Goldman Sachs is a major investment bank that profited greatly during the financial crisis by shorting the subprime mortgage market while still selling mortgage-backed securities to clients. It faces numerous lawsuits alleging it misled investors and profited from the financial products it created failing. While top executives claim they did not bet against clients, internal emails suggest they were aware of the risks in the products they sold. The bank continues to face legal and reputational challenges over its role in the crisis.

1. POWER & PERILS

2. Company BackgroundFounded in 1869 by Marcus Goldman and Samuel SachsHeadquarter in Manhattan, New yorkServices provided- asset management, commercial banking, investment banking, mutual funds, prime brokerage.Offices worldwide – America, Europe, Asia Pacific, middle East. Primary dealer in US Treasury Security market.Currently headed by Lloyd Blankfein, CEO.

3. Sub Prime Crisis – A Human StoryNINJA LoansCDOCDSHigher Interest Rate because of Higher riskU.S. subprime mortgage crisis - a rise in subprime mortgage delinquencies and foreclosures

5. The Tremors of the crisisBondholders-pension funds, who bought sub-prime mortgage bonds.Were worth between 20% and 40% of their original value for most asset classes, even those considered safe by the ratings agencies.A dramatic effect on house prices, causing the first national decline in house prices since the 1930s.

6. The Tremors of the crisisEconomists expected the US economy to slow in the last three months of 2007 to an annual rate of 1% to 1.5%, compared with growth of 3.9%.Reduction of credit availability by banks due to the drying up of the wholesale bond markets and effect of the crisis on their own balance sheets

7. Who all were holding the bag?Held collectively by:Depositors

8. Investors

9. SPV

10. Banks

11. Government

12. Banks worldwide – Domino EffectWhat did Goldman do?Securitizing High Risk Mortgages

13. Magnifying Risk

14. Shorting the Mortgage Market

15. Conflict Of Interests

16. Abacus Transaction

17. Credit Default Swaps“Short” the Mortgage MarketGoldman’s net short investments worth $13.9 billion

18. Record gains in 2007 of over $3.7 billion

19. Net revenues for Goldman’s Mortgage Department of $1.2 billion. Lloyd Blankfein (CEO and Chairman) “We didn't have a massive short against the housing market, and we certainly did not bet against our clients. Rather, we believe that we managed our risk as our shareholders and our regulators would expect," Blankfein said in his opening statement. The Power Player

20. The Power Player Senate In a companies Email – November 2007 “Of course we didn't dodge the mortgage mess, We lost money, then made more than we lost because of shorts,” referring to trading bets that pay off when a bond drops in value.

21. Magnifying Risk & AbacusSelling high risk, poor quality mortgage products to investors around the worldTransfer risk associated with its high risk assets – making on spreadAssisting favoured clients to make profit at the direct expense of the clients that invested in the Goldman CDOs

22. Abacus Transaction Paulson & Company ( Hedge Fund)Wanted GS to make a CDO – full of mortgage assets that were predicted to loose value GS stated assets were selected by ACA – fudged investorsPaulson made $1 billion & gave $15 million to Goldman Sachs

23. The “Fabulous Fab”The lawsuit accuses Goldman Sachs and a Goldman VP Fabrice Tourre of "making materially misleading statements and omissions.“David Viniar (CFO) did not disclose investigation of the ABACUS by FED in 2009He denied the allegations "I wish to repeat -- I did not mislead Deuche Bank or ABM Amro”

24. The “Fabulous Fab”SenateEmails between Tourre and his girlfriend suggesting that he was fully aware that the complex financial packages he helped create would collapse GS paid a $550m fine for sale of Abacus

25. The Lever -Age Short positions were so large and risky that the Mortgage Department repeatedly breached its risk limits.

26. Goldman’s senior management repeatedly gave new and higher temporary risk limits to accommodate its trading.

27. In 2007, GS value risk index revealed 54% risk from Mortgage Department.The Power PlayerSenate v/s Craig Broderick, Chief Risk OfficerThe level of risk in Goldman Sachs's mortgage portfolio during the housing bust was "a matter of expert judgment" and the result of complex data-crunching

28. Goldman Sachs Reputation in PlayThe bank crossed paths with U.S. taxpayersPosted $3.44 billion in 2nd quarter profits 2009 in an environment where Morgan Stanley just reported a $1.26 billion loss. Stalwart voices of Wall Street -have criticized the firm’s undue influence on government and its ruthless pursuit of risky profits

29. The “FED UP” Power players

30. The “ Goldman Plant” in FED Hank Paulson , Treasury Secretary 2006Let Lehman Brothers fail

31. Bail out Bear Sterns

32. Bailing out AIG

33. Government buying illiquid assets

34. TARP money to bail the wall street instead of Main StreetHearing of Hank PaulsonVIDEOClick on the Image to see this video

35. Golden Man of Goldman SachsTimothy Geithner , CEO New York FedAllocation of $800 billion TARP funds Involved in JP Morgan Chase acquisition of Bear Stearns ( 29 Million dollar Govt Aid)Involved with Henry Paulson in March ‘08 that saved AIG from failing.

36. Freidman Case

37. Not grant Lehman Brothers the right to become a bank-holding companyOther Catalyst Alan Greenspan’s malfeasance – Financial DeregulationBen S. Bernanke – chair of FEDCredit rating agencies Cogs in the wheel of financial destruction

38. Fall of the GiantsBear Stearns- sold to JP Morgan Chase in for $236.2 million or $2 per share. Effective nationalization of mortgage giants Fannie Mae and Freddie MacMerrill Lynch sold out to Bank of AmericaFed arranges to lend $180 bn to AIG, American International Group, U.S.A’s biggest national insurer Lehman Brothers, the 158 year old U.S.A’s 4th largest Investment Bank files for bankruptcy

39. US Government – Oligarchy?FANNIE AND FREDDIE FED TAKEOVERLEHMAN BROS. NOT BAILED OUT-FAILED MERRILL LYNCH- JOHN THAINHENRY PAULSONBIGGEST PAYOUT 12.9Bn DOLLARTIMOTHY GIETHNERAIG $180BnBUBBLE WEBNEEL KASHKARICHANGE TO BANK HOLDING CO.TARP, FDIC MONEY, FED DISCOUNT WINDOW 1 year waiverTIMOTHY GEITHNERSTEPHEN FRIEDMANCONFLICT OF INTEREST

40. AIG Bail Out – Why?Goldman Sachs had purchased $20 billion of CDS and other instruments from AIG. GS Had made offsetting transactions in AIG Stock. If AIG was not bailed out GS would Have lost the money.GS got 100 cents per dollar whereas taxpayers only got 2 cents per dollar