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The New York Times and Goldman Sachs

Goldman Sachs bashing is insipid. The NYT has published some total garbage. Ain't the first time.

Synthetic CDOs: Thoughts on Fiduciary Duty and the Victim Mindset

The taxpayers elected the people who were trumpeting less regulation, and arguing that government was the problem, and that it should get out of the way. The taxpayer is hardly innocent here. They've essentially done that for decades in a row.

As for what he will have to pay, it's starting to come into focus.

My taxes have not changed one red cent because of the bailout. TARP is now projected to lose 42 billion, but that number is not net of TARP's earnings. TARP may come very close to breaking even. The Federal Reserve is confident that its Maiden Lane loans will be paid off. Up and down the line, the bailout outcomes are looking positive.

The taxpayer, contrary to all his constant complaining and denial of his own culpability in the matter, has probably gotten the biggest bang for his buck in an emergency situation since WW2.

Synthetic CDOs: Thoughts on Fiduciary Duty and the Victim Mindset

People have the story wrong. Nobody was betting that housing would not go down. What they were betting is its going down would not be a big deal, and that the dip would not last for very long. They thought there would be minor turmoil in the housing market, which would be its own opportunity, and that it would come back strong. They believed financial innovation, which has a system for dealing with losses built into the products, and the deft baton of the conductor, Alan Greenspan, would hold it all together. A prolonged market panic was the bad old days; a prolonged modern market panic was unthinkable. Risk was in a harness and a force only for good.

The buyers did their due diligence. In some cases, they actually helped GS build the CDOs to fit their needs, and some of their clients themselves created and marketed their own CDOs. They made an informed bet on the future, and the future, which nobody knew with certainty, was extremely hard on their bet. It happens. Each day we still have to bet on the future; there is no way out of it.

Goldman Sachs bashing is an insipid fad. They hedged. That was prudent of them. They deserve to be praised, not assaulted.

Is There a Goldman CDO Scandal?

It is well known that AIG misrepresented the risk - to themselves. They deluded themselves. Nobody did that to them.

Is There a Goldman CDO Scandal?

A very clear-headed post.

There is no fraud here unless prosecutors can get Goldman Sach's fortune teller to turn on them. "I looked into my crystal ball and saw there was going to be a financial panic, a run on banks, so Blankfein had the inside goods and he lied to his own clients." And that is, of course, preposterous. There are no fortune tellers. That, in part, is why the BS traders were found innocent. Hunches about the future are not inside information. They're hunches, and prudent risk managers hedge against them whether they believe in the fortune cookie fortune or not. The existence of a hedge proves nothing other than their competence.

Mark to Market: Is Washington Doing Too Much?

The notion that FASB "caved in" begins the error, and the writer just gets worse form there. Mark to Market was poorly schemed to deal with a market panic in what were always a thinly traded items.

When a rule is poorly schemed, its governing body is not "caving in" when it attempts to make a correction after the poorly schemed rule did 100s of billions in unnecessary damage and cost millions of Americans their jobs. FASB was simply practicing common sense. That they had to be cajoled into that is not surprising. Accountants have Lemming DNA, and running a society off a cliff in the name of a poorly schemed rule probably, and unfortunately, made perfect sense to many of them.

King Coal or King Saud?

What Obama said was a new power plant that elected to pay carbon taxes to continue polluting instead of mitigating CO2 emissions via sequestration would go bankrupt. Oddly, it's exactly the same thing John McCain says.