HIDING IN PLAIN SIGHT: BLANKFEIN AND GOLDMAN SACHS

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

EDITOR’S NOTE: Most of the jurors had never heard of Blankfein. Lloyd Blankfein, head of Goldman Sachs, is not recognized by name or face. Somehow, despite years of publicity in which the role of Goldman Sachs with Blankfein at the head of it, most people don’t under stand the connection between the illicit activities of “government” Sachs, who has more people in government allegedly regulating themselves than any other megabank. The simple reason is that in their daily struggle to stay alive people don’t have time to get into the details of who, what, where and when.

And THAT is why this crisis continues. The megabanks are counting on it. And so far they are right. Left out of the digital version of this article but written in the print version is that the jury had no idea who Blankfein was, or what he and Goldman Sachs did. No connection existed in the minds of jurors between Blankfein and the financial crisis that is toppling government and societies in a domino effect all over the world.

That is why this blog exists and that is why you should carry and forward its message to everyone you know. Taxes, utilities and other services provided by state and local governments are going up because of the trick that was called securitization — where the money was safe and sound and then converted into nothing.

Blankfein Describes Financial Crisis Board Meetings at Galleon Trial

By PETER LATTMAN and AZAM AHMED
Charles Dharapak/Associated Press Lloyd Blankfein, the chief executive of Goldman Sachs.

2:00 p.m. | Updated

A prosecutor in the insider-trading trial of Raj Rajaratnam on Wednesday asked Lloyd C. Blankfein, the chief executive of Goldman Sachs, about the financial crisis — without either ever uttering the phrase “financial crisis.”

Before Mr. Blankfein’s testimony, prosecutors had expressed concern that testimony about the financial crisis could unfairly prejudice the jury against Mr. Blankfein.

In his testimony on Wednesday, Mr. Blankfein described September 2008 as “a volatile period in the market,” saying that it was “a dangerous time” that “made us nervous.”

There was also “riskiness” and a “general insecurity,” he said.

The Goldman chief executive described the two board meetings that took place during that period. Rajat K. Gupta, a former Goldman board member, is accused by the Securities and Exchange Commission of providing Mr. Rajaratnam, a co-founder of the Galleon Group hedge fund, with information about the two meetings.

Mr. Blankfein explained to the jury that during the first meeting, on Sept. 23, 2008, Goldman discussed Warren E. Buffett’s $5 billion investment in the bank, which was announced hours later. He told the jury of Mr. Buffett’s reputation as “a shrewd and successful investor” and that the news would “send a very positive sign to the market.”

“Was the Buffett announcement good news or bad news for Goldman?” asked the prosecutor, Andrew Michaelson.

“Good news,” Mr. Blankfein replied.

“Big news or small news?”

“Big news.”

The S.E.C. says that Mr. Gupta called Mr. Rajaratnam and told him about the Buffett investment before it was announced to the public.

The next board meeting discussed was on Oct. 23, 2008, when Mr. Blankfein told the board that the bank’s performance was exceptionally weak and was on track to post its first quarterly loss as a public company. The prosecutor asked Mr. Blankfein what was happening in October 2008.

“We were losing money,” Mr. Blankfein said.

“What was the significance of that?” Mr. Michaelson said.

“We generally make money,” said Mr. Blankfein, breaking into a big smile.

Before lunch broke, John Dowd, the lawyer for Mr. Rajaratnam, had Mr. Blankfein for about an hour of cross-examination.

“I’ll try not to keep you for too long. I know you’re busy and have a heavy schedule,” Mr. Dowd said. “But I have a few questions.”

Mr. Dowd spent the first part of his cross-examination asking Mr. Blankfein about Mr. Gupta, the former Goldman director. Mr. Blankfein acknowledged that Mr. Gupta, the former managing director of McKinsey & Company, was an accomplished and highly regarded business executive.

“He was a valuable board member?” Mr. Dowd asked.

“Subject to only what’s in contention here, yes,” Mr. Blankfein responded.

Mr. Blankfein, dressed in a dark suit and royal blue tie, is the most prominent and most anticipated government witness in the trial. Mr. Rajaratnam is fighting securities fraud and conspiracy charges that he made $45 million in illegal profit trading more than 30 stocks.

Earlier on Wednesday, prosecutors asked Mr. Blankfein whether Mr. Gupta violated the bank’s confidentiality policy when he spoke with Mr. Rajaratnam during a secretly recorded phone conversation in July of 2008.

“Ah … yes,” the chief executive said.

Before playing the call between Mr. Gupta and Mr. Rajaratnam, prosecutors had Mr. Blankfein walk jurors through a Goldman Sachs 101 course. He described for them the company’s various businesses, his role as chief executive and even the definition of P.&L. (profit and loss, which Mr. Blankfein checks almost every day).

Mr. Blankfein told jurors he grew up in Brooklyn and attended Thomas Jefferson High School there. Left unmentioned was that he also attended Harvard University for his undergraduate and law degrees.

The government played for the second time segments of a July 29, 2008, call between Mr. Gupta and Mr. Rajaratnam. The two men are heard on a recording of that conversation going over strategy discussions during a Goldman Sachs board meeting.

During the call, Mr. Rajaratnam asked him about a rumor that Goldman “might look to buy a commercial bank,” like Wachovia.

“Yeah. This was a big discussion at the board meeting,” Mr. Gupta said. “And you know it was a uh, divided discussion in the board.”

At different points, the prosecutor, Mr. Michaelson, stopped the tape to ask Mr. Blankfein whether the subject matter of the call was indeed discussed at the board meeting and whether the content confidential.

For the most part, Mr. Blankfein responded with one-word answers, typically “yes.”

The Galleon networkAzam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network

As he listened to the recording, Mr. Blankfein alternated between leaning back in his seat and hunching forward with his fist pressed against his mouth. When asked whether Mr. Gupta had violated his agreement with Goldman Sachs as a board member, Mr. Blankfein replied: “My sense of it, yes.”

Generally speaking, Mr. Blankfein said that communications with respect to Goldman among board members were meant to be confidential.

Before Mr. Blankfein took the stand, prosecutors continued their questioning of a former Intel executive, Rajiv Goel, a close friend of Mr. Rajaratnam’s who has pleaded guilty to leaking information about his former employer to Mr. Rajaratnam.

During the Fourth of July holiday in 2007, Mr. Goel’s and Mr. Rajaratnam’s family went on vacation in the south of France. Around that time, Mr. Goel said that Mr. Rajaratnam “mentioned that he was either going to make me a lot of money or had made me a lot of money.”

How? By executing trades on Mr. Goel’s behalf in Hilton stock before the company announced on late July 3, 2007, that it was being acquired by the Blackstone Group, according to prosecutors.

Prosecutors flashed two exhibits before jurors that showed Mr. Goel’s personal Charles Schwab account. One showed the purchase of 7,500 shares in Hilton for $264,284, before the company’s announcement. Mr. Goel said that those purchases were either made by Mr. Rajaratnam or someone working at his behest.

The next exhibit showed the sale of those same shares three days later for $342,905, after the stock price of Hilton shot up following the announcement.

Mr. Goel said he thanked Mr. Rajaratnam afterward, as the profit was “a very large amount by my standards.”

But he was struck by something the prosecution alluded to in earlier testimony regarding Mr. Rajaratnam’s trading, which was typically focused on companies in the technology and health care sectors: “I found it a little strange that it was not a technology or health care stock.”

5 Responses

  1. “The simple reason is that in their daily struggle to stay alive people don’t have time to get into the details of who, what, where and when.”

    This is all part of their grand design to keep us all as competative as slaves and as useful to them as livestock. The only way they are able to divise these Labyrinth size games of Mouse Trap is because they have the time and resources that everyone else doesn’t. Despite what they may think or the blasphemous slogans they advertise THEY ARE NOT GODS.

  2. A good Bankster is a Jailed Bankster.

  3. MERS Tells Servicers to Stop Foreclosing in Their Name
    By: David Dayen Thursday February 17, 2011 7:04 am

    Since MERS is owned by the big banks, this has the effect of MERS telling itself to stop existing. But it’s quite significant. In a memo to its members (the member banks who own it), MERS announces that their name should essentially be taken out of all foreclosure operations. Over the past several months, the inclusion of MERS in foreclosure documents, despite not having a material stake in the loan, has generated multiple lawsuits, many of which showed that MERS cannot foreclose, including a recent case in bankruptcy court in New York. That may have been the tipping point. Here’s the relevant language in the release:

    1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.

    2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS’ name before initiating foreclosure proceedings. Assignments out of MERS’ name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).

    You may recall that the MERS “Certifying Officer” is really just an employee at one of the member banks who MERS magically turns into a certifying officer whenever asked. They have over 20,000 certifying officers despite having a skeleton staff, and none of those certifying officers get any compensation or benefits from MERS. The memo details a new method for appointing a certifying officer to pull off these assignments out of MERS’ name, and promises new safeguards on that policy. They also tell members in the memo to “ensure the accuracy of the information” in the foreclosure documentation they use (good luck with that), and to conduct a review of its employees who have been designated as certifying officers, ensuring that they have the proper training to carry out responsibilities.

    This essentially gets MERS out of the foreclosure business. It has been ruled that they lack standing to foreclose one too many times. So there’s this attempt to after-the-fact get MERS out of the process by assigning mortgages out of MERS’ name – and paying the recording fee – to essentially allow for a quick exit.

    But I don’t know if this does anything, outside of provide a small boost in recording fees to local governments, to clean up MERS’ legal problems. As Barry Ritholtz notes:

    Keep in mind, that MERS has always been a legal fiction, simultaneously principle and agent. The courts are increasingly recognizing this, and finding they do not have any standing to bring foreclosure actions […]

    I expect we will continue to see a ongoing reduction in the role of MERS over the next several quarters.

    What follows will either be its eventual dissolution, and replacement with a legal entity — or retroactive legislation making its reckless illegality somehow legal. Watch Congress closely for signs they are rolling over for this.

    Indeed.

  4. The Wolf in sheeps clothing.Imagine that!!

Leave a Reply

%d bloggers like this: