A case study in power, politics and very big money

You’ve probably never heard of IntercontinentalExchange, or ICE, even though it’s based right here in Atlanta. But in the global world of credit default swaps and derivatives trading that is now drawing so much attention, ICE stands as a giant.

Among other things, ICE acts as a clearinghouse for credit swaps and derivatives, putting buyer together with seller and guaranteeing the transaction to both parties. One ICE subsidiary, ICE Trust, announced in March that during its first year of operation, it had “cleared $4.3 trillion in gross notional value on more than 55,000 transactions” involving credit default swaps. According to BusinessWeek, ICE’s two clearinghouse operations have processed $6.4 trillion of trades — again “notional value” — since March 2009. (”Notional value” means the maximum amount that might conceivably be at play in those trades; the real value is considerably less.)

Nonetheless, those are big numbers, and they are likely to get bigger still, given that the total derivatives market is estimated at $600 trillion in notional value. (ICE collects a very tiny percentage of such deals as a fee, but a very tiny percentage of a very big number can get pretty large itself. Founded in 2000, ICE already boasts a market capitalization of $8.2 billion.)

Not surprisingly, the company is very interested in new laws being drafted in Washington. Among other things, those changes could drive a significant amount of new business through ICE. Many transactions that are now conducted privately, between buyers and sellers, would have to be conducted instead through an exchange such as ICE, where regulators could monitor what was happening.

However, other proposed changes in the law might not be so friendly. For example, ICE does an awful lot of derivatives business with big banks such as Goldman Sachs and JP Morgan Chase, which also own part of the company. Under changes approved Wednesday by the Senate Agriculture Committee, those banks would have to cease derivatives trading and spin off those operations into separate units. The theory is that derivatives trading creates too much risk for banks that rely on the Federal Deposit Insurance Corp. to guarantee their stability. Under the proposed bill, banks could trade derivatives, or be FDIC-insured, but not both. That seems perfectly logical and even necessary, given the role that derivatives played in Wall Street’s meltdown.

To protect its interests, ICE recently hired a new lobbyist in Washington, a step that brought it into the limelight in a less than positive way. That lobbyist, Peter Roberson, had worked as a senior advisor with the House Financial Services Committee in writing the House version of derivatives legislation. When Committee Chairman Barney Frank heard about the hiring, he angrily ordered committee staff not to have any contact with Roberson whatsoever as long as Frank still runs the committee.

According to reports filed at the Federal Elections Commission, ICE and its top executives have also been active in the campaign contribution front.

For example, Sen. Saxby Chambliss, the Georgia Republican, is the ranking GOP member on the Senate Agriculture Committee, which has a lead role in regulating derivatives trading. (That’s because derivatives and credit swaps began as ways to manage risk in commodities such as cotton, corn and pigs.) Chambliss is deeply unhappy with the bill as approved by the committee Wednesday, claiming that it is too harsh on the industry and too punitive.

According to Opensecrets.org, ICE  executives and the company’s political action committee have donated more than $60,000 to their home-state senator since 2005, making the company Chambliss’s third most generous donor, after the Club for Growth and the Southern Company. Last year, ICE executives also donated $15,000 to Chambliss’s personal leadership PAC, The Republican Majority Fund.

While that PAC is supposed to raise money for GOP candidates, an awful lot of its contributions are used instead to finance resort golf outings for Chambliss and lobbyist friends. In the 2007-08 reporting cycle, for example, The Republican Majority Fund spent $778,971, but only $205,500 made its way into GOP campaign coffers. More than a third was spent on “entertainment, travel and events,” and among the fund’s biggest recipients were the Ritz-Carlton Naples ($57,894), Caves Valley Golf Club outside Washington ($45,914) and Pebble Beach Resorts ($19,341.)


However, Chambliss was hardly alone as a beneficiary of ICE. According to Federal Election Commission records, the Ag Committee chair, Democrat Blanche Lincoln of Arkansas, received $13.050 in the last two years from ICE execs, while Senate Banking Committee chair Chris Dodd received $14,600.

Another Georgia politician, U.S. Rep. David Scott, is a member of the House Financial Services Committee and sits on its Capital Markets and Financial Institutions subcommittees . The Atlanta Democrat has received $31,850 from ICE  executives since 2006. (I could find no record of ICE-related contributions to Frank, the chair of that influential committee, which strikes me as … interesting, especially given Frank’s outburst of anger when ICE hired that top committee aide as lobbyist.)

Other Georgia congressmen have also received ICE donations. Since 2006, GOP Rep. Tom Price has gotten $7,800; Sen. Johnny Isakson has netted $9,150; Democratic Rep. John Barrow has received $10,600 and Democrat Jim Marshall has accepted $10,850.

The heavy money, however, has gone to party campaign funds. The Democratic Senate Campaign Fund received $28,500 from ICE CEO Jeffrey Sprecher in 2007, while the National Republican Senatorial Committee has collected a whopping $115,900 from Sprecher and ICE Vice President Kelly Loeffler.

None of that suggests any kind of illegal act by anybody involved. It merely offers an interesting window into the way politics, money and power intertwine on an issue like this. With billions of dollars at stake in the writing of highly detailed legislation, the amount of money it takes to get a politician’s ear if not his vote doesn’t amount to crumbs that might fall from the table.

But apparently it pays off.

162 comments Add your comment

Scooter

April 22nd, 2010
8:56 am

Scooter

April 22nd, 2010
8:56 am

Normal

April 22nd, 2010
8:56 am

Global Warming! Melt the ICE!!! :D

ty webb

April 22nd, 2010
8:59 am

man…I’m in the wrong business.

Brakeman

April 22nd, 2010
8:59 am

Yawn ………………..

Outhouse GoKart

April 22nd, 2010
9:00 am

Its those evil people with money. Yes…they are the problem.

Mick

April 22nd, 2010
9:01 am

Why is it that the financial sector continues to package these products to sell when it does nothing to create a manufacturing base? It seems this country is spiraling downward and there is no safety net left to break the fall. Only the wealthy will survive.

Mick

April 22nd, 2010
9:03 am

**Its those evil people with money. Yes…they are the problem**

Only when their blind greed affects my pension and the financial health of the country.

Bosch

April 22nd, 2010
9:04 am

ty,

For real.

Southern Comfort

April 22nd, 2010
9:04 am

I’m gonna announce a run for Congress so I can get some of this lobbyist money.

Bosch

April 22nd, 2010
9:05 am

Mick,

Call me crazy, but it sounds to me like they are just selling money for a jacked up price each time they sell it. It makes no sense. It’s like they print money, then sell it for twice as much, and then sell it again for twice as much as they bought it for. And so on.

danjonglee

April 22nd, 2010
9:07 am

Chuck Schumer?

Gale

April 22nd, 2010
9:07 am

Hmm, what do you think? Roberson didn’t funnel contributions to Frank and Frank is angry about that? Roberson doesn’t like gays and Frank is angry about that? Roberson is slimey and Frank doesn’t like him having influence? As you say, Jay, interesting.

Bosch

April 22nd, 2010
9:09 am

That’s because derivatives and credit swaps began as ways to manage risk in commodities such as cotton, corn and pigs

That makes a little more sense because you are betting against/for something real and tangible. That reminds me of that movie “Trading Places.”

But now, they aren’t betting on anything real or tangible.

Mick

April 22nd, 2010
9:10 am

Bosch

Not only that, since they know its garbage, they can also figure out a way to make money when it tanks – nothing is created except more debt. At some point, there will be nothing left to manipulate or the system will fail due to lack of confidence

TM

April 22nd, 2010
9:13 am

“But apparently it pays off”
Ask Goldman Sachs what it got for it’s $1 million contribution to the President– A lawsuit from the SEC.

Scooter

April 22nd, 2010
9:14 am

Only the wealthy will survive

Don’t worry Mick, they will throw us enough peanuts to eke out a way of life. I hope. :???:

stands for decibels

April 22nd, 2010
9:14 am

I’m gonna announce a run for Congress so I can get some of this lobbyist money.

You gotta win first. And really, if all you get for playing a tired dock wh0re is a lousy $15K or so, I’d say there are better ways to get load the personal coffers.

But seriously, it’s the grotesque “entertainment” outlays that have been permitted all these years, plus the committee contributions, as outline by Jay above that are far more troubling to me. So long as these skimmers–and that’s all an ICE does, really, is find new ways to skim a cut off of other people’s money and work–can parlay influence like that, you can bet that real reform is going to be bruising fight.

I mean, seriously–why would anyone object, after what we know, to preventing the FDIC from insuring banks that do this crap? Has someone got a good case to make for this?

FrankLeeDarling

April 22nd, 2010
9:15 am

I think part of the problem is that too many people want to make money just by touching it

ty webb

April 22nd, 2010
9:15 am

ah yes…”Trading Spaces”. “looking good Billy Ray…felling good Lewis”. Plus a young Jamie Lee Curtis topless. Great movie.

ty webb

April 22nd, 2010
9:16 am

oops meant “trading PLACES” Too much hgtv.

Bosch

April 22nd, 2010
9:17 am

ty,

“Trading Spaces”

I did the same thing when I first typed that, I caught it before I hit submit.

stands for decibels

April 22nd, 2010
9:17 am

“ways to get load”? “as outline by Jay”?

obviously I’m in the wrong business as well. This sucker’s gotta go produce something tangible; later, kids.

Southern Comfort

April 22nd, 2010
9:23 am

dB

I’d see myself more like the guy from Walking Tall than anything else. If nothing else can get an ethics bill thru to curb that kind of behavior, I think a 2×4 would be a tremendous asset. I’d have to pretend to be just like everyone else first so I don’t blow my cover.

Paul

April 22nd, 2010
9:25 am

So neither party has the moral high ground. Neither.

“staffers who become lobbyists are barred from lobbying their former employers for a year ”

Time to change that law. Make it five years. Apply it to members of Congress,not just staffers. And prohibit them from going to work for anyone for whom they’ve written legislation from working for them for five years.

There’s one way to get rid of the influence peddling, vote selling and bribery.

Full federal funding of elections, anyone?

Bosch

April 22nd, 2010
9:27 am

And Damn!! Who is shooting at soccer players in DeKalb?

Mick

April 22nd, 2010
9:29 am

How doe’s one become a lobbyist anyway? Do you need a license or certification? Prequalifications – like washed up politician, staffer, used care salesman, snake oil salesman, how doe’s one get on the boat?

Southern Comfort

April 22nd, 2010
9:29 am

Full federal funding of elections, anyone?

Full funding w/no outside money whatsoever!!!

HDB

April 22nd, 2010
9:33 am

@Paul…You may have something there!!!
@SoCo – In Walking Tall, do you mean the original one with Joe Don Baker…or the new one with “The Rock”?

detritusUSA

April 22nd, 2010
9:34 am

Of Ghandhi’s seven deadly sins, #1 is wealth without work.

Southern Comfort

April 22nd, 2010
9:34 am

Jay

The whole derivative trading thing sounds like slight-of-hand trickery like 3-card monte or something. However, it’s a mirror image of our current economy. It’s all smoke and mirrors with monopoly money as collateral. Once this sham really hits home, we’re f’ed for good.

StJ

April 22nd, 2010
9:35 am

ICE will be child’s play after Cap-n-Tax gets passed…

NowReally

April 22nd, 2010
9:38 am

These companies and their lobbyst do like to “purchase” cooperation from both parties. I guess it’s a lot like betting for both teams in the Super Bowl. :) Either way, you can’t lose.

I’ve already decided to accept my lot in life and wait for my reward in heaven. :)

michael

April 22nd, 2010
9:38 am

As far as I can tell, Chambliss has doe little except sponsor the (supremely kooky) flat tax bill, while spending more on travel than any other congressman even as he has earned the title of “Golf Digest’s” top golfing congressman. When is anyone with the resources to dig deeply enough going to do a thorough investigation into this man’s activities? He appears to be very busy but more or less invisible; he also seems to be doing very little that materially contributes to the welfare of the greater number of people. Why does he get to carry on without being rigorously questioned?

michael

April 22nd, 2010
9:39 am

Sorry for typo- doe should read as done

Bosch

April 22nd, 2010
9:42 am

Paul,

Federally funded campaigns? I would be all for it if there was a limit. Each candidate, no matter who they are gets x amount. That’s it. I don’t care if you are the Communist Party Candidate or the “I think space aliens are great” candidate. You all get the same amount of money and it goes strictly towards campaigning costs – which doesn’t include lugging your family around with you. Strictly on things like advertising.

CRB

April 22nd, 2010
9:43 am

Jay…how much money did Goldman Sachs give to Obama’s presidential campaign?

Bosch

April 22nd, 2010
9:44 am

Now Really,

I saw a funny bumper sticker yesterday – “Come Rapture, can I have your car?” :-)

The Thin Guy

April 22nd, 2010
9:44 am

Not to worry. When Øbungle finishes with them all they’ll have is change. The amounts mentioned are pocket change compared to what we will have to pay for Marxist Medicine and Clap and Trap. MM will destroy our health care system and CT will make The Gorbot our first Green Trillionaire. To put it in perspective, Nazzi Pelosi just spent $ 140 k of the taxpayers money on a light fixture for the House.

stands for decibels

April 22nd, 2010
9:45 am

one other thing:

I’d have to pretend to be just like everyone else first so I don’t blow my cover.

SoCo, seriously, I’d venture to guess most legislators tell themselves some version of that going in. And some of them manage to hang onto some semblance of personal integrity. Others find complex ways to rationalize their means-to-an-end.

Who knows, maybe Tom Delay was playing 12th dimension chess all along and was aiming for turning the US into a Marxist utopia before his legal difficulties forced his departure.

wyldbyllhyltnyr

April 22nd, 2010
9:48 am

Jay, Jay, Jay, my dear, sweet, naive, misguided Jay.

“”Notional value” means the maximum amount that might conceivably be at play in those trades; the real value is considerably less.)” That, my ill informed liberal friend is the gist of the whole credit crisis.

In short, a swap is a contingent obligation that may or may not fund and may or may not have value. The “contingent” nature of these obligations really gums up the ol’ risk management machine.

You see, when measuring the risk inherent in contingent instruments one could say: a) there is zero risk because nothing may ever fund; or b) there is 100% risk because the whole thing will fund; or c) risk is somewhere in between AT THE MOMENT USING A SET OF ARBITRARY ASSUMED CRITERIA. Now what this boils down to is: a) everyone knows that there is some risk in these instruments so you can’t say there is zero risk; and b) theses company’s wouldn’t assign 100% risk because if they did they couldn’t do very many of these profitable transactions; and c) so the firms used some theoretic measure of risk (probably monte carlo sim driven) to manage there positions to a 95% certitude over a one year horizon. What drove the financial crisis was that which is called a tail event – i.e. circumstances outside the 95% confidence range. The examiners “regulated” these exposures to death, but the incompetent, idiots never understood what they were doing, how to properly manage the risk, or what would happen if they were wrong.

Now when you add it all that it shows you just how stupid and inefficient the Obama financial reforms are. They do not address the issues that caused the problems, rather the scratch the itch of some more longstanding liberal fetishes. Veritable fiddling whilst Rome burns, or, more accurately, like throwing gasoline on the part of Rome that isn’t burning through increased regulations and government intrusion into private enterprise.

Paul

April 22nd, 2010
9:50 am

Bosch

Yup. You have half a million people in your district, each candidate gets $n. That’s it. And no personal $$$. We’ve enough millionaires buying elections.

Mick

April 22nd, 2010
9:52 am

**Tom Delay was playing 12th dimension chess**

He seemed more like a dim witted checker player to me.

Paul

April 22nd, 2010
9:55 am

CRB

It goes deeper than that. From all the visits of the Goldman-type operations heads to the White House to former execs working for the White House to ex White House lawyers representing Goldman, you’d think this was a Republican administration.

You would, if you were living under the stereotypes of a couple decades ago (which stereotype many Democrats have successfully perpetuated). Problem is, the head of Goldman, other type institutions and many, many senior execs are not Republicans. They’re Democrats.

So it’s no longer country club conservatives at the top of the financial corporate heap. It’s limousine liberals.

Time to update the stereotypes.

AmVet

April 22nd, 2010
9:57 am

You wanna know why the working class American has taken such a beating and watched as his money was funneled UP to the already wealthy?

That lobbyist, Peter Roberson, had worked as a senior advisor with the House Financial Services Committee in writing the House version of derivatives legislation.

Keep those 10,000 (mainly) corporate criminal facilitators on K Street OUT of the business of writing we the people’s legislation.

And yet, the Georgia dolts keep electing BIG time sleazeballs and cowards like Saxby to facilitate this take over of our sovereignty.

When is somebody gonna waterboard that SOB?

Bosch

April 22nd, 2010
9:59 am

Paul,

“You have half a million people in your district,”

I have to disagree with that aspect, cause then you’d see candidates from more populated places getting more money.

Dave

April 22nd, 2010
10:06 am

Two words: “Crony Capitalism”

As the New York Post reported Tuesday, the Democratic National Committee immediately bought sponsored Internet ads on Google that direct Web surfers who type in “Goldman Sachs SEC” to Obama’s fund-raising site.

Democrats are silent on the $994,795 in Goldman Sachs campaign cash that Obama bagged in the 2008 presidential race.

Goldman Sachs partner Gary Gensler is Obama’s Commodity Futures Trading Commission head. He was confirmed despite heated congressional grilling over his role, as Reuters described it, “as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. The financial instruments have been blamed for amplifying global financial turmoil.”

Goldman kept White House Chief of Staff Rahm Emanuel on a $3,000 monthly retainer while he worked as presidential candidate Bill Clinton’s chief fund-raiser, as first reported by Washington Examiner columnist Tim Carney. The financial titans threw in another $50,000 to become the Clinton primary campaign’s top funder.

Former Goldman lobbyist Mark Patterson serves under Geithner as his top deputy and overseer of TARP bailout — $10 billion of which went to Goldman Sachs.

National Economic Council head Larry Summers reaped nearly $2.8 million in speaking fees from many of the major financial institutions and government bailout recipients he now polices, including JP Morgan Chase, Citigroup, Lehman Bros. and Goldman. A single speech to Goldman in April 2008 brought in $135,000.

Paul

April 22nd, 2010
10:06 am

Bosch

Sounds good. Not to get into the weeds, they could figure it on the smallest districts and cap it at that. Whatever. Just get rid of the influence.

AmVet

April 22nd, 2010
10:10 am

Yep, full feral funding for campaigns.

NO PAC money. NO dirty “soft” money (You Go John McCain!). NO commercial donations.

Dismantle the Communist Commission on Presidential Debates (operated by the Tweedle Dee and Tweedle Dum Parties.) If one can garner 5% of the vote at a minimum, their voice should NOT be excluded in public debates.

Free TV and radio time for ballot-qualified candidates. (WE own those damned airwaves.)

12 year term limits.

And ain’t none of it ever gonna happen…

Doggone/GA

April 22nd, 2010
10:10 am

“Just get rid of the influence”

Not gonna happen. There’s always going to be ways to influence politicians. Personally, I think we could go a LONG way just be stopping the reporting of “contributions” “gifts” and such, and start calling them what they are: BRIBES

AmVet

April 22nd, 2010
10:11 am

Feral funding?

Woo hoo!

(Hey it’s for those right wingers and Tea partiers who hate Uncle Sam the Federalist!)

Bosch

April 22nd, 2010
10:11 am

Paul,

“Just get rid of the influence.”

Yes, definitely.

Paul

April 22nd, 2010
10:11 am

AmVet

I can dream, can’t I?

jewcowboy

April 22nd, 2010
10:12 am

The average cost for a House seat in 2008 was $1.1M…Senate seat $6.5M.

https://opensecrets.org/news/2008/11/money-wins-white-house-and.html

If someone is willing to spend that much to get elected, do we really think they are not planning on stealing it back at a profit little by little through any means available?

Mick

April 22nd, 2010
10:13 am

AmVet

**When is somebody gonna waterboard that SOB?**

Count me in if you need any assistance.

Bosch

April 22nd, 2010
10:16 am

Oooooohhhh, the Googly picture is really cool today! Happy Earth Day all!

Outhouse GoKart

April 22nd, 2010
10:16 am

Perhaps accumulating ones own wealth in lieu of envying and demonizing those that have acquired it is the way to go…

Dave

April 22nd, 2010
10:18 am

“The average cost for a House seat in 2008 was $1.1M…Senate seat $6.5M.”

Reminds me of the quote from the movie “Brewster’s Millions” where Richard Pryor’s character asks about the politicians’ motives if they’re willing to spend millions of dollars to get elected to a position that pays $100,000/yr (or whatever it is).

jewcowboy

April 22nd, 2010
10:19 am

Outhouse GoKart ,

“Perhaps accumulating ones own wealth in lieu of envying and demonizing those that have acquired it is the way to go…”

Perhaps not using ones accumulated wealth to help tear this country apart in order satiate ones greed is also the way to go…

Jay

April 22nd, 2010
10:20 am

All of that is true, Dave, regarding the ties between Obama and Goldman.

Next question though:

Is Goldman pleased with or angry with the Obama administration? Does it support or oppose what the administration has done through the SEC, the proposed legislation, exec compensation, etc.?

In other words, did Goldman get what it may have thought it was buying?

That’s the question, it seems to me.

AmVet

April 22nd, 2010
10:22 am

Mick, that is the one guy who REALLY PO’s me. Saxby is a disgrace and an embarrassment to Georgia. As are most of our Republican representatives in Congress. Linder, Broun, Deal, Westmoreland, Gingrey, Price – all Grade A a–holes and suck ups.

And no that doesn’t mean I’m advocating for the Democratic Party.

But when I see incompetence, corruption and sheer ignorance by our elected “representatives” I will not pretend otherwise…

Outhouse GoKart

April 22nd, 2010
10:25 am

Agreed Vet…Saxby is kindve an Ahole.

BTW…did you catch George Clinton and PFunk at the Masquerade?

AmVet

April 22nd, 2010
10:26 am

And the point that neo-cons seem to fail to grasp, is that it was known AT THE TIME that BHO outraised McCain in corporate contributions.

The first Democratic candidate for US President to ever do so.

Had it been yet ANOTHER Republican, well that’s business as usual. Nothing to see here, move along…

Dave

April 22nd, 2010
10:31 am

Re: Jay @ 10:20 – I think Goldman knows exactly what it’s (trying to get) and here’s why:

April 21, 2010
Is the Goldman-Sachs scandal manufactured? (updated)
Ann Kane

Reports coming in point to a scheme by President Obama to create a national scandal by having the SEC charge Goldman Sachs with fraud in order to bolster support for the sweeping financial regulatory reform bill.

An article from the Washington Examiner supports the premise that the president has always been in bed with Wall Street, even though he publicly chastises the ‘fat cats’ to win approval from the American people and to ram through his overreaching financial reform. From Tim Carney:

Obama’s fundraiser and economic adviser Warren Buffett is very long on Goldman, having bet on them in 2008 in the expectation of a bailout. Mark Patterson, chief of staff to Treasury Secretary Tim Geithner, was a Goldman Sachs lobbyist until months before joining Team Obama.

What does that add up to? Getting a hand in making the regulations:

Politico quoted a Goldman lobbyist Monday saying, “We’re not against regulation. We’re for regulation. We partner with regulators.”

[snip]

Goldman can play it safe, you see, without needing a regulation. But regulations prevent smaller competitors from taking the risks needed to compete with Goldman (and every competitor is smaller).

AmVet

April 22nd, 2010
10:32 am

OG, no. Sounds like fun though.

But I did see him/them at Music Midtown some years ago.

That same year, Earth, Wind and Fire played the same festival. We sang along to most of the songs, of course. The young black kids near us looked at us and laughed and asked how we knew all those lyrics?

I told them, “Hey I grew up with this stuff.”

One world…

Matilda

April 22nd, 2010
10:34 am

Ask not whom your legislators represent. It ain’t you.

Outhouse GoKart

April 22nd, 2010
10:34 am

“An article from the Washington Examiner supports the premise that the president has always been in bed with Wall Street, even though he publicly chastises the ‘fat cats’ to win approval from the American people and to ram through his overreaching financial reform.”

No surprise here…

mikey

April 22nd, 2010
10:35 am

two guesses as to who is firing shots in Dekalb County.

Dave

April 22nd, 2010
10:35 am

Not to mention that the “charges” seem a bit flimsy and possibly manufactured for the political purpose of selling the bill:

“Sebastian Mallaby of the Washington Post is also suspicious:

Unless the SEC is sitting on more evidence than it has laid out so far, the charge sheet looks flimsy. If Goldman has become a poster child for excessive power on Wall Street, the SEC might become a poster child for government power run amok.

The SEC’s 22-page complaint states that Goldman sold fancy mortgage securities without disclosing that a hedge fund manager, John Paulson, was betting that those same securities would go bad. This is a non-scandal. The securities in question, so-called synthetic collateralized debt obligations, cannot exist unless somebody is betting that they will lose value. The firms that bought Goldman’s securities knew perfectly well that some other investor must be taking the opposite position. It was their job to evaluate the Goldman offer and make up their own minds.

[snip]

Next, the SEC complains that Paulson had a hand in designing the securities, maximizing the chances that they would blow up. He did the equivalent of building a timber house with a large fireplace and a blocked chimney, then buying fire insurance on the structure. Shocking though this may sound, it is another non-scandal. An investor who wants to bet against a bundle of mortgages is entitled to suggest what should go into the bundle. The buyer is equally entitled to make counter-suggestions. As the SEC’s complaint states clearly, the lead buyer in this deal, a boutique called ACA that specialized in mortgage securities, did precisely that.

[snip]

The worst that can be said on the basis of the available evidence is that Goldman knew ACA was being stupid and failed to point this out. That falls far short of the offenses that the SEC alleges….”

Outhouse GoKart

April 22nd, 2010
10:35 am

The Pres & Congress say to “we the people”…you want the blue flashlight or the green flashlight.

Jay

April 22nd, 2010
10:36 am

Ah yes, the old quadruple bank-shot conspiracy theory approach.

TM

April 22nd, 2010
10:40 am

Jay
The Goldman mess shows that big $$ doesn’t always pays off as your last sentence implies.

Bosch

April 22nd, 2010
10:41 am

Jay,

“the old quadruple bank-shot conspiracy theory approach.”

ooooo. Sounds fun, do tell.

Bosch

April 22nd, 2010
10:42 am

Kamchak,

Have you been able to find the team rosters on the FIFA WC website? I can’t find it and it’s irritating me.

NowReally

April 22nd, 2010
10:43 am

Didn’t Goldman donate money to Republicans, as well? Didn’t other financial institutions donate money to Republicans, as well? Didn’t some of the people from financial institutions work in the Bush Administration? It doesn’t matter if the answer is yes, I want justice for anyone who lost a job and income because of the financial industry leadership. I want justice for mainstreet, middle income, working poor and independently wealthy americans.

The financial reform bill needs real tooth, nails and consequences. The CEO from Lehmans Brothers (during the hearing) didn’t seem nervous (at all) about spending one night in jail. He was just as arrogant and shallow as the CEO of WaMu. I really wanted to knock that silly arrogance and downright lying smile from his face. How can anyone defend these arrogant jerks and still sleep at night?

thomas

April 22nd, 2010
10:43 am

Jay

April 22nd, 2010
10:20 am

So from what you posted……… would you support a drug cartel donating money to a candidate as long as that candidate later prosecuted drug lords, or even that specific drug cartel?

AmVet

April 22nd, 2010
10:44 am

Politico quoted a Goldman lobbyist Monday saying, “We’re not against regulation. We’re for regulation. We partner with regulators.”

LOL! Over and over!

But I guess the last laugh is always on the American consumer, taxpayer and shareholder…

Chris Broe

April 22nd, 2010
10:44 am

I still don’t understand the charges against Goldman Sachs, and every metaphoric attempt to illustrate the principles involved only confound me more. I’ve seen comparisons to champagne bottles filled with houses. (Thank you, Mr. Bookman). I’ve heard that it’s like buying fire insurance for your neighbors house and then teaching their kids to play with matches. I suggest it’s more like adding two scoops of raisins to cereal and then passing a 1.8 gallon-per-flush law (and then shorting utilities).

I understand that brokers create financial instruments of bundled bonds during market bubbles. Some are gems that create wealth. Some are shiny trinkets not worth the paper they’re printed on. Bubbles generate opportunities for marketing irresistable baubles of bundled bonds which create wealth geometrically into the hundreds of trillions of dollars, (when our entire GDP is less than 15 trillion).

So is this crisis nothing more than a story of a Bobbled Bubble Bauble of Bundled Bonds? (I’m so confused).

Why do meltdowns seem to only happen during bubbles? Because stock market bubbles create enriched egomaniacs who think they’re shielded from oversight. Regulators usually only see the mushroom cloud.

Lesson: When you define yourself by your parachute, a fall can’t be too far behind.

jt

April 22nd, 2010
10:54 am

The answer is simple.

We must get these guys MORE involved in our health-care decisions.

OWO

April 22nd, 2010
10:54 am

Another GS player is Mark Schwartz, tied to George soros, tied to Obama’s 2008 campaign.

Schwartz presently serves as Chairman of MissionPoint Capital Partners LLC, (heavily invested in Obama’s low-carbon capital ventures, and co-founder of New Silk Route Partners LLC. From late 2002 to early 2005. Ben Simpendorfer’s book, “The New Silk Road” sums up what NSRP is all about ——–”The last chapter I found a little disjointed after a great excursion in corners I’d never imagine, making linkages and connections which are often overlooked. But it makes an important point that the west should pay attention to how China and the Middle East are coming together as part of what Simpfendorfer calls “a new global re-balancing.”———

Mr. Schwartz served as a senior advisor to George Soros and then as President and Chief Executive Officer of Soros Fund Management LLC. From 1979 to 2001, he served in various positions at The Goldman Sachs Group, Inc., including as Chairman of Goldman Sachs Asia, from 1999 to 2001 and President of Goldman Sachs Japan, from … 1997 to 2001. He served as a Partner of The Goldman Sachs Group, Inc. from 1988 to he retired in 2001. Mr. Schwartz has been Director of MasterCard Worldwide (Formerly, Mastercard International Inc.) since May 2006. He serves as Director of Mastercard Incorporated and Harbor Point Limited. Harbor Point Limited is a Bermuda-based global reinsurance holding company with shareholders’ equity in excess of $1.9 billion as of September 30, 2009. Harbor Point combines prudent capital and an exceptional underwriting team with a record of proven performance and quality service to the insurance community.

CONSERVATIVE..DITTOhead.

April 22nd, 2010
10:56 am

FOLLOW THE $$$$$$$$…….WHAT ELSE IS NEW..JAY……WELCOME TO THE WORLD OF HIGH STAKES POLITICS…& CONTROL OF AMERICA…….JOSEPH KENNEDY SPENT $$$$$$$$$$$$$$$$$$$$$ &ed. political capital…with the help of your friendly liberal Media..to take the White House….that was 1960…..Now just more $$$$$$$ is invlv

AmVet

April 22nd, 2010
10:56 am

The top five bank holding companies in derivatives – JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley and Citi – hold $280,000,000,000,000.00 worth of notional derivatives contracts, according to the Office of the Comptroller of the Currency. That’s 20 times the gross domestic product of the U.S.

Dave

April 22nd, 2010
10:59 am

I wouldn’t call it a “conspiracy”, just your typical “crony capitalism”/Washington insider business as usual…although this time you have an administration using it for class warfare/political reasons to get some legislation passed.

Glodman will happily take this “public spanking” for these “charges” in exchange for being able to shape the “reform”/”regulation” bill in a way that benefits them… and by all accounts, it looks like it would by providing a permanant “bailout” fund (funded by other banks, insurance companies etc…which would eventually be passed down to us), not for Goldman, but for their creditors which would reduce or eliminate any risk on their part and increase Goldman’s bottom line. Increased regulation would also aid in eliminating any competition for the big companies (who are “too big to fail”). So it’s a win-win for them, not so much for us.

Soothsayer

April 22nd, 2010
11:03 am

Mick

April 22nd, 2010
11:04 am

Some people say the rapture is near, but its more likely there will be an economic rupture that will happen first.

Kamchak

April 22nd, 2010
11:05 am

Bosch

Have team rosters been announced yet? I can’t even find out when the deadline is for posting team rosters.

Bosch

April 22nd, 2010
11:05 am

OK, way off topic, but I thought this was cool:

“Clerks Find Papers From 1881 Gunfight At OK Corral”

http://www.npr.org/templates/story/story.php?storyId=126178583

professional skeptic

April 22nd, 2010
11:05 am

I’d like to do a similar analysis on contributions from the big roadbuilders to Georgia’s state politicians.

When is there ever time?

Bosch

April 22nd, 2010
11:07 am

Kamchak,

“Bosch

Have team rosters been announced yet? I can’t even find out when the deadline is for posting team rosters.”

Well excellent question, that, I do not know. I was just going on assumption. I’ve just been googling the teams individually for the ones I want to know. And, btw, the googly picture is tre’ cool today.

Jay

April 22nd, 2010
11:08 am

Chris, are you familiar with the movie/Broadway musical “The Producers”, by Mel Brooks?

It hit me the other day that it’s something like that. Producer Max Bialystock (played by the great Nathan Lane) wheedles a lot of money out of investors to back his new Broadway show, promising to repay them when the show becomes a hit.

Except that the wily Max deliberately tries to create a show so terrible (think “Springtime for Hitler in Germany”) that it will close immediately, ensuring that he never has to repay a dime to those investors.

According to the SEC, Goldman Sachs took its lead from Max.

AmVet

April 22nd, 2010
11:10 am

April 22 (Bloomberg) — Ndamukong Suh pledged $2.6 million to his alma mater, the University of Nebraska, even before he receives his first paycheck as a National Football League player.

Last week, at the Cornhuskers’ annual spring football game in Lincoln, Nebraska, Suh pledged $2 million to the athletic department for its strength and conditioning program. He promised to give another $600,000 to Nebraska’s College of Engineering, where he graduated in December with a degree in construction management.

Suh, whose mother was born in Jamaica and whose father is from Cameroon, said he won’t change his lifestyle or indulge in expensive cars or homes. He said it’s more important to give back to those who have helped him.

Suh said that after his football career he wants to work alongside his father, a mechanical engineer.

A class act from a class school.

jt

April 22nd, 2010
11:15 am

Big Pharma’s Political Contributions
In 2008, for the first time in 18 years, the pharmaceutical industry’s donations to Democrats were on par with the money it gave to Republicans.

The commodities markets are big now. Livers, hearts, breasts,etc……………

Thanks for the advocacy Jay.

I’m sure this political cronyism only affects the banking industry.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/01/08/GR2009010800559.html

Kamchak

April 22nd, 2010
11:15 am

Bosch

I just had a “duh” moment. Since the European professional season is winding down, and the MLS just starting up,it would be somewhat foolish to announce a roster and then have one or more players ineligible due to injury.

Looks like Bayern München has a shot at the UCL final.

Dave

April 22nd, 2010
11:15 am

Then there’s this:

Obama’s terrible powers
By Dick Morris – 04/13/10 06:47 PM ET

“If the financial regulation bill that passed the House last year becomes law, President Obama and his Treasury Secretary will acquire the right to take over any financial institution they wish to, provided that, in their sole opinion, it is both “too big to fail” and on the brink of insolvency. The House bill provides for no judicial review and does not require any objective evidence of imminent failure to trigger the takeover provisions.

Essentially, this bill permits the government to launch an unfriendly takeover of any financial institution it wishes without risk and with no poison pill or other counter-measures possible.

This legislation, essentially, confers on the federal government police powers that, under our system, are the exclusive preserve of state and local government. The blank check the bill gives the feds to take over any financial institution is really more of an exercise of eminent domain than it is an extension of traditional federal regulatory power.

While the focus on the regulatory bill has been on the consumer protection provisions, which I tend to support, there has been far less scrutiny on these horrific expansions of federal power.

Fidel Castro and Hugo Chavez could only dream of this power.”

willie

April 22nd, 2010
11:16 am

Off with their heads!

Dave

April 22nd, 2010
11:23 am

And this:

A blueprint for coercion
By Dick Morris – 04/20/10 05:31 PM ET

“There are so many reasons to oppose Obama’s financial regulation bill.

Some Republicans have focused on the fact that it sets up a TARP II fund that starts the bidding at $50 billion. In making such an offer to back up firms that are too big to fail, the bill guarantees:

a) that the big firms will feel free to make whatever risky bets they can get away with since their downside (i.e., backside) is covered;

b) that the bigger firms eclipse the smaller ones (as Fannie Mae and Freddie Mac did to the mortgage industry) because of their implicit federal guarantee; and

c) that more firms crowd to get under the $50 billion umbrella and that it expands into an even larger bailout.

[snip]

But we also need to worry about how the power to seize on the one hand and bail out on the other will be used by this administration. Already, we have seen how Obama and Geithner did not hesitate to throw their regulatory weight around to force bondholders to take a pittance in very partial repayment of their loans to General Motors. We can imagine how much political clout these new powers will give to Obama.

With political action committees and bundling by financial firms playing an ever larger part in campaign finance and issue advocacy advertising, will any large financial institution feel free to let its executives work against Obama’s reelection? Will they not worry that he could take them over in a twinkling of an eye? Or will they be so anxious to come in out of the rain of competition to nestle under the bailout umbrella that they won’t want to risk antagonizing Obama?

[snip]

Let’s remember the days of JFK phoning steel-company executives to force a roll-back in their price increases while Attorney General Bobby threatened increased antitrust scrutiny. Equipped with the powers about to be conferred in the financial regulation bill, such government tyranny could be even more dangerous.

Some seem willing to confer these powers if only a bankruptcy judge signs off on the takeovers and seizures. But the administration, which appoints the judges in the first place, can shop for a compliant one like a prosecutor looking for a jurist to issue a search warrant.”

Jackie

April 22nd, 2010
11:24 am

Dick Cheney just announced support for Marco Rubio for the Senate seat in Florida. Wonder when Mr. Rubio’s poll numbers will begin to fall dramatically?

Bosch

April 22nd, 2010
11:24 am

Kamchak,

Yes, that would be dumb. Like I said, you think about things like that alot more than me! :-) I was just looking for a general idea of who was on the teams this time around.

I didn’t see the game, but it appears Ribery was robbed and Robben saved the day!

AmVet

April 22nd, 2010
11:33 am

I guess the bottom line, that the law and order averse, status quo at all costs boys don’t grasp, is that had these banksters and casino capitalists reigned in, even slightly, their insatiable lust for ill-gotten wealth and power, we wouldn’t have the evil government even looking at them.

And GWB did his part. After promising to “clean up Wall Street” in his 2000 campaign, one of his very first acts was to REDUCE the increased budget for the SEC’s Corporate Oversight arm.

Even with all of that bribing to get the responsible parties to play dumb and look the other way, these white collar criminals, like coke addicts, just couldn’t say no to that “sustained orgy of greed and reckless behavior”.

Now the Republiconned want to feel sorry for them.

Go figure,,,

AmVet

April 22nd, 2010
11:36 am

Jackie,

Ah, Dick Cheney, the man of a thousand quotes.

Almost all of which expose him as an idiot and a liar.

The only man in the known universe who could do the impossible – make Spiro Agnew look good…