Payday For Goldman Sachs Again

There are some headlines that just grab your attention. For example, Goldman Sachs chief executive handed $7m stock bonus where we learn:

". . . the bank said last month that it had still been able to amass a pay and bonus pool for its employees of $12.2bn, about the size of the GDP of Albania."

Then there is this one that tells the whole story in 15 words: Goldman Sachs chief executive and financial terrorist Lloyd Blankfein, pockets $7m bonus for outstanding crimes

Finally, we have the following important headline:

Goldman Sachs CEO Blankfein Identifies with Struggling Americans After Bonus Cut in Half
By BC Bass - The Bennington Vale Evening Transcript

Sources inside Goldman Sachs worry about Blankfein making his rent this month

NEW YORK, N.Y. (Bennington Vale Evening Transcript) -- Goldman Sachs CEO Lloyd Blankfein revealed Wednesday that he too is feeling the pinch of the weak economy as his company announced a 47-percent plummet in earnings, the most severe drop since 2008. As a result, the financial group decreased Blankfein's annual bonus, seemingly in tandem, by nearly 44 percent. Blankfein, who was raised in a Bronx housing project, said the dramatic reduction in pay evoked memories of his humble origins. After being awarded a paltry $7 million -- down from $12.6 million the previous year -- Blankfein put on a brave face and told reporters: "Sure, it's hard. I'm like so many Americans who've had their compensation shredded to a questionable living wage. And, you know, it's easy to complain -- to say, 'why they'd even bother,' or to think of the stipend as a hollow gesture in the face of horrendous morale. But then I take a look around and consider myself lucky that I'm even employed. The bank already fired 2,400 people. Unlike Mitt Romney, they didn't seem to enjoy it. I'm grateful, actually."

Blankfein's first bonus, back in 2006, was $27 million, the exact amount of his downtown apartment.

"We feel just terrible about this," a Goldman Sachs Group board member said. "His entire first year's pay went to rent. And since that time, it's continued to drop because of economic hardships in the industry. I really don't know how he's affording to put food on the table."

"I've seen Lloyd sitting in the lunch room slurping Cup of Soup. It's a vile indictment of greed in this country," one co-worker bitterly told reporters. "For a Harvard educated attorney in control of one of America's most powerful banks, it sickens me to think he still can't afford a house -- that he has to live in an apartment. This country is in bad shape."

Blankfein and other executives who faced the frightening news of their compensation reductions today were told that the company would be raising their base salaries from $600,000 to $2 million a year.

"This guy took home almost $70 million his second year as an employee," a company spokesperson added. "Now he'll be lucky to see $9 million -- excluding stock options and individual shares. It's tough, but we're doing what we can. Honestly, we worry that we'll come to the offices one Monday morning and find Lloyd squatting in the park with the rest of the Occupy Wall Street protesters -- and that it will be our fault."

Read the article here

Goldman Sachs's "Piñata Capitalism"

One thing that Max Keiser can be depended on to do is to stay on message and he knows who initiated the world financial crisis: the banks like Goldman Sachs and JP Morgan Chase. The flim flam man from Washington (below) states that the problem "is not a banking problem" but an "over-regulation" problem. What a twisting of truth, truthiness and fiction that conservatives mouth but Max will straighten him out.

We share Max's exasperation.

Goldman Sachs cooked Greece books
Interview with Max Keiser



You can see the video here

Goldman Sachs Has Mississippi's Public Employees' Pension Monies

When we plan for retirement, when we have contributed to our pension fund and when we have entrusted those funds to Goldman Sachs, we expect that the bank will make sure to invest the funds in securities that are reasonably safe. How does it make employees feel when Goldman creates securities that are designed to fail and when Goldman bets against the mortgage market because of those same junk securities in order to makes billions?

And where did Goldman put its profits--into huge salaries and bonuses. This money does not belong to them!

Here's an example to peruse:

Goldman to face mortgage debt class-action lawsuit
By Jonathan Stempel - The Baltimore Sun

(Reuters) - Goldman Sachs Group Inc was ordered by a federal judge to face a securities class-action lawsuit accusing it of defrauding investors about a 2006 offering of securities backed by risky mortgage loans from a now-defunct lender.

U.S. District Judge Harold Baer in Manhattan certified a class-action lawsuit by investors led by the Public Employees' Retirement System of Mississippi.

These investors claimed they lost money in the GSAMP Trust 2006-S2, a $698 million offering of certificates backed by second-lien home loans made by New Century Financial Corp, a California subprime mortgage specialist that went bankrupt in 2007.

Thursday's decision is a setback for Goldman, which had sought to force investors to bring their cases individually.

Class certification lets investors pool resources, which can cut costs, and can lead to larger recoveries than if investors are forced to sue individually.

Read the entire article here

Goldman Sachs Would Not Be Missed....

After reading The New York Times article by Edward Wyatt, one feels dirty and degraded because of the corruption that is being perpetrated on democratic ideas of fairness and justice. The Wall Street banks have spread their contagion far and wide helping to create the death and decay of the financial systems at home and around the world.

When the SEC describes giving waivers to banks so they can avoid being prosecuted for fraud in exchange for the deceitful promise not to commit the foul deeds again, then we know that the corruption is as wide as it is deep. The rot lies everywhere and creates a stench that will not be abated for a very long time.

The DOJ does not even investigate the poisons seeping into the system; the President does not see that unethical behavior is essentially illegal and William K. Black could enlighten him on that belief. Consequently, the Wall Street banking system is putrid with corruptions and Goldman Sachs is the model for it all.

S.E.C. Is Avoiding Tough Sanctions for Large Banks
By Edward Wyatt - The New York Times

WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.

By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

Other waivers allowed Wall Street firms that had settled fraud or lesser charges to continue managing mutual funds and to help small, private companies raise money from investors — two types of business from which they otherwise would be excluded.

“The ramifications of losing those exemptions are enormous to these firms,” David S. Ruder, a former S.E.C. chairman, said in an interview. Without the waivers, agreeing to settle charges of securities fraud “might have vast repercussions affecting the ability of a firm to continue to stay in business,” he said.

S.E.C. officials say that they grant the waivers to keep stock and bond markets open to companies with legitimate capital-raising needs. Ensuring such access is as important to its mission as protecting investors, regulators said.

The agency usually revokes the privileges when a case involves false or misleading statements about a company’s own business. It does not do so when the commission has charged a Wall Street firm with lying about, say, a specific mortgage security that it created and is selling to investors, a charge Goldman Sachs settled in 2010. Different parts of the company — corporate officers versus a sales force, for example — are responsible for different types of statements, officials say.

“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”

Read the rest of the article here

Revolving Door Opens Into Goldman Sachs

The door between the government and Goldman Sachs swings open again and coming through is Richard Siewert who once counseled Treasury Secretary Timothy Geithner and who joined the Treasury Department in 2009. He may become the head of Goldman's communication department. Siewert also once worked as Clinton's press secretary.

Siewert could be an important link between the government's financial and regulatory policies and the financial goals that Goldman would like. Goldman has lobbied against regulating derivatives because such regulation would decrease the big profits that Goldman makes with them. Siewert has important Democratic connections also that would be useful to Goldman.

The policies of the Treasury Department often run counter to Goldman's goals so that through Siewert they could gain important insight into the government's economic goals, its management of public debt, law enforcement and other monetary, financial and economic policies of the U.S.

To avoid such conflicts of interest, it would be advantageous for public servants to observe a two-year moratorium after working for the government and before they can work for Wall Street in any capacity.

Richard Siewert, Former Treasury Counselor, Could Move To Goldman Sachs
By Alexander Eichler - The Huffington Post

The revolving door between Wall Street and Washington is about to turn once more.

Richard Siewart, onetime counselor to Treasury Secretary Timothy Geithner, is reportedly being considered for a position at Goldman Sachs. Siewert, who joined the Treasury Department in 2009, is said to be in the running to head up Goldman's communications department, Bloomberg reports, citing anonymous sources.

The position doesn't appear to carry any direct financial responsibilities, but the news may nevertheless spark concern among critics who think the relationship between Wall Street and Washington has gotten too cozy. Though President Obama touted and signed the Dodd-Frank act -- a landmark piece of financial regulatory legislation -- more than a year ago, banks have lobbied vigorously against the new law, and rulemakers tasked with implementing the law have missed most of their deadlines so far. Critics have expressed doubts that the Obama White House has the political willpower to effect meaningful reform, particularly when so many D.C. power players have spent time on Wall Street, or vice versa.

Among the current or former Obama staffers who have worked in the financial sector are Jack Lew, the president's new chief of staff, who spent time as an executive at Citigroup; Bill Daley, the chief of staff whom Lew replaced, who worked at JPMorgan Chase during the financial crisis; and Rahm Emanuel, another former chief of staff, now the mayor of Chicago, who made a reported $18 million during his three years with the investment bank Wasserstein Perella.

If Siewert moves to Goldman Sachs, he will be joining a bank that spent at least $1.8 million on lobbying in 2011, in part to push back against the Dodd-Frank act. Goldman is also one of several major banks currently trying to get Congress to exempt overseas derivative trading from Dodd-Frank oversight -- meaning that the derivatives market, one of the most high-risk trading areas and one that played a direct role in bringing about the financial crisis, could end up moving hundreds of millions of dollars beyond the supervision of U.S. regulators.

Read the article here

Goldman Sachs Has All the "Hope and $Change"

How discouraging it is to finally come to realize (unless there is a miracle) that the rule of law no longer applies to Goldman Sachs and the other banks that committed accounting control fraud. Goldman Sachs is not a nice bank; it does not stand for ethical conduct and community service; it does not have a conscience; all it lives for is to make the largest amount of money that it can by any means that it can in order to pay bonuses that are out of this world.

It is a hard thing to have to concede that the banks have come out on top and that the government now does what the banks want rather than what The People need and want. It is a sad, sad day and I am in mourning for what might have been. The more frauds that occur, the fewer the prosecutions.

Here are excerpts from the message of William K. Black:

Holder & Obama's Propaganda is "Belied by a Troublesome Little Thing Called Facts"
By William K. Black - New Economic Perspectives

. . . .

I write to add several cautions.

1. There is no reason for granting any civil immunity on mortgage origination or securitization frauds and the grant of even limited immunity for such frauds can only create future problems.

2. The state AGs do not have the resources to investigate mortgage origination fraud. It isn’t even close. Collectively, the 50 state AGs could investigate Countrywide’s frauds if they took every investigator with expertise in financial institutions and assigned them to the case for five years.

3. The state AGs are not investigating mortgage origination fraud by major lenders.

4. The new working group will not investigate mortgage origination fraud. Obama described the task force in these words in his SOTU address.

“And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.”

The working group will not “investigate … abusive lending” and it will not “hold accountable those who broke the law … [by defrauding] homeowners.” It will not “speed assistance to homeowners.” It will not “turn the page on an era of recklessness” – and fraud, not “recklessness” is what prosecutors should prosecute. The name of the working group makes its crippling limitations clear: the Residential Mortgage-Backed Securities Working Group. Attorney General Holder’s memorandum about the working group makes clear that the name is not misleading. The working group will deal only with mortgage backed securities (MBS) – not the fraudulent mortgage origination that drove the crisis (the only exception is federally insured mortgages).

Fraudulent mortgage originators engaged in fraudulent sales of the mortgages, mostly to Wall Street and, eventually, Fannie and Freddie. As I stressed earlier, the administration is continuing to grant de facto immunity to CEOs at the large lenders whose massive mortgage origination frauds drove the crisis. The working group’s mandate helps confirm the administration’s continued refusal to prosecute elite mortgage origination fraud.

5. The working group is a symbolic political gesture designed to neutralize criticism of the administration’s continuing failure to hold accountable the elite frauds that drove the crisis. Neither the Bush nor the Obama administration has convicted a single elite fraud that drove the crisis. This is a national disgrace and represents the triumph of crony capitalism. Remember that the FBI warned in September 2004 that there was an “epidemic” of mortgage fraud and predicted that it would cause a financial “crisis.” There are no valid excuses for the Bush and Obama administrations’ failures. The media have begun to pummel the Obama administration for its failure to prosecute. The administration could not answer this criticism with substance because it has nothing substantive to offer in prosecuting elite mortgage origination frauds. The ugly truth is that we are three full years into his presidency and Holder could not find a single indictment to bring that Obama could brag about in his SOTU address. Who doubts that Holder and Obama would have done so if they had anything in the prosecutorial pipeline? Why do Holder and Obama have nothing in the pipeline? There are three fundamental problems, and the working group has not even addressed, much less resolved, any of the three fundamental defects.

One, criminal prosecutions of elite financial criminals have to come from investigations initiated by those with the expertise and resources to detect and investigate “accounting control fraud” (the form of fraud that can hyper-inflate financial bubbles and cause catastrophic losses and financial crises). Only the federal banking regulators have this capability. The absolute essential to achieving broad success is superb criminal referrals from those regulators. The central difficulty with such referrals should be that roughly 75% of the fraudulent mortgage loans were made by entities not regulated by the federal (or state) banking regulators. They were primarily made by mortgage bankers. Sadly, that did not prove to be the central difficulty with federal banking regulators’ criminal referrals. The federal banking regulators essentially ceased making criminal referrals last decade.

Banks will not file criminals against their CEOs – the people who run the accounting control frauds that produced the epidemics of mortgage fraud. Police and detectives do not investigate elite accounting control frauds. The FBI does not patrol a beat. Unless the regulatory cops on the beat (e.g., the banking regulators) make the criminal referrals the DOJ and the FBI will never investigate or prosecute the fraud. Indeed, because accounting control fraud is inherently complex and requires specialized knowledge to recognize, the DOJ will rarely recognize accounting control fraud even when the facts are only consistent with accounting control fraud (as opposed to bad luck or optimism). Absent high quality criminal referrals from the banking regulatory agencies, DOJ may have episodic successes but it will fail utterly to prosecute any epidemic of elite accounting control fraud. Criminal referrals provide the road map that allows effective investigations and prosecutions.

Two, DOJ has not provided remotely enough resources to investigate the large accounting control frauds. Three, DOJ has adopted a self-serving definition of mortgage fraud that implicitly defines accounting control fraud out of existence. DOJ has violated the central rule of investigating elite white-collar crime – if you don’t look; you don’t find.

We have forgotten the successes of the past. During the S&L debacle, Congress responded to the S&L crisis, once the presidentially-ordered cover up of the scope of the crisis ended in 1989, by ordering and funding a dramatic increase in DOJ resources dedicated to prosecuting the S&L accounting control frauds that drove the second phase of the debacle. President Bush (II), President Obama, and Congress have each failed to emulate the policies that proved so successful in prosecuting elite frauds that caused prior crises. DOJ and the S&L regulators made the prosecution of the elite frauds a top priority by their deeds as well as their words.

. . . .

The Obama and Bush administrations have consistently failed to “pursu[e] any and all leads.” Let us count the ways DOJ has typically failed to pursue leads against the elite officers whose frauds drove this crisis: they have not used grand juries, they have not issued civil subpoenas, they have not used electronic surveillance, they have not used undercover investigators, they have not “wired” cooperating witnesses who they have “flipped”, they have not appealed for whistleblowers to come forward, they have not called elite witnesses before grand juries, they have not convened grand juries, they have not sent FBI agents to their homes or offices to conduct formal interviews, they have not retained expert witnesses or consultants with expertise in accounting control fraud, they have not demanded that the banking regulatory agencies produce high quality criminal referrals, they have not asked those agencies to “detail” examiners and other skilled staff to the FBI to serve as internal experts, they have not trained AUSAs, special agents, and banking regulators in how to detect, investigate and prosecute accounting control frauds, they have not prosecuted where other federal agencies, after investigation, have charged that financial elites committed fraud, and they have not flipped intermediate officers and gone up the chain of command, they have not assigned remotely adequate staff to investigate and prosecute frauds, they have not assigned any meaningful number of their staff to investigate the elite frauds, and they have not made strong, consistent demands that Congress fund adequate staff to end the ability of financial elites to commit fraud with impunity. Conversely, DOJ has assigned its inadequate staff almost exclusively to non-elite mortgage fraud, has formed a “partnership” with the Mortgage Bankers Association (MBA) – the trade association of the “perps”, and has adopted the MBA’s absurd “definition” of mortgage fraud that implicitly defines accounting control fraud out of existence. How does Holder expect to get “leads” against elite frauds when he gets no criminal referrals from the banking regulatory agencies, “defines” the leading fraud perpetrators of mortgage fraud as the “victim” of mortgage fraud, conducts no credible investigation of elite frauds, takes no proactive steps to investigate (e.g., using undercover FBI investigations), makes no plea for whistleblowers to come forward with evidence on the elite frauds, and provides training for regulators, FBI agents, and AUSAs that implicitly denies the existence of accounting control fraud? I understand that he inherited a disaster and a disgrace from his predecessor, but he has made it worse.

Collectively, the Bush and Obama administration have provided de facto impunity from the criminal laws for our largest financial firms and their elite officers who drove our crisis. DOJ has had episodic successes against financial elites not involved in creating the crisis (e.g., Madoff and a prominent insider trader). These “successes” were bittersweet. Madoff conducted a Ponzi scheme that last for decades. DOJ only learned about the scheme because Madoff confessed to his family. He only confessed because the Ponzi scheme was about to collapse. The government learned of the insider trading through a whistleblower and found key facts through electronic surveillance and “wiring” “flipped” participants in the insider trading. The insider trading fraud went on for many years and likely would have gone on for many more years without the government learning of it but for the whistleblower. Both of these frauds were elite financial control frauds, so it is bizarre that Holder simultaneously takes credit for their successful prosecution while implicitly denying that control fraud could exist in elite financial institutions in the mortgage fraud context.

. . . .

Read the entire essay here

Again We Hear About Robert Rubin of Goldman Sachs Fame

In this video, Bill Moyers describes the financial meltdown as a crime scene where the rich take from the rest of us and we give involuntarily. Moyers has begun a series of interviews that reveal how various actors have played their nefarious roles in bringing down the financial system and at the same time have become wealthy by their actions.

John Reed was Chairman of Citigroup when he helped get rid of the Glass-Steagall Act--a pivotal action in bringing about the financial crash of 2008. Reed now regrets his actions and has apologized but you will probably not hear Rubin make any apology for his role.

You may be interested in reading what Jesse has to say about the video at Jesse's Café Américain where he decribes how Easy is the Descent Into Hell. He quotes Virgil, from The Aeneid:

"Easy is the descent to hell; all night long, all day, the doors of dark Hades stand open; but to retrace the path; to come out again to the sweet air of Heaven--there is the task, there is the burden."

John Reed on Big Banks' Power and Influence from BillMoyers.com on Vimeo.

Is There a Pecora for Goldman Sachs?

On this blog, we have been discussing for a long time when or if President Obama will encourage the investigation and prosecution of bank executives that were responsible for fraudulent securitization of sub-prime mortgages and CDOs. The President mentioned that the investigation will be proceeding with a task force on the Mortgage Origination and Securitization Abuses. You will have to pardon us if we do not take this new role seriously because Obama has already said that the banks committed unethical acts that are not considered illegal.

Goldman Sachs had its fair share of securities, CDOs made up of sub-prime mortgages that lost value after being sold. Goldman is being sued by a number of pension and other funds who bought these investments that were rated AAA but actually turned into junk.

Others are a bit skeptical too. Here are two takes on what could be a New Pecora Commission, or not:

A modern Pecora Commission could right Wall Street wrongs
By Barry Ritholtz - The Washington Post, Bloomberg

What shall we make of this surprise pronouncement in President Obama’s State of the Union address? A belated investigation has been launched into the role of fraud in the financial crisis.

This much is clear: Despite rampant illegalities, bank fraud and countless cases of perjury, the response to date — at the federal level and from most, but not all, states — has been underwhelming, cowardly even. A few principled holdouts — the attorneys general of Delaware, New York, Nevada and California — refuse to rubber-stamp a pre-investigation settlement with banks, but that’s all. Despite chances to bring crooks to justice, there has been little action.

So, here we are, four years after the great financial collapse, three years after the recovery began and in the last year of Obama’s term — and the president has finally decided to investigate the role of fraud in the great global financial crisis. Hence, this new task force — the unit of Mortgage Origination and Securitization Abuses — begins behind the curve. The statute of limitations is, in many cases, close to elapsing.

Even so, do not dismiss the investigation out of hand because of the timing: History informs us that a serious investigation can begin four years after the fact. Recall that Ferdinand Pecora was the fourth chief counsel for the Senate committee that investigated the Wall Street crash of 1929 and subsequent Depression. He was appointed in 1932 and received broad investigatory powers in 1933. His report ran thousands of pages. Thanks in large part to Pecora’s findings, Congress passed the Glass-Steagall Banking Act, which separated commercial and investment banking; the Securities Act of 1933, which established penalties for filing false information about stock offerings; and the Securities Exchange Act, which created the Securities and Exchange Commission to regulate the stock exchanges. Nearly 50 years of financial stability followed.

The personality in charge can make all the difference. In an encouraging sign, Obama appointed to the task force New York Attorney General Eric Schneiderman, one of the few attorneys general not railroaded into a premature settlement with banks of the robo-signing-foreclosure scandal.

Read the rest of the article here

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Is Obama's 'Economic Populism' for Real?
By Matt Taibbi - Taibblog (RollingStone)

There is a lot to digest in a recent series of events on the Prosecuting Wall Street front – the two biggest being Barack Obama’s decision to make New York Attorney General Eric Schneiderman the co-chair of a committee to investigate mortgage and securitization fraud, and the numerous rumors and leaks about an impending close to the foreclosure settlement saga.

There is already a great debate afoot about the meaning of these two news stories, which surely are related in some form or another. Some observers worry that Schneiderman, who over the summer was building a rep as the Eliot Ness of the Wall Street fraud era, has sold out and is abandoning his hard-line stance on foreclosure in return for a splashy federal posting.

Others looked at his appointment in conjunction with other recent developments – like the news that Tim Geithner won’t be kept on and Obama’s comments about a millionaire’s tax – and concluded that Barack Obama had finally gotten religion and decided to go after our corruption problem in earnest.

At the very least, Obama’s recent acts were interpreted as a public move toward economic populism: if the president was looking to associate himself with that word, he did a good job, since there were literally hundreds of headlines about Obama’s "populism" the day after his State of the Union speech.

I think it’s impossible to know what any of this means yet. There is a lot to sort out and a lot that will bear watching in the near future. Just to recap, here’s what’s at stake right now:

The impending, much-discussed foreclosure settlement is the Obama administration’s great bailout initiative. If it goes through with the kind of tiny numbers being discussed ($25 billion from the banks if California is in the deal, $19 billion if California AG Kamala Harris stays out), then what we’re talking about is a bailout on par with TARP.

The potential liability each of the banks faces from foreclosure litigation is vastly greater than $25 billion, and uncertainty surrounding that litigation is holding the stock prices of all of the major companies (in particular struggling ones like Bank of America) down.

A settlement would release those firms from that potential liability and likely bring massive surges in stock-market investment. It would therefore have a profound strengthening effect on the Too-Big-To-Fail banks. If the Obama administration wanted to be 100% real on the Wall Street crime front, it would suspend this deal pending the investigation by the new mortgage committee. But if the deal does indeed go through, we’ll know that the banks still have major influence with our populist president.

Some people have been confused about Schneiderman’s new role. The new Unit on Mortgage Origination and Securitization Abuses will not be investigating the same abuses covered in the foreclosure settlement. When the public thinks about corruption in the housing markets on the part of the big banks, what it mostly thinks of is robosigning and the other mass-perjury issues, which is the stuff targeted in the foreclosure settlement.

Read the rest of the article here

Ubiquitous Goldman Sachs Part II

The power of Goldman Sachs is still astonishing. The bank has been mentioned by two of the Republican candidates in both positive and negative ways. It does not seem to matter which role Goldman finds itself in--it is a force that changes the way politics is discussed and it will influence whoever is President after the 2012 elections.

Goldman has become the hook on which everyone seems to hang their beliefs. Below are two such hooks from different articles:

Gingrich Jab at Goldman Sachs Belies Pro-Bank Policy Proposals
By Julie Bykowicz - Bloomberg BusinessWeek

Jan. 27 (Bloomberg) -- Newt Gingrich took aim at Wall Street and by extension Republican presidential opponent Mitt Romney yesterday as the former U.S. House speaker said he isn’t running for president to “represent Goldman Sachs.”

Yet the investment firm Gingrich derided and the banking industry as a whole stand to gain from his proposals to eliminate the capital gains tax and repeal two financial-sector measures, four analysts said in separate phone interviews.

Gingrich’s tax package, which also calls for a reduction of the personal income and corporate tax rates, would be beneficial to many on Wall Street, including those at Goldman Sachs Group Inc., an investment banking firm based in New York, the analysts said.

Read the rest of the article here

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Close Ties to Goldman Enrich Romney's Public and Private Lives

By Nicholas Confessore, Peter Lattman and Kevin Roose - New York Times

When Bain Capital sought to raise money in 1989 for a fast-growing office-supply company named Staples, Mitt Romney, Bain’s founder, called upon a trusted business partner: Goldman Sachs, whose bankers led the company’s initial public offering.

When Mr. Romney became governor of Massachusetts, his blind trust gave Goldman much of his wealth to manage, a fortune now estimated to be as much as $250 million.

And as Mr. Romney mounts his second bid for the presidency, Goldman is coming through again: Its employees have contributed at least $367,000 to his campaign, making the firm Mr. Romney’s largest single source of campaign money through the end of September.

No other company is so closely intertwined with Mr. Romney’s public and private lives except Bain itself. And in recent days, Mr. Romney’s ties to Goldman Sachs have lashed another lightning rod to a campaign already fending off withering attacks on his career as a buyout specialist, thrusting the privileges of the Wall Street elite to the forefront of the Republican nominating battle.

Newt Gingrich, whose allies have spent millions of dollars on advertisements painting Mr. Romney as a heartless “vulture capitalist,” seized on Mr. Romney’s Goldman ties at Thursday’s Republican debate in Florida, suggesting that he had profited through Goldman on banks that had foreclosed on Floridians. And as the fight over regulation of financial firms spills onto the campaign trail, Mr. Romney’s support for the industry — he has called for repeal of the Dodd-Frank legislation tightening oversight of Wall Street — may draw more fire.

Read the rest of the article here

Goldman Sachs Being Sued Again

Want to know how all those pension funds lost money? Well, Goldman Sachs contributed its bit by selling junk securities that were rated AAA to pension funds around the world. That's where the inequality of wealth originated. So when you read that Goldman executives "received another installment of stock awarded in previous years," you could say that that those monies were improperly and fraudulently obtained.

Goldman is being sued by a Dutch pension fund, Stichting Pensioenfonds ABP, and rightfully so:

Pension fund ABP to sue Goldman Sachs over junk mortgages
By DutchNews

Dutch civil service pension fund ABP is taking mechant bank Goldman Sachs to court for providing it with misleading information over the sale of junk mortgages, the Telegraaf reports on Saturday.

Before the economic crisis began, ABP invested in bonds which were coupled to American mortgages. But ABP claims it was wrongly informed about the credit-worthiness of the investment and the mortages were riskier than Goldman Sachs had said.

The pension fund, one of the biggest in the world, declined to say how much in damages it is seeking, the Telegraaf reported.

Read the article here

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You may want to read a short history of banking that helps explain how Goldman Sachs and other banks obtained the power and wealth that they presently enjoy. Read the article written by Michael Hudson: Banks Weren't Meant to Be Like This. In order to get the most benefit from reading the article (which is longish but worth the effort to read), you could substitue the word "Goldman Sachs" for every reference to banks.

You can see how difficult it will be to resolve the present banking crisis just from reading the short excerpt below:

Michael Hudson: Banks Weren't Meant to Be Like This
By Michael Hudson - Posted by Yves Smith in Naked Capitalism

Banking has moved so far away from funding industrial growth and economic development that it now benefits primarily at the economy’s expense in a predator and extractive way, not by making productive loans. This is now the great problem confronting our time. Banks now lend mainly to other financial institutions, hedge funds, corporate raiders, insurance companies and real estate, and engage in their own speculation in foreign currency, interest-rate arbitrage, and computer-driven trading programs. Industrial firms bypass the banking system by financing new capital investment out of their own retained earnings, and meet their liquidity needs by issuing their own commercial paper directly. Yet to keep the bank casino winning, global bankers now want governments not only to bail them out but to enable them to renew their failed business plan – and to keep the present debts in place so that creditors will not have to take a loss.

This wish means that society should lose, and even suffer depression. We are dealing here not only with greed, but with outright antisocial behavior and hostility.

Europe thus has reached a critical point in having to decide whose interest to put first: that of banks, or the “real” economy. History provides a wealth of examples illustrating the dangers of capitulating to bankers, and also for how to restructure banking along more productive lines. The underlying questions are clear enough:

* Have banks outlived their historical role, or can they be restructured to finance productive capital investment rather than simply inflate asset prices?
* Would a public option provide less costly and better directed credit?
* Why not promote economic recovery by writing down debts to reflect the ability to pay, rather than relinquishing more wealth to an increasingly aggressive creditor class?

Solving the Eurozone’s financial problem can be made much easier by the tax reforms that classical economists advocated to complement their financial reforms. To free consumers and employers from taxation, they proposed to levy the burden on the “unearned increment” of land and natural resource rent, monopoly rent and financial privilege. The guiding principle was that property rights in the earth, monopolies and other ownership privileges have no direct cost of production, and hence can be taxed without reducing their supply or raising their price, which is set in the market. Removing the tax deductibility for interest is the other key reform that is needed.

A rent tax holds down housing prices and those of basic infrastructure services, whose untaxed revenue tends to be capitalized into bank loans and paid out in the form of interest charges. Additionally, land and natural resource rents – along with interest – are the easiest to tax, because they are highly visible and their value is easy to assess.

Pressure to narrow existing budget deficits offers a timely opportunity to rationalize the tax systems of Greece and other PIIGS countries in which the wealthy avoid paying their fair share of taxes. The political problem blocking this classical fiscal policy is that it “interferes” with the rent-extracting free lunches that banks seek to lend against. So they act as lobbyists for untaxing real estate and monopolies (and themselves as well). Despite the financial sector’s desire to see governments remain sufficiently solvent to pay bondholders, it has subsidized an enormous public relations apparatus and academic junk economics to oppose the tax policies that can close the fiscal gap in the fairest way.

(I have inserted some paragraph breaks)

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