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goldman sachs
135.9 Million Reasons Why the Working Class Is So Angry
Workers know that when a private equity firm buys up the company at which they work or a stock buyback is announced, they are likely about to get kicked in the face.
Oct 06, 2024
Since 1993, 60.2 million workers who had been on the job for at least three years have been laid off, according to the Bureau of Labor Statistics. Another 75.7 million with less than three years tenure have also been let go.
In total, that's 135.9 million workers who know all too well the pain and suffering of a major disruption to their employment.
Working people understand that the periodic ups and downs of the economy can legitimately lead to job loss. But they also know that in many cases the reason they lost their job was not mismatches in supply and demand. Rather, their jobs were sacrificed to satisfy out and out corporate greed.
Private Equity and Greed
Workers know that when a private equity firm buys up the company at which they work, trouble lies ahead. Just ask the 33,000 workers at Toys 'R' Us, who lost their jobs when that fabled company was driven into the ground by KKR, a huge private equity company. KKR bought the toy giant for $6 billion in 2005. Five billion dollars of the purchase price was financed with debt, which KKR put on the Toys 'R' Us books.
It doesn’t take a rocket scientist (especially not the labor-averse space mogul Elon Musk) to design simple solutions that would provide some protection against needless mass layoffs.
Then the rape and pillage commenced, as Toys 'R' Us slashed costs to service the debt, pay KKR hefty management fees, and quickly fall behind its competition, Walmart and Amazon. Aliya Sabharwal, writing in the LA Times last year, tells us:
KKR and its partners sold off Toys ‘R’ Us real estate, pocketed the money and forced the retailer to lease back its buildings. Along the way, KKR and the other firms paid themselves $250 million in “management fees” and big bonuses to hand-picked executives — right before Toys ‘R’ Us entered bankruptcy.
This kind of corporate looting by private equity has, since the 1980s, happened thousands of times in all sectors of the economy, leading to the needless loss of millions of jobs. Researchers writing for the Becker Friedman Institute at the University of Chicago have found that, on average, employment shrinks by 13 percent when a private equity firm buys a public company. As Forbes notes,
All too often when private equity professionals tout their cost cutting strategies, they do not mention that cost cutting means firing people and taking away their livelihoods.
Stock Buybacks and Greed
Workers are also learning that when hedge funds buy up company stock and demand stock buybacks, there’s job trouble ahead. Just ask the 32,000 workers at Bed, Bath and Beyond, who saw their jobs evaporate to finance stock buybacks, over and over until the company was forced into bankruptcy and liquidation.
A stock buyback, which was essentially illegal until 1982, is a form of stock manipulation. A company uses its funds, or borrows money, to go into the market place and buy up its own shares of stock. By doing so, the number of shares in circulation goes down, while the earnings per share goes up. The stock price rises even though no new value was added to the company. The rise in the share price rewards company executives, who are mostly paid with stock incentives, and moves corporate wealth into the pockets of Wall Street investors.
Starting in 2004, Bed, Bath and Beyond spent $11.8 billion on stock buybacks that, in the short term, boosted the company’s share price and enriched the Wall Street stock-sellers who had pressured the company to buy back those shares. Even as the company struggled in 2022, it spent $230 million on stock buybacks, loading the company up with even more debt to finance them. In April 2023 the company declared bankruptcy. That July, the last store of what had been, in 2011, a chain of 1,142 stores closed
The same thing is happening right now with John Deere, the huge farm equipment manufacturer. Deere wants to move 1,000 jobs to Mexico, ostensibly to remain competitive in the international farm equipment market. But Deere is competitive now. The company posted $10 billion in profits in the 2023 fiscal year and paid its CEO $26.7 million.
The real reason Deere wants to discard workers and flee to Mexico is to finance the $11.6 billion in stock buybacks it committed to over the past year.
Reducing the use of mass layoffs to provide financing for corporate and executive looting would be a big win for working people.
In 2025, Goldman Sachs estimates that corporations will conduct more than $1 trillion in stock buybacks. Tens of millions of jobs will be sacrificed to shift all that money to the richest of the rich.
Solutions Are Easy to Find, But Political Will is not
It doesn’t take a rocket scientist (especially not the labor-averse space mogul Elon Musk) to design simple solutions that would provide some protection against needless mass layoffs. Here’s a list:
- The Security and Exchange Commission, which deregulated stock buybacks in 1982, should basically outlaw them again by limiting stock buybacks to no more than 2 percent of corporate profits. Today, nearly 70 percent of corporate profits go to stock buybacks.
- Debt used in leveraged buyouts should be limited to no more than 10 percent of the purchase price. That would protect workers from being sacrificed to service enormous debt loads.
- Add two simple clauses to the $700 billion of taxpayer money that goes for federal purchases of goods and services. It should read:
- No taxpayer money shall go to corporations that lay off taxpayers or conduct stock buybacks.
- For those companies receiving taxpayer money, layoffs must be voluntary, not compulsory, as is already the case for many white-collar employees.
Reducing the use of mass layoffs to provide financing for corporate and executive looting would be a big win for working people. Alas, we all know deep down that politicians are not about to bite the Wall Street hands that feed them. In the meantime, millions of workers will continue to be sacrificed on the alter of corporate greed.
When no political party dares to challenge Wall Street’s war on workers, there’s only one remaining alternative: working people need to build their own political movement just as the Populists did in the 1880s. There are 135 million reasons for doing so, and soon.
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No, Says Consumer Watchdog, Goldman Sachs Shouldn't Be Allowed to Sell Electricity
"It is highly concerning to see a large Wall Street bank enter a market known for its lack of consumer protection."
Nov 01, 2023
Federal regulators should not allow Goldman Sachs to become the first Wall Street bank to sell retail electricity contracts to U.S. households, a campaigner with Public Citizen argued Wednesday.
"Competitive retail electricity suppliers solicit households to sign contracts to provide electricity, often door-to-door," said Tyson Slocum, director of the consumer watchdog's energy program, in a statement. "The industry is known to frequently employ unfair and deceptive marketing and sales tactics, disproportionately impacting low-income communities, communities of color, and the elderly."
"It is highly concerning to see a large Wall Street bank enter a market known for its lack of consumer protection," declared Slocum, who also dove into problems with the competitive retail electricity industry and a related application to the Federal Energy Regulatory Commission (FERC) in a short essay.
The essay cites reporting from The Wall Street Journal as well as findings from the National Consumer Law Center and the Massachusetts attorney general that the "predatory" sector engages in greenwashing and problematic marketing strategies while saddling vulnerable people with higher utility bills.
"Key to Goldman's ability to make money from selling retail electricity to households is having a sizable financial power trading business buoyed by control over generation."
Industry issues are so bad, the essay notes, that Public Citizen joined with other advocates earlier this year in calling on the Federal Trade Commission to better protect consumer from misleading claims associated with home energy products.
Goldman Sachs is attempting to enter this troubling industry through a private equity firm that last month sought permission from FERC to make sales on behalf of Rhythm Energy—which, according to the application, is "a retail electric provider currently operating in Texas that is seeking to expand its business."
Slocum stressed Wednesday that "lawmakers have attempted to build a firewall between banks owning and controlling nonbank businesses. While Goldman is playing a game with shell corporations, there are very clear connections between Goldman Sachs, private equity firm West Street Capital Partners, and Rhythm Energy."
His essay details a "rent-a-director" scheme for shell companies and states that "Goldman Sachs—a bank holding company subject to regulatory oversight by the Federal Reserve—controls this private equity firm and is able to direct its holdings like Rhythm Energy despite the apparent conflict" with federal law.
"Key to Goldman's ability to make money from selling retail electricity to households is having a sizable financial power trading business buoyed by control over generation," the essay explains. "On October 24, FERC approved allowing Goldman Sachs to control GenOn's fleet of fossil fuel power plants out of bankruptcy (Avenue Capital Group, Prudential Financial, Graham Goldsmith's Cross Ocean, and Stone Point Capital-managed Trident Capital are the other firms controlling it along with Goldman)."
"While this push into selling retail electricity contracts to households appears to be the first by a Wall Street bank," the essay says, there are other examples from private equity firms and fossil fuel giants which show how "aligning control over wholesale markets with locking consumers into retail contracts can be lucrative."
The essay concludes that "Goldman Sachs clearly sees profits to be made selling American families electricity. The question is why the Federal Reserve is allowing Goldman Sachs to be in the business of marketing electricity to households."
As Slocum warned Wednesday, "Controlling both energy generation and building out a network of households that are contractually obligated to buy your energy is ripe for consumer abuse."
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Analysis Details How Wall Street Underwriting Quietly Funnels Billions Into Fossil Fuels
"Underwriting is a huge missing piece of net-zero transition plans, allowing big U.S. banks to continue to help fossil fuel companies raise billions of dollars with limited scrutiny," said one campaigner.
Jul 24, 2023
A report out Monday sheds light on how big U.S. banks' underwriting of bonds and equities for polluting corporations constitutes a "hidden pipeline" for fossil fuel financing.
It's no secret that financial institutions play a leading role in driving the climate emergency. Since 2016, the year the Paris agreement took effect, the world's 60 largest private banks have provided more than $5.5 trillion in financing to the fossil fuel industry, flouting their pledges to put themselves and their clients on a path to net-zero greenhouse gas emissions as the window to avert the worst consequences of the intensifying climate crisis rapidly closes.
But banks' underwriting activities receive far less attention than their direct lending practices, even though both are instrumental in enabling fossil fuel expansion and must be reformed to rein in the industry most responsible for imperiling the planet's livability.
That's the key takeaway from a new analysis of Wall Street's participation in capital markets published by the Sierra Club's Fossil-Free Finance campaign.
"By only focusing on emissions reduction targets for their lending activities, banks are conveniently excluding half of their fossil fuel financing from their climate commitments."
"Banks play a vital role in capital markets," the report explains. "Acting as underwriters, they are the gatekeepers of fossil fuel companies: they advise companies issuing bonds and equities, hold the vital information on the issuer, and help market the instruments to investors disclosing only the necessary risk."
Since 2016, the six largest U.S. banks—JPMorgan Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs—have provided more than $433 billion in lending and underwriting to 30 of the companies doing the most to increase fossil fuel extraction and combustion worldwide, the report notes. More than three-fifths (61%) of that financing comes from underwriting, with those half-dozen banking giants issuing $266 billion in new bonds and equities for the world's top 30 fossil fuel expansion firms.
Climate justice advocates have long criticized the concept of "net-zero" because, they argue, allowing planet-heating pollution to be "canceled out" via dubious carbon offset programs or risky carbon removal technologies is an accounting trick that doesn't guarantee the significant emissions cuts needed to avoid the climate emergency's most destructive impacts.
But even if one accepts the premise of net-zero, big U.S. banks' policies on the topic are misleading.
"Despite the importance of capital markets activities in helping fossil fuel companies secure new funding, banks focus primarily on lending, while downplaying the importance of underwriting, when setting their emissions reduction targets," the report says. "Banks are performing sleight of hand, distracting investors and regulators with net-zero transition plans that are half-finished, while continuing to funnel money to fossil fuel companies via capital markets with limited scrutiny."
In a statement, Adele Shraiman, senior campaign strategist with the Sierra Club's Fossil-Free Finance campaign, said that "without banks, fossil fuel companies cannot raise money through capital markets."
"By downplaying their role in capital markets and refusing to include facilitated emissions in their climate targets, big U.S. banks are intentionally sidestepping a major source of real-world emissions and making it impossible to meet their own net-zero commitments," said Shraiman.
According to the report: "Only three of the six major Wall Street banks include bond and equity underwriting in their sectoral emissions reduction targets—JPMorgan Chase, Goldman Sachs, and Wells Fargo. The remaining three banks have so far chosen to only apply emissions reduction targets to lending activities."
However, "even among those who have set emissions reduction targets that include underwriting, insufficient disclosures and lack of standardization make it difficult to understand how robust banks' facilitated emissions accounting methodologies are, and what progress they are making toward achieving their emissions reduction targets," the report adds.
In a blog post, Shraiman wrote that "banks don't want us to know all of the ways they help fossil fuel companies raise funds to continue building the pipelines, oil rigs, fracking wells, and coal mines that are destroying the climate and hurting communities."
"But investors, regulators, and customers around the world see through their duplicity," she continued. "We are demanding complete, robust, and transparent net-zero plans that cover all types of financing activities and will lead to real-world emissions reductions in line with our global climate goals."
"Banks don't want us to know all of the ways they help fossil fuel companies raise funds to continue building the pipelines, oil rigs, fracking wells, and coal mines that are destroying the climate."
Monday's report comes at a key moment in the fight to stop Wall Street from continuing to fund climate chaos.
As the Sierra Club observed, "Banks currently point to a lack of industry standards on underwriting to justify why they do not disclose or set targets for facilitated emissions." However, the industry-led Partnership for Carbon Accounting Financials is expected to release its updated methodology on accounting for and reducing facilitated emissions in the near future.
"Underwriting is a huge missing piece of net-zero transition plans, allowing big U.S. banks to continue to help fossil fuel companies raise billions of dollars with limited scrutiny," Shraiman said. "By only focusing on emissions reduction targets for their lending activities, banks are conveniently excluding half of their fossil fuel financing from their climate commitments."
"It's time," she added, "for the major Wall Street banks to adopt a robust and consistent methodology for accounting facilitated emissions, and take full responsibility for the climate impacts of their underwriting decisions."
The International Energy Agency has stated unequivocally that there is "no need for investment in new fossil fuel supply in our net-zero pathway."
After the Intergovernmental Panel on Climate Change released its latest assessment in March, United Nations Secretary-General António Guterres said that limiting temperature rise to 1.5°C is possible, "but it will take a quantum leap in climate action," including a ban on approving and financing new coal, oil, and gas projects as well as a phaseout of existing fossil fuel production.
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