tag:blogger.com,1999:blog-74175637756402382282024-02-20T02:50:48.360-08:00LinksIrish Toryhttp://www.blogger.com/profile/00728110234077613744noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7417563775640238228.post-18110083270926557212009-06-30T05:20:00.001-07:002009-06-30T05:20:32.357-07:00AICu know about the American International Corporation today only because of the greed of the executives in one of its subsidiaries, American International Group [AIG}. If we use a search engine, we know AIG as a global insurance company founded in Shanghai, China in 1919. But when we walk past the American International Building at 70 Pine Street in New York where AIG is headquartered, we think of it as the AIG Building. It's not. It's the AIC Building. There is a difference.<br /><br />We know that AIG, the insurance giant which has pretty much dominated the headlines for abusing the use of $170 billion of TARP money received from the pockets of working class taxpayers, is a behemoth global insurance carrier—and one of the most powerful corporations in the world. But, if you ask anyone on the street to name the world's largest insurance company no one, until now, would have suggested it might be AIG. They will answer either MetLife (Metropolitan Insurance Co.), which has $3.3 trillion if insurance in force, or Prudential which has $2 trillion. Yet, AIG is larger than the top five "household name" life insurance companies put together. It has 375 million policyholders and over $19 trillion of insurance in force. Why in the world did AIG need a bailout?<br /><br />The AIG subsidiary that caused most of the unsecured losses for the company was AIG Financial Products Corp, (the derivatives division) in London, England. AIG said its "bad bet" losses (totaling $40.5 billion last year) were the result of using what are known as "credit default swaps" that promises investors payments in mortgage bonds in the event of a default. The "credit default swaps" were used to help financial institutions insure their subprime securities holdings. As the losses mounted throughout 2008 over the subprime meltdown in 2007, AIG depleted its capital reserves—not by covering its debt owed to the financial organizations who expected payment in mortgage bonds from a company whose parent's word has been its bond since 1910, but in an AIG stock buyback as its stock plummeted in value.<br /><br />When the US taxpayers, who oppose bailing out the rich, learned that AIG planned to use $450 million of the TARP money to pay promised bonuses to executives (but only after it had already shelled out $165 million of the original $170 million to executives in its derivatives department in London) the proverbial brown stuff hit the fan in Washington, DC. (It should be noted that AIG FP also has an unobtrusive office at 50 Danbury Road in Wilton, Connecticut. The building is the US headquarters for AIG FP. AIG FP in Wilton also handles derivative contracts, but it's unknown if any, or how many, US employees have, or will, received any of these extravagant bonuses.<br /><br />The Democrats—the 21st century equivalent to the 1920s Keystone Kops, who proudly call the spending bills they single-handedly rammed through Congress without a single GOP vote a "bipartisan effort" (between liberal and moderate Democrats) are now feeling the type of backlash that causes arrogant politicians to lose their jobs and control of Congress to shift from one party to the other. When the politicians stick their hands too deeply into the pockets of the taxpayers, the taxpayers tend to remember the theft the next time they step into the voting booth—particularly when the great, great grandchildren of those taxpayers will still be paying the bill. The rich fat cats who profited from the financial meltdown of 2008 (reminiscent of the Bank Panic of 1906), will also still be recalling the Bailout of 2009, but they will remember those days as the turning point when the working class was returned to their medieval roles as the chattel of the overlords of banking and industry.<br /><br />When Merrill Lynch paid extravagant bonuses totaling $121 million out of its TARP funds to key executives, the public became outraged. New York Attorney General Andrew Cuomo quickly issued subpoenas to force Merrill Lynch to provide the names of the executives who received bonuses.<br /><br />When the Merrill Lynch greedfest was repeated by AIG Financial Products, it prompted some Democratic Congressmen and Senators to write into the second go-round of bailouts, the American Recovery and Reinvestment Act of 2009 a provision that would restrict bonuses, or heavily tax them. However, when the House and Senate versions of the Recovery and Reinvestment Act were being reconciled in Joint Conference the language was altered and all restrictions were erased. Under both House and Senate rules, when bills are reconciled in joint conference, the leadership of both parties meet and iron out the differences. No Republican has been allowed to attend any joint conference thus far in the 111th Congress. The bills were reconciled by Senate Majority Leader Harry Reid, Speaker Nancy Pelosi and White House Chief of Staff Rahm Emanuel.<br /><br />On Thursday, Mar. 19, the House met and, before the sun set, it had enacted HR 1586 which imposed a 90% surtax on TARP recipients. Reid tried to ram the Senate version through that chamber on a voice vote on Friday but he was stopped by Sen. Jon Kyl [R-AZ] who successfully argued that "...I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences. Frankly, I think that's how we got into the current mess." The new income tax imposes a surcharge on family incomes over $250 thousand who work for companies that received bailout packages of at least $5 billion.<br /><br />You need to read no farther than the heading of the legislation, "A Bill to impose an additional tax on bonuses received from certain TARP recipients..." to know the legislation was unconstitutional. The Constitution of the United States says no bills of attainder or ex post facto laws can be passed. A bill of attainder is a law that singles out a person or particular group of people for punishment. An ex post facto law is one that punishes someone after-the-fact for conduct that was not illegal when it was committed.<br /><br />Even though the Democrats know the TARP Bonus Taxation Bill proposed by House Ways & Means Committee Chairman Charlie Rangel [D-NY] and 43 cosponsors violates the Constitution on two points, after George Washington University Law Professor Jonathan Turley said targeting AIG employees invited a court challenge, the Democratic leadership challenged anyone who wanted to, to take them to court. It really doesn't matter to the far left if AIG executives get to keep their bonuses because, ultimately, the far left will be able to keep their 90% tax on incomes over $250 thousand.<br /><br />But here's the rub. The American people have been so focused on the AIG bonus money they ignored a closer look at a major US corporation that has flown completely off the media radar screen for just under 100 years. American International Corporation [AIC], the parent, will celebrate its centennial anniversary next year.<br /><br /><br /><br />For a century the American International Corporation succeeded in remaining invisible because its founders thrived on absolute secrecy. And, those founders—were? AIC was incorporated in 1910. While Charles Stone's name appears as the historic founding head of AIC, the company was the brainchild of John D. Rockefeller, Sr., Andrew Mellon, J.P. Morgan, and Andrew Carnegie. An assortment of American industrialists, bankers and merchant princes joined the AIC parade over the next couple of years because they were convinced that, with the financial clout of the world's wealthiest men behind it, the new 800-lb economic gorilla on the horizon was going to be Russia. They all wanted a piece of the action in a new economy devoid of thousands of government restrictions that hamstring business.<br /><br />Rockefeller's interest in Russia stemmed from the discovery of oil in Baku near the Caspian Sea in Azerbaijan. The oil field was the largest known oil strike in the world. It was controlled entirely by the Swedish munitions manufacturers Alfred and Robert Nobel and Tzar Nicholas II's banker, Baron Alphonse Rothschild. By 1884 Rothschild and Nobel were pumping as much oil from the Baku Oil Fields as Rockefeller was from all of his holdings in the United States. Rockefeller was determined to do in Russia what he had succeeded in doing in the United States in two decades—corner the refining and distribution of oil. By 1870 Standard Oil controlled 85% of the refining and distribution of oil in the entire world. By 1880, he lost most of his distribution rights in Europe to Rothschild.<br /><br />Two things stood in his way of challenging Rothschild's Mazout and Bnito oil refining and distribution companies. One was the Tzar. The other was Count Sergei Witte, the Russian Finance Minister. Witte knew of Rockefeller's reputation for buying politicians and destroying competition, and convinced the Tzar to bar Standard Oil and Rockefeller from coming into Russia. In 1905 Alphonse Rothschild died. His younger brother, Edmond, became the head of the Rothschild empire. He offered Mazout and Bnito to Nobel, who could not afford the asking price. When Rockefeller offered to join forces with Nobel, the Tzar rescinded the offer. Deutsche Bank was then offered the Rothschild oil fields. When Rockefeller's shadow became visible in the Deutchebank deal, the Rothschilds were forced by the anti-Jewish conservatives in the Russian government to sell to Royal Dutch Shell or see their assets seized by the Russian government.<br /><br />Rockefeller knew the only way he was going to get into Russia was to depose Tzar Nicholas II. At the moment, Rockefeller, Morgan, Mellon and his banker friends were already working hard to create the legislation needed to change the nature of the US republic by eliminating the States from the equation of power in order to create a central bank owned by them, and to legislate a national income tax to repay what the United States would soon owe to that privately-owned central bank.. Taking over a foreign country, on the other hand, required a little more effort than bribing a few Congressmen and Senators to legislate a new central bank and manipulate a Constitution by bribing politicians at both State and federal levels to ratify two constitutional amendments to make the government work better for them.<br /><br />After several meetings in New York between the capitalists and Bolshevik Leon Trotsky between 1907 and 1910, Rockefeller, bankers Mellon and Morgan and steel magnate Andrew Carnegie, together with several of America's leading barons of business and merchant princes, pooled their resources, put up $50 million, and formed the American International Corporation. AIC, the cartel announced, was created to stimulate world trade. In reality, AIC was created to fund the overthrow of Tzar Nicholas II by the Bolsheviks. In a deal struck with Trotsky and revolutionist Vladimir Ulyanov, whom the world knew as Lenin, in exchange for financing the Bolshevik Revolution, the capitalists would be allowed to carve up the economy of what was soon to become the Soviet Union—the most terrifying anti-capitalist nation in the world. What that means in plainspeak is that Lenin and Trotsky doublecrossed the richest men in the world. Had the barons of business and merchant princes of America not tried to create their own version of the United States in Central Europe, the 1917 Bolshevik Revolution would have been a fizzle-farce just like the abortive January 22, 1905 Revolution that began and ended in front of the Tzar's Winter Palace on Bloody Sunday. Tzarist guards shot and killed over a hundred peasant protesters. Instead, the well-financed Bolsheviks won and deposed the Romanov dynasty.<br /><br />Tzar Nicholas Pavlovich Romanov and his family were taken captive on Feb., 17, 1917 when the Bolsheviks captured the Winter Palace in St. Petersburg (which they renamed Petrograd). The Tzar and his family were held captive until the early morning hours of July 17, 1918 and, with the White Russians closing in on the villa where they were held, the Bolsheviks took the Tzar, his wife, children, and their servants to the fruit cellar and executed them.<br /><br />When Lenin and the Red Army doublecrossed AIC, there were several small anti-Bolshevik separatist movements brewing throughout Russia. Those aligning to fight the Bolsheviks were landowners, middle class citizens, pro-monarchists, and other reactionaries and non-Bolshevik communists. The agents of AIC recruited one of these groups, known as the White Movement (hence, the White Army) to defeat the Bolsheviks. The White Army was headed by Generals Anton Ivanovich Denkin and N.B. Yudenich and Admiral Alexander Vasilyevich Kolchak. When the Bolshevik Revolution took place, the Whites controlled most of the country even though Lenin controlled the urban centers and the government.. AIC funded the Whites, whose ranks included most of the Tzarist officer corps—and most of the Tzar's military equipment. The White Army was actually better equipped than the Red Army. While history records the Russian Civil War as happening between 1918 and 1921, major fighting between the Reds and Whites did not stop until Oct. 25, 1922, with Gen. Anatoly Pepelyayev surrendering the last enclave of White forces on June 13, 1923.<br /><br />When Lenin reneged on his deal with the American International Corporation, the money barons at AIC used their political clout to keep the American Expeditionary Forces fighting in Europe until April, 1920—16 months after World War I officially ended. On July 26, 1918 British forces under Gen. Lionel Dunsterville captured the Baku oil fields from the Ottomans. American Expeditionary Forces hurried to their defense when a major Ottoman counteroffensive took place between Aug. 26 and Sept. 14. The Allies held the oil fields for two years.<br /><br />At the Paris Peace Conference in in November, 1919, the Soviets, who were blocked from participating because they were fighting a civil war, complained that Allied forces had invaded their country. At the time, the Brits were actively soliciting Russia's neighbors to attack the Bolsheviks. The League of Nations voted that no new Allied troops could be introduced into Russia and that all Allied intervention had to stop. Congress, which professed not to understand why US forces were engaged in Russia, demanded that the Wilson Administration bring the boys home. In early April, 1920, the last US troops left the Baku oil fields. On April 28, 1920, the 11th Red Army overwhelmed the weakened British forces that were still holding Baku, and took the oil fields back, ending World War I, and creating the reason for the Iron Curtain which would divide East and West for 68 years.<br /><br />Who, or what, precisely, is American International Corporation? AIC is one of the two largest corporations ever formed. The other is Standard Oil which, which was broken apart by US District Court Judge Kenesaw Mountain Landis on August 3, 1907. At 4 p.m. on May 15, 1911, the US Supreme Court upheld the Landis judgment, and what was one behemoth oil giant became seven behemoth oil giants—with the Rockefeller family as the primary shareholders in all of them. The government would ultimately learn from its Standard Oil mistake because when the Reagan-era Supreme Court broke up Ma Bell, AT&T was forced to sell-off the breakaway companies.<br /><br />When Rockefeller, Mellon, Morgan and Carnegie masterminded the birth of AIC, they built the corporation in what can be construed as "Standard Oil secrecy layers" that defy scrutiny. Most of the executives brought into the fold were trusted associates from each partner's own commercial ventures. Media leakage has never been a problem. The principles are so powerful that careers are made or lost by their spoken word. On top of that, their executives are compensated so well there is never a question about loyalty.<br /><br />From Rockefeller's National City Bank came Frank Vanderlip, one of the Jekyll Island Seven who would not only help write the Federal Reserve Act legislation, he would also help leverage State politicians to enact the 16th and 17th Amendments by promising them fame and fortune—or failure. Vanderlip was on the board of AIC. So were notables who served at various points of time throughout AIC's century-old life, like Thomas Vail, CEO of AT&T, Percy Rockefeller (one of Senior's brothers), James A. Stillman (a Rockefeller in-law), Pierre DuPont, and George H. Walker, maternal grandfather of George H.W. Bush.<br /><br />In the war years Robert S. Lovett joined the board. He would become a key advisor to President John F. Kennedy. He was one of the authors of State Department Publication 7277 on global disarmament. Lovett advocated breaching the 2nd Amendment and disarming the American people as the first step in creating global government.<br /><br />Other founding directors included manufacturer Cyrus McCormick; railroad executive James J. Hill; Edwin S. Webster (Stone's partner); investment banker Otto Kahn, meat-packer Ogden Armour; Assistant Secretary of the Treasury for Taft, Beekman Winthrop; Henry Smith Pritchett, president of the Carnegie Corporation; and Joseph P. Grace, then a Standard Oil chemist. He developed petrochemical products from crude oil. Also, banker Charles H. Sabin; W.E. Corey, head of US Steel; James Cash Penney, founder of J.C. Penney; and Charles A. Coffin, who replaced Thomas Edison as CEO of General Electric.<br /><br />The lives of the world's wealthiest families—the Money Mafia—are secrets shrouded by such complex layers of anonymity that the world knows nothing about them while believing they know everything. The Money Mafia encourages the fables—providing they downplay rather than magnify their wealth. In the opening days of the 20th century when JP Morgan took a young reporter from the New York American and Leslie's Weekly under his wing, he did so because Morgan wanted a conduit through which he could control the news. The reporter was Bertie Charles Forbes whom, with the help of Morgan, founded Forbes magazine.<br /><br />In 1918, Forbes published his first list of the 30 richest America. Heading the list were the invisible rich whose wealth is never supposed to be mentioned by the media. Among them, alphabetically, were J. Ogden Armour, Vincent Astor, Andrew Carnegie, Pierre DuPont, Henry Clay Frick, Daniel Guggenheim, Cyrus McCormick, John Pierpont Morgan, John D. Rockefeller, Sr., Russell Sage, Jacob Schiff, Charles M. Schwab, and William Vanderbit. Since all but a few of these names own shares of the Federal Reserve, it is unlikely that any of them became "less rich" over time. The business holdings of these men included oil, coal, railroads, steel, gold and silver mining, and investment banking. Rockefeller headed the Forbes list. His wealth in 1918 was conservatively estimated at $1.2 billion by Forbes—in an age when a bank president who earned $5,000.00 per year and was considered to be an extremely wealthy man.<br /><br />These were the kingmakers of the New World Order at a time when the Old World Order—the royalty of Europe, and the vast landowners of Europe—began to lose their grip on global power as the 20th century broke on the horizon. The lofty and often utopian objectives of the princes of industry and barons of banking and business were at odds with the goals of the monarchs of Europe who had ruled vast kingdoms and municipal fiefdoms that have existed since medieval days. A New World Order was formed in the ashes of World War I, with the new wealth of the New World overwhelming the old wealth of Europe. The money barons wanted a world without borders with a common currency with which to trade anywhere in the world. A global economy with a global government .<br /><br />Rockefeller demanded that Forbes pull his magazine off the store shelves in 1918—and reprint it. Forbes did. From that day until now, none of the names of the wealthiest families in the world appear on any of the "wealthiest family" lists. Only the poor rich appear. The first layer of secrecy was in place.<br /><br />The second layer of secrecy is confusion. Keep them guessing. When everyone is telling a different story about the histories of the accumulation of the wealth of the rich, no version is believable. Not even the measurable wealth of those associated with those who possess unfathomable wealth. American International Group [AIG] is a subsidiary of AIC. Internet searches suggest that AIG was created in 1919 by a 27-year old named Cornelius Vander Starr, a recently discharged US Army buck private from Fort Bragg, California (a military installation from 1859-64). However, the facts don't support the legend.<br /><br />Sadly, on the Internet, when urban legends are repeated often enough they obfuscate the truth. Fiction becomes reality. Legend would have us believe a 27-year old, with no advanced education and no money, who served 8 months in the army at the end of WWI—and who never fought in the war and never took officer's training—was discharged as a 2nd Lieutenant after 8 months of service. Legend would have us believed he joined an insurance brokerage firm, Shean & Deasy and virtually overnight became its manager, yet quit his dream job after only a few months to become a mail clerk with the Pacific Mail Steamship Co. Starr, the legend goes, wanted to see the world—which was why he purportedly joined the Army. (Note: In 1914 the Pacific Mail Steamship Co., was purchased by AIC to get the US mail contracts for Asia, and to serve as a toehold in Asia for AIC. AIC in 1914 had already embarked on the path to creating a global economy. The first attempt by the money mafia to create world government would come in the Treaty of Versailles in 1920. The United States never signed it.)<br /><br />C.V. Starr, who was born on Oct. 15, 1892, graduated from Fort Bragg High School in 1909. He began selling life insurance for the James Nelson Realty Co. in Fort Bragg around 1913. In 1914 he moved to San Francisco to sell auto insurance for the Pacific Coast Casualty Co. In 1917 he went to work for an insurance brokerage firm, Shean & Deasy, leaving them to join the army. Logic suggests he came out of the service 8 months later when the Armistice was signed as a buck private. As a soldier, he went no where and did nothing at a time when soldiers might spend one whole hitch waiting for one stripe. Some of Starr's biographers claim he came out of the army as a sergeant, others claim he made lieutenant. Neither makes sense and sound like someone remodeling Starr's past to give him a biography worthy of a wealthy man's latter-year stature.<br /><br />Starr and Frank Raven formed American Asiatic Underwriters—an insurance agency selling policies, not issuing them. Raven had been selling insurance in China since 1904, and had been very successful. He amassed several million dollars, enough to begin underwriting policies. That history's probably correct. At some point, Starr and Raven formulated plans to create an insurance company that would actually insure the policyholders. That, too, is correct. But, that company was not AIG. It was AAU.<br /><br />Starr returned to the United States and convinced several American insurers—in particular Globe Life, Rutgers and National Union—to act as a re-insurer, covering AAU's risk. There may have been a stipulation that forced AAU to open sales offices in the United States since that happened. But now, at age 29, Starr was on his way. But not with AIG. The new company was American International Underwriters [AIU].<br /><br />(My research revealed an American International Group IPO to purchase AIU. I could not determine the date of the IPO.) Starr and his partner managed to build a very lucrative, very successful insurance company with relatively low capital in about two decades. They were so successful that AIU was under contract to manage all of AIG's overseas property-casualty business. Using guesswork alone it's likely the IPO was exercised sometime between 1947 when Mao overran China and 1950 when Starr created a new entity, CV Starr & Company. Or, at the latest, in 1955 when he formed the CV Starr Foundation whose wealth was comprised largely of AIG stock that is now worth about $3.5 billion. None of the various websites contain the history of AAU, AIU, AIG or AIC. It's almost like all of them encourage legend building.<br /><br />The third layer of secrecy like the fourth, fifth, sixth and seventh layers of secrecy are, well...heavily shrouded secrecy. Piled on, layer after layer, to make it impossible for anyone to learn the truth about the wealth of the wealthiest families in the world. That wealth is so vast that it simply can't be measured in terms of dollars and cents.<br /><br />The estimated "wealth" of the truly wealthy is calculated not on the total gross worth of the cash, investments and other wealth of that individual or family, but on the interest received on those those investments and holdings that are paid directly to that individual or family quarterly or annually and reported to the IRS as income. Roughly 99% of the wealth of these individuals is sheltered in tax-free trusts and foundations.<br /><br />When you examine the maze that obfuscates a man who was not part of the world's elite but merely brushed the shroud that shields them, you can begin to understand how, when you ask 20 different people who the six richest men in the world might be, you will get at least a dozen answers with few of them actually getting it right. That explains how one of the most powerful corporations in the world can simply slip through the cracks.Irish Toryhttp://www.blogger.com/profile/00728110234077613744noreply@blogger.com0tag:blogger.com,1999:blog-7417563775640238228.post-48512981124508857182009-06-30T05:17:00.000-07:002009-06-30T05:18:55.988-07:00Comments<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CUsers%5CJames%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CUsers%5CJames%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CUsers%5CJames%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> 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Roman","serif";">BUBBLE #5 - RIGGING THE BAILOUT</span></b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> After the oil bubble collapsed last fall, there was no new bubble to keep things humming - this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.
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<br /> It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers - one of Goldman's last real competitors - collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment-banking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
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<br /> Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding - most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs - and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.
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<br /> Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict-of-interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank-holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman - New York Fed president William Dudley - is yet another former Goldmanite.
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<br /> The collective message of all this - the AIG bailout, the swift approval for its bank-holding conversion, the TARP funds - is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."
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<br /> Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the post-bailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 - with its $1.3 billion in pretax losses - off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 - which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. "They cooked those first-quarter results six ways from Sunday," says one hedge-fund manager. "They hid the losses in the orphan month and called the bailout money profit."
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<br /> Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its first-quarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using half-baked accounting to reel in investors, just months after receiving billions in a taxpayer bailout.
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<br /> Even more amazing, Goldman did it all right before the government announced the results of its new "stress test" for banks seeking to repay TARP money - suggesting that Goldman knew exactly what was coming. The government was trying to carefully orchestrate the repayments in an effort to prevent further trouble at banks that couldn't pay back the money right away. But Goldman blew off those concerns, brazenly flaunting its insider status. "They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after," says Michael Hecht, a managing director of JMP Securities. "The government came out and said, 'To pay back TARP, you have to issue debt of at least five years that is not insured by FDIC - which Goldman Sachs had already done, a week or two before."
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<br /> And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?
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<br /> Fourteen million dollars.
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<br /> That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion - yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.
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<br /> How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely hosed corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two-thirds of all corporations operating in the U.S. paid no taxes at all.
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<br /> This should be a pitchfork-level outrage - but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."
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<br /> <b>BUBBLE #6 - GLOBAL WARMING</b>
<br /> Fast-Forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs - its employees paid some $981,000 to his campaign - sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.
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<br /> <i>AS ENVISIONED BY GOLDMAN, THE FIGHT TO STOP GLOBAL WARMING WILL BECOME A "CARBON MARKET" WORTH $1 TRILLION A YEAR.</i>
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<br /> Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits - a booming trillion-dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.
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<br /> The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.
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<br /> Here's how it works: If the bill passes; there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billions worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.
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<br /> The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand-new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of an electricity suppliers in the U.S. total $320 billion.
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<br /> Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigm-shifting legislation, (2) make sure that they're the profit-making slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson's report argued that "voluntary action alone cannot solve the climate-change problem." A few years later, the bank's carbon chief, Ken Newcombe, insisted that cap-and-trade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that 'Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."
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<br /> The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utah-based firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in green-tech ... the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energy-futures market?
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<br /> "Oh, it'll dwarf it," says a former staffer on the House energy committee.
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<br /> Well, you might say, who cares? If cap-and-trade succeeds, won't we all be saved from the catastrophe of global warming? Maybe - but cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax-collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it's even collected.
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<br /> "If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedge fund director who spoke out against oil-futures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want. It's just asinine."
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<br /> Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees - while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.
<br />
<br /> It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.
<br />
<br /> But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">I don't really have much to say about this except for 'gently caress Goldman Sachs'. <o:p></o:p></span></p> </td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Paper Mac posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">thanks
<br /> why is RS so stupid about their online poo poo anyway, taibbi's blog isn't even on RS<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">I have no idea, he is seriously one of the best journalists in America currently working and you'd think they would want to promote his work.
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<br /> For anyone not already following his blog, here's a post about <a href="http://trueslant.com/matttaibbi/2009/06/24/fareed-zakarias-manifesto/?nucrss=1" target="_blank"><span style="color: blue;">Fareed Zakaria</span></a>:<o:p></o:p></span></p> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">quote:<o:p></o:p></span></b></p> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">quote:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Deep down we all have a Puritan belief that unless they suffer a good dose of pain, they will not truly repent. In fact, there has been much pain, especially in the financial industry, where tens of thousands of jobs, at all levels, have been lost. But fundamentally, markets are not about morality. They are large, complex systems, and if things get stable enough, they move on.
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<br /> via <a href="http://www.newsweek.com/id/201935/page/1" target="_blank"><span style="color: blue;">Zakaria: A Capitalist Manifesto | Newsweek Business | Newsweek.com.</span></a><o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 12pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> From a distance I’ve always vaguely admired the skills of Newsweek’s Fareed Zakaria, who is maybe this country’s preeminent propagandist. Any writer who doesn’t admire what this guy does is probably not being honest with himself, because being the public face of conventional wisdom is an extremely difficult job — and as a man of letters Zakaria routinely succeeds, or pseudo-succeeds, at the most seemingly impossible literary tasks, making the sensational seem dull and the outrageous commonplace, rendering horrifying absolutes ambigious and full of gray areas. Wheras most writers grow up dreaming of using their talents to stir up the passions, to inflame and amuse and inspire, Zakaria shoots for the opposite effect, taking controversial and explosive topics and trying to help rattled readers somehow navigate their way through them to yawns, lower heart rates and states of benign unconcern. He’s back at it again with a new piece about the financial crisis called “The Capitalist Manifesto,” which is one of the first serious attempts at restoring the battered image of global capitalism in the mainstream press.
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<br /> This writer has done work like this before, using a big canvas to rework an uncooperative chunk of history in the wake of a crisis. Zakaria is probably best known for his post 9/11 “Why Do They Hate Us?” article, a sort of masterpiece of milquetoast propaganda that laid the intellectual foundation for a wide array of important War on Terror popular misconceptions, not the least of which being the whole “They hate us for our freedom” idea — one of Zakaria’s central arguments was that poor struggling Arabs were driven to envious violence by the endless pop-culture reminders of American affluence and progress.
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<br /> In one exchange in that piece Zakaria talks with an elderly Arab intellectual who scoffs at Zakaria’s suggestion that Arab cities should try to be more like globalization-friendly capitals like Singapore, Seoul and Hong Kong. The old Arab protests that those cities are just cheap imitations of Houston and Dallas, and what great and ancient civilization would want that?
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<br /> I thought the old Arab’s comment was funny, but Zakaria imbued it with serious significance. “This disillusionment with the West,” he wrote, “is at the heart of the Arab problem.” And while witty Arab potshots at tacky southern strip-mall meccas like Houston were significant enough to put high up in Newsweek’s seminal piece about the root causes of 9/11, things like America’s habitual toppling of sovereign Arab governments and installation of ruthless dictators like the Shah of Iran were left out more or less entirely (Zakaria managed to write a whole section on the Iranian revolution without even mentioning that the Shah come to power thanks to a CIA-backed overthrow of democratically-elected Mohammed Mosaddeq, whose crime was ejecting Western oil companies from Iran).
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<br /> Not that Osama bin Laden and his followers aren’t all homicidal lunatics who should be doused in barbecue sauce and tossed in a shark tank, but Zakaria’s piece did a monstrous disservice to Americans by glazing over the sources of Arab anger and portraying America’s enemies as jealous dupes who chose to swallow the religious extremism fed to them by those opportunistic mullahs who stepped into the power vacuum left by ineffectual socialist strongmen like Nasser. (The neat rhetorical trick of making the current political bogeyman, Islamic terrorism, a descendant of the last political bogeyman, socialism, should not go unnoticed by admirers of the propaganda art). As is the case with almost everything Zakaria writes, there was a grain of truth in such a portrait, but it had the convenient benefit of almost completely absolving America of wrongdoing in the ongoing Shakespearean death-struggle for oil that is recent Middle Eastern history. Appallingly, Zakaria even compared America’s bloodlusting pursuit of Middle Eastern resources (a history that includes numerous CIA-backed coups and more than one brutal war) to the frolicking of Tom and Daisy in The Great Gatsby — ie toppling governments and arming Saddam Hussein against Iran is like a bunch of ginned-up rich folk knocking over the china. “America has not been venal in the Arab world,” he wrote. “But it has been careless.”
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<br /> Zakaria’s Capitalist Manifesto is another such grandly fuzzy apologia, a broad exercise in shifting any blame for a big crisis away from a certain unblamable segment of society, only this one is much worse. In his take on the financial crisis he offers a few basic points:
<br /> 1. Gosh it sucks that the crisis happened, but it’s not as bad as people say. Remember how people used to pick on Internet stocks — well, look at Twitter!
<br /> 2. The solution to what ails capitalism is more capitalism.
<br /> 3. There will be a great public desire to tighten up the laws governing the economic sector, but let’s not get ahead of ourselves!
<br /> 4. You know what’s a great idea? Voluntary self-regulation.
<br /> 5. You can make all sorts of interesting collages just using a bunch of dollar bills and a Photoshop program.
<br /> 6. If we could just all learn to be better people, everything will turn out fine.
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<br /> His description of the root causes of this financial crisis are about what you’d expect from a man who invoked
<br /> The Great Gatsby to explain the mentality of the murderer of 4,000 people. When he mentions the objectionable behaviors that led to the loss of trillions of dollars in wealth and untold numbers of lost jobs and misery, he does so with distant, clinical language, like he’s describing something seen through a telescope, disappearing over the horizon. In fact his method of describing the “moral crisis” that led to the financial implosion was to begrudgingly admit that many people were less than nice. Here’s how he put it:<o:p></o:p></span></p> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">quote:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Most of what happened over the past decade across the world was legal. Bankers did what they were allowed to do under the law. Politicians did what they thought the system asked of them. Bureaucrats were not exchanging cash for favors. But very few people acted responsibly, honorably or nobly (the very word sounds odd today). This might sound like a small point, but it is not. No system—capitalism, socialism, whatever—can work without a sense of ethics and values at its core. No matter what reforms we put in place, without common sense, judgment and an ethical standard, they will prove inadequate. We will never know where the next bubble will form, what the next innovations will look like and where excesses will build up. But we can ask that people steer themselves and their institutions with a greater reliance on a moral compass.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> This is a beautiful piece of writing. Describing the misdeeds of Wall Street in the last decade by saying “few people acted… nobly” is sort of like saying that Stalin was “not always sociable” or O.J. Simpson was “not always committed to preserving life.” I mean, talk about a freaking understatement. Forgetting entirely the other insane lies in this passage (my favorite being the one about bureuacrats not taking cash for favors — I guess he means except for Bob Rubin taking $130 million or whatever from Citi after pushing through that merger), that “not so noble” bit is where Zakaria earns his money. Because if you get into the actual gory details of what went on in those years, there’s just no way you come out of that story not wanting to see every banker on Wall Street strung up by his testicles. The crimes of this era were monstrous thieveries, committed against ordinary people in a highly systematic and organized fashion with the aid and compliance of a bought-off government, and the only way you can not perceive what happened as a profound indictment of capitalism is if you blow off the specifics entirely and try to hide the details in vague, airy words like “irresponsibility” and “excesses.”
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<br /> Because the specifics matter. It’s one thing to say that Citi wasted some of the money taxpayers sent its way via the bailout; it’s another thing to say Citi wasted some of the taxpayers’ money by upholstering the pillows on the private jet Sandy Weill took to Mexico over Christmas vacation with Hermes scarves. It’s one thing to say Wall Street bankers felt pressure to chase profits; it’s another thing to say they achieved those profits by systematically robbing a whole generation of pensioners and working-class homeowners, under the noses of the politicians they bought with tens of millions in campaign contributions.
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<br /> Zakaria works hard to tell the crisis story minus these outrageous details. Then he goes on to argue that, basically, nothing should be done. We mostly just need a “gut check”; we, all of us, need to rediscover that little voice in all of us that says, “if it doesn’t feel right, we shouldn’t be doing it.” I mean, that is actually what he wrote. No one needs to go to jail, we don’t need to worry about who’s to blame, we just need, you know, do a better job using our trusty moral compasses to navigate the seas of life. It’s classic Zakaria in the sense that he attacks ugly political phenomena with tired cliches and hack pablum until you’re almost too bored to keep your eyes open, then in the end reduces it all to a dumbed-down t-shirt that carries us forward to another cycle of political inaction: Laissez-faire capitalism doesn’t rip off people, people rip off people! Amazing stuff — God bless him.<o:p></o:p></span></p> </td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"></td> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">my problem with taibbi is the same as my problem with chomsky. they both exist to make middle class people feel like they've been conned and duped, when it's actually the selfishness, greed and ignorance of those same middle class people that caused the problem in the first place. <o:p></o:p></span></p> </td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Ironic war criminal posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">my problem with taibbi is the same as my problem with chomsky. they both exist to make middle class people feel like they've been conned and duped, when it's actually the selfishness, greed and ignorance of those same middle class people that caused the problem in the first place.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
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<br /> <!--[endif]--><o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Dr. Pwn posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Hey. It's another article in which bellicose moron Matt Taibbi acts indignant about things he doesn't understand. Thanks, LF. I can't wait for Those Fuckers who are stealing Our poo poo to Get Theirs during the Common Sense Revolution.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> i think a good troll is when you know it's a troll and yet you still get pissed off or annoyed
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<br /> so, Good Troll. <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Ironic war criminal posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">my problem with taibbi is the same as my problem with chomsky. they both exist to make middle class people feel like they've been conned and duped, when it's actually the selfishness, greed and ignorance of those same middle class people that caused the problem in the first place.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> how did the selfishness greed and ignorance of the middle class cause goldman sachs to engage in securities fraud <o:p></o:p></span></p> </td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="margin-left: -4.85pt;" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt; width: 79.1pt;" width="105"> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Police Academy 6<o:p></o:p></span></p> <p class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Jul 12, 2006<o:p></o:p></span></p> </td> <td colspan="2" style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Dr. Pwn posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">I'm not trolling. You're an ignorant child no better than the average Fox Nation poster who loves to lap up Taibbi's worthlessly reductive garbage because his childish tantrums pander to your categorical anger against Those BanKKKers who Stole Our poo poo.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> <span style=""> </span><o:p></o:p></span></p> </td> </tr> <tr style=""> <td colspan="2" style="padding: 0.75pt; width: 80.6pt;" width="107"></td> <td style="padding: 0.75pt;"></td> </tr> <!--[if !supportMisalignedColumns]--> <tr height="0"> <td style="border: medium none ;" width="108"></td> <td style="border: medium none ;" width="2"></td> <td style="border: medium none ;" width="644"></td> </tr> <!--[endif]--> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"></td> <td colspan="2" style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Dmitri-9 posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">People are being duped. They might participate in a crooked system but they are ignorant participants by design.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> Why do you feel the need to strip people of their agency and identity by insisting that they are but pawns being crushed under the heel of Big Business. If Americans took a step back and said "can i afford this 5 bedroom house? Do I need a new Chevvy that gets 2/2MPG? Should i keep stuffing my bloated gullet with Baconaters?" then perhaps we wouldn't be in this mess.
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<br /> Jimmy Carter was probably the last person of power to actually try and get the citizenry to be aware of the consequences of their actions, but they didn't listen and now we have leaders of the bawling babies like Matt Taibbi frothing at the mouth about the very people that gave Americans exactly what they wanted:
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<br /> Namely: excess. consequences be damned <o:p></o:p></span></p> </td> </tr> <tr style=""> <td colspan="2" style="padding: 0.75pt;"></td> <td style="padding: 0.75pt;"></td> </tr> <!--[if !supportMisalignedColumns]--> <tr height="0"> <td style="border: medium none ;" width="5"></td> <td style="border: medium none ;" width="2"></td> <td style="border: medium none ;" width="741"></td> </tr> <!--[endif]--> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"></td> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Make Ready posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">no but there was an implicit hands-off environment created by the clinton deregulation<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> ok but to understand that someone campaigning on "i will free the markets" actually translates to "goldman sachs will systematically defraud my pension fund" you have to understand something about behavioural economics which i guess falls under ignorance. but if that ignorance is caused by a lack of education that doesnt rigidly conform to free market ideology which is in turn caused by the pervasive neoliberal ideology of the financial and economic elites who fund the campaigns of the politicians who drive the educational agenda then you're back to shadowy cabals again <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Ironic war criminal posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">because they endorsed every bit of laissez faire capitalist bullshit by constantly electing people who pandered to big business and loved deregulation
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<br /> isn't this obvious?<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> so if he more explictly acknowledged that the public loved clinton/bush/obama and therefore bears a large measure of the responsibility would you otherwise be ok with his analysis <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Paper Mac posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">how did the selfishness greed and ignorance of the middle class cause goldman sachs to engage in securities fraud<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> Firstly, shorting one's position in a market is not tantamount to securities fraud. Maybe you should stop getting your economic education from Rolling Stone Magazine.
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<br /> Secondly, sale in the now-undercollateralized securities would not have been possible if not for the deliberate ignorance and complicity of overaggressive speculators who used (admittedly inaccurate) private ratings as an excuse for their inadvisable actions. These actions, as well as the harms that resulted, were allowed, encouraged, demanded, facilitated, and would not have been possible without by the greedy first-world middle class.
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<br /> Or in Taibbi speak: "THOSE GODDAMN CRIMINALS SOLD POISON MORTGAGES TO YOUR GRANDMOTHER HANG 'EM HIGH SDLAKFHLASKFHALS;KJFSA" <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Ironic war criminal posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">my problem with taibbi is the same as my problem with chomsky. they both exist to make middle class people feel like they've been conned and duped, when it's actually the selfishness, greed and ignorance of those same middle class people that caused the problem in the first place.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">noice <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="margin-left: 23.55pt;" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Dr. Pwn posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Firstly, shorting one's position in a market is not tantamount to securities fraud. Maybe you should stop getting your economic education from Rolling Stone Magazine.
<br />
<br /> Secondly, sale in the now-undercollateralized securities would not have been possible if not for the deliberate ignorance and complicity of overaggressive speculators who used (admittedly inaccurate) private ratings as an excuse for their inadvisable actions. These actions, as well as the harms that resulted, were allowed, encouraged, demanded, facilitated, and would not have been possible without by the greedy first-world middle class.
<br />
<br /> Or in Taibbi speak: "THOSE GODDAMN CRIMINALS SOLD POISON MORTGAGES TO YOUR GRANDMOTHER HANG 'EM HIGH SDLAKFHLASKFHALS;KJFSA"<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 12pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">What is with this blame the victim poo poo? Goldman's actions <i>were</i> tantamount to securities fraud and would not have been possible under laws that existed just a few years ago. Maybe you should stop getting your economic education from the Goldman Sachs men's room.
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<br /> Your second point is just as dumb, the actions of Goldman Sachs (and others) have affected people who have never heard of them, CDO's, CDS', etc., and can't possibly be blamed for them. Did you know that it is also possible for people who have never bought a security in their lives to suffer from the effects of global financial crises?<o:p></o:p></span></p> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Ironic war criminal posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">if he laid some blame at the feet of the american people, i would be much happier.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Are you seriously saying that Goldman Sachs was somehow forced to sell all these securities to pensions by the American people? That he isn't blaming the American people for the crimes of Goldman Sachs in an article <i>about the crimes of Goldman Sachs</i> hardly absolves the company of blame, but if you want to feel better about yourself by reading some angry words about Americans you can always read his article about Sarah Palin or something. <o:p></o:p></span></p> </td> </tr> <tr style=""> <td style="padding: 0.75pt;"></td> </tr> </tbody></table> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif"; display: none;"><o:p> </o:p></span></p> <table class="MsoNormalTable" style="" border="0" cellpadding="0"> <tbody><tr style=""> <td style="padding: 0.75pt;"> <p class="MsoNormal" style="line-height: normal;"><b><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Dmitri-9 posted:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-bottom: 5pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">Strange, the article mentions ethics twice but only uses the word illegal when refering to actual penalties payed.
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<br /> You are a moron.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-bottom: 0.0001pt; line-height: normal;"><span style="font-size: 12pt; font-family: "Times New Roman","serif";">
<br /> I assumed he was talking about Matt Taibbi's reductive, alarmist frothing about the current crisis instead of his reductive, alarmist frothing about the late-90s tech bubble burst. My mistake. <o:p></o:p></span></p> </td> </tr> </tbody></table> Irish Toryhttp://www.blogger.com/profile/00728110234077613744noreply@blogger.com0tag:blogger.com,1999:blog-7417563775640238228.post-63158754032404875792009-06-30T05:00:00.001-07:002009-06-30T05:00:57.115-07:00A Debt The Founders Wouldn't Believe<h2><span id="ctl00_maincontent_FeedList_ctl00_TitleLabel"><br /></span></h2> <p class="artdetails">By <span id="ctl00_maincontent_FeedList_ctl00_AuthorText">SEN. JUDD GREGG</span> | Posted Friday, June 26, 2009 4:20 PM PT </p> <p class="lead">In a 1789 letter to James Madison, Thomas Jefferson wrote: "The earth belongs to each of these generations, during its course, fully, and in their own right. The 2d. generation receives it clear of the debts and encumbrances of the 1st. The 3d of the 2d. and so on. For if the 1st. could charge it with a debt, then the earth would belong to the dead and not the living generation. Then no generation can contract debts greater than may be paid during the course of its own existence."</p> <p>What would Thomas Jefferson think today, as the Obama administration puts this generation on a path to drive the debt sky-high, effectively leaving our children and grandchildren to foot the bill? </p> <p>Over the past 40 years, U.S. debt has averaged 36% of our gross domestic product. Because of the current economic downturn and the fact that the government has had to serve as a lender of last resort to stabilize the financial system, we are seeing what should be only a short-term spike in our debt levels. </p> <p>By the end of this fiscal year, our publicly-held debt will be about 57% of GDP. This is not a good situation, but a temporary spike in debt can be managed, just as it was in the past when we were facing the crises of World Wars I and II, the Civil War and the War of Independence. In those instances, debt was rapidly paid off during the postwar periods.</p> <p>Under President Obama's budget plan for the nation, this debt will not be rapidly paid off once the recession ends. Instead, it will continue to mushroom, driven by the president's new proposed spending that we cannot afford, which comes on top of looming entitlement spending we are already facing as the baby boom generation moves into retirement. </p> <p>Because of this spending, we will have budget shortfalls, or deficits, averaging $1 trillion each year for the next 10 years. </p> <p>Since the president's budget does not propose to ask Americans today to pay for that additional spending through taxes, the only way for the U.S. government to get that money is to borrow it, which means adding to, not reducing, the debt. By the end of the budget period as proposed by the president, the debt will have skyrocketed to 82% of GDP, which is simply not sustainable.</p> <p>Interest payments on that debt will soon be the largest single item in the federal budget — more than $800 billion per year in 10 years' time. That will eclipse what we will spend on national security, and is four times as much as we will spend on education, energy and transportation combined. </p> <p>These are not abstract numbers, either — the debt will have an effect on every American. In 2019, under the president's plan, each U.S. household's share of the federal debt held by the public will be $133,000 — more than many Americans owe on their mortgage. </p> <p>Passing a huge, unaffordable, debt-ridden government on to our children — a terrible thing for one generation to do to another — is only one of the troublesome aspects of this situation. The other reason for serious concern is our standing in the global economy, and most importantly, with our creditors.</p> <p>Currently, the U.S. government has the highest possible credit score — a AAA from credit rating agencies such as Moody's and Standard & Poor's — so the debt issued by the U.S. Treasury is considered a very safe investment and is purchased by individual investors, public and private entities, and governments around the world.</p> <p>U.S. Treasury debt is a desirable commodity, and that has helped to keep U.S. interest rates low.</p> <p>In recent news, Standard & Poor's issued an early warning about the AAA rating of the United Kingdom, indicating that it might reduce the U.K.'s rating within the next two years. S&P has downgraded Ireland's debt rating twice so far this year.</p> <p>What does this mean?</p> <p>When a country's bond rating is downgraded, lenders will have less confidence that the country can repay its debt, and that country will have to borrow at higher interest rates. </p> <p>Could this happen to the United States?</p> <p>I certainly hope not, but China, our biggest creditor, is becoming increasingly concerned about our lack of fiscal discipline and the impact that continued excessive borrowing will have on the value of Treasuries that China holds.</p> <p>A former adviser to the Chinese Central Bank recently said publicly that "the U.S. government should not be complacent," and noted that China has alternatives to buying U.S. Treasuries — that it could invest its money in safer vehicles. </p> <p>If the Chinese start to reduce their purchases of our government securities because of our need to borrow increasing amounts of money to finance all the spending that the president has proposed, we will have to start offering higher interest payments to potential lenders to make our securities more attractive.</p> <p>As that interest on U.S. Treasuries goes up, so does the financial burden on taxpayers in the next generation. This would hit the next generation with a double whammy — unnecessary debt we're already incurring, plus higher interest rates on our borrowing. </p> <p>Right now we are on a perilous and unsustainable fiscal course, which, if left unchecked, will lead to some disastrous results — devaluation of the dollar, massive inflation and a confiscatory tax rate on our children that will destroy any hope for the same economic opportunities and lifestyle that we have enjoyed.</p> <p>But that is exactly the plan the president has laid out. The Obama budget does nothing about the health care and Social Security costs that the credit rating agencies have warned about. </p> <p> The current budget plan puts us in over our heads, fiscally speaking, and we cannot continue to ignore the warning signals. Thomas Jefferson was right — no generation should take on more debt than it can pay off during its lifetime — and we should take his wise words to heart.</p> <p><i>Gregg, a Republican, is New Hampshire's senior senator and ranking member of the Senate Budget Committee.</i></p>Irish Toryhttp://www.blogger.com/profile/00728110234077613744noreply@blogger.com2tag:blogger.com,1999:blog-7417563775640238228.post-78533444978171157702009-06-30T04:59:00.001-07:002009-06-30T04:59:53.788-07:00THE GREAT AMERICAN BUBBLE MACHINE<i>From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again<br /><br />By MATT TAIBBI</i><br /><br />The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who's Who of Goldman Sachs graduates.<br /><br />By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup - which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the rear end in a top hat chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden parachute payments as his bank was self-destructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York - which, incidentally, is now in charge of overseeing Goldman - not to mention ...<br /><br />But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain - an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.<br /><br />The bank's unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere - high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth - pure profit for rich individuals.<br /><br />They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s - and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.<br /><br />If you want to understand how we got into this financial crisis, you have to first understand where all the money went - and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long - including last year's strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn't one of them.<br /><br /><i>IF AMERICA IS NOW CIRCLING THE DRAIN, GOLDMAN SACHS HAS FOUND A WAY TO BE THAT DRAIN.</i><br /><br /><b>BUBBLE #1 - THE GREAT DEPRESSION</b><br />Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids - just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his son-in-law Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out short-term IOUs to small-time vendors in downtown Manhattan.<br /><br />You can probably guess the basic plotline of Goldman's first 100 years in business: plucky, immigrant-led investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there's really only one episode that bears scrutiny now, in light of more recent events: Goldman's disastrous foray into the speculative mania of pre-crash Wall Street in the late 1920s.<br /><br />This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an "investment trust." Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and e-trading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regular-guy investors into the speculation game.<br /><br />Beginning a pattern that would repeat itself over and over again, Goldman got into the investment-trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund - which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah - which, of course, was in large part owned by Goldman Trading.<br /><br />The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line; The basic idea isn't hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.<br /><br />In a chapter from The Great Crash, 1929 titled "In Goldman Sachs We Trust," the famed economist John Kenneth Galbraith held up the Blue Ridge and Shenandoah trusts as classic examples of the insanity of leverage-based investment. The trusts, he wrote, were a major cause of the market's historic crash; in today's dollars, the losses the bank suffered totaled $475 billion. "It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity," Galbraith observed, sounding like Keith Olbermann in an ascot. "If there must be madness, something may be said for having it on a heroic scale."<br /><br /><b>BUBBLE #2 - TECH STOCKS</b><br />Fast-Forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country's wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor's assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a top-drawer firm that had a reputation for attracting the very smartest talent on the Street.<br /><br />It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm's mantra, "long-term greedy." One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a long-term loser. "We gave back money to 'grownup' corporate clients who had made bad deals with us," he says. "Everything we did was legal and fair - but 'long-term greedy' said we didn't want to make such a profit at the clients' collective expense that we spoiled the marketplace."<br /><br />But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's co-chairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.<br /><br />Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national cliche that whatever Rubin thought was best for the economy - a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline THE COMMITTEE TO SAVE THE WORLD. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy - beginning with Rubin's complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.<br /><br />The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.<br /><br />It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system - one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.<br /><br />"Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public," says one prominent hedge-fund manager. "The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash." Goldman completed the snow job by pumping up the sham stocks: "Their analysts were out there saying Bullshit.com is worth $100 a share."<br /><br />The problem was, nobody told investors that the rules had changed. "Everyone on the inside knew," the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They'd been intact since the 1930s."<br /><br />Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. "In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future."<br /><br />Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a little-known company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.<br /><br />How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the Bullshit.com CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of<br />the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price - let's say Bullshit.com's starting share price is $15 - in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the day-trader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit - a six percent fee of a $500 million IPO is serious money.<br /><br />Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nichol as Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television rear end in a top hat Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.<br /><br />"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation - manipulated up - and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations - a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)<br /><br />Another practice Goldman engaged in during the Internet boom was "spinning," better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price - ensuring that those "hot" opening price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger first-day rewards for the chosen few. So instead of Bullshit.com opening at $20, the bank would approach the Bullshit.com CEO and offer him a million shares of his own company at $18 in exchange for future business - effectively robbing all of Bullshit's new shareholders by diverting cash that should have gone to the company's bottom line into the private bank account of the company's CEO.<br /><br />In one case, Goldman allegedly gave a multimillion-dollar special offering to eBay CEO Meg Whitman, who later joined Goldman's board, in exchange for future i-banking business. According to a report by the House Financial Services Committee in 2002, Goldman gave special stock offerings to executives in 21 companies that it took public, including Yahoo! co-founder Jerry Yang and two of the great slithering villains of the financial-scandal age - Tyco's Dennis Kozlowski and Enron's Ken Lay. Goldman angrily denounced the report as "an egregious distortion of the facts" - shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. "The spinning of hot IPO shares was not a harmless corporate perk," then-attorney general Eliot Spitzer said at the time. "Instead, it was an integral part of a fraudulent scheme to win new investment-banking business."<br /><br />Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn't the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.<br /><br /><i>GOLDMAN SCAMMED HOUSING INVESTORS BY BETTING AGAINST ITS OWN CRAPPY MORTGAGES.</i><br /><br />Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits - an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman's mantra of "long-term greedy" vanished into thin air as the game became about getting your check before the melon hit the pavement.<br /><br />The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America's recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that "I've never even heard the term 'laddering' before.")<br /><br />For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent - they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.<br /><br /><b>BUBBLE #3 - THE HOUSING CRAZE</b><br />Goldman's role in the sweeping disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that poo poo out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.<br /><br />None of that would have been possible without investment bankers like Goldman, who created vehicles to package those lovely mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con's mortgage on its books, knowing how likely it was to fail. You can't write these mortgages, in other words, unless you can sell them to someone who doesn't know what they are.<br /><br />Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the lovely ones: The CDO, as a whole, was sound. Thus, junk-rated mortgages were turned into AAA-rated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance - known as credit-default swaps - on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the ex-cons will default, AIG is betting they won't.<br /><br />There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated - and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses.<br /><br />More regulation wasn't exactly what Goldman had in mind. "The banks go crazy - they want it stopped," says Michael Greenberger, who worked for Born as director of trading and markets at the CFTC and is now a law professor at the University of Maryland. "Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped."<br /><br />Clinton's reigning economic foursome - "especially Rubin," according to Greenberger - called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 1l,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.<br /><br />But the story didn't end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housing-based securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities - a third of which were subprime - much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.<br /><br />Take one $494 million issue that year, GSAMP Trust 2006-S3. Many of the mortgages belonged to second-mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation - no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.<br /><br />Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners - old people, for God's sake - pretending the whole time that it wasn't grade-D horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. "The mortgage sector continues to be challenged," David Viniar, the bank's chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions .... However, our risk bias in that market was to be short, and that net short position was profitable." In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.<br /><br />"That's how audacious these assholes are," says one hedge-fund manager. "At least with other banks, you could say that they were just dumb - they believed what they were selling, and it blew them up. Goldman knew what it was doing." I ask the manager how it could be that selling something to customers that you're actually betting against - particularly when you know more about the weaknesses of those products than the customer - doesn't amount to securities fraud.<br /><br />"It's exactly securities fraud," he says. "It's the heart of securities fraud."<br /><br />Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. Massachusetts also investigated Goldman for similar misdeeds, acting on behalf of 714 mortgage holders who got stuck ho1ding predatory loans. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million - about what the bank's CDO division made in a day and a half during the real estate boom.<br /><br />The effects of the housing bubble are well known - it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It hosed the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and hosed the taxpayer by making him payoff those same bets.<br /><br />And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm's payroll jumped to $16.5 billion - an average of $622,000 per employee. As a Goldman spokesman explained, "We work very hard here."<br /><br />But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down - and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.<br /><br /><b>BUBBLE #4 - $4 A GALLON</b><br />By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn't leave much to sell that wasn't tainted. The terms junk bond, IPO, subprime mortgage and other once-hot financial fare were now firmly associated in the public's mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years - the notion that housing prices never go down - was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.<br /><br />Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market - stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a "flight to commodities." Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.<br /><br />That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be "very helpful in the short term," while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.<br /><br /><i>GOLDMAN TURNED A SLEEPY OIL MARKET INTO A GIANT BETTING PARLOR - SPIKING PRICES AT THE PUMP.</i><br /><br />But it was all a lie. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the short-term supply of oil rising, the demand for it was falling - which, in classic economic terms, should have brought prices at the pump down.<br /><br />So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help - there were other players in the physical-commodities market - but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures - agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.<br /><br />As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.<br /><br />In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission - the very same body that would later try and fail to regulate credit swaps - to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.<br /><br />All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops - Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.<br /><br />This was complete and utter crap - the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.<br /><br />Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market - driven there by fear of the falling dollar and the housing crash - finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers - and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.<br /><br />What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.<br /><br />"1 had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you<br />have to clear it with Goldman Sachs?'"<br /><br />The CFTC cited a rule that prohibited it from releasing any information about a company's current position in the market. But the staffer's request was about a letter that had been issued 17 years earlier. It no longer had anything to do with Goldman's current position. What's more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Still, in a classic example of how complete Goldman's capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.<br /><br />Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index - which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil - became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions - meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedge-fund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."<br /><br />Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commodities-trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn't know when oil prices would fall until we knew "when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives."<br /><br />But it wasn't the consumption of real oil that was driving up prices - it was the trade in paper oil. By the summer of2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.<br /><br />In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World.<br /><br />Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. "The highest supply of oil in the last 20 years is now," says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. "Demand is at a 10-year low. And yet prices are up."<br /><br />Asked why politicians continue to harp on things like drilling or hybrid cars, when supply and demand have nothing to do with the high prices, Stupak shakes his head. "I think they just don't understand the problem very well," he says. "You can't explain it in 30 seconds, so politicians ignore it."Irish Toryhttp://www.blogger.com/profile/00728110234077613744noreply@blogger.com0