President Bush with then Secretary of Treasury (July 3, 2006 – January 20, 2009) and former Goldman Sachs CEO Henry “Hank” Paulson. Each of Paulson’s three immediate predecessors as CEO of Goldman Sachs — Jon Corzine, Stephen Friedman, and Robert Rubin — left Goldman Sachs to serve in government: Corzine as a U.S. Senator (later Governor of New Jersey), Friedman as chairman of the National Economic Council (later chairman of the President’s Foreign Intelligence Advisory Board) under President George W. Bush, and Rubin as both chairman of the NEC and later Treasury Secretary under President Bill Clinton. Through unprecedented intervention by the U.S. Treasury, Paulson led government efforts which he said were aimed at avoiding a severe economic slowdown. On September 19, 2008, Paulson called for the U.S. government to use hundreds of billions of Treasury dollars to help financial firms clean up nonperforming mortgages threatening the liquidity of those firms. With the passage of H.R. 1424, former Goldman Sachs CEO Paulson became the manager of the United States Emergency Economic Stabilization fund

The government on Friday April 16, 2010 accused Wall Street’s most powerful firm of fraud, saying Goldman Sachs & Co. (bank received $12.9 billion of taxpayer bailout funds in 2009) sold mortgage investments without telling the buyers that the securities were crafted with input from a client who was betting on them to fail.

And fail they did. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co., a hedge fund, capitalize on the housing bust. The Goldman executive accused of shepherding the deal allegedly boasted about the “exotic trades” he created “without necessarily understanding all of the implications of those monstrosities!!!”

The civil charges filed by the Securities and Exchange Commission are the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

The SEC said Paulson & Co (no relation to Henry Paulson) paid Goldman roughly $15 million in 2007 to devise an investment tied to mortgage-related securities that the hedge fund viewed as likely to decline in value. Separately, Paulson & Co took out a form of insurance that allowed it to make a huge profit when those securities’ value plunged.

The fraud allegations focus on how Goldman sold the securities. Goldman told investors that a third party, ACA Management LLC, had selected the pools of subprime mortgages it used to create the securities. The securities are known as synthetic collateralized debt obligations.

The SEC alleges that Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools and stood to profit from their decline in value. Two European banks that bought the securities lost nearly $1 billion, the SEC said.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” SEC Enforcement Director Robert Khuzami said in a statement.

Paulson & Co. is run by John Paulson, who reaped billions by betting against subprime mortgage securities. John Paulson was among the first on Wall Street to bet heavily against subprime mortgages. His firm earned more than $15 billion in 2007, and he pocketed $3.7 billion. He has since earned billions more, largely by betting against bank stocks and then buying them back after their shares plunged.

Less than a month after the SEC filed fraud charges against Goldman Sachs lawyers for Goldman Sachs Group Inc. were served a subpoena to testify or provide information in a closely watched case of illegal insider trading allegations, according to a court document made public on Monday May 3, 2010.

The subpoena to Goldman Sachs & Co and Goldman Sachs Execution and Clearing LP on April 15, requests “all trading records and monthly account statements associated with account number UF703881” of Michael Kimelman, a former trader at Quad Capital LLC and Incremental Capital.

Mr. Kimelman is charged in a case running parallel with the one U.S. prosecutors are pursuing against Galleon hedge-fund founder Raj Rajaratnam.

U.S. prosecutors described the probe as the biggest hedge fund insider trading case ever in the United States. Mr. Kimelman was arrested and charged last Nov. 5 along with Zvi Goffer, a onetime Galleon employee who later started the Incremental Capital trading firm, and five other traders or lawyers. They have all pleaded not guilty to an indictment and are free on bail.

The subpoena, signed by presiding Manhattan federal court Judge Richard Sullivan, was submitted by Mr. Kimelman’s lawyer Morris Fodeman. It asks representatives of the investment bank’s legal department to appear before the judge at a hearing in the case on May 14. No other details were provided, other than that Goldman acknowledged receipt on April 19.

U.S. prosecutors have accused Mr. Rajaratnam of obtaining confidential information on Goldman, but have not formally included those in the charges, according to court documents. Prosecutors said Mr. Rajaratnam sought information on Warren Buffet’s Berkshire Hathaway’s purchase of preferred shares in Goldman before the transaction became public on Sept. 23, 2008.

They also said he conspired to obtain confidential information about the quarterly earnings of Goldman before public announcements on or about June 17, 2008, and Dec. 16, 2008.

The Sri Lankan-born Mr. Rajaratnam, a U.S. citizen, has pleaded not guilty and is free on bail. His co-defendant, former New Castle Funds LLC trader Danielle Chiesi, has also pleaded not guilty. Their trial is scheduled to start on Oct. 25 before Judge Richard Holwell.

Eleven defendants have pleaded guilty out of 21 charged. Eight people, some of them Mr. Rajaratnam’s former friends and business associates or onetime Galleon employees, have signed cooperation agreements with prosecutors.

Goldman Sachs and other banks of the privately owned Federal Reserve Banks sole beneficiary of the government multi $trillion bailouts

Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).

Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion).

All are banks or shareholders of the privately owned Federal Reserve Bank. Article 1, Section 8 of the Constitution states that Congress shall have the power to coin (create) money and regulate the value thereof. Today however, the FED, which is a privately owned company, controls and profits by printing money through the Treasury, and regulating its value.

Who actually owns the Federal Reserve Central Banks? Rothschild Bank of London, Warburg Bank of Hamburg, Rothschild Bank of Berlin, Lehman Brothers of New York, Lazard Brothers of Paris, Kuhn Loeb Bank of New York, Israel Moses Seif Banks of Italy, Goldman Sachs of New York, Warburg Bank of Amsterdam, Chase Manhattan Bank of New York.

Goldman Sachs conflict of interest

It has been pointed out that former Treasury Secretary Henry Paulson’s plan to use hundreds of billions of Treasury dollars to help financial firms clean up nonperforming mortgages threatening the liquidity of those firms could potentially have some conflicts of interest, since Paulson was a former CEO of Goldman Sachs, a firm that benefited greatly from the plan. Economic columnists called for more scrutiny of his actions. Questions remain about Paulson’s direct financial interest in Goldman, even though he had sold his entire stake in the firm prior to becoming Treasury Secretary, pursuant to ethics law. The Goldman Sachs benefit from the government bailout was recently estimated as USD 12.9 billion and Goldman Sachs was the largest recipient of the public funds from AIG. Creating the collateralized debt obligations (CDO’s) forming the basis of the current crisis was an active part of Goldman Sach’s business during Paulson’s tenure as CEO. Opponents argued that Paulson remained a Wall Street insider who maintained close friendships with higher-ups of the bailout beneficiaries. The Paulson proposed bill gave the United States Treasury Secretary (Henry Paulson) unprecedented powers over the economic and financial life of the U.S. Section 8 of Paulson’s original plan stated: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Some time after the passage of a rewritten bill, the press reported that the Treasury was now proposing to use these funds ($700 billion) in ways other than what was originally intended in the bill.

A quote from Thomas Jefferson about the Bank of the United States sums up the Fed.

“[The] Bank of the United States… is one of the most deadly hostility existing, against the principles and form of our Constitution… An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries.”

Author Eustace Mullins in his 1983 book Secrets of the Federal Reserve stated:

“… The most powerful men in the United States were themselves answerable to another power, a foreign power, and a power which had been steadfastly seeking to extend its control over the young republic since its very inception. The power was the financial power of England, centered in the London Branch of the House of Rothschild. The fact was that in 1910, the United States was for all practical purposes being ruled from England, and so it is today.” (Mullins, p. 47-48).

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” - Woodrow Wilson, the 28th President of the United States, after signing the Federal Reserve into existence