The Fourteenth Banker Blog

July 2, 2010

Goldman FCIC Hearing – “Just Take The Fifth”

Filed under: Running Commentary — thefourteenthbanker @ 7:24 AM

Given my rant yesterday concerning the Goldman hearing at the FCIC, I am obligated to present you two more thorough analysis of the same exchange.   Each arrives at somewhat different conclusions but both are supportive of the idea that Goldman is using its superior knowledge and cleverness to attempt to outsmart and defeat the FCIC. They view it as an adversarial proceeding and do not want the Commission to understand the details of the transactions and therefore have some input on how they might be regulated.  Further, they are obfuscating to prevent data which might be used in civil or criminal trials from coming out.  That is my opinion and is based on my understanding of the culture of such organizations, not on intimate knowledge of the specific facts of these matters.

Naked Capitalism Post Zero Hedge Post


  1. Testimony before any government agency , civil or criminal, is adversarial. The Commission wants what Goldman does not want to give. What the system demands should be forceably given. At the end of it all Viniar said derivatives were 10 % of the business and others think the reverse. Choosing to allocate what the trader did by the trader at the close of business each day must count as persuasive in any adversarial proceeding. So, just why would David Viniar expose himself to criminal sanctions personally? If he did so choose he must have taken into account that people like Yves would find evidence available to the public to discredit him. If not, there are serious delusions of insulation from attack. That, or this is a dog and pony show that will pass and Viniar knows it.

    Under these circumstances what would GS do if Viniar had told GS people he intended to take the fifth for his own protection criminally? Ostensibly, no crime was committed here if all that can be pinned on Viniar is an allegation of perjury. If there is criminality, a’priori then he is fully justified in taking the fifth in earnest other than as a safety precaution. Safety first.The Feds can manufacture all kinds of spurious allegations to force people to rat out their compatriots and do so. Consequently, the fifth is a defensive device even if you were not part of criminality. That is, if you have direct experience in the real world of dealing with state minions.

    Jeff Skilling learned the hard way. Shut up. Say nothing. Ask for a mouthpiece. Of course, all this puts GS on the spot in terms of civil actions.

    These guys want to rule the global empire and apparently do not have the smarts of a savvy street hood. Methinks they cannot abide the notion of being fancy street hoods.

    The use of a derivative is a methodology of executing business revenue generation. The subject of the derivative generates the revenue. It is not the business. It would be the same as characterizing auto agency revenues as cash and credit rather than new cars, used cars, shops and financing. So, Viniar is correct that he is not in the derivatives business and might be akin to me saying 10% of auto agency ops is finance even though 95 % of revenues are non cash settled. Now someone in his position should know that the adversary will twist and cheat everything he says to use it as their advantage. In this case, taking all the circumstances into account the past three years every utterance will be twisted into perjury on his part.

    Comment by Jerry J — July 2, 2010 @ 1:06 PM | Reply

  2. The internet can be utterly hilarious. Today, Alexander Cockburn has a piece on Counterpunch about the Russian Spies. He illustrates his point with the observation that Alexander Hamilton tried mightily to get George Washington to set up a spy organization to steal British Patents. Here we have a ” commission” of truth and vigilence for the “people” that is an adjunct of a state with a vast spy program. They practice ” Deceit” that former Demos Minion William Black correctly accuses the Wall Street crooks of practicing. Two sets of hoods in action? It is somehow pure and noble for the state of Demos to practice deceit as matter of course. Something utterly necessary to survival of Demos. Yet, the citizens of Demos owe absolute fealty to simple truth , no complex truth allowed, or the Demos imprisons you. I find that to be very funny. The hypocrisy of righteousness knows no bounds. The illustrious mendacity that so amused Faulkner too. What would be Socrates bemused views on the American Demos today? Would he be light years funnier than even George Carlin? Tin Men all? Liars against liars on behalf of liars? Surely, Mr. Viniar must understand the reality. And do so seemingly stupid a lie at that?

    Comment by Jerry J — July 2, 2010 @ 2:16 PM | Reply

  3. 14th banker. Take a look at a piece on Business Insider titled ” A visual look at how BP Could Bring Down Large Parts of the Economy”. It is a distillation of a linked piece by a Gordon Long that looks to be informative. The upshot is that BP is the king of swaps and a bankruptcy filing would trigger a few trillions in counterparty settlement of notional values. Chain reaction type of arguement. So far, I have only scanned the piece and Mr. Longs piece. I take this piece to be perhaps a scare piece but even a 5 % of potentials here would indeed be one hell of a chain reaction.

    Even if this piece is pie in the sky chain reaction stuff, these things seem to be proliferating all over the place. Panic makers would be one conclusion. Another conclusion is a very big actual chain reaction. But, somewhere in between is scary all by itself. Mr Long’s piece will take a bit of time to digest.

    Surely , there are some CDS triggers if even BP America alone were to file bankruptcy.

    Comment by Jerry J — July 2, 2010 @ 11:01 PM | Reply

    • Yes, I have seen that also. I’m not sure how sensational it is but I believe this part, BP is Too Big Too Fail. There is no doubt that the ripple effects would be very significant and if some players have unhedged exposures one way or another related to BP they will suffer large losses. Whether that impairs capital or causes a domino effect of failures I can’t say. I’m sure there are folks working long hours on how to keep BP paying as much of the freight as possible on the spill but not so much as to cause it to fail. Meanwhile, as you have so aptly pointed out, other lawyers are calculating when to go adversarial with the US Government and throw this whole thing into court, which the US Government at some point may tacitly approve as a way to save face by playing hard ball while making sure BP does not crater the markets.

      Comment by thefourteenthbanker — July 3, 2010 @ 3:18 PM | Reply

  4. The Rain Dance of BP looks to have started. Reuters tonight is carrying a piece titled ” Report:BP launches search for new investors”. They are looking for major oil state funds or other US majors to take up yo a 10 % stake. In the body of the article it saus BPO has formally asked Anadarko for $272 million and Mitsui for $111 million as their share of direct clean up costs on Macondo.

    It is fish and cut bait time for legal decisions for Anadarko and Mitsui. They pay any amopunt and the essentially agree to all amounts. So, in that case BP sues and Anadarko and Mitsui counter sue. They dare not pay as I see it.

    An effective strategy here might be seeming compliance with the political requests by Obama and a blow off to the legal system when the passive partners balk. I keep hearing speculation that the government could quash a Chapter 11 filing. That would be for the courts to decide. I would strongly think the court could enjoin the administration. Right now, I doubt the USG has a judgement against BP , let alone BP America or BP Exloration & Production. For that matter, they would presumably have to sue the Macondo entity.

    Interestingly, I ran across a piece that claims that BPE&P paid $34 million for the Macondo Block 252 and that the USG royalty was 18.25 %. Undoubtedly , that $34 million was actually bought and paid for by the passive entity. But, people can be careless, so who knows.

    Comment by Jerry J — July 4, 2010 @ 7:59 PM | Reply

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