Sunday, February 20, 2011

It's Time to Have a Serious Conversation About Jim Flaherty and Goldman Sachs

Maude Barlow, with the Council of Canadians, once said that Chantel Hebert was the only progressive voice on Canadian television. The last thing I ever heard Hebert say was that she felt that Jim Flaherty was the most underrated politician on Parliament Hill.

I have never listened to another word from her and avoid her columns. If she told me the earth was round, I would have to rethink my position. But was her remark the result of lazy journalism, or was she, like most Canadians, simply brainwashed by the millions and millions of dollars in taxpayer funded advertising?

Who knows, but she was dead wrong. Next to Stephen Harper, Flaherty is the most overrated politician in the country. But with our money he has created a corporate branding. In the same way that we think of Nike as the company promoting fitness and athletic prowess, or Allstate as the all knowing father who keeps us safe in their hands, the Conservatives have successfully branded themselves as good fiscal managers, even when the facts show the opposite to be true.

But so long as we don't have to see the sweatshops where Nike shoes are made, or the people left high and dry by Allstate, we will continue to buy into the illusions.

Journalist and author Matt Taibbi has two excellent pieces in Rolling Stone magazine, one a year old and the other written just this week: Wall Street's Bailout Hustle and Why Isn't Wall Street in Jail?

I read them both last night and was astounded at how similar the stories are to what is taking place in Canada. In fact, many of the names are directly linked to our current government, the most prominent being Goldman Sachs.

So why is no one in the mainstream media doing an in depth piece on Jim Flaherty? Some have started writing about the sub-prime mortgage mess he's created, and the fact that he "secretly" bailed out our banks to the tune of $125 billion, but what he has actually done with Canadian finances could be a six-part miniseries, in the horror genre.

It's absolutely frightening.

Goldman Sachs
"Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy — they're re-creating the conditions for another crash" - Matt Taibbi (1)
In his piece Why Isn't Wall Street in Jail, Taibbi is incredulous that despite the so-called economic crisis being the result of unlawful and unethical behaviour, no one went to jail. Except of course Bernie Madoff, whose Ponzi scheme wasn't even really part of the the Wall Street highway robbery.
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
But what the folks on Wall Street did was rob from ordinary citizens, and yet no one went to jail. Apparently theft is legal if you really didn't need the money you stole. Madoff is now going public, claiming that the banks and hedge fund managers were in on his scheme, because they could have blown the whistle, but were making far too much money to risk losing a good thing.

And while all of the major U.S. banks were guilty of fraud, Goldman Sachs' activity was unique, because: "Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling."

I've written of this before so won't go into again, but I do want to draw attention to Jim Flaherty's unique relationship with GS and why this matters to Canadians.

Goldman Sachs and the Theft of Seniors Hard Earned Assets

By now, many of us are aware of the treachery of Stephen Harper and his promise not to tax income trusts. But what went on behind the scenes of this fiasco would probably make Bernie Madoff blush.

It started with the hiring of Mark Carney as a financial advisor. Carney, while a brilliant financier, was a long-time Goldman Sachs employee, who knew how to play the game.

Carney managed to convince Canada's finance department to close a tax loophole that allowed huge companies to boost their profits by converting themselves into tax-free income trusts — a practice that he claimed was "draining billions from government coffers". (2) He had first pitched the idea to Paul Martin, but a brilliant financier himself, Martin rejected the notion.
But Carney managed to persuade Conservative finance minister Jim Flaherty of its merits, and when the Tories made their surprise reversal in 2006, senior citizens, a core Tory constituency, were furious about the hit on their portfolios. (2)
The story was sold to Canadians as saving us money, and that the only victims were rich corporations. But the opposite was true. Rich corporations cashed in on the scheme to the tune of 35 billion dollars and the only victims were ordinary citizens, mostly seniors, many of whom lost everything.

What Carney did was rather clever. He found a way to exempt Goldman Sachs from the tax, and make a fortune off the unsuspecting Canadian taxpayer. Because when income trusts took a hit on the market, GS bought them up at the deflated prices. Carney then wrote the tax in such a way that 'private' investors would be exempt from the new rules, so GS simply made their new acquisitions 'private'. All others are subject to a 31.5% tax. (2)

And what about those savings we were supposed to enjoy? More smoke and mirrors. It has cost the Canadian taxpayer $1.2 billion in potential revenue, to solve an alleged tax leakage problem of $500 million. (3) Carney was rewarded with an appointment to the Bank of Canada, and Flaherty is constantly being rewarded with quotes from Carney that help to keep up the facade of him being a good financial manager.

He was a personal injuries lawyer for gawd sake, who almost bankrupted Ontario.

Meanwhile, those Canadian seniors are still without their hard earned assets. Only the already extremely wealthy, mostly Americans, saw any benefit.

And as we listen to the Conservatives blather about being tough on crime, as Matt Taibbi says:
Criminal justice, as it pertains to the Goldmans of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats.
What other decisions of Flaherty's came from Goldman Sachs, via their Canadian representative? How many others have struck it rich off the backs of the Canadian taxpayer?

Stick around, because this is only the first in a series about Jim Flaherty. The story that the Canadian media is afraid to speak of, preferring to become aiders and abettors in our victimization.

And to Chantel Hebert and others who believe that Jim Flaherty is underrated, do your homework. You're going to look awful stupid when the you know what hits the fan. And it will.


1. Wall Street's Bailout Hustle, By Matt Taibbi, Rolling Stone, February 17, 2010

2. Canada’s Merchant Banker: Is the recession really over? A profile of Bank of Canada governor Mark Carney, By John Lorinc, Walrus Magazine, Jul/Aug 2009

3. Mark Carney exempted Goldman Sachs from Flaherty’s income trust tax, CANADIAN ASSOCIATION OF INCOME TRUST INVESTORS, May 11, 2010

4. Still More Goldman Sachs Tentacles, Wall Street Selector, February 13, 2011

5. Why Isn't Wall Street in Jail? By: Matt Taibbi, Rolling Stone, February 16, 2011


  1. Thanks Em. It's a simple equation to make now. Flaherty = Goldman Sachs. Harper = Goldman Sachs.

    Cons=Goldman Sachs.

  2. There was a piece on Carney in Report on Business a few months ago and, later, one on Flaherty. Painting them as good guys of course.

  3. Haper’s rubber stamping MP puppets exposed

    In an appearance before the House of Commons finance committee Tuesday, Kevin Page expressed concern Parliament is approving justice and crime bills without knowing their full cost implications.

    He also noted MPs recently voted in favour of cuts in some departments without understanding the implications of their decision.

    “… Parliament is losing control of its fiduciary responsibilities of approving financial authorities of public monies as afforded in the Constitution.”

    Mr. Page said the PBO’s updated fiscal projections continue to show a deficit in 2016, contrary to the government’s promise to balance the books by then. He warned MPs, however, that the main concern facing Canada’s finances is long term because of the rising costs associated with retiring baby boomers.

    Mr. Page said the current “political climate” leads MPs to ignore these issues.

  4. The myth Steve Harper is competent is being debunked every day.

    I know it’s funny, but the Harper Conservatives have been spinning that tale of fantasy for five years now without a shed of evidence to support the claim. Their talking points say that they are prudent and responsible in matters of fiscal policy, responsible management of government, and competent stewards of the economy.

    Real economic conservatives don’t see the humour in this. They supported Harper on the premise that he was as advertised. What they got instead was a “Conservative” party under Harper that broke all its promises. Far from being competent conservatives, the Harper government has gone to town in an orgy of spending unprecedented in Canada’s history.

    And much of the increases took place well before the recession hit.

    Mr. Harper, with no practical or real world experience outside of the public payroll and never before having practiced economics, calls himself an “economist” because he has a degree from the University of Alberta.

  5. A good repost from: Not the Alliance 2:52 PM on February 2, 2011

    I am a market professional and myself and all of my colleagues and customers cringed when Harper opened his big fat mouth on Oct 8th 2008. Totally irresponsible.

    THEN, the goofball mentioned the "D" word on Dec 16th, 2008. Again, not very responsible when it would have been a good time for him to do his usual clueless lying.

    I posted the indices on the various dates earlier. I posted a link to the article where Harper talks about a possible DEPRESSION - and he did it at the market BOTTOM.

    He was a reverse barometer. If only he could be so perfectly clueless ALL the time.

    (Note my comment at 10:17 am that day)

    Do NOT try to sell the notion that the PM was "right". He wasn't. And a PM has no business trying to tell citizens it's a good time to invest - EVERYBODY has different goals, risk tolerance, etc. It was totally wrong and totally irresponsible.