2010 - %3, April

Goldman's Big Short

| Sat Apr. 24, 2010 12:10 PM EDT

The New York Times reports that Goldman Sachs is a big fat liar:

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.

The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.

Hmmm. Really? What statements were those?

Carl Levin, Democrat of Michigan and head of the Permanent Subcommittee on Investigations, said that the e-mail messages contrast with Goldman’s public statements about its trading results. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products,’ ” Mr. Levin said in a statement Saturday when his office released the documents. “These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”

You know, I'm as willing as the next guy to rubbish Goldman Sachs. But 2007 is not 2009, and Goldman's mortgage-related results might very well have been different during those two years. What's more, making lots of money shorting the housing market is entirely consistent with Goldman's statement that it "did not generate enormous net revenues by betting against residential related products." The obvious conclusion from this is that they lost a truckoad of money on mortgage products and made a truckload of money shorting mortgage products. Apparently the second truckload was bigger than the first during certain periods, but that's all.

As far as I can tell, this has been Goldman's story all along. They were long housing up through 2006, got nervous, and then started to short the market. As a result, they came out of the financial meltdown in decent shape. Not great shape, as their conversion to a bank holding company and $1.3 billion "missing month" in late 2008 demonstrate, but not bad.

There are plenty of things to hate about Goldman Sachs, but this one is a real stretch. Maybe I'm missing something, but I don't really see any kind of serious deception here.

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Inside Goldman Sachs' "Big Short"

| Sat Apr. 24, 2010 10:27 AM EDT

A newly released set of internal Goldman Sachs emails offers further evidence of how the investment firm knowingly bet big against the housing market—what one top executive called its "big short"—and even wagered against mortgage-tied products of its own creation. The documents, released this morning by a Senate committee investigating Goldman and other investment firms, will fuel charges that Goldman positioned itself against the interests of its clients and most Americans. And while not as severe as the Securities and Exchange Commission's ongoing suit against Goldman, the emails are sure to heap more pressure on the under-fire Wall Street titan.

In one October 2007 email exchange, a member of Goldman's fixed income, currency, and commodities desk, Michael Swenson, discusses the now-infamous mass downgrades of $32 billion of mortgage bonds by the rating agency Moody's that month. Those downgrades all but killed the subprime mortgage market, resulted in huge losses on Wall Street, and woke banks and traders up to the realization that the housing bubble was about to burst. For Goldman, though, that was good news, the emails show. In that same exchange, Swenson says Goldman's asset-backed securities desk "will be up between 30 and 35 [million]" on news of the downgrades. Another Goldman staffer responds, "Sounds like we will make some serious money."

A May 2007 exchange inside Goldman includes information on the "wipeout" of a mortgage security from Long Beach Mortgage Company, a former subsidiary of the failed bank Washington Mutual. The security also happened to be underwritten and sold by Goldman. One Goldman staffer says this is bad news, because it'll cost the firm $2.5 million; however, the same staffer adds that because Goldman had bet against that very same security, it netted $5 million, easily covering its losses.

Someone Pinch Us: MoJo Wins Another "Magazine Oscar"

| Fri Apr. 23, 2010 8:45 PM EDT

24 hours later, our heads are still spinning from the National Magazine Awards gala last night. MoJo has been nominated in the General Excellence category each year for the past three; we won in 2008 and again this year. That's an amazing honor that belongs to everyone here—from the CEO, publisher, and board of directors all the way to our fearless interns. But it also belongs to you, our readers, who sustain this operation in a way that really unprecedented in the publishing industry. Some of you help by spreading the word about MoJo on Facebook and Twitter; many of you subscribe, and tens of thousands of you also donate. To know that our readers value the kind of fiercely independent journalism—"tough and tenacious," the magazine award judges called it—is the thing that's kept us going through a pretty rough time for media. (Okay, that and the hot chocolate mix in the kitchen.) So please consider this Ellie your own. Just be careful when you set it on the mantle. Those pointy things are sharp.

P.S. Big congratulations to our fellow Gen Ex nominees—Foreign Policy, Garden & Gun, Martha Stewart Weddings, and Paste—as well as all the nominees and winners, and a special shout-out to the other San Francisco mags whose wins made it a big Bay night at the NMAs: McSweeney's, San Francisco Magazine, and Wired. You all rock.

Corn on "Hardball": Do Cheney Endorsements Hurt GOP Candidates?

Fri Apr. 23, 2010 8:26 PM EDT

David Corn and John Heilemann appeared on Hardball with Chris Matthews to discuss the troll-like position Dick Cheney has assumed in the Republican party since he left office.

David Corn is Mother Jones' Washington bureau chief. For more of his stories, click here. He's also on Twitter.

McCain's 'Straight Talk Express' Gets a Green Makeover

| Fri Apr. 23, 2010 7:46 PM EDT

Since finishing in second place for president in 2008, John McCain has gone to great lengths to distance himself from, well, himself. He's ditched his past compassion for immigration reform, and even gone so far as to disavow the nickname "maverick"his epithet of choice for much of his political career. So it's only fitting, I guess, that McCain's fabled Straight Talk Express campaign bus (shown here, getting the full Cribs treatment) has gone through something of a makeover as well. As Lloyd Grove at the Daily Beast reports, McCain's 2008 wheels are experiencing a second life in an environmental advocacy campaign spearheaded by Alexandra Cousteau, the granddaughter of underwater explorer Jacques:

With the defunct McCain logo now painted over in drab purple, the 45-foot biodiesel tour bus is outfitted with Internet access, state-of-the-art editing suites and other multimedia equipment that will accommodate Cousteau’s international production crew of 15... Cousteau’s journey, starting from the nation’s capital, will take in water spots in the United States and Canada, including the Great Lakes and the St. Lawrence Seaway, the headwaters of the Colorado River, the Florida Keys, and the Kingston, Tennessee, coal ash sludge spill that, when a dam broke on a containment pool at a coal-fired electricity plant, dumped more than a billion gallons of toxic waste into the surrounding area.

I've always wondered (probably too much) what happens to campaign buses after their candidates crash and burn. I guess now we have our answer. Now if only someone can figure out what happened to the Ron Paul blimp.

Wall Street Watchdogs Like Teen Sluts

| Fri Apr. 23, 2010 5:42 PM EDT

File under: Abysmal Timing. Just a week after the Securities and Exchange Commission filed an audacious lawsuit against Goldman Sachs—Wall Street's most-hated casino—comes a revelation that a few dozen SEC employees, including a few lame-ass higher-ups, have been downloading porn on their government computers for years. It's probably a tempest in a teapot, given that you would likely find such misbehavior at any large agency at any time if you bothered to look. But it's still a major embarassment for an agency trying to remake it's public image after blowing it so completely on Bernie Madoff. Mary Schapiro must be pissing her pants right about now.

The Inspector General's office conducted investigations of 33 SEC employees, nearly all since 2008, according to a case summary requested by Senator Charles Grassley and obtained by the Washington Post:

A senior attorney at SEC headquarters in Washington admitted he sometimes spent as much as eight hours viewing pornography from his office computer, according to the report. The attorney’s computer ran out of space for the downloaded images, so he started storing them on CDs and DVDs that he stored in his office.

Grassley's people claimed the timing was coincidental. Right. Meanwhile, Cali Congressman Darrell Issa, the top Republican on the House Oversight and Government Reform Committee was quick to score some points for his party, which has lost a few by opposing the administration's relatively feeble attempt to reform Wall Street. "This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority," Issa told the Post.

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Deep Thoughts from Biz Markie

| Fri Apr. 23, 2010 4:15 PM EDT

It's Friday, and we've had a long week of climate bill highs ("They're introducing a bill on Monday! At last!") and lows ("It's probably sorta weak!"). So instead of more news, I will leave you with Biz Markie's special Earth Day rendition of "Just a Friend."

I would venture that "All we need is a clean energy law/But all they're just hearing is 'blah blah blah'" is not his greatest lyrical accomplishment. But, go on, Biz:

I interviewed Biz a few months ago about his involvement with the Repower America campaign. Asked about why he got involved in the movement, he said, "Without the environment, there would be no hip-hop."

Deep, Biz. Deep.

Will Immigration Crowd Out Climate?

| Fri Apr. 23, 2010 4:10 PM EDT

 When senators unveil a climate and energy bill on Monday, they say it will have the support of industry groups that have long opposed addressing global warming. But now they may face a new challenge: keeping the climate bill on the agenda.

Climate was originally going to be the number two issue on Democrats' to-do list after health care reform. Earlier this year, it was bumped down to third place, after financial reform. Now the Democratic leadership is indicating that immigration reform may jump the queue ahead of climate, too.

The move—likely due at least in part to Majority Leader Harry Reid's tough reelection battle in Nevada this year—won't please the lone Republican at the center of both issues: Lindsey Graham. Graham has been working for months with Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) on the energy and climate effort. He's also working with Chuck Schumer (D-NY) on an immigration reform bill. But he's not happy to hear talk of immigration cutting in line.

Moving on immigration now would be "the ultimate CYA politics" (as in, "cover your ass"), Graham said (via The Hill), explaining that he believed Democrats would be prioritizing it only because they saw it as politically beneficial to them, not because the necessary work had been done. He also warned that moving immigration now "destroys the ability to do something like energy and climate."

Graham got even more fired up in the Wall Street Journal on this subject:

"What bill are we going to take up?" he asked in an interview. "What are we going to do? I mean, you’ve done nothing to lay the groundwork for this, we’ve spent all of our time on health care. What bill are we going to take up? Do you expect me to write a bill? Am I going to write every bill in this Congress?"

And this:

Asked about immigration, it’s fair to say that Graham went into something of a rant. "I thought we had a game plan here," he said. "I thought we were going to take up energy and climate if we could put together a package. You throw immigration into the mix, this is a CYA effort, this is just not a rational way to do comprehensive immigration reform."

Whether climate and energy moves first will depend a lot on what happens on Monday. If Kerry, Graham and Lieberman roll out a bill that has the kind of backing that Kerry is promising, it could be next in line after financial reform. But if the senators can't deliver that support in the coming days, climate and energy might have to take a back seat. Again.

Friday Cat Blogging - 23 April 2010

| Fri Apr. 23, 2010 3:21 PM EDT

Happy Shakespeare's birthday! Maybe. April 23rd is as good a guess as any, and if you're not convinced just pretend you're celebrating St. George's Day instead. Inkblot and Domino are celebrating by hunting critters in the deep, dark jungle in our backyard. I don't really know what Inkblot is looking at, I just know that something caught his eye and he took off like a shot for the bushes to track it down. As usual, he failed. Domino then followed him out and caught sight of some birds. She even made that funny cat hunting sound, which I've never heard her attempt before.

And there's good news to go with all this: Wednesday was vet day, and everyone is healthy. Hooray! What's more, according to the official weigh-in, Inkblot has lost about five pounds since his peak and Domino has lost two-and-a-half. Not exactly supermodel svelte, but that's good enough for now. Have a nice weekend, everyone.

Republicans and Wall Street

| Fri Apr. 23, 2010 3:02 PM EDT

Rich Lowry takes a whack at the cozy relationship between Wall Street and the Democratic Party:

When President Barack Obama’s vast new regulatory state is completed, Wall Street firms ought to have a competition over the naming rights. Will it be the CitiDeal? Or the Goldman Society? Or the UBS/J.P. Morgan Joint Initiative for the Establishment of a Social Democracy?

....Back in 2006, Democrats began a hard sell on Wall Street led by New York senator Chuck Schumer and then-representative Rahm Emanuel, now White House chief of staff. The basic pitch was that Democrats were taking Congress, and the financial world should get on board — surely delivered with all the bare-knuckled subtlety for which those two are justly renowned.

Lowry's tone aside, I'd say he's got a point. (My collection of shots at both parties is here.) The fact is that we'd have a lot easier time reining in Wall Street if it weren't for the fact that Democrats long ago gave up their populist roots and decided to follow Willy Sutton's advice. The only difference is that they don't have to rob banks, they just have to ask them nicely for their money over coffee and scones.

But look: this particular critique would be a lot more meaningful if it were accompanied by some actual ideas about what went wrong with our financial system and what we ought to do to fix it. But Lowry doesn't even try. He makes a couple of tired references to "unfettered capitalism" and "the unforgiving discipline of the market" toward the end of the column, and that's about it. But there's no there there. At some point we need some good ideas too. Unfortunately, conservatives just can't seem to work up any interest in this subject. Funny that.