Why? Because that’s what it’s been programmed to do. Anyone who thinks the market is being pumped by new money is having an out-of-mind experience.

The Federal Reserve – Oracle of Delphi – held its first press conference this week since it was established in 1913, (only took 98 years). The markets lapped up Fed Chairman Ben Bernanke’s indecipherable blather and zoomed higher.

The market couldn’t possibly go down following Bernanke’s insistence that our economy is on the right track. He stated that rising prices are a passing phenomena, that inflation is under control.

Over 200 tornadoes devastated a broad swatch of six southern states hours after Bernanke spoke (a sign?), leveling cities in Alabama and elsewhere. Over 300 dead, 1500 injured, but the market rallied further the next day – and yes, the day after that. Worst tornadoes in 40 years – perhaps in the history of our country. Devastating losses that left people stripped of everything but the clothes on their backs. For many, those were in shreds as well. Who cares? Not Wall Street.

Remember when the market “flash crashed” 500 points in May, 2010, supposedly due to one trader pushing the wrong button, (you really believe that?). Nearly a trillion dollars in wealth instantly disappeared. That single “mistake” allowed the government to institute a limit on how much the market can fall in any given day – no more than 10 percent. No crashes allowed here. Everything is orderly, and the market will never, ever, not in your life-time, go down. Or at least not until Bernanke and his bankster friends decide that it should.

I just loved the part where Bernanke declared that he’s personally committed to transparency. Give me a break. He’s committed to avoiding the Fed audit that Members of Congress have been trying to pass for years. He’s committed to defusing calls for an end to the Fed’s “private” cartel power. Ben Bernanke reminds me of Sara Bernhardt. He’s a fantastic performer.

Or perhaps he has more akin with Mae West, who said: “An ounce of performance is worth a pound of promises.”

Related Posts:

Economic Revival: Economic Revival Wisdom Proven Wrong – Forcasting our Future

Quotes that remind us what economic revival “crash and prosperity” experts didn’t know then and cannot know now re economic recovery. Courtesy of Rights Radio forensic economist and author, Dr. David Goldenberg. “We will not have any more crashes in our time.” – John Maynard Keynes in 1927

Federal Reserve Declares Recession is Dead: Twelve Indicators that Economy is in Trouble

Economists & Fed Declare Recession is Dead. Real folks don’t believe it. Twelve top indicators that the economy is bad.  CEO’s are now playing miniature golf.

Federal Reserve Audit: Why Bernanke held First Fed Press Conference originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on April 29, 2011.

Listen to the show – read the full post below:

The market may have hit a high point on October 13, 2010 – only time will tell.

Yet, we know that 70 billion dollars was drawn out of US mutual funds in September, 2010 – further proof that Wall Street no longer needs investors to push the market higher. We also know that nearly 70 percent of trading is now done by high-speed computers relying on complex algorithms.

So-called “surprise” news of a sharp rise in food and energy prices (what a shock), plus a  20.6 percent rise over the past year in the US trade deficit with China, gives Wall Street players an excellent entry point to short the market. Never mind those enticed to buy in at the top.

Just as major US companies no longer need US workers to sustain and increase their profits (40 percent of their profits come from overseas markets), Wall Street has freed itself of “little guy” investors. Market players can force the market higher with a mere touch of a button – while pulling out their cash and forcing shorts to cover – which pushes it up even further. We’ve all seen this picture before.

Greatest Wealth Heist in US History

For those who still have retirement savings in the market, the upward momentum of the past few months was a big relief. But don’t get too comfy…or grateful.

Wall Street players received 144 billion in bonuses for the greatest con in American history – “convincing” Main Street to bail out their companies. Now they’re playing the market like their own private pin ball machine – perhaps even assisted or directed by the highly secretive US Government Plunge Protection Team. We’ll never know.

Wall Street pundits also insist that US corporations are sitting on “trillions” in cash, just waiting to reinvest in research and jobs. Oh really?

The lure of “trillions of dollars” has a familiar echo. Pundits insisted that there were trillions of dollars in investor cash waiting on the sidelines only days before the market crash of 2000. Using numbers so large, who can contest it? How does anyone know precisely how much cash is hidden in corporate coffers – or how they plan to spend it? Which corporations exactly?

While the Wall Street cup runneth over, a portion of the long-term and under-reported unemployed may never work at “real” jobs again – and don’t have sufficient resources to start their own businesses or go back to school.

Approximately 48 million Americans depend on food stamps, the number of homeless in many cities has doubled in the past year and 1 in 5 Americans are facing foreclosure or are upside down in their mortgages. Yet, 72,000 stimulus checks worth $18 million dollars were sent to deceased individuals.

Wall Street received mega-billions for pulling off the greatest economic heist in American history – obliterating the wealth of Main Street – with the complicity of two presidents and the US Congress.

Now think about that 144 billion dollars in Wall Street bailout bonuses and the shibboleth that if talented types didn’t get their fat raises, they would exit for another Wall Street firm. Or the 183 billion in our money to save insurance giant AIG. Yet, who is saving one American after another from economic ruin?

When President Obama declared on October 12, 2010 that he would not support a moratorium on foreclosures – thus trapping a greater number of homeowners in a downward spiral – Wall Street sent the market higher.

Compare that to Chile’s expenditure of $30 million to rescue the miners trapped beneath the earth – one million per miner. Chilean President Sebastian Pinera put his presidency on the line, proof that the lives of his citizens mattered more to him than money. Wish it were so here. God Bless the President of Chile for reminding us that true leaders protect their people.

When President Pinara thanked numerous presidents and prime ministers for phoning him during the crisis, one name was unmistakeably absent.  Need I say?

To the American people…

Dr. Joyce Starr

Wall Street vs Main Street: Greatest Wealth Heist in US History originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on October 14, 2010.

If you’ve been listening to our show and/or reading my posts, you know I try to bring crucial facts to your attention.

So let’s examine the sequence of events concerning Goldman Sachs.

For those who prefer audio, please click the play button below.

NEWS ALERT! Pirates Open Investment Banking Division

Goldman Sachs realizes that the housing market is heading south by mid-2007 and bets against it. They lose over a billion dollars, yet their balance sheet remains in the black in 2007 and 2008 because they hedged their bets.

Goldman donates four times as much to the Democratic Party as the Republican Party in 2008 – including a sweet $1 million directly to the Obama campaign. Goldman spent over $2.8 million in 2009 on Washington lobbyists. One can assume the numbers were roughly the same in 2007 and 2008.

Surprise! In late 2008 – less than a month before the election – Goldman receives $10 billion in TARP “emergency” funding – thanks to an emergency bill that few Members of Congress read before they sign it.

Americans were told that the sky will fall if the biggest banks aren’t saved (from themselves). Banks agreeing to receive preferred stock TARP investments from the Treasury included Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. (including Merrill Lynch), Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street Corp.

Six Goldman officers and advisers are then appointed to KEY positions in the Obama Administration. Within a year, Goldman profits and bonuses are soaring. Break out the champagne. Does anyone seriously believe ANY of this was a coincidence? Goldman didn’t game the American system. The system is Goldman’s partner.

It’s the American people who were gamed. Maybe it makes sense after-all.

Was Goldman in serious financial trouble from the housing crisis? Was Goldman in danger of going bankrupt? Could Goldman have failed without bailout support? NO! Goldman Sachs CEO Lloyd Blankfein said so himself with the entire world watching. He stated that Goldman exposure to the housing crisis was limited in 2007 and thereafter contained when they hedged  their bets by betting against mortgage backed securities. Yet, there was no follow-up, nary a word, from Senate Committee members on this revelation.

I spoke with a Washington insider, an attorney who works closely with the SEC. I asked his opinion on the SEC action against Goldman,and here’s what he said: “What they did may not prove to be inherently illegal, but it is morally reprehensible. If you believe the SEC did, Goldman went too far.  It’s not your typical fraud case, where x number of people profited. Paulson made a great deal of money. But Paulson wasn’t named, because he didn’t misrepresent anybody in particular.”

I asked, “With so many former Goldman officials in the Obama administration, didn’t it take guts to go after Goldman?”

He responded, “Frankly, nearly everyone who matters has worked at Goldman, Merrill and Bear Sterns. You want senior economic officials to know what they’re talking about. But the head of SEC enforcement, Robert Khuzami, is a tough guy. What took courage is going after the one company that people thought was doing the right thing, but in fact, were just about as evil as they come. They make the rich richer and the poor poorer. They’re all out to line their own pockets.”

Robert Khuzami is a…no-nonsense, thorough, award winning Prosecutor: This guy is the real deal — he busted terrorist rings, broke up the mob, took down security frauds. He is now the director of SEC enforcement. He is fearless, and was awarded the Attorney General’s Exceptional Service Award (1996), for “extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation.” When you prosecute mass murderers who use guns and bombs and threaten your life…you ain’t afraid of a group of billionaire bankers and their spreadsheets. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle. ~ Barry Ritholtz, Ritholz.com

Goldman Chairman Lloyd Blankfein said that “The worst day of his life is losing other people’s money.” Do we really believe that? Or that he understands what worst days can be for people who lose their homes, life savings and hope? Zachary Roth of tpmuckraker.com assembled some interesting numbers:

- Goldman received $10 billion in TARP funds through a Treasury Department purchase of preferred stock. Goldman got a much sweeter deal on those loans from Treasury than it did when it raised capital from Warren Buffet a month earlier. The more generous terms are worth an additional $500 million a year to Goldman.

- But Goldman was also a major counter-party to AIG’s disastrous credit default swaps. As a result, Goldman was the biggest American beneficiary of the various government bailouts of the collapsed insurance giant (which itself is almost 80 percent owned by the federal government):

- Goldman received $4.8 billion from AIG’s securities lending unit.

- It received $5.6 billion, almost twice as much as any other American bank, from Maiden Lane III, the Fed’s “special purpose vehicle” created to unwind AIG’s credit default swaps;

- And AIG posted $2.5 billion in collateral to Goldman last fall, which came directly from its government bailout, according to AIG’s own list of what it did with its bailout money.

- Goldman is getting an additional several hundred million dollars per year in interest savings, according to Gross, thanks to an FDIC program that guarantees bonds issued by banks. Under the program, which is designed to make it easier for banks to raise capital, Goldman has sold $21 billion in bonds since November.

A commenter on Roth’s article asks: How is it that Goldman, the largest beneficiary of the AIG collapse and bailout, was able to negotiate a $10B bailout of their own – while denying that they had a direct stake in what happens to AIG? And when they were never in danger of collapse?

According to Wikipedia, numerous TARP recipients failed to use the money for the reasons it was injected.

Others told investors their money was invested in the federal TARP financial bailout program and other securities which didn’t in fact exist. Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), told lawmakers, “Inadequate oversight and insufficient information about what companies are doing with the money leaves the program open to fraud, including conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.” An overwhelming majority of banks saw the program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future.

Something is terribly wrong with this picture. If Goldman saw major problems int the housing industry by mid-2007, didn’t other major banks anticipate it as well? Is it possible that the TARP party was planned well in advance of the so-called crisis of October, 2008? That the players had already lined up to get their unfair share of our future. Will we ever know the truth?

The one thing that we do know is that the SEC action against Goldman is a fault line. An earthquake of revelations could soon erupt that will put the entire system to shame.

Could the Goldman fraud be the first in a series of  post-TARP scandals? We welcome your opinion.

To the truth,

Dr. Joyce Starr

Related Posts:

US Economic Numbers Don’t Add Up: Why So Giddy Over Economic Recovery?
Contradiction! We’re nearly 13 trillion in debt but the economy is recovering. The stock market has outstripped Vegas as the playground of choice for bankers, brokers and the super-rich (again), while American workers depend on a roll of the dice. Dr. Joyce Starr & Joe Stallard discuss an obvious contradiction…

Goldman Sachs Bailout Winner Dominates Banking Landscape
Under the policy enacted by former U.S. Treasury Secretary Henry Paulson, Goldman’s chief executive until 2006, key competitors have failed or been diminished. Goldman is now poised to dominate the investment banking landscape. The following article by David Weidner appeared on MarketWatch.com on April 7, 2009 in Weidner’s “Writing on…

Goldman Sachs: Betting Against American Taxpayers – Betting on TARP Bailout originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on May 1, 2010.

Can't Wait to Bid You Goodbye

The Senate health care vote was one of the saddest events since 911.  At least half of the voting public was officially abandoned by the ship of state. Their voices weren’t silenced. They were simply ignored.

Senator Harry Reid extolled the True Congressional Ethos: Buying and selling votes is how business gets done, he explained.

The country and western song, “Mothers, don’t let your sons grow up to be cowboys” had it all wrong. The words should be: Don’t let your sons or daughters grow up to be Members of Congress – or more specifically in this case, Democrats.

Reid & Company claim that they saved 30 million Americans or more from life without health insurance. But in fact, they shamed the majority of Americans with their dictatorial behavior.

It’s no wonder that so few adults – let alone children – can only name a handful of Senators or Congressmen.

There are heroes among them, notably the handful who refuse to lobby or vote for earmarked funding for their districts or state. But  ‘hero’ is not a word easily associated with a senator or congressional representative. Indeed, anti-hero would be a more appropriate term in many cases.

Perhaps it’s better to be cast overboard than to remain on a ship of fools.

Fortunately, help is on the horizon. Can you see the flag?

It’s a gigantic battleship called the American Spirit. And amazingly, there’s room for all of us on deck.

What Do Tiger Woods & Senate Democrats Have in Common? originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on December 22, 2009.

Tea Party Express Signs: Go Green: Recycle Congress & We’re Not Your ATM.

Here’s the picture as of September 9, 2009.

1) US Government bailouts = $780 billion.  Yet Social Security liability is reportedly between $10- $17. 5 trillion (depending on the source of the data). Social Security & Medicare liability combined are estimated at $106 trillion. The FDIC is also cash-strapped (down to $10 billion from $60 billion) and will likely look to the US Treasury(taxpayers) for support.

2) We’re facing $12 trillion in debt by 2019. Over a $100 billion is added to national debt every 5 weeks.

3) We pay over $1 billion in interest to China each month.

4) Loss of US household wealth  since the financial meltdown began – $12.196 trillion. (A number of economists estimate the loss of global wealth at over 50 trillion dollars.)

5) The White House granted over four billion dollars to 500,000 car owners, but raised Medicare costs for millions of seniors – with major reductions in care proposed for the future.  The White House is proposing  to cut roughly $150 billion from the highly popular Medicare Advantage program.  One in five seniors enjoy richer and more varied benefits with Medicare Advantage than those in traditional Medicare.

Respected researchers contend that the swine flu is no worse than the ordinary flu – affecting similar numbers – yet the US Government announced this week that half the population will be affected. And we still don’t know what’s in the vaccine. Testing will begin on American soldiers, who have  little or no choice but to submit. The price tag for (and dangers of) inoculating the nation? Unknown.

6) The Administration is now instructing injured and aging vets that they can choose death with honor. The Administration wanted to do so for all seniors, but faced overwhelming public opposition.

Who stands to benefit from the apparent campaign to brainwash the choice of death on the aged and injured? Wall Street! (Stay tuned for bundled insurance investment that will pay investors when you die.)

Over 75 percent of the US population suffers from mild to acute stress. While the new policy will help sell antidepressants, it’s unlikely to lift the spirits of those who fear for their lives (or for their loved ones).

7) The stock market has rocketed thanks to White House stimulus funds to banks and brokers, but we’re facing 10 percent unemployment until 2010 and the first jobless “so-called recovery” in American history.  The head of the Atlanta Fed estimates the true number of unemployed at 16 percent.

How to Listen: The streaming audio is posted below on August 28.  Bookmark this page!

To your economic survival,

Dr. Joyce Starr

More from Rights Radio on this topic…

Federal Reserve Declares Recession is Dead: Twelve Indicators that Economy is in Trouble

Economic Recovery Revisited – Economists & Fed Declare Recession is Dead. Real folks don’t believe it. Twelve top indicators that the economy is bad from Rights Radio resident forensic economist, Dr. David Goldenberg. YOU KNOW THE ECONOMY IS BAD WHEN CEO’s are now playing miniature golf…

Immortal Economic Stimulus Plan: Illusory Fountain of Youth for Declining US Economy

Immortal Economic Stimulus Plan 101, 102… Cap and Charade, Obamacare and Missile Defense Revisited.

Raiding the Treasury: Crushing Debt & Expanding Coffers: New Political Sport? originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on August 26, 2009.

Thirty-three (+) czars later…

Economic Insecurity is Expensive

QUESTION: Administration critics typically preface criticism about the President with the words: “He’s brilliant, but…”

Smart, savvy, politically adept, charming… But vastly misreading the economic data? (“The economy is worse than we thought,” admits VP Joe Biden.) Pushing unemployment 20 percent higher than it would have been if the Administration did absolutely nothing? Spending over 700 billion to leave 14 million people – by some estimates 17 million – out of work? Spending only 10 percent of the first economic stimulus plan and then suggesting that we should spend even more? Targeting the majority of money for the years 2011 through 2019, when we clearly need it now? Heaping riches on big banks and trading firms while bankrupting the middle class?

Leaving our nation defenseless against missile attacks from North Korea? Spending a trillion to provide universal health care benefits to 27-47 million? (Does anyone know the true number of uninsured?) Making unachievable promises that the Administration may not be able to keep?

Listen Up & Listen In: Speaking Out with Dr. Joyce Starr & Joe Stallard. Bookmark this page. Tell your friends.

To your economic rights!

Immortal Economic Stimulus Plan: Illusory Fountain of Youth for Declining US Economy originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on July 9, 2009.

630,000 workers aged 55-and-up joined the workforce last year. But the Equal Employment Opportunity Office reports that age discrimination cases & complaints were up by nearly 30 percent during the same period.

Last week, 146 lawyers signed a letter challenging White House claims that fired Inspector General Gerald Walpin was “confused and disoriented.” The signatories included: three former federal judges, a former Attorney General of the United States, a former Counsel to the President and a former NY Police Commissioner.

“We have known Mr. Walpin as a leading member of the New York Bar for many years. Many of us have seen and heard him speak, including at this month’s meeting of the Second Circuit Judicial Conference and last week’s meeting of the Board of the Federal Bar Council …We note that the signers of this letter include both Republicans and Democrats … But all of us are unanimous in affirming Mr. Walpin’s integrity and competence.”

Gerald Walpin was the first recipient of the American Inns of Court Professionalism Award in the Second Circuit, is counsel to Katten Muchin Zavis Rosenman, and a senior partner of the predecessor firm of Rosenman & Colin for more than thirty years. He was Chairman of the Firm’s Litigation Department for fifteen years.

How to Listen: Click the play arrow at the end of the page to hear the streaming audio. You can also hear the show on our Self-Help Hour page.

Here’s the background on this case from the Associated Press.

“President Obama swept to office on the promise of a new kind of politics, but then how do you explain last week’s dismissal of federal Inspector General Gerald Walpin for the crime of trying to protect taxpayer dollars? This is a case that smells of political favoritism and Chicago rules.”  

“A George W. Bush appointee, Mr. Walpin has since 2007 been the inspector general for the Corporation for National and Community Service, the federal agency that oversees such subsidized volunteer programs as AmeriCorps. In April 2008 the Corporation asked Mr. Walpin to investigate reports of irregularities at St. HOPE, a California nonprofit run by former NBA star and Obama supporter Kevin Johnson. St. HOPE had received an $850,000 AmeriCorps grant, which was supposed to go for three purposes: tutoring for Sacramento-area students; the redevelopment of several buildings; and theater and art programs.

“Mr. Walpin’s investigators discovered that the money had been used instead to pad staff salaries, meddle politically in a school-board election, and have AmeriCorps members perform personal services for Mr. Johnson, including washing his car.”

Read the entire article here.

Streaming Audio!

Boomers in condo associations & HOAs: Learn how to protect your homeowners rights.

Receive alerts on important shows! Subscribe below.

To your employment rights,

Gerald Walpin & Age Discrimination Cases: First Shots “Fired” at Boomers & Older Workers? originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on June 23, 2009.

USAID has also awarded more than $78 million in grants to 10,300 Iraqi businesses – creating or restoring jobs for 37,000 Iraqis. Thirty-seven thousand American small business owners could have created a new business, sustain their current business and prevent bankruptcy with similar support.

Here is the Safety Net release from USAID:

May 28, 2009
Press Office: 202-712-4320
Public Information: 202-712-4810
www.usaid.gov

BAGHDAD -The United States Agency for International Development (USAID) and
Iraq’s Ministry of Labor and Social Affairs (MoLSA) today launched the Social
Safety Net program nationwide aimed at providing benefits to the most vulnerable
citizens of Iraq and facilitating their integration into the country’s economic
development.

In 2005, the Government of Iraq passed legislation to establish a Social Safety
Net to complement the state-subsidized food rationing system, the largest social
security spending in the country. The new system is intended to help low-income
families, displaced workers, and unemployed people adjust to the ongoing
restructuring and reform efforts. The initiative is an essential step in
ensuring food availability, supplementing buying power, encouraging students to
stay in school, and preserving access to other social services.

The USAID-funded Economic Governance Program in partnership with MoLSA provided
technical support in the design of the Social Safety Net program, including
upgrading the information technology system, and leveraging grants from the
World Bank Trust Fund to expand coverage to 21 sites. A team of USAID advisors
and their Iraqi counterparts addressed key capacity building concerns by
enhancing the skills of civil service personnel in technical, operational and
management techniques essential to the implementation of the program. The World
Bank and USAID have invested more than $13 million for the nearly four-year
project.

The Social Safety Net system has robust processes to detect and prevent
operational irregularities that allow for the delivery of benefits in a
standardized manner to all needy recipients. The system uses internal controls
that ensure accurate identification, registration, and verification of
recipients, and appropriate tracking of beneficiary records and payments. Such
mechanisms are aimed at running an effective, transparent and accountable
program.

The success of the 2008 pilot in Baghdad paved the way for a Memorandum of
Understanding between MoLSA and USAID to expand the program nationwide. Today,
nearly 673,000 people, or 2.4 percent of the population of Iraq, are receiving
benefits through the Social Safety Net program. The program is expected to cover
an estimated one million beneficiaries.

Since 2003, USAID has invested more than $6 billion on programs designed to
stabilize communities; foster economic and agricultural growth; and build the
capacity of the national, local, and provincial governments to respond to the
needs of the Iraqi people.

USAID + World Bank Provide Safety Net for Iraqis: Broken Net for Americans & US Small Business originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on June 5, 2009.

Outsourcing the Outsourced Job: Best Paying No Work Jobs originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on April 28, 2009.

Pro Publica, the online investigative reporting site counts 533 institutions that took $333.3 billion in TARP money. Moreover, the current CEO of Goldman Sachs, Loyd C. Blankfein, also earned over 70 million dollars in 2007.

[In a prior MarketWatch article - "Is the rush to exit TARP a trap?" (April 2, 2009) - Weidner states: "Since the middle of March, at least five banks have said they will either not accept TARP funds or they will return the funds received with interest due to Uncle Sam. Four banks that took a combined $338 million actually returned the cash Tuesday. Officials at Bank of America Corp, which took a combined $105 billion from the program, have hinted they want to repay the funds as soon as they can, possibly this year. ... Geithner's care-free attitude about banks repaying the government early defies a truth about the program: many banks were forced to take bailout cash to cover for troubled banks that truly needed it. The government, which never gave detailed criteria about what institutions would qualify for TARP cash, intentionally tried to create confusion around the program. Pro Publica, the online investigative reporting site counts 533 institutions that took $333.3 billion in TARP money."]

Government Sachs is in control
Commentary: Investment bank has strengthened its position through bailout
By David Weidner, MarketWatch
Last update: 12:01 a.m. EDT April 7, 2009

NEW YORK (MarketWatch) — Lloyd Blankfein must be the luckiest guy on Wall Street.

Goldman hasn’t had to forfeit an ownership stake in its firm, and its shareholders — many of them management and employees — have benefited. Goldman shares trade above $100. That’s less than half of where Goldman shares traded at their peak, but far better than the $1 and $3 that AIG and Citigroup shares trade for, respectively.

Since the fall of Bear Stearns Cos. a little more than a year ago, Goldman has taken more than $20 billion in taxpayer cash through loans, payments and backstops. Goldman’s latest bailout coup was a $12.5 billion paid out of AIG’s $180 billion government cash infusion.
Until it was fully extricated, Goldman always characterized its exposure to AIG as “immaterial,” and that its $20 billion notional exposure to AIG was hedged. Turns out that it was — through government bailouts that didn’t exist when Goldman entered the contracts.
Even former New York Luv Guv Eliot Spitzer told journalist Fareed Zakaria on Sunday that he thinks something smells.

“The web between AIG and Goldman Sachs is something that should be pursued,” Spitzer said. “Why did [those payments] happen, what questions were asked, why did we need to pay 100 cents on the dollar for those transactions if we had to pay anything, what would have happened to the financial system had it not been paid?”

But the AIG-Goldman affair is just the beginning, under the policy enacted by former U.S. Treasury Secretary Henry Paulson, Goldman’s chief executive until 2006. Major competitors have failed or been diminished. Goldman already seems, if not just poised, to be dominating what’s left of the investment banking landscape.

We last visited Goldman in the early days of the Troubled Asset Relief Program, or TARP, in October. Then, it appeared Goldman would come out ahead by virtue of avoiding a major investment by a commercial bank. Merrill Lynch had just been sold to Bank of America Corp.
Five months later, Goldman’s position in the marketplace looks even stronger — its future even more brilliant.
“Goldman Sachs has the most powerful investment banking franchise and the most successful trading operation on Wall Street,” Brad Hintz of Bernstein Research wrote Friday, adding that he’s been told “new leverage limits are not expected to impact Goldman’s trading performance.”

“New leverage limits are not expected to impact Goldman’s trading performance.”

— — Brad Hintz, Bernstein Research

Hintz said Goldman is touting how it plans to avoid tighter leverage limits. For one, its trading desk can take advantage of widening bid-offer spreads. Fewer players in the marketplace mean there’s a bigger gap to exploit. Without Lehman and with a diminished Morgan Stanley, Goldman has more ability to corner a market.

Goldman’s commodities oil-trading desk has been linked to the failure of Semgroup Holdings, an oil-trading company in Tulsa, Okla., that declared bankruptcy in July 2008. Semgroup investors say Goldman had access to the company’s trading books and could have used that information against the company, according to Forbes.

That’s just the trading business. Goldman also will have less competition when it comes to underwriting stocks and bonds, advising corporate clients and providing prime brokerage services — including trading leverage — to hedge funds. Goldman ranked No. 1 among advisers with $316 million in revenue during the first quarter, according to Dealogic.
Goldman won’t rake in the exponentially growing profits that it did during the middle part of the decade — it reported $9.54 billion and then $11.6 billion in 2006 and 2007, respectively — but it will improve mightily on the $2.04 billion in returns it earned last year.

As glittering as Goldman’s recent history has been and as bright as its future looks, there is a dark cloud on the horizon. Paulson’s successor at Treasury, Timothy Geithner, is proposing a market-risk regulator that would put the regulatory squeeze on any institution deemed so big that its failure would take down the system with it.

Geithner wants to encourage break-ups and the creation of smaller institutions, said John Garvey, a risk management and banking consultant with PriceWaterhouseCoopers. Goldman, which could easily divide itself into a hedge fund, trading business, private equity shop and advisory firm, would be in the crosshairs of such a plan.

Even separated, though, why would Goldman’s roll stop? In the last year, Goldman has benefited from Paulson’s selective bailouts, a fortuitously timed ban on short selling, a liberal interpretation of bank holding company rules and soon, an easily gamed auction of distressed securities run by the government.

A conspiracy theorist might think this run of fortune has something to do with the former Goldman executives having influential roles in the Treasury Department.
Market-risk regulator? Smaller companies? Goldman will find a way around it. It just seems to have that kind of luck.

Goldman Sachs Bailout Winner Dominates Banking Landscape originally appeared on Rights Radio™ with Dr. Joyce Starr - An Independent Voice on April 8, 2009.