McClatchy is out with an incredibly important series on Goldman Sachs, the first two parts of which have gone up already, that raises questions about whether Goldman committed securities fraud at a massive level. I am guessing the next three parts of this series are going to be really explosive as well. What Goldman essentially did was to have one big group of their traders, call them Group 1, marketing mortgage securities as triple-A investments, while other traders in the company, call them Group 2, were secretly betting that there would be a steep drop in housing prices, which would mean the values of those securities Group 1 was selling would drop off a cliff. Goldman Sachs was making money coming and going, and it is virtually impossible to believe senior management did not know that the securities they were selling were junk. Now I'm not a securities lawyer but that sure sounds like fraud to me.
Gordon's superbly researched series follows on Matt Taibbi's brilliant Rolling Stone article on Goldman Sachs earlier this year, which walks through many of the same issues. With what Gordon and Taibbi have both been able to document, folks at the DOJ sure ought to be looking at whether criminal charges should be filed against Goldman. And the Obama White House should be coming down on the executives at Goldman Sachs with both feet, hard. This kind of financial manipulation, which has cost public pension funds and other investors many billions of dollars, needs to be stopped, and huge conglomerates like Goldman need to be broken apart. This story is not just a story about simple greed or securities fraud, it's a story about a company that has gotten so big and powerful that it can manipulate markets at will. This story goes to the heart of the recent financial collapse, for which Goldman Sachs deserves a sizable share of the blame. They need to be broken into pieces so that they can't wreak this kind of havoc again. And it sounds increasingly like some of their executives might deserve to go to prison for a long time.
More than 5,000 people are packing the streets of downtown Chicago this morning, chanting, marching and rallying against Big Bankers and financial institutions that have taken taxpayer money and are using it to give big bonuses to CEOs and to lobby against financial reforms that would ensure they don't go back on the public dole.
The crowd is marching to the Sheraton Chicago Hotel & Towers, site of the American Bankers Association meeting, to protest the banking industry's greed and irresponsibility that crippled our economy, leaving millions of workers behind.
After the house of cards they built collapsed, bankers and the financial industry took $700 billion in taxpayer funds for a bailout. But rather than reform their failed practices, they want to go back to business as usual-with the chance of again precipitating another financial collapse and need for taxpayer bailout in coming years.
The great Wall Street Bail Out, TARP and the various programs associated with it, continues to breed deep levels of resentment and cynicism in the American public who footed the bill for rescuing the financial sector in America. The resentment is easy to understand. The fact that there really were no good options left by the time Obama was elected President helps to explain his Administration's actions in that crisis, all taken under duress and incredible pressure with virtually no time for full contemplation let alone careful detailed planning. Those facts do almost nothing though to deal with the publics anger, which repeatedly flares up like a California wild fire facing El Nino winds. Huge Goldman Sachs bonuses and Wells Fargo record profits are merely the latest gale wind gusts. All the while cynicism keeps growing that our government is in bed with giant financial interests writing sweetheart legislation as Valentine Day presents for corporate Sugar Daddies in a ritual that repeats as often and predictably as Groundhog Day in Hollywood.
In the past few years, the economic relationship between the United States and China has changed dramatically. As Tim Fernholz writes in the American Prospect: "Chastened U.S. officials who once lectured their counterparts in [China] on financial liberalization are now humbled in front of their largest creditor, reduced to offering promises of fiscal responsibility." It's a strange state of affairs. Fernholz rightly argues that:
"The common interest of the peoples, rather than the economic elite, ought to be the driving motivation behind the two countries' interactions. There is no doubt that economic openness has brought wealth to both countries, and the Obama administration is happy to laud the Chinese for bringing millions out of poverty. But in a relationship between "capitalism with American characteristics" and "socialism with Chinese characteristics," sometimes the people-whether they be workers losing jobs in the United States or the millions of Chinese living without political freedom or prosperity-have interests other than the elites. Today, we're in an economic crisis, and pragmatism overrides all else. But as recovery continues, the U.S. will require more thought on the strategic track, and perhaps in a few years our discussions with China, as they should be with all our friends, will be more frank."
But our current economic relationship with China pre-dates President Obama's "talk first" style of diplomacy. As Robert Scheer of The Nation writes: "Don't blame any of this on peacenik liberals. The new conciliatory-nay, deferential-tone toward China precedes the Obama administration, having begun in bilateral talks during the last years of the Bush administration as the U.S. economy began its ignominious downfall. It was George W. Bush's treasury secretary, Henry Paulson, who set the course when the former Goldman Sachs chairman realized how dependent were his Wall Street buddies on Chinese goodwill."
Strange relations with China aside, things aren't going so well at home. Rick Wolff, an economist from the New School, says the stimulus package has big problems in a discussion with The Real News. Wolff also notes that we shouldn't take Wall Street chatter about an economic upswing too seriously. "I think the first thing to remember is the people who are celebrating where we are now are the same people who could not imagine, did not imagine, did not foresee the problem we had last year," Wolff says.
But what's going on with our favorite bailout recipients? Talking Points Memo takes on the case of former Federal Pension Guarantor Charles Millard, who exploited his personal ties with employees at BlackRock Capital and Goldman Sachs while choosing firms to manage the Pension Benefit Guaranty Corporation. At this point, both firms "may have run afoul of federal contracting rules in how they courted Millard."
Goldman Sachs and BlackRock are also on the lookout for the next big economic bubble. Salon reveals that both firms are diversifying their portfolios to include agriculture, in addition to government contracts. "Food is becoming the new oil," especially since the world's population is expected to crest nine billion by 2050. And a lot of land is necessary to grow enough food for nine billion people. Phillipe Heilberg, founder of American investment firm Jarch Capital, is hedging his bets on farmland in distressed countries. "Instead of buying stocks, the former banker is now speculating on the political future of South Sudan, which he insists will be an independent country in 10 years, at which point land will be far more expensive than it is today."
It's abundantly clear that we can't rely on the economic elite to represent the people's interests. Tomorrow's economic structure must be drastically different if the United States is going to thrive. Put simply, we're going to have to seriously reevaluate our economic priorities and decide who calls the shots. Here's hoping that everyday people have a say.
Like many good progressives in DC and around the country (along with the insurance company lobbyists of course), I am working virtually around the clock at the moment on health care reform. As I have written, this fight will almost certainly determine the fate of the rest of the Obama administration, and whether we have a chance to take on and beat the big business special interests on any other issue. But I have to take just a moment to sit back, take note, and calmly reflect on another rather important topic, financial reform. Andrew Cuomo came out with a report that should be noted. In other words:
DID YOU SEE THE FREAKIN' BONUSES WALL ST FIRMS GAVE OUT LAST YEAR, EVEN IN THE MIDST OF THE BIGGEST ECONOMIC COLLAPSE SINCE THE GREAT DEPRESSION, EVEN THOUGH THEY WERE TAKING BILLIONS OF DOLLARS IN GOVERNMENT MONEY? ARE THESE THE GREEDIEST AND MOST IMMORAL PEOPLE WHO HAVE EVER LIVED?
Okay, now that I have been thoughtful and diplomatic, let me tell you how I really feel. A couple of weeks back I wrote a piece on a gritTV panel I was on with Matt Taibibi and Rob Johnson entitled We Don't Care. We Don't Have To Care. We're Goldman Sachs. And that pretty much sums up the situation. Rather than getting fired, going to jail, or even just hanging their head in shame and slinking off to some cave someplace- as I think would have happened in a more rational society- they are still the most powerful people on the planet. They are still flying in on their corporate jets to DC every week, and telling congress what to do. They are still making the same risky deals that ruined the economy in the first place, and paying themselves outrageous bonuses to do it. And they are still utterly puzzled as to why any of the rest of us thinks they show any shame or remorse.
Read this remarkable piece by Rob Johnson. It should be required reading for every lawmaker, and every citizen worried about our country's future. It talks about how the captains of Wall St and their messaging gurus sold us on the outrageous techniques for greed that they were pursuing, techniques that should be illegal or at least very heavily regulated.
Our number one job today is to take on and beat the health insurance industry, who don't want any changes to a system that lets them allow people to die so that they can make bigger profits, and doesn't give them any real competition even when people are being totally screwed. That's why we need a public option, as good in quality and as affordable as the plan for members of congress. But even as we are fighting the insurance companies today, we have to get ready to fight the even more powerful Wall St lobby tomorrow, because otherwise our economy, and our very democracy, will be in mortal danger again.
It's enough to make the average taxpayer's head spin. But here's another outrage:the Daily News reported Monday that Goldman-Sachs could soon receive up to $321 million in city and state taxpayer dollars as part of an incentive program to keep their offices near Ground Zero. That's on top of $1.6 billion the investment firm has already received in tax breaks and publicly backed bonds for its shimmering new downtown headquarters.
Now that trillions of taxpayer dollars have been pumped through the financial system, Wall Street giants JPMorgan and Goldman Sachs are reporting record profits-and giving out record bonuses. Goldman is planning to pay out $11.4 billion in compensation "earned" with our money. Even worse, attempts to regulate reckless financiers or empower ordinary workers are still being stymied by influential corporate lobbyists.
How did Goldman score the biggest quarterly profit in its history? Matt Taibbi explains in an interview with GritTV's Laura Flanders. The $10 billion in direct capital that Goldman received from taxpayers under the Troubled Asset Relief Program (TARP) is actually one of the minor offenses. The company also converted corporate charters to become eligible for guarantees, and issued a whopping $28 billion in debt guaranteed by the government.
Banks were foundering last Fall, and very few investors were willing to supply them with emergency capital. So the FDIC guaranteed their debt, which allowed banks to raise funds at extremely low interest rates. The FDIC guarantee means that taxpayers will get stuck with the bill if the company defaults. If you can raise money at absurdly low rates, its very easy to turn over huge profits, as both Goldman and JPMorgan did.
There are other outrages: We still don't know how much money the Federal Reserve loaned Goldman through its emergency lending facilities. The government's bailout of AIG served as a huge windfall for the company, funneling at least $12.9 billion in taxpayer largesse directly to Goldman Sachs.
"AIG owed Goldman about $20 billion, and if AIG had gone through a normal bankruptcy, Goldman probably would have gone out of business. Instead, they got paid 100 cents on the dollar for every dollar that AIG owed them," says Taibbi, author of a blistering take-down of the investment banking giant in the most recent issue of Rolling Stone.
In Salon, former Clinton Secretary of Labor Robert Reich says that this year's big bank failures have resulted in a heavier concentration of financial influence in the few surviving firms, namely Goldman Sachs and JPMorgan. We have taken the "too big to fail" problem and made it bigger. JPMorgan acquired rival Bear Stearns for a pittance last March with billions of dollars in government guarantees. The company also picked up national banking giant Washington Mutual last fall. That means more risk in our economy and a greater concentration of lobbying power in our political system.
"We've ended up with two giants that now have most of the casino to themselves, are playing with poker chips backed by taxpayers, and have a big say in what the rules of the game are to be," Reich writes.
Adam Schlesinger of Air America took to Wall Street to compile a hodgepodge of one-on-one interviews with bailout critics and condescending financiers. Schlesinger underscores the absurdity of Goldman's pending bonuses by posting his own checking account balance ($13.75). The point of this massive bailout was to make the economy function for ordinary people. Instead, we've made sure that it benefits extremely wealthy bankers.
The government so completely resists doing anything about this staggering inequality, as Eyal Press writes for The Nation. There are two ways to approach the inequality problem. We can rein in the recklessness at the top by imposing serious regulations, and empower those at the bottom by giving them greater negotiating leverage with their employers (i.e., promoting unionization). While the bonus money flows on Wall Street, the Employee Free Choice Act (EFCA), a key bill to empowering unions, was just stripped of a crucial provision that would have made it easier for workers to organize, as David Moberg reports for In These Times.
As EFCA is gutted, bills proposing regulations for the financial sector are moving at a snail's pace-even after two years of economic turmoil. Last week, Congressional leaders from both parties nominated members for a new panel, the Financial Crisis Inquiry Commission, to investigate the causes of the financial crisis. The investigation seems doomed to failure by its very design. Zachary Roth details the committee's various shortcomings for Talking Points Memo. Of the panelists, six were nominated by the Democratic leadership, while four were nominated by the Republican leadership. If all four Republican nominees vote to block a subpoena, the committee cannot issue it, and without broad subpoena power, the entire exercise is futile.
Roth also emphasizes the excessively political nature of the appointees, particularly on the Republican side, which named former Rep. Bill Thomas, R-Calif., as Vice Chair. The Democratic picks are generally uninspiring, except for Brooksley Born, who fought to regulate derivatives in the 1990s as head of the Commodity Futures Trading Commission. But the Democrats have nobody anywhere near as frightening as Rep. Thomas, a vicious partisan who specialized in ushering money to special interests during his tenure as Chairman of the House Ways and Means Committee.
Mary Kane of The Washington Independent explains the troubling record of another Republican commission appointee, Peter Wallison of the American Enterprise Institute (AEI), a conservative think tank. The various conspiracy theories Wallison peddled include a robustly debunked belief that a decades-old anti-discrimination law is responsible for the mortgage meltdown. The law in question, known as the Community Reinvestment Act (CRA), dates back to 1977, and Wallison's conspiracy theory has been rejected by nearly everyone in the financial commentariat, including regulators appointed by George W. Bush.
The Community Reinvestment Act requires banks to make loans to communities where they collect deposits. If you accept deposits at a branch in a poor neighborhood, you have to offer responsible loans in the same community. The idea is to expand access to affordable credit in the inner cities, while the subprime crisis is heavily concentrated in the suburbs. CRA loans have to be affordable, which means high-interest subprime loans do not count. CRA does not require banks to lower their lending standards, because any recipients have to be credit-worthy. Only 6% of high-interest mortgages were made by companies subject to CRA regulations, and lest we forget, this law was passed in 1977, while financial crisis erupted in 2007.
Instead of appointing toothless commissions, we should be making sure the financial oligarchs do things that are good for the rest of us. Congress should be writing regulations to curb risk in the financial system as fast as bankers are paying themselves bonuses. They're our representatives, after all, and it's our money.
I have always had a simple test for any public policy: who does it benefit the most, and who does it benefit first? If the main or biggest beneficiary is the big majority of poor and middle income people, I rate it a success. If the first and biggest beneficiaries are the wealthy and powerful, then I rate it a failure- after all, they generally do just fine without special benefits from the government. And the who-it-benefits-first thing is a critical part of the equation, because as John Maynard Keynes famously said, in the long run we are all dead. The reality is that policy, politics, other unexpected circumstances change too rapidly in this country that if poor and middle income folks are not benefiting early from some policy change, they probably aren't going to benefit at all (See trickle down economics in general as an example of what I mean.)
By this simple test, even though it is now clear that the stimulus package passed earlier this year was clearly too small, I still rate it a success in some important ways. It has saved the jobs of a lot of teachers, firefighters, police officers, social workers, and others doing important work, and it has created new jobs in the environment, health care, science, technology, the arts, construction, and road building.
With a slew of major companies reporting earnings so far, it's clear that expectations were severely skewed to the negative. Once again, Wall Street analysts overshot - this time to the downside. The substantial margin expansion reported by Intel; the higher-than-anticipated profitability of IBM; and the blow-out quarters of Goldman Sachs and JP Morgan all stand in contrast to sentiment just a few weeks ago, which was grim and getting grimmer. So what happened?
First, the robust results of some of the banks so far is the result of trading revenue and changes in accounting rules rather than a sudden improvement in losses from bad loans. Still, income is income, and the more they generate, the easier it will be to absorb those losses from consumer, commercial and business loans that will continue to go sour for some time.
This is a stickup. Paulson is trying to stampede the Congressional herd into giving him powers and money that he knows they would never give if they had time to think it through carefully. It worked with the Patriot Act. It worked with the AUMF. He's betting it'll work again. Create a crisis (or lie one into existence) then demand dictatorial powers and unlimited spending authority to deal with it.
In effect, that quibble is like you walking into your local bank and saying "I need you to loan me a million bucks. Here are the conditions I must insist are met before I let you lend me the money. First..."
Say what?
He's given his tell, that he's a liar, a thief and a scam artist.
Time for Congress to call his bluff, and to see that the financial crisis is dealt with on their terms, with strict oversight by people they can trust, not by a scam artist and liar like Paulson.
Of course, Congress didn't call his bluff and Congress did fall for it. But let's remember our history. The House voted against. Nancy Pelosi indicated that she would not pass TARP unless Republicans voted for it in the same proportion as Democrats. They weren't going to do that, so TARP was dead.
Then Barack Obama stepped in and started twisting arms. TARP is Obama's baby. If you like it, or don't like it, remember, without Barack Obama it would have died.
This is the fundamental problem right now with Democrats. They passed a lousy stimulus, they made TARP Democratic policy by passing it with majority Democratic votes and they are on their way to passing a lousy healthcare bill which won't even kick in till 2013.
Bad policy leads to bad outcomes. Bad outcomes get blamed on the incumbents (as they should). TARP, the Stimulus, healthcare and the economy become less and less the Republican's problem every month that passed. Even if they screwed it up, Democrats control the House, Congress and the Presidency. It's up to them to fix George Bush's mess, and if they don't they will be judged as failures, and that judgment will be accurate and deserved.
And the outcomes are going to be bad. The stimulus bill was both badly put together (too many tax cuts, not properly targeted) and too small. The healthcare bill should be single payor, because single payor is proven to work and the witch's brew that Congress has put together isn't proven to work and they can't afford to fail. And TARP was, and is, a piece of crap, but the differences between Bush/Paulson financial policy and Obama/Geithner are so thin as to be largely cosmetic.
Policy has consequences. The "compromise" position between "doing it right" and "doing it wrong" may work sometimes, but it doesn't work when a nation is in crisis and has spent 30 years digging itself into a hole.
By the time Obama comes up for reelection, Americans won't have better healthcare and they will have less jobs than before the recession and the stimulus.
That's what he'll be judged on, and all because he signed on for Paulson/Bush financial policies, and compromised his key domestic and economic policies to the point where they wouldn't work.
Goldman Sachs has openly, blatantly gone back to business as usual, knowing they will be bailed out by taxpayers if their high rolling gambles don't work, and they don't care who knows about it.
The reason they can be so breathtakingly arrogant, so stunningly cavalier about not giving a damn about things that any other company's PR and government relations department would advise them against, is that they know they have the power to do anything they want to do. The Obama White House needs to take Goldman Sachs to the woodshed rhetorically, and they should have the Justice Department investigating them for anti-trust violations and all manner of stock manipulation. It is time to start squeezing the management at Goldman, and making them nervous about being broken up into pieces that are not too big to fail.
Here's (with brief intro) Matt Taibbi, Rob Johnson, and myself taking about Goldman Sachs on what is rapidly becoming my favorite media program for discussing economic issues, GRITtv:
Government Bailout Money Through AIGGoldman received 13 billion from AIG, after receiving 5.9 billion before the bailout, which caused AIG to collapse (not that it wouldn't have eventually). The 13 billion is a straight government giveaway, since if AIG had been allowed to go under, GS would have received cents on the dollar, at best.
Goldman Sachs is now a bank. And that means they get money at bank rates from the Fed, which means their cost for money is as low as it is possible to be, which increases their profits.
Privatize the Profits, Socialize the Losses. Or, as a friend put it "Goldman trades high volatility". Which is to say, they take risks. Big risks. If those risks fails (as when they were AIG's largest customer), well then, they get bailed out by the government.
Heads Goldman Sachs wins. Tails the taxpayer loses
It's a good game, if you can be in on it. And this is only an overview. For example there is some speculation that Goldman may have been front running other traders (knowing what trades were coming up and putting in their orders first to take advantage of it.)
If you've seen the news today, you know Goldman Sachs exceeded its second quarter expectations for earnings, making $3.44 billion after dividends. As I wrote yesterday, this gigantic, much better than expected profit is largely from engaging in the same risks that got Goldman and other companies into trouble in the first place- taking massive risks on things like volatile currencies. The same risks that has helped lead the country to economic collapse. Apparently the only thing Goldman learned from the financial collapse was that the government would bail it out if it kept taking big gambles, which isn't the lesson I was hoping it would learn.
And hey look, even more thrilling, it's been reported in late June that the company plans to pay its employee record bonuses. Congrats, guys.
Okay, Goldman. So as long as you're paying record bonuses to many of the same employees that engaged in these wildly speculative trading ventures, how about paying back the $13 billion you got from AIG by way of the U.S.Treasury? Or the unrevealed billions (likely many tens of billions) from the Federal Reserve?
Now I wouldn't be so irritable about all this if unemployment wasn't still going up, and most economists weren't saying it will continue to go up through 2010. I wouldn't be so irate if unemployed folks were getting jobs, home prices were starting to up again, and as a result bankers also made money. I wouldn't be so completely pissed out of my mind if we didn't already know, based on the last eight years, that the trickle-down economics of making sure the biggest banks recovered first just didn't work for everyone else in this economy.
It is time for a movement to take on the big bankers and change the economy so that it produces jobs for the rest of us.
There are many terrifying things in the world, but for my money the most terrifying news article I have read in weeks was the one in the New York Times today by Graham Bowley and Jenny Andersen headlined For Goldman, a Swift Return to Lofty Profits. Now it's obvious from my writing that I am not a fan of the big banking companies like Goldman Sachs, but why would it scare me so much that they had made big money this last quarter? Because of how they made it:
In essence, Goldman has managed to do again what it has always done so well: embrace risks that its rivals feared to take and, for the most part, manage those risks better than its rivals dreamed possible.
"It is, in many respects, business as usual at Goldman," said Roger Freeman, an analyst at Barclays Capital.
Traders said Goldman capitalized on the tumult in the credit markets to reap a fortune trading bonds. It profitably navigated a white-knuckled run in stock markets. It bought and sold volatile currencies, as well as commodities like oil. And it reaped lucrative fees from the high-margin business of underwriting stock offerings, which surged this year as other, more troubled financial institutions raced to raise capital.
So what Goldman is doing is the exact same kind of high-risk, "white-knuckled" trading that led us to the economic collapse of last fall. And because their bets are- so far- paying off, they will be giving out 18 billion dollars in salaries and bonuses to their traders; and because those bets are paying off, most of the other big Wall Street firms will be following them back into these speculative trading ventures.
Goldman is happy to take these risks because, hey look, they are still too big to fail. They know that even if their luck runs out, the Federal Reserve and American taxpayers will still be there to back them up.
This article should be raising five-alarm, all hands on deck red alerts all over Washington, DC. But I fear too much of the business media and DC politicians are once again not paying attention. The good news I can report is that high-level sources in the White House are paying a lot of attention to this, and are very troubled by it. I am very glad about that, but am still concerned that Treasury and most of Capitol Hill seem not to understand the consequences of Goldman and their ilk going back to the exact same dangerous games they had been up to before. It's like last fall's financial collapse never happened.
Now just so you think I'm all doom and gloom, since I started with the scariest article I had read, let me end on the funniest article I've read in weeks. Peter Wallison at the American Enterprise Institute wrote an article attacking the idea of a consumer financial protection agency, in other words, regulations on those big banks' trading practices, saying the idea of protecting consumers and our entire economy from high risk trades is "elitist". Wow, that is comedic chutzpah on a very high level: defending Goldman Sachs and their friends from more regulation, defending the most elite and irresponsible speculators in the world, by calling those of us who want some regulation of them elitist.
That kind of comedy gold is exactly what got us into the mess we are in today. Which I have to admit, isn't so funny after all.
Business reporter Leela de Kretser heaps scorn on Matt Taibbi for telling people things that were already common knowledge in the financial press about the Goldman Sachs vampire squid (never going to get tired of that phrase):
... Thanks to reporters at The Wall Street Journal, New York Times and the New York Post, we already knew Goldman Sachs alumni had positions in governments and influential bodies around the world.
[We knew they were] the biggest contributor to Barack Obama's presidential run ... profited more than any other bank during the sub-prime mortgage mess ... been part of talks about whether to keep its competitor Lehman Brothers afloat ...
Unlike Mr Taibbi, we knew all of this - and didn't think it amounted to sinister conspiracy. Instead we thought this is what the biggest guy on The Street does.
The word 'conspiracy' doesn't appear in the original piece, The Great American Bubble Machine. It's just that when you describe it like this, all the greed and influence-peddling and market manipulation sounds bad to the masses:
Check out this sad story in the New York Times: apparently Morgan Stanley has been doing the right thing by taking fewer risks in their trading than their competitors at Goldman Sachs and Citibank. But in the perverse Wall Street system we have allowed to remain in place in this country, where the big financial traders make money for their firms by big gambles, the bankers who are actually being more responsible are being punished for it. Meanwhile there are record bonuses for the traders at Citibank and Goldman.
This is the problem I have with the resuscitation model rather than the restructuring model when it comes to Wall Street. I give the Obama team credit for wanting to regulate these big financial traders more, but they need to go further than that and change the fundamental financial trading system. What is being recreated in front of our very eyes is the exact same system with the exact same problems that led to our financial collapse in the first place. These big financial conglomerates will still have all the same incentives to take huge risks, and because they are so huge, the risk is to not just to their own company, but to our entire economy. And their financial clout will be compounded by the political power of being that big, which will inevitably lead to weaker regulations and captured regulatory agencies.
Oh, and by the way, that whole "we have no choice but to revive the banks, because that will start the credit flowing and create jobs" thing: it's not working either. Unemployment is going up, we're still losing hundreds of thousands of jobs every single month. I know that it takes a while for jobs to start being produced, but this jobs report is much worse than the forecasts predicted, and the Geithner/Summers team has consistently been too optimistic in their guesses.
We need a big, bold change of direction in this economy. The old models aren't working. Let's get some economists in the White House who actually made accurate predictions on the economy, and let's take on the big banks that brought us this mess. These Wall Street guys are back to their old tricks - risky trades, huge bonuses - and the rest of us are getting hosed.
A couple of items in the financial sector, but both can be summarized in these words: the powerful and greedy continue to run things with impunity in the financial world.
First there's the news that Goldman Sachs is making record bonus payments for the first half of the year. Let me repeat that: RECORD bonus payments. Bigger than 2004 or 2005 or 2006 or 2007. Bigger than at the height of the bubble. In spite of all the toxic assets they have created. In spite of all the government bailout help. In spite of all the stunning damage to the American and world economy. In spite of all of that (or maybe because of some of it), for the very, very short term, the company has good profit numbers. Ergo post hoc, they are giving out really awesome bonuses to their big enchiladas.
Then, there is the massively infuriating article entitled "Treasury's Got Bill Gross on Speed Dial". It seems that Bill Gross is extremely happy these days. Everybody in government seems to hang on his every word. The plan that he helped develop, the Public-Private Investment Program (the PPIP for short), which would coincidentally make him billions of dollars, is being pushed by Tim Geithner.
Read these two articles back to back; and if you are not sputtering with rage at the end, you must truly be the most pro-corporate libertarian around.
Hey, I know it takes a heck of all ill wind not to blow somebody some good. And I knew that when the Summers-Geithner policy of resuscitation of the financial system rather than restructuring it was adapted, that lots of people would make money off the deal. But reading these two articles really does make you wonder who won the election, and how these greedy folks can get away with doing whatever they want.
Check out this absolutely terrific post by Drew Westen, one I had really wished I had written because it's so on target. I want President Obama to succeed more than I've ever wanted anything politically, but it's not going to happen unless he (a) wrenches the control of the economy away from the greedy, and (b) confronts the greedy directly. You have to decide which side you are on, Mr. President: the struggling tens of millions barely hanging on, or not hanging on at all, in this dreadful economy. Or the greedy bankers and health insurance executives. I trust that you have good values and instincts, and I want to be on your side in these fights. I appreciate the good things you've done so far on the stimulus, the budget, health care, the environment. But at some point, you are going to have to confront the greedy, or you are not going to inspire and you are not going to win.
Fight the good fight, Mr. President, and there will be tens of millions of us who will fight it with you. Avoid these fights, and your Presidency will be adrift, with neither set of allies fighting for you or big legislative victories.
President Barack Obama rolled out his plan to overhaul financial regulation last week. While much of the Obama plan relies on the same regulators and structures that led to the current meltdown, there is one key exception. The establishment of an independent Consumer Financial Protection Agency would give ordinary citizens a seat at the financial policy table for the first time and prevent the abuses in credit card and mortgage lending that have wreaked havoc on households all over the country.
President Barack Obama is scheduled to unveil his agenda for revamping financial regulation later this week. As the economy struggles though a recession created by the banking industry, it's crucial that Obama and his advisers craft a set of rules ensuring that the financial sector strengthens our economy instead of destroying it.
by Zach Carter, Media Consortium MediaWire Blogger
With workers all over the globe trudging through a catastrophic recession, it's almost a given that governments will be battling the economic slide for a long time. Part of the effort to rebuild must involve new rules and regulations, but meaningful systems for economic accountability will be just as essential. If we do not hold the reckless executives who caused this crisis accountable for their actions, we risk regressing into similar turmoil in the near future.
