When the SEC announced its fraud complaint against Goldman Sachs, people noted that the penalties involved would involve money, not jail time. But an attorney writing for seekingalpha.com argued over the weekend that John Paulson, the hedge fund manager who worked with GS to create “synthetic derivatives,” accessed FICO scores to create his financial product and therefore violated the Fair Credit Reporting Act (FCRA)–which could mean a penalty as high as $1 billion, and even jail time if the FTC or Justice Department decides to go after him.
Meet the canary in the coal mine that no one wanted to listen to: Brooksley Born. As head of the obscure Commodity Futures Trading Commission she sounded the warning in the late 90’s about the need for more transparency and regulation of the derivatives market, but a coalition of Beltway insiders, including the then rock star Alan Greenspan, formed against her to shut her up and shut her out. After the economic collapse, it’s time for them to eat crow. Learn more in tonight’s FRONTLINE presentation of “The Warning” on PBS at 9pm eastern, or watch online.
Buddy, can you spare 1.144 Quadrillion dollars? Based on one analysis, that’s the total size of the global derivatives market right now, equivalent to $190,000 for every person on the planet. (A derivative is an investment whose value comes from, or “derives,” from another investment, like stocks, credit, or home mortgages…) If you’d like to learn more about derivatives and become frightened by them, check this article out. For further comparison, here’s what the Sears Tower looks like, as dwarfed by a cube of 1 quadrillion pennies.
The Wall Street Journal recently unleashed a wave of anger by reporting that much of the $173 billion given to nationalized insurer AIG went to banks — including billions to European institutions like Societe Generale and Barclays.