Tuesday Reads: Tim Geithner in Control of Obama’s Economic Policy, and Other News

Posted: February 15, 2011 | Author: | Filed under: Bailout Blues, Barack Obama, Economic Develpment, Egypt, financial institutions, Foreign Affairs, Global Financial Crisis, Gulf Oil Spill, Iran, U.S. Economy, U.S. Politics, unemployment, Yemen | Tags: , , , , , , | 22 Comments

Good Morning!! The snow is slowly melting outside my house, and I’ve come down with Spring fever! No more snowstorms please, Mother Nature. Anyway, at least for this week, we are getting temperatures in the 40s and 50s. It is going to be chilly again tomorrow, but after that–springlike! After the frigid winter we’ve lived through, these temperatures feel amazing. Maybe this will make the bad news from DC a little more bearable. I hope so.

This morning I want to focus on an important article that comes via David Dayen at FDL. It’s a piece at The New Republic about Timothy Geithner, written by Noam Scheiber. First a little aside.

Back in November, I wrote a post about the axing of Obama’s economic team and noted that Geither was the last man standing.

In that post, I quoted Andrew Cockburn of Counterpunch:

If Barack Obama needed any help in guiding the Democratic Party over the cliff he certainly got it from Treasury Secretary Timothy Geithner. Voters have told pollsters that the state of the economy, their own in particular, was their principle concern. Though impelled by the specter of unemployment and homelessness, the image of Geithner, toady to the bankers, can only have encouraged them in their fury. A sensible president would therefore already be running out the plank prior to giving this disastrous financial overseer an encouraging shove between the shoulders. But in this case, we may not be that lucky. CounterPunch can reveal the crucial role played in these matters by a group close to the President but unknown to the outside world.

A knowledgeable insider told Cockburn that despite Larry Summers’ reputation as a corporate tool,

“Larry has some idea that there is more to the economy than just the welfare of large banks,” this official suggests. “He did push for a larger stimulus and more jobs programs, for example. Tim just cares about banks.”

I then went on to indulge in a little conspiracy theorizing based on Cockburn’s information. But that’s beside the point right now. The point is that after writing that post, I came to the conclusion that Geithner was running economic policy in the Obama administration.

Getting back to the article at TNR, Scheiber purports to explain how Geithner survived the massacre of the economists. One interesting tidbit in the lengthy article is about Geithner’s relationship with Larry Summers, who acted as Geithner’s mentor and patron early on.

In 1993, Geithner caught the attention of [a] prominent patron—Larry Summers—whom Bill Clinton had appointed as his treasury undersecretary. Summers took a personal interest in Geithner’s career and promoted him each time he rose through the Treasury ranks.

And then during the Obama administration, Geithner apparently stabbed his patron in the back, becoming President Obama’s primary economic adviser–even though Geithner isn’t an economist. (Neither is anyone else on Obama current “economic team,” as Dakinikat frequently points out.)

Geithner actually sounds a lot like Obama–he’s really good at sucking up and convincing people he’s on their side–until he slides in the knife. Regarding Geithner’s time at the IMF, Scheiber writes:

According to former co-workers, Geithner was deft at bringing skeptical colleagues on board. One technique involved homing in on possible dissidents and absorbing their suggestions into his proposals.

Sound familiar? A bit more:

Perhaps most important, Geithner was scrupulously attuned to the temperament of the boss. Like Obama, he evinced a strong aversion to blather. During meetings with the president, he would say little, and usually not until the end, when his opinion was solicited. “I thought [Geithner] got the president really well,” says a former administration official who interacted with him on nonfinancial matters. “When he was in trouble, I said to someone, ‘He just needs to hold on. He’ll be fine with Obama. Once they get to know each other, they’re like the same person.’”

Scheiber describes an epic struggle between Geithner and Summers over how to deal with the banks that had crashed the U.S. economy. Summers argued for some form of nationalization, while Geithner claimed the banks just needed more capital and they could recover.

If Geithner was right, the capital shortfall was much more manageable than Summers feared. The banks might be able to fill it with minimal government help, simply by selling shares to investors. But, if he was wrong, the banks would stumble along in a kind of vampire state, sucking credit from the economy and exacerbating the recession. In the worst case, fears of insolvency could trigger a modern-day version of Depression-era bank runs.

Hey, wait a minute. That sounds like what is happening to our economy right now. But, never mind, Geithner won the battle that counted–the battle for Obama’s favor.

Part of what Geithner convinced Obama of was “that it was ultimately better politics to risk a backlash with unemployment at 10 percent than to feed the backlash and watch the economy shrink further.” So it’s Geithner we have to thank for the new normal of high unemployment, poverty, and suffering among the middle, working, and lower classes.

Finally, what horrified David Dayen was Geithner’s out-front claim that–in Dayen’s words, “what’s good for Wall Street is good for America.” Geithner:

“I don’t have any enthusiasm for … trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world,” he said. “It’s the same thing for Microsoft or anything else. We want U.S. firms to benefit from that.” He continued: “Now financial firms are different because of the risk, but you can contain that through regulation.” This was the purpose of the recent financial reform, he said. In effect, Geithner was arguing that we should be as comfortable linking the fate of our economy to Wall Street as to automakers or Silicon Valley.

In response, Dayen writes:

I don’t even know what to say about this. We’re just a few years removed from the financial oligarchs destroying the global economy through their own greed and negligence. And the man put in charge of regulating them, who had a front-row seat to all this destruction and who has been given expanded powers under Dodd-Frank to see to it that never happens again, thinks that there’s a great “financial deepening” about to take place where the demand for sophisticated financial innovations will jump. Therefore, the financial sector will need to grow and become the most reliable spur of the US economy. That’s his feeling. And regulation can reduce the risk, even though the new regulations barely put a dent into Wall Street’s core business, and are being systematically defunded besides.

Financialization of the economy has led to practically nothing but pain for the average worker and risk for the taxpayer. It has turned the allocation of capital into the placing of bets at a casino, and the stock market into a particularly sophisticated video poker game. This territory was all covered before in the run-up to the Great Depression as well, and we know the precise causes and remedies involved. Geithner prefers not to address the plutocracy he’s really advancing here – where elites provide “financial deepening” services abroad and amass ridiculous profits that they wall off.

This incredibly amoral conman is partnering with our conman chief executive to sell out our country, our lives, and those of our children and grandchildren. There’s lots more of interest in the article, particularly the information about Geithner’s upbringing.

I’ll wrap this up with a few other stories, and then throw the floor open to your links and opinions. Did you hear that Stephen Baldwin is suing Kevin Costner over Costner’s oil-eating invention?

It seems Baldwin sold his shares in Costner’s company right before BP shelled out $50 million for the machines.

Jane Hamsher offers a flow-chart of the principle players in the scandal over US Chamber of Commerce’s attempts to discredit Wikileaks, Glenn Greenwald, Brad Friedman, David House, and others who have supported wikileaks and Bradley Manning. Joseph Cannon has also been covering this story.

Brad Friedman’s post especially is a must read. Get this, the Chamber paid 2 million dollars a month for dirt on Friedman, and got completely inaccurate information. And that inaccurate information came from corporations who are paid billions by our government “to target terrorists.” But Obama wants to cancel heating assistance for poor people to save money.

Mitt Romney is ahead in the latest NH poll, at 40%, for whatever that’s worth. Romney was always going to win NH. They always vote for New Englanders up there. The real test for Romney will be Iowa.

The Patriot Act extension has been passed by the House on the second try. I think the Egyptians will probably get rid of their emergency law before we get rid of ours.

There are “massive” protests in Iran, inspired by the dramatic events in Egypt. There have also been more protests in Yemen and in Bahrain. When will it happen here?

What are you reading and blogging about today?

Label me ‘Not Surprised’

Posted: February 23, 2010 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, Team Obama, The Bonus Class, The Great Recession, U.S. Economy | Tags: , , , , , , , | Comments Off on Label me ‘Not Surprised’

I should’ve stuck to my research agenda, but no, I just had to go look at business headlines. There’s a debate on at The Economist over “Who benefits from financial innovation?” Nobel Prize winning Economist Joseph Stiglitz is arguing that financial innovation hasn’t been boosting economic growth but his position (which is mine) is currently in the minority.

The right kind of innovation obviously would help the financial sector fulfil its core functions; and if the financial sector fulfilled those functions better, and at lower cost, almost surely it would contribute to growth and societal well-being. But, for the most part, that is not the kind of innovation we have had.

In terms of that big question up there, the answer is found today on Bloomberg.com. If you answered “what is the vampire squid”,you’re absolutely right. The more relevant question appears to be what did that cost us? For that, I can only answer a lot and there’s more to come. Here’s the headline: Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs.

Well, there’s your financial innovation for you.

So, the fun thing about the story is that the unlikely hero is Darrold Issa (Republican) member of the House Committee on Oversight and Government Reform who “placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.” Oddly enough,it appears that Issa may have not really known exactly what he had just disclosed. It didn’t really attract any attention at the time. Luckily, some one who knew something eventually looked at it. This was essentially a list of the deals that made AIG insolvent. These were also the deals that the government basically bought when it rescued AIG.

The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value.

The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place.

Here’s an even more interesting analysis from a legal standpoint. I know the deal was shady, I just have never known exactly if shady=unethical=illegal. The devil is truly in the details placed into public record by Issa.

The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured — more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion.

These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: “They may have been trying to shield Goldman — for Goldman’s sake or out of macro concerns that another investment bank would be at risk.”

Okay, so we know who we’re speaking of when Cox says the New York Fed, right? That would be Treasury Secretary Timmy-really-in-the-well-this-time Geithner. Bloomberg is going as far as to label his actions a cover-up. I frankly think that looks like a mild charge. Interestingly enough, an earlier version of the information was released by AIG but the counterparty names were redacted at the time. Chris Dodd’s committee had requested the information. Without the names–or more truthfully the frequency of ONE name in particular–you can’t really see much of a conspiracy.

What this detailed list shows–because the names are now out there along with the deals–is that the very same folks that underwrote the original toxic securities were the same folks that went to AIG to bet against them. It doesn’t look like they were hedging or placing insurance on their risk which would be natural and understandable transactions. It appears they fully knew the securities were bad and were preparing to make money by placing offsetting bets. This activity could only be determined if you saw the names of the counterparties next to the deals themselves. So, the appropriate document to list the information on would be a Schedule A. AIG released a schedule A for several years during the crisis, but without some of the most relevant details. We know now that this was at the request of the NY Fed (aka Tim–I’ve got GS on speed dial–Geithner).

In late November 2008, the insurer was planning to include Schedule A in a regulatory filing — until a lawyer for the Fed said it wasn’t necessary, according to the e-mails. The document was an attachment to the agreement between AIG and Maiden Lane III, the fund that the Fed established in November 2008 to hold the CDOs after the swap contracts were settled.

AIG paid its counter­parties — the banks — the full value of the contracts, after accounting for any collateral that had been posted, and took the devalued CDOs in exchange. As requested by the New York Fed, AIG kept the bank names out of the Dec. 24 filing and edited out a sentence that said they got full payment.

The New York Fed’s January 2010 statement said the sentence was deleted because AIG technically paid slightly less than 100 cents on the dollar.

Before the New York Fed ordered AIG to pay the banks in full, the company was trying to negotiate to pay off the credit- default swaps at a discount or “haircut.”

Read that date. We’re talking November 2008. If you read further into the Bloomberg article you’ll see that the names were withheld also during 2009. Issa put the names out because he wanted to show U.S. taxpayers where their money went. It’s unclear to me if he understood then or maybe even now that by putting out the details of the deals, he’s basically provided information that let’s us know how deeply Goldman Sachs was in on the financial innovations that blew up the economy. Not only that, it appears they knowingly may have been loading some of those innovations with assets they knew would explode and that they were actively placing bets on that outcome at AIG. As of the end of January, 2010 meeting, Geithner and the NY Fed still didn’t want the details released. No fucking wonder!

Janet Tavakoli, founder of Tavakoli Structured Finance Inc., a Chicago-based consulting firm, says the New York Fed’s secrecy has helped hide who’s responsible for the worst of the disaster. “The suppression of the details in the list of counterparties was part of the coverup,” she says.

E-mails between Fed and AIG officials that Issa released in January show that the efforts to keep Schedule A under wraps came from the New York Fed. Revelation of the messages contributed to the heated atmosphere at the House hearing.

…

Tavakoli also says that the poor performance of the underlying securities (which are actually specific slices or tranches of CDOs) shows they were toxic in the first place and were probably replenished with bundles of mortgages that were particularly troubled. Managers who oversee CDOs after they are created have discretion in choosing the mortgage bonds used to replenish them.

“The original CDO deals were bad enough,” Tavakoli says. “For some that allow reinvesting or substitution, any reasonable professional would ask why these assets were being traded into the portfolio. The Schedule A shows that we should be investigating these deals.”

So, check this out.

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who delivered a report on the AIG bailout in November, says he’s not finished. He has begun a probe of why his office wasn’t provided all of the 250,000 pages of documents, including e-mails and phone logs, that Issa’s committee received from the New York Fed.

Okay, now, follow closely as I connect the dots to this one: U.S. Treasury loan plan may exclude TARP watchdog.

If you were Timothy Geithner, would you want Neil Barofsky poking around any more programs? Wouldn’t you be highly interested in controlling TARP oversight? No wonder Treasury officials and others have been after Barofsky for some time. (Here’s an outline of their actions and attempts to remove independency by Glenn Greenwald at Salon from last summer. )

Bottom line:

Geithner basically knew the vampire squid was a huge contributor to the fall of AIG. It looks like he may have actively encouraged covering-up that information. It also looks like GS actively securitized mortgages it knew would fail eventually and made huge counterbets based on that information using AIG as its personal bookie. Then, when AIG couldn’t cover the bets, GS refused to negotiate any deals (they must’ve known something like a bail out was forthcoming). Then knew exactly what was in those securities so they knew their real value. Geithner made AIG pay GS 100% of the value when it appears they were worth around 35%. When AIG tried to report the counterparties, the NY FED told them to withhold the information. (Yet, post Timmy, the NY FED appears to have released everything to Issa’s committee. During Timmy’s time, remember, everything was heavily edited and Barofsky appears not to have gotten the same information.) They also were told not to provide details on the mark downs. Timmy must’ve known that Goldman was betting against the toxic assets they had created. Not only that, it looks like Goldman was actually shorting themselves! AND these guys were Obama’s major contributors. Giethner must’ve been part of the packaged deal.

I got one thing to say now. A lot of folks should be doing a perp walk on this one. This looks like fraud. If this is the kind’ve financial innovation these folks voting on The Economist poll want, then they should just as well turn their life savings over to Bernie Madoff right now. I just wish they’d stop giving the likes of him mine too.

(I hope I’ve explained this adequately, cause this sure is one fucking twisted tale.)

Market Manipulation 101 or How to Rob Fort Knox in front of a Congressional Panel

Posted: February 3, 2010 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, The Media SUCKS, U.S. Economy, Voter Ignorance | Tags: , , , , , | 1 Comment

Every day, as the AIG saga unfolds, I have to wonder if there is any vestige of a functional regulatory scheme left in this country. I’ve already decided that there is no shred of decency left in any one whose hand came close to unraveling the insurance giant and its deals. I know this is an area where eyes glaze over, but really, it’s like solving a crime that even Miss. Marple couldn’t fathom. Ladies and Gentlemen, we’ve been robbed.

It may be too complex for most journalists to report about, but the financial blog realm, full of individual investors, academics and pissed off Americans is keeping the story alive. The headline today from the Atlantic is there are $100 Million More in AIG bonuses. Don’t forget, we basically OWN this company so this is OUR money. Most voters are wise enough to know that this alone does not pass the threshold of decency. You don’t have to have a PHd with an emphasis on corporate governance to figure out that something is very wrong when people can bankrupt a company one year, and still collect bonuses the very next.

In the ongoing AIG bonus saga, the troubled insurer will distribute around $100 million in bonuses today, that’s likely much to the dismay of taxpayers who now own the firm. Despite the fact that AIG is technically under compensation restrictions, many so-called “guaranteed bonuses” that were in place before AIG’s collapse still must be honored by law. This is a regrettable situation, and speaks loudly to the messy problem that bailouts pose.

This is the headline today in many of the mainstream papers. This includes the NY Times that reports those bonuses may have been lowered by$20 million to lessen the blow. This is a mere trifling compared to what was pilfered from the dying AIG by Goldman Sachs as it was in the throes of death. Those Revenuers let Goldman Sachs pick clean the dead body of AIG before we got the bill for the funeral.

“A.I.G. has taxpayers over a barrel,” said Senator Charles E. Grassley, an Iowa Republican, in a statement on Tuesday night. “The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand.”

A.I.G. first promised the retention bonuses to keep people working at its financial products unit, which traded in the derivatives that imploded in September 2008, leading to the biggest government bailout in history.

The contracts, which were established in December 2007, were intended to keep people from leaving the company and called for the bonuses to be paid in regular installments to more than 400 employees in the unit. The final payment, which was for about $198 million, was due in mid-March, but was accelerated to Wednesday as part of the agreement to reduce its size.

Fearing a firestorm like the one last spring, A.I.G. had been working with the Treasury’s special master for compensation, Kenneth R. Feinberg, on a compromise that would allow it to keep its promise in part, without offending taxpayers.

So, the bonuses plays into the theme of the moment–Populist Outrage–which is driving everything from angry teabots to high ratings for media screamers like Glenn Beck. It hides a bigger problem. What is going on behind the schemes in the books and the deals as we attempt to bailout a group of bad gamblers is far worse. Yves Smith of Naked Capitalism lays out some of the issues on HuffPo as well as a series of thread at her own blog. While we rage at the bonuses, the real crime happened behind the curtains, where you’re not supposed to notice Timothy Geithner, pulling the strings and blowing the steam from the giant talking head of Glenn Beck.

Although the focus of press and public attention has been the decision to pay out “100%”, this issue has not been framed as crisply as it should be. Remember, the underlying transactions were crap CDOs that the banks (or bank customers, a subject we will turn to later) owned, and on which the banks had gotten credit default swaps from AIG. The Fed in fact paid out WELL MORE than 100% on the value of the AIG credit default swaps by virtue of also buying the CDOs.

That is one simple paragraph to describe the scheme behind the bailout of AIG. The facts are nearly beyond belief and as Congressman Dennis Kucinich put it, the testimony provided by Timmy-in-the-Well-again Geithner and among others doesn’t “pass the smell test.” I’m not sure how you miss the smells coming from an open, festering mass grave. But, the majority of Americans, and Congressio Critters, seem to think it could be just a few dead birds in the attic. The evil is the ledger accounts at the New York Fed.

Smith says the details show the FED as either captured regulator exhibiting ‘crony behavior’ or the behavior of Geithner was duplicitous and merits legal action. That is even mild. Her Huffpo article lays out the arguments for both scenarios. Either way, Giethner’s NY Fed comes off badly and Paulson and the Bush Treasury come off as co-conspirators to a heist.

Another article which demonstrates palpable anger at both the ineffective Fed and Congress is written in the financial/investment blog Money Morning by Shah Giliani who is a retired Hedge Manager. Again, the lack of knowledgeable staff could be the reason the pieces to the puzzle are being put together outside of the mainstream media. It could be the story is too complex to be glamorous and deemed beyond the reach of the average 5th grade reading level achieved at most major newspapers. It’s even possible no one wants to take on the financial industry. The deal is what happened as outlined in the testimony–had some one on that Congressional Panel actually had a background in something other than professional politics subsidized by the FIRE lobby and a plethora of worthless law degrees and knew finance–should’ve caused outrage around the country and sent subpoenas flying out of the justice department and the SEC. The central players in this are Goldman Sachs and the New York Fed whose people are so entrenched now in the Treasury and the West Wing that you have to wonder if there ever will be enough justice left in this country to counteract what should be the cries of lynch mobs. Following through with the legal obligations to pay out the bonuses–with the smallish $20 million concession–is just the sprinkles on the cake. Perhaps it’s easier to pay them than to have the AIG financiers talk about the details as the FED and Treasury unwound their deals.

The rationale for what is essentially the breaking of so many laws is the rescue of the U.S. and the world from another Great Depression. There are always ignoble deeds, however, done in the name of the most noble causes. This should go down in the press and in history as The Great U.S. Treasury and Financial Market Heist. The last two secretaries of Treasury-Paulson and Geithner–should be hauled before a government tribunal and stuck in Gitmo with the rest of the terrorists and enemies of the state. The dirty details follow the fold.

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What’s That Lassie? Little Timmy’s in the Well AGAIN?

Posted: August 4, 2009 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, president teleprompter jesus, The Bonus Class, The Great Recession, U.S. Economy | Tags: , , , , , , , , , , , | Comments Off on What’s That Lassie? Little Timmy’s in the Well AGAIN?

lassie Wow, it looks like Turbo Tax Timmy has gone rogue! We better send the press up to Alaska to chase down another Palin rumor. First, there’s that nastiness over the weekend with the Stephanapolous show on ABC where he explicitly said that the administration wasn’t ruling out new taxes on the middle class. (Something Larry-the-la-la Summers also inkled, but hey, he’s not a cabinet officer, he’s something akin to a Czar that has to be overthrown by something other than scandal and public displays of stupidity.) I believe that gave Robert Gibbs Excedrin headaches number 349-357 during yesterday’s presser.

Now, there’s rumors of a temper tantrum in the presence of all the nation’s topic economists and financial regulators outlined here in the WSJ. It seems he’s not getting the Obama way on this one. The ladies in the room have taken exception to his granting Ben Bernanke (possibly later, this year, La-la Summers) all the fun and power. I guess being an independent regulator with an agency all to yourself just isn’t what it used to be; especially when you have scary lady parts and a huge brain.

Mr. Geithner told the regulators Friday that “enough is enough,” said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.

Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies.

Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system. Ms. Schapiro and Ms. Bair, among others, have argued that more authority should be shared among a council of regulators.

This current turf battle is only the latest move by a group within government possibly thwarting the Treasury’s plans to continue uploading tax dollars to the bonus class in the guise of saving the financial sector. If there’s still disagreement about this point, can you imagine what other things are going on in complete disarray behind the scenes? Who is really in charge of solving this overt act of sibling rivalry? Well, if you have figured out where the buck stops in this administration, you’re doing better than me. (Hint: these folks are ALL presidential appointments).

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Obama and the Enhanced Status Quo

Posted: June 21, 2009 | Author: | Filed under: Global Financial Crisis, Health care reform, Team Obama, The DNC, Uncategorized, Voter Ignorance | Tags: , , , , , , | Comments Off on Obama and the Enhanced Status Quo

monopoly smoke ringsWe were promised changed. What we are getting is perpetuation of the status quo. Let’s try this headline at the Guardian on for size “Goldman Sachs to make record bonus payout”.

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company’s prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm’s second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company’s shares in January, has already made a $1bn gain on his investment.

The bold part says it all. There continues to be a systematic elimination of competition from merger mania in the financial sector which has created two classes of too-big-to-fail institutions. We now have those that function completely with government funding and those that function by funding candidates for government. Goldman Sachs is benefiting immensely from both.

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