Friday, May 7, 2010

Goldman Sachs: Capitol Hill’s Financial Scapegoat Du Jour?

With the US government and the American public desperately seeking the financial reform of Wall Street, has Goldman Sachs just become another scapegoat of the 2008 financial crisis?

By: Ringo Bones

After surviving relatively unscathed from the 2008 global financial crisis, Goldman Sachs was once again put under the US Securities and Exchange Commission’s microscope. Most likely due to the financial firm’s publicly revealed promise to pay exorbitant executive bonuses after profiting a little over 3-billion-dollars during the first three months of 2010 that revealed anomalies in the financial firm’s proprietary trading of derivatives. After the SEC filed fraud charges, the UK financial watchdog immediately followed suit to investigate Goldman Sachs’ affiliates on British soil. Despite of the financial firm’s somewhat questionable reputation when it comes to shady dealings of derivatives like CDOs, has Goldman Sachs just became Capitol Hill’s latest financial crisis scapegoat?

The primary reason why Goldman Sachs got further SEC scrutiny is probably due to the Obama Administration’s proposed Wall Street reform on financial regulations. The gist of which includes: 1) Consumer protection for stock investors, 2) More SEC oversight on derivatives trading and 3) Set up a fund to lessen the of a large-scale financial meltdown in case it happens again. Will this proposed White House financial reform of Wall Street nothing more than biting the hand that feeds then albeit gently? After all, it is primarily the capital gains tax collected from Wall Street financial firms – and contributions come presidential election time - that made the periodic titanic political battle between the Democratic Party and Republican Party a possibility.

The Capitol Hill versus Goldman Sachs saga just went into another unexpected plot twist when the firm’s CEO, Lloyd Blankfein, was summoned before the Capitol Hill’s investigative committee after allegedly placing the financial firm’s profits before their clients. Senator Carl Levin (D-Michigan), Governmental Affairs Subcommittee on Investigations chairman, managed to add color to the proceedings after his expletive-laden grilling of Goldman Sachs’ executives over the e-mails pertaining to the “Shitty Timberwolf Deal”. Ironically, Senator Levin could be blamed for the current Goldman debacle because he further enabled the laissez-faire policy of the US government when it comes to a genuine Wall Street financial regulation reform after he fully endorsed the Gram-Leach-Bliley Act back in November 4, 1999. Passing the Gram-Leach-Bliley Act more than likely made Goldman Sachs the “evil” financial firm that it is today.


VaneSSa said...

After seeing and hearing Senator Carl Levin spouting out expletives during the grilling of Goldman Sachs' executives over that Timberwolf Deal e-mail - and on learning his full support of the Gram-Leach-Bliley Act back in November 4, 1999 - he does remind me of this cute but creepy older guy I met on line asking me for shared complicity of his Class X Felony. Senator Levin's purported supporting the Obama Administration's proposed financial reform of Wall Street while also staunchly supporting a laissez-faire policy when it comes to the relation of the US government and Wall Street is somewhat too hypocritical for my taste. After being jokingly called an elderly shoemaker by Jon Stewart a few years ago, hanging out with someone like Senator Levin could have me easily embroiled in some Class X Felony case.

May Anne said...

Given Senator Levin's duplicity when it comes to rigmaroley legalese when it comes to legislating laws, it's more like "Class Triple-X Felony".
From an economic standpoint, the raison d'être of derivatives is supposedly for hedging risks and keep markets moving. Unfortunately, the derivatives market did get out of hand near the end of 2007. Lloyd Blankfein - Goldman Sachs' CEO - kept on reiterating that some banks failed during the 2008 financial crisis because they didn't hedge like Goldman did. And Goldman's top brasses say that the proposed regulation of financial parkets put forth by the Obama Administration won't prevent another financial meltdown.
Given the mounting evidence of their deceitfulness, it is now quite hard to tell which one's fact or fiction when top Goldman executives are giving financial advise.

Je M'Apelle Ja'Nelle said...

Rampant speculation of poorly understood financial instruments - like derivatives - by speculators is the primary cause of the global financial crisis of 2008. Speculators can also be blamed for the current Greek debt crisis even though it was primarily caused by "creative accounting" in order to boost Greece's credit rating.
On the topic of Goldman Sachs managing to save themselves during the 2008 Global Credit Crunch via derivatives is somewhat suspect from my point of view. Assuming derivatives can be proven to be wholly different from creative accounting.