Wednesday, May 19, 2010

Truth About California’s Gubernatorial Election 2010

California is renowned for all the obvious reasons. As the most populous state in the United States, California holds unprecedented power: often estimated as roughly the eighth largest economy in the world, the region is the second largest national subentity on the globe, behind Sao Paulo, Brazil. Californians mostly dwell on the concrete islands that constitute the Los Angeles-San Diego and San Francisco-San Jose agglomerations, artificial human constructs which are products predominantly of last century. With an economy roughly the size of Italy's, California makes up one of the U.S.'s "FnCOMA" states (Florida, Nevada, California, Oregon, Michigan and Arizona). Between two ages, California today sits at distinct crossroads. Will the 59th largest political entity in the world work for a fairer world or will its superlative-filled ecology—the state boasts the largest, tallest and oldest trees—have its destiny dictated by the most efficient paths to profit by an increasingly consolidated state-enterprise, working as a rule out of New York, City of London, France, and Germany?

That, as of 2005, 57.59 per cent of California residents age five and older spoke English as a first language at home, while 28.21 per cent spoke Spanish, indicates the degree to which the modern keystone border doesn't divide nation-states and citizens of nations. The world's true borders divide the generations living at one time, families and, of course, entire people's based on something as shallow as the color of one's skin, which is an illusion basically conjured by the sun, melanin and time. Nation-states are units of control, influenced as a rule by transnational entities, such as corporations, foundations and think tanks. Today, nearly all of the premiere conglomerations and their subsidiaries—from banking and finance, military and security, to agriculture and medicine—all act as if they're one, influencing the markets and therefore everyday commerce. The current poster-child for such "market making" corporations has been Goldman Sachs, and for considerably good reason. In California, the news is no different: all three leading candidates in the race do business with G-Sachs; they are, Meg Whitman (R), Scott Poizner (D), and Jerry Brown (D). We'll begin with the multi-billionaire CEO, Meg Whitman.

Of her long record of involvement with Goldman Sachs, Whitman says she "regrets" doing business with the investment and securities firm. Whitman, former CEO of eBay, served on Goldman's board from October 2001 to December 2002. The position paid $475,000 in cash and stock options. Still earlier in 1998, she had hired Goldman to advise eBay's Initial Public Offering. The firm advised a second eBay stock offering and also helped the takeover of online biller PayPal in 2002. Meanwhile, Whitman was also a personal banking client of Goldman and engaged in "spinning," a now-illegal practice in which the bank enabled her some of the first shares in companies going public. Once the shares were made widely available, their prices soared. Thus, stock belonging to preferred clients such as Whitman was sold for a quick profit. Whilst spinning was legal, Whitman made $1.78 million through it. [1]

In the LA Times, Michael Hiltzik ponders Whitman's involvement with Goldman Sachs:

Eight years ago, it came out that Whitman was among an elite group of favored executives who had accepted preferential stock deals from Goldman Sachs while it was seeking business from their companies.

In spinning, executives would typically get shares in coveted initial public stock offerings, which they would "spin," or resell, into a soaring market, usually within days and sometimes within hours. Their quick and almost entirely risk-free profits were effectively gifts, and the investment banks the givers.

Whitman attempted to dodge responsibility for her actions by claiming that there was "nothing illegal" about them at the time.

"Such investment opportunities were common at the time," Whitman wrote in her autobiography released this year. "And I had never seen anyone in the government, the media, or anywhere else raise the idea that this practice was a conflict of interest."

In 2002, Congress looked into spinning, and, a year later, the Securities and Exchange Commission banned it. "I supported those changes," she insisted in her book. The day she left the Goldman Sachs board, the government announced a $1.4 billion settlement with Goldman and nine other firms that included a ban on stock spinning. EBay shareholders sued Whitman for conflict of interest. She maintained that she received insider information only through her personal banking relationship with Goldman. Whitman and two other eBay executives settled the suit in 2005, having admitted no wrongdoing.

Seventy-three percent of Americans believe it to be "somewhat likely" that Goldman is guilty of fraud in the home mortgage market after hearing of the Securities and Exchange Commission's lawsuit against the firm last week, says a Rasmussen poll. 75% also don't oppose the auditing of the Federal Reserve, in which Goldman holds stock, according Bob Chapman of the International Forecaster. [2]

Whitman has publicly received $110,500 in campaign contributions last year from Goldman contacts, among whom are two former executives who are members of Whitman's campaign finance committee, according to her website. Investment adviser Brad DeFoor, a Goldman Sachs managing director in San Francisco, gave her campaign $24,900 and Gene Sykes, who co-chairs Goldman's global mergers and acquisitions group in Los Angeles, donated $25,900.

Further, records detail that Whitman's family foundation is managed by a subsidiary of Goldman Sachs, the Ayco Company out of New York,that manages money for wealthy families, according to the description on its website. The Griffith R. Harsh and Margaret C. Whitman Charitable Foundation had $48 million in assets at the time of its 2008 tax filing.

"It is highly disingenuous and hypocritical for Team Brown to make accusations surrounding Meg's service on a board for only 15 months nearly 10 years ago, when Jerry Brown's own sister oversees Goldman Sachs' dealings with the state of California," said Tucker Bounds, a spokesman for Whitman. Brown's sister, Kathleen Brown, has led the West Coast region of municipal finance for Goldman Sachs since 2003.

"Unsurprisingly, Meg Whitman and her campaign is once again trying to avoid her taking responsibility for her actions. Jerry's sister is an adult who needs no one's permission to take a job," said Jerry Brown's campaign spokesman, Sterling Clifford.

His sister oversaw a deal with the city of Oakland, where he "served" as mayor for eight years. The deal, known as an "interest rate swap," was advertised as guaranteeing Oakland stability in its debt payments, but now costs the cash-strapped city $5 million a year. The agreement goes until 2021, with an estimated cancellation cost of $19 million. The city is trying to renegotiate it, and union officials representing government employees are calling on Goldman to let Oakland and other municipalities free of such agreements.

The swap, like those of many governments, began in 1998, one year before Brown assumed office. City officials renegotiated it in 2003, just before his sister, who was also a former state treasurer, began working for Goldman as the West Coast head of municipal finance. In 2005, when the city paid off the debt Goldman had packaged, it left the interest rate swap in place. Municipal servants argued the decision made sense because they would have had to pay $15 million to cancel the deal. In doing so, a major revenue stream for Goldman Sachs remained in place, benefiting them further during the Downturn, while hurting the city.

Bounds called the agreement "a big-money deal for Wall Street that is costing California taxpayers millions of dollar a matter how you look at it, Jerry and his sister were on both ends of a bad deal for taxpayers, and Goldman Sachs pocketed millions." Not only was Brown mayor, responsible for appointments to city administrator and finance officials who oversaw the city borrowing, Brown was president of the Oakland Joint Powers Financing Authority, though in a non-voting capacity, as it renegotiated the deal and repaid Goldman's debt in 2005. Sterling Clifford, Brown's campaign spokesman, claimed he was not involved.

Poizner borrowed $500,000 to finance his 2004 state assembly race with the help of Goldman Sachs, and state financial records detail his history of investments with the firm. "Attacking a candidate for flimsy ties to a private company is exactly what you would expect from a desperate liberal - and I guess that includes Steve Poisner, too," said Whitman's spokesman, Bounds.

Looming in the shadows of campaign rhetoric, is the continued collapse of California. Almost one year ago, the state government was so deeply indebted that it began to issue IOUs instead of wages. It's current unemployment rate nudges 30 per cent. Unannounced and generally ill-perceived austerity measures and structural adjustments have commenced, with spending for education and healthcare slashed, mass layoffs and forced unpaid leave. An epicenter of suburban living, the housing bubble collapse has impoverished millions and forced tens of thousands of families out of their homes. The political system "is locked in paralysis" and the two-term rule of former movie star Arnold Schwarzenegger seen as a disaster. Professor Kevin Starr, who wrote an acclaimed history of the state, recently stated that "California is on the verge of becoming the first failed state in America."

Starr has a history of mulling over the future of the golden state. In 1988, following three years of debate, a who's who of corporate and civic celebrities handed to then Mayor Bradley a detailed plan for the future of Southern California. L.A. 2000: A City for the Future devotes itself to hyperbolic rhetoric about Los Angeles's certain destiny as a "world crossroads" a la imperial Rome or LaGuardian New York. In a section of the epilogue, Starr, showing his colors as a devotee of totalitarian measures, considered what might happen if the city failed to create a new "dominant establishment" to manage the city and regions diverse peoples. He wrote, "there is, of course, the Blade Runner scenario: the fusion of individual cultures into a demotic polyglotism ominous with unresolved hostilities."

At, there is a list of Goldman Sachs cronies who have worked as U.S. government officials. To be sure, an international version of the list would show connections with key players in countries such as Germany and Greece, as a small example. U.S. connections from LittleSis: [3]

Gary D Cohn
President and COO of Goldman Sachs
Pete Coneway
Investment Banker, Goldman Sachs & Co
Diana Farrell
Deputy director of Obama's National Economic...
Jose Fourquet
Investor, Goldman Sachs & Co.
Stephen Friedman
Chairman of Stone Point Capital; director of...
Gary Gensler
ex-Goldman Sachs executive, Chairman of Commodity...
Dick Gephardt
US Representative from Missouri
Bob Hormats
Under Secretary of State for Economic, Energy,...
Robert J Hurst

Reuben Jeffery III
Undersecretary of State for Economic, Energy, and...
James A Johnson
Vice Chair of Perseus and Goldman director;...
Neel Kashkari
Treasury official in charge of TARP; former...
James C Langdon Jr
Senior Executive Partner at Akin Gump and Bush...
Philip D Murphy
Ambassador to Germany-Designate
Mark Patterson
Chief of Staff to Tim Geithner
Henry M Paulson Jr
Secretary of Treasury under George W Bush; former...
Karthik Ramanathan
Domestic Finance: Acting Assistant Secretary for...
Robert E Rubin
Former Treasury Secretary and senior advisor at...
Faryar Shirzad
Global Head of Government Affairs at Goldman...
Robert K Steel
CEO of Wachovia; Under Secretary of Treasury...
Adam Storch
SEC Chief Operating Officer; former Goldman Sachs...
Larry Summers
Director of the National Economic Council ...
John Whitehead
Banker and public official (ex-Goldman Sachs)
Robert Zoellick
US Trade Representative and World Bank president...

The allegations against Whitman and her ties to G-Sachs have received the most press. For that reason, desperation is setting in at her campaign headquarters. In Roseville on Monday, she told a small audience that she would appoint a grand jury to eliminate the more than $7.5 billion in fraud she claims occurs every year in programs for the poor, seniors, and people with disabilities. Many claim, however, those numbers have little or no basis in reality. [5]

Greg Lucas analyzed her claim from California's Capitol:

Logic suggests hospitals, case workers, emergency room physicians, state administrators, nurses, drug companies, employment training facilities, childcare providers, in-home care workers and the myriad other participants in the three programs would have to work serious overtime to do their jobs and bilk the state 60 cents on the dollar.

SEIU State Council Communications Director Mary Gutierrez:

If Meg Whitman were truly committed to protecting taxpayer dollars, she'd be fighting to protect home care services that fare more cost-effective and compassionate than the alternative -- forcing people with disabilities and our elderly into nursing homes at five times the cost.

In 2008, Goldman Sachs was criticized for proposing ways for investment clients to profit from California's financial Downturn. It urged some of its biggest clients to place investment bets against California bonds despite having collected millions of dollars in fees to help the state sell some of those same bonds. Goldman Sachs financial transactions in Greece reveal that such trades are a uniform policy in Goldman Sachs’s international business model.

1. Jamison, Jane. Meg Whitman's Troubling Connection to Goldman Sachs. Red County, 30 April 2010

Accessible at:

2. Marinucci, Carla; Williams, Lance. Whitman feels heat as Goldman's image tarnishes. SFGate, 22 April 2010.

Accessible at:

3. O’Connell, Justin. Profiling the Power-That-Be. DissidentVoice,

Accessible at:

3. Rothfeld, Michael. Whitman, Brown have ties to Goldman Sachs. Los Angeles Times, 24 April 2010.

Accessible at:

4. Harris, Paul. Will California Become America's First Failed State? Guardian UK, 4 October 2009.

Accessible at:

5. Smith, Steve. Whitman Uses Bogus Claims of Fraud to Attack Workers, Seniors and People with Disabilities. California Progress Report, 18 May 2010.

6. ______. Firm urged to hedge against state bonds it helped sell. Los Angeles Times, 11 November 2008.

7. Liberto, Jennifer. Fed probing Goldman trades with Greece. CNNMoney, 25 February 2010.

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