goldman CDO, mostly derived from mortgages in Arizona, Florida, Nevada and California—states which were subsequently among the hardest hit by the wave of foreclosures.

The banks lured people into taking out mortgages they knew the purchasers could not afford. They then packaged these toxic loans into securities—collateralize debt obligations—and made billions in profits by selling them to investors around the world, including pension funds, 401(k) plans, insurance companies and private investors. Those involved knew very well they were running the equivalent of a giant Ponzi scheme—a fraud far more massive and destructive than the criminal operation headed by Bernard Madoff.  (Thanx to Barry Grey and Patrick O’Connor for the synopsis above)

That is by NO means the end of the tale…..there will be more coming….that is if they really want to find the culprits that caused the economic crisis….it will be interesting see how this plays…after all Wall Street and mostly namely Goldman-Sachs gave a million maybe more to politicians in 2008….will that preclude them being found guilty?