Forget Goldman, Start Worrying About the Government 60 comments
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Look, everyone and his brother are jumping on the “Goldman is evil” bandwagon these days. Even Rupert Murdoch’s Wall Street Journal is talking about Goldman Sachs like they are “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Well, I’m not. I’ve got news for you: you’re barking up the wrong tree.
It’s the U.S. government we should be pointing fingers at. While Goldman (GS) is crying out thank you sir, may I have another as everyone piles on, the U.S. government, which often seems bought and paid for by Wall Street and is the one actually running things here, is getting off scot-free.
Here’s a question for you, if Goldman made out like bandits from the AIG fiasco, who do you think allowed that? Government.
When Goldman’s Lloyd Blankfein was the only person in the room from Wall Street as AIG’s fate was debated, who do you think allowed him? Government.
When TARP funds were disbursed to re-capitalize Goldman and other banks, who made that decision? Government.
When Goldman repaid its TARP funds, paving the way for them to then hand out record bonuses, who do you think allowed this? Government.
When Goldman sold asset-backed securities to investors when it was net short the mortgage-backed market, whose rules do you think allowed this? Government.
Forget about Goldman Sachs. Start worrying about government.
They are the ones who regulate the financial services industry. Government is the one which makes laws governing how financial services companies can and cannot operate. Government is also the one which can change the ground rules going forward to help prevent a recurrence of this sort of financial crisis in future.
As my good friend Marshall Auerback says, the advantages firms like Goldman have are “symptomatic of the problem, but they are not the problem.” The problem is Government and its cozy relationship with the industry it is supposed to regulate and control. The government is captured by the financial services industry, plain and simple. This is why the global financial system is a shambles. The question is: what are you going to do about it?
It seems like the only thing most people are going to do is sit around and whine about Goldman and big banks making a shed load of cash. Then, they’ll get all riled up and angry at Goldman and the rest of Wall Street and try and tax these people to level the playing field. Doesn’t sound like a very comprehensive solution to me.
How about this: stop elections in America from being controlled by money. We can eliminate private funding of the electoral process. Of course, Barack Obama wouldn’t be so happy about this since he owes his election to private funding. And free market zealots will be shouting down this proposal from the word go. But so what? Isn’t it obvious that money drives the political process in the United Sates? Do you have any better ideas?
Here’s another one: let’s get rid of Political Action Committees (PACs) too. Aren’t these just vehicles through which big money can be channelled into supporting one candidate over another. You might want to have a look at the Top All-Time Donors list to see what I mean. By the way, for you Goldman-haters, GS is in 4th place with $30 million donated, right behind our friends at the National Association of Realtors.
And, let’s round out my trifecta of suggestions with a ban on a bunch of lobbying activities. If it were up to me, I’d ban activities like this and this. Why should lobbyists, who usually represent corporate interests, get a seat at the table when you and I don’t? Sure, there are consumer lobbyist groups like the AARP too, but I would restrict their contacts to government as well. And employees of big business should be barred from moving directly from an interested company/law firm to a regulatory.government role and vice versa. They are like lobbyists who are actually inside government: interested parties who will not be able to take arm's length decisions.
So, yes, Goldman is living high on the hog. But the last time I checked, it was Congress and the President who are actually supposed to be looking out for our interests in this representative democracy. Right now, our legislative and executive branches are filled with people who are incentivized to look after the interests of big business and NOT after the interests of individual Americans.
If you want change we can believe in, start focusing in on the right people: Congress and the President.
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This article has 60 comments:
You are so right in this article. I do not intend that you take this as an insult, but you are just stating the obvious. What I like about the obvious in this article, though, is that you you present it with saber precision and sledgehammer impact. Well done.
I am reminded of the sound bite from Senator Dick Durbin (D, Illinois) earlier this year, referring to Capitol Hill: "This place is bought and paid for." I would offer another thought: Change the name from "Capitol Hill" to "Capital Hill". After all, isn't that where capital has been invested by the rich and powerful?
"The hubris of Goldman Sacks is breath taking. They no longer even deny it. They are the broker for the Fed and the PPT. They front run the PPT trades. Their server is parked right next to the execution server so they can almost at will, front run large block trades. Their people have been installed at strategic economic and political choke points throughout the system, a web that has been building since the beginning of the Clinton administration. They have been at the forefront of regulatory deconstruction. They are a huge supporter of Cap and Trade as that is the NEXT major bubble scheme and they are now positioned to take total advantage of that. They own 10% of the exchange that will be trading the carbon offsets, a market that is destined to dwarf the energy market down the road. All their other positions are in PRIVATELY held companies. Too good a deal to let you and I in on, that is for sure, including Al Gore's "little" scam company. Seems he is in partnersip with two very big ex-Goldman boys. Increasingly starting to look like a gangster economy."
Our government and the financial oligarchs have become one and the same. There can be no more illusions as to what is really going on and who are the real culprits.
is the usa becoming the "great satan"?
My question is, "What now?" You suggest we "start focusing in on the right people: Congress and the President." but I wonder what shape this focus is supposed to take. Would trying to elect other candidates work? Are there enough potential congresspeople and senators who would NOT serve the needs of GS reflexively? Tax payers certainly have cause for revolt, but how and to what end? How can common citizens (or even uncommon citizens in better positions of power than me) actually respond to these outrages in any meaningful way? These are not supposed to be rhetorical questions, by the way.
I find myself violently agreeing with your diagnosis of the problem but increasingly feeling powerless about expecting any solution arising through the status quo electoral process.
Wasn't the last US election supposed to be about change?
What has changed at the Treasury and the cronyism of the financial elite?
---Does this oath have any meaning at all anymore? I would suggest that GS and the rest of the financial oligarchs are a domestic enemy.
On Jul 19 04:18 AM Steven Hansen wrote:
> somehow we have equated being legal with being moral. how much of
> the governments or gs activities seem moral.
>
> is the usa becoming the "great satan"?
It is surely equivalent to blaming the puppet for the actions of the puppet master.
Their power is based on the gigantically bloated financial sector, which extracts hugely more money from the economy than in, say, 1980, whilst clearly performing it's overt function of transferring money from depositors to productive enterprises which can increase it far worse, as in fact it is diverted to asset inflation ponzi schemes after having been creamed off by the insiders.
In order to do anything about it you need to recognise the source.
The reason that the political process has been captured is because these sociopaths have money.
The solution is implied in the analysis.
Confiscate the money.
How?
Well, for a start ban CDS contracts where there is no equivalent of an insurable interest.
The a Rico investigation would be needed.
Not being a native I am unfamiliar with the ins and outs of the American legal system, but using the same doctrine of systemic risk that Paulson used to gain absolute control of the funds provided by Congress, freeze the assets of all the executives and highly paid employees of the major financial institution.
Investigations should be for insider trading, false accounting, misrepresentation of financial accounts, and fiduciary irresponsibility off the top of my head.
Contracts specifying that CEO's would not have to pay for any irresponsibility or malfeasance and that liability should lie with their companies should be declared null and void.
How many of these yo-yos would survive any serious holding to account of their past actions?
Any monies paid to those found to have acted improperly or illegally should be levied as as a fine, since the payment occurred having an interest liable of the amount the institutions charge on their credit cards, say 30% per annum.
Is this anti-capitalist? Not at all, it would merely correct some of the abuses which have occurred consequent on the reduction of true, capitalist liability by corporate exemptions.
Interestingly, moves to act far more vigorously against the financial institutions seem to be afoot in Europe, where in France in particular in France the memory of 1789 is ever present.
Here is the situation in Britain, where Whitney's ideas to break up the banks seems to be gaining traction:
business.timesonline.c...
In short, if you are to win back control of the political process, then the root of the power of those who have captured it must be eradicated, and if that involves blaming the amoral grifters, fine.
Edward's ideas of banning the overt political sponsorship is fine as far as it goes, but money is fungible and the huge concentration of it in the hands of the elites and the financial institutions which has happened in the past 30 years needs to be tackled or it will find other means to influence the political process.
to the problem.
On Jul 19 08:14 AM markfl wrote:
> I think we could start by not hiring investment bankers to work at
> the Treasury Dept. Nicholas Brady (Dillon Read, investment bank)
> under G. Bush 1 and Hank Paulson (Sachs) under Bush Jr. come to mind.
> Both were recession Secretaries. Coincidence?
It should be fairly clear to everyone that without anger nothing is going to happen because the industry has such embedded advantages.
The masses aren't going to pay attention to detailed policy papers, and arcane rules for trading. The bonus issue summarizes the sum total of all these issues because if the government was actually doing what it should be there would be no bonus issue.
One must look at the overall goal, and I totally agree with the author, but being nice and rational doesn't get the President or his team to do shit. I'd say this has been proven over and over. So you take the tools available and use them to get to your goal.
That is why getting the public angry is a worth goal in its own right. Now even Fox has realized they are on to something. If the republicans join the band wagon and use the issue to get some power back in washington I am all for it. I want the democrats to be worried they will loose big in med term elections unless they get their act together. That is how we will get change and no other way.
Now...what do you think the chances are of not raising taxes in any way on those making less than $250K. Let's see....tobacco tax, that does not affect them...oh wait...it DOES! How about a national sales tax? That's right...people making less than 250K don't consume anything...and the current version of the National Health Insurance fray...none of the expense of higher taxes on business will be passed on the those making less than $250K...oh wait, that technically is not a pure "in your face" tax.
How many more crooks do politicians have to appoint before the rest of the media, and business WAKES UP!!!
Thanks for FINALLY noticing, and publishing an article that touches a small part of what Republicans and Democrats are doing to us! It is also heartening to see so many comments flowing from people that obviously get it too!
Edward, do you have a link to the Auerback article?
tia
I am somewhat in agreement, if only I could be certain who is in charge.
And it is OK to multi-task.
On Jul 19 03:05 PM Bill Herbert wrote:
> >>As my good friend Marshall Auerback says, the advantages firms
> like Goldman have are “symptomatic of the problem, but they are not
> the problem.” The problem is Government and its cozy relationship
> with the industry it is suppose to regulate and control. The government
> is captured by the financial services industry, plain and simple.
> This is why the global financial system is a shambles. The question
> is: what are you going to do about it?<<
>
> Edward, do you have a link to the Auerback article?
>
> tia
of government. If you teach and get fired and you're "clean", no political or terrorist ties, then you can get re-hired. As for all the "dirty"
teachers and professors and their New World Order, get out. The pitchforks are digging up your dirt and Wall St./Government/Goldman
ties and we can send you back packing on some commune in Europe.
Then fire all politicians repeat and rinse. Needless to say, fire Wall Street, repeat and rinse. Then most of the media, the dirtiest laundry yet. One can dream, right?
You are correct about the moral part, but most of it is probably also not legal either. Front-running, insider trading, naked shorting, computerized theft of information, nepotism, hedges against known fraudlent securitized mortgages, use of inside information to bankrupt Semco, gross misrepresentation, self-serving analyst reports and recommendations, collusion with ratings agencies, and on and on. All of the above are not just immoral, but also illegal, and no doubt Goldman and many other Wall Streets have engaged in most if not all of them. Yes, it would be "nice" if our politicans did what they are supposed to do, namely act to protect the public and investors, but they are so compromised by the big money that one cannot remotely envision that ever happening. The two most promising avenues are probably: 1) A special prosecutor (not subject to political whims) - Use the Rico statues to investigate and prosecute first Goldman, then any other likely suspects. Or, 2) Class action lawsuits - there are at least several class action law firms big enough and with deep enough pockets to take on Goldman and Wall Street - They did with the cigarette companies and the payoff, potentially in the trillions, is large enough that they just might be willing to invest the hundreds of millions and years it woud take to pursue a class action lawsuit against Goldman and other Wall Street financial crooks. Either of the above offer a lot more potential for something actually getting done regarding Goldman and Wall Street than a miniscule hope that politicans will step up and bite the hand that feeds them. JMHO.
On Jul 19 04:18 AM Steven Hansen wrote:
> somehow we have equated being legal with being moral. how much of
> the governments or gs activities seem moral.
>
> is the usa becoming the "great satan"?
I have a little story for you to contemplate,
Several gang members are driving down the road and suddenly one of the occupants in the vehicle starts shooting into a crowd because he or she sees someone who they think may be in another gang.
They end up missing the target but manage to kill and wound several other people in the crowd. The next day they are all arrested for the shooting and they are all charged with the same crimes.
The case goes to trial and they all get a nice little “life without” bonus package but really only one of them pulled the trigger but due to loyalty no one could or would ever say who did it because they were all “home boys” and they don’t “roll that way”, etc, etc.
Go ahead and substitute the usual suspects from your story into my story and I think you get my point.
Personally, I'm not a big fan of publicly financed campaigns, and in my view the proposed legislation does little to offset the power of money in politics, it simply adds a new competitor to the moneyed interests. I'm no lawyer, but in the interests of simplicity, why not try something like:
1. Campaign contributions may only be accepted from US citizens, at least eligible for voter registration.
2. For statewide offices, candidates may accept donations only from those individuals residing in that state.
3. Keep the limits low, say $1000 per contest.
4. No corporations, unions, PACs, or even political parties, may contribute directly. These "entities" may purchase their own ads so as not to restrict free speech. The ads must contain full disclosure of the advertisers identity, along with reference to a comprehensive list of donors and amounts. Corporations would be required to disclose the amounts spent, as the donors are their shareholders, likewise for unions whose donors are their members.
Just a thought. And again, while I'm not a lawyer, one might reasonably expect the supreme court to rule this type of thing unconstitutional. Maybe a constitutional amendment? The revolving door and lobbying problems are a bit trickier. I would be interested in any ideas about these.
Thanks for the post. The comments appear positively one-sided, which I take as a good sign.
On Jul 19 04:37 AM Dialectical Materialist wrote:
> And agreeing with you is going to be just as obvious as John Lounsbury
> says your being, but I can't help chiming in. The problem is that
> I think most people kind of realize what you're saying, Common people
> (like me) have an increasing awareness and sense of frustration that
> the system is stacked against them. Rich and powerful were always
> that way, but now the collusion seems more blatant than ever. The
> transfer of wealth from taxpayers to the rich is a recurring front
> page story (with very little reading between the lines).
> My question is, "What now?" You suggest we "start focusing in on
> the right people: Congress and the President." but I wonder what
> shape this focus is supposed to take. Would trying to elect other
> candidates work? Are there enough potential congresspeople and senators
> who would NOT serve the needs of GS reflexively? Tax payers certainly
> have cause for revolt, but how and to what end? How can common citizens
> (or even uncommon citizens in better positions of power than me)
> actually respond to these outrages in any meaningful way? These
> are not supposed to be rhetorical questions, by the way.
On Jul 19 11:27 AM Relayer10 wrote:
> The author is showing growing awareness and alarm at the power grab
> of the government. It's about time! President Obama promises to take
> only public financing for the presidential election...until unnamed
> donors (how many are from foreign nationals) poured in over the web-
> then he broke promise number 1. A very clear indicater of what Mr
> Obama's word is worth (the same as our deficit)...and he keeps displaying
> it. Say what we want to hear...then DO the OPPOSITE. Then he gets
> elected, and promises that he will have the most ethical administration
> ever- and NO lobbyists....enter Tim Geitner, a financial "genius"
> that signs a document promising to pay his taxes with a check written
> specifically for that purpose....then steals it. Twice. He runs the
> IRS, and builds a trillion dollar deficit. We won't even get into
> the dozens of people that can't get confirmed of cabinet choices
> because of tax cheating issues. Promise # 2 broken. Then hires former
> college room mates for high positions? Are you kidding?
>
> Now...what do you think the chances are of not raising taxes in any
> way on those making less than $250K. Let's see....tobacco tax, that
> does not affect them...oh wait...it DOES! How about a national sales
> tax? That's right...people making less than 250K don't consume anything...and
> the current version of the National Health Insurance fray...none
> of the expense of higher taxes on business will be passed on the
> those making less than $250K...oh wait, that technically is not a
> pure "in your face" tax.
>
> How many more crooks do politicians have to appoint before the rest
> of the media, and business WAKES UP!!!
>
> Thanks for FINALLY noticing, and publishing an article that touches
> a small part of what Republicans and Democrats are doing to us! It
> is also heartening to see so many comments flowing from people that
> obviously get it too!
As long as the U.S. Federal government has the power it has now, fundamentally evil people will gain that power via the political process and the rest of us will live in fear of them. There is no way make sure only "good" people get elected to offices as powerful as these.
The only solution is to reduce the power of Federal government and return it to the States and the people.
That takes shameless into the laughable. Clue in. GS is making it because the government took on all of the counter-party risk from AIG. It is making it because they were able to borrow at next to nothing because of taxpayer loan guarantees. It is making it because the government gave them capital, on let us say more favorable terms than GS got from Buffett. IF THEY WERE EARNING IT, WE WOULDN'T WHINE. WE WOULDN'T EVEN COMPLAIN.
When you say "Government", do you really mean Henry Paulson. He was the one who asked for the funding on short-notice with no oversight. He was the one who decided to make AIG's debts whole and those of Lehman (a GS competitor) worthless. Interesting choice. You have to admit he has an amazing conflict of interest in that decision. GS benefits both ways.
Campaign Finance Reform isn't going to fix this problem. This is just garden variety sleeze.
The Fed is one piece of the system of check and balances that we have. The problem is no one is checking (or is competent to) and balance has shifted.
On Jul 19 07:14 PM reveigel@msn.com wrote:
> Mr. Harrison is right on. Government is the problem and has been
> for decades. In fact, close to a century. The Fed was established
> in 1913 and that began the downhill ride which continues today. It
> was assisted by Hoover and FDR, and most of the other Presidents,
> including our current President with gusto! Ask yourself some questions
> as did Mr. Harrison. Who established the Fed? Government. Who initiated
> the CCC, the RFC, Social Security, the TVA, the NIRA, the AAA, the
> WPA and many other New Deal programs? Government? Who sets tax rates?
> Government. Who causes inflation? Government. Who controls the money
> supply? Government. Who passes rules, regulations and laws? Government.
> Who passed Medicare? Government. Can private industry do this? No.
> If other groups are targeted it is the governments way of trying
> to avoid responsibility. Such other groups are scapegoats or red
> herrings. And with the help of the media government has become expert
> at doing this. Will the public ever wake-up to the flim flam actions
> by government? With control of the educational process by government
> and the brainwashing taking place in our so-called 'learning institutions'
> it is not likely in the near future. It is going to be a long cold
> winter.
JP Morgan engineered the 1907 financial crisis so he could 'save the day'. Morgan was an American arm of the Rothschild banking interest that had successfully taken over the English monetary system in 1694 and was anxious to extend its reach to America from the beginning. George Washington warned about the "European banking interests" that wanted to set up a Bank of England type privately owned 'national' bank to control the US currency. The 1907 crisis was just one of a long series of engineered financial crises designed to weaken American resistance to a central bank. The Rothschild banksters got their central bank in 1913 and are well on their way to owning America, as was the intent all along.
That being said, we can see that the problem is not limited only to GS and is systemic. Blaming the victims (citizens who's money is depriciated and taxpayers) is not the right thing to do nor productive. Waxing poetic about individuals having thepower when even the President is largely held hostage to Washington as usual will not solve anything.
I suppose only passing a Constitutional amendment limiting the Federal Reserve from engaging QE by backstopping and buying bonds if not abolishing the Federal Reserve all together, preventing the government from running budget deficits greater than say 1% or GDP or 2% when GDP drops YoY, and barring the government from ever distributing money to a public company without equal goods or services provided will contain the blatant givaways we see today (even then corruption will still take place just on a lesser degree). The odds Democrats and Republicans will ever write or agree to such a amendment is virtually 0. The argument wil be is unduly ties government's hands, however, the real reason is it prevents government corruption and dole outs.
The author is correct in spirit but solving the corruption we see today is much more indemic and harder to quash than ever.
The simplest but not yet popular way out of this mess in Washington is term limits.
On Jul 19 04:18 AM Steven Hansen wrote:
> somehow we have equated being legal with being moral. how much of
> the governments or gs activities seem moral.
>
> is the usa becoming the "great satan"?
On Jul 19 04:37 AM Dialectical Materialist wrote:
> And agreeing with you is going to be just as obvious as John Lounsbury
> says your being, but I can't help chiming in. The problem is that
> I think most people kind of realize what you're saying, Common people
> (like me) have an increasing awareness and sense of frustration that
> the system is stacked against them. Rich and powerful were always
> that way, but now the collusion seems more blatant than ever. The
> transfer of wealth from taxpayers to the rich is a recurring front
> page story (with very little reading between the lines).
> My question is, "What now?" You suggest we "start focusing in on
> the right people: Congress and the President." but I wonder what
> shape this focus is supposed to take. Would trying to elect other
> candidates work? Are there enough potential congresspeople and senators
> who would NOT serve the needs of GS reflexively? Tax payers certainly
> have cause for revolt, but how and to what end? How can common citizens
> (or even uncommon citizens in better positions of power than me)
> actually respond to these outrages in any meaningful way? These
> are not supposed to be rhetorical questions, by the way.
On Jul 19 06:40 AM Sober Realist wrote:
> "I do solemnly swear (or affirm) that I will support and defend the
> Constitution of the United States against all enemies, foreign and
> domestic..."
> ---Does this oath have any meaning at all anymore? I would suggest
> that GS and the rest of the financial oligarchs are a domestic enemy.
>
On Jul 19 08:14 AM markfl wrote:
> I think we could start by not hiring investment bankers to work at
> the Treasury Dept. Nicholas Brady (Dillon Read, investment bank)
> under G. Bush 1 and Hank Paulson (Sachs) under Bush Jr. come to mind.
> Both were recession Secretaries. Coincidence?
On Jul 19 03:05 PM Bill Herbert wrote:
> >>As my good friend Marshall Auerback says, the advantages firms
> like Goldman have are “symptomatic of the problem, but they are not
> the problem.” The problem is Government and its cozy relationship
> with the industry it is suppose to regulate and control. The government
> is captured by the financial services industry, plain and simple.
> This is why the global financial system is a shambles. The question
> is: what are you going to do about it?<<
>
> Edward, do you have a link to the Auerback article?
>
> tia
On Jul 19 05:04 PM ex- bond trader wrote:
> Here's an idea... fire all the Ivy League and other dual interest
> professors, wait.. just fire all teachers. Let's clean all the
> houses
> of government. If you teach and get fired and you're "clean", no
> political or terrorist ties, then you can get re-hired. As for
> all the "dirty"
> teachers and professors and their New World Order, get out. The
> pitchforks are digging up your dirt and Wall St./Government/Goldman
>
> ties and we can send you back packing on some commune in Europe.
>
> Then fire all politicians repeat and rinse. Needless to say, fire
> Wall Street, repeat and rinse. Then most of the media, the dirtiest
> laundry yet. One can dream, right?
On Jul 19 07:09 PM dcb wrote:
> the answer is you have to be writing office holders, but I think
> the real answer is rioting. they don't pay attention to anything
> else
On Jul 19 08:09 PM Steve in Greensboro wrote:
> Thanks, Mr. Harrison, for the interesting article. I fully agree
> with the headline. The U.S. government is the problem. But the
> solutions you propose (public funding, eliminating PACs and lobbying)
> are profoundly anti-freedom and also miss the point.
>
> As long as the U.S. Federal government has the power it has now,
> fundamentally evil people will gain that power via the political
> process and the rest of us will live in fear of them. There is no
> way make sure only "good" people get elected to offices as powerful
> as these.
>
> The only solution is to reduce the power of Federal government and
> return it to the States and the people.
On Jul 19 09:03 PM a fat panda wrote:
> "It seems like the only thing most people are going to do is sit
> around and whine about Goldman and big banks making a shed load of
> cash."
>
> That takes shameless into the laughable. Clue in. GS is making
> it because the government took on all of the counter-party risk from
> AIG. It is making it because they were able to borrow at next to
> nothing because of taxpayer loan guarantees. It is making it because
> the government gave them capital, on let us say more favorable terms
> than GS got from Buffett. IF THEY WERE EARNING IT, WE WOULDN'T WHINE.
> WE WOULDN'T EVEN COMPLAIN.
>
> When you say "Government", do you really mean Henry Paulson. He
> was the one who asked for the funding on short-notice with no oversight.
> He was the one who decided to make AIG's debts whole and those of
> Lehman (a GS competitor) worthless. Interesting choice. You have
> to admit he has an amazing conflict of interest in that decision.
> GS benefits both ways.
>
> Campaign Finance Reform isn't going to fix this problem. This is
> just garden variety sleeze.
On Jul 19 10:28 PM Mark54 wrote:
> Prior to the Federal Reserve we had JP Morgan to stabilize the financial
> industry in crisis. Obviously we cannot rely on individuals and a
> politicized pure Central Bank is not the answer. Yes the ultra wealthy
> set it up because that is who had the power to at the time and the
> govt relied on these individuals for their knowledge and contributions.
> At the time I believe JP Morgan had more capital than the US Government.
>
>
> The Fed is one piece of the system of check and balances that we
> have. The problem is no one is checking (or is competent to) and
> balance has shifted.
On Jul 19 10:53 PM rdd wrote:
> I am so fed up with Congress, state legislatures, and local politicians
> constantly handing gifts to any lobbyist who swings by their office,
> that I am moving into a mode of voting against incumbents. The system
> appears to be so broken that it is becoming clear that we need wholesale
> change at a scale that happened in 1933 and 1974.
On Jul 19 11:55 PM john12345 wrote:
> Well done. You are right on most points. Remember, Goldman didn't
> create the Washington system, they just recognized it and operated
> accordingly -- and very successfully.
>
> The simplest but not yet popular way out of this mess in Washington
> is term limits.
i have a better idea. i say you should run congress. i'll vote for you.
You don't blame JUST the government or JUST the corporation for fascism - at least not when they've both entered into the relationship without coercion, which is clearly the case here. You blame them both. The author is right to point out that there should be more focus on the government's role in this, but Goldman deserves every bit of ridicule they've been receiving as well.
Enron was able to make its move with the claim that they needed more room to operate in a "free market" (a free market, however, that has nothing to do with any ethical form of capitalism OR socialism).
The majority of comments in this thread reflect the clear-headed recognition that the emperor is indeed naked. Goldman Sachs, as well as plenty of other private and public interests are well "imbedded" within government troops. We can only hope that there are enough politicians, lawmakers, citizens and business leaders with enough integrity to recognize this as well, and clean up the whole mess, inside and out.
On Jul 19 08:09 AM KFC007 wrote:
> THIS IS NOTHING NEW. IT IS WELL KNOWN THAT ROOT CAUSE OF CRISIS IS
> GOVERNMENT, NOT FINANCIAL INSTITUTIONS. THE MOTIVES COULD BE IGNORANCE
> OR GREED OR FEAR, PERHAPS GREED MORE THAN IGNORANCE AND FEAR. THIS
> MEANS MORE POWER TO FED WILL MEAN ANOTHER LARGER CRISIS. RATHER THERE
> IS A NEED TO REDUCE FED'S ROLE AND CREATE ANOTHER WATCHDOG BODY THAT
> WORKS IN PARALLEL AS WELL AS TO TAKE TO TASK AUDIT FIRMS THAT ROUTINELY
> FAIL IN THEIR JOB.
Cheers.
On Jul 19 05:04 PM ex- bond trader wrote:
> Here's an idea... fire all the Ivy League and other dual interest
> professors, wait.. just fire all teachers. Let's clean all the houses
>
> of government. If you teach and get fired and you're "clean", no
> political or terrorist ties, then you can get re-hired. As for all
> the "dirty"
> teachers and professors and their New World Order, get out. The pitchforks
> are digging up your dirt and Wall St./Government/Goldman
> ties and we can send you back packing on some commune in Europe.
>
> Then fire all politicians repeat and rinse. Needless to say, fire
> Wall Street, repeat and rinse. Then most of the media, the dirtiest
> laundry yet. One can dream, right?
The complaining and conspiracy theorized here reminds me of the liberal antagonists in Rand's books. Maybe we should re-read Atlas Shrugged before we ask our political leaders to grab their pitchforks, step in, and level the playing field.
The goverment was created to serve the people when did we become servants of the goverment?
On Jul 19 04:37 AM Dialectical Materialist wrote:
> And agreeing with you is going to be just as obvious as John Lounsbury
> says your being, but I can't help chiming in. The problem is that
> I think most people kind of realize what you're saying, Common people
> (like me) have an increasing awareness and sense of frustration that
> the system is stacked against them. Rich and powerful were always
> that way, but now the collusion seems more blatant than ever. The
> transfer of wealth from taxpayers to the rich is a recurring front
> page story (with very little reading between the lines).
> My question is, "What now?" You suggest we "start focusing in on
> the right people: Congress and the President." but I wonder what
> shape this focus is supposed to take. Would trying to elect other
> candidates work? Are there enough potential congresspeople and senators
> who would NOT serve the needs of GS reflexively? Tax payers certainly
> have cause for revolt, but how and to what end? How can common citizens
> (or even uncommon citizens in better positions of power than me)
> actually respond to these outrages in any meaningful way? These are
> not supposed to be rhetorical questions, by the way.
Lets quit complaining and do something.
W had no clue he meant to fleece,
The taxpayer from his hard earned gains,
To favor his GS friends and ease their pains.
The emphasis seems a bit misplaced. While the President seems to feel it is fair and appropriate to point fingers at Wall Street but fails to accept responsibility for his own actions in this debacle. His administration has yet to take on the need to focus on changing the dynamic between the Government and Wall Street (as pointed out, his administration is full of Wall Street execs in positions of power).
However, the emphasis should be on the Congress and their considerably complicity in the whole affair. As suggested, we need to "follow the money". If we do, we will find that the Congress is where the real reforms need to take place. Term limits, campaign funding limits, bans on lobbying after serving and a stripping as a minimum, all benefits (pension, medical, etc.) if caught in the act (directly or indirectly).
We often challenge the moral correctness of Wall Street but fail to hold our Congressional representatives to an equal standard.
What is needed is the education of the American voter without a “spin” but with the idea of promoting the concept that we need statesmen working for the good of the “whole” country and not just trying to send home some pork. We, the voters seem to have accepted the pork as compensation for the ill behavior of these guys. Are we really that easily bought? Do we even realize we are being bought?
On Jul 20 12:35 AM User 357705 wrote:
> There is something fundamentally wrong with an individual having
> more money than the government. Perhaps it was, or was not the case,
> but none the less.
The original term was capital, and I took it to mean JPM had the stocks of currency to choke off commerce by restricting its flow. Had the government viewed this as a threat to its right to exist, it could’ve nationalized the holdings within its jurisdiction and dispersed them as it saw fit. The "fundamentally wrong" element accurately describes a business model overtaking an entity that has the power of the sword as well as the government taking possession of the tools of production. These two entities require each other’s cooperation, but they must remain separated. It’s only through education / ethical conduct / morality that this separation can be maintained.
The core problem of the United States' banking system (and maybe the world's banking system) is not liquidity but insolvency. The liabilities of the United States' banking system exceed the value of its assets. The issue is not only the toxic assets (toxic mortgage backed securities, toxic commercial real estate loans, sub-prime mortgages, alt-A loans, adjustable loans likely to go bust, increase in prime mortgage default rates, etc) but also off-balance sheet liabilities (such as expected huge unaccounted for future derivatives losses).
This means that bailouts are just beginning and will require bigger and bigger sums of taxpayer money as time goes on. The government will resort to borrowing more and more and eventually to printing money when treasury debt auctions start failing. The end result of this path is a currency collapse and probably total chaos as expected by gold bugs.
One other way to deal with this issue is to stop the bailouts and let the dominoes fall. Defaults and cross-defaults will cause many, many depository institutions (even very large ones) to collapse leading to extreme decrease in money supply as bank deposits are destroyed. Deposits of failed banks cannot be used to pay bills, make purchases and/or service debts.
Which will probably lead to even more defaults as unemployment increases and debtor's are unable to service their debts. This process will probably cause extreme deflation as businesses lower prices in a bid to survive. This will also lead to wage cuts, increased unemployment and a deflation spiral and much chaos. But probably less chaos than a currency collapse.
Is there a better way?
Here is my idea:
1) We essentially need an orderly bankruptcy and liquidation of the United States' financial system.
2) I suggest we create a government owned bank and transfer all deposits of the private commercial banking system to the new government owned bank. This "transfer" is really just new money creation. This new money will be digital cash (electronic version of physical paper cash). Very much like reserves at the FED.
3) Note that the plan will not create net new money since we will be destroying all deposits of the commercial banking system in the process.
4) All assets of the commercial banking system will be transferred to the government and auctioned off in an orderly manner over the next 10 years. The proceeds from the sale would go the United States treasury and not the commercial banks. The assumption here is that commercial banks deserve nothing since the entire industry would have been most likely destroyed any way. Even good banks would have been destroyed due to bank runs and defaults if the government had allowed the dominoes to fall. Of course bank shareholders, bank bond holders and counter parties of bank derivatives would not receive anything.
5) After the transfer FDIC protection will be removed for any private bank which wishes to remain in business or any new private depository institution or bank. From that point on the government should make it absolutely clear that there will be no more bailouts and no more conversions. This will discourage (but not completely eliminate) fractional reserve deposit banking and private money creation that results from pyramiding of government created money. This will also limit debasement of the currency that results from fractional reserve deposit banking. In fact, we can have "free banking" from that point on and not even have reserve requirements or capital requirements. All depositors who use private banks will be fully at-risk. The industry will have to set the interest rate high enough to attract depositors.
6) The new government bank will act as an electronic "piggy bank" only. All deposits will be 100% reserve and it will make no loans. Loan making will be left to the private banking system (with no deposit insurance or a possibility of a future bailout). The new government owned bank exists only as a "safe" money storage and a payment clearing system so the public does not have to carry around physical paper cash to make purchases and pay bills.
6) Of course this plan is not without pain or cost. Cost of funds for banks and borrowers will probably rise as bank deposits are a source of very low cost money for the banks. Nothing is free. We are just exchanging higher cost of funds for removal of systemic failure risk. Economically we are recognizing that when money is loaned there is always credit risk.
7) We are just separating the payment and clearing transaction system which is absolutely necessary for day-to-day commerce (no credit risk) from the loan banking and investment system (has credit risk).