THE SINSOF  GOLDMAN SACHS AND THEIR CRONIES

“They were careless people, Tom and Daisy, they smashed up things and creatures, and then retreated back into their money or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made.” 

The Great Gatsby -F. Scott Fitzgerald

Lord Acton's historic warning that "power corrupts and absolute power corrupts absolutely" has never been more evident.  The repeal of the Glass Steagall Act by Ex Goldman head Ron Rubin while Treasury Secretary under Clinton is one of the key reasons for the meltdown.  This act had been in place since the Depression to stop businesses from becoming too big to fail, but it was repelled at the urging of Rubin, Goldman, and Goldman lobbyists, so that they could broker huge deals with the likes of Citibank that wanted to get into other areas like buying Traveler’s Insurance.  Citi and Goldman made millions underwriting, as did others in their big acquisitions, and Rubin upon his exit as Treasury Secretary got the payola position of Citibank Board member and received more than 126 million.  It opened the doors to the likes of Ex Drexel Burnham Junk Bond thieves like Joseph Cassano and his cronies to open up the Financial Products division of AIG, with current taxpayer bailout of 173 billion.

Hank Paulson installed Goldman Sach’s vice chairman Ed Liddy as AIG's CEO to protect his old firm's $20 billion derivatives exposure, then gave AIG another $150 billion to keep them out of bankruptcy, and to make sure AIG's derivative contracts were paid off, including Goldman's $13 billion.  Paulson protected Goldman and himself from being sued by AIG for fraud.

Hank Paulson led the argument to change leverage rules in front of the SEC.  The changing of the leverage laws from having to actually have one dollar for every twelve dollars leveraged was changed by Paulson to only having to have one dollar available for every forty dollars they could gamble.  All firms jumped their leverages to over three times what had been available in the past, along with trading trillions in OTC hidden derivatives.  Many consider the perfect storm of Glass-Steagall repel, leverage changes, and the hidden derivative exposure, to be the biggest reasons for the financial collapse.  Paulson personally passed the leverage rule change that led to this crisis, then he led the effort to solve it by giving $700 billion of borrowed money from your kids to failed banks including his former employer Goldman Sachs, from whom he received $600 million in severance when he headed to Washington.  The current bailout number is estimated at 2 trillion.

Paulson signed an “ethics agreement” as Treasury Secretary to not be involved with anything even peripherally connected to Goldman Sachs.  When the financial crisis occurred, he conveniently gave himself an exemption, and then lined the pockets of Goldman with billions of dollars, giving them not only a 100% of their misguided CDO bets, but also a 100% of their Credit Default Swaps, basically allowing them to “double dip” on their terrible investments.  The others took 10 to 20 cents on the dollar.  Paulson forced unlimited power on dispersing of funds and no consequences would be allowed on his decision-making, and no scrutiny or disclosure of where that money was given.  He was quoted as saying, "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” 

One can draw a great deal of conclusions about Paulson’s central beliefs on business and politics by mentioning that one of his first positions of power was serving as assistant to John Erlichman, the central architect of Richard Nixon’s Watergate Scandal. 

A man who believed that when it came to winning seats of power, it’s best to break and enter, steal, and destroy one’s enemies at all costs.  Erlichman was convicted on conspiracy, obstruction of justice and perjury.  Paulson went on to become CEO of Goldman Sachs.

Goldman Sachs and Goldman lobbyists were the key influence in getting regulators, who in the past, were an outside group to keep an objective view of what they were regulating, to being shifted to being paid by the banks they were regulating.  Banks like Goldman knew that if the paycheck of these regulators were coming from them, that they could manipulate them into giving triple A ratings to risky and confusing derivatives like Collateral Debt Obligations that deserved far lower ratings.  They could use the power of the paycheck to give these false ratings on high-risk sub prime and Alt A loans to fool investors.  They securitized loans in order to make them seem less risky and hid them off balance sheets to pretend they didn’t own them.

Goldman got money from Warren Buffet, five billion, received TARP money from the government, ten billion, got thirteen billion government money from AIG for CDS’s, received eleven billion from the Fed, and thirty billion from FDIC, and became a commercial holding bank, even though they are almost entirely a hedge fund, and didn’t really invest much of anything in “Main Street.”  The reason for this was so they could get cheap money, allowing them to go to the FED window and get even more undisclosed money, up to 35 billion with no questions asked, for an interest rate of approximately 0.5.

The massive amount of newly liquid money, over 70 billion, was then used to buy everything on the cheap in a distressed asset pool, at pennies on the dollar, leading to their first quarter, second highest ever return, of 3.4 billion.  Goldman gave more than 16 billion in bonuses in 2010.

John Thain, Ex Goldman Sachs head, lost 15 billion in one quarter running Merrill Lynch into the ground, while redecorating his office for 1.2 million, including an $87,000 rug and a $35,000 commode, then demanded a 40 million dollar bonus from Ken Lewis to sell Merrill to B of A.  Thain was called to a crisis meeting on September 16, 2008 by Hank Paulson to discuss the looming Depression, along with the big 9 other banks.  It was noted by members present in the room that Thain was only concerned with making sure that his salary, bonuses, and B of A bonus would remain intact. 

Robert Steel, former Goldman head, got 225 million for driving Wachovia into insolvency. 

 Goldman packaged mortgages with 99.21 percent loan to value, meaning less than 1 percent in cash down payment.  No equity.  58 percent of those loans were “no doc,” no documentation of employment.  Yet, somehow 68 percent of the derivative package was given AAA rating.

 Goldman was the number one underwriter of IPO’s, 64 in 2000 alone, even though they knew that almost none of these companies has a chance to make money.  In the past, they needed to be a company for five years and show certain profits before being taken public, but Goldman stopped that practice for the easy underwriting money, even though it would hurt the overall economy.

 Nicholas Maier, former syndicate manager of Cramer and Co, the same Jim Cramer of “Mad Money” and former Goldman employee, stated that while working for Jim Cramer between 1996-1998, he was repeatedly forced to engage in illegal “laddering” in the IPO deals with Goldman.  Goldman online had to pay 40 million in penalties for this “laddering,” but did not have to admit any guilt.

 Goldman was also implicated in “spinning,” the practice of giving CEO’s of IPO companies a lower stock price prior to the offering.  Goldman again only had to pay 50 million for this crime, while making billions, and again, did not have to admit guilt.

Goldman Sach’s Fabrice Tourre, currently under indictment for fraud, is quoted in an email, “the whole building is about to collapse any time now, only potential survivor, the ‘Fabulous Fab,’ standing in the middle of all these complex, highly leveraged, exotic trades, which he created without necessarily understanding all the implications of those ’monstrosities.’”

 Goldman did what Goldman does when caught in fraud, paying the highest SEC settlement in financial history, over 550 million.  The settlement involves Goldman and Paulson and Co, handpicking a CDO, purposely putting in assets that they knew would collapse, then bought CDS’s to bet they would go under.  Like selling cars, but pulling the engine, and not telling the buyer.

 Goldman Sachs' entry into the commodities market has been implicated by some in the 80% rise in food prices that occurred between 2005 and 2008.   In a 2010 article, Frederick Kaufman of Harper's magazine accuses Goldman Sachs of profiting from the ensuing starvation.

On May 10, 2009, the Goldman Sachs Group agreed to pay up to $60 million to end an investigation by the Massachusetts attorney general’s office into whether the firm helped promote unfair home loans in the state.  

This settlement may open the door to state government actions against Goldman throughout the United States aimed at securing compensation for predatory mortgage lending practices.

 Goldman Sachs was the key figure in obscuring Greece’s billions of dollars in debt, using hidden derivatives, then bet heavily that the country would fail, again using it’s knowledge of fraud for it’s personal gain.

Ron Rubin was chairman of Citigroup, from 2007 to January 2009, where he made $126 million.  Last fall, Citigroup's stock dropped over 60% in a week.  Paulson then gave Citi another $20 billion TARP on top of $25 billion previously committed, to help his old Goldman Crony. 

Steven Freidman was allowed to participate in the government bank crisis while still on the payroll of Goldman Sachs and was even allowed to purchase more shares in Goldman once he knew they were getting billions in bailouts, “earning” himself an additional three million dollars.

Hank Paulson only brought in Ex Goldman Sachs employees to disperse hidden TARP funds.  Robert Steel, Steve Shafran, Neal Kaskari, Dan Jester, Ken Wilson, Gary Gensler, Mark Patterson, William Dudley.  They were in charge of the “hidden” money. 

Another momentous event in Goldman's history was the Mexican bailout of 1995.  Ron Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key holder.

Back in 2007, the average bonus for the "average Goldman staffer" was an a whopping $600,000, 10 times what the average American makes, while America's markets lost trillions and taxpayers were saddled with trillions in new debt.   

 According to a 2009 New York Times piece by Morgenson and Story, Goldman Sachs created collateralized debt obligations (CDOs), sold them to investors, and then bet short against them.  Jonathan M. Egol was named as a 'prime mover' behind the products, called 'Abacus' deals, worth billions.  A Goldman worker named Tetsuya Ishikawa was involved in these deals and later wrote a novel called, "How I Caused the Credit Crunch.”  Goldman did 25 Abacus deals from 2004-2008.  The article claims Goldman tried to pressure Moody's to rate its products higher than they should have been.

Goldman Sachs had software that they believed had been stolen, then went to the media, telling them that, “someone who knew how to use this software, could potentially manipulate the market,” as if the knowledge that Goldman had such a device to manipulate the market was just fine.  Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program could be used to manipulate markets in unfair ways?

Goldman Sachs started a new investment instrument, Death Bonds, buying life insurance policies and selling them in bundles, betting on people dying sooner than later. 

The city of Kenosha, Wisconsin, disclosed on the evening news a heartrending account of its teachers’ retirement fund, 95% of which was lost when it bought broker guaranteed income investment from Goldman Sachs, now toxic derivatives.  So much for Goldman’s assurance that people caught in the derivatives market are “sophisticated investors.”

 Goldman in the new CDO, created a security so opaque and complex that it remained misunderstood by investors and rating agencies, the synthetic sub prime mortgage backed bond, which got triple A rated even thought it was clearly toxic. 

 A desperate Goldman Sachs jumped at Warren Buffet’s offer to help them with five billion, with Buffet knowing very well that Ex Goldman Head and then Treasury Secretary Paulson, would never allow Goldman to fail.  Warren Buffet got 10% and options on his money, while Paulson gave Goldman a sweetheart government discount interest rate of only 5% and took less options than Buffett. 

 Bailout was part of Goldman’s strategy.  They understood that in the case of severe shock, the government would have no choice but to step in and give aid.  Goldman championed this as a hedge against their wild gambling, because Goldman instigated a change in government lending from “actual commercial transactions” which Goldman would not fall under, to “miscellaneous provisions,” ensuring that the Fed could lend to any collateral in a time of crisis, and Goldman would fall under this provision.  They instigated pushing this provision though. 

 When Brooksley Born, head of the Commodities Futures Trading Commission in 1994, warned that derivatives had gone from a minor player on Wall Street to a major instrument into the trillions, and was being traded in the dark in over the counter trades, opaque in any transparency or understandable risk, she urged congress to regulate them. 

Ex Goldmanite, Ron Rubin, then Treasury Secretary, called in Larry Summers, Arthur Levitt, and Alan Greenspan to derail her, even after derivatives had brought down “Long Term Capitol Management” to the tune of 14 banks bailing them out at a couple hundred million apiece.  They knew that the collapse of more of these funds, or banks, could be catastrophic, yet wanted their wild party of easy money to continue, and stopped regulation.

 Ex Goldman head Hank Paulson, as Treasury Secretary, allowed Lehman, the biggest competitor to Goldman, to go bankrupt.  He collapsed other competitors into other banks, making the old big 9, into the newer, bigger, big 6. 

Less competition, more special privileges, newly liquid with taxpayer money, and certainly too big to fail.

A former Goldman employee summed up what goes on there with this quote a managing director once told him, “Don’t you understand our business model?  We sell time bombs and move them around from customer to customer.  The trick to is to make sure we’re not the ones holding them when they go boom!”

 In Conclusion:

Goldman Sachs and its cronies played the major role in creating the financial meltdown that has destroyed the portfolios of an entire generation.  Goldman Sachs, and their lobbyists and cronies, with their infiltrated placements in the Fed and Treasury, were the most powerful in deregulating, massive leveraging, excessive risk, creating lax regulations, kept off balance sheet accounting, indulged in inept risk taking due to too big to fail, inflated the bubble, and profited from the bust.  According to Rolling Stone’s Matt Taibbi, “Goldman positions itself in the middle of a speculative bubble that they help to prop up, selling investments they know are toxic.” 

They then vacuum up vast sums from the middle and lower floors of society, even the poorest, with the aid of a crippled and corrupt state that allows their infiltration of the Fed and Treasury to get them special privileges, rules and laws changed, that assure their short term greedy gains, but ultimately the long term disaster for the world.  All of this in exchange for pennies in political patronage.  They didn’t need to break laws that their lobbiest had purchased. 

 No need for conspiracy theories when the facts about conflict of interest and wanton sacrifice of integrity for blind ambition and betrayal of public interest don’t register with people who have immunity to shame.  Finally when it all goes bust, leaving millions of ordinary citizens broke and starving, they start it all over again.   The oligarchy of Goldman Sachs, “ the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” has found a way to off load all their risk on to the American people, defining who wins, who loses, and who pays.  Organized greed always defeats disorganized democracy. 

Give ‘em the old three ring circus.  Stun and stagger ‘em.  When you’re in trouble, go into the dance.

“WE’RE DOING GOD’S WORK.” 

Goldman Sachs CEO - Lloyd Blankfein

By Brian J. De Palma