We are so inured to tales of business corruption that even a devastating exposé in The Wall Street Journal no longer shocks us. The fact that the chairman of the New York Federal Reserve Bank made millions off his secret purchase of Goldman Sachs stock, "in violation of Federal Reserve policy," as the WSJ put it, at a time when the N.Y. Fed was ostensibly overseeing the antics of the Wall Street firm, has barely registered a blip of outrage.
When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multi-million-dollar stock stash and to remain on the Goldman board. The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary. Yet, without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares. With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Monday.
Friedman was in violation of the Fed's policy because, thanks in part to the urging of Geithner and the N.Y. Fed, Goldman Sachs was allowed to become a bank holding company, making it eligible for government bailout funds (an option that Geithner had denied to Goldman rival Lehman Brothers). But that shift also put Goldman under more rigorous banking regulations that required Friedman as Class C director of the N.Y. Fed, a position in which he ostensibly represents the public instead of the banks who dominate the board, to step down as a Goldman director and divest his holdings. Instead, he stayed on the Goldman board and added additional shares while waiting for the Fed waiver. Nor did he inform the Federal Reserve of his additional purchases last December, and the lawyers for the N.Y. Fed didn't know about that purchase until the WSJ raised questions in April. Friedman has made a profit of about $3 million on the additional shares.
The significance of this conflict of interest was summarized by the lead of the WSJ story: "The Federal Reserve Bank of New York shaped Washington's response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after."
In addition to that capital injection, which at least carries some expectation of being repaid, Goldman received an additional $8.1 billion that will not have to be returned to taxpayers. This is a result of the bailout engineered by then-N.Y. Fed president Geithner of AIG, which listed Goldman as its top insured credit-swap customer. As Jerry Jordan, former president of the Fed Bank in Cleveland, told the Journal in reference to Friedman's obvious conflict of interest, "He should have resigned."
Unfortunately, this was not the view during the reign of Geithner, who argued that Friedman needed to remain chairman of the N.Y. Fed board to find a suitable replacement for Geithner as he moved on to be secretary of the Treasury. Friedman chose a fellow former Goldman Sachs exec for the job.
All of which calls into question the unique power of Goldman Sachs over the U.S. government, as described in another important, but largely ignored, article from The New York Times last October headlined "The Guys From 'Government Sachs.' " Their power is vast, no matter which party controls the White House. As the Times noted, two leaders of Goldman Sachs--Robert Rubin, who co-chaired Goldman with Friedman, and Henry Paulson--had become secretaries of the Treasury in the Clinton and Bush administrations, respectively.
Under Paulson, the bailout of Wall Street was dominated by Goldman Sachs alums, and as the Times noted, "Indeed, Goldman's presence in the (Treasury) department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs."
That power continues unabated in the Obama administration. Geithner is a protégé of former Goldman Sachs chairman Rubin. And it was therefore not surprising when he picked Mark Patterson, a registered lobbyist for Goldman Sachs, to be his chief of staff at the Treasury Department. That appointment was made on the same day that Geithner announced new rules for limiting the influence of registered lobbyists. Need more be said?
Robert Scheer is editor in chief of Truthdig and author of The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.
Steve Weissman | Betting on a Global Crapshoot
http://www.truthout.org/050709R?n
Geithner, despite how his Wall Street mentors describe him as understanding all the workings of the markets, is ethically incompetent and lacking character to assert his authority with his friends in the finance sector. Geithner failed at responsible oversight at the NY Fed before and during the crisis. Now taxpayers must forbear Geithner serving the public in a larger capacity thanks to his patrons and the bank lobbyists who blatantly write his policy proposals.
By TIMOTHY GEITHNER
"The strategy of the stress tests was to lift the fog of uncertainty over bank balance sheets and to help ensure that the major banks had the capital to continue lending."
It probably won't surprise anyone that he is very optimistic about the "glimmers" of hope of ending this economic crisis. Amazingly, he seems to believe that the stress tests were just tools to help all the big banks get ready in case the "recession" worsens, in which case they would need more help from the government, i.e., us taxpayers. The 19 have 6 months to clean up their act. There is no mention of the terrible situation many homeowners find themselves in nor the increasing number of Americans without a job, as well as a home.
When the 4th estate is as broken and corrupt as Congress, one has to wonder if this crisis could be the beginning of the end for our country as we know it.
Geithner & Co are going to bring Obama and the Democrats down. Whether Obama deserves this is yet to be seen, but he invited the snakes in and is therefore responsible. He can't possibly be ignorant of all the conflicts of interest inside his treasury department.
http://www.goldmansachs666.com/
Check it out.
Also, watch this--his delivery is not slick but his list of Goldman alums in govt. is truly frightening--
http://www.youtube.com/watch?v=ejXy4UxWmHs&feature=related
The damage potential of High Crime is truly limitless.
Could the author confirm or look into this please?
Not bad!
The banks serve a purpose for sure but they have become a predatory unbridled beast devouring our nation's and peoples general prosperity...!
Without Nationalizing and radically reorganizing our banking system we will not see our Real Economy which is not just bank prosperity recover, and or rebound...!
The entire system is corrupt, and corrupted...!
We are also outraged at the lack of action by regulators and justice.
Organize us!
Get us out in the street in sufficient numbers to make a demanding impact.
We elected our president, now we need our leader!
We know the Banksters are fleecing us.
Why do you think the banker dress down now?
When will our democratically elected governmnet represent the will of the people
and charge these banksters with Fraud,
Take triple damages,
And throw them in prison for a long time.