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Goldman Sachs fined $450,000 (Gets wrist slap for hundreds of short sale violations)
UPI ^ | 05/2010

Posted on 05/08/2010 8:12:52 PM PDT by SeekAndFind

U.S. regulators and stock exchange authorities fined Goldman Sachs $450,000 Tuesday for hundreds of violations involving short sales.

The Securities and Exchange Commission and New York Stock Exchange Regulation fined the bank for continuing to write naked short sale orders after regulators banned short sales two days after Lehman Brothers collapsed in September 2008, USA Today reported.

Short sales are deals in which an investor borrows an asset, then sells it, betting the price will go down. The investor agrees to buy the asset at a later date. If the price drops, the investor makes money.

A naked short sale is the same, except the investor skips formally borrowing the asset.

In Washington, Sen. Arlene Specter, D-Penn., has suggested strengthening the financial reform bill to force financial brokers to bet on the same side as their clients, The New York Times reported.

On Monday, the beleaguered firm said six lawsuits had been filed against it for "breach of fiduciary duty, corporate waste, abuse of control … and unjust enrichment," The Wall Street Journal reported.

Last month, the SEC charged Goldman with loading bonds with securities secretly designed to fail.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: fine; goldmansachs; shortsale
FYI, Goldman Sach's assets are worth about $800 Billion.

NYSE Regulation, part of NYSE Euronext, imposed the fine. Half the penalty is to be paid to the US Treasury, whose Secretary is a an income tax evader.

According to NYSE Regulation, between Dec 2008 and January 2009 GS accepted roughly 385 orders to short equity securities in which it had open 'fail to deliver" positions, without first borrowing or arranging to borrow the securities as collateral. Charges are the GS failed about 68 times in the same time period to notify customers about these lapses.

A short sale occurs when a customer borrows a security, sells it in a bet that the price will go down, then buys it back later at the lower price to reimburse the security's lender. A "fail to deliver" occurs when a clearing intermediary firm fails to satisfy its obligation to deliver a particular security on a particular date.

Goldman consented to the hand-slap and the $450k fine without admitting wrongdoing.

Some investors have the means and connections to arrange shorts, some do not. And become the victims of shorters, if they choose to sell at the bottom out of fear, which is what shorters hope for and try to instill in small investors. All profit, in a very real sense, comes from commerce, and is based on faith in the validity of a promise. Is knowingly failing to honor that promise a criminal act? Is it treason, as well? You be the judge.

1 posted on 05/08/2010 8:12:53 PM PDT by SeekAndFind
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To: SeekAndFind

Well, I’m in a hard place here...

Hitler had the Jews
Obama has Goldman Sachs.

As I have yet to believe Anything coming out of Obama’s trap, I don’t know what to believe about Goldman.. and I’ll wait to see..


2 posted on 05/08/2010 8:15:42 PM PDT by gwilhelm56 (The one thing we learn from history is .. People REFUSE to Learn from History!!)
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To: SeekAndFind

this was a speeding ticket for a world wide crime.


3 posted on 05/08/2010 8:21:29 PM PDT by ken21 (i am not voting for a rino-progressive.)
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To: SeekAndFind
A short sale is just a forward contract to deliver a specified number of stocks at a specified price below the current market price.

So when the contract is agreed, no one has bought or sold anything.

Since no one in his right mind would agree to a forward contract selling a stock he owns at below the current market price, a short contract makes no sense unless you plan to acquire the stock at a lower price at a date at or near the contract delivery date.

The securities rules require you to borrow the stock at the current price (really, you get a loan on the margin & pay interest to the stock holder for the loan). Your profit is the expected difference between your negotiated sale price and the (lower) actual price at the contract expiration, minus any interest and other transaction costs.

a) In some ways it's not much different than buying an out-of-the money put option.
b) if these were OTC short contracts negotiated with Goldman, I assume the counterparties were not ordinary investors but other big fish;

The real issue is whether Goldman was making use of insider knowledge of other financial institution's bad positions to make the short contracts, e.g. knowing Citi's mortgage backed securities were junk before anyone else did.

4 posted on 05/08/2010 8:34:31 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: SeekAndFind
Can anyone explain what short sale means to a doorknob like me? How? What? Why?

I want to short sale and make some easy money. Why isn't everyone doing it?

5 posted on 05/08/2010 8:37:11 PM PDT by deadrock (Liberty is a bitch that needs to be bedded on a mattress of cadavers.)
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To: SeekAndFind
"Sen. Arlene Specter, D-Penn."

Arlene?

I thought something was funny about that guy.

6 posted on 05/08/2010 8:40:51 PM PDT by SnuffaBolshevik
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To: SeekAndFind

Virtually legal counterfeiting......sure they got a small civil fine, but the one who really got slapped, is the small investors whose share values were diminished a result of these blood suckers.


7 posted on 05/08/2010 8:53:47 PM PDT by krogers58
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To: DEADROCK
Can anyone explain what short sale means to a doorknob like me?

You short an asset when you think its price will be lower tomorrow than it is today. From the article,

A short sale occurs when a customer borrows a security, sells it in a bet that the price will go down, then buys it back later at the lower price to reimburse the security's lender

If the price goes up, then you have to buy it back later at the higher price. There are many ways to short assets. Stocks are the most obvious, but there are numerous ETFs that short entire market sectors. ETFs also exist to short gold, silver, US treasuries and so forth.

8 posted on 05/08/2010 8:58:19 PM PDT by mlocher (USA is a sovereign nation)
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To: pierrem15

I think a short sale is a sale of borrowed stock which you must some day return to the owner. It is not like a put or call which are options and can be allowed to expire. You have to cover a short at some time in the future, at least theoretically. In the meantime there is a charge for borrowing the stock.

In the case of a short, your losses are theoretically unlimited since you are on the hook for any increase in price of the stock after you sell it and before you cover.


9 posted on 05/08/2010 8:59:59 PM PDT by northman99
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To: SeekAndFind
Goldman Sachs Will Be Sitting Pretty With Emanuel in the Obama White House
Timothy P. Carney, Examiner Columnist, November 21, 2008 Goldman Sachs always has clout in Washington, as evidenced by the firm’s alumni serving as Treasury secretaries under both Presidents Bush and Clinton. Today, in these tumultuous times of bailouts and meltdowns when the investment banking leviathan needs Washington more than ever before, Goldman can leverage its most valuable asset yet—incoming White House chief of staff Rahm Emanuel. Goldman Sachs is the giant of Wall Street, and more than any other investment bank, Goldman is surviving the current financial storm.

Traditionally a Democratic booster, and one of Barack Obama’s top sources of funds in this past election, Goldman has always had some particularly strong allies within government.

Emanuel is one such ally. An interesting early chapter in the Goldman-Emanuel relationship took place in the setting of Bill Clinton’s campaign for the White House in 1992. Clinton hired Emanuel as his chief fundraiser. At the same time, however, Emanuel was on the payroll of Goldman Sachs, receiving $3,000 per month from the firm to “introduce us to people,” in the words of one Goldman partner at the time. This is certainly a noteworthy relationship, but it’s one that has almost entirely escaped scrutiny. (snip)

In his four terms in Congress, Emanuel has raised $74,750 from Goldman, making the firm his number four source of funds.

Goldman has helped Emanuel. How has Emanuel helped Goldman? The most obvious answer, as mentioned in this column two weeks ago, is in Emanuel’s lead role in shepherding the “$700 billion” bailout—first proposed by former a Goldman CEO, Bush Treasury Secretary Henry Paulson—through the skeptical House.

Of course, back in the Clinton days, Goldman benefited from NAFTA and the bailout of the Mexican currency, with Emanuel pushing NAFTA through Congress, and Rubin hammering out the peso bailout.

Did Goldman improperly funnel money to the Clinton campaign by subsidizing Emanuel’s salary in 1992? Did Goldman’s help to Clinton spur the Democratic president to push NAFTA and the Mexican bailout?

The answers to these questions are opaque, and with Emanuel burrowed deep within the Obama White House, the continued relationship between Goldman Sachs and Obama’s right hand man won’t be easy to follow.

Watch which regulations of Wall Street Obama fights for. Watch where the bailout money goes. And don’t be surprised to see Goldman soon sitting pretty once again.

SOURCE http://www.washingtonexaminer.com/opinion/columns/TimothyCarney/

10 posted on 05/08/2010 9:07:34 PM PDT by Liz (If teens can procreate in a Volkswagen, why does a spotted owl need 2000 acres? JD Hayworth)
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To: DEADROCK

“Can anyone explain what short sale means to a doorknob like me?”

http://www.businessjive.com/

The above URL links to an online presentation — 100 slides, approximately an hour — that explains it all: short sales, naked short sales, stock IOUs, Failure-to-Deliver, (FTD), the role of the DTCC, the role of Broker-Dealers, the collapse of Bear Stearns and Lehman, the almost unreported Refco scandal, and most importantly, why the SEC has not, and will not, do anything about fundamental systemic corruption in the capital markets.

From a basic “public choice theory” analysis, the reason the SEC is so ineffective — see, e.g., the $450K fine to Goldmam — is that the SEC has been in on this whole thing for many, many years. In public choice theory terms, the SEC is a “captured” regulatory agency; i.e., it serves the interests of the very industry it’s supposed to be keeping an eye on. These points, too, are gone over in the above-linked presentation.


11 posted on 05/08/2010 9:21:20 PM PDT by GoodDay (Palin for POTUS 2012)
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To: SeekAndFind

Maybe someone pushed the wrong button when it was suppose to be a $4,500,00 fine.


12 posted on 05/08/2010 9:33:50 PM PDT by CaptainK (...please make it stop. Shake a can of pennies at it.)
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To: SeekAndFind; gwilhelm56

Naked short selling ought to be illegal. Naked short selling has been used to destroy companies when traders borrow, buy, and sell stocks that they don’t own and may not even exist.


13 posted on 05/08/2010 9:38:00 PM PDT by Blood of Tyrants (The US will not die with a whimper. It will die with thundering applause from the left.)
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To: DEADROCK

I want to short sale and make some easy money. Why isn’t everyone doing it?
*********************************************
because it requires real money to cover if it goes wrong. I personally have always thought it was easier to spot a “dead man walking” and bet on it’s demise than decide which one out of hundreds of great athletes will make it to the finals...

Right now underfunded mid caps that are sell high end type goods are due to get hammered ... RUTH Chris steakhouse is down 25% in a few weeks from over $6 to $4.36 ,, they were almost bankrupt a few months ago (trading at $2) ,, sold their newly built HQ building and had what amounts to a secondary offering to raise cash... when the Obamacare tax kicks in and the economy tanks nobody will eat there even if they have the money ... they’re dead...


14 posted on 05/08/2010 9:42:59 PM PDT by Neidermeyer
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To: Blood of Tyrants

This fine is just another innoculation... so they can say “that’s old news”. Naked shorting is terribly destructive and should be heavily fined maybe 100% of the gross value of the shares sold,, not by the person placing the sell order but the house that allows it to go through..


15 posted on 05/08/2010 9:48:23 PM PDT by Neidermeyer
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To: SeekAndFind
IOW, about the same amount it costs to keep GS executives plied with gin and hookers for an evening.
16 posted on 05/08/2010 9:54:17 PM PDT by Ken H
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To: northman99
The exposure is why I said 'in some ways.'

I just think a lot of people seem upset about the 'naked' shorts when the bigger issue is whether Goldman abused it's insider knowledge.

17 posted on 05/08/2010 10:21:40 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: SeekAndFind; Jet Jaguar; NorwegianViking; ExTexasRedhead; HollyB; FromLori; ...

The list, ping


18 posted on 05/08/2010 10:34:07 PM PDT by Nachum (The complete Obama list at www.nachumlist.com)
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To: Nachum

Can anyone say how the new rules for short selling, to take effect later this year, will affect short sales of ETFs like SPY?


19 posted on 05/08/2010 11:59:54 PM PDT by Tax Government (Don't vote commie unless you ask your mommy.)
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To: SeekAndFind
>>Is knowingly failing to honor that promise a criminal act?
 
Hos 12:7
7 The merchant uses dishonest scales;he loves to defraud.
 
>>Is it treason, as well? You be the judge.
 
Hos 12:7
8 Ephraim boasts,"I am very rich; I have become wealthy.With all my wealth they will not find in me any iniquity or sin."
 
R.I.N.O.

20 posted on 05/09/2010 5:10:48 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: DEADROCK

>>Can anyone explain what short sale means to a doorknob like me?

To little people like us?

It means BOHICA.


21 posted on 05/09/2010 5:13:45 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: SeekAndFind
OF COURSE!

This was just a big show from the start, to keep those donations pouring into the MaObama team! Now, they will use this to make their takeover of the financial sector complete and pass another “reform” bill.

Any “Reform” legislation they sell is code for Socialist totalitarian rule.

22 posted on 05/09/2010 5:24:58 AM PDT by PSYCHO-FREEP ( Give me Liberty, or give me an M-24A2!)
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To: CaptainK
Maybe someone pushed the wrong button when it was suppose to be a $4,500,00 fine.

Mistakes are always possible ( note how you inadvertedly missed a zero above).

But this so called fine is so laughable that I don't even know if it will change any habit of Goldman Sachs. Fining an $800 Billion company $450,000 ? Most of these executives would throw that kind of money away in one night of partying and not even miss the cash the next day.

The amount would be like fining me 1 cent for violating traffic laws.
23 posted on 05/09/2010 7:57:13 AM PDT by SeekAndFind
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To: SeekAndFind

not millions?


24 posted on 05/09/2010 6:33:39 PM PDT by dalebert
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To: dalebert

RE: not millions?

Nope. And if even if it were ten times this fine, that’s chicken feed to Goldman. They claimed to have lost $90 Million in the ABACUS CDO trade by betting on the long side and it didn’t hurt their bottom line ( nor the bonuses they gave ) one bit.


25 posted on 05/09/2010 7:10:12 PM PDT by SeekAndFind
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To: SeekAndFind
Wow...less than 5% of Blankfein's annual bonus...color me impressed. Off, OFF Damned Sarcasm!

A simple reform is to require that short selling be done with borrowed shares, plus enforcing the uptick rule.

26 posted on 05/09/2010 7:15:45 PM PDT by Night Hides Not (If Dick Cheney = Darth Vader, then Joe Biden = Dark Helmet)
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