Goldman got screwed by their own trader and then fined for not supervising?  What a great job the Commodities Future Trading Commission is doing.  Protecting Goldman – but what about the F.B.I. investigating the SEC, the Fed and how Goldman and the other Bank Holding Companies, nee investment banks, concealed the lack of substance of all the so-called sub prime AAA rated debt in 2008.  And what’s up with enough swap derivatives to drown the globe?

Former Goldman Trader Surrenders to F.B.I.

Former Goldman Trader Surrenders to F.B.I.

The headquarters of Goldman Sachs in New York.Mark Lennihan/Associated Press

The headquarters of Goldman Sachs in New York.Mark Lennihan/Associated PressThe headquarters of Goldman Sachs in Manhattan.

A former Goldman Sachs trader suspected of fabricating huge positions at the bank surrendered to the F.B.I. on Wednesday morning, escalating a case that until now has produced only civil charges.

Matthew Taylor, whose trading caused unexpected losses for Goldman, is expected to plead guilty to securities fraud, according to a person briefed on the matter. Mr. Taylor, who more recently worked for Morgan Stanley, will likely admit to entering fabricated trades that concealed an $8.3 billion position….

Gee, the CFTC sanctioned Goldman for failure to supervise and charged a $1.5M fine.  But how about failing to supervise its own greed? I have a series 39 which is a principal’s license that allows me to run a minimum net capital broker dealer or be a supervisory officer in a bank like Goldman or a wire house, what is Goldman doing about contriving investments for fees, like swap derivatives without foundational value? And where does Goldman stand on the Everest sized, $700 trillion to $1.2 quadrillion mountain of worldwide swap derivatives? Who will be the scapegoat when the financial plague hits?

Guess it will not be Mary Schapiro who was careful not to ruffle too many Street feathers during her entire career before she left to represent the alleged wrong doers. And her predecessor, Mary Jo White, returned from her 12 year sojourn of being the chief litigator for one of the most prominent securities defense firms after so many successful defenses of securities fraud, will only follow in Mary’s prone footsteps as the head of the SEC.

Can you imagine anyone defrauding Goldman? What a terrible world.  Did Goldman conceal the rancid substance of trillions of bad CDOs and CMOs – or did Goldman bribe the raters with huge fees to gleefully hand out triple A ratings like jelly beans.

From How We Got Swindled by Wall Street Godfathers, Greed & Financial Darwinism ~ The 30-Year Against the American DreamCHAPTER 8: SELF-SERVING REGULATORS SERVE THE SELF-INTERESTED ULTRA RICH

“What happens when Wall Street Banks promote investing in large, securitized, blind pools of sub-prime debt termed bonds – and then add diversification and Swaps to assure investors the “bonds” are safe? And even better the bonds are rated AAA by Credit Rating Agencies to provide further validation of the prudence and safety of the Bonds! After all these safety

procedures to further affirm the safety and prudence to be obtained by investing in the Bonds, Wall Street then advertises how the risk has been quantitatively measured using the latest financial engineering tools available to reduce risk. We know what happens

First, focus on the SEC (the Securities and Exchange Commission) which is easier to understand than the complicated economic responsibilities of the Federal Reserve System (informally referred to as the Fed) whose Board of Governors is in charge of the supervision of banking, and primarily comprised of bankers and investment bankers. It gets complicated, but to follow all the conflicts is to follow the money, which is the source of motivation for all the betrayals of public trust.

Section 10(b) of the 1934 Securities Exchange Act makes it “unlawful for any person…to use or employ, in connection with the purchase of sale of any security.., any manipulative or deceptive device or contrivance or contravention of such rules and regulations as the SEC may prescribe.” 15 U.S. C. sec.78j. Rule 10b-5, which implements this provision, forbids the use, “in connection with the purchase or sale of any security, “of any device, scheme, or artifice to defraud” or any other “act, practice, or course of business” that “operates…as a fraud or deceit.” 17 CFR sec. 240. 10b-5 (2000) One of Congress’ primary objectives in passing the act was “to insure honest securities markets and thereby promote investor confidence” after the market crash of 1929. United States v. O’Hagan, 521 U.S. C. 642, 658 (1997) Further Congress wanted “…‘to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus achieve a high standard of business ethics in the securities industry.’

So far the SEC has not applied the concept of “deceptive device or contrivance” to the lack of substance of Swaps or Mortgage Backed Subprime Bonds – but it is very clear that these bonds and many Swaps were definitely securitized. It is self-evident that innovative financial products embody many of the basic elements that rule 10b-5 was designed to address, and this chapter will argue that the SEC has been more derelict in its responsibilities than anyone has imagined. The controlling issue behind financial products is that they have been manipulated to camouflage and misrepresent risk and the lack of explainable real substance….”

Fabricating and or contriving is against SEC regulations!  So what about all the derivatives that are too complex to explain, because they are fabrications.  It’s not easy to explain nothing much fabrications that are being traded in virtual markets to bet real dollars on.

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This should be must-reading for every policy maker in Washington and every student of economics and finance.”

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