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Larry Summers: Goldman Sacked September 17, 2013

Posted by rogerhollander in Barack Obama, Economic Crisis.
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GregPalast.com

Larry Summers:  Goldman Sacked

By Greg Palast for Vice Magazine
Monday, 16 September 2013

Joseph Stiglitz couldn’t believe his ears.  Here they were in the White House, with President Bill Clinton asking the chiefs of the US Treasury for guidance on the life and death of America’s economy, when the Deputy Secretary of the Treasury Larry Summers turns to his boss, Secretary Robert Rubin, and says, “What would Goldman think of that?”

Huh?

Then, at another meeting, Summers said it again:  What would Goldman think?

A shocked Stiglitz, then Chairman of the President’s Council of Economic Advisors, told me he’d turned to Summers, and asked if Summers thought it appropriate to decide US economic policy based on “what Goldman thought.”  As opposed to say, the facts, or say, the needs of the American public, you know, all that stuff that we heard in Cabinet meetings on The West Wing.

Summers looked at Stiglitz like Stiglitz was some kind of naive fool who’d read too many civics books.

R.I.P. Larry Summers
On Sunday afternoon, facing a revolt by his own party’s senators, Obama dumped Larry as likely replacement for Ben Bernanke as Chairman of the Federal Reserve Board.
Until news came that Summers’ torch had been snuffed, I was going to write another column about Larry, the Typhoid Mary of Economics.  (My first, in The Guardian, 15 years ago, warned that “Summers is, in fact, a colony of aliens sent to Earth to turn humans into a cheap source of protein.”)

But the fact that Obama even tried to shove Summers down the planet’s throat tells us more about Obama than Summers—and whom Obama works for.  Hint:  You aren’t one of them.

All these Cabinet discussions back in the 1990s requiring the blessing of Goldman Sachs revolved around the Rubin-Summers idea of ending regulation of the US banking system.  To free the US economy, Summers argued, all you’d have to do is allow commercial banks to bet government-guaranteed savings on new “derivatives products,” let banks sell high-risk sub-prime mortgage securities and cut their reserves against losses.

What could possibly go wrong?
Stiglitz, who would go on to win the Nobel Prize in Economics, tried to tell them exactly what would go wrong.  But when he tried, he was replaced and exiled.
Summers did more than ask Rubin to channel the spirit of Goldman: Summers secretly called and met with Goldman’s new CEO at the time, Jon Corzine, to plan out the planet’s financial deregulation. I’m not guessing:  I have the confidential memo to Summers reminding him to call Corzine.

[For the complete story of that memo and a copy of it, read The Confidential Memo at the Heart of the Global Financial Crisis.]

Summers, as Treasury official, can call any banker he damn well pleases.  But not secretly.  And absolutely not to scheme over details of policies that could make a bank billions.  And Goldman did make billions on those plans.

Example:  Goldman and clients pocketed $4 billion on the collapse of “synthetic collateralized debt obligations”—flim-flam feathers sold to suckers and dimwits i.e. the bankers at RBS.  (See Did Fabrice Tourre Really Create The Global Financial Crisis?)

Goldman also cashed in big on the implosion of Greece’s debt via secret derivatives trades permitted by Summers’ decriminalization of such cross-border financial gaming.

The collapse of the euro-zone and the US mortgage market caused by Bankers Gone Wild was made possible only by Treasury Secretary Summers lobbying for the Commodities Futures Modernization Act which banned regulators from controlling the 100,000% increase in derivatives assets, especially super-risky “naked” credit-default swaps.

The CMFA was the financial equivalent of a fire department banning smoke alarms.

Summers took over the Treasury’s reins from Rubin who’d left to become director of a strange new financial behemoth:  The combine of Citibank with and an investment bank, Travelers. The new bank beast went bankrupt and required $50 billion in bail-out funds.  (Goldman did not require any bail-out funds–but took $10 billion anyway.)

Other banks-turned-casinos followed Citi into insolvency.  Most got bail-outs … and got Larry Summers–or, at least, Larry’s lips for “consulting” or for gold-plated speaking gigs.

Derivatives trader D.E. Shaw paid Summers $5 million for a couple of years of “part-time” work.  This added to payments from Citigroup, Goldman and other finance houses, raising the net worth of this once penurious professor to more than $31 million.

Foreclosure fills the Golden Sacks
When Summers left Treasury in 2000, The New York Times reports that a grateful Rubin got Summers the post of President of Harvard University—from which Summers was fired. He gambled away over half a billion dollars of the university’s endowment on those crazy derivatives he’d legalized.  (Given Summers’ almost pathological inability to understand finance, it was most odd that, while President of the university, he suggested that humans with vaginas aren’t very good with numbers.)

In 2009, Summers, Daddy of the Deregulation Disaster, returned to the Cabinet in triumph. Barack Obama crowned him “Economics Tsar,” allowing Summers to run the Treasury without having to be questioned by Congress in a formal confirmation hearing.

As Economics Tsar in Obama’s first term, did Summers redeem himself?

Not a chance.

In 2008, both Democrat Hillary Clinton and Republican John McCain called for using the $300 billion remaining in the “bail-out’ fund for a foreclosure-blocking program identical to the one Franklin Roosevelt had used to pull the US out of the Great Depression.  But Tsar Larry would have none of it, although banks had been given $400 billion from the same fund.

Indeed, on the advice of Summers and his wee assistant, Treasury Secretary Tim Geithner, Obama spent only $7 billon of the $300 billion available to save US homeowners.

What would Goldman think? 
As noted, Goldman and clients pocketed billions as a result of Obama’s abandonment of 3.9 million families whose homes were repossessed during his first term.  While American homeowners were drowning, Tsar Summers torpedoed their lifeboat:  a plan to prevent foreclosures by forcing banks to write-off the overcharges in predatory sub-prime mortgages.  Notably, Summers’ action (and Obama’s inaction) saved Citibank billions.

Loan Shark Larry
The deregulation disaster machinery is not done with mangling Americans.  While not-for-profit credit unions, lenders of last resort for working people and the poor in the US, have been under legal and political attack, a new kind of banking operation has bubbled out of the minds of the grifters looking for a way to make loan-sharking legit.

One new outfit, for example, called “Lending Club,” has figured out a way to collect fees for arranging loans charging as much as 29%.  Lending Club claims it cannot and should not be regulated by the Federal Reserve or other banking police.  The recent addition to its Board of Directors:  Larry Summers.

If you want to know why Obama would choose such a grifter and gamer to head the Fed, you have to ask, Who picked Obama?  Ten years ago, Barry Obama was a nothing, a State Senator from the South Side of Chicago.

But then, he got lucky.  A local bank, Superior, was shut down by regulators for mortgage shenanigans ripping off Black folk.  The bank’s Chairwoman, Penny Pritzker was so angry at regulators, she decided to eliminate them:  and that required a new President.

The billionaires connected Obama to Jamie Dimon of J.P. Morgan, but most importantly to Robert Rubin, former Treasury Secretary, but most important, former CEO of Goldman Sachs and mentor of Larry Summers.  Without Rubin’s blessing and overwhelming fundraising power, Obama would still be arguing over zoning on Halsted Street.

Rubin picked Obama and Obama picks whom Rubin picks for him.

Because, in the end, Obama knows he must choose a Fed chief based on the answer to one question:  What would Goldman think?

Special thanks to expert Lori Wallach of Public Citizen without whom our investigation could not have begun.

For the complete story of the investigation of Larry Summers, the “End Game” memo and the finance crisis, see Palast’s highly acclaimed book Vultures’ Picnic.
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Greg Palast is also the author of the New York Times bestsellers, Billionaires & Ballot BanditsThe Best Democracy Money Can Buy and Armed Madhouse.

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Shaking the System: A Greek Gift to Occupy USA November 2, 2011

Posted by rogerhollander in Democracy, Economic Crisis, Greece, Revolution.
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Published on Wednesday, November 2, 2011 by Black Agenda Report

 

 

The Greek government, after months of demonstrations by a citizenry that rejects impoverishment for the sake of the bankers, has promised to submit the bailout plan to a referendum. This should be a lesson to the Occupy Wall Street movement and the U.S. public in general: force the issue, or the issue will be forced upon you. “Americans think that backing two political parties who are both eager to work in the interests of banksters is a solution to averting a disaster despite the fact that the disaster never ends.”

The European debt crisis is but one symptom of the crisis in which the capitalist system finds itself. The years of accumulated “fictitious” capital, followed by a succession of ruptured market bubbles, were all signs that the system is like Humpty Dumpty, unlikely to be put back together again.

Greece is the current focus of attention, with American markets rising or falling based on the status of negotiations among the Eurozone leadership. Greece’s “partners” agreed to bail out that nation only on the condition that it impoverish its citizens. Yet because of sustained protest against the austerity measures, the prime minister has promised his people a referendum on the plan, which has thrown domestic politics and international finance into a state of turmoil.

“If only American politicians had to fear their people as much as their European counterparts do.”

The turmoil cannot be confined to Europe either. Former New Jersey governor Jon Corzine is in the news because the commodities firm that he heads, MF Global, was caught up in the European crisis and has now filed for bankruptcy. Corzine is a former Goldman Sachs executive who self-financed his own political campaigns for senator and governor. If there were a poster child for the unholy alliance between money and politics, Corzine should be it.

The fortunes of American firms and European politicians are not looking very promising these days, and that is a good thing. Greek Prime Minister Papandreou can’t close the rotten deal because his people won’t stand for it. As a result of popular actions such as strikes and demonstrations, he must offer a referendum which puts the entire system on notice and across the ocean MF Global and the American markets go in the tank.

“Greece’s ‘partners’ agreed to bail out that nation only on the condition that it impoverish its citizens.”

It is an important lesson for Americans. Greeks and other people around the world aren’t taken in by predictions of doom from the high and mighty. They have declared loudly and clearly that they will not pay a price because of corruption committed without their knowledge and consent.

The Occupy Wall Street movement should sit up and take notice. Their consensus organizational structure and national assemblies upon which it is based began in Europe. The OWS organizers would do well to repeat European actions taken against the 1% and the members of political class who are eager to do their bidding.

It is well and good to say that the OWS movement is finding its way, but if it doesn’t notice what happens when people take mass action, then they aren’t ready for the big leagues. Three years ago the American people were told that they would suffer if Wall Street was not bailed out with their money. The TARP deal went forward with the collusion of both Republicans and the then Democratic nominee, Barack Obama and the rest of his party.

The results of that capitulation have been calamitous. TARP was a band aid solution to a structural crisis and Americans are suffering despite the fact that their resources continue to be sucked into the bottomless pit of the federal reserve. Unemployment numbers are not improving, the housing market remains stagnant, and there is still no light at the end of the tunnel.

“Even Social Security, the erstwhile “third rail” of politics, is on the table ready to be butchered by the party that used to at least pretend to defend it.”

If only American politicians had to fear their people as much as their European counterparts do. Instead of cowering in fear when the Wall Street chieftains shout, “Your money or your life,” we might have something to show three years after the big heist. Instead, Americans think that backing two political parties who are both eager to work in the interests of banksters is a solution to averting a disaster despite the fact that the disaster never ends.

The Greeks are bearing a good gift to the people of the United States but only if Americans have the awareness to see it. It would be wonderful to witness Barack Obama and the Democrats having to undo their dirty work with the Republicans because of popular action. Instead, even Social Security, the erstwhile “third rail” of politics, is on the table ready to be butchered by the party that used to at least pretend to defend it.

Prime Minister Papandreou has risked the wrath of European leadership because the people of his country won’t stand for anything else. There is no reason to fear turmoil in the markets and firms going belly up. We ought to let American political leaders know that we too have had enough of the back room deals which never serve our interests.

If democracy wasn’t born in ancient Greece, it is certainly exemplified by the actions of its people today. Their actions have rattled cages in many parts of the globe, and not only should these events not be feared, they should be celebrated.

© 2011 Black Agenda Report

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Margaret Kimberley

Margaret Kimberley’s Freedom Rider column appears weekly in BAR. Ms. Kimberley lives in New York City, and can be reached via e-Mail at Margaret.Kimberley(at)BlackAgendaReport

Editorial: Separate and Not Equal December 21, 2008

Posted by rogerhollander in Human Rights.
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Published: December 20, 2008

Civil unions are an inadequate substitute for marriage. Creating a separate, new legal structure to confer some benefits on same-sex couples neither honors American ideals of fairness, nor does it grant true equality. The results are clearly visible in New Jersey, which continues to deny same-sex couples some of the tangible civil benefits that come with marriage.

Gov. Jon Corzine of New Jersey has long said that he would sign a measure granting the right to marry to couples of the same sex. We are heartened that he has declared that that should happen sooner rather than later.

We hope Mr. Corzine intends to prod legislators into passing such a law early in the 2009 session. That would make New Jersey the first state to legalize marriage for same-sex couples through legislative action. Three other states — Connecticut, Massachusetts and California — have done so through the courts. Unfortunately, California voters approved a ballot measure in November rescinding that right, at least for now.

Mr. Corzine made his statement after a state commission released its final report on New Jersey’s two-year-old civil union law. The commission noted the hurt and stigma inflicted by shutting out gay people from the institution of marriage. It also found that civil unions do not assure gay couples of the same protections, including the right to collect benefits under a partner’s health insurance program and to make medical decisions on behalf of a partner who is unable to do so. The panel concluded unanimously that the state should enact a law to remove the inequities.

We regret that the leaders of the state’s Democratic-controlled Legislature do not view this issue with the same urgency. Senate President Richard Codey, for instance, said recently that progress in civil rights areas “is typically achieved in incremental steps.” We suspect that political expedience is clouding Mr. Codey’s sense of fairness. Next year in New Jersey, the governorship and all seats in the Assembly are up for grabs in an election. Some Republicans already are talking about making their opposition to same-sex marriage a campaign issue.

Governor Corzine typically takes the right side on important issues, but he has been known to retreat in the face of opposition. We hope that’s not the case here. It’s past time for him and for the Democrats in Trenton to find the political courage to extend the right to marry to gay couples.

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