90.9 WBUR - Boston's NPR news station
Top Stories:
PLEDGE NOW
Goldman Sachs vs. S.E.C.

Goldman Sachs chairman and chief executive officer Lloyd Blankfein testifies on Capitol Hill in Washington, Wednesday, Jan. 13, 2010, before the Financial Crisis Inquiry Commission. (AP)

The SEC took out the knives Friday, filing a civil suit against Goldman Sachs that alleges the bank knowingly defrauded investors of billions of dollars, and in fact made money on its investors’ losses.

Authorities say the bank gave its seal of approval to investments it knew were rotten. The worst of the toxic assets — the sort that helped bring down the financial system. 

It’s a big charge, and it could have sweeping consequences.

Goldman Sachs, which says the charges are “unfounded,” wasn’t the only investment bank wrapped up in these trades. All of Wall Street was doing it.  

This Hour, On Point: the federal government versus Goldman Sachs.

Guests:

Matt Taibbi, contributing editor for Rolling Stone magazine. You can listen back to our hour with him last year, in which he debated a longtime consultant to Goldman Sachs. You can also read his big, and controversial, piece on Goldman.

Arthur Laby, professor of law at Rutgers School of Law. Before joining the Rutgers faculty, he served nearly ten years on the staff of the U.S. Securities and Exchange Commission.

Gregory Zuckerman, a senior writer and columnist for The Wall Street Journal who has closely followed these insider trading cases. His new book is “The Greatest Trade Ever: The Behind-the-Scenes Story of how John Paulson Defied Wall Street and Made Financial History.” You can listen to the On Point segment in which he tells the backstory of what went on with Goldman Sachs and other investment banks.

Please follow our community rules when engaging in comment discussion on this site.
  • joshua

    How far will they go with this? What does it really mean? Will any real punishment be handed out? What we need to do is shock and awe the corporate community–strike fear into the hearts and minds of the CEO’s and the 400 some odd billionaires that think they can manipulate mankind and horde everything for themselves and make everyone else wage-slaves. We have no middle class–there is the billionaire elite, and there is the working class–their digits–or as the banks and insurance companies refer to us–dead peasants. their rhetoric and their actions prove they are morally bankrupt and the true enemy of the state, and the of the earth. this goes way beyond fiscal responsibility–it is the dark heart of the industrial-military-congressional complex killing Americans, and massacring the rest of humanity.

    Shock and awe!

    I’m afraid all that will happen is a few prisons will be sacrificed for the greater demon-head machine, and they will suffer in plush country clubs called prisons for the elite. We all know how terribly Martha Stewart suffered. Prisons for dead peasants and ‘detainees’ is one thing, prisons for the greedy and the powerful quite another. But with all the hard work that they do–I can see why they need the back rubs and pleasant gardens.

  • joshua

    ‘few prisons’ above should say pions (pee-ons).

  • http://www.richardsnotes.org Richard

    Simon Johnson’s and James Kwak’s site, http://baselinescenario.com/ is a great source for clear commentary and discussion about this.

    If you missed it, they were on Bill Moyers’ show this past Friday:

    http://www.pbs.org/moyers/journal/04162010/watch.html

    If this spreads beyond Goldman to Citi and Rubin gets in trouble no doubt it will lead back to Summers and Geithner and…

    I do think Paulson and even Greenspan ought to get a spanking as well.

  • Gary

    The puppets in congress are ALL against any type of regulations being imposed on their masters. If the current bill is not killed our discussed to death, then it will be amended in exchange for campaign kickbacks to let the current environment remain unchanged.

    The GOP has come down in unity against ALL regulations (Rule of law). Perhaps they should examine the free market paradise of Somalia, and how total deregulation has made them the free market industrial giant that is the envy of all the world. I’m certain that the Dems are against regulation as well, but there is that pesky voter anger to deal with. http://www.cnn.com/2010/POLITICS/04/16/republicans.financial.reform/index.html

    Indeed when the Wall St lobbyists enter a congressional office, and hand the representative the amendments and talking points that will be given in the house or senate, the representative instinctively assumes the kneeling position and obediently begs to service the lobbyist.

    The lobbyist responds that maybe another time because , Senators give better oral presentations than congressmen anyway. The congressman smiles and shoves the $6000 into his pocket, but remains on his knees to thank God for his guidance. http://dealbook.blogs.nytimes.com/2010/03/28/lobbying-blitz-takes-on-obamas-plan-for-wall-st-overhaul/

  • Janet

    I’m glad someone is finally looking at Goldman Sachs, but at the end of the day, they will pay a small fine, and continue doing business. They are too big, too power for anyone to take down.

  • cory

    It’s America. Money is the boss, applesauce!

  • Natalie

    The timing of this seems completely suspect. I sense a backroom agreement between the SEC and Democrats looking to get politically-driven financial regulation passed.

    When an investment bank is on the other side of the trade, it’s always buyer beware. There is no way this deal should be portrayed as david v goliath. This was big bank dealing with big bank; only big boys playing here.

  • http://n/a Adam S.

    I was happy to hear this news, though have to agree with the ‘slap on the wrist’ scenarios being discussed here.

    Maybe all that we can hope for is a re-tuning of their brand image; to something closer to Matt Tiabbi’s “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money”.

  • Rob

    I personally believe people should let the specific facts of this case come out, rather than rushing to immediate judgment (e.g. populist attacks on Wall Street, President Obama, Rubin, Hank Paulson – not to be confused with the hedge fund client as it is simply the same last name, etc…). Here are some of the specific facts of this case as I see it.

    In 2007, Goldman created a product, a collateralized debt obligation, for a hedge fund client Paulson & Co. that was extremely bearish on the value of US housing. This product allowed Paulson & Co. to make a bet against the value of housing. On a side note, Paulson and Co. should not to be confused with the former Treasury Secretary as there is no relationship.
    Goldman then sold these CDO’s to investors. There is nothing illegal about an investment banking firm representing both sides on a transaction. To make sure the product was vetted ahead of its sale, Goldman hired an independent company, ACA Management, to do just that. And they released a report telling potential buyers exactly what was in there. Did Goldman do something illegal when it vetted the product, letting everyone know what was in it? Or were the buyers of the CDO’s just plain stupid for wanting CDOs backed by deadbeat mortgages in the first place? While I personally think the latter as investors need to be responsible for performing their own due diligence on any transaction, some of the key questions relate to the following:
    1) Whether the proper disclosures were made to the CDO investors that Goldman was acting on both sides
    2) Did Goldman properly disclose its specific relationship with Paulson and Co. to potential investors?
    3) Did Goldman allow Paulson and Co. to cherry pick a specific composition of the CDO’s without disclosing this fact to investors?

    On another note, the root causes of the US housing crisis and our current economic problems are of course far more related to excessive overconsumption relative to income (particularly among middle class Americans) and the lack of any real savings rate to the point where the US needs to rely on foreign savings to fund our overconsumption. However. I am sure Goldman’s arrogance will make a nice whipping boy for the mindless populist politicians on the left and the right.

  • Martin Field

    Rolling Stone? What were all the Spin guys busy?

  • Natalie

    ACA had final say on all 90 securities that went into the CDO and rejected more than half of Paulson’s original suggestions so it does not appear that the structure was designed to lose money for long investors; ACA was long.

  • Rick

    Would be interesting to know if there were Countrywide mortgages include in the CDO. Worth noting is that Countrywide was also listed by the Fed as late as 2008 as a Primary Government Securities Dealer. That meant they were subject to Fed supervision (Greenspan to the contrary notwithstanding).

    According to Louise Story in todays’s NY Times, default swaps were also included in some CDOs offered by ACA. Were the buyers of the product thus doubling down on the mortgages in the CDO?

    Mike Lewis points out in The Big Short that some dealers were bundling up the CDSs they had written and placed then into CDOs which were then sold and had CDSs written against.
    A truly unvirtuous circle. Mind boggling.

  • kung fu

    The Obama administration is now castigating Goldman and the rest of Wall Street, but in 2008 the Obama campaign team had no qualms with taking large donations from these robber barons.

  • Martin Field

    Didn’t take long to realize Matt is completely out of his depth. At least he admitted he’s a lefty.

  • Todd

    Civil suit? So what! A civil suit results in a monetary fine; which Goldman-Sachs will pay from the proceeds of the money they stole through their fraud. Why isn’t the SEC pursuing CRIMINAL charges against Goldman-Sachs? This is nothing more than a token slap-on-the-wrist to placate the public.

  • John

    Did Jane really just ask “Why is this story important?”

  • rich4321

    “Investment companies” such as Goldman, Sachs, are nothing more then a thief and robber. These crooks get their money by cheating their clients, by robbing and by stealing from us the tax payers. These people in charge are the biggest criminals in the country. They should all be sent to China and face the fire squad!!!

    I hope the Obama administration will go full force to clean out these carps of mankind!!

  • Haskell

    Goldman Sachs got their ideas from Magnetar. Perhaps someone ought to bring them up.
    http://www.propublica.org/feature/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble

  • David Browne

    A question: 1)Did Goldman have a fiduciary duty to the people who bought the bad bonds? Or did they just have an obligation disclose their content?

  • john

    This Goldman event was a two hour blip on the radar on Friday. While this will no doubt drag on, as critics have said, we have a very short attention span.

    The Market is up today. I rest my case.

  • David Browne

    In answer to Todd: The reason this is a civil suit and not a criminal case is that the SEC doesn’t have the power to bring criminal charges. However, they can refer cases to the Justice Department for them to bring criminal charges.

    I’d bet that Justice is looking into whether they can win a criminal case (it’s a MUCH harder burden). But it’s important to remember the implications beyond this one issue. This is one case they may not be able to afford to lose. If Goldman can win the case — all they have to show is a reasonable doubt — it will make the political battle for regulation much harder. Justice will probably only pursue criminal charge if they have a lot of confidence they can win.

    The real problem for Goldman is not criminal charges, but all the follow-on suits from its customers — that may add up to the many billion$.

  • http://www.lit.org/author/fritzwilliam F. William Bracy

    Can anyone hear the words, “betting,” and “deals” going on and being used by your great Wall Street reporter? Does anyone hold back any reserve at all for conservatives anywhere in this country? … including journalists?

    Wall Street doesn’t represent investment in America. This is pure Las Vegas and it’s heading us toward the Roulette wheel as a substitute for retirement plans and college funds for the average American.

  • Nancy Rabinowitz

    First of all, many thanks to Matt Taibbai for his great work in bringing some light to the workings of Wall Street.

    It seems to me that the real “entitlement” problem in this country is on Wall Street and in the banks. When it comes to making more money with Wall Street it appears that anything goes and they have lawyers who will interpret the law to rationalIze and justify just about anything. We need regulation and enforcement. We do not need exotic “instruments and vehicles”. The best idea I’ve heard so far is that companies that trade in these exotic “instruments” be denied access to the discount rates at the Federal Bank. Let’s not help these guys rob u.

    Matt wrote a great article that appears in the latest “Rolling Stone Magazine” gives us one example us how greed and an insatiable desire for more money has led to incredibly bad deals for countries, cities, towns and individuals everywhere.

  • http://n/a Adam S.

    Your guest just tipped his hand. Capitalism is our form of government? Really? Last I checked, that doesn’t even qualify as a form of government, but a form of economics. Boy, oh boy.

  • Natalie

    Matt needs to answer these to regain any credibility:

    What is the significance that this was a synthetic CDO?

    Who bought the equity tranche?

  • Cay Llacey

    Why do Americans distrust government as pointed out in this morning’s reporting? Because the government is being manipulated by the lobbyists for the financial industry (NOT profession!) as witnessed by the 20-year rollback of regulation, incluidng GLB and other well-disguised efforts to remove all restraints from this unmitigated greed. If the Republicans succeed in blocking necessary financial reforms, citizens are justified in the current level of disillusionment with government.

    I have worked in real estate for years and was well aware of the dangers of sub-prime mortgages and other artificial pressures on the housing market. However, I was totally unaware of how the interconnected mess of sub-rosa networks of CDOs and CDSs would pull the world economy down. A remaining ache is that the folks who benefitted appear to be keeping the goodies!

    I fundamentally trust the government to do what is best, but when elected representatives are motivated only by partisanship and the desire to retain their offices, the process is perverted. The recent decision on campaign finance is both the cause and result of this process.

  • kim siebert

    I would like to make a point about regulation and the role of government. My view is that government must step to protect citizens when the system doesn’t otherwise work in a way that safeguards the common good.

    All this noise against big government ignores the fact that, left to its own, the marketplace has demonstrated it will work to benefit only the few and only the elite— to the detriment of average folks.

  • Jan Harbaugh

    Taylor Caldwell explained this whole system in A Prologue to Love. None of it surprises me, and since these bankers essentially own most–if not all–of the Congress–I have little hope that real consequences or reform will ever happen.

  • Martin Field

    Goldman says they lost $90M on this deal because they held onto some. So apparently they defrauded themselves. Pretty dumb for supposedly smart guys. But maybe they can sue themselves and get the money back. Gotta love the U.S.A.!

  • http://www.lit.org/author/fritzwilliam F. William Bracy

    @Adam S.

    Good catch! Perfect! You’re referring to the WSJ journalist who doesn’t deserve the name or the recognition as a journalist. His press badge should be revoked.

  • Andrew Bell

    You don’t need short-selling to burst bubbles. They burst when people stop buying. Witness Beanie Babies and tulips.

  • http://www.lit.org/author/fritzwilliam F.William Bracy

    We need bubbles, huh, Mr WSJ? Wait until you have a few years and a little experience in life under your belt. Wait until you’re the one whose retirement plans are ditched into the toilet, you &)&*^&!

  • Tom

    In the past investors were attracted to Goldman Sachs for some of the same reasons they were attracted to Bernie Madoff — the apparent ability to produce better returns than anybody else. The hint that someone has an “inside edge” turns out to be more attractive than the concern that it may be gained unethically/illegally.

    If Goldman can fight the charges or isolate them to a single player, I think there is a good chance that many clients will love them even more – as long as Goldman is making money for them.

  • Don M

    I recognize that the facts of the ‘case’ should be framed within the proper scope.

    However, Wall Street consistently earns our public derision. Regardless of how much they couch terms in ‘complexity’, ‘financial instruments’ or what the market requires.

    It’s a shell game. It has become the mathematics PHD equivalent of 3 Card Monte.

    People are always going to want to play, and people are always going to game the system.

    I’d feel better if Wall Street relocated to Las Vegas.

  • http://www.lit.org/author/fritzwilliam F.William Bracy

    This is the worst program I’ve ever heard on WBUR. I would have expected to hear everything that’s being said on FOX, and nowhere else. Disgusting!

  • jeffe

    Correct me if I’m wrong, but I don’t think mortgages should be bundled and sold in the first place.

    This is about homes, and what people can afford.
    A mortgage should be about the community it is in and some kind of thing to be traded. I know this is old fashioned, but clearly the CDS’s did not work.

    There is no transparency on wall street so they get away with a lot. They have the money to hire the best and brightest legal talent to avoid situations like this.
    I know as I have a friend in one of those large wall street firms legal department. They all knew these were bad, the rating agencies did and so did the people on wall street making these bets.

    I don’t believe for one minute that the CEO’s of these firms did not know what was going on. It is the height of audacity.

    I urge people to watch the Bill Moyers show on this very topic.

    http://www.pbs.org/moyers/journal/04162010/watch.html

  • Bernard B

    In this case, contra your experts,as the NYT recently pointed out, the shorters (i.e. Magnatar) actually allowed the party to continue and the bubble to get more catastrophic by providing counterparties to the guys who wanted to get the CDOs (mortgage derivatives).
    More broadly, it is useful to think of two levels to the problem. Our attention is drawn to the toxic shock aspect of derivatives. So the legislators are thinking in terms of trying to avoid such disasters.
    But there is also the tapeworm aspect to the modern (deregulated, computer and whiz driven) financial markets, which have been eating up larger portions of the economy. The magnificent Paul Volcker (don’t trust the rest, they are not evil, but they are fools) said it best. Of the financial innovations of the recent decades, the thought one was useful: the ATM machine. He also (1992) said businessmen need stability, and speculators need instability. So Congress is going to try to put a fence around the beast — keep the tapeworm as a pet. There will be piles of laws, laws, laws instead of eliminating the naked debt swaps.
    Lawsie me.

    Bernard B

  • Benjamin Stewart

    Securitization has made home ownership more widely available by lowering rates for all. If you go back to Bailey Bank and Loan days where banks hold onto all the mortgages they issue, only the swells are going to be able to buy a house in Pottersville. The rest of us will be renting, not terrible, but somewhat feudal.

  • Natalie

    Bill Moyers, please that guy cheery picks his guests to go along with his far-left bias.

    I’m also disappointed that OP couldn’t call a bond trading desk at Fidelity or something and get a practioners insight into this thing. I’m not saying keep them on all hour, but this is pretty esoteric stuff and I’m convinced these guys who don’t deal with it everyday don’t get it. We’ve got people buying and selling this stuff all day right here in Boston and we have to listen to a journalist from a music magazine, an academic, and a journalist pushing a book.

  • jeffe

    I disagree Benjamen. My parents bought a house in an upper middle class neighborhood and the bought the house they could afford. They did get into debt later in life like a lot of Americans, they bought into the credit card world of easy money. However on the house front they were not wealthy.

    Houses are over valued, and in some areas such as New York City it’s out of control. In some areas a one bedroom is over 1.5 million. You have to make ate least 300K a year to afford this. Giving a mortgage for anything over what they can afford is nuts.

    In most other countries more people rent than own. I do not see anything wrong this.

    We have an obsession with home ownership in this country and it’s misguided and recent events seem to prove this.
    Look at all foreclosures of the last few years, millions of them. How can anyone sit there and say this system works?

  • jeffe

    Natalie and you cherry pick for your right wing agenda.
    I guess you like this set up? You want wall street to be able to bring the on another Great Depression?

    You seem to not to be able to grasp what was said on the Moyers show. Simon Johnson is a well respected authority on this subject. You’re OK with six banks holding assets in excess of 63% of the U.S. Gross Domestic Product?

    To me this is not a left right problem as if the economy fails our political ideologies will not put food on the table. Natalie try to use some common sense, I know it’s hard for you, but try.

  • Benjamin Stewart

    Most people buy houses they can afford, and treat the house as a home not an investment/cash machine.

    Home prices generally are a function of supply and demand. Lower rates and poor underwriting can skew the demand side temporarily.

    Somebody/entity is always going to own the home someone else is renting. People with variable or unstable incomes should not be owners, but everyone should have the chance to buy a home they can afford.

  • http://reinventing-america.blogspot.com/ ulTRAX

    I just don’t buy into the notion that Credit Default Swaps are necessary to stop speculative bubbles from forming. What did we do prior to 2003 when these CDSs took off?

    My fear is that the high returns from skimming the cream off the churn of money in these speculative markets drains money from productive activities.

    I favor more incentives for the banking sector to engage in productive activities that promote innovation and create jobs.

    We also have to see Wall St for what it is… largely a glorified crap game that puts a drag on our economy. That speculators like Goldman Sachs pushed oil up to $147 a barrel in ’08 was one of the straws the broke the camel’s back.

    I favor creating massive disincentives for this casino economy… bringing back Glass Steagall, speculation transaction taxes, transparency in all markets, getting all but end-users out of the commodity markets, strict limits on leveraging for speculative investments etc.

  • Natalie

    Personal attacks aside, looking at one side of a bank’s balance sheet is an act of sheer ignorance. I find it hard to believe he made such a statement.

    With that said, I would not be opposed to raising capital requirements as bank’s market shares grow, varying capital requirements by asset type and limiting leverage overall.

  • Todd

    “In answer to Todd: The reason this is a civil suit and not a criminal case is that the SEC doesn’t have the power to bring criminal charges. However, they can refer cases to the Justice Department for them to bring criminal charges.

    I’d bet that Justice is looking into whether they can win a criminal case (it’s a MUCH harder burden). But it’s important to remember the implications beyond this one issue. This is one case they may not be able to afford to lose. If Goldman can win the case — all they have to show is a reasonable doubt — it will make the political battle for regulation much harder. Justice will probably only pursue criminal charge if they have a lot of confidence they can win.

    The real problem for Goldman is not criminal charges, but all the follow-on suits from its customers — that may add up to the many billion$.”
    Posted by David Browne

    @ David Browne:
    Thank you for a well-thought answer! Yet, I ponder the wisdom of placing the SEC in the position of regulating/enforcing rules, the infraction of which can be criminal, and not vesting said agency with the authority to directly pursue the criminal aspects. I wouldn’t hold my breath for the DoJ to follow up with any criminal charges against Goldman-Sachs—too many revolving-door connections between D.C. politics and Goldman-Sachs for that to happen.

    Also, how can the SEC even have standing to sue Goldman-Sachs on civil grounds? The SEC didn’t suffer any direct damages. Are they suing on behalf of investors, or are they claiming that their feelings were damaged when their toothless rules were violated? How are damages to be determined? And, even if the SEC prevails in its civil suit, who benefits from the damages awarded?

    At the very least, it will be interesting to see this case unfold!

  • Martin Field

    In constant 1973 dollars oil at $147 was nothing to whine about. We all know how you love constant dollars. Please explain why you’re whining.

  • Louise

    This is Obama politics Chicago style. Smoke and mirrors with a bogus civil fraud case meant to get some astroturf protesting for overregulation. Boring!

  • Ellen Dibble

    If the banks wanted to influence Congress, they needed money/lobbyists. In order to do that, they needed Fast Money, and if Americans in general were sitting on that Fast Train, then all was in order. The problem is, America betting on ever inflating prices of homes is very different than America betting on production. Communist Manifesto, right? Who owns the means of production? The people. But what we have now: What production? Our wealth comes from making bets on residences. I would call this “going to seed.” We are not producing new blossoms, new fruit, just settling in and waiting for Armageddon. Or that was the “American dream,” of home ownership.
    The banks were thrilled by this dream. They could collect mortgage interest in most spectacular ways. If you offered to pay for the house up front, you were not at all so “interesting” to the realtors. They liked to point you straight to a bank, for some reason.
    How do we get ship of state a-right? Doubtless not by letting the judiciary do it all by themselves. The banks and investment companies will shout that our 401(k)s will go down, that every state will suffer when their pension funds go down, and lo and behold, the Dow will fall. See? Vote back in the clan in Congress that is in our pockets, Or Else.
    Or Else.
    People don’t look at their homes, their jobs, and their retirements go down the tubes without total disgust.
    I wouldn’t leave it to certain radio commentators to “handle” this all alone. I would call in not just to “friendly” shows that hope for the best. I would be calling the shows where I probably disagree with every listener. Let’s get on the same page somehow. Government may be pathetic, but does it need to be?

  • jeffe

    Natalie you post here a fair amount and you seem to make comments that are based on a political ideology. Most of us do, but your swipe at Bill Moyers and that show in particular was based on nothing more than ideology.

    I Moyers does have a liberal bent to his programs, however they are usually pretty informative and in the case of the one I mentioned, very informative.

    The other thing that I noticed is you seem to support Wall street and the system that created this mess. I’m not against Wall street or investment banking, but it is clear to me and I would hope anyone else that what has been going on for the last 20 years has not worked. It needs to be fixed. It needs to be regulated. Banks to big to fail need to be broken up. Everyone I know lost huge amounts of their 401k’s while the people who brought this on still collected their bonuses.
    From where I sit the deck seems pretty stacked against people like me and everyone I know.

    The other question I have, what does Wall street do that is productive for the economy as a whole? Not much it seems.

    I was watching a program on Detroit the other day and what a mess that city is in. Why is there no investment in building up that sector of the country? We let corporations and Wall street call the shots and in doing so they have destroyed cities, communities and lives. Why? All for the bottom line. I’m not advocating hand outs. I’m advocating for serious long term investment and education in order to keep us competitive. Right now that does not seem to be happening.

  • Natalie

    My contention is that there is generally sufficient regulation but regulators need to do their job. It would help if they didn’t have politicians telling them to look the other way for the greater good a la Robert Rubin and Barney Frank.

    Losing money in your 401(k) has nothing to do with regulation. Did your investments go down in 2001? That’s cuz markets go up and markets go down, a worthwhile lesson to learn but don’t scapegoat the markets for your inability to ascertain an appropriate level of risk for yourself.

    Please tell me how Bill Moyers made the connection between Wall Street and the sinking of Detroit. Wall Street wasn’t to blame for corrupt politicians, crushing pension obligations, drugs or related crime, the demise of the American auto industry, self-defeating union labor contracts, white flight, …

  • Ellen Dibble

    I thought Jeffe made some excellent points, and I see a boatload of questions from Natalie, unanswerable to the extent we might not have encyclopedic memories of exactly what Bill Moyers presented on this, that, and the other, but still. Gotta go.

  • Lon C Ponschock

    jeffe,

    Thanks for the program on Moyers. I urge everyone else to listen to that 30 minutes. Unlike the discussion here, what Moyers program discusses is belief systems. Thomas Frank (from What’s The Matter With Kansas?) calls it One Market Under God– from his earlier book title. Until and unless there is — how to call it — financial apostacy, the belief system will continue and the complicity with it will remain.

    In short it’s not them it’s us. Catherine Austin Fitts describes a condition of “financial intimacy” in which savers and by extension investors know where their money is– what banks are doing with it.

    Defunding banks can be done not in a bank run, but in what I’d call a bank stroll. Here and there state banks are created, people move their money out of large institutions and into local banks which provide the service industry that they were chartered to do.

    Chartering is another thing. Corporations are chartered. Those charters can be contested and withdrawn.

    John Nichols most recently described how the US Post Office at one time acted as a small savers bank at their locations and could do so again.

    Now to the subject of the program which is legal investigation of Goldman. Take a look back at the catastrophe of the Exxon Valdiz. Exxon has been able to legate the issue down to nothing and then refuses to pay that while the flesh and blood victims of the nearby native peoples die after twenty years of corporate manipulation. They can always wait.

    The answer is to remove the feeding tube.

  • ulTRAX

    Martin Field wrote: In constant 1973 dollars oil at $147 was nothing to whine about. We all know how you love constant dollars. Please explain why you’re whining.

    I supposed you LOVED paying $4.50 a gallon for gas and not having a clue where the hell the money was going?

    What did it buy us? More security? More money diverted to develop alternative energy? That bubble in the oil market bought us nothing. It was a backdoor Wall Street tax on ALL of us. The gas pumps became vacuum cleaners stripping cash from our wallets. And no doubt this oil spike damaged the economy. Why? Because almost every recession in the past 40 years have been caused by spikes in energy prices… 1973, 1980, 1990, 2001, and arguably while the current Bush recession started in 2007, this massive oil price spike no doubt made this recession that much worst.
    http://research.stlouisfed.org/fred2/series/OILPRICE

    BTW, you’re constant dollar estimate is off by about 30%. According to inflation calculator at
    http://www.westegg.com/inflation/
    What cost $147 in 2008 would cost $30.66 in 1973… yet the actual price of crude spiked about $40, not $30.66. $40 oil in 1973 would cost $191.78 in 2008.

    Are you always that sloppy? And why are you comparing spike to spike? Why not what the difference was in oil prices before and during the spike? THAT’S what is the economy killer. There’s no time for the economy to adjust.

  • ulTRAX

    To Martin… my apologies. I misread your post in regard to constant dollars.

    That doesn’t negate the rest of what I said.

  • Natalie

    Yeah, the answer is to deny entities their legal rights.

  • jeffe

    Personal attacks aside, Natalie I did not say that Moyers made any connection from Detroit and Wall street. My point was that this place is dieing and long and hard death and to me is a symbol of how investment and long term investment in our country is not producing any viable results for large portions of the nation. It’s all about the quarterly return. I don’t understand why people are so against investing and educating as a on going concern to keep the nations GDP and competitiveness on par with the rest of the world.

    I recently saw some images of the Detroit area and it looks like a war zone. It seems to me that if this kind of thing spreads far and wide enough through the Midwest and other areas we could have some serious problems in this country.

    Wall street as far as I can see offers nothing to rest of the nation on real growth and investment. As this show clearly highlighted. The issue was not betting against the housing market it was how it was done. While I understand why this kind of thing happens it seems to me that this kind of speculative BS does nothing for the common good of the nation.

    No Wall street is not responsible for the things you listed but they are for forcing corporations to have unrealistic returns every quarter. As for all the other problems you listed about Detroit, from bashing Unions and bad management in the Auto industries I have to agree with some of that. But why is it that this area can’t be turned around? Why is it we are spending billions on a wreck of a country like Afghanistan and nothing on a wreck like Detroit?

    I’m not a bad investor, I don’t have the money to do so.
    401K’s were not meant to be retirement accounts. They were originally designed as supplemental to pension funds. Now most of us have these accounts that were not designed for retirement.

  • Anthony LaCassia

    Investment banking firms, stock brokers, stock rating organizations and traders all derive a fee for their services. Mortgaged-backed securities had elements of risk for a number of reasons. There appears to be a passionate need to identify a scapegoat for the meltdown, and exact the proverbial “pound of flesh”. What about the homeowner during the years of 1990 through 2005 who sold their homes for 3-4 times the value that they had originally paid for the home. They pocketed the lions-share of the risky loans that were approved and used to payoff the original owner and provide the new owner (now in default) with the mortgage necessary to purchase the home. All the entities involved with the sale and purchase received a fee or commission but it was the title holder of the home who walked away with a windfall profit. Now I turn to the local building departments of the townships with the USA, who issued building permits for new starts. I ask the obvious: What was the basis to approve of a tidal wave of new starts? Was there a population boom, a sudden increase in the immigration quotas? What exact science did the local governments use to approve the building permits or variances necessary for builders to break ground? Property tax revenues is the answer! Every time a new foundation is poured, the local governments hear the sound of new tax money entering the local treasury. Has anyone bothered to analyze why local and state governments currently have shortfalls. When you have 17% unemployment, 28% delinquency rate on mortgage payments, 24% of US homes worth less that he mortgages against those assets (toxic), and a healthy decline in consumer spending in conjunction with people refraining from using credit to make purchases then, you have a dramatic decline in the streams of revenue to local and state governments. That is why there are thousands of new home construction projects that have been halted just after the bubble burst. In order to keep the budgets balanced, the local and state governments require new home construction. Without them they can not balance their budgets. Yes, perhaps GS might receive penalties however, the real culprits are our own governmental officials, and their insatiable appetite to spend our money in the form of tax revenues. The FED as well as the Treasury Department are just as guilty.

  • jeffe

    Anthony so a large portion of the melt down is people who bought home in 1990 through 2005. I’m not sure anyone buying a home in the Boston area in that year going back to 2000 made that much. 1990 is 20 years ago. Anyone holding on to a house for 20 years does not seem to me to be a home speculator.

    The banks let people borrow who clearly should not have been allowed to. The Investment banks were trading in billions and I can not think how that even compares to the amounts of money of people selling there homes after 20 years. Or the amount who practiced flipping homes.

    In the Boston area there was very little new home building going on and yet there were and still are a lot of foreclosures in this city.

  • ulTRAX

    Martin Field wrote: In constant 1973 dollars oil at $147 was nothing to whine about. We all know how you love constant dollars. Please explain why you’re whining.

    Wrong. 2008 oil prices were the same in constant 1973 dollars when prices hit $106 a barrel. In fact they rose to $147.

    http://www.npr.org/templates/story/story.php?storyId=87991822

    As for my screw up, I was looking at the one chart’s adjusted price of 1973 oil instead of the actual price. My apologies again for rushing to accuse you of being sloppy. But in fact we both were.

    I can self-correct. Can you?

  • http://www.beccar.wordpress.com Eugenia Renskoff

    Hello, Tom, Maybe there is life at the end of the tunnel after all. Maybe we, the people who got scammed via mortgage fraud and lost our homes foreclosure will get our day in court as well as our money back. Eugenia Renskoff

  • Mark S.

    I suggest that anyone wanting to understand the kinds of personalities who helped engineer this mess, as well as a paltry few who warned the SEC about it even before the crash but were ignored, read “The Big Short” by Michael Lewis. The people who engineered this mess needed the system to crash to make their money on the back end through credit default swaps, so they didn’t care or were so deluded that they didn’t see. The loan originators didn’t care because they dumped them into CDOs as fast as they could, and couldn’t get enough crap mortgages to collateralize. The ratings agencies are literally worthless as reliable indicators of what’s going on in The Great Casino. The “market” that GS helped create fed upon and needed crap mortgages to make money on the back end, and here we are…

    The whole system is rotten to the core and it will happen again though some other mechanism. When it does, and the gummint no longer has the leverage or the capacity to act, that’s when all hell breaks loose.

  • Rob

    @ Eugenia Renskoff, commented
    “………….Maybe we, the people who got scammed via mortgage fraud and lost our homes foreclosure will get our day in court as well as our money back.
    Please note that I am not making any comments regarding your specific situation (as I do not have any basis for doing so) and I do have sympathy for the life upheaval many Americans have experienced after losing their jobs. However, I find it impossible to have sympathy for many of these people who knowingly took out mortgage loans that they could never afford by either lying about their income and/or never took the time to understand the potential risks inherent with variable rate mortgages. A reasonable person would not purchase a home under a variable interest rate, when after doing some basic budgeting they could not afford the monthly payments after the mortgage reset to a higher rate. Understanding these mortgages only requires a basis understanding of personal finance, rather than a Phd in mathematics.

    As I noted above, the only relevant facts of the SEC vs. Goldman case rest upon whether Goldman made the proper legal disclosures to the CDO investors regarding its relationship with Paulson and Co. This has nothing to do with foreclosures or “homeowners” who purchased homes without understanding their mortgages (many of whom also committed fraud by lying about their income, etc…..).

    In the spirit of some bipartisanship, I do agree with Jeffe’s comment above that “Americans need to get over this fascination our society and both political parties have with home ownership”. I would argue that a person who purchases an overpriced property with an interest only mortgage and no equity is not a “homeowner”, rather they are the economic equivalent of an overpaying renter from the bank. Renting can also allow many people, particularly younger workers, the ability to be mobile with respect career opportunities and amny people are probably better off diversifying their savings.

  • Rob

    In case anyone wants to read the SEC’s specific charges and some of Goldman’s responses to these charges, here are some links:

    SEC Charges
    http://www.sec.gov/news/press/2010/2010-59.htm

    http://www.sec.gov/litigation/complaints/2010/comp21489.pdf

    Goldman’s response: http://msnbcmedia.msn.com/i/CNBC/Sections/News_And_Analysis/_News/__EDIT%20Englewood%20Cliffs/Goldman%20Sachs%20SEC%20Complaint.pdf

  • Steve

    The biblical rules for city of refuge for those considered guilty by the general populace should apply.

    Let the leaders of Goldman and their families escape to cities of refuge to seek protection against bloodlust or let them face those whose lives that have been ruined by their avarice.

    Further, these cities of refuge should be established in Haiti, Darfur, or Yemen.

    Let these men who profess to being doing “God’s work” learn service and self-sacrifice.

    But please let’s keep an eye on them…they have the skills to steal from the poorest of the poor.

  • Joe S.

    Did that guy just say “this is a narrow case”?

    Come on now. This is not an anomalous situation. It is at best a trend, at worst a virtue.

    To suggest anything else is either obtuse or naive. Our lady of denial watch over you.

    Why be so cagey about embracing profit over people, just claim it baby. It’s safe to do so in this country-heck we’ll name a library after you if you’re good atit.

  • Paul A

    Does it matter that Paulson chose some contents of the portfolio that Goldman set up? All investors had the right to reject anything in the portfolio. ACA, the biggest investor, was the agent that had final say.

  • Ellen Dibble

    I have always wondered how exactly investors conceived of “betting” that the value of home mortgage equities would go up.
    Easy. House values rise. (The house sprouts wings, learns to play croquet?)
    Also easy: What goes up must come down.
    But along the way, there is the FastFood jobs equivalent; there are jobs building the home.
    But: does the home produce jobs? Nyet. Nein. No. A very small amount of mathematical facility tells you that the population growth even with a mightily pumped-up “American Dream,” cannot sustain full employment by building homes year-in year-out. (Every child of the house grows fast and gets a mortgage at age 21 on their own brand-new home???)
    I recall a program about 2000 (my guess) on WBUR where the question was what would happen when the bubble burst (I’m wondering why I thought it was a housing bubble since that was pre-dot-com, but anyway), and the debt owed by the USA to China and others was the other side of the question — or least to my mind. And I believe I posted that China would end up owning all the homes because the banks would run out of money (when the mortgage payers couldn’t pay up).
    What I mean is: This is not all so sudden, not all such a surprise. But as Saturday Night Live put it circa October 2008: “If my investments are going up and up, I certainly don’t ask why.”
    One more thing about renting, besides that you are paying a landlord (who makes profits locally, pays property taxes locally like everybody else, and likely employs maintenance people), you the renter end up a bit baffled to speak up in public meetings after a string of people have been saying they have been paying taxes for 20 years. Therefore I keep track of building assessments so I can announce that my building has been paying $12,000 a year and has never sent a child to public schools and I don’t use the roads except for biking (well, I say some of that, but); I say that I’m not buying the building (that the landlord can get his money back by selling the building, some of that, but), and as a tax-paying citizen, how about x, y, or z.
    “No representation without taxation,” I say.
    Barney Frank and Fannie Mae and Freddie Mac seem to have been trying for decades to deprive renters of their citizenship (their property-tax-paying representative citizenship) this way by pulling as many people as possible into “Affordable” rental units, whose leases are set up as a tax deduction for the owner, rather than as tax-paying real estate. PILOT payments are designed to be less, and certainly less public. (Payments in Lieu of Taxes.)
    And the leases do not allow you to rent cheap and save to buy a home outright. I smell a lobbyist here: The bank apparently wants huge profits whenever someone buys a home; they want it impossible for us to save upfront, so people have to get mortgages with minimal downpayments (and the bank makes off like a bandit).
    Well, the ramifications go on and on, all of which are highly Politically Incorrect to mention, but it’s high time to mention it.
    A young person (or anyone) will be much more mobile if one rents, more able to seize the next career opportunity, but not so mobile if the rental stock has been steeply diminished (through condominiumization and shifting to “affordable” units).
    Communities that still have enough rental stock to allow in-town mobility (where one knows one can move and move till one has that treasured mini-community and place of one’s own), those communities are the derelict ones, factories closed, no money-hungry developers looking to create cash cows (condominiums) or tax breaks (affordable housing).
    Lately, the cost of building per SRO (single-room rental unit, many storied building) was found here to be (I don’t dare trust this memory but heard it 3 times) a million dollars — per subsidized unit. That had been about 12/08, mid-crash, and I did think at the time, land values haven’t gone up THAT high.
    My point is that single-family homes are our current contretemps, stumbilng block, but multi-unit homes involve even greater potential for profit and for, um, gambling.
    Once “they” are done tearing down abandoned single-family homes in Detroit, then they can start building rental units somewhere for those people. We’ll see.

  • asterix

    The guest on this show is supporting CDSs as a means to burst bubbles, and he argues that they are “good” for the market.

    But the problem is that in this case, the people betting against the bubble first blew the bubble up as large as possible, and THEN popped it.

    In order for Paulson to bet against the market, he had to first get MORE people to take the other side of his trade, which obviously he had to do without complete disclosure.

  • Sam

    one of the commentators stated that capitalism, “is the best form of government”, and Jane let this pass with no challange. The unfortunate reality is tht all too many people ,apparently Jane included, do not know the difference between governmental forms, ours being a representative republic, and economic systems. This is the sort of confusion that leads to supreme court pronouncements that insure corporate domination of our elections.

  • Lauritz Larsen

    Your guest who stated today that capitalism is the best system and we all know that, it’s proven time again, bla,bla bla, clearly has missed the obvious. If it is so good, why would this malfeasance occur? Time after time. Without greed and avarice, what is capitalism called?

  • Ellen Dibble

    If we want our investments to increase in value, we’re going to have to educate the bankers in other ways to achieve that other than betting one investment against another. The idea that the only way for a trader to get ahead is to have a closer guess as to the value of X at time Y — that is how investments have been inflating, and how they’ve been popping.
    I envision my investments as being in the back pocket of someone hiking through a field with a group of young engineers, scientists, planners, with a vision of the future, making their case.
    I do not envision my investments as gambling except in the sense that something like one in ten enterprises succeeds. Some bank may have to back someone ten times before they get on track.
    But what we hear about is investment as roulette, or a game of trickery and entrapment, which is not building the economy, nor creating jobs, which might not be illegal, but what about all that bailout money.

  • Mark S.

    Credit default swaps are financial weapons of mass destruction that enabled the crash. In Lewis’ book it was made clear that the CDS market was what players like GS and the other banksters and mortgage bond swindlers were betting on to make their money when the 2005 and 2007 mortgages “reset” in 2007 and 2009 respectively. All they had to do was find a sucker like AIG to back the CDS funny money.

    The one thing that I got from Lewis and other books I am reading about the crisis is that our economy, and hence our lives, are alternately in the hands of sociopathic financial madmen or clueless idiots, with regulators and ratings agencies asleep at the switch or actively aiding and abetting.

    Derivatives should be regulated to the point at which they become untenable. CDOs and CDSs should be regulated out of existence. If that means that the “economic dynamism” of the vaunted financial services industry, perhaps mores the better. The real economy has been both enslaved and crippled by the financial services masters of the universe. Face it, but a lot of people who had conventional mortgages and who were paying their mortgages on time have lost their incomes and then homes due to job losses caused by the devastation wrought by financial services industry.

    Too big to fail means too big to exist. Take them down.

  • Mark S.

    Oops! I meant to say: “If that means that the “economic dynamism” of the vaunted financial services industry is blunted or slowed down, perhaps mores the better.”

    And yes, I meant it.

  • luigi

    Jane:

    You need to speak up when a guest states an incorrect comment: Zuckerman (the money man) says we have a capitalistic government. REALLY??? We need some thinkers, not lightweights.
    Where was the former SEC guy during all these years of corruption? Was he booted out of the SEC or did he bail?

  • luigi

    Get some real guests who know something instead of those shilling their books or covering their butts.

  • luigi

    Zuckerman! Nobody cares about your damn book!!!!

  • Todd

    “Your guest who stated today that capitalism is the best system and we all know that, it’s proven time again, bla,bla bla, clearly has missed the obvious. If it is so good, why would this malfeasance occur? Time after time. Without greed and avarice, what is capitalism called?”
    Posted by Lauritz Larsen

    @ Lauritz Larsen:
    Call it capitalism without greed and avarice. No economic model is perfect; some are merely less imperfect than others. And, any model is only as honest, or corrupt, as the people that operate within it. Besides, in practice, there is no such thing as a pure capitalist economy. The malfeasance has occurred, not because capitalism is so bad or good, but because greed and avarice are always bad—in any economic model.

  • joshua

    Can u count how many times they say this is “complicated”–rhetoric–the same thing you say to a child when you don’t know how or you don’t want to explain something–it’s complicated–as if we are all children (we peasants)–don’t be angry, this is necessary. how many times do they tell us –don’t be angry, it’s complicated–just like we are ignorant naive children that should recognize their place–just accept it and be obedient.

    This is nonsense–there is something cold and heartless about these people–they speak of these things as if they are pure numbers–we are talking about people and livelihoods. Should we have a casino as a government–its insane–but that’s what w have in America. He says we should and need to be able to bet against bubbles–but they creates incentive to create bubbles–capitalist is based on profit. he says there needs to be more transparency and that’s pretty much all he can say–oh, there needs to be somebody on the other side–essentially-he has said nothing of value. He’s asking us to have faith in super-capitalists to be moral, and ethical–that’s what he thinks regulation is. They cannot be moral or ethical–that’s not how capitalism works. When have we ever seen capitalists, captains of industry, robber barons behave morally–is that why we are raping Iraq and countless other nations around the world–because we are so superior in our morals!? is that why we have a middle man between us and government profiting off of death in the health-care industry. It’s morals that allowed so many miners to perish–no–it was greed–profit above all else–even humanity, even society, even civilization–profit above and against America and Americans. keep in mind as these robber barons are betting against the house, they are manipulating common people who don’t necessarily understand the game that is being played–it’s so “complicated” –they don’t know they are playing a game, and in most cases don’t want to–but they have no choice–they are being bet against and forced to play Russian-roulette with bankers and investors in every aspect of their life. So people are not seen as human beings who suffer, but as assets and tools to be manipulated and exploited–from sickness to housing, to labor–all for the mighty rich. What’s not being said is that these common peasants can’t play the game because they cannot and probably will never have the buying power or the assets–wealth is inherited, mostly. So the filthy rich use the plebeians and bet against them, hoping they will suffer, and perish-so money can be made for the very few–that is what is happening. The very rich are hoping common people suffer, and even die–DIE! So the elite can make money. That is this capitalist system they rave about and say is too complicated for children like you to understand–don’t be angry–be happy. Take your soma. Take your designer drugs we pitch on the boob-tube–the one-eyed monster. Go have a drink. Go shopping. narcotic capitalism. its a drug. The pimps and the corner boys (wall street and bank of America are keeping it real, for you–how noble–because its too complicated for you to understand!

  • joshua

    It should be emphasized that if you have a system where is allegedly healthy to bet against the bubbles (apparently this is some kind of regulation) than it creates incentive to create bubbles-therefore finding loopholes in the system, breaking the law, deceiving, manipulating, backroom deals–un-ethical systems–to lie, cheat, and steal from the American people–especially the under-educated, and the labor class–the digits–this is no kind of regulation. We need people power. Independent organizations and government–direct democracy–enforcing powerful laws and regulation–moral ethical laws. That is the point of government–to enforce ethics where there are none. the ethics of the people–and the more educated u are the more u understand your place in the world and what is being done to you in your name. Its no coincidence that our education declines dramatically as the billionaire class gathers it dark powers. It’s no coincidence that got everybody believing government and regulation is somehow a bad thing. To them it is–they want to rape you!

  • joshua

    It’s not complicated at all. it’s really very simple. “Complicated” is code for let us do the thinking for you. they now just how to push your buttons. Its complicated, and everyone just tunes out or submits.

  • Mark S.

    Ideally, I would like to see Goldman Sachs follow Lehman Brothers, Arthur Andersen and other corporate sociopaths into oblivion.

    Now, I am supposed to say I don’t really mean that and I’m just angry, soon to return to a more moderate view of the world.

    No, actually, I would like to see Goldman Sachs sent to corporate oblivion, along with a nice on camera perp walk. Won’t happen under Obama, but then you take what you can get. Under a Republican Administration, GS would probably be given a civilian medal of honor for meritorious service screwing those not in the 1 percent.

  • Gary

    @ Mark S “Too big to fail means too big to exist. Take them down.”

    That is the absolute and most realistic point made in the comments as per this issue.

    I would also like for the readers and listeners to step back and think about all of the things that the “financial services” industry has done to make the money in your pockets the money in their pockets.

    Where are you going to go with your money that is out of their reach, what instrument, or institution is free of their forced financial servitude?

  • Steve

    to paraphrase John Lennon -
    “I no longer play the game”

    Voluntarily opt out, start with eliminating the use of credit cards. Do your buisiness with only local banks and institutions. (Before I took out a mortgage I searched for banks that agreed not to sell the mortgage – it was possible even during the run-up)

    Purchase only what you can afford – if you cannot afford the big screen TV, chose to spend time with those people you hold most dear instead. You may even come to enjoy them more than the TV. Your stuff is only dust, the relationships are what lasts.

    This will necessarily deprive the large banks of the ability to corrupt us all. It will also limit the power of the federal government.

    Know your neighbors intimately, take care of them and let them take care of you.

    Believe that it is possible and have faith to act.

  • Todd

    @ joshua:
    Sounds complicated, but I agree with you 100%! ;)

  • Gary

    It is ironic that these financial corporations use taxpayer money to declare record profits, and are using that same taxpayer money to pay lobbyists in Washington to keep the taxpayer funds flowing in, by putting taxpayer money, into taxpayer salaried congressmen, to keep taxpayers poor, and these corporations from having any kind of loss, or pay any taxes at all.

    Its the American business model…

  • Natalie

    The fact that this lawsuit decision went on a party-line vote confirms that politics is behind this whole thing.

  • ulTRAX

    With a curious interpretation of the facts Natalie wrote The fact that this lawsuit decision went on a party-line vote confirms that politics is behind this whole thing.

    Really? :roll: Why can’t it mean that GOP commissioners are determined to abuse their positions on the SEC to COVER-UP for Goldman Sachs?

    Nah!

    Depending on your political stripes, a plausible explanation… or spin, may make something appealing.
    It doesn’t make it true.

  • ulTRAX

    Twenty niner wrote: But during the last thirty years, increasing deficits have never caused any immediate pain that would have translated into political pressure to raise taxes and/or cut spending, in any meaningful way. As long as inflation was under control and the economy was seeing productivity gains, the country could almost borrow at will.

    It’s not as if this situation could go on forever. In about 8-10 years that Social Security surplus that we’ve been pissing away on other things will dry up and we’re going to be faced with either taxing ourselves to pay those IOUs off… or borrowing even more.

    This is why it was critical to start paying down debt 10 years ago when we had a surplus… not that it could last forever even without the Bush tax cuts. But Bush RAN ON PRESERVING THOSE SURPLUSES TO STRENGTHEN SOCIAL SECURITY… here’s one of his 2000 press releases:
    http://romcache.tripod.com/bush2000.pdf

    Yet the FIRST thing he did was pass round after round of tax cuts even after the surplus vanished. That SHOULD have been a red flag to all but the politically dimwitted that it was his intent TO RUN UP DEBT. Why not… the starve the beast strategy has been at the heart of extreme Right politics since Reagan.

    And since Bush already stated during his campaign that the surplus was necessary to strengthen Social Security… it’s not a big leap to realize his intent was also to WEAKEN Social Security.

  • david peterson

    Taibbi was the only one who got this story right,
    the two quests on the show were clowns from the
    financial industry. The fact that Levy worked for
    the Sec and owned Goldman stock made me sick. I think
    on point should have chosen better quests to go
    over this like Simon Johnson, who btw does not think
    derivatives add anything to the economy. Its complicated
    so they can screw the average joe out of their money
    and not go to jail. The two guest were corrupt members
    of that same class. Shame on On Point for not having
    the guts to have Taibbi or someone else like him on
    the whole time.

  • Michael Drew

    This was an absolutely excellent show. Diverse viewpoints, from Taibbi to insiders (insiders have a lot of important, valuable information even if they are insufficiently critical in their viewpoint, though, if you listened carefully, i think you’d find strong criticisms in these two’s stated views). The most technical discussion of the issues I have heard on MSM. Good work.

  • ulTRAX

    Peter Davidson wrote: Taibbi was the only one who got this story right, the two quests on the show were clowns from the financial industry.

    Truly, aside from Taibbi… Laby and Zuclerman were a terrible choice of guests. The notion that the cure to reckless speculation is MORE speculation against the original speculators is absurd. It just diverts even more money into the casino economy and away from productive activities. It’s time to rethink the purpose of Wall Street: to provide capital for economy, not for the economy to revolve around the needs and whims of speculators on Wall Street.

  • http://krameroneill.com kramer

    What an odd show. A few minutes of Matt Taibbi, followed by thirty-plus minutes with two market evangelicals. I don’t understand why you needed two of them; their opinions were almost identical, they both celebrated greed, corruption, and the artificial inflation and deflation of bubbles–the very definition of market manipulation–as “necessary,” and they both condescended to the “angry” callers (as did Jane, in a slightly-less egregious but still pretty lousy way).

    Yes, it’s certainly interesting to hear these people express their worldviews without interruption–it is, in its way, much more chilling than anything Taibbi has written about such people (even more so when one considers they probably genuinely represent the values of our ruling elites). But it might have been helpful to correct at least some of their egregious misstatements, no? “On Point” did not seem particularly on point today.

  • justanother

    @Posted by ulTRAX, on April 21st, 2010 at 5:16 PM

    ulTRAX, can’t agree more!

  • d-Arcy

    1) “Capitalism” may not be the ideal economic system, it’s just better than whatever is in second place.

    2) A $2 billion fine wouldn’t cripple GS. (A I write GS has reported a $3B PROFIT for Q1, 2010!)

    3) Throughout this program I kept hearing “investors bet”. That’s an oxymoron. Gamblers bet. Speculators bet. Investors invest. Gamblers should go to the track or the casino — with their own cash.

    4) The “investment banks”, GS, MS and the investment arms of Citi, etc., can shop around among the ratings agencies for the best rating on an issue. They should be required to pay the full fee to each agency contacted and the issue should carry the ratings of all the agencies contacted. (For an excellent description of gaming the ratings see “Fiasco: Blood on the waters of Wall Street” by Frank Partnoy, 2nd edition.)

    5) Short selling should be banned. If an investor (no speculators allowed) thinks a stock he owns is about to tank, he can sell shares he holds, or not purchase additional shares. The guests went on and on about the necessity of counter “bets” being necessary. Bull! If investors come to think an issue is overvalued its price will fall naturally as would-be sellers outnumber would-be buyers.

    One way around an outright ban would be to require that “short” sales be labeled as such. If Joe Slez wants to short sell Acme Industries he would only be able to sell to people willing to take him up knowing that it is a “short” offer. Bill TruHart can place his order, conditioned that it not be counter to a short seller. As things stand now, Bill wouldn’t know that the shares he’s buying were sold short.

  • Steve

    Goldman Sachs potential defense that because they lost money, they did nothing wrong in defrauding their clients is ridiculous. That is just like saying that if a bank robber does not get away with the loot, that he did not rob the bank!!

    If found guilty, Goldman needs to go down along with their reputation and then like dominoes, each and every one of these seemingly above the law, to big to fail, evildoers needs to be brought to bear if they participated.

  • Natalie

    The party-line vote, the fact that the suit was announced the same day a super-condemning IG report on the SEC’s investigation of the Stanford ponzi scheme came out, and the timing relative to the financial reform debate in the Senate all stink.

    This whole thing is an Obama administration political clustermuck. Civil fraud, how weak can you get.

  • Natalie

    Goldman is not defending themselves against the fraud charges by saying they lost money. They’re saying they lost money to support the fact that this product wasn’t designed to fail.

  • Natalie

    All defenders of Taibbi to answer these to maintain any credibility:

    What is the significance that this was a synthetic CDO?

    Who bought the equity tranche?

  • ulTRAX

    Natalie wrote: “Who bought the equity tranche?

    Typically the equity tranche, the first to take a hit if there are defaults, remains in the hands of the originator of the portfolio.

    So are you suggesting that if the originator is Goldman, then this gets them off the hook? Or does it just further demonstrate their culpability in that Goldman was taking out insurance against investments they put together knowing they’d go bad?

  • Natalie

    Typically in a synthetic CDO there is no equity tranche, as there wasn’t here. Despite that the SEC complaint refers to the equity tranche. So my point is that the SEC doesn’t know what they’re talking about, at best, but more likely they made this all up to serve their political masters.

    Also Goldman didn’t put this deal together or didn’t you read the complaint.

  • ulTRAX

    Who says there wasn’t? Seems others like Barons believe there was an equity tranche that Goldman hung on to. Not sure you can get this article… sometime it displays in full, sometimes only as a summery:
    http://online.barrons.com/article/SB127171119804979635.html

    Essence of it is: The government complaint against Goldman refers to a contemplated equity tranche of 9% in the deal. And 9% of $1 billion happens to be $90 million, the size of the firm’s loss on the deal.

    The Securities and Exchange Commission charges that Goldman essentially duped ACA, the credit insurer that selected the underlying mortgage issues for the ABACUS deal, into believing that Paulson would be an effective owner of the securities and indeed would be holding the riskiest part of the deal – the equity.

    “In fact, Goldman never intended to market to anyone a “0 to 9%” first loss equity tranche in this transaction,” the government complaint states.

    This statement is curious because if there was a 0-9% tranche, which would have totaled $90 million, it would have been in Goldman’s interest to sell it since that tranche bore a lot of risk.

    You can claim all you want that this SEC complaint is political. I think what’s political is that it’s been nearly TWO YEARS since the Bush/Wall Street economy fell apart and there’s STILL no real investigations or reforms. Where are the televised hearings like with Watergate that expose all the inside deals and corruption and serve to educate the American People?

    Compared to the Pecora hearings in the 30’s, Obama’s and the Democratic Congress’s lame response are the real scandal here. In my mind this is not some long, thoughtful attempt to get reforms right… but an attempt to derail serious reforms.

  • windcatcher

    An “octopus wrapped around the face of humanity” as one journalist put it; the New World Banking Order has arrived. In 2009 speculative, uncontrolled derivatives were the Worlds largest market at an estimated 600 Trillion. The Worlds total economic output was an estimated 58.07 Trillion and the total World bond market was an estimated 82.2 Trillion. Yet, there is no “crime” that the bankers can be charged with as they bankrupt citizens and Nations into the New World Order?
    The appropriate criminal charge should be Treason to the American People and our Democratic Republic and Constitution. The members of the Trilateral Commission and the Bilderberg Group in government and banking who conspired to overthrow our soverenity as an independent nation, who conspired to bankrupt our Treasury with three unjust Wars and multinational corporate bailouts, conspired to control mass media “free Press” propaganda, conspired and manipulated “financial crisis” for their own gain, conspired to “relocate” American industry and technology, conspired to offshore “American Income Tax”, and who have conspired to enslave American citizens with National debt (about $64,000 per citizen) and personal debt. Deserve the death sentence by firing squad for Treason.
    Obama, your New World Order is Totalitarian and we Patriots, American free citizens, will fight for our Democracy, Independence and Freedom.

  • greg

    I am presently in litigation with Fremont Reorganizing, Goldman Sachs dba Litton Loan Servicing, et al., (2 different cases) for about 2 years now. The main issue with the complaint is a fraudulent loan originated by Fremont in June 2006. This in turn produced an array of other
    issues: unsigned deed of trust, over billing issues, lost payments, excessive balloon payment, back dated assignments, illegal non-judicial foreclosure documentation, missing documentation, illegally reporting to my credit, falsifying declarations, 6 week TRO’s, court procedures not followed, judges wait until the courtroom is cleared to rule against a TRO (both times); retired (78 year old) judge ruled against a seated judges TRO where the retired judge took 30 minutes to read a 300 page brief. The whole time they have been ignoring my request and failing to give me the required documentation so that I can rescind the loan. Goldman Sachs dba Litton Loan Servicing has been aggressively trying to foreclose on my property. I believe to cash out for insurance reasons. (It’s over a million dollar loan) I have invested over $400,000 into this property for the past 5 years and if I had known about this mortgage meltdown game played by Wall Street I would have never proceeded with this Real Estate transaction. The Media and the Government has not once addressed or helped the borrower, namely me, who also has been damaged by these defaulted CDO’s.

    A Time line of what’s going on with Goldman Sachs to show how they are scheming to pursue foreclosures for the insurance by acquiring distressed, shelled fraudulent companies which will eventually or haven’t already gone BK…

     Oct 26, 2005 Litton Loan Servicing Class Action – mishandling loans, servicing over 400,000 borrowers – case settled Feb 17, 2009 for $537 (limited due to class status)
     Feb 27, 2007 FDIC Cease and Desist – Fremont Reorganizing for illegal loan practices, et al., (largest predatory lenders who heavily solicited brokers for their schemes)
     Oct 16, 2007 Massachusetts Lawsuit vs Fremont and Goldman Sachs – Predatory Lending Practices – settled May 11, 2009 for $60 mil
     Dec 11, 2007 – Goldman Sachs Acquires Litton Loan Servicing
     June 2, 2008 Litton (Goldman Sachs) Acquires Fremont Reorganizing Servicing Rights
     June 19, 2008 Fremont Reorganizing files BK
     Apr 16, 2010 – SEC vs Goldman Sachs – Securities Fraud

    Here is the link to my blog http://bushnellcomplaint.blogspot.com/ if you want to download court documents pertaining to my case.

    Note: My wife is pursuing individuals who are interested in joining her in a class action lawsuit with regards to violation of her community property rights in a wrongful foreclosure. If you are in a community property state and a spouse is not on title you may have grounds for legal action.

  • http://www.judgeroberts.com/ Steven

    The party-line vote, the fact that the suit was announced the same day a super-condemning IG report on the SEC’s investigation of the Stanford ponzi scheme came out, and the timing relative to the financial reform debate in the Senate all stink.

    This whole thing is an Obama administration political clustermuck. Civil fraud, how weak can you get.

  • http://www.guiltymethod.com/ Dave

    This was an absolutely excellent show. Diverse viewpoints, from Taibbi to insiders (insiders have a lot of important, valuable information even if they are insufficiently critical in their viewpoint, though, if you listened carefully, i think you’d find strong criticisms in these two’s stated views). The most technical discussion of the issues I have heard on MSM. Good work.

ONPOINT
TODAY
Jul 29, 2014
The U.S. Senate is seen on Capitol Hill in Washington, Wednesday, July 16, 2014. (AP)

The “Do-Nothing” Congress just days before August recess. We’ll look at the causes and costs to the country of D.C. paralysis.

Jul 29, 2014
This April 28, 2010 file photo, shows the Colstrip Steam Electric Station, a coal-fired power plant in Colstrip, Mont. Colstrip figures to be a target in recently released draft rules from the Environmental Protection Agency that call for reducing Montana emissions 21 percent from recent levels by 2030. (AP)

A new sci-fi history looks back on climate change from the year 2393.

RECENT
SHOWS
Jul 28, 2014
U.S. Secretary of War Newton D. Baker watches as wounded American soldiers arrive at an American hospital near the front during World War I. (AP Photo)

Marking the one hundredth anniversary of the start of World War One. We’ll look at lessons learned and our uneasy peace right now.

 
Jul 28, 2014
This June 4, 2014 photo shows a Walgreens retail store in Boston. Walgreen Co. _ which bills itself as “America’s premier pharmacy” _ is among many companies considering combining operations with foreign businesses to trim their tax bills. (AP)

American companies bailing out on America. They call it inversion. Is it desertion?

On Point Blog
On Point Blog
Our Week In The Web: July 25, 2014
Friday, Jul 25, 2014

Why the key to web victory is often taking a break and looking around, and more pie for your viewing (not eating) pleasure.

More »
Comment
 
The Art Of The American Pie: Recipes
Friday, Jul 25, 2014

In the odd chance that our pie hour this week made you hungry — how could it not, right? — we asked our piemaking guests for some of their favorite pie recipes. Enjoy!

More »
Comment
 
Hillary Clinton: ‘The [Russian] Reset Worked’
Thursday, Jul 24, 2014

Former Secretary of State Hillary Rodham Clinton took time out of her global book tour to talk to us about Russia, the press and the global crises shaking the administration she left two years ago.

More »
3 Comments