---------------- Leo W. Gerard, president of the United Steelworkers, raised these explosive questions in a stinging letter sent to Paulson this week. The union did what any private investor would do. Its finance experts vetted the terms of the bailout investment and calculated the real value of what Treasury bought with the public's money. In the case of Goldman Sachs, the analysis could conveniently rely on a comparable sale twenty days earlier. Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought the same types of securities--preferred stock and warrants to purchase common stock in the future. Only Buffett's preferred shares pay a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar, Buffett "received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms," Gerard pointed out. "I am sure that someone at Treasury saw the terms of Buffett's investment," the union president wrote. "In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal--50 percent invested and 50 percent as a gift--is quite consistent with the Republican version of spread-the-wealth-around philosophy." ---------------------- "The analysis is based on the assumption that Warren Buffett is an intelligent third party investor who paid no more for his investment than he had to," Bloom's report explained. "It also assumes that Gold Sachs' job is to protect its existing shareholders so that it extracted from Mr. Buffett the most that it could.... Further, it is assumed that Henry Paulson is likewise an intelligent man and that if he paid any more than Mr. Buffett--if he paid $1 for something for which Mr. Buffett would have paid 50 cents--that the difference is a gift from the taxpayers of the United States to the shareholders of Goldman Sachs." The implications are staggering. Leo Gerard told Paulson: "If the result of our analysis is applied to the deals that you made at the other eight institutions--which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return--you paid a$125 billion for securities for which a disinterested party would have paid $62.5 billion. That means you gifted the other $62.5 billion to the shareholders of these nine institutions." If the same rule of thumb is applied to Paulson's grand $700 billion bailout fund, Gerard said this will constitute a gift of $350 billion from the American taxpayers "to reward the institutions that have driven our nation and it now appears the whole world into its most serious economic crisis in 75 years."
"I am sure that someone at Treasury saw the terms of Buffett's investment," the union president wrote. "In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal--50 percent invested and 50 percent as a gift--is quite consistent with the Republican version of spread-the-wealth-around philosophy." ---------------------- "The analysis is based on the assumption that Warren Buffett is an intelligent third party investor who paid no more for his investment than he had to," Bloom's report explained. "It also assumes that Gold Sachs' job is to protect its existing shareholders so that it extracted from Mr. Buffett the most that it could.... Further, it is assumed that Henry Paulson is likewise an intelligent man and that if he paid any more than Mr. Buffett--if he paid $1 for something for which Mr. Buffett would have paid 50 cents--that the difference is a gift from the taxpayers of the United States to the shareholders of Goldman Sachs."
The implications are staggering. Leo Gerard told Paulson: "If the result of our analysis is applied to the deals that you made at the other eight institutions--which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return--you paid a$125 billion for securities for which a disinterested party would have paid $62.5 billion. That means you gifted the other $62.5 billion to the shareholders of these nine institutions."
If the same rule of thumb is applied to Paulson's grand $700 billion bailout fund, Gerard said this will constitute a gift of $350 billion from the American taxpayers "to reward the institutions that have driven our nation and it now appears the whole world into its most serious economic crisis in 75 years."
A conscious swindle--or just staggering incompetence? Capitalism searches out the darkest corners of human potential, and mainlines them.
A conscious swindle--or just staggering incompetence?
Hmm, let me see, nobody gets to such positions within Goldman Sachs by being incompetent, so I'd guess the other is true. And oddly, that trait'd also be useful for rising up the hierarchy of GS.
But then again, republicans and a big pile of money invariably equals crookery. keep to the Fen Causeway
My dream: Dean Baker for Treasury, Bill Greider for second in command. Capitalism searches out the darkest corners of human potential, and mainlines them.
incompetence at foreseeing the consequences of their greed, followed by conscious swindle.
the savings and loan bailout, followed by enron, followed by the Great Halliburton Wealth Transfer to Dubai, all were warm-ups for this last one.
how far can they push the credulousness envelope?
how long will jargon and obfuscation hold back the tide of public feeling?
how many 401K's have to vaporise? how many bushvilles? ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
