The headline caught my attention: “Ex-Goldman Sachs Trader Surrenders to FBI After Securities Fraud Probe”. Wow, I thought to myself. Really? Almost 5 years after the financial crisis, the government is finally going after Goldman? Is that possible? Did Goldman stop appointing Treasury secretaries and NY Federal Reserve presidents? How is it possible that finally, after all of these years, after all of the articles, whistle blowers and hearings that the government decided to go after Goldman? Did someone finally realize the absurdity of having taxpayers kick in $10B to save the world’s preeminent financial services firm, without asking the Gazzilionaire Goldman partners to kick in some money?
Did the government finally find enough evidence that Goldman knew the mortgage market was blowing up at the same time that they were putting their stamp of approval on the securitized packages so they could sell them to pension funds, unions and investment firms? Is it because they found evidence that Goldman traders knew the credit agency rating of their securities were completely bogus but kept selling junk trances labeled as “A” grade? Was it because they knew the hundreds of billions of dollars of CDS that AIG was writing were never going to be paid, because their value exceeded the entire value of AIG several times over?
And then I started reading the story. Well, it turns out this has nothing to do with any of the above.
It turns out that a “rogue” trader had the audacity to exceed his trading limits, and is now charged with “intentionally concealing… the true huge size, as well as the risk and potential profits or losses associated” with his trades. Of course, the absurdity and the irony was too subtle for the press to pick up.
The absurdity of the fact that when firms like Goldman concealed their huge bets with off-balance sheet entities, derivatives that leveraged them 50x over, and tranches that were securitized with garbage loans but called “A” grade, result in the loss of billions to investors, they call it a “unforseeable” and they ask for tax payer bailouts, but when similar actions by a trader costs them $118 million, the FBI is called in because it’s a crime.
The funny thing is that if the trader’s bet had gone the right way, he’d be sitting behind the wheel of a Bentley Continental, not behind bars.