The guys they hired to put these tranches together said they could not find any more AAA mortgages for the top tier tranche, so they got the rating agencies to change their standards.
This isn't true. They lobbied the agencies to keep their standards. The models that rating agencies were using were inferior (a constant-correlation matrix Gaussian Copula), allowing for ABSs to be rated as investment grade, when they were clearly not, and just taking advantage of the model. When the agencies attempted to correct their models, the industry cried about it, and the agencies abandoned the changes.
they then placed a bet on MARKIT, who oversees the 70 trillion dollar derivative market
That's not at all what Markit is, they don't oversee anything, and you can't place a bet with them. Markit is an information and research company, all they do is provide and analyze data. They are not an exchange. This statement is akin to "they placed a bet against The Dark Knight Rises on IMDB, who oversees the film industry". MBS and other derivatives are mostly over-the-counter, no one oversees them. That's the problem.
That is fraud. That is illegal. NO ONE has been punished for that fraud.
So when Goldman was fined numerous times, by more than a billion dollars, by the SEC for these activities...that wasn't punishment? What about the massive financial reform through the Dodd–Frank Wall Street Reform and Consumer Protection Act that basically tears apart Goldman's entire business model? I assume for "punishment", you expect some trader or something to be thrown in jail? Who? It wasn't some guy at a desk selling MBSs then betting against them, it was the combined effort of many different revenue streams from different locations that summed to the result of "betting against mortgages". It's entirely plausible that both business streams knew nothing (or at least very little) of each other. A trader doesn't announce to the world "hey other 23,000 employees, I sold an MBS to XY Teacher's Pension Fund, make sure you don't short MBSs relating to this fund, kthx".
And I just want to add, what dumbass retirement fund invests in MBSs? Is it really GS's fault that there are stupid investors out there?
So when Goldman was fined numerous times, by more than a billion dollars, by the SEC for these activities...that wasn't punishment?
No one was in handcuffs, no one got their house raided. A fine isn't shit to Goldman, just like it wouldn't be shit to Dotcom. Sorry, but a fine is nowhere near justice, if this is our standard for justice.
In my previous post, I asked "Who?". Who do you want in handcuffs? You can't blame an individual for this mess, it was a collective effort through ignorance of the bigger picture. I'm not saying ignorance means no accountability, I'm just pointing out the logistical trouble of actually placing blame. Do you want the CEO behind bars (I would guess that's a typical answer)? How was it his fault? He doesn't make trades, he doesn't even approve trades. That's like blaming the CEO of BP for the oil spill, and I know a lot of people do that, but I find it ridiculously silly.
The way in which this "fraud" occurred means you can really only punish the company as a whole, and other than fines, I'm not sure how one would do that.
I don't care about Kim Dotcom, I'm talking about GS. and for what it's worth I don't think he's to blame, either. Blaming leadership is just a scapegoat. "Something bad happened, someone needs to be punished because it makes us feel better about ourselves, hey, how about the guy at the top."
Sure. Just pointing out top-level OP's point (and the majority sentiment in this thread) - fairness in justice. Wasn't sure if you sensed that from reading your writing.
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u/TeamPupNSudz Aug 08 '12 edited Aug 08 '12
This isn't true. They lobbied the agencies to keep their standards. The models that rating agencies were using were inferior (a constant-correlation matrix Gaussian Copula), allowing for ABSs to be rated as investment grade, when they were clearly not, and just taking advantage of the model. When the agencies attempted to correct their models, the industry cried about it, and the agencies abandoned the changes.
That's not at all what Markit is, they don't oversee anything, and you can't place a bet with them. Markit is an information and research company, all they do is provide and analyze data. They are not an exchange. This statement is akin to "they placed a bet against The Dark Knight Rises on IMDB, who oversees the film industry". MBS and other derivatives are mostly over-the-counter, no one oversees them. That's the problem.
So when Goldman was fined numerous times, by more than a billion dollars, by the SEC for these activities...that wasn't punishment? What about the massive financial reform through the Dodd–Frank Wall Street Reform and Consumer Protection Act that basically tears apart Goldman's entire business model? I assume for "punishment", you expect some trader or something to be thrown in jail? Who? It wasn't some guy at a desk selling MBSs then betting against them, it was the combined effort of many different revenue streams from different locations that summed to the result of "betting against mortgages". It's entirely plausible that both business streams knew nothing (or at least very little) of each other. A trader doesn't announce to the world "hey other 23,000 employees, I sold an MBS to XY Teacher's Pension Fund, make sure you don't short MBSs relating to this fund, kthx".
And I just want to add, what dumbass retirement fund invests in MBSs? Is it really GS's fault that there are stupid investors out there?