Monday, July 13, 2009

So scam artists Goldman Sachs are now recording blowout profits

after receiving quite a bit of bailout money. Glenn Greenwald gives a guided tour of the events preceding the most recent news, and then adds:

Other than those individuals whose life purpose is to serve as reverent apologists and servile defenders for the most powerful financial elites, is there anyone who would be willing to claim with a straight face that the last event is unrelated to all the ones that preceded it? Add to that all the Serious consensus-talk about how the country can't afford health care reform and how Social Security, Medicare and Medicaid must be cut because they're too expensive, and the picture couldn't be clearer.

Read the above-excerpted paragraph from Simon Johnson describing how, in his experience, fundamentally corrupt emerging-market nations respond to financial crises ("at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government. . . . Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk -- at least until the riots grow too large"). That "until" provision never seems to be triggered, which is why, as Johnson points out, the behavior continues unabated.

UPDATE: Several commenters add a crucial point: back in September, the Federal Reserve allowed Goldman (and a few other surviving institutions) to convert from an investment bank into a bank holding company. The Wall St. Journal claimed at the time that the move meant the firm would "come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed." A mere nine months later, Goldman boasts of "blowout profits." So much for "less profitability." As for allegedly greater regulations and capital restrictions, they freely admitted from the start: "'We don't believe we'll have to get out of any businesses,' says Lucas van Praag, a Goldman spokesman. Adds Morgan Stanley's Mark Lake, 'There will not be much in terms of divestitures'."

But what the conversion did allow was access to lending from the Federal Reserve. Since then, the Fed has increased its balance sheet by $2 trillion while steadfastly refusing to disclose the beneficiaries of that credit. Thus, even aside from the bailout money it directly received and the billions in bailout money which it indirectly received (through AIG), Goldman has had access to massive amounts of Fed lending in order to fuel its bulging profits. That unimaginably enormous (though entirely secret) lending is, in part, what is behind the Ron Paul-sponsored bill to audit the Fed -- a bill that is now co-sponsored by a majority of House members from across the political spectrum (progressive, conservative and everything in between), yet which continues to be blocked by Congressional leaders from receiving a floor vote.

It's quite a scam. Those of us whose taxes were used to pay for it got hosed.

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