SF Chronicle
Sunday, July 25, 2010
The president pronounced this month that "because of this (financial reform) bill, the American people will never again be asked to foot the bill for Wall Street's mistakes."
As if to prove him wrong, Goldman Sachs simultaneously announced it had struck a deal with federal prosecutors to pay $550 million to settle federal claims it misled investors - a sum representing a mere 15 days' profit for the firm based on its 2009 earnings. Goldman's share price immediately jumped 4.3 percent, and the Street proclaimed its chair and CEO, Lloyd ("doing God's work") Blankfein, a winner. Financial analysts rushed to affirm a glowing outlook for Goldman stock.
Blankfein, you may recall, was at the meeting in late 2008 when Timothy Geithner and Hank Paulson decided to bail out AIG, and thereby deliver through AIG a $13 billion no-strings-attached taxpayer windfall to Goldman. In a world where money is the measure of everything, Blankfein's power and influence have grown. Presumably, Goldman can expect more windfalls in future years.
Although the financial reform bill may have clipped some of Goldman's wings - its lucrative derivative business may require Goldman to jettison its status as a bank holding company, and the access to the Fed discount window that comes with it - the main point is that the Goldman settlement reveals everything that's weakest about the bill.
(More here.)
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