Being a Wall Street Executive

For those sensitive to such language and graphics excuse me, but I think the message is quite clear: "You put Lloyd Blankfein in a pound-me-in-the-ass-prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide in a Rolling Stone interview. "That's all it would take. Just once." Here is the complete article, Why Isn't Wall Street in Jail? I think it is pretty clear. Wall Street is essentially the government if you look in the case of Bill Clinton's Treasury Secretary who went to Citigroup or Goldman Sach's Hank Paulson who became Treasury Secretary under George Bush.

Being Goldman Sachs

In her article "Why a Criminal Case Against Goldman Sachs Matters and Why Charges Could Stick" Pam Martens makes her case clearly. Here is a large portion of the article:

The first Goldman Sachs panel to line up before Senator Carl Levin’s subcommittee on April 27 consisted of Daniel Sparks, Joshua Birnbaum, Michael Swenson and Fabrice Tourre. Mr. Sparks headed the Mortgage Department and supervised the other three who worked in the Structured Product Group at the time the SEC has alleged the securities fraud occurred.

To hear these four tell it, their jobs included trading for Goldman’s benefit (proprietary trading), originating investment products, selling the products to customers once they were created (distribution), and, in Mr. Tourre’s case, even speaking with the rating agency that would transform these subprime bets into AAA derivatives. And how did they sum up all of this as a job description? They testified, under oath I might add, that they were “market-makers.” In a sane world, a market maker is an entity that matches buyers with sellers and profits from capturing a portion of the spread (bid and ask) on the buy and sell price of securities.

To a lay jury, this might fly as legitimate conduct; something akin to a short order cook who shops for the groceries, whips up the omelets, throws a little parsley garnish on the plates, serves the diners, and tallies up his P&L at the end of the day. If he overbought on ground beef, he might have to have three days of specials like Shepherd’s Pie, Hungarian Goulash, and Spaghetti with Meat Sauce to “flatten” his position and “get closer to home.” Nothing criminal going on here; just good ole American know-how and innovative workouts.

The major problem with this analogy, and most others in defense of Goldman, is that the short order cook wasn’t trying to pass off E. coli beef for prime rib. Another problem for Goldman is that embedded in the heart of every securities law is the principle that the customer must be treated honestly and fairly and any mechanism or device to deceive, manipulate or defraud is patently illegal. Remember, securities laws grew out of the ingrained Wall Street corruption exposed in two years of Senate hearings in 1932 and 1933.

It is difficult to see how one can be engaging in proprietary trading for the benefit of the firm at one moment, acting in an agent capacity for the benefit of the customer the next moment, and creating investment products designed to fail on a latte break. Sparks, Birnbaum and Swenson all had principal licenses to engage in investment banking activities like underwriting as well as the Series 7 license to trade securities. Mr. Tourre had only the Series 7 and Series 63 licenses to trade securities. He had no principal license according to his regulatory file available online. That could be a big legal issue for Goldman as a firm, for Mr. Sparks who supervised him, and for the controlled-demolition investment product he assisted in creating without a principal license. Failure to supervise is one of the first areas security lawyers review in assessing a firm’s liability.

Please find the entire article here. Ms. Martens worked on Wall Street for 21 years.

Being Goldman Sachs

It's Mother's Day and I really wanted to keep the love flowing, but I am just outraged listening to Henry Paulson testify before Congress on C-Span as if he's a bumbling idiot. He isn't. Before becoming the Treasury Secretary under President Bush for four years, he ran Goldman Sachs for eight years with some $642 billion in stock according to Forbes. It's also outrageous listening to Congress chase that illusive tail. Of course, there is probably a bit of theater going on there too.

Matt Taibbi needs to be asking the questions on behalf of the people. After he brilliantly eviscerated Goldman in a piece for Rolling Stone, Goldman wrote that it was a "hysterical compilation of conspiracy theories." Taibbi shot back with more brilliance: "The first thing you need to know is that Goldman Sachs is everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood into anything that smells like money."

Being Goldman Sachs

The internal emails that have been released proves what many have been saying about Goldman Sachs for some time now: It is a toxic firm. Goldman Sachs benefited on the front end and back end. As people were losing their homes, this investment bank positioned itself to win on the front end by creating and bundling an alphabet soup of complex derivatives that were given bogus AAA credit ratings by credit agencies. (Credit agencies were complicit in the financial meltdown too. Why should our credit scores have so much weight when the game system is obviously rigged? They lowered Berkshire's credit rating long after it was quite clear that they were not deserving of the coveted AAA credit rating. It currently has some $20 billion in debt on its balance sheet.) On the back end Goldman was bailed out by tax payers to the tune of $12.9 billion via AIG, not to mention the tens of billions it received directly from the government. I have been writing about Goldman Sachs' double dipping everywhere for nearly two years now. This seems illegal.

One email from Goldman Chief Executive Lloyd Blankfein dating from November 2007 read: "Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts." In a released statement Senator Carl Levin (D-MI) said of the email: "There it is, in their own words: Goldman Sachs taking 'the big short' against the mortgage market. Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients." The SEC civil case may need to broaden; this seems criminal. The credit agencies need to also be investigated for their role in the financial crisis.

Being Meg Whitman

Eight years ago Meg Whitman was accused of defrauding ebay shareholders when she was accused of being bribed by Goldman Sachs to favor this Wall Street investment firm as she sat on its board. Whitman did not admit guilt but settled by paying a measly $395,000-dollar fine. She was released from Goldman's board summarily, probably merely for the sake of appearances. Goldman has long prided itself publicly on being above board; what happens privately is being investigated yet again. As with the SEC case against Goldman which charges the firm with defrauding shareholders, naming and implicating the former Treasury Secretary, Henry Paulson, ebay shareholders were apparently screwed too. Goldman Sachs will probably pay a fine and Meg Whitman will probably become the governor of California. How sick is that? Many of these people need to be charged criminally and go straight to jail. We need financial reform now!

Being Goldman Sachs

The Securities and Exchange Commission has charged with fraud. Great! The Wall Street Journal reports that Goldman Sachs was charged with "defrauding investors, alleging that Goldman let a big hedge fund fill a financial product with risky subprime mortgages and then failed to disclose that to the product's buyers. The SEC's civil lawsuit is one of the biggest moves by authorities in response to the financial crisis of 2007-08, and it sent Goldman shares sharply lower. The firm's shares were down about twelve percent around midday, and the Dow Jones Industrial Average was off more than one percent." Hallelujah!

Being Goldman Sachs

David Pfeiffer, Communications Director for the White House, wrote in a blog post on Sunday that Goldman Sachs advised their investors that "profits will continue to soar under the status quo." Now, where do you think Goldman Sachs' interests lie?

Being Warren Buffett

Warren Buffett has never been out so much on television as he has been in the last two years. Usually, we see him once a year during his annual quirky shareholders' meeting in Omaha. The interesting thing is that Berkshire has never been in such a dubious position as it has been over the same period. Yes, I'm aware that Berkshire has been profitable lately. Do you remember how much Buffett was insisting on the need for bank bailouts? He had vested interests, real skin in the game.

There seems to be a correlation with the once reclusive billionaire investor and the now very talkative one. Buffett talks health care today as a typical politician in a back and forth wiggle room position, rejecting the current bill while saying that other countries--mostly socialized countries I might add--do it better. The world pays about 9 percent of their GDP on health care he noted. We pay 17 percent.

Buffett says that we should "attack cost cost cost" as "jobs jobs jobs." But he doesn't suggest how these things might be done. Real lawmakers, not obstructionists, are in the real position of dealing with how things are done. Often times, comprises are necessary. I did not like the tone Buffett took on President Obama's effort of bipartisanship and beginning anew with that infamous "white sheet of paper" is out of the question.

Regarding the health care bill, Buffett says that he would prefer a Plan C as opposed to the current A or B but he doesn't say how this Plan C would look or why his ideas--whatever they are--could be added to the current bill. His uncertainty or inability to actually express what he means did not instill confidence.

The Oracle of Omaha seemed to be a bit of red meat for the giddy often ill-informed CNBC analysts who tried to force him to say what he was actually saying as opposed to dancing like an inept dancer. Perhaps Buffett felt as if he needed to make a television appearance as George Soros' did brilliantly yesterday on Fareed Zakaria GPS. It did not work well for him.

An article in the Huffington Post reports that "Berkshire owns clothing, furniture, jewelry and corporate jet firms, but its insurance and utility businesses accounted for one-third of the company's profit last year. It's net income jumped 61 percent in 2009 to $8.1 billion largely because the value of its investments and derivatives rose sharply."

As I read this I couldn't help but to wonder if Berkshire is so very profitable as Goldman Sachs now is through government bailouts of Wall Street firms. (Yes, I understood the necessity of the bailouts, although not the lack of accountability.) Goldman Sachs is now also reporting record profits. After all, Berkshire was heavily invested in Goldman Sachs and Goldman Sachs heavily insured by AIG. As indicated above "insurance and utility accounted for one-third of the company's profits last year." A question: Are banks essentially utilities?

What a web we are all in. But some of us get caught therein while others win big, lecturing us on what we need to do without offering any real solutions on how to do it. There is cost control containment in the current health care bill, although perhaps there could be more. Some would say that the public option would insure greater cost containment.

While being for the public option, it is not a deal breaker for me in this first stage of health care reform. Changes to Medicare has also occurred over time. But if Warren Buffett has an opinion on what needs to be further included in the current health care bill he should say so or otherwise not comment at all. After all, he is known to be the Oracle of Omaha and some might just listen to him. But in this CNBC interview what has he really said?

Being Goldman Sachs XV

Not knowing the background of Goldman Sachs Chairman and CEO, Lloyd Blankfein, not that this would make much of a difference, I couldn't help but to think of him as I watched his testimony before the Financial Crisis Inquiry Commission as a cross between a used car salesman and a circus carnival leader. His appearance was as oily and buffoon-like in his constant effort of wining over an audience as opposed to soberly answering essential questions. Mr. Blankfein seems to think that we are stupid. Maybe we are. Goldman Sachs is flushed with cash that we gave them to the tune of double digit billions for betting on bogus securities leveraged to the hilt, as the American people hurt badly.

Being Goldman Sachs XIV

Witnessing what is reported here up close in a very successful real estate broker friend's office ten years ago, I have long said that if the government wouldn't have backed home ownership through "no doc" loans through Fannie Mae and Freddie Mac and if banks and mortgage companies would not have given such loans, the American public would not have been able to receive these mortgages turned bundled derivatives by the like of Goldman Sachs, where it hedged on its investment, gaining on the front end in fees and the back end in bailout billions, the financial crisis would not have occurred.



While Goldman Sachs may not have been obligated to "disclose its secret bets to its investors," the American people should not have been obligated to secure these bets to the tune of billions. Here we have an investment bank turned commercial bank hedging as the former and receiving FDIC protection without the deposits of the American people. The FDIC is supposed to secure deposits not risky investments. To think that the Financial Times bestowed Goldman Sachs CEO Lloyd Blankfein with the "Person of the Year" is shameful.

May the new year bring real banking reform.

Being Goldman Sachs XIII

Goldman Sachs is "doing God's work."

--Lloyd Blankfein, CEO Goldman Sachs

Being Goldman Sachs XII

The Financial Times, has named Goldman Sachs' CEO, Lloyd Blankfein, "Person of the Year." Here is noted bank analyst Christopher Whalen's response in a letter to the paper upon canceling his subscription:

Mr. Blankfein and his colleagues at Goldman Sachs, in my view, have done more to damage the reputations of global financial professionals than any other organization in 2009, yet you applaud them. Not only is your suggestion ridiculous and repugnant, but it illustrates to me the fact that the FT is part of the problem in global finance, not as one would hope and expect, part of the solution.

I could not agree more. It is indeed "ridiculous and repugnant." I shall discontinue my subscription also in complete agreement that the Financial Times "is a part of the problem in global finance, not as one would hope and expect, part of the solution." Goldman Sachs is currently being investigated by the federal government for dubious trading practices.

This choice says a lot about the malaise in global finance. It also seems to say a lot about the "collusion" of media and big business and their desire to pull the wool over the eyes of sane people everywhere--sort of like Blankfein's words that this investment bank is "doing God's work."

The Financial Times writes that Goldman Sachs -- though recently becoming a "commerical" bank as if there are deposits in order to be federally protected by the FDIC with billions in backing -- "not only navigated the 2008 global financial crisis better than others on Wall Street but is set to make record profits, and pay up to $23BN in bonuses to its 31,700 staff."

With this kind of choice and assessment, the Financial Times could not go out of business fast enough and the results of the investment practices of Goldman Sachs could not come sooner. Let's insist that Congress do an investigation worthy of itself.

Being Wall Street

Matt Taibbi, Rolling Stone contributing editor, said that Wall Street "is one Ponzi scheme after another." A good friend who is an investment banker made this exact same point to me last week. He said the only difference in what Madoff did and what investment bankers do everyday is that Madoff was not a licensed investment banker.

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Taibbi talks about the change in Wall Street from investing, which built businesses, to gambling occurring over the last 20 years. Nicholas Darvis , Hungarian world-renowned dancer, self-taught investor and respected author, wrote How I won 2,000,000 on Wall Street (1960) and Wall Street: The Other Las Vegas (1964) thought differently.

I read How I won 2,000,000 on Wall Street and Wall Street: The Other Las Vegas years ago and it was very difficult to refute the arguments therein. The former dealt with avoiding tips by brokers and the latter with how to game a gaming system. I've gotta pick them up again.

Being for Main Street

Robert Reich, former Secretary of Labor, made three excellent suggestions on what to do for Main Street. He contends that Wall Street has no shame. While the people bailed them out to the sum of over $700 billion, they refuse to assist Americans who are underwater on their mortgages and lend to small businesses, instead setting aside multiple billions for executives and traders. Goldman Sachs set aside $17 billion and JP Morgan Chase around $5 billion.

To assist Main Street, Reich proposes the following:

Congress and the Obama administration should give homeowners the right to go to a bankruptcy judge and have their mortgages modified.

And while they're at it, resurrect the Glass-Steagall Act that used to separate investment from commercial banking, so Wall Street can't continue to use other people's money to gamble.

Finally, before Goldman hands out $17 billion in bonuses, claw back the $13 billion Goldman took from AIG and the rest of us and add it to the pool of money going for mortgage relief.

I would also like to see a real program that targets lending for small businesses during this crisis. Goldman has set "up a crudely conceived $500 million PR program to help Main Street." But a "PR program" is hardly one that will be most beneficial to small businesses, although I'm sure likely recipients would not turn it down. Small businesses are really hurting.

Might Reich's proposal work better in relief for Main Street?

Being Goldman Sachs XI

Astute readers of this blog and another whose focus is business have commented that we should move on instead of continually writing about Goldman Sachs. We should not dwell on this crisis they have insisted. They believe that the country doesn't benefit from evoking the past and that anger doesn't have a place in this crisis. We need to simply get on with the business of fixing the problem. The problem, however, includes the past and without it a viable present is not possible. Goldman Sachs should not only be held accountable for their role in the crisis but they need to do something about it. They have benefited at the front end in fees and the back end in bailouts.

Last week, the Chairman and CEO of Goldman Sachs, Lloyd C. Blankfein, gave a half-ass apology for Goldman's significant role in the crisis by engaging in collateralized debt obligations (CDOs) and securing these bogus derivatives with AIG. The government bailed AIG out for $90 billion of which Goldman Sachs got $12.9 billion on top of the $10 billion received by the government. Blankfein said that his company "participated in things that were clearly wrong," but did not say what it did nor offer an acceptable solution to repair the damage. Americans are suffering.

Goldman Sachs seems blinded by greed and engulfed in a particular elitism that enabled it to not as Blankfein said to do "God's work" but to be the beneficiary of an unjust god who rewards executive failure with billions and makes the people bear it. Goldman Sachs recently announced a $500 million token to small business. (It set aside $16.7 billion this year for bonuses to those who brought on the crisis.) "The money will be welcomed by recipients, but if Goldman wants to make a meaningful contribution, it would have to be in the billions and aimed more directly at taxpayers," said the New York Times.

This unjust God allows Brian Griffiths, a Goldman Sachs international adviser, to make statements to excuse billions in bonuses by saying "We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all...'To whom much is given much is required,'"as if the aggregate of the people did not bailout Goldman Sachs for billions while they suffered. Without the billions in bailout, Goldman Sachs would be sacked.

Being Goldman Sachs X

In response to Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs, that he was doing "God's work," Andy Stern says two words, "get real." Mr. Stern breaks it down very simply in a post on the Huffington Post:

The reality is, Goldman Sachs continues to profit off the home foreclosure of families who are struggling to make ends meet.

The reality is, Lloyd Blankfein and his fellow executives continue rewarding themselves for their bad behavior - paying out $16.7 billion in compensation and bonuses in the first nine months of 2009 alone.

The reality is, Wall Street firms like Goldman Sachs continue to engage in the same risky behaviors the drove us to financial collapse.

So, when Lloyd Blankfein issues his press release saying Goldman Sachs has suddenly seen the light - they're suddenly making a commitment to small businesses with a $500 million donation over the next five years - my response is simple: get real.

Do read the entire article. It's worth it. The question remains what are we going to do about it? I am a big proponent of clawbacks.

Being Goldman Sachs IX

"A blue ribbon commission with subpoena powers should be established."

Hank Greenberg, the former chairman and CEO of AIG, made this comment in a panel discussion on C-Span, "Government Aid to Private Industry." The eye-opener was that AIG had worked out a discount of 40% with its counterparties before the bailout. As a private company, AIG was doing exactly what it needed to do to stay viable, to stay in business. Otherwise, it would have had to file for bankruptcy. Some were allowed to fail others weren't. I wonder why?

When the bailout occurred AIG's counterparties received 100 percent. I do not think that it was an accident that Henry Paulson, the former chairman and CEO of Goldman Sachs was the Treasury Secretary when the bailout occurred. Goldman Sachs received not only $10 billion dollars from the government but an additional $12.9 billion, but not before eliminating its competition, Bear Stearns and Lehmann Brothers. Under Paulson, these two investments banks were allowed to fail.

I agree with Hank Greenberg completely that a commission with subpoena powers should be established" and that if it is determined that there is wrongdoing that these should be help responsible for their actions. Below are a list of AIG counterparties that received 100 percent instead of the 40 percent discount that AIG had negotiated. The New York Times listed the banks that received bailout fund via AIG. $38.8 billion went to US banks, $50.2 billion went to foreign banks, $12.0 billion went to municipal bonds and $84.0 billion is still unaccounted for.

Here is the list of banks that received TARP funds via AIG:

$12.9B Goldman Sachs
$12.0B Bank of America/Merrill Lynch
$5.2B Bank of America
$6.8B Merrill Lynch
$11.9B Societe Generale
$11.8B Deutsche Bank
$8.5B Barclays
$5.0B UBS
$4.9B BNP Paribas
$3.5B HSBC Bank
$3.3B Calyon
$2.3B Citigroup
$2.2B Dresdner Kleinwort
$1.6B JPMorgan/Morgman Stanley
$0.4B JPMorgan
$1.2B Morgan Stanley
$1.5B Wachovia
$1.5B ING
$1.1B Bank of Montreal
$1.0B Deutsche Zentral-Genossenschaftsbank
$0.8B Rabobank
$0.7B Royal Bank of Scotland
$0.7B DZ Bank
$0.5B KFW
$0.3B Banco Santander
$0.4B Dresdner Bank AG
$0.4B Credit Suisse
$0.2B Citidel

The "blue-ribbon commission" Henry Greenberg suggests will hopefully get to the bottom of this. Although I must admit to wondering about the impact of work currently being done by the Congressional Oversight Panel charged with figuring out exactly what happened to the TARP funds. I have yet to hear what happened to the $84 billion still unaccounted for.

Being Productive

In an interview with the Financial Times, Lloyd C. Blankfein, the CEO and Chairman of Goldman Sachs in an effort to explain their multiple billion dollar bonuses said:

I often hear references to higher compensation at Goldman. What people fail to mention is that net income generated per head is a multiple of our peer average. The people of Goldman Sachs are among the most productive in the world.

How is this so when Goldman Sachs had to be bailed out to the tune of mulitple billions and hedged through AIG for additional billions, not to mention that Goldman Sachs doesn't produce anything?

As an investment bank Goldman Sachs employees are largely paper shufflers, essentially debt traders. Debt is about all it produces and that not very well since it need billions in bailout.

By the way, the point above about the "peer average" makes it right, eh? It's not that the industry itself needs reform or that the average is out of wack as Goldman Sachs has far fewer employees as pointed out in the Financial Times article.

Wall Street banks executives are so far removed from reality.

Being Goldman Sachs IX

Goldman Sachs executives are sounding more and more like televangelists who say things like "We are doing the work of the ministry. 'Give and it shall be given unto you.' By giving to this telecast you will receive a blessing in due season."

Isn't it funny that giving to televangelists is immediate while receiving for givers is delayed? Often times those who receive rarely give to the givers. Televangelists have done well in this regard, investing in their personal wealth. Many churches have become businesses and use Wall Street as a model. Wall Street executives are now taking their lead from televangelists.

A few weeks ago Brian Griffiths, a Goldman Sachs international adviser, said "We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all...'To whom much is given much is required.'" Now, Times Online reports that Goldman Sachs' Chairman and CEO, Lloyd C. Blankfein, said that he was doing "God's work." Oh, really? Methinks they're all prosyletizing Pharisees.

Here are the words of Jesus Christ:

"Woe to you, teachers of the law and Pharisees, you hypocrites! You travel over land and sea to win a single convert, and when he becomes one, you make him twice as much a son of hell as you are."

--Matthew 23:15

Many televangelists proselytize all over the world converting people to Christianity but have made them by far worse then they were. (When people convert they are usually looking for a better way of existing.) The new converts follow the bad pracitices of ministers under the guise of Christianity, perverting the message of Jesus.

Goldman Sachs invests all over the world using the beauty of a free market democratic system. But the market needs ethics. Through their practices they have indebted the world, perhaps making some by far worse than they were in the long run. The same kind of practices are then perpetuated by the debtors under the guise of a free market system, even if democracy isn't embraced. Inextricably bound to the highest form of democracy are justice and fairness.

All progression is not necessarily progress and all deliverance is not necessarily salvation.

(By the way, the Times Online article above is a must read. It looks at all sides fairly and is very enlightening.)

Being Goldman Sachs VIII

Goldman Sachs got the same amount of doses of the Swine Flu vaccine that Lenox Hill Hospital got while pregnant mothers and school children went without. Seth Meyers and Amy Poehler "really" tell it like it is during their segment "Really?!?" on SNL. It's right on and very funny!