A special adaptation of Little Red Riding Hood and the Big Bad Wolf is open for a special onetime run in Washington. Oh poor little Red (that would be the American people) has been ravaged mightily by the nasty Wolf (that would be Goldman and Sachs). It all seems so dire, so unfair – but wait, who is that rushing to her defense? It is the brave Woodsman (that would be congress), he has come rushing in – axe in hand. The Wolf snarls and snaps but he is no match for our stalwart hero. The fight is fierce and much noise is being made. But in the end, we know our brave Woodsman will avenge Little Red Riding Hood and all fear and injustice will sink into a glorious sunset as the curtain closes.
This is the reality of the hearings. It is very gratifying to hear our anger voiced so clearly on TV for all to hear. Oh the snide remarks, the dripping contempt of Goldman crushed under the angry demands and bone chilling threats of our local congressman. This will go on for several days. In this manner our little spectacle more closely resembles the Roman spectacles held for the very same purpose as these hearings. Namely, to calm and entertain the populace while a handful of men gets back to running the nation.
Unfortunately for us, the Roman analogy does not hold very close beyond that however. For at least the Roman citizen, got to see real blood in exchange for their liberty. We however will have to muddle through with our humble vaudeville. It will have to suffice because it is all we are being offered.
These hearings will come and go having accomplished nothing. No more than the bailout hearings prevented further bailouts, abuse of bailouts or the banana republic corruption of bonuses paid from bailout funds. By all accounts the reform bill in congress will, like health care before it, be a giant gift bag to the finance industry. In exchange for meaningless paper reforms Goldman and others will keep access to the federal paper money mill. No banks will be broken, no trading outlawed. Sure some specific types of securities will come under tighter control – but only in areas where Goldman has so overfished the waters that no fish is likely to bite again for years.
The hearings will end, the limelight will dim. Congress and Goldman will retire for the weekend and remove the dirt and grime of public performance sharing drinks together on the Goldman dime. The “reform” bill will pass. The stock market will rise in anticipation of higher profits. Goldman will begin to reap its toxic returns from the debt crisis it fueled in Europe. Taxpayers will feel that their ongoing pain and abuse has been made meaningful. All will be well and happy – for a while.
Tick Tock
Thursday, April 29, 2010
Wednesday, April 28, 2010
Islam's Prophet and America's Profit - two radical fundamentalisms
To many people - wise and foolish, it seems that America is locked in a struggle with Islam or at the very least with the radical elements of Islam. The question is whether this conflict will be limited in time and intensity or whether it will erupt into an all out battle to the death.
I do not propose to enter into that debate. I would simply like to point out that there is a direct correlation between the likelihood of struggle and the degree of radical fundamentalism. When you look at the Muslim citizens of American it is hard to find a radical majority. Most Muslim Americans are proud to be American and vigorously self police their community for signs of terrorism. Show a group of Islamic parents walking their children to mosque and you will be hard pressed to get the average American to declare them mortal enemies.
However, present that same American an image of raging Pakistani youth burning an American flag or stoning rape victims to death and you will quickly reach a consensus that “those” people are dangerous and must be confronted totally.
So we have established that a radical fundamentalist response is met much more forcefully than a more measured one. The higher the degree of fundamentalist fervor the higher the antagonism towards the group. We see that relationship between Islam and the American public. Let is now turn the mirror on ourselves. Do we present any degree of radical fundamentalism to the Muslim world?
Some might argue that we do offer a fundamental Christian view to the world. I do not think that is true enough to be a general statement. Some may argue that we present a fundamentally western view. Now, that is closer to truth and frankly I am perfectly satisfied to be tied to the western principles of the enlightenment.
However, I would argue that America may adhere to enlightened principles in law and society but they hold closer to an even higher god. That god is capitalism. Not just capitalism but a radical fundamental view of capitalism that stands at the very core of our values. No cry of heresy is hurled as loudly as that of being against the free market. No profanity can reach the staining power of socialist. No violation of morality or social justice is unredeemd by a healthy income statement. Yet we do not see ourselves as radical nor fundamental.
America complains about the insanity of the Muslim extremist who follows the word of the Prophet Mohammed to any excess. Yet American worships our own prophet – Profit and we are every bit as radical in its defense – we destroy environments, cultures, entire civilizations in the holy name of Profit. We parade 12 year old girls in lingerie ads in the name of Profit. We send entire communities into poverty and despair when we ship their jobs overseas in the name of Profit. Profit is holy and Profit is an answer unto itself.
We build temples to Profit - our very homes are measured by how much profit they represent. Our careers are measured in Profit. We earnestly declare that no scientist would want to cure cancer if it did not end in Profit. Our coal is mined and cars built with a keen balance being kept between the cost of funerals and bottom line Profit. Liberal arts have withered to ghost presences on our campus because they yield no Profit. Profit – holy Profit – it is the ghost in the machine of American culture.
The Islamic world values sanctity and order and worships their Prophet. America values capitalism and freedom and worships our Profit. Two zealots locked in a battle of heresies do not bode well for compromise. We need to realize how our own radicalism threatens their world before we expect them to abandon their own fundamentalism. One irrational radical fundamental fanaticism deserves another. If there is any hope of coexistence, we need to recognize our own orthodoxies.
I do not propose to enter into that debate. I would simply like to point out that there is a direct correlation between the likelihood of struggle and the degree of radical fundamentalism. When you look at the Muslim citizens of American it is hard to find a radical majority. Most Muslim Americans are proud to be American and vigorously self police their community for signs of terrorism. Show a group of Islamic parents walking their children to mosque and you will be hard pressed to get the average American to declare them mortal enemies.
However, present that same American an image of raging Pakistani youth burning an American flag or stoning rape victims to death and you will quickly reach a consensus that “those” people are dangerous and must be confronted totally.
So we have established that a radical fundamentalist response is met much more forcefully than a more measured one. The higher the degree of fundamentalist fervor the higher the antagonism towards the group. We see that relationship between Islam and the American public. Let is now turn the mirror on ourselves. Do we present any degree of radical fundamentalism to the Muslim world?
Some might argue that we do offer a fundamental Christian view to the world. I do not think that is true enough to be a general statement. Some may argue that we present a fundamentally western view. Now, that is closer to truth and frankly I am perfectly satisfied to be tied to the western principles of the enlightenment.
However, I would argue that America may adhere to enlightened principles in law and society but they hold closer to an even higher god. That god is capitalism. Not just capitalism but a radical fundamental view of capitalism that stands at the very core of our values. No cry of heresy is hurled as loudly as that of being against the free market. No profanity can reach the staining power of socialist. No violation of morality or social justice is unredeemd by a healthy income statement. Yet we do not see ourselves as radical nor fundamental.
America complains about the insanity of the Muslim extremist who follows the word of the Prophet Mohammed to any excess. Yet American worships our own prophet – Profit and we are every bit as radical in its defense – we destroy environments, cultures, entire civilizations in the holy name of Profit. We parade 12 year old girls in lingerie ads in the name of Profit. We send entire communities into poverty and despair when we ship their jobs overseas in the name of Profit. Profit is holy and Profit is an answer unto itself.
We build temples to Profit - our very homes are measured by how much profit they represent. Our careers are measured in Profit. We earnestly declare that no scientist would want to cure cancer if it did not end in Profit. Our coal is mined and cars built with a keen balance being kept between the cost of funerals and bottom line Profit. Liberal arts have withered to ghost presences on our campus because they yield no Profit. Profit – holy Profit – it is the ghost in the machine of American culture.
The Islamic world values sanctity and order and worships their Prophet. America values capitalism and freedom and worships our Profit. Two zealots locked in a battle of heresies do not bode well for compromise. We need to realize how our own radicalism threatens their world before we expect them to abandon their own fundamentalism. One irrational radical fundamental fanaticism deserves another. If there is any hope of coexistence, we need to recognize our own orthodoxies.
Monday, April 26, 2010
In Goldman Sachs They Trusted - 1929 and 2008 Deja Vu
“In Goldman we trust” - Kenneth Galbraith warned us 55 years ago
In 1955 Kenneth Galbraith published what is considered the definitive book on the great depression called with all the wit and imagination of an economist – “The Great Depression” What it may have lacked in marketing edge it made up for in content and insight. It has been held to the test of time and emerged today as an essential work on the economic meltdown of the 1930s.
However, a recent reread showed how it can also be seen as a prescient warning. You might want to be sitting down for this one. Chapter 3 of his historic book is titled “In Goldman Sachs We Trust” In it; Galbraith explains how the firm went from being one of the newest kids on the block to the leading promoter of closed end stock funds prior to the great crash.
Essentially these closed end funds were exactly the same as the ones operated today by Goldman and reputable firms throughout the world. A fixed number of shares in the closed end fund are sold to raise capital. This money is used to invest in other stocks. The manager of the fund is presumed to be able to outperform the market and from this performance the fund will earn a profit in excess of the market.
These funds were essentially the first derivatives, since they drew their value not from their own effort but by the underlying value of the stocks they bought. But, the difference is that in 1928 Goldman basically turned the idea of closed end funds into a pyramid ponzi scheme. They issued Goldman Sachs Trading Company in December 1928. One million shares were issued at $100 a share to capitalize the firm at $100, 000, 00. Then 90% of the stock was sold to the public. Within 2 months Goldman bought back 560,724 shares of its own stock, this created huge market demand and the stock prices soared. By the end of the month after sending prices to $222 a share Goldman sold of most of its shares at over 120% profit. Then in 1929, Shenandoah Corporation was created. Its major purpose – to purchase shares of Goldman Sachs Trading Company. Within months they had created the Blue Ridge Corporation. Its major purpose – you guess it – to purchase shares of Shenandoah.
This scam went on until the US economic meltdown in October of 1929. At its peak, this pyramid scheme drove shares of Goldman Sachs Trading Company to over $280 a share. By 1932 when Goldman was being hauled into Congress for a series of investigations the shares were worth a buck and some change. On the stock of the Trading Company alone Goldman Sachs had lost over $565 million dollars. Adjusted for inflation that would be over 7 billion dollars today.
The losses for Shenandoah and Blue Ridge were similar in style and scope. However, this is not the limit to the Goldman touch on the great depression. In their first two years of operation Goldman Sachs issued similar deals with leveraging of up to 99 to 1. These created, merged, bought or managed dozens of the closed end funds. The total cost to the people is billions and billions of dollars beyond calculation.
Goldman was hauled into Congress and all over Washington. They were excoriated and fined. But to no avail. For Goldman showed even way back then how adept it was at creating a profit opportunity – seizing the bulk of the profit – but then astutely letting go before the phony economics caught up with the deal.
Goldman Sachs always leaves someone else holding the bag. In 1929 they did it to millions but most spectacularly to William Crapo Durant. Durant was the founder of General Motors and later became a big player in the stock market. Goldman sold a huge amount of its shares to Durant. By 1936, Durant died bankrupt and living on charity. Goldman Sachs however, had stashed away enough of its money to pay all the fines it was levied and to hire the best admen available to rehabilitate its image.
In 2008 they did it to AIG, Lehman Brothers and the American taxpayer. Now it only awaits for them to suffer whatever pitiful fury their lapdogs in congress are willing to parade out for public consumption. That dealt with, Goldman will do what it has done before. Pay its fines and go on to the next scheme.
At the height of the current meltdown, Michael Robinson, the ex public affairs and policy chief for the SEC said of Goldman: "This is entirely new territory for them," "They are not accustomed to it.” Unfortunately no, it isn’t new to them and yes, they are accustomed to it. The problem is we never learn even from our most vivid histories. “Those who refuse to learn from history are doomed to repeat it” – historian George Santayana.
SOURCES
“The Great Depression” by Kenneth Galbraith 1955
LINK
In 1955 Kenneth Galbraith published what is considered the definitive book on the great depression called with all the wit and imagination of an economist – “The Great Depression” What it may have lacked in marketing edge it made up for in content and insight. It has been held to the test of time and emerged today as an essential work on the economic meltdown of the 1930s.
However, a recent reread showed how it can also be seen as a prescient warning. You might want to be sitting down for this one. Chapter 3 of his historic book is titled “In Goldman Sachs We Trust” In it; Galbraith explains how the firm went from being one of the newest kids on the block to the leading promoter of closed end stock funds prior to the great crash.
Essentially these closed end funds were exactly the same as the ones operated today by Goldman and reputable firms throughout the world. A fixed number of shares in the closed end fund are sold to raise capital. This money is used to invest in other stocks. The manager of the fund is presumed to be able to outperform the market and from this performance the fund will earn a profit in excess of the market.
These funds were essentially the first derivatives, since they drew their value not from their own effort but by the underlying value of the stocks they bought. But, the difference is that in 1928 Goldman basically turned the idea of closed end funds into a pyramid ponzi scheme. They issued Goldman Sachs Trading Company in December 1928. One million shares were issued at $100 a share to capitalize the firm at $100, 000, 00. Then 90% of the stock was sold to the public. Within 2 months Goldman bought back 560,724 shares of its own stock, this created huge market demand and the stock prices soared. By the end of the month after sending prices to $222 a share Goldman sold of most of its shares at over 120% profit. Then in 1929, Shenandoah Corporation was created. Its major purpose – to purchase shares of Goldman Sachs Trading Company. Within months they had created the Blue Ridge Corporation. Its major purpose – you guess it – to purchase shares of Shenandoah.
This scam went on until the US economic meltdown in October of 1929. At its peak, this pyramid scheme drove shares of Goldman Sachs Trading Company to over $280 a share. By 1932 when Goldman was being hauled into Congress for a series of investigations the shares were worth a buck and some change. On the stock of the Trading Company alone Goldman Sachs had lost over $565 million dollars. Adjusted for inflation that would be over 7 billion dollars today.
The losses for Shenandoah and Blue Ridge were similar in style and scope. However, this is not the limit to the Goldman touch on the great depression. In their first two years of operation Goldman Sachs issued similar deals with leveraging of up to 99 to 1. These created, merged, bought or managed dozens of the closed end funds. The total cost to the people is billions and billions of dollars beyond calculation.
Goldman was hauled into Congress and all over Washington. They were excoriated and fined. But to no avail. For Goldman showed even way back then how adept it was at creating a profit opportunity – seizing the bulk of the profit – but then astutely letting go before the phony economics caught up with the deal.
Goldman Sachs always leaves someone else holding the bag. In 1929 they did it to millions but most spectacularly to William Crapo Durant. Durant was the founder of General Motors and later became a big player in the stock market. Goldman sold a huge amount of its shares to Durant. By 1936, Durant died bankrupt and living on charity. Goldman Sachs however, had stashed away enough of its money to pay all the fines it was levied and to hire the best admen available to rehabilitate its image.
In 2008 they did it to AIG, Lehman Brothers and the American taxpayer. Now it only awaits for them to suffer whatever pitiful fury their lapdogs in congress are willing to parade out for public consumption. That dealt with, Goldman will do what it has done before. Pay its fines and go on to the next scheme.
At the height of the current meltdown, Michael Robinson, the ex public affairs and policy chief for the SEC said of Goldman: "This is entirely new territory for them," "They are not accustomed to it.” Unfortunately no, it isn’t new to them and yes, they are accustomed to it. The problem is we never learn even from our most vivid histories. “Those who refuse to learn from history are doomed to repeat it” – historian George Santayana.
SOURCES
“The Great Depression” by Kenneth Galbraith 1955
LINK
Sunday, April 25, 2010
Sec Watched Porn During Economic Meltdown
Take us the foxes, the little foxes, that spoil the vines: for our vines have tender grapes” Song of Solomon 2.15 KJV
The SEC watchdogs were licking themselves while the foxes from Wall Street raided the American hen house. I think that just about sums up the news story part of this discussion. Revelations have come out that agents of the SEC were spending vast amounts of time in diligent search of porn. One chap fought his way around over 16,000 warnings in his search of porn. Not only were they spending large portions of every workday looking for fresh titillation, but there was a huge increase in this behavior after the 2008 meltdown began.
This is the instructive part of this sordid little tale. I realize job is a nebulous term in government bureaucracy, but weren’t they hired to monitor the financial sector? Why would the amount of time they had for leisure increase during the height of a financial crisis?
The answer that comes to my mind is clear and simple. They stayed even further away from their ostensive jobs as monitors because they were told to do so. So far the SEC has been a toothless, senseless watchdog who sleeps through every violation and excess and only acts when goaded repeatedly into action. Not only were these agents trained to sloth and indolence by years of abiding by the holy covenant between the government regulators and corporations in every sector. The corporations pretend to observe regulations and the regulators pretend to monitor. It is a very polite little dance with precise rules to be sure neither party is ever upset by having reality intrude upon their little cotillion.
I am sure the agents knew from years of learned behavior that it was best to wait. For even when finally roused from slumber the hounds of the SEC tend to bark more and bite less. Any overzealous agent who uncovered problems with a corporation is sure to be accused of damaging a corporation’s free market rights. The sin of offending profit is the ultimate sin against capitalism and can easily cost a fellow his “job”. So naturally, our highly paid SEC agents chose to search for chicks on the internet rather than a fox in the henhouse. Waiting to see if this was another little scandal that would wash away with the next news cycle.
The agents watched more porn in 2008 than in 2006 because they were even less engaged in monitoring during the height of the crisis. But, they were not disengaged from any extraordinary lack of work ethic on their part. They sat idle because the whole recent history of American corporate regulation told them to sit idle until their bosses were given the go ahead for some real investigation, however feeble.
In fact, the scandal did last more than a news cycle and the SEC was finally wakened to some action. But do not be deceived - the SEC is more a doorman for the financial corporations than a guard. They know and the corporations know that they will never be allowed to interfere with business.
This small and fragile fraud case against Goldman Sachs is a perfect example. If it is pursued and a judgment goes against Goldman Sachs the fine levied is likely to be so small in comparison with their profits that is will disappear into the rounding errors on their financial statement. Worse yet, this whole case is just as likely to be set up as a mere morality play in which Goldman sallies forth to demonstrate their diligence and honor as custodians of America’s paper wealth. It is not beyond the corruption of the relationship to believe that this is a setup case to prove that some few – aka Fabrice Tourre did some bad things but the noble folks of Goldman were right on his heels and about to fire him anyway.
Fab will walk away with a scarlet A on his designer suit and walk straight into a limo and onto another high paying job in Finance. He will be a well paid and well looked after scapegoat that clears the Wall Street foxes and lets the SEC hounds return to napping on the porch.
SOURCES
NPR story on porn at the SEC
LINK
Second Song of Solomon, King James version of the bible
The SEC watchdogs were licking themselves while the foxes from Wall Street raided the American hen house. I think that just about sums up the news story part of this discussion. Revelations have come out that agents of the SEC were spending vast amounts of time in diligent search of porn. One chap fought his way around over 16,000 warnings in his search of porn. Not only were they spending large portions of every workday looking for fresh titillation, but there was a huge increase in this behavior after the 2008 meltdown began.
This is the instructive part of this sordid little tale. I realize job is a nebulous term in government bureaucracy, but weren’t they hired to monitor the financial sector? Why would the amount of time they had for leisure increase during the height of a financial crisis?
The answer that comes to my mind is clear and simple. They stayed even further away from their ostensive jobs as monitors because they were told to do so. So far the SEC has been a toothless, senseless watchdog who sleeps through every violation and excess and only acts when goaded repeatedly into action. Not only were these agents trained to sloth and indolence by years of abiding by the holy covenant between the government regulators and corporations in every sector. The corporations pretend to observe regulations and the regulators pretend to monitor. It is a very polite little dance with precise rules to be sure neither party is ever upset by having reality intrude upon their little cotillion.
I am sure the agents knew from years of learned behavior that it was best to wait. For even when finally roused from slumber the hounds of the SEC tend to bark more and bite less. Any overzealous agent who uncovered problems with a corporation is sure to be accused of damaging a corporation’s free market rights. The sin of offending profit is the ultimate sin against capitalism and can easily cost a fellow his “job”. So naturally, our highly paid SEC agents chose to search for chicks on the internet rather than a fox in the henhouse. Waiting to see if this was another little scandal that would wash away with the next news cycle.
The agents watched more porn in 2008 than in 2006 because they were even less engaged in monitoring during the height of the crisis. But, they were not disengaged from any extraordinary lack of work ethic on their part. They sat idle because the whole recent history of American corporate regulation told them to sit idle until their bosses were given the go ahead for some real investigation, however feeble.
In fact, the scandal did last more than a news cycle and the SEC was finally wakened to some action. But do not be deceived - the SEC is more a doorman for the financial corporations than a guard. They know and the corporations know that they will never be allowed to interfere with business.
This small and fragile fraud case against Goldman Sachs is a perfect example. If it is pursued and a judgment goes against Goldman Sachs the fine levied is likely to be so small in comparison with their profits that is will disappear into the rounding errors on their financial statement. Worse yet, this whole case is just as likely to be set up as a mere morality play in which Goldman sallies forth to demonstrate their diligence and honor as custodians of America’s paper wealth. It is not beyond the corruption of the relationship to believe that this is a setup case to prove that some few – aka Fabrice Tourre did some bad things but the noble folks of Goldman were right on his heels and about to fire him anyway.
Fab will walk away with a scarlet A on his designer suit and walk straight into a limo and onto another high paying job in Finance. He will be a well paid and well looked after scapegoat that clears the Wall Street foxes and lets the SEC hounds return to napping on the porch.
SOURCES
NPR story on porn at the SEC
LINK
Second Song of Solomon, King James version of the bible
Friday, April 23, 2010
Goldman Sach's Fabulous Fab Says Let Them Eat Cake
“More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”
Article 18 of the SEC fraud filing against Goldman Sachs quotes VP Fabrice Tourre in an email to a friend where he pats himself on the back as “fabulous Fab”. Apparently, obscene salary and the sycophancy of an entire Wall Street cult in America was not enough to satisfy his ego. No, “Fab” needed self sastisfaction so much he has to refer to himself as some sort of cartoon super hero? This is just disgusting and it comes from the very top of the “best and brightest” at Wall Street. It is a bold indictment as to how juvenile, artificial and scheming the finance “industry” is.
But not only does “Fab” fawn over his brilliance, he admits in the same sentence that he has no idea what he has created or how to manage it. Later on in another memo, he exhorts a friend to hurry making deals because “the cdo biz is dead we don’t have a lot of time left.”. Here in his own words is proof that the people running Wall Street are nothing more than salesmen who hype their product without the slightest real competency. The sales pitch is the thing, the main thing, the only thing. This is the skill we need so desperately that we must pay billions in salary to acquire the “very best”?
Goldman VP Fabulous Fab is the epitome of some carny barker who has created a sales pitch so slick and so confusing that even he can’t follow it any more. He just keeps repeating the pitch and calling in the suckers. Well that is what Wall Street was and what it remains – a glorified carny game where there can be only one winner no matter how many suckers try to play the game.
I hope that this memo has the power to engage and enrage the popular imagination like its predecessors in the past. Classic ditties like “let them eat cake” comes to mind. If this does not awaken American to the people who purposely orchestrated the American meltdown – I simply do not know what will.
SOURCES
SEC Fraud Filing on Goldman Sachs
LINK
Article 18 of the SEC fraud filing against Goldman Sachs quotes VP Fabrice Tourre in an email to a friend where he pats himself on the back as “fabulous Fab”. Apparently, obscene salary and the sycophancy of an entire Wall Street cult in America was not enough to satisfy his ego. No, “Fab” needed self sastisfaction so much he has to refer to himself as some sort of cartoon super hero? This is just disgusting and it comes from the very top of the “best and brightest” at Wall Street. It is a bold indictment as to how juvenile, artificial and scheming the finance “industry” is.
But not only does “Fab” fawn over his brilliance, he admits in the same sentence that he has no idea what he has created or how to manage it. Later on in another memo, he exhorts a friend to hurry making deals because “the cdo biz is dead we don’t have a lot of time left.”. Here in his own words is proof that the people running Wall Street are nothing more than salesmen who hype their product without the slightest real competency. The sales pitch is the thing, the main thing, the only thing. This is the skill we need so desperately that we must pay billions in salary to acquire the “very best”?
Goldman VP Fabulous Fab is the epitome of some carny barker who has created a sales pitch so slick and so confusing that even he can’t follow it any more. He just keeps repeating the pitch and calling in the suckers. Well that is what Wall Street was and what it remains – a glorified carny game where there can be only one winner no matter how many suckers try to play the game.
I hope that this memo has the power to engage and enrage the popular imagination like its predecessors in the past. Classic ditties like “let them eat cake” comes to mind. If this does not awaken American to the people who purposely orchestrated the American meltdown – I simply do not know what will.
SOURCES
SEC Fraud Filing on Goldman Sachs
LINK
Wednesday, April 21, 2010
Mr. Rubin and the Definition of Morally Bankrupt
Robert Edward Rubin currently sits on the board of Harvard, Mount Sinai, and Council on Foreign Relations. To put it mildly, he is a big deal. He is the ex chairman of Citicorp, Ex Secretary of the Treasury and of course sine qua non – ex chairman of Goldman Sachs.
He is a key player in both the deregulation run-up to the American financial meltdown and its current incarnation as a circus of bailouts and “gosh, I didn’t know” statements by people alleged to be brilliant and talented. They say you cannot judge a man’s life until he has lived it all. So I will withhold my judgment on his talent. Although he will need a great many “up” years to make up for crashing Citigroup, not to mention his key part in deregulation which led directly to the meltdown of the entire economy.
Robert Rubin spent most of his early life working his way up through Goldman Sachs. He joined in 1966 to work in the area of risk arbitrage. Over the next two decades he climbed the Goldman ranks to become Chairman.
In 1992 he joined the Clinton administration as Secretary of the Treasury. He was a strong advocate for deregulation and globalization. Under his watch the safeguards put in place after the Great Depression were dismantled. Between Robert Rubin and Phil Graham basically all the FDR era regulations were swept aside as part of Rubin’s financial modernization. The key piece – the Glass Steagall Act which created FDIC insurance and strictly separated banking from financial speculation was repealed in 1999.
When Rubin resigned as Bill Clinton’s head of Treasury, Clinton called him the “greatest Secretary of the Treasury since Alexander Hamilton” In fact, Mr. Rubin liked that epithet so much he founded The Hamilton Project. Said project has as it goal: “to help build an economy that benefits more Americans” Lovely mission statement. Recent papers include a call to reduce taxes on corporations, and one declaring the meltdown a “panic” caused by unsophisticated citizens failing to see the real economy. If this is Hamiltonian economics then it single handedly justifies that little trip to the oaks with Aaron Burr.
After leaving the administration, Rubin joined the board of Citigroup in 1999. By 2001 he was named in a scandal over a phone call he made to Moodys to try and prevent them from reducing the debt rating of Enron. Does Enron ring a bell with anyone? Rubin carved out a position in Citigroup as senior advisor and chair of the executive committee. 2007 he stepped into the Chairman’s seat. In 2008 under his direction Citigroup was on the verge of bankruptcy and received 45billion in direct bailout and government guarantees against 300 billion in the sort of leveraged debt Rubin has been touting for years. In that same year, Mr. Rubin received over 17 million dollars in salary and over 33 million in stock options. He resigned in January, 2009.
Having resided over the meltdown of the 3rd largest American bank and profited mightily from it, one would think Mr. Rubin would have the grace to be humble. Far, far from it – he has stated that we need a more educated population to be able to address these issues. He even told congress that as the senior advisor to Citigroup he had no idea – none what so ever, about what they were doing with the very type of “investments” he specialized in while at Goldman.
But the pinnacle of his hubris was surely reached this month while speaking at his very own Hamilton Project forum. On April 20th 2010 he told reporters from the Huffington Post that he had been a supporter of regulation all along. With a straight face he stated that "I thought we should regulate derivatives; I thought so when I was at Goldman Sachs and I thought so afterwards," The Huffington article by Dan Froomkin is terse clear and shocking. Rubin is so glib and so unflustered by his part in the disaster that he makes a concerted effort to prove he was for regulation his entire career. Fortunately, Froomkin smashes that rhetorical edifice with some real world facts. Pointing out that when regulation of derivatives was brought up by the Futures Commission both Rubin and Greenspan called the idea caused "…grave concerns about this action and its possible consequences,"
The story of Robert Rubin’s life is one of influence and applause for his talent and intelligence. But if we balance his losses with his successes the net results would indicate a man whose central idea has been an unmitigated disaster. In a few months or collective reality, all the spun sugar financial empires built up by Rubin and his followers have vanished. Huge profits remain in the hands of a very few, but America as a whole is much diminished.
So, if you can define a man by his history and his works – this is Robert Rubin. He has provided that testimony over 40 years in business and government. My title proposes a link to moral bankruptcy. Here unfortunately Robert Rubin has also defined that term with his words and testimony over the last year.
By the way, on April 18, 2010, speaking on ABC’s “This Week” Clinton said Rubin was wrong to advise deregulation and that he was wrong to accept that advice. That is something we used to call – responsibility, it is an antonym of morally bankrupt.
Sources:
Huffinton Post – Dan Froomkin
LINK
Fortune --- Rubin said part of the problem is that we need a "more educated electorate"
LINK
Senate investigation into Enron and Citigroup
LINK
He is a key player in both the deregulation run-up to the American financial meltdown and its current incarnation as a circus of bailouts and “gosh, I didn’t know” statements by people alleged to be brilliant and talented. They say you cannot judge a man’s life until he has lived it all. So I will withhold my judgment on his talent. Although he will need a great many “up” years to make up for crashing Citigroup, not to mention his key part in deregulation which led directly to the meltdown of the entire economy.
Robert Rubin spent most of his early life working his way up through Goldman Sachs. He joined in 1966 to work in the area of risk arbitrage. Over the next two decades he climbed the Goldman ranks to become Chairman.
In 1992 he joined the Clinton administration as Secretary of the Treasury. He was a strong advocate for deregulation and globalization. Under his watch the safeguards put in place after the Great Depression were dismantled. Between Robert Rubin and Phil Graham basically all the FDR era regulations were swept aside as part of Rubin’s financial modernization. The key piece – the Glass Steagall Act which created FDIC insurance and strictly separated banking from financial speculation was repealed in 1999.
When Rubin resigned as Bill Clinton’s head of Treasury, Clinton called him the “greatest Secretary of the Treasury since Alexander Hamilton” In fact, Mr. Rubin liked that epithet so much he founded The Hamilton Project. Said project has as it goal: “to help build an economy that benefits more Americans” Lovely mission statement. Recent papers include a call to reduce taxes on corporations, and one declaring the meltdown a “panic” caused by unsophisticated citizens failing to see the real economy. If this is Hamiltonian economics then it single handedly justifies that little trip to the oaks with Aaron Burr.
After leaving the administration, Rubin joined the board of Citigroup in 1999. By 2001 he was named in a scandal over a phone call he made to Moodys to try and prevent them from reducing the debt rating of Enron. Does Enron ring a bell with anyone? Rubin carved out a position in Citigroup as senior advisor and chair of the executive committee. 2007 he stepped into the Chairman’s seat. In 2008 under his direction Citigroup was on the verge of bankruptcy and received 45billion in direct bailout and government guarantees against 300 billion in the sort of leveraged debt Rubin has been touting for years. In that same year, Mr. Rubin received over 17 million dollars in salary and over 33 million in stock options. He resigned in January, 2009.
Having resided over the meltdown of the 3rd largest American bank and profited mightily from it, one would think Mr. Rubin would have the grace to be humble. Far, far from it – he has stated that we need a more educated population to be able to address these issues. He even told congress that as the senior advisor to Citigroup he had no idea – none what so ever, about what they were doing with the very type of “investments” he specialized in while at Goldman.
But the pinnacle of his hubris was surely reached this month while speaking at his very own Hamilton Project forum. On April 20th 2010 he told reporters from the Huffington Post that he had been a supporter of regulation all along. With a straight face he stated that "I thought we should regulate derivatives; I thought so when I was at Goldman Sachs and I thought so afterwards," The Huffington article by Dan Froomkin is terse clear and shocking. Rubin is so glib and so unflustered by his part in the disaster that he makes a concerted effort to prove he was for regulation his entire career. Fortunately, Froomkin smashes that rhetorical edifice with some real world facts. Pointing out that when regulation of derivatives was brought up by the Futures Commission both Rubin and Greenspan called the idea caused "…grave concerns about this action and its possible consequences,"
The story of Robert Rubin’s life is one of influence and applause for his talent and intelligence. But if we balance his losses with his successes the net results would indicate a man whose central idea has been an unmitigated disaster. In a few months or collective reality, all the spun sugar financial empires built up by Rubin and his followers have vanished. Huge profits remain in the hands of a very few, but America as a whole is much diminished.
So, if you can define a man by his history and his works – this is Robert Rubin. He has provided that testimony over 40 years in business and government. My title proposes a link to moral bankruptcy. Here unfortunately Robert Rubin has also defined that term with his words and testimony over the last year.
By the way, on April 18, 2010, speaking on ABC’s “This Week” Clinton said Rubin was wrong to advise deregulation and that he was wrong to accept that advice. That is something we used to call – responsibility, it is an antonym of morally bankrupt.
Sources:
Huffinton Post – Dan Froomkin
LINK
Fortune --- Rubin said part of the problem is that we need a "more educated electorate"
LINK
Senate investigation into Enron and Citigroup
LINK
Tuesday, April 20, 2010
UK CALLS WALLSTREET MORALLY BANKRUPT
Rule Britannia – and umm hurrah Germany – Germany really needs a new slogan, the old ones have image issues. In any case, it is a great and abiding relief to see more evidence that popular democracy and enlightenment still exist in the western world.
The BBC has posted an article that brings a real chance of a serious and vigorous investigation into the crimes of Wall Street. UK Prime Minister Gordon Brown hit it right on the head when he called the situation one of “moral bankruptcy”. The German government announced that “After a careful evaluation of the documents we will decide about legal steps” France has yet to make a statement, but that may have something to do with the fact that Societe Nationale – one of their largest banks made billions out of the AIG bailout.
This is a solid indication that somewhere in the world people have a clue to how monstrously harmful the mega banks have become. They are no longer a beneficial tool helping to grow economies. The giant financial corporations have become feudal bandit lords. Just like the petty kingdoms that used to dot the Rhine in Germany and charge “tolls” for passage down every mile of the river they impede real economic progress and simple exist to enrich themselves.
England has already passed a 50% tax on bonuses. Mr. Brown is calling for a special investigation. Hopefully this is an indication that they are serious about this and will pursue the Goldman Sachs hierarchy like the thieves and parasites they are.
The whole BBC article can be read here
The BBC has posted an article that brings a real chance of a serious and vigorous investigation into the crimes of Wall Street. UK Prime Minister Gordon Brown hit it right on the head when he called the situation one of “moral bankruptcy”. The German government announced that “After a careful evaluation of the documents we will decide about legal steps” France has yet to make a statement, but that may have something to do with the fact that Societe Nationale – one of their largest banks made billions out of the AIG bailout.
This is a solid indication that somewhere in the world people have a clue to how monstrously harmful the mega banks have become. They are no longer a beneficial tool helping to grow economies. The giant financial corporations have become feudal bandit lords. Just like the petty kingdoms that used to dot the Rhine in Germany and charge “tolls” for passage down every mile of the river they impede real economic progress and simple exist to enrich themselves.
England has already passed a 50% tax on bonuses. Mr. Brown is calling for a special investigation. Hopefully this is an indication that they are serious about this and will pursue the Goldman Sachs hierarchy like the thieves and parasites they are.
The whole BBC article can be read here
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