Goldman Sachs and their economic downturn

So I was watching C-span for 6 hours yesterday and I figured I'd summarize wtf is going on in the investment banking world for you. That'll save you the agony of watching c-span, though some of our nation's senators are pretty feisty! So here's the dilly-o as I understand it...

Apparently Goldman Sachs sold tons of product. The product was an assembly of lots of individual components (a portfolio), but all those components were pretty much at the same level of crappiness that had a huge risk of failure (Like loans that people take out on "stated income" not "proven income"). But they made it look good by adding in a few golden eggs, which ups the average of the whole portfolio. Lay people didn't get to see what's inside but saw the average/rating thinking it was o.k.; insiders that knew couldn't get a straight answer from Goldman Sachs as to why they were selling it! But they continued to sell it.. and they continued to give the impression that the products (CDOs) were an investment that would grow, not fail. All the while, they never told anyone that they were putting money on the products FAILING (short selling) and continued to aggressively sell it to investment firms even after they had sealed their position on it. And then when everything failed, they cashed in (because they had done such a good job of exposing everyone to the risk) and laughed all the way to the bank... errr banks closed down. Maybe they just laughed in their office.

So where did they get their product from? Well no one just willy nilly creates portfolios. A company like ACA compiles a list of components that gets put into the product which middlemen like Goldman Sachs can sell to their clients (which are investors who want to buy products that will make them money) One of the products they sold was known as Abacus, and it was the idea of one of Goldman Sachs' former employees, John Paulson who runs his own investment company now. He sat in on several meetings between ACA and Goldman Sachs when they were crafting the portfolio and supplied a list of at most (but over half) 55 of the 90 components in that portfolio. (see reference at bottom) Then Paulson organized through Goldman Sachs an arrangement to short sell that product... as in plan to make money when the product loses value. So THIS is the motive for why Goldman would want to sell so much of the bad product... to benefit one client over another.

But this didn't just happen once with one product. It happened again... and again.. with so many different product names and portfolios, but they all had one common thread. They were all solely dependent on risky loans that should never have been given out in the first place. So why were the loans made? It's because CDO's like these takes the risk off the bank and shifts it to the people who buy the CDOs. The banks were happy to make loans because the money keeps pouring in from one end to give to the other. But when the money never appeared to send the money the other way (people didn't pay their loans/mortgages), that's when all the products lost value, the banks crashed because there was no money, and EVERYBODY that was betting for the CDOs to increase in value lost their money.

I think the real damning evidence in the case would come from whether or not we can prove this:
Did Goldman's aggressive sales of the poor product drive riskier and riskier behavior from the banks, causing the whole system to feedback on itself and explode? It's interesting to think of this in Mechanical terms.

Hope you enjoyed,
Alvin



http://www.businessinsider.com/aca-didnt-exactly-select-most-of-those-mortgage-bonds-paulson-did-2010-4

Israel... Secular State or Religious Entity?

The government of Israel is a democratically elected, secular body. Shouldn't we as Americans be able to criticize the actions of said government without even bringing up the notion of antisemitism. Of course, if Israel is a religious body like the Vatican, then is the formation of their state really legitimate? If that's the case, then Israel should definitely not be allowed to have a modern military just like the Pope does not have a full-scale army within the Vatican. If Israel is a religious body, then no, we can't criticize them without risk of antisemitism. But if Israel is ruled by a democratically elected, secular government, then we can say WHATEVER THE FUCK WE WANT!

ISRAEL BETTER STOP SETTLING ON PALESTINIAN LANDS SO WE CAN END THIS MIDDLE-EAST CONFLICT AND GET THE FUCK OUT OF THERE!

Tax and Regulate 2010

It's really going to happen... Marijuana is going to be legalized this year. Do you know what that means?! That means no one will lose their job for failing a drug test (which can happen from trying marijuana once, months before the test) People won't have to buy marijuana from drug dealers who also sell more dangerous substances, possibly have connections to Mexican drug cartels, and from whom there are zero consumer protections. Doctors and the general public will have access to more research on marijuana, and there will be an even larger variety of marijuana plants available. Also, more and more textiles will be made from hemp, which I am fairly certain is every bit as efficient a plant in making textiles as cotton with a fraction of the care. (Not to mention that they're supposedly more durable - I saw Albert and Gio's hemp messenger bags. Stylin')

What does this mean for me? I won't be a criminal anymore. I can tell my parents about what I do, and why I like doing it. I can share with them how it's helped calm my life down from the frantic pace of college life (I pulled two all-nighters in a row just last night, and I only had a 4 hour nap just now.) so I can chill out and take a break. I'm not like those other people who can just sit and watch TV and put work on the back burner. Maybe I can do that for a little while, but then it just starts to nag, and knowing you have work to do makes any short period of downtime very difficult to enjoy. Marijuana changes that. It lets you focus on what you're doing, setting aside the other parts of your life that don't matter at the moment.

And what does this mean for you? You could get a job! You like baking? you could grow plants, bake cookies, sell them! They're not regular cookies, people will buy them for a much higher price, and it's freaking wholesomely delicious! You bake, I buy, then we baked. how about that? Haha some freakonomics we're up to, huh?

Census 2010 and LBJ is my hero

The Census is so important! I don't know why cable news is portraying it as a possible threat, but it's clear that recording demographics is an essential part of governing! How else would the government decide the distribution of tax revenue needed to build infrastructure? How would you like it if you lived in a major suburb, but no one knew to build any sort of mass transit to your location? Worse yet, people could be PROFITING from your plight? (THE OIL COMPANIES) The fact that you're forced to operate a car, wait in traffic, all the while burning more and more gasoline?

An ideal government should act for the right reasons, in expanding the opportunities of its citizens, and preventing abuse between its groups. Our government needs this information to provide you with more opportunities. Whether extending and upgrading the Bart train to save you money on commuting to work, or building that awesome high speed rail that could get me back down to socal much more conveniently and cheaply!