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We learned, yesterday via a breaking story by Bob Ivry over at Bloomberg, that in 2008 Tim Geithner’s Federal Reserve Bank of New York (“NYFRB”), under the auspices of the Federal Reserve, was managing the distribution of $80 billion in highly secretive, “subsidized” loans--the specifics of which, up until now, were unreported to Congress and in the press--to some of the world’s largest banks, including Goldman-Sachs, which received $30 billion from this program.

Is THIS a “breaking” news story which will generate more questions than answers, and lead us into bigger breaking news in coming days?

IMHO, yes, it certainly is. Based upon these revelations by Bloomberg’s Bob Ivry over the past 24-plus hours, it also might appear to some of us peasants that Goldman Sachs’ Chief Operating Officer Gary D. Cohn committed blatant perjury in his testimony before the Financial Crisis Inquiry Commission on June 30th, 2010. (More about this, down below.)

Has the sh*t just hit the fan in D.C., but nobody’s courageous enough to ask, “What the hell is that smell in the room?” Or, did someone in our Treasury Department confer with Goldman-Sachs’ legal counsel and advise (tacitly or otherwise) Mr. Cohn that it was okay to lie to the government’s Financial Crisis Inquiry Commission last year?

Follow me below the fold…

Fed Gave Banks Crisis Gains on $80 Billion Secretive Loans as Low as 0.01%.
Bob Ivry
Bloomberg Media
May 26, 2011 10:47 AM ET

Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.


Yesterday’s breaking news--a story about which even then-House Financial Services Committee Chair Barney Frank was unaware until he learned of it in the past 24 hours—informs us that 20 of the world’s largest banks, including Goldman-Sachs, which was prominently mentioned in the Bloomberg article, received massive sums of cash at “…interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.”
“This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”
The Federal Reserve Bank of New York, which oversaw ST OMO, posted aggregate data about the program on its website after each auction, said Jeffrey V. Smith, a New York Fed spokesman. By increasing the availability of short-term financing when private lenders were under pressure, “this program helped alleviate strains in financial markets and support the flow of credit to U.S. households and businesses,” he said…

Tim Geithner is now Treasury Secretary. As President of the NY Federal Reserve Bank in 2008, he was not only aware of this secret lending facility, which commenced earlier in 2008 (before he was named as the Treasury Secretary-designate by the incoming Obama administration); he was directly responsible for managing this program’s implementation.

Six weeks ago, the MSM was ablaze with THIS story of how Senator Carl Levin’s Committee on Oversight and Investigations was, among other matters, forwarding to the Department of Justice for potential criminal prosecution possible evidence of Goldman-Sachs’ executives perjuring themselves before Congress.

From Zero Hedge, on March 31st, 2011 (spelling it out, contextually and chronologically: over eight weeks prior to yesterday’s breaking story at Bloomberg):

Will Goldman COO Gary Cohn Face Consequences For Committing Perjury Before The FCIC?
ZeroHedge.com
03/31/2011 16:46 -0400

Christine Harper, Michael Moore and Bob Ivry have been quite busy today. After poring through the lifetime legacy project of their late colleague Mark Pittman, the trio may have just made a discovery that in a non-banana republic could be enough to at least force a special hearing into whether Goldman COO Gary Cohn committed perjury while testifying to the FCIC on June 30. The culprit: Goldman's (ab)use of the discount window not once, not twice, but five times. Well everyone else was doing it, especially Goldman's insolvent peers like JPM, Merrill Lynch, Bear Stearns, Lehman Brothers, Bank of America, Wachovia, UBS, Credit Suisse and, well, everyone else. So what's wrong with that? Here's what: "Goldman Sachs President and Chief Operating Officer Gary D. Cohn told the Financial Crisis Inquiry Commission June 30 that “we used it one night at the request of the Fed to make sure our systems were linked with their systems, and it was for a de minimis amount of money.” Peter J. Wallison, a member of the Financial Crisis Inquiry Commission, then asked, “you never had to use it after that?” “No, and as I said, we used it on the Fed’s request,” Cohn replied. Alas, that is a lie. And last time we checked, lying to Congress under oath is not quite the right the way to conduct God's work (and yes, a perfectly innocuous "I don't recall" ala David Sokol from his CNBC interview would have sufficed). Alas no: Goldman just had to demonstrate how very immune from the legal process it is, by "risking" its credibility and reputation with the assumption that it is either never wrong, or, like Warren Buffett, that it can never be caught doing wrong. Well, it just was.

--SNIP--

We are confident that the corrupt "representatives" (of Wall Street interests) in Congress will get right on sending out a subpoena to Cohn asking him to explain why he lied under oath.

--SNIP--

…we feel our confidence waning... waning...

Eight weeks later, the public’s now informed of  “…a secret bailout program used to "rape" the peasantry by the entitled kleptocrats, which nobody thought would be exposed, and would allow those in control to lie blatantly to Congress…”

Questions:
Did anyone at the Treasury Department communicate to Goldman-Sachs’ COO Gary Cohn that it was okay to perjure himself before FCIC?

Does this breaking story from yesterday effectively (or indirectly) undermine at least a portion Senator Levin’s Committee’s investigation?

Is this even greater breaking news staring us in the face?

Secretary Geithner, please…do tell us what the hell is going on here?!

At the very least, I’m sure Barney Frank and Carl Levin would appreciate the answers to these questions.

h/t to Kossack Route66, for his post, yesterday.

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Comment Preferences

  •  Will *anyone* face "consequences"? (8+ / 0-)

    Yes . . . you and me and all the peons.

    Not the perps, though.  They've got the whole government on their side . . .

    Fake Left, Drive Right . . . not my idea of a Democrat . . .

    by Deward Hastings on Fri May 27, 2011 at 10:28:27 AM PDT

  •  another dead end - Goldman's collateral was 100% (5+ / 0-)

    backed by the US Treasury.   A role of the Fed is to provide liquidity when none exists.  At that point in time the $1.7 trillion CP market had frozen to the point that even McDonalds tapped the Fed to make payroll.

    The New York Fed conducted 44 ST OMO auctions, from March through December 2008, according to its website. Banks bid the interest rate they were willing to pay for the loans, which had terms of 28 days. That was an expansion of longstanding open- market operations, which offered cash for up to two weeks.

    The loan term was short - so the low interest rate was justified.

    As for perjury - who knows?  I am still waiting for Sammy Sosa to get charged.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Fri May 27, 2011 at 10:29:01 AM PDT

    •  Apparently, you know more than everyone... (10+ / 0-)

      ...else, Shrike. My, oh, my...you must have some incredible sources...better than Congressman Frank and Senator Levin, even! You really should let us in on all of this inside info!

      Or, is posting this type of unchallenged commentary just part of your "M.O.?"

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Fri May 27, 2011 at 10:36:20 AM PDT

      [ Parent ]

      •  The bloomberg article supports the first point (3+ / 0-)
        Recommended by:
        shrike, Lying eyes, virginislandsguy

        "The 20 banks -- previously designated as primary dealers to trade government securities directly with the New York Fed -- posted mortgage securities guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac in exchange for the Fed’s cash."

        And the notion that the fed is supposed to provide liquidity is not exactly unique information (though it may come as a suprise to readers of goldbug site zerofacts).  As far as perjury goes, the link to the FCIC report doesn't necessarily specify which lending facility Cohn was talking about.  If the Congress didn't realize this one existed, it's doubtful he was asked about St. Omo.  

        I'm not trying to carry water for Goldman, but let's just say when the diary promised a "smoking gun," I was a tad disappointed.   And the use of the term "rape" -- spectacularly unfortunate.

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Fri May 27, 2011 at 11:30:20 AM PDT

        [ Parent ]

    •  The ignorance of these tinfoil headed clowns here (3+ / 2-)
      Recommended by:
      Lying eyes, shrike, virginislandsguy
      Hidden by:
      squarewheel, emal

      is astounding.

    •  Wow disinformation - (5+ / 0-)

      Hope Shrike is not a sockpuppet but no no no. This was not disclosed is the issue.

      And yes Goldman continually lie to Congress and the Public. Obama called Blankfein's statements "flatly untrue" and yes he perjured himself in front of congress.

      What the loan program proves is that Goldman would have collapsed without assistance. AND that the Federal Reserve if it was a government agency (which it isn't) would be a rogue agency deceiving Congress and the public.

      Sorry those are just facts.

      •  Goldman might have collapsed since after Lehman (3+ / 0-)
        Recommended by:
        Lying eyes, Loge, virginislandsguy

        the next was Morgan Stanley and then GS then many many others.   That is the role of the Fed (to prevent systemic collapse).

        In the interest of civil discussion the accusation that I am a sockpuppet will be ignored.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Fri May 27, 2011 at 10:50:48 AM PDT

        [ Parent ]

        •  Yes, that's my point and Sen. Levin's (5+ / 0-)

          Blankfein explicitly stated Goldman was not in danger of collapsing because they properly managed risk and hedged the possibility of AIG collapsing. This is sworn testimony.

          The revelation, unknown to Levin, Frank as well as the Rs was they received this extension and moreover that yes if AIG had collapsed Goldman was going down too.

          Goldman didn't just paint a rosy/unrealistic scenario they knew that scenario wasn't true as they tapped into this secret program.

          •  You can't perjure yourself for stating a business (2+ / 0-)
            Recommended by:
            Lying eyes, virginislandsguy

            opinion.   And the reason loans are secret is to prevent shorts from running a bank into insolvency like they did Lehman (who didn't have the collateral to save itself).  

            "The way to see by faith is to shut the eye of reason." - Thomas Paine

            by shrike on Fri May 27, 2011 at 11:16:52 AM PDT

            [ Parent ]

          •  Apples and oranges (2+ / 0-)
            Recommended by:
            Lying eyes, virginislandsguy

            it doesn't matter of GS was solvent (based on its hedges) if it couldn't finance its operations, especially given the amount of leverage they had.  

            I don't see what GS did wrong, based on this.  The ZeroFacts link doesn't make it clear which lending facility Cohn was talking about.  

            The facility, itself doesn't seem nefarious -- it was a misguided attempt to stem a collapse in the MBS market, based on the belief that the mortgage market was fundamentally sound, just spooked.

            "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

            by Loge on Fri May 27, 2011 at 11:26:09 AM PDT

            [ Parent ]

            •  Cohn, IMHO, committed perjury...the only real... (6+ / 0-)

              ...question was: Was it sanctioned by our government? Who would then be seen as leaving folks like Levin and Frank flapping in the wind, and thus making a mockery out of the basic/entire concept of lying to Congress.

              There was no issue about where the support funds came from. You're making that up out of thin air, based upon available information about all of this, in any event.

              "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

              by bobswern on Fri May 27, 2011 at 11:38:51 AM PDT

              [ Parent ]

              •  what am i making up? (2+ / 0-)
                Recommended by:
                Lying eyes, virginislandsguy

                the bloomberg article said that the fed took Fannie and Freddie-backed assets in collateral for the loans and described what it is they said they thought they were doing.  So, here's my question:  what makes you think Crandall was wrong when he said in that same article that the Fed was trying to boost trading in MBS's and "thaw a frozen short term funding market?"   Why do you think the Fed was accepting the risk that the fannie and freddie assets would fall in value over 28 days?  Now, this "might" be something bad, but the idea it's a "smoking gun" is what is pulled out of thin air.  

                And before you get to the conclusion that perjury was "sanctioned," you have to identify perjury.  Otherwise, it's red queen territory -- verdict first, then trial.

                "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                by Loge on Fri May 27, 2011 at 11:56:50 AM PDT

                [ Parent ]

            •  Apples and Apples - Solvency and Collapse (4+ / 0-)

              Loge is making my point indirectly.

              The question posed to Blankfein was whether Goldman was in danger of collapsing if AIG collapsed. Blankfein said NO because Goldman had hedged based on that eventuality.

              But that's not true because of what I am saying and is also Levin's issue (well one of them) which is if Goldman didn't get access to these special programs it would have collapsed or in Loge's words been unable to 'finance its operations.'

              Guess what? You can't finance your operations you collapse.

              •  Not really, (1+ / 0-)
                Recommended by:
                virginislandsguy

                Blankfein's statement was that if AIG collapsed, it wouldn't have had to eat its entire exposure, and so it wouldn't have caused a sufficient loss that would render it unable to raise cash.  That in no way suggests that Goldman wasn't at risk due to an entire collapse in the repo or commercial paper markets, especially if Goldman would no longer be able to do things like post mortgage-backed securities as collateral to private sector lenders.  Goldman would not have turned itself into a bank holding company if it could maintain market confidence without the fed.

                "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                by Loge on Fri May 27, 2011 at 11:47:59 AM PDT

                [ Parent ]

                •  You're making 2 diff arguments then (2+ / 0-)
                  Recommended by:
                  ScienceMom, bobswern

                  1. Goldman in it's operations didn't break the laws

                  2. Blankfein didn't commit perjury.

                  I think 1. is true actually - worth nothing Goldman and the Financial Round Table write the laws so they don't need break them.

                  But on 2. I have to say NO, not true. Blankfein left little to no daylight in his testimony. He said Goldman did not need assistance with AIG or TARP in order to survive - that is, to quote President Obama "flatly untrue."

                  When you say things 'flatly untrue' under oath you're committing perjury.

                  •  Thank you for putting that in boldface, (1+ / 0-)
                    Recommended by:
                    virginislandsguy

                    as that point never came up in law school.  (It was Chicago after all -- the truth is what the market says it is.)

                    In all seriousness, and since you missed it the first time, you are shifting the goalposts.  Did Goldman need the money from paying out its AIG contracts to survive?  Did it need the infusion of capital in the form of TARP?  It's possible that the answer to both questions is 'no' -- keeping in mind Goldman raised money from Buffett at about the same time it took loans from the Treasury.  At the same time, it is also possible that Goldman might have faced a run on the bank if it were not for other, separate and distinct measures taken by the feds.  I looked up his prepared testimony, and Blankfein talked extensively about increasing Tier I capital from 2007 onwards.  I assume Goldman did not do that for his health.

                    Anyway, the testimony about AIG is directly contrary to the view that Goldman deliberately brought AIG down through aggressive marks.  If it was willing to risk the possibility that AIG not be bailed in order to increase its payout, it stands to reason Goldman was adequately hedged. (Unless a schmuck like Lloyd Blankfein really is the puppet master, but I don't personally think he's up to it.)

                    "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                    by Loge on Fri May 27, 2011 at 12:12:58 PM PDT

                    [ Parent ]

                    •  U Chicago problem #1 - but no goal posts were (2+ / 0-)
                      Recommended by:
                      route66, DorothyT

                      moved.

                      Shorting your own sale is not illegal as I understand it. Taibbi, Levin and others brought up what to my mind were more ethical than legal points. And the "they are big boys" defense may fit the definition of sophisticated investor for the law but it still is suspect behavior especially if you were thinking of being a GS client. Though that reputational damage has been more than done (see Vampire Squid)

                      I did not say that Goldman brought down AIG on purpose by aggressive write down of marks nor does William Cohan who just wrote a book on Goldman (Money and Power).

                      What Cohan says, and the evidence supports it is that Goldman recognized the problem and instead of "self-regulating" the market they took a short position and then beat other banks to the punch in their write downs. Not illegal either just unethical and a SMOKING GUN that Wall Street firms will not self-regulate for systemic risk.

                      Blankfein claimed Goldman was never in jeopardy and if AIG went down Goldman would still not face collapse. And while Buffett was a good confidence play it did not neutralize the greater systemic threat Goldman faced - one that required them to take additional, including secret, bailout money. That Blankfein knew of when he testified.

                      •  oh, jeez. (0+ / 0-)

                        maybe I don't understand this.  Hard, when you're neither an economist nor a financier.

                        I do try, though.

                        Wanna give it to me in words of one syllable?

                        The heart is a bloom, shoots up through stony ground/But there's no room, no space to rent in this town

                        by SouthernLiberalinMD on Fri May 27, 2011 at 02:12:11 PM PDT

                        [ Parent ]

                      •  The exact spot (1+ / 0-)
                        Recommended by:
                        virginislandsguy

                        where you are moving the goalposts is the term "and" in the first sentence of the fourth paragraph.  Take it out and you've accurately described his testimony, as far as I've been able to determine.  Read a 10-k sometime -- nothing but warnings, to the point of meaninglessness.  (this would also matter for proving intent and materiality.).

                        If Blankfein perjured himself elsewhere, that's obviously a problem, but using a lending facility six month prior to AIG's downgrade dies not mean he lied about the counterparty risks to Goldman posed by AIG.  And for all I know, he was lying, but the accuser has the burden of proof.  

                        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                        by Loge on Fri May 27, 2011 at 02:35:51 PM PDT

                        [ Parent ]

                        •  Stay Tuned I'll do a full post of what Blankfein & (1+ / 0-)
                          Recommended by:
                          emal

                          company said to Levin and the reality of these new Fed revelations.  

                          It might even beat the indictment coming

                          •  all i'm saying (0+ / 0-)

                            is these new fed "revelations" are not how you'd prove perjury as to AIG or TARP, and as to more general statements about GS's finances, you're looking at statements that are either rendered immaterial by the nature of GS's risk disclosures, protected opinion, or both.  

                            "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                            by Loge on Sat May 28, 2011 at 08:08:25 AM PDT

                            [ Parent ]

          •  wow. so the "Goldman Fed" thing is for real (4+ / 0-)
            Recommended by:
            DSWright, bobswern, emal, gulfgal98

            they acted to prop up Goldman so that when the dust settled, Goldman would be one of the few that looked responsible and reliable.

            IOW, so that Goldman would be one of the few who came out on top and smelling like roses.

            (It takes me a while, but I do eventually get it!)

            The heart is a bloom, shoots up through stony ground/But there's no room, no space to rent in this town

            by SouthernLiberalinMD on Fri May 27, 2011 at 02:08:18 PM PDT

            [ Parent ]

        •  I do not think you're a sock puppet and welcome (1+ / 0-)
          Recommended by:
          emal

          the alternate view.

          The thing that I get wrapped up in is how the creators of the disaster were prevented from causing "systemic collapse" and given such gracious terms and all the help they would ever want for being a bunch of greedy, destructive assholes.

          big badda boom : GRB 080913

          by squarewheel on Fri May 27, 2011 at 05:09:12 PM PDT

          [ Parent ]

      •  Inconvenient facts for some here, unfortunately nt (4+ / 0-)

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Fri May 27, 2011 at 10:51:33 AM PDT

        [ Parent ]

      •  fed reserve now along the same lines as NSA/CIA? (5+ / 0-)
        Recommended by:
        DSWright, Bluefin, DorothyT, emal, gulfgal98

        tacitly allowed to hide stuff from Congress?

        The heart is a bloom, shoots up through stony ground/But there's no room, no space to rent in this town

        by SouthernLiberalinMD on Fri May 27, 2011 at 02:06:38 PM PDT

        [ Parent ]

  •  Public enemy #1: (3+ / 0-)
    Recommended by:
    bobswern, emal, gulfgal98

    Lloyd Blankfein, cartel jéfe:

    People like this are stealing us all blind.
    Practically zero 'value added' or productive capacity benefit to society, yet exorbitant profits are obtained.
    The similarity to the so-called 'illegal drugs' trade and all its problems is striking.

    "Double, double, toile and trouble; Fire burne, and Cauldron bubble... By the pricking of my Thumbes, Something wicked this way comes": Republicans Willkommen auf das Vierte Reich! Sie Angelegenheit nicht mehr.

    by Bluefin on Fri May 27, 2011 at 03:30:17 PM PDT

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