28 Wednesday Apr 2010
Posted in economy, financial reform, financial regulation, Goldman Sachs, Politics, Wall Street
Former Goldman Sachs executive Daniel Sparks put on a demonstration of bobbing, weaving, ducking, and dodging yesterday in response to Sen. Carl Levin’s questioning about Goldman’s “shitty deal” the likes of which I haven’t seen since Muhammad Ali was in his prime. Take a look:
Kudos to Sen. Levin, but it can’t stop with the theatrics of a televised hearing. Refer this to the DOJ and let the indictments begin. Those responsible must be held accountable.
28 Wednesday Apr 2010
Tags
Br'er Rabbit, campaign donations, financial reform, Goldman, Lloyd Blankfein, Republicans, Wall Street
OK, now I’m suspicious. Goldman CEO Lloyd Blankfein says Wall Street will be the “biggest beneficiary” of financial reform:
“A financial regulatory reform bill has at least one supporter outside of Congressional Democrats, Lloyd Blankfein, the head of investment bank Goldman Sachs. “I’m generally supportive,” Blankfein told the Senate Permanent Subcommittee on Investigations. Wall Street will benefit from the bill because it will make the market safer, Blankfein said.
“The biggest beneficiary of reform is Wall Street itself,” he said.
I think one of the commenters at The Hill has the right analogy. “Oh please don’t throw me in the briar patch, said Br’er Rabbit.”
Or it could be that Blankfein and his fellow banksters are anticipating a favorable return on their investment:
“For the first time since 2004, the biggest Wall Street firms are now giving most of their campaign donations to Republicans.
A Wall Street Journal analysis of 12 large financial services companies, including J.P. Morgan Chase & Co., Goldman Sachs Group Inc. shows that they have collectively made $1.4 million in political donations, with 52% going to Republicans so far this year.”
27 Tuesday Apr 2010
Tags
Carl Levin, Goldman Sachs, Lloyd Blankfein, mortgage securities, Senate Permanent Subcommittee on Investigations, shorting the market, subprime
By the summer of 2006, Goldman Sachs executives realized that the subprime mortgage market and its related securities were headed for a fall, “a very unhappy ending” as senior trader Michael Swenson wrote in a 2007 memo. They also knew their firm was heavily invested in this ticking time bomb.
What to do? The solution from Typhoid Lloyd (Blankfein) and the Goldman gang? Let’s find some suckers to dump this trash on, tell them it’s treasure, bet on it to fail, and rake in the dough.
And rake it in they did.
“The firm, which had profited handsomely off packaging and selling securitized subprime home mortgages to investors during the housing boom, switched directions in early 2007, furiously shedding its home mortgage-linked risk and buying as much insurance as it could, effectively shorting the market throughout the year — a move that netted the firm “billions and billions” at the expense of its clients, according to the documents released by the Senate Permanent Subcommittee on Investigations.The firm was “spreading the poison throughout the system,” Levin charged.
“Goldman Sachs made billions of dollars from betting against the housing market, and it placed those bets in some cases at the same time it was selling mortgage-related securities to its clients,” said the committee’s chairman, Carl Levin (D-Mich.).”
Poison is the sanitized version. Goldman exec Tom Montag put the appropriate tag on it:
“One particular security, named Timberwolf I, a collateralized debt obligation of other collateralized debt obligations that were based not on actual home mortgage bonds but instead on those bonds’ movements, lost 80 percent of its value within five months of issuance. A senior executive…remarked in a June 22, 2007, email, “Boy, that timberwolf was one shi**y deal.”
Which is precisely what Goldman’s clients got—one shi**y deal.
19 Monday Apr 2010
Tags
Countrywide, Dylan Ratigan, fraud, German government, Goldman Sachs, Gordon Brown, Lloyd Blankfein, Robert Khuzami, Securities and Exchange Commission
Could Friday’s news that the Securities and Exchange Commission is bringing civil charges of fraud against Goldman Sachs be the tip of the iceberg? Consider what has happened since then.
The German government is considering legal action against Goldman.
British Prime Minister Gordon Brown called for investigations into the bank’s role in the mortgage market.
“The SEC is investigating whether other mortgage deals arranged by some of Wall Street’s biggest firms may have crossed the line into misleading investors.
S.E.C. Enforcement Director Robert Khuzami told CNBC, “We have brought and will continue to pursue cases involving the products and practices related to the financial crisis.” … a wide range of cases are currently being investigated.”
Subprime mortgage king Countrywide is also in the crosshairs:
“Federal criminal investigators looking into the collapse of Countrywide Financial Corp. have been calling witnesses before a grand jury, say people familiar with the matter.”
Former Goldman employees are starting to talk, implicating company execs up to and including CEO Lloyd Blankfein in Goldman’s profiting from the housing market collapse.
Dylan Ratigan has a basic explanation of what Goldman and others were doing. The analogy goes like this—they were selling cars with faulty brakes and then taking out life insurance policies on the people to whom those cars were sold.
But it was even more sinister than that. Goldman not only sold the car with faulty brakes, while telling the buyers that the brakes were good, they designed the car to have faulty brakes, knowing that it was going to crash at some point. So they profited on both ends, selling the car they knew would crash and then collecting the life insurance when it crashed.
Those who are quick to dismiss the charges against Goldman as a tempest in a teapot, something that will quickly blow over after the firm pays a small (relative to their size) fine and goes on their merry way should remember this. It was a night watchman who found a piece of tape on a lock on a door at the Watergate Hotel which led to an investigation which culminated in the resignation of a president.
The question now is do we have a modern-day Woodward and Bernstein? Do we have a modern-day Ben Bradlee who will defy the powers that be and publish the information those reporters uncover in spite of the possible repercussions that those powers may bring to bear? Do we have a modern-day Sam Ervin in Congress? Is there a modern-day John Dean? An ethical person with inside knowledge of the activities at Goldman and other Wall Street giants who is willing to talk?
Time will tell.
18 Sunday Apr 2010
Tags
endless taxpayer bailouts, Goldman Sachs, John Boehner, Mitch McConnell, Newshoggers. Frank Luntz, Ron Beasley, SEC, Steve Benen, talking points, Washington Monthly
Ron Beasley at Newshoggers has the appropriate image of Senator Mitch McConnell in his post yesterday entitled, “If He Only Had a Brain” :
McConnell continues to mindlessly repeat Frank Luntz talking points about “endless taxpayer bailouts of Wall Street banks,” talking points written before there was an actual bill. Rachel Maddow compares the similarity, purely coincidental I’m sure, between Luntz’s “words to use” and McConnell’s statements:
Speaking of mindless, there’s McConnell’s sidekick, Congressman John Boner Boehner. After Friday’s news that the SEC was suing Goldman Sachs for fraud, Boner Boehner released a statement, “calling the firm a “key supporter” of the president’s bid to reform the nation’s financial regulatory system.”
“These are very serious charges against a key supporter of President Obama’s bill to create a permanent Wall Street bailout fund,” Boehner said Friday in the statement. “Despite President Obama’s rhetoric, his permanent bailout bill gives Goldman Sachs and other big Wall Street banks a permanent, taxpayer-funded safety net by designating them ‘too big to fail.’ Just whose side is President Obama on?”
Steve Benen at Washington Monthly:
“To hear the dim-witted Minority Leader put it, the Obama administration and Goldman Sachs are close allies, and the administration-backed reform bill is intended to help firms like Goldman Sachs. And we now know for sure that administration officials are carrying water for Goldman Sachs because … they just charged Goldman Sachs with fraud.
What?
I’m trying to imagine the conversation in Boehner’s office when the statement was being written. Which genius on Boehner’s staff discovered that the Obama administration is going after Goldman Sachs, regardless of its campaign contributions to Obama, and thought, “A ha! Now we’ve got ’em!“
I would guess that genius was the Orangeman himself.
02 Friday Apr 2010
Tags
Alabama, Jamie Dimon, Jefferson County, JPMorgan Chase, Looting Main Street, Matt Taibbi, Rolling Stone
In a March 26 letter to shareholders Jamie Dimon, CEO of JPMorgan Chase, wrote:
“The crisis of the past couple of years has had far-reaching consequences, among them the declining public image of banks and bankers…[W]hen we vilify whole industries…we are denigrating ourselves and much of what made this country successful…We also should refrain from indiscriminate blame of any whole group of people…While JPMorgan Chase certainly made its share of mistakes in this tumultuous time, our firm always has remained focused on the fundamentals of banking and the part we can play to support our clients and communities.”
One example of JPMorgan’s “support” for their “clients and communities” and a reason for the “declining public image of banks and bankers” can be found in another in a long line of excellent pieces by Matt Taibbi at Rolling Stone, entitled “Looting Main Street: How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece”
The article is lengthy, but a must-read, in my opinion. It’s the story of bribery, corruption, and fraud in Jefferson County, Alabama. Briefly (or maybe not so briefly), it goes like this.
In the early 90’s the EPA sued the county in order to bring its antiquated sewer system into compliance with the Clean Water Act. In 1996 county commissioners decided to build the “Taj Mahal of sewage treatment plants” with cost estimates of $250 million. Taibbi:
“But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs.”
Originally the plan was to pay for the project by increasing sewer rates. But as costs continued to escalate county commissioners knew that sooner or later customers would revolt over the ever-increasing rates, so they started looking for “creative financing.” That’s music to the banksters ears and, true to form, they came riding to the rescue with their gobbledegook of variable rate refinancing and “swaps.”
Here’s where local JPMorgan rep Charles LeCroy meets crooked politician, with local “wheeler-dealer” Bill Blount as the middle man:
“LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, who at the time had just been elected president of the county commission…Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees.
Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep “churning” you for more and more fees.”
But unbeknownst to LeCroy, Blount had a another suitor, Goldman Sachs. So:
“JP Morgan cut a separate deal with Goldman, paying the bank $3 million to [go away], with Blount taking a $300,000 cut of the side deal.”
The payoff for JPMorgan?:
“The deals wound up being the largest swap agreements in JP Morgan’s history. Making matters worse, the payoffs didn’t even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan “passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions.”
In other words, not only did the bank bribe local politicians to take the [lousy] deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.”
As happens sooner or later with all Wall Street scams, the whole thing collapsed in early 2008. And as also happens with Wall Street scams, the banksters got the gold mine and the taxpayers of Jefferson County got the shaft.
But don’t think this is an isolated incident. Taibbi concludes:
“The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren’t number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money.”
Any questions about that “declining public image” of banks and bankers, Mr. Dimon?
04 Thursday Mar 2010
Posted in bailout, Congress, economy, Financial Crisis, Goldman Sachs, Obama, Politics, Wall Street
Tags
Chris Dodd, Congress, Elizabeth Warren, Financial Crisis, Goldman Sachs, health care reform, proprietary trading, regulatory reform, Rob Johnson
Remember the economy and that little thing we had not too long ago called…what was it…oh yeah, the financial crisis. While Congress and the White House spend “the next few weeks” mired in the never-ending saga of health care reform, there are some potential problems which could affect us a lot sooner than 2014. If legislators have some spare time they might want to give it a glance:
“Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.
…Without more stringent reforms, “another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable,” Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.”
In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.
But in typical Congressional fashion, “beefing up” financial regulations and “stringent reforms” aren’t on the agenda:
“The proposal” [that would ban the banks receiving federally insured deposits from engaging in trading which benefits the banks and not their customers] “faces strong resistance in Congress, where lawmakers have shown little appetite for adding to the prolonged debate on overhauling financial regulations.”
The reason for Congress’ “little appetite” should come as no great surprise:
“Goldman Sachs and Morgan Stanley would probably be the Wall Street firms most affected by the ban, known informally as the Volcker Rule…”
Goldman most affected? We can’t have any of that. Chris Dodd needs a job starting in January.
23 Tuesday Feb 2010
Posted in AIG, economy, Goldman Sachs, Wall Street
The bonuses at AIG keep on coming:
“… AIG, the fallen insurer, paid out an additional $100 million this month, much of it to the very financial products division whose rampant risk-taking took the firm to the brink. And there’s another $75 million coming…[Treasury Secretary Tim] Geithner, and pay czar Kenneth Feinberg, say that while lamentable, the AIG payments must legally be honored.”
But yet last May during the General Motors–United Auto Workers negotiations, which the government insisted be a part of a GM bailout:
“People familiar with the UAW agreement said it largely mirrors concessions the UAW granted Chrysler LLC last month, including a suspension of cost-of-living allowances, bonuses and some holidays.
…The deal is the latest concession by the UAW after several years of cutbacks. Unlike past negotiations, which often dragged on for months and went past deadlines, the parties — under pressure from the Treasury, which has lent GM $15.4 billion — moved quickly to revise a contract approved in 2007.”
Compare that $15.4 billion for GM, which came with “pressure from the Treasury” to re-negotiate existing contracts, with the $182 billion given to AIG, no strings attached, and contracts that must be “legally honored.”
Sure sounds like a double-standard to me. White collar contracts? Sacred. Blue collar contracts? Toss ‘em in the garbage. But then again, Geithner wasn’t laundering money through GM to pay off his buds at Goldman Sachs, like he did through AIG (allegedly).
15 Monday Feb 2010
Posted in Financial Crisis, Goldman Sachs, Wall Street
Jesse’s Café Americain nails it in this commentary on Simon Johnson’s piece at Baseline Scenario about the possibility of an audit of Goldman Sachs by the European Commission over Goldman’s role in helping the Greek government hide its debt:
“…the American Wall Street banks have become dominated by a culture of compulsive sociopaths who are incapable of reforming or restraining their greed. Like all addicts, they push the envelope, emboldened by each successful scam, the weakness of regulators, and the craven support of politicians, going further and further until at long last they go one step too far, with spectacularly destructive results.
Goldman Sachs may have reached that point… the rebuke may be coming from foreign nations who become weary of the extra-legal antics of the rogue American banks.”
Johnson posits:
“..the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here – a sustainable recovery and a viable financial system, or one particular set of investment bankers?”
Given the infestation of the Obama administration with Rubin/Goldman acolytes, I’m betting on the latter.
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