Goldman Sachs Group [GS] is raising money for a new fund that will buy home-loan bonds and, it hopes, benefit from an improving real-estate market, according to Bloomberg. My initial reaction is: this is insane.
The firm should at least have the common sense and decency to stay quiet, having helped cause the housing market meltdown. Now it is positioning itself to profit from the housing recovery? How is this possible?
Consider the following:
On April 28, 2003, every major U.S. investment bank was found to have aided and abetted efforts to defraud investors. The firms were fined a total of $1.4 billion dollars by the SEC, triggering the creation of a Global Research Analyst Settlement Fund. Goldman Sachs, specifically, was found to have "issued certain research reports for companies that were not based on principles of fair dealing and good faith and did not provide a sound basis for evaluating facts, contained exaggerated or unwarranted claims about these companies, and/or contained opinions for which there was no reasonable basis." The firm was fined $110 million dollars.
On September 4, 2003, Goldman Sachs admitted that it had violated anti-fraud laws. Specifically, the firm misused material, nonpublic information that the U.S. Treasury would suspend issuance of the 30-year bond. The firm agreed to pay over $9.3 million in penalties.
On January 25, 2005, the SEC announced "the filing in federal district court of separate settled civil injunctive actions against Morgan Stanley & Co. Incorporated (Morgan Stanley) and Goldman, Sachs & Co. (Goldman Sachs) relating to the firms' allocations of stock to institutional customers in initial public offerings (IPOs) underwritten by the firms during 1999 and 2000."
On July 15, 2010, the SEC announced that "Goldman, Sachs & Co. will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse. In agreeing to the SEC's largest-ever penalty paid by a Wall Street firm, Goldman also acknowledged that its marketing materials for the subprime product contained incomplete information."
Goldman has a history of saying one thing and doing another. On June 22, 2007, Goldman Sachs launched the GS Sustain Focus List, a list of investments selected, in part, because of their corporate governance. Yet, the behavior above suggests Goldman would not be eligible for inclusion in its own list of "socially responsible companies."
On September 21, 2008, the Federal Reserve Board approved, pending a wholly immaterial and irrelevant five-day antitrust waiting period, the application of Goldman Sachs to become a bank holding company. By so doing, the Fed allowed Goldman access to the discount window, access the bank promptly took advantage of to the tune of $2 trillion dollars. That's two trillion in public funding, while engaging in actions that are diametrically opposed to the public interest. How obscene.
Now they are starting a fund, financed by "Muppets," to kick widows and orphans to the curb, probably using techniques they picked up from Litton Loan Servicing, a loan processor Goldman purchased in 2007 and sold in 2011. Litton is one of the mortgage-servicing businesses under investigation by 50 state attorneys general for seizing homes illegally, using corrupt procedures.
God's work, indeed.
Again, how is this even remotely possible and why is there not a socially responsible residential real estate fund?
William Michael Cunningham is a social investment adviser at Creative Investment Research Inc.