The government, via insurance and regulations, has some leverage over the banks. It should use it to recover the money the banks stole and return it to retired public workers.
Oh, and a unicorn.
The government, via insurance and regulations, has some leverage over the banks. It should use it to recover the money the banks stole and return it to retired public workers.
Oh, and a unicorn.
Goldman Sachs CEO Lloyd Blankfein has broken the law and should go to prison for five years.
I don’t mean in terms of conspiring to commit fraud or other complicated areas, although I personally believe he has broken the law there, too. I mean he has done the same simple, stupid thing that got former baseball star Roger Clemens indicted: He lied to Congress.
Matt Taibbi helpfully explains:
Though many legal experts agree there is a powerful argument that the Levin report [a report stemming from an investigation led by Sen. Carl Levin — Lex] supports a criminal charge of fraud, this stuff can keep the lawyers tied up for years. So let’s move on to something much simpler. In the spring of 2010, about a year into his investigation, Sen. Levin hauled all of the principals from these rotten Goldman deals to Washington, made them put their hands on the Bible and take oaths just like normal people, and demanded that they explain themselves. The legal definition of financial fraud may be murky and complex, but everybody knows you can’t lie to Congress.
“Article 18 of the United States Code, Section 1001,” says Loyola University law professor Michael Kaufman. “There are statutes that prohibit perjury and obstruction of justice, but this is the federal statute that explicitly prohibits lying to Congress.”
The law is simple: You’re guilty if you “knowingly and willfully” make a “materially false, fictitious or fraudulent statement or representation.” The punishment is up to five years in federal prison.
When Roger Clemens went to Washington and denied taking a shot of steroids in his ass, the feds indicted him — relying not on a year’s worth of graphically self-incriminating e-mails, but chiefly on the testimony of a single individual who had been given a deal by the government. Yet the Justice Department has shown no such prosecutorial zeal since April 27th of last year, when the Goldman executives who oversaw the Timberwolf, Hudson and Abacus deals arrived on the Hill and one by one — each seemingly wearing the same mask of faint boredom and irritated condescension — sat before Levin’s committee and dodged volleys of questions. …
Lloyd Blankfein went to Washington and testified under oath that Goldman Sachs didn’t make a massive short bet and didn’t bet against its clients. The Levin report proves that Goldman spent the whole summer of 2007 riding a “big short” and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits. Are we all missing something? Is there some different and higher standard of triple- and quadruple-lying that applies to bank CEOs but not to baseball players?
In fairness to both Taibbi and Sen. Levin and his investigators, there appears to be ample proof on the record that Goldman as a corporation and its individual officers committed a multitude of crimes — enough that any sane state would give Goldman the death penalty and lock the officers up for the rest of their natural lives. But those are, to a greater or lesser degree, complicated charges, challenging to prove. Lying to Congress? No-brainer.
They got Al Capone not for murder but for tax evasion. Lloyd Blankfein doing five years for lying to Congress wouldn’t be justice, but it would be a start.
One other question, perhaps more difficult: Why is it that you, I, Carl Levin and some scruffy reporter for Rolling Stone can see this but the Attorney General of the United States cannot? Are we just smarter, or what?
UPDATE: Apparently we’re smarter than the Attorney General on the John Ensign case, too.
David Gergen used to be a respected, moderate Republican eminence. Then he went to work for Clinton. Now, he dispenses incredibly tired, out of touch conventional wisdom and is so out of touch that he doesn’t even realize that those things dangling from the tip of Matt Taibbi’s K-bar? Are his testicles:
Gergen: If Obama is going to govern as well as prosper politically, he has to pivot back toward the center. He must embrace some sort of Social Security reform, just as Clinton did with NAFTA, even though his base will scream about it. He must also enlarge his inner circle by bringing in people who have the trust of the business community. One of the surprises for me has been that even though Obama rescued the banks, the alienation of the business community has reached a point that is threatening the recovery. Business people are sitting on a lot of money and not investing it because there is so much uncertainty about taxes, health care, financial regulations and energy. Obama’s got to be more of a partner with the business community.
Taibbi: I have to disagree. The notion that the business community is disappointed with Obama because of what he’s done in the past two years, I just don’t see that. They’re sitting on a lot of money, but they’re sitting on it because he gave it to them. [And because those consumers who can spend are so terrified that soon they won’t be able to that they won’t spend. — Lex]
Gergen: You don’t think they’re disappointed?
Taibbi: I’m sure they would have preferred the Republican agenda, where they would get 100 percent of what they want. Under Obama, they only got 90 percent. He bailed out the banks and didn’t put anybody in jail. He gave $13 billion to Goldman Sachs under the AIG bailout alone and then did nothing when Goldman turned around and gave themselves $16 billion in bonuses. He passed a financial-reform bill that contains no significant reforms and doesn’t really address the issue of “too big to fail.” FDR, in the same position, passed radical reforms that really put Wall Street and the business community under his heel.
Gergen: If you talk to many CEOs, you’ll find that they’re very hostile toward Obama.
Taibbi: Who cares what these CEOs think? I don’t care — they’re 1/1,000th of a percent of the electorate. They’re the problem. Obama needs to get other people’s votes, not their votes.
Gergen: It’s not their votes he needs to get — it’s their investments and jobs.
Q: In 2008, Obama managed to win over both the financial sector and the progressive wing of the Democratic Party. Now he seems to have pissed off both ends of that coalition.
(Pollster Peter) Hart: There’s a fascinating point from the exit polls that supports part of what Matt is saying. When you ask voters who is most to blame for the current economic crisis, 35 percent say it’s Wall Street bankers, 29 percent say it’s George W. Bush and 23 percent say it’s Barack Obama. However, among those who say it’s Wall Street bankers, 56 percent voted for the Republicans in this election. So go figure.
That said, I worry that if the president and the Democrats were to follow Matt’s advice, they would be appealing to the smallest segment of the electorate. Right now Obama has the support of 85 percent of Democrats. If you want to get America back to work, you don’t want to put the people who have the ability to invest on the other side of their fence.
Taibbi: So if we put people in jail for committing fraud during the mortgage bubble, we’re endangering our ability to win over the CEOs? Obama should have made sure that there are consequences for people who committed crimes. Instead, he pursued a policy of nonaction, and that left him vulnerable with ordinary people who wanted an explanation for why the economy went off the cliff.
Gergen: I don’t think his problem is he hasn’t put enough people in jail. I agree that when people commit fraud, they ought to spend some time in the slammer. But there’s a tendency in today’s Democratic Party to turn away from someone like Bob Rubin because of his time at Citigroup. I served with him during the Clinton administration, when the country added 22 million new jobs, and Bob Rubin was right at the center of that. He was an invaluable adviser to the president, and he is now arguing that one of the reasons this economy is not coming back is that the business community is sitting on money because of the hostility they feel coming from Washington.
Taibbi: I’m sorry, but Bob Rubin is exactly what I’m talking about. Under Clinton, he pushed this enormous remaking of the rules for Wall Street specifically so the Citigroup merger could go through, then he went to work for Citigroup and made $120 million over the next 10 years. He helped push through the Commodity Futures Modernization Act of 2000, which deregulated the derivatives market and created the mortgage bubble. Then Obama brings him back into the government during the transition and surrounds himself with people who are close to Bob Rubin. That’s exactly the wrong message to be sending to ordinary voters: that we’re bringing back this same crew of Wall Street-friendly guys who screwed up and got us in this mess in the first place.
Gergen: That sentiment is exactly what the business community objects to.
Taibbi: [Expletive] the business community!
Gergen: [Expletive] the business community? That’s what you said? That’s the very attitude the business community feels is coming from many Democrats in Washington, including some in the White House. There’s a good reason why they feel many Democrats are hostile — because they are.
Taibbi: It’s hard to see how this administration is hostile to business when the guy it turns to for economic advice is the same guy who pushed through a merger and then went right off and made $120 million from a decision that helped wreck the entire economy.
The number and importance of the key facts and concepts that Gergen demonstrates he either doesn’t know about or doesn’t care about here is mind-boggling. Add to that the fact that he automatically presumes that if the CEOs in his circle differ with the president, why, they must be right and the president must be wrong, and you’ve got a guy who clearly will never be mistaken for a card-carrying member of the Reality-Based Community. He will, however, continue to be mistaken, over and over, by our lousy excuse of a media for someone who actually knows what he’s talking about.
UPDATE: John Cole adds:
David Gergen makes up his own reality and responds to feelings and trite beltway babble. Matt Taibbi looks around him and reacts to evidence and data. David Gergen is considered a very serious person and advises Presidents. Matt Taibbi is not considered serious because he says [expletive].
We’re so screwed as a nation.
The most entertaining and outrageous journalism outfit in Russia — also, quite possibly, the best — succumbs to state pressure:
“One of the big complaints we heard for years—really violently angry complaints—was: You cannot mix, in one paper, satire and real investigative journalism,” Ames says. “And we were, like, ‘Why?’”
Matt Taibbi looks back at the 11-month mark in Obama’s presidency and finds that what we were promised ain’t what we got.
A lot of progressives are miffed that a lot of other progressives are unhappy with Obama. Uh, guys, we’ve already tried unwaving support of the president by the party that controlled Congress. That’s exactly what got us into the mess we’re in today.
My take is that any interest group that sees its ostensible champion wavering has not just a right but a duty to scream, early and often. I say that not just because that’s what I did, but because that’s what interest groups are supposed to do. Why? Because slippery slope isn’t always a fallacy and turning up the heat on the frog in the pot of water on the stove top is sometimes more than just a metaphor.
Taibbi’s piece is particularly timely now. Consider what Obama said just a few months ago:
Insurance companies will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or lifetime, and we will place a limit on how much you can be charged for out-of-pocket expenses – because no one in America should go broke just because they get sick.
Now consider this:
A loophole in the Senate health care bill would let insurers place annual dollar limits on medical care for people struggling with costly illnesses such as cancer, prompting a rebuke from patient advocates.
The legislation that originally passed the Senate health committee last summer would have banned such limits, but a tweak to that provision weakened it in the bill now moving toward a Senate vote.
As currently written, the Senate Democratic health care bill would permit insurance companies to place annual limits on the dollar value of medical care, as long as those limits are not “unreasonable.” The bill does not define what level of limits would be allowable, delegating that task to administration officials.
Adding to the puzzle, the new language was quietly tucked away in a clause in the bill still captioned “No lifetime or annual limits.”
Question: During the debate on health-care reform, why is it that only the progressives have to make any concessions?
Answer: Because Obama and the party he leads believe, despite a couple of decades of experience to the contrary, that they’ll do better politically by hacking off progressives than by hacking off moderates.
Perhaps they’re right. But if they keep it up, what I think they’re going to learn is that 2010 isn’t 1992.
Matt Taibbi tells Sarah Palin that, yes, the media really are out to get her. But it ain’t just the media. And it ain’t for the reasons she probably thinks. And it ain’t just her they’re out to get:
What the people who are flipping out about the treatment of Palin should be asking themselves is what it means when it’s not just jerks like us but everybody piling on against Palin. For those of you who can’t connect the dots, I’ll tell you what it means. It means she’s been cut loose. It means that all five of the families have given the okay to this hit job, including even the mainstream Republican leaders. You teabaggers are in the process of being marginalized by your own ostensible party leaders in exactly the same way the anti-war crowd was abandoned by the Democratic party elders in the earlier part of this decade. Like the antiwar left, you have been deemed a threat to your own party’s “winnability.”
And do you know what that means? That means that just as the antiwar crowd spent years being painted by the national press as weepy, unpatriotic [wimps] whose enthusiastic support is toxic to any serious presidential aspirant, so too will all of you afternoon-radio ignoramuses who seem bent on spending the next three years [exploiting] white resentment now find yourself and your political champions painted as knee-jerk loonies whose rabid irrationality is undeserving of the political center. And yes, that’s me saying that, but I’ve always been saying that, not just about Palin but about George Bush and all your other moron-heroes.
What’s different now is who else is saying it. You had these people eating out of the palms of your hands (remember what it was like in the Dixie Chicks days?). Now they’re all drawing horns and Groucho mustaches on your heroes, and rapidly transitioning you from your previous political kingmaking role in the real world to a new role as a giant captive entertainment demographic that exists solely to be manipulated for ratings and ad revenue. What you should be asking yourself is why this is happening to you.
I don’t know, but I’ll hazard a guess: With the Religious Right in decline, The Powers That Be are trying to replace it with the teabaggers. That would mean they would use the teabaggers for their votes while marginalizing them enough so that they don’t feel obliged to actually do anything for them.
But that’s just a guess. I could be wrong.
… and Matt Taibbi is already writing its obituary. What’s worse, he concludes that the failure of reform constitutes final proof that the American political system is irretrievably broken:
Almost every single one of the main players — from House Speaker Nancy Pelosi to Blue Dog turncoat Max Baucus — found some unforeseeable, unique-to-them way to [screw] this thing up. Even Ted Kennedy, for whom successful health care reform was to be the great vindicating achievement of his career, and Barack Obama, whose entire presidency will likely be judged by this bill, managed to come up small when the lights came on. We might look back on this summer someday and think of it as the moment when our government lost us for good.
First, I don’t think Obama’s entire presidency will likely be judged by this bill. I think it will definitely be judged by this bill.
Second, Mr. Taibbi’s gloom notwithstanding, I don’t think we’re there yet.
I think the Supreme Court will actually have to rule in the Citizens United case before we get to that point. But with oral arguments now behind us and the Roberts Court already having exhibited more judicial activism in this one case than we’ve seen from the entire court since Earl Warren died, we can see there from here.
Michael Lewis corrects some misimpressions about Goldman Sachs. It’d be funny if, well …
Less amusingly, Matt Taibbi and New York magazine discuss Goldman’s near-death experience this past fall … an experience it appears to have survived only because of an injection of tax money, separate and apart from the tax money funneled to it through AIG, which makes the company’s current compensation plan even less justifiable than it already was (if you can get less justifiable than “completely unjustifiable”).
Rolling Stone’s Matt Taibbi has written a groundbreaking article on the involvement of Golden Sachs in every major economic bubble of the past century and its likely involvement in what Taibbi thinks will be the next bubble, tied to cap-and-trade:
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates. …
But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.
He has followed up that article with this blog post, explaining how Goldman’s incredible 2Q profit of $3.44 billion, and its earmarking of $11 billion for employee compensation, wouldn’t exist without the enforced generosity of the American taxpayer.
That’s bad enough. What’s even worse is that the company is now taking more of the same kinds of lunatic risks that led to this financial collapse in the first place, as illustrated by this chart of Goldman’s daily Value at Risk. Note that the phrase “reduce its leverage” in the chart probably should be enclosed in irony quotes:
Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “[screw] you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.
This is the economic equivalent of war profiteering, but as Taibbi points out, given Goldman’s role in creating the financial crisis, it’s also as if Goldman started the war from which it is now profiteering.
These are your tax dollars at work, folks, and if you don’t raise holy hell with your congresscritters, you will never see them again.
Goldman Sachs CEO Lloyd Blankfein is really, really sorry that his company just somehow got swept up in the events that led to the current economic crisis. Really:
While we regret that we participated in the market euphoria and failed to raise a responsible voice, we are proud of the way our firm managed the risk it assumed on behalf of our clients before and during the financial crisis.
Tell it to my 401k, you schmuck.
Matt Taibbi brazenly dares to point out that Goldman’s role was actually, well, a little more involved than that:
Really, Lloyd? You “participated” in the market euphoria? You didn’t, I don’t know, cause the market euphoria? By almost any measurement, Goldman was a central, leading player in the subprime housing bubble story. Just yesterday I was talking to Guy Cecala at Inside Mortgage Finance, the trade publication that tracks statistics in the mortgage lending industry. He said that at the height of the boom, in 2006, Goldman Sachs underwrote $76.5 billion in mortgage-backed securities, or 7% of the entire market. Of that $76.5 billion, $29.3 billion was subprime, which is bad enough — but another $29.8 billion was what’s called “Alt-A” paper. Alt-A mortgages are characterized, mainly, by crappy documentation and lack of equity: no income verification, no asset verification, little-to-no cash down. So while “only” 38% of the mortgage-backed securities Goldman underwrote were subprime, more than three-fourths of their securities were what is called “non-prime,” i.e., either subprime or Alt-A. …
These [lousy] mortgages … would never have been possible had not someone devised a method for selling them off to secondary buyers. No local bank is going to keep millions of dollars worth of Alt-A mortgages on its books, because no sensible company lends out money to very risky customers and actually keeps those loans on its balance sheet.
So this system depended almost entirely on banks like Goldman finding ways to … chop the mortgages up into little bits, repackage them as mortgage-backed securities … and sell them to unsuspecting customers on the secondary market. … Next thing you know, a bunch of teachers in Holland are betting their retirement nest eggs on a bunch of meth-addicted “homeowners” in Texas and Arizona.
This isn’t really commerce, but much more like organized crime: it was a gigantic fraud perpetrated on the economy that wouldn’t have been possible without accomplices in the ratings agencies and regulators willing to turn a blind eye. …
I’ve been saying that last bit for some time. Glad to know that someone who knows significantly more about this than I do agrees with me.
But wait! There’s more!
Second of all, what is particularly obnoxious about this phrase is that Goldman is bragging about the fact that it actually made money while it was pumping the economy full of explosive leverage. … Goldman’s continual bragging about its mortgage hedges is one of the more obnoxious phenomena in the recent history of Wall Street, given that it was selling this [garbage] by the ton during that same period.
And it wasn’t just selling lousy mortgage-backed securities, either. It also was killing other companies and putting a screwing for the ages on the American taxpayer in the process:
AIG’s death spiral was triggered not so much by its bets going sour, but by companies like Goldman that demanded that AIG put up cash to show its ability to pay. These collateral calls were what killed AIG last September, and Goldman was one of those creditors pulling the trigger: what makes this fact even more obnoxious is that ex-Goldmanite Henry Paulson then stepped in and green-lighted an $80 billion taxpayer bailout. Ultimately another ex-Goldmanite named Ed Liddy was put in charge of AIG, and Goldman ended up getting paid 100 cents on the dollar for its AIG debt. So basically Goldman helped kill AIG, necessitating a federal bailout, after which time it got paid off handsomely for bets that it certainly would not have been paid off completely for had AIG simply been liquidated.
Go read the whole thing, not-safe-for-work language and all. And the Blankfeins of the world wonders why there’s still a small but persistent segment out there calling for the whole freakin’ finance industry to be nationalized….