By Michael Snyder, on January 15th, 2010
In an absolutely stunning admission, the CEO of Goldman Sachs acknowledged on Wednesday that the investment bank engaged in “improper” behavior during 2006 and 2007. This improper behavior included making huge bets against the housing market while at the same time peddling more than $40 billion in securities backed by risky U.S. home loans.
The CEO of Goldman Sachs, Lloyd Blankfein, made this stunning admission during the opening hearing of the Financial Crisis Inquiry Commission. The Financial Crisis Inquiry Commission is a 10 member panel that Congress created to investigate the causes of the worst financial crisis since the Great Depression.
The chairperson of this commission, Phil Angelides, warned Blankfein that he would be “brutally honest” during his questioning. He directly confronted Blankfein about Goldman’s behavior during the housing crash. In particular, he pressed Blankfein about whether it was proper or not for Goldman Sachs to make huge bets against the housing market when they were peddling tens of billions of dollars worth of mortgage-backed securities at the same time. In response to the questioning by Angelides, Blankfein made the following statement….
“I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it.”
Lost money?
The truth is that tens of billions of dollars were lost. In fact, the garbage that Goldman sold them has some state governments on the verge of bankruptcy.
But Goldman came out of the housing crash smelling like a rose. In fact, they made tens of billions of dollars in 2009.
So will this commission get to the bottom of this mess?
Not likely, but at least Angelides was willing to ask some of the tough questions.
You can see a large portion of the confrontation between Blankfein and Angelides below….
Meanwhile, the U.S. government continues to deal with the horrific aftermath of the housing crisis. The U.S. government just posted its largest December budget deficit on record (91.9 billion dollars) as higher unemployment reduced revenue and the government spent large amounts of money to help the U.S. economy recover.
A 91 billion dollar deficit in a single month?
What kind of madness is this?
We are dumping a massive debt on to our children and grandchildren that they will never, ever be able to repay.
In fact, a two year study by the 24 member Committee on the Fiscal Future of the United States says that the United States must soon either raise taxes or cut government spending to curb its debt.
But either action would have devastating effects on the U.S. economy.
However, if the U.S. government keeps piling up debt at the current rate it is absolutely going to destroy the financial system of the United States.
The truth is that the U.S. government is between a rock and a hard place.
If it raises taxes or cuts spending it will seriously hurt the economy, but if the government continues to rack up debt at this pace the consequences will be catastrophic.
The truth is that hard choices need to be made and that there is going to be economic pain no matter what is decided.
In fact, U.S. Chamber of Commerce President Tom Donohue is warning that the U.S. faces a double-dip recession because of the new taxes and the new regulations under consideration by Barack Obama and the Democratic Congress.
While some in the mainstream media talk hopefully of “recovery”, the truth is that things continue to get worse for the U.S. economy.
Millions of Americans have lost their jobs and are now stuck in a cycle of hopelessness. In fact, some analysts now believe that the true unemployment rate in the United States is close to 22 percent.
All of this unemployment means that millions of Americans cannot pay their mortgages. Almost 3 million U.S. homeowners received at least one foreclosure filing during 2009 which set a new all-time record.
However, things are going to get even worse for the housing market when the next wave of adjustable mortgages start resetting in 2010. A massive wave of adjustable mortgages is scheduled to reset between 2010 and 2012, and the reality is that there is simply no way that another huge wave of mortgage defaults is going to be able to be avoided.
Things have gotten so bad that a record number of American citizens are turning to the U.S. government for assistance. The number of Americans enrolled in the food stamp program has set a record for the ninth month in a row.
So is there any end to this economic misery?
Are things going to get even worse?
Well, not for the folks over at Goldman Sachs. Total bonuses for executives at Goldman Sachs for 2009 are expected to be somewhere around 20 billion dollars.
You see, being a bankster is quite profitable these days – even if it did take a little “improper behavior” to get it done.
