and goldman sachs is your first primary target. and for the record, do you own goldman shares yourself? no, i do not own goldman shares. but i will tell you this, that if goldman got into the 135, 140, i would certainly be looking at maybe six months, nine month out options. call options. i would be looking for it buy down in there. ok, well let's talk about overall financial sector. since the sec may be looking at other banks. do you short financials now, or do you still buy them? no, i like financials. i think like bank america, i still like bankamerica. but, bankamerica up at 19 and the whole financial. if you look at the xl f, just as an index or an exchange traded fund. you see the percentage gain that we've seen this year alone. i think we got way to far ahead of ourselves. the market is going to struggle, banks will struggle throughout 2010 and probably for the first half of 2011. but i don't think you do not want to not have exposure. i think you want to have exposure. looking at citi for example, we hit $5, we tapped off of

a rough time for goldman sachs. the company says it will vigorously contest these charges, and as we had, try to defend its reputation, a reputations that's now under siege. erin? >> thanks very much, scott cohen. let's get the market reaction. bob, off the lows for the market for now. >> but not by much. the most interesting thing is over here at the politics and the timing of the announcement. we have a huge financial regulatory reform bill up in the senate, probably in the next couple weeks. senator dodd has been shepherding that. roger freeman, a pretty respected analyst over at barclays had a note out in the middle of the day, which i think crist liesed a lot of people's comments. it was a way to sway some of the on the fence republicans to support a tougher financials bill. the president has said that anybody who votes against this -- so strong rhetoric around here today. the goldman sachs here, a low of about $155, well off that low, huge volume, north of 0 million shares changing hands. citigroup also droppe

they have accused goldman sachs of essentially designing... collaborating with a short sell to design securities that would fail. and then deceiving investors about how these securitys were created. and it is a riveting case because although i had heard tell of such things happening inside the big wall street firms until now i didn't know for sure that it had. and so i feel like for the first time a light is being shrined be into places where it needs to be shineeneded and we all all learn a lot about how these places conducted their business. >> rose: you think this is just the begin? >> oh, yes. i'd be really surprised if goldman sachs was the only firm designing securities with the help of short sellers that were made to fail and i'd be surprised if john paulson was the only hedge fund manager working with the firms to do it. and more generally it points to just the degree of corruption in fixed income markets. i mean, we have... the story gets complicated as you dig into it but goldman sachs was... essentially seems to have been using a se

the securities and exchange commission filing civil fraud charges against goldman sachs as well as one of its vice presidents involving mortgage-backed securities. the s.e.c. says that goldman structured a portfolio of what turned out the to be toxic mortgages hand picked by a hedge fund manager run by john paulson. and the s.e.c. says that goldman did not disclose that paulson not only had picked the mortgages, but that he was betting against those mortgages in 2007 as the housing market was about to come undone. goldman sachs today says it will vigorously fight the charges and work to restore its reputation, a reputation that today is very much under fire. here is the s.e.c. chief of enforcement speaking today in new orleans. >> there is a fundamental difference between somebody being short on a synthetic cdings o or taking a view that the assets will perform poorly and a world of difference between thoo and letting that person being involved in the selection process of the portfolio. >> that person being john paulson of john paulson and company, the big hedge fund company and more t

is he going to be set up and labeled as a rogue by goldman sachs? >> i can't imagine they won't ultimately have to play it that way. if you remember, in 2003, goldman was accused of front-running the closing of the long bond? >> yep. >> and what ended up happening there was you had about a $90 million settle mend and you had the employee at the center of it going to jail. i'm not sure this ends up terrifically different. obviously, front-running versus material statements, but the substance ends up looking the same. >> interesting what he will be responsible for. he was a pretty junior player in all of this it was very clear. jesse, what's your point of view on the point you just made about how far this goes? is this really going to hone in on goldman or become broader some. >> i think this is going to be much bigger than this. i think that the cdo business of 2006 and 2007 is not dead yet, and people are going to be re-examining it. my colleague, jake bernstein, and i investigated hedge fund magnitar that did deals with nine investment banks, cdos l

when you do that, you end up with an impact that's certainly manageable for a goldman sachs. what people are forgetting on is that this is a 144-a private placement. everyone in this signed that they were sophisticated investors. and all goldman was was the placement agent. they weren't an underwriter. as an underwriter you have a very different obligation as a placement agent. >> that's a good point. joe, you had a question. >> next week on the earnings conference call what's the one question, what's the one answer you want to hear from goldman? >> on this one i want to hear what is your -- the impact on regulation? what's going to happen on your derivatives book? how big is that going to be? because it really looks like the street's going to lose the derivatives fight. a lot of the business is going to shift over to the exchanges. and what's the bottom line? >> i think it will be interesting to see in their 10q when they do file it shortly how they characterize this situation. do they call up material? what do they think is the potential liability from this? >> right. >> may

do you think that goldman sachs did anything wrong in this whole process of the synthetic cdos? >> well, i don't think goldman did something wrong -- >> so you don't think goldman did anything wrong. >> but that doesn't mean that we didn't do deals that were bad decisions to do and didn't believe like we wanted them to do, and it doesn't mean we didn't periodically make mistakes, but wrong to me has some qualitative comment about doing something inappropriate. that doesn't mean we didn't make mistakes or do deals that didn't turn out the way we hoped they would. >> okay. what's your definition of a synthetic cdo, so we know if we're on the same page? >>. >> sure, it would be a collection of -- well, it could be a number of -- basically a cdo where there's no cash references involved, so though it's listed as a bunch of assets, it's clear it's not that, it's done by shorting some sort of derivative from that, and from that you can create cash instruments or synthetic instruments. >> do you know, when was this idea thought up? this synthetic cdo idea? is this a fairly new phenomeno

it's goldman sachs and mr. tourre, as if there's no one in between. >> i can tell you based on my experience at the s.e.c. when we worked on matters of significant size, we tended to coordinate or investigation alongside the fbi, and also in this case i would imagine the new york state attorney general, connecticut, their attorney general verbalize that they're looking into this. they want to understand whether it was tied to just goldman. with regard to fabrice, assuming he was guilty, it's hard to believe he acted alone. >> if it's true that he represented that -- this guy is going to jail, i don't know about that, and i've heard conflicting opinions. >> goldman i don't believe believes he misrepresented things. otherwise he would have been fired. >> i think they'll put a lot of pressure on him, the s.e.c. and possibly the justice department. it's amazing the kind of pressure they can put on somebody like that. if he goes over and cooperates with them, clearly they're going to want him to give up other people

goldman sachs reported huge first quarter profits. on the other hand, their stock dropped another 2%. michelle cabrera has the details. >>> and later on, should synthetic cdos be banned? we'll talk to david goldman and peter morici. there is a debate. you're watching cnbc, first in business worldwide. >>> all right. fresh off s.e.c. fraud charges, goldman sachs reported huge first quarter earnings today. cnbc's michelle cabrera joins us. hello. >> three and a half billion dollars they made in profits, much better than a year ago. nearly double what they made a year ago. look at the numbers. turned out to be 5.59 per share, much better than expected. there's the chart. what the stock did today. we'll explain why it was down toward the end here. once again, the first thing we wanted to show you were the actual earnings which were much better than expected. revenue came in better than expected. nearly $13 billion in revenue. there you see the actual income. 98% better. there we see revenue. $12.8 billion. a year ago they made only $1.4 bi

goldman sachs. goldman sachs, lloyd says we're doing god's work, it was probably a joke.o real response from goldman sachs. after that was quoted in the paper. communication when you're a public enterprise and a publicly nobody enterprise. paulson is a private company, but he's an internationally known figure. and i think he's getting very good advice here to communicate with these people. >> we showed a list of some of paulson's top holdings, some of which have seen some liquidation in the stocks, that is, on fears there are redemptions in paulson funds. but anthony, you actually like one of his holdings. which one? >> yeah. it's time for the hedge fund trade of the week. and this is cit, which is in paulson's portfolio. it's also in avenue's portfolio. and the way these guys got this stock is that they owned the debt in cit and they got this stock and warrants out of the bankruptcy. cit has a brand new management team in john thain. it's trading below book value. and it's a warrant on the middle market lending recovery that we should see as the economy recovers. so this

keeping an eye on vik pandit's citigroup, it shed 5% since yesterday, much of it because of goldman sachs. the company reports on monday. if it's good, you could be getting a gigantic goldman-inspired bargain on a stock that i think could ultimately wind its way higher, maybe to $12 in 2012. then third, you buy the big industrials, which haven't yet reported, a little more risk here, right? that's why it's third. the ones that have been galloping and galloping higher until this news broke about goldman. they are entirely unaffected. the issue of course here is that you can't be sure what will be reported. so now you are relying on the decline to create values that might not be realized, hence the more risk. for example, i saw high-quality cyclical like boeing, that reports next wednesday. it was down 2%. i think you can buy some boeing ahead of wednesday's report. i'm sanctioning that. because it is at the beginning of what i believe will be a multiyear, maybe a seven-year cycle. then you go buy more if it gets knocked down more when it reports because i'm a conviction fan. you know i lik

the goldman sachs didn't just make money.e of its clients' reasonable expectation that it would not sell products that it did not want to succeed. and that there was no conflict of economic interest between the firm and the customers that it had pledged to serve. those were reasonable expectations of its customers. but goldman's actions demonstrate that it often saw its clients not as valuable customers, but as objects for its own profit. this matters because instead of doing well when its clients did well, goldman sachs did well when its clients lost money. >> i do not think that we did anything wrong. >> okay. >> there's things that we wish we could have done better, in hindsight, but at the times we made the decisions, i don't think we did anything wrong. >> now, regret to me means something like you feel that you did wrong, and i don't have that. what i do have, though, is, you know, we made mistakes in our business, like i think any business does. and we made some poor business decisions in hindsight. >> so do you think

goldman sachs faces congress. all your favorite characters will be there from fab fab all the way up to lloyd blankfein. but holes already being poked in the s.e.c.'s case. will it be smooth sailing for the financials after tomorrow's three-ring circus? on the fast line right now anthony scaramucci of skybridge capital. anthony, after tomorrow is the coast clear? we're getting some static here. >> i'll tell you i'm not so sure about the coast being clear for goldman. but here is what's going to happen in this slugfest tomorrow, and here's the backdrop. number one, goldman is clearly losing in the court of public opinion. you can see the stock continuing to trade lower. the central thesis being this uncertainty will be a cloud over its stock and other financial services stocks. number two, they have whistleblower rhys many. an angry spouse, somebody in there leaking another bad situation for goldman. and lastly, if they win, it's sort of a pyrrhic victory. look for the s.e.c. to really gear up and continue to look

>> goldman sachs. >> right, goldman sachs. what were you going to ask? >> i was going to say do you think there is anything inherently wrong or there should be any admission by the companies and a lot of the profits are coming because of the federal government. are you fine with the way the announcements have come? >> look, i -- there should be some admission of that. and before they all pat themselves on the back for the great job they did and get a big bonus based on their profits, somebody ought to recognize a great deal of that profit came from interventions from the government saving their bae the >> let's talk about too big to fail. that's a bone of contention. we had kay bailey hutchison on yesterday talking about it. i was under the impression -- by the way, i am an a-political kind of animal. i was always under the impression that too big to fail was more of an economic condition or situation than a government policy. if you're big enough to cause a problem with the system, then you are, by definition, too big to fail. and don't we need some mec

looking at them, the current or former top executives, wall street investment bank goldman sachs. as you know, watching cnn, goldman stands accused of helping turn a garden variety recession into a worldwide economic melt down or having a part in that. i'll spare you for now but what the senate subcommittee is claiming and what the s.e.c. ver separately is charging, is that goldman peddled mortgage backed investments that goldman themselves was betting against and maybe even engineered them to fail. take a listen to one of these senators. >> you are the bookie. you are the house. you have less oversight and less regulation as you all began this wild, wild west of traunches, waterfalls, equity traunches, residual, warehousing, as you began all that, you had less oversight than a pit boss in las vegas. >> i said i would avoid the jarg jargon. i never said anybody else would. goldman says it didn't mislead anybody. it lost more than a billion dollars on its own investments. ceo lloyd blankfein testifies. he says, we didn't have a massive short against the housing market and we certain

he says we got mugged by goldman sachs. and today congress rips into that firm, accused of ripping you off. >> you knew it was a [ bleep ] deal. >> larry: plus, moore's take on arizona's controversial immigration law and sarah palin, and the american auto industry's comeback. michael moore, his opinions for the hour next, on "larry king live." >> larry: like him or dislike him, he is never dull. we welcome michael moore. >> try to like him if you can, please. >> larry: we welcome michael moore back to "larry king live." the oscar-winning documentary filmmaker, best-selling author, most recent film "capitalism: a love story." kind of prophetic today. we're going to talk about goldman sachs. and i think he is going to take them to task. the firm's executives past and present were on the hot seat on capitol hill hill today. hearings just ended. members of the permanent subcommittee on investigation accused them of unbridled greed in helping push the u.s. economy into a tailspin. the final witness goldman chairman and ceo lloyd

i don't carry any water for goldman-sachs.e recipients of government welfare which in my view, they voshouldn't have gotn and the constitution doesn't authorize. this is a novel lawsuit with a novel cause of action. whenever you sell something, you have to tell the buyer everything you know about it even when the buyer is a bank as sophisticated as you. there's no such rule right now. >> all right. judge andrew napolitano, we'll be listening to you and "brian & the judge" on the radio in two hours and four minutes. >> we'll find something to disagree about. >> and the judge will be wrong to disagree agreeably. >> coming up, breaking news overnight about that volcano in iceland. there are reports that eruptions are strengthening. we'll be live at j.f.k. airport with the very latest. >> then ponch and the hulk joining up. joining us live in studio next hour. smart...you're staying at this resort for free? how? welcomerewards from hotels.com. see when i accumulate 10 nights, i get one free. and...they let me choose where to use t

we'll also go wall to wall tonight on a day goldman sachs reports record profits. we'll show you where goldman gives, which politicians get and how it influences the debate in washington. in "one-on-one" the focus middle east peace. we talk to a man with experience negotiating for the united states who now says we have the wrong assumptions in the arab/israeli conflict. the most person you don't know tonight will tell you something you don't want to hear. $770 million of your money wasted on a project that was supposed to make big improvements in border security. >>> it's been 18 months now since wall street's collapse. almost sent the country into a depression. and your congress has done exactly nothing to keep it from happening again. they're trying and tonight there's some optimism of a bipartisan deal in the senate. i know, we'll believe it when we see it. after all, the president says republicans are lining up to defend the big banks and the republican leadership says what the president and his party want are endless bailouts. but i spent a bit of time on capit

of goldman sachs. there is no question about that. >> yes, sir. >> you set the tone. >> yes, sir. >> i have asked a lot of questions about ethics. i have a question for you. why did goldman sachs decide to release the personal e-mails of mr. tourre and not everybody else in this hearing? it had no investigative purpose. we did not expose any of that. we were not exposing it. was that the right decision? is it fair to your employee? is that a political ploy or a defense ploy? why would you do that to one of your own employees? >> you know, i was not closed to the decision -- close to the decision. i was not specific about that. we wanted to get, and i was not thinking about that -- we also provided information from e- mails it respect to the business and there were elements here that spoke badly of the firm and we just wanted to come of breast -- abreast. there was nothing to my understanding about mr. tourre's e-mails that were evidence of the mills that were already out. i did not think we were adding

there no question goldman sachs has friends in high places. a number of bigtime players have swung through the revolving door. first the former goldman ceo ast henry paulson. he left to become bush's treasury secretary. jon corzine became a u.s. senator and later new jersey's governor. robert rubin also ran goldman, then left to become treasury secretary under president clinton. then went back to work for citigroup and was an economic adviser to president obama during the campaign and a mentor of mr. obama's top current economic aides. more goldman alums were currently in high positions in washington. representative jim hines currently sits on the house financial services committee. overseeing financial companies. hines is a former goldman vice president. gary gensler is the current chairman of the u.s. commodities futures trading commission and his office is expected to have a big hand in the future regulation of the derivatives market. he's also a goldman sachs alum. and many people might recognize this man, neel kashkari. he was the point ma

goldman sachs just is being goldman sachs. >> for the people that want to try the political side to this whole deal and what's coming down the pike in washington, people are also talking about mary schapiro, head of the s.e.c., this is the second time she's been -- the independent's cast the deciding vote on the settlement on the back of the america, merrill lynch settlement too. people are worried this is part of an attack on the entire sector and there's other names to follow, still feel nervous. and if you look at what the s.e.c.'s doing here, it's hard to separate that from what the administration -- although they are absolutely independent. but the timing is uncanny. >> i can tell you this. the read from the options market speshlth, when you look at goldman sachs, you look at the volatility, they traded four times normal volume. almost 500,000 contracts today. volatility came in throughout the day. by the end of the day. we had peaked out last friday somewhere near that mid 40s sort of an area, 43%, 45% volatility. now it's around 37%, 38%, the at the money calls and puts. those str

. >> tom: lawmakers say goldman sachs bet against its clients, but c.e.o. lloyd blankfein says that's not the case. >> susie: today's hearing into the role of investment banks in the financial crisis lasted for hours, with goldman taking it on the chin for wall street. you're watching "nightly business report" for tuesday, april 27. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: fireworks on capitol hill today as senate lawmakers gave goldman sachs executives a drubbing over their role in the financial crisis. >> susie: from the trader at the heart of the s.e.c.'s case against goldman, fabrice tourre, to the company's c.e.o., lloyd blankfein, senate lawmakers took hours with the testimony. we're over eight hours in, and the hearing is still going on. >> the biggest surprise came a short while ago after c.e.o. lloyd blankfein was sworn in. committee chairma

those familiar with the deal say it was structured such that goldman sachs was much better off if cit went bankrupt. goldman has always defended that deal, saying they gave the company workable financing when no one else would. the broader issue, of course, that goldman sachs faces, is that every time they have to defend themselves against a new allegation, whether it's this charge by the s.e.c., whether it's the situation with cit, aig, they are having to face down the notion that perhaps they have a corporate culture that puts clients second. guys, know they're keenly aware to this, because their letter to shareholders this year referred to clients 56 times and lloyd

political analyst david gergen and alexis glick who once worked as an analyst at goldman sachs i should point out. david, how political is this? i mean, is this just a coincidence? this is happening on the eve of, you know, debate over financial regulation? >> i do think it's suspicious. i think the timing is probably not a coincidence. eliot spitzer argued today that it was not a coincidence. and it's going to make a big difference in the senate debate. let me go back to what michael was arguing. anderson, the big question to me tonight is, goldman sachs says, yeah we may work with paulson but we bet against paulson and lost $90 million doing that. michael says i don't think that happened. but it does seem to me that's the most material fact to learn. because it just would be hard to believe that goldman sachs would intentionally defraud itself. >> for me, the layman lesson is don't give yourself a dumb nickname in an e-mail. you know? this guy torre, what did he call himself? the fabulous -- >> yes, yes. look, he's -- you know, one of

laws against goldman sachs when they are in goldman sachs' pocket. i find that the height of hypocrisy when they stand and grandstand and act all indignant when they are the ones taking money. i just find that almost disgusting, to say the least. that is what i want to make a comment on. host: massachusetts, charles on the independent line. caller: i have been in the financial industry the last 40 years and i would just like to make a comment. i would like to pull back out that the senate hearings and all so -- also a number of stations that cover it in the media have generally all missed what i think is the most significant about the financial crisis and about its causes, namely that there were all over the world -- the united states and the rest of the world -- huge number of institutions that had very, very large positions and securities that were all related to mortgages and the housing market and the question is, why did all of these institutions really buy all of these things, why were they so interested in holding these securities? and the thi

on goldman sachs. is that any different than what president obama is doing? >> goldman sachs gave president obama during the election four times more money than they gave john mccain, but what's interesting about the harry reid story, megyn, is how it developed. wednesday of last week, i introak the -- broke the story he had this fund-raiser with goldman sachs, he got the money from them, not only that but he yelled at them for basically, you know, leading the charge on the sort of antiwall street front, basically the democrats have been very critical of wall street, they basically called for that, the next day i broke the story, in which mcconnell and cornyn, the republican side, they were in new york to basically raise money for wall street and talk about financial reform, maybe how to get the -- get some of the aspects out of there that are not good for wall street out of the bill. reid uses that to start attacking cornyn and mcconnell in the republican efforts to derail financial reform. the presid

i mean, any way you look at it goldman sachs comes out of this looking like a big bad guy. a lot of fingers pointed at goldman of course over the course of the last year. it's an easy company for main street america to hate. so now all of a sudden all of this attention on, you know, potentially, allegedly goldman sachs defrauding its investors. and this gets washington angry and rightly so. it gets main street america angry. and people are saying, something has got to be done. that's when the politicians step in. >> i'm trying to do a whole show on the anger is out of control but yet in this instance. okay. i'm a guy paying my bills, paying my credit card bills. as i understand this, billionaire john paulson, okay? who basically gets in bed with goldman sachs and says i'm going to go out and find the worst mortgages i can find. you're going to help me put this product together. i'm going to bet against it. ha ha. by the way other guys at goldman sachs go out and sell it to your customers while i'm shorting it. how do they explain that as anything other than fraud? the fact t

goldman sachs goes short. no disclosure in the prospectus that paulson had anything to do with picking securities. you think about paulson circa march 2007, but no one knew who he was in march 2007. people knew who goldman sachs was. i have to believe ikb, they knew what they were doing, they took on the risk. they had a list of home builders, they had a list of every one of the cdos, could do whatever due diligence they wanted and made the bet they made. >> knowing goldman was short was probably, you know -- >> more significant. >> -- more significant than paulson. >> goldman laid it off on paulson, but they said in the prospectus they may not keep the rick, they may keep some, they may short some to others. and i think it would have been unethical had goldman sachs disclosed who the opposite side of the trade was. i think one of the key -- if the s.e.c. rules is that client confidentiality is paramount. >> why should i know the long fnt the short? >> well -- >> i know who the longs are. >> paulson didn't kno

all eyes on goldman sachs. the investment giant is facing accusations that it bet against the american people and turned a profit on the country's economic collapse. executives will go to the hill today where they're expected to deny investor fraud. rianne carter is live in the newsroom with more on this story. >> good morning. the hearing will get underway at 10:00 this morning on capitol hill. goldman sachs executives are expected to face tough questions. goldman sachs executives could face a grilling on the hill today. >> bemis led the country and were not fair to their customers. >> during the hearing this morning, email dating back to 2007 may be a topic of discussion. those e-mails that show that the bank allegedly positioned itself to make a fortune off the mortgage crisis. the e-mails, the bank says, were cherry pick. >> you can see what goes on beneath goldman sachs and they will have to address that. that is relatively rare. >> it faces charges that it is led declines by selling mortgage investment se

paulson made a billion dollars, and the other clients of goldman sachs lost a billion dollars and goldman sachs walked away with $50 billion of fees that were paid to him -- paid to goldman sachs by mr. paulson. now, that is the basis of the f.c.c. complaint filed against goldman sachs for civil fraud. so what is civil fraud you might ask? civil fraud is, it shall be unlawful for any person in the offer or sale of any securities to obtain money or property by means of any untrue statements of a material fact or any omission to state a material fact necessary. so the question is, was it a material fact that they were made up of these mortgage-backed securities, 90% of which were considered no dock mortgages -- mortgages? that mines there was no documentation that the people that got those mortgages could pay for them. there was no documentation of income, no documentation of debt. those were no doc loans and there were history of no doc loans going back. so it was fixed from the very beginning. they were arranged by john paulson, a material fact that was not disclosed to the other buyers.

. >> sean: the obama administration is slamming goldman sachs with a lawsuit why is the administration filled with so many of the banking giants former employees? former goldman partnerç gary ginsler is head of the president's kphady futures trading commission. more outrageous, geithner deputy mark patterson who oversaw the tarp bailout is a former goldman sachs lobbyists. rahm rahmbo dead fish emanuel received $80,000 from the bank during his congressional tenure. the president will march to new york city tomorrow to announce his plans for wallç street reform. joining me with reaction to this is the author of the "new york times" best shelter culture of corruption, michelle malkin. he's going to lecture them. meanwhile he's got all these connections a million dollars in donations from geld man to his campaign. all -- from goldman to his campaign. all these people who work for goldman. audacity of hope, corruption, what would you call it? >> just plain sheer audacity, sean. this white house can no moreç disown itself from government sachs than obama can from chicago politics thiser

but think about goldman sachs, goldman sachs is a bank holding company and became a bank holding company in september, 2008 as a to save it from collapse. has access to the fed discount window. it's private equity does well i can assure you they will make all like bandits to use a technical term. if it goes badly whose problem is that? is a bank with access to the discount window. we cannot let these banks fail. and goldman sachs says okay we will just not be your bank. supplement guys, they were a rather loose not entirely accurate term the they were not regulated by the federal reserve. and they took a lot of risks and they were on the verge of failing for no fault of their own in the book they would like to defer if you let them out of this size with these characteristics of this relation to the rest of the system and they get in trouble again he will give them access to the federal reserve and you may promise up and down know, we won't do it honestly we promise you can pass as many laws as you want at the end of the day when faced by calamity the government will always have the power

if i had to buy something that goldman sachs was selling, i would think twice about buying from goldman sachs. >> so as a client, it bothers you that there wasn't the transparency -- they didn't tell the other side that it was john paulson who selected many of the securities. >> yeah. it's securities fraud if there is an -- if the seller of the product omits to state certain things that are very material. >> as far as whether or not this is the tip of the iceberg -- in other words, we don't know how many other wells notices are out there. we don't know how significant or steep the number of lawsuits will be for the entire industry. somebody saying just like you're saying, if they defrauded this person, they must have defrauded me. i want to sue because maybe i didn't get transparency. so there is a bit of a vacuum of information from an investment standpoint. we don't necessarily know the extent of this twb right? >> yeah. and it's unfortunate that just in this early stage of recovery, i think it's going to be a very limited one -- but it's unfortunate just in this delicate stage that w

now he's representeding goldman sachs. now he goes to the same people he was doing business with involved in the -- >> supposed to be a two year ban on representing clients -- >> sean: we have tape later. >> no idea accident it is called government sachs. there's an incestuous relationship between the big banks and wall street and the government and they are closely linked. >> craig was forced to leave the white house because of an inability to perform the way the president wanted him to when it came to guantanamo bay. >> sean: the administration i think they are up to their eyeballs in this scandal inasmuch as the president got almost a million dollars from goldman. four or five million from wall treat in toto himself is >> look at how that worked out for goldman. >> sean: blanche lincoln got money she said she is not going to return her money. i would think anybody in washington that received any money from any wall street firm has got to recuse themselves by returning the money, no? >> i think it is a little too far. >>

maybe at goldman sachs in particular. but how big a hit is this to goldman? as i said at the top, they have been the gold standard of investment banks. and the whole idea is they put their clients first. is that reputation at ris snk. >> i think the way they do business, and traditionally have done business, is at risk. i would argue that the old goldman sachs, from 15, 20 years ago, would never put themselves in position to be under such public scrutiny where it was so close to the line about what they did was right or not. just because you can do something, just because you can create a synthetic cbo, whatever that means, doesn't mean you should. and the old goldman sachs wouldn't have done this. they would have been focusing on raising capital for their clients. >> what's going to come out of this? will wall street change the way they do business? and will goldman settle this s.e.c. case? >> i predict after the legislation is passed, goldman will quietly or not so quietly, find a way to settle. whether they change the way they do business, why do scorpions

that senate subcommittee is expected to use some of goldman sachs' own e-mails when it questions lloyd blank fine. blankfein, of course, will denny wrongdoing insisting that goldman never misled its chints. the ceo of goldman sachs will try to convince lawmakers that the banking giant did not cheat its clients. according to prepareded testimony, lloyd blankfein will tell senators we managed our risks as our shareholders and our regulators would expect. but that's not what a senate investigation found. newly released company e-mails suggest goldman made billions from the housing meltdown while its investors paid the price. sounds like we will make some serious money, e-mailed one employee as foreclosures grew. in another e-mail, one goldman trader wrote, i'm not so convinced this is a total death spiral. in fact, we may have terrific opportunities. >> people have a right when they are being offered a bond or a stock or a security that the person that's offering them that security hopes it will succeed. >> reporter: today's senate hearing will also likely address the civil fraud charges

in a statement goldman sachs called the sec allegations completely unfounded. oldman rigged the market to get rich. matt taibbi joins us. he wrote a scathing article on t the deal. thanks for being with us. matt, you accused goldman sachs of a lot of shady behavior. you say what they're accused of right now is worse than you thought. >> back in the summer i wrote an article. basically what i wrote was, basically i said that goldman was betting against its clients. at the time all i really knew is that at a certain point in time goldman was short the housing market. they were short mortgage-backed securities. at the same time, they were selling these same sorts of instruments to their clients. this is actually a step worse than that. the allegation here is that they got together with this guy, paulson, and they conspired to basically make a giant ball of crap that they could sell to their investors. this is actually making a bad investment that you can bet against and then unloading it on your clients. >> what's interesting, too, matt, what shocks people on, you

it's a breath of fresh air. >>> goldman-sachs remains under scrutiny. allenge of goldman's reputation yet. my favorite player is someone who calls himself fabulous fab. >> you know, ali, we'll meet him on tuesday. he's going to testify on tuesday and we're going to meet the fabulous fab trader who according to those sec documents is the one who said, the wreckage of the market, one survivor. it will be me. the guy who made all the complex instruments. a lot of interesting players in all of this. including number 45 on the forbes billionaire list. goldman-sachs itself. the ceo of goldman-sachs and a lot of interesting folks right down to the "wall street journal" this week tracked down the homeowners who defaulted on mortgages that caused all of this stuff. right down to the homeowners. we're go down to the basics on this story. where it goes from here. contribute be editor of rollingstone and from reuter, talk about the story, guys. every day we're learning more about it. how big of trouble is goldman zachs s zacs? >> goldman-sachs is not a fly-by-night

fraud accusations against goldman sachs. it's a pleasure to be seeing you. >> i'm so leap to be here, dylan. >> here's my question for you -- do you believe that the goldman sachs fraud case, forget whether it has merit or not or what its outcome is. is indicative of the type of business practices that were common at merrill lynch? deutsche bank, ubs, lehman brothers, and the rest of goldman sachs, who were the firms that were the most aggressive with this type of trading and security in general? do you believe that there is, if we once we start pulling, we're going to see a lot more of this? >> this is certainly not an isolated example, dylan. i mean i think that some of these securities that were underwritten by all the firms that you mentioned, might be different in little nuanced ways. but what we're talking about is, yes, a really overarching effort to figure out a way to short the mortgage market. to bet against the mortgage market. not only for their customers in some cases, like mr. paulson, who was the hedge fund ma

he went to goldman sachs and created subprime mortgages. what goldman helped him do was go out and find other side to that. that's what goldman sachs and other investment banks do, find buyers and sellers. what happened and was wrong was that goldman not only disclose to the buyers, but they were working with john paulson. he helped pick what mortgages were going in, but also led the b buyer to believe that he thought the mortgages would go up, not down. that is where the real issue is and where this complaint comes from. it was a billion dollars. a german bank that lost a billion. there was a guy listed,

this morning on john paulson's first comments since charges were filed against his trade with goldman sachs. he obviously was not a part of the charges, but he's going on the offense. and steve liesman just broke a big story on the charges against goldman. so, let's start with you, steve. >> erin, thanks very much. cnbc has learned that the government has testimony from a former top paulson official appearing to contradict a part of its own case, specifically, cnbc has reviewed documents that questions the government's contention in its case against goldman sachs that the wall street firm misled the insurance company aca about paulson & company's intentions to short the deal. the government's complaint reads "unbeknownst to aca at the time, paulson intended to effectively short the rmbs portfolio it helped select." however, cnbc has learned that a top paulson official, paolo pellegrini, told executives that they intended to short the portfolio. they asked him about a meeting with laura schwartz -- "did you tell her that you were

. >> if i had a mortgage -- the likes goldman sachs sales it to ikb. they think they are being really smart. >> all along, i am starting to not be able to pay at some point. three years into it, i go from 2% to 12%. >> i cannot refinance and all of a sudden i default. >> we are sitting there watching this and betting that it will all collapsed. let me finish this paragraph. the paragraph -- >> don't say it is all too complicated, because it isn't. >> it is not because it is complicated, but i will read the rest of it and try to figure all this out. here is what i am getting at. the party against -it was at thi saw that, i said there was $180 billion from aig that subsequently went to bail out goldman sachs. >> yes, for vets. there were bets. what's in repulsive and been bernanke, why did the two of them -- milan >> >> because all of the wall street firms were on the other side of those bets. if aig did not pay off the debts, the firms would have seen the law spirit goldman sachs had lost on its debt -- the firms would have seen the loss. goldman sachs

situation where people say i don't see morgan stanley mentioned in any of these circles as far as goldman sachs but the stock has underperformed goldman massively. the stock was down in sympathy today. i like this structure and i'll tell you why for a couple of reasons. if you're inclined to maybe buy the stock and you think there's some near-term down side you could put this trade structure on saying worst case scenario i get long down 10%, 15%, something like that. the other thing to scott's point earlier about these spreads, this actually because you're selling two of those down sides, you are net short volatility. the whole situation settles in a little bit, you're going to make money on the vol compression on those two that you're short on the down side. >> but of course a very, very important point to make on this trade, you have to be willing to get long morgan stanley's stock at $25. >> that's always the case whenever you're net short puts. >> and the important thing also to remember is because of that, because you may have a stock put to you, you have to leave premium with your broker.

goldman sachs is going to fight this. st point out something, they took $10 million in initial bailout money, right? on friday, the market took $12 billion away from goldman's market cap. the market is saying something here. they have really punished this company on friday. futures are expected to be lower again this morning. it has really rattled wall street. >> the second question is, would any regulation stop this and will this help with the obama administration trying to push the current -- >> the answer to the second part of that question is yes. >> christine, thanks so much. >> we do have a romans numeral but we'll get to that later as well. >>> we'll introduce you to a group of soldiers that announce their allegiance to the constitution is what is front and center, not necessarily their allegiance to the president. >> i think i know something about that story. >> you did the story. >> the oath keepers. and it's a group that founded itself on april 19th, which happens to be today. >> we look forward to seeing more ab

should goldman sachs be prosecuted? i'm not sure.t. >>> is health care reform fiscally irresponsible? not quite sure. >>> should we torture terrorists for information if it makes us safer? not sure again. >>> is president obama doing a great job? i got to say, it is too early to tell. >>> should we legalize marriage? not sure. okay. i'd like to introduce you to a new media critter. i am donny deutsche. guess what. i will admit it. i'm just not sure about a lot of stuff. there, i said it. i think i'm a pretty smart guy. i built a big business. always full of opinions. let me say, there's just not a lot of stuff i'm sure about today. maybe if we could all come clean on that, we could take some of the steam out of the anger that's suffocating us. i'm going to wrote a new book, "sometimes wrong, often in doubt." maybe, just maybe, we can do a little anger management by admitting we've got some rubix cube problems here. there's the blue state of mind. there's the red state of mind. let me introduce you to purple. that's where i think most

think about goldman sachs and the goldman sachs says. goldman sachs is event. became a bank holding company in september 2008 as a way to save it from collapse. it has access to the fed discount window. if it's private equity investments do well, i can or should you they will make out like bandits. to use a technical term. [laughter] >> if it goes badly, whose problem is that? is a bank. it's a bank with access to the fed discount window. we do not let these banks fail. we cannot let them fail. and goldmans is okay, if that's your attitude, they give a much, we are no longer a bank. you became a bank in order to save you. they were an investment bank before, a rather loose not entirely accurate term but they were not regulate by the federal reserve. and it took a lot of risk and they were on the verge of failing. they say through no fault of their own. again in the book we beg to differ. if you let them out at this size, with these characteristics with this relationship to the rest of the financial system and they get into trouble again, you let them become a b

not saved, it would have wrecked the entire system possibly with goldman sachs included. host: a couple more points on the piece and then we'll get to phone calls with paula dwyer, washington editor for bloomberg's "business week." first of all, goldman was not a public company until is the 99. what changed? guest: well, lot of the big investment banks wanted to have more capital so that they could finance their clients' activities so that they could do more trading, you know, use their capital, put it to work to make bets in the various markets. and as long as you're a partnership, you don't have a lot of that capital, and so they went public, and it was controversial. it caused a debate within. that has resulted in the company's changing from being much more of a relationship-based company to a trading factory. it's a huge trading monstrosity now. host: so that was part of the big change about 10 or 11 years ago. it also received in a new corporate office. guest: well, that just happened. they're just moving into that office now along the hudson river. host: and you pain