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You are here: Home / Economics / Free Markets Solve Everything / Goldman to Pay Half Billion Dollar Fine

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64Comments

  2. 2.

    BR

    This is maybe a better post to pass along this link on what this whole financial system’s bailout has really done:

    1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.
    2. Sell these MBS as “safe” to credulous investors, institutions, town councils in Norway, etc., i.e. “the bezzle” on a global scale.
    3. Make huge “side bets” against these doomed mortgages so when they default then the short-side bets generate billions in profits.
    4. Leverage each $1 of actual capital into $100 of high-risk bets.
    5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).
    6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.
    7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed.
    8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations.
    9. Slowly acquire trillions of dollars in Treasuries–not difficult to do as the Federal government is borrowing $1.5 trillion a year.
    10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries.
    11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending.
    12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands.

    (I would separate the paragraphs if I ever figured out how to do that in a blockquote…)

  4. 4.

    beltane

    At least they were not caught smoking a joint. That would really have landed them in some hot water.

  5. 5.

    tkogrumpy

    @beltane: With what these masters of the universe pay for personal security, it’s a wonder if they are ever caught at anything.

  6. 6.

    Elizabelle

    Yeah, the fine was a cost of doing business, and they might not have liked what came out at trial. In their interest to settle.

    Not a big enough punishment, but at least it was a punishment.

  10. 10.

    Kirk Spencer

    The longer this goes, the more my “simple tax” idea moves from humor to serious.

    1) All income is income, regardless of source.

    2) The first $100,000 per person (single or married, not kids) is tax free.

    3) Everything else is taxed at 50%.

  11. 11.

    cat48

    Yea, another BIG Obama FAIL. McCain would have gotten the $60B, clawed back bonuses & shut the company down.

    This is one reason business is so pissed at Obama. Things that we disregard as nothing. Fines. He has ICE investigating businesses & forcing them to fire illegals & then the Feds fine the business. Not employer raids. Just one ICE agent assigned to a business, perusing the record, taking the necessary action & moving on. Rethugs are really pissed off about this too, but I have not seen them publically criticizing him for it. I suppose they can’t because they want just “the border protected.” Not businesses hasseled! So far, ICE has hit 2900 businesses and fined $3M this yr.

    Obama is a fining machine.

  14. 14.

    Libby

    Not sure how poor little GS is ever going to recover from that stinging slap. Wonder if it also came with a sternly worded letter. Bet it’s really going to scare the bejeebers out of the rest of the malfeasors on Wall St, fer sure.

  17. 17.

    Corner Stone

    Sorry John Cole, but JMN really, really disagrees with you.
    And he’ll be by shortly to spreadsheet the shit out of why for you in 5..4..3..2..

  18. 18.

    Cat Lady

    @cat48:

    I are an Obot too, but don’t tell Glenn Greenwald. Make them pay, then make them look over their shoulder – Rome didn’t fall in a day.

  19. 19.

    That's Master of Accountancy to You, Pal (JMN)

    @Corner Stone: Well, other than the fact that decided to pull a number out of his ass that has no relationship to how much Goldman made over the last two years, not really. I mean, he was only off by a factor of four. Really, unless it’s a full order of magnitude, it’s nothing, right?

    Honest to god, it pisses me off that so many people who object to their opponents making things up turn around and demonstrate that they don’t believe that numbers really mean anything. Any old figure will do, and it doesn’t matter whether it actually means what they want it to mean.

    Given your past expressions that it’s a good thing that the job search process is filled with job seekers and potential employers lying to each other and trying to bait each other into inappropriate responses, I’m not surprised. Professional liars shouldn’t be expected to have respect for the truth in other contexts.

  20. 20.

    eemom

    So, who will be the first republican to apologize to GS for this latest Chicago-esque “shakedown”?

  22. 22.

    Mike in NC

    Goldman to Pay Half Billion Dollar Fine

    I bet that won’t happen once they call out their whores in Congress for relief. Maybe half a million?

  23. 23.

    Sanka

    Stupid banksters.

    I can’t wait until these Republicans are in the minority, and Democrats get a solid majority in both houses, then when Democrats get the White House, we can really stick it to those greedy bastiches, and their dirty Republican benefactors in government…

    Oh wait…

  24. 24.

    That's Master of Accountancy to You, Pal (JMN)

    Maybe one of these years, Congress will decide to raise the SEC’s budget enough that they can actually afford to take one of these to trial.

  25. 25.

    danimal

    Wanna bet that if Obama, Pelosi or Reid called for a half billion dollar tax hike that Goldman Sachs would solemnly declare the tax hike would bankrupt them? And the GOP would claim Wall Street would shrivel up and die, taking thousands of well-paying jobs overseas? Wanna bet??

  30. 30.

    Warren Terra

    @cat48:

    He has ICE investigating businesses & forcing them to fire illegals & then the Feds fine the business. Not employer raids. Just one ICE agent assigned to a business, perusing the record, taking the necessary action & moving on. Rethugs are really pissed off about this too, but I have not seen them publically criticizing him for it. I suppose they can’t because they want just “the border protected.” Not businesses hasseled! So far, ICE has hit 2900 businesses and fined $3M this yr.

    This.

    This was the subject of a big New York Times story on Saturday, and I was amazed by the resounding silence the story received in the blogs I read (I commented to this effect in an open thread here on Monday or Tuesday). The only way we can hope to reduce illegal immigration, if indeed we hope to do so, is to make sure there are fewer opportunities awaiting the illegal immigrant, and the way to do that is to crack down hard on people who knowingly employ undocumented workers (starting, ideally, with the most exploitative of these employers).

    I’d like to see bigger fines for Goldman for the things it did, and I’d like downright extortionate fines for AIG and for those counterparties who’ve benefited most from the AIG bailout (see: Sachs, Goldman). So I’m not sure I’d agree with you that “Obama is a fining machine”. But he is using fines in some good ways in ways that are improvements over anything previous Presidents have done, not just bettering the low bar of his immediate predecessor.

  31. 31.

    JAHILL10

    @cat48: This.
    And OT, I know, but without anyone noticing, the administration has also banned the use of antibiotics on healthy livestock, hopefully turning away one of the biggest threats to our nation’s food supply.
    Put another fan on JC’s junk. He really is Mr. Crankypants lately. While it might/would be emotionally satisfying to see some GS folks hit the pavement — hard– I’d rather have half a billion fine than business as usual which is what we would have gotten out of President McCain.

  32. 32.

    Warren Terra

    @General Stuck:

    Wonder if bankers make a big noise when they hit the cement?

    They have people to do that for them.

    And it’s spelled “banksters”.

  33. 33.

    cat48

    @JAHILL10:

    I read at TNR an article by Galbraith that said after 9/11, they took all the FBI agents that worked on Wall St and moved them to terror duty, etc. I wonder if any of them have been replaced down there. I’m hoping they will be soon if not. They helped investigate all these funny money tricks and people. They might have gotten harsher punishment for GS if they had had more investigative teeth. I wish someone in the useless WH press corp would ask the admin that everyday instead of if the Obamas were “going to vacation in the Gulf this year instead of fancy New England and if not, why?”

  34. 34.

    asiangrrlMN

    @Warren Terra: I like the term banksters. I believe I will use this term from now on. And, half a bill is better than nothing, but it’s basically the CEO team forgoing one night of coke, wimmenz, and dinner.

  35. 35.

    Steeplejack

    @BR:

    Blockquote primer:

    Last line of “regular” text above blockquote.
    &#060blockquote&#062
    Paragraph 1. Don’t leave a blank line above the blockquote, else your quote will be in bold. FYWP.
    &#095&#095
    Paragraph 2. Put two underscores between each paragraph to keep the blockquote together.
    &#095&#095
    Paragraph 3, etc.
    &#060/blockquote&#062
    Resume normal text. (Blank line not needed after blockquote. WP takes care of it.)

    (h/t Monkeyboy © 2009)

    In practice, all you have to do is put two underscores on the blank lines between the paragraphs of the blockquote, then highlight the whole thing and mash the b-quote button above the comment box. The stuff above just shows you how it will end up looking, in case you (or anyone) want to roll your own.

  37. 37.

    Janet Strange

    @JAHILL10: Wow! Antibiotics in the feed of healthy animals is stupid, stupid, stupid. It makes them put on weight faster (I don’t think anyone really understands why though there are several hypotheses) so I understand why ranchers do it.

    But the threat is more to the effectiveness of the antibiotics than to our food supply. See MRSA. Evolution by natural selection in action, right before our eyes, in our lifetimes. Take that, creationists!

    Those pesky pathogenic bacteria just keep evolving mechanisms to thrive in the presence of antibiotics when we just keep dumping them everywhere. Like in the feed of healthy animals. Then when we get a really serious bacterial infection . . . with a resistant strain of bacteria . . . sorry, don’t count on an antibiotic to help you out.

    I tell my students – you get sick with a bacterial infection there’s really only two possible outcomes. You get well or you die. We do (most of us) have an immune system, so a lot of the time, you get well, even without an antibiotic. But a hundred years ago, before antibiotics, the dying option was a lot more common. If we don’t start using antibiotics wisely, we’ll be back in those days too soon.

  38. 38.

    BGinCHI

    Plus the stock went way up today.

    GS, making America shittier and shittier one day at a time. Enjoy CT you douche bag pieces of shit.

  39. 39.

    The Main Gauche of Mild Reason

    @Janet Strange:

    I think the current theory about why weight gain happens in cattle in response to antibiotics is that the antibiotics kill intestinal flora that consume a significant amount of the animal’s calories. Seems pretty reasonable to me. The other possibility is that the bacteria produce something that’s important for satiation, and their absence makes the cattle voracious eaters.

  43. 43.

    cckids

    @Janet Strange: Yes, take this seriously. I have a 27 year old son, severely handicapped (CP, wheelchair, respirator) who was given 2 (!) antibiotic-resistant strains while in the hospital 4 years ago. He has both MRSA and a lesser known bug, pseudomonas. They flare up 2-3 times a year & he has to get a PIC line put in & have the only IV antibiotic that (kinda) works. He’s what they call “colonized” with both bugs. The drugs that work don’t clear it from his system, just make it back off for a while. It will kill him eventually. I’d love to have some way to show the hospital personnel whose errors caused this the pain & heartache they’ve caused. Bastards.

  44. 44.

    MikeJ

    @hg:

    And with the passage of Thought Control last year, they say NOW is the time to push their perverse “life-style” on every man, women and child in America.

    We passed thought control last year? Why are people still arguing about it if we control their thoughts?

  45. 45.

    Steve

    @That’s Master of Accountancy to You, Pal (JMN):

    The SEC has a budget? I thought they were self-funding via all these fines. $300 million, or however much they get to keep from this settlement, will hire a lot of bean-counters.

    By the way, it’s worth remembering that the SEC has 5 commissioners: 3 Democrats, 2 Republicans. Both Republicans voted against filing this case… the case that settled a couple months later for $550 million. Good call there, guys.

  46. 46.

    MikeJ

    @Steve: It’s not as if the SEC get’s to keep *all* the fines. This year Obama asked for an 11% increase in the SEC budget, bringing the total to $1.23 billion.

    That funding is based on SEC collecting $1.74B and funding operations with $1.23B.

  47. 47.

    FlipYrWhig

    @MikeJ:

    We passed thought control last year? Why are people still arguing about it if we control their thoughts?

    Obviously it didn’t go far enough. Another wussed-out compromise from the Obama FAIL administration. I’m starting to think he never really supported thought control at all.

  48. 48.

    Bill E Pilgrim

    Like many deep-sea cephalopods, Vampire Squid lack ink sacs. If threatened, instead of ink, a sticky cloud of bioluminescent mucus containing innumerable orbs of blue light is ejected from the arm tips. This luminous barrage, which may last nearly 10 minutes, is presumably meant to daze would-be predators and allow the Vampire Squid to disappear into the blackness without the need to swim far.

  49. 49.

    eemom

    @FlipYrWhig:

    we don’t need no education
    we don’t need no thought control
    no dark sarcasm in the clahssroom
    teachers leave us kids alone……

    OMG, Pink Floyd is Teh Obots too.

  50. 50.

    cmorenc

    The most enormous mistakes Obama made early on were:
    1) Geithner at Treasury
    2) Summners as Chief Economic Adviser

    Geithner is completely, thoroughly an inside creature of the Wall Street financial crowd. This (and his experience as head of the New York FED) supposedly gave him the understanding of the complexities of what went wrong and how to fix them, but what he inextricably brought with him was also a monsterously inflated sense of the the importance to the country of preserving the particular firms, institutions and people who ran it, including its compensation structure. Geithner’s key role in making the Obama Administration appear to give priority to generously serving and underwriting the Wall Street Financial class instead of making some heads roll and aggressively pursuing wholesale housecleaning was by far the most important factor in starting to undermine public confidence and support for his administration. That, more than Health Care Reform is what has made the Obama administration vulnerable to the whole series of GOP negative attacks, even though most of them are pure crap and the GOP itself was heavily responsible for fomenting the conditions that created the mess in the first place.

    Larry Summers is not only an arrogant windbag with as much expertise in alienating other people as he supposedly has with finance and economics, but as importantly he was a key player during the Clinton Administration behind legislation and other measures that contributed that administration’s share of responsibility for laying essential groundwork for the crash at the end of the Bush Administration (e.g. repeal of Glass-Stegal). Summers may be brilliant, but in much the exact same sense as Anton Scalia’s supposed brilliance is harnessed to and crippled by an incredible lack of wisdom and obtuseness about how real life operates outside of his own narrow elite circles.

    In short, some of the key help Obama hired turned out to be toxic assets. It is vastly less than reassuring that Obama has failed to recognize how necessary it is for him to fire both of them, and that he should have done so well over a year ago (and never should have hired either one in the first place).

  52. 52.

    Quaker in a Basement

    $60 billion in stolen money and a half-billion in fines?

    When you put it that way, it sounds less like punishment and more like the gov’t taking its cut of the vig.

  53. 53.

    Yutsano

    @Quaker in a Basement: Even more so when you realize the government only gets $300 million of it. The rest gets distributed to the two counterparties as part of the settlement. So even by that standard it’s even weaker sauce. But now they have a stain of saying “Well, we didn’t do anything wrong, but we’ll still shell out a ton of cash to make it go away.” Now the civil suits will come in droves. This ain’t even close to the end for GS.

  54. 54.

    fucen tarmal

    @Yutsano:

    good luck on that, GS alums and their college buddies go to law school and become judges too. they will pay, some, but really, more like cooling the marks. also, too, i bet many who sue them, will still be making money with them, carving up some other pie. the govt took less than a percent…

    that is a tax bracket i could live in.

  55. 55.

    bob h

    A possible downside for Goldman is that this represents a settlement with just two defrauded clients. Presumably there will be a long line of others seeking to be compensated. I think the final cost goes much higher.

  56. 56.

    Frank

    @BGinCHI:

    Plus the stock went way up today.

    The market hates uncertainty. Thus, pretty much any stock will go up when it settles a lawsuit since the market hates uncertainty.

    By the way, since late 2008 when this whole thing started, the GS stock has underperformed the Dow. This, in spite of having good earnings. So, if its stock went up today, it is still down when compared to 2008.

  61. 61.

    Jay in Oregon

    @TooManyJens:

    Agreed. How John manages to not overuse the hell out of that picture, I don’t know; it seems like every 3rd post could use it.

  62. 62.

    Jay in Oregon

    @Quaker in a Basement:

    Sophie: These are not small fines. Last year, my department handled a case where the company had to pay out 2.5 billion dollars.
    Darren Hoffman: Oh yeah, everybody heard about that. But what the news didn’t tell you is that that company made $16 billion on the same drug. That fine was 14% of the profit. Fourteen. Percent. That’s like tipping your waiter: “Thank you very much for taking our drugs. Here’s a little something for your family.”

    — Leverage, The Double-Blind Job

  63. 63.

    burnspbesq

    It’s not likely to appease anyone who’s not in the mood to be appeased, but Goldman has apparently agreed as part of the settlement that the $ it is paying is a “fine,” which is not tax-deductible. So it really is costing the firm that much.

  64. 64.

    arguingwithsignposts

    So late, but until some of these banksters spend *hard* time in prison for their shenanigans, no amount of fines will do a damned bit of good. And besides, won’t they be able to deduct these from their taxes? (thanks burnspbesq)

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