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Wall Street's Goldman Sachs, Which Got $10 Billion Government Handout, Paid Only 1% in Taxes

Here's one that should start a revolution. In October, Wall Street's Goldman Sachs, supposedly the best-managed investment firm (calling itself a bank) on the Street, got $10 billion and debt guarantees from the U.S. government, according to Bloomberg.com. But this year, Goldman will pay a mere $14 million in taxes, compared with $6 billion in 2007. The company's effective income tax rate plunged to 1 percent from 34.1 percent, Goldman admitted. Goldman lost money in its fourth quarter, but nonetheless raked in a profit of $2.3 billion in 2008. It passed out $10.9 billion in employee compensation and benefits. A tax and advisory firm called the 1 percent tax rate "a little extreme." U.S. Representative Lloyd Doggett, Democrat of Texas, said that, "This problem is larger than Goldman Sachs. With the right hand out begging for bailout money, the left is hiding it offshore." On another front, the banks getting a bailout were supposed to be forced to restrain ridiculously high topside compensation. But, using loopholes, those banks got out of that requirement.

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The return of the day of the Locust

Breaking out the bug suits one more time

Here's one that should start a revolution. In October, Wall Street's Goldman Sachs, supposedly the best-managed investment firm (calling itself a bank) on the Street, got $10 billion and debt guarantees from the U.S. government, according to Bloomberg.com. But this year, Goldman will pay a mere $14 million in taxes, compared with $6 billion in 2007. The company's effective income tax rate plunged to 1 percent from 34.1 percent, Goldman admitted. Goldman lost money in its fourth quarter, but nonetheless raked in a profit of $2.3 billion in 2008. It passed out $10.9 billion in employee compensation and benefits. A tax and advisory firm called the 1 percent tax rate "a little extreme." U.S. Representative Lloyd Doggett, Democrat of Texas, said that, "This problem is larger than Goldman Sachs. With the right hand out begging for bailout money, the left is hiding it offshore." On another front, the banks getting a bailout were supposed to be forced to restrain ridiculously high topside compensation. But, using loopholes, those banks got out of that requirement.

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Comments
10

Is Goldman still predicting $150-a-barrel oil at the end of the year? I guess not.

Dec. 16, 2008

Response to post #1: I assume not. I wonder if the guy (or gal) who predicted that has been promoted. To a $50 million a year post? Best, Don Bauder

Dec. 16, 2008

Couple your post with the news from the NYT:

http://www.nytimes.com/2008/12/17/business/17madoff.html?_r=1&em

Then add the story about Aguirre's brother dismissal from the SEC:

http://www.signonsandiego.com/news/business/20061224-9999-1b24gary.html

It's clear that the SEC, even long before Cox came in, was enabling rather than preventing fraud.

The world's loss of confidence in our financial system looks entirely warranted.

Dec. 17, 2008

Response to post #3: You're absolutely right, Fred. I have been writing about Gary Aguirre's battle with the SEC for several years, and just talked with him recently once again. I have done both columns and blog items on the disgusting matter. Gary wanted to interview the head of Morgan Stanley; there was intriguing evidence that he may have been involved in an insider trading scheme with the head of a large hedge fund, a close friend. Gary was told that the Morgan Stanley official had contacts with the Bush administration. Gary was told to lay off and then fired, and the Morgan Stanley CEO wasn't interviewed until after the statute of limitations had run out. A senate committee studied the whole matter and said Gary was right and the SEC was wrong. It's deeper than that: the SEC exists to protect the big crooks. It goes after little ones who pull of tiny pump and dump schemes or makes a few thousand on insider trading, but it protects those who make hundreds of millions on pump and dumps or insider trading. Much of this SEC corruption is related to the "revolving door" phenomenon. Lawyers go to work for the SEC, knowing that if they play their cards right, they can get a $2 million a year job with a big law firm. When that law firm, representing someone who has raked in hundreds of million in insider trading, comes to the SEC, the cozener gets off and the SEC official gets a job with the law firm. As I have written dozens of times, the SEC official handling the Peregrine scam went to work for Latham & Watkins, which had done a study whitewashing board members, particularly John Moores. The SEC lawyer had blessed that study. The study was spearheaded by Charles La Bella, then Moores's personal lawyer. Best, Don Bauder

Dec. 17, 2008

Hey Don: This the same SEC that spawned the Arther Leavitt that our city was so fortunate to get to help us get our financial books in order> And, oh hey, didn't he do a GREAT job! Best

Dec. 17, 2008

Response to post #5: Yeah, the same Arthur Levitt, who headed the SEC during the Clinton years. His firm and its law firm fleeced San Diego for $20 million to prepare a report full of facts and interpretations that had already been dug up and reported by Mike Aguirre. Christopher Cox, the current head of the SEC, is even worse. The SEC admitted today (Dec. 17) that it blew its investigations of Madoff. So the SEC will investigate; that will be a complete whitewash -- guaranteed. Best, Don Bauder

Dec. 17, 2008

Don (or anybody else who knows),

A little off topic:

What do you know about Gerald Celente and the Trends Research Institute? I just heard an interview with him that was very interesting, and I was wondering what his real track record is and what (if any) credibility he has.

Dec. 17, 2008

Response to post #7: Don't know him. I believe I have heard of the Trends Research Institute. Tell me more. My phone: 619-546-8529 or email [email protected] Best, Don Bauder

Dec. 17, 2008

The appointment of Shapiro to head the SEC is a big disappointment.

This does not bode well...

Dec. 19, 2008

Response to post #9: Agreed. Schapiro is a disappointment, although Obama could have done worse. She is a Washington insider. However, for the most part she has been on the regulatory side. I don't believe she has close ties to Wall Street firms or Wall Street law firms. Generally, the SEC prosecutes small-time pump-and-dumpers or insider trading bandits. But it ignores those who steal hundreds of millions. Why? One reason is political influence. Another is the revolving door policy. Lawyers go to work for the SEC expecting to get a $2 million a year job with a law firm. When that firm represents a crooked client before the SEC, the lawyer gets the cozener off the hook and then takes a fat job with the law firm. Lawyers who have worked for the SEC know how clients can get off by following the letter of the law, not the spirit. So they are valuable to big law firms. There are people who have been calling for securities reforms for years. They are qualified to head the SEC. But Obama didn't name them. Shame. Best, Don Bauder

Dec. 19, 2008

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