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Playing President

By Robert Scheer
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Live Chat: Robert Scheer on the Goldman Hearings

Posted on Apr 29, 2010

(Page 2)

11:50 Robert Scheer

Thu, 29 Apr 2010 19:50:52 GMT


 The problem is that Goldman Sachs was well represented in the government during the last 20 years when radical deregulation of the derivative market became the law. And you’re quite right given the Commodity Futures Modernization Act, pushed through when ex-Goldman Vice Chair Robert Rubin was treasury secretary in the Clinton administration, and expanded in scope under George W. Bush when ex-Goldman Chairman Henry Paulson was also secretary of treasury. There is very little in the way of legal protection for the unsuspecting customer of stocks, and I expect that they will skate on this with a fine that they can easily absorb.

11:50 Comment From P. T.

Thu, 29 Apr 2010 19:50:54 GMT

Comment: I have not followed all the ins and outs, but it sounded kind of like one of the bundles of subprime mortgages was created just so the hedge fund could short it?  Is that your sense of things?

11:52 Robert Scheer


Square, Site wide

Thu, 29 Apr 2010 19:52:42 GMT


 Worse than that, we now know of five such packages, but they aren’t even real packages, in the sense that somebody put money up to actually help a human being get a house. These were synthetic bets on what would happen to packages of real mortgages. And the problem is that the games that were played, resulting in a bubble in the market with tremendous run-up of prices, were bound to crash, and Goldman, while it was selling those suspect products, was betting on the crash, and came out very rich as a result.

11:52 Comment From Guinevere

Thu, 29 Apr 2010 19:52:46 GMT

Comment: Do you think anything will be done to change the way bonuses are doled out on Wall Street—e.g., linking them to something other than the bottom line—given how that motivates execs to turn a blind eye to how exactly those profits are made?

11:52 Truthdig Pete

Thu, 29 Apr 2010 19:52:55 GMT


 Feel free to submit more questions while Bob answers the latest. We’ll try to get to all of them. Lynne is up next.

11:53 Robert Scheer

Thu, 29 Apr 2010 19:53:07 GMT


 The chairman of Goldman Sachs, Blankfein, got $68 million in 2007 when these nightmare products were being marketed.

11:53 Comment From Lynne

Thu, 29 Apr 2010 19:53:11 GMT

Comment: Do you think then that the Dems are merely grandstanding?

11:56 Comment From walldizo

Thu, 29 Apr 2010 19:56:04 GMT

Comment: What you think of Fareed Zakaria’s defence of Goldman Sachs?

11:56 Robert Scheer

Thu, 29 Apr 2010 19:56:07 GMT


 I think both the Democrats and the Republicans are now under enormous public pressure to at least appear to be doing something. That’s why the Republicans had to call off their stalling on the debate. But if your question is do I trust the Dems to do the right thing, no. In particular, we have to watch for the survival of two key elements to reform. One is a truly vigorous consumer protection agency that can deal with outrageous loan packages, credit card usurious interest rates, and deception. The other key element is to restore the wall between commercial banking, which is backed by the good faith of the U.S. government, and say that anyone that is such a bank cannot engage in the sale and packaging of unregulated derivatives. And that for Goldman Sachs, for example, which was allowed to become a bank holding company, they would have to make a decision to give up their current ability to go to the Fed window and other important perks, and decide whether they are an investment bank dealing with private investors, which would mean they do not have the backing of the U.S. government.

11:56 Robert Scheer

Thu, 29 Apr 2010 19:56:30 GMT


 Derivative trading has to be done on regulated exchanges with complete transparency.

11:56 Comment From Lynne

Thu, 29 Apr 2010 19:56:42 GMT

Comment: If finance is such a huge part of our economy (I’ve seen estimates from 40-60%), then is it really likely that any significant legal reform can take place?

11:58 Robert Scheer

Thu, 29 Apr 2010 19:58:18 GMT


 (To Lynne) The financial sector accounts for one-third of all profit. And that is unnatural for any modern economy, and if that greedy appetite of Wall Street cannot be contained, we will not have sound investment in the investments that the American economy really needs, instead of wild gambling.

11:58 Comment From P. T.

Thu, 29 Apr 2010 19:58:23 GMT

Comment: Sounds like Goldman Sachs was killing two birds with one stone. They were getting rid of their lousy subprime mortgages at the same time their cohorts were shorting them. They made out both ways.

11:59 Robert Scheer

Thu, 29 Apr 2010 19:59:30 GMT


 (to P.T.) Of course, but the problem is, were they deceiving their customers in the process? And that is the issue involved with the Abacus deal, which clearly was designed to fail, but which they sold as a winner.

11:59 Comment From Bob

Thu, 29 Apr 2010 19:59:31 GMT

Comment: I know it sounds naive, but is there anyway we can make lobbying illegal?

New and Improved Comments

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By Werner Simon, May 3, 2010 at 12:10 pm Link to this comment
(Unregistered commenter)

I used to think commenting like this served a positive purpose! At 77 and increasigly irascible, I note all political sites offer this venting into thin air democratic expression technique. It could increase member donations and I’m sure every cent is more than welcome. Other than that its an endless avalanche of preaching to the choir verbosity!!!!

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By ron_woodward, May 1, 2010 at 12:58 am Link to this comment
(Unregistered commenter)

The American does not become upset until he loses his job to outsourcing, his home to a sub-prime mortgage scheme or his daughter to a sex trafficking ring. Goldman Sachs works 24/7 to fleece the American of his net worth. It is an uneven fight. Goldman buys immunity from prosecution by devoting a tiny fraction of its ill-gotten gain to campaign contributions.
Since Wall Street continues to kill the country, the proper name for their activities is subversion. In time of war this escalates to treason invoking the death penalty.
It’s the least we can do.

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By orange, April 30, 2010 at 11:26 pm Link to this comment
(Unregistered commenter)

Everything hearing the Democrats have held for the last decade has been nothing but show-boating.

You can believe its real when you see these guys from GS wearing orange-jump suits.

You can believe its real when you see their mansions and their yachts being seized. When you see the FBI putting as much effort into tracing and seizing their offshore accounts as they do into tracking ‘terrorist’ money.

You can believe its real when the government of the people of the United States of America goes after this money to refund its citizens what was stolen from them.

When you see them sitting there in their thousand dollar suits and then getting back on their private jets to fly back home to their mansions, then the only thing you need to know is that they paid Obama and the Democrats a lot of money to stay out of jail.

My guess is that the current threats are just a combination of political theater and a money-contribution shakedown to remind these guys who they have to pay off to stay out of jail.

If you want real action, stop voting for the candidates with millions of wall street dollars in their account (aka ‘Democrats’ and ‘Republicans’)

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By Steve Wimer, April 30, 2010 at 12:41 pm Link to this comment
(Unregistered commenter)

I hate to be cynical, but I have little faith that the system will be cleaned up.  Lobbyists have a way of inserting loopholes, that no one notices, until after the fact.  Do you think anything really meaningful will come of this?  By the way, I love your work.

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By jack, April 30, 2010 at 2:03 am Link to this comment
(Unregistered commenter)

Of course they can be prosecuted, if there’s the political will - frankly, it appears
that it’s all smoke and mirrors - an exercise to placate working-class rage -
Obama’s boys gotta do this theatre - but that’s all it is - after all, Wall St. bought
and paid for him - he’s not going to bite the claw that feeds him - moreover, this
is one more distraction from the endless Global War Of Terror - and who profits
from that? Right! Wall St., City of London - The Global Finance Oligarchy.
Nothing’s changed.

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