Goldman-Sachs, The Financial Crisis and The Demagogue

The recently uncovered actions of Goldman Sachs are NEGLIGENT AT BEST and PERHAPS INTENTIONALLY DECEPTIVE AND CRIMINAL. The Justice Department is right in investigating Goldman Sachs and Congress needs to make some changes in the laws to better regulate megabanks and possibly break them up so we no longer have financial institutions that are "too big to fail". Goldman Sachs does not stand alone; many, if not all, big Wall Street banks and investment houses acted similarly in contributing to the 2008 crash and have been often working against the best interests of their clients while making huge profits for themselves for a decade or more. Meanwhile, many of these same megabanks got TARP fund bailouts and are now lending LESS money to small businesses than those banks that didn't get bailouts, while the executives of the bailed out firms are getting bigger raises and bonuses. This is what happens when government interferes. If Goldman-Sachs had openly informed every client that they believed the mortgage market was going to crash and that they were betting in that direction, then no-one could fault them for making a profit at a time when others did not see the looming disaster.


But, it appears that Goldman-Sachs mislead their clients, by commission or omission, to believe the opposite, which is unethical and perhaps criminal. The political grandstanding in congress is disgusting, but does not excuse Goldman Sachs actions.

What slips by with little notoriety, is the fact that the GOVERNMENT WAS COMPLICIT, for 15 to 20 years, in creating the conditions for the 2008 meltdown. The GOVERNMENT SPONSORED ENTITIES, FANNIE MAE AND FREDDIE MAC, led the charge for so-called "affordable housing" with little or no down payments, no proof of affordability and even without proof of employment. It is a disgrace that the government gets off the hook and is able to turn the total focus on Wall Street. If one person can be cited as being most responsible for the culmination in the financial meltdown of 2008, it is Rep. Barney Frank (D-MA) who promoted the affordable housing gimmicks, who blocked every effort to regulate Fannie and Freddie, even to this day, and who lied to his colleagues in Congress and to the public many times by assuring everyone that Fannie and Freddie were financially sound. The people of Frank's district in Massachusetts must be ignorant or just gullible fools; they ought to take notice of their home values due to Frank's irresponsible actions and they can look forward to higher costs of living with inflation due to the huge debts accumulating in Fannie and Freddie. Barney Frank was not alone in protecting Fannie and Freddie from scrutiny; he had help along the way from Sen. Chris Dodd, Sen. John Kerry, Sen., Barack Obama, Sen. Hillary Clinton and others who took political contributions from Fannie and Freddie.

Another area where the government was complicit in creating the financial crisis is when the GLASS-STEAGALL ACT WAS REPEALED under Democrat Bill Clinton in 1999. Glass-Steagall kept a clear separation between what was intended to be low-risk commercial banking and high-risk investment banking. The repeal of Glass-Steagall led to the growth of the megabanks and the mixing of commercial banks, investment banks, brokerage and mutual fund firms and insurance companies with everyone getting into each others' businesses and all dealing in new high risk highly leveraged financial instruments .

Obama has gotten into the act by claiming that in the Spring of 2008 he predicted the financial meltdown due to a lack of regulation. Of course, what OBAMA DOESN'T MENTION, is that he VEHEMENTLY OPPOSED REFORM of Freddie Mac and Fannie Mae, the two government sponsored entities that were at the core of the mortgage crisis. OBAMA SIDED WITH HIS BUDDY REP. BARNEY FRANK (D-MA) TO PROTECT Freddie and Fannie from any scrutiny. Now, with the Goldman Sachs scandal, Obama has found one more chance to demagogue, create a boogeyman and push for "change" far beyond what is required, so that he can further transform America toward becoming a socialist nation.

Obama never misses an opportunity to take advantage of a crisis (as Rahm Emanuel has been quoted in the past). The opportunity here is for Obama and big government to take over the entire financial industry instead of making a few sensible reforms. WHAT IS NEEDED is full transparency of derivatives (they should be traded like stocks with all information available), full disclosure in real time of the direction of investment from financial institutions dealing in derivatives or other highly leveraged instruments, re-instituting Glass-Steagall or some similar legislation that once again separates commercial and investment banking and strengthening of the enforcement of numerous existing regulations by numerous existing government agencies. What is NOT NEEDED is more government agencies, more bailout funds and the government deciding if and when it can take over a financial institution.