Goldman Sachs announces $5 billion government settlement -- No Criminal Charges, of course

[mg]

"Goldman Sachs announces $5 billion government settlement

By Peter Schroeder - 01/14/16 05:39 PM EST
Goldman Sachs announced Thursday that it would pay roughly $5
billion to settle a government probe.

The investment giant said the deal, if finalized, would resolve
potential civil charges sought by a government task force exploring
the creation and sale of securities backed by residential mortgages,
an investment type central to the 2007 financial crisis. Authorities
involved in the probe included the Justice Department, the states of
New York and Illinois, and other regulators.

“We are pleased to have reached an agreement in principle to resolve
these matters,” said Lloyd Blankfein, the bank’s chairman and CEO.
Goldman said the settlement would cut into $1.5 billion of its
fourth-quarter profits. The deal would also include a $2.4 billion
monetary penalty, another $875 million in cash payments and $1.8
billion in consumer relief.

That consumer relief would come in variety of ways, ranging from
principal forgiveness for underwater homeowners to the financing of
construction or rehabilitation for affordable housing.

The agreement still needs to be finalized, but if it is, it would be
the latest in a series of eye-popping settlements between the
government and big banks. For example, in 2013, JPMorgan Chase
announced a $13 billion deal to settle charges around its
residential mortgage-backed securities activity.

The monetary settlement may not be enough to satisfy administration
critics from the left, however, who have pushed for the government
to not just assess large fines but bring criminal charges against
bank executives for wrongdoing."

http://thehill.com/policy/finance/265962-goldman-sachs-announces-5-billion-government-settlement

[rumpelstiltskin]

Yet another reason to vote for Bernie. He may not be able to
stop this in the face of congressional collusion with money and
power, but he will at least try, and will lay it out on the table
for everyone to see.

[mg]

I don't think that the option for criminal prosecution has any
connection with congress. I think it is strictly and solely an
executive branch decision.

[islander]

It is good to finally see successful prosecution of the big banks for
the abuses that led up to the 2008 financial crash, but we are still
seeing very few executives of these companies face criminal prosecution.
This is primarily because they are protected by the rats nest of
legislation passed in the fervor of deregulation of the financial
industry that happened during the '80s and '90s. We have talked about
the Gramm-Leach-Bliley Act of 1999 and the Commodities Modernization Act
of 2001, but these are only two of the Congressional acts that
contributed to the casino banking that occurred in the mid 2000 decade.

Bernie has his heart in the right place, but he has a tendency to over
simplify the job that he would face as President, unless he has the
support of Congress. Trying counts, of course, but actually
accomplishing anything is what counts in the long run. I sincerely wish
that the Democratic party had a better strategy for winning back the
Congress.

Personally, if I were Bernie, I would produce a loyalty oath (much like
Norquist did to reduce taxes) and would try to convince the DNC, the
DCCC and the DSCC that candidates for Congressional office would have to
sign that pledge to receive any support from these organizations.

[rumpelstiltskin]

They don't have to prosecute it, I just don't want it
to be hidden as it habitually is. That should get
people p.o.'d about it enough to insist that it be made
public. Politicos want to ride the gravy train while
trying to conceal that fact as much as possible from
the public, and that's exactly why it should be made
public. People have a right to be p.o.'d about that.
Concealing it serves nobody but politicians and the
money boys who are bribing them to do what the
money boys want, against the interests of the f.ing
peasants who constitute 99+% of the country.

[mg]

I think the biggest problem is that the banks are to big to fail,
and to a large extent, to big to control. The same thing is probably
true of the oil industry, the medical industry, and the
military/industrial complex.

The banks should have been broken up instead of bailed out. As I
recall, the Democrats were mostly in favor of the bailout and the
Republicans were mostly against it, at least on the first vote.
According to Wikipedia "Democrats voted 140–95 in favor of the
legislation, while Republicans voted 133–65 against it."
https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

Here's a quote from one source on what happened with the bailout:

"The Democrats’ press conference was an exercise in deceit. Speaker
of the House Nancy Pelosi, flanked by Senate Majority Leader Harry
Reid and the chairmen of the House and Senate banking committees,
Barney Frank and Christopher Dodd, presented the windfall for the
richest people in the country as though it were a punitive measure
aimed at reigning in corporate greed.

“The party is over,” she proclaimed. “No longer will tax payers be
forced to bail out reckless investors.”

Both candidates of the two major political parties, Democrat Barack
Obama and Republican John McCain, signaled their support for the
bailout bill on Sunday. They echoed the line of President Bush, who
said in his weekly radio address on Saturday, “The rescue effort
we’re negotiating is not aimed at Wall Street; it is aimed at your
street.”

Obama boasted on the CBS News program “Face the Nation” that he has
been in constant communication with Paulson on the progress of the
bailout bill.

The myth that the Democratic Party represents a “lesser evil” to the
Republicans, let alone a “party of the people,” is being shattered
by its emergence as the most servile defender of the interests of
the financial oligarchy.
https://www.wsws.org/en/articles/2008/09/bail-s29.html

[rumpelstiltskin]

On Sat, 16 Jan 2016 12:39:58 -0700, mg <no...@none.nl> wrote:
<snip>

I like Nancy Pelosi, whose office has helped me out a couple of
times, and I'm convinced she has the interests of the people at
heart. Nevertheless, I say smash the old machines, even if it
seems we could use them, because leaving them around will
only perpetuate their malevolent influence into the "New Age".

[islander]

If you recall the conversations about the big banks prior to the 2008
financial crisis, it was all about how they needed to be big in order to
compete in the world financial market. Unfortunately there was no
chance of breaking them up during a time of increasingly emphasis on
eliminating regulation, an emphasis that produced a series of
legislation that overturned prior legislation that controlled the banks
and which blinded the government to what they were doing. After all, if
it is private money, what right does the government have to regulate it
was the siren call of the '90s.

So, nothing was done and the whole financial industry got in trouble.
People still argue that we should have allowed the companies to fail,
but Lehman scared everyone. In reality, it was a disaster which would
have been much worse if the government had allowed the banks to fail.
The bailout described above was distasteful in the extreme, but it was
necessary. Fortunately, there were enough adults around to accept the
bitter medicine and act. Unfortunately, by the time the Dodd/Frank
legislation was being written, the anti-regulation, free market
advocates were still around and seemed to have forgotten or were in
denial about what had happened only two years earlier.

[Werner]

The Fed was a Wilson (Democrat) era bastard. The Fed regulates debt money and banks.

[islander]

On 1/16/2016 3:10 PM, Werner wrote:
> The Fed was a Wilson (Democrat) era bastard. The Fed regulates debt money and banks.
>

We witnessed how well an independent banking system worked in the latter
part of the 19th century - essentially a chaos of bank failures,
recessions, panics, and instability. The need for a central bank was
clear and the panic of 1907 was the last straw. The public called for
reform of the banking system and the Woodrow Wilson administration
created a distributed Central Banking system that has served us well
(with a few notable exceptions) ever since.

[Werner]

I would say the Great Depression fits your chaos of bank failures. If "that has served us well" you have an odd notion of 'well'.

[mg]

I have a friend; he and I go back to the 7th grade. We've been to
hell and back together. One time when I was fixing his dad's
computer, his dad said something like, "You know, it's just not
right the way John has treated his ex-wife and kids and never paid
any support." My reply was something like, "I know, but he's still
my best friend".

I doubt if there are very many people who are totally bad, or
totally good. One sometimes has to look at the circumstances that
they are in and officials, who have to survive in our oligarchy
frequently find themselves in difficult situations.

[Emily]

On Sat, 16 Jan 2016 14:52:53 -0800, islander <no...@priracy.com> wrote:

>So, nothing was done and the whole financial industry got in trouble.
>People still argue that we should have allowed the companies to fail,
>but Lehman scared everyone. In reality, it was a disaster which would
>have been much worse if the government had allowed the banks to fail.
>The bailout described above was distasteful in the extreme, but it was
>necessary. Fortunately, there were enough adults around to accept the
>bitter medicine and act. Unfortunately, by the time the Dodd/Frank
>legislation was being written, the anti-regulation, free market
>advocates were still around and seemed to have forgotten or were in
>denial about what had happened only two years earlier.

How would it have been worse? What would have happened? I suppose if
the banks failed, some people would be out of a job but I'm unable to
work up any concern about people who routinely get multi-million
dollar bonuses. I'm not being argumentative, I just don't understand
how the failure of those banks would impact my life. Since that
brouhaha, the money market fund that had paid me around $50/month in
interest has paid me less than 20 cents/month. How much worse could
that be than it is now?

Who did those big banks lend money to, if anyone? It seems to me that
if you're running a business and have to borrow money every month, you
must be doing something wrong.

I readily admit that what I understand about high finance and the
various aspects of the financial system could easily be written on the
head of a pin which no doubt explains why I have to ask the question.

[islander]

The Great Depression was the product of the economic policies of one
individual: Andrew Mellon who did everything that he could to undermine
the Fed as Treasury Secretary and ex-officio Chair of the Fed under the
three presidents following the Woodrow Wilson administration. You would
have liked Mellon. Even back then, he believed in reducing taxes for
the wealthy and reducing the size of government.

[islander]

The issue was not so much about who the big banks loaned money to, but
about who invested in them. In this capacity, they were assumed to be
safe investments, but they were cooking the books. The crisis focused
on the mortgage industry, but was much broader than that. Essentially
they would buy up debt from smaller banks and mortgage brokers and
bundle it into derivatives of various kinds to sell to investors. They
depended on the long history of the average person working hard to get
out of debt. This had worked for Fannie Mae since the '30s and for
Freddie Mac since it was formed in the '70s and had provided liquidity
for mortgage loans. What JP Morgan discovered in the '90s was a set of
analytic tools that predicted risk in these types of investments and
this started a rush across the industry to develop ever more exotic
derivatives and investment schemes. This dominated the private
secondary mortgage market by the mid 2000 decade and was expanding into
other types of credit as well. To add insult to injury, the rating
agencies, essentially federally licensed companies that were supposed to
give investors a measure of the safety of the investments in these banks
were in competition for the business, paid for by the banks, and they
inflated their ratings. As a result, a lot of very conservative
investment funds like retirement funds, state treasuries, and other such
organizations were heavily invested in these banks on the false faith in
the honesty of the rating agencies. Even foreign countries were
investing heavily in the big banks.

The short answer to your question is that the implications of a failure
of these large banks would have had repercussions across the entire
spectrum of finance. The money that you put away for retirement would
have been gone. State governments would have failed. It was a very
serious situation, potentially even worse than the Great Depression.

There was really no choice but to bail them out, as distasteful as that
was. Unfortunately we have not done nearly enough to prevent another
crash. Bernie is correct in arguing that we need to break up the big
banks. Unfortunately I doubt that he will be able to do it. We have
allowed them to become too powerful.

[Werner]

1920s: The Beginning of Open Market Operations

Following World War I, Benjamin Strong, head of the New York Fed from 1914 to his death in 1928, recognized that gold no longer served as the central factor in controlling credit. Strong's aggressive action to stem a recession in 1923 through a large purchase of government securities gave clear evidence of the power of open market operations to influence the availability of credit in the banking system. During the 1920s, the Fed began using open market operations as a monetary policy tool. During his tenure, Strong also elevated the stature of the Fed by promoting relations with other central banks, especially the Bank of England.
https://www.federalreserveeducation.org/about-the-fed/history

Current Fed is old wine new bottle for the vast population not in the banking monopoly. Only you truly faithful deluded folks believe central banks provide miracles for us little people while the widening wealth gap you condemn gets worse. Like Rumple you are a fraud to your own professed values. A benevolent government is as real as a benevolent God. How long before your grandchildren get drafted to fight for the controll structure you worship?

[Werner]

The implication, dummy, is the banks/government regulated the country into debt and destruction as was the case before the Great Depression. Bankers can't lose as they print the money they need. Those who are not allowed to forge money lose. That would include We the People.

You picture yourself as smart. There are people much smarter than you. They change and invent rules for their benefit you can't even think of. I understand bankers are now accounting rules for bad oil patch loans to hide losses.

[rumpelstiltskin]

On Sat, 16 Jan 2016 14:52:53 -0800, islander <no...@priracy.com> wrote:

>On 1/16/2016 12:16 PM, rumpelstiltskin wrote:

<snip>

>> I like Nancy Pelosi, whose office has helped me out a couple of
>> times, and I'm convinced she has the interests of the people at
>> heart. Nevertheless, I say smash the old machines, even if it
>> seems we could use them, because leaving them around will
>> only perpetuate their malevolent influence into the "New Age".
>>
>If you recall the conversations about the big banks prior to the 2008
>financial crisis, it was all about how they needed to be big in order to
>compete in the world financial market. Unfortunately there was no
>chance of breaking them up during a time of increasingly emphasis on
>eliminating regulation, an emphasis that produced a series of
>legislation that overturned prior legislation that controlled the banks
>and which blinded the government to what they were doing. After all, if
>it is private money, what right does the government have to regulate it
>was the siren call of the '90s.
>
>So, nothing was done and the whole financial industry got in trouble.
>People still argue that we should have allowed the companies to fail,
>but Lehman scared everyone. In reality, it was a disaster which would
>have been much worse if the government had allowed the banks to fail.
>The bailout described above was distasteful in the extreme, but it was
>necessary. Fortunately, there were enough adults around to accept the
>bitter medicine and act. Unfortunately, by the time the Dodd/Frank
>legislation was being written, the anti-regulation, free market
>advocates were still around and seemed to have forgotten or were in
>denial about what had happened only two years earlier.
>

So some say, but although I made money off the stock
market and am thinking of sticking my toe back in if it
falls a lot farther than it has so far, I've never thought
of it as anything but a big "greater fool" game.

[Emily]

Thanks for the explanation. Would the money we put away for
retirement have been any safer in the local bank than invested in
something that then invested it in one of those crazy CDOs or
something like that? Obviously it wouldn't have grown much but would
it have been any safer than being invested in some fund that was
dependent on the market? Or would everything have collapsed?

I also doubt that Bernie will be able to do anything about when he's
elected because not only do the big banks need to be broken up, but a
lot of laws need to be changed or just repealed. There's no way that
will happen with a Republican Congress.

Also, if everyone is stuck on the idea that we should be homeowners,
it would be a good idea if somehow builders were encouraged to build
moderately or modestly priced houses. I realize that if you buy a
McMansion with fifteen rooms, you're likely to spend a lot on
furniture and stuff, but it seems to me it would make more sense for
people to be able to buy something they can probably afford and
certainly not everyone can afford, or even wants, a McMansion.

[islander]

Money that you put away in your local bank would have been protected up
to $250K by the government under FDIC. If you had more than that, you
could have split it up between several banks, or even under different
ownership categories at the same bank.

A lot of people were depending on defined benefit retirement programs,
however. Those funds were invested by their union, their employer, or
the state governments. That money would have been gone.

[islander]

I'm guessing that you have a problem with open market operations?