Goldman Sachs Stole $3 Billion in TARP Funds from You, the American Taxpayer

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>> you $10 pl se. serio seriously, they do. a lot of banks got backdoor bailouts. at the time, goldman claimed they were just passing that money on to their clients and the whole economy would go down if their clients didn’t get paid. now we find out that they kept nearly $3 billion of taxpayer money for themselves. that’s about $10 for every man, woman and child in the country. think about that for a second. you had to take money out of your taxpayer dollars and give it over to the richest bankers in the country who caused the collapse in the first place. quote, goldman sachs capital si ized to get more money from the insurers. $2.9 billion from proprietary trades, goldman kept for their own profit. they distributed $2.9 billion into their own coffers. and goldm maclearly needed it. goldman sachs posted more than $ $13 billion in profit. and that was after paying out $16 billion in compensation. so they kept $3 billion of your money in the middle of making record profits for themselves. by the way, who was the guy who made the decision to pay goldman on behalf of the government? that would be then treasury secretary hank paulson who was once head of? goldman sachs. this is one of the many infuriating revelations released by an inquiry commission today. but it’s just the tip of the ice bergs. here’s the headline from the chairman of the commission.

>> we concluded first and foremost that this crisis was avoidable.

>> i love that man. everyone likes to pretent it was a national disaster that couldn’t be avoided. there was nothing we could do. no one saw it coming. jamie dimond says these things happen every seven years or so. there was nothing we could to.

>> this crisis was avoidabavoidable. despite the views of many in the financial and political power the crisis could not be foreseen, there were many, many warning signs that were ignored or discounted. let be clear — this calamity was the result of human action, inaction or misjudgment. nonmother nature or computer models gone haywire.

>> when we deregulated the banks and hoped they wouldn’t take huge risks, that was an enormous mistake. and by the way, a mistake we continue to make since financial reform didn’t change that at all. look, this is a bipartisan problem. there’s no question that bush and his treasury secretary were the ones who deregulated and did the original t.a.r.p. bailout in the first place, everybody knows that. but the obama administration has p continued to pretend there’s no problem. tim geithner was the one who went along with the backdoor bailout to goldman again in the first place when he was head of the new york fed. president obama literally couldn’t have found anyone more guilty of the bailout unless he renominated paulson. in my opinion, the bankers and the government combine to rob us blind. this report explains exactly how they did that. but there’s one thing we request do. we can at the very least ask for our money back. goldman nearly took $3 billion in taxpayer money and put it inaire pocket. there shouldn’t be a conservative, a liberal or a moderate in the government who should stand for that. we invited tea parties and republicans to come on the show and talk about the outrage. somehow they couldn’t make it on the show. i don’t know if that’s because their leadership has already been co-opted by the banks and big business or just because they didn’t have time today. but i want to continue to extend that invitation to them. you’ve got to help get taxpayer money back for all of us. this is something the whole country should agree on. now joining me is one of the members of that financial crisis inquiry commission, brian giorgio. great to have you on today.

>> nice to be with you.

>> what caused the collapse in the fist place? obviously angelini said it wasn’t a natch rat disaster. it was avoidable.

>> there were extraordinary risks taken, huge amount of leverage, very little capital that placed a number of financial institutions in highly precarious situations. there were failures in the regulatory process. we entrusted the federal reserve and others to act on behalf of the safety and soundness of the entire financial system, and there were many, many warning signs that were ignored and no action was taken.

>> i want to go to this backdoor bailouts that i just talked about in the opening piece there. i literally put together a protest on this months ago, myself. because i thought it was the most outrageous thing i had ever seen. and now we find out that goldman did keep $2.9 billion of it. is there any justification paying goldman 100 cents on the dollar when at that point the most they would have gotten was the 20% from the market according to most people. am i missing something here? or is it as egregious as it looks?

>> well, there’s no question that many people wondered how all the counterparties who were owed money received 100% on the dollar. but that judgment was made by the people in the trenches at the time. and really it’s not our function as a commission to second guess those judgments. aig entered into credit default swap contracts under which they agreed to insure the counterparties against the failure of those particular securities, and to that extent, aig owes them the money. now, if aig had gone out of business, had it not been bailed out by the government, of course, they wouldn’t had been able to pay the money and the counterparties would have been left holding the bag with insurance that couldn’t pay. so now the question is, now that the government has infused some $180 billion into aig and some portion of it has found its way to goldman to compensate them for proprietary trades they made on their own account, should they be able to keep it? well, they were owed it, so that’s an argument they ought to be able to keep it. on the other hand, many people are outraged obviously that taxpayers had to be placed on the hook for losses that were created by circumstances people went into with their eyes opened.

>> yeah, i didn’t make the bet with goldman sachs. aig made the bet with them. and goldman sachs should have known they could go bankrupt. for me to pay that bet off is crazy talk. look, i know it’s not your fogs to judge. it’s my position to judge and it’m telling you, it’s crazy talk. you laid out great information to make that judgment with actual facts. i want to ask you, go ahead.

>> we, i hope you’ll get a chance to read it and your listeners will get a chance to read it. we spent almost a year and a half, interviewed some 700 witnesses, conducted 19 days of hearings around the country with witnesses and experts. and this is a very thorough rendition of the facts, and people can come to their own conclusions. we reached the whole variety of conclusions, the most significant of which is that was an avoidable crisis. it’s an act of god or a calamity that befell us. it was a crisis that was the result of human action and failures to act in both the public and private sector.

>> that leads me to the final question here. look, it could have been avoided before and it wasn’t. and i get a sense from you guys that we didn’t really fix it. even though we can avoid it in the future, we’re not going to. if the current system holds, it’s probably going to happen again.

>> well, we certainly all hope that it won’t, but the really is there are several elements of the financial system that are not really in significantly better shape today than we were before the financial crisis. for example, the top banks held about 58% of the assets of the financial services industry about four years ago. and today, they hold 63% as a result of the merger of bear turns and the jpmorgan chase, the purchase of merrill lynch by b of a and the bankruptcy of lehman brothers. so the consolidations have placed us in a situation where there’s even more consolidation and concentration of assets in the financial sector. so the real question is, are we going to face the same difficult choice that the leadership of america was faced with a few years ago. to either risk the collapse of the financial system by permitting these large institutions to fail, or infuse trillions of taxpayer dollars to bulk them up so that we can avoid what many people thought would be an even greater catastrophe. and that’s, of course, been the subject of great speculation. it’s certainly one of the things that many people in the center and the right and the left all agree upon is that when people make big risky bets in the private sector, they ought to have the right to gain when they succeed and fail when they don’t succeed. and in this instance, they were only permitted to gain on the upside and the taxpayers picked um the down side.

>> that’s exactly right. and the whole country should agree to that. i hope the whole country reads your report and takes action. unfortunately, it seems neither one of our parties are interested in fixing it. thanks for joining us and being a part of that important commission.

>> thank you very much. a pleasure to be on your program. .

>> for more, let me bring until a member of the house oversight and government reform committee, now investigating t.a.r.p. congresswoman, let me ask you first about goldman sachs. any way we can get that $3 billion back for the american taxpayer?

>> i believe we should. i have a bill that first of all would recoup all their bonuses at 100%. and in addition to that, i would be the first in congress to tax them to get our money back. over the last two years they made doverover $22 billion in profits. yet they rigged the system because they have so much power. six banksthe money in this country. think how concentrated and uncompetitive our credit system is and how they stifled lending at the local level, which is hurting our recovery. they have so much power, they were able to get their nose, goldman sachs under the tent of the fdic. they made the american taxpayer their insurance company. it’s wrong.

>> they got bigger as the commission explains. the whole thing is an outrage. honestly, they bought both sides. but tim geithner? for him to be appointed with an outrage to begin with. let me turn to the republicans. if you say hey, i want to get my money back. and they have all those points on the tea party guys, they’re not going to agree, are sna.

>> it looks dicey right now. the financial services industry is the largest contributor in presidential and congressional races. we need to get the money out of politics. in fact, this week, the republican party took away the voluntary contributions that citizens could make for public financing of our cam pins. — campaigns. this isn’t required. it’s voluntary. if people know our current system is taking their government away from them by these big interests, they would be the first to say we ought to reform campaign finance, but the very individuals, the very companies that are the biggest givers are the ones that just put their hands into the taxpayer till of this country. we’ve got to return our republic back to the american people.

>> owe know, one of the vice presidents of goldman sachs came out and said oh, no, no, no. the real problem is regulation. we’re overregulated. the republican guys they bought go along with that. part of the republicans on the commission who put out their own comical version of the report, not mentioning wall street at all. they literally banned word wall street from their commission. what do you do when the other party purposefully ignores the actual facts in the case. .

>> hank paulson who headed goldman sachs with the secretary of treasury in september, october of 2008 when all of this came down, and joshua bolton who had run the goldman operation in england was the president’s chief of staff, president bush’s chief of staff. they were in the cat bird seat when all of thf was rammed through the congress at lightning speed back in 2008. so you can really criticize that administration, but if you look at the current administration, and the legislation that passed, it didn’t break up the big banks, it didn’t restore competition to the system of credit we have in this country because you had people like michael patterson and others brought over from gold map. they maintained their position. it’s almost like a wall street government.

>> yeah, that’s the kind of honesty i like. democratic administration, but it’s absolutely true what you said. we really want to thank you for coming on tonight.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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