THE UNITED STATES OF GOLDMAN SACHS
by Robert Scheer
from HUSTLER Magazine September 2010
THE INVESTMENT FIRM’S DOMINATION OF GOVERNMENT BANKING POLICY GREEN-LIGHTED DISASTER.
Goldman Sachs is right to claim innocence of any charges, criminal or civil, that the government brings against the financial conglomerate for banking fraud. Of course the firm is innocent, no matter the ugly facts of its hustling the unsuspecting, from New York to Athens and many other points worldwide. Sure, its CEO, Lloyd Blankfein, was paid $68 million in 2007, the year Goldman bet against its own customers with those phony “synthetic” derivatives. But you’d better believe it was all legal.
How could it be otherwise when Goldman got to help write the laws governing the selling of derivatives and other key aspects of financial deregulation that allowed it to grow too big to fail and thus be eligible for generous government bailouts? Its lobbyists, one of whom got to be chief of staff in the Obama Treasury Department, were the leaders in getting the government to make the regulations Goldman-friendly. If convicted of anything, Goldman’s wiseguys have a right to the outrage of handcuffed Mafia bosses in the bad old days when they felt betrayed by judges and legislators they assumed had been properly bought.
That’s more than a wild rhetorical point. The massive bank-lobbying effort that Goldman’s big bucks helped pay for forced through the radical deregulation that ended effective government supervision of the big investment banks and resulted in the banking debacle that wiped out the home ownership and jobs of tens of millions of people worldwide. Under the presidencies of Bill Clinton and George W. Bush, when laws enacted during the Great Depression were made moot, the Treasury Department was practically a subsidiary of Goldman Sachs. It was the most blatant takeover of the government by one firm in American history. Clinton named former Goldman Sachs Vice- Chairman Robert Rubin to be his Treasury secretary, and Bush did the same giveaway of power when he named Goldman Chairman Henry Paulson to fill that post in his administration. Goldman’s total domination of the Bush Administration’s banking policy was so widespread that the New York Times ran an article headlined “The Guys From Government Sachs.”
As the Times story pointed out, “Goldman’s presence in the [Treasury] department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.”
Ex-Goldman CEO-turned-Treasury Secretary Paulson had an eager accomplice in Timothy Geithner, who was serving as head of the New York Fed before he replaced Paulson at Treasury in the Obama Administration. While at the New York Fed, it was Geithner who presided over the shameful payouts of taxpayer dollars to Goldman, as well as facilitating its overnight transformation into a bank holding company eligible for access to low-interest borrowing from the Fed and other profitable favors. If that privilege had been granted to Lehman Brothers, the company would still be with us instead of having disappeared through bankruptcy.
The closeness of the Geithner-Goldman connection was underscored by a Wall Street Journal report that concluded: “The Federal Reserve Bank of New York shaped Washington’s response to the financial crisis last year , which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after.”
With friends like that running Washington’s oversight of Wall Street, it’s no wonder that Goldman traders got a bit wild in their greed and that the firm’s top leaders gave them the green light to milk the system and, ultimately, we taxpayers for all it was worth. CEO Blankfein would later claim in testimony before a Senate committee that he “did not know” the details of those trades, but if that is true, it is obviously because he didn’t want to know as long as the money was pouring in.
The synthetic deals now at the heart of various lawsuits against Goldman would have smelled rotten to an experienced trader like Blankfein if he had paid scant attention to the derivatives packages that his company’s own internal e-mails described as “a shitty deal” and “a piece of crap” for the suckers buying them from Goldman. He didn’t have to care, because those deals were expected to go sour. Goldman bet on that outcome even as it failed to inform its customers of that likely result.
When the Mafia played those kinds of games, it was called “loan-sharking,” and the Mafiosi were put away behind bars for long stretches. But they didn’t have the right lobbyists and their own shills on the inside of the federal government. Not so the guys from Government Sachs, who are never going to require the services of the Witness Protection Program.
Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.
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