Wall Street's Infinite Sleaze: Goldman and AIG
According to the NYT, Lloyd C. Blankfein, Goldman Sachs CEO, was in the room with Henry Paulson (former CEO of Goldman) when the decision to save AIG was made. Why does this matter? According to the NYT, AIG owed Goldman $20 billion. If AIG had been allowed to go bankrupt, Goldman would be in line with all the other creditors, hoping for a few dimes back on each dollar of debt. Because Henry Paulson decided to rescue AIG, Goldman gets paid in full.
Did Goldman's influence with their ex-CEO make a difference in Paulson's decision? I have no idea, but this thing stinks. Can you imagine if clerical workers losing their homes got to sit around with bankruptcy judges deciding the fate of their mortgages? It doesn't work that way where the rest of us live.
It is impossible to exaggerate the corruption of this Wall Street crowd.
Mr. Baker you are so right, and I admire you for standing up to the truth. That is why I came here. I thank God you are exposing the corruption which is far deeper, then anyone knows. Paulson must be stopped, but it looks like it's not going to happen. What a huge mistake to bail out AIG and the others!!
http://everett-hurst.memory-of.com time line upper right corner
Keep on letting the public know Mr. Baker, thank you.
September 27, 2008 11:01 PM | Reply | Permalink
Is that something like Insider trading, a violation of the law?
While the general public was being told "The Fundamentals of the economy are strong"
So you suckers ride this out, because were bailing
September 27, 2008 11:25 PM | Reply | Permalink
Is anybody else suspicious? Why are Paulson and Bernanke so strident? They are highly intelligent men who, one would think, would try to sell all this in a softer more encouraging tone. Instead, they sound like Joe Sixpack making threats at the local bar. GWB is easy to understand, he is just reading the scrip. Paulson and Bernanke, though, are just too smart to make such a naked power play. Naked power plays usually don't work. It is as if P&B are trying to torpedo their own plan. Maybe there is something bigger going on behind the scenes. Is a lot of money leaving the US? Are the foreign currency exchanges trading at abnormal volumes? Is this "bailout" a cover for something else? Probably not. All is probably just as it seems on the surface: Very wealthy people trying to stay very wealthy.
September 27, 2008 11:56 PM | Reply | Permalink
I've been talking with someone who has been tracking these financial institutions and this problem for a year or two. If what he says is true, this will not be the only story to come to light and books will be written.
The word "regulation" is somewhat misleading in all this. In many cases what are called "regulations" are laws that hold people accountable.
I do think that part of this is true panic that they mistakenly thought they could prevent or control. They can't. These assets have no value in the kind of market they are in and are held by folks who have no capacity to determine their value or do anything with the underlying real assets. They may be worth something but if there is no buyer, they ain't worth diddly. What do (or did) the primary actors have to lose? Who is going to hold them accountable?
If the response of one of my Senators is any indication, the members of Congress have been getting an earful and are not really in a position to avoid a complete give away. It is not going to be pretty.
September 28, 2008 12:14 AM | Reply | Permalink
Oops! I meant that Congress is not in a position to simply give away the farm, e.g., "Impeachment is off the table." They have to put something in this that people can tell has real teeth. Baby teeth most likely.
Too bad people don't understand that you can get something done with a general strike. It can change the hearts and minds of bureaucrats and legislatures in a big hurry.
September 28, 2008 12:23 AM | Reply | Permalink
Robert Rubin -- past Co-Chairman of Goldman Sachs and principal lobbyist in the Clinton Administration for the adoption of Gramm-Leach-Bliley -- resigns and within days of G-L-B being signed joins Citigroup, a main beneficiary of G-L-B (Travelers and Citibank), now, current Chairman of Executive Committee of Citigroup.
As Enron was going down the tubes used his past relationship with the Treasury Department to attempt to get special favor for Enron -- his employer Citigroup just happening to be "one of Enron's biggest creditors" -- in order to slow down its entry into bankruptcy.
He's back!
September 28, 2008 12:25 AM | Reply | Permalink
Histrionic Ellen, if one phone call is the only dirt you can dig up in the way of character assassination on Rubin - get a life!
Most here who have read your 'stuff' here would trust Obama's judgment over yours by a light year, thank you.
His phone call was in 2002: it did not affect Treasury's decision and Rubin was cleared of wrongdoing by a Congressional investigation. Rubin left Citibank in 2002.
Rubin is also a member of the Africa Progress Panel (APP), an independent authority on Africa launched in April 2007 to focus world leaders’ attention on delivering their commitments to the continent.
http://en.wikipedia.org/wiki/Robert_Rubin#Economic_record_and_retirement_from_office
September 28, 2008 12:53 AM | Reply | Permalink
Rubin left Citibank in 2002.
I wonder where he went.
Ah, Chairman of Citigroup's Executive Management Committee. Do you think they threw him a good bye party when he "left Citibank," hmm NobleCommentDecider?
Although what with the turmoil he and his friends are responsible for currently roiling the financial world, last month he apparently determined it would be beneficial to him and Citigroup if he hid out under a new title -- Senior Counselor*. Nonetheless, Citigroup says he "will continue in all of his roles for the Company."
Rubin was cleared of wrongdoing by a Congressional investigation.
Yep; just like McCain in the Keating Five scandal. Why am I not surprised?
* Makes him sound like some sort of Boy Scout -- you remember, clean in word and deed not to mention trustworthy and thrifty.
September 28, 2008 2:39 AM | Reply | Permalink
...trustworthy
not to mention, prepared
"It's the derivatives, stupid"
September 28, 2008 3:08 AM | Reply | Permalink
Ellen, is your point that "there's not a dime's worth of difference" between Obama and McCain then?
Will you be voting for Nader, or staying home, come November 4?
-- ARG
September 28, 2008 11:32 AM | Reply | Permalink
'His friends' sounds like Rubin may have known someone who was 'bad' or 'unamerican'. Ellen, were you or have you ever been a member of Joe McCarthy's band of witch hunters?
I would say again I trust Obama's judgment more than Ellen, TPM's leading cynic.
September 28, 2008 11:43 AM | Reply | Permalink
Ellen can have issues with some of advisers and not distrust Barack.
I am sure Obama has people from all sides of this argument providing advice and I am quite sure he isn't blind to the Clinton Administrations contribution to this mess. If I can see it, then Obama certainly sees it.
There is too many discussions taking place on the right and left that don't allow for grays. Just because Rubin has the appearance of being a dick, doesn't mean he shouldn't be involved.
We just need to keep an eye on him.
Just like I keep an eye on anyone in a position of authority given the huge failures of our public and private systems to provide for the common sense interests of America, both at home and overseas.
I think Ellen contributes a valuable perspective, shades of gray if you will, that keep the echo chamber from becoming too strident.
September 28, 2008 11:55 AM | Reply | Permalink
Most here who have read your 'stuff' here would trust Obama's judgment over yours by a light year, thank you.
On forensic economics?
Sorry, I love me some Barack, but he don't know dollars like Ellen.
September 28, 2008 3:18 AM | Reply | Permalink
McClatchy Washington DC: Senator Feinstein on Paulson's concern that limiting executive pay will discourage participation in 'the plan':
http://www.mcclatchydc.com/227/story/53180.html
Personally I would like to see Paulson and Goldman execs chatting on on that boat also.
September 28, 2008 12:33 AM | Reply | Permalink
Three Men in a Boat
You'll want to include Obama, NobleCommentDecider -- at the oars, perhaps? Goldman Sachs should get something for its $691,930, don't you think?
And that's To Say Nothing of the Dog.
September 28, 2008 2:56 AM | Reply | Permalink
See, it is bullshit like this that make your other comments worthless.
Obama has collected hundreds of millions of dollars, so grouping a bunch of Goldman Sacks employees together, many of whom can afford to contribute the limit as individuals, as some sort of indication of influence over a $300 million endeavor is intellectually dishonest at best.
If that isn't what you were trying to say, then perhaps you can be more clear with this type of innuendo. Perhaps as clear as the information you tried to convey up above.
Unless, of course, you are a McCain fan. If that is the case, own up to it and lace up your gloves.
September 28, 2008 12:00 PM | Reply | Permalink
Obama's a trimmer; McCain's a demolisher.
As the lesser evil, Obama's got my vote -- or would have if I lived in a battleground state and my vote counted for anything.
Right now, I'm sitting with bated breath waiting to hear what Barrack "We haven't seen the language yet" Obama will say about the bailout plan.
September 28, 2008 2:25 PM | Reply | Permalink
Greetings,
In response to Dark Times. I wrote this several days ago.
ARE WE SHEEP?
Are we sheep and Paulson our shepherd?
Or are we citizens with the Constitution our guide?
Are we fools for their financial shock and awe?
Or are we wise to these masters of deceit?
If Wall Street is a brownfield of toxic debt –
then suit-up in hazmat our auditors to clean.
If the money-men want to be rescued –
why do they throw us the lifesaver?
Enough!
Enough of rule by edict from a place of fear.
Enough!
It’s not enough to want change.
What we must reclaim is what they have sucked dry.
Power.
Power - to first – say NO!
Power.
Power - to second – call their bluff.
They threaten us with a financial strike,
but we can play that game too.
We can take a work-holiday!
They can shutdown the Street.
We can shutdown the city.
- axel ztangi
September 28, 2008 1:01 AM | Reply | Permalink
I always thought something like a pandemic of Bush or Paulson flu would be effective. At least some folks might get paid.
Alas, I live in a country where people will actually vote for George Bush and get excited about Sarah Palin.
I just about died laughing when someone asserted that Dean Baker was "ultra-liberal." At times in our history his suggestions would have been considered mainstream. People do not seem to realize how far off the track we are. Actually they do but they don't know how to get their institutions to respond. In fact, it is hard to get those affected to agree on much of anything beyond "things ain't right."
I'm not willing to demonize everyone involved. I do not think this kind of situation gets resolved quickly or easily. There is no easy fix. People either decide that their constitution and laws matter and insist that they are taken seriously or the do whatever it is they are doing.
September 28, 2008 1:36 AM | Reply | Permalink
The closing of Washington Mutual is very suspicious, too. WaMu hires a Goldman Sachs exec and good buddy of Paulson, three weeks later, JP Morgan picks up the sweet part of a major competitor and the exec gets $19.6 million. The FDIC shut WaMu down but the sell of to JP Morgan was done immediately. The details had to worked out in advance. Would you buy a huge retail branch network without a modicum of due diligence? Too bad for WaMu stockholders and bondholders.
This kind of stuff has many smaller traders and firms spooked. Stanley Morgan lost somewhere between 1/3 and 1/2 of its depositors (deposits, actually) on Friday. Apparently they did not think their money was safe there. Nobody said where it went.
I've been told that the Bear Stearns situation could not withstand much scrutiny either. Apparently there are only so many life boats on the Titanic and it helps to know the captain.
September 28, 2008 1:11 AM | Reply | Permalink
One problem not discussed regarding the transfer of Wamu to JP Morgan is that if Wamu was too big to be allowed to fail, what does that make JP Morgan? Much to big to be allowed to fail?
This means that any means of making more money, how ever risky, is not risky for JP Morgan. They know they can't be allowed to fail, so the government -us- will step in and accept the downside risk for them.
This is one reason for anti-trust laws. I know anti-trust is just so 20th century, but the problems that led to anti-trust laws were real and continue to be real. If we had enforced those laws all along we wouldn't be in this crisis, if we are in a crisis at all.
September 28, 2008 12:41 PM | Reply | Permalink
Haven't most of Mrogan's moves in the past 6 months been done in collusion with Bernanke and carried out with some guarentees and promises made between them? I distincly recall having read that more than once during the summer. The two entities are acting in concert.
September 28, 2008 1:57 PM | Reply | Permalink
"Did Goldman's influence with their ex-CEO make a difference in Paulson's decision?"
You're kidding right? Tell me you're kidding.
Of course, it made every difference. What else would he be doing in that room? Looking out for the taxpayer? Stop it please! You're killing me with this! AAAAAAhahahahahahahahahahah!!!!!!
Asking the question above is like asking the proverbial question about what bears do in the woods and then saying you don't know.
September 28, 2008 3:36 AM | Reply | Permalink
Just to be clear -- if Blankfein could get in the room, it was Blankfein's job to be in the room. What he's doing isn't corruption, it's what the CEO of a public company must do.
It was Paulson's job to keep these people out of the room. Wall Street will do what it must to get every advantage it can. It's government's job to say no.
September 28, 2008 4:41 AM | Reply | Permalink
What do WE THE PEOPLE DO, when our leaders just colluded with the banking Industry in forming a cartel?
How does this new plan affect the foundation of Sherman anti trust laws?
Was this crisis created to overturn the law?
Conscious parallelism?
September 28, 2008 5:05 AM | Reply | Permalink
We need to turn out for primary elections in numbers much greater than ever before.
This year was a good start, but still only in the 35 to 40% range. That is why things never change, because Americans don't fucking vote. When they do vote, they tend to do so only in the general election and usually for the incumbent at that point.
The same people will keep making the same bad decisions until we put new people in there.
September 28, 2008 12:41 PM | Reply | Permalink
Bloomberg News reported a story last week that the two biggest beneficiaries of the proposed bailout might well be Goldman Sachs and Morgan Stanley.
It notes near the bottom that Paulson is a former CEO of Goldman.
I'd also note that Bernanke was arguing against executive compensation caps and equity for the government in the bailout plan because they would discourage solvent firms from participating.
Why do we need solvent firms need to be part of the bailout again?
Certainly Paulson would be above using his influence to help out his old employer, right?
Kudos to Dean Baker for pointing out the elephant in the room here.
September 28, 2008 8:38 AM | Reply | Permalink