NYTimes: Why I Am Leaving Goldman Sachs
by Greg Smith
Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
Source: The New York Times
Matt Taibi: Another Hidden Bailout: Helping Wall Street Collect Your Rent.
Here’s yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue.
This is from the WSJ this morning:
Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae…
While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs.
In con artistry parlance, they call this the “reload.” That’s when you hit the same mark twice – typically with a second scam designed to “fix” the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that’s the reload.
In this case, banks pumped up the real estate market by creating huge volumes of subprime loans, then dumped a lot of them on, among others, Fannie and Freddie, the ever-ready enthusiastic state customer. Now the loans have crashed in value, yet the GSEs (Government Sponsored Enterprises) are still out there feeding the banks money through two continuous bailouts.
Congratulations, America, your quasi-governmental housing entity is about to subcontract out mass-landlording/slumlording jobs to the likes of John Paulson and Warren Buffett…
Source: abaldwin360
Source: thedreadedhorde
Undisclosed to Congress, the Fed Gave Banks $13 Billion in Secret Loans
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
Source: bloomberg.com
Massive Wave Of Resignations From Top Level Bankers.
Here are the recent resignations in chronological order:
February 6, 2012: Dhanlaxmi Bank CEO Amitabh Chaturvedi quits
February 10, 2012: Tamilnad Mercantile Bank MD resigns
February 13, 2012: Kuwait central bank chief resigns amid political tensions
February 14, 2012: Nicaragua’s Central Bank President Antenor Rosales quit admist row
February 15, 2012: Slovenia’s Two Biggest Banks’ CEOs Step Down
February 15, 2012: World Bank President Zoellick Resigns
February 16, 2012: CFO of ANZ Bank Resigns Amid Turmoil
February 16, 2012: Royal Bank of Scotland’s Stephen Williams quits the role
February 17, 2012: Credit Suisse’s Private Bank Chief Asian Economist Tan Resigns
That’s 9 resignations in eleven days, we have not included the other resignations from the likes of the head of the central bank in Switzerland a month ago, and the talk of the head of Goldman Sachs leaving. Why are the heads of very large financial instutitions resigning? Corporate governance experts would say that people resign to make room for new policies, but this is a peculiar situation of contagion amongst those with key exposure.
The first to see the flame usually leave the building first…maybe this is not the case, nonetheless, such events with obvious patterns should be taken note of.
And many, many more:
(via thetruthisviral)
Source: abovetopsecret.com
States Negotiate $26 Billion Agreement to Help Homeowners
After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, state and federal officials said. It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years.
Source: The New York Times
Hundreds of protesters clad in rain gear marched through downtown San Francisco on Friday evening - one of several events in a day of action organized by Occupy San Francisco and other allied groups on the second anniversary of the U.S. Supreme Court’s decision in Citizens United, which removed limits on how much money corporations could spend on political campaigns.
Multiple blocks of California Street and Montgomery Street were blocked for hours by the demonstrations at two banks and the ensuing response by police in riot gear.
In the city’s financial district police arrested 18 people for trespassing, including a group that refused to move their human chain blocking an entrance to the headquarters of Wells Fargo. Another was arrested for allegedly grabbing a police officer’s baton.
Source: fogcityjournal.com
this is happening now today right now…at this moment…oh my !!!
Source: lemonsandmushrooms
Tell the White House to Investigate the Banks
Please join us in urging Barack Obama to investigate the Wall Street banks.
Wall Street banks continue to profit from the brutal housing crisis that has displaced an estimated 7 million American families from their homes. After receiving a massive taxpayer bailout, these same banks continue business as usual, with the public paying a heavy price for Wall Street’s corruption and greed. Accountability is long overdue.
1. Sign the petition from ColorOfChange
Sign ColorOfChange’s petition to push for a full investigation, compensation to homeowners, and real accountability for those responsible.
2. Submit your photo.
Make or print an investigation sign, take a photo of yourself (and all of your friends) at your local bank, and submit it to our blog.
3. Spread the word!
Reblog your photos once we post them and invite your friends to do the same!
Still wondering why you should join us in calling on President Obama to investigate the banks? See the evidence.
Submitted by: investigatethebanks
I must warn you that I am not an economics expert. But I will explain from my own understanding.
The amount of real money is not actually printed. It is often only represented as data on bank computers. Federal Reserve can create money out of thin air and due to inflation, money, or rather value, CAN disappear. Houses were overvalued and oversold. The value was inflated through LOANs (promises of money, like billions of iou’s being traded when that money was never actually printed), so I suppose when that value dropped, in theory, money value disappeared as it was created out of nothing to begin with. As that video showed, those iou’s became like hot potatoes until the perceived value caught up with actual value. The first people to suffer were the families at the bottom wrung and then it was the people who trusted AAA safe investments to be safe - pensions, bonds - these are often people who do not invest in risky, high pay investments - like your grandparents’ retirement stocks. The perception of worth, however, still quickly traveled up and concentrated in the 1%. The money was emptied from tax payer pockets, bank holdings, and into the personal holdings of investors and CEOs (i.e. it is probably sitting in some Swiss bank after being exchanged into a more stable currency like gold or art etc. as the dollar becomes increasingly worthless). Money was then given to Wall Street in the bail out to refill their banks, but no one bailed out the millions of families who suffered. It’s reverse socialism, reverse Robin Hood.
Some graphics that will hopefully help illustrate how money was taken from the working classes and concentrated into the personal hands of a very select few who were likely connected with insider trading knowledge that helped to defraud millions of American families:
Big picture break down - the amount of money taken out of the pockets of the poor is about the same exact amount gained by those at the top. This is why people are protesting Wall Street and the 1% on it, not out of jealousy, but because they have defrauded a nation.
Source: occupyonline
Simple, visual education video on Wall Street banks, investors, the Fed, families’ mortgages and how it all came together to create the credit crisis.
Note: not really a fan of graphic used to display “risky and safe families”, but still a good source of info
Credit Card Firms: They Don’t Just Steal From Cardholders
Great story out this morning by Bloomberg reporter Thom Weidlich, detailing yet another devious and dirty scheme in the consumer credit industry.
The story outlines the misfortunes of a successful Park City, Utah restaurant called Cisero’s that is best known for serving the movie stars and film glitterati attending the nearby Sundance film festival. The restaurant is engaged in a legal battle with its bank, but the larger struggle is between the restaurant and major credit cards like Visa and MasterCard.
It’s a complex tale, but the gist of it is that the credit-card companies invoked arcane provisions of operating contracts with the merchant, and unilaterally “fined” the restaurant for enormous sums of money without proving any of the charges. Some of that money was actually debited from the merchants’ account before they managed to close it.
When a restaurant opens for business, it signs service contracts with middleman firms that allow them to accept charges from Visa and MasterCards. These middleman firms process the charges on behalf of the issuing cards, and also debit the accounts of merchants for things like debit fees.
The problem is that when merchants like these restaurant owners in Utah sign their service contracts, they also have to agree to a series of draconian security rules, under which they are automatically liable to the card companies if the card companies suspect fraud or lax security procedures.
In the case of the Utah restaurant, Visa and Mastercard both claimed that the restaurant allowed charges from fraudulently used cards, and also violated security rules by keeping the data for too many customer accounts on their company computer.
Source: Rolling Stone
if any ‘terrorists’ had in reality inflicted even a tiny fraction of the harm on America that its own financial institutions and politicians have, then the nonsensical ‘war on terror’ might actually have had some point …
Source: cartoonpolitics
S.E.C. Charges Former Fannie and Freddie Chiefs With Fraud
The Securities and Exchange Commission has brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled the government and taxpayers about risky subprime mortgages the mortgage giants held during the housing bust.
Those charged include the agencies’ two former CEOs, Fannie’s Daniel Mudd and Freddie’s Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis. The case was filed in federal court in New York City.
In a statement released through his attorney, Mudd said the lawsuit “should never have been brought” and said the government reviewed and approved all of the company’s financial disclosures. ”Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public,” Mudd said. “The SEC is wrong, and I look forward to a court where fairness and reason — not politics — is the standard for justice.”
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
Fannie and Freddie own or guarantee about half of U.S. mortgages, or nearly 31 million loans. The Bush administration seized control of the mortgage giants in September 2008. So far, the companies have cost taxpayers almost $150 billion — the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
Source: inothernews
America Airlines Strategic Default - Smart Business; Homeowner Default on Mortgage - Shameful Failure. Double Standard Much?
We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts, it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different.
The bursting of the housing bubble has left millions of homeowners across the country owing more than their homes are worth. In some areas, well over half of mortgages are underwater, many so deeply that people owe forty or fifty per cent more than the value of their homes. In other words, a good percentage of Americans are in much the same position as American Airlines: they can still pay their debts, but doing so is like setting a pile of money on fire every month.
These people have no hope of ever making a return on their investment in their homes. So for many of them the rational solution would be a “strategic default” — walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages; studies suggest that perhaps only a quarter of all foreclosures are strategic. Given how much housing prices have fallen, the question is why more people aren’t just walking away.
Part of the answer is practical. Defaulting (even in so-called non-recourse states) is still a lot of trouble, and to most people it’s scary. In addition, homeowners are slow to recognize how much the value of their homes has dropped, and have inflated expectations of how much it will rise in the future. The biggest hurdle, though, is social: while companies get called “very smart” for restructuring their contracts, there’s a real stigma attached to defaulting on your mortgage. According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse, since that would have stuck lenders with large losses and a huge number of marked-down homes. So strategic default was portrayed as the act of dishonorable deadbeats. David Walker, of the Peterson Foundation, waxed nostalgic about debtors’ prisons, and John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”
Paying your debts is, as a rule, a good thing. But the double standard here is obvious and offensive. Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense. Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.
When it comes to debt, then, the corporate attitude is do as I say, not as I do. And, while homeowners are cautioned to think of more than the bottom line, banks, naturally, have done business in coldly rational terms. They could have helped keep people in their homes by writing down mortgages (the equivalent of the restructuring that American Airlines’ debt holders will now be confronting). And there are plenty of useful ideas out there for how banks could do this without taxpayer subsidies and without rewarding the irresponsible. For instance, Eric Posner and Luigi Zingales, of the University of Chicago, suggest that, in exchange for writing down mortgages in hard-hit areas, lenders would take an ownership stake in a house, getting a percentage of the capital gain when it was eventually sold. Lenders, though, have avoided such schemes and haven’t done mortgage modifications on any meaningful scale. It’s their right to act in their own interest, but it makes it awfully hard to take seriously complaints about homeowners’ lack of social responsibility.
Of course, many borrowers made bad decisions and acted irresponsibly. But so did lenders—by handing out too much money and not requiring sensible down payments. So far, banks have been partially insulated from the consequences of those bad decisions, because Americans have been so obliging about paying off overinflated mortgages. Strategic defaults would help distribute the pain more evenly and, if they became more common, would force lenders to be more responsible in the future. It’s also possible that a wave of strategic defaults—a De-Occupy Your House movement—would get banks to take mortgage modification more seriously, which would be all for the better. The truth is that banks have been relying on homeowners to do the right thing. It might be time for homeowners to do the smart thing instead.
Source: newyorker.com
