The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in U.S. history has one company wielded such destructive power over our political economy, irrespective of whether a Republican or a Democrat happened to be president.
At least the robber barons of old built railroads and steel mills, whereas Goldman Sachs makes its money placing bets on people losing their homes. On Tuesday, Goldman announced a 91 percent jump in profit to $3.46 billion for the quarter, while the dreams of millions of families continue to be foreclosed and unemployment hovers at 10 percent because of a crisis that that very company did much to cause.
It was Goldman-Vice-Chairman-turned-Treasury-Secretary Robert Rubin who pushed through the radical financial deregulation during the Clinton presidency that made the derivatives madness possible. When Bill Clinton was asked on ABC's Sunday show This Week if he now regretted the advice he received back then from Rubin and his protégé Lawrence Summers, now a top Obama adviser, he responded: "On derivatives, yeah I think they were wrong and I was wrong to take it. ..."
Thanks to that bad advice, Clinton signed off on the Commodity Futures Modernization Act, which categorically exempted those derivatives from any existing law or regulatory body. It was that exemption that freed Goldman Sachs and others on Wall Street to run wild in packaging collateralized debt obligations, and their attendant swaps, which turned people's home into nothing more than gambling chips. The more suckers to be conned into those mortgage obligations, the better for the financial casino--until it had to be saved by taxpayers from spiraling completely out of control.
And it was Goldman-Chairman-turned-Treasury-Secretary Henry Paulson who engineered the Bush-era bailout that left Goldman holding the high cards. The corporation was allowed to suddenly become a bank holding company, a privilege denied Lehman Brothers, and hence eligible for TARP funding and a sharp discount in the cost of borrowing money. Treasury Secretary Timothy Geithner, then head of the New York Fed, worked with Paulson to give Goldman the federally protected status of a commercial bank and also worked on the deal that passed taxpayer money through AIG to Goldman.
It wasn't surprising, then, that last week Geithner formally opposed the section of a bill by Sen. Blanche Lincoln that would ban banks from dealing in swaps and other derivatives. Now that it is a bank, Goldman would have to drop that lucrative business or give up its right as a bank to borrow from the Federal Reserve as well as the protection of federal deposit insurance.
The test for serious financial reform could well be that if it's good for Goldman Sachs, it's bad for the country. But with scores of Goldman alums as well placed in the Obama administration as they were under Clinton and George W. Bush, it is a test the government is likely to fail as far as taxpayers are concerned. Or should we simply trust Mark Patterson, who is chief of staff to Geithner and a Goldman lobbyist for three years before he entered the Obama administration, to do the right thing for the rest of us?
Maybe he will. After all, Gary Gensler, a former Goldman partner who now heads the critically important Commodity Futures Trading Commission, does seem to have had a change of heart from his days in the Clinton administration, when he thought that bringing "legal certainty" to the trade in what turned out to be "toxic derivatives" was a great thing. The SEC civil suit also a sign of progress. There are other positive stirrings, as in President Barack Obama's most recent speeches, but what is needed now is a profound populist commitment among those who elected Obama to demand he throw the money-changers out of the temple of democratic governance.
Instead they are crowding in. The New York Times reported: "With so much money at stake, it is not surprising that more than 1,500 lobbyists, executives, bankers and others have made their way to the Senate committee that on Wednesday will take up legislation to rein in derivatives." That's the committee that Sen. Lincoln heads, and she needs the president's support rather than Geithner's opposition to her plan to ban banks like Goldman from trading in derivatives.
It is insulting to the spirit of populist revolt, which has been fundamental to the success of America's grand experiment in democracy, that a fat-cat Republican-funded tea party revolt is now the vessel of popular anti-Wall Street discontent. That vessel ought to be our president, who campaigned as a champion of the common people.
If so, then this is an indictment of the outside auditors.
If these companies, like WaMu and Lehman, got "unqualified" opinions on their financials, which seem likely, then the outside auditors had a duty to note them in their opinions.
It was the job of auditors to find the control fraud and notify authorities.
Because this didn't happen, this is an indirect indictment of the accounting profession, one I gladly renounce and denounce.
Arthur Anderson was and is the correct metaphor for this corrupt profession.
I particularly like the comparison with the robber barons. At least the Rockefellers and Carnegies built the industry of this country.
Even the banker JP Morgan back then served a purpose because he raised capital in Great Britain and had it invested here. (It was not easy to do because the US was an emeging nation back then)
But those guys at GS today are just plain parasites. They contribute nothing to the economy. Look at Goldman financials and you will see that most of its revenue comes from trading (gambling) and not from traditional financial intermediation.
Just plain disgusting................
We should not respect Goldman Sachs and JP Morgan any more then Bernie Madoff and Enron.
As soon as these criminal fraudsters are brought to justice and their gambing casinos placed in RECEIVERSHIP, the better off our country will be.
The American sense of JUSTICE should've never allowed such fraud that has injured so many.
The Obama faithful never read your thoughts, are never challenged by your insight, and never are required to answer in any logical way their continued closed eyed support for 'That vessel (who) ought to be our president, who campaigned as a champion of the common people.'
The man continues to surround himself with the very enemies of the People that you've mentioned and no one here asks WHY?
As you pointed out, Goldman creates Nothing! Unless you consider debt slavery and loss of our Constitutional Rights as chains we are willing to buy and wear.
:-]
Expect no serious regulation; no consumer protections; no transparency; and no limitations what-so-ever on the ability of investment bankers to use other peoples money to make outrageous profits with risky bets on exotic instruments.
What ever reform eventually passes will be sham. And eventually the next crisis will hit and no amount of government intervention will keep the world economy from going down the tubes.
If the true defenders of the free market system had any sense, they would be insisting on the necessary regulation and transparency to keep the system and the greedy sociopaths that run it from destroying itself.
As we saw last year with the health reform debacle, the corrosive influence of corporate money in our politics successfully ensured that the most meaningful and substantive reforms got left by the wayside in the final product. Lobbyists and industry leaders made sure that too many loopholes and watered down regulations made it into the final legislation.
We can expect to see financial reforms similarly gutted as the corporate weasels go to work in Washington to make sure that no significant legislation gets crafted that will in away shut down the casino where they are free to score their enormous profits at the expense of working Americans.
Nothing will get better as long as these things are allowed to continue.
Campaign Finance Reform Now!!
Laws & regulations were intentionally changed by co-conspirators to permit/allow legal greed & gambling with the lives of others, & we can, we must, change back & strengthen regulation so the perpetrators of fraud & theft can never do it (or another scam) again. Profits at the expense of people must not be tolerated, & if Obama will not fight for true reform this time, we will never fight for him again. Greedy inhumane Capitalism is not the same as Democracy. There comes a time to choose a side, & that time is now for Prez Obama, the Dems, and all Americans; either they stand with the people or with corrupt campaign contributions and greed; there is no middle-ground, no "centrist" evasion of moral leadership that will be tolerated. The Founders vision of The Common Good has been stood on its head and that notion of “nationhood” made a mockery by the “legal” theft by the morally depraved who victimize so many.