Who Will Hold Goldman Accountable? - Might Just be Everyday People

Whether it is Goldman Sachs' central role in the subprime crisis, handing out hundreds of millions in bonuses soon after receiving a $10 billion taxpayer bailout, or CEO Lloyd Blankfein claiming that his company does "God's work," this Wall Street giant has rightfully earned the leading role in the story of "All That is Wrong with Wall Street."

Ten years ago neighborhood residents from 20 states came to Washington, DC to try and block the repeal of Glass-Steagall, the Depression era banking act that provided a firewall between commercial banks and investment firms.

Led by longtime community leader, Gale Cincotta, hundreds of Americans went to the home of Phil Gramm, the champion of this deregulatory effort, to challenge the then Texas Senator to reverse course.

He didn't, and the American people have paid the price for it. There is no question that the repeal of Glass-Steagall resulted in the massive growth of a number of financial institutions, making them less accountable and more dangerous. It is also clear that tearing down critical financial firewalls paved the way for the casino-like behavior that drove the subprime crisis. As you list the monstrosities that grew out of the repeal of Glass-Steagall you won't read long before naming Goldman Sachs.

One of the people who made the trek to see Gramm in 1999 was Des Moines resident Brenda LaBlanc. Three weeks ago the 81-year old Iowan led 1,000 people to the America Bankers Association Convention in Chicago. With the Administration and Congress being slow to hold banks accountable, she and other Americans deputized themselves, calling for a Showdown in Chicago.

After visiting the Bankers' Convention, LaBlanc was also among those who paid a visit to the Chicago Headquarters of Goldman Sachs.

Now, LaBlanc and delegates from the Showdown are heading to Washington on November 16. Among the stops will be the DC headquarters of Goldman Sachs.

The message is simple: Banks, like Goldman, that have been deemed "too big to fail" are too big to exist. The American people cannot be expected to continue to prop up the same institutions that created the crisis we all face today. Until federal officials decide to hold the big banks accountable and break up the biggest banks, the American people will have to sign up for duty and do it ourselves.

Showdown delegates will also be bringing a proposal to Goldman. Word on the street is that Goldman is anticipating a $23 billion bonus pool in 2009. Yes, the same firm that we rescued with a $10 billion taxpayer bailout a year ago, is now preparing to hand out up to $23 billion in bonuses. If Goldman wanted to do their part to clean up a mess that they helped create (and clean up their image), a good place to start would be the creation of a foreclosure prevention program. A one billion dollar contribution from Goldman's bonus pool would prevent 200,000 foreclosures. A few billion would go a long way toward helping stem the cresting tide of foreclosures.

One thing is clear. The public is ready for banks like Goldman to be held accountable. And if Congress and the Administration don't have the stomach to take them on, the rest of us should join fearless Americans like Brenda LaBlanc and do it ourselves.

 

Comments

[back office drone]

I think a good break down of what actually caused the credit crisis might be useful so here goes: Mr. and Mrs. Prime see that housing prices have been going up since the beginning of time and go see a mortgage lender about financing a home. The mortgage lender says "cool np brb". He issues the loan, then calls up his investment banker friend and sells him the mortgage. If the Primes default on their loan the lender is off the hook because now the I-Banker holds all the risk. This makes the lender happy. The I-Banker gets all the monthly payments from the Primes, but to him this is small potatoes so he calls up the lender and says "moar!" The lender finds 999 other Prime families, and again sells the mortgages to the I-Banker. The I-Banker doesn't like to use his own money, so to pay for the mortgages he goes out and borrows enough money to buy up everything the lender has. In order to reduce his risk, the I-Banker takes all the mortgages and repackages them into something called a collateralized debt obligation (CDO). (More to follow...)

[back office drone]

(Might be double post...bug­gy comment system)

These he splits up into risky and non-risky tranches so he can sell them to his investor friends. The tranches are organized so the safe ones get paid first as the loan repayments come in. Some of the investors like to live on the edge and buy the riskier tranches because those pay more interest. The rest buy the "safe" tranches which pay a lower interest. So now, all the loan repayments are actually going to the investors and the I-Banker is off the hook. This makes the I-Banker happy. The investors also know that if any of the home loans default, the lender will seize the home and the proceeds from the sale will be used to pay off the remaining debt. Housing prices have been going up since the beginning of time, so this makes the investors happy. Everyone, it seems, is winning. The Primes have a home, the lender has a new Mercedes, the investors are getting rich, and the I-Banker is snorting coke off a stripper's ass. Everywhere you go people are saying things like "can't lose" and "sure thing". Not getting enough of a good thing, the investors call up their I-Banker friend and say "moar!" and the I-Banker calls up the lender and says "moar!" Unfortunately, all of the Primes already own homes so there's no one left to take out a loan.

[back office drone]

Well, the lender knows the I-Banker will buy any mortgages he's got, so he calls up Mr. and Mrs. Subprime and offers them a loan. The lender knows the Subprimes will likely default, but isn't worried because he can always just take the home if he has to. This goes on and after a while, a significant chunk of the system is made up of crappy loans. All of the sudden, the Subprimes realize they've made a big mistake and can't afford their monthly payments. They go into default and ditch the house. At first this is okay because their house is still going up in value. But then another family defaults. Then another. Now there are so many houses saturating the market, that housing prices actually drop. Interest payments dry up and the investors start to lose money. Even the "safe" investors are losing big-time, causing them to question just who the hell said they were safe in the first place (Hint: It was the ratings agencies). The I-Banker still has a ton of mortgages to get rid of, but when he calls up the investors they tell him "interest payments or GTFO". The I-Banker is now screwed because he paid for all the mortgages with other people's money and is now at risk of defaulting himself. Nobody will lend him money so he stops buying mortgages. The mortgage lender can't sell any mortgages, even good ones, so he stops lending. Bam! Credit freeze.

[viper234]

When the big banks were on the verge of "foreclosure," government said not doling out trillions of taxpayer dollars to these institutions was the ONLY way to avert "economic disaster." Yet considering 1 foreclosure filing is taking place every 13 seconds in America, according to the Center for Responsible Lending, with more than 6,600 filings taking place per day with no signs of easing any time soon, the silence and benign indifference by government to the nation's worst housing crisis since record-keepers began tracking such data in the late 19th century, is astounding. Equally astounding is the benign indifference to unrelenting unemployment and the fact that 1 in 6 Americans is suffering from hunger.

So the government's definition of "ending the recession" is saving the financial sector, but it's fine for The Great Depression to ravage Main Street in the form of record unemployment, with accompanying record home foreclosures and an unconscionable percentage of Americans going hungry. There is a massive gulf between government and the people they work for. Part of "going green" in America should include finding "new sources of energy" from among the people to represent our best interests in Washington. It's time to "end our dependence" on old-style, corrupt, legislative bureaucrats in Congress.

[dugsmith]

If enough people took this article to heart and worked to take our economy back from the clutches of companies like Goldman Sachs, change could actually happen. Here is a great article that shows why we need dramatic economic reforms and how they could start with a public outcry against banks that are 'too big to exist'. http://www.truthsavvy.com/content/how-about-town-meeting-challenge-goldman-sachss)

[Kassandra]

After reading all the comment letting Goldman off the hook, all I can say is that SOMETHING really bad has happened to this economy!
I, personally, blame this mindless adherence to Friedman economics and the willingness of the governments we've had for the last generation to take from the workers to give to people who sit on their butts in offices and figure out how to screw people who have less and less power.

I also blame Obama who was too little, too late and gave away, with the help of the Fed, so many trillions to central banks all over the world. Bush, of course, is a root cause and hardly bears mentioning; his part is very well known.
We still have a tendency to see what we believe and we'd better wake up and stop playing this "sports team" game which has divided us from each other, which is exactly what the powers want.

I'll repeat, SOMETHING is terribly wrong with this system that rewards gamblers/c­onartists/­thugs and not honest hardworking Americans who really, really don't want to be bothered with all this and just want to live their lives in peace., with a little prosperity in the "greatest nation on earth".

[jojony]

Goldman doesnt care what you think. Do what you want. Your wasting your time.

Their clients are NOT ordinary Americans.

[Chazet2]

Yes, you are correct-we ordinary Americans are just their financiers.

[Baltotoast]

Goldman does a very, very good job at what it does. Do you punish the piranha because it does a good job of eating other fish? Of course not, you recognize it for what it is. And you build adequate protections so the piranha does not get into the swimming pool or the water supply (ok, metaphor breakdown.­..). The problem is that our system of building fencing around the GS's of the world has broken down completely - eliminating Glass Steagal was certainly a start.

But what we need is a comprehensive regulatory structure, not the demonization of a very successful company. Direct your rage to Washington, not Wall St.

[martin2]

No Justice No mercy.

[Baltotoast]

No logic....

[DuganS1]

Goldman Sachs wasn't directly affected by the repeal of Glass-Steagall. They were an investment bank and had owned and traded mortgage backed securities long before it repeal. Goldman wasn't exposed to sub-prime either. In fact, they were net short. The reason Goldman received a bailout was because the value of their assets fell so much as a result of the other investment banks and commercial banks failing and being forced to sell all their assets, some good assets which Goldman also owned. People might not like the fact that Goldman is thriving during this crisis, and their employees are making millions while regular Americans are struggling, but they're not the bad guy here. They actually navigated the crisis brilliantly.

[TheLastWallStreeter]

It is futile to use reason here. The populist outcry, fueled by this site, is that Goldman Sachs is the devil. The vast majority of the bloggers and commentators that are crying for blood on this site have no idea what Goldman does.

[grateful4thedead]

read zerohedge dot com

find out the truth about goldman

they are too big and are controlling the markets, ably assisted I should add by the Fed and the US Treasury.

goldman is still on the government mammaries: they have $22 billion out in FDIC TLGP bonds and can borrow (as a bank) at zero from the Fed.

Goldman is dangerous to the USA.

by the way, I am a registered Repub who spent over 30 yrs in the financial services industry. believe me, goldman is a danger as is the Fed.

[joeneri]

They took our money to survive.

[back office drone]

...Continu­ing on. Big banks spend money. Let me repeat that with emphasis. Big banks spend LOTS of money. JP Morgan Chase has over 200,000 employees. How many of them do you think are bankers? Not many is the answer. Do you care might be a better question. Most of them are back office drones like me, or operations, which is worse. Most of us get paid reasonable wages at rates correlated with our academic achievement. A few are not. A FEW get paid a hellishly large amount. But don't forget about the construction jobs for new buildings, the plethora (Three Amigos tangent!) of restaurants and other service-based businesses kept afloat by a vibrant financial industry. I mean, I pay ten dollars for a sandwich whenever I eat lunch out. Ten frickin' dollars!

I think all the Matt Taibi's and Matt Taibi wannabes need to take a chill pill and give our man Obama some room to breath. The guy is doing a helluva job so far. He already saved our economy once while juggling healthcare and fixing our public image. Just let the man work and repeat after me: "Tyler Durden is not my hero, Tyler Durden is not my hero."

[back office drone]

Yes, rise up in populist anger! Bring the banks down! Mob rule! Yes! YES! -- Er, I mean no.

Let's break this down to it's bare essentials, shall we? It's about the haves and the have-nots. Always was, always will be. The haves tend to defend the system, naturally, because it has worked so well for them. The have-nots want to bring it down. And while I am a fan of change, bringing down the banks will likely bring down the entire system on all our noggins. Not good for any of us. I'm sure there's some Utopian solution that would harmonize the relationship between the hoi polloi and the ruling class, but that ain't happening any time soon. This is the now, and right now we need our banks to be healthy. Rich even. Hell, I hope Lloyd Blankfien makes a $100 million dollars this year. Because if he does there's a good chance that your home will go up in value next year, or I'll get a raise too, or my favorite bodega won't close down like it almost did last year. It would be, in other words, a good sign. (Got more to say, damnit, so I'm posting again!)

[martin2]

Do a little research , if somebody is making Billions somebody else is loosing
The losers are pension funds and other corp. Millions of Americans out of work.

[Baltotoast]

What evidence do you have that GS's success has caused pension funds to lose money, or millions of Americans to be out of work? A fact based comment would be appreciated.

[back office drone]

There were plenty of pension funds that lost their money, but it would be tenuous at best to link the poor performance of a specific pension to the success at GS. And don't forget, many pension funds are recovering quite nicely now that the banks are too.

Also, one of the main reasons for Goldman's and Morgan Stanley's and JP Morgan's success these days is the reduced competition. As soon as Bear Sterns and Lehman collapsed, they instantly got a boost in clients. More clients = more fees. You think your bank screws you on overdraft charges? You should see what banks do to each other!

[TheLastWallStreeter]

That is simply not true. You can make money/wealth without taking money or wealth from someone else.

Goldman is not making money because people are out of work, in fact it hurts their business. They would be making much more in a stronger economy.

[stronggal]

Goldman Sachs must be tone deaf to even contemplate handing out bonuses at a time when so many are struggling because of the economic mess that Goldman helped create. One would think the Wall Street robbers would not be so blatant about their greed. But wait! Maybe the arrogance of Wall Street has something to do with the fact that our politicians have been bought off with huge campaign contributions from financial players. Time to break up the big banks and regulate what's left. And, time for public campaign financing. Let's take back our government from the big money interests who currently own our "democracy­."

[Baltotoast]

Would we have a subprime crisis, or a credit crisis, if people were not defaulting on their obligations?
What, exactly did GS contribute to that?

[tartentart]

Baltotoast what planet do you live on? GS, the financial industry or Wall Street, call it whatever you want have done a great job screwing the US! It's called greed! And it's not going to change because we have a government that will not change it. After all how many politicians have been brought by Wall Street?

[LizRM]

I'm so tired of Goldman and all the big banks completely screwing the rest of society. I've had enough and I'll be there with Brenda!

[mcguffog]

Phil Gramm is largely responsible for the repeal of Glass-Steagall. Gramm also passed legislation deregulating derivatives which enabled Enron and AIG. Wall Street is looting America thanks to Phil Gramm. What a scoundrel!

[iowaowl]

i love the idea of goldman's bonus dollars going to foreclosure prevention. it's the least they could do if they really want to do God's work.

[blueken]

I for one plan to dollar vote. Our financial system has proven to be totally un-trustworthy. I am desperatly looking for investments that I can believe in. I think Wall Street will find it increasingly hard to find money to float investments as people loose all trust in what they have to sell.

[Furby2]

It's time for a niche financial manager that promises never to trade through Goldman. There are a lot of people who would be happy to give up a percentage point of ROI just to make sure GS doesn't get the trades. I'm one.