Friday, April 15, 2011

George Clooney - New Spin Doctor for Goldman Sachs?

Is the American public about to be subjected to some counter-spin for the criminals on Wall Street, and the bankers somehow glorified by Hollywood?

George Clooney has signed on to produce a Wall Street bailout film, based on a 2009 Washington Post article called The $700 Billion Man which centers around two Goldman Sachs bankers. (Another story is here at the Huffington Post)
The 1999 Gramm-Leach-Bliley Act put the parent holding company of each of the big American brokerages beyond SEC oversight. It repealed part of the Glass–Steagall Act of 1933, opening up the market among banking companies, securities companies and insurance companies. The Glass–Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.

And let's not forget, the financial industry spent billions of dollars bribing influencing "lobbying" congress for lax SEC regulations and laws favorable to them. Might they also produce a Hollywood movie to entertain middle America, putting these banking criminals in a more positive light? Will Goldman Sachs, with its far reaching tentacles into major corporations (including the movie industry) finance the film?

In 2004, at the request of the major Wall Street investment houses - including Goldman Sachs (then headed by Hank Paulson) the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure...and that all our financial institutions could essentially police themselves.

The New York Times reported that in late September 2008 Christopher Cox, Chairman of the Securities and Exchange Commission and a longtime proponent of deregulation, acknowledged that failures in the 2004 "voluntary supervision program" for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down. In his statement, posted at the SEC website, he says: "When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns."

The Washington Post's story is about a man named Neel Kashkari, who was a 35-year-old business school graduate from a suburb of Akron, Ohio, who had gone to Washington in 2006 to learn how government worked. Before that, he had been a tech banker at Goldman Sachs in San Francisco.

Hank Paulson, who was the chief executive at Goldman Sachs at the time, was then named the U.S. Treasury Secretary. Kashkari called Paulson, who claims he didn't know the low-level employee, and asked if he could go along. Ten days later, Kashkari was sworn in as Paulson's aide. (Why would an older and very experienced CEO of a bank like Goldman Sachs take on a young "unknown" with him to a new and important new job in Washington D.C., then make him his "right hand man"?)

In February 2008, for some unknown reason that wasn't explained, Hank Paulson's protégée drafted an emergency plan in the "unlikely" event of an economic meltdown. Kashkari and a colleague wrote, "Break the Glass: Bank Recapitalization Plan." When the banks actually DID tank later that year, the 10-page plan laid out the basis for TARP. Amid the chaos, Kashkari was appointed czar.

But in a later congressional hearing it was revealed that an e-mail from a Goldman Sachs boss singled out two executives for good performance after they packaged some bad mortgage-backed securities into something investors wanted to buy. "You traveled the globe, you packaged...and you made lemonade from big, old lemons," the document stated.

In point of fact, that was the "job" of these Goldman Sachs executives. They had large investor clients who wanted to bet that the housing market would decline in 2006 and 2007. Goldman created the investment vehicle for these clients and protected itself by shorting the housing market as well. Technically, because part of the Glass–Steagall Act had already been repealed, it wasn't illegal. So they knew!

A Goldman Sachs document said of the firm: "During most of 2007 we maintained a net short sub-prime position and therefore stood to benefit from declining prices in the mortgage market."

But conveniently, Kashkari and a colleague, for no other reason, just decided to write the "Break the Glass: Bank Recapitalization Plan"?

In October 2008 Kashkari was appointed by the then-U.S. Treasury Secretary Hank Paulson as the federal bailout chief and was suddenly in charge of the $700 billion TARP fund (the Troubled Asset Relief Program) which bailed out all the big banks (including Goldman Sachs) following the economic collapse. (See "Inside Job: The Film that Cost Over $20 Trillion to make!"

Kashkari, managing a team of mostly older career bureaucrats, used his BlackBerry to determine the bailout sum presented to Congress. His arithmetic: "We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number." 

He explains: "Seven hundred billion was a number out of the air. It was a political calculus. I said, 'We don't know how much is enough. We need as much as we can get [from Congress]. What about a trillion?' "
"No way," Hank Paulson shook his head.

"I said, 'Okay, what about 700 billion?' " 

"We didn't know if it would work. We had to project confidence, hold up the world. We couldn't admit how scared we were, or how uncertain." 

Thoughts tended toward the apocalyptic. During midnight negotiations with congressional leaders, Paulson doubled over with dry heaves. A government economist broke into Kashkari's office sobbing, "Oh my God! The system's collapsing!"

Kashkari recalled: "We were terrified the banking system would fail, but the thing that scared us even more was, what would we do the day after? How would we take over 8,000 banks?"

Kashkari says he once ran into Rep. Meeks of the Financial Services Committee: "Barney Frank is drafting new regs for the financial system. We gotta make sure this doesn't happen again," Meeks says.

In the Washington Post article Kashkari claims he worked 18 hours a day, for 40 straight days, before submitting his TARP report. He had disbursed more than $400 billion, invested in 540 banks, implemented a $50 billion foreclosure prevention plan (which has failed to come even close to meeting its stated goal). And he says he also made other mistakes - such as a punitive interest rate on the AIG (American International Group) intervention and a clause allowing unilateral changes to the Capital Purchase Program contracts.

Obama's Home Affordable Modification Program isn't working out well either: Homeowners Protest: "It's just a scam and the banks are getting everything!" And many investors are also benefiting from all the cheap foreclosed homes.

In their book, titled, On the Brink, Hank Paulson and Neel Kashkari (the two former Goldman Sachs bankers) tell their side of the story. Kashkari's version of events in the Washington Post article seems awfully suspicious as Warren Buffet notes: The U.S. Treasury lent $10 billion to Goldman Sachs through the TARP program (another article says it was $13 billion). The FDIC also guaranteed tens of billions of loans to Goldman Sachs. And Goldman Sachs was allowed to borrow tens of billions of dollars from the Fed at well below market interest rates. That's where all the HUGE profits and bonuses came from...the U.S. taxpayers...a redistribution of the wealth.

In the aftermath of the crash, when Senator Carl Levin had been interrogating Goldman Sachs execs, he had been doing a poor job of hiding his disgust with them, their company and Wall Street in general. He recalled a Goldman Sachs e-mail in which an employee described a "shitty deal." Was Goldman Sachs only sorry that it wrote on an e-mail that was eventually made public and that it was peddling shitty deals, or was it really sorry it was pedaling those types of deals?

Many say that in fact is was actually Goldman Sachs (and their enablers) who almost single-handedly caused The Great Recession that put the housing market underwater and killed millions of jobs. Goldman Sachs has HUGE holdings in many different major U.S. corporations and has great leverage as a major shareholder in their actual operations. (And then of course there are the subsidiaries and the subsidiaries of the subsidiaries of these limited liability multi-national corporate conglomerates. I wonder if Goldman Sachs holds shares in MGM.)

Two years later after the "Crash of 2008" Goldman Sachs is much bigger and less regulated than ever, with almost a trillion dollars on their balance sheets that is backed by the full faith and credit of the United States Treasury (the taxpayers). And it's still deemed "too big to fail" (while their execs receive billions of dollars in bonuses), but it might have to be bailed out again by U.S. taxpayers! (As an aside: According to this post, Goldman Sachs is a part-owner with the Rothschilds of the U.S. Federal Reserve / U.S. Treasury.)

BREAKING NEWS! "Goldman Sachs Chief Could Face Criminal Prosecution For Role In Financial Crisis" - But if you seriously think that any of these criminals will actually go on public trial in a court of law and be sentenced to any real prison time, then you're crazy. The U.S. Attorney General Eric Holder and his boss President Obama are just two-bit players in this global game of Monopoly. We know who runs the Corporate States of America and the rest of the world. Oh sure, the American public might be given some dog-and-pony show to quiet the masses, but no real justice will ever be meted out to those who caused all the mass financial destruction. Hank Paulson was dead smack in the middle of this...and was the fox in the henhouse.

According to this recent New York Times article one problem our government had in prosecuting the bankers (and Hank Paulson) was that [government] "regulators failed in their crucial duty to compile the information that traditionally has helped build criminal cases. In effect, the same dynamic that helped enable the crisis — weak regulation — also made it harder to pursue fraud in its aftermath." Personally, I would have stated it like this: "The same regulators that were bribed to allow this, made sure to cover up all the evidence."

But one thing I'm almost certain of, Goldman Sachs (or one of the other big banking criminals) will most likely finance George Clooney's new movie. I can't wait to find out who the good guys are and who the hero is. George should play a part too, he would make a great Wall Street banker.

The overall suicide rate rises and falls in connection with the economy according to the Centers for Disease Control. The largest increase in the overall suicide rate occurred in The Great Depression (1929-1933). The figures for The Great Recession haven't been tabulated as of yet. But oddly, we didn't see any bankers jumping out of their windows on Wall Street this time around...I wonder why.

Meanwhile, after his good work was complete on TARP, Neel Kashkari and his wife subsequently left Washington D.C. and moved to what looks like an isolated mansion-like cabin in Northern California.

Neel Kashkari with one of his dogs in California.

* The newspaper that ran that story, The $700 Billion Man, is owned by The Washington Post Company. Unlike most CEOs, its CEO Donald E. Graham doesn't get annual grants of stock options or other similar incentives because he is the company's largest individual shareholder. As of January 31, 2011, there were 27 holders of record of the Company’s Class A Common Stock and 695 holders of record of the Company’s Class B Common Stock. Both classes of the Company’s Common Stock participate equally as to dividends. Quarterly dividends were paid at the rate of $2.25 and $2.15 per share during 2010 and 2009, respectively. Shares are currently $434.56 per. Retained earnings reported in SEC filing - $4.5 billion. I wonder if Goldman Sachs (either directly, or indirectly) holds shares in this company.


  1. Great article Mr. Meyers. I encourage you and your readers to contact George Clooney and urge him to use this film as an honest expose on Goldman Sacs, the Wall Street inside and how our government (fails to) regulate. Here is the contact information:

    George Clooney
    c/o Stan Rosenfield & Associates,
    2029 Century Park East - Suite 1190,
    Los Angeles, CA 90067 USA

    phone 310-286-7474
    fax 310-286-2255

    George Clooney's Agent
    Bryan Lourd
    Creative Artists Agency
    2000 Avenue of the Stars
    Los Angeles, CA 90067 USA

    phone 424-288-2000
    fax 424-288-2900

    George Clooney's Production Co

    George Clooney
    Smoke House Pictures
    10202 W Washington Blvd
    Culver City, CA 90232 USA
    phone 310-244-4000

  2. UPDATE: New York Times (October 5, 2015)

    Mr. Bernanke and Timothy F. Geithner, the Federal Reserve Bank of New York president at the time, agreed by email that a new $10 billion-a-week lending program was not big enough.

    “The number seemed small to me,” Mr. Bernanke writes. “I emailed Geithner, and he agreed. A half-hour later, we were at $25 billion a week, or $100 billion for the month of March.”

  3. UPDATE:

    George Clooney endorses Hillary Clinton for President.

    Will Hillary Clinton every release the transcripts of her speeches to Goldman Sacks so that we might see her "47%" remarks to Wall Street?

    1. But don't worry folks. Hillary said no bank is too big to fail and no executive is too bog to jail...