Entries categorized "Goldman Sachs"

"Wall Street profits from trades with Fed"

There is currently a proposal that would require Congress to audit the Federal Reserve.  The bill has 282 co-sponsors, which means it would easily pass the House.  Yet someone in the House has buried the bill.  The Fed, of course, does not want audited. 

Although the Fed gave hundreds-of-billions of money directly to Wall Street, the Fed has actually transfered trillions (nine trillion, by conservative estimates) through many subterfuges.  Here is a recent example

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

In other words, the Fed gives Wall Street advanced notice of what to buy.  The Fed tells Wall Street that it's willing to pay a sucker's price for bonds.  

Would you walk into a car dealership announcing, "I am willing to pay $50,000 for a car"?  Only if you're a chump.  You never name the top price you are willing to pay.  It's banal to even state that!

The Fed is not run by chumps.  Rather, it is run by men who want to transfer wealth from taxpayers to Wall Street.

An audit of the Fed would not doubt reveal even more unscrupulous practices.  It is therefore unsurprising that the Fed has resisted an audit.  

Have you written your congressperson, supporting an audit of the Fed?  

Political activism is generally futile.  One cannot usually take on City Hall - or Wall Street.  Yet there is massive populous outrage.  There is time to channel the power of the mob.  

The outrage has almost tipped.  Although the public has a short attention span, there are enough Wall Street scandals to keep that public's attention.  We must act now, or all is lost.

Write your congressperson here.

Fed Chairman Ben Bernanke's Lies About AIG, Lehman Brothers, and Goldman Sachs

There are a lot of questions we all should have about the bailouts: Why was Lehman Brothers, Goldman Sachs' main competitor, not bailed out?  Why did the Fed give AIG $85 billion, of which $13 billion went to  Goldman Sachs?  Chairman Bernanke, in a speech given today, claimed

The case of the investment bank Lehman Brothers proved exceptionally difficult, however.... [T]he company's available collateral fell well short of the amount needed to secure a Federal Reserve loan of sufficient size to meet its funding needs. As the Federal Reserve cannot make an unsecured loan, and as the government as a whole lacked appropriate resolution authority or the ability to inject capital, the firm's failure was, unfortunately, unavoidable....

Sounds plausible, right?  Most lies, when read in isolation, are plausible.  A lie must be read within the context of the rest of the story.  Bernanke continued:

In contrast, in the case of the insurance company American International Group (AIG), the Federal Reserve judged that the company's financial and business assets were adequate to secure an $85 billion line of credit, enough to avert its imminent failure.

Do any of Bernanke's supporters care to defend the Fed's assessment that AIG had the credit worthiness for a $85 billion loan?  AIG is actually going through reorganization, precisely because AIG did not have the assets to pay back an $85 billion loan.  Either Bernanke is lying, or he lacks the ability to forsee whether a company will be able to pay back billions in taxpayer money.  Either way, the taxpayers lose.

Ben Bernanke wants to keep his power.  He wants to remain Chairman of the Federal Reserve.  He must be ousted.  

Please note, too, how economists view Bernanke: Tyler Cowen and other establishment economists think Bernanke should keep his position as Chairman. (Yes, they really do "think" that.)  There is a reason most of us consider macroeconomics to be nothing more than voo-doo.  No thinking person could trust Bernanke.  Macroeconomics, like other superstitions, requires you to stop thinking.  

Bernanke made everyone afraid of invisible forces that would destroy the economy.  He then gave trillions (in payouts and guarantees) to those same people who caused the economic crisis.  He, contrary to federal law, favored insiders like Goldman Sachs.  

Goldman Sachs is reporting record profits because Bernanke gave billions to Goldman Sachs.  More than the free money, Bernanke killed Goldman's chief competitor.  

It's clear that Bernanke is a wicke man who does not deserve his crown.

Alex Kozinski on Ethics and Henry Paulson

In 2005, Alex Kozinski wrote a brilliant article in Legal Affairs on judicial ethics. He noted that current ethics laws are mostly trivial. A judge, e.g., must recuse himself when hearing a case involving a corporate client if the judge is a shareholder in the company. How many judges are actually going to corrupt their judgment over a few shares of stock?

The real ethics issue come in cases involving bad facts. Will a judge bend the law when there is an especially sympathetic litigant before her? That’s unethical.  Will a judge rule a certain way to avoid nasty editorials that would appear national newspapers? Writing with the New York Times over your shoulder is corrupt, too, but is also not addressed by ethics laws.

It’s covert biases that corrupt judicial decisionmaking. The same could be said of Henry Paulson’s decisions regarding Goldman Sachs. Yet the ethics laws did not even make room for the possibility of Paulson’s true conflict.

Paulson signed an ethics waiver that prohibited him from having contact with anyone on Goldman Sachs. The basis? Paulson had a pension plan with Goldman. This pension plan was probably around 1% of Paulson’s net worth.

What the ethics waiver didn’t even mention: Paulson spent his entire private-sector life working for Goldman Sachs. Paulson had many former friends and business associates at Goldman. Paulson was CEO of Goldman Paulson is the man who led Goldman when Goldman made the same investments that would have brought Goldman down.

No one who has seriously studied Paulson, thinks that Paulson wanted to save his pension plan. That is moronic. Paulson saved Goldman Sachs to save Paulson’s legacy.

Paulson is an old man who has made his money. He is worth at least $700,000,000. He is a serious man with intellectual interests. He’s an arborist and naturalist. He doesn’t jet set around the world, pop champagne corks, or wear bling. It doesn’t cost much money to read books on trees and to study trees.  Paulson is leaving his hundreds-of-millions to nature funds.

He has nothing to live for but his legacy.

What would Paulson’s legacy have been if Goldman Sachs had gone bankrupt? That is the Thirteen Billion Dollar Question. It’s a question that on one in government even asked - even though it was the only question that required an answer.

Henry Paulson Lied to Congress About AIG and Goldman Sachs

Former Secretary of the Treasury Henry Paulson testified before Congress about his role in the bailout of A.I.G. During his July 16, 2009 sword testimony, Paulson said: “I want you to know that I had no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.”

"Role” is defined as: “a function or part performed especially in a particular operation or process.” Paulson’s sworn statement was clear. Paulson claimed to have played “no role whatsoever in ay of the Fed’s decision.” The evidence, however, directly contradicts Paulson’s sworn testimony.

Through Freedom of Information Act requests, The New York Times recently obtained substantial information about Paulson’s role regarding the Fed’s payments to A.I.G.’s creditors and counterparties. The Times investigation revealed the following:

A. The Testimony of Anonymous Whistleblowers Contradicts Paulson’s Sworn Testimony. The New York Times spoke with two anonymous whistleblowers. They have revealed:

But according to two senior government officials involved in the discussions about an A.I.G. bailout and several other people who attended those meetings and requested anonymity because of confidentiality agreements, the government’s decision to rescue A.I.G was made collectively by Mr. Paulson, officials from the Federal Reserve and other financial regulators in meetings at the New York Fed over the weekend of Sept. 13-14, 2008.

These people said Mr. Paulson played a major role in the A.I.G. rescue discussions over that weekend and that it was well known among the participants that a loan to A.I.G. would be used to pay Goldman and the insurer’s other trading partners.

Paulson’s testimony is thus directly contradicted by two people familiar with the Fed’s decision to funnel taxpayer money from A.I.G. to Goldman Sachs.

B. Paulson Wrote a Letter to the Federal Reserve Regarding A.I.G.

The New York Times reported:

Mr. Paulson’s involvement in the decision to rescue A.I.G. is also supported by an e-mail message sent by Scott G. Alvarez, general counsel at the Federal Reserve Board, to Robert Hoyt, a Treasury legal counsel, that same day. The subject of the message, acquired under the Freedom of Information Act, is “AIG Letter,” and it contains a reference to a document called “AIG.Paulson.Letter.draft2.09.16.2008.doc.” The letter itself was not released.

Why did Paulson write a letter to the Federal Reserve about A.I.G.? According to the file’s date, Paulson created the file on September 16, 2008 – the same day that the Federal Reserve gave billions to A.I.G.

What did this letter say? The Treasury and Federal Reserve have stonewalled the Times, refusing to respond to FOIA demands for the letter. Even without reading the actual letter, is it consistent for Paulson to claim that he had “no role whatsoever,” when he was in fact sending official letters to the Federal Reserve about A.I.G.?

C. Paulson’s Spokesperson Confirmed that Paulson’s Wanted to “Rescue” Goldman Sachs.

Paulson requested an “ethics waiver” that allowed him to have one-on-one, off-the-record conversations with Goldman Sachs officials.

Paulson will not respond to press inquiries. His spokesperson, however, told the Times: “The waiver was in anticipation of a need to rescue Goldman Sachs, not to bail out A.I.G.”

The “need to rescue Goldman Sachs,” was inextricably entwined with the need to bail out A.I.G. Everyone – including Paulson – knew that Goldman would lose billions if A.I.G. went bankrupt. Everyone – including Paulson – knew that Goldman would receive billions if A.I.G. was bailed out.

How could someone concerned with rescuing Goldman Sachs claim to have played “no role whatsoever” in A.I.G.’s decision to pay billions to Goldman Sachs? Goldman needed the money. Paulson ensured that Goldman got it.

D. Paulson Personally Called A.I.G. CEO Robert B. Willumstad, Firing Willumstad.

On Sept. 16, 2008, the Federal Reserve bailed out A.I.G. On the same day, Paulson personally called Robert B. Willumstad, A.I.G.’s CEO. Paulson fired Willumstad. (Please see the attached Wall Street Journal article.)

If Paulson had played “no role whatsoever,” why did he personally call Mr. Willumstad to dismiss him? Are we to believe that the Federal Reserve simply called Paulson to delegate him the task of firing Willumstad?

Moreover, Paulson’s next step was crucial. Paulson replaced Willumstag with Edward Liddy.

Before being anointed CEO by Paulson, Mr. Liddy was on the Board of Directors of Goldman Sachs.

If Paulson had had “no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties,” then why did Paulson already have a replacement in mind?

E. Paulson Was Not Too Clever By Half.

Henry Paulson might, in the words of today’s youth, defend himself as follows: “I ‘punked’ Congress. Sure, I played a major role in the Fed’s decision to bail out A.I.G. I was instrumental in having A.I.G.’s CEO fired. I was instrumental in appointing a Goldman Sachs Board member as A.I.G’s. CEO. However, none of that proves that I played a role in the ‘Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.’”

Paulson’s defense would fail. First, it is contradicted by two anonymous informants. Second, it is contradicted by the extensive evidence, noted above. Paulson lied before Congress. He is a clever man, but he was not clever enough. He committed perjury.

Henry Paulson: 

  • wrote letters to the Federal Reserve concerning A.I.G.; 
  • wanted to “rescue” Goldman Sachs; 
  • fired A.I.G.’s CEO; 
  • and anointed a Goldman Sach’s Board member as CEO of A.I.G.

Further, two anonymous informants have revealed that Paulson played a major role in A.I.G.’s decision to pay billions to Goldman Sachs. No rational person could conclude that Paulson played “no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.” 

Paulson committed perjury and should be prosecuted.

Hank Paulson and Goldman Sachs Are RICO Enterprises

This New York Times expose on Henry Paulson and Goldman Sachs makes one thing clear: There is now no doubt that Henry Paulson and Goldman Sachs have violate numerous federal laws.  Paulson laundered several billion dollars of money to Goldman Sachs, through A.I.G.  Paulson lied to Congress about the true nature of TARP.  Paulson lied to Congress about his role in the Federal Reserve's decision to give over $185 billion to A.I.G. 

Paulson has also violated the federal honest service statute, which makes it a felony for a government official to breach his fidicuariy obligation to taxpayers.  See 18 U.S.C. 1346 ("the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services.")

Paulson clearly violated his duties to American taxpayers when he transferred billions of dollars of wealth to Goldman Sachs under false pretenses; when he lied to Congress in order to obtains hundreds-of-billions of dollars in TARP funds; when he conspired with Goldman Sachs to "save" A.I.G. for Goldman's sake; and whe he lied to Congress about his role in "saving" A.I.G.

The New York Times is reporting about some of Paulson-Goldman Sachs conversations:   

While Mr. Paulson spoke to many Wall Street executives during [the early days of the economic crisis], he was in very frequent contact with Lloyd C. Blankfein, Goldman’s chief executive, according to a copy of Mr. Paulson’s calendars acquired by The New York Times through a Freedom of Information Act request.

During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.

What did they talk about?  We are left to draw reasonable inferences.  Clearly they discussed how to launder money through A.I.G. into Goldman Sachs.

Paulson has lied repeatedly about his role in laundering money through A.I.G.  He told Congres, under oath:

“I want you to know that I had no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.”

Yet FOIA requests reveal that Paulson committed perjury when he lied before Congress:

On Sept. 16, 2008, the day that the government agreed to inject billions into A.I.G., Mr. Paulson personally called Robert B. Willumstad, A.I.G.’s chief executive, and dismissed him. 

Mr. Paulson’s involvement in the decision to rescue A.I.G. is also supported by an e-mail message sent by Scott G. Alvarez, general counsel at the Federal Reserve Board, to Robert Hoyt, a Treasury legal counsel, that same day.The subject of the message, acquired under the Freedom of Information Act, is “AIG Letter,” and it contains a reference to a document called “AIG.Paulson.Letter.draft2.09.16.2008.doc.” The letter itself was not released.

We need Elliot Spitzer.  The New York Times has discovered corruption and federal crimes through FOIA requests - which generally only net banal evidence.  It is now clear that Henry Paulson violated the federal honest services statute.  He is a criminal.  

If the Times was able to uncover so much corruption through Freedom of Information Act requests, imagine what a federal prosecutor could uncover with subpoenas and FBI agents.  The Paulson-A.I.G. letter would most certainly be released to federal prosecutors; there'd be no choice.

As we all know, though, the Department of Justice is not interested in investigating corruption on Wall Street.  Bernie Madoff spent decades cheating investors out of billions.  He wasn't arrested until he called the police on himself - through his sons.  When a Goldman Sachs employee allegedly stold a few lines of code from Goldman Sachs, though, the Department of Justice took less than 48 hours to make an arrest.

Henry "Hank" Paulson's Federal Crimes

Here is a great law school exam idea for a course in White Collar Crime.  

Dear Student,

You are a young, knowledgeable, ethical federal prosecutor in the Southern District of New York.  You take seriously your promise to provide equal justice under the law.  Thus, you are not beholden to Wall Street.  (Yes, this is all hypothetical.) 

Your assignment is to investigate what crimes, if any, Henry Paulson committed while Secretary of the Treasure.

Please read this New York Times article.  

You have three hours to complete this exam.

United State Senate Declares: Chris Dodd May Accept Bribes from Subprime Lenders

Connecticut Senator Christopher Dodd received a better mortgage deal from subprime lender Countrywide, simply because Dodd was a United States Senator.  Today, the United States Senate cleared Dodd of wrongdoing.  According to CNBC:

In the end, it takes a lot for the country's most elite club to turn on one of its own. Senators Christopher Dodd and Kent Conrad have been cleared of any ethics violations for accepting sweetheart, "Friends of Angelo" mortgages from Countrywide.

The Senate's deciding to clear Dodd comes just a couple of days after the SEC gave a sweet heart deal to Bank of America - which, according ot the SEC, had misled investors about a several-billion-dollar loss.

The Senate's decision comes just weeks after the Department of Justice took less than 48 hours to arrest and beging criminally proceedings a Goldman Sachs employee for theft of trade secrets.  

Judges, are you paying attention?  You are the only remaining protectors of individual rights.  Congress and the Presidency has been purchsaed.  Barack Obama accepted nearly $1 million in campaign contributions from Goldman Sachs.  Larry Summers has accepted payments from Goldman Sachs and other Wall Street banks.

Yes, I was once a member of the Federalist Society.  I know all of the arguments against "judicial activism."  There are, however, three branches of government.  The Executive and Legislative branches have all bowed down to Wall Street.  That leaves the last remaining branch - the Judiciary.

As a matter of separation of powers, federal judges have a constitutional duty to fight back.  Refuse to take anything the Executive or Legislative Branch says at face value.  They have no credibility - nor does anyone who claims that the Judiciary Branch should "defer" to these corrupt officials.