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Market Oracle FREE Newsletter


Propaganda from the Mainstream Press on the SEC-Goldman Case

Politics / Mainstream Media Apr 21, 2010 - 05:08 PM GMT

By: Mike_Stathis


Best Financial Markets Analysis ArticleI want you to read an article by the Associated Press. As you will see, it was very deficient, hardly critical of the SEC and the banking fraud, and left out key issues.  

This is just another example how the media brainwashes the public. I run across this type of deceit all day every day. The article is in italics. My comments follow.  

Goldman Case Shows Power of SEC's Bully Pulpit

The Securities and Exchange Commission's fraud case against Goldman Sachs signals a new era of toughness for an agency beset by a series of public blunders.

This statement is complete bullshit. Show me the executives of the major banks in prison serving 30-year terms with no parole, and then I'll be convinced of "a new era of toughness" for the SEC.

Yet as it aims to become a tougher cop, the SEC faces a new obstacle: Banks have grown faster than the penalties the agency typically imposes. The sheer size of Goldman — whose quarterly profit just hit $3.3 billion — means court-approved penalties are likely to be too small to hurt it financially.

This is practically the only accurate statement made in the entire article.

But current and former SEC officials say penalties aren't the agency's most potent tool. The SEC's statements and actions often carry higher costs: Boards remove managements. Shareholders file their own lawsuits. Investors sell off company stock. And potential clients defect to competitors.

Bullshit. There are no "higher costs." If the SEC imposed adequate penalties to discourage fraud, it would eventually be virtually non-existent. Instead, they want you to think there are “other adverse ramifications” none of which are guaranteed and none of which will do anything.  Reading this statement makes my blood boil because it’s intended to deceive the public.  

"The weapons in the commission's arsenal are many, but the bully pulpit is unmatched," said former SEC spokesman Michael Robinson. "Once the SEC makes an announcement, the dominoes start to fall." 

Bullshit. What bully pulpit? Does anyone ever go to jail? NO. Because the SEC cannot impose a criminal indictment and they do very little to get the Department of Justice to pursue criminal indictments. Even Michael Milken, the criminal that extorted a couple of billion dollars (along with his buddy, Ivan Boesky) during the Savings and Loan Crisis, spent three years in club fed, only to return to $500 million of money he stole. To this day, Forbes lists him as a philanthropist and never mentions his role in the S&L Crisis.

Already, the potential costs to Goldman are piling up. Britain's Financial Services Authority said Tuesday it will investigate Goldman Sachs International, an overseas subsidiary. And German regulator BaFin will ask the SEC for information as it considers bringing its own charges, Germany's Welt am Sonntag newspaper reported, quoting a spokesman for Chancellor Angela Merkel.

Bullshit. This is all hot air. When you factor in the billions Goldman stole (and it could easily surpass $100 billion over the past 5 years in profits and avoidance of losses) a few billion dollars in penalties serves as NO detriment for continued fraud. It’s business as usual on Wall Street. Moral hazard is the name of the game for these crooks.

Still, there appears to be little concern about Goldman's long-term health. Credit Suisse analysts still say they think Goldman will continue to outperform the financial sector, they wrote in a research note Monday. They wrote that any financial penalties for the firm would likely be "very manageable relative to Goldman's income generation."

Of course. They are criminals and they have bought off all the top government officials, including Obama.

Still, SEC enforcement chief Robert Khuzami said the fear of fallout from SEC charges will deter securities firms from breaking financial laws. And he argued that financial penalties also play an important role in cases like the one against Goldman.

Bullshit. Based upon this statement, Khuzami is either a bold-faced liar or a complete idiot. Even the reporter notes at the beginning of the articles that the penalties are far too small to make an impact. How in the Hell are these penalties going to deter fraud?   

"Financial penalties are critical because they add some sting to a sanction," Khuzami said in an interview with The Associated Press. The ripple effects of the penalties also can hurt by, for example, leading shareholders to question management's conduct.

Bullshit. More of the same bogus claims. Hey Khuzami. Wake up. Impose an adequate penalty instead of relying on delusions of shareholder justice.

When it comes to financial penalties, "bigger isn't necessarily better," Khuzami said. The government doesn't want to impose fines so large that they would hurt shareholders, he said.

Bullshit. That’s like saying when it comes to profits bigger isn’t necessarily better. Why would Khuzami be more concerned about protecting Goldman shareholders than fighting for the shareholders hurt by the bank's fraud? Goldman shareholders deserve to be hurt, as would any shareholders who invested in a company that engaged in fraud. Goldman stole its profits. Shareholders need to pay the price.  What kind of mentality does Khuzami have?  It sounds to me like he has friends and relatives who own shares of Goldman. Khuzami is obviously a front man for Wall Street and Goldman Sachs.

Khuzami, I demand your resignation immediately. You are just another bought-off jackel for Wall Street.

Since joining the agency a year ago, Khuzami has led the SEC's drive to toughen its stance on Wall Street. He pointed to a range of new initiatives. They include grouping lawyers by subject area so they can develop expertise, new policies for working with whistleblowers, clearing the way for faster subpoenas and assessing division performance through standardized metrics.

Bullshit. This is completely false. They have made these claims but I know for a fact its just rhetoric. The SEC certainly has not provided me with these new policies despite several calls I’ve made. They kept dodging the bullet. And they certainly have made no efforts to contact me despite my offer of assistance.

The enforcement push follows a series of embarrassing failures of oversight for the agency before Khuzami and SEC Chairman Mary Schapiro. They included Bernard Madoff's Ponzi scheme and the one allegedly run by jailed Texas financier R. Allen Stanford.

Bullshit. These are small cases when compared to the fraud that has not been caught. Where is mention of the fraud committed by the banking executives?  Why is there no mention by the AP reporter of the securities fraud committed by Dimon, Lewis, Blankfein, Cayne, Fuld, Mozilo, Thain, Killinger and the others?? They should all be in prison. 

That argument was bolstered by the revelation that SEC commissioners approved the charges against Goldman on a 3-2 vote, along party lines, with both Republicans opposing them.

This tells you where republicans stand on Wall Street fraud. It’s okay as far as they’re concerned. Not that democrats are any better, as this is merely a political game. Both parties are the same. The democrats have their own brand of fraud they endorse. This serves as a good indicator that the charges against Goldman are political in nature. Make no mistake. Goldman committed securities fraud, as did hundreds of other financial institutions. But so did Paulson. Yet, he was left out of the charges.

The only reason the SEC is going after Goldman is because the White House wants to recoup some credibility for holding those committing fraud accountable. Sorry but even if the SEC wins, a $1 billion or $2 billion fine is hardly holding criminals accountable for vaporizing the retirement savings and stripping the homes and jobs from millions of Americans.

But former officials from both parties agreed that the SEC would not have brought charges if agency employees weren't confident they could win in court.

Yea, I was told the same thing by the SEC, and I laughed. The only problem is that the SEC has lost many much smaller cases which were much easier to prove. And just because you think you can do something doesn’t mean you can, and that assumes they really want to win, which I am not convinced. The SEC does not know its limitations.

Regardless, even if the SEC wins, it won’t make a bit of difference. The criminals must be sent to prison for a very long time. That includes Paulson. And that includes the executives of all major banks.

Of course that would never occur even if Hell froze over. 

Perhaps the most unfortunate aspect of the story is that the public will buy into the propaganda that the SEC is changing. 

Let me assure you that the SEC will bring about as much change as Obama has. I documented the problems with the SEC in America's Financial Apocalypse while none of the so-called experts even brought up the topic. That should point to my insight in this issue.  Unlike all others, I am by means no "Johnnie come lately."


By Mike Stathis

Copyright © 2009. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

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