Wednesday, October 17, 2012

When Warren Buffett Says Jump, Goldman CEO Blankfein Asks, "How high?"

Warren Buffett likes to give the impression that he is just a simple guy from Omaha, Nebraska.

Former FDIC chairman Sheila Bair, in her new book, Bull By The Horns, gives us a glimpse into Buffett the behind the scenes power player. The backstory here is that the FDIC was trying to raise money for ShoreBank. Bair writes:
Most of the major banks were investing [in ShoreBank], with the exception of Goldman Sachs and a few others, which had refused. I hit the roof. Goldman had made generous use of our debt programs as well as the Fed's lending facilities and Treasury's TARP capital investments...I felt that Goldman was more interested in taking than giving back. 
Around that time, the SEC had announced a major enforcement action against Goldman Sachs, based on its failure to disclose important information to investors about the risks of certain complicated securities deals. A few days later, Warren Buffett was quoted as defending Goldman's actions. I didn't know anything about the merits of the SEC's suit, but I wasn't feeling too charitable toward Goldman, so still in a snit, I called Buffett to question his defense of the institution. I was probably out of line, but I told him I was frustrated with Goldman's complete lack of interest in helping us recapitalize failing institutions.... 
I don't know what Buffett said or did, but literally, within an hour, Goldman CEO Lloyd Blankfein was calling me, asking if there was something he could do to help me. I recounted to him my disappointment that he had refused to participate in the ShoreBank capitalization ...Blankfein not only agreed to contribute but also to help recruit other investment interest. 
As an aside, if you are curious as to why Bair might have been so aggressive in pushing the ShoreBank bailout. Here are some fun facts via
A small bank in Chicago called SHOREBANK almost went bankrupt during the recession. The bank made a profit on its foreign micro-loans (see below) but had lost money in sub-prime mortgages in the US. It was facing likely closure by federal regulators. However, because the bank's executives were well connected with members of the Obama Administration, a private rescue bailout was arranged. The bank's employees had donated money to Obama's Senate campaign. In other words, ShoreBank was too politically connected to be allowed to go under. ShoreBank survived and invested in many "green" businesses such as solar panel manufacturing. In fact, the bank was mentioned in one of Obama's speeches during his election campaign because it subjected new business borrowers to eco-litmus tests. 
Prior to becoming President, Obama sat on the board of the JOYCE FOUNDATION, a liberal charity. This foundation was originally established by Joyce Kean's family which had accumulated millions of dollars in the lumber industry. It mostly gave funds to hospitals but after her death in 1972, the foundation was taken over by radical environmentalists and social justice extremists. 
This JOYCE FOUNDATION, which is rumored to have assets of 8 billion dollars, has now set up and funded, with a few partners, something called the CHICAGO CLIMATE EXCHANGE, known as CXX. It will be the exchange (like the Chicago Grain Futures Market for agriculture) where Environmental Carbon Credits are traded. Under Obama's new bill, businesses in the future will be assessed a tax on how much CO2 they produce (their Carbon Footprint) or in other words how much they add to global warming. If a company produces less CO2 than their allotted measured limit, they earn a Carbon Credit. This Carbon Credit can be traded on the CXX exchange. Another company, which has gone over their CO2 limit, can buy the Credit and "reduce" their footprint and tax liability. It will be like trading shares on Wall Street.
Well, it was the same JOYCE FOUNDATION, along with some other private partners and Wall Street firms that funded the bailout of ShoreBank. The foundation is now one of the major shareholders. The bank has now been designated to be the "banking arm" of the CHICAGO CLIMATE EXCHANGE (CXX). In addition, Goldman Sachs has been contracted to run the investment trading floor of the exchange.
So far so good; now the INTERESTING parts. 
One ShoreBank co-founder, named Jan Piercy, was a Wellesley College roommate of Hillary Clinton. Hillary and Bill Clinton have long supported the bank and are small investors. Another co-founder of Shorebank, named Mary Houghton, was a friend of Obama's late mother. Obama's mother worked on foreign MICRO-LOANS for the Ford Foundation. She worked for the foundation with a guy called Geithner. Yes, you guessed it. This man was the father of Tim Geithner, our present Treasury Secretary, who failed to pay all his taxes for two years. Another founder of ShoreBank was Ronald Grzywinski, a cohort and close friend of Jimmy Carter. 
The former ShoreBank Vice Chairman was a man called Bob Nash. He was the deputy campaign manager of Hillary Clinton's presidential bid. He also sat on the board of the Chicago Law School with Obama and Bill Ayers, the former terrorist. Nash was also a member of Obama's White House transition team. (To jog your memories, Bill Ayers is a Professor at the University of Illinois at Chicago. He founded the Weather Underground, a radical revolutionary group that bombed buildings in the 60s and 70s. He had no remorse for those who were killed, escaped jail on a technicality, and is still an admitted Marxist). 
When Obama sat on the board of the JOYCE FOUNDATION, he "funneled" thousands of charity dollars to a guy named John Ayers, who runs a dubious education fund. Yes, you guessed it. The brother of Bill Ayers, the terrorist. 
Howard Stanback is a board member of Shorebank. He is a former board chairman of the Woods Foundation. Obama and Bill Ayers, the terrorist, also sat on the board of the Woods Foundation. Stanback was formerly employed by New Kenwood Inc. a real estate development company co-owned by Tony Rezko. 
(You will remember that Tony Rezko was the guy who gave Obama an amazing sweet deal on his new house. Years prior to this, the law firm of Davis, Miner, Barnhill & Galland had represented Rezko's company and helped him get more than 43 million dollars in government funding. Guess who worked as a lawyer at the firm at the time. Yes, Barack Obama). 
Adele Simmons, the Director of ShoreBank, is a close friend of Valerie Jarrett, a White House senior advisor to Obama. Simmons and Jarrett also sit on the board of a dubious Chicago Civic Organization. 
Van Jones sits on the board of ShoreBank and is one the marketing directors for "green" projects. He also holds a senior advisor position for black studies at Princeton University. You will remember that Mr. Van Jones was appointed by Obama in 2009 to be a Special Advisor for Green Jobs at the White House. He was forced to resign over past political activities...
Curiously, in her book, while not identifying any of these connections, other than to say some considered ShoreBank an "Obama Bank," she did go out of her way to write in her book:
I certainly never received any pressure from anyone in the administration to help ShoreBank...
Interesting, though, earlier in the book she provides this other fun fact:
Obama also announced that Rahm Emanuel, a congressman from the Chicago area, would serve as White House chief of staff. Several months before, Rahm had reached out to me as an Illinois congressman to express support for my efforts on loan modifications and, in classic Chicago-style semantics, to assure me that he "had my back."


  1. How the world works. A case study.

  2. Is there much of a doubt that Bair is just a water carrier for the elite and connected? Where was the due diligence? Why did these people agree to post money based on a phone call from her? Does she honestly believe that was part of some sound decision making and these people weren't patronizing her?

    There's a level of disconnect with these regulators that's just fascinating. To be honest, if they're not taking advtantage of their position, it's probably to dumb to realize what's going on. And that in a nutshell is the hope for taxpayers at this point -- regulators not taking personal advantage are too dumb to realize they can.

  3. Truly sickening. And people still believe we live in a free country and not an oligarchy.

    1. Unfortunately, at present these are society's 'Winners' in terms of money and power. We live in the age of the state, where demand is created where there is none, where convenient saleable 'movements'(climate change) are used to enrich and empower the actors. Where foundations, and other tax dodge entities are funneled billions of fiat bucks. You are either a part of this small clique, or you are not, really no middle ground.

      How long it goes on is anyone's guess(maybe it's the New Global Normal in perpetuity).

  4. Shorebank? This is a story. CFSI. Payments system. Where's PEU Report?