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Posts Tagged ‘goldman sachs’

Moody’s Investor Services Slashes Credit Ratings On 15 Major Banks

June 22nd, 2012 Comments off

As further proof of the continuing global economic and financial crisis, Moody’s cut the credit rating on fifteen major banks, including the most powerful investment bank in the world. The list included  Goldman Sachs, JP Morgan Chase, Citigroup and Bank of America. The European Banks on Moody’s list included Deutsche Bank, HSBC and Barclays.

The Eurozone debt crisis, raging out of control, was clearly a  factor in the Moody’s downgrade. However, volatility and exposure to weak econometrics in the U.S. and China, questionable risk management and the negative outlook for profitability of these banking institutions amid the continuing  global economic crisis were also linked to the Moody’s downgrade. It should be recalled that since the crisis emerged, the ratings agencies have tended to be a lagging as opposed to a leading indicator of economic turmoil. It is likely that the financial risk to major banks is even worse than suggested by the most recent Mood’s downgrade.

                 

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Goldman Sachs Director Resigns In Bombshell New York Times Op-Ed

March 14th, 2012 Comments off

 

People usually resign from a position through a private letter to the boss. Greg Smith, a Goldman Sachs executive director based out of London who manages U.S. equity derivatives for clients in Europe, Africa and the Middle East chose a different method when he decided to leave the payroll of  Goldman Sachs; he gave the reason for his resignation in a powerful opinion piece on the editorial pages of The New York Times entitled, “Why I Am Leaving Goldman Sachs.”

The reason for Greg Smith’s resignation can be summed up as follows: the corporate culture at Goldman Sachs has been transformed and deteriorated to the point where it became rotten to the core, and where clients are viewed as mere “muppets” who can be fleeced through the investment bank’s rapacious greed.

Here is an excerpt from  Smith’s piece:

“These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’ It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid’ doesn’t exactly turn into a model citizen.”

The devious, greed-encrusted investment bank got that way because of its leadership, Greg Smith emphasizes. The same leadership that boasted that it “does God’s work.” Unfortunately, the corrupted investment bank Smith describes is probably the most powerful non-governmental actor in the world. That is what makes Greg Smith’s explanation for leaving Goldman Sachs so bone-chilling and terrifying.

So, will the resignation of Greg Smith change the corporate culture at Goldman Sachs? I doubt it. It was not so long ago when we learned about the e-mails Goldman Sachs trader Fabrice Tourre sent to his girlfriend, one of which said, “…More and more leverage in the system, the entire system is about to crumble any moment…the only potential survivor the fabulous Fab…standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstrosities !!!”

The public explanation for resigning offered by Greg Smith, and what were intended as private musings by Fabrice Tourre, are insights into the inner sanctum of a global financial octopus. Already subsidized by a massive taxpayer bailout after the financial collapse of 2008 (Goldman Sachs got a $12 billion payment through the AIG payout made by Uncle Sam, about enough to pay one year’s bonuses to the senior executives), Goldman Sachs is a paradigm of arrogance and indifference to the public that saved the investment bank from itself. Somewhat optimistically, Greg Smith hopes that his public explanation will somehow induce the board of directors at Goldman Sachs to “correct” its corporate culture. I wish I could be as optimistic, but I’m not. If there is a solution to the systemic risk posed by this selfish behemoth, it is unlikely to come internally from within Goldman Sachs. Other remedies are called for.

 

 

 

                 

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The Ben Bernanke Federal Reserve Semi-Annual Follies

July 22nd, 2010 Comments off

Twice yearly the chairman of the U.S. Federal Reserve, Ben Bernanke, must testify before Congress on monetary policy and the Fed’s economic outlook. Bernanke has achieved during his time as a principal policymaker on the U.S. economy an enviable reputation for poor forecasting and a unique ability to put a happy, optimistic face on the global economic crisis. However, is his most recent testimony before Congress, Bernanke gave hints that he is losing his laudable ability at spinning bad economic realities into “green shoots” of an imminent recovery.

Amid all the worthless Bernanke verbosity that the world has become accustomed to (e.g. “although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth” ), there was a single sentence that betrays how even Bernanke is running scared that his policies of unprecedented public debt and quantitative easing are leading to disaster. The once pompously arrogant but now uncertain Fed chairman told Congress, “even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.”

After adding trillions of dollars to the national debt, more than a trillion dollars in worthless assets to the Fed’s balance sheet and opening up its subsidized discount window to the likes of Goldman Sachs, the best Bernanke can mutter to the politicians in Washington is, “the economic outlook remains unusually uncertain.”

If Bernanke is publicly admitting that the economic outlook for the United States is unusually uncertain, I think we can cross off his previous forecast about green shoots.

Goldman Sachs and the Fabulous Fab

April 21st, 2010 Comments off

He is a Goldman Sachs trader based  in London, of French extraction, who until the Securities and Exchange Commission filed fraud charges against his employer, was unknown to the general public. Now, however, his notoriety has been sealed forever. He is Fabrice Tourre, but will forever be known by the moniker he employed to self-describe himself in a bilingual e-mail he sent in 2007, which has emerged since the SEC allegations were made public.

I can do no better than to quote from the Fabulous Fab himself, in the following from his 2007 e-mail:

“More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fabrice Tourre…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!! [sic]”

Read this output from the mind of one of Goldman Sach’s esteemed “masters of the universe,” and ask yourself if people like this are running the global financial system, what are the odds that we will avoid Great Depression2?

Goldman Sachs, Titan of Wall Street, Faces Fraud Charges From SEC

April 16th, 2010 Comments off

The most powerful investment firm on planet Earth, Goldman Sachs, has been hit with civil charges by the Securities and Exchange Commission, involving allegations of serious fraud. The SEC alleges specifically that Goldman Sachs deliberately withheld information regarding subprime mortgage investments that it sold to clients, involving  hedge fund and client Paulson & Co in selecting the makeup of those securitized investments. As it transpired, Paulson & Co and Goldman Sachs stood to profit in the event these subprime CDO investments tanked, which they did.

Up till now, Goldman Sachs has appeared untouchable. Its vast power is not only tabulated financially; it is a political behemoth in Washington DC and in other power centers across the globe. As the global economy disintegrated with the onset of the worldwide financial crisis, Goldman Sachs took in massive profits. To keep it afloat, the U.S. government infused the corpse of bankrupt insurance giant AIG with taxpayer money, of which nearly $13 billion was funnelled from AIG into the coffers of Goldman Sachs. Incidentally, the taxpayer money paid to Goldman Sachs through AIG almost matches the recent bonuses that Goldman Sachs senior executives decided to pay to themselves.

Lloyd Craig Blankfein, the current CEO of Goldman Sachs, claims his firm “does God’s work.” Perhaps the world will soon discover if fraud, chicanery and defrauding investors forms part of  Blankfein’s definition of divine work.

AIG Continues To Haemorrhage Bucket Loads of Cash

February 28th, 2010 Comments off

Just over a year ago, simultaneously with the implosion of Lehman Brothers, the U.S. Federal Reserve and Treasury Department decided not to let American International Group  fail, no matter the cost. That bill has been heavy; $182.3 billion of U.S. taxpayers money has been injected into AIG to ensure its survival amidst massive losses on its London-based credit default swap business. Each and every citizen of the United States has been billed more than $600 to cover AIG’s losses. In effect, the Fed and U.S. Treasury have used the zombie-like subsidized life support of AIG as a pass-though, transferring billions of dollars to investment and foreign banks. The largest recipient of American taxpayers money transferred through AIG was Goldman Sachs, which received a $12.9 billion payoff, which seems to have gone straight into bonuses for its senior executives. Was it mere coincidence that Goldman Sachs CEO Lloyd Blankfein sat in on a meeting with Ben Bernanke and Hank Paulson to decide on the scope of the taxpayer’s subsidy to AIG?

The Fed and Treasury, which decided on their own to effect a bailout of AIG without any input or sanction from Congress and the American people, have assured us that their infallible judgement can be relied on to make the correct decision for the U.S. taxpayers. Well, that “infallible” decision-making has left the American people tied ball and chain to a private corporate entity that is still losing vast amounts of money. AIG has recently reported its Q4 results: a loss of $8.9 billion. This may be a sign of more red ink to come, as the global economic recovery falters amid mounting concern over high unemployment and sovereign debt crises. AIG apparently is not done as a costly financial liability for the citizens of the United States, despite the fact that not a single one of them had the opportunity to vote in favor of this hideously expensive experiment in corporate socialism.

Hank Paulson Fleeced the American Taxpayers in Order to Save Them

July 17th, 2009 Comments off

Hank Paulson is deeply empathetic about the American people’s plight; absorbing  intergenerational levels of debt to cover the costs of unbridled greed and recklessness on the part of Wall Street. Thus, while being raked over the coals at a congressional hearing for his role in the near destruction of the global financial system last fall, and the $700 billion TARP Wall Street bailout package he was able to pull through a terrified Congress as the price of avoiding financial Armageddon, the former Treasury Secretary had this to say about the plight of the American people: “The tragedy is they didn’t create the problem. But they would be the ones that would pay the greatest penalty if there was a collapse.”

Paulson’s statement, while superficially sympathetic to the injustice of the collective innocent paying for the sins of the few, is in substance the manifestation of a disdain for the broad masses that borders on contempt. In effect, he is reiterating a posture that has been consistently maintained by the “masters of the universe” since the onset of the global financial and economic crisis; privatize the profits (especially after radical deregulation) but socialize all losses.

Since last fall, trillions of dollars have been added to the U.S. national debt through TARP, fiscal stimulus packages made necessary by the financial collapse, and other forms of direct and indirect government and Federal Reserve aid to the financial sector. All in the name, we are told, of the American people who, it is claimed, would be subjected to even greater debt and future taxation if Wall Street is not bailed out. The old concept of “moral hazard,” still in force when Paulson allowed Lehman Brothers, a competitor  of his former stomping ground Goldman Sachs to die, was swiftly ejected when AIG faced bankruptcy.

Now Goldman Sachs is declaring a record quarterly profit, and arrogantly boasting of the billions of dollars of bonus payments that will be dished out to its employees. What the firm that Paulson used to lead as Chairman won’t divulge is how much of its profit was due to $13 billion it received in payment from the U.S. taxpayer, using AIG as a pass-through for the payment. Neither will this Wall Street entity make public the impact of tens of billions of dollars in low-interest, taxpayer subsidized loans it now has access to, once Hank Paulson and Fed Chairman Ben Bernanke changed the rules, and allowed investment banks such as Goldman Sachs to magically transform themselves into bank holding companies.

If Hank Paulson symbolizes the incestuous relationship between Wall Street and government, his attitude reflects how insignificant the general public has become in the minds of those calling the shots and making the critical policy decisions in the wake of the worst economic crisis to afflict the American people since the Great Depression. But when those who caused the disaster are spared the ravages of the unwashed masses who are now being corralled into ever-growing unemployment lines, and instead are basking in the illumination of near record bonus payments, their callousness can at least be understood.

The question that Hank Paulson and his ilk may ultimately be compelled to answer is why should the American people be eternally grateful for their “noblesse oblige” when it becomes crystal clear to them that they have been dispossessed of much of their future as  the price for  bailing out Wall Street and its  architects of our current economic and financial doom.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

Goldman Sachs, America’s Unofficial Welfare Queen?

April 14th, 2009 Comments off
Wall Street received the news from Goldman Sachs as though a gift from the gods above. The former investment bank, now deemed a “bank holding company” so as to qualify for Federal bailout money under the TARP program, exceeded the expectations of analysts in reporting first quarter profits of $1.66 billion. This follows the first ever loss for Goldman Sachs in the final quarter of 2008, when the red ink amounted to $2.3 billion. The iconic Wall Street firm also let it be known that it would raise billions of dollars through a stock sale so as to repay the U.S. Treasury the $10 billion in TARP funds that Goldman Sachs had received.
However, when one looks deeper at the details surrounding Goldman Sachs and its interactions with the Federal government as the financial world built by Wall Street began to implode, it appears that an essential component in the survival of this illustrious firm is missing from the most recent quarterly report; specifically, the lifeline to Goldman Sachs that runs through AIG. For it is clear that without that lifeline, there would be no Goldman Sachs.
Back in September, former Goldman Sachs CEO Hank Paulson, now serving as Treasury Secretary in the Bush administration, made two fateful decisions. He decided to let a principal competitor of Goldman Sachs, Lehman Brothers, go bankrupt, resulting in a systemic meltdown that brought the global financial system to the edge of the abyss. Simultaneously, Paulson also decided to save AIG, which he deemed as being “too big to fail.” He and Fed chairman Ben Bernanke immediately provided an $85 billion taxpayer funded loan to AIG; in the months since, that public stake in AIG has increased by another $100 billion. Participating in a crucial meeting involving the Federal Reserve Bank of New York and the U.S. Treasury Department on the fate of AIG was only one CEO of a major Wall Street firm; Lloyd C. Blankfein of Goldman Sachs.
As it turned out, the Treasury and Fed have merely been using AIG as a pass through to funnel tens of billions of dollars in taxpayer money into the coffers of major Wall Street banks and financial institutions. The largest recipient of these payments to AIG counterparties has been Goldman Sachs, which reportedly had received $12.9 billion in Q4 of 2008. Strange coincidence indeed that a former Goldman Sachs CEO serving as U.S. Treasury Secretary “invites” his successor CEO at Goldman Sachs to participate in a meeting that decides to put the U.S. taxpayer on the line for payment to AIG counterparties, in which that same company has been the most significant beneficiary.
Allegations have already surfaced regarding the payments to AIG’s counterparties, and the inspector general for the TARP program, Neil Barofsky, is currently conducting an audit of the payments. The question being raised is why the American taxpayer should be accountable for 100% of the obligations AIG had on insuring the derivative contracts held by firms such as Goldman Sachs. As with the recent controversy over AIG bonuses, the major financial firms maintain that they had a contractual relationship with AIG. Of course, if AIG had been permitted to go bankrupt, as was the case with Lehman Brothers, those Credit Default Swaps would have become worthless. That appears to be the sole rationale for maintaining the zombie existence of AIG on life support; to pay out derivative contracts to firms such as Goldman Sachs.

If Goldman Sachs were not the recipient of AIG pass through money in the last quarter of 2008, it is clear that this firm would be facing the serious prospect of liquidation. It is therefore somewhat odd that after a catastrophic last quarter, the firm can gleefully announce a return to profitability in Q1 of 2009. To set the record straight, Goldman Sachs should come clean on any funds it received from U.S. taxpayers, passed through AIG, in the first quarter of 2009, and provide a precise accounting on how those payments affected their Q1 bottom line. Absent this transparency, Congress should demand full disclosure on any continuing payments to Goldman Sachs through the corporate corpse called AIG. In the final analysis, if it transpires that AIG payments are what is keeping Goldman Sachs alive, then the Obama administration should explain why General Motors and Chrysler should not be wards of the state, while Goldman Sachs is anointed as the nation’s unofficial welfare queen.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com