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More about “Government Sachs” (they own America; we just live here)

31 July 2009

Few things so powerfully illustrate the cowardly passivity of modern Americans than the lack of response to the news about Goldman Sachs.  It’s OK to get angry, America!

Here are some of the major volleys to date in this emerging story.  Of course, few signs of this surface in the mainstream media – journalists dying a just and well-deserved death for their failure to cover the new important to America.  the poor fools relying on them for information are the last to know anything of importance.

Contents

  1. The Rolling Stone article that sparked what has grown into a wildfire
  2. A letter from Goldman to the rest of us, by Michael Lewis, Bloomberg, 28 July 2009
  3. Tenacious Goldman“, Joe Hagan, New York Magazine, 26 July 2009 — “Inside Goldman Sachs, America’s most successful, cynical, envied, despised, and (in its view, anyway) misunderstood engine of capitalism.”
  4. More articles about Goldman by Matt Taibbi

Excerpts

(1)  The article that sparked what has grown into a wildfire:

  • The Great American Bubble Machine“, Matt Taibbi, Rolling Stone, 2 July 2009  — From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they’re about to do it again

(2)  A letter from Goldman to the rest of us, by Michael Lewis (author of Liars Poker), Bloomberg, 28 July 2009 — Excerpt:

Today, the sheer volume of irresponsible media commentary has forced us to reconsider our public-relations strategy. With every uptick in our share price it’s grown clearer that we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours.

America stands at a crossroads, and Goldman Sachs now owns both of them. In choosing which road to take, ordinary Americans must not be distracted by unproductive resentment toward the toll-takers. To that end we at Goldman Sachs would like to dispel several false and insidious rumors.

Rumor No. 1: “Goldman Sachs controls the U.S. government.”

Every time we hear the phrase “the United States of Goldman Sachs” we shake our heads in wonder. Every ninth-grader knows that the U.S. government consists of three branches. Goldman owns just one of these outright; the second we simply rent, and the third we have no interest in at all. (Note there isn’t a single former Goldman employee on the Supreme Court.)

(2)  Tenacious Goldman“, Joe Hagan, New York Magazine, 26 July 2009 — “Inside Goldman Sachs, America’s most successful, cynical, envied, despised, and (in its view, anyway) misunderstood engine of capitalism.”  Excerpt:

Of course, it will take a lot more than that to truly dampen Goldman’s influence in Washington. As financial writer Michael Lewis recently said, the Obama administration, led by Geithner and the White House’s National Economic Council director, Larry Summers, continues to operate from an economic worldview shaped by people who believe that the world can’t function without Goldman Sachs. Goldman also has a key ally in Obama’s chief of staff, Rahm Emanuel, a former investment banker and onetime adviser to Goldman Sachs who frequently solicited campaign funds from the firm while working with the Clintons. And in mid-July, the week Goldman Sachs announced its massive second-quarter profits, the administration quietly hired Robert Hormats, another Goldman executive, as an economic adviser to Secretary of State Hillary Clinton.

Ultimately, Goldman Sachs probably still has the nod and the wink it needs to continue to rake in profits with impunity. And even if tighter regulations do pinch the firm, it has a long history of figuring out how to prevail in any regulatory environment. If [you] looked at the history of regulatory changes that have happened,� says Rogers, they’ve improved the markets by and large, and Goldman Sachs actually benefited historically from all those changes.

The idea that things might just go back to the way they’ve always been on Wall Street is, of course, infuriating to those who had hoped the financial meltdown would be an opportunity for reform. A few days after Goldman reported its second-quarter profits, Eliot Spitzer, a critic of the AIG bailout, tells me: If all we are getting are newly empowered and capital-rich hedge funds that benefit from market volatility, then we are not only rebuilding the same edifice, but we’re contributing to the underlying rot in our economy.

(3)  More articles about Goldman by Matt Taibbi

Ex-SEC chief reincarnated as Goldman Sachs policy adviser, 4 June 2009 — Excerpt:

Well, here’s something amazing. It’s like protocapitalist buddhism: the endless life-cycle continues. Clinton’s SEC chairman, the man who powdered his nose and fondled himself for years and years while companies like Goldman Sachs bilked America with one “Bullshit.com” IPO after another, is now going to work for… wait for it… Goldman, Sachs. Nothing like years of hideously ineffectual non-enforcement to attract those lucrative Wall Street job offers!

The Greatest Non-Apology of All Time, 18 June 2009 — Excerpt:

Anyone else out there find himself doubled over laughing after reading Goldman, Sachs chief Lloyd Blankfein’s “apology” for his bank’s behavior leading up to the financial crisis? Has an act of contrition ever in history been more worthless and insincere? Even Gary Ridgway did a better job of sounding genuinely sorry at his sentencing hearing — and he was a guy who had sex with dead prostitutes because it was cheaper than paying live ones.

On giving Goldman a chance, 30 June 2009 — Excerpt:

Goldman’s rep: “we are painfully conscious of the importance of being a force for good.”
Taibbi: “{That} is not quite the same thing as saying that that bank is a force for good, or wants to be.”

Goldman Sachs is reeling under public pressure, 2 July 2009 — Excerpt:

After watching its thoroughly maladroit handling of several p.r. problems this week, I’m absolutely convinced that Goldman Sachs can be hurt if enough people keep piling on with the pressure. The latest evidence of this is its abject collapse in the face of questions from Zero Hedge about the possibility that it is using the data its takes from users of its website to front-run those same people.

The financial institutions that WaPo dare not name, 7 July 2009 — Excerpt:

This is a great example of how a story that’s primarily about Goldman and Morgan Stanley manages never to mention them by name. The Post leaves out a lot of details in this piece. Among other things, they describe this new plan by the CFTC to place restrictions on speculative commodities trades as an idea that came from new CFTC commissioner Gary Gensler, who of course is a former Goldman banker and was a key aide to Bob Rubin back when the two of them were in the Treasury in the late 1990s and pushing for the deregulation of derivatives.

From what I understand, the opposite is true here.

On The ‘Everyone Was Doing It’ Excuse, 7 July 2009 — Excerpt:

It’s been interesting, to say the least, watching the public reaction to my Rolling Stone piece last week.

… Then there is this other argument, the one being bandied about by Time magazine, among others. According to Steven Gandel of Time, the problem with my piece is that it is — get this — too specific. … focusing on Goldman in particular when attempting to explain (in general) the crimes of Wall Street to ordinary readers is somehow a distraction from the “real problem.” {From Time magazine:}

…spend too much time on Goldman and you miss the fact of how broadly the financial system and the regulations that are supposed to keep profiteers in check failed us.

I had to read that passage several times to even begin to grasp its ostensible meaning. Apparently this is the best argument that Time could come up with to discredit this article, that the rhetorical technique of using a specific example of a specific bank like Goldman to tell a broader story about Wall Street in general distracts readers from the “more important” issue of how government regulators… failed to stop banks like Goldman! I mean, really, how’s that for circular thinking? This is silly stuff even by Time magazine’s standards.

I’ve been shocked by how many grown adult people seem to have swallowed this argument, that the argument against Goldman’s behavior during the bubbles of recent decades is invalid because “everyone was doing it” — and other banks, like for instance Morgan Stanley, were “just as bad” as Goldman was.

Two things about that. One, it isn’t true, not really.

Draw your own conclusions about the distance between Goldman Sachs and the US government, 13 July 2009 — Excerpt:

{I}f you’ve followed Zero Hedge’s speculations dating back months about Goldman somehow manipulating program trading at the NYSE, this is connected to that, as the theory here is that Aleynikov stole the computer program that Goldman may have been using to manipulate the NYSE.

Such speculations until recently may have sounded like conspiracy theories, but then last week Assistant U.S. Attorney Joseph Facciponti stood up in court and let loose a whopper. “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” he said.

Again, this is a federal prosecutor quoting Goldman Sachs, admitting in open court that it has been using a computer program that can be used to unfairly manipulate markets. Take that information and couple it with the insane data about Goldman’s share of program trading volume since the beginning of the year and… well, you can draw your own conclusions.

The real price of Goldman’s giganto-profits, 16 July 2009

So what’s wrong with Goldman posting $3.44 billion in second-quarter profits, what’s wrong with the company so far earmarking $11.4 billion in compensation for its employees? What’s wrong is that this is not free-market earnings but an almost pure state subsidy.

… these guys on Wall Street causesd this crisis, and now they’re raking in money on the infrastructure their buddies in government have devised to bail them out. It’s a self-fulfilling cycle — beautiful, in a way, but at the same time sort of uniquely disgusting. That they’re going to get away with it is bad enough — that they’re getting praised for it, for being such smart guys, is damn near intolerable.

Is Goldman Screwing Taxpayers in TARP Negotiations?, 18 July 2009 — Excerpt:

The press is starting to pile on now, and Goldman is taking it from all sides, which is sort of interesting. Let’s see how long it lasts.

Goldman Sachs always gets its way, 21 July 2009 — Excerpt:

A lot of people have remarked upon Goldman’s extraordinary VaR levels during this whole year, and in particular recently — the bank actually set a record the other day when its VaR rose to $245 million. VaR measures the amount of money the firm could lose in a day’s trading, and is the standard measure of a company’s risk appetite. Goldman’s is and has been extremely high, in particular lately, suggesting one of several possibilities. One, it is emboldened by its vast array of state safety nets to take bigger chances in the equity markets. Two, it isn’t really taking chances, and I think I’ll leave the explanation of that possibility basically at that.

New Info: Goldman Really Was In Trouble, 27 July 2009 — Excerpt:

Joe Hagan’s new piece in New York magazine brings out a lot of excellent new information, but the most interesting from my point of view is his insight about the period after the AIG bailout and before the announcement of the new FDIC lending program. It seems things were worse than even I thought at the bank, with then-COO John Winkelreid putting up his Nantucket house for sale in order to raise quick cash and management discussing taking the company private to avoid catastrophe.

Hagan describes a bank that was in crisis, its share price plummeting to $47, one that was really rescued by the FDIC program, which made bank holding companies (which Goldman had just become, thanks to a hurried conversion) eligible for billions in government-backed lending.

Afterword

Please share your comments by posting below.  Per the FM site’s Comment Policy, please make them brief, civil and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).  For information about this site see the About page, at the top of the right-side menu bar.

For more information from the FM site

To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp interest these days:

Posts about theft pretending to be solutions

  1. Slowly a few voices are raised about the pending theft of taxpayer money, 21 September 2008
  2. The Paulson Plan will buy assets cheap, just as all good cons offer easy money to the marks, 30 September 2008
  3. A reminder – the TARP program is just theft, 24 November 2008
  4. A solution to our financial problems: steal wealth from other nations, 2 February 2009
  5. Stand by for action – more theft of our money being planned in Washington, 4 February 2009
  6. Update: yes, the Paulson Plan was just theft, 14 February 2009
  7. Now is the time for America to get angry, 24 March 2009
  8. America on its way from superpower to banana republic, 28 March 2009
  9. Bush’s bailout plan is now Obama’s. His quiet eloquence guides the sheep into the pen, 30 March 2009
  10. “The Greatest Swindle Ever Sold”, by Andy Kroll in The Nation, 28 May 2009
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6 Comments leave one →
  1. BlogTest permalink
    31 July 2009 12:47 pm

    The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults.
    .
    .
    Fabius Maximus replies: Agreed. There are many good books on this subject, such as “Devil Take the Hindmost: A History of Financial Speculation”, by Edward Chancellor and “Manias, Panics, and Crashes: A History of Financial Crises” by Charles P. Kindleberger.

  2. Captain Ramen permalink
    31 July 2009 5:36 pm

    But WHY do the assets run up in value? Speculation. Some speculation is healthy, but too much can be lethal. Some PoS 800 sq ft house sliding off a mountain in Los Angeles should not sell for a half million dollars!

  3. anna nicholas permalink
    1 August 2009 8:21 pm

    If Goldman Sachs were called Itiqaitaek Usuiituk , we could be discussing whether there was an Inuit Problem .

  4. 2 August 2009 9:01 pm

    “The people who cast the votes decide nothing. The people who count the votes decide everything.”
    — Joseph Stalin {Said in 1923, as quoted in The Memoirs of Stalin’s Former Secretary by Boris Bazhanov, 1992}

    Any questions?

  5. 3 August 2009 3:37 am

    I always remain skeptical of Taibi’s pieces. Try as hard as I can, I am never able to shake the feeling that Taibi is spinning his facts. Yet investment economics is not a strong point of mine, and I have been unable to truly assess the validity of his claims.

    Luckily, I do know a few souls in the investing world. One friend sent me this reply after I gave him the original Taibi piece:

    Does he have a lot of facts right? Probably. Investment banking is not beanbag and Goldman certainly played to win. Listing all the flaws in retail, you’re going to run into Walmart once or twice; if we’re whacking investment banking — surprise! Goldman Sachs will show up a lot.

    The area I would be most familiar with to provide a credible critique is the dotcom, tech bubble section. I think he is off base there. There was demand for shares and demand for capital and I don’t think Goldman was less scrupulous than anybody else. IPOs were a racket. They (everybody, not just Goldman) would float them at artificially low strike prices so that underwriters and “friends and family” investors could be guaranteed big returns.

    Research from the underwriters was a joke but if you had an IQ over 100 or were not a Member of Congress (I repeat myself), you knew the game. His assertion that nobody told people the rules had changed is patently false. I don’t want to blow up anybody’s shareholder lawsuit but grown ups knew what was going on. Like the housing boom, while everybody was making money, nobody minded these practices; when we started looking for scapegoats…

    What he says sound pretty convincing. Might I be so impudent as to bother you for a reply?
    .
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    Fabius Maximus replies: His comments are nonsense, in that they don’t reflect the nature of the critique. His comment’s imply that bubbles just happen, ignoring the evidence that they are a deliberate and profitable (for some) aspect of the system — which is why they happen so often (far more often since 1980 than in the past).

    “I don’t think Goldman was less scrupulous than anybody else.”

    That’s not the point. The critics say that Goldman is an exemplar, not a lone gunman. Due to its leadership position in the industry, Goldman was able to exploit these booms better than most. As its realtive strength has increased, its ability to do so has increased even more.

    Also note that it is not just Taibbi. The Zero Hedge crowd has done much of the initial digging. Hagan’s article contiained some good reporting. Various regulators are also looking into this, and their are noises from Congress.

  6. 6 August 2009 4:13 pm

    Interesting read, but I do wonder if we are becoming a nation of speculation as opposed to a nation of action.

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