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The Secret Goldman Sachs Tapes
An anonymous reader writes: The radio program "This American Life" has published an extraordinary investigative report on how the U.S. government regulators in charge of keeping an eye on the banks actually interact with powerful financial institutions (podcast here). Financial journalist Michael Lewis describes the report thus: "The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems. Just the opposite: The Fed encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them. The report quotes Fed employees saying things like, 'until I know what my boss thinks I don't want to tell you,' and 'no one feels individually accountable for financial crisis mistakes because management is through consensus.'"
most people here anyone have known for a long time that the banks and government have a symbiotic relationship. I guess its nice to see some proof for once. I cant say I am shocked in the least however.
have you seen my sig? there are many others like it but none that are the same
Our government clearly lacks the balls to regulate the banks and provide leadership. This is just sad.
Isn't it nice ... if you destroy one persons life, you get penalty big enougf to ruin your life - if you ruin 100'000 you get a "golden parachute".
Number of prosecuted persons (from last bank breakdown - and one before that - and next) is just appalling.
Carmen Segarra was hired to to clean up the poor oversight of the banks. Instead, she was fired for doing her job. Read the prepublica articles. It's a shame. Contact your senator and tell them to launch an investigation into the retaliation against Carmen!
I pledge allegiance to my share
of the United Stockholders of America
and to the profit for which it stands
one stock, Class-B non-voting, with a golden parachute for our CEO
Amen.
> The report quotes Fed employees saying things like, 'until I know what my boss thinks I don't want to tell you,'
No shit, its called top-down management. The minions don't do, say or think anything until instructed by their boss (or their boss's boss, or their boss's boss's boss)
Did anyone seriously expect anything else out of a system which STILL (probably will NEVER) hasn't nailed anyone to the wall for the financial crash?
Obama or Biden a former GS executive ? I'd like to meet your crack dealer.
Ate you going to update Wikipedia with your bogus facts? The bailouts happened on Bush's term. Democrat or republican makes no difference. Both parties practice the same revolving door policies.
If we just get those evil (insert other party) out of office and then pass better laws, finally, regulations will work and achieve the desired outcome! Life will be swell!
I'm going over the headlines today working on my pandering campaign platform. So far as president I promise to fire the entire forest service, prosecute the phoebus cartel to the fullest extent of the law and demand that my banking regulators not only do their jobs properly but to antagonize the bankers as much as possible (Up to and including stabbing them in the face if they feel it's required.) I predict this will be fairly popular on the internet but end up receiving no campaign contributions. How's that working so far?
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Warren Buffet, a government employee and/or consultant? Please
Warren Buffet has probably one of the few people who has always gotten the best of Goldman Sach's because whenever they really fuck things over, he squeezed them for top of the line deals. Pretty much what Goldman Sach's did to anyone else given half the chance.
I happened across this before it got on here and listened to the entire thing. Here's a brief summary:
1. This American Life is a great show. My favorite, you should listen to it often.
2. Managers at the fed seem to be terrified of the banks
3. The lady doing the recordings is aggressive and speaks her mind.
4. There are many "Old Guard" people at the fed that have a cozy, friendly relationship with the banks they work with.
5. The banks actively cultivate this relationship because they realize friendly regulators are less likely to press issues.
6. She uncovered the fact that GS had no formal definition for "Conflict of interest" which is a violation of Fed rules.
7. The fed worked for months gathering evidence and there was consensus that they needed to force GS into creating a policy
8. Suddenly one day her management agreed GS did have a policy just not a good one.
9. She was called in and her boss tried to bully her into changing her report to say they did have a policy.
10. Not too long after she was fired.
11. I believe the suggestion is that GS has control over management and who gets hired/fired at the fed.
It is a well known fact that Bush's Treasury Secretary, Henry Paulsen, who railroaded the wall street bailout through congress, was a former Goldman Sachs CEO. It is unfortunate that very little changed under Obama, but the article is primarily discussing conditions prior to and during the 2008 financial collapse, before Obama was even elected.
Ideology: A tool used primarily to avoid the bother of thinking.
A friend of mine worked on Wall Street and said that her firm had a guy at the fed whom they slipped bribes to in exchange for information about the interest rates. Apparently this is widespread.
Timothy Geithner never worked for Goldman Sachs and off the top of my head I can also see Warren Buffet never worked for Goldman Sachs or the Obama administration, Robert Rubin never worked for Obama, Rogert Altman has neither worked at Goldman Sachs or the Obama administration.
Might want to check that list again to see what other missteps are there.
We will bankrupt ourselves in the vain search for absolute security. -- Dwight D. Eisenhower
Of course, Obama then gave a cabinet post to Geitner, who was in charge of the NY Fed before and during the collapse. ie. the guy who was supposed to be regulating wall street.
Compared to all the other banks that took stupid risks GS was one of the firm that actaully did not require the bailout money due to their better risk management..
They got TARP money, a few billion form the AIG bailout, etc. They also got to declare themselves a "bank" (as in a depository bank, not an investment bank, which is what they are). That gave them access to billions in effectively interest free loans from the Fed. If you don't think that's a bailout, try getting a 0.1% loan from the Fed. I'd love to get that deal for my mortgage.
He did this in 2008, http://online.wsj.com/articles..., an easy $500 million that no one else would be able to get.
Perhaps you didn't notice those names were in ALL CAPS, which makes his allegations very, very serious.
The Federal Reserve doesn't regulate Wall St. The only thing they regulate are boring transactional stuff like funds transfers (e.g. ACH), and even then often only if the banks voluntarily use the Federal Reserve's electronic services (an opt-in regulatory burden). Their policy making authority is extremely limited. You can thank President Andrew Jackson for that.
Most of the power the reserve banks have is soft power--the bank presidents are at the center of a complex network of relationships between private and public stake holders.
Geitner got promoted because he went out of his way to ensure the financial system didn't collapse. He strong-armed banks like Bank of America to take on huge amounts of debt; not because he had the legal authority to do so (if anything, his threats bordered on blackmail), but through shady, lightning-quick horse trading. He stepped up when many people in his position would have floundered.
His opinions on sub-prime mortgage securitization, or any of that other stuff, are irrelevant. Obviously he's largely an apologist for the status quo. But judged solely by his tenure at the Fed, and in particular the few weeks at the height of the meltdown, the man is in many respects a hero. He displayed bold leadership, which is what you look for when filling top cabinet posts.
The biggest selling point they gave me was that if I played nice after 10 years I could leave the Comptroller's office and get a huge paycheck from one of the major banks.
Goldman Sachs has captured something much much bigger than a regulatory agency. The Federal Reserve is a massive financial operation with a charter from the people of United States to maintain the monetary conditions for a stable and robust market economy.
Goldman got the General Counsel of the New York Fed to force the dismissal of an investigator who was brought in specifically to stop the kowtowing. She was fired for asking follow-up questions and telling her superiors to change her reports themselves if they wanted them changed.
In the background of this scandal, Goldman Sachs was engaged in a transaction with the sole purpose of allowing a European bank to pretend that it was not overextended and so avoid recapitalizing to meet European-Union capital requirements. In other words, a European bank was risking an economic catastrophe that would have forced the EU to conduct a too-big-to-fail rescue, and Goldman Sachs enabled that bank to circumvent European banking authorities.
Every investment in securities involves risk, and risk reduces the price at which paper trades. The Fed is now a guarantor of financial investments, making them more valuable than they might be if true risks were incorporated into the pricing. And the Fed is just one of the sovereign assets controlled by Goldman's posse of financial institutions.
Meanwhile, we have neither a stable nor a robust economy. We just have incredible liquidity for investors in securities.
Listened to segment on NPR this morning, what I got out of it was the Fed is afraid of the big investment banks, when it should be the other way around. I was honestly a bit shocked by how timid and afraid the Fed people were, it was embarrassing.
'The unexamined life is not worth living' - Socrates
Let's not the forget the stupid risks those other institutions took included insuring overvalued GS securities that GS knew would make a loss. Who insured most of the GS securities? AIG. What happened to GS for conducting large-scale insurance fraud? Their debts were covered by the US government, nothing more.
Summary of the GFC: An influx of customers allowed banks to create a massive tranche of debt securities, causing profits to rise. Many institutions wanted to re-invest their profits in AAA-rated securities, increasing demand. To satisfy this demand banks created more debt securities using NINJA borrowers and pretended they were AAA-rated. Financial institutions created other unsound investments to increase their profits during this glut of money. When the fake securities didn't pay-out, the unsound investments also didn't pay-out, magnifying the losses.
We saw it at Arthur-Anderson, Enron & WorldCom, and GS: When the profits are above average, the rule-book is thrown away. Corporations silence conflict of interest, risk management, even legal constraints, when the money says "you can't lose". And if they didn't break a lot of laws, corporate welfare can be bought cheap.
The Fed guy at Goldman was right. Reality doesn't matter. In spite of the numerous replies pointing to the large number of inaccuracies, the post is still modded +5 Informative. In a world where the majority of people find false information "informative", what good is a moderation system?
Ideology: A tool used primarily to avoid the bother of thinking.
Comment removed based on user account deletion
This is how you know it was all planned, from Clinton signing off on the final; removal of Glass Steagall to Fab stating "I don't even know what I'm selling".
The same group of people have been at these financial constructions designed to rob people, the FED is a part of it, you need only look at who runs the financial institutions, who is tops at the fed, who has the presidents ear and finally who really drives the wars in the Middle East.
All the same group of people, it's amazing people aren't pointing it out...
Except there is.
http://www.pbs.org/wgbh/pages/...
http://www.ifamericansknew.org...
Another Clinton in the White House will seal the deal and screw the rest of us, Hillary is beholden to foreign powers.
"If any question why we died, Tell them because our fathers lied."
When you wrote: "...the banks and government have a symbiotic relationship... you seem to have missed the fact that neither side in this story was "the government"
The Federal Reserve Bank is NOT a part of the Federal Government; it is a bank that is run by the banks. This highly market-manipulating entity which would otherwise run contary to all the antitrust laws that Teddy Roosevelt gave us only LOOKS to the public to be part of the government because of [1] its name, [2] the bank allows the US President to nominate its chairperson, and [3] the Federal government allows its "notes" (those dollars in your wallet) to be used as the currency of the land. (THESE entanglements DO involve government, but that's not what is in the article). The artical involves a bank (Goldman Sachs) getting easy treatment by the (non-government) "Fed" (the privately-owned and hyper-secretive economy-manipulating Federal Reserve Bank, which is owned by the banks)
Can your say conflict of interest? I knew you could.
Although TIME Magazine had him as runner up for the Person of the Year in 2008 they also listed him as one of the "25 People to Blame for the Financial Crisis"
Why is Snark Required?