Goldman Goes Rogue – Special European Audit To Follow

At 9:30pm on Sunday, September 21, 2008, Goldman Sachs was saved from imminent collapse by the announcement that the Federal Reserve would allow it to become a bank holding company – implying unfettered access to borrowing from the Fed and other forms of implicit government support, all of which subsequently proved most beneficial.  Officials allowed Goldman to make such an unprecedented conversion in the name of global financial stability.  (The blow-by-blow account is in Andrew Ross Sorkin’s Too Big To Fail; this is confirmed in all substantial detail by Hank Paulson’s memoir.)

We now learn – from Der Spiegel last week and today’s NYT – that Goldman Sachs has not only helped or encouraged some European governments to hide a large part of their debts, but it also endeavored to do so for Greece as recently as last November.  These actions are fundamentally destabilizing to the global financial system, as they undermine: the eurozone area; all attempts to bring greater transparency to government accounting; and the most basic principles that underlie well-functioning markets.  When the data are all lies, the outcomes are all bad – see the subprime mortgage crisis for further detail.

A single rogue trader can bring down a bank – remember the case of Barings.  But a single rogue bank can bring down the world’s financial system.

Goldman will dismiss this as “business as usual” and, to be sure, a few phone calls around Washington will help ensure that Goldman’s primary supervisor – now the Fed – looks the other way.

But the affair is now out of Ben Bernanke’s hands, and quite far from people who are easily swayed by the White House.  It goes immediately to the European Commission, which has jurisdiction over eurozone budget issues.  Faced with enormous pressure from those eurozone countries now on the hook for saving Greece, the Commission will surely launch a special audit of Goldman and all its European clients.

This audit should focus on ten sets of questions.

  1. Which eurozone governments have worked with Goldman, and on what basis, over the past decade?  All actions prior to and after the introduction of the euro need to be thoroughly reexamined.
  2. What transactions has Goldman facilitated and how has that affected the reporting of European government debt?  (Under the Maastricht Treaty, eurozone government debt is not supposed to exceed 60 percent of GDP.) 
  3. In the case of Greece, the accusation is that Goldman deliberately and in a premeditated manner conspired to hide the true degree of government debt.  Is this true, and to what extent has Goldman helped other countries engage in similar transactions, e.g., countries now seeking entry to the eurozone?
  4. What is the full extent of Greek and other government liabilities, if these are accounted for properly?  Without this reckoning, it is impossible to design a proper level of European Union (or any other) support for weaker eurozone countries.
  5. Are there non-eurozone countries that have also been aided and abetted by Goldman in this fashion?  For example, are the UK and Switzerland implicated – and thus endangered?
  6. Has Goldman extolled the virtues of government debt in Greece, or other countries, while at the same time helping to deceive investors on the true risks inherent in those debts?  What were Goldman’s own holdings of these securities?
  7. Is there evidence that Goldman has structured similar transactions for the private sector – enabling companies to conceal the level of their true indebtedness?  Have securities issued by such firms also been endorsed by Goldman to the buying public?
  8. Were Goldman’s US-based supervisors aware of Goldman’s activities in Greece and other eurozone countries?  Did they condone activities that undermine the integrity of the European Union?
  9. Where was the European Central Bank while all of this was happening?  Has the ECB become dangerously enraptured with the new Wall Street and its “techniques”?
  10. Did any responsible official really think that what Goldman was constructing was really some sort of productivity-enhancing financial innovation – as opposed to a sophisticated form of scam?

The Federal Reserve must cooperate fully with this investigation.  Ordinarily, the Fed might be tempted to sit on useful information, but they can now feel themselves in Senator Bob Corker’s crosshairs.  Republican Senator Corker is willing to cooperate with Senator Dodd on financial sector reform, opening up the possibility of legislation that will pass the Senate, but he wants the Fed to lose its supervisory powers.  If the Fed refuses to help – willingly and fully – the European Commission with bringing Goldman to account, that will just strengthen the hand of Senator Corker and his allies.

If the Federal Reserve were an effective supervisor, it would have the political will sufficient to determine that Goldman Sachs has not been acting in accordance with its banking license.  But any meaningful action from this direction seems unlikely.

Instead, Goldman will probably be blacklisted from working with eurozone governments for the foreseeable future; as was the case with Salomon Brothers 20 years ago, Goldman may be on its way to be banned from some government securities markets altogether.  If it is to be allowed back into this arena, it will have to address the inherent conflicts of interest between advising a government on how to put (deceptive levels of) lipstick on a pig and cajoling investors into buying livestock at inflated prices.

And the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action?  What is the priority here – a sustainable recovery and a viable financial system, or one particular set of investment bankers?

To preserve Goldman, on incredibly generous terms, in the name of saving the financial system was and is hard to defend – but that is where we are.  To allow the current government-backed (massive) Goldman to behave recklessly and with complete disregard to the basic tenets of international financial stability is utterly indefensible.

The credibility of the Federal Reserve, already at an all-time low, has just suffered another crippling blow; the ECB is also now in the line of fire.  Goldman Sachs has a lot to answer for.

By Simon Johnson

209 thoughts on “Goldman Goes Rogue – Special European Audit To Follow

  1. Now remember, these guys take home 7- and 8-figure bonuses every year for “making the global economy more efficient”.

  2. Earth to Simon: Goldman didn’t do anything illegal. Goldman is not Greece’s keeper, and no sane person would ever think otherwise. You think Goldman is going to be blacklisted from some European securities markets? What a delusional idea. There won’t be any sort of investigation like this — nor are there grounds for any such investigation — and you know it. This is just a pathetic attempt to draw attention to yourself. I pity you.

  3. It may be the ECB that puts the breaks on Goldman Sachs, and not the spineless and overly politicized atmosphere in Washington. From what I understand, Goldman Sachs had/has a conflict of interest (to put it mildly?) not only with U.S. investors but overseas counterparties. The house of cards will ultimately fall, just a matter when, not if….. parse the words as one may, but I think angst and recklessness was apropos in describing Greece’s financial crisis.

  4. I think at the back of the author’s mind,is the quiet realisation that nothing, absolutely nothing, is going to happen about this. At best, if any, a rap on the knuckles.
    Goldman are way too savvy for any minor bit of business to become collateral damage. At the time, they did what was best. Anything else would be classified as kerfuffle. Moan all we can about the prowess of GS, they are too big to fail and the global economy is so enmeshed within their offices around the world as to make them untouchable.
    Don’t blame the player….Blame the game !!!

  5. The fed has the ability to pull the bank’s ticket for unsafe and unsound practices. The SEC has the ability to pull the ticket of the broker-dealer. The SEC hasn’t done this to a major firm since the early 60’s. I’m with the other Johnson on this (Samuel). A good public hanging will be remembered for a generation or more. The deterrent would be wonderful to behold.

  6. History repeats itself.

    I’m thinking of NYSE head Richard Whitney going to prison for embezzlement in 1938 as 6,000 watched him get frog-marched onto the train to Sing-Sing.

    Be still my heart.

    The show trials are coming.

  7. simon -I thought the NY Times totally butchered the story here. If there is any story, it’s that Greece did a spurious currency swap via Goldman at NON-MARKET rates (the Der Spiegel story).

    The NY Times, however, seemed to get distracted by the monetizing events: the sale of future lottery revenues and future landing fee revenues from the airport – which are COMPLETELY irrelevant to the story, especially if the intent of the article was to show illicit behavior on the part of GS.

  8. I’ll bet that GS gets through this with nothing more than some bad press that won’t make any difference.

    They’ve been doing this a while and they probably took out their own insurance (and not the phony derivatives type either) by having plenty of embarassing info on people in the right places in European finance.

    Still, it’s nice that people can still feel outrage at serious fraudulent activities.

  9. And yet we might finally have a head of the central bank with a proper understanding, primed by the best company in the world, Mario Draghi, who may, as a former MD of Goldman Sachs, be able to put this obnoxious discussion to rest and finally silence abherent voices such as those of Simon.
    Maybe the problem is not so much undue influence, as too little influence. With Mario as a president, the ECB would have the same access to the real players, currently reserved only for the officer of the FED.
    If you cant beat them, join them!

  10. What happens if most or close to all Eurozone governments have worked with Goldman or others one tier down in ability to instruct about the shell game? All governments are now hungry to borrow OPM. Is there even an exception or two? Consequently, the ECB and others are in the same boat as the Federal Reserve. How can you exempt legislatures when they have the same need to grift. They grift always. Look at the budget balancing shenanigan’s engaged in by the US Congress and Legislatures. Every experienced tax guy subjected to these shenanigan’s could write a book on the subject. US government has been petty grifting for a couple of generations. Look at LBJ including Social security in the budget in days when net SS funds were very, very positive.

    It must be really great to be grift trained at GS.

  11. Was Goldman advising Greece? If so, does a duty follow from such advice? In any event, how do you draw conclusions before knowing the facts? And why the personal insults???

  12. The thing I don’t understand about a response like this is that you don’t account for any of the fallout that comes from Goldman’s decision to help Greece hide its debt from European officials. It was clearly a covert action that showed contempt for European regulations. This decision allows short term profits that benefit a handful of people. Meanwhile, the world economy and the loss of trillions in productivity is put in peril in addition to the billions in taxpayer-subsidized bailouts that will be needed to cover for this mess. The only people I could possibly see endorsing these actions are executives and major stockholders in Goldman, maybe a couple hundred people. Meanwhile, the other 6 billion humans get screwed.

  13. Do you know anything about anything? This idea is so far-fetched its ridiculous. Goldman didn’t force Greece to do anyting. If Greece decided to commit economic suicide –its their own fault. Your attempt to blame this on GS is pure idiocy. It getting harder and harder to take anything you say seriously.

  14. As smart (and evil) as Goldman has been to this point, I am now starting to think these guys are not so smart. It’s hard to figure out. Simple hubris? It can’t be all about greed. Goldman keeps pushing and pushing, thumbing its nose, essentially mocking the governments and populations that have kept it afloat. Goldman the company has turned into a serious worldwide political problem. The Europeans — who generally to not care for plutocracy — will not put up with this garbage. Europe and the European Commission is dealing with significant civil strife in Greece and potential civil strife in Spain. Germany is pissed as hell at bailing out Club Med, which is another huge problem.

    I don’t know how this ultimately plays out but Goldman is getting perilously close to huge beat down. I wonder Blankfein has realized this yet?

  15. How short Greece did Goldman get after Gary Cohn’s failed sales call on the Greek government in November 2009?

  16. Why can’t conflicted posters like this Gerry freak be banned? ….. and we could get on with the critical analysis of the Rhinosaurus in the Living room, Golden Sacks. Really, reading a response like Gerry’s just when you are getting into the heart of the discussion is very disruptive and his IP should be searched and blocked.

  17. How reasonable is it to think Greece was the only country hiding their problems?

    There is a nightmare scenario here.

  18. GS + Fed + US Treasury are a criminal syndicate with lethal enforcement powers. EU can do nothing of substance. Only a terminal Crash will alter the situation.

  19. The Bankers arrogance – its on display in the comments here – will ultimately be their downfall. They will meet the same fate the elites of all failed societies have throughout human history. They will hang from lampposts. I am not advocating this. I am merely pointing out that it will happen. And that they will deserve it. The great mass of “commoners” can only be defecated on for so long.

  20. I completely agree with you, as much however as “the Germans” hate the spendthrift ways of the southern Europeans, there is one thing that (at least the west germans) hate considerably more, that is the spendthrift ways of the east germans(former GDR/DDR), that has led to a surcharge on income tax of 5+% and to a total expense of €1.6trn plus over 20 years. You will find everyone bitching about it in Germany, yet I hear very few people proposing that not pursuing reunification would have been a better idea.
    In terms of European Unity this holds true all the more, the Eurozone will stay intact without a question, which is essentially what the leaders of France and Germany have said quite clearly. Even though GS may not get this point, more than 100mn lifes have been lost to get to the current state, and assuming that Europe will be influenced on its core issues, is a grave mistake. It´s like assuming that loving brothers who disagree about how their allowance is distribute by their parents are for that reason prepared to kill one another. Of course everyone is and will be bitching about any outcome. Unity will be kept however.
    What Greece decides to do, matters less, then what happens in France or Germany over the next two quaters(any change in GDP amounts to 1-2X greek GDP).
    I´m very sorry that GS has made itself the prime focus of this tragedy, i hope my friends at GS will forgive me, but there has been an attack on European souverainity and, in political matters, a scalp will have to be had. This means GS, the company that has been front, centre, right and left of this issue, involved at any instance, doesnt really stand too much of a chance in political terms.
    It may be inconvient to realize, that what one has perceived to just be an anthill of lots of disoranized individuals, suddenly turns out to be a lion(at least for at time), but thats how companies fail.

  21. Personally, I have no love lost for Goldman-Sachs. There’s nothing I’d love to see better than FBI and Feds walk in with a cart full of balls and chains and drag off the entire criminal enterprise into the maximum-security dungeon somewhere in Guantanamo (waterboarding optional), lock, stock and barrell.

    Having said this, I must add that successive Greek governments – on BOTH sides of the political spectrum – very cleverly colluded with Goldman-Sachs in order to create an illusion of fiscal responsibility and hide the magnitude of the country’s budget problems from their own constituents . The Greek-Goldman partnership was one of criminal intent by BOTH parties involved. The Greek governments were literally AND figuratively the partners in crime and should be criminally prosecuted, pronto!

    In doing so, the Greek political elite had undermined not only their own nation and its future, but the European Union on the whole, and turned the entire concept of Euro-solidarity on its head. The word “treason” easily comes to mind.

    While I do not normally sympathize with the Germans, on this occasion the Germans are absolutely, totally CORRECT and should be given a firm show of support NOT only by their European allies but by American Government as well. This charade, this international pyramid-scheme should not be allowed to continue for another second. The independent audit of Goldman-Sachs’s international dealings is now about 20 years overdue.

  22. Simon uses his real name, and he makes clear predictions such as “Goldman Goes Rogue – Special European Audit To Follow”. Would be the commenters here would find intellect and courage to do the same.

  23. IPs can change, particularly since most individuals use IPs that are assigned to them randomly out of the ISP’s pool. As a consequence IP (and especially IP block) bans are ineffective weapons against trolls.

    A better weapon is simply ignoring them or responding to their fevered stupidity with reasoned and well put arguments. If you have something open for comments on the internet, you’re going to have trolls.

  24. Yeah. It would also be lunacy to try people for providing material support to murderers or terrorists while aware of the intentions of those they’re supporting. Never get mad at the guys supplying advice on how to get around legal limitations. Especially if they’re being paid for that advice, they should be allowed to walk free. It’s not like they’re doing damage or anything. It’s not like everything they put their hands in winds up exploding in the world’s face. Right?

  25. They have been getting through the bad press mostly because the press has been exceptionally BAD at facts, figures, materiality, etc.

  26. I think we’ve got to stop looking at GS as an impenetrable blob.

    It breaks down into 3 pieces
    1.GS Bank USA, which is now huge, US govt backed, and stuffed with the crap at the former GS Cap markets, among others.
    2.The US broker dealer which is a primary dealer,
    3.GSI Non US, London based

    Most of the trading profits are generated at these 3 vehicles.

    GSI is the piece at the center of the Greek mess. Let’s get a list of arrangement fees (and corresponding bonus payments) from GSI, and start digging from there. No need to wait for any special audit. The list for the industry could probably be compiled from league table stats.

  27. “the Commission will surely launch a special audit of Goldman and all its European clients.”

    What if the Commission discovers that European governments have made significant use of derivatives for regulatory arbitrage? Will it be so keen to publicize the true state of “balance sheets” of EU governments. Or will it do what it did for the European banks which have plenty of worthless assets on their books, i.e. look the other way?

    There are two more reasons why official debt statistics are not that useful for measuring government solvency:

    (i) official government debt statistics do not take account of pension and health care liabilities, which in Europe are typically two to three times as large as the official public debt,

    (ii) the last two decades have seen an increasing use of various public-private partnership type arrangements to provide public services which in many cases contractually bind the governments to provide some sort of financing to these entities — these liabilities are also not counted toward government debt.

    Are you really sure that the EU Commission will want to take a look at the credibility of the official public debt statistics? Somehow I don’t think so… there are just too many skeletons in that closet.

  28. Investigation will revealthis has been quite common. There are a set of definitions and rules, and companies and govts hire the best advice they can to ‘manage’ these ‘constraints’. It issimilar to what tax lawyers do to aid individuals and cos in their tax ‘planning’.Basically Greece was raising short-term cash,vs the sale of long term revenue streams,then using the cash to reduce their debt.Versus Greece’s total debt,this represented a tiny, tiny fraction.This was surely studied very, very carefully to be sure that it was compliant.But the bigger issues are political

  29. I suspect that many of the present British Government’s public/private partnership deals could have been helped on their way by Goldman Sachs. About 15 years ago several very close allies of New Labour were given posts in GS.

    Something tells me that Gordon Brown would not wish to move against GSI. And I doubt if his potential Tory successors have any cleaner hands.

  30. The bigger issues here are not these technical ones described in the article –which are pretty standard practice–,but are related to 1. addressing the vast tax evasion in Greece,(and elsewhere)and the political unwillingness to deal with it;2. the weak competitiveness of economies such as Greece, which has meant yrs of subpar growth, and so hi unemployment, and social welfare costs.These two together have meant that the Greek govt has been for 20 yrs using all kinds of tricks to keep the party going…Selling future revenue versus cash today was but one of these….

  31. GS facilitated Greece. Greece is the major offender. In order to hide debt from the EU and continue with their socialist spending, the Greeks used GS to keep debt of the books. Now, they have a debt equal to about 124 percent of GDP.

    In Italy, the same thing was done, for the same reason.

    In the US, Freddie Mac/Fannie Mae was “privatized” to take the debt off the books of the federal budget. Now, the government is on the hook for upto $6.3 trillion in debt for Freddie/Frannie.

  32. As for the fx swaps-it is very very unlikely goldman had this business totally to itself.When the yen was devalued vs the euro,and JPN interest rates were chopped to zero,many countries and companies (in EU, and elsewhere)issued tons of unhedged yen debt. Later this came back to haunt them as the yen strengthen.Currency swaps were what many did to try to reduce their yen exposure thru fx swaps.The biggest players in this business are DB,JPM,Citi,MS,GS,Societe Gen,UBS and CS, ie the biggest players in the global fx market.Were the Greek govt fx swaps mispriced?As this is a very, very competetive business,and as there were surely many others angling for this business, probably not…It is very, very unlikely that this business was handed to Goldman on a non-competitive basis… The bigger issue is what was Greece –and others– doing when they issued tons of unhedged yen bonds? It was part of the same game of raising ‘cheap’ debt to continue financing the party which Greece, and many others, could not afford. Now the chickens are coming home to roost, not just in Greece but everywhere.

  33. This news is devastating to the already ruined image of the United States. As a citizen I am honestly downright HORRIFIED. How dare an institution with which I am inextricably associated as an American citizen be basically perpetrating this rapacious form of international financial terrorism. The unfettered powers of the global economic capitalist entities which the United States in particular has spawned are bullet to the heart of this nation, or a bullet from the heart of this nation.
    This type of behavior YET AGAIN puts a BULLSEYE on America as a target for any global citizen’s fully justified rage and anguish at the state of the world today. We >are< complicit, but worse, we are to blame. Not only for the malfeasance which resulted in what's now being referred to the Great Recession, but now also as we can see for the ongoing perpetuation of the same behaviors which wrought that outcome a short while ago.
    I am OUTRAGED, and truly HORRIFIED, but this revelation. What's more, i am certain this view is shared by tens of millions of people world-wide who are finding this out too.
    It's bad enough having stoked the ire of the Muslim world for decades with "religious" zealotry. Now we're seeing the naked bloodthirsty greed of America in another way ever so clearly.
    Should it be a surprise that a nation founded on the rape of a continent's resources and the slaughter of its inhabitants–both human and otherwise–would perpetuate nihilistic brutality for not just decades, but centuries?
    I am afraid of being an American because i feel like we do deserve the ire of the world now.
    How do you like that? Don't you feel it too?

  34. Well said.
    But when questions of personal responsibility are not involved, but only of opinion, pseudonyms have a useful place. They protect one’s name from abusive or contemptuous insult.
    What your statement means is that it’s cowardly & low to attack a courageous economist like Simon J. while hiding in the bushes.
    signed Ernest Werner

  35. As Obama has so succinctly stated, these are “savvy” people and it is the free market working at its best. No one has been fired. No one has been made accountable. No assets seized. No one going to jail. Bonuses are still being paid. It is still business as usual and I do not expect any change on Wall St or the banking methods. Obama is in love with them all. This really is incredible and so far reaching I can’t get my mind wrapped around it.

  36. Paulson and pals will smooth it all over. They’re just a bunch of misunderstood good ole boyz from the street. They don’t mean no harm. I think I hear the tankers of money on their way to the hallowed halls of Congress and the White House at this very moment.

  37. I’ve slowly come to the conclusion Simon purposely fluffs up stories light on evidence to increase his visibility as someone trying to sell books and that you and Ariana have some obligation to disclose whatever arrangement you two have with her hyping your publicly disseminated thought bubbles. Why do nearly all of your musings warrant giant above the fold screaming headlines on her highly trafficked website? What is going on here? Or are you like the dour professors who were miserably wrong last March (ie. Roubini, Stiglitz, Krugman) who hang out in Ariana’s NY social circles and this constant cross referencing an intellectual circle jerk?

  38. Plebianswillrevolt: While I also disagree with what Gerry has to say why should his “IP be searched and blocked”? I mean no disrespect but are you writing from China, North Korea or Iran ? Just curious.

  39. see bmeisen, I had a very similar thought as i was reading thru the article. and as i think about it, I am thinking it probably has an overlapping time frame. I think it would be interesting to see how many ways arthur anderson in particular is tied to GS and/or whomever else is involved in this. If it were 20 years in the future and i was writing a historical piece that would be where i would start. Seems likely to me that the big banks absorbed the arthur anderson folks. But at this point it is all speculation on my part. :)

  40. What’s going on here? The government of Greece was totally irresponsible in creating an unmanageable debt load (as many other national governments have done and are doing). I repeat it was the government! I would guess that 99% of those joining the feeding frenzy on Goldman would, of course, recommend a vast increase of government power and spending (for all governments, everywhere, increasing debt imbalances) to protect these poor helpless innocent governments from the world-wide conspiracy of evil bankers.
    Where is the logic here?? If governments are controlled by lobbyists and bankers, why would increasing the role of government make things better?

  41. How about rolling the guilllotine back. Set it up on Wall Street and then shove a few heads on that giant bronze bull nearby. Only a dream. Evil walks that street.

  42. Leaving aside the politics of Obama’s comments, the money men at Goldman and their ilk are savvy businessmen and this is the free market at its best.

    What everyone seems to forget that the overriding purpose of the free market and these corporations is to make money. It is not to contribute to the common good, and it rarely does contribute to the common good these days. Goldman happens to be extremely good at playing the system, but they all do it. They make money when the economy is good, they make money when the economy is bad. They don’t care as long as they make money.

    Until voters understand that and forcefully convey it to those who write the rules it will never change.

  43. which planet do you live on? the fed is owned by a coterie of private banks, the lead bank among them being goldman sucks, and they run the military-industrial complex and the (executive and legislative) government

    if congress has the will to save america, let it pass the REAL patriot act: reinstate the constitution (article I, section 8) and abolish the fed

  44. Earth to Gerry – there’s a difference between tax planning and tax fraud. Admittedly, there can be legitimate differences of opinion over where the line should be drawn. I’m going way out on a limb here and assume that you would draw the line in a different place than most of the rest of us.

  45. The first victims in this crash were four municipalities in northern Norway. Fall of 2007 they realised that they had “swapped” their future earnings from hydroelectric power plants with some CDOs which they then pledged as collateral for a deal selling CDS protection on US municipality bonds, loosing half of the money. They were told by the bank that since it was a “swap”, not a loan, they could do it without reporting it in the balance sheet. The deal was created by Citi.

  46. To many i-bankers, the bonuses aren’t just a dollar figure (be it a 7,8 or even 9 digit one), but a symbol of their entire self-worth.
    The Lords of Finance want their tribute (aka bonus)the costs to society, country and “global economy” is not their concern. They don’t want the situation in Greece to chew any part of their bonus.

  47. Obviously, Gordo was the Chancellor at the time.

    But the regulatory authority in the U.K rests in the hands of the FSA, and Adair Turner is pretty determined

  48. you say that the Greek governments on either side of the political spectrum have been clever.
    They haven’t been clever. They must have known that their participation in these legal scams would be detected sooner or later. They could only hope that that SOMEDAY would be a very long time off. This latest GS-Greece scam took place in Nov-09, not very long ago, is it? Trust doesn’t come cheap these days. And you’re wrong saying that the EU cannot do anything about it. They can, and they will.
    Trust the Germans especially to be very thorough here. They don’t need to go after governments here, they’ll seek out culprits in governments, in the bureaucracy etc. They may start with Greece, but they’ll investigate all the EU states, weak and strong, and it will take a long time. And they’ll scrutinize GS and other bankers operations pertaining to Europe.
    The EU leaders aren’t answerable to the Fed and the US government, they don’t need to fear K Street and the US Congress.
    Europe isn’t as rich as the US, and cannot and will not let a criminal and totally rotten financial system break and ruin their countries and people. You’ll see.

  49. It is interesting that bank supporters seem to have a laundry list of defenses. First, it is “legal”. Only a court can really say, but the possibility fraud against certain investors is excluded. Then they will suggest it is about government incompetence, in this case Greek, even when a bank is in full participation of the secret investments in question. Then they go on about how this is just standard practice!

    They never mention that we need markets that actually work efficiently, so let’s keep things transparent, which means, no secrets. They do not suggest that we should have appropriate regulation so that nefarious and dangerous activity is actually illegal, not technically legal. They never indicate that we need to standardize to best practices, not behavior that got an entire nation into serious trouble, and is harming the citizens of its country.

    When I have looked at what they rattle on about, I alternate between thinking that they are clever trolls, or some bankers that live in some bizarro-world. Who knows?


  50. hmmmm, covering losses so as to look healthy and prosperous, sounds quite similar to Madoff’s scheme times a thousand.

  51. GS and their ilk are not savvy business people, they are con men and should be treated as such. Every financial implosion and explosion has GS fingerprints on them. When will the US government officials step in and shut down their operation until they can get to the bottom of fraud and misdeeds. At least the Germans are standing up and doing the right thing for the EU.
    American culture has an innate conscience for fairness, especially when backed against the wall. Our economy will not turn around until we get that balance of fairness.

  52. I also happen to share deeply this opinion; that it is in deed, cowardly and low to attack while hidden behind pseudonyms.

  53. Hi, and ‘whatsup?’ from the UK!

    Greece, the PIGS, the Euro in general, now Dubai… when does the penny drop and fiancial journalists stop being bullied by agenda setters, and look a bit closer to home where crunch time is approaching faster and faster?
    My 2pence

  54. Here’s a nice simple solution (short-term): The ECB and European Union simply declares Greece’s debt to Goldman-Sachs null and void. Starve Goldman-Sachs of its monies from theft. It must be made abundantly clear that scamming and simply shuffling paper back and forth is NOT a basis for any economy and is NOT acceptable behavior, period. You either provide funds for business, etc, or you lose your banking license.

    Goldman-Sachs produces nothing but steals everything. NOTHING is produced by Goldman-Sachs except “bonuses” for the lazy thieves who run the place (and who have never EVER worked an honest day in their miserable lives).

    Declare any and all debts to Goldman-Sachs as null and void, thus telling Blankfein and all its shareholders that they are SOL.

  55. I am absolutely no apologist for Goldman, but in this case, it really is a matter that everyone was doing it. So it’s not just Goldman that will resist any move to investigate these trades, pretty much all the banks will want this stopped at source.

    Greece is probably not ground zero for these national accounts shenanigans, Italy practically invented this cottage industry.

  56. Other than maybe the ‘motive’ portion, Goldman perfectly meets the definition of an economic terrorist (definition from wikipedia):

    ‘Contrary to “economic warfare” which is undertaken by states against other states, “economic terrorism” would be undertaken by transnational or non-state actors. This could entail varied, coordinated and sophisticated or massive destabilizing actions in order to disrupt the economic and financial stability of a state, a group of states or a society (such as market oriented western societies) for ideological or religious motives.

    These actions, if undertaken, may be violent or not. They could have either immediate effects or carry psychological effects which in turn have economic consequences.’

  57. I think you’re on to something here. Unless the authorities are starting to go after these arrogant criminals and getting them behind bars — for their own protection perhaps — I wouldn’t be surprised if some outraged people will start popping them off.

  58. As a conservative, I love reading the Huffington post. Its hard for me to believe that any of the posts originate in the US but I suppose they do. Let me get this straight, GS did what the Government of Greece wanted, so the answer is more government? The ‘victims’ of Northern Norway decided to invest and lost everything (apparently, even gaute concedes they were not very bright), so the answer is more government. If you believe the underlying issue is one of morality, I would assume you would support more religious training. If not, then why wouldnt you do whatever you could to enhance your own welfare? And to Jeff Roth, you’re comments are beyond despicable. I assume you cheered whan the planes hit.

  59. This is Gerry’s Mother, please stop trying to talk to my son, He’s not allowed on here anymore so please just stop.

  60. It is very obvious that GS has PR people working on the discussion here. If they add enough writings from the “regular participants” then the discussion will be fogged out. Lets be clear. GS has a lot to loose here. And especially people on the command chain that covered Greece and the manager of various product lines that were involved. Well, what do they pay their media and communication people for? At times like this crisis and reputation management is the primary responsibility.

  61. didn’t realise reading these comments that the Greek government got all of its financial advice from GS ;) – clearly there are no investment banks in europe??

    oh that’s right, all europe’s problems are the US’s – or GS’s fault -very convenient – the GS currency swap deal was for 1 billion euro years ago, so is GS responsible for the other 200-300b euro in debt that Greece has? no fan of GS but come on

  62. You’re the pathetic person here. Personal insults like this, do you work for GS or what?

    Even if GS doesn’t get blacklisted, you can indeed believe that all this bad press is not good for business in the medium term. All this will probably wash off in a few years and we’ll be back to normal anyway. So whatever…

    But the fundamental cause of all this mess is the hubris of unfettered financial engineering. Of course we shouldn’t also rule out greed on the part of the banks, and the stupidity and myopia on the part of politicians who only care about the next elections.

    But most of the blame should go to the politicians. They’re supposed to be looking out for their citizens. As for bankers, well, we always knew they’d sell you anything for the money. Add to that their confidence in the new smart financial products and you could just be waiting for such stuff to happen.

  63. One other thing – you should ask who at Goldman signed off on this trade. Hank Paulson was CEO at the time, any chance a trade with the mother of all deltas needed his approval?

  64. The current financial system resembles the “face hugging” Alien from a Ridley Scott movie, the creature’s proboscis deeply entwined with the host’s vital organs. We all know how that turns out if you do nothing, or try to remove it.

    Yesterday’s tools can’t fix tomorrows problems.

    Financial Panics

    Panic of 1785
    Panic of 1792
    Panic of 1819
    Panic of 1837
    Panic of 1857
    Panic of 1873
    Panic of 1893
    Panic of 1907 (Bankers Panic)
    Panic of 1929…….

  65. Johnson asks:

    What is the priority here – [#1] a sustainable recovery and a viable financial system, or [#2] one particular set of investment bankers?

    I’m going for what’s behind Door #2. After all, everything done so far has been for one particular set of investment bankers, so why change now, especially when things are working so well?

  66. when will we wake up?

    we need to recognize that it’s the fed/banks running the entire show for their sole enrichment, writing the laws themselves or through their lobbyist proxies, and congress rubber-stamping them–and then calling it a “level playing field”

    how else can we explain obama’s u-turn? increasing the war effort(s), continuing the bank bailout(s), striking deals with the pharma industry instead of health care reform?

    “government entities” are just a convenient front to bamboozle the people

    some democracy!

  67. Everywhere there is debt on the planet Goldman Sachs and JP Morgah Chase are there. Like villainous/ravenous spiders, they create the web to lure everyone in and then they go in for the kill to feed and devour the prey they trapped. Time to nationalize the FED and the five major banks (Goldman Sachs, JP Morgan Chase, Citibank, B of A, and Wells Fargo)and break them up into smaller banks and put the CEO’s of the five in prison for life. Time to put some tough antiTrust laws back onthe books and have some serious oversight on our banking and currency creation. What is going on right now is insidious and preventable.

  68. This just confirms for me the extent to which the United States of America & the U.K., (but especially the U.S.) have sunk to a moral and ethitcal nadir of Biblical proportions..

    The American Dream was about poor people moving to America and having the freedom to achieve their dreams and live a decent life, both moral and financial.

    What it has become is a quagmire of greed bent on destryoing the wealth of the middle class and keeping the poor down (and in the process exporting the American Dream to the developing World). The benefactors of last Century’s American Dream have taken control and created the conditions for the current American Nightmare…

    Unless America gets it’s ethical and moral compass in order it is doomed to continue down this path of self imolation.

    This is a complete cultural and moral failure and it is a bi-partisan one because at the end of the day this is a class war between the Super Wealthy and everyone else. And it very much becoming a World Financial War with potentially dire consequences if events end up spiralling out of control.

    WW1 and WW 2 were the result of new misunderstood technologies (rail, artillery, aviation, atomic energy) far outstripping humanity’s ability to manage them… How is this new situation any different. We cannot conceive how things might degenerate.. we really cannot.

    Here’s hoping that the brewing hurricane of human folly passes more gently than the last…and that the West ends up on the winning side…

  69. Would Goldman profit from Greece defaulting? That would be like selling mortgage bundles that you highly suspected were mispriced and then betting the bundles would go bad. Hmmmmmm… Is that called “Making your own luck”?

  70. I feel it and I want to do something about it. I want to nationalize the FED and the five major banks includinig GS – put former and current upper mangement in jail as economic terrorists, break up the banks into smaller commercial and investment banks and make them non-profit entities. Take the greed out of banking! Banks should be a tool used to transact monies for loans or savings, but it should not be an insidious wreckless greedy entity devouring everything it touches and blackmailing nations who have fallen victim to its scams and schemes.

  71. Praedor said

    I read Goldman SOLD the swap, after collecting $300+ mil
    in fees, they sold it to a Greek bank. That’s their MO, they never hold the crap. Genius… or how “savvy” as Obama would say. I guess GS reminded Obama they were his largest campaign contributor.

  72. When this system collapses, you can bet the politicians will be looking for all sorts of scapegoats, and GS will be at the top of the list.

  73. Speedhair- the destruction of the middle class by the Super-rich is a massive conspiracy, the largest transfer of wealth in US history. Just think of how SAVERS ARE BEING PUNISHED, the Federal Reserve-FDIC conspiracy of ZIRP (Zero Interest Rate Policy) transferring $1 Trillion of fraudulent mortgage bonds from the banks in exchange for Treasuries, they are recapitalizing the banks by paying them INTEREST on free money, and MANDATING THEY CAN’T PAY MORE THAN 3/4 point above the national interest rate on savings! It’s killing savers, especially seniors. The banks WON’T recapitalize the old-fashioned way, collecting deposits, paying a fair rate on savings, and ultimately loaning again. WHO IS STANDING UP FOR THE PRUDENT SAVERS IN THE US? Nobody!

  74. There is a big difference between a savvy businessman and an expert swindler.
    Madoff was in the first category until he ran out of cash and his sons turned him in. Kind of like Greece, he had a cash flow problem.
    He as never caught by the government although they were tipped off several times over many years.

  75. I like to read this kind of stuff. He sounds like a MSM shill like the ones that are on CNBS every day.

  76. If that’s a genuine philosophy, then write it down. I’ll even start you off with a title for your book: “Lying and Cheating your way to wealth and the American Dream” Subtitle: “Never regret the consequences to others”.

  77. Probably not, but what you are saying is the best reason I can think of for converting all my FRNs I don’t need for the next few years into physical gold I personally control.

  78. November 1, 2009 – McClatchy – excerpt

    WASHINGTON — “In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

    Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.”

  79. Corporate charters were originally justified as a legal entity granted to companies to provide a necessary public service. Today, with their seemingly unlimited powers and teflon-like characteristic to be above any nations’ laws, we believe that they are justified by their money-making quality. Somehow, corporate charters must come to reflect the service component and a reasonable profit. As they exist now, there are fewer national governments capable of bringing them under control, as these corporations are able to exist in rogue nations.

  80. . . . . and what will you say to the shareholders of Golden Sacks if the “investment” in Greece turns to custard, and they are banned from Europe?

  81. You will see some when this collapses. As a previous poster stated, It is when, not if, and we are moving into the final innings with increasing speed.

  82. OK, but does it have to SUBTRACT from the common good?

    How long are societies supposed to tolerate predators in their midst? A company that periodically destroys the wealth, health and well-being of members of society has to be done away with or fenced in so tightly that it can do no more harm.

  83. The more GS gets away, the quicker this world fiat system is going to collapse, just like the old USSR.

  84. CDSs, CDOs, off-balance sheet SIVs, SPEs, etc., etc. Same MO, just different corporations, countries and alliances. Enron, WorldCom, et al, on a GLOBAL basis.

    It would appear the jig is up and it’s time to lay all the cards on the table (which will NOT happen). The big question is how do we re-set the global financial structure from here, and is it realistically possible? Centuries of history would indicate it is not, at least not in an orderly, prinicpled, equitable and humane fashion.

    This one’s gonna leave a mark…

  85. I’ve been saying for years now that this is a political crisis with economic/financial symptoms. This is yet another shining example.

    My analog is that GS is playing this like a giant game of Risk – they cashed in a bunch of cards and get the 5 counters for North America and have launched their ultimate assault figuring they can win it all so long as the (loaded) dice don’t get cold.

  86. Cantillon and the other “its Greece’s fault” people –

    You’re arguing with a strawman. Everyone agrees that Greece was completely irresponsible. I don’t think anyone is complaining that Goldman screwed Greece. People are complaining that Goldman helped Greece cook its books to defraud the rest of Europe. I don’t know if that’s true or not, I certainly don’t know if the fact that the transaction is economically debt makes it debt for accounting purposes, but that’s the claim that’s being made. If it is true, then Goldman and Greece would both bear the blame, just as Arthur Anderson bore its part of the blame in Enron.

    And I’m not sure where your “OMG you all want more government power for all governments everywhere” argument is coming from. If an investigation is held, and it turns out fraud was committed, and the fraud wasn’t caught because the EU was understaffed or didn’t have sufficient audit authority, then maybe the EU will want more funding for auditors or something. But this issue just doesn’t apply to most of the world, because the EU is sui generis.

  87. I have questions for the supporters of GS and their ilk:

    America has 4.5% of the global population,who have current possession of most of the world’s wealth. Should American banks have unfettered right to do whatever they like, regardless of the consequences to the other 95.5% of the world?

    Would GS supporters be as supportive of non-American banks had they done the same to America during the Bush era?

    Corporates are run by people. As their work practices demonstrate their moral and ethical beliefs, does this reflect a new American form of Christianity?

    I ask this, because there is always lots of talk about their Christianity amongst the same sorts of people as those who support unfettered freedoms for American businesses.

  88. We are now discovering the terrible role Goldman Sachs had in falsifying Greek (and possibly other) public debt figures.

    Probably this is just the tip of the Iceberg.

    How can we exclude that Goldman and / or other former broker dealers did not do the same with other States, but possibly even with other firms, in financial arrangements whose only purpose was to cook the books?

    When will the damage reveal itself in its full tragic reality? As we have seen, these deals only turn sour after years or decades.

    Will our politicians, both in the US and in the EU be strong enough to free themselves from their financial captors?

    Only time will tell, but I’m afraid there is little scope for optimism.

  89. This may seem like a totally retarded question but:

    Is there any way to simply reset all the World’s debt? You know, like just say nobody owes anyone anything and we start over?

    The whole system is a human construct..can’t we all just find a way to get along?

  90. Simon- I normally have an immense amount of respect for your work, but not in this case. I think you’re being rather sensationalist and more than a little disingenuous. These swaps have been public knowledge since I was in graduate school in ’02. The legality was debated, and confirmed at the time, in articles in the FT, by S&P and by a long, detailed piece in Risk magazine.

    This piece from ’03 details the whole deal:

    Please feel free to contact me if you want any other citations to the articles I mention – I did a research piece on this as part of a graduate school finance paper on European debt re-financing.


  91. Bob- there is a good deal less difference than you think. The last 25 years of what is characterized as tax planning comes down mostly to what was formerly criminal tax fraud. What happened is the IRS had its teeth pulled when it came to enforcement against corporations. The average major US corporation now pays less than 7% in income tax.

  92. People of the USSR wanted change. People of the US want people punished, yes, but they don’t want anything to change. See the difference?

  93. Sure. The whole system is based on a bunch of guys pretending pieces of paper or bits of data are worth something anyway. The trick is just that you have to convince the people who are the most powerful and have the most to lose by that reset to accept the reset. Good luck with that. ;-)

  94. The only question is this: why only Goldman? Where are other banks? JP Morgan is by far the biggest interest rate swap dealer in the known universe! (with 90+% market share in that particular business)
    Yes, GS si the most politically connected, but after witnessing Bear/JPM deal, I’d say JPM is the most important “baby” of the Fed. I’m afraid they are as much if not more involved!

  95. “…. Countries that show persistent breaches of the 3% [deficit/GDP] target are liable to pay heavy fines to Brussels of up to 0.5% of GDP under the so-called Excessive Deficit Programme (EDP). Performing the key regulatory role of determining whether the targets have been met is the European Statistical Office (Eurostat)….”

    ….The answer can be found in ESA95… a manual on government deficit and debt accounting, published by the European Commission and Eurostat in 2002. As revealed by Piga, the drafting of ESA95’s section on derivatives was the subject of fierce arguments between the government statisticians and debt managers of certain eurozone countries”

    The statisticians of which countries? Anyone smell a lobbying trail?

    I’m torn between “fascinating!” and “uh oh”….

  96. The European Commission has the capacity to audit the activities of Goldman Sachs and their clients, European governments. But does any impartial group have the authority to audit the activities of the investment banks with American state and local governments?

    In 2008 Philadelphia very nearly made a deal with a very complicated financial instrument that was promised to solve the city’s problem with its unfunded pension. But Wall Street collapsed a few months later so little more was said about it. The deal was so complex that journalists struggled to make sense of it in very sincere, honest attempts to bring transparency to city finances:

    The problem of local governments funding their debt through Wall Street was well described in this early ’08 article from NYT’s: States and Cities Start Rebelling on Bond Ratings []

    Can we ever know how much extra burden investment banks caused local governments as they struggle to finance basic services? Will the Greek crisis be able to illuminate the dealings of investment banks with local governments? It seems likely the banks approached that game with similar tactics and techniques.

  97. That’s unnecessary and unfair! American people are not scum.

    However, the belief in unfettered right to make profit at any cost indicates an inhuman level of moral and ethical bankruptcy which has become endemic to a disturbingly substantial section of the American population.

    The crisis into which the world has been plunged was largely founded in the misbegotten American belief that business principals would be honest, and would police themselves. They weren’t honest, so self-policing was never a consideration.

    Fortunately, we have so far been little affected in New Zealand, because our financial and business regulations are strong and enforced. We live in what some misguided people in America would call a “socialist” state, where critical social services (health, education & welfare) are operated by the government and tax-payer funded. Few would want our system changed, though if someone proposed it, they could always stand for election and try.


  99. To what extent have African governments racked up “sovereign debt”? Has GS and other banks colluded with African leaders to gamble away the future of poor Africans? Weak institutions, corrupt leaders, greedy bankers and mineral reserves… Sounds like a recipe for financial disaster.

  100. The question is, if “everyone was doing it”, was it right? Did anyone say “NO”, or are they all devoid of morality and ethics?

  101. Don’t count on it. When financial gridlock (or collapse) occurs, most people are going to to wake up (right now, most still aren’t aware) and will be beyond angry. They will be looking to assign blame and the name Goldman Sax will be very near the top of the list.

    As I write this, there are 133 comments to this article. Probably the majority of the commenter’s see and blame GS as a central player responsible for the financial Armageddon we are facing in the next few years.

    Now take that number and multiply that by the hundreds of millions of people whose way of life is soon to be completely changed, and that change will most likely have been for the worse.

    Goldman Sax is a criminal enterprise. ALL of their senior management should be arrested and imprisoned.

    And before this is finished, some, if not all of them will.

  102. From what I see elsewhere, the most ardently vocal of people who support businesses against the requirement to be ethical and moral are right-wing American fundamentalists who call themselves Christian, so your assumption is wrong. Parental and religious teaching should bolster our moral compass, which starts with our innate knowledge of right and wrong.

    I was raised to believe that one of the foundations of being a human is that we have a duty to ourselves and our fellow travellers on this planet to exercise our innate moral and ethical beliefs in a loving manner. It is contained in a number of philosophies, from the concept of “karma”, through the Biblical exhortation to “do unto others as you would have them do unto you”.

    However, if you can live happily with yourself while screwing others, and watching your friends, family and others being screwed by similarly thinking people, and can praise your beliefs even as you get taken down, I guess you were raised in a somewhat dehumanised manner, which is rather sad for you and for the world you live in.

  103. As a distant observer, it is astonishing U.S. tax payers have been fooled into thinking the failure of AIG would have been catastophic by undermining confidence in the financial system. Let’s be clear here: It was to bail out Goldman Sachs!

    In essence, this veil of deception allowed a Coup d’etat of the U.S. Government and Treasury by the banking system elite.

    It is undeniable that politicians in Washington D.C. have been bought and sold for years by financial lobbyists in favor of Wall Street’s interests at the expense of U.S. tax payers for many generations to come.

    A most glaring abdication of duty by U.S. politicians indeed! (i.e.,.Paulson, Richard Shelby, Chris Dodd, Barney Frank, Geitner, Bernake, and both the Clinton and Bush Administrations, etc…).

    One must ask the question who was responsible for supervising and overseeing the behavior of AIG and Wall St. firms while U.S. politicians basically rolled the dice in providing subsidized housing (i.e., Fannie/Freddie via Clinton’s State of the Union Address)?

    From the U.S. tax payer viewpoint, the actions of U.S. politicians and Wall St. are totally indefensible and is the apotheosis of utter incompetence, greed, arrogance!

    The smell of this egregious behavior by the U.S. permeates from Shanghai to Dubai!

  104. Its getting hard to tell who’s more culpable here, the US or the UK. These deals were done at the London unit. I’m not suggesting GS’s US management isn’t ultimately to blame, but London some explaining to do as well.

  105. +100

    Unless people are able to undergo many years of extreme discomfort and life-wrenching change
    willingly, then it will be forced on them.

    Personally, I’d rather opt for it than have it thrust upon me. But I venture that I am in the lowest octile.

  106. Very good point. Why Dimon gets a pass is a mystery.

    But as you say, Goldman Sucks has inserted its tentacles into every nook, cranny and nexus of every meaningful financial entity in existence. And that alone makes them first on the guillotine.

  107. Sometimes I wonder if the company names change but the people pulling the scams are all the same. i.e. Arthur Anderson/Enron.

  108. Well there was the Civil War… Americans are more than happy to riot and even kill each other to settle an argument.. It’s what the Founding Fathers intended wasn’t it??

  109. Given that Blankfield said they were simply doing “God’s work” I guess we have no one to blame but the Supreme Being himself….

  110. Boston University’s Kotlikoff has written extensively and lucidly about issue (i).

    But your first point is more important: an investigation/audit like the one Simon wants will never be done. Why? Well, it is not just Goldman and Greece in a one-off, dodgy deal. Every major bank, including German, French, UK, and probably Italian and Spanish “champions”, and many countries’ finance ministries from all political stripes were doing this sort of thing. And while Gerry’s use of insults is deplorable, he is, in the main, right: Goldman did not do anything illegal (in this case).

    Accounting rules, like tax rules, are rigid and yet sometimes vague; just as individuals and corporations have every right to seek to minimize their liabilities and/or “look good” to investors, so countries cook their books regularly to try to win favor or put off unpleasant realities to the next administration.

  111. This might be a good time to remember that when Hank Paulson became Treasury Secretary he was able to sell his five hundred million dollars worth of GS stock (and before it collapsed no less) and save over a hundred million dollars in taxes because of a recently passed law allowing those going into “public service” to avoid taxes on such sales. I wonder who pushed for that change in the tax code?

  112. Do you really believe that only the US controls the world’s finances? What a ridiculous statement. These are multinationals competing against other multinationals. And whats the alternative. Turn capital over to government? Or do we as individuals control capital. The heart of your argument is the lack of morals. Glass houses. I was no supporter of bailouts, however, there is a lesson to be learned from 1929.
    And, maybe Jackson was right to opposed a centralized bank, but, we learned it from the Europeans. And, while he did reduce the debt to almost nothing, it was closely followed by a deppression which increased the debt by a factor of 10.

    Another thing to consider. Civil servants typically receive 4 weeks vacation/year plus 12 to 13 days paid holidays. And, oh, BTW, they work 8 hours/day. I wonder what the GS guys work. Not saying there arent very smart people in government, they just dont have the incentive. More government is not the answer.

  113. How long must we suffer these Goldman people running amok?

    And we consider Al Qaeda a dangerous terrorist organization wreaking world-wide destruction.

    Mere amateurs.

  114. Good perception there. One request: when you post could you use proper capitalization instead of all caps? All caps is really difficult to read, and good posts like yours should be easily read and absorbed!

  115. The greatest terrorists the world has ever seen do not wear cloth wrapped around their heads and ride around through sandy deserts in beat up pick ups.. They wear Armani and ride around in Bentleys through the Hamptons.

  116. Claiming their exposure to an AIG default was 20 billion – false, it was zero -, and claiming that, after the Federal Reserve loaned 85 billion to AIG, Goldman Sachs had to be saved by expediting their application to be a BHC-FHC, which is also totally false.

  117. I think that economic warfare was and is the goal of Al Qaeda. They have no chance of militarily defeating the US, but economically and financially they can do and have done considerable damage. While I think the damage sustained so far is mostly self inflicted, the strategy is sound.

  118. In”I.O.U.: Why Everyone Owes Everyone and No One Can Pay” (John Lanchester) he writes about how all these games played out and how far companies will go to design around regulations. Many people are hesitant to admit that CAPITALISM is an economic system, not a moral or social one. The people at GS and other companies see their responsibility as being to themselves and their shareholders, and believe in caveat emptor.
    He writes:

    Remember the SPV, the special purpose vehicle designed to keep the securitized debt off the bank’s books (and out of reach of the tax man)? Many of the new CDOs were set up via a similar innovation, the structured investment vehicle, or SIV. These were part-independent subsidiaries of the banks which got some of the earnings from selling off the CDO assets and some from their parent companies, but they did the same thing as the SPVs: they kept assets off the banks’ balance sheets and thus helped them avoid the Basel restrictions on capital reserves. The way in which they did that was sheer genius. The Basel rules applied to all credit lines which existed for a year. So the SIVs were set up to last for 364 days or fewer. Magic. The rules existed for a reason, of course—to help keep the banks solvent in times of trouble by keeping the capital levels at a sensibly cautious level—but, really, who gave a damn about that? There’s something almost thrilling about the pure indifference to the reasons behind the rules, the reasons why the rules were set up. The banks were certain, absolutely certain, that they knew better. Many of the biggest banks in the world piled into the new mortgage-backed CDOs as if their lives depended on it, among them UBS, RBS, Merrill Lynch, and Citigroup—every one of which has now been bailed out by its respective taxpayers.

    He then pointed out that Greenspan and others in the field are Ayn Rand followers, and he continues:

    “Rand’s central ideas focused on her belief that society must get out of the way of great men. Man is “a heroic being, with his own happiness as the moral purpose of his life,” and the only good society is capitalism, which Rand glossed as follows: “When I say ‘capitalism,’ I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism.”3 Today Objectivism seems a sophomoric belief system, whose main truth lies in its unexpressed but profound longing for the world to be a much simpler place than it is.”

    Unfortunately, when the people with the big money plays games to generate outsized profits, they realize that governments have no choice but to socialize the losses. They rail against government regulation, but they know we can’t let the entire system go down with them.

  119. First, it is completely inaccurate to describe Goldman Sachs as an American company. Goldman, like many Multinationals operates globally, and completely defies national and international jurisdiction and regulation. Goldman only calls itself American when it has its hat in one hand and its other hand out demanding bailouts and preferential treatment from the American government, funded by the American taxpayer. Otherwise, the 300 Million Americans are mere marks to fleece to Goldman, just like the rest of population, corporations, countries, and governments of the world. Goldman clear cuts, and lays waste wherever it goes. Goldman’s only loyalty is to money.

    Second, Goldman has been characterized as a business driven by religious beliefs, practices, morals, and loyalties. But most certainly not of the Christian bent. Do a little research. Goldman….Sachs….Blankfein….

    My question is what the end game will be. Goldman Sachs operates globally as a highly aggressive stage 4 cancer which grows exceedingly well and thrives…until the host succumbs and dies…then the cancer dies as well. What happens when Goldman and the others end up with all the monopoly money, and have successfully bankrupted the planet? OK, Goldman, like cancer, will win-many battles, but itself will lose the war. Money is only valuable if its valuable….

  120. The American people collectively may or maynot be scum yep, – but quite obviously our government and our socalled leaders, and everysingle person party to these crimes in the Amerikan finance sector are indeed, scurrilous, treacherous, heartless, greedy, scum. The American government is scum!!!, because our government allows and tolerates grotesque crimes and horrific abuses by the predatorclass and has turned it’s back on the people they represent, and they Constitution they are sworn to serve.

    The Amerikan government is scum!!!

  121. If this were truly capitalism, we would no longer have Goldman Sachs, JP Morgan Chase, AIG, Wells Fargo, Citibank, and Bank of America, etc. Just as we no longer have Bear Stearns, Merrill Lynch, Wachovia….ALL of these institutions FAILED….some were resurrected post mortem using extraordinary and artificial/un-capitalistic measures. Oligopoly would be a much more accurate description of the current American system than capitalism.

    What we currently have is completely different from capitalism-at least for the select group of too big to fail institutions. The rest of us (bottom 99.999%) are relegated to operating according to brutal capitalism rules-with no safety net. If Goldman Sachs crashes the global economy, and credit dries up, too bad, so sad for Joe’s Garage. If Alice’s Restaurant goes under because her unemployed customers can’t afford to eat there any longer, oh well-if Alice wants a friend, she should buy a dog.

    Capitalism was unceremoniously killed with the bailouts, guarantees, special Fed access and discount rates, etc. The bailout decision was the final stake in the heart of American capitalism. Any remaining likeness or similarity to capitalism in the American system was slaughtered with the bailout(s).

    If the American system were truly, and uniformly capitalist, ALL the failed institutions MUST HAVE FAILED. No exceptions. Just like Joe’s Garage, and Alice’s Restaurant. Same rules, same standards, brually applied to all capitalist ventures, regardless of size, without exception. Period.

    Many folks skewer Ayn Rand of late. Most don’t understand, and draw the wrong conclusions. Ayn Rand would roll over in her grave regarding the too big to fail bailouts, and the epidemic political patronage and graft attendant to our current “system”. Ayn Rand would rail against bailouts, and political patronage. And, she would argue that capitalism is more important than Goldman Sachs or any of the others, individually or collectively.

    The bottom 99.999% of us are all currently accurately personified by Howard Roark in the Fountainhead who battled incessantly against monied, politically connected, nepotistic, entrenched, powerful, self serving, and self perpetuating oligopoly. Owing to the reality of the death of American capitalism, many of us have gone Galt as John Galt did in Atlas Shrugged-we have surrendered the un-winnable war, moved to other countries which practice a truer nature of capitalism with its attendant level playing field, and uniformly and universally applied rules, and gotten on with our lives.

    Ayn Rand came from Russia and railed AGAINST oligopoly, while evangelizing in favor of capitalism.

  122. Assuming that this is true, it kind of cripples any argument regarding the necessity of Goldman’s size to handle large international clients. This sounds very much like the kind of thing, if left unresolved, that could cause the Mayan prediction of the end of the world in December 2012 to look very realistic. If we had true and complete global financial destabilization, all bets are off regarding those who hold a nuclear arsenal and need to defend against the kind of chaos that this situation would necessarity invoke. Sorry, but it is true. Unfortunately, with over 700 bases in 130 countries around the world, the government with the largest arsenal is us, and we would bear the brunt of the world’s ire for having substantially been responsible for the potential financial destruction of the world economy.

  123. +100

    We have been living under a Corporatocracy for 100 years.

    Couldn’t agree with you more on every point.

  124. It is called war.
    And the guys holding the papers have also a young population and one of the best armies in the world.
    I don´t think there is a chance …

  125. Bayard’s comments leave me chilled to the bone! But I cannot help feeling that this will be the outcome of the current financial situation. The “New World Order” will come about, but not in the way, the “powers that be” envisage. Iran’s nuclear ambitions will be the undoing of western influence. The stage is set for the next empire that will arise.

  126. This is kind of a dumb statement. It’s like if I said that what Obama should do, as commander in chief, is deploy a paramilitary force to GS and start plugging selective skulls full of bullets and torturing the rest for information on their international terrorist act because that’s what our contemporary military does.

  127. As you watch the US market go up today, don’t think Goldman & JPM don’t control it, with the Fed’s/Treasury’s blessing. A pattern of corrupt intervention to prop the US stock market has been shown since March 2009. The Fed has been swapping Mortgage Backed Securities (MBSs) from the banks for Treasuries. This money is then funneled to the prop trading desks at Goldman, JPM, and the other primary dealers. Now my point.
    It has been shown the most purchases have occured DURING OPTIONS EXPIRATION WEEKS, an average of $40 Billion in MBS purchases. Why? Because that’s the most volatile time the prop desks can move the market up. Trim Tabs, the world expert on money flows, has said this explains the parabolic move up in the market, there is NO OTHER SOURCE OF INFLOWS. Pure government intervention, and Obama has to be complicit in this. Today’s reports shows China has sole $50 Billion in US debt over the last 5 months. Net outflows have been huge since Jan 2009 from US stock mutual funds (into bond funds) Individual tax receipts down 10% over last year, corporate tax receipts down 50%.
    Biderman at Trim Tabs says the government is buying stocks. All the evidence is there. He just didn’t know the mechanism. The Primary Dealers at Goldman and JPMorgan are integral to this massive scheme, shown by 75% of profits coming from TRADING!

  128. Jim wrote:

    “A pattern of corrupt intervention to prop the US stock market has been shown since March 2009. ”

    I’m no rocket scientist, but one of the technical metrics I use to monitor the equity markets suggests additional interventions have taken place since July, not only in North America, but simultaneously in Europe and Asia. My best advice would be to focus on asset preservation (a bird in the hand). Cheers.

  129. There is no argument here against what you write.

    Good summary especially when you consider Goldman Sucks (and others) bonus payments came mainly from insider trading.

    In essence, the thieves at Goldman Sucks have been paid billions in bonuses to pump the markets ‘artificially’ creating even more ‘genuine’ spendable cash centimillionaires at the firm.

    Only could happen with a conspiracy of monumental proportions and all they have to do to earn it is for
    Lod Blankfein to lie to Congress a few times a year.

  130. I was wondering why George Soros and gang did not bet against the euro, with so many states in financial trouble, just like they did during the asian financial troubles in 1997-8.

  131. Then we should not begrudge them their default. GS would not exist today, if we had left them to their own risks, savvy?

  132. CNBC reported that the United States is moving from a services economy to a financial services economy. God help us all!

  133. This is an attack to GS! It looks like that you really don’t like this American company! If GS disappears, you would being crying too!

  134. Aiding and abetting isn’t it and what about the RICO act is that a law passed especially for those of Italian decent?

  135. They could spark a revolution from below if they keep trying to ram austerity programs down their throats. That is the real fear over there. Most Europeans are most ideologically informed than those of us in North America. That is why the workers there have already started a General Strike. It is an example that could catch on at least I hope it does.

  136. This could lead to the mutual destruction of both classes rather than a victory of one over the other. Certainly if a revolution was to occur in the USA it would start a civil war-the teabagger milita and other disorientated social formations along with the ruling class against the workers and enlightened persons on the other side. Not pretty, but an accurate prognostication if I do say so myself.

  137. WEll even though they could probably find me in a NY minute being a communist is not exactly safe in North America. It is not fear of other posters but a false sense of security that I won’t disapper in the middle of the night given that habeas corpus is no longer a requirement of law enforcement in the Great White North.

  138. However, the capitalist system has been touted as the best system to deliver the goods so to speak- that all boats rise with the tide or whatever sort of malarky they have used to justify this system over that of socialism. It is a myth that has become as true in the minds of it’s adherents and as deeply engrained in the American psyche as faith in the Lord Jesus. That sort of prejudice is hard to overcome-especially when the corporate rulers own the means of communication and the entire intellectual resources of the nation has been devoted to promulgating the myths of the free market.

  139. Capitalism is a social order in the same fashion that Feudalism was a social order. The economic cannot be seperated from the polical or the social, it encompasses the entire ensemble of social relations. Political-economy as the study of economics used to be called became de-coupled along the way to further mystify and obsfucate the exploitative aspects of the system. The key to understanding the inner workings of any society is to discover the manner in which surplus labour i.e profit, is pumped out of the direct producers. Under capitalism, the direct producers historically were seperated from the means of production-the serfs were freed from the land ( on which they had tenure and could produce enough for themselves and their families while giving the Feudal Lord his due for protection from other Feudal Lords who could possible harm them. Protection money vis a vis ownership of the land. Once displaced during the industrial revolution, the serfs-became a new class the working class who had nothing save their labour power to sell in exchange for a wage. These are our social relations, they are also our economic relations and they depend on the political system to enforce these relations. The state acts as administrators on behalf of the ruling class thus,
    The law locks up the hapless felon
    who steals the goose from off the common,
    but lets the greater felon loose
    who steals the common from the goose.

  140. Sovereign debt is now a market for lemons and a Ponzi scheme.
    Again it’s true that the recession is uncovering what auditors (and I add economists/statisticians) could not (or better did not want.
    Since foreign banks own some 70% of Greek debt, it appears clear that “market structures helped overcome information asymmetries and sustained the development of Greece sovereign debt”, under very peculiar conditions.
    This paper at
    can explain the incentives to fraud in the market for lemons of sovereign bonds…

  141. Excellent point. Being an engineer I cannot fathom credit default swaps, and all this other exotic nonsense. But I can understand the ecosystem and the earth are closed systems with finite resources. Either we mature, voluntarily tighten our belts, diet, and move forward into an economic system predicated on long-term sustainability (“hemostatic”) or we suffer a massive heart attack when some resource runs out (peak oil, precious metals, land loss from global warming) from corporate (and individual) rapaciousness. Time to pack the US Congress with 90% mathematicians, ecologists, climate scientists, and 10% clergy rather than the shills there now.

  142. If that’s the case you’d had better be good at making things, repairing stuff, salvanging stuff, growing things….e.g working with the hands…

  143. I challenge, or beg – any of the many erudite financiers, accountants, economists and other lights on this site to define what exactly is this thing called “Capitalism”, – because from my reading capitalism is one thing, – the kleptocratic bandit capitalism we hazard and endure today is something entirely different. The submit that the global financial system is something entirely different from, and aberrant to – that thing called Capitalism.

    The process of defining this thing called Capitalism, – which is the predatorclass and oligarchs holy mantra and sacred chant, – will prove beyond a shadow of doubt, – that the entire global financial system, and particularly the “…den of vipers and thieves” in the Amerikan financial sector do NOT honor, abide, or operate under the principles and definition of “Capitalism”.

    Crimes have been, and are being committed, grotesque injustices. Trillions of the peoples dollars funneled into the offshore accounts of the predatorclass and predatorclass oligarchs. Our founding fathers would revolt against this government! And so should we. I would also challenge my fellow commentarians to recall that the people have “…the right…to petition the government for redress of grievances.” If we no longer have that right, – then when was this right annulled, and who exactly redefined the Bill of Rights? I know of no official legal rescission of the 1st Amendment. Do any of you?

    So… a crime is a crime – and a criminal is a criminal, – and there is no “painting lipstick on a pig”. We either live in a society of laws, rooted in the rule of law, – and everyone is applicable, and NO ONE is above or beyond the law – or we don’t. If we do, then “…the den of vipers and thieves” at GS and through-out the US financial, regulatory, and insurance sectors, are going to jail.” If we don’t – the woe to us, – for we will inhabit then a world where the are no laws. In a world where there are no laws, – there are no laws for anyone predators!!

  144. I wish I had a pet Rhinosaurus – is that a cross between a Rhino and a dinosaur? Can I get a miniature one to carry in my manbag?

  145. It’s been shown the OPTIONS EXPIRATION (this week) week have coincided with the Fed purchasing the most toxic mortgages, an average of $40 Billion, that is why this money is going to Goldman, JP Morgan and a couple other High Frequency Trading desks, TO PROP THE STOCK MARKET. Just look at these charts, if you don’t think Goldman, making 1000 trades PER SECOND, can’t move the market up by buying index ETFs, SPY and DIA, they moven the market down over 800 points in 5 days, and have moved it up more than half that already using Treasuries exchanged for MBSs, on this, OPTIONS EXPIRATION. You think this is by coincidence?

  146. This blog has documented the Fed injecting an average of $40 Billion into the Goldman and JPMorgan prop desks, the Primary Dealers, during options expiration week. This is government intervention on the largest scale in US financial history to enrich the corrupt investment banks with taxpayer funds.
    This from the blog, link follows.

    “There is an interesting distribution top forming in the US equity markets. This rally has been driven by liquidity delivered from the Fed and the Treasury primarily to the Wall Street banks, who are deriving an extraordinary amount of their income from trading for their own books, at least based on published results.

    Much of the rally in US stocks has occurred on thin volumes and in the overnight trading sessions. Definitely not a vote of confidence, and a sign of potential price manipulation in fact.”

  147. To include what the global financial elitists have been doing under the rubric of Capitalism is just the left’s way of trying to grab more power and seeking a scapegoat to do it. And they need something simple.

    As you write, what they have done is no more about what Capitalism is than what voting is about self-governance. If they control the money, then our vote is a complete waste of time and worse perpetuates the illusion that we have some control of our destiny.

  148. Everyone wishes that. Every thinking person on the planet, or, in any case, everyone who understands what these thieving bastards have done to destroy the US and the world economy while enriching themselves beyond anyone’s wildest dreams.

    What we’re all waiting for is for someone, somewhere, somehow to take out these scum and by now it’s becoming clear that this can only be achieved by violence.

  149. So you either work for Goldman or you’re defending these thieving, lying bastards for your own sick reasons.

    There is no word in our current lexicon to appropriately describe the atrocious, loathsome, heinous, malevolent, malicious, nefarious, repulsive, vile behavior, and character, of people like you and the Goldman scum you are defending. You are literally re-inventing this area of our vocabulary, for want of a descriptive term to match your repulsive, disgusting nature, you piece of garbage.

  150. Flying an airplane into 85 Broad St. is too good for these charming individuals because in many cases death would be almost instantaneous, thus depriving them of the slow death they have inflicted on millions of others.

    No, they need to be hung from meat-hooks so their death agony will be equivalent to the damage inflicted. And this should be filmed as an example to other bankster criminals determined destroy our children’s future in order to pay for their excess and greed.

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