Annotated Bibliography 6

United States.Congress.House.Committee on Financial Services.  Emergency Mortgage Loan                                      Modification Act of 2008 :   report (to accompany H.R. 5579) (including cost estimate of                                   the Congressional Budget Office).[Washington, D.C. : U.S. G.P.O., 2008]

 

This Act states that all mortgage loan pools must be watched by a servicer who will act in the best interest of the security holder at all times.  The servicer is forced to maximize profits for the investor no matter what affect it will have on the company unless a prior agreement was reached between the investor and the company.  This act also prevents investors from suing servicers who perform their jobs according to the agreements.  The act clarifies what role the servicer has specifically, therefore there can be no debate over whether the servicer was performing their job properly.  The Mortgage Bankers Association reported 5.82% of all loans on single-family properties outstanding in the fourt quarter of 2007 were delinquent (4). This Act shows that action is being taken in order to try and protect the investors from getting involved once again in securities such as Abacus.  This will help my paper because it shows the beginnings of a solution to the problem caused by Goldman Sachs and one way which it can start to be fixed. This is closely linked with a few of my other sources which deal with the convincing of the investors at Goldman Sachs that these securities were reliable.

Annotated Bibliography 5

Benston, George J, et al. "Bank Capital Structure, Regulatory Capital, and
     Securities Innovations." Journal of Money, Credit, and Banking 25.3 (2003):
     301-322. Print.

Trust preferred securities (TPS) have no maturity date and also have a mandatory redemption feature.  TPS became extremely popular in the late 1990s and many companies were only offering these forms of securities by 2000.  TPS have a large tax advantage over normal equity and ordinary preferred stock.  Bank holding companies (BHCs) were predicted not to benefit from issuing TPS.  The banks were doing well during the period of research referred to in the article therefore, the stock prices did not decline in the way they were predicted to and therefore investors came out alright. Some BHCs did not loan TPS because the benefits would not outweigh the costs of transactions.  These long term securities have several benefits to them and are legal to issue, this is an example of what securities were being sold to investors before the scandal in 2008 involving Goldman Sachs.  This can be another example of a solution to the Goldman Sachs scandal, the sale of securities such as these, which are legal, to investors would profit the company and its investors.  This can be related to the securities which Goldman did sell and I can compare the two and see the differences between the two. The sale of these securities would have been a more moral choice for Goldman Sachs, though they may not have earned as much profit.

Annotated Bibliography 4

McGee, Suzanne.  Chasing Goldman Sachs:   How the Masters of the Universe Melted Wall     

         Street Down-- and Why They'll Take Us to the Brink Again / 1st ed. New York: Crown                            Publishers, c2010.

Goldman Sachs was creating securities which were not being backed by any real assets.  These are called "synthetic securities" (McGee 57).  All of Wall Street was working for the benefit of Wall Street and nobody else.  All of Wall Street is attempting to catch Goldman Sachs in terms of its profitability.  Goldman Sachs is the most strategic firm on Wall Street, they do not put all their eggs in one basket, but diversify to ensure they do not endure massive losses.  Former Goldman Sachs front man, Robert Rubin, went on to become Treasury secretary for the Clinton administration.  Between 1996 and 2008 Goldman Sachs return on equity was at an average of 24.4% (83).  New securities were part of largest and most liquid markets (bond market and real estate market) and claimed that they were risk free securities.  This book has several chapters relating to different aspect of the scandal as a whole.  The corruption inside Goldman Sachs and all of Wall Street is revealed through this book.  It contains statistics on Goldman's profitability during and after the scandal which will be useful to my paper.

Three Questions

How is the sale of mortgage-backed securities beneficial and to whom is it beneficial?
- Benefits Goldman-Sachs and its employees, make money
- SEC can use case as an example to warn other companies and show they will take action even against the biggest companies
- Not beneficial for investors and economy
- Lead to collapse of housing market and economic downturn

Why can't the charges the SEC filed against Goldman Sachs be used as an example for other companies?
- Goldman-Sachs was punished, but punishment was no where near profits they made from scandal
- Did not lose hardly any customers due to this case
- Research how many customers were lost and how much money was made even after payments

How is Goldman-Sachs reputation affected by being punished by the SEC and the public knowledge of the deception of their investors?
- Not much of an affect on reputation, still investment in company
- Research views of people who invested and lost money as well as outsiders who did not invest, see if there is a difference in views
- Research how many investors who lost money reinvested in Goldman-Sachs again

Annotated Bibliography 3

Colombo, Ronald J. "Goldman Sachs rationalized fraud." Christian Science Monitor 27 Apr.                         2010: N.PAG. MasterFILE Premier. EBSCO. Web. 7 Nov. 2010.

Goldman-Sachs are attempting to defend their case to the Senate, but the facts are too strong against them.  They sold securities which were bound to fail in order to benefit a hedge fund to their clients.  Clients lost around $1 billion total from the investment of these CDOs.  Officials have not accused Goldman-Sachs of lying to their investors, but instead not revealing the entire truth to them that these securities were designed to fail.  Goldman’s actions may not have broken the law according to some securities law experts.  These experts believe the laws need to be made more specific so that action can be taken against moral wrongdoings such as this and have there be no argument over whether or not it is legal.  This article brings in a new side to the argument that the actions of Goldman-Sachs may have in fact been legal, just very immoral.  If this is the case it could change the entire proceedings.  I need to further investigate whether or not laws were broken or if it was just dishonest selling by the company which is not technically illegal.  All of the other articles I have read state that Goldman-Sachs have broken the law and so I will have to  investigate this source and see the legitimacy of it.

Annotated Bibliography 2

Lieberman, David. "SEC is locked in a stare down with Goldman Sachs." USA Today n.d.:                             MasterFILE Premier. EBSCO. Web. 7 Nov. 2010.

The SEC is using this investigation as a basis to further investigation of other companies such as Citi, UBS, and Bank of America.  Goldman-Sachs is worried about its reputation and fears losing customers due to the negative publicity brought about by this scandal so they are afraid to cut any corners to make a little extra money.  The company says they continue to work with the FCIC and provide them with any information which they ask for in the investigation.  Goldman-Sachs failed to tell their investors that several of the securities which they were investing in were bet on to fall by a hedge fund manager.  They deceived their investors and that is the reason for this investigation.  After the housing market collapsed, the hedge fund manager made $1 billion when Abacus (the securities) tanked.  Goldman denies doing anything wrong, saying they were selling to “seasoned investors” (Lieberman 1).  The SEC is taking advantage of this case to show its strength and that it is able to punish even the biggest firms for illegal actions.  This article gives many details on the punishment of Goldman-Sachs and the action of the SEC throughout the case.  The next step in researching would be to figure out specific laws which were violated by Goldman-Sachs.

Annotated Bibliography 1

Trumbull, Mark. "Goldman Sachs $550 million settlement a 'stark lesson' for Wall Street."                                         Christian Science Monitor 15 July 2010: N.PAG. MasterFILE Premier. EBSCO. Web. 7                        Nov. 2010.

Goldman Sachs was forced to pay a $550 million fine for misleading investors to buy securities which were thought to be falling in value.  After the case was settled the price of Goldman-Sachs stocks rose immediately.  The SEC intends to use this case as an example that they are cracking down on corruption on Wall Street.  If nothing else this case will force Wall Street firms to have staff which are more educated on the law and aware of when corruption is occurring.  The securities were, ”Synthetic collateralized debt obligation (CDO)” which are securities in which some people will benefit if they do well, while other investors will suffer if they do well.  The SEC is also conducting a review of Goldman-Sachs as a whole to detect any other corruption in the company.  This is vital to my project because I need to know the reasons they were breaking the law.  Also, I need to know the details of the punishment from the SEC and how the court dealt with Goldman-Sachs.  My next research step is to figure out what laws exactly they violated and who is at the top of the company who was running this corruption.