Pecora Process Underway !

April 28, 2010 (LPAC)—Here, out of Washington, Senator Levin has mopped the floor with Goldman Sachs in good prosecutorial fashion. What we have, as Lyn said, is the Pecora Commission process going on right now. It's broken out. Many people are hard-put to explain it, but it is a key feature of the dynamic, which we can understand.

Levin convicted Goldman Sachs of swindling their clients out of billions, not just in the one CDO which was the subject of the SEC suit, but three others, which in turn stood for numerous others. They were selling packages of mortgage-backed CDO's in order to bet that these very packages would fail, as they all did,— and their gains from these gambling bets against their own products, matched their clients' losses. On the bigger scale, the firm was betting up to $13 billion against the whole residential mortgage market throughout 2007, while actively peddling mortgage-backed securities themselves, including from many of the most notorious fraudulent lenders, like New Century and WaMu. And they were aggressively bundling not only mortgage-backed securities, which are bad enough, but mortgage-backed CDO's, which, being derivatives, multiply the systemic risk many times over. And synthetic CDO's, a level even beyond that. Thus, they made a major contribution to bringing down the whole system, and destroying the whole economy just as they destroyed their own clients.

The first panel, of five lower-level executives, were under instructions to run out the clock with delaying tactics and refuse to answer questions, which the Senators duly noted. In this way, they convicted themselves in the face of reams of documentary evidence, often from their own e-mails, of what they had done.

Sen. Claire McCaskill summarized, "Synthetic CDOs were created purely to bet. This is the lala-land of ledger entries. It's pure gambling. You are the bookie and you are the house. You had less oversight than a pit boss in Las Vegas. You think you're so smart? No street gambler would ever place a bet with the likes of you!"

The final panel was CEO Blankfein by himself. After the catastrophe of the first panel, Blankfein tried to appear reasonable and friendly, but he, too, was caught in a big lie when his insistence that Goldman had not played the "big short" was disproved by numerous official Goldman documents. And he continually insisted on Goldman's right to sell its clients booby-trapped securities designed to fail, while enriching itself by betting against its own products via credit-default swaps.

The Pecora process is on!