Obama’s ‘bait and switch’ strategy: Propose bills that do the opposite. Why would Goldman Sachs like the bill?

GOLDMAN SACHS rallies for Obama in Wall Street 'reform'?

In his self-styled war against Wall Street, President Obama appears to have a powerful ally: Goldman Sachs.

The nation's largest investment bank, famously cozy with top government officials in both parties, has tipped its hand to its shareholders, indicating that major financial "reform" proposals will help Goldman's bottom line.

"Given that much of the financial contagion was fueled by uncertainty about counterparties' balance sheets," Goldman Chief Executive Officer Lloyd Blankfein and President Gary Cohn wrote in a letter at the beginning of the annual report, "we support measures that would require higher capital and liquidity levels, as well as the use of clearinghouses for standardized derivative transactions."

Goldman's executives are calling for two regulations here. First, they want the federal government to restrict free-wheeling, heavily leveraged, high-stakes financial risk taking. Second, they want government to set more rules of the road for trading derivatives -- financial products that are often complex.

These are the very "fat cats" to whom Obama directed his trash talk in January: "If they want a fight, that's a fight I'm willing to have." Well, it looks like they don't really want a fight. It looks like they want more regulation. The question is: What's in it for Goldman?

If you take Blankfein and Cohn's word, stricter federal liquidity and capital requirements would amount to regulators doing Goldman's work for Goldman. They want Uncle Sam to mitigate "uncertainty about counterparties' balance sheets." That is, they want the government to reduce the risk that Goldman's debtors or insurers will run into trouble.

This is an odd function of government: Making Goldman Sachs feel safer in its business dealings. Blogger Ira Stoll, at his Web site The Future of Capitalism, put it well:

"It's one thing for some elderly retail depositor to ask the FDIC to protect her from risk by guaranteeing bank deposits. But the idea that the government needs to run around setting capital requirements to protect Blankfein and Cohn from the risk that their counterparties might go under or get in a liquidity crunch seems a bit odd. Let them protect themselves."

Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/columns/Goldman-rallies-for-Obama-in-Wall-Street-_reform_-90957879.html#ixzz0lH1vmUJs