Seth Cline of Open Secrets Blog reports some extremely disturbing connections between Congressional leaders and Goldman Sachs. I think it’s time for a law that places congressional investment accounts into a blind trust.
According to research by the Center for Responsive Politics, 19 current members of Congress reported holdings in Goldman Sachs during 2010. Whether by coincidence or not, most of these 19 Goldman Sachs investors in Congress are more powerful or more wealthy than their peers, or both.
Nine of them sit on either the most powerful committee in their chamber or committees charged with regulating the Wall Street giant. Moreover, seven of them are among the 25 wealthiest members of their respective chambers, according to the Center’s research.
And of the six lawmakers who fall into neither category, two are the most influential Republicans in the U.S. House of Representatives: House Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.).
Altogether, the 19 had at least $480,000 and as much as $1.1 million invested in Goldman Sachs in 2010, the most recent year personal finance data are available. That’s an average of about $812,900 for these 19 lawmakers’ holdings combined.
Lawmakers are only required to report their personal assets and liabilities in broad ranges, meaning it’s impossible to know the precise value of these holdings. The Center uses the minimum and maximum values listed on the filings to calculate an average value for each asset and liability.
But these financial interests are not a one-way street: Goldman Sachs employees and its political action committee have contributed about $124,000, combined, to a dozen of the lawmakers who reported holdings in the company in 2010, according to the Center’s research. This includes all money given during the 2010 election cycle and thus far in 2011.
So, not only do Boehner and Cantor get donations from Goldman Sachs, they are also stock holders. No wonder they want to get rid of the Volcker Rule. Looks like Paul Ryan is an investor also.
In the leadership category are names such as Boehner and Cantor, each of whom has an average $32,500 invested in Goldman.
Goldman Sachs’ employees, meanwhile, have also contributed heavily to Boehner and Cantor.
Boehner has received $29,500, and Cantor $48,000, from them since 2009, according to the Center’s research.
Other Goldman investors with this kind of power include two members of the Joint Select Committee on Deficit Reduction, better known as the debt supercommittee.
The first, Sen. Jon Kyl (R-Ariz.), reported $1,177 invested in Goldman in 2010, and, as minority whip, is the second highest ranking Republican in the Senate.
And not only is Kyl a member of the supercommittee and party leadership, he also sits on the Senate Finance Committee, which regulates Goldman Sachs and its peers on Wall Street.
Another one of Kyl’s colleagues on the supercommittee, Rep. Fred Upton (R-Mich.), is also a Goldman investor.
Upton had an average of $8,000 invested in the company in 2010, according to the Center’s research.
Rep. Paul Ryan (R-Wis.), is another influential Goldman shareholder in Congress.
Ryan reported an average of $8,000 invested in Goldman and has received $5,800 from the company’s employees so far this year after receiving $10,000 from them during the 2010 cycle, according to the Center’s research.
One of Goldman Sachs’ most valuable congressional investors is Rep. Randy Neugebauer (R-Texas), whose average of $550,000 in investments in the company is far and away the most in Congress.
Additionally Neugebauer sits on the House Financial Services Committee, which oversees Wall Street and the securities and investment industry of which Goldman is a part.
That also helps explain the $9,500 Goldman Sachs employees have contributed to Neugebauer since January 2009 through the company’s political action committee.
Rep. Gary Peters (R-Mich.) is another Goldman Sachs investor on the Financial Services committee. He has an average of $8,000 invested and has received $4,500 from the company this year from its PAC.
There’s a substantial list of Republicans listed that I didn’t include in the list above.. Democrats holding GS stock include Sens. Ben Nelson (D-Neb.), Claire McCaskill (D-Mo.), Sheldon Whitehouse (D-R.I.) and Sen. Mark Warner (D-Va.). The details are on a spreadsheet here.
Can you really believe that they’re acting in our best interest when their wealth is vested in stopping GS from doing suspect things like selling lemons to clients and placing side bets that the lemons lose? I sure don’t. The Volker Rule places trading restrictions on institutions like GS. It controls the types of transactions that GS can do in its proprietary trading like the example I just gave you. They settled fraud charges in the US with the SEC and are under investigation in the UK and some of Europe. You may recall the unit and testimony before congress. The US settlement came in 2010. That’s the same year that these holdings were found by the Center for Responsive Politics.
The FSA opened its investigation into the bank in April after the SEC charged Goldman with misleading investors in a complex mortgage-backed security known as Abacus. The SEC claimed that Goldman had failed to disclose that a hedge fund that was betting against the security had selected some of the mortgage loans included in the portfolio, costing investors as much as $1bn.
The largest fine handed down by the UK regulator came three months ago, when JPMorgan paid a £33.3m for failing to keep client money in separate accounts.
Goldman, the world’s best-known investment bank, has seen its reputation tarnished in recent months as questions continue to swirl over whether it favoured the interests of some clients at the expense of others during the financial crisis.
The bank’s business model is also under pressure amid volatile markets and regulatory reforms that have forced it to shut some of its highly profitable “proprietary” trading operations.
No wonder we don’t see perp walks. These folks have skin in GS. We are so f’d.
According to an investigation by Steve Croft of CBS’ 60 Minutes, a number of stories in Greg Mortenson’s bestselling book may be false or exaggerated.
The heart of Mortenson’s “Three Cups of Tea” is the story of a failed attempt in 1993 to climb the world’s second-highest peak, K2.
On the way down, Mortenson says, he got lost and stumbled, alone and exhausted, into a remote mountain village in Pakistan named Korphe.
According to the book’s narrative, the villagers cared for him and he promised to return to build a school there. In a remote village in Pakistan, “60 Minutes” found Mortenson’s porters on that failed expedition. They say Mortenson didn’t get lost and stumble into Korphe on his way down from K2. He visited the village a year later.
That’s what famous author and mountaineer Jon Krakauer, a former donor to Mortenson’s charity, says he found out, too. “It’s a beautiful story. And it’s a lie,” says Krakauer. “I have spoken to one of his [Mortenson’s] companions, a close friend, who hiked out from K2 with him and this companion said, ‘Greg never heard of Korphe until a year later,'” Krakauer tells Kroft.
Mortenson also claimed to have been kidnapped and held for eight days by the Taliban in Waziristan. In his new book, Stones into Schools, he included a photo of three of his supposed captors.
“60 Minutes” located three of the men in the photo, all of whom denied that they were Taliban and denied that they had kidnapped Mortenson. One the men in the photo is the research director of a respected think tank in Islamabad, Mansur Khan Mahsud.
He tells Steve Kroft that he and the others in the photo were Mortenson’s protectors, not his kidnappers. “We treated him as a guest and took care of him,” says Mahsud. “This is totally false and he is lying.”
Kroft also talked to Daniel Borochoff of the American Institute of Philanthropy, who says that Mortenson’s foundation, The Central Asia Institute, spends most of the donations to promote his books. Jon Krakauer told 60 Minutes that he stopped donating after he learned from a former member of the Central Asia Institute board that that Mortenson uses the Central Asia Institute “as his private ATM machine.”
Kroft says he visited schools in Pakistan and Afghanistan that Mortenson supposedly has built and funded. He found that “some of them were empty, built by somebody else, or simply didn’t exist at all. The principals of a number of schools said they had not received any money from CAI in years.” But Mortenson blamed a “disgruntled employee” for not paying teachers and didn’t respond to the other accusations.
Mortenson has ignored CBS’s requests for an interview, but he defended himself in his hometown newspaper, the Bozeman Daily Chronicle.
“I hope these allegations and attacks, the people doing these things, know this could be devastating for tens of thousands of girls, for the sake of Nielsen ratings and Emmys,” Mortenson told the Chronicle in a phone interview Friday.
“I stand by the information conveyed in my book,” he wrote in a statement, “and by the value of CAI’s work in empowering local communities to build and operate schools that have educated more than 60,000 students.”
In the statement, Mortenson implied that the central story of his book was falsified.
The book told how Mortenson got lost on a 1993 climb of K2, the world’s second highest peak, and then stumbled exhausted into the remote village of Korphe, was cared for by villagers, and promised to return and build a school.
“I stand by the story of ‘Three Cups of Tea,'” Mortenson said in a written statement, but added, “The time about our final days on K2 and ongoing journey to Korphe village and Skardu is a compressed version of events that took place in the fall of 1993….What was done was to simplify the sequence of events for the purposes of telling what was, at times, a complicated story.”
According to records examined by the paper, the CAI pays Mortenson $180,000 per year. In 2009, the charity took in $14 million, of which it spent “$4.6 million on travel, guest lectures and educating Americans about the plight of Pakistani and Afghan children.” It spent $3.6 million on “schools overseas.” Mortenson told the Daily News that “as of now,” he will be paying his own travel expenses.
I haven’t read Mortenson’s books, mainly because they always sounded a little too good to be true to me. A blogger at Discover Magazine, Razib Kahn, wrote something similar based on actual knowledge:
I’ve been a bit skeptical of the details of Greg Mortenson’s story in his book Three Cups of Tea for years. It seems be to so predicated on contemporary biases about the basic universal goodness of human nature. I hoped everything was true, but it seemed too good to be true. Other people who worked in Afghan NGOs tended to tell a more gritty and gray story, so either Mortenson was embellishing, or he had a special magic touch. Since I don’t believe in magic touches, I wondered as to the nature of embellishment.
Kahn still says he’s not going to judge until he learns more.
A quick Google search shows that Mortenson has spoken at numerous colleges and universities as well as high schools and middle schools around the country. If any of this is true, a lot of young people are going to be very disillusioned.
Somebody must have a lot of time on their hands to write a song called “Hey, Paul Krugman” but still, if the angsty, artsy fartsy creative class that foisted this POTUS on us is finally waking up, then Twitter me when the Revolution comes. I’ve even read the orange cheeto place and seems even a few of them are beginning to see the writing on their blackberries.
So, Paul is still appalled and speaking out against the Zombie Plan. I’d say this is another sfz! warning to the White House. What I can’t repeat enough is that it’s not just Paul. It’s not just me. It’s everyone with any knowledge of macroeconomics and the financial system.
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
I don’t know if you’ve ever sat in an economics class, but most of you who have will attest that few economics professors are what you would call the dramatic, excitable types. However, I’ve seen more animation out of them recently than I’ve seen in all recent Marvel Comic Books.
From “Reasons Why The Obama Administration will not solve this crisis by the end of 2009” at The Underground Investor:
Consider that President-elect Obama voted FOR the horrible $700 billion bailout plan that accomplished less than zero in fixing the global economy while only transferring wealth from people that were struggling the most to the unethical financial executives that created this problem. These were my exact words in October, 2008, verbatim, about the eventual effect of the bailout plan: “Don’t believe the media spin. This will fix nothing. Even if and when the government overpays Wall Street and US banks by 300%, 500% and 1000% for their toxic assets, this temporarily recapitalizes these financial institutions but only creates A MUCH BIGGER PROBLEM for the future.” If I understood why the bailout plan would most definitely fail, as I blogged here, and the next President of the United States could not, that is a scary thought. On the other hand, if President Obama understood that the bailout plan would likely accomplish nothing but the transference of wealth from hard-working citizens to corrupt financial executives and still voted for the bill, then this action needs no further discourse.
From FT’s Willem Buiter:
Why are the unsecured creditors of banks and quasi-banks like AIG deemed too precious to take a hit or a haircut since Lehman Brothers went down? From the point of view of fairness they ought to have their heads on the block. It was they who funded the excessive leverage and risk-taking of banks and shadow banks. From the point of view of minimizing moral hazard – incentives for future excessive risk taking – it is essential that they pay the price for their past bad lending and investment decisions. We are playing a repeated game. Reputation matters.
Three arguments for saving the unworthy hides of the unsecured creditors are commonly presented:
- Unless the unsecured creditors are made whole, there will be a systemic financial collapse, with dramatic adverse consequences for the real economy.
- If the unsecured creditors are forced to take a hit, no-one will ever lend to banks again or buy their debt.
- The ultimate ‘beneficial owners’ of these securities – notably pensioners drawing their pensions from pension funds heavily invested in unsecured bank debt and owners of insurance policies with insurance companies holding unsecured bank debt – would suffer a large decline in financial wealth and disposable income that would cause them to cut back sharply on consumption. The resulting decline in aggregate demand would deepen and prolong the recession.
I believe all three arguments to be hogwash.