Finance

Feudal Future: Understanding California's Recent Financial Deficit

Joel Kotkin and Marshall Toplansky — Tue, 28 May 2024 11:38:21 -0400

Discover the unexpected fiscal twists and turns as California confronts its financial future, with insights from Steve Malanga of the Manhattan Institute and ex-Orange County Treasurer John Moorlach. As your guides, we, Marshall Toplansky and Joel Kotkin, promise to lead you through a landscape shaped by COVID-19 aftershocks, federal aid windfalls, and the intricate dance of managing state budgets and pension reforms. Prepare to be enlightened by our conversation on the surprising surpluses, the stark reality of tax collection downturns, and the resilience—or vulnerability—of California's fiscal policies.

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This show is presented by the Chapman Center for Demographics and Policy, which focuses on research and analysis of global, national and regional demographic trends and explores policies that might produce favorable demographic results over time.

The Silicon Valley Bank Collapse Will Hurt Joe Biden

Joel Kotkin — Fri, 24 Mar 2023 11:39:25 -0400

The rescue of Silicon Valley Bank and its large depositors has drawn together unlikely bedfellows. Both the Right-wing Free Beacon and the Leftist Stranger magazine, to give two examples, have denounced this federal largesse as “socialism for the rich”.

Whether this is true or not lies in the eye of the beholder, but one thing is for sure: this is a crisis that could reshape the 2024 election.

Americans, particularly progressives, no longer see the Silicon Valley elites as “enlightened plutocrats” eager to create a better world. Now they view these same people as sinister far-Right figures, as evidenced by the treatment of Elon Musk since his takeover of Twitter. Indeed, the vast majority of Americans now also fear the tech elite, and the industry’s approval dropped dramatically in the years before the pandemic.

Read the rest of this piece at UnHerd.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

The SVB Collapse Marks the End of the Silicon Valley Era

Joel Kotkin — Mon, 13 Mar 2023 11:05:14 -0400

The collapse of Silicon Valley Bank, the second largest in US history, is raising concerns about a “contagion” that could trigger a financial panic. As the 18th largest bank in the US, SVB’s bankruptcy may not prove an event on the scale of Lehman Brothers, but it may reflect something perhaps even more important: the decline of the Valley’s once vibrant entrepreneurial culture.

As a young reporter, I covered bank founder Roger Smith in 1983 when he came up with the idea of providing conventional financing to young, often venture-backed growth companies. In those days the big Wall Street financiers were largely clueless about technology, and the industry needed someone who understood their needs and ambitions. The now-retired Smith became a real player in the tech world, as well as in the Valley’s philanthropic scene.

Read the rest of this piece at UnHerd.

A Lifetime of Financial Advice for 2015

Susanne Trimbath — Wed, 25 Feb 2015 09:50:35 -0500

When household savings falls and household debt rises, “most people” are spending more than they make. When people find out I’m an economist, they often ask if I can explain why “most people” can’t figure out how to handle their money. The New York Fed recently reported the end of deleveraging: American households are borrowing again. When you get paid, you can do one of two things with your money: save it or spend it. If you aren’t saving AND you are borrowing, then clearly you are spending more than you make.

There are a lot of people in America who are young, struggling and without inheritance or some initial endowment to get started in life. The Census Bureau reports a 17.5% rise in the number of 25 to 34 year olds living with their parents (from 2007 to 2010). This increase cuts across all socio-economic lines. Regardless of the demographics that impact the way the economy grows, we all go through life-cycles. I did it, you did it and “most people” will do it, too. If you are smart, you’ll engage the economy throughout the cycles of your life. Here’s how it works. The six cycles correspond roughly to the decades from your 20s to your 70s.

CYCLE 1 (20s): Without an initial endowment, we all struggle in the first decade after we leave our parents home (or foster care, or whatever situation it was that brought you to adulthood). Your skill set is very low and you may or may not have gotten a college education. You are an unknown quantity in the job market, untried and unproven, so your wages will be quite low. You also have no secondary source of income (no endowment, remember, means no investment income). If you are smart and lucky, you’ll figure out that you have nothing and so you will spend nothing that you don’t have. Focus on keeping a good job, building some skills, try to get a little more education and keep your nose clean. That’s enough for the first decade.

CYCLE 2 (30s): By now, you’ve got a resume built up so you can expect to be promoted or to look for a better job that pays more, maybe has some benefits like health insurance and some kind of a savings plan. Put something into that employer-matched 401k plan: sure, you probably won’t be able to wait until age 65 to dip into it, but it will be money that you won’t otherwise have. The match means that you earn an instant 100% on your money. Even if the penalty for early withdrawal is about 25%, you will still be ahead by 75% even if you can’t wait for retirement. If you have some financial assistance (from family or a grant of some kind), you’ll probably acquire some sort of property at this point. Maybe it’s a small business or a home but it’s the grown-up thing to do. Stay away from making a big investment in some depreciable asset, like a sports car, at this point. These are the beginning of the years in which you will build capital for the future: financial capital (investments), human capital (skills and education), and social capital (a good network of contacts, both social and business). Focus on moving up in your career a couple of times so that you can begin to put money into savings and investment on a regular basis. Avoid the trap of building up a lot of debt during this stage and be sure to stay within your means.

CYCLE 3 (40s): These are the real building years. You should be well-established in your field of work and hopefully you have built strong and stable social connections, too. It’s time to start thinking about giving back to the community that supports you. You can volunteer, start making larger cash donations to charities, attend some charity balls or even run for office (or get active in the campaign of a candidate you support). Some of these social and charitable contacts will be helpful to you in business and some will just be the kind that makes living in a community more pleasant. Your focus now is to set achievable life-goals. Whatever your ambition was in your 20s, by now you will have a clear vision of what you can realistically attain. With that idea in mind, set goals for your career, your finances, when you want to retire from work, etc. Make them realistic for now, based on what you know. You’ll get a chance to adjust them only once more in your lifetime.

CYCLE 4 (50s): Now’s the time to begin planning for the culmination of your work life. It could be another 20 years off, but you need to think through how you will sustain that longer career, or to plan to stop working altogether. If you wait till the next cycle, when you are in your 60’s, it may be too late to make any changes that will be necessary for you to achieve your goal. Your earnings will peak in this decade so if you haven’t saved enough along the way, this is the last chance to start to bring your savings in line with your goals.

CYCLE 5: (60s): By now, if you’ve followed through with planning and budgeting, you should be able to take it easier. A lot easier (retire from working) or a little easier (work part-time or in your own business). If you’ve been able to get some education, you may be able to support yourself fully as a knowledge-worker. Knowledge workers have longer work lives because they won’t have limitations on endurance or other physical job requirements. Even if your job was physically demanding, it is possible that an employer will need your advice as a manager or consultant on a project that will benefit from your years of experience.

CYCLE 6 (70s): Average life expectancy in the US is in the low- to mid-80s for both men and women. That means that, on average, this will be the penultimate decade of your life. Depending on your early choices, you may find yourself now at the pinnacle of your profession. Try to pass along as much of your knowledge as you can to the next generation, both what you learned in your career and what you learned from your life experiences.

If it seems they aren’t listening, keep talking. Maybe something will sink in and when they read in the news that “most people” spend more than they make, they will be able to count themselves among the unusual. Have a safe and prosperous 2015!

High Frequency Trading Is Not Fast Enough

Susanne Trimbath — Fri, 04 Apr 2014 08:24:50 -0400

A new book by the original yellow journalist of Wall Street, Michael Lewis, initiated global coverage about the flaws of American capitalism. The culprit in Lewis’ new book is High Frequency Trading or “HFT.” There is no doubt that US capital markets are imperfect. New York Times DealBook writer Andrew Sorkin lays the blame at the feet of the stock exchanges of which there are so few remaining that the Federal Trade Commission could label them a monopoly.

Even defenders of HFT, like Tim Worstall at Forbes, have to admit that it has risks and problems. It pushes volatility when markets are under stress; programming errors and misuse of software packages have been known to bankrupt the trading companies. The argument in favor of HFT fails when its proponents bring in “free market” economic theories – primarily because the stock market is not “free” in any economic sense. There are a limited number of big players – 5 banks in the US control 85-95% of trading depending on which market you measure. That is still more like an oligopoly than a competitive market. There are barriers to entry set up by the SEC, the FRB, and state banking and securities commissions. Finally, the transaction costs are enormous. Anyone active in the market knows about trading commissions and management fees. DTCC took in over $1 billion in revenue in 2012 (latest available) and still lost over $25 million. You get the picture – there is no free market argument.

The programs used for high frequency trading are bastardizations of heat transfer dynamic equations. Those underlying equations are based on assumptions. First, they only hold true when time goes to infinity – but trades are executed in finite time. Next, they assume linear behavior – but markets are more like waves than straight lines. Finally, those equations require simultaneity of action. No matter how close the servers are located to the exchange, the computers are not fast enough to read the prices in one market and execute a trade in the next without some lag which violates the assumption. Richard Bookstaber called it A Demon of Our Own Design (Wiley, 2007). The university whiz-kids who built the programs knew they were violating the assumptions but they were under pressure from their Wall Street bosses so they decided to take the money and run the programs – warts and all.

Trading programs treat capital markets as if one security is indistinguishable from the next – and that defeats the purpose of having capital markets at all. The reason we have these markets is so that entrepreneurs can access capital to fund new opportunities. Instead of letting computer programs decide which stock has the best opportunity for a price change, investors should be deciding which business has the best opportunity for success. The funded opportunities create jobs that pay income to households who turn around and put some of those earnings into savings. Lots of little savings accumulate into a pool of loanable funds that become available to other businesses to fund other opportunities to create more jobs, etc., etc. The goal of high frequency trading is to make money – at any cost. And the cost is the ability of capital markets to serve their primary purpose.

Is the Acela Killing America?

Aaron M. Renn — Fri, 14 Dec 2012 10:40:15 -0500

Has the finance industry trainjacked America?

By all accounts the Acela has been a success. Thought it is far from perfect and constitutes moderate speed rail for the most part, it seems to have attracted strong ridership. A midday train was totally packed on both the BOS-NYC leg and NYC-DC leg the last time I rode it. I didn’t see an empty seat anywhere. Which is pretty amazing given how much more expensive it is than the regional, and frankly not that much faster. It does seem to have accomplished its mission of more closely linking Boston, New York, and Washington.

The question is, is that actually a good thing? Or has the improved connectivity the Acela brings had unforeseen negative consequences? I believe you can make an argument that the Acela has actually helped birth the stranglehold the finance industry has over federal fiscal and monetary policies, and thus has hurt America.

I don’t have time to fully develop that here, but to anyone who has been following any of the many excellent sites tracking the financial crisis over the last few years, it is obvious.

There is now a near merger between Wall Street and K Street. During the financial crisis, the government and the Fed have kept Wall Street well supplied with bailouts and nearly free access to capital that allows them to literally print risk free profits by recycling in the free loans into interest bearing government debt, all while Main St. businesses and homeowners have borne the full brunt of a credit crunch, state and local governments fiscally starve, and infrastructure funds dry up. Finance industry insiders have now obtained a near lock on the position of Treasury Secretary. When a president like Bush dares to appoint someone with actual industrial experience, Wall Street’s displeasure is made manifest, and it generally succeeds in undermining him. New laws like Dodd-Frank strangle new entrants to the field while enshrining the privileged status of the too big to fail. The fact that it allows government to seize these “systematically important financial institutions” shows not the industry’s weakness but its strength, as big banks de facto function as instrumentalities of the state, but with profits privatized and losses socialized. Not a single major figure in the events causing the financial meltdowns has gone to jail or even been prosecuted (only a collection of ponzi schemers and insider traders who, despite their criminality, had no systematic impact – the crisis blew up their scams, their scams did not cause the crisis). The list goes on.

The geographic proximity of New York to Washington, with quick trips back and forth on the Acela, facilitates this. Clearly, you could get back and forth on the shuttle without it, but given the Acela’s popularity, it does seem to have some big benefits in shrinking the distance between New York and DC. I’d argue this has been unhealthy for America. If true high speed rail ever came to the NYC-DC corridor, who knows what might happen?

Perhaps you don’t agree and will feed me to the dogs for this post. But I think it’s very clear that transportation networks have vast impact on the structure of society, not just how people and goods get from Point A to Point B. The interstate highway system is proof of that. Indeed, advocates of high speed rail (and I’ve been a qualified one myself, supporting it clearly in the Northeast Corridor but being skeptical about most others) boast of the positive transformational effects of HSR as one of the reasons to build it. But as with the interstate highway system, we need to be aware of the hidden risks as well.

The Acela is perhaps living proof that high speed rail can reshape America. It is literally helping rewrite the geographic power map of America. Unfortunately, at this point don’t think that’s been a good thing.

This piece originally appeared at The Ubanophile.

The House Home Savings Built

Sun, 25 Mar 2012 17:10:48 -0400

After doing his duty for the Navy in Washington D.C. during World War II, my father returned to Los Angeles, and my parents moved into the Talmadge Apartments between Western and Vermont. They’d been married for 17 years without having any children. So my father informally adopted his two nephews.

Around 1949, those nephews, who were students at UCLA, threw a party at the apartment. It was apparently a night to remember. The management decided to not renew my father’s lease. Shortly after that, my father’s wife announced, after nearly two decades of a childless marriage, that she was with child. (Full disclosure: that child was none other than this writer.)

So my dad leased a house facing the Wilshire Country Club in Hancock Park. Then, in 1959, he formed a corporation to buy a nearby Tudor house, hire domestics, and rent the house back to him with domestic services. This was the man who founded the largest savings and loan in America, who in those years probably enabled more Californians to become homeowners than anyone else. But he was technically a renter all his life. Those were the days of the 70-percent and 90-percent top tax brackets, and byzantine legal structures were common.

In mid-century Los Angeles, anything on Wilshire Boulevard was considered more prestigious than anything on the side streets. On the eastern end near Lafayette Park was the Bullocks Wilshire department store. Several miles west were the Miracle Mile department stores, which had beautiful shop windows facing the boulevard, even though most people entered the stores through portes-cochères in the rear. Many of the major liberal establishment churches—the PCUSA, the United Methodists, St. Basil’s Cathedral, and the Wilshire Boulevard Temple, Rabbi Magnin’s huge reform synagogue—lined the street. The Ambassador Hotel was one of the great hotels of the city. And then there was The Brown Derby Restaurant, which gave us the Cobb Salad.

My father was originally from Omaha, Nebraska, but he moved west, graduating from the University of Southern California in 1927 and emerging from the Great Depression as a successful insurance underwriter. During the war, he heard talk among the military that Southern California was going to take off, so he bought a one-branch thrift downtown called Home Savings and Loan. Soon, it grew to be a multi-branched empire in four counties: Los Angeles, Orange, San Bernardino, and Riverside.

Partly to get involved in philanthropy and partly to set up an estate plan, my father set up The Ahmanson Foundation. The idea was that The Ahmanson Foundation, after my father’s death, would inherit and control the for-profit companies. This was a common legal arrangement at the time, offering a way for wealthy families to preserve more of the family fortune. (I recommend the novel God Bless You, Mr. Rosewater, by Kurt Vonnegut, for a sense of how it worked.)

Apparently, my father wasn’t a full member of the downtown establishment, for he chose to base his business several miles west of the establishment thoroughfares of Flower and Figueroa. He recruited the artist Millard Sheets to design for him a corporate headquarters on the north side of Wilshire Boulevard, between Serrano and Oxford Streets, in the early 1950s. Then he conceived of a fancier project for that site and hired Edward Durell Stone to design it. A model of it was in our house during my later high school years. It featured two buildings next to each other, with concave faces toward a courtyard. A third, taller building was to stand in back. But that part was never built.

My father died suddenly on June 17, 1968, before ground was broken on the project. Fifteen months later, the U. S. Congress passed, and President Nixon signed, a bill called the Tax Reform Act of 1969. It rendered my father’s estate plan obsolete, for a non-profit foundation could no longer own a controlling interest in a for-profit corporation. Instead of remaining under the control of the The Ahmanson Foundation, Home Savings of America would have to go public. In the meantime, my father’s nephew Robert Ahmanson wound up overseeing construction on the pair of buildings. They were finished in 1973.

The interest rate spike of the early ’80s was hard on Home Savings of America, and they sold off the Ahmanson Center on Wilshire at that time. Still, Home Savings coasted through the savings and loan crisis of the end of the ’80s, thanks to maintaining the conservative policies that my father had instituted.

The area changed a lot in these years. After the Watts Riots of 1965, and in the 10 or 15 years after that, the upper and upper-middle classes of Pasadena, San Marino, Arcadia, and Hancock Park relocated en masse to the Newport Beach area in what I call the secessio patriciorum, or the secession of the patricians. Los Angeles Magazine featured an article in 1977 called “The Ripening of Orange County: Is It Stealing the L.A. Dream?” Indeed, a lot of the life seemed to get sucked out of Los Angeles at that time. One consequence of the secessio was that finance and retail and new construction tended to concentrate either downtown or west of central Beverly Hills. That left the Wilshire corridor in between down at the heels.

Later, that part of Wilshire recovered and reinvented itself. New immigrants from Korea and Latin American countries moved in, and, for many years, such gentrification as took place in the area was done by these immigrants and not so much by white Anglos. After 1990, previously uncool areas like Pasadena, Santa Monica, and parts of downtown began to recover, and the Wilshire district became the heart of Koreatown. I now think of Los Angeles as being similar to San Francisco and Oakland. The West Side up to Hancock Park is like San Francisco, while the parts east of it are like Oakland and the East Bay. London and Berlin have the same sort of east-west-ness.

Koreatown is a wonderful neighborhood, and the Ahmanson Center is still beautiful. But I can’t help feeling a touch of melancholy that my dad’s vision was never fulfilled. He’d hoped to make that part of Wilshire Boulevard one of the great financial and retail corridors of America. Today, the big players are concentrated downtown or in Beverly Hills and westward.

If you walk up the Oxford Street side of the Ahmanson Center, you can see a travertine block with a Latin inscription. Translated, it says, “Robertus and Mauritius, two virtuous men, dedicate this stone to themselves.” Robertus is Robert Ahmanson, who supervised the construction of the center. Mauritius is Maurizio Bufalini, owner of a marble quarry in Carrara, Italy. Bufalini was a good friend of our family, and he provided the Italian and Greek marble that decorates the center. Both these men are “late,” as they say in Botswana English, meaning dead. The stone is dusty now, but the words can still be read. I wonder if anybody notices it, or wonders what it means.

This piece first appeared at Zocalo Public Square.

The Slippery Slope of Corporate Culture

Henry Ehrlich — Fri, 16 Mar 2012 18:52:47 -0400

Greg Smith’s resignation lament in the New York Times, Why I Am Leaving Goldman Sachs, has rightly caused an uproar. He writes, “I can honestly say that the environment now is as toxic and destructive as I have ever seen it,” implying that it has been toxic and destructive all along. Tell us something we don’t know.

Twenty years ago when I worked at JP Morgan, the public bond underwriters and pension managers complained that they were at a disadvantage when competing for business with Goldman because they weren’t allowed to “pay to play”, i.e. make political contributions in exchange for business.

Those two banks had long been at opposite ends of the spectrum. A century ago, the original J. Pierpont Morgan told counsel for a Congressional committee investigating the money trust that the most important criterion for supplying commercial credit was character, “Because a man I do not trust could not get money from me for all the bonds in Christendom.” Language, I must add, that distinguished him in ways large and small from moneylenders like Mr. Goldman and Mr. Sachs. Fifteen years ago an unnamed executive summed up the difference in business practices between the two banks to a Times reporter: “Morgan will show up with 20 people for a three-hour presentation to a client. Goldman Sachs will just send two people to sketch out a deal on a napkin at the golf club bar.”

With Robert Rubin, Henry Paulson, and Jon Corzine among the ranks of Goldman's recent former CEOs who have distinguished themselves in government and finance, you learn almost everything you need to know about the contemporary Goldman ethic, good and bad. Current honcho Lloyd Blankfein has said they are doing “God’s work.” For a Goldman investment banker to evoke the almighty as justification, he has to feel real heat.

Mr. Smith feels let down by corruption in Goldman’s corporate culture:

“It might sound surprising to a skeptical public, but culture … revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients…. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years."

A closer look at that culture would reveal something besides always doing right by the client. Corporate culture is really a nice way of moving people with a variety of motives in lockstep. One man’s client service is another man’s rapacious self-interest. Given the profitability of modern finance, rapacious self-interest has had an inexorable pull. The habits ingrained through a strong corporate culture are merely instruments for moving the herd along. Call it conformism, and in this, as in so many other areas, there’s no question that Goldman is a leader.

Upon reading Smith’s op-ed, I opened an excellent reference volume, The Wiley Book of Business Quotations, to the Goldman Sachs entry for corporate culture. (Okay, maybe that isn't quite accurate—I compiled the book myself and knew what was there.) I found Theresa M. Potter's New York Metropolitan Diary column of November 13, 1996:

Dear Diary:
Overheard on the elevator at Goldman Sachs on a recent “dress-down Friday,” a conversation between a long-time partner and a smartly attired young analyst.
Partner (sternly): It’s Friday. You’re not supposed to be wearing a tie.”
Analyst (crestfallen): “But it’s not silk.”

It’s a slippery slope.

Replaced by a Machine

Susanne Trimbath — Mon, 12 Mar 2012 00:26:54 -0400

I love the Omaha World Herald – I read papers all over the world and this one is the best local paper I’ve seen. The bias is largely limited to the Opinion pages and they do original research on local topics. For national and world news, they have reporters outside the Omaha metro, but they also include the best of the news wire articles. The paper is a readable length, yet it contains enough stories that you know what’s going on but not so many that it’s a repeat of the nightly news from the national broadcast networks. Mostly, I like the way they let the reader connect the dots.

A perfect example appeared on Sunday March 11, 2012 on page 10A in the print edition. Two stories occupy the three columns on the left side of the page. The story occupying the top of the three columns is about IBM’s Watson supercomputer (from Bloomberg news). Watson’s newest consulting client will be Wall Street bank Citigroup, Inc. “the third-largest U.S. lender.” Directly beneath that is a story from the Associated Press (AP) about Main Street abandoning Wall Street – seems that if individual “ordinary” investors do not start giving their money to Wall Street banks again soon, the re-inflated stock market bubble will deflate – bye-bye Dow 15,000.

How do these two stories relate? Well, Citigroup is feeding information to Watson on “sentiment and news not in the usual metrics” like what you post on Facebook or search on Google. Citigroup will use Watson to “analyze customers’ needs” and process that with their client data to figure out how to get you to put your money back where it makes them the most money in fees and commissions.

Watson doesn’t come cheap – according to the Bloomberg News article, banks spent $400 billion last year on “information technology,” helping to generate $107 billion in revenue for IBM. How can banks afford to spend billions of dollars to get consultations with a computer? The answer is in the AP article in the bottom of the same columns: “corporate America has racked up double-digit profit gains” since the official end of the Great Recession in 2009.

These two articles make me a little happy. The first one pleases the economist in me because an American company with a real product is going to thrive by charging Wall Street billions of dollars for something. The second article pleases me because it means that Main Street got the message – don’t eat the hot dogs at the Wall Street party because the fuel for the weenie roast is your future. Let the machines do it.

[NOTE: Omaha.com links are available without registration for up to 2 weeks after publication. Access to the archives requires email registration.]

Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethics and the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.

Goldman Profited from Crisis – Shocking!

Susanne Trimbath — Sun, 25 Apr 2010 23:13:09 -0400

If someone is just finding out last week that Wall Street is profiting from the crisis it created, then I have only one question for them – "what rock have you been living under for the last two years?"

I’ve been shining a bright light on this since I first joined NewGeography.com to cover finance. From one of my first articles in November 2008, where I explained the nuances of financial innovations – “Who stands to gain? … Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley …. You can do the math from there.” – to recent blogs on the impact of stimulus and bailout spending – “Goldman Sachs … even got transaction fees for managing the Treasury programs that funded the bailouts.” – I hope that it has been more obvious than painful that you have to take personal responsibility for your finances because you can’t rely on Wall Street to do it for you.

Last week, the SEC charged Goldman Sachs with civil fraud. On Friday, a group of investors filed a lawsuit against Goldman’s executives for behaving in an “unlawful” manner and for “breaches of fiduciary duties” – meaning they were reckless with other people’s money. Goldman is also being sued by the Public Employee’s Retirement System of Mississippi for lying about the real value of $2.6 billion in mortgage-backed securities (MBS). I remind you that there’s a good chance that Goldman (and other Wall Street banks) were and are selling MBS that don’t have mortgages behind them – as I like to put it, there’s no “M” in their “BS”.

In a nauseating twist to the story, AIG (according to sources for the Business Week article) insures Goldman’s board again investor lawsuits – so AIG may be paying the costs of defending Goldman’s executives in addition to any fines or settlements on the cases. AIG is still on bailout life support from US taxpayers. In December 2009, the Federal Reserve Bank of New York took $25 billion worth of AIG preferred stock as partial payback for the $182.3 billion bailout.

Even less shocking to readers of NewGeography.com should be the story that the SEC lawyers were busy surfing the internet for pornography when they should have been preventing this stuff from happening in the first place. I wrote an article last February about bailed-out Wall Street bankers spending taxpayer money on prostitutes. Those SEC staffers will need to be up to date on all things unholy when they head for the door that leads them to more lucrative jobs on Wall Street.

Like the arsonist who gets the insurance payoff after burning down his own house, the Wall Street bankers profited from transaction fees in creating the crisis, profited from the bailout payoffs funded by the U.S. taxpayers and they continue to profit from their credit derivatives as the whatever was left standing begins to collapse around us. Like most Americans, I think I’d get some sense of satisfaction from seeing someone in handcuffs over what has been done to the value of our savings and the global reputation of our capitalist system.