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that's not a b of rolling stone magazine uh... uh... welcome back to the majority
report that had very few have from a its
darling
we uh... always suggest we should take note that we should've played the we
have a clip of europe megane mcardle
effing will play it after you have to go you are and where your with the players
excel wonderful so
uh... let's talk about this piece
this
i think
hopefully yaar attorney general new york state uh... were the only two people in
the country as far as i can tell who are paying attention to what the senate was
doing
first tell us about this investigation
who is investigating goldman sachs and uh... a couple of these banks and why
and the senate permanent subcommittee on investigations which is uh... headed by
senator carl levin of michigan and republican
uh... senator tom coburn from oklahoma
uh... they did this
huge when two-year investigation of
of the mortgage bubble and they focused on three companies washington mutual
uh... golden tax and or should that
and uh...
their result of the reports came out of a month ago and what they really did
become a journalist huge panoramic portrait of the fraud that what are you
uh... in the years leading up to the crash in two thousand eight
images typically at those three capability
you know you alan
there the findings that we talk about that but how did the huh i mean
hiding truck schumer allow this to happen
i mean honestly like i mean i you know this this is uh... this this
investigative uh...
committee seems to go on
completely under the radar i haven't heard anybody talk about its existence
a at least you-know-who
lane in recent times uh... them
from a political standpoint hot crowded in my soul jaded that i find it hard to
believe that anybody was working on this
is it a little bit pricing and i think
become of the people that that i talked to him at a lower am
of little surprise that the
uh... accredited
of this report especially considering that it was
somewhat
genuinely bipartisan i think you know coburns office definitely had come into
it
tied into this report
and normally you know what you'd expect from a bipartisan committee
is a kind of act not kick historic historical review problem that
kind of identified issues but that's another point the finger at individual
exactly the opposite of what went on in this report this report is uh... you
know a full-blown although
you know she accused type of thing
where they're really you know kind of throwing the book is three companies and
in particular you know one still thriving company in common tax
and i want to uh... give u bs
uh... the french dropping on the that fits that added extra bonus pointed
finally got a new leader that's not a good thing
so i felt we have this report is common it's six hundred and fifty page report
uh... it is
interesting in that it's bipartisan it's interesting that you know relative to
the fiscal
emergency report that came out that blue-ribbon commission of the
republicans didn't uh...
it should their own competing reports because of the use of of words like frog
or wall streeters herbert like that and so we have this report
wyatt bom
what to tell me about the sort of the the general surrounding the one of the
things that it came out came out of this was that there has been an incredible
decrease in the oversight of the sector
yeah that one of the key report talking about it
islam
and and
to have to come to go back in time here
go back to the late fee in the early nineties
regulation was done in a completely different way use typical bag
uh...
had a a regulator from
my veneto dvd off the controller of currency
or the o_t_s_ golf for supervision
where the f_b_i_ d
you would have a somebody practically living on the right
tobacco
going through your book is going to your loan
because you know after all bankers
you
prickly commercial backed out of there are federally ensured sympathize and so
that they have an interest in making sure that everybody
safe that there isn't a lot of deadly leverage on everybody's book and that
you know and and the department of education
uh... and their federally insured because we we saw a during the
the great depression we we we saw what happened when you have
banks making crappy loans and they they go on dirty it wreaks havoc on the
entire financial system
absolutely absolutely ok created account
third-world duration or nobody would be uh... you know uh... heritage afraid to
do business with everybody else because nobody knew you would have to be
weighing the views of the uh...
solvency of all your business partners nobody want to be in that situation
that's why we put in the controlled
but in the last twenty years ago that kind of
corroded that whole process
through a series of regulatory changes and by the time we got to the mortgage
bubble the years we're talking about here
uh... this process was almost completely voluntary there were no longer
people from the o_t_s_ videotaped the area geography or
or the fed lena hood to figure out everybody books
they relied upon the beckoned selves
too
selfishly and voluntary disclosures to the regulators
uh... telling them you know about that martin and other trends on the book and
goldman with you know with one of the bank of the kind of pushed for the those
changes
and uh... you quote
in your piece era rights good corn for peace in nineteen ninety-five according
to an independent study banking regulators filed eighteen hundred
thirty-seven referrals
during the height of the financial crisis between os seven eight of ten
just seventy two
right yet
it appears again inspecting regularly don't have their own private oral power
so
the way they would bill the cages is you know they've got to go through the
gather all the evidence men they kinda hand it
to the justice department
and they're here run with it if there is a criminal case in that powell
that now you got uh... for entering at middle crisis you know they may actually
put seventeen hundred
very tender people in jail during that time period through this process
but you know that that he didn't play that show
they essentially stop doing that
this decade they've paid really as a matter of course do not make referrals
anymore in fact when i called the o_t_s_ ask about this
they very humorously war offended and played well with that
where the u_s_ typically doubted that we do a lot of herbal referral process
another though if i could get on the phone and we tell somebody picked up of
department aged check this out a minute it is not there is no longer its profits
literally you know did you know that it's about maybe
the bankers really really really complied
have great racing well-developed you know we're laughing about it but that
that's kinda what everybody that's attending are claiming right that's why
it doesn't know where complying
everything's ryan
no primes here so
so let's let's go down and focus on
goldman
these guys uh... were able to essentially leverage
extraordinary amounts of money land is much as they want where they want
whatever but now you have goldman what do the things that goldman sachs did
that are now clearly elicit
yet adjusted tobacco rooted in a little tiny bit hearing talk about the the the
bigger picture just because uh... kinda plays into what goldman did
the chain of fraud here usually started with a company like countrywide or or
new century right
we had you had to kind of gigantic whereabouts when there's that were using
every trick in the book
to create as many loan did they could
you know they were doctoring in
application of the reason why you know two fifty one
a good lender could borrowers information and uh... in place of the
bad borrowers are they work
pushing people who you know could have flattened
fixed rate loans a it more risky option area of low income they were picking
people who worked at it and they were you know they were doing all kinds of
taking credit scores
through all the stuff just to create loans rights because
the bank had created this method of converting crappy low-income
likeness sub-prime loans into triple-a rated security pleaded derivative
baron structures called videos
and to hold onto hocus pocus math that allowed me to take all that crap
and turn it into triple-a rated investments which are worth as much as
what treasury bill it and we said we should also say that it is going to that
you know one country rot wide
has no stakes in the loan being paid back because all they're doing is
basically
servicing the loan in that moment and then selling at the value of the note
that to somebody else they have no smoothness can in the game
now and of course because we're making it more than they were
they were getting rid of them ten minutes waiter i mean i'm not even
exaggeration
they were holding on to the stuff
for any length of time
the feeling that they were security guide
butterworth chopped up into a little bit first a look at security
they were off
the lenders book and then they were a in on the booking some of a company like
goldman tobacco
which then basically repeated exactly profit they got the world
and they were trying to move the ms quickly as possible to annette walker
down the road but down the line
who would typically like at our pension fund or foreign bank or maybe another
bank or a hedge fund
and and that with the book and he took a whole bunch of
really really realty
piano not very well
who were the
sub-prime loan you converted the magically into triple-a rated jury
and then you told them to people all around the world
solid gold went of course they really were not without them
at the backdrop now it's eight slash one point one think doing this dynamic
because this is this is really important as we going to talk about uh... goldman
is that there was a lot of people out there who wanted to buy these things
that that's an
handed they were looking for some investment there was going to give them
a high return because we know the treasury bonds at that point we're we're
we're you know in stale are kicking off very little interest and so there was
that there was a real market there
that uh... that was uh... sort of pre-existing inouye in in this function
goldman is acting is a sort of a broker is just sort of like uh... you want to
uh... to buy the stuff will go find a ford
it or actually goodman partner and had a lot of these companies were required
to have certain certain amount of triple-a rated
abit on their books
gloomy reserve requirements whether it's insurance companies are other bag when
you have to have
liquid cash out of it on your book beneath regulatory requirement to a lot
of the two companies
these these customers
the applicant who today they wanted to have
little tough because that pay a higher rate of return then treasury bills or
municipal bonds are ever whatever else
so there was a huge that's market for this stuff that was actually
deadly in topic and i'm not really wasn't worth while
filling with a little goldman was sitting atop a whole bunch of these
appetite they word they had accumulated a huge along petition by the end of
december two thousand six
partially by accident because of the they had created in decker to invest in
mortgages made bob had bought a whole bunch of stuff that they intended to
read about later
but they were
worried that they were going to get creamed on the mortgage market with a
kind of
engaged in this
conscious strategy to unload all their crap on their clients
and then they did that
now or do they not tell their clients
that they had that negative opinion of their inventory
but they are they didn't tell them that they were also betting against it at the
same time
uh... and that's kinda what commandeered a dade told us that they knew was going
to blue up blow up
and then a bet against it at the same time they didn't other quiet about it
and then when they got called to washington they lied about okay so now
let's unpacked us a little bit at the end of two thousand six goldman has six
billion dollars
worth of these assets
and if they're sitting there
now buddy of mine will say will look it's their job to sell this everybody
hedges against this stuff so everything that uh... tavis talking about that's
called business
and so how is this different from
the
a the the pristine confines of does business
okay will receive picture number one say
yet absolutely do need to edge and if you have a quick billion dollar along
position it certainly would make them to to create a pic billion dollar short
position offer that batter
alleged some kind of that you don't pick any water that you know that broker
dealer doesn't know really want to be in the business gambling it really does
want to be making money on that on the trip the commission
the transactions
buckled more beyond that they went beyond even
and they ended up with a sixteen billion dollar short position they were no
longer detaching
they were full blown bedding
they they had come to the conclusion that this market would go explode
and they went well beyond heading into this world where they were actually
creating that huge that factors in terms of the email in one of these them eleven
report documents were very high ranking official says very openly
if not a heads you know that's that's where we're making a bet here
i think that
and then there's also the fact that
you know companies should be allowed to
to get rid of that inventory
but you have to tell your client that you have
yeah but you're betting against them
but he can't
you know we have to keep it we have to cure it was for you're not allowed to a
lot of people and they view
you know you don't have an interest in this if you have to twelve yet to talk
about some of the representations they made about these assets that they sold
to their
their clients
because they told them that
that this was in stuff that they were holding in reserve
these were bets that actually the goldman sachs said made
this was stuff that they were actually actively going out and finding
as of the request of their clients
radio like anyone deal for example you are going to be a little bit dirt their
client that mcgill quote-unquote then
short-run treat another word that they got out in the open market bottled up
but the reality was that this was all
goldman's own inventory
uh... and now that we've got a highly curtain in fact
you know if you cured if you're buying
budget securities from somebody
you know you definitely we want to know that that if if the company known mister
fitness elf and with desperate to unload it that's a fact you'd probably want to
know right and that's what they call a material fact
and goldman definitely required to
critical of that and that they didn't so in this instance and just you know i
won't belabor this point because you know for a those of us
like myself who don't really
fully grasp the stuff
uh...
goldman was presenting themselves as a broker
there are people out there who have the stuff that we're going to broker the
deal as opposed to being an actual vendor we have created these these
products we have we have we have
polled these things
could today did they get away with saying well when we said that we are we
bought these in the open market we did we just the bottom in the open market a
while back
what's the distinction there
yeah they actually made an argument domlur two that and responses some of
the investigators unpacked
uh...
when one of the investigator that's one of the coleman guy who'd like ask how
can you
how can you tell your client that you know
you bought the stuff off the street when in fact the came out here on inventory
uh... well the answer
the uh... the client temperament goldman afterwards
but we are the jury
you know if we get if we're going to get from our spells then met up with a
different from buying it from the street
but that really matter and that was diapered parsing connecticut and and
indian tribes at work their way out of reality punctuation
and so they also made uh...
they also had an obligation right um...
to to tel
their clients that they were betting against it and you can
you can see that they sort of
will fudge that by telling their clients that they were uh... actually that their
interest were aligned with their clients 'cause they had baat six million
of the of the offering without telling of the day that sixteen billion again i
can't do it with the new billion actually when i went to
yeah i know you're absolutely right and maintain one in one of the deal
they actually pay affirmatively
you know our interests are aligned with viewers because look we don't like a
million dollars worth of a deal that we're going to you
but they left out the part that they had done the fifth two billion dollars
pedicures debit uh... and do it with the made in that deal is that when some of
the
total required let me know immediately for a living money again it with a car
that doesn't even make it to the first stop laying of the engines already
exploding before you go through the content of a lot
and the client other are incomplete helen goldman hayward yukiko whatever's
left you know that we don't get completely creamed
goldman's called and refused to tell
because dot at the lower the stuff when value the more money they made
because they had the judge in a short position on the other side of it
and i've got to go all the talk about a complicated and then people are going to
be a or what should i care that one bank agree another
but the problem at all firmly although
colvida fleeting ended up coming out of our pockets because because of the
bailout because of a lot of energy
you know this is uh... ultimately it was really depressed from from all of them
and so anyone who also who were these clients that were buying this stuff and
he was it just off
all hedge funds are was a pension funds was it uh...
large institutions that said you know like you say uh... we need to have a
certain amount of triple a_ assets on our books in this one's paying a much
higher interest rate there are theoretically will pay a higher interest
rate than any other trip labor era but
product
it with a with there with the whole range client in one of the deals remain
quiet mourning her family
and they lost in automobile a lot of nine hundred and fifty million dollars
on that deal
which again to michael carrots red it's more than we like our market of weep
over them that
within a year the taxpayer was giving more to the family ten billion dollars
to make up for the waffle reasonably could you could pretty directly to the
coleman ended up taking that money out of
the taxpayer's pockets
uh... and other cases you know there was a korean hedge fund that violence is the
notorious timber wolf deland them aside not talk to him got uh... now defunct
auto trillion hedge fund that bought a hundred million dollars worth of the
stuff of one point and uh... again that would another car that put it right out
of a lot and uh...
they were out of business within q mother doing that deal
um... though it was people all around the world uh... a big big
companies in small market mall but but media bad an an overhead
last year
varied goldman have was sued by the s_e_c_
over something called abacus red uh... and so over how do they come out i mean
the
and they were did tell me the details of how it that way
different from what what what was found here
well becomes part of this purported paid up to me there is no longer section on
abacus in here and
there
what they do inevitably return edge one guy named john paul dot in that they are
vipers short seller guy who
reliable brought market we're packing one of the bed again at the time to go
to go many that i want you help me
uh... put together a batch of the crappy it's more of it is possible that i can
bet against them but of course *** do that you need to find a somebody on the
longer than a deal who will actually buy it for that for for that all of them
could shorten it
the goldman and paul can work together to create this gigantic
batch of really deadly
mortgage at that point then
goldman way oversight even found a pair banks one-touch one german kal baat the
bulk of this multi billion dollar deal without telling the bank that in fact
you know the advert from the deal has been elected
specifically delude by this guy jump altman who is betting against them these
products
b_a_ may choose them because they know they're going to self-destruct
recuerdo they were specifically children to fail
that was that with the idea
and goldman called the this service renting the platform another word blown
you know
viewed far back they wouldn't have bought the steelers if they knew that
the guy in the other side was with a hedge fund you know
carnivore who was who's been betting against them
they goldman eventually quickly rented they're good name to jump olefin
so that these banks would buy from goldman who they are angry with neutral
and four and for the service goldman only charge fifteen million dollars very
small amount of money to commit that kind of attraction
uh... but often ended up making over a billion dollars in that deal
but what good for him i'm sure it enhances any you know make that kind of
money unless you have a good person
effected so no so when you hear this news that the
*** item in is a is starting to investigate these guys do you have the
feeling that
uh... do do you know anything as to whether or not
this is the type of stuff he's pursuing at this point
uh...
you know well it's it's emerged at our old
ballpark of that i mean i i think i think the that that had more to do ring
with uh... video origination and put in some other things that were
you know to put it mildly tangential
so i think uh... to the people to think that i heard about this morning
also involved defrauding the government
uh... so vetoes it
the mistakes were
by
president you know
trudging
the government uh... for f_h_a_
properties that actually had more than actually paid a lot less in the open
market to get them with different things but he's been on the general idea of
going after bangkok and they're under the big ones becker american citibank
another thing by
that's a good thing community definitely but
you know what what i was reading about miss pieces
do you know that i think there was there with a highly combined moment you know
after one golden back to the top
company on walter when they came to washington to talk about stuff
and they basically just break and we live in the testimony walked away from
it and bruno resources still waiting for the government will respond and i
thought if we're talking in this committee did a formerly referred to
uh... department of justice or they just put it out there and say
know they they deliver it but they don't have any relationship with the
department of justice there in the plane but that we are you know let let me know
when when the report was done he will letter
could eric holder at the justice department today you know
we think you should look into that
uh...
father doesn't mean
that they're going to do anything they don't have any special poll there
so we're world limbo
all right well that's a big thank you so much of the pieces in this month's
rolling stone folks
and courage you ago uh...
i think you can read it online or pick up the magazine one of the government
kit