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kpete Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 06:22 PM
Original message
Paulson, Goldman CEO spoke often last fall: report
Source: Reuters

CHICAGO (Reuters) - Former U.S. Treasury Secretary Henry Paulson had frequent conversations with Goldman Sachs Group Inc's chief executive during last fall's financial crisis, raising questions about his ties to his former firm, according to a New York Times report.

Paulson, a former CEO of Goldman Sachs, spoke much more often with Goldman CEO Lloyd Blankfein than with other executives, the report said, according to entries in Paulson's calendars that the paper acquired through a Freedom of Information Act request.

According to the report, Paulson said he asked for an ethics waiver for his interactions with Goldman "when it became clear that we had some very significant issues with Goldman Sachs."

On September 16, 2008, the U.S. government agreed to loan $85 billion to insurance giant American International Group. Goldman was a major beneficiary of the government's rescue of AIG.

Read more:
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DeSwiss Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 06:52 PM
Response to Original message
1. "Ethics Waiver" Nice.
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 10:15 PM
Response to Reply #1
9. just how do you think that works?
I, knowing that I am doing something unethical and probably illegal, do hereby wave my hand over some piece of paper that says "It's okay to be a slimy garbage infested thief"?
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 06:55 PM
Response to Original message
2. In what way is Goldman Sachs and their Washington buddies
Edited on Sat Aug-08-09 06:55 PM by truedelphi
Shaping our economic policy? And how much are these insiders offering to the lining at Goldman Sachs coffers?

From May 4th, 2009 | By Contrarian Profits | Category: Top Story
Contrary to the prevailing analysis, we believe that the Obama and Bush administration insistence on protecting banks at the expense of the taxpayer is the result of a Machiavellian effort by Goldman Sachs and other major banks to influence U.S. economic policy by infiltrating the corridors of power.

Today, we duly note that Goldman Sachs has just hired former Barney Frank staffer Michael Paese to be its top Washington lobbyist. This position was formerly held by Mark Patterson, the current chief of staff at the Treasury.

Pease and Patterson are not the only ones to pass through the revolving door between Washington and Goldman. Bushs Treasury secretary, Hank The Hammer Paulson is a former Goldman CEO. And his replacement, Tim Geithner, was mentored by Gerald Corrigan, a former New York Fed president and current partner and managing director of the Office of the Chairman of Goldman Sachs.

Who else was President Obama considering for Treasury secretary? Former Goldman hotshots Robert Rubin and Jon Corzine (now the governor of New Jersey).

Are other Goldman alumni close to government? Just a few Ed Liddy, who the government appointed as CEO of AIG was Goldmans vice chairman. World Bank president Robert Zoellick was a managing director. Neel Kashkari (an appropriate surname for a government bagman if ever there was one), the 35-year-old overseer of the TARP program was a vice president. And Geithners replacement as president of the New York Fed, William C. Dudley, is also a former Goldman employee.

Oh and Robert Rubin was Treasury secretary under President Clinton. And former Goldman senior partner Stephen Friedman headed Bushs National Economic Council in the first term. And Josh Bolton, another former Goldman golden boy, served as White House chief of staff under Bush.

The former CEO of the NYSE, John Thain, is also a Goldman Sachsalumnus. And his replacement, Duncan Niederauer, spent 22 years of his career at the bank.

Of course, these high-level appointments are probably just coincidental.

Note This Just as it was probably coincidental that on September 15, 2008, then New York Fed president Tim Geithner pressed for AIGs biggest counterparty, Goldman Sachs, to help the insurer raise capital after it became clear that AIG was at risk of going bankrupt. And that on the same day Goldmans current CEO, Lloyd Blankfein, was at the New York Fed. And that Goldman ended up in receipt of about $12 billion in tax dollars thanks to AIGs wholesale credit-default swap unwinds after the government bailed out the insurance giant.

How much did President Obama receive as campaing donations while running for the Highest OFfice from Goldman Sachs? $884,000?

If its a conspiracy to believe that Goldman Sachs gets preferential treatment from White House administrations that are 1) in receipt of major funding from Goldman Sachs employees and 2) populated by former Goldman Sachs insiders, wed love to know what the official explanation is.

Why are Goldmans close ties with Washington important? Just consider this: during the recent junk-stock rally that has pushed up the value of bank stocks and taken pressure off a beleaguered White House, Goldman has been by far the biggest program trader by volume on the NYSE (where former Goldman boy Niederauer is CEO). And when we say by far the biggest, we mean by far the biggest.

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catzies Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 07:44 PM
Response to Reply #2
3. I want more of that! Got link?
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 10:17 PM
Response to Reply #3
10. here's the link:
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catzies Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-09-09 11:50 AM
Response to Reply #10
11. Outstanding! Many thanks. n/t
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bvar22 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 08:19 PM
Response to Original message
4. It just keeps getting worse.
The Class War is over.
We lost.
This is the Looting and Raping Phase that the Class War Winners are totally enjoying.

Just look at the flush of VICTORY on their faces as they impose the New Rules on the Working Class.

NOW we have Your Childrens Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is Bi-Partisanship !
Better get used to it!!

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KoKo Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 09:33 PM
Response to Reply #4
8. Spiegel On Line/ "THE RETURN of GREED--Banks Reopen the Casino...Europe, too!
07/28/2009 03:19 PM
Banks Reopen Global Casino

By Frank Hornig, Christoph Pauly and Wolfgang Reuter

Investment banks, of all things, are making serious money again, thanks in part to government aid. Ironically, they are benefiting from the crisis they helped to create. As profits go up, so do salaries -- only this time, it's the taxpayers who are shouldering the risks.

Anshu Jain, 46, listened stoically and silently to the remarks of shareholders at the annual meeting of Deutsche Bank at the end of May. Many were troubled by the fact that the bank had reported its biggest ever loss in 2008, 3.9 billion ($5.6 billion), for which Jain, as its top investment banker, was responsible.

Deutsche Bank, like all major investment banks, took great risks in the boom years, speculating with securities that we now call toxic, because they have poisoned bank balance sheets.

While many shareholders at the annual meeting discussed the causes and effects of the financial crisis, and while politicians around the globe debated the introduction of stricter regulations to impose tighter limits on the risky activities of investment bankers, Jain saw the crisis as an opportunity. His first step was to get customer accounts back into the game, followed by a return to speculative investment in proprietary trading.

"What we will see is five to six formidable global players in investment banking," the normally reserved banker told the British trade publication Euromoney in early May. "Sales and trading will continue to drive the lion's share of profits."

Apparently speculation has worked out for Deutsche Bank. Thanks to Jain's good timing, CEO Josef Ackermann was able on Tuesday to announce a profit figure in the billions for the first half of the year. The bank has also apparently set aside billions in reserves to pay bonuses to its investment bankers.

The casino is open again, worldwide. Many investment banks are raking in massive profits once again, driving up risks and attracting talent with high salaries. It's as if nothing had happened, and as if it hadn't been precisely this type of behavior that brought the financial system to the brink of collapse last fall and then plunged the world economy into its worst crisis since World War II.

The collapse of the financial system was averted, but only through colossal public spending, as governments bolstered ailing banks with loan guarantees and equity injections and central banks pumped billions in liquidity into the markets.

But now that the worst seems to be over, banks are back to behaving the same way they did before the crisis. Even worse, thanks to government guarantees for the financial sector and cheap money from central banks, it has never been easier for banks to make money.

Money-Making Opportunities Amidst the Crisis

"The taxpayer is paying for the chips in the casino," the head of the German operations of an international investment bank says quite openly, but anonymously nevertheless. "It doesn't get any better." The government, he says, provided guarantees for banks like Munich's Hypo Real Estate, whose securities are now being traded on the market at a huge discount. Investment banks, for their part, have bought the securities with money they borrowed from central banks at ridiculously low rates.

According to the anonymous bank executive, these investment banks, as well as hedge funds and major investors, expected that governments, in the wake of the Lehman Brothers bankruptcy in September, would ultimately bail out all major banks.

Indeed, rates for bank bonds soon began rising again, and the first aggressive players in the market collected exorbitant profits. "Unfortunately, the bad bonds of the bankruptcy candidates are now sold out," says the bank executive.

The biggest beneficiary of the crisis has been US investment bank Goldman Sachs, which posted record earnings of $13.8 billion (9.7 billion) in the second quarter. Its traders used money from the US government and the Federal Reserve Bank to speculate, behaving as if the bank were a gigantic hedge fund. Profits from proprietary trading almost doubled over the previous year, while earnings rose by a whopping 186 percent in the bank's bond, commodities and foreign currency speculation businesses. And Goldman CEO Lloyd Blankfein's appetite for risk is still growing. Value at risk (VaR), a measure of the risk of loss on a single day of trading, rose to $245 million -- the highest VaR in the bank's history.

The fact that Goldman Sachs was downgraded to an ordinary commercial bank in the course of the crisis, thereby losing a number of the privileges of an investment bank, doesn't seem to have harmed the hedge fund mentality. The bankers promptly set aside billions for their Christmas bonuses.

What's good for Goldman Sachs "is bad for America," economics Nobel laureate Paul Krugman wrote in the New York Times, and noted that " Wall Street's bad habits ... have not gone away." Even the pro-business Wall Street Journal sharply criticized the " Goldmans of the world," arguing that the bank "enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong."

Most alarmingly, the classic investment banks are paying little or no heed to the actual business of banking, at least as seen from the German perspective: lending. The reason is clear: Risks are often higher in the lending segment, while profit margins are smaller.

A Boom in Corporate Bonds

Because no one can compel the banks to lend money, companies are being forced to resort to issuing bonds to raise cash. Bond issues, in turn, are a prime -- risk-free -- money-maker for investment banks.

It is a deep irony that the current crisis, which began in the capital markets, is now strengthening the capital markets once again. The volume of bond issues, at any rate, has exploded. In continental Europe alone, companies -- not including banks -- have borrowed $318 billion in the first six months of this year. This represents a roughly 50-percent increase over the average of the last three years.

A boom has begun in bond trading that hasn't been seen since the 1980s. The crisis has made the bond market attractive again, causing demand to rise and prices to fluctuate -- the key ingredients to making money.

But only a few banks are able to join the game, while other banks that are still struggling to fill the holes in their balance sheets are left out in the cold.

This second group of banks includes Germany's troubled state-owned banks and recently merged Commerzbank/Dresdner Bank, which is no longer able or willing to participate in the current game of Monopoly.

"Their employees are biding their time, and they have absolutely no motivation whatsoever. They're just waiting to get jobs somewhere else," says one banker. But most of these people will find themselves waiting a long time -- because the winners in this crisis, banks like Goldman Sachs, JP Morgan Chase and Deutsche Bank, though hiring again, are only interested in hiring the cream of the crop. Besides, they have also taken to poaching each other's employees with promises of higher compensation.

"What we see now is the separation of the chaff from the wheat," says a senior investment banker. Even in the crisis, the fastest and the cleverest have managed to find ways to make money, while others haven't even understood what the rules of the game are yet.

When the prices of the bonds and loans of financial institutions, and later industrial corporations, declined by several percentage points at the beginning of the crisis, employees at Goldman, JP Morgan and Deutsche Bank foresaw the coming landslide and quickly sold these debt securities en masse, taking the resulting losses, though small at the time, in stride.

more at...,1518,638...
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defendandprotect Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 08:57 PM
Response to Original message
5. Isn't this what Congress and Congressional Hearings are for . . .. ????
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ixion Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 09:04 PM
Response to Original message
6. Indeed. The 'crew' of any robbery needs to stay in contact
to make sure their heist comes off as planned.

I would say they succeeded beyond their wildest dreams.

Bonuses for everyone! :sarcasm: :grr:
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DallasNE Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-08-09 09:32 PM
Response to Original message
7. Why Didn't Paulson Simply Recuse Himself
And turn over all contacts with Goldman to one of his assistants. As it is it smells to high heaven. Frankly, I have always thought Goldman's got a sweetheart deal from the government and their record profits supports that thought.
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No Elephants Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Aug-10-09 02:49 AM
Response to Original message
12. Ethics' waivers, letters from lawyers saving you from prosecution for torture. We are so screwn.
Edited on Mon Aug-10-09 02:54 AM by No Elephants
Whenever anyone says Dummya was dumb, I just shake my head. Look what he accomplished for himself and his friends.

I wish I were that dumb, but with, you know, morals. I could do so much good in this world.
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