Jamie Dimon isn’t alone in living the Teflon life in the world of the financial elite. He’s got company at least from Lloyd Blankfein.
Just a day after you could read about Dimon’s $13 billion deal made with the government to settle charges against JPMorgan Chase, Blankfein is apparently going to grace the financial world with his presence for a bit:
Lloyd C. Blankfein’s grip on Goldman Sachs Group Inc. has grown stronger than ever.
The Wall Street bank said Monday that J. Michael Evans, a vice chairman who was once seen as a potential candidate to succeed Mr. Blankfein, would retire at year-end.
The departure of Mr. Evans, a former Olympic gold medalist who helped lead an internal effort to improve the company’s business practices in the wake of the financial crisis, is the latest acknowledgment that Mr. Blankfein intends to stay in his role for the foreseeable future and that his top lieutenant, Gary D. Cohn, Goldman’s president, remains his most likely successor.
Why put Blankfein in Dimon’s company? Well, we have short memories. Remember what Sen. Carl Levin found when he investigated Goldman’s practices:
Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing
1. Securitizing High Risk Mortgages. From 2004 to 2007, in exchange for lucrative fees, Goldman Sachs helped lenders like Long Beach, Fremont, and New Century, securitize high risk, poor quality loans, obtain favorable credit ratings for the resulting residential mortgage backed securities (RMBS), and sell the RMBS securities to investors, pushing billions of dollars of risky mortgages into the financial system.
2. Magnifying Risk. Goldman Sachs magnified the impact of toxic mortgages on financial markets by re-securitizing RMBS securities in collateralized debt obligations (CDOs), referencing them in synthetic CDOs, selling the CDO securities to investors, and using credit default swaps and index trading to profit from the failure of the same RMBS and CDO securities it sold.
3. Shorting the Mortgage Market. As high risk mortgage delinquencies increased, and RMBS and CDO securities began to lose value, Goldman Sachs took a net short position on the mortgage market, remaining net short throughout 2007, and cashed in very large short positions, generating billions of dollars in gain.
4. Conflict Between Client and Proprietary Trading. In 2007, Goldman Sachs went beyond its role as market maker for clients seeking to buy or sell mortgage related securities, traded billions of dollars in mortgage related assets for the benefit of the firm without disclosing its proprietary positions to clients, and instructed its sales force to sell mortgage related assets, including high risk RMBS and CDO securities that Goldman Sachs wanted to get off its books, creating a conflict between the firm’s proprietary interests and the interests of its clients.
5. Abacus Transaction. Goldman Sachs structured, underwrote, and sold a synthetic CDO called Abacus 2007-AC1, did not disclose to the Moody’s analyst overseeing the rating of the CDO that a hedge fund client taking a short position in the CDO had helped to select the referenced assets, and also did not disclose that fact to other investors.
6. Using Naked Credit Default Swaps. Goldman Sachs used credit default swaps (CDS) on assets it did not own to bet against the mortgage market through single name and index CDS transactions, generating substantial revenues in the process.
So, this little mob pillaged the people — and yet they can skate off, reaping huge rewards.
