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Tuesday, April 20, 2010

Commit Fraud, Get Free Money

Borrow at 0%, Lend at 3%, Make Billions

Is it customary, when someone is charged with fraud and awaiting trial, to leave them in possession of the victim's credit cards, and, indeed, to continue to allow them to spend and gamble the victim's money?

In the corporate arena, apparently the answer is "yes."

U.S. vs. Goldman Sachs

While the putative victims in the SEC's fraud case against Goldman Sachs are two institutional investors, the real victims are the millions of Americans who've lost their homes and jobs due to Wall Street's role in causing The Great Recession.

Yet Goldman Sachs, by virtue of its status as a "bank holding company," continues to have direct access to the Federal Reserve's discount window, where the cost of money is . . . . nothing (not coincidentally, what millions of thrifty Americans are currently earning on their hard-earned savings).

Goldman Sachs and other too big to fail banks can then take that free money and turn around and lend it back to the government -- taxpayers -- for a risk-free 3% (more if you add leverage).

How much of Goldman Sachs' just announced $3.5 billion quarterly profit was made in such a fashion?

How about, just for the sake of decorum, suspending Goldman Sachs' access to free Fed money, until it's cleared of the charges pending against it?

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