Brown attacks Goldman Sachs "moral bankruptcy"
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Prime Minister Gordon Brown has attacked Goldman Sachs’ “moral bankruptcy” in the wake of the US government’s investigation into an alleged sub prime mortgage security fraud.
On Friday the Securities and Exchange Commission revealed it was charging Goldman Sachs for misleading investors in a complex debt obligation based on US sub prime mortgages. The regulator says the investment bank allowed a hedge fund to short the assets for its own gain, which led to investors losing more than $1bn (£657m).
Reports say ABN Amro, part of the RBS group, lost £545m in the transaction. The Mail on Sunday says the state-owned bank may sue Goldman Sachs.
Talking to the BBC yesterday, Brown called for further investigations into the bank’s activities. He said: “I am shocked at this moral bankruptcy. This is probably one of the worst cases that we have seen.”
The FSA will not comment on the case but Liberal Democrats shadow Chancellor Vince Cable told the Independent: “Serious allegations of abuse in the large financial institutions should be pursued just as rigorously as the small fry.”
At the centre of the case is Goldman Sachs vice president Fabrice Tourre, who is accused of orchestrating the deal, known as ABACUS. According to the Telegraph, in an email to a friend he said: “More and more leverage in the system. The whole building is about to collapse anytime now … Only potential survivor, the fabulous Fab … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implication of those monstruosities [sic]!!!”
Goldman Sachs is vigorously denying the charges. It says it actually lost $90m on the transaction. It says: “We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact.”
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Readers' comments (8)
John Lacy | 19 Apr 2010 9:26 am
Talking about the pot calling the kettle black---there has never been a more morally bankrupt Prime Minister in UK history---He steals our pesion money and then complains that we are not making sufficient provision for our dotage.
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Exasperated me | 19 Apr 2010 9:36 am
An amoral bankrupt pot calling the kettle black.
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Keyboardface | 19 Apr 2010 12:06 pm
So that's all right then. As long as Brown cops the vitriol for (alleged) amorality and hypocrisy the "fabulous Fab" and his email comments don't merit any judgment at all.
It seems to be that because Brown does wrong (allegedly) it's OK for others to do the same thing - therein lies the real amorality. Could it be our fabulous Fab friend is in the right and beyond criticism because Goldman Sachs is "doing God's work" and therefore must be unchallenged in everything?
But Fab actually admits he's clueless about how the financial gimmicks he's profiting from actually work (and therefore what impact they might have). Unemployment? Business failures? Fewer resources for education, health, defence and the police? Nah, not his problem, as he says himself he'll still be there when the paper empire folds.
Or maybe Fab should be excommunicated? We can vote for the party we wish to lead us after May - but we can't have a say about Fab et al. Pity the same accountability for politicians can't be applied to the masters of the universe.
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Simon Mansell | 19 Apr 2010 12:38 pm
This is the pot calling the kettle brown!
FACT: Gordon Brown inherited one of the best private pension savings systems in the world. Britain had more pension savings than the rest of Europe combined. We also appeared to have long-term state pension costs under control, despite our ageing population.
FACT: Now more than half of pensioners now rely on means-tested benefits - up from 39 per cent in 1997. Since 1997 Britain's savings ratio -including pensions savings - has halved, to 5 per cent. Stakeholder pension planning removed the distribution charge and therefore the distribution and now they want to do the same under RDR!
FACT: Since 1997 the once-thriving company pension system has crumbled. Most traditional final salary schemes have now closed. This of course does not apply the army of public sector works and their gilt edge pension guarantees all fund from the tax burden imposed on those whose own pensions have been hit by Browns raid of the pension pot!
FACT: Brown abolished dividend tax relief for pension funds. This single policy has so far cost our pension schemes tens of billions of pounds and been responsible for the collapse of our private sector final salary pensions.
FACT: Over 100,000 people have lost most or all of their final salary pensions, when their FSA declared "safe" schemes were wound up.
FACT: The FSA advised these scheme members that they were guaranteed and many, without advice rejoined.
FACT: Brown sold 395 tonnes of our gold reserves into a rising market. It has lost £175m. It has also lost more money by investing a large proportion of the $3.3bn proceeds as a support operation for the euro. Some saw this as a method of entry into the Euro by stealth! The value of gold rose by £40 an ounce since the government’s selling started. (FT 6/3/02) Since the auctions, the value of gold has trebled, leaving the Treasury with a £2bn loss on the deal.
SIMON MANSELL
TEMPLE BAR IFA LTD
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Keyboardface | 19 Apr 2010 1:48 pm
Whilst not seeking, as a layman, to challenge the accuracy or otherwise of the statements made by Mr Mansell, pension contribution holidays taken by many companies also blew a hole in their pension funds (as I understand it). But this isn't included in his comments.
Many public sector workers Mr Mansell refers to so disparagingly as an "army" (including my highly-qualified spouse) are professional, dedicated people - and also clients of IFAs. They were encouraged to enter public service partly on the back of a reasonable pension that would at least in some way restore the imbalance caused by historically lower salaries versus the private sector. Yet here (and in the pages of the more rabid right-wing press) they are effectively portrayed as scroungers.
It's always great to find someone to blame for the world's woes, and to point an irate finger at a soft target, but given IFAs are supposed to offer impartial advice to clients (of all backgrounds and professions, presumably) attacking one group or another reflects extremely badly on IFAs as a whole.
Surely the objective is to avoid the emotive rhetoric, address all of the facts and manage the situation, on behalf of all clients, according to what's actually happening?
My personal experience of mis-sold pension plans, endowment policies that are worthless and the blight of negative equity (under a Conservative government, although the current lot aren't perfect) demonstrates to me that financial advice in the last 30 years has been more about IFAs' self-interest, trousering commission and making frankly disreputable promises - rather than assisting me to provide for my family and at least get a reasonable return for my hard-earned cash over the years.
The IFA sector is crying out for people who will actually stand up and challenge the obvious abuses in the banking sector but there's no evidence of that here.
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Ian Young | 19 Apr 2010 5:05 pm
Why do I get the impression that keyboardface is on the payroll of number 10 and is a paid lackey of this totally corrupt, incompetent grubby government.
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Keyboardface | 19 Apr 2010 6:09 pm
Mr Young speculates on my motives and bona fides.
I'm not a lackey of No 10 although your use of the term "lackey" does have Stalinist overtones - perhaps we can organise a show trial on the Daily Mail's website?
What fascinates me about the responses so far is that no-one has actually commented upon the Fab person who so complacently joked about screwing the pooch at Goldman Sachs while admitting he was peddling financial instruments he didn't understand. If that isn't gross irresponsibility, what is?
I do not defend Brown or the Labour party for their huge miscalculation in siding with the masters of the universe. Besides their over-reliance on big money they have made big errors and will doubtless be punished at the ballot box for their sins.
"All power corrupts; absolute power corrupts absolutely "(I think) - either way, corruption, incompetence and grubbiness are hardly characteristics unique to Labour. Nobody's perfect but some - it seems - are more imperfect than others.
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Ericthekleric | 19 Apr 2010 8:35 pm
Disingenious. The article implies that 'allowing' the shorting is what destroyed the value in the pool of leveraged assets.. That is not how it works. ABN A took a bet that went wrong - big deal - another client of Goldman's bet the other way. Clever them. How does that equate to accusation that G.S. deliberately destroyed the value fo the assets? It can't.
Of course it is the pot calling the kettle black. Brown is as ruthlessly ambitious politically (to hell with us all) as G.S. are commercially. So morals aren't even in the ball park.
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