Saturday, April 17, 2010

Saturday Bidness

Steve Benen:
* Wow: "Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail. The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers."
John Cole: Sociopaths

Sen. Bob Corker, one of the people who helped draft the resolution aspect of the financial reform legislation and who knows full well that McConnell is lying, joined every other Republican in signing a letter opposing the bill. “Moderates” Susan Collins and Olympia Snowe signed as well. In for a penny, in for a pound.

This is not an opposition party, it is a suicide cult. Except they are holding the gun to your head and apparently are not having second thoughts about pulling the trigger.

DougJ: Nuclear waste dump

I’m trying to get a feel for the Goldman investigation. Felix Salmon takes a detailed look at the charges here and sums up:

The scandal here is not that Goldman was short the subprime market at the same time as marketing the Abacus deal. The scandal is that Goldman sold the contents of Abacus as being handpicked by managers at ACA when in fact it was handpicked by Paulson; and that it told ACA that Paulson had a long position in the deal when in fact he was entirely short.

(note: the Paulson here is not Hank, it is the hedge fund Paulson and Co.)

Essentially, Goldman was selling investors CDOs that Goldman thought were worthless and was lying about who assembled the CDOs along with what the actual assembler really thought of the CDOs’ contents. The former is legal, the latter may or may not be.

Goldman exemplifies need for GOP-opposed reform April 16: Rachel Maddow talks with Pulitzer Prize-winning columnist Eugene Robinson about the SEC's lawsuit against Goldman Sachs and the seemingly ill-advised Republican opposition to financial reform.

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After reports surfaced yesterday that the Securities and Exchange Commission is going after Goldman Sachs, both sides of the political divide tried to seize on the news to make a larger point. Only one side made sense.

For Democrats, the case was pretty easy -- Goldman Sachs' alleged wrongdoing only reinforces the obvious need to pass Wall Street reform, bringing new safeguards and accountability to the financial system. For congressional Republicans, the argument was a little trickier.

Republicans sought to tie President Barack Obama to Wall Street firm Goldman Sachs after it was hit with civil fraud charges.

House Minority Leader John Boehner (R-Ohio) released a statement after the Securities and Exchange Commission filed charges against the Wall Street titan, calling the firm a "key supporter" of the president's bid to reform the nation's financial regulatory system.

"These are very serious charges against a key supporter of President Obama's bill to create a permanent Wall Street bailout fund," Boehner said Friday in the statement. "Despite President Obama's rhetoric, his permanent bailout bill gives Goldman Sachs and other big Wall Street banks a permanent, taxpayer-funded safety net by designating them 'too big to fail.' Just whose side is President Obama on?" [...]

Boehner's office also pointed to Goldman employees having collectively contributed more than almost any other company or institution to Obama during the presidential campaign.

Boehner's analysis of the legislation is, on its face, idiotic. But putting the obvious legislative nonsense aside, I can't quite wrap my head around Boehner's political point.

To hear the dimwitted Minority Leader put it, the Obama administration and Goldman Sachs are close allies, and the administration-backed reform bill is intended to help firms like Goldman Sachs. And we now know for sure that administration officials are carrying water for Goldman Sachs because ... they just charged Goldman Sachs with fraud.


I'm trying to imagine the conversation in Boehner's office when the statement was being written. Which genius on Boehner's staff discovered that the Obama administration is going after Goldman Sachs, regardless of its campaign contributions to Obama, and thought, "A ha! Now we've got 'em!"

Let me try to explain this is a way even Boehner can understand: when the Securities and Exchange Commission accuses a major Wall Street firm of fraud, that's not good for the firm. If the administration were trying to do favors for Goldman Sachs, it wouldn't file a civil lawsuit against the firm.

"Just whose side is President Obama on?" Well, as of yesterday, he doesn't appear to be on Goldman's side. Given that Republicans are trying to shield Wall Street for accountability and safeguards, the better question is, "Whose side is Boehner on?"

Beutler (TPM): Republicans And Democrats Dig In For Bruising Fight Over Wall Street Reform

It's shaping up to be a clash of the titans.

On the one hand, Senate Democrats aren't stepping back an inch from their pledge to move ahead with financial regulatory reform, with or without Republicans, by the end of next week. In fact, just today, President Obama threatened to veto a final bill if it's weakened too much during the legislative process.

But on the other hand, Republicans have coalesced around a strategy of uniform opposition to the Democrats' draft legislation authored by Senate Banking Committee Chairman Chris Dodd.

So we're at an impasse.

Democrats don't want to deviate far from the Dodd draft, and they love the politics of putting Republicans and Wall Street on the same side of a battle line. They hope the optics there will be so bad, that Republicans will ultimately be shamed into caving. But ultimately Dems need 60 votes simply to debate the bill, and if the Republicans stick together in the face of a likely political backlash, there won't be a bill. And nobody knows dedication like the Senate GOP.

Assuming Dodd, and his counterpart Sen. Richard Shelby (R-AL) don't reach some sort of agreement this week, this can only play out in a handful of ways:

--One or two Republicans could break off next week and allow the bill to come to the floor.

--If that doesn't happen, Democrats could stick to their guns, until political pressure forces the GOP's hand.

--The political food fight could continue, while in the background Democrats and Republicans reach a compromise of some kind.

--Despite the...highly questionable...nature of the claim, Republicans could win the spin war and convince the public that the Dems' bill really will lead to "endless" taxpayer funded bailouts.

--Republicans can go down swinging, and no bill will pass.

Now, it's important to note that Republicans are mainly taking issue with the sections of the bill that deal with "Too Big To Fail" institutions. And Obama linked his veto threat to a separate section of the bill that addresses derivative trading. And though Republicans also oppose Dem proposals for regulating derivative swaps, it's conceivable that an agreement will be reached whereby Republicans give Dems ground on derivatives, while Democrats inch toward the GOP position on resolution authority, etc. Today, Senate Agriculture Committee Chair Blanche Lincoln unveiled far-reaching legislation to regulate the derivatives market.

It's also important to note, as I did in this post, that while the GOP's tone is pretty extreme, they haven't vowed to use Senate filibuster rules from preventing the bill from coming up for debate. So there is some wiggle room.

But with rhetoric this heated, it's hard to imagine the two factions joining hands to sing kumbaya before this comes to a head.

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