Last year, I ran for Senate on the idea of sticking up for the little guy against a system rigged for the big guy.
It's outrageous that the Federal Reserve loans money to big banks at 0.75% interest, while interest rates for college loans will be 9 times higher starting July 1. That's why I introduced a bill saying college students should get the same low rate.
I am proud that more than 385,000 Americans have signed a petition to Congress supporting my proposal -- in less than a week.
Can you join them, and add to the momentum? Click here.
...The simple fact is that big Wall Street banks wrecked our economy. College students did not.
Students are the future of our country and our economy, and they should get the same good deals as Wall Street – they shouldn’t be saddled with debt...
Thank you.
Sen. Elizabeth Warren
Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts
Tuesday, May 14, 2013
Sunday, May 12, 2013
Slaying the Mythical Tax-Fattened Hog
"...[S]tate and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience."
Slaying the Mythical Tax-Fattened Hog
August 12, 2010
by Stephanie Rozsa
Cities Speak.org
National League of Cities
Big headlines come across my desk each morning, but none more sensational than this one from Wednesday: “Bloated public sector needs a crash diet” (The Examiner). As I skimmed the article, I read: “While much of the private sector has laid off workers, frozen pay and cut capital investment, public sector employees have lived high on the tax-fattened hog.” This editorial is just one of many causing a stir about public compensation as the recession tightens its grip. The most infamous story came from Bell, California, where the city of 37,000 paid several top employees egregious salaries, including $800,000 to the chief administrative officer. While this kind of abuse is out of the ordinary, it does raise a fair question about public compensation.
In a series of articles, USA Today (most recently on August 10, 2010) similarly asserts that public sector employees are overcompensated compared with their private sector counterparts. Their analysis compares the salaries of similar occupations in each sector, accountants to accountants, for example. While this approach may seem logical, a new report, commissioned by the Center for State and Local Government Excellence (CSLGE) and the National Institute on Retirement Security, declares that the reality is that 80 percent of private positions do not have direct public sector equivalents.
For the 20 percent of occupations that allow comparison, then, USA Today relays only the raw salary differences that suggest higher earnings for state and local workers. This means that their analysis fails to factor in other qualifying factors of comparison between employees, like education level, years of experience, training, and skill sets. So while both USA Today and the new CSLGE report confirm that public employees do, in fact, earn more on average than private sector workers, the public sector workforce earns this higher average salary because the average employee is better educated and has more experience. Once these factors are included in compensation calculations, the latter explains that state and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience.
In fact, the CSLGE report discovered that state and local sector employees are twice as likely as their private sector counterparts to have a college or advanced degree. The major driver in this pattern is that government workers have jobs that demand more education, like teachers, university professors, nurses, and social workers. In other words, state and local government employees earn less than they would if they took their skills to the private sector.
How much less?...With benefits factored in, state and local employees still earned an average of nearly 7 percent and 7.4 percent less, respectively...
Slaying the Mythical Tax-Fattened Hog
August 12, 2010
by Stephanie Rozsa
Cities Speak.org
National League of Cities
Big headlines come across my desk each morning, but none more sensational than this one from Wednesday: “Bloated public sector needs a crash diet” (The Examiner). As I skimmed the article, I read: “While much of the private sector has laid off workers, frozen pay and cut capital investment, public sector employees have lived high on the tax-fattened hog.” This editorial is just one of many causing a stir about public compensation as the recession tightens its grip. The most infamous story came from Bell, California, where the city of 37,000 paid several top employees egregious salaries, including $800,000 to the chief administrative officer. While this kind of abuse is out of the ordinary, it does raise a fair question about public compensation.
In a series of articles, USA Today (most recently on August 10, 2010) similarly asserts that public sector employees are overcompensated compared with their private sector counterparts. Their analysis compares the salaries of similar occupations in each sector, accountants to accountants, for example. While this approach may seem logical, a new report, commissioned by the Center for State and Local Government Excellence (CSLGE) and the National Institute on Retirement Security, declares that the reality is that 80 percent of private positions do not have direct public sector equivalents.
For the 20 percent of occupations that allow comparison, then, USA Today relays only the raw salary differences that suggest higher earnings for state and local workers. This means that their analysis fails to factor in other qualifying factors of comparison between employees, like education level, years of experience, training, and skill sets. So while both USA Today and the new CSLGE report confirm that public employees do, in fact, earn more on average than private sector workers, the public sector workforce earns this higher average salary because the average employee is better educated and has more experience. Once these factors are included in compensation calculations, the latter explains that state and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience.
In fact, the CSLGE report discovered that state and local sector employees are twice as likely as their private sector counterparts to have a college or advanced degree. The major driver in this pattern is that government workers have jobs that demand more education, like teachers, university professors, nurses, and social workers. In other words, state and local government employees earn less than they would if they took their skills to the private sector.
How much less?...With benefits factored in, state and local employees still earned an average of nearly 7 percent and 7.4 percent less, respectively...
Saturday, January 19, 2013
Community Colleges are so underfunded that students must spend
Community colleges' crisis slows students' progress to a crawl
Thousands of degree seekers are able to enroll in only one class at a time. Hopes of graduating or transferring wither as years pass.
By Stephen Ceasar
LA Times
Oct. 4, 2012
See also California's community colleges staggering during hard times.
The first course Charity Hansen is taking as a freshman at Pasadena City College is a basic class on managing time, speaking up in discussions, setting ambitious goals and then going after them.
If only she could.
It's the only class she managed to get this semester. No math. No English. No science.
"I can't use what I'm being taught yet because I can't get these classes," said Hansen, a 19-year-old from Los Angeles who hopes one day to become a psychologist. "It's frustrating."
Hansen's college education has stalled just as it is beginning. Like thousands of students in California's community college system, she has been reduced to taking one class because there's no room in other classes.
Instead of a full-time load of 12 units, some students are taking three units or even less.
Frustrated students linger on waiting lists or crash packed classes hoping professors will add them later. They see their chances of graduating or transferring diminishing.
It's a product of years of severe budget cuts and heavy demand in the two-year college system. The same situation has affected the Cal State and UC systems, but the impact has been most deeply felt in the 2.4-million-student community college system — the nation's largest.
At Pasadena City College, nearly 4,000 students who are seeking a degree or to transfer are taking a single class this fall. About 63% are taking less than 12 units and are considered part time. The school has slashed 10% of its classes to save money.
The lives of some community college students have become a slow-motion academic crawl, sometimes forcing them to change their career paths and shrink their ambitions.
Mark Rocha, president of Pasadena City College, said California's once-vaunted community college system has never been in such a precarious state.
"It breaks our hearts," he said. "The students who are here, we're desperately telling them 'Don't drop out, don't give up hope. We'll get you through.'"
Since 2007, money from the state's general fund, which provides the bulk of the system's revenue, has decreased by more than a third, dropping from a peak of nearly $3.9 billion to about $2.6 billion last year.
Without enough money, course offerings have dropped by almost a quarter since 2008. In a survey, 78 of the system's 112 colleges reported more than 472,300 students were on waiting lists for classes this fall semester — an average of about 7,150 per campus.
California ranks 36th in the nation in the number of students who finish with a degree or who transfer to a four-year university, according to a February report by the Little Hoover Commission. Many students drop out before completing even half of what is required to earn a typical associate's degree, the report found.
Even for those who persevere, it can take years to graduate — well beyond the two years it once took.
Cinthia Garcia thought she was on the right track. She went straight from high school to El Camino College in Torrance with plans to transfer to a four-year university.
That was six years ago.
"I've been in school forever," said the 24-year-old graphic design major from Compton.
At El Camino, she struggled to get classes, typically landing a spot in only two or three. The art department at El Camino began losing professors and Garcia decided she needed a change.
Pasadena City College, with a respected arts program, was appealing, so she moved to Los Angeles to be closer to school.
Still, she was unable to enroll in more advanced art classes, in part because they also were full.
She emailed every instructor in the art department, searching for a class. One responded. She told Garcia she would help her get the last seat in a Web design class. By then, the class was full, but a few days later, someone dropped the course and Garcia was in.
"All that for just one class," she said, shaking her head.
The crowding has rippled through the school, causing long waits to see academic counselors — an important issue for many community college students who need advice on navigating the sometimes complex requirements to transfer to Cal State, UC or a private university.
At El Camino, Garcia said, the lines to see counselors were hours long. She'd make appointments weeks in advance, never seeing the same advisor twice, she said.
"I tried to do it on my own but I was only able to get so far," she said. "Students are isolated because the counselors have such an overwhelming load."
Garcia said all the delays have made her life harder. She had a full-time job at Ikea, but cut back her hours, hoping the extra time would allow her to power through Pasadena City College.
Over the years, she has shifted her goals from a four-year degree, to a community college associate's degree, and now to a certificate, which requires fewer credits.
That decision could cost her in the long run.
A study by the U.S. Bureau of Labor showed that in 2009, the median weekly earnings of workers with bachelor's degrees was about $1,137 — about a third more than workers with an associate's degree.
Jeffrey MacGillivray attended three community colleges in search of classes and direction.
He started at Los Angeles Harbor College, then tried West Los Angeles College, where he failed to get into any classes, and now he is at El Camino.
This fall, he managed to find a seat in only one academic class — philosophy. He later added a boxing class to fill some mornings.
"I was thinking I can just go to community college, do my two years and transfer," said the 20-year-old Redondo Beach resident. "I had no idea I'd probably end up at El Camino for four years."
MacGillivray has focused much of his attention on trying to play football and run track in community college in hopes of getting a scholarship to a four-year school.
But he has never been able to get enough classes — at least 12 units each semester — to qualify for a team. At El Camino this semester, 98% of class sections are filled to capacity.
"It's really frustrating, having this goal of running track at a university and graduating with a degree," he said. "Junior college is being a bigger obstacle than it should be."
Next semester, MacGillivray may be changing schools again. He was offered a chance to join the Long Beach City College track team — with the possibility that the school could help him get the classes he needs.
For all the trouble, MacGillivray said there is a bright side to his academic wanderings. After two years, he's figured out what he wants to major in — media arts.
And to his surprise, he has discovered that he actually enjoys philosophy.
On a recent afternoon, he listened intently as his professor lectured on ethical relativism — the belief that morality is linked to the social norms of one's culture.
"She's so deep," MacGillivray said of his professor. "I only got one class, so it's pretty cool it was that one."
Thousands of degree seekers are able to enroll in only one class at a time. Hopes of graduating or transferring wither as years pass.
By Stephen Ceasar
LA Times
Oct. 4, 2012
See also California's community colleges staggering during hard times.
The first course Charity Hansen is taking as a freshman at Pasadena City College is a basic class on managing time, speaking up in discussions, setting ambitious goals and then going after them.
If only she could.
It's the only class she managed to get this semester. No math. No English. No science.
"I can't use what I'm being taught yet because I can't get these classes," said Hansen, a 19-year-old from Los Angeles who hopes one day to become a psychologist. "It's frustrating."
Hansen's college education has stalled just as it is beginning. Like thousands of students in California's community college system, she has been reduced to taking one class because there's no room in other classes.
Instead of a full-time load of 12 units, some students are taking three units or even less.
Frustrated students linger on waiting lists or crash packed classes hoping professors will add them later. They see their chances of graduating or transferring diminishing.
It's a product of years of severe budget cuts and heavy demand in the two-year college system. The same situation has affected the Cal State and UC systems, but the impact has been most deeply felt in the 2.4-million-student community college system — the nation's largest.
At Pasadena City College, nearly 4,000 students who are seeking a degree or to transfer are taking a single class this fall. About 63% are taking less than 12 units and are considered part time. The school has slashed 10% of its classes to save money.
The lives of some community college students have become a slow-motion academic crawl, sometimes forcing them to change their career paths and shrink their ambitions.
Mark Rocha, president of Pasadena City College, said California's once-vaunted community college system has never been in such a precarious state.
"It breaks our hearts," he said. "The students who are here, we're desperately telling them 'Don't drop out, don't give up hope. We'll get you through.'"
Since 2007, money from the state's general fund, which provides the bulk of the system's revenue, has decreased by more than a third, dropping from a peak of nearly $3.9 billion to about $2.6 billion last year.
Without enough money, course offerings have dropped by almost a quarter since 2008. In a survey, 78 of the system's 112 colleges reported more than 472,300 students were on waiting lists for classes this fall semester — an average of about 7,150 per campus.
California ranks 36th in the nation in the number of students who finish with a degree or who transfer to a four-year university, according to a February report by the Little Hoover Commission. Many students drop out before completing even half of what is required to earn a typical associate's degree, the report found.
Even for those who persevere, it can take years to graduate — well beyond the two years it once took.
Cinthia Garcia thought she was on the right track. She went straight from high school to El Camino College in Torrance with plans to transfer to a four-year university.
That was six years ago.
"I've been in school forever," said the 24-year-old graphic design major from Compton.
At El Camino, she struggled to get classes, typically landing a spot in only two or three. The art department at El Camino began losing professors and Garcia decided she needed a change.
Pasadena City College, with a respected arts program, was appealing, so she moved to Los Angeles to be closer to school.
Still, she was unable to enroll in more advanced art classes, in part because they also were full.
She emailed every instructor in the art department, searching for a class. One responded. She told Garcia she would help her get the last seat in a Web design class. By then, the class was full, but a few days later, someone dropped the course and Garcia was in.
"All that for just one class," she said, shaking her head.
The crowding has rippled through the school, causing long waits to see academic counselors — an important issue for many community college students who need advice on navigating the sometimes complex requirements to transfer to Cal State, UC or a private university.
At El Camino, Garcia said, the lines to see counselors were hours long. She'd make appointments weeks in advance, never seeing the same advisor twice, she said.
"I tried to do it on my own but I was only able to get so far," she said. "Students are isolated because the counselors have such an overwhelming load."
Garcia said all the delays have made her life harder. She had a full-time job at Ikea, but cut back her hours, hoping the extra time would allow her to power through Pasadena City College.
Over the years, she has shifted her goals from a four-year degree, to a community college associate's degree, and now to a certificate, which requires fewer credits.
That decision could cost her in the long run.
A study by the U.S. Bureau of Labor showed that in 2009, the median weekly earnings of workers with bachelor's degrees was about $1,137 — about a third more than workers with an associate's degree.
Jeffrey MacGillivray attended three community colleges in search of classes and direction.
He started at Los Angeles Harbor College, then tried West Los Angeles College, where he failed to get into any classes, and now he is at El Camino.
This fall, he managed to find a seat in only one academic class — philosophy. He later added a boxing class to fill some mornings.
"I was thinking I can just go to community college, do my two years and transfer," said the 20-year-old Redondo Beach resident. "I had no idea I'd probably end up at El Camino for four years."
MacGillivray has focused much of his attention on trying to play football and run track in community college in hopes of getting a scholarship to a four-year school.
But he has never been able to get enough classes — at least 12 units each semester — to qualify for a team. At El Camino this semester, 98% of class sections are filled to capacity.
"It's really frustrating, having this goal of running track at a university and graduating with a degree," he said. "Junior college is being a bigger obstacle than it should be."
Next semester, MacGillivray may be changing schools again. He was offered a chance to join the Long Beach City College track team — with the possibility that the school could help him get the classes he needs.
For all the trouble, MacGillivray said there is a bright side to his academic wanderings. After two years, he's figured out what he wants to major in — media arts.
And to his surprise, he has discovered that he actually enjoys philosophy.
On a recent afternoon, he listened intently as his professor lectured on ethical relativism — the belief that morality is linked to the social norms of one's culture.
"She's so deep," MacGillivray said of his professor. "I only got one class, so it's pretty cool it was that one."
Wednesday, August 22, 2012
Community college districts' bonds inflate cost to taxpayers
Community college districts' bonds inflate cost to taxpayers
Erica Perez
California Watch
Aug. 22, 2012
Several California community college districts have sold bonds that allow them to put off payments for up to 40 years, causing the total repayment to cost taxpayers from five to nine times the principal.
Poway Unified School District, while not a community college district, made headlines this month for issuing a bond for $108 million that will end up costing taxpayers nearly $1 billion over 40 years.
Poway Unified has become the poster child for long-term capital appreciation bonds, increasingly common but controversial tools that enable districts to get cash now for voter-approved construction programs, while delaying the payments and tax levy for decades.
A retired Detroit Free Press reporter, Joel Thurtell, reported on Poway Unified's bond sale on his blog. After Voice of San Diego reported in-depth on the deal Aug. 6, the story garnered national attention.
The Los Angeles treasurer and tax collector's office has taken an aggressive stance against long-term versions of these bonds.
"Once you see a repayment obligation that materially exceeds the principal amount, by that I mean four, five or 10 times more, you have to question why they did it," said Douglas Baron, director of public finance at the Los Angeles County treasurer and tax collector's office.
More standard bond sales cost closer to $3 per dollar borrowed.
California Watch reviewed bond sales at several community college districts in search of similar deals. Although few appear to match the size of the Poway Unified example, several districts financed construction programs using long-term capital appreciation bonds that will end up costing much more than traditional financing because of compounded interest.
San Bernardino Community College District issued $56 million in bonds that will cost $493 million by the time they're paid back in 2048 ---- nine times the principal.
Victor Valley Community College District borrowed $34 million in bonds that will end up costing $271 million to pay back by 2049 ---- eight times the principal.
Yosemite Community College District's $78 million bond issue will cost $453 million by 2042 ---- six times the principal.
Chabot-Las Positas Community College District will pay $850 million by 2046 on $169 million in bonds ---- totaling five times the principal.
District officials chose the more expensive bonds for a number of reasons. Some said they saw the bonds as the best way to maximize buying power without exceeding legal or promised limits on tax rates.
Here's the difference between capital appreciation bonds and the standard variety: With traditional current interest bonds, districts borrow money and start paying interest right away. The money for the debt payments comes from taxes on residents.
They can only borrow so much this way because state law says community college districts can't levy more than $25 per $100,000 of property value.
With capital appreciation bonds, districts get the cash up front, but don't have to pay interest or levy taxes right away. The interest on these bonds compounds over time, without being paid out, until the bond comes due. The further out the bonds come due, or mature, the bigger the payoff for investors and the higher the price tag for districts and future taxpayers.
State law prohibits districts from selling bonds that come due more than 40 years out. The Los Angeles County treasurer and tax collector's office published a white paper stating it would not support capital appreciation bonds in that county with maturities greater than 25 years.
And Baron said the office would advocate changes in the law that would set a cap at 25 to 30 years.
California Watch
Aug. 22, 2012
Several California community college districts have sold bonds that allow them to put off payments for up to 40 years, causing the total repayment to cost taxpayers from five to nine times the principal.
Poway Unified School District, while not a community college district, made headlines this month for issuing a bond for $108 million that will end up costing taxpayers nearly $1 billion over 40 years.
Poway Unified has become the poster child for long-term capital appreciation bonds, increasingly common but controversial tools that enable districts to get cash now for voter-approved construction programs, while delaying the payments and tax levy for decades.
A retired Detroit Free Press reporter, Joel Thurtell, reported on Poway Unified's bond sale on his blog. After Voice of San Diego reported in-depth on the deal Aug. 6, the story garnered national attention.
The Los Angeles treasurer and tax collector's office has taken an aggressive stance against long-term versions of these bonds.
"Once you see a repayment obligation that materially exceeds the principal amount, by that I mean four, five or 10 times more, you have to question why they did it," said Douglas Baron, director of public finance at the Los Angeles County treasurer and tax collector's office.
More standard bond sales cost closer to $3 per dollar borrowed.
California Watch reviewed bond sales at several community college districts in search of similar deals. Although few appear to match the size of the Poway Unified example, several districts financed construction programs using long-term capital appreciation bonds that will end up costing much more than traditional financing because of compounded interest.
San Bernardino Community College District issued $56 million in bonds that will cost $493 million by the time they're paid back in 2048 ---- nine times the principal.
Victor Valley Community College District borrowed $34 million in bonds that will end up costing $271 million to pay back by 2049 ---- eight times the principal.
Yosemite Community College District's $78 million bond issue will cost $453 million by 2042 ---- six times the principal.
Chabot-Las Positas Community College District will pay $850 million by 2046 on $169 million in bonds ---- totaling five times the principal.
District officials chose the more expensive bonds for a number of reasons. Some said they saw the bonds as the best way to maximize buying power without exceeding legal or promised limits on tax rates.
Here's the difference between capital appreciation bonds and the standard variety: With traditional current interest bonds, districts borrow money and start paying interest right away. The money for the debt payments comes from taxes on residents.
They can only borrow so much this way because state law says community college districts can't levy more than $25 per $100,000 of property value.
With capital appreciation bonds, districts get the cash up front, but don't have to pay interest or levy taxes right away. The interest on these bonds compounds over time, without being paid out, until the bond comes due. The further out the bonds come due, or mature, the bigger the payoff for investors and the higher the price tag for districts and future taxpayers.
State law prohibits districts from selling bonds that come due more than 40 years out. The Los Angeles County treasurer and tax collector's office published a white paper stating it would not support capital appreciation bonds in that county with maturities greater than 25 years.
And Baron said the office would advocate changes in the law that would set a cap at 25 to 30 years.
Tuesday, May 29, 2012
Top Labor Leader Lorena Gonzalez Hints at Teacher Givebacks
Be sure to click on the following link to get the original story with lots of links to other stories:
Morning Report: Top Labor Leader Hints at Teacher Givebacks
By Randy Dotinga
Voice of San Diego
May 25, 2012
In almost as many words, the top labor leader in the region yesterday told the San Diego teachers union to get off the dime. Lorena Gonzalez's message: It's time for movement already.
What kind of movement? Forgoing pay raises instead of allowing one of every five teachers to be laid off? Well, Gonzalez, the most powerful labor leader in San Diego, didn't quite go that far. But she got close.
"It doesn't make any sense to play a game of chicken, it's not going to work on either side," she said. Gonzalez didn't let the district off the hook, saying it's got to do more to explain the options that exist.
Meanwhile, the teachers union president told the U-T that he wants to survey its members about what to do over the next few days to see how to proceed.
For a quick explainer, check out our Reader's Guide on the district's financial crisis.
• In letters, San Diego teacher Joe Wainio says it's time for his union to negotiate. "To say that our raise is non-negotiable, standing by while hundreds of our fellow teachers and other staff are downsized and the quality of instruction is necessarily compromised, is irresponsible and short-sighted."
Morning Report: Top Labor Leader Hints at Teacher Givebacks
By Randy Dotinga
Voice of San Diego
May 25, 2012
In almost as many words, the top labor leader in the region yesterday told the San Diego teachers union to get off the dime. Lorena Gonzalez's message: It's time for movement already.
What kind of movement? Forgoing pay raises instead of allowing one of every five teachers to be laid off? Well, Gonzalez, the most powerful labor leader in San Diego, didn't quite go that far. But she got close.
"It doesn't make any sense to play a game of chicken, it's not going to work on either side," she said. Gonzalez didn't let the district off the hook, saying it's got to do more to explain the options that exist.
Meanwhile, the teachers union president told the U-T that he wants to survey its members about what to do over the next few days to see how to proceed.
For a quick explainer, check out our Reader's Guide on the district's financial crisis.
• In letters, San Diego teacher Joe Wainio says it's time for his union to negotiate. "To say that our raise is non-negotiable, standing by while hundreds of our fellow teachers and other staff are downsized and the quality of instruction is necessarily compromised, is irresponsible and short-sighted."
Wednesday, March 14, 2012
Departing Goldman banker slams 'rip-off' culture
How do you find out the truth about what's going on in secretive organizations? From disgruntled ex-employees! Everyone else is keeping his/her mouth shut in order to get ahead. Who agrees with me on this? A whole lot of investors.
Goldman Stunned by Op-Ed Loses $2.2 Billion for Shareholders
By Christine Harper
Mar 14, 2012
(Bloomberg)
Goldman Sachs Group Inc. (GS) saw $2.15 billion of its market value wiped out after an employee assailed Chief Executive Officer Lloyd C. Blankfein’s management and the firm’s treatment of clients, sparking debate across Wall Street.
The shares dropped 3.4 percent in New York trading yesterday, the third-biggest decline in the 81-company Standard & Poor’s 500 Financials Index, after London-based Greg Smith made the accusations in a New York Times op-ed piece.
A departing Goldman Sachs Group Inc. employee mounted an unprecedented public attack on its "toxic and destructive" culture in a New York Times opinion piece, becoming the first serving insider to openly criticize the firm. Goldman Sachs said it disagreed with comments made by Greg Smith, identified by the newspaper as an executive director and head of the firm’s U.S. equity derivatives business in Europe. Gigi Stone and Christine Harper report on Bloomberg Television's "In the Loop."
Smith, who also wrote that he was quitting after 12 years at the company, blamed Blankfein, 57, and President Gary D. Cohn, 51, for a “decline in the firm’s moral fiber.” They responded in a memo to current and former employees, saying that Smith’s assertions don’t reflect the firm’s values, culture or “how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.”...
Departing Goldman banker slams 'rip-off' culture
By Douwe Miedema and Lauren Tara LaCapra
Mar 14, 2012
(Reuters) - Goldman Sachs faced an unprecedented assault from one of its own after a banker published a withering resignation letter in the New York Times, calling the Wall Street titan a "toxic" place where managing directors referred to their own clients as "muppets."
It was the latest blow for the storied investment bank, which has long supplied senators and cabinet secretaries to Washington but now draws comparisons to a "great vampire squid wrapped around the face of humanity."
In an opinion column in Wednesday's Times, Greg Smith, who worked in equity derivatives, said Goldman had become "as toxic and destructive as I have ever seen it.
"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,'" Smith said.
In the United States "muppet" brings to mind lovable puppets like Kermit the Frog, but in Britain, "muppet" is slang for a stupid person.
..."Part of Goldman's defense is everybody is sophisticated and everybody knew as much as we knew did," the lawyer, Eric Lewis, said. "But if you're calling your clients muppets -- most muppets don't have the cranial capacity of Goldman."
In recent years the company has faced other high-profile incidents damaging to its image after the near-collapse of the global banking system in 2008.
Earlier this month it was accused of a major conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, while being a significant shareholder in Kinder Morgan.
One of its bankers, Fabrice Tourre -- who referred to himself as "fabulous Fab" in emails -- is still embroiled in legal claims in the United States after allegations that he duped buyers of a complex credit instrument.
And two years ago, Chief Executive Lloyd Blankfein caused a media storm when he said that as a banker he was just "doing God's work," defending high banker pay and the role their institutions play in the economy.
Paul Volcker, a former Federal Reserve chairman, called the Smith piece a "reflection of the change in market mentality over the last 15, over the last 20 years."
At an economics summit in Washington hosted by the Atlantic magazine, he said when Goldman went public in the 1990s and bought a large trading operation, "it became a trading organization and not customer oriented."...
Goldman Stunned by Op-Ed Loses $2.2 Billion for Shareholders
By Christine Harper
Mar 14, 2012
(Bloomberg)
Goldman Sachs Group Inc. (GS) saw $2.15 billion of its market value wiped out after an employee assailed Chief Executive Officer Lloyd C. Blankfein’s management and the firm’s treatment of clients, sparking debate across Wall Street.
The shares dropped 3.4 percent in New York trading yesterday, the third-biggest decline in the 81-company Standard & Poor’s 500 Financials Index, after London-based Greg Smith made the accusations in a New York Times op-ed piece.
A departing Goldman Sachs Group Inc. employee mounted an unprecedented public attack on its "toxic and destructive" culture in a New York Times opinion piece, becoming the first serving insider to openly criticize the firm. Goldman Sachs said it disagreed with comments made by Greg Smith, identified by the newspaper as an executive director and head of the firm’s U.S. equity derivatives business in Europe. Gigi Stone and Christine Harper report on Bloomberg Television's "In the Loop."
Smith, who also wrote that he was quitting after 12 years at the company, blamed Blankfein, 57, and President Gary D. Cohn, 51, for a “decline in the firm’s moral fiber.” They responded in a memo to current and former employees, saying that Smith’s assertions don’t reflect the firm’s values, culture or “how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.”...
Departing Goldman banker slams 'rip-off' culture
By Douwe Miedema and Lauren Tara LaCapra
Mar 14, 2012
(Reuters) - Goldman Sachs faced an unprecedented assault from one of its own after a banker published a withering resignation letter in the New York Times, calling the Wall Street titan a "toxic" place where managing directors referred to their own clients as "muppets."
It was the latest blow for the storied investment bank, which has long supplied senators and cabinet secretaries to Washington but now draws comparisons to a "great vampire squid wrapped around the face of humanity."
In an opinion column in Wednesday's Times, Greg Smith, who worked in equity derivatives, said Goldman had become "as toxic and destructive as I have ever seen it.
"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,'" Smith said.
In the United States "muppet" brings to mind lovable puppets like Kermit the Frog, but in Britain, "muppet" is slang for a stupid person.
..."Part of Goldman's defense is everybody is sophisticated and everybody knew as much as we knew did," the lawyer, Eric Lewis, said. "But if you're calling your clients muppets -- most muppets don't have the cranial capacity of Goldman."
In recent years the company has faced other high-profile incidents damaging to its image after the near-collapse of the global banking system in 2008.
Earlier this month it was accused of a major conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, while being a significant shareholder in Kinder Morgan.
One of its bankers, Fabrice Tourre -- who referred to himself as "fabulous Fab" in emails -- is still embroiled in legal claims in the United States after allegations that he duped buyers of a complex credit instrument.
And two years ago, Chief Executive Lloyd Blankfein caused a media storm when he said that as a banker he was just "doing God's work," defending high banker pay and the role their institutions play in the economy.
Paul Volcker, a former Federal Reserve chairman, called the Smith piece a "reflection of the change in market mentality over the last 15, over the last 20 years."
At an economics summit in Washington hosted by the Atlantic magazine, he said when Goldman went public in the 1990s and bought a large trading operation, "it became a trading organization and not customer oriented."...
Thursday, July 07, 2011
Schools' Financial Watchdog Stripped of Powers
Schools' Financial Watchdog Stripped of Powers
Jul 6, 2011
by Emily Alpert
When parents and teachers plead and protest to save beloved programs and people, strapped school districts have had to think twice about whether it is prudent, knowing a higher power is watching.
County offices of education can refuse to sign off on unsound budgets and force school districts to rewrite them if financial projections are flimsy. They can even stop districts from cutting checks. And they have forced school districts to plan two years into the future, explaining publicly how their budgets will be balanced.
Now those powers are on hold.
Schools still have to show the county office that they can get through this coming school year. But this year, the county office cannot judge their budgets for the next year or the year after, the first step that can trigger more intensive interventions to keep school districts solvent. School districts can just disregard their advice on how to keep themselves afloat in the future.
The changes, made with little public discussion, came in an 11th-hour budget passed by Democratic lawmakers last week. They put a pause on oversight powers that were given to county offices of education two decades ago, after several school districts suffered financial meltdowns.
Now the biggest watchdog over school budgets has been pulled back at a time when more and more districts are weighing financial peril against the yearning to cancel painful, unpopular cuts.
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"School districts are under a lot of pressure," said Lora Duzyk, assistant superintendent of business services at the San Diego County Office of Education. "It's hard sometimes to withstand that pressure."
Financial hawks lambasted lawmakers for cutting back on budget oversight and pressed the governor to veto that part of the bill. School Services of California, which advises school districts on finances, argued it would put hundreds at risk of insolvency. The president of the California School Boards Association called it "a statutory invitation to fiscal recklessness."
Teachers unions cheered the move. They argue the decisions should rest solely with the local school board members that voters elect and oust.
County offices tend to be more financially cautious than school boards, a step removed from the political and emotional turmoil of school cuts. While the San Diego County Office of Education does have an elected board, it attracts much less public attention and protest.
"Their budgets are not going to be changed or rejected by someone else," said Jim Groth, a longtime Chula Vista teacher and a board member for the California Teachers Association, the biggest teachers union in the state. "It puts the decision-making back on local districts and local school boards."...
Jul 6, 2011
by Emily Alpert
When parents and teachers plead and protest to save beloved programs and people, strapped school districts have had to think twice about whether it is prudent, knowing a higher power is watching.
County offices of education can refuse to sign off on unsound budgets and force school districts to rewrite them if financial projections are flimsy. They can even stop districts from cutting checks. And they have forced school districts to plan two years into the future, explaining publicly how their budgets will be balanced.
Now those powers are on hold.
Schools still have to show the county office that they can get through this coming school year. But this year, the county office cannot judge their budgets for the next year or the year after, the first step that can trigger more intensive interventions to keep school districts solvent. School districts can just disregard their advice on how to keep themselves afloat in the future.
The changes, made with little public discussion, came in an 11th-hour budget passed by Democratic lawmakers last week. They put a pause on oversight powers that were given to county offices of education two decades ago, after several school districts suffered financial meltdowns.
Now the biggest watchdog over school budgets has been pulled back at a time when more and more districts are weighing financial peril against the yearning to cancel painful, unpopular cuts.
Subscribe to the Morning Report.
Join thousands of San Diegans who get the day's news in their inboxes every morning. Get the Morning Report now.
"School districts are under a lot of pressure," said Lora Duzyk, assistant superintendent of business services at the San Diego County Office of Education. "It's hard sometimes to withstand that pressure."
Financial hawks lambasted lawmakers for cutting back on budget oversight and pressed the governor to veto that part of the bill. School Services of California, which advises school districts on finances, argued it would put hundreds at risk of insolvency. The president of the California School Boards Association called it "a statutory invitation to fiscal recklessness."
Teachers unions cheered the move. They argue the decisions should rest solely with the local school board members that voters elect and oust.
County offices tend to be more financially cautious than school boards, a step removed from the political and emotional turmoil of school cuts. While the San Diego County Office of Education does have an elected board, it attracts much less public attention and protest.
"Their budgets are not going to be changed or rejected by someone else," said Jim Groth, a longtime Chula Vista teacher and a board member for the California Teachers Association, the biggest teachers union in the state. "It puts the decision-making back on local districts and local school boards."...
Thursday, January 20, 2011
Jobs are not at the top of the Republican agenda;campaign contributions flow from health insurers and banks
Industry giving to GOP House leadership Washington Post
Jan. 21, 2011
The new House committee chairmen have in many cases received campaign donations from the industries their panels oversee.
72 super PACs spent $83.7 million on election, financial disclosure reports show
By T.W. Farnam
Washington Post
December 3, 2010
The newly created independent political groups known as super PACs, which raised and spent millions of dollars on last month's elections, drew much of their funding from private-equity partners and others in the financial industry, according to new financial disclosure reports.
The 72 super PACs, all formed this year, together spent $83.7 million on the election. The figures provide the best indication yet of the impact of recent Supreme Court decisions that opened the door for wealthy individuals and corporations to give unlimited contributions.
The financial disclosure reports also underscore the extent to which the flow of corporate money will be tied to political goals. Private-equity partners and hedge fund managers, for example, have a substantial stake in several issues before Congress, primarily the taxes they pay on their earnings.
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"Super PACs provide a means for the super wealthy to have even more influence and an even greater voice in the political process," said Meredith McGehee, a lobbyist for the Campaign Legal Center, which advocates for tighter regulation of money in politics.
American Crossroads, a conservative super PAC that outspent its peers, pulled in six- and seven-figure donations from the financial industry. That included $500,000 from Anne Dias-Griffin, founder of the Aragon Global Management hedge fund, and her husband, Kenneth Griffin, founder of the Citadel Investment Group hedge fund.
Crossroads, which was founded with the support of Bush administration adviser Karl Rove, raised $70 million, much of it used to support 10 Republican Senate candidates and 30 Republican House candidates...
Corporate contributions have surged for new Republican leaders in House
By Dan Eggen and T.W. Farnam
Washington Post
January 22, 2011
The new Republican leaders in the House have received millions of dollars in contributions from banks, health insurers and other major business interests, which are pressing for broad reversals of Democratic policies that affect corporations, according to disclosure records and interviews.
72 super PACs spent $83.7 million on election, financial disclosure reports show
*
New Republican lawmakers are hiring lobbyists, despite campaign rhetoric
*
Incoming GOP freshmen rapidly embracing big-money fundraisers
*
Campaign cash: Who's spending where in 2010
Much of that money flowed to the GOP chairmen overseeing banking, energy and other key committees - leaders who will play a central role in setting the House agenda over the next two years.
The impetus behind such largess is simple: Many companies and industry groups hope House Speaker John A. Boehner (Ohio) and other Republicans will succeed in rolling back Democratic policies they find objectionable, including environmental and Wall Street regulations.
GOP lawmakers took their first step in that direction Wednesday by voting to repeal President Obama's health-care overhaul law. Major health-care firms and their employees gave Republican leaders at least $5 million over the past two years, including well over $2 million to Boehner and Majority Leader Eric Cantor (Va.), according to a Washington Post analysis of contribution data...
Petty Bickering Trumps Jobs Need as Republicans Vote to Repeal Health Care Reform
by Mike Hall
Jan 19, 2011
What do Republicans do with their first big chance as the U.S. House majority? Address the economy, create jobs? Nope. They vote to repeal health care reform. AFL-CIO President Richard Trumka says the action “signals that they won’t let go of old grudges to do the work of the people.”
The nation is in its 20th straight month with unemployment above 9 percent. The electorate in November told lawmakers to “focus less on petty partisan bickering and more on jobs, jobs, jobs,” says AFL-CIO President Richard Trumka.
But in their first significant action since taking majority control of the U.S. House, Republicans chose bickering instead of jobs and threw a huge hunk of red meat to their right-wing backers today by voting (245-189) to repeal the Affordable Care Act.
The action came, although repeal has no chance of succeeding—the Senate will not take the measure up and President Obama has said he would not sign it...
Thursday, August 12, 2010
GOP plan to extend tax cuts for rich adds $36 billion to deficit, panel finds
GOP plan to extend tax cuts for rich adds $36 billion to deficit, panel finds
By Lori Montgomery
Washington Post
August 12, 2010
A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year -- and transfer the bulk of that cash into the pockets of the nation's millionaires, according to a congressional analysis released Wednesday...
By Lori Montgomery
Washington Post
August 12, 2010
A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year -- and transfer the bulk of that cash into the pockets of the nation's millionaires, according to a congressional analysis released Wednesday...
Slaying the Mythical Tax-Fattened Hog
"...[S]tate and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience."
Slaying the Mythical Tax-Fattened Hog
August 12, 2010
by Stephanie Rozsa
Cities Speak.org
National League of Cities
Big headlines come across my desk each morning, but none more sensational than this one from Wednesday: “Bloated public sector needs a crash diet” (The Examiner). As I skimmed the article, I read: “While much of the private sector has laid off workers, frozen pay and cut capital investment, public sector employees have lived high on the tax-fattened hog.” This editorial is just one of many causing a stir about public compensation as the recession tightens its grip. The most infamous story came from Bell, California, where the city of 37,000 paid several top employees egregious salaries, including $800,000 to the chief administrative officer. While this kind of abuse is out of the ordinary, it does raise a fair question about public compensation.
In a series of articles, USA Today (most recently on August 10, 2010) similarly asserts that public sector employees are overcompensated compared with their private sector counterparts. Their analysis compares the salaries of similar occupations in each sector, accountants to accountants, for example. While this approach may seem logical, a new report, commissioned by the Center for State and Local Government Excellence (CSLGE) and the National Institute on Retirement Security, declares that the reality is that 80 percent of private positions do not have direct public sector equivalents.
For the 20 percent of occupations that allow comparison, then, USA Today relays only the raw salary differences that suggest higher earnings for state and local workers. This means that their analysis fails to factor in other qualifying factors of comparison between employees, like education level, years of experience, training, and skill sets. So while both USA Today and the new CSLGE report confirm that public employees do, in fact, earn more on average than private sector workers, the public sector workforce earns this higher average salary because the average employee is better educated and has more experience. Once these factors are included in compensation calculations, the latter explains that state and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience.
In fact, the CSLGE report discovered that state and local sector employees are twice as likely as their private sector counterparts to have a college or advanced degree. The major driver in this pattern is that government workers have jobs that demand more education, like teachers, university professors, nurses, and social workers. In other words, state and local government employees earn less than they would if they took their skills to the private sector.
How much less?...With benefits factored in, state and local employees still earned an average of nearly 7 percent and 7.4 percent less, respectively...
Slaying the Mythical Tax-Fattened Hog
August 12, 2010
by Stephanie Rozsa
Cities Speak.org
National League of Cities
Big headlines come across my desk each morning, but none more sensational than this one from Wednesday: “Bloated public sector needs a crash diet” (The Examiner). As I skimmed the article, I read: “While much of the private sector has laid off workers, frozen pay and cut capital investment, public sector employees have lived high on the tax-fattened hog.” This editorial is just one of many causing a stir about public compensation as the recession tightens its grip. The most infamous story came from Bell, California, where the city of 37,000 paid several top employees egregious salaries, including $800,000 to the chief administrative officer. While this kind of abuse is out of the ordinary, it does raise a fair question about public compensation.
In a series of articles, USA Today (most recently on August 10, 2010) similarly asserts that public sector employees are overcompensated compared with their private sector counterparts. Their analysis compares the salaries of similar occupations in each sector, accountants to accountants, for example. While this approach may seem logical, a new report, commissioned by the Center for State and Local Government Excellence (CSLGE) and the National Institute on Retirement Security, declares that the reality is that 80 percent of private positions do not have direct public sector equivalents.
For the 20 percent of occupations that allow comparison, then, USA Today relays only the raw salary differences that suggest higher earnings for state and local workers. This means that their analysis fails to factor in other qualifying factors of comparison between employees, like education level, years of experience, training, and skill sets. So while both USA Today and the new CSLGE report confirm that public employees do, in fact, earn more on average than private sector workers, the public sector workforce earns this higher average salary because the average employee is better educated and has more experience. Once these factors are included in compensation calculations, the latter explains that state and local government employees earn less total compensation than their private sector counterparts with similar education, training, and work experience.
In fact, the CSLGE report discovered that state and local sector employees are twice as likely as their private sector counterparts to have a college or advanced degree. The major driver in this pattern is that government workers have jobs that demand more education, like teachers, university professors, nurses, and social workers. In other words, state and local government employees earn less than they would if they took their skills to the private sector.
How much less?...With benefits factored in, state and local employees still earned an average of nearly 7 percent and 7.4 percent less, respectively...
Thursday, July 22, 2010
Top Banks Paid $1.6 Billion in Excessive Bonuses, U.S. Finds
Top Banks Paid $1.6 Billion in Excessive Bonuses, U.S. Finds
Brendan Hoffman/Bloomberg News
July 22, 2010
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender...
Brendan Hoffman/Bloomberg News
July 22, 2010
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender...
Thursday, July 08, 2010
Goldman Sachs sold a portfolio without disclosing that this person designing it was betting against it
As I struggle to understand exactly how and why financial institutions inflicted so much damage on the American economy, I appreciate articles like this one from NPR.
Fresh Air
May 4, 2010
Today, a conversation with New York Times financial editor Gretchen Morgenson, who has covered the world financial markets since 1998. She'll be discussing what's going on with Goldman Sachs, the Justice Department, and the SEC.
...Ms. MORGENSON: What the SEC really is saying is that they have omitted a material detail in the selling of this security. Here's how it was created. It was created with a very big hedge fund that was a client of Goldman Sachs.
It was called the Paulson and Company Hedge Fund, and it was run by a man named John Paulson, who has subsequently become very famous for making billions of dollars betting against subprime mortgages when people were still sort of thinking everything was fine.
Now, he and Goldman put together this portfolio of mortgages that were then sold to Goldman's clients. But the element that is at the crux of the case is Mr. Paulson had interest in this portfolio being filled with sort of toxic mortgages, mortgages that were less likely to perform well, that were really sort of on the precipice already.
So was it right for Goldman Sachs to sell such a portfolio to its clients without disclosing that this person who was selecting the portfolio had a negative bet on and was therefore opposed to the people who were buying it, who were hoping that it would perform and that the mortgages would continue to pay?
GROSS: So the suit names Fabrice Tourre, who is a vice president at Goldman, who helped create and sell these derivatives. How come the suit doesn't name the hedge fund manager who helped create the derivative and then betted against it?
Ms. MORGENSON: Well, John Paulson, the hedge fund manager who is involved, did not have a duty to disclose to investors his role in it because he was not selling the securities...
Fresh Air
May 4, 2010
Today, a conversation with New York Times financial editor Gretchen Morgenson, who has covered the world financial markets since 1998. She'll be discussing what's going on with Goldman Sachs, the Justice Department, and the SEC.
...Ms. MORGENSON: What the SEC really is saying is that they have omitted a material detail in the selling of this security. Here's how it was created. It was created with a very big hedge fund that was a client of Goldman Sachs.
It was called the Paulson and Company Hedge Fund, and it was run by a man named John Paulson, who has subsequently become very famous for making billions of dollars betting against subprime mortgages when people were still sort of thinking everything was fine.
Now, he and Goldman put together this portfolio of mortgages that were then sold to Goldman's clients. But the element that is at the crux of the case is Mr. Paulson had interest in this portfolio being filled with sort of toxic mortgages, mortgages that were less likely to perform well, that were really sort of on the precipice already.
So was it right for Goldman Sachs to sell such a portfolio to its clients without disclosing that this person who was selecting the portfolio had a negative bet on and was therefore opposed to the people who were buying it, who were hoping that it would perform and that the mortgages would continue to pay?
GROSS: So the suit names Fabrice Tourre, who is a vice president at Goldman, who helped create and sell these derivatives. How come the suit doesn't name the hedge fund manager who helped create the derivative and then betted against it?
Ms. MORGENSON: Well, John Paulson, the hedge fund manager who is involved, did not have a duty to disclose to investors his role in it because he was not selling the securities...
Thursday, July 01, 2010
Trying to avoid future crises in schools and the economy: we are now halfway to the goal of financial reform
The financial crisis has devastated schools and the economy--so why are Republicans fighting reform? Answer: campaign contributions. But it looks like a few Republicans care more about our economy and our democracy than they do about corporate lobbyists. Let's hope they stand firm.
The battle is only half won with the vote below in the House of Representatives. The Senate still has to agree.
This bill was hammered out less than a week ago in a marathon session.
See all posts re financial abuses.
House passes landmark financial reform bill
Andy Sullivan and Kevin Drawbaugh
Reuters
July 1, 2010
The House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama.
Still, the 237 to 192 vote in the House marked a win for Obama and his fellow Democrats, who have made the most sweeping rewrite of Wall Street rules since the 1930s a top priority in the wake of the 2007-2009 financial crisis.
"It has been a long fight against the defenders of the status quo on Wall Street, but today's vote is a victory for every American who has been affected by the recklessness and irresponsibility that led to the loss of millions of jobs and trillions in wealth," Obama said in a statement.
Analysts say Obama is all but certain to get the measure on his desk eventually, but Democrats' hopes of sending him a bill to sign into law by the July 4 Independence Day holiday were dashed.
The death of Democratic Senator Robert Byrd and cold feet among Republican allies has complicated efforts to round up the votes needed in the Senate. A week-long break following the July 4 holiday means the Senate won't act until the week of July 12, at the earliest..
Obama earlier on Wednesday accused Republicans of being out of touch with the American people for opposing reforms. Others echoed his line of attack on the House floor.
"Republicans have sided with big Wall Street banks at every opportunity," said Democratic Representative Luis Guitierrez. "If it helps Wall Street banks, they favor it, but if it helps Main Street and regular Americans, they won't vote for it."...
The battle is only half won with the vote below in the House of Representatives. The Senate still has to agree.
This bill was hammered out less than a week ago in a marathon session.
See all posts re financial abuses.
House passes landmark financial reform bill
Andy Sullivan and Kevin Drawbaugh
Reuters
July 1, 2010
The House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama.
Still, the 237 to 192 vote in the House marked a win for Obama and his fellow Democrats, who have made the most sweeping rewrite of Wall Street rules since the 1930s a top priority in the wake of the 2007-2009 financial crisis.
"It has been a long fight against the defenders of the status quo on Wall Street, but today's vote is a victory for every American who has been affected by the recklessness and irresponsibility that led to the loss of millions of jobs and trillions in wealth," Obama said in a statement.
Analysts say Obama is all but certain to get the measure on his desk eventually, but Democrats' hopes of sending him a bill to sign into law by the July 4 Independence Day holiday were dashed.
The death of Democratic Senator Robert Byrd and cold feet among Republican allies has complicated efforts to round up the votes needed in the Senate. A week-long break following the July 4 holiday means the Senate won't act until the week of July 12, at the earliest..
Obama earlier on Wednesday accused Republicans of being out of touch with the American people for opposing reforms. Others echoed his line of attack on the House floor.
"Republicans have sided with big Wall Street banks at every opportunity," said Democratic Representative Luis Guitierrez. "If it helps Wall Street banks, they favor it, but if it helps Main Street and regular Americans, they won't vote for it."...
Friday, June 25, 2010
Financial Reform passed!/How did Scott Brown get to be in charge of bank reform?
Our financial system failed us in 2008. One of the biggest victims has been our school system. Why don't Republicans agree that we need financial reform?
UPDATE: Financial reform passed!
Lawmakers agree on historic Wall St reform at dawn
Charles Abbott and Andy Sullivan
WASHINGTON
Fri Jun 25, 2010
Reuters
U.S. lawmakers hammered out a historic overhaul of financial regulations as dawn broke over the nation's capital on Friday, handing President Barack Obama a major domestic policy victory on the eve of a global summit devoted to financial reform.
In a marathon session of more than 21 hours, legislators agreed to a rewrite of Wall Street rules that may crimp the industry's profits and subject it to tougher oversight and tighter restrictions.
To secure agreement, lawmakers reached deals in the final hours on the most controversial sections which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.
Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out...
How did Scott Brown get to be in charge of bank reform?
As the fate of the Volcker rule is determined, the junior senator from Massachusetts may tip the balance
Andrew Leonard
Salon.com
June 24, 2010
...A senator sworn in five months ago owns the swing vote on the most important financial reform legislation in decades.
Brown's concerns are strictly parochial. On the one hand, he wants mutual funds and insurance companies exempted from the Volcker rule. Not uncoincidentally, such exemptions would apply to major Massachusetts-based financial institutions such as Fidelity and MassMutual...
UPDATE: Financial reform passed!
Lawmakers agree on historic Wall St reform at dawn
Charles Abbott and Andy Sullivan
WASHINGTON
Fri Jun 25, 2010
Reuters
U.S. lawmakers hammered out a historic overhaul of financial regulations as dawn broke over the nation's capital on Friday, handing President Barack Obama a major domestic policy victory on the eve of a global summit devoted to financial reform.
In a marathon session of more than 21 hours, legislators agreed to a rewrite of Wall Street rules that may crimp the industry's profits and subject it to tougher oversight and tighter restrictions.
To secure agreement, lawmakers reached deals in the final hours on the most controversial sections which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.
Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out...
How did Scott Brown get to be in charge of bank reform?
As the fate of the Volcker rule is determined, the junior senator from Massachusetts may tip the balance
Andrew Leonard
Salon.com
June 24, 2010
...A senator sworn in five months ago owns the swing vote on the most important financial reform legislation in decades.
Brown's concerns are strictly parochial. On the one hand, he wants mutual funds and insurance companies exempted from the Volcker rule. Not uncoincidentally, such exemptions would apply to major Massachusetts-based financial institutions such as Fidelity and MassMutual...
Wednesday, May 26, 2010
Corporate interests are balking at even modest changes from the permissiveness of the Bush era.
The Old Enemies
By PAUL KRUGMAN
New York Times
May 23, 2010
...[C]orporate interests are balking at even modest changes from the permissiveness of the Bush era.
From the outside, this rage against regulation seems bizarre. I mean, what did they expect? The financial industry, in particular, ran wild under deregulation, eventually bringing on a crisis that has left 15 million Americans unemployed, and required large-scale taxpayer-financed bailouts to avoid an even worse outcome. Did Wall Street expect to emerge from all that without facing some new restrictions? Apparently it did.
So what President Obama and his party now face isn’t just, or even mainly, an opposition grounded in right-wing populism. For grass-roots anger is being channeled and exploited by corporate interests, which will be the big winners if the G.O.P. does well in November.
If this sounds familiar, it should: it’s the same formula the right has been using for a generation. Use identity politics to whip up the base; then, when the election is over, give priority to the concerns of your corporate donors. Run as the candidate of “real Americans,” not those soft-on-terror East coast liberals; then, once you’ve won, declare that you have a mandate to privatize Social Security. It comes as no surprise to learn that American Crossroads, a new organization whose goal is to deploy large amounts of corporate cash on behalf of Republican candidates, is the brainchild of none other than Karl Rove.
But won’t the grass-roots rebel at being used? Don’t count on it. Last week Rand Paul, the Tea Party darling who is now the Republican nominee for senator from Kentucky, declared that the president’s criticism of BP over the disastrous oil spill in the gulf is “un-American,” that “sometimes accidents happen.” The mood on the right may be populist, but it’s a kind of populism that’s remarkably sympathetic to big corporations...
By PAUL KRUGMAN
New York Times
May 23, 2010
...[C]orporate interests are balking at even modest changes from the permissiveness of the Bush era.
From the outside, this rage against regulation seems bizarre. I mean, what did they expect? The financial industry, in particular, ran wild under deregulation, eventually bringing on a crisis that has left 15 million Americans unemployed, and required large-scale taxpayer-financed bailouts to avoid an even worse outcome. Did Wall Street expect to emerge from all that without facing some new restrictions? Apparently it did.
So what President Obama and his party now face isn’t just, or even mainly, an opposition grounded in right-wing populism. For grass-roots anger is being channeled and exploited by corporate interests, which will be the big winners if the G.O.P. does well in November.
If this sounds familiar, it should: it’s the same formula the right has been using for a generation. Use identity politics to whip up the base; then, when the election is over, give priority to the concerns of your corporate donors. Run as the candidate of “real Americans,” not those soft-on-terror East coast liberals; then, once you’ve won, declare that you have a mandate to privatize Social Security. It comes as no surprise to learn that American Crossroads, a new organization whose goal is to deploy large amounts of corporate cash on behalf of Republican candidates, is the brainchild of none other than Karl Rove.
But won’t the grass-roots rebel at being used? Don’t count on it. Last week Rand Paul, the Tea Party darling who is now the Republican nominee for senator from Kentucky, declared that the president’s criticism of BP over the disastrous oil spill in the gulf is “un-American,” that “sometimes accidents happen.” The mood on the right may be populist, but it’s a kind of populism that’s remarkably sympathetic to big corporations...
Saturday, May 22, 2010
U.S. drops criminal probe of AIG executives: Too big to go to jail?
See all AIG posts.
U.S. drops criminal probe of AIG executives
Christian Plumb
Sat May 22, 2010
Reuters
The U.S. Justice Department has dropped a probe of American International Group Inc executives involving the credit default swaps that sent the insurer to the brink of bankruptcy and forced a huge taxpayer bailout, lawyers for the executives said on Saturday.
The investigation had centered on AIG Financial Products, which nearly brought down the giant insurer after writing tens of billions of dollars on insurance-like contracts on complex securities backed by mortgages that turned out to be toxic.
The U.S. government stepped in with a $182 billion bailout to avert a bankruptcy filing by AIG.
The criminal probe had focused on whether Joseph Cassano, who ran the financial products unit, and Andrew Forster, his deputy, knowingly misled investors about the company's accounting losses on its credit default swaps portfolio...
The Wall Street Journal first reported on Friday that the two-year investigation, one of the highest profile of the various probes stemming from the 2008 financial meltdown, had been dropped.
The FBI and other government agencies had been looking into whether Cassano misled investors with overly optimistic forecasts about the extent of the firm's exposure to securities backed by risky subprime mortgages.
Investigators were said to have focused on a December 2007 investor presentation at which Cassano played down the market value of losses on the credit default swaps.
Over the course of the next year, AIG took writedowns of more than $40 billion on the swaps and had to put up billions more in collateral to counterparties like Goldman Sachs.
Cassano resigned under pressure in March 2008 as AIG's financial situation began to weaken...
U.S. drops criminal probe of AIG executives
Christian Plumb
Sat May 22, 2010
Reuters
The U.S. Justice Department has dropped a probe of American International Group Inc executives involving the credit default swaps that sent the insurer to the brink of bankruptcy and forced a huge taxpayer bailout, lawyers for the executives said on Saturday.
The investigation had centered on AIG Financial Products, which nearly brought down the giant insurer after writing tens of billions of dollars on insurance-like contracts on complex securities backed by mortgages that turned out to be toxic.
The U.S. government stepped in with a $182 billion bailout to avert a bankruptcy filing by AIG.
The criminal probe had focused on whether Joseph Cassano, who ran the financial products unit, and Andrew Forster, his deputy, knowingly misled investors about the company's accounting losses on its credit default swaps portfolio...
The Wall Street Journal first reported on Friday that the two-year investigation, one of the highest profile of the various probes stemming from the 2008 financial meltdown, had been dropped.
The FBI and other government agencies had been looking into whether Cassano misled investors with overly optimistic forecasts about the extent of the firm's exposure to securities backed by risky subprime mortgages.
Investigators were said to have focused on a December 2007 investor presentation at which Cassano played down the market value of losses on the credit default swaps.
Over the course of the next year, AIG took writedowns of more than $40 billion on the swaps and had to put up billions more in collateral to counterparties like Goldman Sachs.
Cassano resigned under pressure in March 2008 as AIG's financial situation began to weaken...
Monday, April 26, 2010
Tourre emails show agony, ecstasy of being a banker
Tourre emails show agony, ecstasy of being a banker
By Alistair Barr, MarketWatch
April 26, 2010
Fabrice Tourre comes across as an arrogant investment banker in the Securities and Exchange Commission lawsuit against him and his employer Goldman Sachs Group Inc.
But personal emails released by Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 151.93, -5.47, -3.48%) this weekend show Tourre struggling with "ethical questions" as he sold complex mortgage-related securities that he worried were suspect.
The SEC charged Goldman with securities fraud on April 16, alleging the investment bank didn't tell investors in a collateralized debt obligation that hedge fund firm Paulson & Co. helped structure the deal and was betting against it. Goldman and Paulson have denied wrongdoing. Read about the charges.
The SEC also charged Tourre, an executive director in Structured Products Group Trading, with securities fraud, alleging he was mainly responsible for the CDO, known as ABACUS 2007-AC1. Pamela Chepiga, an attorney for Tourre, declined to comment.
In the suit, the SEC quoted a January 2007 email that Tourre sent to a friend.
"More and more leverage in the system, The whole building is about to collapse anytime now...Only potential survivor, the fabulous Fab[rice Tourre]...
Friday, April 23, 2010
SEC staff surfed porn sites during crisis buildup: inspector
April 23, 2010
SEC staff surfed porn sites during crisis buildup: inspector
By Ronald D. Orol
MarketWatch
WASHINGTON (MarketWatch) -- As the 2008 financial crisis was developing, top Securities and Exchange Commission employees and contractors were using government computers on official time to view pornography, according to an SEC inspector general.
The SEC's inspector general found that 33 employees or contractors violated commission rules and policies by viewing porn, according to a memo obtained Friday by MarketWatch. The investigation was requested by Sen. Charles Grassley, R-Iowa.
The memo reported incidents by year:
*
2010: 3 so far
*
2009: 10
*
2008: 16
*
2007: 2
*
2006: 1
*
2005: 1
The 33 employees cited in the memo represent less than 1% of the SEC's approximately 4,000 employees. Of those employees, 17 were senior officials whose salaries ranged from $100,000 to $222,000, according to the memo. It isn't clear if the employees discussed in the memo were involved in oversight matters related to the financial crisis.
According to the memo, a regional office supervisory staff accountant admitted he frequently viewed pornography at work on his SEC computer for about a year and accessed pornography on his SEC-issued laptop computer while on official government travel.
Another regional office supervisory staff accountant admitted that he used an SEC assigned computer to access Websites containing pornography and other sexually explicit material during work hours fairly frequently, sometimes twice a day, according to the memo.
Another regional office staff accountant received 16,000 access denials for Internet websites classified by the SEC's Internet filter as "Sex" or "porn" in a one-month period. "In addition, the hard drive of this employee's SEC laptop contained numerous sexually suggestive and inappropriate images," the memo said.
A senior attorney at the SEC's headquarters in Washington admitted accessing Internet port so frequently that, according to the memo, on some days, he spent eight hours accessing Internet porn.
"In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office," the memo said.
Rep. Darrell Issa , R-Calif., the Ranking Member of the House Committee on Oversight and Government Reform, said he was disturbed by the findings.
"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," he said in a statement. "This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority. Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."
Ronald D. Orol is a MarketWatch reporter, based in Washington.
SEC staff surfed porn sites during crisis buildup: inspector
By Ronald D. Orol
MarketWatch
WASHINGTON (MarketWatch) -- As the 2008 financial crisis was developing, top Securities and Exchange Commission employees and contractors were using government computers on official time to view pornography, according to an SEC inspector general.
The SEC's inspector general found that 33 employees or contractors violated commission rules and policies by viewing porn, according to a memo obtained Friday by MarketWatch. The investigation was requested by Sen. Charles Grassley, R-Iowa.
The memo reported incidents by year:
*
2010: 3 so far
*
2009: 10
*
2008: 16
*
2007: 2
*
2006: 1
*
2005: 1
The 33 employees cited in the memo represent less than 1% of the SEC's approximately 4,000 employees. Of those employees, 17 were senior officials whose salaries ranged from $100,000 to $222,000, according to the memo. It isn't clear if the employees discussed in the memo were involved in oversight matters related to the financial crisis.
According to the memo, a regional office supervisory staff accountant admitted he frequently viewed pornography at work on his SEC computer for about a year and accessed pornography on his SEC-issued laptop computer while on official government travel.
Another regional office supervisory staff accountant admitted that he used an SEC assigned computer to access Websites containing pornography and other sexually explicit material during work hours fairly frequently, sometimes twice a day, according to the memo.
Another regional office staff accountant received 16,000 access denials for Internet websites classified by the SEC's Internet filter as "Sex" or "porn" in a one-month period. "In addition, the hard drive of this employee's SEC laptop contained numerous sexually suggestive and inappropriate images," the memo said.
A senior attorney at the SEC's headquarters in Washington admitted accessing Internet port so frequently that, according to the memo, on some days, he spent eight hours accessing Internet porn.
"In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office," the memo said.
Rep. Darrell Issa , R-Calif., the Ranking Member of the House Committee on Oversight and Government Reform, said he was disturbed by the findings.
"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," he said in a statement. "This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority. Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."
Ronald D. Orol is a MarketWatch reporter, based in Washington.
Thursday, April 22, 2010
Obama to Wall Street: ‘Join Us, Instead of Fighting Us’; Steve Schwartzman doesn't get it
This related story seems an apt introduction to Obama's words:
Wall Street's know-it-alls can't tell right from wrong
By Steven Pearlstein
Washington Post
April 23, 2010
I know you'll all be comforted, as I was Wednesday, by the public vote of confidence from Steve Schwartzman, chief executive of private equity giant Blackstone Group, when he said that his firm would continue to do business with Goldman Sachs and that he's never had a shred of doubt about the investment bank's ethical character.
So let me get this straight. Goldman Sachs is now relying on the character reference of a Wall Street sharpie who notoriously snookered investors into buying non-controlling shares of a private equity firm at the very moment when a credit-induced takeover bubble was about to burst...
Obama to Wall Street: ‘Join Us, Instead of Fighting Us’
Ruth Fremson/The New York Times
By PETER BAKER
April 22, 2010
President Obama challenged some of the nation’s most influential bankers on Thursday to call off their “battalions of financial industry lobbyists” and embrace a new regulatory structure meant to avert another economic crisis.
Speaking in the bankers’ backyard, at the Cooper Union in Manhattan, Mr. Obama castigated a “failure of responsibility” by Wall Street for having led to the financial crisis of 2008, and he pressed his case for what he called “a common-sense, reasonable, non-ideological” system of tighter regulation to prevent any recurrence. He took issue with the claim that his proposal would institutionalize the idea of future bailouts of huge banks.
“That may make for a good sound bite, but it’s not factually accurate,” Mr. Obama said. “It is not true. In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts...
Wall Street's know-it-alls can't tell right from wrong
By Steven Pearlstein
Washington Post
April 23, 2010
I know you'll all be comforted, as I was Wednesday, by the public vote of confidence from Steve Schwartzman, chief executive of private equity giant Blackstone Group, when he said that his firm would continue to do business with Goldman Sachs and that he's never had a shred of doubt about the investment bank's ethical character.
So let me get this straight. Goldman Sachs is now relying on the character reference of a Wall Street sharpie who notoriously snookered investors into buying non-controlling shares of a private equity firm at the very moment when a credit-induced takeover bubble was about to burst...
Obama to Wall Street: ‘Join Us, Instead of Fighting Us’
Ruth Fremson/The New York Times
By PETER BAKER
April 22, 2010
President Obama challenged some of the nation’s most influential bankers on Thursday to call off their “battalions of financial industry lobbyists” and embrace a new regulatory structure meant to avert another economic crisis.
Speaking in the bankers’ backyard, at the Cooper Union in Manhattan, Mr. Obama castigated a “failure of responsibility” by Wall Street for having led to the financial crisis of 2008, and he pressed his case for what he called “a common-sense, reasonable, non-ideological” system of tighter regulation to prevent any recurrence. He took issue with the claim that his proposal would institutionalize the idea of future bailouts of huge banks.
“That may make for a good sound bite, but it’s not factually accurate,” Mr. Obama said. “It is not true. In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts...
Wednesday, April 21, 2010
We need more regulation of financial industry: Lehman Examiner to Testify That S.E.C. Sat on Its Hands
Lehman Examiner to Testify That S.E.C. Sat on Its Hands
Stephen Crowley
The New York Times
By SEWELL CHAN
April 19, 2010
The court-appointed examiner who dissected the Lehman Brothers bankruptcy is expected to criticize the Securities and Exchange Commission on Tuesday for its decision to “stand by idly” as the investment bank veered toward collapse.
The S.E.C. knew that Lehman did not have adequate liquidity and had exceeded its own limits on risk-taking but in essence did nothing, the examiner, Anton R. Valukas, will say in testimony released in advance by the House Financial Services Committee.
One of the most damning findings in Mr. Valukas’s 2,209-page report last month — that Lehman used accounting gimmicks to hide the extent of its indebtedness — was not known to the S.E.C. He wrote: “I saw nothing in my investigation to suggest that the S.E.C. asked even the most fundamental questions that might have uncovered this practice early on, before Lehman escalated it to a $50 billion issue.” ...
Stephen Crowley
The New York Times
By SEWELL CHAN
April 19, 2010
The court-appointed examiner who dissected the Lehman Brothers bankruptcy is expected to criticize the Securities and Exchange Commission on Tuesday for its decision to “stand by idly” as the investment bank veered toward collapse.
The S.E.C. knew that Lehman did not have adequate liquidity and had exceeded its own limits on risk-taking but in essence did nothing, the examiner, Anton R. Valukas, will say in testimony released in advance by the House Financial Services Committee.
One of the most damning findings in Mr. Valukas’s 2,209-page report last month — that Lehman used accounting gimmicks to hide the extent of its indebtedness — was not known to the S.E.C. He wrote: “I saw nothing in my investigation to suggest that the S.E.C. asked even the most fundamental questions that might have uncovered this practice early on, before Lehman escalated it to a $50 billion issue.” ...
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