Posted on 04/29/2010 4:09:15 AM PDT by Kaslin
In its quest to ram perpetual bank bailouts and draconian new government regulations through the U.S. Congress under the guise of “financial services reform,” the administration of Barack Obama and its allies have seized upon a convenient new enemy – Goldman Sachs.
Armed with a government lawsuit tailor-made to stoke populist headlines, Obama and his allies want to further force Washington’s tentacles into a financial industry that it ostensibly “rescued” using trillions of dollars borrowed from future generations of U.S. taxpayers.
“If we don’t change what led to the crisis, we’ll doom ourselves to repeat it,” Obama said recently in an article conveniently headlined “Charges Against Goldman Sachs Boost Case for Financial Reform.”
Yet in typical Washington fashion, Obama’s proposed “reforms” do nothing to address government’s starring role in the most recent debacle. Nor do they protect taxpayers from future raids on the public treasury. In fact, the legislation Obama is championing would maintain (and even expand) the same federal regulatory conditions and incentives that led to the collapse of the housing market in the first place – while making taxpayer-funded bailouts for financial institutions a permanent part of public policy.
In other words, Washington has learned absolutely nothing.
“The American public has a lot to be angry about, but the spark for that rage was the bank bailouts,” writes Mark A. Calabria, director of financial regulation studies at the Cato Institute.
And yet as Calabria and others have astutely observed, government’s solution to the sub-prime mess is to encourage the same loose lending practices that created it – particularly as it relates to government-owned behemoths Fannie Mae and Freddie Mac, whose toxic assets helped sink Bear Stearns at the beginning of the current downturn. Accordingly, Obama’s reforms “wouldn’t bring stability to our financial system, but (would) further erode market discipline — while asking us to put all our faith in the same regulators who have failed repeatedly,” Calabria writes.
Ironically, the beleaguered Wall Street firm that Obama has selected to play the role of whipping boy in this process is a familiar “enemy,” having pumped $4.4 million into the coffers of Democratic candidates in 2008 (compared to $1.4 million for Republican candidates). Apparently, Goldman Sachs forgot the old adage about “not feeding the tiger in the hopes of being the last one eaten.”
All of this leads us to a fundamental question that must be asked (and answered) about our economy moving forward: Specifically, is it government’s job to assume the risk associated with bad business decisions? Or if you prefer to get even more Orwellian about it: Is it government’s job to arbitrarily restrict free market exchanges in an effort to prevent bad decisions from being made in the future?
If the government’s answer to either of those questions is “yes,” then it is embracing a Soviet-style command economy and repudiating the free market principles on which this nation was founded.
Finally, in assessing Obama’s populist push on “financial reform,” it would be wrong not to briefly mention the flimsiness of the federal case that’s at the forefront of literally tens of thousands of international headlines. At the heart of the SEC’s complaint against Goldman Sachs is the allegation that the firm misled a German bank into buying toxic assets at the behest of a savvy hedge fund manager. This simplistic salvo ignores two salient facts – Goldman’s $90 million loss on the deal as well as clear and compelling evidence that the German firm knew exactly what it was getting into.
In fact, just a year before the Goldman deal, the German bank referenced in the SEC filing was concluding similar agreements with other companies and bragging about its expertise in evaluating the very sort of “corporate loan portfolios” that it now claims it was misled into purchasing.
But as much as Obama and his allies are picking a fight against a convenient enemy, this debate isn’t about defending Goldman Sachs – it’s about defending the free market from additional government intervention.
We must DISMANTLE federal regulation of the financial services business — and of business in general.
This happens even in places where there are no Jews, and where no Jews have ever lived.
But here in America? You have a combustible mix of Leninist destroyers running the Executive Branch, a financial services industry hooked on anti-Constitutional government actions to sustain their illegal schemes, a President steeped in anti-semitism, and now come the high-visibility targets - most or all, I venture to bet, Joos.
Look out, my Jewish friends - just don't say we didn't warn you.
The author pretends to support free markets, yet does it by defending Goldman Sachs? Goldman has been inexticibly entwined with big government for years to rig the system in its favor and was up to its neck in the housing bubble. Not only do these guys not represent the free market, they are amopng its greatest enemies. In fact Goldman’s (and Citigroup’s) CEO have already endorsed the Dodd bill.
Oh, and about that 90 million loss Goldman took on the Abacus deal? They admitted during congressional testimony that they only maintained that position because they could not find a buyer for it.
No lover of free markets should defend Goldman Sachs.
So you side with 0bama and the democrats who got millions of dollars in campaign contributions? 0bama almost $1mil alone. Isn’t that nice
GS is not the “enemy” of socialists, neither is JPM, MS, CG, BoA or any of the others.
They are the partners of the Statists.
You see, the Statists, through their Treasury Department and their central bank (the Federal Reserve), pass draconian Statist laws (e.g., forcing lenders to give subprime loans to people who are extreme risks) while turning a blind eye to the legal tricks that those institutions play to try to survive those laws (CDS, etc.).
Now, the regulators, the handmaidens of those in power, turn a blind eye to those tricks because they really don't care what damage they do. They like that “damage” because they know eventually they will use it to condemn Capitalism and free-market ventures.
The uber-rich are Statist by nature. Oh, even though they rise to their position on the shoulders of Capitalism and free-market ventures, their goal is never-ending power and wealth. They are happy to leave the ranks of Capitalists and collude with government to ensure their profits and a monopoly at the expense of the markets, the consume, the taxpayer and free-market competition (which includes the risk of failure). Incidentally, let us not call these players “Crony Capitalists” or “State Capitalists.” Once an enterprise colludes with the government for these reasons, they abandon the tenets of Capitalism and join with the Statists. They are best terms “Corporate Socialists.”
What has been happening the past year is obvious, though it is difficult to find the hard evidence to prove, because we cannot audit the private-banking system known as the Federal Reserve.
The government since the enactment of the Federal Reserve Act in 1914 has blown one bubble after another. Each of those bubbles has led to a bust. That cycle puts money in the hands of these uber-rich consortia and enables the government to pass more laws in order to prevent these cycles (even though these laws, by restricting the market, help to create this boom-bust cycle).
Each time there is a bust, the government colludes with the Treasury and the Federal Reserve to pull debt forward from tomorrow to pay yesterday's loans and today's bills, wrapping the debt up into an ever-growning ball of barbed wire that cannot be untangled.
But a strange thing has happened in the last 15 years. Anyone with more than an ounce of working brain in their skulls have seen a giant wall that we are rushing toward at 10,000 miles an hour. That wall is the end of our ability to borrow because we cannot service the debt we have accrued.
What is happening currently is nothing more than another act in this ongoing melodrama where the government is the good guy and those who represent “Capitalism” is the evil with the long pointy mustache and top hat. You and I are supposed to be the beauty in distress that the villain has bound and is strapping to the rails as this train of our economy comes hurtling towards us. The pianists in the state-run media are playing a suspenseful and exciting tune as the communists in power come to our rescue.
But it is all just a melodrama. And GS is in on the act.
The government has forked over trillions to GS and its competitors over the past year. They have done so directly and indirectly. GS has taken that money and used it to invest with their HFT algorithms to sock away a nice little profit for themselves. The government backed this because it enabled them to prop up the equities markets so that they could claim their Keynesian spending had saved us from Financial Armageddon.
They've timed these “trials” perfectly to precede the 2010 midterms. As the pianists in the state-run media clank out their hackneyed tune, the anti-heroes in the Republican party object to what they will be accused as defending an attack on crooked Capitalism.
GS will be given a small fine relative to how much they have earned. The government will be able to crack down on free-market ventures for the littler players, but they will be sure to craft the regulations in such a way that their big supporters like GS are not affected by the regulations.
To reiterate. What we are witnessing is not the fighting of two enemies, because they are allies joined at the hip. We are watching a cheap melodrama designed to delude us toward greater Statism, empowering and enriching slave-masters who rule over us politically and financially.
I don’t side with 0bama on anything. I side with the Constitution and free markets.
The Dodd bill, endorsed by Goldman CEO Lloyd Blankfein, will institutionalize bailouts without congressional oversight forever. The Democrats and Goldman are on the same side of this debate. Goldman is simply (temporarily) serving as a convenient political whipping boy right now but will benefit enormously if the Dodd bill becomes law.
This is Crony Capitalism. The leaders of most of Wall Street’s biggest firms are in bed with the Democrats. Republicans should be pointing this out in their effort to fix the financial regulatory system.
I’ve written about these issues on Intellectualconservative.com:
http://www.intellectualconservative.com/2010/01/25/the-slow-death-of-free-market-capitalism/
“No lover of free markets should defend Goldman Sachs.”
You are so right, fellow freeper! GS is representative of what’s wrong with the current culture; unbridled greed!
And the populists shooting at Goldman are typical useful idiots for Obama's commies...
The only usefull idiots in this situation are the morons defending Goldman and the other liberal at the big Wall Street houses. Let’s look at a partial list of some of Wall Streets latest liberal all stars:
Angelo Mozillo - Countrywide
Stan Oneal - Merril
Robert Rubin - Goldman
John Corzine - Goldman
Hank Paulson - Goldman
Jamie Dimon - JP Morgan
Lloyd Blankfein - Goldman
John Mack - Morgan Stanly
Larry Fink - Blackrock
This a very short and incomplete list because I’m pressed for time. Look at this quote from Charles Gasparino’s The Sellout:
“One of the great media fallacies is that Wall Street is a bastion of right-wing politics. In fact, over the course of 2007-2008, much off Wall Street leadership ... openly sided with democrats and were now supporting Obama for president.”
“(Hank) Paulson, meanwhile, was a Republican from the party’s old liberal wing ... but the party had changed much: it was now more southern, more free market, and decidedly less big government. It’s agenda was pro business, with an emphasis on small business.”
Those siding with Goldman today are siding with the left against the free market, small business, and the individual and in favor of statism and corporatism. Choose sides.
Which is radicalism, not conservatism.
In simplest terms, the biggest problem behind much of the financial disaster is the fact that government lets certain companies gamble with taxpayer money. If they win, they keep the profit, but if they lose, the taxpayer eats the loss. From a game-theory perspective, one who lets someone else gamble with his money on such terms should expect to lose most of the time.
If people were limited to gambling with their own money, and were required to cover their own losses, the financial meltdown wouldn't have happened. But when people can gamble with other people's money, losses are inevitable and will escalate until the supply of other people's money is exhausted..
Which companies?
But when people can gamble with other people's money, losses are inevitable
Yeah, all those mortgage losses were terrible. So no more mortgages?
There is nothing radical about supporting free men and free markets vs. the three-headed leviathan represented by big labor, big business, and big government.
While your buddies at Goldman, Citigroup, and the other big liberal Wall Street firms were bailed out at taxpayer expense by your big-government liberal friends in Washington, several hundred small to mid-sized banks went out of business. By defending these fat cat liberals you are hurting true free-market capitalism. You are the useful idiot for the corporatist liberals.
While your liberal friends were taking billions of taxpayer dollars and paying themselves multi-million dollar bonuses for the great job they did destroying their own companies, they were laying off thousands of middle-class working people.
My political philosophy is not of my own making. I’m not that smart. I believe in and defend the political theories of Jefferson and Madison and the economic theories of Milton Friedman.
I have written three articles on this subject:
http://www.intellectualconservative.com/2008/10/02/an-open-letter-to-congress/
http://www.intellectualconservative.com/2010/01/25/the-slow-death-of-free-market-capitalism/
By siding with Goldman you are defending the too-connected-to-fail status qou which is destroying small businesses all over this country and eroding individual liberty.
Those that had to be bailed out because they were "too big to fail"
Yeah, all those mortgage losses were terrible. So no more mortgages?
Some lenders wrote mortgages to people who could not reasonably have been expected to pay them back (e.g. people whose total income would barely suffice to even pay the interest); they further hired their own appraisers to assign valuations far above what anyone would actually pay (bearing in mind that the "buyers" wouldn't be able to pay the appraised price even if they wanted to). They then declared the loans to be of far lower risk than they actually were, thus pocketing the spread between the real value of the loans and what they could sell them for, while making someone else eat the risk.
This situation was made possible in some measure by the marketing of credit default swaps by companies who made welshing on their bets an essential part of their strategy. Planned welshing on bets is another form of gambling with other people's money.
Which companies?
Those that had to be bailed out because they were "too big to fail"
I thought the financial disaster occurred before the bailouts?
Some lenders wrote mortgages to people who could not reasonably have been expected to pay them back
Yeah, borrowers were gambling with other people's money. Should we outlaw mortgages?
companies who made welshing on their bets an essential part of their strategy.
Which companies planned to welsh? How do you know?
Planned welshing on bets is another form of gambling with other people's money.
Yeah, lots of mortgage borrowers planned on welshing and actually did.
What you describe is one of the core reasons why these trials and “financial regulation” is nothing more than populist bunk.
That and excessive fractional-reserve lending and the Federal Reserve itself guarantee an unstable financial system that shifts wealth from the masses to the elite.
What would be a good level of reserves?
How about getting back to 10% as a starter, and which used to be a ridiculously low minimum.
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