Image by Fresh Conservative via FlickrThe following was a comment made on the post "Goldman Sachs' Tim Geithner" by RobertM. It makes some very good points as well as raising some very good questions.
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Here is the comment:
Always the same face of the same coin
There are no two ways to see it, 2 faces of the same coin or the other hand argument.
Billions of taxpayer’s money that will never be returned were used to bailout an insolvent company. The decision to bailout this company came just days after Lehman went bankrupt and spread panic in financial markets across the globe.
To make the right questions we need to first contextualize.
a) In the week before FEDs intervention AIG paid more than 5bln USD of collateral calls to Goldman. More than to any other counterparty
b) After the intervention AIG paid more than 12bln USD of collateral calls to Goldman, more than any other entity and multiples of other American Banks exposure
c) AIG tried to negotiate haircuts on the payments of collateral and UBS accepted them. Goldman didn’t.
d) The regulators forced AIG to pay 100 cents on the dollar to its counterparties
e) New York FED was actively involved in the bail out
f) Hank Paulson was actively involved on the bail out
g) Edward Liddy from Goldman was chosen to be AIG CEO after the bail out and when blns of taxpayers’ money was thrown to AIG and subsequently to Goldman. Ed Liddy was not paid by regulators, treasury or AIG for the job he has done in AIG
h) The Chairman of the New York FED was Stephen Friedman who was serving in Goldman board at that very same time
i) While being Chairman of the regional Bank that regulated Goldman Stephen Friedman bought Goldman shares several times after the bail out
j) New York FED tried to limit the disclosures of information of these bail outs
k) New York FED still tries to avoid disclosing important details of the bail out
l) The FED is not audited
m) FEDs members are not chosen by popular vote
n) Paulson called and emailed Blankfein more times than any other Wall Street banker
o) After the departure of Tim Geithner and Stephen Friedman, Bill Dudley was chosen as NY FED president
a) Three persons were in the meeting/conference call that decided the bail out of AIG. Bernanke, Paulson, Blankfein
b) The unwinds of AIG trades with Goldman were not done at fair price
c) AIG bail out was not legal and the FED didn’t have the authority to do it much less decide unilaterally who to give taxpayers money to
Questions from this blog:
a) Who is going to audit the FED and what he has done with taxpayer’s money on AIG bailout, TARP, TALF and so on? Where did the money go, how it was spent? Which securities were bought? From which entities? What was financed? Who received financing? What levels were used to price the collaterals posted?
b) Who is going to audit Goldman? The FED and SEC are mined with Goldman alumnus, there are no conditions for an independent investigation of how they make money, what do they have in their books, what is the real network between Goldman and its gang of hedge funds what was Goldman and its gang of hedge funds role in Bear Stearns and Lehman fall? How can a company with the size of Goldman in developed markets, with fierce competition and volatile markets make close to 100% return on equity? (if we add just the bonus pool to net income, not the salaries and the salaries are not exactly low)
I challenge anyone to change my mind and to make me believe that they earn this ROE because they are the brightest of the brightest... The brightest of the brightest have failed miserably through out history. Never in human kind bright minds managed to keep such an impressive track record and if they are so good, again I doubt it, maybe we should dismantle Goldman anyway because these brilliant minds could be doing much more productive activities for makind.
The only developed markets that i am aware of that have these kinds of returns are arms traffic, drug dealing and human slavery…