Goldman Sachs Fined £20m

Britain’s Financial Service Authority has fined Goldman twenty million pounds.

Goldman kept vital information from the government regulatory agencies in Great Britain, and most certainly from the investing public as well. Goldman Sachs has been involved in the melt down of the Greek economy, unfair home loans in the United States (paying a 60 million dollar penalty), and a wide variety of violation of American financial regulations.

Perhaps someone should catalog the company’s activities around the world. It would seem from many, many news reports that pushing the boundaries of the law and direct law breaking are habits of the company. Considering the firm’s immense financial holdings, these practices could post serious dangers to the American economy.

Goldman Sachs And Patriotism?

Goldman Sachs in the true spirit of duty to country paid one percent of its profits in taxes. That’s right, you may have paid a little more but reflect that 14 million dollars is still a good piece of change. Of course, they did hold on to the other 2 billion dollars in profit. That might upset you. It made me feel uncomfortable. What am I lacking that they have?

It’s tax havens. There are places they can go to register their business and pay little or no taxes. Now, you might think that businesses obtaining heavy and continued benefits (like the bailout and cheap borrowing from the Federal Reserve) from being (actually) in the United States would feel an obligation to support the country that has given them so much (you know, little things, blood of our soldiers, etc.). But they don’t feel that way.

The following quote is from a report available here. The report is entitled – Unfair Advantage, The Business Case Against Overseas Tax Havens.

In 2008, Goldman Sachs, with 29 subsidiaries located in offshore tax havens, reported profits of over $2 billion and paid federal taxes of $14 million, an effective tax rate of just one percent, and less than one third what they paid their CEO Lloyd Blankfein ($42.9 million).

The report estimates that America loses minimally 37 billion in tax revenues due to tax havens. Fifty years ago, corporations paid almost a quarter of the tax revenues of the federal government. Today it is less than a tenth.

So, I return to my question, do businesses have a duty to patriotism or is the only duty a corporation has to its shareholders to advance profits? Should we expect business organizations to advance the welfare of the citizens of their country and the nation itself?

I have the duty to tell you that the current doctrine practiced in “American” corporations is that there is no national duty whatever. What is taught is a fervent loyalty to shareholders and profits.

I do not believe that a pursuit of profit should be the only goal of an organization like a corporation. I worry that one day this nation will be in terrible danger and these enormous behemoths of business will simply find another place to go.

James Pilant

Goldman Sachs’ Value Drop – July 20th, 2010

This a news analysis of the July 20th, drop in Goldman Sachs’ shares. Forgive the commercial that opens it. I can’t get around it.

This is a PBS two part series on how Goldman Sachs’ profit. If you want to understand our economy’s problems and what is likely to continue to go wrong, this is a good place to start.

This is the second part.

Matt Taibbi Is Mad

Matt Taibbi is angry. The reform bill on the financial industry is a sham and he’s going to let everybody know.

Mr. Taibbi has the same contempt for the way things are done in the government and private business that I do. Whatever makes the most money is the only consideration. It takes a lot of dead people or an incredible catastrophe to get the government to react or private industry to change course.

Here’s Matt venting about Goldman Sachs.

A Public Official Does His Job

A Public Official Does His Job

Phil Angelides is the Chairman of the Financial Crisis Commission. Yesterday during testimony he said this to Lloyd Blankfein, the CEO of Goldman Sachs.

“I’m just going to be blunt with you,” he told Blankfein. “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars. It doesn’t seem to me that that’s a practice that inspires confidence in the market.”

(What the company was doing is explained in a McClatchy news article. Most simply it was a set of investments in which the contract created a situation that if the investements prospered, Goldman Sachs made money, but if the investments went sour, Goldman Sachs made even more money. The investor bore all the risk.)

For so much of the time after this unprecedented story of financial incompetence, greed and outright stupidity, public officials have said little but given much to the financial industry. Here is a different voice. Whether in the long term this proves sincere is still a question. But I liked the sound of it. Ethics tends to work well in an environment in which there are penalties for doing wrong. The wrong doers have profited from their actions. This is not the kind of example a country and developing civilization need. It is in fact quite dangerous when a large group of powerful Americans no longer share common interests or abide by the same rules as other Americans.

James Pilant

Heads I Win, Tails You Lose

Heads I Win, Tails You Lose

According to a McClatchy investigation, Goldman Sachs begin creating a new form of security in 2006. These “investments” were placed off shore in the Cayman Islands. The investments were high grade securities based on home mortgages but there was a catch. They insured these collateralized debt obligations so that the investors were on hook to cover their losses. The investors thought they were getting good investments but instead they were investing in the real estate bubble. If they lost as Goldman Sachs might have concluded was highly likely, the investors were required by contract to cover the losses. The contracts literally converted the investors into insurers. They insured that Goldman Sach would make money whether the investments did well or collapsed.

I recommend you give it a read.

Collateralized debt obligations are the chief weapon that destroyed the financial security of millions of Americans as well as countless others around the world. The McClatchy articles are an excellent way to begin to understand these strange forms of investments.

James Pilant