Goldman Sachs Profiteers on Taxpayer Largesse to Report Huge Earnings

In 2007 and 2008, Goldman Sachs was selling trillions of dollars of worthless mortgage securities and as they later had to pay fines after being prosecuted for knowingly selling investors worthless junk, Goldman apparently knew that this stuff was worthless. At the same time, Goldman was risking their depositor’s and shareholders’ and lenders’ capital by leveraging up on bets offered by other firms that would pay off when the investors buying the worthless mortgage securities started losing the money that Goldman knew in advance they would lose. Now these other firms were also selling trillions of dollars of mortgage securities that were worthless just like Goldman was – and just like Goldman they were risking their depositors’ and shareholders’ and lenders’ money by leveraging up on bets offered by Goldman and other firms that would pay off when the investors buying the worthless securities from these firms betting against the very securities they were selling as “good investments” to their clients started losing the money that these firms knew they would.

Like most Ponzi schemes, this one worked great while new money would come in and all the money was passing back and forth among the firms and they could pretend that those fees on those bets being placed at the AIG casino or at the Citigroup casino or at the Deutsche Bank casino were pure profits and that most all the money sloshing around could and should be paid out to the people running the casino before the wheel had even stopped turning.

And so when Bear Stearns and then AIG, a couple of those other firms selling and betting on these worthless mortgage securities and the options and derivatives and insurance, couldn’t make all the payments they owed to the players in their casino that were betting against very products they were telling investors were safe and smart, Goldman called up the guys who used to run Goldman but nowadays run the Treasury and the Federal Reserve and told them that the whole economy would collapse if they didn’t make Goldman whole on the bets they placed at a crooked casino that didn’t have enough money to pay the players at the tables their winnings.

So Hank Paulson, Neil Kashkari, Robert Rubin and Lloyd Blankfein and Larry Summers and the other gamblers/casino regulators called up the Republicans and Democrats in power, including Obama, McCain, Bush, Pelosi and Palin, and they all came to you and me and took any money we had left in the casino and gave it to Goldman, which got at least hundreds of millions from the Bear Stearns bailout and at least $12 billion from the AIG bailout. And when that wasn’t enough, Goldman had to beg you and me for $10 billion from TARP for them to gamble in the few casinos that are left standing, and most of which they own. And when that wasn’t enough, Goldman came to you and me and made us to guarantee that if any of the billions of dollars their lenders are still willing to lend them are lost, that you and I will cover those losses too.

Meanwhile, here’s how Lloyd Blankfein explained it to you as the company was taking all those billions from the state –

Goldman, he continued, also has plenty of capital. The day after it became a bank, the Federal Reserve deemed it "well capitalized."

In the following two weeks, Goldman raised $21 billion of new capital from Berkshire Hathaway, a public stock offering and from the U.S. Treasury.

Yeah, when the tens of billions of dollars of state money that could have helped fix health care wasn’t enough, Lloyd Blankfein, the CEO of Goldman, just kept right on denying that he and his firms were insolvent because they’d gambled at casinos without bothering to make sure the house could actually pay off the bets being offered, and he went out and convinced Buffett and other investors that since the state was going to cover any losses that the firm might have at their own casino anyway, he might as well put in a little bit of his money to catch some upside.

Why doesn’t someone send someone to prison for this stuff? It’s clearly illegal, no?