More on What Blankfein Should Have Said

http://www.futureofcapitalism.com/2010/04/more-on-what-blankfein-should-have-said

After the original post on what Goldman Sachs CEO Lloyd Blankfein should have said to the Senate hearing this week, suggestions are flowing on others who are better subjects for a Senate inquisition on the causes of the financial crisis than are Mr. Blankfein or Goldman Sachs. Mr. Blankfein could have told the senators:

If you are really looking for some headline-grabbing testimony, why don't you invite Andrew Cuomo up here? The press is on the verge of anointing him the next governor of New York, but he spent the 1990s as President Clinton's housing secretary pushing mortgages to people who couldn't afford them. Maybe you don't want to spoil the Democrats' chances of holding the governorship of New York? Or maybe because he's a politician like you guys are, you are going easy on him.

Or, if the reason you are focusing on Goldman Sachs is that we didn't lose as much money as some of the other firms did during the crisis, how about calling Bill Gross of Pimco to answer some questions under oath? You senators seem to be troubled by the fact that Goldman was repaid 100 cents on the dollar by AIG. But we already had collateral against most of that. Not so with Pimco's Fannie Mae or Freddie Mac debt, which was also repaid at 100 cents on the dollar at government expense, while the Fannie and Freddie shareholders were mostly wiped out. Here's how the New York Times put it:

Pimco was a direct beneficiary of the Treasury Department's actions. In 2008, when it appeared that Fannie Mae and Freddie Mac might fail, Mr. Gross saw an opportunity. He moved Pimco's flagship Total Return Fund heavily into mortgage-backed securities guaranteed by the two agencies. Then he vociferously advocated for the government to rescue them during television appearances on CNBC and elsewhere. On Sept. 7, 2008, the fund's value soared by $1.7 billion when Mr. Paulson announced the government takeover of Fannie Mae and Freddie Mac.

Is the reason you have me up here rather than Mr. Gross because he says things like, "When I go home, I don't watch Fox and I vote for Obama"? Certainly it can't be because Mr. Gross has been averse to conspicuous consumption: the Wall Street Journal reported the other day that he bought an 11,000 square foot, nine bedroom, 12 bathroom house for $23 million that he plans to tear down and build a brand-new house to replace.

Anyway, I'm happy to be here, senators, but I really think I am using up time you could be taking to question other, more valuable witnesses.

by Ira Stoll  |  Apr 29, 2010 at 7:51 am Related Topics:  Banking, Bill Gross, Capital Markets Regulation, George Soros, Goldman Sachs, New York, Politics, President Obama, SEC receive the latest by email: subscribe to the free futureofcapitalism.com mailing list