Keith Richards, Cockroaches, and the Firm of Goldman Sachs
In today's New York Times, we see the headline:
Goldman to Raise Capital, With $5 Billion From Buffett
And in the accompanying story written by Ben White, we can read the following:
The billionaire Warren E. Buffett will invest $5 billion in the investment bank Goldman Sachs, as part of the bank's efforts to raise $7.5 billion in fresh capital, a Goldman spokesman, Lucas Van Praag, said Tuesday. In return, Berkshire Hathaway, the conglomerate run by Mr. Buffett, will receive perpetual preferred shares in Goldman, Mr. Praag said. The preferred stock will pay a 10 percent dividend.
So here's how a real bailout works: Goldman Sachs needs money, Warren Buffet gives them money. In return, Warren Buffet gets stock that pays a ten percent dividend.
Now, for comparison, here's the shell game version. Keep your eye on the pea.
(1) Goldman Sachs gives Hank Paulson seven hundred million dollars (that's seven zero zero comma zero zero zero comma zero zero zero) in salary and bonuses.
(2) Goldman Sachs lends Hank Paulson to the Treasury (now that he can afford to be a public servant).
(3) As the Secretary of the Treasury, Paulson insists that we give Goldman Sachs a lot of money, in exchange for a lot of crap. (If not, we all die.)
(4) Except it's not Hank Paulson's money, it's ours.
(5) If the crap turns out to be crap, we're stuck with it. (And by the way: if it's not crap, why are they so desperate to unload it?)
(6) In four months, Paulson returns to Goldman Sachs.
(7) Paulson receives salary and bonuses from the money we just gave to Paulson to give to Goldman Sachs to give to Paulson.
(8) It's our money. Or was. But we don't get preferred shares. We don't get a ten percent dividend. We don't even get a free copy of The Warren Buffet Way: Second Edition (Paperback). We get crap.
In essence: when Goldman Sachs needs money, and the guy lending the money is rich, they give him something for it. When Goldman Sachs needs money, and the guy lending the money is us, they don't.
Why should they, unless they have to? And the way it stands now, they don't have to.
It's been said that when the dust clears from WWIII, the only things left standing will be Keith Richards, cockroaches, and the investment bank of Goldman Sachs. Having lived long enough to see the Stones, my old New York kitchen, and the events of the past week, I wish I could disagree.
Update - Warren Buffet today tells CNBC he wholeheartedly supports the bailout plan. So: our money goes (for free) to prop up a company he just invested $5,000,000,000 in. Why in God's good earth wouldn't he support it?
Update (2) - And then there's this, from Bloomberg.com (h/t mogamboguru):
Paulson Debt Plan May Benefit Mostly Goldman, Morgan (Update2)By Jody Shenn
Sept. 22 (Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.
``Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,'' Jeffrey Rosenberg, Bank of America's head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.
The guy from BofA is too polite to "identify... particular banks." But Bloomberg.com isn't; and you don't have to be, either!
Follow Howard A. Rodman on Twitter: www.twitter.com/ivanjohnson
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
The interesting thing is the fact that all of Henry Paulsons net worth is tied up in Goldman Sachs. He let Bear Stearns and Lehman Brothers fail and he let Merrill Lynch get sold but the minute Goldman Sachs is in trouble we need a massive bailout right now with no oversight except for his! Hummm....And Warren Buffett is no idiot, he knows his money is safe because Paulson will not let Goldman fail!
goldman will not only profit off the deal by being able to get rid of toxic debt but by evaluating and servicing the loans that underlie these securities.
http://tinyurl.com/4ota33
someone's gotta do it.
and i'm sure they're not gonna do it for free.
another way to look at it:
Litton Loans may be the KBR of the bailout
and Goldman is Halliburton.
by the way, how much money did Halliburton make off of no-bid contracts in iraq so far?
sound familiar?
I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country; corporations have been enthroned, an era of corruption in High Places will follow, and the Money Power of the Country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.
Abraham Lincoln
I wish I was smart enough to actually understand the whole financial mess and how we got there. I get the greed part of the equation. But here's the thing -- if someone like Warren Buffet can pump $5 Billion into Goldman Sachs (for a consideration of stocks and 10% return), why can't other extremely wealthy people (like the CEO's of these institutions) also pump in some capital and let the markets work like they're supposed to? Seems to me, if the taxpayer's are supposed to put up all the money to bail out these institutions, we should get something in return, i.e. stocks and a 10% return. Seems only fair.
Woodrow Wilson, quotes
:
The government, which was designed for the people, has got into the hands of the bosses and their employers, the special interests. An invisible empire has been set up above the forms of democracy.
Wrong analysis. All the banks are in this multi-trillion $ mess together. Goldman is exceptional, because they managed to avoid most of the really bad stuff. The write-downs B of A talked about are just guesses, that keep getting bigger and bigger. Are they right? Is B of A really out of the woods? Who knows?
The time has come to end this empire. We are well past the death of the republic. Now the military is bringing home troops to supress the populus. I am sure that Bush's COG order includes financial crisis. Their coup is almost complete. The time has come for the Second Republic.
http://www.thedailyshow.com/
Jon Stewart: I didn't think that there was another area that these guys could screw up.
John Oliver: I know... and it wasn't easy. It was like finding a vein on a Failure junkie.
Jon Stewart: What is left for them to de-complish?
This article said it ALL! Game, set, match.
Oh Please! Will you wake up now Americans, now that you have been hit in the wallet? You have gone along with being fleeced of your rights, your privacy,your constitution, your military sons and daughters,your water,your farmlands,your jobs,your homes.your culture (Steven Spielberg sold to India). Will you draw the line at your cash?
This is the model of capitalism that you have exported to China. They streamlined it and went right to the dead babies.
Is there ANYTHING of the American ideal that you will stand up for?
J. P. Morgan, quotes;
Capital must protect itself in every way... Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.
Why are Paulson et al exempted from FBI investigation list? Well, we can trust Buffet but politics get on the way sometimes.
Just because Buffet is filthy rich doesn't mean he is an honorable man. I wonder about his connections to the Franklin Cover-up.
Why,,,,is this not FRONT Page News,,,instead of a side line on Huffington Post,,,,Paulson JR,,,will profit, as it says above, over 700 Million Dollars on this,,,what in the hell is wrong with this Country to allow this to happen, of course The Adm wants a quick decision,,how can Paulson set at these hearings with any kind of a straight face, he should be laughing his a... off,,,through the whole thing,,,Buffet gets 10% of the tax payers money,,,that is why he is worth Billions,,,10%,,when you might get 2/3 % from a solid bank..
whew
I have no doubt that the original Bill that was introduced without any provisions regarding oversight, salary compensation, etc. would have been passed by a Repulican congress. We have seen the evidence duing the first 6 years of this administration. Now is the time for the dems to do some good. They are in a prime negotiating position. Wall Street wants the money...the Congressional Dems control the money...Wall Street doesn't get to dictate the terms. It doesn't work that way. Most borrowers don't get to dictate the terms of a loan. The lender has that position...or did Wall Street forget that is how they do business. And while I realize that there are a borrowers that are so strong they do get to dictate the terms of some loans. Wall Street is no longer in that position. Their short sighted, greedy and possible criminal actions does not put them in the prime negotiating position. And just like anyone applying for a loan, Wall Street can wait for their money until the terms can be decided.
The inequity is what angers taxpayers. When Jan Smith applies for a loan, she has to wait days and often weeks. But Wall Street wants their money now. If Jan Smith has to wait...so does Wall Street.
I want names. They put up pictures of dead-beat dads and sex offenders in our neighborhoods. Kids who steal $50 and have a gun get prison time. Can we see pictures of the CEOs and executives who are going to walk away with our money with little consequence?
How about a zillion hours of public service for every employee of a firm that gets a bailout. Not as punishment, as a required concession before they get any money. My town's sidewalks could use some sweeping. The soon-to-be very busy homeless shelters can probably use some volunteers, too.
$700 billion / $6.55 per hr. minimum wage = 106,870,229,008 hours of public service to pay us back.
Oh
My
Gawd
I had been wondering why the strong push to give all this power to the Treasury Secretary, when he's on the way out. Thanks for opening my eyes.
The adminsitrators in the Bush mafia table will go to positions at these companies as "consultants" when they are released from public service. That is why they are fighting so hard to keep Golden Parachutes. Its just another way for these people to loot the treasury. Like the Iraq war. Running up domestic oil prices. "Rebuilding" Iraq.
I'd be curious to know if, when the bailout happens, the gov't owns all of these defaulted houses whose mortgages are dragging them down.
Case history in point- If you recall from the S & L Scandal, the gov't (us) bailed them out and then sold them (them= the very same people we bailed out) back all of the properties for pennies on the dollar so they made out like the bandits that they are!
This is unacceptable.
Yes, it's truly a good deal for the banks. they get the foreclosures AND the houses too and the people are stripped.
Here's another reason why I hope that you contact your State representative to vote No on the Bail Out.Just this month the Government bail out of mortgage giant Freddie Mac with $200 billion dollars of taxpayers monies.Now they're asking for another $700 billion dollars for the crooks in Washington and Wall Street. Now the FBI is investigating 26 CEO's activities from 26 major financial institutions pertaining to sub-prime lending practices and cooking the books. Lobbyist connections with Senators. I smell another Enron scandal!!!!
All under the careful watch of George Bush and his Republican cronies, although there are enough Democrats in Washington complcit enough in this mess, to do the perp walk as well. You think Crips and Bloods are gangsters? They've got nothing on these government sponsored mobsters who are engaging in the biggest shakedown of the American people.
You must be logged in to comment. Log in or connect with
