Audit Notes: Triple Dip; Bloomberg Terminals; Goldman, AIG, and the Fed

By Ryan Chittum

Jeffrey Verschleiser is in the news for renting out the entire
ninety-four room Hotel Jerome this weekend for his daughter’s bat
mitzvah.

Who’s Jeffrey Verschleiser?

Rolling Stone’s Matt Taibbi revisits the tale, reported by Teri Buhl
in The Atlantic last year, of the former Bear Stearns executive who
now works high up in Goldman Sachs and is being sued, along with his
former and current employers, by the Federal Housing Finance Agency
for fraud.

Verschleiser securitized toxic mortgages, sold them to investors,
returned the obviously fraudulent ones to the banks, pocketed the
money without telling the suckers, and then shorted the companies who
insured his toxic waste, according to an insurance company’s lawsuit.
Taibbi:

So in essence, Verschleiser was triple-dipping. First he was selling
worthless “sacks of shit” to investors, representing them as good
investments. Then, he kept the money from the return sales of the
wormy apples. And then, on top of that, he made money by betting
against the insurers he was sticking with these toxic assets. We all
know what happened from there. Bear, Stearns went under, thanks in
large part to insane schemes like Verschleiser’s, and all of us were
forced to pick up at least part of the tab as the Fed spent billions
subsidizing Bear’s emergency takeover by JP Morgan Chase. In
subsequent litigation, Chase has steadfastly refused to buy back the
bad mortgages dumped on investors by the likes of Verschleiser, and
has even fought tooth and nail to prevent the information in the Ambac
suit from being made public.

Taibbi sums it up:

If there was ever a news story that crystalized the moral dementia of
modern Wall Street in one little vignette, this is it.

The cheapest room next weekend at the Hotel Jerome, by the way, goes
for $719 a night.

— The New York Times has an interesting report on how the collapse of
MF Global has hurt Bloomberg LP.

The broker-dealer had some 600 Bloomberg terminals, which cost twenty
grand a year. That’s a million bucks a month:

The sudden loss of business caused Bloomberg employees to miss their
target sales by 12 percent in 2011, people briefed on the matter said,
a shortfall that could take a toll on the firm’s bonuses.

While $1 million sounds like a rounding error for Bloomberg, which
generates nearly $7 billion in revenue a year, the hit underscores the
symbiotic relationship between Wall Street and Bloomberg.

Bloomberg will be all right, though. It’s terminal count rose by
14,000 last year. That’s about $280 million in new revenue. Amazing.

— Goldman Sachs, AIG, toxic mortgages, and the Federal Reserve, back again.

The Wall Street Journal reports that Goldman Sachs of all companies is
trying to buy AIG’s busted mortgage bonds from the Fed:

The bonds that Goldman sought to buy represented roughly a third of a
mortgage portfolio with an unpaid principal balance of almost $20
billion, the people said. It couldn’t be determined how much Goldman
offered, but the bonds in Maiden Lane II had an average fair value of
roughly 47 cents on the dollar at the end of September, suggesting
Goldman could have been willing to pay about $3 billion. It is unclear
if Goldman or another dealer will be able to buy the bonds from the
New York Fed, which has previously said it will sell only if it can
fetch good value for the securities.

Goldman, of course, got billions of dollars via the Fed and Tim
Geithner’s no-haircut backdoor bailout via AIG in 2008.

http://www.cjr.org/the_audit/audit_notes_triple_dip_bloombe.php