Timing is Everything

Fluffy, a Wall Street investment banker and hedge fund manager, receives his bonuses from a well timed bet against the value of your home funded by low interest rate loans from taxpayers and the FED's discount window. Laissez les bon temps roulez Fluffy!!! Vive la Laissez Faire!!!!

The Goldman Sachs casino–aided and abetted by folks in the NY Fed and friends in congress that refused to set up reasonable regulation and standardization in derivatives market–is finally getting some serious investigation. We’re beginning to see that the complete lack of regulatory framework around the more exotic derivatives allowed GS to become very very rich while passing on social costs to its clients and to the taxpayer. You just can’t convince me that these folks didn’t know full well that what they were doing was seriously screwing over some of their clients and what they were doing later was taking full advantage of taxpayer largess.

The NY Times has been running a series of articles on the firm that you really should read. While the mortgage market was in free fall, GS folks were full speed head profiting by what looks like the creation of adding more momentum to the crash and passing on more losses to clients with the offsetting position. A senate committee released some emails today and they are a very interesting read.

However, imho, the timing of all of this release of information can’t be just coincidental. It seems uniquely close to a big Presidential speeches demonizing the firms who funded his presidential campaign in a big way and the bill coming out of the Dodd committee which is now looking slightly bipartisan because all this release of information is making Republicans look like enablers of a gambling addict even when Democrats have been equally enabling in the past. It also appears to be the prime issue that could give Democrats up for re-election some momentum in the fall and just oddly enough, we’re getting close to the partisan primary season.

I have to ask what seems to me to be an obvious question at this point, did they have this information earlier and have they just sat on it for possibly a year and a half while we’ve taken on more costs–both social and transactional–of their actions? Is it just coincidence that endangered senators like Blanche Lincoln (who faces a primary challenge from the Democratic left) are front and center in the debate? Could they have released this information sooner and saved the taxpayer a lot of money as well as stopped GS and other investment banks from making billions of dollars of profits and giving their execs millions of bonuses? This stinks of Axelrahm to me.

In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm had lost money initially. But it later recovered by making negative bets, known as short positions, enabling it to profit as housing prices plummeted. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”

In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, reacted to figures that said the company had made a $51 million profit from bets that the value of mortgage -related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote in an email to Gary D. Cohn, now Goldman’s president.

There’s really no way that I can say for certain that messages dated back in 2007 probably were discovered earlier and could’ve been brought to public attention prior to the spring of 2010. But, you have to believe, that release of information like this would’ve derailed health care legislation and focused public angst on Wall Street had it come to light earlier. We possibly could’ve gotten the systemic reform we need at least a year ago.

You also can’t convince me that delay of the release of these memos hasn’t created a situation where we’ve had a few more months of money going to Wall Street via the Fed Discount Window and the TARP over the last few years that has allowed them to rake in profits from the recovery in financial markets which also, not so coincidentally has increased stock prices of firms like GS. The fact this information was discovered three years later has certainly created a huge rate of return on delay. Look, there were committees looking at what happened on Wall Street and the housing market meltdown while we were still be regaled by the idea of an office of the President-Elect. For Pete’s sake, Paul Volcker and Warren Buffett sat on some of them. You can’t tell me regulators weren’t on site as early as the fall of 2007. The New York Fed and Tim Geithner were actively on the phone with GS during the earliest moments. It doesn’t take a first rate FBI agent to think about looking at emails of your prime suspect during the timing of the commission of a possible crime.

Meanwhile, we have the also interestingly timed released of personal information on SEC employees and their porn addictions played out on work computers. This some how seems to imply that the release of the above information might be related to SEC staff not doing their job rather than, well-timed political timing. Also notice, that we’re getting many firms that are saying they are now more flush with cash and can quickly pay off taxpayers and return to business as usual. This while, everything that brought the 2007 crises to a head is still completely out there and operating per usual business. They’ve been allowed to completely recover their losses and now they’re making extraordinary profits. All these speeches and release of information couldn’t have happened before they raked in their current years’ extraordinary profits?

The more I read these ‘discoveries’ and the more that I see the President out on another marketing mission, the more I think the timing of all this is incredibly suspicious. I don’t have access to Robert Gibbs, SEC investigators, or congressional insiders, but if I did, I think I would be questioning why, if this data is over two years old, and we know there has been a focus by many folks on figuring out what went wrong within key financial institutions, have we waited until AFTER the health care debate, AFTER the recovery of Wall Street and the achievement of more of its gambling profits, and DURING the election cycle to get around to disclosing it?

This inquiring mind really wants to know.

Update: Karl Levin has provided a link to the documents in question here.