Get News & Views Updates
Most Popular This Week
Popular content
Today's Top News
Goldman Plays, We Pay
The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in U.S. history has one company wielded such destructive power over our political economy, irrespective of whether a Republican or a Democrat happened to be president.
At least the robber barons of old built railroads and steel mills, whereas Goldman Sachs makes its money placing bets on people losing their homes. On Tuesday, Goldman announced a 91 percent jump in profit to $3.46 billion for the quarter, while the dreams of millions of families continue to be foreclosed and unemployment hovers at 10 percent because of a crisis that that very company did much to cause.
It was Goldman-Vice-Chairman-turned-Treasury-Secretary Robert Rubin who pushed through the radical financial deregulation during the Clinton presidency that made the derivatives madness possible. When Bill Clinton was asked on ABC’s Sunday show “This Week” if he now regretted the advice he received back then from Rubin and his protégé Lawrence Summers, now a top Obama adviser, he responded: “On derivatives, yeah, I think they were wrong and I was wrong to take it. …”
Thanks to that bad advice, Clinton signed off on the Commodity Futures Modernization Act, which categorically exempted those derivatives from any existing law or regulatory body. It was that exemption that freed Goldman Sachs and others on Wall Street to run wild in packaging collateralized debt obligations, and their attendant swaps, which turned people’s home into nothing more than gambling chips. The more suckers to be conned into those mortgage obligations, the better for the financial casino—until it had to be saved by taxpayers from spiraling completely out of control.
And it was Goldman-Chairman-turned-Treasury-Secretary Henry Paulson who engineered the Bush-era bailout that left Goldman holding the high cards. The corporation was allowed to suddenly become a bank holding company, a privilege denied Lehman Brothers, and hence eligible for TARP funding and a sharp discount in the cost of borrowing money. Treasury Secretary Timothy Geithner, then head of the New York Fed, worked with Paulson to give Goldman the federally protected status of a commercial bank and also worked on the deal that passed taxpayer money through AIG to Goldman.
It wasn’t surprising, then, that last week Geithner formally opposed the section of a bill by Sen. Blanche Lincoln that would ban banks from dealing in swaps and other derivatives. Now that it is a bank, Goldman would have to drop that lucrative business or give up its right as a bank to borrow from the Federal Reserve as well as the protection of federal deposit insurance.
The test for serious financial reform could well be that if it’s good for Goldman Sachs, it’s bad for the country. But with scores of Goldman alums as well placed in the Obama administration as they were under Clinton and George W. Bush, it is a test the government is likely to fail as far as taxpayers are concerned. Or should we simply trust Mark Patterson, who is chief of staff to Geithner and a Goldman lobbyist for three years before he entered the Obama administration, to do the right thing for the rest of us?
Maybe he will. After all, Gary Gensler, a former Goldman partner who now heads the critically important Commodity Futures Trading Commission, does seem to have had a change of heart from his days in the Clinton administration, when he thought that bringing “legal certainty” to the trade in what turned out to be “toxic derivatives” was a great thing. The SEC civil suit is also a sign of progress. There are other positive stirrings, as in President Barack Obama’s most recent speeches, but what is needed now is a profound populist commitment among those who elected Obama to demand he throw the money-changers out of the temple of democratic governance.
Instead they are crowding in. The New York Times reported: “With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives.” That’s the committee that Sen. Lincoln heads, and she needs the president’s support rather than Geithner’s opposition to her plan to ban banks like Goldman from trading in derivatives.
It is insulting to the spirit of populist revolt, which has been fundamental to the success of America’s grand experiment in democracy, that a fat-cat Republican-funded tea party revolt is now the vessel of popular anti-Wall Street discontent. That vessel ought to be our president, who campaigned as a champion of the common people.
Comments
Note: Disqus 2012 is best viewed on an up to date browser. Click here for information. Instructions for how to sign up to comment can be viewed here. Our Comment Policy can be viewed here. Please follow the guidelines. Note to Readers: Spam Filter May Capture Legitimate Comments...
14 Comments so far
Show AllGoldman Sachs realizes they can make more money on bad mortgages than good ones. They make loans to the most unqualified people they can find, sell the mortgages to other investors and then turn around and short sell them. When the mortgages go bad Goldman Sachs make a near 100% profit on the short sell.
Doesn't this sound like the plot of "The Producers"? Two guys decide they can make more money with a Broadway flop than a Broadway hit, so they deliberately put on the most awful play they can, i.e. "Springtime for Hitler, a Romp in the Berchtesgaden with Adolf and Eva".
It would be really funny if only it were a Mel Brooks movie.
The last sentence devalues Scheer's otherwise well structured article.
The last sentence needs to remind us that Goldman Sachs contributed more money to Obama's 2008 campaign than any other entity.
Perhaps the best chance for real reform will come as foreign countries begin to look into Goldman's shady practices and the role it's played in imperiling their economies. With electoral cycles every two to four years the oligarchs in the country have the deep pockets to slow any congressional process of reform to a trickle while they improvise more ways to "skin the cat." Foreign governments, in going after one not of their own would be in a better position to effectively build a stronger case in prosecuting Goldman's financial crimes. Obama has shown himself too enamored of the status quo. And it is difficult to foresee real financial reform with enough teeth in it from a Treasury Dept. that is constantly filled with Goldman Sachs alumni. Nothing short of a wholesale overhaul of the Treasury Dept. posts will effectively send a clear signal that Washington is beginning to get it regarding true financial reform for the benefit of the majority of Americans as opposed to its oligarch class.
Why isn't Bill Clinton being hauled before congress and put under oath and asked questions about Nafta, WTO, The New World Order, and why he is worth one hundred million dollars today.
Why are Democratic Party Members to scared to mention Nafta and the outsourcing of our industrial base to China, and the connestions with Slick Willie Clinton? The Scott Brown Victory has not put the fear of death in the Democratic party yet.
We need more Scott Brown victories, so that we can get control of the Democratic party again.
Sheer is full of beans. He sees promise in Obama's latest words, but the onus is on "a profound progressive commitment." Yep, it's up to you. Don't screw it up.
He says populist revolt has been fundamental to the grand experiment in democracy. Nice try. It has been a tainted republic from the start. Populism gets squashed every time.
He closes with; "our president, who campaigned as a champion of the common people."
Obama voted to extend the Patriot Act, FISA, and the Military Commissions Act. Maybe, I'm not common enough, but I detest all three and could see Obama didn't represent me.
This is one of ... God, how many? ... hundreds of virtually identical articles. But nothing is done to stop the theft.
Obama took gobs of cash from Wall Street, appointed Geithner and Summers, the bankers keep making billions, pretty much end of story.
Scheer sez: "The New York Times reported: 'With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives.' That’s the committee that Sen. Lincoln heads ... "
***
This might be simply a cunning ploy by Lincoln, knowing that by introducing a potentially threatening "regulatory bill" she would be inundated by cash-soaked lobbyists.
What true reform may look like:
http://globalnerdy.com/wordpress/wp-content/uploads/2007/06/guillotine-execution.jpg
What a joker! I needed a laugh.
Prescient commentary from Thomas Jefferson:
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Let's see, three major issues (health care, jobs and now banking and finance) and three F's? Hey, that's not progress, it's regression, yet we're to do what, stick with same old same old status quo incrementalism and never mind that with time running out we're already at the abyss? But if not incrementalism, what? We rise up en masse, each of us a leader, nobody left out, whereupon, it'll be up to us, the what sort of world.
You forgot closing Guantanamo, pulling out of Iraq, and eliminating the practice of torture.
The 'F's do pile up don't they?
sierra7
All the surplus capital built after WW2 has now been flushed down the bankers toilets along with the near future "progress" we expect as ordinary folk.
Now the only thing left to be wasted by the "Masters of the Universe" after we used our surplus to save the rich and the bankers/financial crooks, we have SS, Medicare, and education plus the declining wages of those same common folk left to suck dry.
After that....who knows...may social revolt....it's possible.
Don't look for the politicians to save us......they're part of the problem.
Deregulation was started under Pres Ford, carried on by Carter, escalated on steroids with Reagan, hefted by Bush 1, slip lipped by Clinton fortified by the same idiots that are on Obama's team...ratcheted ever higher by Bush (idiot)2, so here we are......slipping and sliding into the abyss!
Obama is a shill of the financial system? I am shocked, shocked I tell you.