Jon Stewart explains Goldman Sachs — good.

On April 20, 2010, in The Public, by Tiffiniy Cheng
The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
These F@#king Guys – Goldman Sachs
Daily Show Full Episodes Political Humor Tea Party
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Wall Street, Englewood, and the Rule of Law

On April 18, 2010, in The Public, by Joe Costello

Well, the SEC has finally brought a case, cheers to that. Though the SEC has proved itself particularly hapless over the past couple decades, one must nonetheless always allow for the restitution of any system. Let’s hope this is just a start, a case against a Goldman underling is only that. The fraud on Wall Street is systemic. It is an industry that has turned predatory against both their clients and the greater society. People need to go to jail, and not the underlings, but the heads of the firms.

The NYT editorializes:

We urge everyone to keep a close eye on this case. If it is handled correctly, it should finally answer the question of whether malfeasance — and not merely unbridled greed, incompetence viagra best online store canada and weak regulation — was also responsible for the financial meltdown.

There is no question of malfeasance, it is rampant. The only question is what perpetrators go to jail. At the FT, Gillian Tett writes:

Thus while Goldman Sachs might have been the focus of Friday’s suit – and makes a tempting target for politicians – its practices were certainly not unique. I would not be at all surprised if other names eventually jump into the SEC gunsights too.

Of course, it remains to be seen in court whether any of this will actually produce convictions. Precisely because the subprime and CDO markets were so opaque during the credit boom, it was often very unclear what was legal – or not. Moreover, bankers were extremely adept at “innovating” to get round the law.

In what other industry is breaking the law considered innovation? If you want a layman’s view of what was happening across the industry, check out Dylan Ratigan’s explanation here. The greatest problem is the SEC brings civil not criminal cases, and a few slaps on the wrists to underlings and token fines, combined with fraudulent reform isn’t going to do anything. The president needs to get the Attorney General to start bringing criminal cases. The problem with that is he will have to start prosecuting some of his funders. We’ve heard endlessly about the president’s stint as a community organizer, but very little about how he received more Wall Street money than any candidate in American history. Of course you won’t hear about that from the Republicans, because they’re still scratching their heads trying to figure out how the hell the Democrat’s became the party of Wall Street.

This is where real courage is necessary and if the President needs some fortitude, I suggest next time he’s back in Chicago, he take a stroll from his house in Hyde Park and head a few blocks south and west to Englewood, in his old state senate district. Englewood has lit up lately, 40 shootings in a couple days, four dead. Now, pretty much everyone in Englewood has a relative or knows someone in jail, and if the President was to tally up the total money pilfered by everyone from Englewood sitting in a jail cell, it wouldn’t add up to one tranche of one fraudulent Wall Street CDO. Yet, the Englewood folks are all in jail, while Wall Street enjoys record bonuses.

If you want to see what happens to a society when the rule of law breaks down, just head to Englewood. As the report states, “A gulf of mistrust remains between many Englewood residents and police.” Can you imagine after forty years of “law and order” as ubiquitous campaign policy across America and thirty years after Morning in America, there’s people in this country that mistrust the police?

Residents say, unfortunately, similar incidents –while tragic– are neither shocking, nor surprising, not in Englewood.

“It’s something you come to expect around here. So, on a hot day, don’t get too far from your house so when the shots start, you can run. Really. Always, around here, somebody is going to want revenge,” a neighbor said.

When the rule of law breaks down, revenge replaces justice.

Cross-posted from Archein: Wall Street, Englewood, and the Rule of Law

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Fraud and the Economy

On April 18, 2010, in The Public, by Joe Costello

In her book Econned, Yves Smith showed the role Magnetar hedge fund played in manipulating the last two years of the sub-prime bubble. By going in and buying the worst of the worst and then betting against it with derivatives, Magnetar innovated the classic pump and dump scheme, riding off with hundreds of millions of dollars. The President calls this “savvy” business. Smith more recently connected Magnetar with Obama’s Chief of Staff Rahm Emmanuel. Rahm’s made a political

career out of bringing Wall Street money to Democrats, first with the Clintons, and then in the Congress. It has been the greatest aspect of his success in politics.

Again, this all shows the great elements of fraud and corruption that are missing from the “debate” on the financial system. Of course, it’s lacking because our politics are bought and sold by Wall Street and other assorted interests, which no one seems to argue about now, though no one seems to want to do anything about either. Any suggestion a political process, which can’t deal with fraud and is drowning in money from Wall Street, is going to come up with any sort of financial reform is simply ludicrous. Dylan buying real viagra without prescription Ratigan has put up an excellent video completely catching the zeitgeist, Change the Law. It’s a for the times variation of the 1970′s “School House Rock” video, I’m Just a Bill. My suggestion is watch both.

Earlier in the week, I attended the Levy Institute’s forum on the financial mess. Eliot Spitzer spoke and it made me want to cry. In fifteen minutes, every aspect of what’s missing from the talk of the financial debacle, he nailed. Fraud, clawing back the outrageous bonuses, the capture of the regulatory agencies, the complete corruption of the NY Fed, and the overall costs to the economy, Spitizer talked about. His most important point on the current financial regulation “debate” was how the banks’ public hemming and hawing about an already weak “Consumer Protection” plan was a giant bait and switch, distracting from all the other more essential elements the banks’ lobbyists and elected officials are writing into law. He also made the great and essential point against those arguing for keeping the mega-banks together, that the most innovative aspect of the American economy of the last thirty years happened by breaking up AT&T. The only way we are going to get reform in the American political economy is by breaking up power, both corporate and government.

Finally, no one can argue the Fed’s continued money pumping isn’t having an impact. JP Morgan and B of A announced great profits on their trading desks, but continued problems with their loan portfolios. We seem to have innovated our financial system into a variant of the 19th century boom-bust system, but, we now have the Fed to pump money in as each bubble pops. How this all works out, well, place your bets. The Democrats are betting it will be good enough by November they can keep control of the Congress. And who am I to argue? The political skill of the Democrats is immense. Who else could take a completely unpopular group like the Republicans — after 30 years, a completely exhausted and discredited political force — and with control of the presidency and large majorities in the Congress, within a year, bring the Republicans right back into the game. That is a sublime politics beyond this fool’s simple imagination.
Cross-posted from Archein: Fraud and the Economy

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What Too-big-to-fail Means for Compensation

On February 1, 2010, in Background and Research, by Tiffiniy Cheng

These are great visuals from WSJ, and Econompic Data did a fantastic job boiling down for us:

from WSJ: “executives, traders and money managers at 38 top financial firms can expect to earn nearly 18% more than they did last year, and slightly more than they did in the record year of 2007.”

from ED: “the lack of competition among the largest banks has caused compensation within the industry to become even more concentrated.”

“the increase in compensation (and risk) is now concentrated among only these top banks. Bonuses at these “big four” banks are up a whopping 25% since 2007 (all other firms are down 18% since that time) and 40% since 2006 (whereas all other firms are down 2%).”

“For all the talk and supposed intervention, nothing has changed (actually, with these banks even more “too big too fail”, things may actually be worse).”

1. Supreme Court kills public discourse, 2. lobbying money of the biggest banks, 3. Goldman Sachs bonuses, 4. Obama decides to try out breaking up the banks in a few ways.

1. Public discourse getting crushed: “A divided Supreme Court on Thursday swept away decades of legislative efforts to restrict the role of corporations in election campaigns, ruling that severe restrictions on corporate spending are inconsistent with the First Amendment’s protection of political speech. ”

2. The HIll: “Eight of the nation’s largest banks spent nearly $26 million lobbying federal lawmakers in 2009, during one of the most tumultuous periods in financial history… The banks spent nearly 6 percent more on federal lobbying last year compared with 2008, according to a review of congressional lobbying records. The banks spent $25.8 million on lobbying in 2009 and $24.4 million in 2008, the two years at the heart of the worst financial crisis since the Great Depression.”

3. Goldman Sachs bonuses announced today. In a year or two, we will forget what caused the crisis. But for now, GS has heard the public outcry a little bit and lowered their bonuses. From some public interest groups: “This reveals more than simply hubris. It shows that Wall Street believes that nothing has changed. The terrible truth is that so far, thanks to their own continued success in lobbying for their narrow interests, even as they have benefited from trillions in public support, they are right. Income disparity between executives and ordinary workers. While Wall Street paid record bonuses and compensation in 2009 to its top executives and traders,[6] rank and file workers continued to get squeezed.  Like other hard-working Americans, thousands of front line bank workers were laid off or had their pay cut last year.  In fact, average real hourly wages for nonsupervisory workers in financial services increased only one cent between January and September of 2009,[7] even though total compensation at the top six banks last year was up 17% from a year earlier.[8] The record bonuses did not trickle down to ordinary bank workers. This had also been true in the boom years before the collapse.  Between 2001 and 2007, average compensation overall at the top six banks and their predecessors did not even keep up with inflation, increasing only 15%.  But at the same time, the top five executives at each of the six banks saw their average compensation more than double from $9.8 million in 2001 to $22.5 million in 2007.”

4. WE have been leading on the fight for breaking up the banks – Obama hears us now that Brown won the Senate seat. Bloomberg: “President Barack Obama today will propose limiting the size and trading activities of financial institutions as a way to reduce risk-taking, an administration official said.” AP: “But his announcement Thursday will broaden those measures, particularly by endorsing Volcker’s proposal to restrict proprietary trading by commercial banks. Such a limit would separate commercial banks from investment banks, a line that was blurred a decade ago by the repeal of the Depression-era Glass-Steagall Act. That restriction would affect some of the nation’s biggest banks, including banking giants Bank of America, Goldman Sachs and Citigroup.”

The Banksters

On January 14, 2010, in Current Leadership, by Joe Costello

the banksters

This may be the year when we finally come face to face with ourselves; finally just lay back and say it – that we are really just a nation of 220 million used car salesmen with all the money we need to buy guns, and no qualms at all about killing anybody else in the world who tries to make us uncomfortable. – Hunter S. Thompson, Fear and Loathing on the Campaign Trail, 1972

The Good Doctor was a prescient s-o-b. While not many understood the above thought in 1972, almost forty years later, it might as well be inscribed on the flag. If you watched the Financial Commission yesterday, you couldn’t escape the feeling you had walked onto a not very reputable used-car lot. Lloyd Blankfein is one of those guys who look you in the eye, by no means squarely, to see how much of his bs you are buying. Lloyd’s a used-car salesman in a nicer suit.

Little old lady, “Well Mr. Blankfein it seems like its a very nice car, but I’ve never heard a clanking coming out of an engine like that.”

Lloyd: “Oh, that was a feature on this model. That clanking let’s you know the engine’s running well, when you don’t hear it anymore, then you know you’re in trouble. And, we have this little insurance policy, fifty bucks a week, we’ll come pick you up wherever you are when…err I mean if, the clanking stops.

Lloyd was feeling his oats so thoroughly by the end, he had this to say, “The derivatives market worked better then we had a right to expect, it was lucky.” Yeah Lloyd, you could even say it was god damn fortunate that your predecessor at Goldman, Hank Paulson, was Treasury Secretary and could shovel 13 billion of taxpayer money to Goldman to pay-off AIG’s derivatives. Lucky indeed!

Oh Bubba, ain’t we better than this? Football season is almost over, and that marks five years since the Good Doctor quit making rounds. He is missed. If you paid too much attention to the political class over the last few decades, the Doctor was a great reality check. He never averted his eyes from the maladies and diseases gone hyper-malignant in the American body politic, and that’s dark dark stuff. Self-medication, humor, and action were the Doctor’s prescriptions. He was an increasingly rare breed. He was a remnant of the old republic and I can count on one hand the others I’ve met over the years. He was a citizen. Back when the hippies were turning on, tuning in, and dropping out,  he ran for sheriff of Pitkin county Colorado. The incumbent sported a crew-cut, so

Hunter shaved his head so he could refer to him as, “my long haired opponent.”

“Don’t be greedy.” Those were the words scratched on the pad on his desk. In his last piece, Shot-gun Golf with Bill Murray, he talked about taking in a round of his new game — shot-gun golf. You’re opponent tries to pitch onto the green, while with a shot-gun you try blasting it off. Ho, Ho, Ho Bubba, remember the Good Doctor’s prescience. Do as he did, look straight into the darkness, and rage, and act!

If you can’t think of anything else, run for office, any office.

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They used the words “Government enforced-oligarchy”

On January 13, 2010, in The Public, by Tiffiniy Cheng

Will keep posting good quotes:

“Government enforced-oligarchy”

“Capitalism without being able to fail is like Christianity without hell.”

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by Donny Shaw and Tiffiniy Cheng

Brown University President Ruth J. Simmons has spent her career serving students in higher education. She has also spent the past decade serving on the Board of Wall Street bank-holding company Goldman Sachs. If she truly cares about helping people obtain an education, it makes sense that she should step down from the board immediately.

We came across this information on Sourcewatch’s page for Goldman Sachs here. It popped right out because she is known to be a really down-to-earth, funny, extremely smart, “tough on what’s broken” leader (a good friend went to Smith and another good friend went to Brown and Simmon’s positive presence is contagious). Her service on the board of a company that has engaged in possibly illegal, and definitely immoral and unethical behavior, and which embodies the most ruthless form of capitalism’s legal outer limits casts suspicion over her role as a leader in educating students to solve the world’s problem.

Goldman Sachs’ fraudulent financial speculating was at the core of inflating and bursting the housing bubble that created the financial crisis of 2008. the results: university endowments and state education funds have dried up resulting in higher fees and tuitions for students, fewer loans are available and job markets for graduates is almost non-existent. Add to that the fact that young people will ultimately be on the hook for paying back the billions in bailouts and loan guarantees that the government paid out to the banks, and you can start to see how Goldman Sachs has hamstrung the generation that Simmons is supposed to be looking out for in academia.

Goldman Sachs’s business model; involves inflating financial bubbles and then popping them at a profit. In the years leading up to the burst of the housing bubble, Goldman was bundling and selling subprime mortgage-backed securities and creating other more exotic financial products more often and more quickly than the other big investment banks, and with a more sinister intent. Unlike the other banks that were doing it, and were actually buying them from Goldman, Goldman knew that the securities they were selling were essentially worthless and that the meltdown of the entire market was imminent. That led them to broker deals in which the buyers of their securities were also insurers agreeing to pay Goldman huge sums when the value of the securities collapsed. In essence, Goldman was betting against the junk they were dealing in.

They gamed the system by taking a lot of their sketchiest transactions offshore to places like the Cayman islands where the rating agencies were more lenient. That allowed them to secure top-notch AAA ratings for securities that in the U.S. would have been rated much lower. These inaccurate ratings, coupled with Goldman confidence in dealing in the exotic securities led a lot of the less connected and less sinister investment banks to take the raw deal.

Goldman ended up walking away with record profits. And to top it all off, after the Wall Street bailout law took effect they changed their status from investment bank to bank-holding company so they could get some taxpayer bailout money and have access to the trillions in loan guarantees coming from the Fed. Goldman lobbied to allow themselves and 4 other investment banks to lower requirements on how much they need to hold in reserves to cushion investments in the market from a ratio of 12:1 to 40:1

Goldman Sachs also received $10 billion in TARP bailout funds and paid out $4.8 billion in bonuses in 2009 while earning only $2.3 billion.

Brown University has been a bastion of activism against the exploitation of corporations, for example of sweatshop laborers in the sweatshop reform movement. Ruth herself has lectured on inequities on racial issues and the existence of slavery in Rhode Island. How can Ruth Simmons serve on a board of one of the most ruthless “banks” on the planet who work to profit on the inflation of bubbles in poor and minority communities?

Journalist Matt Taibbi has called Goldman Sachs “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” If Simmons cares about making the world a better place through education, she should end her ties with Goldman Sachs.