Goldman Sachs

Goldman Sachs' posting of a $2,000,000,000 profit during the second quarter, even after repaying the the $10,000,000,000 TARP loans to the Treasury definitely raises the ire of the common folk. Even I, as rational as I try to be, immediately threw up the moniker "Goldman Sucks" after parsing the news. No matter how you slice it, it just doesn't smell right.

Why is Goldman now considered the strongest bank in the United States? Could it be that the former Treasury Secretary, Henry Paulson, Jr was previously the Chairman and CEO of Goldman Sachs? Wasn't it Paulson who designed the $700,000,0o0,000 TARP plan and urgently shoved it down Bush's and Congress' throat - Bail out the financial industry or the United States economy would collapse? Didn't AIG funnel Goldman some $12,000,000,000+ out of the $167,000,000,000 in bailout funds it received? I guess Goldman paid back the Taxpayers with Taxpayer dollars while we wait for AIG to repay those funds, if ever. How is that for financial engineering? Also, in this whole conflict of interest financial conflagration Goldman became a bank allowing it to borrow billions from the Federal Reserve at 0%. Has it repaid these funds? How much did it value its toxic assets with the suspension of the mark-to-market accounting rule? I guess I'll just value my house at $1,000,000 because I say it is. Oh look I am rich.

Certainly there must be positive elements in all of this manuevering but it will be a stretch to get me to acknowledge or accept them.

What is Good for the Goose is Not Good for the Gander

What a difference a weekend makes. This is starting to become a familiar refrain in the financial market milieu - on Friday a bank or major financial institution is on the verge of collapse, then the  government decides over the weekend whether they are "too big to fail," and lo and behold, on Monday, the biggest bailout you've ever seen is rolled out with surety - the taxpayer is once again convinced of the "rightness" of the bailout and the stockmarket rallies on the news as the government goes on the hook again for the "good of the economy." 

There I was lamenting on Friday over the death of my bank and now it has been super-revived by the government, I should have known that it wouldn't be allowed to fail. As I was caught up in the rain dance of the Automakers, praying for their own shower of cash, I was starting to be lulled by the actual possibility that the government spigot was slowing to a trickle. Oops!  

When major (and well-respected) economists jump into the fray to declare why the major financial institutions cannot fail and why the Automakers should be allowed to fail and why one or the other outcome is good, better or best for the ailing economy...you start to wonder what parsing words are left to convince the conspiracy theorists that Treasury Secretary Hank Paulson, Mr. $500,000,000,000 golden parachute Wall Street investment banker, is simply not helping his friends. You do start to wonder whether the claims that the "rich" are simply carrying out the biggest heist in the history of the United States, having found the most effective umbrella, TARP, no less, (what are the odds?) to transfer taxpayer dollars into their coffers. All of this unfolding under the gleeful and ever watchful eye of the outgoing President who, many say, is simply completing his final, grand, mission.

As the Citi Sleeps

As I watch my bank die, I ponder all of the consequences of it as I have now grown accustomed to its stellar online services and being a beneficiary of its free services. I for one am not sure how I will survive without my free interbank transfers which I use on a regular basis. I have had accounts at many banks over the years, but no one has had as great a website as Citi. In addition, they have long combined all accounts, whether asset or liability, banking, brokerage, credit cards and savings, to figure your total worth to them which in turn determined your monthly checking account fees. Both my husband and I came into our marriage with varying forms of Citi accounts that once combined practically guaranteed that, for the most part, we would enjoy free checking, a nice benefit for us poor folks who would never qualify otherwise since we would never have the rather hefty account minimums required. 

Over the years we have been fortunate to save quite a bit in fees. Odd things would happen though, if we paid down our credit card, this would reduce our stake dipping us into to monthly fee territory or when we moved our brokerage account to a discount online broker dipping us into monthly fee territory again. Then one day, our mortgage having been sold multiple times eventually landed at Citi. At first I was not excited to have that much exposure to Citi after they had gone through a rather irksome period a while back when they seemed to snub their noses at their less than wealthy account-holders. I even cancelled my citicard because they p'd me off. But I was back on track when it came to light that by merely linking our mortgage account to our checking account, the amount of our worth to Citi would guarantee free checking for life so I changed my tune pretty quickly though having to see the entire mortgage amount staring me in the face everytime I log on sometimes is a little disconcerting. 

Now the powerhouse Citigroup stock is less than $5 and they are thinking about selling themselves. No amount of Saudi investment and countless billions in bailout funds has been able to help them stave off the devastation caused by that 3-word financial instrument that keeps rearing its ugly head; credit swap derivatives. They will be the bane of our existence because they are difficult to understand and impossible to comprehend. And ironically, Treasury Secretary Henry Paulson's decision to jettison the fundamental intent of the TARP bailout by not purchasing those toxic assets from banks dealt another decisive blow to the Citi umbrella. 

What will happen if they choose to sell themselves in part by spinning off vital assets like the credit card business or the mortgage business? What will happen if they choose to sell themselves in whole? Whatever happens, the world will change for me, spinning off any assets will reduce by stakehold, my worth to Citi or if Citi sells itself and ceases to exist, I will have a new bankmaster. In any event, I will most likely lose my free checking privileges. 

Boy, it can be very easy to start protecting the monster when it serves your purposes. If I was on the other end of the stick, I would surely be spouting off about how they deserved their fate in varying degrees of negative yada, nay-yada. But now as I watch my bank fail, I realize that they have somehow been good to me and I will be sad to see them go especially when I have to start paying those monthly fees again.

Observations On Another Down Day

The stock market woke up today, fresh from another delusional rallying stupor, looked around and noticed that the economy is bad and tanked over 400 points...again. It keeps sinking when it recognizes reality and rallying for no other reason than it is tired of sinking. Citigroup stock is at $6.45, GM at $2.79, Ford at $1.26 and so on; what more indication do we need to convince ourselves that things are not so good? 

More companies are on the brink of requesting bailouts and those who already got them still whine for more. So we ask our Treasury Secretary, where did all the money go? and he decides not to tell us. The only place where that $350,000,000,000 infusion of bailout dollars trickled down into is the pockets of the CEOs, upper management and shareholders in the form of dividends. This is what happens when all of these financial corporations get capital infusions in return for shares - business as usual. Except this time around they are not lending us any money at all. Who are the fools as we watch the economic disaster continue to roll out its red carpet before us while our hard-earned tax dollars wind up in the hands of the connected few? 

All we see are so many stores going out of business and though we are initially shocked by the revelations, we consumers begin circling like hawks. We look around and scoff at the huge beckoning signs, "up to 30% off original prices," "nothing held back," and the ubiquitous "everything must go," as we turn our noses up at the paltry bargains, most of which are priced only 10-20% off. We mutter to ourselves and to our fellow shoppers that the bargains are not so good, one shopper asked me "where's all the stuff for 30% that they promised? For a nation of shoppers who have been handed coupons for the last few years regularly giving us 20-30-40% off the item of our choice and enticed by the seemingly endless clearance sales offering 40-50-60% off, we are not so moved by a liquidation sale where prices revert back to original prices with a puny amount off. We shoppers have all been trained to seek better bargains. We all want to buy something but we are afraid to spend too much.

The only thing I've learned about spending lately is the opposite of the lessons I have been adhering to: be prudent and wise, save for a rainy day, don't spend what you can't afford and do what you can to suspend instant gratification. I am not so sure anymore because all the money I scrimped to save is gone and right now I don't have much money to purchase what I really need. Only the connected few have it the best, when times are good they spend and when times are bad they still spend. Case in point, witness the auto executives flying in on their private jets to beg Congress for our money.

Hank Paulson Has Gone "Rogue"

This week, the revelations about Treasury Secretary Hank Paulson changing tax rules and refusing to divulge the recipients of the Congressional bailout funds began to raise eyebrows now that the election is over and we have time to pay attention. Well, today we have our answer.

Secretary Paulson appeared before Congress today stating that he decided not to use the funds for what they were originally intended, to buy up troubled mortgage assets and, in fact, he had decided it was a better idea to inject capital into banks instead in return for preferred stock. Essentially he has spent and will continue to spend the $700,000,000,000 bailout funds in any way that he sees fit. Folks, he has gone "rogue."

Actually, capital investment in banks may be a better investment for us taxpayers in the long run than buying up toxic bank assets but shouldn't he have informed Congress first? He does not have the authority to use Congressional funds for any other purpose than Congress intended or does he?

Originally Paulson appeared before Congress with a 3 page ransom note requesting the money with no strings and even though cooler heads prevailed within the maelstrom and protections were written in on behalf of the taxpayer, the bailout bill was stuffed with so much pork so if Congress got theirs, I guess, Mr. Paulson would get his.

He is only back before Congress because they have to vote on giving him the additional $350,000,000,000 because they only released half of the funds to begin with. He has proposed a new plan for the remaining funds; to buy up other debt securities mainly credit card and auto loan debt that were packaged and sold to investors in the same way as mortgage loans. This also may not be a bad idea but are we sure he will even do what he says since he hasn't so far?

Mr King of the Universe will do whatever he wants with our taxpayer dollars and Congress will allow it. The Congress doesn't know who to give the money to either; everybody wants a bailout. American Express asked for $3,500,000,000 today. AIG already got theirs and then some. GM has been begging for $25,000.000.000 for a week. Personally I don't think AIG should get any more and GM's Union-contracted labor costs are too high and will drain the company regardless. But it is too late, the animals are out of the barn and nobody knows who to save first, the cows, the pigs, the goats or the chickens. So it will wind up as Barney Frank says, that the funds will be given out until they run out.

The Bernanke-Paulson Coincidenza

What do the Chairman of the Federal Reserve and the Treasury Secretary really have up their sleeves. The slow trickle of truth unfolds. The Federal Reserve waived the rules today to allow American Express to become a bank so that they can have easy access to Federal Reserve funds whenever they want to. Goldman Sachs became a bank. Morgan Stanley became a bankl We really didn't ask why because Bernanke and Paulson have convinced us that it had to be so; we had to save our financial institutions.

In addition, Treasury Secretary Paulson single-handedly changed tax law section 382 allowing companies to assume the debt of acquisitions thus off-setting their gains and significantly reducing their taxes. This loophole was closed in 1986 by Congress precisely to prevent companies from misusing this statute to circumvent their tax liability. Perhaps the treasury saw the benefit of giving good companies incentive to buy up losing companies but they don't have the authority to change tax law. Wells Fargo used this statute the very day it was unhinged to snap up Wachovia out of Citibank's grip successfully reducing its tax liability by $25,000,000,000.

Amidst off this, Paulson and Bernanke came begging congress for a $700,000,000,000 bailout package to rescue our financial institutions. Basically this gave them a multi-trillion dollar pot of funds to dole out to whomever they want to and now they don't want to give us all of the details for any of it. These Kings of the Universe have plundered the taxpayer, plundered the Federal Reserve and plundered the Treasury with virtually no oversight.

The two highest financial institutions in America have been hijacked by Bernanke and Paulson for in the process of saving our financial institutions, they have undone all of their own regulations. This can't be any accident. This doesn't look good.