Goldman, a Criminal Enterprise, But We Knew That
What I find so interesting about Goldman’s current travails is that most of it has been known almost since the housing bubble burst in August 2007. It didn’t take a rocket scientist to know there had to be something that stank about shorting the market at the same time Goldman was selling into it. Yet for a long time Goldman wasn’t condemned for this. It was praised for its perspicacity, which is really funny when you consider that it had to be saved at least twice by the government in the week when Lehman hit the wall. So as I was saying what is interesting is that only now has this image of Goldman as a corrupt and crooked operator crystalized, now that there some official charges out there. It could not happen to more deserving guys.
As someone who has been a critic of Goldman long before Matt Taibbi’s vampire squid article, I would like to point out that Goldman has been at the heart of every scam running on the Street.
1. Sitting in at the table in September 2008 on the AIG deal (heck, their use of AIG because the regular monolines wouldn’t touch their dreck) and then having Geithner sign off on payouts to Goldman among others at par in November 2008
2. Their involvement in the dark pools (Sigma X is the biggest player in them and guess who owns it?)
3. The use of computer frontrunning
4. The use of "huddles" to reward some customers and stiff others
5. Manipulation of oil markets (through its subsidiary J. Aron, and you wondered why gas was selling at around $3 a gallon in a recession)
6. Its involvement in the Greek sovereign debt crisis
7. Its revolving door penetration and control of both the Fed and Treasury (Remember how Hank Paulson former chairman and CEO of Goldman was Treasury Secretary when everything hit the fan, or how he put his mini-me Kashkari a 30 something Goldman exec who had followed him to Treasury in to head the TARP? Robert Rubin ring any bells? The list of the Goldman’s "public service" is long. Thank goodness, that’s all over. Oh wait, William Dudley Goldman’s former chief economist is the current president of the NY Fed and Mark Patterson who also is a Goldman alum is Timmy’s
minder chief of staff)
8. Its manipulation of stock markets by trading on its own account (acting like its own hedge fund) and also through its participation in the NYSE’s Supplemental Liquidity Provider program (So you wondered how those sudden late in the day "rallies" happened. Some exchanges are so effectively controlled that only an idiot like a pension fund manager would be stupid enough to invest in them)
9. And as long as we are on the subject of exchanges, the one that ICE has set up to handle derivatives is owned by Goldman and other big players.
10. Its history of stiffing investors by awarding employees monster size bonuses.
11. And of course it was Hank Paulson back in April 2004 who persuaded SEC head Christopher Cox to remove leverage limits (through elimination of the net capital rule, and we know how that turned out)
12. After Lehman blew up on September 15, 2008, Goldman and Morgan Stanley got their applications insta-approved just 6 days later on the 21st to become bankholding companies. This gave Goldman access to fat government credit lines and allowed them to pick up where they had left off.
13. However, when it became apparent that being a bankholding company might lead to some government oversight, Goldman changed its status yet again and became a financial holding company
14. Then of course we have the current fraud charges based on Goldman loading a CDO with dreck, selling CDS on it through ACA to John Paulson et al and then selling the toxic CDO to sophisticated investors, also known as fund managers and foreign banks, or rubes for short
15. Finally, there has been Goldman’s successful push with other big financial players against any meaningful financial reform. Some have said that the Goldman charges were a means to pre-empt a Wall Street effort to block reform. What this ignores is that both the Frank and Dodd bills are already empty vessels. Watching Democrats beat their breasts and accuse Republicans of being in bed with Wall Street is the kind of humorous hypocrisy and kabuki that many of us got used to in the healthcare debate or before that with the wars in Iraq and Afghanistan.
In any case, this is a list I made pretty much on the fly. Its purpose is to remind myself as much as anyone why enterprises like Goldman Sachs should not exist. They serve no useful social or market function. Not only do they not create wealth, they lead to great wealth destruction. They are completely and totally unreformable. We look at the bonuses and say that it only took them a year to go back to their old ways. The truth is that Goldman never gave up its ways. It found a new patsy, the US taxpayer, within days of the meltdown and the crony casino capitalist band played on.