Two Giants Emerge From Wall Street Ruins
A new order is emerging on Wall Street after the worst crisis since the Great Depression — one in which just a couple of victors are starting to tower over the handful of financial titans that used to dominate the industry.
On Thursday, JPMorgan Chase became the latest big bank to announce stellar second-quarter earnings. Its $2.7 billion profit, after record gains for Goldman Sachs, underscores how the government’s effort to halt a collapse has also set the stage for a narrowing concentration of financial power.
“One theme here is that Goldman Sachs and JPMorgan really have emerged as the winners, as the last of the survivors,” said Robert Reich, a professor at the University of California, Berkeley, who was secretary of labor in the Clinton administration.
Both banks now stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits.
For the most part, the worst of the financial crisis seems to be over. Yet other large banks, including Citigroup and Bank of America, are still struggling to return to health. Both are expected to report a more profitable quarter on Friday, but a spate of management changes and looming losses from credit cards and commercial real estate have thwarted a stronger recovery.
And then there are the legions of regional and small banks that are falling in greater numbers across the country. While many have racked up large losses, they stand to bleed more red ink if the recession wears on. Fifty-three have failed this year, and the Federal Deposit Insurance Corporation is girding for scores to follow.
Uncertainties over the economy mean that Goldman and JPMorgan may be enjoying a fragile dominance, industry experts said. JPMorgan reported big declines in its consumer business on Thursday, and it has set aside more than $30 billion to cover future losses from surging credit card charge-offs and mortgage and home equity losses.
“Nobody is through this until unemployment turns around,” said Moshe Orenbuch, a Credit Suisse banking analyst.
And if regulation being considered in Washington is passed, banks would face new limits on the amount of their own capital they may trade. That could limit the profits that banks like Goldman and JPMorgan make from their trading businesses, and level the playing field, experts say.
Other former Wall Street stars like Morgan Stanley, which was hurt more by the crisis and has avoided taking big risks in the new era, may also rebound and begin to take on old rivals.
3 opmerkingen:
'The real crisis awaits us. It is the crisis of high unemployment, of stagnant and declining real wages confronted with rising prices from the printing of money to pay the government’s bills and from the dollar’s loss of exchange value. Suddenly, Wal-Mart prices will look like Nieman Marcus prices.
Retirees dependent on state pension systems, which cannot print money, might not be paid, or might be paid with IOUs. They will not even have depreciating money with which to try to pay their bills. Desperate tax authorities will squeeze the remaining life out of the middle class.
Nothing in Obama’s economic policy is directed at saving the US dollar as reserve currency or the livelihoods of the American people. Obama’s policy, like Bush’s before him, is keyed to the enrichment of Goldman Sachs and the armament industries.
Matt Taibbi describes Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentless jamming its blood funnel into anything that smells like money.” Look at the Goldman Sachs representatives in the Clinton, Bush and Obama administrations. This bankster firm controls the economic policy of the United States.
Little wonder that Goldman Sachs has record earnings while the rest of us grow poorer by the day.'
Zegt:
Paul Craig Roberts former Assistant Secretary of the Treasury in the Reagan administration
http://www.counterpunch.org/roberts07162009.html
http://informationclearinghouse.info/article23071.htm
AMY GOODMAN: How much money did Goldman Sachs pay in taxes in 2008?
MATT TAIBBI: They paid $14 million in taxes last year, which is an effective tax rate of about one percent, which means that they paid in taxes about a third of what CEO Lloyd Blankfein actually made in compensation last year. And that sounds like an amazing number. And if you—their excuse for why that is is because they had changes in their so-called geographic earnings mix, which basically means that they moved all their revenues to foreign countries, where the tax rates were lower. And so, Goldman, which was, again, the beneficiary of massive subsidies during the bailouts, you know, paid really just a pittance in taxes last year.
MATT TAIBBI: Well, the number of Goldman Sachs—former Goldman Sachs employees who are in the government is so—it’s so enormous that it would be impossible to list on this program
And because of that, they have access to these, you know, contacts in government, and they’ve always been able to get whatever they want from government, whenever they want, the key example being the AIG bailout last year, when they got so much money through that.
AMY GOODMAN: Explain that.
MATT TAIBBI: Well, when—if AIG had been allowed to proceed to an ordinary bankruptcy without government intervention, Goldman Sachs might actually have gone out of business, because AIG owed Goldman about $20 billion at the time. But what happened instead, you know, Goldman was able to appeal to its former chief, Hank Paulson in the Treasury, who engineered an $80 billion taxpayer-funded bailout of AIG, and immediately about 13 billion or 14 billion of those dollars went directly to Goldman Sachs. So this was really Goldman Sachs bailing out Goldman Sachs in the middle of the bailout.
What’s important to remember is that that same week that the AIG bailout happened, Hank Paulson elected not to rescue Lehman Brothers. So Goldman Sachs went from facing almost certain disaster to seeing their primary competitor leave the market and getting $13 billion in money from the taxpayer
MSM doet ook al mee met Goldmanbashen
The Joy of Sachs
By Paul Krugman
July 17, 2009 "New York Times"
http://informationclearinghouse.info/article23082.htm
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