CNNMoney.com Staff Reporter
NEW YORK (CNNMoney) - A Senate panel issued a scathing report Wednesday that describes Goldman Sachs as a "case study" of the recklessness and greed on Wall Street that set off the 2008 financial crisis.
The 600-page report also blames the lending practices of big commercial banks, such as the now-defunct Washington Mutual, for plunging the U.S. economy into a painful recession.
The regulators who failed to crack down on the banks, including the Office of Thrift Supervision, are faulted for their cozy relationship with Wall Street, as are the major credit rating agencies, Moody's and Standard & Poor's.
"Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing," said Senator Carl Levin, chairman of the Senate subcommittee charged with investigating the causes of the financial crisis.
The subcommittee, which spent two years on the investigation, based its report on thousands of internal company documents and emails, as well as hundreds of interviews and Congressional testimony.
The subcommittee singled out Goldman (GS, Fortune 500) and Deutsche Bank (DB) as examples of Wall Street firms that reaped huge profits by marketing securities backed by subprime mortgages as safe investments to clients, even as the banks bet against these very same securities.
Tom Foreman | BIO
[cnn-photo-caption image=http://i2.cdn.turner.com/money/galleries/2010/news/1004/gallery.Goldman_Sachs_Players/images/lloyd_blankfein.gi.jpg caption="You know what Goldman Sachs CEO, Lloyd Blankfein, and the island nation of Kiribati have in common? In 2007 they each made about the same amount of money."]
You know what Goldman Sachs CEO, Lloyd Blankfein, and the island nation of Kiribati have in common? In 2007 they each made about the same amount of money. $68 million. I’m no enemy of capitalism, and I love the notion of folks getting ahead, but doesn’t that seem perhaps a tad excessive?
I return to the smiling Mr. Blankfein because in the wake of his visit to Capitol Hill to defend Wall Street, he has continued to suggest that people should not be angry with his staggering income because, after all, he earned it.
Well, let’s look at his theoretical time sheet. We’ll assume he’s a hard worker, never takes vacations, and even on holidays catches up on paperwork. But the financial markets are closed on weekends, so he gets 260 working days in a year. I’ll further assume he’s a steady laboring guy; your head doesn’t get that shiny without a lot of hair pulling and sweating the details. We’ll say he is at the office at least 12 hours a day; so 3,120 hours for the year.
We do some math, carry some ones, and Bob’s your uncle, turns out old Lloyd’s going rate is just under $22,000 an hour. Or $363 a minute. Which raises a question: How can anyone possibly “earn” that much, in the sense that most of us understand the concept of earning?
Pro athletes, heart surgeons, plumbers, hookers, and hit men don’t rake in that kind of dough. Heck, load up an airport van full of them all mixed together and they’d still collectively be paupers compared to the oh so valuable Lloyd.
For that matter, take your run-of-the-mill extremely well-paid professional, say some gal who pulls a million a year, which is not just Slurpee money. If she started working at the age of 21, she would not get to clean out her desk and book a tee time until she was almost 90 years old; and at that point she would have made only what Senor Lloyd banked in one year.
So while he certainly received, scored, banked, snared, and/or got a lot of money that year, his argument that he “earned” it, I suspect for many working folks, rattles like a counterfeit quarter. Or 272 million of them. But who is counting?
Tom Foreman | BIO
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The fury over Wall Street Fat Cats reached a new high on Capitol Hill this week, as a police lineup of Goldman Sach’ers came to scratch and yawn while Senators desperately tried to make them admit…well, frankly, anything.
In my brief moments of lucidity as I struggled against the coma-inducing Kryptonite of a Congressional hearing, this is what they extracted in the way of confessions: 1) High finance is really complex, 2) We’re upset about how things turned out, because the tens of millions we scored in bonuses is not nearly enough, and 3) Yes, we heard something about a housing collapse. How is that working out for you little people?
Part of the problem was a language barrier. The Senators were speaking in Outrage; a commonly understood tongue of the American populace. But the GS’ers were answering in Filthy-Richese; actually a rare dialect of that language known as I’ve-Got-More-Money-Than-the-Pope. And btw, he’s got a boss, I don’t.
But there was also a knowledge gap between the sides. Members of Congress are often more instinctive than intelligent. Don’t get me wrong: They can be smart, but the skills needed to win public office these days do not necessarily require it. (Oddly enough, getting elected does require an almost feral ability to sniff out and avoid cell phone cameras when a mistress is in tow, but that’s another story.) As a result, precious few of our top elected officials appear to be as versed in the big money game as they need to be for this kind of show down.
Out of the entire panel trying to pin down the GS’ers, only Senator Carl Levin of Michigan seemed truly comfortable navigating the arcane terms and concepts that the Wall Street crowd sprays like octopus ink whenever the questions get too threatening. And even he, with his prosecutorial zeal, never really came close to cornering them.
Because in the end, the GS’ers came wrapped in virtually impenetrable suits of money, capable of deflecting almost anything the politicos fire at them. They deny any wrongdoing. They are fighting the SEC charges against their company. They’re keeping the cash.
Money talks. And what it is saying to those in DC who think Wall Street greed helped tank the U.S. economy, is “So what?”
Special to CNN
[cnn-photo-caption image=http://i2.cdn.turner.com/money/2010/04/27/news/companies/goldman_sachs_hearing/smlvid.four_swearing.gi.jpg caption="Sauer: Goldman Sachs accused of lying about its method to help client short housing market" width=300 height=169]
Pity the poor short-seller. Seriously. That much-maligned creature gets no love at the best of times, and these days are more like the worst.
This, despite the irreplaceable benefits he brings to the financial markets. Short-selling in the conventional sense involves borrowing stock, selling it and, at a later date, replacing the borrowed shares though market purchases. If, in the interim, the shares have declined in value, the short-seller prospers. If not, he doesn't.
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Top representatives from Goldman Sachs maintained Tuesday that the company did not engage in any questionable business deals leading up to the financial crisis.
Don't miss our analysis of the hearing tonight on AC360° at 10 p.m. ET.
And if you didn't have time to watch the hearing, you can read the testimonies here:
[cnn-photo-caption image=http://ukiahcommunityblog.files.wordpress.com/2009/07/goldman_sachs.jpg caption="Goldman Sachs' PAC and employees were among the top contributors to Barack Obama's campaign."]
The charts below summarize Goldman Sachs’ political contributions to federal candidates over the last several campaign cycles. Federal law prohibits a company from directly contributing money to a campaign; the totals below include contributions from the Goldman Sachs PAC and individual contributors who listed Goldman Sachs as their employer, and their family members. All of this information and more can be found at the Center for Responsive Politics.
Barack Obama’s top contributors from company PACs and employees (2007-2008 cycle)
Grouped together, Goldman Sachs’ PAC and employees were among the top contributors to the Obama presidential campaign.
University of California $1,591,395
Goldman Sachs $994,795
Harvard University $854,747
Microsoft Corp $833,617
Google Inc $803,436
Citigroup Inc $701,290
JPMorgan Chase & Co $695,132
Time Warner $590,084
Sidley Austin LLP $588,598
Stanford University $586,557
National Amusements Inc $551,683
UBS AG $543,219
Wilmerhale Llp $542,618
Skadden, Arps et al $530,839
IBM Corp $528,822
Columbia University $528,302
Morgan Stanley $514,881
General Electric $499,130
US Government $494,820
Latham & Watkins $493,835
John McCain’s top contributors from company PACs and employees (2007-2008 cycle)
Merrill Lynch $373,595
Citigroup Inc $322,051
Morgan Stanley $273,452
Goldman Sachs $230,095
JPMorgan Chase & Co $228,107
US Government $208,379
AT&T Inc $201,438
Wachovia Corp $195,063
UBS AG $192,493
Credit Suisse Group $183,353
US Army $167,820
Bank of America $166,026
Gibson, Dunn & Crutcher $159,596
Blank Rome LLP $154,226
Greenberg Traurig LLP $146,437
US Dept of Defense $144,105
FedEx Corp $131,974
Bear Stearns $117,498
Lehman Brothers $114,357
Click here to see a summary of Goldman Sachs PAC and employee contributions over the years. Goldman Sachs PAC and employees have given more to Democrats than Republicans across the past several campaign cycles.
Breakdown of Goldman Sachs PAC and employee contributions to members of Congress
Money to Congress: 2010 Cycle
# of Members
# of Members
Goldman Sachs PAC and employee contributions to Senate Banking Committee members (2009-2010)
Bayh, Evan (D-IN) $5,400
Bennet, Michael F (D-CO) $4,800
Bennett, Robert F (R-UT) $8,800
Bunning, Jim (R-KY) $2,000
Crapo, Mike (R-ID) $3,000
DeMint, James W (R-SC) $1,000
Dodd, Chris (D-CT) $4,250
Schumer, Charles E (D-NY) $22,600
Shelby, Richard C (R-AL) $34,600
Goldman Sachs PAC and employee contributions to House Financial Services Committee members (2009-2010)
Adler, John H (D-NJ) $5,750
Bachus, Spencer (R-AL) $2,500
Bean, Melissa (D-IL) $9,400
Capuano, Michael E (D-MA) $1,500
Castle, Michael N (R-DE) $2,400
Donnelly, Joe (D-IN) $1,000
Ellison, Keith (D-MN) $500
Foster, Bill (D-IL) $4,500
Garrett, Scott (R-NJ) $2,000
Hensarling, Jeb (R-TX) $1,000
Himes, Jim (D-CT) $15,150
Hodes, Paul W (D-NH) $13,100
Jenkins, Lynn (R-KS) $2,000
Lance, Leonard (R-NJ) $3,000
Lee, Christopher J (R-NY) $2,000
Maloney, Carolyn B (D-NY) $4,400
McCarthy, Kevin (R-CA) $4,500
McCotter, Thad (R-MI) $2,000
Meeks, Gregory W (D-NY) $2,500
Minnick, Walter Clifford (D-ID) $5,000
Paulsen, Erik (R-MN) $2,000
Posey, Bill (R-FL) $2,000
Royce, Ed (R-CA) $2,400
Velazquez, Nydia M (D-NY) $3,500
Waters, Maxine (D-CA) $2,400
Watt, Melvin L (D-NC) $2,500
Top Recipients, all federal candidates (2009-2010 cycle only)
McMahon, Michael E (D-NY) House $50,550
Shelby, Richard C (R-AL) Senate $34,600
Gillibrand, Kirsten (D-NY) Senate $23,800
Murphy, Scott (D-NY) House $23,450
Schumer, Charles E (D-NY) Senate $22,600
Kirk, Mark (R-IL) House $21,600
Pleitez, Emanuel (D-CA) House $20,175
Wyden, Ron (D-OR) Senate $15,900
Himes, Jim (D-CT) House $15,150
Khazei, Alan (D-MA) Senate $14,600
Hodes, Paul W (D-NH) House $13,100
Crist, Charles J Jr (R-FL) Senate $10,100
Dold, Robert (R-IL) House $9,850
Bean, Melissa (D-IL) House $9,400
Bennett, Robert F (R-UT) Senate $8,800
Roskam, Peter (R-IL) House $7,400
Saujani, Reshma M (D-NY) House $7,200
Coakley, Martha (D-MA) Senate $7,050
Blunt, Roy (R-MO) House $6,200
Adler, John H (D-NJ) House $5,750
Brown, Scott P (R-MA) Senate $5,550
Bayh, Evan (D-IN) Senate $5,400
Chachas, John Gregory (R-NV) Senate $5,100
Meek, Kendrick B (D-FL) House $5,050
Hoyer, Steny H (D-MD) House $5,000
Minnick, Walter Clifford (D-ID) House $5,000
Reid, Harry (D-NV) Senate $4,900
Bennet, Michael F (D-CO) Senate $4,800
Fiorina, Carly (R-CA) Senate $4,800
Conway, Jack (D-KY) Senate $4,650
Foster, Bill (D-IL) House $4,500
Lincoln, Blanche (D-AR) Senate $4,500
McCarthy, Kevin (R-CA) House $4,500
Ayotte, Kelly A (R-NH) Senate $4,400
Maloney, Carolyn B (D-NY) House $4,400
Dodd, Chris (D-CT) Senate $4,250
Foley, Thomas C (R-CT) Senate $4,150
Inouye, Daniel K (D-HI) Senate $4,000
Velazquez, Nydia M (D-NY) House $3,500
Specter, Arlen (D-PA) Senate $3,350
Hoffman, David (D-IL) Senate $3,150
Crapo, Mike (R-ID) Senate $3,000
Lance, Leonard (R-NJ) House $3,000
Murphy, Patrick J (D-PA) House $2,900
Tedisco, Jim (R-NY) House $2,900
Jackson, Cheryle (D-IL) Senate $2,800
Dorgan, Byron L (D-ND) Senate $2,650
Portman, Rob (R-OH) Senate $2,650
Bachus, Spencer (R-AL) House $2,500
Meeks, Gregory W (D-NY) House $2,500
Watt, Melvin L (D-NC) House $2,500
Bera, Ami (D-CA) House $2,400
Castle, Michael N (R-DE) House $2,400
Fisher, Lee Irwin (D-OH) Senate $2,400
Flake, Jeff (R-AZ) House $2,400
Royce, Ed (R-CA) House $2,400
Sowers, Tommy (D-MO) House $2,400
Waters, Maxine (D-CA) House $2,400
Williams, Roger (R-TX) Senate $2,400
Ros-Lehtinen, Ileana (R-FL) House $2,200
Bono Mack, Mary (R-CA) House $2,000
Bunning, Jim (R-KY) Senate $2,000
Camp, Dave (R-MI) House $2,000
Garrett, Scott (R-NJ) House $2,000
Grassley, Chuck (R-IA) Senate $2,000
Jenkins, Lynn (R-KS) House $2,000
Lee, Christopher J (R-NY) House $2,000
McCotter, Thad (R-MI) House $2,000
Melancon, Charles (D-LA) House $2,000
Paulsen, Erik (R-MN) House $2,000
Posey, Bill (R-FL) House $2,000
Rangel, Charles B (D-NY) House $2,000
Schwartz, Allyson (D-PA) House $2,000
Capuano, Michael E (D-MA) House $1,500
White, Bill (D-TX) Senate $1,500
Boxer, Barbara (D-CA) Senate $1,250
Arcuri, Michael (D-NY) House $1,000
Baucus, Max (D-MT) Senate $1,000
Burton, Dan (R-IN) House $1,000
Cantor, Eric (R-VA) House $1,000
Coburn, Tom (R-OK) Senate $1,000
DeMint, James W (R-SC) Senate $1,000
Diaz-Balart, Mario (R-FL) House $1,000
Donnelly, Joe (D-IN) House $1,000
Etheridge, Bob (D-NC) House $1,000
Grayson, Trey (R-KY) Senate $1,000
Gutierrez, Armando Jr (R-FL) House $1,000
Hamos, Julie (D-IL) House $1,000
Hensarling, Jeb (R-TX) House $1,000
Isakson, Johnny (R-GA) Senate $1,000
Kind, Ron (D-WI) House $1,000
Klobuchar, Amy (D-MN) Senate $1,000
Leahy, Patrick (D-VT) Senate $1,000
McDonald, Jack (D-TX) House $1,000
Murkowski, Lisa (R-AK) Senate $1,000
Murphy, Chris (D-CT) House $1,000
Murphy, Tim (R-PA) House $1,000
Norton, Jane (R-CO) Senate $1,000
Pelosi, Nancy (D-CA) House $1,000
Rooney, Brian John (R-MI) House $1,000
Top Recipients, all federal candidates (1990-2010)
Obama, Barack (D-Ill) $1,053,795
Clinton, Hillary (D-NY) $682,690
Corzine, Jon S (D-NJ) $585,870
Bush, George W (R-Texas) $528,124
Schumer, Charles E (D-NY) $481,040
Kerry, John (D-Mass) $351,750
McCain, John (R-Ariz) $337,065
Bradley, Bill (D-NJ) $323,550
Dodd, Chris (D-Conn) $273,466
Romney, Mitt (R-Mass) $254,025
Ryan, Jack (R-Ill) $218,161
Edwards, John (D-NC) $213,750
Lazio, Rick A (R-NY) $194,300
D'Amato, Alfonse M (R-NY) $189,150
Himes, Jim (D-Conn) $170,248
Bayh, Evan (D-Ind) $164,950
Specter, Arlen (R-Pa) $164,700
Daschle, Tom (D-SD) $158,500
Giuliani, Rudolph W (R-NY) $150,750
Menendez, Robert (D-NJ) $149,950
Clinton, Bill (D-Ark) $140,659
Lowey, Nita M (D-NY) $132,290
Lieberman, Joe (I-Conn) $123,700
Rangel, Charles B (D-NY) $115,100
Ford, Harold E Jr (D-Tenn) $111,997
Hutchison, Kay Bailey (R-Texas) $111,300
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/02/23/poll.economy/art.wall.st.gi.jpg caption="Wall Street should not be blamed for the crash of 2008, says Frum."]
Financial reform? Not exactly. The bill before Congress does nothing to address the fundamental background causes of the crash of 2008.
Wall Street may have been the instrument of the crash. But the crash was made elsewhere: in Washington's failed policies for middle-class families - and in China's distorted rush for economic growth.
The story is not a simple one. But I hope you will pay attention to the details. If you don't, you may find that the pocket that has been picked is your own.
As you've heard, the crash begins with the huge excess load of debt built up in the last two decades by American households. Why did Americans borrow so much? Some like to tell a story of irresponsibility: We borrowed too much because we were self-involved yuppies who just could not deny ourselves the latest flat-screen doodad for our McMansions.
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/06/22/art.goldman.jpg caption="The public's wariness of Wall Street is growing, with Goldman Sachs being accused of fraud by the Securities and Exchange Commission."]
I wish the titans of Wall Street could meet Mark Dalton.
Not that it would be likely to change anything. But I wish the leaders of Goldman Sachs and of the other big banking firms could talk to Mark Dalton for just a few minutes.
They might learn a few things about how to better connect with the American people.
I didn't know Dalton's last name until a few days ago. For almost two years, I've held onto something he mailed to me. There was no reason not to throw it out, yet I had a feeling that someday I'd want to refer to it.
That day is now. With the public's wariness of Wall Street growing, with Goldman Sachs being accused of fraud by the Securities and Exchange Commission (even as Goldman was announcing first-quarter profits of $3.46 billion, nearly twice as much as in the first quarter a year ago), with investors wondering if they're being given a fair shake by the firms to which they have entrusted their money, Mark Dalton's way of doing business might be worthy of at least a moment's attention.