Dear Mr. Blankfein:
I was interested to see your company’s full-page advertisement in support of BuildAmerica Bonds in yesterday’s edition of the Politico newspaper that stated that GoldmanSachs is “one of the principal underwriters…" of Build America Bonds. The “jobs bill"that passed the Senate today contained an expansion and an increase in the subsidy levelsof the Build America Bonds program. This increased subsidy allows non-taxpayingentities to receive a check from the American taxpayers equal to either 65 percent or 45percent (depending on the amount of bonds issued) of these non-taxpaying entities’interest costs on Build America Bonds. The American Recovery and Reinvestment Actof 2009, more commonly known as the stimulus bill, allowed non-taxpaying entities toreceive a check from the American taxpayers equal to 35 percent of these non-taxpayingentities’ interest costs. The President has proposed in his most recent budget for nontaxpayingentities to receive a check from the American taxpayers equal to 28 percent ofthese non-taxpaying entities’ interest costs.
A Nov. 27, 2009, Bloomberg article by Jeremy R. Cooke stated that:
“States and municipalities paid an average 37 percent more to investment banks forunderwriting Build America Bonds than for handling tax-exempt sales since offerings ofthe subsidized taxable debt began in April…. ‘The large subsidy gives them leeway tocharge more because the issuer probably cares less about the underwriting fee,’" saidMatt Fabian, managing director and senior analyst at Concord, Massachusetts-basedindependent research firm Municipal Market Advisors. ‘They shouldn’t care becausefederal taxpayers will cover the difference. As a federal taxpayer, I’m highlyconcerned.’"
I, too, am concerned that American taxpayers are subsidizing larger underwriting fees forWall Street investment banks, including Goldman Sachs, as a result of the Build AmericaBonds program. I have raised concerns about the increased subsidy levels in the BuildAmerica Bonds program that passed the Senate today.
As “one of the principal underwriters" of the Build America Bonds program, pleaseanswer the following questions:
1. How much in total underwriting fees has Goldman Sachs collected to date onBuild America Bonds’ issuances?
2. How has Goldman Sachs determined its underwriting fees on Build AmericaBonds’ issuances?
3. Are these underwriting fees larger than the underwriting fees that Goldman Sachshas charged on tax-exempt bond issuances? If so, how much larger are theseunderwriting fees?
4. Has Goldman Sachs received any money, in addition to the underwriting fees, inconnection with the Build America Bonds program?
5. Does Goldman Sachs expect to receive additional underwriting fees if the BuildAmerican Bonds expansion and subsidy increase that passed the Senate today isenacted into law?
Thank you in advance for your prompt response to these questions.
Sincerely,
Charles E. Grassley Ranking Member
