November 5, 2007(LPAC)--Even amid the blatantly apparent world financial meltdown, and with many others of the world's largest banks reporting immense write-downs and loan losses in the third quarter, Goldman Sachs displayed a report claiming that it, merrily, profited by $2.8 billion. This alleged success was chalked up to, what else, besides the great talents of Goldman Sachs' "financial wizards".
Now, Goldman's magic wand is snapped, and it appears that Goldman is not only hiding large losses, but may have more impending losses than most other banks.
A new accounting rule, SFAS157, which is scheduled to go into effect at the end of the first quarter 2008, would require that banks divide their "tradeable assets"-- ie, the loans that they have made, the Mortgage-Backed Securities that they own, etc. -- into three "levels" according to how easy it is to get a market price for them. Level 1 assets would have quoted prices in active, liquid markets. At the other extreme, Level 3 assets would only have assets which are very difficult to get a market price for, largely because they are untradable. The gimmick is the banks are permitted to value Level 3 assets {according to the bank's own internal model.} Needless to say, the banks would not devalue their Level 3 assets, but claim that they are worth their full original purchase price.
Goldman Sachs decided to disclose its Level 3 assets during the third quarter, 2007, six months before required to do so. Goldman classified a whopping $72 billion of assets as Level 3. Further, Goldman claimed profits from its Level 3 assets; in reality, had it actually valued them properly, it should have been taking a huge write-down.
To understand how large this would be, when Nomura Securities exited the U.S. mortgage business and sold its mortgage portfolio, during the third quarter, it took a write-down of 28% on these assets, according to the Nov 3 {Asia Times}. Were that percent applied to Goldman Sachs' Level 3 assets, Goldman would be required to write off $20 billion in assets, which is 56% of Goldman's capital base of $36 billion, seriously imperiling the company. Goldman's boast of third quarter profits is a chimera.
The Goldman Sachs dangerous accounting gimmick was also employed by Lehman Brothers, JP Morgan Chase, and Bear Stearns.
Thus, because these companies amount to a cumulative zero, or less, in creative input toward a continuance of civilization for the rest of this century and beyond, they should be swiftly eliminated, as they would be, were any moral body of legislators to act now. This elimination would occur naturally, as the general population has no actual need for them whatsoever in the improvement of their lives or liberties, if the law was enacted to protect homeowners and state chartered banks, as has been stated by LaRouche and certain key state legislators, brave enough to follow in his footsteps.
