The Great Scam And Fraud Of The Century
Floor Speech
BREAK IN TRANSCRIPT
Mr. WELCH. Thank you, I appreciate very much, and I think all of us do, you having this hour to talk about Wall Street. You know, there are a couple of things about it that are obvious to everybody on both sides of the aisle.
The salaries are totally out of control; $145 billion in bonus pool to the banks after they have been bailed out by the taxpayer is not acceptable. Everybody, I think on both sides of the aisle, is concerned about greed being too much a part of the culture on Wall Street. On that we agree. But the threat in the long term, as lamentable as the greed is, as not acceptable as $145 million in bonus money is, what Goldman Sachs and others are doing is destroying what banks are about.
Our American economy needs a financial sector that's strong and vibrant but that lends money to entrepreneurs, to businesses that are going to create new products, that are going to allow for manufacturing to occur in this country, to families that are trying to buy homes. This recent case about the filing of an SEC lawsuit of civil fraud against Goldman Sachs highlights that they have gone from being an agency, an entity that lends money to a gambling casino.
And let's just talk about the structure of this abacus deal that is the subject of the SEC litigation for civil fraud charges against Goldman Sachs. This is a situation where a hedge fund investor figured that the housing market was going to go south and not only put his own bets against the housing market but he asked Goldman Sachs to create an investment vehicle that was not distributing mortgages, it was not originating mortgages, it was just creating a pool where one side of the transaction bet that the underlying securities would go down in value and then other parties bet that they would go up in value.
You know, you might say, well, they are just betting. And you know what? That's true, but what they are not doing is investing. What they are not doing is lending.
And then as these collateralized debt obligations accelerate out from one buyer, one seller, one buyer, one seller, at the end of the day, or the end of the month or at the end of the year, when the music stops and somebody doesn't have a chair to sit in, it's the taxpayer that's left holding the bag. There is a vast acceleration of risk with no investment in any productive activity. Not a single mortgage was created by the abacus deal.
Not a single new business deal was financed by the abacus deal. Not a single new company got seed capital or venture capital. There was no banking done. Why is it--what is the social purpose that is achieved by allowing this type of casino gambling to occur with the sanction of law and ultimately with the backstop of the taxpayer?
So what this whole challenge to us is is not just about the personal habits in overreaching on greedy salaries that many of those folks have on Wall Street, and it is even more than about getting our taxpayer money back, which we want to. It's about are we going to have a banking system that's going to be there to lend money to folks and to businesses and to entrepreneurs that need it, and are about creating jobs.
I want to contrast the Goldman approach with the banks in Vermont. We have got community banks, and I know you do in California as well, I know Mrs. Dahlkemper does in Pennsylvania, Ms. Speier in California as well.
There is one in St. Albans, Vermont, where when you go into that big lobby of the old-style banks, and there are the teller windows and there are some desks for loan officers, there is a desk that's slightly bigger than the others. It's the president of the bank. He is sitting right in the front hall.
And anybody at St. Albans who wants to talk to him about a car loan, about service, about their checking account, they can go talk to him right away. At the end of the day he feels good if his bank has made a loan to a farmer, to a family, to a small business.
And you know what? That's the culture that I value that I think Americans value. The Goldman culture is whatever it takes, as much as they can get.
BREAK IN TRANSCRIPT
Source