The Goldman Sachs Boys

"Even as the economy continues to struggle, much of Wall Street is minting money and looking forward again to hefty bonuses," the New York Times said last week.

The Times wondered how this could possibly be with banks that were bailed out by the government prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?

What has happened is that the investment bankers like Goldman Sachs are making a fortune in new fees that they can charge because competition in the business has been eliminated.

Many of the steps that Washington took last year to stabilize the financial system actually helped to set the stage for a new era of prosperity on Wall Street. It didn't really help the little people.

The FED helped a lot by reducing interest rates to near zero while the Congress authorized big bailouts to bolster big banks with taxpayer money and guaranteeing billions of dollars of financial institutions' debts.

The investment bankers that are left after the fallout, like Goldman Sachs and JPMorgan Chase have been making fortunes charging higher and higher fees for trading stocks and bonds rather than helping the economy in the business of lending people money as was Congress' intention.

They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder which is a direct benefit of having less competition after the failure of Lehman Brothers and other big firms last year.

"All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending," the Times quoted Gary Richardson, a research fellow at the National Bureau of Economic Research, as saying. "But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that."

While the investment bankers are making a killing, the regular banks are not doing so well. The big ones like Citigroup and Bank of America, who are tied to ordinary consumers, are struggling to turn themselves around.

The decline in the number of investment bankers on Wall Street has left Goldman Sachs able to charge a wide range of higher fees says the Times. "They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them," said Douglas J. Elliott of the Brookings Institution.

A year after the crisis struck, those institutions which were deemed too big to fail, are, in fact, getting bigger, not smaller.

For them, it is business as usual.

This is really not a surprise.

The Obama administration is crammed with Goldman Sachs people from the cabinet on down.

Former Goldman Sachs people, from the beginning, made sure that Goldman Sachs and its friends would make a lot of money off the recession and be able to cash in underwriting green companies, wind turbine manufacturers, electric car developers and the like.

The case of Lawrence Summers, director of the National Economic Council highlights the politically incestuous character of relations between the Obama administration and Goldman Sachs.

Last year, Mr. Summers pocketed $5 million as a managing director of D.E. Shaw, one of the biggest hedge funds in the world, and another $2.7 million for speeches delivered to Wall Street firms that have received government bailout money. This includes $45,000 from Citigroup and $67,500 each from JPMorgan Chase and the now-liquidated Lehman Brothers. For a speech to Goldman Sachs executives, Mr. Summers received $135,000.

Alluding diplomatically to the conflict of interest, the Times said "Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama's policy decisions for the troubled financial industry, including firms from which he recently received payments."

But Larry Summers is not an exception. He is rather typical of the Wall Street insiders who comprise a White House team that is filled with former Wall Street and big bank personnel.

Michael Froman, deputy national security adviser for international economic affairs, worked for Citigroup and received more than $7.4 million from the bank from January of 2008 until he entered the Obama administration this year. This included a $2.25 million year-end bonus handed him this past January, within weeks of his joining the Obama administration.

Citigroup has thus far been the beneficiary of $45 billion in cash and over $300 billion in government guarantees of its bad debts.

David Axelrod, the Obama campaign's top strategist and now senior adviser to the president, was paid $1.55 million last year from two consulting firms he controls. He has agreed to buyouts that will garner him another $3 million over the next five years. His disclosure claims personal assets of between $7 and $10 million.

The president's deputy national security adviser, Thomas E. Donilon, was paid $3.9 million by a Washington law firm whose major clients include Citigroup, Goldman Sachs and the private equity firm Apollo Management.

The presence of Wall Street insiders extends to secondand third-tier positions in the Obama administration as well.

Adam Storch, vice president in Goldman Sachs' Business Intelligence Group, has become managing executive of the SEC division.

The move comes as the SEC revamps its enforcement efforts following the agency's failure to uncover Bernard Madoff's massive fraud scheme for nearly two decades despite numerous red flags.

In October of last year, a Goldman Sachs Vice President, Neel Kashkari, was named by former Goldman CEO and then-Treasury Secretary Hank Pauslon to oversee the $700 billion TARP bailout.

In January, Tim Geithner hired a former Goldman Sachs lobbyist, Mark Patterson, to be his top aide and Chief of Staff.

In March, President Obama nominated former Goldman Sachs executive Gary Gensler to head the Commodity Futures Trading Commission, which regulates futures markets, even though he confessed to lax regulation during the Clinton administration over the derivative instruments that caused the financial collapse.

In April, Goldman hired as its top lobbyist Michael Paese, who, before that, was the top aide to Rep. Barney Frank on the House Financial Services Committee, which Frank chairs.

According to ABC News in October, 2008, Goldman had "spent more than $43 million dollars on lobbying and campaign contributions to cultivate friends and buy influence in Washington, D.C. since 1989 and their "bankers have been the country's top political campaign contributors this year."

As Michael Moore has been pointing out, Goldman was the number one source of funding for the Obama 2008 presidential campaign.

The bailout of AIG which resulted in massive federal government monies to Goldman was engineered at a meeting between Mr. Paulson, President Bush's former Treasury Secretary, Mr. Geithner and Goldman CEO Lloyd Blankenfein.

The Times obtained calenders from Sec. Geithner which revealed that "Goldman, Citi and JPMorgan have gotten Mr. Geithner on the phone several times a day if necessary, giving them an unmatched opportunity to influence policy" and "Geithner's contacts with Blankfein alone outnumber his contacts with Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee."

Documents obtained by the Times relating to Geithner's work before becoming Treasury Secretary "show that he forged unusually close relationships with executives of Wall Street's giant financial institutions."

It seems that no matter who's in power, Mr. Obama or Mr. Bush or, for that matter the Clintons, nothing changes. The rich get richer while the little people get the shaft.