The New York Times and The Wall Street Journal are bristling with the news that Republicans have decided now is the time to suck up to Wall Street. As the saying goes, there is no truer friend than a Wall Street arbitrageur—they are the salt-of-the-earth, the most loyal men who ever drew a breath!
What are Republicans thinking? While not every money-manipulator on Wall Street deserves to be treated like a heroin dealer, lots do. Could the Republicans be a little more discriminating in picking up the Democrats’ old friends?
The Democrats are acting as if they want to punish everyone in the financial services industry, including the innocent, while the Republicans seem to want to protect everyone on Wall Street, including the guilty.
How about just punishing the guilty? The Democrats can’t do that because the list of Wall Street’s biggest offenders may turn out to be eerily similar to the list of Obama’s biggest campaign contributors.
Employees from Goldman Sachs gave more to the Obama campaign than any other organization except the University of California—with Citigroup and JPMorgan Chase quickly following in sixth and seventh place.
Whatever Obama has in mind for punishing the financial industry, I promise you, he won’t punish his friends. After JPMorgan CEO Jamie Dimon took a $17 million bonus this week, and Goldman CEO Lloyd Blankfein got a $9 million bonus, Obama said he didn’t begrudge them their bonuses, saying, “I know both those guys.”
Obama seems to be hoping that his vague bluster about “obscene profits” will lure Republicans into embracing Wall Street welfare recipients—thereby losing Americans forever.
Never bet against Republicans being outwitted.
Risk-taking and speculation are good. But the Democrats’ crony capitalism is the worst of both worlds: risk-taking without any real risk for the risk-takers. It’s like gambling with your rich daddy’s money, except we’re the rich daddy.
Obama, like the rest of his party, is an ideologue who doesn’t understand or particularly like the free market. He fundamentally believes in the efficacy of the welfare state, whether the beneficiary is a layabout single mother or a rich Wall Street banker.
As Peter Schweizer describes in his magnificent book “Architects of Ruin,” the Democrats have been bailing out investment houses from their bad bets since the Clinton administration. The bankers got all the profits when their risky bonds were paying—and then gave massive donations to their Democratic benefactors. But once the bets went bad, it was the taxpayers’ problem.
Heavily leveraged securities packages put together by Goldman Sachs and others were the HIV virus that killed the American economy. And the reason investment firms piled leverage on leverage on leverage was that they knew the government would bail them out if their house of cards collapsed.
On one hand, Goldman put together toxic securities packages for their clients, but on the other hand, Goldman knew the mortgage securities being sold on the market were crap, so they also took out lots of insurance with AIG on crappy products being traded on the market.
It would be as if, anticipating a major earthquake, Goldman bought massive insurance policies on every house on the San Andreas fault line.
There’s nothing wrong with taking risks and making bets, provided that if you bet wrong or if you bankrupt your betting partner with wild gambles: You lose.
The problem was that Goldman and AIG, among many others, knew they wouldn’t lose. Twenty years of Democratic bailouts have led them to understand that when their bets go bad, the taxpayer will save them.
Which is exactly what happened.
When the earthquake hit toxic securities, the insurer, AIG, couldn’t pay up. Normally, that would result in the insurer going bankrupt, an orderly proceeding in bankruptcy court to distribute AIG’s assets, and Goldman recovering only a portion of the insurance payout on the crappy products.
But instead of AIG going bankrupt and Goldman taking a hit, the U.S. taxpayer made good on AIG’s securities insurance. In a deal arranged by former Goldman CEO and current Obama BFF, Hank Paulson, Goldman ended up being paid—by you—an astonishing 100 cents on the dollar.
So Goldman CEO Lloyd Blankfein’s boast that his firm didn’t want TARP money and has paid it all back is completely irrelevant. Goldman took billions of dollars—that’s millions with a “b”—of the AIG bailout money. How about paying that back?
It took The New York Times a year and a half to figure out Goldman’s jackpot winnings from the AIG bailout—$12.9 billion, according to the Times—so the first thing Republicans ought to do is hold hearings to determine who benefited from the Democrats’ crony capitalism, and not take their bluster as fact.
The next step should be to get all the bailout money back.
When the government steps in to save the very financial institutions that poisoned the nation’s financial system with contaminated securities and derivatives—all while the bankers get to keep the fees and bonuses on their bad bets—we are not talking about a free market.
We’re talking about regular Americans being forced to foot the bill for the gambling habits of left-wing multimillionaires by buying the malefactors more chips every time they lose.
Republicans should defend any investment houses that never benefited from a government bailout. But anyone who took huge gambles, lost and got bailed out with taxpayer money should be tortured and then shot, miraculously brought back to life, tortured some more, then shot a few more times.