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Sunday, April 18, 2010

WSJ: What is material to Goldman?

Tonight we have this story in the WSJ:

Question: Was a Securities and Exchange Commission investigation into possible fraud at Goldman Sachs Group material to the Wall Street giant's investors? The stock-market verdict on that score was pretty clear: When news of the SEC's accusations surfaced Friday, Goldman's market cap fell by $12.4 billion.

Goldman appears to have taken a different view. It chose not to disclose in at least two recent regulatory filings that it had received in July 2009 a so-called Wells Notice. Such notices are a warning the SEC may bring an enforcement action against a firm or individuals. It also chose not to disclose it had received subpoenas from the SEC in August 2008, an indication it was under formal investigation by the SEC.

I relayed my own opinion on the Wells notices that Goldman didn't disclose.
Goldman didn't update their filings because of the Wells notice that had gone out....Well, can investors now sue Goldman because the market determined that this was a material event, and Goldman didn't disclose it? Or does Goldman always just have a problem of disclosure.
April 17, 2010 1:27 PM

Now Goldman says they were blind-sided by this:

WSJ
Goldman Sachs Group Inc. officials said they knew as far back as August 2008 that regulators were examining controversial mortgage securities created by the firm but were stunned by the bombshell civil fraud suit lodged against it Friday, with most having learned about it from news reports...

It sent about eight million pages, said a person familiar with the matter.

In July 2009, Goldman and Mr. Tourre received so-called Wells notices from the SEC. Such notices are a formal warning that regulators intend to file civil charges, and serve as a point of negotiation about a settlement. By September 2009, both Goldman and Mr. Tourre had responded to the charges in a 41-page document, according to people familiar with the matter.

The gist of Goldman's defense: The disclosure of Mr. Paulson's involvement would not have had any real effect on buyers of the CDO created by Goldman.

"If this matter is litigated, Goldman Sachs is confident that a fuller record...will underscore that no one in fact considered Paulson's role important and that no one was misled," Goldman told the SEC in September 2009, in a document reviewed by The Wall Street Journal.

That was the last contact Goldman had with the SEC about the matter until late March, when Goldman placed a phone call inquiring about the case.

The call wasn't returned, Goldman said. On Friday, the SEC moved ahead with charges, stunning Goldman officials.
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So now Jim Cramer, and every other Goldman PR hack, will tell you, that this isn't a big deal. Even though the SEC didn't follow standard protocol,. Even though the SEC didn't give Goldman a chance to settle. Even though the SEC didn't return Goldman's phone calls.
And now, Goldman says that it was "blindsided" by the suit. The suit, that wasn't material enough for them to report. The suit that knocked off almost $13 billion in market cap of Goldman.

So then Goldman sends the SEC 8 million pages of documents, and then, they think the SEC owes them a return phone call?

Maybe the people at Goldman have to get real. Does being blindsided by the SEC means that the SEC is now getting real with Goldman? Or, is that Goldman's argument, that the reason they didn't disclose the Wells notice was that they didn't think it was material? So a $13 billion lop off of market value isn't material? And if Goldman's judgment and disclosure on this was so poor, where else is their judgment lacking? Will Goldman say that the 28 year old "Fab" put together a billion dollar deal, that they didn't know about? Goldman, who brags that they have the best and the brightest and the biggest collection of PHDs who each and every day, compute Goldman's risk--were they then, left in the dark, and left fumbling for an answer?

And maybe Goldman says that this wasn't material, but doesn't anybody think that some class action lawyers may think otherwise? And if this little event, that no-one, like Jim Cramer, says means anything--if this little event causes the stock market to lop off $13 billion of Goldman's value, what happens, then, when the SEC digs a bit deeper? When the Governments around the world decide also to take a shot at Goldman?

So when are we not going to hear about the useless hacks defending Goldman, when billions and billions of dollars were paid to Goldman on behalf of the US taxpayer, courtesy of AIG, regarding previous Abacus deals?

Dollars from the taxpayer, that weren't synthetic? Dollars that caused workers to lose their jobs? Dollars that came back and were recycled into the pockets of Goldman employees come bonus time?

Defend Goldman all you want. All we know for sure is that, last week, they had a director, that is being investigated for inside trading, who left Goldman "for other commitments." His co-conspirator, (and I use that term loosely)  Raj's insider trading scheme, generated hundreds of millions of dollars of commissions for Goldman. And Raj, the who traded on the inside information, participated in Goldman's "huddles" that just provided "market color" that wasn't dispensed or was adversarial to the research and opinions that Goldman had on the street. And now we have Goldman, creating synthetic products, that bet against the housing market, so that they could make billions more, and yet, we have these air headed pundits on television saying that Goldman only made $15 million on the scheme.

So then you want us to believe, that Goldman, didn't use that idea, to create and bet against biliions and billions of their own packaged products that they sold, while buying insurance on the same from AIG?

I guess we are all so stupid. And I guess the folks at the SEC are so stupid also.

So if all these people at the SEC, and anyone who sold the stock on Friday were stupid, and if the only person who has the correct read on Goldman is Jim Cramer, how is it then, that these stupid people at the SEC were able to blindside Goldman?


After all, can anyone else tell me when Goldman was blindsided like this?

And would anyone besides Wall Street, really care if  the SEC took out Goldman's knees?

Because isn't that what thugs always threaten to do?

2 comments :

Anonymous said...

Good for you! Do you publish this elsewhere beside this blog?

Anonymous said...

Loved your great research on Scribd. Any interest in exchanging by email I have UBS and MS to offer???