Wall Street: Inside You Can Find Crap

By Author: Italo Zanotti
Total Articles: 62
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Wall Street seems to have passed quickly opened an investigation by the SEC against Goldman Sachs. In fact, after the initial backlash recorded last Friday by the actions of the most powerful investment bank in the U.S. fell 13%, which have dragged downward the other banking stocks, everything seems to have subsided. Yesterday an investigation against Goldman Sachs also by the UK supervisory authority has passed virtually unnoticed. To all this may have contributed to the profits billionaires announced by JP Morgan, Bank of America and Citigroup, one of the groups hardest hit by U.S. banking crisis, and $ 3.46 billion profit in the first quarter of this year by the same Goldman Sachs. To mitigate the influence of serious complaint was mainly the line of defense from Wall Street: The SEC's initiative is an initiative of the Obama Democrats seeking to unlock the parliamentary process of financial sector reform currently discussion in the Senate. In particular, the aim would be to break the strong resistance from Wall Street to transfer stock in trade in derivatives, thus severely reduced the profits that investment banks active ...
... in New York realize this kind of activity. This interpretation was supported by emphasis on the great news that the decision to initiate an investigation against Goldman was supported by the democratic representatives in the SEC and opposed by Republicans. Although it is likely that there are political motivations behind the initiative of the SEC against the most powerful U.S. bank, the fact is that the alleged scam confirms that there is something rotten in Wall Street, so as to encourage the professional journals to report that " canyons "claim that the SEC will soon similar investigations against other banks and even to indicate institutions (including some newspapers also fit UBS) that soon will be the focus of attention of U.S. authorities monitoring.
The current number one bank, Lloyd Blankfein, had recently stated that "Goldman Sachs is the work of God." It therefore seems interesting to know, thanks to the SEC complaint, through mechanisms such as the Institute is carrying out this divine ability to put aside his own men in key positions of both Republican and Democratic administrations. Suffice it to recall the ministers of the Treasury Henry Paulson George Bush and Robert Rubin under President Clinton (both previously Chief Executive Officer of Goldman Sachs). In essence, the SEC accused Goldman Sachs of having sold a financial instrument specifically built to lose money to those who had bought it. In practice, a fraud against customers unaware that a hedge fund and the same bank would seek to maximize the loss of the instrument sold. Goldman Sachs defends itself, arguing that customers, the German IKB and the Dutch ABN-Amro then absorbed by Royal Bank of Scotland, were inexperienced and were fully aware of the dangers.
Giving details of the transaction still open a gash on the mechanisms that caused the recent financial crisis and ways to work on Wall Street. In 2007, John Paulson, manager of a large hedge fund that made billions betting on the collapse of the U.S. housing market, asked Goldman Sachs to create a financial instrument against which to speculate. The bank builds synthetic CDOs, or Collateralized Debt Obligations of that instead of being backed by a portfolio of bonds were guaranteed by various derivatives (Credit Default Swap) on bonds. So one of several means by which a single mortgage loan gave rise to four securities, with the result that if the beneficiary had begun to pay the mortgage, the effect of its decision would be multiplied by four in the financial markets . Goldman Sachs, which in turn provided the collapse of U.S. real estate bubble, part of the synthetic CDO Credit Default Swap (CDS) shown by John Paulson, or insurance policies on bonds chosen from among those most at risk, as they were bundled subprime mortgages, and sold to buyers without disclosing that the CDS had been chosen by John Paulson and his hedge fund that is the same bank would operate on the market that these synthetic CDOs lose the most value. It follows a strong conflict of interest for Goldman Sachs. This is not a unique case, but a widespread practice in the financial sector that is not just about Wall Street. We must recognize that in the United States sometimes has the courage to lift the veil on these practices, while this almost never happens in Europe. If the American justice system will prove to the SEC, Goldman Sachs will not only pay one billion dollars to defrauded customers, but will be liable to heavy penalties which may also be not only a financial nature.
This case also highlights the close operational ties between investment banks and hedge funds. Even though some deny this marriage, which often emerges, as in this case, the so called talents that handle the most successful hedge funds derive their innate qualities of these relationships with the banking world at least very questionable. The fame and earned billions for example by John Paulson are not only the result of correct prediction of the collapse of the housing bubble, but especially the relationship with Goldman Sachs, who had prepared the vehicle against which to shoot and that in any case would have helped minimize losses even if the prediction was proved wrong. This case, the hedge fund Galleon Group, accused of insider trading, fraud and blatant Madoff highlight a perverse alliance between investment banks and hedge funds. He would then regulate the first sense without also regulate the latter.
In conclusion, the story Goldman Sachs as the facts are coming to light in Chicago in process on the bankruptcy of Lehman Brothers on Wall Street confirmed that the rot has spread.
Photo: John Paulson

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