Malaysia seeks $7.5B in reparations from Goldman Sachs
reuters.com
reuters.com
https://www.rollingstone.com/politics/politics-news/the-grea...
Taibbi's lede? "The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. "
Apparently not, since vampire squids feed on marine snow, not blood [1].
His colleagues are journalists, they consider him a journalist, and he's won awards you'd only get if you're a journalist, and his process of information gathering and writing meets the definition of journalism. His style is highly editorialized, but his stories aren't devoid of facts while containing only opinion, and the facts presented aren't often wrong. You can certainly argue from a contrarian perspective that his editorial conclusions are all wrong, but that still wouldn't make him not a journalist.
If someone's primary goal is entertainment, you can call it newsertainment or perhaps comedy.
He consistently leaves out important data that runs counter to his narrative and exaggerates data that supports it.
Laudable examples who have also greatly enriched society include HL Mencken, Upton Sinclair, and Hunter S. Thompson.
That's not at all reflective of the cited text.
First off, he never even implied 'obvious' - which is used to blame the reader/listener for not getting it.
Second, while he does refer to his view of the material (at the time) as satire, his current view (at least in the cited text) is clearly, and solely, regret.
But if words like "great vampire squid" appear in the lede, then the author is surely biased.
If you say he's biased you need to support that statement.
Corruption. He fritter'ed a great deal of this money to precisely the same Prime Minister who selected him.
This wasn't unique, either. This sort of corruption is much more pervasive than most people believe. In China many of the top party officials are billionaires. Vladimir Putin is widely believed to have massively enriched himself during his reign.
Frankly, the biggest surprise is that the corruption in this case was caught.
As opposed to US politicians like the Bushes, Clintons and Obamas? Or any of the countless corrupt puppet dictators that the US installed around the world?
Listen, I know they're pushing really hard for a war right now; but unless you're right up there at the top of the pyramid, war is hell.
The only thing that will ever get us out of this hole is truth, and truth starts with not spreading BS.
The Clinton's Uranium deal with Rosatom is a nice example of how this works; of course you can't just give politicians piles of money, it needs to come with a bedtime story for the voters.
A Canadian company owned uranium reserves and wanted to sell the ownership of them to Rosatom. Not the physical resources, which cannot leave the country, just the ownership.
This still requires government oversight, so 8 different agencies had to sign off on it. All agencies did, including the state department. Hillary was not involved in the decision to approve the sale, apart from in charge of one of the many departments overseeing it.
You can safely ignore anyone who claims that the Clintons took money from anyone if they're claiming that money donated to their charity ends up in their pockets. They don't know what they're talking about.
Basically everyone outside of their little communist bubble know what the Clintons are all about. More power, at any cost. But it's ending any second now, mark my words. The stuff that's been trickling out so far is the tip of the iceberg.
Sounds like you got a bad case of Whataboutism [2], I suggest seeing a doctor right a way.
The world needs more whistlerblowers. Or at least better tools and protection for those who plan to do it
Given that our government is literally off right now, you can guess my current opinion.
By claiming that all of that was legal. Plainly and simple, until some prosecutor does not walk over facts and not file a charge, no crime is being prosecuted. In such cases, the very reason for starting a process is prosecutorial discretion.
(Anti)Nepotism laws are notoriously hard to act upon: unless somebody got caught red handed (taped, stinged,) any accusation of appointment beyond merit is just a lot of speculation and rhetoric.
The same way ... Boston Consulting Group, and PWC have decades long record of employing 20 something scions of officials for well paid senior positions in every major country you can think of.
Juxtaposed with:
> Boston Consulting Group, and PWC have decades long record of employing 20 something scions of officials for well paid senior positions in every major country you can think of.
Asks for some citation or proof.
First, US prosecutors are also investigating this (and ironically so is the Federal Reserve). Now US banks might get soft glove treatment in their home country but so far the American authorities have shown some teeth in this scandal.
Second, GS executives are personally named in law suits. Malaysia has foreign assistance treaties in other countries where GS operates so that'd be sticky.
Finally, the reputation damage from GS withdrawing from a country to avoid a lawsuit would be hugely damaging.
As for the executives, they will probably hide behind limited liability. Getting the US to hand them over will not be easy.
Also, I know for a fact that they really care about their reputation, and that internally, they are stressing about this.
Initially they claimed there was no conflict of interest and that’s simply how finance works, but then internal communication leaks showed they knew the assets they were selling clients were not just shit (but knew the underlying mortgages were fraudulent themselves going back to 2005) and they were doing that in mass as part of an effort to artificially prop the asset value up as they were liquidating their own.
It all came out in a case they settled for $5B with the government. From the department of justice : “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.”
yet they still operate, are more powerful than ever, and there is a revolving door with them and top levels of government...so I agree with you reputation is irrelevant to them. Plain and simple everyone knows they are scumbag oligarchs at the top of that organization, but they are oligarchs nonetheless.
https://www.justice.gov/opa/pr/goldman-sachs-agrees-pay-more...
And so is Malaysia
I mean, I’m not fan of Trump but to say he is looked upon favorably by corporations over his opponent is verifiably untrue. Let alone claims of “the messiah”.
(Neither of these terms are particularly accurate—I used to work a block away from Wall Street, and all the actual trading happened by ssh to New Jersey—but they're metonyms with specific meanings.)
Good journalists are worth gold
I don't think there is another investment bank on Wall St that has had its short term greed and disregard for society exposed to the degree that GS has.
Do you not know about the subprime mortgage product they sold ? It was notable in that it was designed to fail i.e they defrauded investors
see:
http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/
http://www.washingtonpost.com/wp-dyn/content/article/2010/07...
http://content.time.com/time/magazine/article/0,9171,1983886...
>"They are probably the most respected bank on Wall St"
Respected by who exactly? Other investment banks constantly mired in their own scandals and white collar crime.
Here's some other Goldman highlights:
I would expect people to have more animosity for consumer facing banks like Wells Fargo or Bank of America as their nickel and diming practices actually hurt average people.
I doubt your average joe even knows what GS does beyond being a “vampire squid.”
I don't think we can reasonably expect everybody to really know everything. Wall Street in particular is a highly complex world, where only some of that complexity is really necessary. I've been reading the financial press since before I was in high school and spent years working in the industry. I don't feel like I fully understand it, and I'm sure I never will.
That said, I think the reputation is reasonably justified. Many smart people have pointed out that the financial sector has increased drastically in size, soaking up an awful lot of money relative to the value it creates in the economy. I'm sure people do dislike their banks, but at least those banks do something for them. Goldman Sachs extracts billions from the economy and doesn't do jack for average people. If those average people hear from people closer to the problem that Goldman Sachs is a vampire squid, I don't think it's unreasonable of them to trust that and tie it to their very reasonable economic resentments.
Oracle in particular is an interesting example here. Their revenues are $40 billion per year. I know for a fact that some of that revenue is from companies that are stuck using Oracle for historical reasons; they wouldn't use it if they were starting fresh today with, say, Postegres. Oracle surely knows this, and so has an extractive, rentier approach to pricing.
Are they a company that creates $40 billion in value every year? I doubt it. Is it possible that net of costs, they are a net negative? Definitely.
This is even more true with financial companies, who act as intermediaries or are external actors to transactions. I used to work for a proprietary trading firm. We had no customers. Our job was to go into the markets and turn a pile of money into a bigger pile of money. As market-makers, we provided a little more liquidity to the markets. But did we create societal value in line with how much money we extracted? I sure don't think so. Which is part of why after a few years I got out and never went back.
Another factor surely is notional utility. Even if somebody buys a different car, they can understand what Tesla might do for them. They might never fly on Virgin Galactic, but they could imagine doing it. What Goldman does is something most people will not only never need, but would have a very hard time imagining that they need.
GS OTOH is a meta entity that moves your assets around in a never ending quest to find bigger fools willing to pay more than they did to acquire them. There is literally nothing useful about it and eventually it destroys the value of your assets once there are no more fools left. But it’s legal because they seek out and fund, make rich (IPO), or (apparently) pay off enough socially important people that the practice is allowed to slide. And it’s sure nice when you get the modest kick backs to your account, amirite? Let’s just hope the supply of fools never runs out and we can keep growing money forever. Not an unsafe bet either, unfortunately.
Put another way, what the corporations you cited do is called produce goods. It’s the economic model in many places and despit capitalism having its own set of problems at least companies produce things that people pay for. There are many useful services the financial industry supplies but here we are talking about the guts of how the investment banking subsector operates. If the industry was honest 2008 wouldn’t have happened. When was the last time Tesla royally fucked over your personal assets?
Yes, any time you defraud investors the damage done to your reputation is more than justified:
http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/
>"I doubt your average joe even knows what GS does beyond being a “vampire squid.”"
Yes and even sophisticated investors(hedgefunds) did not know what GS does when they bought their Abacus synthetic CDO product and were hookwinked:
https://sevenpillarsinstitute.org/case-studies/goldman-sachs...
..which is a prime example of bad reputation. Reputation, does not care about justification, it just exists once it started existing.
It must be tempting for GS to just not care about their reputation on main street since they don't engage in that kind of business, but the business they do engage in does not get easier when everyone they might want to interact with is carefully weighing the benefits against the risk of getting tainted by association.
(sorry for the low effort answer)
I guess the question is whether it matters what the average joe thinks. If it does, then GS is in a bad place because all the joes I know wouldn't touch them with a 10ft pole. If not, then we only need to consider what the financial folks think (which I can't speak to).
1-https://theintercept.com/2016/12/09/trump-makes-america-gold...
Did anyone know what actually GS do anyway? Yes, they are an investment bank, they are dealing with money, they are going after ever bigger margin for profit. But how they get there is anyone's guess, and doubt there are that many people in the whole world understand what exactly GS did to get those money.
Average joes might not know what GS is, as with most of us here on HN, but they surely feel pain that the investment bankings brought to them. In that sense, 'vampire squid' is actually quite useful metaphor: It is mystical, it is malicious.
Wall Street investment banks have a much, much worse reputation than ordinary retail banks.
The only consumer product I know of is a savings account from Marcus.com, and since it’s a brand new product, the growth is strongly positive.
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
This description fits Goldman Sachs to a "T". And I think they would probably like the description, given its origin.
So, to be clear, Goldman Sachs are capitalists.
Both point are also true for Facebook, if you want an example closer to our industry, to understand the people and motives involved.
The CFO of Huawei was arrested in Canada for extradition to the US.
https://www.nytimes.com/2018/12/05/business/huawei-cfo-arres...
Malaysia is taking on Goldman Sachs, going where faint-hearted and fearful first-world regulators fear to tread.
Perhaps we'll see more justice coming from unexpected sources.
[1] I don't think Bell Pottinger's erstwhile members have stopped interfering with South Africa but that's a conspiracy theory for another day.
Bell Pottinger cannot be blamed for our problems. The problem is pure and simple that the state is spending too much money on civil servants and inefficient state owned companies.
What Bell Pottinger did, is provide cover for a state capture programme, that, over a short period, funneled money from state owned companies and other parts of the state to the Gupta and Zuma families, and in doing so tried to foment a race war.
7.5b is more than 10 times the fee collected by Goldman, why stop there?
The punishment has to be 5000$ and personal punishment such as imprisonment.
Ex. Law #265: "If a herdsman, to whose care cattle or sheep have been entrusted, be guilty of fraud and make false returns of the natural increase, or sell them for money, then shall he be convicted and pay the owner ten times the loss.
https://en.wikipedia.org/wiki/Code_of_Hammurabi
Innocent until proven guilty was also in the Code of Hammurabi, not sure about the 'eye for an eye' bit or the treatment of slaves though. Nonetheless the precedent of 10x is there.
> 196. If a superior man should blind the eye of another superior man, they shall blind his eye.
> 198. If he should blind the eye [...] of a commoner, he shall weigh and deliver 60 shekels of silver.
> 199. If he should blind the eye of a slave of a superior man [...], he shall weigh and deliver one half of the slave's value (in silver).
[1]: From page 106 of "Sapiens: A Brief History of Humankind" which I was just coincidentally reading on the bus and would def recommend.
baybal2 - sibling comment - was correct and unfairly modded down. A well known leader referenced the Law of Hammurabi the other day.
Coincidentally I was listening to this press conference whilst procrastinating on HN, to come across this story. New to the Law of Hammurabi, I had to check out the Wikipedia page, to read the 'ten times' bit, enabling me to conveniently cut 'n' paste the above comment.
Despite going to school I had not ever heard of Law of Hammurabi before. I have not read it in depth but just that small bit of knowledge regarding the history of written laws has changed how I see and understand the world.
I don’t think GS did anything wrong and I hope they tell the Malaysians to fuck off.
Could you provide some data to substantiate these accusations? The prosecutor is the first non-Muslim Attorney General in Malaysia's history, picked right after a historic election for Malaysia where the opposition party won for the first time. I don't see any evidence of corruption from what I scanned.
https://en.wikipedia.org/wiki/Tommy_Thomas_(barrister)
The finance minister is Lim Guan Eng. A politician who was previously imprisoned for defending a rape victim. Allegations of corruption against him were proven to be false and planned by, ironically, a corruption-funded organization under the former regime (the one that was partnered with GS). https://en.wikipedia.org/wiki/Lim_Guan_Eng
> I don’t think GS did anything wrong and I hope they tell the Malaysians to fuck off.
You seem to have very strong opinions. I'm wondering if you realize that Tim Leissner, Goldman's VP already pled guilty to money laundering. https://www.forbes.com/sites/korihale/2018/11/08/goldman-sac...
I'm very curious about your motivations for your post.
But GS are just the underwriters of the bond, they aren't guaranteeing the bonds. They didn't steal the money either. The Malaysian government is claiming that because the fee was large (around 10%) that it's clear evidence that the organization as a whole was complicit and guilty. I don't think that's a very strong argument.
But the Malaysians don't seem as interested in justice (certainly the two partners should be jailed) as they are in finding someway to get their money back. So instead of looking at the people in their own country who stole the money, an investigation that might implicate other powerful people besides Jho Low, they turn their eyes to easiest target they have, GS, a foreign company.
It might even be reasonable to ask for the underwriting fee back (though I'm on the fence about that), but 7.5 Billion USD? Do you think that number of motivated by justice? Do you think it's motivated by "teaching them a lesson?" Or do you think that the number is so high because Malaysia wants the money and they see an easy way to get it?
7.5 Billion is almost 10% of the entire company's shareholder equity, truly a staggering sum for GS to pay. Total revenue for GS in 2017 was around 30 Billion, net profits were just 4 billion. How is almost 2 years of net profits in the least bit fair as a punishment?
And if it is fair, why stop at that? Why not 15 billion? Or 30 billion? Why not just take all their equity and turn it into a state corporation. Surely Goldman Sachs, the blood sucking squid, deserves a comeuppance for all the proletariat ire they have received over the years.
Maybe that last paragraph is a little much, but the point still stands. I think people irrationally hate banks and hate wall st, and their view of justice for the banks is colored by that discrimination.
> 7.5 Billion is almost 10% of the entire company's shareholder equity, truly a staggering sum for GS to pay.
Apparently the 1MDB losses have cost Malaysian taxpayers around USD $12 billion. Given that GS was the underwriter and allegedly the key enabler of the scandal, punishing GS by making them pay at least the majority of those taxpayer losses seems unjustified or unfair to you? What amount do you believe is fair?
For example, if a "fence" helps a thief sell off some "gear" and the thief is caught. How much should the "fence" be liable for? How much should the victims get back?
[edit: added 'Also, not all the $6 billion disappeared']
Wikipedia. https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad_s...
"According to its publicly filed accounts, 1MDB has nearly RM 42 billion (USD 11.73 billion) in debt"
The Malaysian taxpayer got finangled into guaranteeing all of that debt allegedly by GS.
Even if guilty, what GS has to do with any debt beyond what it raised for 1mdb (us$6b)?
You write: "Given that GS was the underwriter and allegedly the key enabler of the scandal, punishing GS by making them pay at least the majority of those taxpayer losses seems unjustified or unfair to you? What amount do you believe is fair?"
But from reading the first paragraph under the History section here:
https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad
it is clear that by the time Goldman started raising money for 1mdb (2012 if i am not mistaken), a lot of money been raised already, i.e. GS wasn't the key enabler.
So why blame Goldman for all the debt accumulated under 1mdb?
I think the answer is Goldman Sachs. That's not praise for them. If it were Singapore filing charges -- and the article suggests they are looking into it -- then I"d believe Singapore.
But the scandal itself tells you a lot about the Malaysian government's credibility and honesty.
Also, as pointed out elsewhere in the comments, Malaysia has changed government quite recently.
https://en.wikipedia.org/wiki/2018_Malaysian_general_electio...
So if it's scandal, you believe the media, otherwise, you believe the opposite.
What's the logic?
This is very funny. It’s like saying Stalin or Mao commanded superior credibility because they were responsible for tens of millions of lives.
> they are bestowed with power to fulfill the will of the people
Bestowed with power != using it properly.
Not to mention, people could just start a separate company if they absolutely need to do business in Malaysia.
> Singapore’s widened probe opens a potential new battle front for Goldman less than a week after Malaysia filed the first criminal charges against the firm over a relationship that spawned one of the biggest scandals in its history. Singapore is coordinating closely with the U.S. Justice Department, which is also investigating Goldman and has filed criminal charges against two former senior bankers at the firm, the people said.
https://www.bloomberg.com/news/articles/2018-12-21/singapore...
https://en.wikipedia.org/wiki/Enforcement_of_foreign_judgmen...
If GS refuses to pay, the best they can do is ban them from the country. What else can they do, seriously?
But fraud is fraud, Malaysia can sue them in good, old, USA. Who thinks that GS, the paragon of integrity, behaved correctly, raise their hands. Right, zero hands.
Goldman Sachs did have to pay 5.1B for the Great Recession scams [1].
As long as GS can keep the "financial innovation" in Malaysia they will probably pay it after trying to reduce it, if they can't gain from it further in the future they won't.
[1] http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/
Also, the average fees for a bond issuance might be $1m because most bond issuances are small. It's usually higher on a percentage basis.
That explains more
Giant investment firms like Goldman Sachs do their own due diligence before entering in any deals. They did several deals with 1MDB over the years, and the corruption should have been obvious earlier if they actually cared to check for it.
I don't think the Malaysian prosecutors are disputing that the (previous) Malaysian government was corrupt. They arrested Najib Razak (the PM during the 1MDB project), as well as other officials. But they're also saying that GS has a partial responsibility. And given the numbers provided in the news article I don't find it hard to believe.
I know it might be difficult for US or Canadian natives to understand this. But people from most of the rest of the world know exactly what I'm talking about.
Just to make my point clear, a few decades ago (in Africa), we didn't have electricity (quite a lot still don't) we used candles and lamps. Apart from shutting down a candle factory, there wasn't much an individual could do to affect the whole country (other factories can open and candles can be imported). Now we use electricity for lighting and it is provided by one government-owned entity. It makes the head of the entity very powerful giving him/her access to billions and billions of dollars. They also able to screw the whole country up.
[0]http://www.702.co.za/articles/329758/sorry-south-africa-for-... [1]https://mg.co.za/article/2018-01-12-00-eskom-has-a-problem-a...
“Their figure is $1.8 billion. Ours is $7.5 billion,” Lim said.So, no, gs are offering nothing at the moment.
From Goldman's q3 report: 'As of the date hereof, the firm has estimated the upper end of the range of reasonably possible aggregate loss for such matters and for any other matters described below where management has been able to estimate a range of reasonably possible aggregate loss to be approximately $1.8 billion in excess of the aggregate reserves for such matters.'
Even in the US many politicians are far, far wealthier than their official salaries would suggest is plausible.
Update: By the downvoting I know that you all know I mean the Clintons.
Just reporting on such issues is why most western newspapers have been blocked. They don’t even bother trying to refute it, because princeling dominance of the economy an open dirty secret. It also puts better into perspective how the economy is managed in favor of their own interests.
https://www.smh.com.au/world/chinese-leaders-family-worth-a-...
https://www.nytimes.com/2014/06/18/world/asia/chinas-preside...
And do you remember that discussion about Wen Jiabao's mom controlling a good chunk of China's jewelry industry that got the new york times banned:
https://www.nytimes.com/2012/10/26/business/global/family-of...
I think Chinese officials are genuinely surprised in how poor western politicians are and how many of them even lack xiaosans.
Except for the late-1970s cattle futures investment (which was legal and documented, just surprisingly unlikely), I think everything about the Clintons can be explained by their straightforward participation in private business like speaking engagements, consulting, and selling books. If you count their "official salaries" as salaries just from their jobs as public servants, you'd get a lower number, yes, but you don't need to speculate about bribery or corruption to figure out where the rest of the money comes from.
(I suppose you could construct an argument that these forms of private business are in fact morally equivalent to overt corruption, but I'd be curious to hear the details of that argument, especially as basically all of them were after Bill left office. There's a huge difference between bribing a current politician and a former one, in that the current one can meaningfully look the other way or send you kickbacks.)
Goldman's paid her a lot, didn't they?
Actually there isn't[0], because the former one can have looked the other way or sent you kickbacks while they were in office, in the knowledge that you would bribe them later, when it no longer officially 'counts' as corruption. This is the standard way that corruption works in the US, since there are laws against just directly bribing a politician the way you would in some other countries.
0: Edit: isn't a huge difference; obviously there is a little difference, just not enough to do more than slow down the development of corruption.
Putin or a Chinese Politburo member can get as much a Clintons ever made (all public--books, speech fees) by calling /blackmailing an oligarch or an exec of their big corps. In one shot. You simply do not exist unless the state allows you to in those countries.
Over there, every project has a corruption tax added to it and it goes to the top officials. Now think of that when it comes to hundred of billion projects a year.