Goldman Sachs: Making Money by Stealing
It
16 March 2012
By Stephen Lendman
Money power in private hands and democracy can't
co-exist. Wall Street crooks transformed America into
an unprecedented money making racket.
Goldman symbolizes master of the universe manipulative
fraud. It's been involved in nearly all financial
scandals since the 19th century.
It makes money the old-fashioned way. It steals it
through fraud, grand theft, market manipulation,
front-running them, scamming investors, bribing
political Washington, having its executives in top
administration posts, and getting open-ended low or no
interest rate bailouts when needed.
It's business model and culture assure billions of
bonus dollars for company officials, complicit
traders, and others on the take. It's a crime family,
not a bank. It's connected to others like it on Wall
Street and corrupt politicians.
Compared to Goldman, Bernie Madoff was small-time. So
are most other swindlers. Ones who matter most sit in
Wall Street board rooms, plotting other scams.
Former bank regulator expert on white-collar crime,
public finance, economics, and related law, Bill Black
explained Goldman shenanigans pertaining to earlier
SEC charges this way:
"Goldman designed a rigged trifecta. It turned a
massive loss into a material profit by selling deeply
underwater, toxic CDOs it owned. It helped make John
Paulson (CEO of a huge hedge fund that Goldman would
love to have as an ally) a massive profit - in a
'profession' where reciprocal favors are key, and blew
up its customers that purchased the CDOs."
An SEC civil suit charged Goldman with defrauding
customers. It made billions, and settled for $550
million. It was pocket change, the equivalent of four
2009 revenue days. It hardly mattered.
No executive was fined or imprisoned. Grand theft
continues unabated. They include fraudulent
pump-and-dump schemes. Major media scoundrels don't
explain. Only scammed customers and insiders part of
the dirty game understand.
On March 4, Black used James Q. Wilson's "broken
windows" metaphor pertaining to blue collar crime. He
applied it to far more serious elite white-collar
offenses. None rise to the level of financial ones.
The amounts involved are staggering. Broken lives,
communities, and economies result. The landscape's
littered with them.
No firm's more adept at amassing fraudulent fortunes
than Goldman. Its CEO Lloyd Blankfein calls it "doing
God's work." It's hard imagining greater arrogance.
It's harder knowing the Supreme Court ruled banks and
other financial entities immune from securities fraud
by those harmed. Only Washington may sue for redress.
It's also appalling that Murdoch's Wall Street Journal
"serve(s) as cheerleader and apologist for those" who
amass wealth by stealing it, said Black.
Goldman Executive Resigns
Broken clocks are right twice a day. On March 14, so
was The New York Times. It gave rare op-ed space to
high level Goldman executive Greg Smith for views
worth sharing. He served as executive director and
head of the firm's domestic equity derivatives
business in Europe, the Middle East and Africa.
Headlining, "Why I Am Leaving Goldman Sachs," he said:
After almost 12 years with the firm, today was his
last day. He worked there "long enough to understand
the trajectory of its culture, its people and its
identity. And I can honestly say that the environment
now is as toxic and destructive as I have ever seen
it."
In "simplest terms," he said client interests are
sidelined. Goldman thinks only about making money.
"The firm has veered so far from the place I joined
right out of college that I can no longer in good
conscience say that I identify with what it stands
for."
In less blunt terms than Black, this writer, and other
critics, he stopped short of explaining its grand
theft model, but comments he made suggested it.
An earlier Goldman culture contributed to its success,
he said. "It revolved around teamwork, integrity, a
spirit of humility, and always doing right by our
clients."
Exaggerated? Absolutely, whatever minor differences
between today and earlier existed. According to Smith,
"virtually no trace" of what he admired remains.
Whatever pride he once had is now gone. It was time to
leave when he no longer could look aspiring students
wanting Goldman jobs "in the eye and tell them what a
great place this was to work."
How can it be operating like a crime family. It's
business model involves grand theft. Customers are
defrauded, not helped. Politicians are bought like
toothpaste. Laws are subverted and ignored. Others are
discarded or rewritten at its behest. Economies are
wrecked for profit.
When future Goldman histories are written, honest ones
will say Blankfein, president Gary Cohn, and other top
executives "lost hold of the firm's culture on their
watch. I truly believe that this decline in the firm's
moral fiber represents the single most serious threat
to its long-run survival."
Smith said his career involved advising two of the
largest global hedge funds, five of America's largest
asset managers, and three of the Middle East's most
prominent sovereign wealth funds. His clients manage
over a trillion dollars in assets.
He took pride, he said, advising them "to do what I
believe is right for them, even if it means less money
for the firm. This view is becoming increasingly
unpopular at Goldman Sachs." He knew it was time to
leave.
"Leadership used to be about ideas, setting an example
and doing the right thing. Today, if you make enough
money for the firm (and are not currently an ax
murderer), you will be promoted into a position of
influence."
Three key ways, include:
(1) Advising clients to invest in assets Goldman wants
to dump, including toxic ones.
(2) Getting them to buy what makes Goldman most money.
(3) Trading "any illiquid, opaque product with a
three-letter acronym," no matter how much toxic or
without merit.
He attended sales meetings devoid of ways to help
clients. They're about maximizing Goldman's profit, no
matter how illegally. "It makes me ill," he said, "how
callously people talk about ripping their clients off.
Over the last 12 months, I have seen five different
managing directors refer to their own clients as 'muppets.'
"
They're marks to be manipulated and scammed for
profit. He can't explain how senior managers don't
understand that losing client trust means forfeiting
their business. No matter if you're the smartest guys
in the room. They'll know you're smart enough to scam
them without hearing back room insults about "muppets,"
"ripping eyeballs out," and "getting paid" at their
expense.
He hopes his article "can be a wake-up call to"
Goldman's board. "Make the client the focal point of
your business again. Without clients you will not make
money. In fact, you will not exist."
"Weed out the morally bankrupt people, no matter how
much money they make for the firm." Make "people want
to work here for the right reasons. People who care
only about making money will not sustain this firm —
or the trust of its clients — for very much longer."
A Final Comment
Goldman's entire history, or at least most of it,
reflects predation. Its scams way pre-date Smith's
birth. In the 1920s, its Ponzi scheme investment
trusts defrauded investors. Goldman profited. They
lost out, and when Wall Street crashed were left high,
dry, and broke.
One trust sold investors reflected others. Its
offering price was $104 a share. It became virtually
worthless at $1.75. It lost over 98% of its value.
Unwary buyers then and now lose out. Only the stakes
get bigger.
Today they're enormous. Getting in bed with Goldman's
like swimming with sharks. You're prey. They're
predators. Those burned understand Goldman's culture
enough to know it's toxic and corrupted.
In 2002, it was largely responsible for Greece's debt
problems. It involved circumventing Eurozone rules in
return for mortgaging assets.
Using creative accounting, debt was hidden through
off-balance sheet shenanigans. Derivatives called
cross-currency swaps were used. Government debt issued
in dollars and yen was swapped for euros, then later
exchanged back to original currencies.
Debt entrapment followed. Greece was held hostage to
repay it. The country's been raped and pillaged.
Paying bankers comes first. Doing it left Greeks
impoverished, high and dry. Goldman profited
enormously by scamming an entire country and millions
in it.
Its business model thrives on similar schemes
globally. It's about profits, no matter the huge cost
to others. Expecting this leopard to change spots is
like imagining reformers will transform Washington.
Former alderman Paddy Bauler once said "Chicago ain't
ready for reform." It's still not ready and may never
be.
Neither is political Washington, Goldman, other Wall
Street crooks, or their counterparts throughout
corporate America.
They connive, cheat, profiteer from wars, drain
trillions from households and the national treasury,
wage war on labor, sell dangerous products, destroy
the environment, and do whatever they damn please
complicit with corrupt politicians who let them.
Goldman and other Wall Street giants are the worst of
the lot. Standing armies pale by comparison. Michael
Hudson calls finance warfare by other means.
Generalissimo bankers run everything.
Their job is pillaging households, investors,
communities, and countries for profit. Doing so holds
humanity hostage. They'll lose everything unless
stopped. Job one's assuring that's done. The stakes
are too high for failure. It's up to public rage to
change things.
Stephen Lendman lives in Chicago and can be reached
at lendmanstephen@sbcglobal.net. Also visit his blog
site at sjlendman.blogspot.com and listen to
cutting-edge discussions with distinguished guests on
the Progressive Radio News Hour on the Progressive
Radio Network Thursdays at 10AM US Central time and
Saturdays and Sundays at noon. All programs are
archived for easy listening. http://www.progressiveradionetwork.com/the-progressive-news-hour/.
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