Congress Gives Goldman One More Free Pass
By Jeff Macke Jun 25, 2009 11:40 am
But is still doing nothing to alleviate widespread economic fear.
Congress had the former chairman of Goldman Sachs (GS) on the stand and never once asked about potential conflicts of interest. Months later, they had AIG’s (AIG) CEO -- and former Goldman board member -- Ed Liddy before them, and heckled him endlessly over the $160 million in bonuses being paid to the young men and women trying to unwind the hideous mess AIG had become.None of these highly regarded inquisitors thought to ask how it came to pass that Goldman got paid back 100 cents on the dollar when literally no one else did. Goldman has a marvel of a balance sheet, and its executives were paid many times what the AIG bonuses amounted to -- even though those bonuses were going to young people who'll wear the scarlet letters “AIG” on their suits for the remainder of their careers.
Hank Paulson and Ed Liddy managed to testify for several days without ever answering why Goldman Sachs got favorable deals from the government, what role they played in those negotiations, and why, specifically, we wasted our time harassing kids who'll literally never work in this town again -- despite the fact that $160 million in bonuses is a drop in the Atlantic relative to what Goldman’s been paid.
As if that weren’t enough, Goldman was the first group to find the mistake in AIG’s algorithm -- a mistake that eventually grew so huge that it brought the financial system to the brink of collapse. Goldman took the other side of AIG’s flawed trade so far that they moved the price, which brought the trade to the attention of other Wall Street players, who promptly got on board. Cue the meltdown.
Despite this, Goldman's role has gone quietly unnoticed by the same media and legislature that pilloried AIG. Indeed, Goldman ended up paid in full and looking like public servants. It’s Goldman’s world, folks. We just live in it (at Goldman's discretion, of course).
- Why is Buffett the Oracle of Omaha? Well, for one thing, he used to be one of the best investors alive. For another, he can get live coverage anytime he wants, despite Berkshire (BRK-B) being down over 37% in the last 2 years. Congratulations to Dennis Gartman, who saw this coming and has been short BRK-B for a while.
- Two companies executing well and going nowhere: Target (TGT) and Wal-Mart (WMT). No retailer makes money with 10% unemployment, unless it's just starting up and has captured the zeitgeist months ahead of time.
- It took less than a month for the popular talking heads to go from whining about hyperinflation to admitting there was simply no pricing power. Translation: Deflation's still a bigger threat. Sounds familiar...
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2009 Minyanville Media, Inc. All Rights Reserved.
(19)
Reply
2009-06-25 11:52:50
What's the Question?
I learned long ago that Congressional hearings are more about cover ups than uncovering. When you narrow the scope of your questions, you get the double benefit of appearing to be asking so-called tough questions while at the same time protecting the very people you are questioning.
This is the art of CYA, both for yourself and those who support you. When everyone is swimming in the same dirty pool, it's in the best interest of all the swimmers to cover up the fact that 1) the water is filthy and 2) you're also in the pool with the others.
This is the art of CYA, both for yourself and those who support you. When everyone is swimming in the same dirty pool, it's in the best interest of all the swimmers to cover up the fact that 1) the water is filthy and 2) you're also in the pool with the others.
2009-06-25 12:02:14
Goldman is getting press -
I took the opportunity to google Goldman sachs AIG last night and found two or three great reads. First, Rush Limbaugh took them to task on his far right talk show...and hit the points solid. Love him or hate him, and I don't care for him, he nailed it.
And Taibbi's 12 page crucifixion article in Rolling Stone that seeking alpha links to is a must read. It's a crying arse shame the WSJ can't do that kind of an expose to give it main street attention and focus.
And Taibbi's 12 page crucifixion article in Rolling Stone that seeking alpha links to is a must read. It's a crying arse shame the WSJ can't do that kind of an expose to give it main street attention and focus.
2009-06-25 12:11:58
good questions, bold words...
...whatever the answers, we need the questions asked -
thanks jeff!
thanks jeff!
2009-06-25 12:31:28
Newspeak
"Unnoticed" by media/Congress and "looking like" public servants seem less euphemisms for "swept under the rug" and "respectfully portrayed as" as Newspeak for "pay no attention to that little man behind the curtain! Behold the Great and Powerful!"
The masters of the world, at least, understand the proper use of distraction for manipulation.
Yes, we live in it, and are even permitted to shovel a bit. As of last night we will even be "allowed" to keep our own doctors and insurance, golly!
Hussein's best line during last night's infomercial: "Maybe you really don't need the surgery, and you can just take the painkiller."
The masters of the world, at least, understand the proper use of distraction for manipulation.
Yes, we live in it, and are even permitted to shovel a bit. As of last night we will even be "allowed" to keep our own doctors and insurance, golly!
Hussein's best line during last night's infomercial: "Maybe you really don't need the surgery, and you can just take the painkiller."
2009-06-25 12:53:31
Quote: "As if that weren't enough, Goldman was the first group to find the mistake in AIG's algorithm -- a mistake that eventually grew so huge that it brought the financial system to the brink of collapse. Goldman took the other side of AIG's flawed trade so far that they moved the price, which brought the trade to the attention of other Wall Street players, who promptly got on board."
Well, excuse me, sir, but isn't that how the game is played ? AIG mis-priced their trades, and "got their faces ripped off ". Or are you criticising GS over 'size' - that they couldn't stop going to the easy-trade well ? Tell me exactly what is wrong with GS's actions.
I see a lot of GS-bashing; usually from the ill-informed. I also see a lot of well-informed commentary calling GS the "best of breed". I'm inclined to take my stand with the latter group, if I may.
Well, excuse me, sir, but isn't that how the game is played ? AIG mis-priced their trades, and "got their faces ripped off ". Or are you criticising GS over 'size' - that they couldn't stop going to the easy-trade well ? Tell me exactly what is wrong with GS's actions.
I see a lot of GS-bashing; usually from the ill-informed. I also see a lot of well-informed commentary calling GS the "best of breed". I'm inclined to take my stand with the latter group, if I may.
2009-06-25 13:08:16
TRUTH IS NOT A VALUE
The bottom line is the bottom line. CEOs, CFOs, traders, ad nauseum want to make money without any concern for social welfare or real work (don't make me out to be a flaming liberal, I'm not). Congress (the people not institution) wants the markets to make money at any cost for various reasons: lobbyists' perks, re-elections, "get of out the house" and avoid real job search. (I think there may be some true public servants.) In general, Congress is not smart enough to deal with broad issues. It's a child playing grown up.
No one wants the truth. All administrations (GOP or DEM) seem to believe that we can't handle the truth, so they lie. They create diversions, one crisis after another to help us forget who created our dissatisfactions. One grandstand moment after another, while the back office orchestrates ways for power and wealth to further consolidate. We the People, can't wake up. Nay, must not wake up or we will be responsible.
No one can pull the curtain back without being destroyed by the money that put the curtain up. You know all too well what happens when truth is told.
So we subvert conscious truth for personal gain and play the games only to be pawns in a greater game of life. All actions ultimately have a reckoning. I have no answer for the timing of such. We delay world progress every day that we allow ourselves to live in delusion and lies. It is a choice we have collectively made.
You're the best MrJeffMacke.
BTW, Goldman is a very adept player in strategically placing knives in the backside of anyone sorry enough to come within their reach.
No one wants the truth. All administrations (GOP or DEM) seem to believe that we can't handle the truth, so they lie. They create diversions, one crisis after another to help us forget who created our dissatisfactions. One grandstand moment after another, while the back office orchestrates ways for power and wealth to further consolidate. We the People, can't wake up. Nay, must not wake up or we will be responsible.
No one can pull the curtain back without being destroyed by the money that put the curtain up. You know all too well what happens when truth is told.
So we subvert conscious truth for personal gain and play the games only to be pawns in a greater game of life. All actions ultimately have a reckoning. I have no answer for the timing of such. We delay world progress every day that we allow ourselves to live in delusion and lies. It is a choice we have collectively made.
You're the best MrJeffMacke.
BTW, Goldman is a very adept player in strategically placing knives in the backside of anyone sorry enough to come within their reach.
2009-06-25 16:39:08
The Matrix
We need the red pill.
Thanks, Jeff, for being one of the Neos out there.
Thanks, Jeff, for being one of the Neos out there.
2009-06-25 17:55:47
Rolling Stone article
Simply read the GS article in the next issue of Rolling Stone - a masterpiece.
2009-06-25 23:58:59
The Matrix
Exactly. Let's see how deep the rabbit hole goes.
It's not easy knowing.
It's not easy knowing.
2009-06-26 03:25:48
Point of concern is not goldman's wisdom in picking profitable trades but its influence on white house and congress which is supposed to take decisions for people and not just big companies. With government becoming slave of big companies, common man especially middle and lower class suffers the most. Fed depreciating currency, higher inflation makes people suffer. Inflation adjusted salaries have gone down 15-20% in last 2 decades. Just making profitable trade doesn't justifies action. It should not be at the cost of human pain. Such violent ups downs in economy doesn't make people happy. Banks will make big and sane money when lending is for profitable business. Banks expanded with rail road and information revolution in last century. Artificially inflating asset prices and making money out of that doesn't sound best of bread.
2009-06-26 07:13:13
Best of what Breed?
No doubt some smart people work there. Access to the levers of control allows fatal errors to go away. Their models need not allow for counter-party risk. They are as insolvent as JPM.
2009-06-26 14:27:18
Rolling Stone Article
The aforementioned article is up at Zero Hedge for anyone interested, it really is a great read:
http://zerohedge.blogspot.com/2009/06/goldman-sachs-engineering-every-major.html#disqus_thread
Not to discount GS traders' abilities (I'm sure they employ the "best and the brightest"), but it isn't difficult to make profitable trades when you influence/front-run government policy. It seems more apparent every day this once-great democracy has become a plutocracy/kleptocracy.
http://zerohedge.blogspot.com/2009/06/goldman-sachs-engineering-every-major.html#disqus_thread
Not to discount GS traders' abilities (I'm sure they employ the "best and the brightest"), but it isn't difficult to make profitable trades when you influence/front-run government policy. It seems more apparent every day this once-great democracy has become a plutocracy/kleptocracy.
2009-06-27 12:07:00
The Wealthy shall pay much of the Burden
I have no issue with Goldman playing smart hardball. That's what makes them Goldman.
I have a big problem with inquisitors too daft to understand who they are asking questions. On the forthcoming Macke Network (which already runs in my head 24/7) I would have simply cut the feed and started ragging on the process. It made the Estes Kefauver, Godfather II hearings and J Edgar Hoover's FBI in general look nothing but groups of upstanding seekers of the truth.
Goldman was insanely smart to exploit AIG's flawed math. The trade made them billions. But they triggered an avalanche which ended up plowing through Wall Street. Literally no one else got paid back anywhere near what GS got.
Thought of another way, many of you have more money than me, many of you have less. Regardless, most of us have more than enough to be considered "rich" by this administration. As a result, we paid off Goldman (who has more money than all of us), bought GM (I put the over/ under and 250b in stated costs to get us out of that mess... and I'm setting the number high because I want to take the over in massive size) and bailed out Citigroup, a company that no one is positive what their business is anymore.
Goldman's AIG trade was so good it was bad. If I get someone on the hook for the under to the degree he can't pay me I'm not going to get paid back by taxpayers. Goldman, a company that can and does frequently eat everyone else's lunch got bailed out without anyone knowing it.
That's my beef about the way it went down. Nothing more or less.
I have a big problem with inquisitors too daft to understand who they are asking questions. On the forthcoming Macke Network (which already runs in my head 24/7) I would have simply cut the feed and started ragging on the process. It made the Estes Kefauver, Godfather II hearings and J Edgar Hoover's FBI in general look nothing but groups of upstanding seekers of the truth.
Goldman was insanely smart to exploit AIG's flawed math. The trade made them billions. But they triggered an avalanche which ended up plowing through Wall Street. Literally no one else got paid back anywhere near what GS got.
Thought of another way, many of you have more money than me, many of you have less. Regardless, most of us have more than enough to be considered "rich" by this administration. As a result, we paid off Goldman (who has more money than all of us), bought GM (I put the over/ under and 250b in stated costs to get us out of that mess... and I'm setting the number high because I want to take the over in massive size) and bailed out Citigroup, a company that no one is positive what their business is anymore.
Goldman's AIG trade was so good it was bad. If I get someone on the hook for the under to the degree he can't pay me I'm not going to get paid back by taxpayers. Goldman, a company that can and does frequently eat everyone else's lunch got bailed out without anyone knowing it.
That's my beef about the way it went down. Nothing more or less.
2009-06-27 12:10:53
The Wealthy shall pay much of the Burden
PS
And they are Best of Breed because they are Oz; kings of a land of deeply confused people with a strong desire to believe in them.
So, I told what was wrong with GS actions and why they are still best of Breed (albeit in the "3-legged dogs with Mange" category.
And they are Best of Breed because they are Oz; kings of a land of deeply confused people with a strong desire to believe in them.
So, I told what was wrong with GS actions and why they are still best of Breed (albeit in the "3-legged dogs with Mange" category.
2009-06-27 13:13:49
The Wealthy shall pay much of the Burden
Jeff, I also had an afterthought. I *have* read of (at least one) trader cancelling part of a large trade gone wrong for the counter party - showing mercy, if you like. In the instance I recall, the trader is on record as saying they wanted to preserve the fragile market they were together pioneering - it was a business decision. Contrari-wise, although the CDS market was arguably in a developmental stage, keeping AIG in the market was a non-starter, so GS had no business reason to show mercy.
It's good to be the King.
Thanks, DLF (All Rights Reserved (^_^)
It's good to be the King.
Thanks, DLF (All Rights Reserved (^_^)
2009-06-29 13:37:47
David,
What do you think about this?
http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs
What do you think about this?
http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs
2009-06-29 16:48:42
Re: On the forthcoming Macke Network (which already runs in my head 24/7)
HA! Funny one. I have one too (oddly tho, it's always just me I've never seen you).
Regarding the topic:
Until the peasants are hurting nothing can be changed. The current political system has been refined for the last 50 years (at least) and is now paying off for its owners. If you happen to be a thinking American (not a REAL one) it must be hard to stomach, but if you're not, it's easier to laugh at the results. But, don't worry, all oligarchies have their GS, probably even the Romans; after all - what's the point of owning a government if you can't skew the peasants for their cash. As long as the nobility can keep the peasant's brains occupied with something scary the game will continue as is (look, behind ya, they're gonna GIT ya - threat level orange! OH, it's "THOSE PEOPLE" again, better check yer women and yer guns!)
Regarding the topic:
Until the peasants are hurting nothing can be changed. The current political system has been refined for the last 50 years (at least) and is now paying off for its owners. If you happen to be a thinking American (not a REAL one) it must be hard to stomach, but if you're not, it's easier to laugh at the results. But, don't worry, all oligarchies have their GS, probably even the Romans; after all - what's the point of owning a government if you can't skew the peasants for their cash. As long as the nobility can keep the peasant's brains occupied with something scary the game will continue as is (look, behind ya, they're gonna GIT ya - threat level orange! OH, it's "THOSE PEOPLE" again, better check yer women and yer guns!)
2009-07-01 23:49:57
Confrontation
G-S needs to be confronted...by about 50-100 thousand angry Americans willing to do whatever it takes to throw these slimeballs out of this country. And they can take their prostitute legislators with them.
Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options. Click here for a free 14 day trial to OptionSmith by Steve Smith.
Copyright 2009 Minyanville Media, Inc. All Rights Reserved
