The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

Unethical Wall Street Banks

On April 11, 2016 we heard that Goldman Sachs will pay $5 billion settle. The US DOJ said:

“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail.”

JPMorgan Chase & Co. will pay more than $300 million to settle SEC charges claiming that the firm didn’t disclose its preference for putting clients’ money into the bank’s own investment products.

JPM admitted that two of its wealth management subsidiaries failed to tell customers it preferred JPMorgan-managed mutual funds and hedge funds from 2008 to 2013.

Total settlement of the top financial firms for misdeeds leading to the 2008 global fiasco is over $110 billion. Of course, it’s the innocent shareholders who will pay this. The top executives who created the deceptions aren’t even charged. They keep their big yachts, corporate jets, Bentley’s, etc. And the government gets the money. So what is achieved?

We believe that eventually bond market investment firms and their funds will be subject to class-action suits. The game of valuing bonds in the portfolios when no public price was available led to some interesting games. Mutual funds of such firms often bought bonds from their own managed portfolios. Were these arm’s-length transactions? That will be the question. The fund in effect became dumping grounds for securities they couldn’t sell in the markets.