Congratulations! To President Barack Obama, Senator Chris Dodd, Rep. Barney Frank and other Congress members from both sides of the aisle for their contribution to the historic victory on the Financial regulations bill.

The United States Senate approved the long overdue financial regulatory reform that was challenged by Wall Street and their representatives since conception.

Not long ago, the global economy faced the possibility of the ‘Great Depression,’ emerging from the deregulated financial markets with extraordinary privileges in the public fund mismanagement and speculative trading showing no regard for the dire consequences, now a harsh reality experienced by the billions around the world.

Wall Street exercising the ‘free market’ power to engage in calculated high-risk ventures especially through derivatives and hedge fund activities led to a near free fall in the absence of any oversight on the reckless involvement.

The U.S. economy would have succumbed to the economic crisis if not for the American Investment Recovery Act passed by the Democrats and isolated republican members in Congress.

President Barack Obama and the lawmakers behind this legislation deserve credit in this regard.

Unfortunately, their actions have not been truly acknowledged for the substantial measures implemented through this stimulus bill aimed at helping citizens across the political spectrum.

The positive results benefiting American life from the economic stimulus subverted for political reasons in the election year.

In a democracy, the most grueling aspect is the legislative process.

It’s even harder with the special interests controlling the legislative course on every issue, further exacerbated by the majority in the opposition pledged to defeat the legislation against national interest.

With respect to HR 4173 – it’s a monumental task to gain unanimous consensus on a broad legislation targeting the most powerful sector in the economy.

As expressed by the Chairman, U.S. Senate Committee on Banking, Housing and Urban Affairs, Chris Dodd, the dissatisfaction from the different political factions are legitimate and reaching an agreement on common grounds is the preliminary step towards consumer protection along with many other important regulations in this bill.

Arguably, it is not perfect as every Senator holds some reservations and distinct views about their support or the lack thereof in the crucial legislation.

The main components of the bill are elaborated in the – http://banking.senate.gov/public/_files/FinancialReformSummary231510FINAL.pdf

Pros and Cons: The Treasury secretary historically and more relevantly have close ties with Wall Street – going back to several administrations.

Hence, the conflict of interest is a major concern with the Treasury secretary as the head of the 10 member regulatory council – evidenced in the failure to monitor the financial market between 2000 and 2008 that caused the economic meltdown.

Otherwise, the 10-member council of regulators representing the oversight committee is an effective strategy.

Given the facts on the subprime lending and credit card abuses, the consumer protection agency is the hallmark of this legislation.

The contentious derivatives and hedge fund management is subject to rigorous standards underscoring the transparency and accountability factor in this bill.

Opposition claim on the omission of the controversial Fannie Mae and Freddie Mac from the financial regulation could be clarified to dispel misconceptions about any exemptions to the lender.

The compromise on the $19 billion bank tax to earn the Republican Senator Scott Brown vote whereas not pursuing the Democrat Senator Russ Feingold seeking tougher regulations is an irony in the democrats led legislation.

Nevertheless, the three Republican Senators cooperation is praiseworthy.

Overall, the framework of this legislation encompasses the requirements to avert the financial crisis and the economic downturns barring no Wall Street intrusion in the regulatory mission.

Thank you.

Padmini Arhant

Congratulations! To Spain on the spectacular victory in the world cup final.

Spain winning the crown in the world’s most popular sport – football/soccer for the first time is well deserved.

Netherlands’ competitiveness to earn the first world cup title was impressive and kept the global audience on the edge about the outcome.

All participants displayed their best performance and gained valuable experience from the event.

The host – South Africa demonstrated remarkable talent in organizing the gala ceremony and the world cup series.

Young South Africa’s progress and the leadership ability to represent Africa in sports as well as other fields was reflected in the outstanding contribution.

The world wide fans await the next FIFA championship in a different venue with much hope and enthusiasm.

No one is a loser in a game for everyone exchange their attributes to one another inadvertently or otherwise and enhance the competition spirit.

In that sense – Congratulations! to all for promoting the humanitarian interest through sport.

Best Wishes to all nations.

Thank you.

It originated in Iceland with the pervasive subprime mortgage factor and similarly affected other economies like Ireland, Greece, Portugal and Spain, referenced as PIGS.

Although, every nation in this category share the contaminated ‘derivative’ traded internationally, the lack of deficit control with the national budget exceeding the GDP growth also contributed to the meltdown and subsequently reflected in the poor credit rating.

More prominently, Greece identified with:

“Goldman Sachs between the years 1998-2009 has been reported to systematically helped the Greek government to mask its national true debt facts.

In September 2009 though, Goldman Sachs among others, created a special Credit Default Swap (CDS) index for the cover of high-risk national debt of Greece. This led the interest-rates of Greek national bonds to a very high level, leading the Greek economy very close to bankruptcy in March 2010.”

The culmination of internal and external mismanagement primarily led the Mediterranean economy to the brink of collapse seeking bailout from the European Central Bank (ECB), EU and IMF.

European Union was challenged with a predicament in the Greece bailout to either ignore the problem or address it to avert the contagion in Europe.

Since Greece is an EU member using the reserve currency euro in the 16 of the 27 states representing the eurozone, the former alternative would have had serious ramifications.

Besides, the euro being the second most traded currency in the world after the U.S. dollar; it has multifaceted impact on the financial markets dealing with high volume trading especially in the futures exchange.

The industrialized and emerging economies are in a bind with the euro value reduction, due to the competitiveness expansion in export trade. For example, the export oriented Germany is at a competitive edge with the United States, Japan and China irrespective of Germany specializing in high end industrial and heavy machinery equipments.

Hence, the euro crisis upside is the European nations gaining export affordability.

Accordingly, the emerging economy and the major U.S. creditor China is concerned about the potential split in global market share and availing the opportunity to reject the U.S. request for currency (renminbi) value adjustment, which has been set below the market determination despite China’s extraordinary trade surplus.

China’s currency, renminbi (RMB) or yuan (CNY) has been withheld from floating as the international currency in the foreign exchange market to protect the status quo.

At the same time, the positive aspect of the dollar appreciation is omitted in the evaluation and that being the foreign investments in U.S. dollars particularly the Treasury bills held by China is strengthened in value and guarantee long term security in futures contract.

Financial stability measures adopted by EU, IMF and ECB with approximately one trillion dollars of which a conditional rescue loan worth $110 billion to Greece is approved to reverse the negatives in the financial markets reacting to the euro downslide from the unsustainable government debts and deficit level.

Had the eurozone requirement on its union members to keep deficits below 3 percent of GDP maintained, Greece and other struggling economies need not have been subject to harsh austerity strategies that has resulted in protest among the mainstream population in Greece and Ireland.

Regardless, the current global financial crisis calls for wasteful expenditure elimination and the national budget review to direct investments in high value returns.

Appropriate actions involving tax hikes and spending cuts are necessary to balance the budget.

However, spending cuts targeting the fundamental programs inevitably generating revenues through productive workforce and consumers is counteractive.

Restoring essential programs and services for the job creation and preservation, youth education, citizens’ health care, social security, safe and clean environment nurture healthy and middle class society to ease the burden on the top 1% or 10% wealthy taxpayers in different economies.

Most importantly, the defense budget consuming a significant proportion of taxpayer revenue in the prolonged wars could be divested to peaceful and profitable opportunities benefiting the citizens at the domestic and international front.

The ideal solution for the European Commission and the monetary union to avoid rising deficits in Europe without compromising the member states’ sovereignty in their national fiscal policy decisions would be to establish an independent, non-partisan committee by the states to examine the individual spending and tax plan, rather than the centralized monitoring or the neighboring authority verifying it.

Further, the constitutional amendment by Germany to contain the deficit to 0.35 percent of GDP by 2016 provided the higher deficit not attributed to GDP decline is a trendsetter in curbing the economic crisis.

In concurrence with the economic experts’ advice – The ECB expediting the credit approval on government bonds used as collateral upon qualifying the self-regulated constitutional limit on deficits is prudent in deterring broad speculative lending activities.

Alongside, the EU sweeping financial reform with tough standards against the hedge fund managers including the two proposals by German Parliament:

Global financial transaction tax and Financial activity tax focused on CEO’s Personal Income & Bonuses are effective steps with the exception of the global financial transaction tax because it is eventually transferred to the end-consumer and may not be a viable option for all participants.

Nevertheless, international agreement on financial regulation by G-20 and other nations is crucial in order to emerge from the existing crisis and prevent the future economic recession.

The systemic risk in the multi trillion dollars ‘derivatives,’ that caused the financial debacle in Europe, Middle East (Dubai), North America, Asia and elsewhere demands stringent policies and independent investigations on fraudulent ventures.

The financial overhaul passed by the U.S. Senate last week has been under scrutiny by analysts with mixed response and elaborated in the article titled:

“New Financial rules might not prevent next crisis – Associated Press, Sun May 23rd. 2010 at 3.55 PM EDT. Reported by Jacobs from New York and contributed by AP writer Jim Drinkard.”

Unequivocally, closing the loopholes as detailed in the cited article and other reports is paramount to establish a financial system free of K street influence.

The apparent revolving-door relationship between Wall Street and Capitol Hill in which employees and consultants have moved in and out of high level US Government positions, with the prevalent conflict of interest is a hindrance to any legislation.

Only the electorates with the voting power in a democracy can remove the persisting obstacles by rejecting the special interest representatives in politics against meaningful legislation.

People as the consumers, taxpayers and voters are the ultimate force in achieving the progress for common good.

Thank you.

Padmini Arhant

All the reports on Goldman Sachs from various credible sources confirm the fact that,

There is more to it than meets the eye.

SEC investigation must go underneath the surface.

For Goldman Sachs – it’s analogous to “make a mountain out of molehill.”

When in fact, it’s an erupting volcano that has already claimed many lives and threatening more in the present.

Wikipedia Report – Goldman Sachs Controversies: Thank you.

“Robert Freeman, who was a senior Partner, who was the Head of Risk Arbitrage, and who was a protégé of Robert Rubin, was also convicted of insider trading, for his own account and for the firm’s account.”

Per the above report on “Goldman Sachs’ Controversies,” juxtaposed to NYT article on the Obama administration’s economic team,

The New York Times report – By Jackie Calmes – Published: Monday November 24, 2008 – Thank you.

“The president-elect used the announcement Monday that he was appointing two Rubin protégés, Timothy Geithner as Treasury secretary and Lawrence Summers as senior White House economic adviser, to underscore his determination to step aggressively into a economic leadership vacuum in Washington while also maintaining continuity with the Bush administration before the transition of power Jan. 20.

Obama is expected to soon announce the appointment of another Rubin protégé, Peter Orszag, as White House budget director.

And even the headhunters for Obama have Rubin ties: Michael Froman, who was Rubin’s chief of staff in the Treasury Department and followed him to Citigroup, and James Rubin, Robert Rubin’s son.

Geithner, Summers and Orszag have all been followers of the economic formula that came to be called Rubinomics: balanced budgets, free trade and financial deregulation.

On Wall Street, Rubin is facing questions about his role as director of Citigroup, given the bank’s current troubles, and,

During the weekend held several discussions with Treasury Secretary Henry Paulson as a government rescue of Citigroup was organized.”

“What worries me is there is not one person in the senior group who is the outsider to this club.

And that’s particularly ironic, given Barack Obama’s bias toward copying Lincoln’s ‘team of rivals,”‘ said Robert Kuttner, a colleague of Bernstein’s at the liberal Economic Policy Institute who has written a book, “Obama’s Challenge,” on free-spending, pro-regulatory approaches to the economic crisis.

“Where is the diversity of opinion in this economic team?” he said.”
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Perspective – By Padmini Arhant

The establishment’s control of the economic power in the Executive branch is noteworthy.

Whether it was the former Goldman Sachs CEO and Treasury Secretary Henry Paulson serving the previous Bush-Cheney administration,

Or,

The Obama administration’s economic team identified as “Robert Rubin’s” protégés,

The trend continues with the economic management by those responsible for the economic crisis.

Is it an irony or the undermining of democracy with “business as usual” concept prevailing in any administration.

Goldman Sachs investigation is just the tip of the iceberg.

Rigorous investigation and appropriate action is warranted to resurrect the financial market and the Wall Street credibility.

Goldman Sachs’ dealings in diverse portfolio and the recent performance beckons scrutiny considering the ramifications experienced in the domestic and international financial markets.

Prime examples are Greece and the U.S.economy.

Several European banks reported to have lost money in the deceptive deal.

SEC cannot be complacent with the preliminary finding.

Therefore, it’s incumbent upon SEC to proceed with further investigations against Goldman Sachs to deliver justice to the victims and protect the system from systemic abuse.

The U.S and the global economy cannot sustain history repeating itself.

Thank you.

The Securities and Exchange Commission filed lawsuit against Goldman Sachs on the toxic derivatives camouflaged with the internationally renowned investment firm, authenticating the risky mortgage securities sold to trusting investors in the domestic and global financial market.

Goldman Sachs is engaged in Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.

Needless to state that sub-prime mortgage is synonymous to the ‘speed boat’ designed for a fatal crash due to the deliberate sabotage. Sure enough, it had a negative impact on the financial and housing market that contributed to a precipitous economic decline worldwide.

The savvy designers protected their own investment with ‘insurance’ on the ‘abyss’ through yet another global conglomerate ‘AIG,’ technically partners in the ingenious profit oriented craft.

Why?

Because, the insurance companies grill the ‘regular folks’ when applying for any insurance to minimize risk exposure.

Even the trivial finding in the applicant’s background is used as the grounds for rejection or the cause for high premium – e.g. the health insurance industry.

It’s noteworthy that both Goldman Sachs and AIG were swiftly bailed out with taxpayers’ funds on the “Too Big to fail,” concept.

As a result, the fire starters were salvaged by the taxpayers.

The fire sale was organized for the Treasury to buy the damaged goods at the taxpayers’ expense from the banks on the brink of collapse.

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Goldman Sachs reportedly,

Wikipedia.org – Thank you.

“Goldman also received $10 billion preferred stock investment from the U.S. Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).

In June 2009, Goldman Sachs repaid the U.S. Treasury’s TARP investment, with 23% interest (in the form of $318 million in preferred dividend payments and $1.418 billion in warrant redemptions).

New York Attorney General Andrew Cuomo questioned Goldman’s decision to pay 1556 employees bonuses of at least $1 million after it received TARP funds in 2008.

In December 2009, Goldman announced their top 30 executives will be paid year-end bonuses in restricted stock, with clawback provisions, that must go unsold for five years.”

It’s essential to emphasize that Goldman Sachs is not new to controversy.

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Source: Wikipedia.org – Thank you.

Controversies

In 1986, David Brown was convicted of passing inside information to Ivan Boesky on a takeover deal.
Robert Freeman, who was a senior Partner, who was the Head of Risk Arbitrage, and,

Who was a protégé of Robert Rubin, was also convicted of insider trading, for his own account and for the firm’s account.

On November 11, 2008, the Los Angeles Times reported that Goldman Sachs, which earned $25M from underwriting California bonds, had advised other clients to “short” those bonds.

Shorting is essentially betting that the state will default on the bonds, which serves to drive up the cost of the issue to the state.

During 2008 Goldman Sachs came under criticism for an apparent revolving-door relationship in which its employees and consultants have moved in and out of high level US Government positions, where there may exist the potential for a conflict of interest.

Former Treasury Secretary Hank Paulson was a former CEO of Goldman Sachs.

Additional controversy attended the selection of former Goldman Sachs lobbyist Mark Patterson as chief of staff to Treasury Secretary Geithner, despite President Barack Obama’s campaign promise that he would limit the influence of lobbyists in his administration.

During 2010, Goldman Sachs has been accused for its involvement in the 2010 European sovereign debt crisis.

Goldman Sachs between the years 1998-2009 has been reported to systematically helped the Greek government to mask its national true debt facts.

In September 2009 though, Goldman Sachs among others, created a special Credit Default Swap (CDS) index for the cover of high risk national debt of Greece.[66] This led the interest-rates of Greek national bonds to a very high level, leading the Greek economy very close to bankruptcy in March 2010.”
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Actions in the 2007–2008 subprime mortgage crisis:

Despite the 2007 subprime mortgage crisis, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by selling subprime mortgage-backed securities short.

Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm’s large profits during America’s sub-prime mortgage crisis.

The pair, who are part of Goldman’s structured products group in New York, made a profit of $4 billion by “betting” on a collapse in the sub-prime market, and shorting mortgage-related securities.

By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives.

The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized loans being offset by gains on short mortgage positions.

Its sizable profits made during the initial subprime mortgage crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finances.

The firm’s viability was later called into question as the crisis intensified in September 2008.

Allan Sloane of Forbes, a financial writer of reputation, wrote a referenced article on 15 October 2007, at the time the crisis had begun to unravel.

It appeared on CNN’s website: “So let’s reduce this macro story to human scale.

Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year.

We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm – and this one’s pretty bad.

“It was sold by Goldman Sachs (Charts, Fortune 500) – GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.

“This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust.

It’s got speculators searching for quick gains in hot housing markets;

It’s got loans that seem to have been made with little or no serious analysis by lenders; and finally,

It’s got Wall Street, which churned out mortgage “product” because buyers wanted it.

As they say on the Street, ‘When the ducks quack, feed them.'”

Weeks of chaos that sent Lehman Brothers into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.

According to a 2009 Brand Asset Valuator survey taken of 17,000 people nationwide, the firm’s reputation suffered in 2008 and 2009, and rival Morgan Stanley was respected more than Goldman Sachs, a reversal of the sentiment in 2006.

Goldman refused to comment on the findings.
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2. According to http://www.wsws.org/articles/2008/sep2008/paul-s23.shtml – Thank you.

Published by the International Committee of the Fourth International (ICFI)

Who is Henry Paulson?

By Tom Eley, 23 September 2008

Henry Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994.

In 1998, he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.

Goldman Sachs is perhaps the single best-connected Wall Street firm.

Its executives routinely go in and out of top government posts.

Corzine went on to become US senator from New Jersey and is now the state’s governor.

Corzine’s predecessor, Stephen Friedman, served in the Bush administration as assistant to the president for economic policy and as chairman of the National Economic Council (NEC).

Friedman’s predecessor as Goldman Sachs CEO, Robert Rubin, served as chairman of the NEC and later treasury secretary under Bill Clinton.

Agence France Press, in a 2006 article on Paulson’s appointment,

“Has Goldman Sachs Taken Over the Bush Administration?” noted that, in addition to Paulson,

“[t]he president’s chief of staff, Josh Bolten, and the chairman of the Commodity Futures Trading Commission, Jeffery Reuben, are Goldman alumni.”

Prior to being selected as treasury secretary, Paulson was a major individual campaign contributor to Republican candidates, giving over $336,000 of his own money between 1998 and 2006.

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals.

In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase.

Then, a little more than a week ago, he allowed Lehman Brothers to collapse,

While simultaneously organizing the absorption of Merrill Lynch by Bank of America.

This left only Goldman Sachs and Morgan Stanley as major investment banks,

Both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

Paulson bears a considerable amount of personal responsibility for the crisis.

Paulson, according to a celebratory 2006 Business Week article entitled –

“Mr. Risk Goes to Washington,” was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.”

Under Paulson’s watch, that meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999.

It means placing big bets on all sorts of exotic derivatives and other securities.”

According to the International Herald Tribune,

Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.”

Paulson “stubbornly assert[ed] Goldman’s right to invest in, advise on and finance deals, regardless of potential conflicts.”

Paulson then handsomely benefited from the speculative boom.

This wealth was based on financial manipulation and did nothing to create real value in the economy.
On the contrary, the extraordinary enrichment of individuals like Paulson was the corollary to:

The dismantling of the real economy,

The bankrupting of the government and,

The impoverishment of masses the world over.

Paulson was compensated to the tune of $30 million in 2004 and took home $37 million in 2005.

In his career at Goldman Sachs he built up a personal net worth of over $700 million, according to estimates.
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3. By Jackie Calmes – Published: Monday, November 24, 2008 – Thank you.

Obama’s economic team shows influence of Robert Rubin – with a difference

WASHINGTON — It is testament to the star power of former Treasury Secretary Robert Rubin among many Democrats that as Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.

The president-elect used the announcement Monday that he was appointing two Rubin protégés,

Timothy Geithner as Treasury secretary and Lawrence Summers as senior White House economic adviser,

To underscore his determination to step aggressively into a economic leadership vacuum in Washington while also maintaining continuity with the Bush administration before the transition of power Jan. 20.

Obama is expected to soon announce the appointment of another Rubin protégé, Peter Orszag, as White House budget director.

And even the headhunters for Obama have Rubin ties: Michael Froman, who was Rubin’s chief of staff in the Treasury Department and followed him to Citigroup, and James Rubin, Robert Rubin’s son.

Geithner, Summers and Orszag have all been followers of the economic formula that came to be called Rubinomics: balanced budgets, free trade and financial deregulation.

The combination was credited with fueling the prosperity of the 1990s.

But times have changed since then.

On Wall Street, Rubin is facing questions about his role as director of Citigroup, given the bank’s current troubles, and during the weekend held several discussions with Treasury Secretary Henry Paulson as a government rescue of Citigroup was organized.”

“What worries me is there is not one person in the senior group who is the outsider to this club.

And that’s particularly ironic, given Barack Obama’s bias toward copying Lincoln’s ‘team of rivals,”‘ said Robert Kuttner, a colleague of Bernstein’s at the liberal Economic Policy Institute who has written a book, “Obama’s Challenge,” on free-spending, pro-regulatory approaches to the economic crisis.