Goldman Sachs and the Brother-In-Law Strategy
Frank Rich wrote a scathing commentary today on Goldman Sachs, the financial powerhouse that played a big role in the ongoing economic crisis and yet emerged from it with huge profits, to the extent that it could afford to pay out $16.7 billion in bonuses to its management and employees.
Goldman, having received $10 billion in the initial bailout, has paid it back to the U. S. Treasury, and now claims that it really never needed the money. Rich points out, however, that $12.9 billion of the taxpayers’ money that went to bail out AIG went immediately to Goldman Sachs, to whom it owed the money as the result of its insuring Goldman’s bad debts.
And we do not know how much money the Federal Reserve pumped into Goldman as part of its efforts to preserve the banking system.
The truth is that Goldman clearly knew what it was doing all along, and calculated that the Treasury would have to bail out AIG, which would in turn reimburse Goldman for losses on its own toxic assets. It may have been legal, but if so, it was a legal scam on businesses and the public.
Think about it this way: Imagine yourself at a party where everyone, including yourself, was so drunk that they could barely get off the floor, much less drive their car home. The neighborhood is swarming with police officers with breathalyzers and there is no way you can avoid being stopped and asked to walk a straight line if you attempt to drive home. What do you do?
Simple. You find the brother-in-law of the police chief (who happens to be a guest) and ask him to drive you home. If your host has been smart enough to invite the chief himself or even the mayor, you prevail upon one of them to drive. They won’t be stopped and you avoid even the risk of being charged with public drunkenness, which is what usually happens when the driver is arrested for DUI and the passenger is too inebriated to drive the car home.
AIG was the brother-in-law. The Goldman veterans at Treasury and the Fed running the show—both in the Bush and Obama administrations—knew they couldn’t let AIG go under, and of course, they didn’t mind helping their alma mater in the process of bailing out AIG.
It’s a ripoff of Bromdingnagian proportions, but it looks like they will get away with it.
It is widely and correctly understood that Wall Street, with Goldman as a leader and with regulators in thrall, helped to inflate and profited from a credit bubble that burst and cost tens of millions of Americans their jobs, incomes, savings and home equity. American taxpayers continue to stand behind the bailouts and other government interventions that have stabilized the financial system, including Goldman, enabling the firm to post blowout profits in 2009 and to set aside $16.7 billion for bonuses so far this year.
Goldman, having received $10 billion in the initial bailout, has paid it back to the U. S. Treasury, and now claims that it really never needed the money. Rich points out, however, that $12.9 billion of the taxpayers’ money that went to bail out AIG went immediately to Goldman Sachs, to whom it owed the money as the result of its insuring Goldman’s bad debts.
And we do not know how much money the Federal Reserve pumped into Goldman as part of its efforts to preserve the banking system.
The truth is that Goldman clearly knew what it was doing all along, and calculated that the Treasury would have to bail out AIG, which would in turn reimburse Goldman for losses on its own toxic assets. It may have been legal, but if so, it was a legal scam on businesses and the public.
Think about it this way: Imagine yourself at a party where everyone, including yourself, was so drunk that they could barely get off the floor, much less drive their car home. The neighborhood is swarming with police officers with breathalyzers and there is no way you can avoid being stopped and asked to walk a straight line if you attempt to drive home. What do you do?
Simple. You find the brother-in-law of the police chief (who happens to be a guest) and ask him to drive you home. If your host has been smart enough to invite the chief himself or even the mayor, you prevail upon one of them to drive. They won’t be stopped and you avoid even the risk of being charged with public drunkenness, which is what usually happens when the driver is arrested for DUI and the passenger is too inebriated to drive the car home.
AIG was the brother-in-law. The Goldman veterans at Treasury and the Fed running the show—both in the Bush and Obama administrations—knew they couldn’t let AIG go under, and of course, they didn’t mind helping their alma mater in the process of bailing out AIG.
It’s a ripoff of Bromdingnagian proportions, but it looks like they will get away with it.
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