Goldman sucks

Goldman Sachs, which has survived and thrived despite countless scandals over the years, may have finally stepped in a pile of trouble too deep to escape.

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Goldman has survived many scandals in recent years. The bank paid $550 million to settle the infamous “Abacus” affair, in which Goldman helped hedge fund investors create a born-to-lose mortgage investment product to bet against.

Then they agreed to pay another $5 billion to settle claims of improper “packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities” between 2005 and 2007.

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There’s even a Donald Trump angle to this latest great financial mess, but the outlines of that subplot – in a case that has countless – remains vague. The bank itself is in the most immediate danger.

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In the 1MDB scheme [which is currently under investigation, with criminal charges filed against Goldman], actors tied to former Malaysian Prime Minister Najib Razak allegedly siphoned mountains of cash out of a state investment fund. The misrouted money went to lavish parties with celebrity guests like Alicia Keys, a $35 million jet, works by Monet and Van Gogh, property in New York, Los Angeles and London, and (ironically) the funding of the movie The Wolf of Wall Street.

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Najib lost re-election in May, ending a 61-year reign for his party. National anger over 1MDB was a major reason for his downfall. The prime minister was allegedly central to the scam, which involved luring investors to national development projects that mostly never took place.

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Malaysian authorities filed criminal charges [...] seeking a stunning $7.5 billion in reparations for the bank’s role in the scandal. Singapore authorities also announced they were expanding their own 1MDB probe to include Goldman.

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The cash for this mother of all bacchanals originally came from bonds issued by Goldman, which earned a whopping $600 million from the Malaysians. The bank charged prices for its bond issuance that analysts believe were suspiciously high – like a massage price that suggests you’re probably getting more than a massage.

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Najib was one of the first world leaders to congratulate Donald Trump on his win in 2016. At least at one time, the two men were pals. [...] Trump hosted Najib at the White House last year, thanking the soon-to-be-ousted leader for “all the investment you’ve made in the United States.”

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On November 30th of this year, the Justice Department filed a civil forfeiture suit targeting more than $73 million funneled into the country by 1MDB players. There is email evidence the money may have been intended to help influence the Trump administration to drop the case.

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[Najib's electoral loss] completely reversed the situation,” says John Pang, a former policy adviser to the prime minister’s office in Malaysia. “Before, you essentially had the victim saying there was no crime. Now, you had the Justice Department meeting with a 1MDB task force in Kuala Lumpur.”

  Matt Taibbi

All this reinforcing for Trump, being in a similar corrupt position, the fact that he can't lose office or his goose is cooked.

In addition to the Malaysian action seeking $7.5 billion, the company is facing two more class-action lawsuits filed by investors, and a significant amount of negative press.

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At year’s end, Goldman is known to be under investigation in the U.S., Singapore and Malaysia, while 1MDB probes are ongoing in at least 10 countries.

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What was in it for the bank? About $600 million in fees [...] “two hundred times the typical fee.”

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Clare Brown of the Sarawak Report, who broke many of the early stories about 1MDB, was writing about Goldman’s pricing a long time ago. In one story in 2013, she noted that when the bank earned $196 million in one transaction, that represented “around 8.8% of the issue’s total nominal value rather than the normal rates, which might be expected to amount to around 0.25%, according to traders.”

Reached by email this week, Brown said recent events only bring what was obvious some time ago into greater focus. “Basically, anyone with any knowledge of the markets and banking could see this deal was fishy as hell,” she says, adding, “What is absolutely clear is there is no way the bosses of the bank could have failed to see what a mere onlooker like myself was calling out back in 2013. They ALL HAD TO KNOW.”

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The scandal showed that all it takes is a corrupt official and a morally flexible bank office to generate billions in public losses.

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 ...but hey, do what you want...you will anyway.