“It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein.
The nation’s major banks and investment firms say they are ready to give utterly decimating the world’s economies “another go.”
NEW YORK—Claiming that enough time had surely passed since they last caused a global economic meltdown, top executives from the U.S. financial sector told reporters Monday that they are just about ready to completely destroy the world again.
Representatives from all major banking and investment institutions cited recent increases in consumer spending, rebounding home prices, and a stabilizing unemployment rate as confirmation that the time had once again come to inflict another round of catastrophic financial losses on individuals and businesses worldwide.
“It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come.”
“People are beginning to feel at ease spending money and investing in their futures again,” Blankfein continued. “That’s the perfect time to step in and do what we do best: rip the heart right out of the world’s economy.”
According to sources, the overwhelming majority of investment bankers are “ready to get the ball rolling” by approving a host of complex and poorly understood debt-backed securities that are doomed to quickly default, as well as issuing startlingly high-risk loans certain to drive thousands of companies into insolvency.
Top-level executives also told reporters that when it comes to depleting the life savings of millions of people and sending every major national economy into a tailspin, they feel “refreshed and raring to go.”
“The other day I actually overheard someone on the sidewalk utter the words ‘I’m saving up for retirement,’ and right away I thought to myself, ‘Well, time to get down to work,’” said Morgan Stanley chairman James P. Gorman, adding that the increasing number of individuals entertaining ideas of starting their own businesses or buying houses was the financial sector’s cue to set off another devastating global recession. “We’re definitely thinking on a huge scale again, because we all really enjoy toying with the livelihoods of millions of people overseas and forcing them to wonder why reckless, split-second decisions made thousands of miles away dictate their whole country’s socioeconomic future.”
“Plus, it’ll be nice to finally wipe out the Euro once and for all this time,” Gorman added.
While most private equity firms, investment banks, and hedge funds are reportedly still undecided on the precise route to take in order to torpedo the job market and crash all international stock exchanges, sources confirmed they are nearly in position to resume gambling away trillions of dollars belonging to the American populace.
“We’ve got a lot of options on the table; it’s just a matter of picking which one we want to use to paralyze every single sector of the world economy,” said Capital One executive vice president Peter Schnall. “We already burst the dot-com and housing bubbles, so this time we can maybe mix it up by popping the education bubble and shattering the lives of everyone with outstanding student loans. Or maybe we’ll artificially inflate prices of stocks in social media companies and then pull the rug out, bankrupting every investor tied to companies like Facebook and Twitter. Or do both.”
“On second thought, maybe we’ll wipe out the housing market again too, just for the hell of it,” Schnall quickly added. “Might as well, right?”
According to a recent survey of Wall Street officials, 82 percent said they were “excited to shake off the rust” and send the Dow and NASDAQ into another freefall. Additionally, 75 percent of respondents admitted they have been “champing at the bit” for months to wholly undermine the nation’s local banks and money market accounts, leaving Americans too terrified to leave their savings anywhere.
Moreover, the chief financial officers from Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo unanimously told reporters that it has been “way too long” since they last saw the utterly dejected faces of American families whose homes had just been foreclosed on due to circumstances totally beyond their control.
“Now that the public’s efforts to curtail questionable Wall Street trading practices have all but ceased, it’s time for us to bring the world to its knees again,” said AIG CEO Robert Benmosche. “There are still plenty of opaque financial derivatives, high-frequency trading operations, and off-balance sheet transactions out there, all with virtually no federal regulation. Trust me, we can definitely work with that. And if anything, we can always just lobby for further concessions and deregulation in Washington—which, by the way, is so, so easy to do—and then we can cause as much damage as we want.”
Added Benmosche, “And while we’re at it, we’ll make sure we once again come away from this whole thing scot-free and far wealthier.”
‘During a period of immense financial market upheaval and Government bailouts of banks and financial insurance companies, Friedman was Chairman of the New York Federal Reserve Board (which implements the Federal Reserve’s Wall Street policies) while simultaneously serving Goldman Sachs (a company impacted by the quasi Governmental policies of the Federal Reserve) as a Board Director. The AIG bailout, an historically large controversial bailout, directly benefitted Goldman Sachs who had one of the largest counterparty claims against AIG. On May 7, 2009 Friedman resigned as Chairman of the Federal Reserve Bank of New York in response to criticism of his December 2008 purchase of $3 million of stock in Goldman Sachs. Friedman, who remains a member of Goldman Sachs’ board, came into violation of Federal Reserve policy when Goldman was converted to a bank holding company in September 2008, thereby placing it under the regulatory authority of the New York Fed. Friedman requested a waiver from this violation when the conversion occurred, which was granted roughly two and a half months later. In his resignation letter, Friedman stated that the Fed did not need the “distraction” caused by his “public service motivated continuation on the Reserve Bank Board…being characterized as improper.”‘ (Wikipedia)
So we should not be surprised that Friedman is presently making exceptionally high compensation as a director of Goldman Sachs (and that is not the only board on which he presently serves):
The Government Has It Bass-Ackwards: Failing To Prosecute Criminal Fraud by the Big Banks Is Killing – NOT Saving – the Economy
The Morale of this story is that the real criminals are getting away Scot free whilst the story concerns the USA it is in reality a worldwide phenomena
U.S. Attorney General Eric Holder said today:
I am concerned that the size of some of these institutions [banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy
As we’ve repeatedly noted, this is wholly untrue.
If the big banks were important to the economy, would so many prominent economists, financial experts and bankers be calling for them to be broken up?
If the big banks generated prosperity for the economy, would they have to be virtually 100% subsidized to keep them afloat?
If the big banks were helpful for an economic recovery, would they be prolonging our economic instability?
In fact, failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 … and will cause huge crashes in the future.
After all, the main driver of economic growth is a strong rule of law.
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:
The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.
I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.
Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.
Indeed, professor of law and economics (and chief S&L prosecutor) William Black notes that we’ve known of this dynamic for “hundreds of years”. And see this, this, this and this.
(Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down.)
The Director of the Securities and Exchange Commission’s enforcement division told Congress:
Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public’s fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.
Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank’s Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, showing that enforcing the rule of law – i.e. prosecuting white collar fraud – is necessary for a healthy economy.
One of the leading business schools in America – the Wharton School of Business – published an essay by a psychologist on the causes and solutions to the economic crisis. Wharton points out that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:
According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. “Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG.” The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. “Normal expectations of what is safe and dependable were abruptly shattered,” Sachs noted. “As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred.”
People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.
He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. “She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.
“By no means a sophisticated economist, she knew … that some people had become fantastically wealthy by misusing other people’s money — hers included,” Sachs said. “In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished.”
Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to “hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again.” In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.
Note that Sachs urges “hold[ing] the perpetrators of the economic disaster responsible.” In other words, just “looking forward” and promising to do things differently isn’t enough.
Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.
Indeed, it is beyond dispute that bank fraud was one of the main causes of the Great Depression.
Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:
The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy.
In 2004, the FBI warned publicly of “an epidemic of mortgage fraud.” But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ….
This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.
The government that permits this to happen is complicit in a vast crime.
Galbraith also says:
There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that’s a process which needs to get underway.
Galbraith recently said that “at the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.
As he has repeatedly noted, the economy will not recover until the perpetrators of the frauds which caused our current economic crisis are held accountable, so that trust can be restored. See this, this and this.
No wonder Galbraith has said economists should move into the background, and “criminologists to the forefront.”
The bottom line is that the government has it exactly backwards. By failing to prosecute criminal fraud, the government is destabilizing the economy … and ensuring future crashes.
Postscript: Unfortunately, the government made it official policy not to prosecute fraud, even though criminal fraud is the main business model adopted by the giant banks.
Indeed, the government has done everything it can to cover up fraud, and has been actively encouraging criminal fraud and attacking those trying to blow the whistle.
Dear American Taxpayers:
In 2008, you paid for a bailout of A.I.G. totalling $182 billion. Today, we are writing to tell you that we’re thinking of suing you.
When we made this decision, we knew we were in for some rough treatment from the media. We’ve been called everything from soulless bloodsuckers to Satan’s scabrous handmaidens, and worse. At A.I.G., though, we have a different name for ourselves: true American heroes.
You see, by suing the same people who bailed out our asses just five years ago, we are standing up for one of the most precious American rights of all: the right to sue someone who has just saved your life.
Let’s say that you’re trapped in a burning building and a fireman pulls you out to safety. Once you’re out of the fire, though, you notice that the fireman carelessly ripped the lapel of your Armani jacket. Shouldn’t you be able to sue the fireman for the full cost of its replacement?
Or let’s say you’re drowning in the ocean. A lifeguard dives in, pulls you back onto the shore, and administers mouth-to-mouth resuscitation. Aren’t you entitled to take appropriate action—i.e., sue him for sexual harassment?
By suing you, we are standing up for the right of every other American who might, through no fault of his own, have his life saved and want to sue the person who saved him for millions of dollars. And that’s why we’re asking for your help today.
Lawsuits aren’t cheap. They require highly paid lawyers, who rack up millions in legal fees, not to mention first-class airfare, hotels, and sumptuous gourmet meals—hardly the kind of expense that we at A.I.G. can afford.
That’s why we’d like you to pay for it.
You may think we’re expecting a lot, asking you for the money necessary for us to sue you. But, remember, there’s a bigger principle at stake, and someday, if you’re pulled from a burning building or an ocean, you’ll be glad you stood with us today.
Oh, and as for our ad campaign, “Thank you, America”? We’re sticking with that, just changing the first word.
See you in court,
Your friends at A.I.G.
Tomorrow: Can you Trust big Business? Practicing the most stark acts of corporate inhumanity -Pharmaceutical Giants
Goldman Sachs From Greenberg’s Vantage Point
Normally, it would not be very engaging to record viewpoints of the wealthy about the wealthy, but the following article may be an outlier to that belief. There is something blackly humorous about a former CEO whose corporation helped bring down the financial system in 2008 calling out the other actors in the play that they all enthusiastically took part in.
Hank Greenberg used to be the CEO of AIG. He was partly responsible for the implosion of that company and, besides, he is no stranger himself to corruption and fraud. He does, however, reveal some of the grimy details of his relationship with the likes of Goldman Sachs and the government officials who acted during the financial crisis.
It’s all about greed and no one’s reputation can be redeemed from Greenberg’s description of what are pretty much self-serving and profit-loving crony capitalists in full regalia.
Conspiracy to pay Sachs: Greenberg
Payback’s a bitch. Just ask veteran insurance titan Hank Greenberg.
Former CEO of American International Group Inc., Maurice “Hank” Greenberg
In his new book, “The AIG Story” (co-written with Lawrence A. Cunningham and coming out this week), Greenberg says that in the summer of 2008, the company was in contentious talks with Goldman Sachs and other investment banks to settle trillions in claims on questionable derivatives linked to debt obligations that Wall Street banks were writing.
Before any deal could be brokered between Chief Executive Robert Willumstad and the banks, Lehman Bros. filed for bankruptcy, and AIG, along with hundreds of other firms, were no longer able to fund day-to-day operations.
Willumstad was talking with NY Fed chief Tim Geithner and Treasury officials the weekend prior to Lehman’s filing, to get a temporary loan.
Greenberg points out, “The Fed opened its discount window to nearly any applicant, dispensing hundreds of billions in loans to nearly any applicant. Dexia of Belgium, Depfa Bank of Ireland, the Bank of Scotland, and the Arab Banking Corp., then 29 percent owned by the Libyan central bank.”
But on that Monday, Willumstad was told by Treasury chief Hank Paulson and Geithner that the window was slammed for AIG.
“Had the Fed opened the discount window to AIG . . . the liquidity crisis would have been nipped in the bud.”
Greenberg then relates how Goldman got its pound of flesh from AIG. Rather than go back to negotiations on their debt — which likely would have resulted in cents on the dollar — the government arranged a back-door bailout.
Greenberg says on Monday night Paulson hastily fired Willumstad and began the seizure of AIG. Paulson appointed Ed Liddy — a man Paulson nominated for the Goldman Sachs board — as AIG’s head. Liddy became a “one-man creditors committee to follow orders from Paulson and Geithner,” Greenberg writes.
Both Paulson and Geithner did not want this to look like a taxpayer bailout of AIG and attached very harsh terms to any help.
“Aware that he had scant legal authority to fire Willumstad or commandeer AIG’s equity, Paulson that evening succumbed to a bout of the dry heaves. Geithner worried that the terms were draconian,” the book says.
“Like dogs sensing weakness, [Paulson] and the Goldman alumni on his staff may have found it convenient to roll over AIG to prop up the old firm [Goldman].
“The conflict of interest was clear but ignored: A Goldman director signed over AIG to the government, which would call all the shots in settling fateful negotiations.”
In the end, Liddy agreed to a $60 billion loan to AIG; that cash went quickly out the back door to a small group of banks both here and abroad, including Goldman’s $14 billion.
Greenberg called the loan rigged. “The terms were bizarre: There was no relationship between the stock and the loan, as the government would keep the stock even after AIG repaid the loan in full.
“It’s as if your bank lent you money to buy a home, and even if you repaid the loan, the bank took ownership of your home as well.”