Back in September, the Federal Reserve allowed Goldman (and a few other surviving institutions) to convert from an investment bank into a bank holding company. The Wall St. Journal claimed at the time that the move meant the firm would "come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed."
Now, a mere nine months later, Goldman is boasting of "blowout profits." So much for "less profitability." As for allegedly greater regulations and capital restrictions, they freely admitted from the start: "'We don't believe we'll have to get out of any businesses." Adds Morgan Stanley's MarkLake, 'There will not be much in terms of divestitures'."
But what the conversion into being a bank holding company did allow was access to secret lending from the Federal Reserve: Since Goldman's conversion, the Fed has lent out $2 trillion while steadfastly refusing to disclose the beneficiaries of that credit. Thus, even in addition to the bailout money it directly received, and the billions in bailout money that it indirectly received (through AIG), Goldman has probably had access to massive amounts of under-the-table Fed lending that helped fuel its now bulging profits.
And quite likely it is this unimaginably enormous (though largely secret) Fed lending that probably gave rise to the Ron Paul-sponsored bill to audit the Fed -- a bill that is now co-sponsored by a majority of House members from across the political spectrum (progressive, conservative and everything in between), yet which continues to be blocked by Congressional leaders that have essentially been paid off by the likes of Goldman Sachs.
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So why doesn't President Obama direct our attorney general to open an investigation of Goldman Sachs' behavior in the area of securities fraud, insider trading, and misuse of government funds? Without an official inquiry into financial misconduct of this company, and others, public anger and confusion will likely overwhelm any attempts to transform our contracting economy and the president's ability to manage it. And that's just the way boss Goldman wants it.
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