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Rick's List
Goldman Sachs Under Fire; Economy Improving?
Aired April 19, 2010 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICK SANCHEZ, CNN ANCHOR: CNN Money's Poppy Harlow is joining me now. She's right there in New York City. By golly, she's got a handle on this thing.
Everybody was wondering, well, with the Goldman Sachs bust today, what's going to happen on the Dow?
POPPY HARLOW, CNNMONEY.COM: Right.
SANCHEZ: Tell us, what's happened on the Dow?
HARLOW: What a story, though, a pop in the market. The Dow's up about 72 points. We're looking at the closing bell right there, Rick.
But Goldman Sachs, all the talk still today on Wall Street. I have got to tell you, shares of Goldman are actually up right now, about 1.5 percent, after falling 13 percent on Friday, after the SEC unveiled those massive fraud charges against Goldman related to, did it disclose enough in dealing with its clients on the subprime mortgage crisis?
Goldman Sachs, that big drop you see on Friday, recovering a little bit today, Rick. But I have got to tell you, if you're a head of one of these Wall Street firms, you are worried right now, is this the tip of the iceberg?
SANCHEZ: They should be.
HARLOW: Is the SEC going to come after your firm as well?
SANCHEZ: Yes.
HARLOW: That's the big fear here on Wall Street, Rick.
SANCHEZ: They should be worried. It's a good thing that they're worried. I think -- I mean, I think that's what most people are probably thinking about.
I mean, most people are watching this newscast right now and they're wondering why there haven't been even more investigations, why there haven't been more arrests like the one --
(CROSSTALK)
SANCHEZ: Hey, Poppy, do me a favor. Stay right there. Don't go away. Can you stick around for just a little bit? HARLOW: You got it.
SANCHEZ: Because I got a lot of -- I have got a couple of other pretty smart people here who are going to -- joining me.
It's hour two. It's time to pick up the pace of today's LIST.
For those of you who are just now checking in, number one on my list, the case against Goldman Sachs. It's what everybody's talking about in New York. You heard Poppy talking about it. "The New York Times" is reporting that Goldman Sachs chairman Lloyd Blankfein was taking a keen interest in the firm's mortgage division at the time of the alleged shenanigans.
Now, you have seen him before. He's been hauled before Congress concerning Goldman's role in the meltdown and the multibillion-dollar bailout. Now, the SEC says that Goldman Sachs was peddling a mortgage investment fund that allegedly was devised to fail.
Now, think about that. If you know someone -- something's not going to be doing very well, would you let people buy into it?
Ali Velshi is joining me here in Atlanta. And, from New York, Robert Lenzner is going to be joining me as well. You remember Bob. He's the -- our columnist from "Forbes" magazine who has joined us from time to time, and then of course Poppy standing by as well.
Let me start with you, Ali.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes.
SANCHEZ: What's the situation here? What were they doing? Is this very much in tune with the default tax swaps and the default credit swaps that you and I have talked about in the past?
VELSHI: Well, let me tell you, you were saying, would you let your investors buy something if you knew it was going to fail?
Goldman's in the business of letting anybody buy anything. That wasn't where the problem lies.
SANCHEZ: Yes.
VELSHI: There are some people -- the hedge fund that was set up was to short mortgages. In other words, that was the belief, that people were going to fail, not pay their mortgages.
There's always another side to that deal. The problem is whether Goldman disclosed adequately to the people it was selling those investments to that it was perhaps designed to fail and there was somebody betting against it. So, that's the issue.
(CROSSTALK)
SANCHEZ: But, Bob, that's the problem. The problem is, I'm looking for -- what's this guy's name? Tourre? Tourre? ROBERT LENZNER, NATIONAL EDITOR, "FORBES": Paulson.
VELSHI: Sure. Fabulous Fab Tourre.
LENZNER: Oh.
(CROSSTALK)
VELSHI: Fabrice Tourre.
SANCHEZ: Fabulous Fab Tourre.
You -- I was reading about him this morning in all the papers, "The Wall Street Journal" and "The New York Times."
VELSHI: This is the vice president --
(CROSSTALK)
SANCHEZ: And it's interesting, because he's like a mad, evil genius who came up with these incredibly complicated plans that only he understood. And, as I look at that, I'm thinking, that just doesn't seem right.
LENZNER: Well, "The New York Times" story this morning, if it's right, which I assume it is, puts a very serious threat to Goldman Sachs that there will be other people named either in this suit or suits about other transactions that are similar.
There are at least two dozen other transactions by Goldman and other firms like this. And, then, also, there's the potentiality of a criminal investigation.
But it -- there's a lot of difference of opinion about the illegality of this transaction. I don't look at the illegality of it. I look at it that they were selling what you would think is a buildable real estate lot, and they knew it was swampland. So -- so --
SANCHEZ: Exactly. And it's -- look, let me just stop you right there --
LENZNER: Yes.
SANCHEZ: -- because I couldn't agree with you more on this.
It just seems like, every time we talk about illegalities, the real question maybe should be, is this something that you would do a friend, do to your parents, do to a family member?
VELSHI: But they're not your friend. They're not your friend. Goldman Sachs is not your friend.
SANCHEZ: But you're supposed to be ethical, Ali.
VELSHI: I hear you. But when we're -- while we're here talking about what you're supposed to be do it, because we're going to be talking with the president about regulation --
SANCHEZ: Right.
VELSHI: -- you can't regulate people being nice. You can regulate people not breaking the law.
SANCHEZ: But you can regulate what people -- shouldn't there be a difference? I mean, didn't these guys know when they were doing these kinds of things?
Poppy, help me out here. It looks to me --
HARLOW: I -- I -- I --
SANCHEZ: It looks to me -- and I'm just going to say this. And maybe one of you guys can help me -- Poppy, maybe you.
HARLOW: Yes.
SANCHEZ: Tourre, I think, may have been given up by this other guy, Egol, who was the other mad genius in this scheme that they devised.
HARLOW: What's interesting -- and I completely agree with Ali -- you can only regulate so far.
And, listen, Rick, this is Wall Street. This is business. You're not dealing with your friends. You're dealing with your competitors. You have got clients on both sides of the trade. The question is, was it a big moral question mark? Was it morally reprehensible? Or was it truly illegal?
If it was truly illegal, Goldman is going to pay a big fine. And let's not forget criminal charges. The question is, will the Department of Justice bring criminal charges against Fabrice Tourre or not? That's the big question as well. But when it came to who ratted who out or who was responsible, Lloyd Blankfein, the CEO of Goldman Sachs, Rick, left a message on all of the employees' voice-mails at Goldman Sachs when they came in this morning and said, this is one isolated incident, one employee; this is not what Goldman Sachs does.
SANCHEZ: Well, but --
HARLOW: This is not how they do business.
They're obviously trying to separate themselves from this one man.
SANCHEZ: But, Bob, is it OK --
LENZNER: Yes.
SANCHEZ: -- to cheat as long as it's not legal?
LENZNER: No, of course not.
VELSHI: As long as it's not illegal.
SANCHEZ: As long as it's not illegal?
(CROSSTALK)
LENZNER: No, of course it's not. Of course it's not proper, not proper at all.
SANCHEZ: But isn't that what we have seen? I mean, look, you go down the list here, you look at the credit default swaps. You look at people getting AAA ratings, AAAA on stuff they knew was garbage.
You look at this case with this bundling they did with Goldman. Those things all look like they're getting away with something and they had to know it, right?
LENZNER: Well, the nub of it is not who gave up whom, but they did not tell the buyers --
VELSHI: Right.
LENZNER: -- that John Paulson, the hedge fund manager picked out the worst mortgages to put behind the security that he could.
VELSHI: Yes.
(CROSSTALK)
LENZNER: That's A.
B, they didn't tell the buyers that they sold insurance to Paulson to protect him that he would make money on --
VELSHI: If it failed.
LENZNER: -- when -- if it failed.
HARLOW: Right.
LENZNER: OK. So --
HARLOW: And -- and -- and --
LENZNER: -- the buyers had no idea what was going on behind the scenes here.
(CROSSTALK)
HARLOW: And, ultimate --
SANCHEZ: Go ahead, Poppy.
(CROSSTALK)
SANCHEZ: Go ahead. HARLOW: I think, ultimately, here, one of the points that Bob just made that is a great one is that John Paulson, the hedge fund manager, that not only betted, shorted these securities, he also had insurance, so he had no real skin in the game.
Richard Quest -- CNNI's Richard Quest made a great example today. You look at apples. He got to pick and choose which apples, which mortgages, went into this barrel. So, ones that looked a little healthier, allegedly, he took out, betting that this barrel would fail. And that's -- that's what the SEC is alleging.
(CROSSTALK)
LENZNER: There's one more element about this, Rick, is, what's the story about them and Paulson? Paulson wasn't even this big shot at the time they did this transaction. They're claiming that they only got a fee of $15 million and lost money about it. Why did they do --
(CROSSTALK)
VELSHI: Then why you doing -- then why you doing that?
(LAUGHTER)
LENZNER: Exactly.
(CROSSTALK)
LENZNER: Why would they do this favor --
VELSHI: That's not their business. You don't --
(CROSSTALK)
SANCHEZ: Take us -- Ali, take us out. What's the last word on this thing?
(CROSSTALK)
VELSHI: All right.
Well, one of the things -- and Bob has worked at Goldman. This is important to know. Goldman, they are notorious micromanagers. They are not a firm that has rogue traders and people who do things on a big level without people knowing and inventing new financial instruments.
So, what I want to know is, as this develops, how high up the chain this actually went.
SANCHEZ: Exactly.
VELSHI: That's what I think --
(CROSSTALK) SANCHEZ: And that's where, what's his name, Blankenfein?
VELSHI: Blankfein.
SANCHEZ: Blankfein.
VELSHI: Lloyd Blankfein.
SANCHEZ: Blankfein.
And, by the way, just a caveat on this conversation, Citigroup reported today a $4.4 billion profit for the first quarter. The question is, do we throw tomatoes or do we cheer? Don't answer that.
(CROSSTALK)
LENZNER: Well, it also -- Rick, it also arms Obama with respect --
VELSHI: Yes.
LENZNER: -- to the reform bill.
SANCHEZ: Yes.
(CROSSTALK)
LENZNER: And you had Bill Clinton on Sunday saying that he made a mistake listening to Rubin and Summers about not regulating derivatives.
There's going to be a hard fight to regulate derivatives now --
VELSHI: Yes.
LENZNER: -- but helped but this particular fraud case by the SEC.
VELSHI: Yes.
(CROSSTALK)
SANCHEZ: I -- I -- and I think Americans are going to be asking once again for Garn-St. Germain. They're going to be asking --
VELSHI: Yes.
SANCHEZ: -- again for some kind of Glass-Steagall, because, in the end, elimination of those things is what got us into the situation we're in now.
VELSHI: Yes. And they may get it.
SANCHEZ: And they may get it --
VELSHI: Yes. SANCHEZ: -- because of what we're seeing now.
Gentlemen and Poppy, excellent conversation. I really enjoyed it. I'm glad we all had a chance to do this.
Hey, Bob, good to see you.
LENZNER: Great to see you.
SANCHEZ: You look fantastic.
LENZNER: Thank you very much. I appreciate --
You look good.
LENZNER: Well, I appreciate that. So do you every day.
SANCHEZ: We will do it again. All right, thanks so much.
Look at this: the camouflage gear, the guns, the clandestine meetings in the woods. That's what most think of when they think of the anti-government militia groups. Is that right? Or is it even fair? Well, we're going to let you see it from the inside.
And then, from our follow-up file, the hate crime that pitted a group of New York teenagers against a helpless immigrant from Ecuador. The verdict is next. That is next. We're going to be all over it.
Thanks for coming out. Appreciate you sticking around, as you always do.
VELSHI: Always.
SANCHEZ: Ali Velshi, ladies and gentlemen.
(COMMERCIAL BREAK)
SANCHEZ: We keep lists, and this is one of the most important ones.
On the terror watch list today, al Qaeda's going to have to replace its two top men in Iraq. They were killed in a rocket attack at a safe house. It was a joint U.S. and Iraqi operation.
Vice President Joe Biden is calling it a potentially devastating blow to al Qaeda.
(BEGIN VIDEO CLIP)
JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Equally important, in my view, is this action demonstrates the improved security, strength, and capacity of Iraqi security forces. The Iraqis led this operation. And it was based on intelligence the Iraqi security forces themselves developed.
(END VIDEO CLIP) SANCHEZ: And General Odierno told me just moments ago it was a very significant bust and killing.
On the follow-up list now, remember the Suffolk County New York teenagers who were allegedly looking to beat up some Mexicans? That's a direct quote. One was convicted today of manslaughter as a hate crime for killing an immigrant from Ecuador, Jeffrey Conroy also convicted of assaulting three other Hispanic men. He's going to be sentenced next month, could get up to 25 years in prison.
Some flights in Europe are starting up again, conditions permitting, of course. Eruptions from a volcano in Iceland have been getting weaker. A trade group says airlines are losing at least $200 million a day. A European airline wants governments to start compensating them, just like they did after the 9/11 explosion disrupted travel all around the United States.
OK, what does Kansas know about economic recovery, that the rest of the country doesn't seem to know? We're going to take you there because there does seem to be some kind of recovery going on in our country. And a lot of folks are starting to smile, at least a little bit, not a big smile.
And I'm no volcanologist, but I do know someone's blowing a lot of hot air my way. I'm going to explain this to you in a little bit. This is about the list that you don't want to be on and someone who wrote something about this show about me and Chad last week. Have you figured it out yet? My turn to shoot back.
(COMMERCIAL BREAK)
SANCHEZ: Welcome back. I'm Rick Sanchez. This is your list. This is RICK'S LIST. It's our national conversation.
And now it's time for the list that you don't want to be on. I get written about a lot. It comes with the territory, right? Some on the left go after me for reports that they don't like, and some on the right attack me for much of the same thing.
But, sometimes, a shot is just so cheap, it warrants at least a phone call. So, that's what I did. I made a phone call today. I called the person who is at the very top of the list that you don't want to be on.
Matthew Balan is his name. He is a writer for NewsBusters. It's a Web site that points out bias in the media. He writes that I have demonstrated my lack of knowledge of basic science because the other day on the air I was kidding with Chad Myers about a volcano in Iceland.
Now, Balan couldn't tell I was kidding. I was. And if you look at the video, it couldn't be more obvious. Remember, I'm coming out of a commercial break, where Chad and I had just been talking to each other for a couple of minutes. You can actually hear Chad laughing in the background as I'm coming out. And I'm smiling through the entire segment, not my usual serious look, whatever that is. Here it is.
(BEGIN VIDEO CLIP)
SANCHEZ: Take a look at these pictures that we're going to be sharing with you. I was just asking Chad, how can you get a volcano in Iceland?
(LAUGHTER)
SANCHEZ: Isn't it too -- too -- when you think of -- when you think of a volcano, you think of like Hawaii and long words like that. You don't think of Iceland.
CHAD MYERS, CNN METEOROLOGIST: Right.
SANCHEZ: You think it's too cold to have a volcano there. But, no, there it is.
MYERS: Look at that.
SANCHEZ: What do you -- what is this? It's -- go --
MYERS: That is a -- that is --
SANCHEZ: Take us through these pictures.
MYERS: That -- that --
(END VIDEO CLIP)
SANCHEZ: All right, let's listen to it again. Note, again, that I'm coming out of a break and that I'm laughing from the moment I come out of the break. And so is Chad. You can hear him laughing in the background, because we have been kidding about this very thing that we were talking about it being too cold. Listen again.
(BEGIN VIDEO CLIP)
SANCHEZ: Take a look at these pictures that we're going to be sharing with you. I was just asking Chad, how can you get a volcano in Iceland?
(LAUGHTER)
SANCHEZ: Isn't it too -- too -- when you think of -- when you think of a volcano, you think of like Hawaii and long words like that. You don't think of Iceland.
CHAD MYERS, CNN METEOROLOGIST: Right.
SANCHEZ: You think it's too cold to have a volcano there. But, no, there it is.
MYERS: Look at that.
SANCHEZ: What do you -- what is this? It's -- go --
MYERS: That is a -- that is --
SANCHEZ: Take us through these pictures.
MYERS: That -- that --
(END VIDEO CLIP)
SANCHEZ: "But no."
Look, Balan has a right to call me ignorant or whatever he wants to write about. I'm a big boy and I'm a public figure. But wouldn't you think, with all that laughter from me and Chad in the background, that he might at least wonder if I was maybe kidding? Shouldn't he at least pick up the phone and call CNN, call me, call Chad? Call Chad, and don't even tell him that you talked to me, say, "Hey, Sanchez, was he possibly really serious? Or were you guys talking about this during the break?"
Did Balan call anybody? No, didn't call anyone, didn't call CNN, didn't call me, didn't call Chad.
But, look, I didn't want to do to him what he did to me. So, I did call him this afternoon. And I asked him, what was the segment before our joke about the cold weather? He said he didn't know.
So, here's a guy writing about this, but he didn't know that I was coming out of a break where Chad and I had been chatting about the volcano for over two minutes before we kidded about the cold weather. He says that he thought I was kidding at the beginning, but then somehow he couldn't tell if I was or wasn't kidding after that, because there was video over me when I said the last part of my line.
So, he said, at that point, he thought I was serious. That's what he said. And I'm going to give him the benefit of the doubt -- that he didn't give me, by the way. Maybe he really didn't get it. Maybe he thought I was being serious.
Bottom line is, what he wrote, though, was unfair, his judgment, his opinion, no balance, no phone call to see if there was a conflicting story or mitigating circumstances, just, Rick Sanchez doesn't know that hot magma can pour out of the Earth's surface in the cold region in the form of lava. Isn't Rick Sanchez stupid?
Mr. Balan sounded on the phone to me like a nice enough fellow. But what he did to me is what we call in this business a hot job. It's called a slam. And, for that, he's at the very top of the list that you don't want to be on.
(BEGIN VIDEO CLIP)
NOAH WRIGHT, OZ WINERY: Since we have opened, we have grown every year. And we don't know if we would be 10 times more than that or if we would just be at the same -- same level. You know, we just don't know if it's affecting us yet. (END VIDEO CLIP)
SANCHEZ: Looking for signs the recession is bottoming out? Just head to Kansas. We will show you how it's taking -- what is going on in Wichita, because, you know, if it's happening in Wichita, it's for real.
That's next. Stay right there.
(COMMERCIAL BREAK)
SANCHEZ: Are we actually coming out of the recession? Now, according to CNN polls, Americans are feeling slightly more optimistic. Magazine covers pronounce that possibility. There's more auto sales up, retail sales up, furniture sales. Retail, by the way, is seven weeks straight now.
Does that mean that we're out of the woods? I don't think so. But, sometimes, the best way of finding out what the real DNA is out there in the country is to go places like Peoria, or Wichita.
In fact, with the help of Tom Foreman, let's do that. Let's go to Wichita.
(BEGIN VIDEOTAPE)
TOM FOREMAN, CNN CORRESPONDENT (voice-over): Out of the tourist attraction called Old Cowtown, amid the cannon and guns, Kansans are reenacting some of the battles from their state's historic past. But their present struggle is for the future.
(on camera): Do you see a lot of people around here worrying about the economy right now?
RACHEL HUNT, OLD COWTOWN MUSEUM: Yes.
GREGORY HUNT, OLD COWTOWN MUSEUM: Yes. My friends, some of them don't know where their next check is coming from.
R. HUNT: I'm in the automotive industry, and we have seen a big downturn, and everybody's worried about it.
FOREMAN: Worried, but like that famous Kansan Dorothy in "The Wizard of Oz," not sitting still. Smack in the middle of the country, Kansas has historically rolled out wheat, cattle, transportation, and aviation products worth billions.
UNIDENTIFIED MALE: Yellow Brick Road. It's a blend of chardonnay and Vignoles.
FOREMAN: So, to build up, many here have turned to past success for inspiration and a competitive edge. That's what Noah Wright did.
NOAH WRIGHT, OZ WINERY: Kansas, before prohibition, was the third largest grape-producing state in the nation.
UNIDENTIFIED FEMALE: But this wine is not too sweet, not too dry.
FOREMAN: Just three years ago, he had an idea to combine the state's little known wine-making past with its fame as Dorothy's home. And Oz Winery has been booming ever since, despite the recession.
WRIGHT: Since we have opened, we have grown every year. And we don't know if we would be 10 times more than that or if we would just be at the same -- same level. You know, we just don't know if it's affecting us yet. We have no way to tell.
FOREMAN: Such efforts by thousands of small businesses have helped produce an unemployment rate well below the national average, a housing market on the rebound, and a population, if not entirely upbeat, at least hopeful.
That classic American tune "Home on the Range" was written in Kansas almost 140 years ago. And, since that time, it's become a lot more than just the state song. For many people here, it is a measure of commitment, their commitment to always build up whenever times turn down.
DINA BISNETTE, KANSAS: The people here still have the same mentality. Whatever happens to us, we're going to manage. We're going to make due.
(END VIDEOTAPE)
SANCHEZ: The late, great Don Hewitt used to say, just tell a good story. Tom Foreman tells as good as story as anybody here. Just thought I would say that.
By the way, I just told you a story a little while ago about this fellow Balan, Matthew Balan. And we follow tweets from everyone who is relevant to the news that we tell. So, here we go.
We just received a tweet from Matthew Balan. And he says: "Well, thank you, ricksanchezCNN, for at least calling me a nice enough fellow."
He was. My conversation with him today on the phone today was quite nice. And he did come across as a nice guy.
It happens.
Watch this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We don't want anybody that's racist. We don't want Nazis. We don't want extreme Christians, or the opposite, you know, extreme anarchists.
(END VIDEO CLIP)
SANCHEZ: Have these guys rewritten the militia motto? I mean, think about that, right? It's -- what you think of what militias are, it may change after you watch this story. We go inside this particular militia movement. And it may make you do a double-take.
Also, take a look at this.
(BEGIN VIDEO CLIP)
(LAUGHTER)
UNIDENTIFIED FEMALE: Oh, my God.
UNIDENTIFIED MALE: Lady --
(LAUGHTER)
UNIDENTIFIED FEMALE: Oh, my God.
UNIDENTIFIED MALE: -- you are the best thing that's ever happened to me.
(END VIDEO CLIP)
SANCHEZ: "You are the best thing that's ever happened to me."
"Fotos" -- next.
(LAUGHTER)
(COMMERCIAL BREAK)
