Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy – they’re re-creating the conditions for another crash
By MATT TAIBBI
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a “bailout tax” on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. “In a year that proved to have no shortage of story lines,” he said, “I believe very strongly that performance is the ultimate narrative.”
Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn’t alone. The nation’s six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. “What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?” asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America’s populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what’s the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there’s still a widespread misunderstanding of how exactly Wall Street “earns” its money, with emphasis on the quotation marks around “earns.” The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its “performance” was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
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Cēterum cēnseō factiōnem Rēpūblicānam dēlendam esse īgnī ferrōque.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” -Adam Smith
I read the article at the Rolling Stone website yesterday, and it is very interesting.
The Man, I would encourage editing your OP by linking to a source and then quoting key passages- quoting an article in full runs into violation of fair use provisions.
ETA: Taibbi has an interesting point to make at his blog, regarding the question of well, what would have happened if these investment banks were allowed to fail?
Quote:
My feeling on that is similar to what Barry Ritholtz (check out his site if you haven’t), the author of Bailout Nation and one of the guys I spoke with at length for this story, proposed. He said that “we should have gone Swedish on their asses.” The Swedes after a similar bubble burst in 1992 temporarily seized control of insolvent institutions, forced banks to write down losses before they got aid, and gave taxpayers a huge share in the upside of recovery. It was a tough-love approach that really worked and forcefully addressed the moral hazard issue in a way we never touched.
That’s one way we could have proceeded. But whatever we didn’t do, we can be sure that what we did do was exactly wrong. Barry pointed out the classic pronunciation of Victorian economist/journalist Walter Bagehot, who said that in a crisis, a Central Bank should lend freely to solvent institutions against good collateral, at penalty rates. We did exactly the opposite: we lent to insolvent institutions, against shit collateral, at zero percent interest. We told these guys to drink themselves sober. Total crap thinking and totally typical.
Fair point, but unfortunately Rolling Stone doesn't have it on their site. I'll link to a blog that posted it though.
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Cēterum cēnseō factiōnem Rēpūblicānam dēlendam esse īgnī ferrōque.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” -Adam Smith
well that showed me. I googled the text and it didn't come up on their site.
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Cēterum cēnseō factiōnem Rēpūblicānam dēlendam esse īgnī ferrōque.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” -Adam Smith
Interesting, if it's "a matter of high public concern" they seem to say (and I could be cherry picking here) it's more likely to be a fair use.
I could argue that the functioning of a major part of our economy (or pillage of said economy) should be of high concern. I'm sort of dismayed that it isn't a high public concern.
I am wondering what the next bubble crash will be, I think healthcare.
This monopoly global capitalism can only expand so far before it pops like a soap bubble.
I am wondering what the next bubble crash will be, I think healthcare.
This monopoly global capitalism can only expand so far before it pops like a soap bubble.
Credit cards will be the really big problem, I think. If the credit card bubble bursts it has the potential to take the global economy down but good.
Americans have a seriously staggering credit card debt problem: The average American household’s credit card debt in 1990 was $2,966. In 2007 it was $9,840. Yep, that's the average household debt. Holy shit.
I'm still so pissed at how badly the US bailout was managed. It was a golden opportunity to remake the global economy and what happened? Same old, same old. It just shows how corrupt the western democracies, especially the USA, are.
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Don't pray in my school and I won't think in your church.
I'm still so pissed at how badly the US bailout was managed. It was a golden opportunity to remake the global economy and what happened? Same old, same old.
A U.S. District Court judge has given final approval to the $150 million dollar settlement between Bank of America and the U.S. Securities and Exchange Commission over the bank's lack of disclosures in its acquisition of Merrill Lynch a year ago.
Judge Jed S. Rakoff said he was approving the agreement, though he called it “far from ideal,” referring to it as “paltry” and “half-baked justice.” Rakoff rejected a proposed $33 million settlement last year as inadequate.
In approving this settlement, Rakoff ordered the $150 million to be distributed to shareholders who lost money on their Bank of America stock when it plunged in the wake of the Merrill Lynch merger.
Though the judge was not initially satisfied with the settlement, the SEC pushed hard for it.
...>snip<... Merrill Lynch paid $3.6 billion in employee bonuses just days before Bank of America completed its purchase of the investment firm on January 1, 2009.
Soon after, Merrill Lynch reported losses of more than $15 billion for the fourth quarter of 2008.
But maybe the shareholders can reign in the company they own stock in, hey? LA Times:
Quote:
Since becoming CEO, Moynihan has made an effort to engage regulators and lawmakers in Washington. He said this month that BofA wouldn't fight President Obama's proposal to create a consumer financial protection agency, something other banks are trying hard to thwart.
But under Moynihan the bank also has asked the SEC to block all six resolutions regarding executive pay that have been proposed by BofA shareholders, according to SEC data. Other major banks have agreed to put one or more pay-related resolutions on their ballots. Also unlike other banks, BofA hasn't tried to open a dialogue regarding the resolutions it disagrees with, investor activists say.
What does the SEC do again? I mean besides springboard regulators into lucrative positions with the regulated?
Quote:
That Linda Thomsen is the same one whose resumption of employment with white-shoe law firm Davis Polk & Wardwell (I say “resumption” because Ms. Thomsen worked at Davis Polk until she joined the SEC in 1995) was announced today in this gem (“SEC Enforcement Chief Joins Davis Polk“) from the Blog of Legal Times (“Law and Lobbying in the Nation’s Capital”).
The announcement reads, with no detectable irony: Linda Thomsen, who headed the SEC’s enforcement division until February, is starting as a partner in the firm’s white-collar defense and government investigations and enforcement practices in June. She will be joining former SEC commissioner Annette Nazareth, who started at Davis Polk last year, and Robert Colby, who joined the D.C. office this year after serving as deputy director of the SEC’s trading and markets division… Thomsen practiced in Davis Polk’s New York office before joining the SEC in 1995. She started at the commission as assistant chief litigation counsel and went on to become head of enforcement in 2005. After leaving the SEC earlier this year, Thomsen says, “I had no preconceived ideas about where I was going to go, or what I was going to do.” – Translation: “I swear, it never occurred to me to go work for the law firm defending wealthy clients against whom I was overseeing cases until weeks ago.”
If a large number of people showed up and closed/withdrew/transferred accounts could it hurt them?
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Beware the Plutocrat Man, for he is the Devil's pawn. Alone among God's primates, he kills for sport or lust or greed. Yea, he will murder his brother to possess his brother's land. Let him not breed in great numbers, for he will make a desert of his home and yours. Shun him; drive him back into his jungle lair, for he is the harbinger of death.
In response to someones post I do not believe a run on a bank would be possible. Central banks have been devised with just such action in mind. The notes and deposit accounts outstanding of the US Central bank are backed by the full faith and credit of the united states. That means if you somehow overdraw the deposit accounts on hand at the fed, which is very unlikely, the American taxpayers are actually on the hook for the overdraft.
For those that are interested in more on banking and central banks, I recommend this.
I am wondering what the next bubble crash will be, I think healthcare.
This monopoly global capitalism can only expand so far before it pops like a soap bubble.
Credit cards will be the really big problem, I think. If the credit card bubble bursts it has the potential to take the global economy down but good.
Americans have a seriously staggering credit card debt problem: The average American household’s credit card debt in 1990 was $2,966. In 2007 it was $9,840. Yep, that's the average household debt. Holy shit.
That's old news, the new news is Americans reduced their credit card debt from $980 billion to $855 billion in a single year, a reduction of 13.8%. And that's why the economy continues to flounder.
Wall Street's Bailout Hustle, by Matt Taibbi
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