Image via Wikipedia

Goldman Sachs will announce its giant bonuses today. The SEIU has been researching the bank and this summary of its service to humanity:

GOLDMAN SACHS

Federal taxpayer bailout funds received: $63.6 billion
Profits for the years 1998-2008: $46.8 billion
Profits for the first half of 2009: $5.2 billion
2007 Goldman CEO Lloyd Blankfein pay: $70.3 million
2008 bonus pool: $4.8 billion
First half 2009 bonus and compensation pool: $11.4 billion
Bonuses (top 5 execs) last 10 years: $543.4 million
Effective tax rate in 2008: 0.6%
Offshore subsidiaries in tax havens: 29
Lobbying fees in first 9 months after bailout: $1.8 million.
Campaign contributions in 2008 federal elections: $7.1 million

Role in subprime crisis:

• Goldman Sachs had a hand in the worst of the subprime lending excesses, providing financing to three of the five largest subprime lenders: #3 New Century Financial Corp., #4 First Franklin, and #5 Long Beach Mortgage Co. This financing provided the companies with the capital they needed to originate subprime mortgages. Together, these firms issued more than $200 billion in subprime loans from 2005-2007.
• Goldman Sachs played a major role in underwriting and selling the exotic financial instruments like credit default obligations or CDOs that fueled the subprime machine through mortgage backed securities. Just before the housing bust, Goldman was ranked third by Bloomberg in the underwriting and sale of CDOs, earning $239 million. The CDO market was further fueled by other exotic financial instruments called credit default swaps, a form of insurance against possible mortgage defaults. Here again Goldman was a major player, getting bailed out on its bad bets when the government saved AIG from tanking.

• When the housing bubble burst, Goldman was hit with a series of lawsuits, including one by New York state regulators; after being subject to another investigation in Massachusetts for misrepresenting the quality of their mortgage backed securities, Goldman eventually agreed to pay a $60 million settlement.

Profiteering off the bailout and gambling with taxpayers’ money:

• Goldman Sachs put taxpayers on the hook for up to $63.6 billion in bailout funds and programs plus an unknown amount from the Federal Reserve’s $8 trillion in emergency programs. While Goldman has since repaid its $10 billion in TARP money, allowing it to avoid government oversight on executive compensation, it doesn’t have to repay the $12.9 billion received through the AIG bailout, which is even larger than the $10 billion it repaid.

• In order to access these billions of taxpayer bailout money, in September 2008, Goldman Sachs sought and received approval to become a bank holding company. As a bank holding company, Goldman should be subject to much stricter regulations and oversight. However, Goldman sought and obtained a Federal Reserve waiver from Market Risk rules required of commercial banks.

• Instead of using the bailout funds to shore up its capital base or expand lending, Goldman has issued its highest dividends to shareholders since 2003, shopped for acquisitions internationally, lavished bonuses on the same financial personnel who contributed to the crisis, and increased the amount of capital it’s put at risk. According to the company’s CFO, Goldman’s “model really never changed.” In fact, 78% of the company’s most recently reported revenues came from high-risk trading and investments, and potential trading losses on any given day were at an all time high of $245 million, up (75%) from the $139 million held at risk before becoming a holding company. In response, ten legislators sent a letter to the Federal Reserve accusing Goldman of “officially gambling with government money,” and requesting justification for their exemption. Two and a half weeks later, the Fed authorized Goldman to morph into a Financial Holding Company, which basically allows it to continue these high risk practices at taxpayer expense.

• Goldman literally gambled with California taxpayer money, advising its investor clients to take advantage of the state government’s financial crisis by betting against state bonds that Goldman itself had helped sell, pocketing millions in fees. The giant investment firm did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California’s deepening financial misery. In Sacramento, officials said they were concerned that Goldman’s strategy could raise the interest rate the state would have to pay to borrow money, thus harming taxpayers.

• Goldman’s bailout money has gone little to help struggling homeowners. Goldman’s loan servicing operation, Litton Loan Servicing LP, has started trial mortgage modifications for only 3% of its 103,871 borrowers who are eligible for the Obama Administration’s Making Home Affordable Program (and are at least 60 days past due).

• Moreover, Goldman is back in the mortgage securitization business, repackaging the mortgages that have been stuck on their books since the housing bubble burst and now selling them as a new product. Known as “re-remics”, they simply pull out the worst of the bonds to boost the credit rating to make the sale, kind of like what brought on the financial crisis in the first place.

Related articles by Zemanta

• "Suck on Our Yachts": Goldman Sachs Issues Non-Apology for Destroying the World Economy (bravenewfilms.org)