Posts Tagged ‘SEC’

An ethics challenge to Wall Street…from the U. S. Senate, of all places

April 24, 2010

In the wake of Wall Street scandals, collapses, bailouts, bonus billions, record profits, and now, according to the SEC, charges of fraud, the big show moves to Washington on Tuesday when the Senate Permanent Subcommittee on Investigations, chaired by Carl Levin (D-MI) will grill Lloyd Blankfein, Goldman Sachs CEO, and six current and former Goldman people, including Fabrice “Fabulous Fab” Tourre. The show starts at 10 AM EDT.

Levin is a very bright, very tough, inquisitor who is not one of the 46 senators who have gotten major contributions from Goldman. Nor is the ranking Republican, Tom Coburn (R-OK). The committee has a long history of changing Americans’ attitudes and behaviors, going back to 1921. It may well start to change the way Americans think about ethics and business.

Blankfein will testify last. He’ll face an awful dilemma: Will he defend Goldman’s behavior—described by Business Week’s Michael Lewis as creating a billion dollar bond package to fail, tricking and bribing the ratings agencies into blessing the package, then selling it to a slow-witted German?

Or will he say that Fabulous Fab’s deal was inconsistent with Goldman’s ethical standards, and thereby give credence to the SEC’s charge of fraud?

What would you do?

Is it OK to cheat as long as it’s not illegal? Does Goldman Sachs say yes?

April 20, 2010

After the Securities and Exchange Commission last Friday charged America’s most respected financial firm, Goldman Sachs, with defrauding investors, CNN’s Rick Sanchez asked, “Is it OK to cheat as long as it’s not illegal?

Goldman says no: CEO Lloyd Blankfein left a voicemail on every Goldman worker’s phone saying,

“Goldman Sachs has never condoned and would never condone inappropriate activity by any of our people. On the contrary, we would be the first to condemn it and take immediate and appropriate action.”

We’ll see. According to the SEC complaint, Goldman Sachs was approached by hedge fund operator John Paulson (no relation to ex-Treasury secretary and ex-Goldman CEO Henry Paulson), who wanted to bet against sub-prime mortgages—that is, he wanted to bet that their value would fall as their riskiness became clear and as borrowers defaulted.

Working with G-S vice president Fabrice Tourre (“Fabulous Fab,” as he called himself), Paulson hand-picked a billion dollar portfolio of mortgage-backed securities that he considered the absolute riskiest and most likely to fail. (more…)