Dear Mr. Blankfein:
I was interested to see your company’s full-page advertisement in support of Build AmericaBonds in yesterday’s edition of the Politico newspaper that stated that Goldman Sachs is “one ofthe principal underwriters…" of Build America Bonds. The “jobs bill" that passed the Senatetoday contained an expansion and an increase in the subsidy levels of the Build America Bondsprogram. This increased subsidy allows non-taxpaying entities to receive a check from theAmerican taxpayers equal to either 65 percent or 45 percent (depending on the amount of bondsissued) of these non-taxpaying entities’ interest costs on Build America Bonds. The AmericanRecovery and Reinvestment Act of 2009, more commonly known as the stimulus bill, allowednon-taxpaying entities to receive a check from the American taxpayers equal to 35 percent ofthese non-taxpaying entities’ interest costs. The President has proposed in his most recentbudget for non-taxpaying entities to receive a check from the American taxpayers equal to 28percent of these 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 for underwritingBuild America Bonds than for handling tax-exempt sales since offerings of the subsidizedtaxable debt began in April…. ‘The large subsidy gives them leeway to charge more because theissuer probably cares less about the underwriting fee,’" said Matt Fabian, managing director andsenior analyst at Concord, Massachusetts-based independent research firm Municipal MarketAdvisors. ‘They shouldn’t care because federal taxpayers will cover the difference. As a federaltaxpayer, I’m highly concerned.’"
I, too, am concerned that American taxpayers are subsidizing larger underwriting fees for WallStreet investment banks, including Goldman Sachs, as a result of the Build America Bondsprogram. I have raised concerns about the increased subsidy levels in the Build America Bondsprogram that passed the Senate today.
As “one of the principal underwriters" of the Build America Bonds program, please answer thefollowing questions:
1. How much in total underwriting fees has Goldman Sachs collected to date on BuildAmerica Bonds’ issuances?
2. How has Goldman Sachs determined its underwriting fees on Build America Bonds’issuances?
3. Are these underwriting fees larger than the underwriting fees that Goldman Sachs hascharged on tax-exempt bond issuances? If so, how much larger are these underwritingfees?
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 is enactedinto law?
Thank you in advance for your prompt response to these questions.
Sincerely,
Charles E. Grassley Ranking Member
