Editor's note: Anderson Cooper reports on the dealings of Goldman Sachs at issue in a recent congressional report.
Related on CNNMoney.com: Goldman blasted for conflicts of interest
Ben Rooney
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
AC360° Correspondent
[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
AC360° Correspondent
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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?”
Tom Foreman | BIO
AC360° Correspondent
Richard Sauer
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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AC360°
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:
Lloyd Blankfein, Chairman and CEO, Goldman Sachs
Fabrice Tourre, Goldman Sachs International, London
Michael Swenson, Managing Director, Goldman Sachs Mortgage Department
Josh Birnbaum, Managing Director, Goldman Sachs Structured Products Group
[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."]
David Frum
CNN Contributor
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."]
Bob Greene
CNN Contributor
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.