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Nomi Prins: Could Lloyd Blankfein Face A Prison Sentence?

The Goldman Sachs CEO didn’t get a big-time criminal-defense lawyer because he’s worried about an SEC wrist slap—there’s a real possibility of doing time (for perjury AND obstruction of justice), says former Goldman managing director Nomi Prins.

Daily Beast

There’s a saying that loose lips sink ships. So can dead weight.

Goldman Sachs CEO Lloyd Blankfein, who just got himself a lawyer, may be facing the possibility of sinking, either because of his own words in April 2010 before the Senate Permanent Subcommittee on Investigations (PSI) or because his shipmates are distancing themselves in a legal version of every man for himself. Or both.

Recall that Blankfein emphatically told the subcommittee, “We didn’t have a massive short against the housing market, and we certainly did not bet against our clients.” The 650-page subcommittee report (PDF) presented on April 13, 2011, which cites Blankfein 79 times, begs to differ.

The report accused Goldman of trading against its clients by simultaneously shorting certain subprime mortgage securities (a.k.a. “cats and dogs”) while stuffing them into the collateralized debt obligations it sold. It also suggested that Goldman executives, including Blankfein, misled Congress in testimony surrounding the Abacus CDO, Hudson, Timberwolf, and other deals, by saying it didn’t have a big short.

The top lesson I learned before leaving Goldman in the wake of Enron was Goldman’s foremost internal policy is to protect Goldman. It’s also to protect the most powerful members. When cracks manifest in the corporate armor, those two policies are at odds.

The executives running Goldman are exceedingly wealthy, not least because when the firm faced its darkest hour and lowest stock price in years during the bank-created crisis of fall 2008, the government provided it billions of dollars in the form of cheap loans, FDIC debt guarantees, TARP, AIG make-wholes, and a late-night moniker change from investment bank to bank holding company, giving the firm access to excessive Federal Reserve aid.

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Reader Comments (9)

The Quake We Should Fear

The earthquakes yesterday scared people along the East Coast, but Simon Winchester warns that the truly terrifying earthquake may strike the Midwest—and why FEMA is preparing for it.

Aug 24, 2011 at 5:38 PM | Registered CommenterDailyBail
Good link. Thanks LC.
Aug 25, 2011 at 1:17 AM | Registered CommenterDailyBail
Please, that's like asking if the Treasury Department, or Tim Geithner, or the Federal Reservae can actually go to jail. Obama will not allow his lord and master to go to jail.
Aug 25, 2011 at 1:46 PM | Unregistered CommenterJohn Mack
How could someone who is above the law go to prison? Besides, if Blankein was to become a serious liability for GS, they would just heart attack the SOB.
Aug 25, 2011 at 3:24 PM | Unregistered Commenterj r
Two realities are being ignored by The Daily Bail on two seperate issues. 1) Who controls the SEC and has for over 10 years, and who are they loyal to. Blankity-Blankfein will drop the vein he is on for his successor and go home fat and happy. 2) Study HAARP technology. This is no longer your grandfather's world nor is it yours or mine. What was science fiction has been developed into weather manipulation and earthquake creating science and APPLIED technology. Start with dutchsinse.com to see monitoring in progress, then see 'Weather wars? That's Impossible.' and 'Angels Don't Play These Harps'
Aug 25, 2011 at 4:15 PM | Unregistered CommenterHoward T. Lewis III
Howard. Regarding point 1, this is not an SEC investigation. This is DOJ. I'm not saying I think Blankfein will serve time or even be charged. I'm simply posting a column by Nomi Prins who is a smart, former goldman managing director.
Aug 25, 2011 at 10:20 PM | Registered CommenterDailyBail

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