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Obama and the 'Savvy' Bankers
In an interview, the US president described the Goldman Sachs CEO as 'savvy'. So how did he and his crew use their wisdom?
Perhaps the Goldman gang's best claim to savvy was in buying up hundreds of billions of dollars of mortgages and packaging them into mortgage backed securities, and more complex derivative instruments, and selling them all over the world. Blankfein and Goldman earned tens of billions of dollars on these deals. The great trick was that many of the loans put into these securities were issued by banks filling in phony information so that borrowers could get loans that they would not be able to repay. But this was not Goldman's concern. They made money on the packaging and the selling of the securities.
In fact, Goldman actually recognised that many of these loans would go bad. So they went to the insurance giant AIG and got them to issue credit default swaps against many of the securities it had created. In effect they were betting that their own securities were garbage. Now that is savvy. (It says something else about the highly paid executives at AIG.)
Goldman doesn't just confine its savvy to the US economy; it shares it with the rest of the world as well. According to the New York Times it worked closely with the Greek government over the last decade to help it conceal its budget deficit. The trick was to construct complex financial arrangements that appeared on the books as "swaps", even though they were in fact loans. Greece was adding billions of dollars to its debt, and thanks to the ingenuity of the Goldman crew, no one knew about it until now.
But Goldman's greatest triumph was to get the government to come to its rescue when the financial sector was melting down in the fall of 2008 as the housing bubble that they had helped to fuel began to collapse. The treasury secretary and former Goldman CEO Henry Paulson rushed to Congress and demanded $700bn for the banks, no questions asked. He dragged along Federal Reserve Board chairman Ben Bernanke for support, along with Timothy Geithner, then the important head of the New York Federal Reserve Bank and now President Obama's treasury secretary.
This triumvirate somehow managed to convince Congress that we would have a second Great Depression if it didn't cough up the money immediately with no conditions. At that point Goldman, Morgan Stanley, Citigroup, and most of the other major banks were staring at bankruptcy. While this cascade of bank failures would have been bad news for the economy, there was no plausible scenario in which it would have led to a second Great Depression.
There was also no reason that Congress could not have put conditions on its money. For example, Congress could have dictated that as a condition of getting the money that bankers would get the same sort of paycheques as other workers, that they would get out of highly speculative activity, that the largest banks would be downsized and that the principle would be written down on bad mortgages. At that point, Congress could have told the bank honchos that they had to run around Wall Street naked with their underpants on their head. The bankers had no choice; their banks would crash and burn without government support.
But the savvy Mr Blankfein and the other bankers got the money no questions asked. In fact, Goldman even got the government to pick up the bankrupt AIG's debts. Thanks to the government's intervention, Goldman got paid every penny on its bets with AIG. This came to $13bn, enough money to pay for 4 million kid-years of healthcare under the Children's Health Insurance Program.
No one should doubt that Blankfein is a very savvy banker. Without his ingenuity Goldman Sachs would likely be out of business, its component divisions being auctioned off to the highest bidder. Instead it is making record profits and paying out record bonuses.
But unlike the successful ballplayers to whom President Obama compared Blankfein, Goldman's success is inherently parasitic. It comes at the expense of taxpayers and the productive economy. President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth.
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126 Comments so far
Show AllIt's very revealing about Obama that he confuses greed, unethical practices, and irresponsibility to the rest of society with being 'savvy'.
Just how deep into the Banksters' pockets is he?
Is it even possible to have a President and Congress not owned by Wall Street, War Profiteering Corporations, Big Pharma, and 'Health' Insurance Parasites?
Meanwhile, all these Corporate Whores and Pimps expect the rest of us to continue to dutifully pay our taxes to support them, and obey the law, even as they ignore it.
YOu got that right, ED. Our society is as corrupt and dead as it can be!
In answer to your question: No, it's not possible to have a President and Congress not owned by Wall Street, War Profiteering Corporations, Big Pharma, and 'Health' Insurance Parasites?
On a happy note, we only have 2 years and 11 months to go and this odious corporate slug will be retired in Chicago. Of course, his successor will continue the grand American tradition in which the current president makes the last guy look good by comparison. We're doomed.
Dean left out one key item; the unsurpassed campaign contributions Goldman gave to Obama (they contributed more to his 2008 campaign than any other entity) and Congress that explain why Obama and Congress were so anxious to hand Goldman and AIG as much money as they needed carte blanche, and why Obama and Congress continue to halt any meaningful financial industry regulation.
If your Us Congressperson or either of your two US Senators voted in favor of the TARP or if either of your US Senators voted to reconfirm Ben Bernanke as Fed Chairman, you need to contact them now and tell them you will not vote for them.
Obama's ballplayer analogy was idiotic. Is he that out of touch?
Out of touch with you and I, but very in touch with the banksters, war profiteers, insurance companies, drug makers and nuclear industry players that keep his campaign war chest overflowing with dirty money.
I respect Dean Baker but I have to say that the idea that "President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth." is to think that Obama hasn't already made that decision. That is simply naive or wishful thinking or both.
ED got it exactly right: "It's very revealing about Obama that he confuses greed, unethical practices, and irresponsibility to the rest of society with being 'savvy'." Good call ED!
As the first person of color president, which is worse-
Leaving a legacy of servile pandering to the master or incompetence, reinforcing the perception that Black preference is based on AA dictates rather than merit.
*Comment deleted by site administrators for violating our Comment Policy*
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Vern didn't say that it is important to mention Obama's color. Obama is allowing the banks to exploit his race for their economic reasons. Are you trying to be facetious or something?
*Comment deleted by site administrators for violating our Comment Policy*
see: http://www.commondreams.org/comment-policy
I wondered if it was sarcasm for bringing up the issue of race?
Perhaps it is politically incorrect for me to make such observations? One must be black to draw conclusions about Clarence Thomas--or a woman to scrutinize Hillary Clinton? Or both black and female to condemn Condoleeza Rice?
If Clarence Thomas is considered a Tom why should Obama be given cover? If he is servile-it is viewed as weakness by the criminal elite he serves and if he is complicit, it is betrayal to those he claims to speak for. Either way it will ultimately be determined as failure.
Such stuff - maliciously mimicking another persons user ID is offensive. I'm reporting it.
This isn't the first time that the offender fudged someone else's name. The troll has done it to JenniferBedingfield in the past and recently cassandra too. I discussed the details with Sioux Rose in the comments section under David Michael Green's article "Lead, Follow, or Get Out of the Way".
Ranjit: I ran across some comments by someone with the screen name kassandraduplex, and I was reminded of cassandra. I'm glad you noticed, too!
Thanks for the info, I was wondering WTF was going on. I will make sure to discern clearly who is peaking when Kay(e) Johns(t)on is speaking. I have noticed that CD is becoming more populated by trolls lately. It is sad, because for a long time this was the only forum I could go to where I didn't have to deal with shit heads (trolls, you know who you are). This Kaye Johnston would seem to be the Obama in our midst, pretending to be somebody good, Kay Johnson, when they are nothing of the sort, what a scandalous trick. BTW, there is not a thing wrong with having dark skin, but there is everything wrong with having a dark heart.
Thanks, Rich! I sometimes miss a couple of days on CD if I have work, and I returned to find Kaye Johnston, and wondered what that was about! I also noticed that several regular CD posters called out the troll immediately!
RichM, Kay, everyone else, thanks for the notification. Ranjit, I will read your explanation from the article you said you posted your explanation reply under. I have some catching in reading to do obviously. There was something fishy about that plagiarist. I read the articles and comments too but while I can't catch them all, I do know Kay Johnson well enough to know that she would never say anything race baiting. Race may be an issue out here in the Magnolia but right now, this country has banker hell that affects all races. I have seen African American progressives do far better than Obama. Obama has done to African Americans, progressives, liberals, the Democratic Party, and the country the same thing Bush did to rural whites in the south/midwest, conservatives, libertarians, the Republican Party, and the country. He tarnished it all.
Sioux Rose
RICH: I noted this, too, on a thread posted on Sunday. Thank you for alerting the forum.
Sioux Rose
RICH: Thank you for relating that. The air on these threads is so thick with trolls that I am wondering if it's possible to invent an aerosol repellant? The group buzzes like a swarm of flies; that is when they're not changing their screen-names faster than most change their under garments. I'm grateful for voices of intelligence like yours! It makes CD still a site worth visiting.
Re: "President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth."
Um... Isn't that already painfully clear? Why play stupid?
Since President Obama decided to stand with the banks, he can be sure I will NOT stand with him in the next Presidential election!!!
Snip
"While this cascade of bank failures would have been bad news for the economy, there was no plausible scenario in which it would have led to a second Great Depression."
Mr. Baker: Are you kidding me?! We've had the deepest recession since the Great Depression WITH the bank bailout. Are you telling us that things wouldn't have been a whole lot worse if we had let the largest US banks fail?!
How did the bank bailout do anything except create a "Night of the Living Debt by transforming bad private debt into solid public debt.
Sure, something should have been done, nationalizing the failed inverstment banks would have been a start.
The bankers should have been required to eat there losses as has been the case in past bamk crises.
cyon, you fall for the too big to fail corporate propaganda. The bank bailouts were not about saving the economy, it was about saving the wealth and status of a priveleged few
I believe he is saying the banks are economic terrorists. Give us money or we blow everything up. The answer is not to give them money, but to blow THEM up. There are various ways of letting them go out of business while still keeping the credit markets afloat using government funds directly (Sweden), then tearing the banks up into little pieces and then re-privatizing them. An argument has been made that the markets would have dropped more and stayed down, but the economy as a whole would be better off medium and long-term. If fact, the argument is, the bailouts actually make things worse in the medium and long-term. For example, the money could be use to directly pay off ALL the subprimes if we wanted - and actually to put people to work on various projects, ala WPA.
-"There was also no reason that Congress could not have put conditions on its money. "
There was one very obvious reason, it would have put the kybosh on Obama's funders, giving themselves fat bonuses. Why, especially now after we have seen the Democrats in action for a year, would we expect Obama to have done that?
"President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth."
Damn it, he already made his decision to stand with the banks over the workers. Obama has never regretted the 700b bailout and he's planning on doing some more. He also has a favorite CEO.
What does Obama consider as "savvy"--making money. How it is made or what the consequences are for the country at large are not of concern. Obama is one of the self made men that glory in their own success. Although making millions from his books is not as pernicious as the CDO bundling that Blankfein did he displays about the same level of social conscience. These men live to glorify their accomplishments, their wealth, their success and their chests swell with pride and self worth when they examine their power and success which I am sure they feel they deserve. Concern about the rest of us-- not so much.
"President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth."
Dean, Obama does not stand at all (at least, not on his own). He is held up. If you look closely you'll see the strings from head, arms, hands, legs and feet extending up above him to the puppeteers.
If this:
"Dean, Obama does not stand at all (at least, not on his own). He is held up. If you look closely you'll see the strings from head, arms, hands, legs and feet extending up above him to the puppeteers."
be the case, it's because Obama allowed himself to be painted into that corner. Hey...don't kid yourself(ves). It's his own damned fault.
Obama clearly admires Blankfein and his AIG pals for all the sleight-of-hand they pulled on the entire world, and didn't mind paying them billions for their criminal talents. It's been blindingly obvious that Obama "stands" with these sociopaths and firmly against their victims, the entire public, since he waltzed into office. Goldman, AIG, Citigroup and the others invited him to dance with them and Barack has been shuckin' and jivin' since. He's smitten by their shameless savvy and wouldn't begrudge them billions in bonuses for the world. The rest of us? He expects us to sing the national anthem as we sacrifice our collective future to these mafia kingpins. See, we're not nearly as savvy as they are, and the American Way is all about the spoils going to the savviest.
"President Obama must decide whether he stands with the Wall Street banks or whether he stands with the workers and businesses who actually produce wealth."
a) As others have said it's pretty damn obvious that Obama long ago decided to stand with the Wall Street banks.
b) Other than weapons and food what wealth is produced by workers anymore? Does a delivery driver or retail clerk actually produce wealth? No, they are part of the chain of distribution but actually produce nothing. Wealth, thanks to the investors version of globalization we're stuck with, is produced in China (among other places).
I just watched a program on Frontline called "The Warning" which highlights the attempts by Brooksely Born to as head of the CFTC to head off the financial disaster we just experienced. I HIGHLY recomend it, as a matter of fact I mentally force you to watch it! Not that there is so much there that people here don't already have a peripheral understanding of, but it is so well produced and it is great to watch Greenspan grovel in his own puke at what he created. Absolutely first rate.
The link is:
http://www.pbs.org/wgbh/pages/frontline/warning/view/?utm_campaign=homepage&utm_medium=proglist&utm_source=proglist
Thanks for the link! I will watch the program when I return home tonight.
There were warnings from so many individuals who saw the signs, and many of them actually did try to shake the tree, so to speak. But, the so-called experts -- like Larry Summers, et. al. -- knew better.
When David Halberstam used the phrase, "the best and the brightest," he meant it with both irony and sarcasm.
Hummmm. Obama's campaign is funded by Goldman Sacks (the best sackers in the world), and then Geithner, Summers, and other Rubenites are immediately placed in positions of financial power in Obama's administration in lieu of "the tree shakers" (you're absolutely right Kay, there were a number of very talented people of whom Obama could have used other than those he choose.)
Then...Mr. Obama makes an appearnce on 60 Minutes to tell the nation he doesn't work for the "fat cat bankers." (Oh really???)
Well, the picture is perfectly clear as to who Obama works for and it damn sure ain't we the people. Bush III is obviously who was mistakenly elected.
That's a good program. Frontline and Nova are two of the few programs I watch regularly. The last program about the Buffalo airline crash is another good one too. And the Frontline program Heat is the best one of all in my opinion.
Good point, the idea that 'nobody saw this coming' is total, propagandistic garbage. Here's a (very partial) list of some of the well-known people of different ideologies (mostly economists) who did:
Noriel Roubini
Nassim Taleb
Warren Buffet- warned about the 'derivatives time bomb' in 2003
George Soros
Jimmy Rodgers
Ron Paul
Doug Noland
Bill Fleckenstein
David Tice
John Hussman
Robert Prechter
Bill Bonner
Martin Weiss
Joseph Stiglitz
Robert Shiller
Joshua Rosner
Booksley Born
Dean Baker
As for people who did not expect the crisis, we have no less than Paulson and Bernanke (ex-Goldmanites) in in the Bush administration 2007:
"In May, Bernanke returned to the containment theme, saying, "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system." A few weeks later, he reiterated that "the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system." On July 26, Paulson told Bloomberg, "I don't think [the subprime mess] poses any threat to the overall economy." In China a week later, he revised and extended his remarks: "I also said I thought in an economy as diverse and healthy as this that losses may occur in a number of institutions, but that overall this is contained and we have a healthy economy."
http://www.marketoracle.co.uk/Article10813.html
Sioux Rose
LUCKY: Thanks for the post/list.
RULE U: Good post, too.
There are a lot of sharp people on this discussion thread. Nice job, folks.
It's disgusting that credit default swaps are still legal. CDSs, and all derivatives that are "side bets" are gambling and must be made illegal. They are not investment vehicles, because they do not channel any capital to any useful purpose... they are simply a bet against the success of another instrument! They are economic waste.
Thank you for clarifying for me - an economic illiterate - exactly what derivatives are.
A savvy banker is like a more virulent pathogen.
A virulent pathogen with the savvy to pull off the greatest heist in history and not only get away with it, but receive a bonus instead of jail. This will not change until people take to the streets and shut down this parasitic system known as global capitalism. Voting, as Obama and our one party system have proven, are not going to do the trick.
Good work Dean but,clearly, our goose is cooked. Read on--
While Rome burns, fiddle away your time by repeating 3x (or until you get it): Goldman-Sachs is never wrong--it does God's work; the US is never wrong-it does God's work.
Sadly, we're heading into our endgame-- our moneyed class makes money off speculation not manufacturing (and they're not going to change their ways--the money is too easy)--in this we follow other former empires that went down the tubes for this reason --the Dutch, Britain , Spain.
"follow other former empires that went down the tubes for this reason --the Dutch, Britain , Spain."
Have you read Kevin Phillips' book Wealth and Democracy? It shows the parallels between the US and Spain, then the Dutch, and finally the English. I never knew how the Spanish "offshored" to Holland who later "offshored" to England and then England to the US. All these "empires" offshored to the other while creating speculative economies in their own countries.
While many of the observations Baker makes are generally agreeable, like references to the hypocritical corporate welfare doled out to the banks and auto companies, or the all too cozy relationships between corporate America and the regulators, the politicians, I don't understand how the basic elements of this story differ from our own efforts. We continue to, in a much more straight forward way than Goldman and thier dirivatives, through simple borrowing and spending, push more and more debt to pay for our irresponsible military sojourns, as well as our ever burgeoning welfare state (social security, medicare, medicade, almost universal healthcare) down the proverbial road. The piper will be paid, as Greece is now experiencing. How are we any different in our own state of denial?
Except what you refer to as the "welfare state" I call the "common good".
Is asking too much to except some return on our investment for the people actually paying the bill instead of subsidizing the entitlement of the class Obama serves?
Greece has been calling their welfare state the "common good" as well. The problem, regardless of its handle, is that the state cannot supply all of the "common good" using policies of borrow and spend. Blame Goldman for being the supplier, but as long as there is demand there will be a supplier. It is math, and fairly simple math at that - mostly addition and subtraction, some basic multiplication and division. Serving the "common good" without honest identifiably revenue sources will ALWAYS bankrupt ANY nation.
Do you know why the US is escalating war in the Middle East?
Amazing how they don't even bother to justify or defend it--yet no problem funding it--or subsidizing the casinos of the financial class, but we who foot the bill it comes out of our hide and medicare and social security are considered too expensive--or unaffordable, if not downright "waste".
Vern, what they really fear is ending all of their wars and having to supply jobs for all of the returning veterans, when they can not give jobs to 17 million Americans allready. We are no longer a manufacturing based economy, we are a war economy. Our #1 export is arms and when your main export is arms you have to make sure there is war so that your economy can thrive. This is compasoniate conservatism and change you can believe in rolled all into one.
Not going to end well.