Where's RICO?

Where indeed?

Where's RICO?

Wednesday 21 April 2010

by: James Howard Kunstler, t r u t h o u t | Op-Ed

(Image: Lance Page / t r u t h o u t; Adapted: RLHyde, aresauburn™, Pink Sherbet Photography)

It's interesting and instructive to read The New York Times' lead story this morning, "Top Goldman Leaders Said to Have Overseen Mortgage Unit." While it pretends to report all the particulars of the huge scandal growing out of Friday's SEC action against Goldman Sachs (GS), the story really comes off as an attempt to create an alibi for the so-called "bank." It pretends that some kind of an intellectual struggle was going on among GS executives as to whether the housing market was doing just fine or poised to tank - therefore, muddling the company's intent in setting up investment deals based on sketchy mortgages designed to blow up, so that a favored big customer, John Paulson, could collect on the deal insurance known as credit default swaps.

The truth is that anyone with half a brain could see the securitized mortgage fiasco coming from 10,000 miles away. I said as much in Chapter Six ("Running on Fumes: the Hallucinated Economy") of my book "The Long Emergency," which was published in 2005, but written well before that in 2002-2004. And I had had no work experience whatsoever in banking generally or Wall Street investment banking in particular.

Ah! That's about the same time I took out a 4% fixed rate loan and paid off credit cards. Haven't used one since. It hasn't been easy, but I shutter to think where I would be if I had kept living above my means.

One week before the SEC action against GS, the Pro Publica web site published a story about virtually the same kind of mischief being run out of the Chicago-based hedge fund Magnetar led by a clever young fellow named Alec Litowitz. Like GS, Magnetar deliberately constructed investments (bundles of bundled mortgage-backed securities called collateralized debt obligations or CDOs) that were certain to fail, so that Magnetar could collect on credit default swaps that amounted to a bet against products they themselves had participated in creating. There was no question that Litowitz and his employees did this absolutely on purpose. Nor is there any question that they aggressively sold positions in these CDOs to credulous investors like Thrivent Financial for Lutherans and others.

The question that now begs to be answered is: why is this activity not being investigated and prosecuted under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) statutes against racketeering? RICO was designed to punish exactly this kind of behavior, whether the defendant's name ended in a vowel or not. How is it not a racket to deliberately and systematically construct investments designed to fail so you can collect what amounts to insurance against them - and then to sell those financial instruments to customers without telling them that these investments were engineered to blow up? At the very least, it amounts to a failure to disclose material information, which is the basis for distinguishing illegality. More to the point, it almost certainly amounts to prosecutable criminal fraud and insider trading.

Dylan Ratigan at MSNBC asked pretty much this question on Friday when interviewing Connecticut Attorney General Richard Blumenthal (because the AIG company, headquartered in his state, sold gobs of credit default swaps to GS for dodgy CDOs, leading to a giant government bailout and incidental huge payoffs to GS). Blumenthal's answer was lame, to put it mildly - that recent federal rules tied his hands, he claimed. He could have at least publicly protested his hand tying and applied pressure to the US Department of Justice to enforce the anti-racketeering law.

So, where is the DOJ's criminal division in all this? The GS racket has been publicly known, in one form or another, for several years. I wrote in this space several times at least as far back as 2007 that GS was essentially shorting it's own issued securities, and I'm neither a lawyer nor a finance professional. Anyone could see this from just reading the news. Magnetar's activity was so notorious that the very business of engineering dodgy CDO investments to collect insurance on their failure became known throughout the industry as "the Magnetar Play."

The feigned cluelessness among some of the highest-profile figures in these rackets is something to behold. For instance, Citibank was among the companies that helped Magnetar put together their designed-to-fail CDOs. Citi's chairman at the time, former US Treasury Secretary Robert Rubin, testifying before the new Financial Crisis Inquiry Commission said, "Almost all of us, including me, who were involved in the financial system - that is to say financial firms, regulators, rating agencies, analysts and commentators - missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis." Bank of America's CEO, Brian Moynihan, told a Congressional hearing, "No one involved in the housing system - lenders, rating agencies, investors, insurers, consumers, regulators, and policy-makers - foresaw a dramatic and rapid depreciation in home prices [and, therefore, in investment instruments based on mortgages]."

Either they are lying or they are profoundly stupid and incompetent. If the former, then they might be induced to spend some time talking to federal prosecutors; if the latter, then the US financial system is too hopeless to survive and we will all soon be bartering hand tools and designer shoes for food. Evidence of the latter is ample, for instance, in Citigroup's loss of 70 percent share value during Rubin's chairmanship - for which, in the crash year of 2008 alone, he was paid $17 million plus $33 million in stock options.

The GS SEC action and the related Magnetar story seems to be a pretty big deal, and appear to be dragging public opinion to a crossroads where we acknowledge the deep structural corruption of the financial system or watch the legitimacy of both banking and government dissolve. At least, it throws gouts of gasoline on the political fires lit by Tea Partiers and even more extreme political factions. I don't see how President Obama can keep Rubin at his elbow or the hosts of other GS alumni in their federal jobs. The whole episode is disgusting in the purest sense of the word. If Obama doesn't shake these people loose, and if he doesn't pick up the phone and direct his attorney general to execute the laws - including the RICO law - then all the moonbeams issuing from his renowned smile will not avail to keep him in office, or keep the financial underpinning of the USA from collapse.

This article has been previously published on James Howard Kunstler's blog.

James Howard Kunstler is the author of "The Long Emergency," the novel "World Made By Hand" and the sequel, "The Witch of Hebron," coming out in September from The Atlantic Monthly Press.

All republished content that appears on Truthout has been obtained by permission or license.

Let The Sun Shine In......

Goldman Hires Obama's Ex-White House Counsel to Defend Bank Against Fraud Charges

WTF?

 

Monday 19 April 2010

by: Jason Leopold, t r u t h o u t | Report

(Image: Jared Rodriguez / t r u t h o u t; Adapted: macten, Seabamirum)

Wall Street banking behemoth Goldman Sachs, which was charged with securities fraud last Friday over its role in the subprime mortgage meltdown, has hired President Obama's former White House Counsel Greg Craig to defend the company, according to a report published late Monday by Politico.

Reporters Eamon Javers and Mike Allen, citing an unnamed source, reported that Craig was hired “in recent weeks to help navigate the halls of power in Washington.”

“Whatever the reason for his hiring, Craig will presumably be a key player in the intricate counterattack Goldman Sachs officials in Washington and Manhattan improvised during the weekend — a plan that took clearer shape Monday as Britain and Germany announced that they might conduct their own investigations of the firm,” Politico reported.

As Truthout reported, Craig was ousted last November after he fell out of favor with some Obama administration officials, including White House Chief of Staff Rahm Emanuel, because Craig backed public disclosure on documents and photographs related to the Bush administration’s use of torture against alleged terrorist detainees and his role in pushing the White House to shutter Guantanamo within a year.

Craig’s efforts, originally championed by the administration, led to blistering attacks against the Obama White House by former Vice President Dick Cheney and Republican lawmakers who accused the president of giving aid and comfort to the “enemy.”

Craig is no stranger to high-profile cases. He represented fomer President Bill Clinton during his Senate impeachment trial. was also instrumental in working closely with Karl Rove’s attorney, Robert Luskin, and House Judiciary Committee Chairman John Conyers and his staff that resulted in Bush’s former political adviser testifying before the panel behind closed doors about the firings of nine federal prosecutors in 2006 and the apparent political prosecution of former Alabama Gov. Don Siegelman. Craig also arranged a similar deal for former White House Counsel Harriet Miers.

As Goldman's attorney, Craig will have defend the bank against charges that it failed to inform its investors that one of its clients had a hand in creating a mortgage-based investment portfoloio and then bet the housing market would collapse, which led Goldman to lose $1 billion. The trader earned $3.7 billion, according to a civil suit filed last week against the company by the Securities and Exchange Commission following a nine-month investigation.

Despite the allegations the SEC levled against the firm in a civil complaint last week, 

Goldman still intends to dole out about $5 billion in bonuses, the Times of London reported.

Separately, Newsweek reported earlier Monday that Sen. Carl Levin, the chairman of the Senate’s Permanent Subcommittee on Investigations, has obtained new documents that link “certain actions to specific people” at Goldman Sachs related to deals the company made that precipitated the housing market crash.

Levin’s office wouldn’t disclose the substance of the documents he has obtained nor would his staffers identify the individuals at Goldman the Michigan Democrat intends to name as having played a direct role in the collapse of the bank and the financial collapse that ensued.

But come next week, according to an unnamed legislative official quoted by Newsweek, Levin believes the information he has collected will result in “another big shoe to drop on Goldman.”

Levin’s subcommittee is scheduled to hold hearings next week where Goldman’s Chief Executive Lloyd Blankfein will testify about what he knew and when he knew it. It’s unknown if Craig, who returned to private practice after his departure as White House counsel last year, will accompany Blankfein to the hearing.

 
This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Let The Sun Shine In......

What’s Wrong with the Financial Reform Bill

By MATT TAIBBI

Senate Banking Committee Chairman Christopher Dodd’s financial “reform” proposal (Barney Frank’s wasn’t much better) won’t change the nature of anything Wall Street does. Dodd’s needless watering down of a proposal to create a new Consumer Financial Protection Agency has been well-documented, so here is a list of 10 other problems Dodd’s bill will not fix:
via Speculating Banks Still Rule — Ten Ways Dems and Dodd Are Failing on Financial Reform | Economy | AlterNet.

Friend Nomi Prins, who in a former life worked for Goldman, this weekend sent along a link to an article in which she outlines the gaps in the current version of the financial regulatory reform bill. Given that the bill is sometimes being pitched as the answer to some of the problems underlined by the Goldman case, it’s a very sobering read.

My favorite is the halting, incomplete attempt at a rollback of the Gramm-Leach-Bliley Act, i.e. the pseudo-restoration of the Glass-Steagall Act known as the Volcker rule. Nomi writes:

2) It won’t reduce the economic danger from rampant, overleveraged trading activities. The bill would restrict certain banks from having proprietary trading operations (trading with their own capital) under the “Volcker rule,” but it’s full of problematic exemptions:

a) Banks that claim they trade on behalf of their customers (which they all say they do) escape the rule.

b) Banks that trade for “market-making” purposes (i.e. Goldman Sachs betting against its own clients) are home-free.

c) Banks aren’t required to itemize their trading operations to regulators, so they get to decide what they consider trading for their customers and what they consider proprietary. I wonder how that will work out.

Then of course there’s the treatment of hedge funds, also relevant given the business with John Paulson:

5) It won’t contain the risk to the shadow banking system from hedge funds, private equity firms and venture capital funds. Venture capital and private equity advisers still won’t have to register or report to the SEC, though hedge funds with over $100 million in assets will. There’s also no statutory definition of what actually constitutes a hedge fund, and the bill doesn’t close the tax loophole that allows fund managers to be taxed at the lower capital-gains tax rate of 15 percent, rather than the higher income tax rate of 34 percent. If it sounds crazy to you that the richest people in America are being taxed at the lowest rates, it is: the loophole cost taxpayers about $5 billion this year alone.

There is some good stuff in the bill, but it is riddled with loopholes. Far more important than the actual bill is the effort to actually enforce existing laws. While it is true that the near-complete absence of a regulatory structure to oversee derivatives trading is problematic, there is a lot the government could have done still, if it had wanted to, to prevent catastrophes like AIG and Lehman Brothers. The decision to take a whack at Goldman for this Paulson business is therefore the best news there’s been on this front…

Let The Sun Shine In......

Maybe Nationalizing the Banks Isn't such a bad idea

Wasn't Hoover who said that the problem with Capitalism is Capitalists?

• 
• • Will Hutton
  • The Observer, Sunday 18 April 2010
  • Article history

Goldman Sachs was in the spotlight last November when demonstrators protested outside its Washington offices against executive bonuses. Photograph: Andrew Harrer/Bloomberg via Getty Images

The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

Beneath the complexity, the charges are all rooted in the same phenomenon – deception. Somebody, somewhere, was knowingly fooled by banks and bankers – sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman's case, by creating a scheme to enrich one favoured investor at the expense of others – including, via RBS, the British taxpayer. Along the way there is a long list of so-called "entrepreneurs" and "innovators" who were offered loans that should never have been made. Lloyd Blankfein, Goldman's CEO, remarked only semi-ironically that his bank was doing God's work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation.

The investors who bought the collateralised debt obligation (CDO) were not complete innocents. They had asked for the bond to be validated by an independent expert into residential mortgage-backed securities – a company called ACA management. ACA gave the bond the thumbs-up on the understanding from Fabrice Tourre that the hedge fund Paulson were investing in it. But the SEC says Tourre misled them, a pivotal claim that Goldman denies. The reality was that Paulson was frantically buying credit default swaps in the CDO that would go up in price the more valueless it became – a trade that would make more than $1 billion. Worse, Paulson had identified some of the dud sub-prime mortgages that he wanted Tourre to put into the CDO. If the SEC case is true, this was a scam – nothing more, nothing less.

Tourre could see what was coming. In one email in January 2007 he wrote: "More and more leverage in the system. The whole building is about to collapse anytime now… only potential survivor, the fabulous Fab[rice Tourre] .. standing in the middle of all these complex highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities". Fabulous Fab, like his boss, will not be feeling very fab today.

The cases not only have a lot in common – using financial complexity allegedly to deceive and then using so-called independent experts to validate the deception (lawyers, accountants, credit rating agencies, "portfolio selection agents," etc etc ) – but they also show how interconnected the financial system is. In Iceland Citigroup and Deutsche Bank covered the margin calls of distressed Icelandic business borrowers, deepening the crisis. Lehman uses the lightly regulated London markets and two independent British experts to validate that their "Repo 105s" were "genuine" trades and not their own in-house liability. 

The American authorities pursued a Swiss bank over aiding and abetting US nationals to evade tax.

Bankers will complain these cases all involve one or two misguided individuals, but that most banking is above board and was just the victim of irrational exuberance, misguided belief in free market economics and faulty risk management techniques. Obviously that is true – but, sadly, there is much more to the crisis. Andrew Haldane, executive director of the Bank of England, highlights the remarkable reduction in the risk weighting of bank assets between 1997 and 2007. Put simply, Europe's and the US's large banks exploited the weak international agreement on bank capital requirements in the so-called Basel agreement in 2004 to reclassify the risk of their loans and trading instruments. They did not just reduce the risk by 5 or 10%. Breathtakingly, they claimed their new risk management techniques were so wonderful that the riskiness of their assets was up to half of what it had been – despite property and share prices cresting to new all-time highs.

Brutally, the banks knowingly gamed the system to grow their balance sheets ever faster and with even less capital underpinning them in the full knowledge that everything rested on the bogus claim that their lending was now much less risky. That was not all they were doing. As Michael Lewis describes in The Big Short, credit default swaps had been deliberately created as an asset class by the big investment banks to allow hedge funds to speculate against collateralised debt obligations. The banks were gaming the regulators and investors alike – and they knew full well what they were doing. Simon Johnson's 13 Bankers shows how the major American banks deployed vast political lobbying power and money to create the relaxed regulatory environment in which all this could take place. In Britain no money changed hands. Gordon Brown offered light-touch regulation for free – egged on by the Tories, who wanted to go further.

This was the context in which Goldman's Fabulous Fab created the disputed CDOs, Sean FitzPatrick allegedly moved loans between banks and Lehman created its Repo 105s along with the entire "debt mule" structure revealed this weekend of inter-related companies to shuffle debt around its empire. London and New York had become the centre of an international financial system in which the purpose of banking became making money from money – and where the complexity of the "innovations" allowed extensive fraud and deception.

Now it has all collapsed, to be bailed out by western taxpayers. The banks are resisting reform – and want to cling on to the business practices and business model that has so appallingly failed. It is obvious why: it makes them very rich. The politicians tread carefully, only proposing what the bankers say is congruent with their definition of what banking should be. Labour and Tories alike are united in opposing improved EU regulation of hedge funds, buying the propaganda those operations had nothing to do with the crisis. Perhaps Paulson's trades at Goldman, and the hedge funds' appetite for speculating in credit default swaps, may disabuse them.

It is time to reframe the question. Banks and financial institutions should do what economy and society want them to do – support enterprise, direct credit to where it is needed and be part of the system that generates investment and innovation. Andrew Haldane – and the governor of the Bank of England – are right. We need to break up our banks, limit their capacity to speculate and bring them back to earth. Britain should also launch an official investigation into what went wrong – and hand the findings to the Serious Fraud Office. This needs to become this election campaign's number one issue – not one which either a compromised Labour party or a temporising Conservative party will relish. The Lib Dems, the fiercest critics of the banks, have begun to get very lucky.

Crisis timetable

September 2007 Funding problems at Northern Rock triggers the first run on a British bank. It is nationalised in February 2008.

April 2008 Bear Stern faces bankruptcy after a run on the company wipes out cash reserves in less than two days. Backed by the Federal Reserve, JPMorgan buys up shares at far below market value.

September 2008 Lehman Brothers files for bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.

December 2008 Bernard Madoff arrested for operating the largest Ponzi scheme in history.

January 2009 The Bank of England launches £200bn quantitative easing.

March 2010 Former chairman of Anglo Irish bank Sean Fitzpatrick is arrested in Dublin after failing to disclose details of loans worth millions from the bank.

April 2010 Northern Rock former directors, David Baker and Richard Barclay, are fined £504,000 and £140,000 for deliberately misleading analysts prior to nationalisation.

April 2010 The US Securities and Exchange Commission accuses Goldman Sachs of "defrauding investors by misstating and omitting key facts".

Joanna Aniel Bidar
• This article was amended on Monday 19 April. A reference to Anglo Irish looking after the Post Office's financial services was removed. Bank of Ireland is the Post Office's financial services provider.
Let The Sun Shine In......

A volcanic cloud over Wall Street

Apr 16th 2010 | NEW YORK
From Economist.com

The charges against Goldman could have far wider consequences


IS THE most powerful and controversial firm on Wall Street about to get the comeuppance that so many think it deserves? On Friday April 16th America’s Securities and Exchange Commission (SEC) filed civil charges against Goldman Sachs and one of its vice-presidents, Fabrice Tourre, for allegedly defrauding investors by failing to disclose vital information about a financial product linked to subprime mortgages, as America’s housing market was starting to wobble. Goldman’s shares tumbled, dragging down stockmarkets.

The instrument in question, structured and marketed by Goldman, was a synthetic collateralised debt obligation (CDO), whose performance was tied to that of residential mortgage-backed securities. Goldman told its investors, who included some European banks, that the securities bundled together to form the CDO had been selected by an independent third party, ACA Management. The SEC alleges that the investment bank failed to disclose that another firm, Paulson & Co, a big hedge-fund manager, had in fact had a hand in choosing what went into the CDO.

This was a crucial omission, since Paulson & Co—run by John Paulson, who made billions in 2007-08 betting against the housing market—had taken a short position against the CDO; in other words, his firm would profit if the instrument performed poorly. “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, head of the SEC’s enforcement division.

Goldman called the charges “completely unfounded” and said it would contest them vigorously. Paulson & Co has not been charged; the firm issued a statement saying that ACA, as the third-party collateral manager, had sole authority over the selection of securities in the CDO. In a more detailed response issued later, Goldman said it had itself lost money on the transaction and insisted that extensive information about the portfolio had been provided to the buyers, who were sophisticated investors aware of the risks.

The SEC says Paulson had an incentive to select mortgage securities that would bomb

According to the complaint, Paulson shorted the portfolio it helped to select by purchasing protection against the default of certain layers through credit-default swaps (CDSs) it entered into with Goldman. The SEC argues that these derivatives gave the hedge fund an incentive to select mortgage securities that would bomb. And bomb they did. The deal closed in April 2007; by the end of January 2008, 99% of the portfolio had been downgraded by credit-rating agencies.

Mr Tourre was responsible for the CDO, known as ABACUS. He is alleged not only to have known about Paulson’s undisclosed short position, but also to have misled ACA into believing that Paulson & Co had ploughed around $200m into the equity of the CDO.

The charges could hardly come at a worse time for Goldman. The firm has been under fire on a number of fronts, including over the handsome payout it secured from the New York Fed as a derivatives counterparty of American International Group, an insurer that almost failed in 2008. In a string of negative articles over the past year, Goldman has been accused of everything from double-dealing for its own advantage to planting its own people in the Treasury and other agencies to ensure that its interests were looked after. One profile memorably likened the firm to a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Goldman has continued to insist that it fared better than most of its rivals because of smart risk management, not because of any conflicts or duplicity. Its boss, Lloyd Blankfein, launched a vigorous defence of the firm’s practices in his recently published letter to shareholders.

The charge against Goldman will unleash waves of Schadenfreude

But this week’s hammer-blow will unleash waves of Schadenfreude. Sceptics will say it confirms their suspicions that, for all the talk of helping its customers (Mr Blankfein used the words “client” or “clients” 56 times in his letter), Goldman puts its own interests, and those of favoured trading partners, first. The SEC’s move “marks an escalation in the battle to expose conflicts of interest on Wall Street” and exposes a “cynical, savage culture” that allows dealers to deceive one customer to benefit another, said Christopher Whalen of Institutional Risk Analytics.

The charges also have implications for financial regulation. American senators are caught up in a heated debate over a wide-ranging reform bill, a key part of which covers over-the-counter derivatives, especially CDSs, which many see as having exacerbated the crisis. The head of the Senate’s powerful agriculture committee has proposed that large banks be forced to spin off their derivatives-trading units. Goldman’s problems could make it more difficult to see off such draconian measures.

The cost of any penalties to Goldman, if found guilty, is likely to be in the tens, possibly hundreds, of millions. The SEC is seeking the return of any ill-gotten gains plus a penalty. Investors in the CDOs are said to have lost more than $1 billion. But the damage could be much greater, if the affair shatters Goldman’s fragile reputation, weakened as it has been by all the negative publicity of recent months. In a sign of how seriously the market views the civil charges, Goldman’s shares were down by more than 15% at one point on Friday.

Its rivals should not feel too smug. The SEC has been working hard to beef up enforcement. The case is the first to be brought by its new structured-products group. It will not be the last. On a call with reporters, Mr Khuzami said the team was looking at other instruments, some of them no doubt structured by other firms. Goldman’s rivals have long been envious of its prowess. Some of them may soon be empathising with its plight.

Copyright © 2010 The Economist Newspaper and The Economist Group. All rights reserved.

Let The Sun Shine In......

My Head May Well Explode!

Which Temple, Robert? These people are all worshipers of the Golden calf and always have been. Where your heart is, there will be your treasure. Wall Streeters are heathens. Treat them as such.

Throw The Money-Changers Out of The Temple

Posted on Nov 19, 2009
Wall Street profits are an obscene affront to Scripture, as Robert Scheer details in an interview with Amy Goodman on “Democracy Now!”
Democracy Now!:

Partial rush transcript from Democracy Now!:

AMY GOODMAN: We turn now to the latest on the economy. A pair of new government reports released this week paint a startling picture of where the country is, more than a year after the economic meltdown. On Tuesday, the New York Comptroller’s Office said Wall Street profits are set to exceed the record set three years ago. The four largest firms—Goldman Sachs, Merrill Lynch, Morgan Stanley, JPMorgan Chase—took in $22.5 billion in profits through September. The top six banks set aside $112 billion for salaries and bonuses over the same period. In a recent interview, the CEO of Goldman Sachs, Lloyd Blankfein, defended the bank’s massive profits, saying Goldman is, quote, “doing God’s work."


Meanwhile, the Department of Agriculture has revealed that far more people are going hungry in the United States than previously the ought. The Department estimates 50 million Americans, including a quarter of all children, struggled to get enough to eat last year. The number of children who live in households in which food at times was scarce last year stands at 17 million, an increase of four million children in just a year. 


Our next guest has been closely following the impact and causes of the economic meltdown. Robert Scheer, editor at Truthdig.com, author of many books, including The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America. His latest column is called “Where Is the Community Organizer We Elected?” He joins me here in Burbank, California. 


Welcome to Democracy Now!, Robert Scheer. OK, just talk about these figures, from hunger to Goldman Sachs. 


ROBERT SCHEER: Well, first of all, I mean, the whole thing about the profit of Wall Street that makes it particularly obscene is that we gave them that money. Your previous guest talked about how China is carrying $800 billion of our debt. We’re running up a $1.4 trillion deficit. And what happened was, we threw a lot of money at Wall Street. In particular, in relation to Goldman, we had this buyout of AIG, $180 billion. We’ve guaranteed the toxic assets of these enterprises. And that money, in a really truly shameful way, was passed on directly to the very companies that you mentioned that are giving themselves profits. So there’s something—yes, I’ll use the word “obscene.” 


It’s also interesting that he should say he’s “doing God’s work,” Blankfein, the head of Goldman Sachs. And my goodness, if Scripture is clear on anything, it’s condemnation of those who take advantage of the poor. 

You know, after all, Jesus threw the money changers out of the temple. Scripture is devastating in its condemnation of usury, the immorality of usury. And yet, in your promo, you mentioned Chris Dodd is trying to get a bill passed that would cap interest rates. You know, where is the Christian right? Where are the Christians? Where are the Jews, for that matter? Or the Muslims? At least the Muslims, in their religious practice, don’t believe in interest as a principle, but the idea that we’re jacking up credit cards to 30, 35—this is loan sharking. And we can’t even get a bill passed through Congress that would cap interest payments. 


The other thing is, their rationalization is they’re somehow saving the economy. It’s the old blackmail thing. 
They ruined the economy; they got the legislation, the radical deregulation they wanted, that permitted them to become too big to fail—Citigroup and these companies; and then they turn around and say, “If you don’t throw all this money at us, the economy is going to go into the Great Depression.” But they haven’t solved the main problems. Mortgage foreclosures this month are higher than they’ve been in ten months. We have the commercial housing market exploding, you know, apartment building rentals exploding, going into mortgages. And so, you know, they are not dealing with the fundamentals. What has happened is an incredibly expensive band-aid was put on this. And these people don’t even have—they’re not even embarrassed. 


And the reason I wrote that column is they’ve also captured the President. And, you know, I voted for this president. I even contributed money that I didn’t have to his campaign. You know, I still feel great that he’s the President. You know, I’m biased. I like the guy, you know. I like everything about him.


AMY GOODMAN: Yet you ask, where’s the community-organizer-in-chief?


ROBERT SCHEER: I am appalled. This is not a minor criticism. I think the guy is betraying—betraying—his own presidency, the promise of his presidency, because he has taken these thieves—and I use the word advisedly. You know, I think people like Lawrence Summers, who pay themselves—you know, maybe he’s not legally a thief, but, you know, a guy who pays himself, or gets paid from hedge funds and other people, $15 million in ’08, while he’s advising Obama about the economy. And he’s the guy who, more than anyone else, when he was Secretary of the Treasury in the Clinton administration, pushed through the radical deregulation that allowed these businesses to get in all this trouble and refused to regulate derivatives and all that sort of thing. And then these guys are made the head of the—what? They’re going to save us now? 
 

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Let The Sun Shine In......

Goldman Sachs Stocks Up....On H1N1 Vaccinations

This is beyond outrageous. Pregnant women and children with respiratory problems struggle to get access to scarce doses of the H1N1 vaccine. But according to NBC News, bankers at Goldman Sachs enjoy a stockpile of 200 doses of the vaccine -- the same as allotted to Lenox Hill Hospital in New York.

With hospitals, schools and community health clinics in desperate need of the H1N1 vaccine, it's unconscionable that Wall Street can just cut in line and secure scarce doses for bankers.

Goldman Sachs received over $1 billion in taxpayer bailouts during the financial meltdown. But that's not all. It was the single-largest recipient of taxpayer money in the AIG bailout, receiving almost $13 billion once AIG's positions were unwound.

And now, analysts predict Goldman Sachs could give its bankers as much as $23 billion in bonuses, while the rest of country struggles through the jobless "recovery."

NBC chief medical correspondent Nancy Snyderman has suggested that Goldman donate its doses to Lenox Hill Hospital. I agree, that's the least they can do.

I just told Goldman Sachs: Donate your H1N1 vaccine doses to Lenox Hill Hospital. Your at-risk employees should go wait in the same line with the taxpayers who bailed you out.

I hope you will, too. Please have a look and take action.

http://act.credoaction.com/campaign/h1n1_vaccine/?r_by=6596-1852929-1X0rEEx&rc=paste1
IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. PELICAN BLOGS HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR ARE PELICAN BLOGS ENDORSED OR SPONSORED BY THE ORIGINATOR.


"VIEW SOURCE ARTICLE" LINKS ARE PROVIDED AS A CONVENIENCE TO OUR READERS AND ALLOW FOR VERIFICATION OF AUTHENTICITY. HOWEVER, AS ORIGINATING PAGES ARE OFTEN UPDATED BY THEIR ORIGINATING HOST SITES, THE VERSIONS POSTED ON THIS BLOG MAY NOT MATCH THE VERSIONS OUR READERS VIEW WHEN CLICKING THE "VIEW SOURCE ARTICLE" LINKS.

Let The Sun Shine In......

THE BATTLE WITH THE BANKS IS ON: PROTESTS AND PITCHFORKS

Hang 'Em High!

capitalist world and then change it

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 By Danny Schechter

As New Bank Bailouts Seem Likely, There Is More to Speak Out Against

There’s phrase that’s worked its way into the Japanese language: “Lehman Shokku”—translated as Lehman Shock. It refers to what happened to 460,000 people after Hank Paulson and Tim Geithner let the global Lehman Investment Bank collapse. A former Lehman executive told me over Matzoh at a Passover seder that she believes the decision reflected a competitive conflict and ego battle between the former Goldman Sachs chief turned Treasury Secretary and the bullheaded CEO of Lehman.

The clash of two power-crats in New York triggered a hard rain across the world.

Bloomberg reports on a forty year old former bank employee, Miki, who “now sleeps in cardboard boxes under the elevated Hanshin expressway in Umeda, Osaka’s central business district…as the global recession triggered by the implosion of Wall Street banks batters Japan. … Miki’s loss of housing shows how Japan’s 2.95 million unemployed people threaten to fuel a rise in homelessness.”


Bloomberg is doing more than reporting bad news; it is also suing the Federal Reserve Bank for information that the privately run “public institution” wants to hide. Bloomberg wants the FED to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.

As the sun creeps through and the weather warms, there’s an expectation that the new season will wipe out the winter’s bad karma and lead to a desperately needed economic recovery. Obama Advisor Larry Summers, like an evangelist from the Elmer Granty era, sees the signs in small upticks of business activity. Now, according to the News n Economic blog comes an analyst, Roger Shealy, who has examined the footnotes and available data concluding “The Fed is holding a larger share of risky assets as collateral for its riskless currency and Treasuries lent on the open market.”

Translation: We are living on Quicksand.

The Fed also admits that its consumer credit plan is faltering. Reports TIME: “The second round of the Federal Reserve’s attempt to restart the nonbank consumer-lending market, the so-called TALF program, went even worse than the faltering first round did last month. The poor performance is causing some Fed officials to doubt the entire premise of the effort to restart nonbank credit markets.”

On top of that, as the Treasury Department runs so-called “stress tests on the soundness of the banks,” the Fed wants the banks to stay silent on the results. Again, Fed watcher Bloomberg is on the case: “The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.”

On this Easter weekend of “He Has Risen,” a lot seems to be still falling.

For the most cogent explanation of what’s going on, visit the Baseline Scenario website run by former IMF exec and MIT Professor Simon Jenkins:

“Just as global financial liberalization created the potential for capital to move violently across countries and greatly facilitated speculative attacks on currencies, so financial deregulation within the United States has made it possible for capital markets to attack - or, in less colorful terms, go short or place massive negative bets on - the credit of big banks and, in the latest developments, the ability of the government to bailout/rescue banks.

“The latest credit default spreads data for the largest banks show a speculative run underway. As the system stabilizes, it becomes more plausible that a single big bank will fail or be rescued in a way that involves large losses for creditors. This would like trigger further speculative attacks on other banks, much as the shorting of countries’ obligations spread from Thailand to Indonesia/Malaysia and then to Korea in fall 1997.”

In other words, them chickens will soon be coming home to roost.

The banks seem confident that having learned the disasterous lessons on Lehman Shokku the government will keep bailing them out. Quiet as its kept, Insolvency in many banks suggests another wave of bailouts is coming.

The banks seem confident that they have “captured” the government and can depend on taxpayer monies to pay off their crimes and mistakes. At the same time, they are worried about something else: US.
JP Morgan Chase overlord Jamie Dimon fears that the public anger will torpedo the schemes the banks are running, saying, ‘“if you let them vilify us too much, the economic recovery will be greatly delayed.”
Comments Jenkins:

“The “center vs. the pitchforks” idea fundamentally misconstrues the current debate. This is not about angry left or right against the center. It’s about centrist technocrat (close to current big finance) vs. centrist technocrat (suspicious of big finance; economists, lawyers, non-financial business, and - most interestingly - current/former finance, other than the biggest of the big, particularly people with experience in emerging markets.)”

If anything, this seems the time to get the pitchforks going, to intensify the pressure, to make noise and press for change. Paul Krugman tells us that the policy world and the bankers want to rebuild a corrupt system, writing:

“Despite everything that has happened, most people in positions of power still associate fancy finance with economic progress. Can they be persuaded otherwise? Will we find the will to pursue serious financial reform? If not, the current crisis won’t be a one-time event; it will be the shape of things to come.”

That’s why events like this weekend’s banking protests organized by a new force, A NEW WAY FORWARD, is crucial. Their three-word phrase, NATIONALIZE, REORGANIZE and DECENTRALIZE sums up the aims spelled out at ANewWay.org
They have issued a call:

• “Pledge to Break Up the Banks: Tell Obama and Congress, “If it’s too big to fail, it’s too big to exist.

• Dismantle the power of the financial elite and make policies that keep a new crop from springing up.

• We want our economy and politics restored for the public.”

If the protests fail along with the banks, you can bet, the pitchforks will be back.

Mediachannel.org blogger Danny Schechter wrote PLUNDER: Investigating Our Economic Calamity (Cosimo Books at Amazon.com) and is making a film on the crisis.

Comments to dissector@mediachannel.org

 Let The Sun Shine In......