CORPORATE CRIME REPORTER
Spitzer
Calls on Holder to Prosecute Goldman Sachs or Resign
25 Corporate Crime Reporter 17, April 22, 2011
Former New York Attorney General Eliot Spitzer called on Attorney General Eric
Holder to either criminally prosecute Goldman Sachs or resign.
Last week, CNN's Anderson Cooper asked Spitzer whether he thought the Department of Justice will prosecute Goldman Sachs.
“If they don't, shame on them. If they don't, the Attorney General should resign if he can't bring this case,” Spitzer said.
Spitzer said that he had read Senator Carl Levin’s report on the financial crisis and that it confirmed “our worst fears about double dealing, lying.”
“Goldman Sachs has zero, none, nada credibility in my book,” Spitzer said. “They have scammed the American public, lied to Senator Levin's committee. That's what he said. They made a high-level decision in 2006, December '06 that this entire market was going to collapse. They bet against it.”
“They saw that the market was going to collapse?” Cooper asked.
“That's right, two things, two critical things,” Spitzer said. “One, they then bet against it, meanwhile telling their clients keep buying it. And even worse, after years of having the financial services sector say trust us, we will regulate ourselves, they did not pick up the phone, did not go to a regulator, did not go to their colleagues and say this merry-go-round is out of control, we better stop.”
“They
said we can make money and they pounded forward. It is an outrage and I think
the American public should say enough. They have learned nothing.”
Rolling Stone’s Matt Taibbi, who was also a guest on Cooper’s
show said “the only reason that this is even controversial, that we're
even asking the question should they be in jail is because this is the financial
services industry and this stuff is complicated.”
“If this was any other industry, if this was a car dealership, for instance, basically what happened was imagine you're a Ford dealership and you get a whole inventory full of Broncos that have defective brakes in them and you decide not only to sell them, but to give bonuses to your salespeople to sell these defective products. And then you go out and take out life insurance policies on the drivers of the cars that you sold.”
“That's exactly what happened here in a nutshell. They had defective merchandise. They had these terrible mortgaged-backed deals that they knew were going to blow up and they unloaded it as fast as they could on their clients while they bet against them.”
Spitzer said that “there are documents out there that came from Clayton, the company that did due diligence on the underlying mortgages -- I don't want to get too technical - that the banks had, many of the banks had this that said these mortgages are no good.”
“They will not satisfy even your own standards for issuing mortgages. These are the mortgages they then wrapped up into these securities, sold them off saying buy this stuff, and bet against it.”
“They gave the information to Moody's and to S&P's, and they all were culpable, which is why Moody's and S&P's, in my view, should also be stripped of their capacity to rate these things. They all blew it in the most fundamental way.”
“When
I was AG back in 2002 and 2003, and went after these companies for the same
thing, lying to the public about the quality of the stocks, they said, we get
it, we have learned,” Spitzer said. “Bunk. They did the same thing
year after year after year because they saw a penny they could pick up. Outrageous.”
Cooper askesd Taibbi – “Two-and-a-half years after this, no one
has gone to jail; no one has even been prosecuted on charges?”
“Well, but they have sure gone after Barry Bonds and Roger Clemens,” Taibbi said.
“I mean the entire history of this whole era clearly demonstrates that the Justice Department has no appetite whatsoever for taking any cases against any of these Wall Street executives, even when they have very good evidence and very strong cases.”
“The regulators were completely asleep at the wheel and in some cases they were tremendously understaffed and didn't have the resources or the wherewithal to take on these jobs. A great example being AIG, whose regulator was the Office of Thrift Supervision – a savings and loan regulator was regulating the world's largest insurance company and they had one insurance expert on their entire staff.”
Spitzer said that he “went after AIG, got them to get -- the biggest settlement in history. Their accounting was a fraudulent scam, top to bottom.”
“I was called and told back off by the U.S. attorney in the Southern District, we will take care of it. They never did, never did it,” Spitzer said.
Spitzer then took a shot at his successor as New York Attorney General – Andrew Cuomo.
An article in the New York Times titled “In Financial Crisis, No Prosecutions of Top Figures” last week reported that Treasury Secretary Tim Geithner met with then Attorney General Cuomo in an effort to “calm the markets."
“Tim Geithner, treasury secretary, apparently reported in today's New York Times was calling people saying don't bring cases, it will unsettle the markets, so they let these guys go free. Meanwhile, he signed off on $12.9 billion to Goldman to cover a bad bet they made.”
Cooper asked Spitzer – can you prove intent on Goldman Sachs, intent to defraud?
“It gets harder to prove this, and this is where the complexity and structure of an organization creates insulation as you move up the hierarchy, because proving the intent to deceive as the paper trail gets a little thinner is a problem,” Spitzer said.
“But the civil charges that should be brought are there screaming out to be brought based on the Levin report, based upon the documents that are out there. And the fact that it hasn't been done yet is really staggering.”
“Do you think politicians are scared of going against Goldman Sachs?” Cooper asked Taibbi.
“Absolutely,” Taibbi said. “Goldman Sachs was the number one private campaign contributor to Barack Obama's presidential election campaign. It's one of the single biggest campaign contributors to both parties in Congress.”
“So it's a rare event when, you know, an establishment politician like Carl Levin decides to basically open up a shooting war against a company like this. It just doesn't happen very much because the consequences for these politicians are so severe, and that's one of the reasons why they have lasted this long.”
Spitzer said that “before we went after Merrill Lynch, which was the first case we filed many years back, I was told by their lawyer – this is a direct quote – ‘be careful, we have powerful friends.’”
“Do you think the Justice Department will prosecute?” Cooper asked Spitzer.
“If they don't, shame on them. If they don't, the Attorney General should resign if he can't bring this case.”
“It is so outrageous to me, the deeper we dig and the more fundamental the violations we see that these investment banks hiding behind the patina that they would take care of the public interest in regulating the stock market, time and time again scammed and deceived and our tax dollars are paying those grotesque bonuses that we still read about.”
Taibbi said that “I talked to one guy who was a former SEC investigator and he said basically if you start sending Lloyd Blankfein or one of those guys, put one of those guys in a real maximum security prison for six months, this whole thing would be over very quickly. The whole situation would be cleared up.”
“But the problem is, there's no incentive for these guys to change their behaviors, because they never, ever get punished. Not only do they not get punished. They get a bailout.”
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