Re: From Crisis 2007 Banks' Criminal Indictments to Weiner – Alleged Lies, Honesty, Perjury and Fraud
Author: Uri Praiss, Attorney at law (Israel, since 1990)
Law & Economics lecturer
I believe neither Perjury nor Lies are the Issues on 2007's Crisis or any other Criminal or S.E.C. Investigations. It is just a distractive topic. It can lead us, even spin-deliberately, to a "dead-end-back-street-alley". The same is true on general and even for those piping and gossipy Weiner's chats. More important to know what those suspects did, than how they tried to cover up later. Lies are almost self-defense. We are already highly distracted by Wealth, Beauty, clothes, accent, calculation and spelling mistakes. Give us the substance, the raw facts and documents, with the unpleasant uncertainty.
Andrew ("Too Big to Fail") Sorkin and many others ask lately (Sorkin, N.Y.T., June 7th) whether it is possible that "Lloyd C. Blankfein, Goldman Sachs’s chief executive, could have perjured himself — as Senator Carl Levin has suggested — when he testified last year in front of the Senate’s Permanent Subcommittee on Investigations.
According to Sorkin, "Blankfein declared (actually read, what sounds clearly, I believe, as some brilliant expensive lawyers helped him defining, dealing with some tough questions about Paulson and "The Big Short", see below–U.P.) – "I didn't have sex with this woman", sorry, “We didn’t have a massive short against the housing market” as well as saying that "the firm was
As I understood (saw and heard on T.V.) at least Sen. Carl Levin and Matt Taibbi do not believe him. Sorkin's report starts with the words "The vampire squid haters won’t like this column." (if any American missed it, this is Taibbi's nickname for GS, which became very popular, on daily sad jokes, frequently shortened to "Squid", with some matching pictures. I'll save here the full Taibbi's definition)
Further Sorkin explains why "I (Sorkin) have come to a different and perhaps unsatisfying conclusion for those readers looking for a big scalp: Mr. Blankfein wasn’t lying."
Few days later, on June 10th Francine McKenna sharpened on Forbes: "Goldman Sachs Executives May Have Lied But Not About Anything “Massive”
Both of them attached some matching pictures as well:
On the other hand, John Carney, C.N.B.C., on "Goldman Stung by its own Secrecy", June 6th, adds that "The report (Levin's Committee) claimed that Goldman was "net short"—that is, positioned to profit from a decline in mortgages—in 2007. Several internal documents submitted by Goldman support that position.
For instance, here's a quote from one document prepared by risk managers of Goldman Sachs explaining the firm's position, apparently to the firm's tax department:
"A quick word on our own market and credit risk performance in this regard. In market risk - you saw in our 2nd and 3rd qtr results that we made money despite our inherently long cash positions.—because starting early in '07 our mortgage trading desk started putting on big short positions, mostly using the ABX index, which is a family of indices designed to replicate cash bonds. And did so in enough quantity that we were net short, and made money (substantial $$ in the 3rd quarter) as the subprime market weakened. (This remains our position today)"
There are lots of other instances of people inside of Goldman insisting that the firm was "net short"."
During the S.E.C.’s investigation we first met this secret "Investment" banking code – "L.D.L." When Fabrice Tourre defined (by e-mail) those mortgage "investments" ("bombs") as “a way to distribute junk that nobody was dumb enough to take first time around”, to his team-mate, one Jonathan Egol, Before the manipulative criminal "Big Short", coordinated with Rating companies' downgrade, he was answered at once: “LDL.”("Shut Up!!" in French). Usually security rules of GS are stricter than an Iranian Nuclear Station. Young Tourre wrote and talked a lot. I wonder how come N.Y.A.G. and N.Y.D.A. haven't started interrogating and negotiating Tourre, as a start.
So maybe the "Massive Short Positions" were in favor of "The Firm"' (NYSE:GS) Nostro, whatever, and dear Alibi-"Client"-Partner-Paulson (by the way, watch them in an interesting and very suspicious Disclosure Multi-Fight on the late, for now, Lehman Bros.'s "Inheritance", at Bankruptcy Court. I bet we can find some amazing Skeletons and Corpses there, excuse me)
On the other (bloody) hand, "The Criminal Triangle" - "Insider Trade –Manipulation-Fraud" was to "distribute junk that nobody was dumb enough to take first time around", meaning "Clients" (not dear Paulson and "The Firm").
It is much more criminal than "Bet against their clients" or "Lie to their Clients", as good old Levin called these facts. "The Big Short" is a Multi-$ Billions-Fraud that caused a Multi-$Trillions-Economic Loss. That is only the last Satanic episode. First they created and "distributed" the "double-loans bombs" and Fraud "securities", trafficked viciously across the U.S. and the Globe.
Other e-mails attached by April 13th Levin Report, were the bankers' urgent and tough "negotiations" (I call it a fatal threat) with the Rating Agencies, Moody's and S&P, to postpone the date of "The Big Short" – "The Re-scale or Downgrade Day".
Senators' Carl Levin - Tom Coburn Committee Filed their 635 pages comprehensive final report and thousands of attached documents, Testimonies etc., of 2007 Financial disaster, where GS and Mr. B. are leading actors. The respectable Committee sent just a few weeks ago its severe report to D.O.J., N.Y.A.G. and S.E.C., recommending many examinations and investigations of events and conclusions (I think they should've written "Indictments") as follows:
"The Report concludes that the most immediate cause of the financial crisis was the July 2007 mass ratings downgrades by Moody’s and Standard & Poor’s that exposed the risky nature of mortgage-related investments that, just months before, the same firms had deemed to be as safe as Treasury bills. The result was a collapse in the value of mortgage related securities that devastated investors. Internal emails show that credit rating agency personnel knew their ratings would not “hold” and delayed imposing tougher ratings criteria to “massage the … numbers to preserve market share.” Even after they finally adjusted their risk models to reflect the higher risk mortgages being issued, the firms often failed to apply the revised models to existing securities, and helped investment banks rush risky investments to market before tougher rating criteria took effect. They also continued to pull in lucrative fees of up to $135,000 to rate a mortgage backed security and up to $750,000 to rate a collateralized debt obligation (CDO) – fees that might have been lost if they angered issuers by providing lower ratings. The mass rating downgrades they finally initiated were not an effort to come clean, but were necessitated by skyrocketing mortgage delinquencies and securities plummeting in value. In the end, over 90% of the AAA ratings given to mortgage-backed securities in 2006 and 2007 were downgraded to junk status, including 75 out of 75 AAA-rated Long Beach securities issued in 2006. When sound credit ratings conflicted with collecting profitable fees, credit rating agencies chose the fees."
Legal Tools Exist. This is the "Tip of the Iceberg". N.Y.A.G., N.Y.D.A., S.E.C, F.B.I. and Police, can, at last, Investigate, interrogate separately, confront and arrest, yes, definitely. They respected the Senate Investigation, and waited. There is a need for some special team – tons of documents, disinformation, spins. Levin's Committee issued a very professional public report, a compass and basic conclusions. They do not have police's and S.E.C. tools. That is a good start. Levin deserves a medal.
It is not a matter of Perjury or lies at all. The real issues are Manipulations, Insider Trade and Fraud, that caused $ Trillions of loss and waste, millions of homeless, jobless and hopeless families, for these greedy Bombs'-1st & 2nd Loans'-Securities' Manipulative Fraud.
Rajaratnam's Insider Trade did not cause almost any victim any damage. We just envy. This is also a back-street-gossip-alley. He was not an Insider, maybe neither the bankers-traders all along the stairway to hell – from the "Explosive Loans" to "The Big Short". It is all Inside Trade, but look at the horrible "Industrial Scam" and unbelievable damages. How dare this Dimon to interrupt Bernanke's efforts. Jamie is sweating. He saw what happened live to DSK.
Perjury Indictments are very rare, for good reasons. Sorry to say but after practicing Law as an active Attorney for 21 years, and serving 2 Supreme Court's Chief Justices, I've seen some research lately that affirmed my learned guess: "Everybody lies everyday, some even all day long."
It doesn't really matter (another dead-end-back-street-alley) if it is a "Massive" or Skinny lie, neither the legally used Dichotomy of "Active" or "Passive" lie (or behaviors in general). Some concealment, cover up or spin of facts can be a Mega-Mass-Fraud or even deadly. I don't think it is getting us anywhere (alley, etc) to talk about a "White", "Black", "Yellow", "Small" or big lie.
I don't want to judge, tag, decide or find any lie. Many times I prefer to stay with my healthy and painful uncertainty. Professionally I might tell my client: "Don't tell me anything, otherwise it might sabotage our defense. Just answer my questions." But sometimes I must warn him: "I need to know this and that. It is safe and privileged. A lie on that matter can kill our case in court."
So don't take yourself or anybody else too seriously. It is scientific. "Homo Economicus" is a Rational, more or less (see below), Utility Maximizer by definition. He always tends, built in, to tell you, conceal and spin anything that serve his conscientious, sub-conscientious, illusional or delusional utility, not the truth at all.
That is why I am very suspicious towards any fish or other, waiter's (not to mention trader-banker-advisor-or-any) recommendation. I might lie when you ask me "How are you" or what I really think about your new hair cut. To be honest with myself is even harder, but more basic.
By Law, the accused can plea "Not guilty" even if 2 minutes later he admit or proved guilty. That is not Perjury. Constitutional rights, Privileges (as against self-incrimination) and practical common-sense Judicial Policies, make Perjury Indictment almost theoretic.
Experienced and/or wise judges might know, you cannot be sure if this fluent, charming and learned $ 10,000 suit lies, conceal or spin, and the other confused sweating bum tells the peculiar real truth.
Even theatrical Anglo - American Cross – examinations lost their importance, follows Continental (European) Judicial system. Most important and fruitful witnesses might lie somewhere, few times. That is life. "Hard cases make bad Law". We just want to try to understand what really happened, what shouldn't be legal and try to deter the next financial greed crisis.
It is already here. Watch algorithmic HFT daily net $ Hundreds of Millions net trade profit Manipulations, learned pessimistic fears and some "Flash Crash". Lately we've become aware (and panicked) of "Splash Crash" as well. S.E.C. and Exchanged are put to deep sleep, for too many years, by the Robber Barons.
So $10 Million fine for those "Research Huddles" faked cover for Criminal heavy daily Insider Trade and Anti – Trust (cartelistic) Securities Manipulations, as well as other S.E.C. and states cheap deals tickle Trading –"Investment Banks" to laugh. It is not about lies or Semi – Ethics. Prison sentences might work, even for Royal Robber Barons and Huns, "Jamie and Lloyds".
We can be used, tricked and bored to death with this "Frank-Dodd"'s Muppets Show. Only total Separation (including ownership) between Banks, Trade, "Investments", Advisors, Underwriting, IPO's, etc. Overhaul revolution of S.E.C. and Exchanges is needed urgently. Those were the main lessons of The Great Depression. Even Martin Act, 1921 was forgotten. It is not a matter of Perjury or lies, neither any of many other spins.
Uri Praiss, Attorney at law
Law & Economics Lecturer