Justice pursuing wrong target in mortgage mess

Of all the villains in the home loan crisis, the Justice Department appears ready to target the least bad: Goldman Sachs.

By Jim Cramer May 4, 2011 8:40AM

jim cramerthe streetOf all the people who tricked Americans into terrible mortgages, all of those who encouraged out-and-out fraud to get a commission, all of those who made it so many people have lost their homes to foreclosure, you would think that the Justice Department would have at least one if not two or three of the top scalps involved.


Think of all of the people in the process who created, packaged and sold securities that they knew were worthless because they originated the mortgages. Think about all of the people who dissembled their exposure to trick companies into lending them money, so when the "collateral" of those mortgages unraveled, it led to trillions in bank losses and the destruction of some once-great American companies.


Think about all of that advertising you and I saw for no-money-down mortgages and home-equity loans that flowed hourly. Think about the rubber-stamping by those who should have known better, including the largest buyers of mortgages in the country who, for huge fees, packaged gigantic loans in bundles that they knew would lead to huge defaults.


Think about the entities that checked off on the health of mortgages when they knew nothing about them and had done no due diligence yet were relied upon to protect people who were buying packages of mortgages without the ability to check the bona fides of those loans underneath.

Of all of those villains in the script, we have yet to see any results, anyone go to jail, anyone pay criminally for what he did.


But now we are about to do that. At last. The problem is that the guy they are going to nail did none of the above. Neither he nor his company tricked people into taking mortgages or home-equity loans, nor did he force the packages of loans on unsuspecting buyers who were naive and needed protection. The target didn't lie about his exposure and bring down his company or any other banks with it. The target didn't make grand sweeping claims on commercials about no money down, and the target didn't and hasn't foreclosed, recklessly backed up by nothing but robo-signed documents. And the target didn't require billions in bailout money to keep highly paid union employees or white-collar workers on the payroll and get big bonuses for doing so.


That's right, the Justice Department, at the request of one of the most powerful people in this country, Sen. Carl Levin, is going to look into and most likely nail Lloyd Blankfein for what he did during the mortgage crisis and what he said he did in front of Congress. We have the Roger Clemens of the securities scandals on display, and, by golly, he's going to pay for it!


This news that Levin has asked Justice to investigate ratchets up the odds that Goldman Sachs (GS) will be the company that the Justice Department truly goes after for the era's misfortunes. The fact that no one will stand up and say that Goldman wasn't part of what we are really angry about is astounding to me.


Goldman isn't Mr. Clean. But the real issues were always about the consequences of underwriting crummy mortgages and then lying about the worth of them to the regulators so you could borrow more money. The era was about tricking people into taking mortgages and then foreclosing on them. The era was about disguising your true exposure to the point where you needed bailing out by the government.

Has anyone even accused Goldman of any of that?


I know that this article will fall on deaf ears. I know people feel that I will defend Goldman for anything because of my loyalty. But give me a break. I worked there 25 years ago. There's no one left there of much consequence who was there when I was. I don't have any friends there anymore. I am simply aghast that Blankfein is the one they want to go down. Can they be that foolish in Washington? Of all the actors in the play, does Justice really have to go after the least bad?


That's the way it looks.


What a juggernaut. Can't be slowed. Will get its man.


What a travesty.


At the time of publication, Cramer had no positions in the stock mentioned.


Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.


Follow Cramer's trades for his Charitable Trust.


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May 4, 2011 1:20PM
Kramer and Kudlow and the Treasury guy all Goldman and wall street PUPPETS sucking unwary peole into their schemes.
May 4, 2011 12:08PM


I’m aware you’re in this business to enrich yourself. I’m also aware you don’t give a damn about your reputation as long as it lasts a millisecond longer than people’s memory. But today you crossed the line again. You say that the Justice Department shouldn't go after Blankfein on the basis of him not being the town's worst villain. This is like saying we shouldn’t have gone after al-Zarqawi of al-Qaeda in Iraq because he wasn’t as big a mass murderer as bin Laden.



Be mad at the public’s gullibility, not at Cramer. If the public used their brains Cramer would starve to death.


Anyone can go on TV and make lots of predictions, cull the bad ones and keep reminding people of the good ones. If you toss a coin and predict the result you know that 50% of the time you’ll be right. There is zero accountability so the risk of loss of reputation is nil.


Cramer is a self-appointed guru. He recommends a lot of stocks; he tosses a coin and he’s fine with the expected results. He claims expertise in the banking industry. He strongly recommended AIG on Nov 7, 2005 when AIG was $1,325. Today it trades at around $31 a 97% loss. On Sep 5, 2008 he said Lehman Brothers was a “screaming buy”. 10 days later, on Sep 15, Lehman collapsed.


May 4, 2011 1:48PM

Cramer is now and perhaps always has been a person who cares only about money and not much about his negative reputation as he obviously thinks he is great. And he rationalizes the reasons why some people hate him...... Jewish money grubber I am sure is at the top of his ill-reasoned list. But, not mine, as his P.T. Barnum "entertainer" approach to investing is all wrong IMO but does he care if people buy it and it makes him a truckload of cash? Homeless 30 years ago and now worth $500 million. Think he has been successful working his angle? Lots of dopes looking for an investing guru, and he fills that bill for many.


Gov't workers become totally immune to public criticism as they rationalize the poor work they do for bosses who don't require greatness or even mediocrity, let alone getting their "work" done on schedule. Just like that, Cramer has become immune to everything except the performance money he makes.

May 4, 2011 12:57PM
babooya!  I think they are being smarter than you think Jim.  They want to go after the guy who is innocent because GS OWNS the government.  This way people think the gmnt is finally going after those crooks when in reality it's nothing but a puppet show.  They aren't going to jail the guys who funded their campaigns or the place that can give them their next job.  I would like to see people take justice into their own hands on such issues.  I believe that an American revolution is the only way to fix a broken system beyond repair.
May 4, 2011 10:41AM

Goldman should go down for selling securities that were toxic.  They are the bank of the world handling the accounts of the most sophisticated investors in the world.  They pay top dollar for the best minds in the world.  Do you really think they sold those CDO's in good faith?  They had no idea they were selling garbage?


Jim you are naive if you believe that.  I like how you threw in the "high paid Union" comment.  Are you implying Unions caused the housing market collapse and subsequent banking bailout spree?  Last time I looked, Unions haven't established a strong foothold in the banking segment. 


You're starting to sound like Trump, a complete sell out.

May 4, 2011 12:20PM
C'mon Cramer, surely you understand the economical and strategical point of going after Goldman right???  Cheaper to get them possibly, and if you pull at the strings, more will come undone.  Can't you see the deals, plea bargains, and fallout that might lead to additional charges of others?
May 4, 2011 1:19PM
I would also read this PR stunt to mean that GS lobbyists have already won Volcker.  This is a PR step to take the heat off gmnt.  Maybe a good time to buy GS and join in on, and benefit from the raping of America.
May 4, 2011 1:54PM
Hey I love Cramer's enthusiasm for stocks - something most people are bored with.  He's given me a lot of good ideas and gets my brain going on different topics and themes.  Most recently I'm Rockin with Baken.  No one can pick all winners.  If you want to be mad at something or someone be mad at the people buying government decisions, the people taking the bribes and the system that allows it to happen. 
May 4, 2011 12:13PM
Jimmy Boy. I think you may be wright for once, but somebody should be taking a hard look at you and the kaka de toro that you put out most of the time.
May 9, 2011 7:11PM
And the target didn't require billions in bailout money to keep highly paid union employees or white-collar workers on the payroll and get big bonuses for doing so.
GS did receive a back-door bail-out through AIG. They got 100 cents on the dollar for their CDS. In fact it was better than a bail-out because they didn't have to pay it back.
May 4, 2011 6:16PM

Like the other Kramer, Cramer is always good for a big laugh.


Never forget- once a Goldman man, always a Goldman man.  Only this time he is a contractor, not an employee on the books.

May 4, 2011 11:57AM
May 4, 2011 11:59AM

"Jim you are naive if you believe that.  I like how you threw in the "high paid Union" comment.  Are you implying Unions caused the housing market collapse and subsequent banking bailout spree?  Last time I looked, Unions haven't established a strong foothold in the banking segment. "

Unions have destroyed America.


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