Eliot Spitzer

I was originally going to cover all of the TV personalities telling Goldman to go to h*ll for using Tax Payer Money to re-lever and front run client trades and then pay out record bonuses, but Spitzer has been on a roll this week and his works are sufficient to cover Goldman and California!

Spitzer on Goldman
http://www.clipsyndicate.com/video/play/1019966

“The issue in my mind is not whether they will announce enormous earnings today – I think everybody knows that - the question is, what does it mean both politically and what does it mean outside the context of Wall Street?

Because I think we have a division here – Wall Street is beginning to come back, because the Government has pumped an unbelievable amount of money into Wall Street… there’s no question we, as taxpayers, have put billions, in fact trillions of dollars into The Street.

The question is does that generate jobs - which is the word we haven’t heard anything about – out in the real economy?”

You are on to something, Eliot.

“(Goldman’s) Proprietary Trading, in a volatile Market, where their Cost of Capital was driven to virtually nothing, because we, as taxpayers, gave them access to Capital. They made a bloody fortune. Now the question is, is that good for us as taxpayers? Is it good for the Economy? Does that generate jobs? Where is their Capital going?

If all they are doing is going back to proprietary trading, buying bonds and selling them in this volatility, taking advantage of spreads that were really quite remarkable… If that is their business model, but that’s all they are doing, then as policy makers, the folks in DC – Geithner and Summers and the President – need to say ‘wait a minute, this isn’t going to create jobs for the future in Biotech, in New Energy’ – (The banks) job should be, from a macroeconomic perspective, to raise Capital and put it into those sectors that will create jobs.

If they are not getting that done, then why are we supporting them the way we have been?”

Is Spitzer talking about Goldman and the Banks, or Team Obama? Wall Street used to be the place where companies would seek money to invest back into their business. Shareholders would buy a part of the company and hope to build long term value as the company grew. Now it is a bunch of Quant Models front-running client trades at the Great Wall Street Casino…

“This is the division… we have seen over the past decade a confusion between Financial Services and the Economy at large. The Bubble masked what in my view was the fundamental transformation - a dangerous transformation – where we were losing the entirety of our Manufacturing Sector, we created paper profits in financial services that collapsed when asset values – which were dependent upon intense leverage – collapsed.

And we are not going to recreate that and over the course of this decade we lost the capacity to produce and hence we are now importing virtually everything… As we became more dependent upon foreign manufacturing, the core of our economy dissipated. That is the real risk we face.”
Amen. Somebody finally mentioned the 800-pound gorilla. We have no Manufacturing Base – therefore, we have no Middle Class. Building a Middle Class is the “Change” people wanted him to initiate. He has failed. There will come a time over the next decade where America again commits to building a manufacturing Base – that will be the long-term buy and hold Investment Cycle that makes investors rich over the course of an entire Generation.

“This could be a political explosion. When members of Congress say ‘we have just given money to Goldman Sachs and their employees are making $700,000 (average comp per employee) and I’ve got Auto Workers, I’ve got people who serve coffee in the Diner out of work because there’s no money in the Economy - Unemployment hitting 10% soon, Job Losses last month 467,000’… numbers we haven’t seen since The Depression. “

“In this case the public is right in saying ‘wait a minute, we bailed out the people who created the problem (and now they are making their bonuses again), we haven’t address the underlying problem – whether it’s Healthcare, Energy Efficiency, Smart policy to Create a Manufacturing Base… And somehow the public is saying there’s something amiss right here. And they don’t see anything changing in Policy to give them comfort.”

I left the Big Bank because I could not live with myself, knowing that I worked for a company that used Taxpayer Money to mask its mistakes and then took that money and used it to enrich the fat cat executives by selling the Taxpayer a bunch of crap Debt, at artificially inflated prices. The backlash is coming and it will be severe.

The SEC
“The Regulatory Agencies already had the power to do everything they needed to do. They just affirmatively chose not to do it. The Fed has always been a systemic Regulator. The SEC has always had the capacity to look at the books of every bank out there. The New York Fed in particular, failed to do what it should have been doing – to look into the Capital and the Leverage Ratios of the various Banks…

You don’t need new regulations, you just need the will to do what they were supposed to do.”

“(The SEC) missed the largest transformation in the Market Place – which was that Middle American, we invited Middle Americans into the Marketplace and said ‘put your Capital into this Market’, but we then did not create the protections for the Small Investor to prevent them from being taken advantage of by the Major Firms. And that was the real crisis.”

The rich get richer and the little guy gets the bill. The Regulators chose to not regulate, because they knew they could get jobs at the banks after they let the banks lie, cheat and steal for a few years. The Regulators were promised future wealth to look the other way.

Spitzer on California and State Budget Deficits
http://www.slate.com/id/2222776/

“What a perfect metaphor for our economic circumstances! California is literally drowning in red ink and political gridlock, with deficit figures that are staggering and portend worse news for the future at the same time that a bailed-out Wall Street is profiting from a new, and essentially useless, trading vehicle.”

Instead of the Federal Government taking action to bail out California, the SEC declares California IOUS to be “securities” and Wall Street sets up a trading market for them…

“Where does this leave us? The Obama administration's first stimulus package offered a Band-Aid for state budgets. As the recession worsens and states face California-like catastrophes, more fundamental thinking is going to be needed.

Two critical areas must be addressed. First, public pension liabilities have to be restructured. Since many state constitutions prohibit retrospective realignments—that is, lowering pensions that have already been guaranteed—states will need to lower guarantees for new employees radically, shifting from defined benefit plans to defined contribution plans. Second, and more fundamentally, states will need to shift more funding of health care and education to the federal government. In health care, where Medicaid is the primary state expenditure item, there currently exists a federal-state burden sharing arrangement. As the health care reform process continues in D.C., Washington must recognize that requiring greater state expenditures is simply not realistic at this time.”

Are you starting to see how the effort to nationalize Healthcare is more a function of saving the Pensions of Public Employees and Union Workers, rather than fixing a “broken” system?