LIPINSKI QUESTIONS CHAIRMAN BERNANKE ON GOLDMAN SACHS
Taxpayers must be protected from Wall Street’s appetite for risk, Congressman Lipinski says
September 21, 2009
Congressman Dan Lipinski (IL-3) has joined nine of his colleagues in sending a letter to Federal Reserve Chairman Ben Bernanke seeking to protect taxpayers from the danger posed by investment bank Goldman Sachs' renewed embrace of high-risk trading strategies.
"The economic turmoil resulting from Wall Street's recklessness continues to cost American workers their jobs, yet Goldman Sachs appears to be indulging in the same kind of risk-taking that got us into this mess," Lipinski said. "We can't allow Wall Street firms to stick taxpayers with the bill for losses resulting from greed and short-sightedness, only to watch them turn around and report record profits and outrageous pay packages. Part of the reason I refused to go along with the bailout of Goldman and other big banks was that I believed it would encourage them to simply return to business as usual. Unfortunately, I was right."
Last fall, Goldman Sachs converted from an investment bank into an ordinary bank - seemingly a lower-risk enterprise - in order to obtain government assistance. But earlier this year the Federal Reserve granted it a temporary exemption from the rules that apply to ordinary banks, allowing it to continue engaging in risky trading. With the help of government funds, Goldman went on to post the biggest quarterly profit in its history and set aside enough money to pay its employees an average of approximately $770,000 each this year.
"The only difference between Goldman Sachs today and Goldman Sachs last year is that today the company is officially gambling with government money," the letter to Chairman Bernanke states. "This is the very definition of 'heads we win, tails the taxpayers lose.'"
The letter asks Chairman Bernanke for answers to a series of questions intended to help Congress and the public evaluate the consequences of the Federal Reserve's decision to allow Goldman to operate as an investment bank.
"If the crisis on Wall Street and the resulting recession have taught us anything, it is that we must rewrite the rules governing the financial system to prevent history from repeating itself," Lipinski said. "Goldman's recent behavior reinforces that. Apparently, the only lesson some banks have learned is that it still pays to gamble with other people's money."
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