SEC Lawsuit against Goldman Sachs – Perspective

April 19, 2010

By 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.

Padmini Arhant

Written by Padmini Arhant · Filed Under Business | Leave a Comment 

Housing Market Recovery by decelerating Foreclosures

January 18, 2010

By Padmini Arhant

As stated earlier, the key to the economic recovery is to revive the job market, the housing market and passing the health care legislation. Both job and housing market is entirely dependent upon the consolidated commitments from the public and the private sector.

The public sector represented by the government has the right agenda with the President’s proposal to levy tax on the financial institutions responsible for the financial crisis. However, the collected tax and fees from the finance industry is rumored to be accumulated in the stimulus pool against the Republican supporters’ demand that the proceeds be applied to the national deficit reduction.

Another contentious issue is the industry retaliation to the tax levy trickling down to the end consumer. It’s reported earlier that the industry has vowed to pass on the charges to the customer with an alternative threat to move jobs overseas.

Banking sector’s response of this nature is not unusual and prompts a swift termination of such protocol through regulations blocking the antagonistic traditions that brought the economy on the brink of collapse. Otherwise, taxes and fees should be imposed on the bonuses and stock options claimed by the executives and the senior management.

It’s important to enlighten those individuals fixated on reducing the national deficit when the economy is struggling to emerge from the deep recession. Further, the national deficit is a matter of great concern regardless of political allegiance as the debt mitigation burden is on the immediate and the future generation.

Minimizing deficit by merely returning the revenues and sources of income while, ignoring the cited economic woes is analogous to an attempt to contain the flood with an imaginary barrier.

Expansion in economic growth would directly contribute to the deficit contraction and there is an urgency to divert attention towards the two components i.e. the job and the housing market.

An element of truth noted in the funds being allocated to the potential banks’ bailout per disclosure by the current Treasury Secretary Timothy Geithner on the $75 billion housing market stimulus package.

The frustration in this respect is mutual and shared between the Tea Party movement and the Progressives in a bizarre convergence. It’s indeed a relief to view the polarized factions possessing some commonality, proving that a consensus can be arrived on national issues.

Taxpayers can no longer afford to bailout industries who betray them upon being bailed out and fail to fulfill their end of the bargain, i.e. to create and protect jobs that would lead to the economic revival.

Reverting to the tasks ahead for the public and the private sector, the effective strategies are:

Congress should reinstate the repealed Glass Steagall Act that prohibits the finance industry from indulging in speculative trading and instead focus on equity building, deposit security and bar insurance undertakings with high-risk collaterals.

The stand-alone Consumer Financial Protection agency as part of the rigorous financial regulation is a requirement to address the waywardly conduct demonstrated by the financial sector.

President Obama’s proposal in the creation of an agency to safeguard the consumer interests against abuses in mortgages, credit cards and other form of lending is precisely the remedy for the ethically deteriorating banking sector.

Abandoning the measure is a green signal for the repeat episode. Any legislators opposing the proposal are clearly against their constituents and the national interest.

In another related issue, stripping the Federal Reserve of all regulatory responsibilities is based on the dismal performance by the Federal Reserve authorities in the past two decades predominantly due to excessive power entrusted to the single most Federal institution.

On the contrary, the Administration’s position to expand the Fed’s role is a move in the reverse direction considering the status quo.

A noteworthy factor in the legislative affairs is, whenever a suggestion or a legislative proposal is made to reform any industry from the democratic side, the Republican representatives in the House and the Senate have unanimously rejected with a rare exception of one or two daring members casting their vote by bowing to the conscientious call of duty.

The partisanship and double standards was prevalent during the Clinton Presidency but even conspicuous throughout the Obama presidency.

The point in reference is available in the recent Financial Reform bill favoring the stand-alone consumer financial protection agency introduced by the Democratic Senator Chris Dodd and initiated by President Obama.

In contrast, the legislation with a similar agenda from the Republican aisle is overwhelmingly approved not only by the Republican minority but also with the cooperation from the democratic side.

A classic example being the year-end legislative amendment to the financial reform bill put forth by the Republican House of Representative Ron Paul –

The House Financial Services Committee approved Rep. Ron Paul’s measure by 43-26, calling for drastic expansion of the government’s power to audit the Federal Reserve.

The irony being, the ideological opposition consistently against the democrats sponsored government action characterized as ‘take over’ in any legislation is somehow complacent to the vast government intervention in this particular case.

Nevertheless, the amendment is a positive step in the financial regulation aimed at achieving transparency and accountability from the Federal Reserve, the long desired goals in the political and economic sphere.

With populace demand, the gridlock in Washington could be prevented by identifying the legislators contesting the party and not the issue. Likewise, those lawmakers obstructing their constituents opportunities for self-benefit through filibuster and unfair deal negotiations in the Senate vote, ought to explain the reason behind violating the constitutional oath.

Proceeding towards the core economic issue, the housing market decline has unequivocally contributed to the liquidity freeze and paralyzed the residential and the commercial real estate trajectory across the nation.

The housing market synopsis from the news report is depressing and conclusively the forecast is dire unless multiple course of action from the combined forces of the finance industry, the Treasury and the Congress is taken to resurrect the dying sector.

Source: Associated Press, January 16, 2010

Mortgage modifications fall well short of U.S. goal

Housing market may face another difficult year, economist says

By Alan Zibel

“Almost a year later, it appears about 750,000 homeowners – a fraction of the 3 million to 4 million originally projected – might complete the application process, predicts Mark Zandi, chief economist at Moody’s Economy.com.

A record 2.8 million households were threatened with foreclosure last year, up more than 20 percent from a year earlier, RealtyTrac reported this week.

The foreclosure listing firm expects another record this year.

Home prices, meanwhile, are down 30 percent nationally from the peak in mid-2006.

“It’s a very serious threat to the housing market, and still one of the most significant risks to the broader recovery,” Zandi said.

The Obama plan aims to help borrowers in financial trouble by making homeowners’ payments more affordable.

But just 66,500 borrowers, or 7 percent of those who signed up, have completed the program as of December, the Treasury Department said Friday.

Another 49,000, or more than 5 percent, have dropped out of the program entirely – either because they missed payments or were found to be ineligible.

Thousands more remain in limbo awaiting an answer.

There’s blame on both sides:

Mortgage companies say they have struggled to get back the necessary paperwork, while homeowners and housing counselors say navigating the bureaucratic maze often seems impossible.”

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Resolving the Solvable: By Padmini Arhant

Since the government is the largest employer during the economic recession, it’s reasonable to expect the agencies involved in the housing program to function efficiently. In addition, maximum utilization of technology should enable user-friendly application format.

As for the homeowners and the counselors faltering on the paperwork submission despite simplifying the process presumably with a deadline, serving a written notice with a foreclosure warning should yield the necessary response or action from them.

On the paperwork completion, it’s entirely up to the homeowners to salvage their homes from being foreclosed. There are non-profit workshops and agencies working in many counties apart from the internet sources to assist homeowners with the documentation.

Eligibility is the bone of contention in most national issues from housing to health care.

Perhaps, the program needs a thorough review and necessary threshold adjustments to accommodate the volume that would eventually relieve the homeowners, the mortgage companies and the banks from the debt confinement.

It appears that the stringent rules often cause more harm than good in resolving crisis of great magnitude confronting the nation at the present time.

Given the gloomy economic environment, sometimes leniency or relaxing the rules on an individual basis would help the situation with the homeowners retaining possession of their homes.

Foreclosure is an epidemic and drastically affects everyone involved beginning with the mortgagee, the lender, the county, the city and the nation at large, not to mention the crime emanating as a result of the unfortunate event.

Improvement in home values made possible through customized lending as opposed to generic programs is crucial in dealing with the escalating foreclosures, thereby significantly easing the economic recession.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy | Leave a Comment 

National Unemployment and the Economic Status

July 23, 2009

By Padmini Arhant

The ravenous economy has absorbed about $3.7 trillion dollars via bailouts and stimulus plans, (please refer to individual stimulus package topics for breakdown) yet the nation’s jobless rate rising like a tidal wave rather than settling along the shores. Several arguments mounting regarding the precarious job situation across the nation with some fifteen states like California, Michigan, Indiana, Ohio and others experiencing double digit in job losses accumulated over a period of time.

Not surprisingly, criticisms with an ominous prediction such as a possible return of the ‘Great Depression’ from various political and economic factions pouring against the current administration’s level of action and apparent inaction in averting the precipitous decline of the job market.

The irony being, President Obama’s opponents and fierce critics expressing deep concerns over the present generation’s children and grandchildren burdened with the burgeoning multi-trillion dollars national deficit from the ‘supposedly’ bizarre and revolutionary health care reform.

Unfortunately, the pervasive selective memory among the cynics forbids anyone from reminding the junkyard legacy by the previous administration. Nevertheless, it’s important to revisit the situation in order to find a pragmatic and an effective cure for the epidemic unlike a band-aid treatment tactic by the prior administration.

As detailed earlier on many occasions, the wild adventures in the past eight years eroded the fundamentals of the capitalist system. Immediately following the 9/11 attacks, the widespread panic about the United States economic and national security surely had an impact on the American investments ranging from housing to stock market including the exodus of some expatriates selling homes combined with the withdrawal of their investments.

The Bush-Cheney administration laid out the extravagant scheme to trump the situation with yet another war by invading Iraq when the mission in Afghanistan had barely begun. Conservative ideology dictates that wars promote prosperity. Actually, the notion might not be far-fetched because wars are highly beneficial to the nexus group gambling with others’ life and nation’s wealth.

When the administration inheriting a surplus economy engaged in a dubious agenda at the most improper and inconvenient time, the market conditions in 2002 and onwards became more volatile due to enormous speculations surrounding the United States affordability to wage another war.

The Bush-Cheney administration sailed through the storm with false assurances and blatant lies that Iraq war would be self-funded through oil revenues expected to be reaped exclusively by the United States in return for the establishment of democracy.

One must also not forget the administrations’ prophesy on the premature valentine’s day celebration by the cheering Iraqis handing out rose bouquets to the U.S. occupying forces at the expense of their blood and national treasury.

The excessive borrowing commenced at the dawn of the Iraq war with the fiscal conservatives now objecting to their constituents’ health care benefits, then turning a blind eye and signing a blank check to an unarguably a corrupt administration.

Funding two simultaneous wars converted the national surplus to national deficit adversely affecting the Treasury Notes and subsequently the U.S. currency in the international market. In the backdrop of the weakening Bond market, the stock market performance accelerated with investors’ confidence in the growth of different sectors specifically the oil and defense stocks due to the on-going wars, technology sector and the financial sector with hyperbolic balance sheets.

Above all, during that time the Federal Reserve and the Treasury’s overly cautious inflationary measure by reducing the interest rates beyond market conditions and unleashing the free market from necessary regulations in an utter conflict of interest essentially provided a fertile ground for the financial sector to exploit the unique opportunity in the lending activity.

In addition, the conglomerate like AIG and major investment banks extending towards the commercial bank’s activities risking long-term investments for short-term gains induced further competition for the traditional banking sector adopting strategies detrimental to the key components of the economy viz. the housing market, retail and commercial lending.

The financial sector’s unethical and unscrupulous practices in every aspect of lending targeting the nerve of the economic system i.e. the consumer, exacerbated the economic recession.

From the notorious sub-prime mortgages in the housing market now appropriately defined as ‘toxic assets’ bundled into the mortgage backed securities exchanged through international trading, to teaser rates offered on credit card later escalating to atrocious interest rates exceeding market affordability…are primarily responsible for the chronic ailments of the current real estate and the liquidity crisis.

Unequivocally the present woes of the economy are attributable to the overwhelming greed by the financial sector and the defiance for any rule of law until date. As clarified by President Obama during the press conference on date, the financial regulatory reforms are in order.

Since some prominent economists have been recently pushing for more stimulus over and above the total $3.7 trillion dollars, it’s necessary to obtain the facts and details on earlier investments to evaluate the methods applied as a result of the negative economic growth and dismal unemployment rate.

Please refer to stimulus package details followed by careful analysis in the subsequent segments.

Meanwhile, it’s imperative and incumbent on all bailout recipients and the previous administration officials regardless of hierarchy to come forward, testify under oath to Congress as the representatives of the American electorate, and explain exactly where and how the trillions of dollars have been invested.

Is it a coincidence that Goldman Sachs after being assisted by the former Treasury Secretary Henry Paulson in gobbling Bear Stearns and Lehman Brothers, emerges with a bumper profit rewarding its every employee with a despicable amount $700,000 bonus the past week ? – Absolutely not.

It’s about time the criminals of the financial world are brought to justice in order to avoid a twenty first century revolution in the world’s modern democracy.

Congress must act in the interest of the people and abide by the constitutional rule of law with an honest and thorough investigation of the massive bailouts carried out at the expense of the hard working American taxpayers.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Business, Economy, Featured | Leave a Comment