Goldman Sachs Financed Hillary Clinton’s Son-in-Law to Make Bullish Greek Bets After It Structured Unseemly Greek Debt Deals that Hobbled that Country
Pam Martens & Russ Martens report in Wall Street on Parade:
Goldman Sachs will interminably,thanks to Matt Taibbi at Rolling Stone, conjure up images of “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” The vampire squid has now popped up in the middle of a potential new scandal involving the Clintons, while uproar over its payment of $675,000 to Hillary Clinton personally for three speeches is still simmering. Clinton, a presidential candidate, has thus far refused to release the transcripts of those speeches, despite numerous editorials calling on her to do so.
On May 10, the New York Times gently dropped a bombshell on the hedge fund investing world of New York’s one-percenters. Hillary and Bill Clinton’s son-in-law, Marc Mezvinsky, who married their only child, Chelsea, in an opulent 2010 wedding, was shuttering the Eaglevale Hellenic Opportunity Fund after it had lost 90 percent of its value. That is a staggering loss for a hedge fund, which is, as its name implies, supposed to have hedges in place to prevent that kind of loss.
The fund with the steep losses is part of a larger hedge fund firm run by Mezvinsky and two former colleagues at Goldman Sachs, Bennett Grau and Mark Mallon. The idea that a hedge fund should wait until it had only 10 percent of its clients’ assets remaining before shutting down is causing angst in billionaire circles, as are many other details surrounding this hedge fund. According to a 2015 article in the Wall Street Journal, the same fund had already lost 48 percent in 2014 – raising the question as to why it wasn’t shuttered then, when clients could have gotten a sizeable amount of their principal returned.
Mezvinsky is not the top dog at the hedge fund, Eaglevale Partners LP, according toonline data. That spot goes to Bennett Grau, who is listed as the Founding Partner, Chief Investment Officer, and Chief Risk Officer. Those designations make a lot of sense to veterans on Wall Street, since Grau is clearly the senior member of the team.
Grau’s former tenure at Goldman Sachs spans 30 years, from 1981 to 2011 – a period during which he worked with Goldman’s now Chairman and CEO, Lloyd Blankfein, who started his career in the same trading area as Grau, the J. Aron & Co. subsidiary that Goldman bought in 1981. Both Blankfein and Grau were considered experts in foreign exchange and currency trading, with Grau heading up the J. Aron Foreign Exchange Trading Group beginning in 1977.
According to Rob Copeland, writing in the Wall Street Journal in February 2015, Blankfein personally invested in the Eaglevale hedge fund and Goldman Sachs did just about everything but hang its shingle directly on this upstart. Copeland writes: . . .
Still winnowing the collection. This one’s been cleaned in the ultrasonic cleaner. (So was the EJ Chatsworth, but it’s more important for the adjustables, which have an internal mechanism.)
Unfortunately, when government fails, the most vulnerable bear the brunt: The horror of Connecticut’s group homes
Connecticut seems to underfund its government services. When my friend moved there, he at first was pleased by the low tax load, but then realized roads were crap, sidewalks were crumbling, libraries had short hours and small collections, and so on. And as Joaquin Sapien reports in ProPublica, Connecticut’s group homes are horrible:
The woman was sent to a Connecticut emergency room 19 times in 15 months. Her injuries were ghastly. She swallowed pieces of razor blades. She burned herself. She inserted pins, nails, metal can lids and other objects inside her vagina and rectum.
She was developmentally disabled; living in a group home overseen by Connecticut state authorities. Each of her injuries should have been investigated by the state. None of them were.
The woman’s experience is part of a federal report formally released Wednesday by the Department of Health and Human Services Office of the Inspector General. Hers were among more than 300 emergency room visits examined by federal investigators between January 2012 and June 2014.
The report found that on dozens of occasions, Connecticut group home workers failed to uphold their legal obligations to report incidents of abuse, injury, and neglect to authorities. Even when such reports were made, the state rarely took appropriate steps to find out what happened.
“The results of this investigation are worse than I could have imagined, and clearly the oversight agencies have failed in their responsibility to prevent and investigate incidents of abuse,” said Sen. Chris Murphy, D-Conn., who ordered the report following a 2013 investigation of Connecticut homes for the disabled by the Hartford Courant. “The state needs to take action as quickly as possible to address the issues raised in this disturbing report.”
Group home workers are required by law to report all injuries and signs of abuse or neglect to a state social services agency. In Connecticut, the Department of Developmental Services is then supposed to pass on particularly alarming reports— those of severe injury or that might suggest abuse at the hands of staff— to an independent state agency called the Office of Protection and Advocacy, which employs specially trained investigators.
But the federal investigation found that Connecticut’s oversight system failed at almost every level.
The Inspector General reviewed 152 “critical incidents” where residents came to harm. It found that group home workers understated their severity in more than half the cases; that the state failed to appropriately follow up on 99 percent of incidents that should have raised “reasonable suspicions of abuse or neglect,” and that hospital workers, who are also required to report such incidents, failed to do so in all but one of 310 emergency room visits.
As in many other states, Connecticut’s developmentally disabled were once held in large institutions with hundreds, even thousands, of beds. Some of those facilities became notorious for abusive conditions, with patients suffering severe injuries and even death. Many of them were shut down and Connecticut has moved people into smaller group homes meant to resemble a family atmosphere and provide better supervision.
The report looked specifically at people whose care is paid for with federal Medicaid dollars. Currently there are more than 2,000 such beneficiaries living in scores of group homes throughout the state.
Another interesting article in Salon, this one by Sarah Sweeney:
Last January, I met with a friend who volunteered regularly at a clothing donation center. Kari learned the cheap clothing that many people donate – the Forever 21 skirt that cost less than your breakfast, the H&M blouses that never fit quite right, the Zara pants that pilled after one wash – all comes at a devastating cost to the environment. And while you’re clearing out your closet for donation bragging to your friends (and tax accountant) how much you sacrificed for those less fortunate, well, much of that disposable fashion still ends up in a landfill.
“One million tons of clothes are thrown away every year,” says wildculture.com, “with 50% of the total ending up in landfill.” The unsustainable impact of producing such mass quantities of clothing is ravaging the environment. For example, one pair of those cute jeans you only intend to wear a few times requires 1,800 gallons of water to grow enough cotton just to manufacture them. And this trend is all quite recent; disposable fashion as it’s called only began ramping up in the mid-2000s.
Needless to say, learning this did not spark joy. The consequences of disposable fashion now struck me as so obvious, yet societal expectations encourage to buy buy buy! As a bleeding-heart environmentalist, I set out to spend a year without shopping.
Spend one full year without purchasing new clothing, shoes, purses, accessories or jewelry.
I’m not much of a clotheshorse, but I’ve met many people who cannot go a single week without buying something new. Seriously, how much closet space do they have? It took all sorts of restraint to withhold my thoughts on how ridiculous I find these people. Biting my tongue in front of their wasteful over-fashioned trying-too-hard faces seemed to be another thing I gave up. Those who say things like “no pain, no gain” as their feet hemorrhage inside of 4-inch heels? No thanks! I set out to prove that retail didn’t own me; that I could spend a year without needing anything. I wanted to discover that quality really is superior to quantity and that I can put together new outfits with my existing wardrobe. That the “basics” are called as such because they go with everything. Oh and money. Saving lots of money.
The Fine Print . . .
If you ask anyone what caused the devastating 2008 financial crisis, you’ll invariably receive the same answer: Wrongdoing by the Wall Street banks.
This is no wonder because this explanation has been trumpeted everywhere. It’s all over the media, our politicians repeat it endlessly, and the current presidential candidates harp on it incessantly. So this explanation has now seeped into our public consciousness as the conventional truth.
But there is a tiny little nagging problem. There just seems to be some very curious flaws in the case that simply do not seem to add up.
The central charge is that Wall Street banks made risky mortgage loans to people who could not afford to repay these loans. So, for example, a taxi driver who earns an income of $30,000 per year should not be given a loan to buy a $200,000 house. This line of criticism also accuses the banks of wrongdoing by failing to verify the incomes of borrowers and thus enabling borrowers to overstate their incomes, which became known as “liar’s loans.”
The problem with this analysis is that it ignores the fundamental essence of what a mortgage loan is all about. The bank lends not based upon the income of the borrower, but instead, the bank lends upon the value of the house. The collateral for a mortgage loan is not the borrower’s stream of income, it is the house itself. If the borrower fails to repay the loan, the bank’s primary remedy is not to seize the borrower’s income, but instead, the bank forecloses upon the house, sells the house in the market, and applies the sale proceeds to repay the loan. So any analysis of the riskiness of a mortgage loan must be based upon the value of the house, not upon the income of the borrower.
Of course, banks customarily consider income as well, but as a secondary matter and not as the primary source of repayment for the loan. Income serves as a useful indicator of whether the borrower is likely to meet the monthly loan payments. But income does not determine whether a mortgage loan is fundamentally good or bad, only the value of the house does that. So income, no matter how badly misstated, could not possibly have caused the financial crisis.
In addition, incomes became less of a factor as a result of the housing bubble. As the bubble expanded, home values kept increasing. Year after year prices experienced double-digit increases. This attracted a stampede of investors, just like in every bubble. It wasn’t that the banks were negligently failing to consider the borrower’s income and concealing it, but rather, investors were not concerned about the borrower’s income when the value of the house was certain to increase. Thus is the nature of bubbles.
Another common charge is that the Wall Street banks were engaged in a massive fraud by making bad loans and selling them as good loans. Sounds sinister. But the facts simply do not support the charge.
In order for a fraud to exist, there must be some sort of a hidden deception. But there was no deception here because the banks went to great lengths to disclose all sorts of information about these loans. In fact, the entire classification of the riskier types of loans was openly named “subprime” mortgages, meaning “risky loans.” How in the world could there have been a fraud when the entire classification is named “subprime?” Obviously, buyers of these loans knew what they were buying.
But even further, for every transaction that offered mortgage-backed securities, the banks issued a “prospectus,” which is basically an entire book that can run several hundred pages in length that describes all sorts of facts and details about the underlying loans, including disclosure about the levels of risk. Again, the banks were hardly trying to conceal the nature of the loans, but instead, the banks disclosed extensive information about the loans.
Of course, when the bottom fell out of the market and people lost money, they resorted to the great American tradition of rushing to the courthouse and filing lawsuits against the banks. But these claims are not what you would expect for a “massive fraud.” The claims do not reveal any sort of a diabolical scheme of the banks pretending to sell “prime” loans when in fact they were selling “subprime” loans. No. Nothing like that. The banks clearly disclosed that they were selling riskier loans. Instead, the lawsuits seem more about the details around the edges, like the banks did not double-check things, or the loan files contained errors, or the number of loans in a given category did not exactly match the disclosure in the prospectus. But this hardly exposes any sort of a massive fraud that could have caused the financial crisis.
In fact, this whole claim of a massive fraud just doesn’t seem credible when considered with even a small dose of common sense. It just doesn’t pass the smell test. How could there possibly be a massive fraud in something as wide open as the housing market?
Fraud requires a hidden deception, but the credit standards banks use to make loans are widely known and readily available. Millions of people receive mortgage loans all throughout the nation all around us. Everything is out in the open in plain sight. Yes, it was easier to obtain a loan for a more expensive house, but everyone knew this. It was common knowledge. We all had friends and family who were buying bigger houses or repeatedly refinancing their mortgages for ever greater proceeds. This was hardly a big secret hidden away in order to perpetrate some sort of a massive fraud. That notion is simply absurd.
Then there is the little problem of the rating agencies, such as Standard & Poor’s, Moody’s, and Fitch. Before a bank issues bonds in a mortgaged-backed securities transaction, the bank presents all of the information to one or more independent rating agency that then analyzes the transaction from scratch and issues a rating on each class of bonds to signify the level of risk. The rating agencies are independent, third-party companies. Their entire business model is predicated upon them making sound financial judgments and their ratings being accurate. This makes it all the more unlikely that the banks could get away with any sort of a fraud scheme of trying to sell bad loans as good loans because the independent rating agencies analyzed every transaction separately.
So how does the conventional wisdom deal with this little problem? Well, as the popular tale goes, the rating agencies were in on the massive fraud along with the banks. So the banks would submit horrible loans, and the rating agencies would nonetheless fraudulently issue top triple-A ratings on this junk.
Really? So all of the various banks had some sort of a grand scheme cooked-up along with all of the independent rating agencies to commit a coordinated massive fraud? C’mon. It’s just not credible.
This is similar to the little problem of why no executives on Wall Street have gone to jail for causing the financial crisis. This is a favorite issue of the prophets of the conventional wisdom of the massive fraud by Wall Street. They love to hammer this point with a mob mentality. They are outraged at the injustice of it all. They want heads to roll. Send some bankers to jail!
But a fair society does not just send people to jail without proof beyond a reasonable doubt that they committed a crime. So, there is a perfectly reasonable explanation for why no executives on Wall Street went to jail. And that is, simply, because they committed no crimes.
Yes, Wall Street executives lost a lot of money for a lot of people. But that does not mean that they broke the law doing it. Sometimes markets go down. And sometimes markets go down a lot.
This is by far the most rational explanation. It just makes no sense that there was some sort of a massive fraud but now no one can figure out how that fraud was perpetrated. A fraud so enormous like this could not possibly remain completely concealed. The fact that no one can find any evidence of this massive fraud leads us to the obvious conclusion that, in fact, there was no massive fraud.
It also makes no sense to think that prosecutors discovered this massive fraud scheme, they know full well all about the heinous crimes that were committed and who committed them, but the prosecutors secretly decided not to charge anyone. Why in the world would they do that? It’s not that they are afraid to prosecute Wall Street. In fact, prosecutors certainly did not hesitate to aggressivelyprosecute executives on Wall Street only just recently for insider trading.
And just think of the massive conspiracy that this would require. The financial crisis has been endlessly examined by legions of investigators from all sorts of different authorities, such as financial regulatory agencies, the U.S. Department of Justice, federal prosecutors, and numerous state prosecutors. Many of these ambitious crusaders for justice would have loved to make a name for themselves by uncovering the fraud that caused the financial crisis and then jailing the Wall Street executives behind it. That would have been a huge career grand slam. But to think that all of these prosecutors and regulators are secretly conspiring to conceal from the public the massive fraud scheme that they uncovered? It just makes no sense. It is a wild conspiracy theory.
So if there was no underlying fraud on Wall Street, then what caused the horrendous financial crisis?
Well, the answer actually seems quite clear and simple, although it is rather disturbing.
The cause of the financial crisis appears to have been nothing more than . . .
Kathryn Schulz has an interesting profile in the New Yorker:
The first person in Sheridan, Wyoming, to learn that Hot Tamale Louie had been knifed to death was William Henry Harrison, Jr. The news came by telegram, the day after the murder. Harrison was the son of a member of Congress, the great-grandson of one President, the great-great-great-grandson of another President, and the great-great-great-great-grandson of one of the signers of the Declaration of Independence. Hot Tamale Louie was the son of nobody knows who, the grandson of nobody knows who, and the great-great-grandson of nobody knows who. He had been selling tamales in Sheridan since Buffalo Bill rode in the town parade, sold them when President Taft came to visit, was still selling them when the Russians sent Sputnik into space and the British sent the Beatles to America.
By then, Louie was a local legend, and his murder shocked everyone. It was front-page, above-the-fold news in Sheridan, and made headlines throughout Wyoming, Colorado, and South Dakota. It travelled by word of mouth across the state to Yellowstone, and by post to California, where former Sheridan residents opened their mailboxes to find letters from home-town friends mourning Louie’s death.
That was in 1964. Two years later, the killer was tried, found guilty, hanged, removed from the gallows, then hanged again. Within a few years after that, Louie, his tamales, his murder, and everything else about him had faded from the headlines. A half century passed. Then, late last year, he wound up back in the news.
The events that propelled him there took place in the town of Gillette, ninety minutes southeast of Sheridan. Situated in the stark center of Wyoming’s energy-rich but otherwise empty Powder River Basin, Gillette grew up around wildcat wells and coal mines—dry as a bone except in its saloons, prone to spontaneous combustion from the underground fires burning perpetually beneath it. Because its economy is tied to the energy industry, it is subject to an endless cycle of boom and bust, and to a ballooning population during the good years. The pattern of social problems that attend that kind of rapid population growth—increased crime, higher divorce rates, lower school attendance, more mental-health issues—has been known, since the nineteen-seventies, as Gillette Syndrome. Today, the town consists of three interstate exits’ worth of tract housing and fast food, surrounded by open-pit mines and pinned to the map by oil rigs. Signs on the highway warn about the fifty-mile-per-hour winds.
A couple of hundred Muslims live in northeastern Wyoming, and last fall some of them pooled their money to buy a one-story house at the end of Gillette’s Country Club Road, just outside a development called Country Club Estates, in one of the nicer neighborhoods in town. They placed a sign at the end of the driveway, laid prayer rugs on top of the wall-to-wall carpeting, and began meeting there for Friday worship—making it, in function if not in form, the third mosque in the state.
Most locals reacted to this development with indifference or neighborly interest, if they reacted at all. But a small number formed a group called Stop Islam in Gillette to protest the mosque; to them, the Muslims it served were unwelcome newcomers to Wyoming, at best a menace to the state’s cultural traditions and at worst incipient jihadis. When those protests darkened into threats, the local police got involved, as did the F.B.I.
Whatever their politics, many outsiders, on hearing about Stop Islam in Gillette, shared at least one of its sentiments: a measure of surprise that a Muslim community existed in such a remote corner of the country. Wyoming is geographically huge—you could fit all of New England inside it, then throw in Hawaii and Maryland for good measure—but it is the least populous state in the Union; under six hundred thousand people live there, fewer than in Louisville, Kentucky. Its Muslim population is correspondingly tiny—perhaps seven or eight hundred people.
Contrary to the claims of Stop Islam in Gillette, however, the Muslims who established the mosque are not new to the region. Together with some twenty per cent of all Muslims in Wyoming, they trace their presence back more than a hundred years, to 1909, when a young man named Zarif Khan immigrated to the American frontier. Born around 1887, Khan came from a little village called Bara, not far from the Khyber Pass, in the borderlands between Afghanistan and Pakistan. His parents were poor, and the region was politically unstable. Khan’s childhood would have been marked by privation and conflict—if he had any childhood to speak of. Family legend has it that he was just twelve when he left.
What he did next nobody knows, but by September 3, 1907, he had got himself a thousand miles south, to Bombay, where he boarded a ship called the Peno. Eight weeks later, on October 28th, he arrived in Seattle. From there, he struck out for the interior, apparently living for a while in Deadwood, South Dakota, and the nearby towns of Lead and Spearfish before crossing the border into Wyoming. Once there, he settled in Sheridan, which is where he made a name for himself, literally: as Hot Tamale Louie—beloved Mexican-food vender, Afghan immigrant, and patriarch of Wyoming’s now besieged Muslim population.
When Khan arrived in Sheridan, he and Wyoming were roughly the same age—the man in his early twenties, the state nineteen. At the time, the idea that anyone at all would move to the region was a novelty. Although Native Americans had lived there for millennia, Europeans didn’t visit until at least 1743, and they didn’t linger. As late as 1870, scarcely nine thousand people lived in the entire territory. The coming of the railroad, which was supposed to solve that population problem, temporarily exacerbated it instead. “Hundreds of thousands of people had seen Wyoming from train windows,” the historian T. A. Larson wrote, “and were spreading the word that the territory looked like a barren wasteland.”
That was particularly true in northeastern Wyoming. The rest of the state could be daunting, with its successive mountain chains rising like crests on a flash-frozen ocean. But at least it had grandeur, and verdure. In the east, by contrast, you could travel five hundred miles and not see a tree. Precipitation was similarly scarce. The Homestead Act offered Western settlers a hundred and sixty acres—not enough, in that landscape, to keep five cows alive. In winter, the mercury could plunge to fifty degrees below zero. People froze to death in blizzards in May. Frontier Texas, the saying goes, was paradise for men and dogs, hell on women and horses. Frontier Wyoming was hell on everyone.
Perhaps because it so desperately needed people, Wyoming was, from the outset, unusually egalitarian. Beginning in 1869, women in the territory could vote, serve on juries, and, in some instances, enjoy a guarantee of equal pay for equal work—making it, Susan B. Anthony said, “the first place on God’s green earth which could consistently claim to be the land of the free.” Despite resistance from the U.S. Congress, Wyoming insisted on retaining those rights when petitioning for statehood; in 1890, when it became the forty-fourth state in the Union, it also became the first where women could vote. On the spot, it acquired its nickname: the Equality State.
At statehood, Sheridan was a tiny settlement, just across the line from Montana, just east of the Big Horns, and otherwise very far from much of anything. But two years later, following rumors of coal (true) and gold (overblown), the population began to boom. By 1909, when Khan arrived, around eight thousand people lived there and, on the evidence of the local business pages, the town had developed a kind of frontier-cosmopolitan chic. It had seventeen Blacksmiths, one Bicycle Dealer, and five purveyors of Buggies and Wagons. It had a Clairvoyant—one Mrs. Ellen Johnston—and a great many Coal Miners. Residents could go Bowling, or to the Opera House, or visit a Health Resort. They could get a Manicure from a Mrs. Rosella Wood, who was also available for Massages. They could read two different newspapers—one Republican, one Democratic. They could buy Grain and Guns and Horses, Books and Stationery and Coffee, Camping Outfits, Driving Gloves, Musical Instruments, and Talking Machines.
But perhaps the most striking entry in the Sheridan business directory was the one tucked in between “Tallow and Grease” and “Taxidermists”: “Tamales.” When Zarif Khan first began selling them, he shouldered a yoke with a bucket swinging from each end and walked to wherever he could find customers: outside the bank at lunch, outside the bars at closing time, down at the railroad depot when the trains came in. Business was good enough that he soon bought a pushcart. By 1914, the Sheridan Enterprise was referring to him, inaccurately but affectionately, as “the well-known Turkish tamale vendor.” (In fairness, nearly all references to Khan’s nationality were inaccurate, including his own. Although he identified as Afghan and official documents pertaining to his life reflect that, his natal village was ceded to British India before his birth, and today belongs to the Federally Administered Tribal Areas of Pakistan.)
In 1915, or maybe the year after, Khan opened a restaurant—a hole-in-the-wall on Grinnell Avenue, around the corner from Main Street. The hand-painted lettering on the façade said “Louie’s,” and, forever afterward, that is what both Khan and his restaurant were called. . .
Do read the whole thing. It becomes increasingly fascinating in its examination of the contradictions in US naturalization policies. And then it comes to today, but now in context.
This is a hefty guy: 109g. Listing is here.