The Year of Karma: April Corp Edition

by Minority Fortune

Amidst taxes, the 2010 Census, the health care bill development, China’s yuan appreciation, and the market, it’s been an eventful springtime. Last month brought us much to discuss for the Year of Karma theme. April is no different. Here to join their automotive brethren in deception, manipulation, and dipped sales are two huge conglomerates: Goldman Sachs and General Electric. Welcome to Karma, guys!

Goldman Accused of Subprime Fraud

goldman-sachsThe SEC has finally caught up with Goldman Sachs. They were one of the few firms that profited tremendously from the housing market turmoil. It doesn’t take a scientist to realize that Goldman Sachs had its hand in the cookie jar during the subprime market manipulation. Why it has taken the SEC three years to discover this is news to us.

According to the Wall Street Journal, Goldman Sachs was charged with “deceiving clients by selling them mortgage securities secretly designed by a hedge-fund firm run by John Paulson, who made a killing betting on the housing market’s collapse.” This sounds like the secret mission statement that Goldman Sachs lives and breathes by: deception, manipulated profits, and questionably legal partnerships with politicians and other financial firms. Neither John Paulson nor his hedge-fund firm have been charged in this matter.

Goldman Sachs partnered with Paulson & Co to create a new financial product called collateralized debt obligation aka CDOs. They were comprised of subprime mortgage equities, which Paulson & Co firm betted against. At the same time, GS was selling these packages to its investors that faltered when the market fell. The SEC hasn’t quite determined how many high officials were aware of this matter, but they have astoundingly found quite a few.

Goldman Sachs is fervently denying the charges, and they’re ready to pay people under the table contest the allegations. However, the market has paid attention and is responding to the news. GS stock dropped 13%, which is the biggest drop the stock has ever experienced since it went public.

We certainly hope that this is the beginning of the house of cards falling for Goldman Sachs. However, we’re wary. Unless they’re going to ask for every last billion GS pocketed from the subprime market back, then they’ll just take the slap on the wrist and keep on wreaking havoc. However, Obama is using this as momentum to get a bill passed that will place restrictions on derivatives. Overall, we’re excited that GS has a bad spotlight cast on them. There’s many other big banks and politicians that should be thrown into the hot seat. Let the games begin!

GE Profit Drops 31% on Discontinued Operations

GEstockGE doesn’t seem to be doing to well this year. Their first quarter has experienced a 31 percent drop in revenue from a year ago. As sad as that is for the monolithic industrial company, they also are being investigated by the SEC for telling fibs. Two and a half years ago, GE convinced investors that their commercial paper programs were flourishing. Evidence shows that the exact opposite may have been true. As the SEC is still investigating, GE is denying the allegations.

Since the recession hit, GE hasn’t been the dominant, money hording company that it once was. Profits have almost been cut in half. Instead of innovating its way out of the mess, the Wall Street Journal reports that CEO Jeffrey Immelt seems to have his eye on the US Government stimulus program. If the best that they can do is look for federal handouts, we hope GE continues to spiral downward.

*Images courtesy of WSJ and ABC News.
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