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Jul. 18 2009 - 10:06 pm | 130 views | 6 recommendations | 38 comments

Is Goldman Screwing Taxpayers in TARP Negotiations?

Alas, no one would tell me what the government is asking for the warrants or what Goldman is offering for them. “We are in discussions with the Treasury on the buyback of the warrant,” said Goldman spokesman Lucas VanPraag. “The purchase price has yet to be determined…. We believe that taxpayers should get a decent return, and we hope that our discussions with the Treasury will do just that.” The Treasury declined comment.

My estimate — okay, my SWAG (for scientific wild-assed guess) — is that the Treasury is asking for $1 billion to $1.5 billion and Goldman is offering $500 million or so.

Under the law, Goldman, like other early TARP repayers, has the right to force the Treasury to sell back the warrants after a lengthy set of price arbitrations.

via Goldman Sachs pulls a dumb move by squabbling over TARP – Jul. 17, 2009.

So as part of the TARP deal the government holds some very valuable stock purchase warrants that Goldman eventually has to buy back from the state in order to be fully free and clear of its obligations (in fact technically its payment of exorbitant bonuses before this matter is settled is illegal — or could be, if the state chose to interpret the TARP that way). Sloan here is guessing that Goldman is underbidding to buy back those warrants by $500 million or more; neither he nor anyone else has any real evidence on this score, but rumors that the banks have been taking a hard line in these negotiations have been circulating for weeks.

Another part of this article details yet another hidden subsidy to Goldman in the past year — the state’s rapid intercession to give Goldman access to liquidity that prevented a run on the bank:

I’m also talking about the Federal Reserve Board moving with lightning speed last fall to allow Goldman to become a bank holding company. By giving Goldman access to vast amounts of money it was making available to bank companies, the Fed ended panicky demands from Goldman customers that the firm immediately return the cash and securities it was holding for them. That was the equivalent of a run on the bank, which no institution can survive. Stopping it saved Goldman.

The press is starting to pile on now, and Goldman is taking it from all sides, which is sort of interesting. Let’s see how long it lasts.


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  1. collapse expand

    Thank you, Matt, for being the heavy blanket in this financial Dutch-Oven. Choke em’ out!

  2. collapse expand

    Were the Lehman and Bear Stearns gangs too shell-shocked to scream in real time about all that special treatment for Goldman? Didn’t we all know in real time that that swift approval to convert to a bank holding company was to give Goldman access to the Fed discount window? If we knew that, think about how much more the Wall St losers had to have known.

  3. collapse expand

    Hi Matt, your work is great but I sent you the missing piece of the puzzle. Hopefully someone has called your attention to it at RS. It’s truly the missing piece , and it pulls everything that is and has happened together. Unfortunately, the powers that be haven’t wanted this information considered . Look for something sent to you about a week ago please. It’s important.
    THANKS>

  4. collapse expand

    The Obama Administration – Summers, Geiithner, Bernancke – have decided that Goldman Sachs is an essential part of the federal reserve system, and the “face” abroad of the US financial system.

    I suspect there is some sort of China play here, a fear that any sort of problem with Goldman Sachs will be viewed negatively by China.

    GS will be allowed to do whatever it pleases.

    Once again: Goldman Sachs 10, USA 0.

  5. collapse expand

    Matt, this is slightly off-topic, but have you addressed GS’s carbon trading activities? If you have, then please disregard this comment, but I have heard that GS bought up $1 billion of carbon credits and 10% of the CCX. In light of the upcoming vote in the Senate on a government-mandated carbon cap and trade program, I think you should look into this, if you haven’t already. I think I’ll be paying higher utility bills so that GS can pay themselves higher bonuses.
    Thanks for all your work on the GS story.

  6. collapse expand

    Here we are down the rabbit hole where everything just gets curiouser and curiouser and where four times five is twelve, and four times six is thirteen and the government has to sell its warrants at the cheapest price possible.

  7. collapse expand

    I’m fascinated how well-organized the Bushies were in the orderly response to a financial Katrina.

    Like Katrina, the actual real Free Market threatened to kill the Wall Street folks who metaphorically built their casino on bottomland and floodplain.

    The “Credit Freeze / Credit Crisis” of last year was the investment banking equivalent of Joe the Plumber going to the store and not buying something because it was overpriced.
    Credit was there – it just cost too much for the tastes of Wall Street.

    A Bagehot response would have been for the US to auction cash loans off for the best interest rate available. You want credit? You take 14% for it? No? Tough.

    Instead, we put Goldman Sachs up as the chief candidate for the US Bank #3, and decided that the financial security of GS would be the bellweather for Wall Street’s security.

    What we actually did, was to let the first-class passengers hit the lifeboats, while everyone else was told that the ship had been fixed.

    Just wait.

  8. collapse expand

    Did we have a coup d’etat last Fall?

  9. collapse expand

    I foresee a future in which the term “In Goldman We Trust” will appear on our currency. Dollars will be printed on the cardboard that is not being used to package and ship the products we don’t make. The cardboard dollars will be heavier and bulkier, which may have a somewhat pleasing psychological effect, but any illusory feeling of bliss will surely be fleeting once the reality of the devalued currency hits home.

    BTW, without going into detail as to why Claudia Deutsch is ill-equipped for both cheerleading and economics reporting, I’d like to respond to her “where were the regulators?” question. Regulators were (are) conspicuously absent because they are in bed with Wall Street and Washington, which means allowing/protecting the “free” (Rigged) market. Look at the Madoff situation as a microcosm of the larger, systemic Ponzi scheme. The “folks” at the SEC, for instance, are either TSTHTKOR (TooStupidToHaveThatKindOfResponsibility), or are complicit. And nobody is THAT stupid. We must realize that the Washington vs. Wall Street theatrics are a sideshow. The hearings are an insulting joke designed to appease “populist rage”, and to allow Congress some self-congratulatory harrumphing. The reality is ALL about bleeding Main Street dry.

    Should I ever have children, I will urge them to become TooBigToFail, because obviously, being TSTC/R (TooSmallToCheat/Rig) is for sucker morons who DESERVE to get ripped off by sociopathic “financial innovators”. Just ask Goldman and the rest of the Derivatives Dealers. Heh Heh.

    • collapse expand

      Hey just because someone doesn’t understand basic concepts even after they’ve been carefully repeated over and over and over again to her shouldn’t disqualify her from speaking in Serious tones about how someone who has researched this for several years in depth doesn’t understand the situation as well as her…. even though she doesn’t understand it at all.

      In response to another comment. See in context »
    • collapse expand

      >Dollars will be printed on the cardboard that is not being used to package and ship the products we don’t make.

      Hah! You think we’ll be efficient in that regard? They’ll make new cardboard for this venture. Recycling the unused cardboard will cost you G$10/pound. Bubble #8.

      In response to another comment. See in context »
  10. collapse expand

    Matt’s hard investigative work is clear. I would appreciate more the commentary, if some woud suggest ways or steps realistically we can take now that we know the apparent truth – that we have been the gullible food source for these bloodsucking parasites. Anyone read Watership Down? I fear many of us are satisfied so long as we have a door to lock and a can of spam. Where do go from here?

    • collapse expand

      First step would be to eliminate the Washington PACs/Lobbies. We’ll never get meaningful regulation until we get that done. Second, would be to enforce the ‘conflict of interest’ Chinese Wall that is supposed to exist in Washington, thereby eliminating the possibility of these jokers co-opting the direct power of the People.

      I’m afraid (realistically) we’ll never get either done, until we take it to the streets.

      One fun idea – we COULD have a series of ‘USAID’ concerts like we had LiveAid, FarmAid, and the Free Mandela, etc… concerts in the 90s. This time to raise money for Foreclosure victims, make our voices heard, and vent our frustration. The politicians will listen if we pack every stadium in this country with the People demonstrating their anger, Woodstock style.

      In response to another comment. See in context »
  11. collapse expand

    Hi Matt, we translated your Rolling Stones Article about Goldman into German. I wanted to write you an Email to ask what to do with it, but I can’t find your Email anywhere… :)
    Please write me to b.d.s (ad) web.de .
    (pls delete this comment once you’ve read it)

    Thanks for all the reporting! I find it a lot brighter than ripping off people and calling it being clever.
    Jon

  12. collapse expand

    I just received an email calling for a November 30th protest of the World Bank to commemorate the 1999 protest in Seattle. Would such a protest be a positive step toward taking action about all the fraud and destruction of the US economy? The following is from that email: – quoting Noam Chomsky: At this stage of history, one of two things is possible: Either the general population will take control of its own destiny and will concern itself with community interests guided by values of solidarity and sympathy and concern for others, or alternatively there will be no destiny to control. -Noam Chomsky, Manufacturing Consent. November 30, 2009 will mark the tenth anniversary of the historic Seattle protest against the World Trade Organization that stalled the use of multilateral trade agreements to consolidate global corporate power. This anniversary presents an extraordinary opportunity for We the People of the United States to assert our democratic right to reclaim the political power that corporations have usurped.
    How can we organize protests and make our concerns known so that politicians realize they must change what is going on. . .make GS pay fines or incarceration or both for each and every identifiable crime committed, beginning with fraud; bribery; etc. And, not only GS, but the other entities that have profited from the fraud and destruction. The US should take back any monies (like RICO allows) and reduce our incredible deficit and regain some credibility for our country and our citizens in particular.

  13. collapse expand

    Do we really feel that the press is “piling on”? You seem to be the only one pursuing this story, which is like a novel unfolding.

    I don’t seen anything on cable about it, nor the NYT, nor NBC Nightly News which I watch every day. And that worries me.

  14. collapse expand

    I think the way Taibbi covers this story has a dimension outside of the “OMG these guys are so smart!” narrative. There are those who would congratulate GS because this kind of extortion is legal and they’re lining their pockets and hey thems the breaks. What I like in Taibbi’s reporting is the ethical urgency to not rely on such weak standards like that it’s somehow OK to be fucked if it’s within the confines of a game that was rigged from the beginning.

    • collapse expand

      Op-Ed segments in the televised and paper news seem to be tagging on to Matt’s article; that’s the most I’ve heard, but I’m teaching in the middle of the woods this summer.

      I’m in the middle of Great Derangement right now, and the commentary on legislative “In the Loop”* -ness made me wonder why we weren’t already rioting. If I had any stake in the investments covered by GS, I’d be taking time I din’t have (hah – like the time I’m using now) to pen as many missives as possible. Yeah; I should be doing it anyway, and hopefully before the summer’s over, Harkin (who might care) and Grassley (who will laugh and send me a BS response) will have received at least one email from me.

      If there were a D.C. protest to occur on Aug. 18th, I’d gladly take a southern detour from the route home.

      *see the movie *In the Loop* when it comes to a theater near you – I command you all!

      In response to another comment. See in context »
  15. collapse expand

    hathor- Matt addressed Sach’s carbon trading schemes in several interviews and pieces I’ve read. That’s probably the most discouraging thing- even the slightest cap and trade policies will end up enriching these sociopaths.

    Mr. Taibbi has started something here. As he mentioned, the media is starting to take notice. Let’s all hope that another pop singer doesn’t die soon so that the story lasts long enough to warrant action.

    The public outcry from the AIG bonuses spurned Congress to do something- hopefully we can get some new white collar crime laws in place as a result of this.

    Keep up the great work, Matt. You’re doing your country and the world a great service.

  16. collapse expand

    Just getting to my Times online. Y’all seen the Peter Goodman article on FedMod today? Nice one; trying to make toxic lemonade with lemon mortgages. Here’s the single page link for those who just can’t get enough of this: fsm.contribute@gmail.com

    Sorry for all the posts; wasn’t planning on this.

  17. collapse expand

    What gets me is that the argument that team GS are just smart actually works. Money = Smart? Bad equation in my opinion. If you are good at making money because your brain can process information quickly but are completely oblivious to the world and people around you that makes you pretty stupid in my book. Empathy has to be part of an assessment of someone’s intelligence. A better example of smart person would be Greg Mortenson not Tim Geithner. Being able to design,create and implement sustainable paradigms in economics and in anything else needs to be the standard for what is considered smart. Not how well you can make a fortune, skirt loopholes, control government, etc.

  18. collapse expand

    Health care will probably overshadow it this week. Unless they are somehow related?

  19. collapse expand

    I’m new here. Can someone please explain to me the “Your comment is awaiting moderation.” process to me? (The T/S Comment Policy is of no help at all.) A post of mine from Sunday has been sitting there awaiting moderation ever since. I’m guessing that posts with URLs in them must be moderated? Are there actually any moderators here? Thanks in advance for bearing with my naivety.

  20. collapse expand

    The old history. in 1720 England parliament aprobe “South Sea Act” reserving the trade of state Bonus to a Company owned for Duke of Kent, relative of King. In combination were several members of the house of commons as was knowed after the bubble explode. An intimate relation between Goverment-capitailst-South sea Company have monopoly of slaves trade to América. Always State-financial-Capitalists earn máximun profit. 50 years after Bubble South Sea, england people pass hungry yet. Excuse my English.

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