The Breakdown | Explaining Southern California's economy

Did Goldman Sachs get a back-door bailout during the financial crisis?

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Goldman Sachs has been much in the news the past few days, what with Greg Smith's Muppets op-ed and the passing of the Fed's stress tests. Now Hank Greenberg, the former head of AIG who saw the firm he built completely destroyed during the financial crisis, comes pretty close to accusing Goldman of fraud, in the above clip from Bloomberg TV. He also says Goldman got a back-door bailout during the financial crisis — at the terminal expense of AIG. 

Worth watching, just to see what an old Wall Street hand — one no stranger to controversy himself — thinks of the new Wall Street.

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Sorry, small business — liquor stores can increase crime

A group of activists say there are too many liquor stores in Boyle Heights.
Grant Slater/KPCC

KPCC's Ruxandra Guidi did a story on Tuesday about Boyle Heights and its liquor store problem. To summarize, a group of activists believes that the concentration of liquor stores in the neighborhood is far too high, that this leads to crime, and that the issuance of new liquor licenses should be limited.

Initially I thought this was a good example of the vice league standing in the way of market forces — and small business, to boot! There may be a lot of liquor stores in Boyle Heights, a neighborhood east of Downtown L.A., but they pay taxes and probably employ one or several people in addition to the owner. True, they may be preying on the area. But then again, if you want to open a liquor store or establishment that serves alcohol, you want to go where the customers are.

However, this is one of those cases where the public good trumps the free market. Some undated research done by Kathryn Stewart of the Pacific Institute for Research and Evaluation demonstrates that there's a link between alcohol outlet density and violence:


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Trackback: Is the California lottery's $200 million jackpot worth a shot?

Courtesy of the California Lottery

The jackpot for the Mega-Millions jackpot is now $200 million, and there's a drawing on Friday. This probably has lots of folks out there asking themselves, "Should I buy a ticket?" I tackled this question last December, and I haven't changed my thinking. So I'm reposting — and pointing out that the jackpot is TWICE as big now:

The California lottery's Mega Millions jackpot is up to $100 million (Mega-Millions is actually a multi-state lottery, an aggregate of 42 lotteries). That's a pretty nice chunk of change and should bring out many more players, even infrequent ones — and even ones who never play. What we're talking about here are the people who understand the odds against winning. So why would they change their minds, simply because the jackpot has crossed a threshold?

For starters, you have to understand why these folks don't play. The site Strange Loops explains:


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Actually, the Muppets ARE Goldman Sachs clients

That's not a Goldman Sachs executive behind the wheel.
Frederick M. Brown/Getty Images

Yesterday's big news in the financial world wasn't Apple stock climbing above $600 per share — it was the op-ed resignation letter to end all resignation letters penned by former Goldman Sachs executive Greg Smith, in which he savaged the Vampire Squid and accused it of betraying its clients. 

According to Smith, Goldman clients aren't clients — they're routinely referred to as "Muppets."

Goldman lost $2 billion of market value in a hurry as the news circulated through the Muppet Theater.

No word on whether there is or ever has been a Vampire Squid Muppet in the works. They've already got Count von Count, after all. You could probably just add a few more arms and a blood funnel.

However, it turns out that calling clients Muppets, in Goldman-speak, isn't necessarily the insult that it sounds like at first. Because the Muppets are Goldman clients. I'm not kidding.


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Invest with James: Spreadsheets for kids — for real

James can't wait to get his hands on a spreadsheet. Right after he gets done with Angry Birds.
Matthew DeBord

Another great post from Fred Wilson, a successful venture capitalist and partner at Union Square Ventures in New York. This one has nothing to do with startups or high-risk/high-reward finance and any of the nice juicy VC stuff. This one is all about...budgets. Budgets...for kids! Here's Fred:

For a long time, probably the first fifteen years of our life together, [my wife and I] lived paycheck to paycheck. Sometimes it was two paychecks, other times it was one. For a brief period as I was starting Flatiron, it was none. I got shingles that year.

As our income went up and down, our spending had to do the same. I created "fredsheets" that we looked over, debated, discussed, and then adjusted and signed off on. Then we created budgets so that each of us would live to these spending plans. It worked. We always made it to the next paycheck. Many times by the skin of our teeth.

In the second fifteen years of our life together, we've had the pleasure of living in a different financial situation. But we still use budgets. We created budgets for our kids which they live up to. We created budgets for our real estate projects, our angel investing, art collecting, and so on and so forth.


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