Goldman, Goldman, Goldman…
Did anything happen this weekend? You sure wouldn’t know it from listening to the MSM, who have no other topic to discuss. I was contacted by over a dozen media people asking me to comment on GS’s guilt or innocence (and, big hint for those of you who like to be quoted – don’t say “how the hell should I know“) but, by far, the best analysis I read this week was Sam Antar’s analysis, where Sam says:
Goldman Sachs Makes Huge Error in After Market Response to SEC Lawsuit. Rule 10b-5 prohibits public companies, their officers, and employees from making:
…any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person….
The SEC claims that Goldman Sachs and Fabrice Tourre violated Rule 10b-5 by failing to disclose material information about Paulson’s role in selecting certain underlying mortgage securities and that Paulson was betting against the viability of those securities by taking a short position against them.
The Goldman Sachs press release starts out by saying:
…We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact.
At the very least, the SEC’s allegations are founded in law under Rule 10b-5, contrary to the company’s representation to investors in its press release. In addition, the press release misleads investors about the SEC complaint, too. Therefore, the Goldman Sachs press release may subject the company to additional Rule 10b-5 violations.
Oh what a tangled web we weave… The bottom line is that the SEC is sending a message to the financial community that business as usual will not be tolerated going forward and I urge you to read through Sam’s entire post on the subject as it’s a very good overview of the legal issue GS faces. The other big issue around GS is that the MSM seems to have a lot of trouble explaining what they did wrong.
Mostly they keep referring to a “defective car” model, comparing GS and Paulson to people who purposely sold a defective vehicle and then bet that the people who bought it would crash. Sure that’s…
