Goldman Sachs, coming under fire but why should they care?

Goldman took $13 billion of taxpayers money from AIG bailout—$13 billion which kept it alive. And it’s now back making huge profits gambling on the markets and paying out huge bonuses.

This is causing notice. Matt Tabibi wrote a wonderful article in Rolling Stone blaming Goldman for the majority of the fraud (OK, legal fraud) in the dotcom stock boom, the oil price spike, the mortgage boom & the upcoming cap & trade boom. A little taster on his blog here. Paul Krugman says essentially the same thing in his column today. And for the kiss of humorous death, here’s Andy Borowitz’ column about Goldman agreeing to take over the US Treasury—after all it’s already happened.

But the issue here is that incentives haven’t changed—other than the taxpayer has been told to give Goldman money and in return Goldman has been allowed to do what it always does. And regulations haven’t been written that will change that behavior.

On the night when the House Ways and Means committee has voted to put more taxpayers money into the health care system, without any real change in incentives or serious regulation, the parallels are a little close.

Two codas:

1) I guess the combination of renewed Goldman bonuses and a surtax on those earning more than $1 million, means that at least we have a short-term financing mechanism for the uninsured

2) When Wall Street collapsed last November a noted health care analyst told me he was buying Goldman stock as it would never be this low again. Sadly his cynical forecasting was correct, meaning that nothing has been done to ensure that a repeat of the 2008 crash and the bubble that ran up to it won’t happen.


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7 replies »

  1. ever noticed how many goldman sachs guys are running the show now in Washington? Isn’t one of their board memnbers even serving a dual role?

  2. I always suspected that Hugo Chavez was your kind of guy. He’s done a hell of a job for Venezuela.

  3. tcoyote, when Hugo Chavez nationalizes a company, he steals the assets from the shareholders for the taxpayer (or whatever passes as such). When the US government does the same thing, the reverse happens. If forced to choose I prefer Chavez approach, as the redistribution of wealth goes (somewhat) downwards in his model.

  4. “the entire derivatives market would have collapsed, and we would have entered a capital markets nuclear winter.”
    No evidence for this assertion whatsoever. Andy Borowitz’s satire on this is on target, as always.

  5. TCoyote, but US tax payers’ money bailed out AIG so that it could pay Goldman Sachs, insuring that Goldman Sachs did not have to suffer the consequences of its risky behavior. What sort of markets did this involve?
    There is another kind of connection with health care. Many of the leaders of the financial firms that got us into this mess also are leaders of health care non-profits, e.g, hospitals, academic medical centers, medical schools, medical schools’ parent universities, health care foundations, etc, etc. One example re: Goldman Sachs is my alma mater (Brown University’s) president is on the Goldman Sachs board. So this has provided an avenue for the sorts of thinking and culture prevalent on Wall Street to infect health care.

  6. You mean, AIG paid Goldman back on its insurance contracts at full value when they expired? That’s not a bailout. If AIG defaulted on those payments, or any of its derivative contracts, the entire derivatives market would have collapsed, and we would have entered a capital markets nuclear winter. How long can YOU hold your breath without turning blue?
    Markets: bad?
    P.S. I bought Goldman Sachs at $100.

  7. Thanks for great insight. I guess results of so called stimulus package will be evident very soon and it will prove how much terribly wrong govt have been. So unfair to see my taxes going this way to big guys who already have endless wealth.