Thanks to Matt Taibbi’s wonderful article “The Great American Bubble Machine,” I was inspired to do some more bailout math.
It looks to me like Goldman Sachs won big on the bailout. They got a $13 billion windfall from the AIG bailout. They got a $10 billion bailout in TARP that they paid back when they were ready. They got to become a bank holding company so they can raise capital using the FDIC credit. Can you imagine how cheap your borrowing rates would be if you could offer your creditors a federal guarantee? So your credit card rate would be 2% instead of 36%.
OK, the Fed lent the big banks $8.7 trillion. However, it is secret where that went. So we will not even count how much Goldman got from that or how much they made lending that money back to the U.S. government to finance the deficits that are increasing daily, in no small part thanks to Goldman.
And we are not counting how much Goldman made on shorting the housing market or on the take down of Bear Stearns and Lehman. We bet it was a lot, though.
Now, it turns out relative to the 2008 period that Goldman paid out $4.7 billion of compensation, of which their CEO got $42.9 million. During the same period—are you ready—their total US tax bill was $14 million.
OK, so let’s compare this to a potential California bailout. California needs $24 billion to balance their budget. If the federal government gave California $13 billion and loan them $10 billion, like they did Goldman, California would have to make $1 billion in cuts. However, if California refinanced their debt with the federal credit, as Goldman has been authorized to do, that would sufficiently reduce California’s cost of borrowing, that they should then have no deficit at all.
California would not pay out $4.7 billion in bonuses. They would also not pay $14 million in taxes to the federal government. However, if California does experience a real shock doctrine budget balancing exercise, the result will be a spiral down in the economy, leading to significant cuts in tax revenues to both California and the federal government. So figure the savings for federal revenues could be substantial.
The advantage of letting California hit the wall, is that then Goldman, their partners and their syndicates can buy up lots of land and businesses for cheap. Meantime, Californians can be busy working to pay the taxes to fund the billions gifted to Goldman so they can buy California. Californians will also have to work harder to make up for their losses on their defaulted California municipal bonds.
Think of this as a neighborhood leveraged buyout — except this time it could be an entire state. Indeed, another year of this and it could be an entire country.
Ever wonder how much money could be made shorting the California municipal bond market? Surely, there is a derivatives play…
Walter Burien, who has devoted years to the study of Comprehensive Annual Financial Reports, has shown that in 1999 ALONE, by investing OUR tax monies, OUR government EARNED a total of 8.5 TRILLION Dollars, AFTER expenses. That’s 8.5 TRILLION THEY earned in ONE year on OUR MONEY. Mr. Burien: “Keep in mind, Government only wants you to see one side of the picture; The DEBT. This is so that you will turn your back to the debt in fear or disgust and look the other way. Now, look at how much money OUR Government has to employ, buy off, and CONTROL; the BEST Marketers, Psychologists, Strategists, Takeover Specialists, Entertainment Propagandists, etc. etc. etc. Could it be that OUR very own Government over the last several decades has been promoting to those fortune 500 companies, MANY of which our Government OWNS, through Bond – Loan investment / stock ownership [EXAMPLES: 82% stock ownership of Microsoft Corporation, Disney 61%, AOL – Time Warner 58%, EXXON 72%] that they should manufacture abroad, so that Government would realize greater returns on their investments of OUR money, at the direct expense of WE THE AMERICAN PEOPLE in terms of JOBS and OUR OWN wealth retention, thus ACCOMPLISHING the laying of the groundwork for “balancing” world wealth, which is the primary foundation block of nothing other than the NEW WORLD ORDER? OUR Government wouldn’t do that for a few extra trillions of NON-TAX-INCOME dollars right? Well, sorry to have to break it to you but you’re WRONG. In the 60’s, most government investment funds were restricted to a cap of 5% to a maximum of 10% invested outside of the USA. By 2000, that restriction has been increased in many a case to over 45% and in some cases no restriction at all per percent of International investments held.
http://tpmmuckraker.talkingpointsmemo.com/2007/05/how_immigration_judge_spots_we.php
Walter Burien again: “You now know the primary reason why Gorbechev went democratic, more money = more control. We showed Gorbachev the blueprint for true communism. In Russia’s past, the state openly owned everything. In the USA the state truly owns everything, but through walls of well-masked corporate veils created over the decades. The US Government now has more control over more wealth amassed from the people then old Russia ever thought was possible or ever dreamed about.” For the Hegelian ochestrators of our “free” America and world, the function of a Parliament or a Congress is purely psychological; merely to “allow” individuals to feel that their opinions have some value, and to allow government to take advantage of whatever wisdom the ‘peasant’ may accidentally demonstrate. As their patron saint Hegel put it: “By virtue of this participation, subjective liberty and conceit, with their general opinion, (individuals) can show themselves palpably efficacious and enjoy the satisfaction of feeling themselves to count for something.” War, the organized conflict of nations for Hegelians, is merely “the visible outcome of the clash between ideas”. Following the outbreak of war in 1939, Social Creditor C.H. Douglas said, “The international money marketeers care no more for the immolation of the peoples of a continent that for the death of a sparrow”; and “Unfortunately the world is in the grasp of theorists to whom misery and death of millions is a grain of sand beside the working out of their designs”.
Perhaps this clip from an article today provides some insight into the reason behind the contrived financial crisis in CA….
“Bass said the governor’s demands include changes to allow the state to more easily hire contractors, a reduction of money the state puts into the state employee pension system, and the building of a ‘massive new computer system that we would use in determining public assistance.'”
Bass is the current Speaker of the CA Assembly
Article clipping from SF Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/07/MNTC18JU36.DTL
If you start mapping out the financial ecosystems in a place with a really smart group of people and just keep at it…over time the matrix truly does dissolve. And there is all sorts of leverage.
I should do a collection of all my place based stories in one place. Well, I guess that is my book. Back to the salt mines…
OMG, Texas does a wonderful job with its CAFR, showing each Fund in detail, with balances down to the penny!
https://fmx.cpa.state.tx.us/fm/pubs/cashrpt/07/html/index.php
However, ultimately, I find Catherine’s location-based idea of analyzing funding to be an essential tool for properly analyzing public sources and uses. It would be wonderful to be able to map a community across FED, State & local funding sources and uses…. I’m sure the discoveries would be amazing. Great article from 2002, Catherine:
“I was told the day after I left that the preparation of place-based financial accounting and statements had been terminated.
That was one of the reasons I turned down the opportunity to serve at the Federal Reserve and instead started Hamilton upon leaving the Bush Administration. It was the reason why we at Hamilton built Community Wizard. The Community Wizard made it possible for anyone to put together a sources and uses statement for government activities (taxes, time use, spending, credit, regulation, operations, and more) in their community. An easy step was just linking to the Consolidated Financial Reports (CAFRS). The shock of finding so much in the way of hidden assets and where the money was really going was always a pleasure to watch. Why should the finance committee chairmen of the political campaigns be the only ones to see the information on how the money works by place?
Luis Mendez, one of my partners at Dillon Read, visited me in Washington in 1996. He said that Wizard was a stupid idea that would not work. Things were hopeless, he said. I showed Luis a printout of the CAFR for his community of Bronxville, New York. When he saw the figures, he exploded in rage. The first item was $4 million of flood insurance. This was the worst form of corruption, Luis said. Apparently, Bronxville was on a hill. The next day Luis spent two hours on the phone with the Deputy Mayor of Bronxville going through each item and informing him this was all going to stop. Apparently, things were far from hopeless, once one had the information. It just took one good map to see how to fix thousands of little things, one at a time.”
Bert:
I just printed out the 299 page CAFR for 2008 (apologies to the trees — it will become compost in my garden after shredding). I don’t have time to delve into it until later this week. It’s time to dig deeper — although I don’t trust government documents as a rule.
You should come to the Financial Permaculture summit in Hohenwald. We will have a track on mapping financial ecosystems including an exercise that will be VERY interesting,
Catherine
This CA financial crisis is really quite intriguing as I merely start to scratch the surface. So, I check out State Controller John Chiang’s page on the fiscal “crisis” and all I find are references to CASH receipts and CASH outlays and CASH shortages.
http://www.sco.ca.gov/eo_news_fiscalissues.html
Chiang has created a pretty graph showing CASH shortfalls for the 2009 fiscal year, but where in the heck is the pro forma income statement and balance sheets? He’s just showing cash flow, and discussing everything in terms of CASH. This is semantic deception at its most ludicrous.
Catherine, have you found a full set of pro forma (ie projections) financial statements for CA for FY2009? If you’ve already posted a link, then I’ve missed it. But if not, I’d certainly appreciate some direction, as we can’t tell anything without these.
P.S. I did check out Chiang’s daily cash receipts tracker and found that the state is about $700M short of its goals for end of April 2009 (collecting actuals of $37.6B versus projected of $38.3B), but one really can’t assess the significance of this without a complete set of pro formas.
http://www.sco.ca.gov/taxtracker.html
Bert:
The gist of what Walter is saying about the CAFR’s dovetails with what I found on the mortgage/community wizard side, so I assume it is true. No doubt, these extraordinary pools were the basis of much fun in the derivatives market, as, among other things, derivatives will allow you to buy up a lot of things without your name being on anything.
Catherine