My initial response to the article: What cojones those bailed out banks have who are lending money to California! First, they get bailed out by the Fed and amass a large surplus of cash then they bail out a state that they have already oppressed.
But then I vaguely remembered that Goldman Sachs had a previous financial relationship with California in 2008 which ProPublica reported on. The title of their article: Goldman Sachs Urged Bets Against California Bonds It Helped Sell. That is the GS we know and dislike.
ProPublica reported that Goldman Sachs collected millions of dollars in fees to help sell California state bonds. Then it urged its clients to place bets against those same bonds. Goldman's strategy could have caused interest rates in the state to rise so that it would have to pay more to borrow money which in turn would harm taxpayers. These actions show how Goldman Sachs treats conflicts of interest also--it screws its clients as we have already witnessed in the Abacus civil suit.
In a Capitol Weekly article, we find that California's relationship with Goldman Sachs presents many risks to municipal taxpayers. Goldman likes to profit from California's bond business but refuses to invest in California's needs.
With such a despicable track record why would California trust GS yet again? Goldman Sachs is not interested in working for the public good; it only looks at its own bottom line. What good are they?
Goldman Sachs ready to bail out California
By Tim Kiladze - The Globe and Mail
The times they are a-changin.'
In 2008, the U.S. government bailed-out the country's biggest investment banks amid financial turmoil. Now the banks are ready to backstop the government as debt ceiling talks go down to the wire, which DealBook first reported.
On Tuesday, the government of California unveiled a plan under which big banks are ready to lend $5.4-billion (U.S.) to the state if it can't pay its bills after the debt ceiling deadline on Tuesday. California needs the backup plan because its budget included going to the market to sell about $5.4-billion in bonds in late August.
"But if Congress and the President do not reach an agreement to raise the debt ceiling by Aug. 2, capital markets likely would be thrown into chaos," State Treasurer Bill Lockyer said in an announcement of the bank backstop. "Additionally, if the federal government prioritizes payments to conserve cash and avoid default, California and other states could see a disruption in their payments for health care, transportation and other services."
The bank backstop comes in the form of selling interim "revenue anticipation notes" that yield a measly 0.237 per cent and mature on Nov. 22.
Goldman Sachs and Wells Fargo are the lead lenders and will pony up $1.5-billion each. The consortium also includes Citigroup, Barclays, JPMorgan, Bank of America Merrill Lynch, Morgan Stanley and US Bank.
Read the article here