It’s been quite a while since I’ve written a blog and a lot has happened over the past several weeks. Since I am at home on Thanksgiving break and away from school, I thought I’d jot down some of my thoughts on some of today’s pressing issues. I’m breaking this up into separate parts because there are a lot of things I’d like to cover. This post is Part 1.

ECONOMY:

A few weeks ago, McClatchy reporter Greg Gordon wrote a very scathing expose on Goldman Sachs. The report basically boils down to this: Goldman Sachs peddled more than $40 billion in securities backed by thousands of risky home mortgages to investors while betting that the U.S. housing market would crash, thus, leading to a large drop in the values of those securities. Goldman did this because it knew the transactions would bring the firm tons of money.

Here are a few passages from the first article that began the expose series of articles:

“In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.”

Here’s a summary of the main findings:

“McClatchy’s inquiry found that Goldman Sachs:

• Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.

• Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

• Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

• Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board’s blessing, AIG later used $12.9 billion in taxpayers’ dollars to pay off every penny it owed Goldman.

These decisions preserved billions of dollars in value for Goldman’s executives and shareholders. For example, Blankfein held 1.6 million shares in the company in September 2008, and he could have lost more than $150 million if his firm had gone bankrupt.

With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials’ demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.

Goldman announced record earnings in July, and the firm is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.”

The expose is too long for me to discuss in-depth but the above pretty much sums up the gist of it. Here are the series of articles published in McClatchy:

1. “How Goldman secretly bet on the U.S. housing crash” by Greg Gordon. McClatchy Newspapers, November 1, 2009.
2. “Goldman takes on new role: taking away people’s homes” by Greg Gordon. McClatchy Newspapers, November 2, 2009.
3. “Goldman left foreign investors holding the subprime bag” by Greg Gordon. McClatchy Newspapers, November 3, 2009.
4. “Why did blue-chip Goldman take a walk on subprime’s wild side” by Greg Gordon. McClatchy Newspapers, November 4, 2009.

I also recommend watching the videos shown in the articles and on The Real News Network. I posted some of the video segments below (the only I didn’t post is the one from the first article). I recommend watching the one about the Becker family and how Goldman Sachs played a role in the foreclosure of their home. Their courage to stand up to Goldman Sachs and get their house back is very amazing.

And since we’re on the subject of the economy, I think it’s worth mentioning this recent article published today in SocialistWorker that discusses the prevalence of hunger in the United States, especially during the recession. It points out:

“THE NUMBER of Americans vulnerable to hunger grew sharply in 2008 to nearly 50 million–or about one in every six men, women and children in the U.S.

The Agriculture Department’s official figures show that the number of people suffering ‘food insecurity’ last year jumped by more than one-third in just 12 months, reaching the highest level since the government began reporting this statistic a decade and a half ago.

About one-third of the 49 million people threatened with hunger were part of households that had what researchers call ‘very low food security’–meaning that one or more members of the household skipped meals, ate reduced portions or otherwise didn’t get enough to eat at some point in the year.

The rest of those counted as ‘food insecure’ typically ate enough, according to the report, but only by relying on cheaper or less nutritious foods, and by getting help from government programs like food stamps or from soup kitchens or food pantries…

…‘[F]ood insecurity’ in the U.S. isn’t confined to the poorest of the poor, as it is often portrayed.

So, for example, a separate federal study from the Agriculture Department’s annual report found that even before the recession began, ‘more than two-thirds of families with children who were defined as “food insecure” under federal guidelines contained one or more full-time workers,’ the New York Times wrote in an editorial. ‘This suggests that millions of Americans were trapped in low-wage jobs before the downturn that made it more difficult for them to provide children with adequate nutrition.’

Likewise, some 40 percent of U.S. families who receive government food stamps have ‘earned income,’ up from 25 percent two years ago, according to the Financial Times. Agriculture Department officials attribute this to the wage and hour cuts hammering even workers who still have jobs–the average workweek has fallen to 33 hours, the lowest on record, and a record 8.8 million people have to work part-time because they can’t find full-time work, according to the Labor Department…

One obvious sign of the recession-driven increase in ‘food insecurity’ is the record number of people participating in the government food stamp program–36 million people in the U.S. now get food stamps, a rise of nearly 40 percent in just two years…

Many turn to food banks or food pantries, where requests for help have surged 30 percent in just the last year. Feeding America’s Escarrra says her network of food banks served 25 million people, the majority of whom didn’t receive food stamps.

Shamia Holloway, communications manager at the Capital Area Food Bank that supplies agencies in the Washington, D.C., area, told the Financial Times: ‘People who used to donate to the food bank are now coming to the food bank. So imagine the shame–a lot of these people came from good jobs.’”

[You can view the USDA report on hunger here.]

An economic crisis caused by the greed-driven decisions of wealthy and powerful financial institutions such as Goldman Sachs (which BETTED ON the crashing of the U.S. housing market to make big bucks) has resulted in higher unemployment, home foreclosures and increased hunger. This is misery not just for the poor (who are usually atrociously overlooked in most mainstream discussions about the economy) but for people commonly considered to be middle class, as well. Those who hunger are being deprived of a human necessity and a fundamental human right – the right to food.

Article 11 of the International Covenant on Economic, Social and Cultural Rights states:

“1. The States Parties to the present Covenant recognize the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions. The States Parties will take appropriate steps to ensure the realization of this right, recognizing to this effect the essential importance of international co-operation based on free consent.

2. The States Parties to the present Covenant, recognizing the fundamental right of everyone to be free from hunger, shall take, individually and through international co-operation, the measures, including specific programmes, which are needed:

(a) To improve methods of production, conservation and distribution of food by making full use of technical and scientific knowledge, by disseminating knowledge of the principles of nutrition and by developing or reforming agrarian systems in such a way as to achieve the most efficient development and utilization of natural resources;

(b) Taking into account the problems of both food-importing and food-exporting countries, to ensure an equitable distribution of world food supplies in relation to need.”

Unfortunately, the United States (along with Belize, Comoros, Cuba and South Africa) has signed but not ratified this very essential treaty. For those of you who like visuals, view the map below, which I retrieved from Wikipedia.

This concludes Part 1.