Goldman Sucks fraud rife through whole system—Australia too

This morning CEC Leader Craig Isherwood charged that there is not one major bank in the world that does not use the practices for which Goldman Sachs has just been charged with fraud.

On 16^th April the U.S. Securities and Exchange Commission (SEC) lifted the veil from a tiny corner of the massive fraud at Goldman Sachs, by charging the company with an $11 billion securities fraud against its own customers in 2007. The Australian Securities and Investments Commission is considering joining the growing list of authorities, including those of Britain and Germany, which are opening their own investigations.

Goldman flogged mortgage-backed securities to among its biggest customers; securities that were picked by a third party, hedge fund bandit John Paulson, who was betting that those securities would fail. The suckers lost billions of the $10.9 billion they invested, and the money they lost was passed through to Paulson, after Goldman took its cut. The use of credit default swaps (CDS) to provide insurance for such phony transactions—the same tools which earned banks like Goldman, billions of bailout dollars in 2008—is also being investigated by the SEC.

“This fraud is not an aberration,” charged Mr Isherwood. “This is a systemic practice in the world of derivatives. The entire system is toxic, and must be reorganised!

“The banks—including Australia’s—who ordered the world’s governments to deregulate the financial system over the past two decades, created derivatives to leverage all the cash flows they could parasitically siphon off of real economic activity, into exotic, toxic paper that added up to quadrillions—all to prop up their collapsing system. In some cases this type of gambling was based on methods developed in the games of poker and blackjack!

“The same insanity still prevails in Australia’s housing bubble: housing has been deliberately hyperinflated up to totally unaffordable levels, crushing homeowners and renters under soaring costs, but the Australian media call it ‘a recovery in housing’.”

In the U.S. the next stage of the real estate crash is about to hit, between a massive volume of adjustable-rate mortgages about to reset, zooming home foreclosures, and a crisis in commercial real estate delinquencies. On 13^th April Morgan Stanley reported the largest private equity loss ever in commercial real estate, with a write-off of $5.4 billion of its $8.8 billion real estate funds business.

Six million U.S. households are more than 60 days delinquent in their mortgages and 4 million of them are more than 120 days delinquent, and will almost certainly lose their homes. 11-12 million households owe more mortgage debt than their house is worth. The numbers of homeless are growing, while census figures show that 10.9 per cent of American homes were completely vacant, year-round, at the end of 2009. Experts are awaiting another crash in home prices, and therefore, another crisis in mortgage securities values.

“The essential thing to recognise,” Mr Isherwood stated, “is that the same systemic problems we faced in 2007, triggered by the ‘sub-prime collapse’ still remain, which is quite lawful, because our government did nothing to address the underlying problem. They threw money at it. Now, despite the wishful thinking of the last two and a half years or so, those problems are coming right back at us, even harder.

“Economics is not about money or statistics; it is about whether you have a home to live in, a good job, food on the table, and a future ahead of you. By that measure there ain’t no economic recovery here, or anywhere on the planet. It’s time we adopt Lyndon LaRouche’s science of physical economy, which must begin with a full Pecora-style investigation into fraudulent systemic banking practices and a global ‘Glass-Steagall’ re-regulation. Join me in forcing our government to admit, and then solve, our problem.”

To find out more about the case of Goldman Sachs, click here to view a five-minute video.