The awful actor and Nixon apologist Ben Stein has an editorial in this weekend's NYTimes that, while almost unreadable due to Stein's overwrought prose, does raise an interesting point:
To my old eyes, the recent unhappiness about mortgages and Goldman’s connection with them are not examples of sterling conduct. It is bad enough to have been selling this stuff. It is far worse when the sellers were, in effect, simultaneously shorting the stuff they were selling, or making similar bets.
Doesn’t this bear some slight resemblance to Merrill selling tech stocks during the bubble while its analyst Henry Blodget was reportedly telling his friends what garbage they were? How different would it be from selling short the junky stock that your firm is underwriting? And if a top economist at Goldman Sachs was saying housing was in trouble, why did Goldman continue to underwrite junk mortgage issues into the market?
HERE is a query, as we used to say in law school: Should Henry M. Paulson Jr., who formerly ran a firm that engaged in this kind of conduct, be serving as Treasury secretary? Should there not be some inquiry into what the invisible government of Goldman (and the rest of Wall Street) did to create this disaster, which has caught up with some Wall Street firms but not the nimble Goldman?
Huh? What Stein is accusing Paulson and the rest of Wall St. of is underwriting and pimping risky investments like sub-prime mortgages, while at the same time telling insiders they were junk and selling them short. And now Paulson is the U.S. Treasury Secretary.
Man, rarely has there been a clearer case of fox v. henhouse. It's a strange day when I find common ground with Ben Stein, who still waxes rhapsodic on the teevee about his glory days in the Nixon White House. Although he did kindly hold a door open for us at a bookstore in Studio City.
Chris Dodd issued a press release about this, not sure if any other candidates have:
"I am deeply concerned about the questions raised by Mr. Stein's story in the New York Times yesterday about the activity of Goldman Sachs in aggressively pushing sub-prime mortgages that they knew to be of concern while simultaneously shorting collateralized mortgage obligations.
If these facts are indeed true, the Administration's inaction when this crisis began to emerge earlier this year, is increasingly suspect. It is in the best interest of resolving this crisis if Secretary Paulson, who was leading Goldman at the time in question, addresses the concerns raised by Mr. Stein's article. Failure to do so may be cause for a more formal investigation."
Indeed. If a Right-winger like Stein says an investigation is needed, then it really must be needed. Of course at the bottom of Stein's concern isn't the people who were misled into buying these travesties and now are losing home.
No, it's the investors like him who may lose a few bucks on their way to a glorious retirement most of us only dream of.
Update: I just found this; unbelieveable!
Revealing more details about a national mortgage-rescue plan that's still in the works, Treasury Secretary Henry Paulson proposed Monday to help state and local governments issue tax-exempt bonds to pay for mortgage refinancing and confirmed that he seeks to temporarily freeze the rates of tens of thousands of home loans that are about to adjust to higher rates.
Paulson told a national housing forum that Congress should authorize state and local governments to broaden their tax-exempt bond programs temporarily. Currently, states have authorization to issue tax-exempt bonds only to aid first-time homebuyers in designated distress zones. Paulson proposed to expand this to allow state and local governments to issue tax-free bonds to help in mortgage refinancing.
I can't cut-and-paste here, you really need to read the whole thing; it's not very long. Paulson want government support for the poor finance industry who created and sold this crap. He wants more lenient government rules for mortagages. In other words, it's all about the industry and not the consumers.
Here are the money quotes at the end of the article:
"Buccaneer capitalism 21st-century style: 'Dear Government, please come help us,'" responded Joseph Smith, North Carolina's banking commissioner and a co-panelist with Killinger.
Senate Banking Committee Chairman Christopher Dodd, D-Ct., said that Paulson's recommendations "strain credulity. The administration has repeatedly failed to use the tools at its disposal to protect homebuyers from abusive lending. The administration has been late to recognize the severity of the problem and slow to act."
No kidding. Bastards.
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