Turn Goldman Anger Into Government Action

In a world where real competition, modern technology and lack of special government standing means most American businesses have no choice but to adapt and innovate -- Wall Streets wimps only apparent skill is rigging the game.

In fact, on Wall Street there have always been only two basic ways to make money. The first and most difficult: Be a great investor -- to the best investors go the profits, rewarding those who are best at picking winning businesses for America and punishing those who fail through the loss of their money. The second, and seemingly preferred method, exploit those who know less than you -- and take their money, even if you have to change the laws to do so.

Now, this second business was much easier to pull off prior to the internet and 24-hour exchanges etc. as technology is the enemy of any business that makes its living overcharging customers who don't know better or are given no other choice.

So bankers, facing an onslaught of web-driven transparency and reduced profitability during the last decade along with an increasingly educated customer-base became anxious to change the laws in 2000 and are even more anxious to protect those changes now.

While things like stock and bond trading became a very low margin business because of modern information -- the legalization in 2000 of a secretive market for crooked insurance with no transparency or accountability has been an absolute boon.

They called it credit derivatives -- where banks and insurers offer to effectively "insure" financial assets. For instance, they were used to insure much of the real estate and pension liabilities in America the past 10 years.

To make money, the banks exploit two loopholes. The first -- overcharge customers by depriving them of the type of competitive pricing only possible on an exchange like the New York Stock Exchange or Chicago Mercantile Exchange.

And the second, exploit the lack of transparency to hide the fact that you are keeping little or no money to pay claims while selling insurance and collecting fees on every house and pension payment in America.

The key to success here is that when there is a default or claim against that so-called credit insurance -- the banks keep all the past payment -- and the taxpayer under threat of collapse pays off the claims while getting nothing in return.

This quite simply, is a brilliant way to steal our money.

Now this method of "business" is only possible if the government continues to allow these crooked insurance contracts to be written in secret, allows them to hold little or no money in reserve for payment and allows them to sell enough coverage on enough vital national assets that if there is a default -- the taxpayer has no choice but to pay.

Needless to say, J.P. Morgan & Co. has never had more revenue and the Goldman Sachs bonus pool has never been bigger.

Considering the $23.7 trillion of taxpayer money being used to support these Corporate Communists one would hope they could at least make a few billion in profits with it. In context, making a few billion risking a few trillion is a rather pathetic return after all.

As we talked about last week - allowing these outdated banks to take control of our government and change the rules so they are protected from the natural competition and reward systems that have created so many innovations in our country, you not only steal from the citizens on behalf of the least worthy but you also doom them by trapping the capital that would have been used to generate new innovation and, most tangibly in our current situation, jobs.

We don't want a government commandeered by those in our banking system who have failed and been passed over by technological advancements, innovation and flat out smarts.

The government's job is to restore the rules of investment, not indulge those who want to unfairly sustain their wealth and power at our nation's expense.

What we want, is a Wall Street that would attract men and women who would seek to be the next Warren Buffett, or great venture capitalist. Men and women competing to analyze the countless ideas of our best and brightest - investing in those who will best be able to bring their innovations to America and the world.

To tell your congressman, go to dylan.msnbc.com and heed the call.

 

Follow Dylan Ratigan on Twitter: www.twitter.com/DylanRatigan

Comments

[twofish]

Stop worrying about the bonuses and tax the cr*p out of anything of value these banksters (and other crooks) acquire. The more they make, the more we make. Pay off the deficit in no time that way.

[David A. Love - Huffpost Blogger]

Thank you for your valuable insights. I agree with your analysis. Just to add to your closing comment-- I think part of the problem is that Wall Street has been attracting too many of the best and brightest, for a life of paper shuffling and moving money around, while not adding much value to society.

[Jezreel]

Thanks Dylan for your excellent coverage of the economic crisis and health care reform legislation.

Your illustration, which employed a magician's costume to outline Goldman Sach's role and impact on the economic crisis was brilliant and illuminating.

I readily admit that I, like most Americans, am lacking in the depth of knowledge that is necessary to make proactive and defensive decisions in the area of national economics or global finance. And I am totally bereft of an understanding of derivatives. To me, derivatives are akin to a rarely heard foreign language that I do not understand or recognize.

That's why I'm writing to ask that you continue teaching me and others about how we can do more than react to legislation and begin taking a more active role in influencing legislation before it is passed.

BTW, your writing and television work on this and other complex issues of importance to our economic & social well being is just what I have been hoping and praying for, for at least a year. Your perceptiveness in this area is a sorely needed addition to our political arsenal. It's what we need to usher in meaningful change in the way politics is done in America.

Finally, may I suggest that in a future program you further elaborate on the meaning of claw backs.

Thanks again.

[igorvitch]

Help me out here. I know many of you are informed and smart. I'm a penny ante investor in the stock market and a former teacher. I lost just about a third of my retirement in the last debacle on Wall Street. I know investment involves a gamble but I've never, until recently, seen it as quite the same as a ball whirling around a rigged roulette wheel. To me, it was a way of making a reasonable profit and supporting American enterprise and, consequently, companies that would hire workers. I NEVER invested for the sake of making CEOs richer than Cresus. Now dear old Goldman and Sachs after a year of profits is establishing new exorbitant bonuses. Please explain to me what the h____ their board of directors is doing? Does catering to greed-obsessed Ceos and upper management make more jobs for American workers? Do insane bonuses strengthen businesses so they can reinvest in themselves and attract new customers and, consequently, provide more jobs? Is this competitive, accountable capitalism we're seeing in action or little more than not so sophisticated burglary? No one has actually answered the question about why Goldman and Sachs was saved from bankruptcy while other just as large banks were knocked out for the count, other than their former head honcho Hank Paulson happened to be Bush W's Sec. of the Treasury at the time. But these guys don't need any government regulations. LOL

[igorvitch]

Help me out here. I know many of you are informed and smart. I'm a penny ante investor in the stock market and a former teacher. i lost just about a third of my retirement in the last debacle on Wall Street. I know investment involves a gamble but I've never, until recently, seen it as quite the same as a ball whirling around a rigged roulette wheel. To me, it was a way of making a reasonable profit and supporting American enterprise and, consequently, companies that would hire workers. I NEVER invested for the sake of making CEOs richer than Cresus. Now dear old Goldman and Sachs after a year of profits is establishing new exorbitant bonuses. Please explain to me what the h____ their board of directors is doing? Does catering to greed-obsessed Ceos and upper management make more jobs for American workers? Do insane bonuses strengthen businesses so they can reinvest in themselves and attract new customers and, consequently, provide more jobs? Is this competitive, accountable capitalism we're seeing in action or little more than not so sophisticated burglary? No one has actually answered the question about why Goldman and Sachs was saved from bankruptcy while other just as large banks were knocked out for the count, other than their former head honcho Hank Paulson happened to be Bush W's Sec. of the Treasury at the time. But these guys don't need any government regulations. LOL

[susan5555]

Now dear old Goldman and Sachs after a year of profits is establishing new exorbitant bonuses. Please explain to me what the h____ their board of directors is doing? Does catering to greed-obsessed Ceos and upper management make more jobs for American workers? Do insane bonuses strengthen businesses so they can reinvest in themselves and attract new customers and, consequently, provide more jobs? Is this competitive, accountable capitalism we're seeing in action or little more than not so sophisticated burglary? No one has actually answered the question about why Goldman and Sachs was saved from bankruptcy while other just as large banks were knocked out for the count, other than their former head honcho Hank Paulson happened to be Bush W's Sec. of the Treasury at the time.

First let me say I know nothing you don't know but by my own reasoning you have given enough information to spectulate. My speculation is they are paying these guys off to keep their mouths shut about what they know as who else would know more about the internal workings than the CEOs and ditto for Hank Paulson.... the circle is complete. Now speculating and proving it are two different things and I will bet you they have covered their tails extremely well as lets face that is what they do all day long.

[azdisabledsci]

Yesterday I called the congressional finance office & they told me a bill passed the house back in April to limit pay. It is HR1664. Today I called My senators & left messages at both offices . I expressed my outrage at the bank bonuses being paid out & asked if there is anything average americans can do to stop this madness.
140 billion dollars being paid to people who are only afloat because of taxpayer money. We need to flood the phone lines & email addresses. Please don't just blog. Make calls & write letters. I have a cavity in my spinal cord & can barely sit up, but I can make a few phone calls. Lets start the revolution NOW by demanding the senate to take action. I am going to call the White house today too.

[katocat]

Keep up the great work Dylan.

[VANDERGRAAFK]

I missed the point here. What specifically are you upset at? The megaprofits at Goldman et al. The outsized bonus pool? The inability or unwillingness of the government to "regulate" Wall Street? So many issues, so little time.

Take, for instance, the government. Unless you hire financial geniuses who are not at all tempted by Wall Street greed, where do you get the expertise to "regulate" Wall Street? Not the Fed! Not Treasury!

I, too, am upset at the excess bonus pool. As a teacher, I am even more upset that there is a culture on Wall Street that says my base salary of, say, $275,000 is not enough. I need a bonus at the end of the year. Worse: my bonus should not be tied to the generation of true and lasting profit, but can rely on market manipulations which achieve short-term (4 quarters or less) gain at the expense of the medium and long-term. Without clawback provisions, it's heads, I win. Tails....

Let them have their bonuses, then surtax the hell out of the superrich in order to finance the probable loss of government money at AIG. But, then start a cultural assault. Shame these people by exposing the lie that some thin strata of people require an extra incentive to do their jobs. Every day, millions of Americans go beyond the contract and perform above and beyond the call of duty. Why? They expect themselves to do so. Industry demands they do so without bonuses.

[antirepublocrat]

"...surtax the hell out of the superrich..."

Yes, we need a steeply progressive income tax closer to what it was in the Eisenhower years and indexed to a real measure of inflation. Lack of indexing is what doomed those earlier progressive rates, as "bracket creep" affected more and more people in the middle class. We also need to re-instate the inheritance tax as it previously was, again indexed for inflation. No real "family" farm has ever been lost to the estate tax, unless you're talking about multi-million dollar businesses that were more corporate extended family arrangements than single family affairs.

[VANDERGRAAFK]

Read today's column in the New York Times business section where the reporter attempted to get to the bottom of our "envy" of the rich. Ludricrous were the attempts to blame this on us. And, worse, to remind us that our envy will cause us heartburn, etc. We were also advised to look in the mirror and examine our own profligate ways.

You've got to love reportage that glosses over the sharp skewing of income since Reagonomics was allowed to run amok.

[CherokeeGirl]

Dylan, I saw your magic act this morning and you did GREAT despite the lack of good support.

This part of your article explains why Government is needed to step in on healthcare, as well:

"The government's job is to restore the rules of investment, not indulge those who want to unfairly sustain their wealth and power at our nation's expense."

I'm sure glad you are on our side, Dylan. And I love the show, but don't "Leave it there" at the wrong spot!

[ReedYoung]

In a brilliant article, the last paragraph stands out. The "best and the brightest" will never be full-time Wall Street investors. We prefer to make things and provide real services than to speculate on others' productive ability for our profits. The role of investment is to serve the real economy, not to drive it.

[bflaska]

Our elected officials are selling us out, ok, and for peanuts, according these figures tallying the spread gathered up from American Banking Association's "lobbying efforts":

"Last year, according to the Center for Responsive Politics, major banks and other financial institutions in receipt of $295 billion in TARP money pumped $114 million into Washington in lobbying and campaign contributions. As a stand-alone figure, $114 million sounds like a lot. Set against the torrent of cash flowing in the opposite direction, it is minimal. At 258,449 percent it has been called “the single best investment in history.” Our elected representatives are giving it away."

"The decision did wonders for Wall Street balance sheets. Wells Fargo’s capital officially soared by $4.4 billion, while Citigroup boosted its reported earnings by $413 million in the first quarter of ’09. Yet Melissa Bean, D-Ill, who got the most money from the coalition of any committee member, garnered a mere $20,000 toward her next campaign. Chairman Frank was apparently satisfied with $8,500."

How the Bankers Bought Washington
Our Cheap Politicians
By ANDREW COCKBURN

http://counterpunch.org/andrew10152009.html

[TruelyFedUp]

You think the politicians were cheap - what did WE get out of it?

Truly

[Jezreel]

Thanks for the link.

[aview999]

Yes, Thank You Dylan! You doing such a great job lately. I mean that!
Everyone go sign Grayson's message to our elected officials:
Where's our money?!!? UNMASK THE FED" http://www.unmaskthefed.com/

[TruelyFedUp]

It seems the government has already planned its response http://bighollywood.breitbart.com/jjmnolte/2009/10/15/leaked-memo-reveals-the-white-house-has-control-of-your-television-set/

Apparently now that they have taken all the money Americans can possibly produce the next step is to ask us to volunteer - so we will still be working for them - but now we don't get paid.

Our response should be www.thevenusproject.com

Truly

[Jezreel]

Thanks for the link.

[spinns17]

time to put these crooks in there place

[tarryd]

When no major Wall Street CEO showed up for Obama's speech in NYC as few weeks back, it was clear that these guys thought THEY were in charge of America. This week listening to their spokes people on the subject of bonuses and profits.... built on the back of tax payer dollars..... it was only re-enforced. I do not think they realize just how much danger they are in personally and as institutions. Even reasonable people are now saying it is time to take them down. Excessive GREED is not good.

[jefke]

They are in charge, and they didn't need to come and listen because a) they knew what he was going to say, and b) they knew that what he was going to say was just for show. He works for them.

[hglindquist]

IMHO the best metaphor for what the financial gurus are doing is pouring sand through a funnel and having it fall in a cone. They are doing this on the beach ... and every once in awhile the exterior forces of storm and tide sweep their cones away.

Then they go right back to pouring sand through their funnels (millions-­billions-t­rillions of individual transactions -- the sand, of course -- shaped by their financial "products" -- the funnels) and call the shaping of the cones "The Invisible Hand" of the market.

And as others become more and more adept at predicting the shape of the cone, they become more and more invested in the huge (obscene?) profits to be made in these financial markets ... and then the tide comes in ...

Get the picture?