Econintersect: As mentioned in another news story today, mega banks deal with management problems. There is a lack of control on entities that have been called "structurally defective." One of the issues that mega banks face is the control of information. Additionally, rare is the day when hidden information leaks from its sources. However, according to an article yesterday (15 May 2012) by Matt Taibbi of Rolling Stone, the lawyers for Goldman Sachs, without noticing, apparently, gave to the public a record of material that the company has been trying to hide for years. They have given an inside look to the bank’s darkest practices, and a debate has started around all the findings from it.
Some of the revelations from the document include a lawsuit between Bank of America/Merrill Lynch and Goldman against Overstock.com related to short selling issues. Even though short selling is not an illegal practice in some circumstances, the way the banks have been doing it gives food-for-though to those in the market. The banks, surprisingly, have been creating an imaginary supply of stock shares while manipulating stock markets with “failing” trades, in a kind of naked short selling that was actually legal (but controversial according to Taibbi) until regulations against it were implemented in 2008.
Additionally, the document highlights the bank’s position towards laws and regulations, Wall Street tactics to keep experts on their side to manipulate the stories, and the constant denigration of and damage to the “Muppets,” as some bankers disrespectfully call their customers. (See GEI News.) Arrogance, abrogation of respect for protecting clients and disregard of the law is reflected in the Taibbi report, reflected by the RollingStone.com quote of Peter Melz, president of Merrill Lynch Professional Clearing Corporation, when asked about following regulations on short sales,
"Fuck the compliance area- procedures, schmecedures"
Written by: Andrea Rangel
Sources and References:
- The complete Rolling Stone article: Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'
- Bhide: JP Morgan Structurally Defective
(GEI News, 16 May 2012)
- GS Exec: No More Ripping Eyeballs out of Muppets (GEI News, 14 March 2012)
Hat to to Roger Erickson.