It Doesn’t Change The Facts

Published today in CommPro.biz http://www.commpro.biz/news/tuesday-october-30-2012/ 

 

Remember last March when a Goldman Sachs executive very publicly resigned with a scathing OP-ED in the New York Times? Well, last week (2012.10.23) Greg Smith released a book fleshing out his description of Goldman’s decay over the twelve years of his impressive career from the heady time when he made the cut and became an intern. Prior to the book’s release, Goldman fired back. They deny that they play any of the smarmy games that Smith claims are routine.

The investment banking firm paints Smith as a disgruntled employee who left not out of disgust with a deteriorating culture, but because he was refused an increase in his annual bonus from a half-million to a million dollars. Smith doesn’t deny that request, but suggests that instead of select items, Goldman should release his entire personnel file. He says it will show twelve years of rave reviews.

While smearing Greg Smith may blunt his criticism, the fact is, Goldman has paid out more than a half-billion dollars to make charges of the very kind Smith hangs his arguments on, go away. Goldman CEO Lloyd Blankfein told the Times of London, that he is “just a banker doing God’s work.” Comedian Stephen Colbert noted that “Blankfein had not indicated which god. Perhaps Shiva, Lord of Destruction.”

Blankfein has hired a lawyer with a history of defending high profile corporate crooks; not what those working in God’s vineyards normally do. On the face of it Greg Smith has an impressive track record. During his twelve years at Goldman he rose from intern to a high ranking position in their London office. He was chosen as one of ten out of more than 30,000 Goldman employees to appear in their college recruiting video. He was certainly a key player.

A Congressional investigation detailed that Goldman routinely sold packages of crappy investment vehicles to their customers (AKA “Muppets”) all the while betting that they would fail. Testifying before a Congressional Committee, CEO Blankfein denied knowledge of these practices. However, the Committee trotted out internal documents putting his denial in “Pants on Fire” territory.

So it comes down to this. Greg Smith’s motivation for leaving may or may not have been pristine. However, his motivation does not make his claims untrue. Goldman Sachs is not a nice outfit. They are not doing God’s work. They grind out huge profits moving money around. In Goldman’s case not a role that contributes to the well-being of society.

Understand, many investment banks play an important role. They provide bucks to keep major organizations in business and serve as advisors to businesses and to institutional investors. Problem is Goldman Sachs and some other bottom feeders play both sides of the street. The game that regulators during the Great Depression decided was a really bad idea. The laws set up back then to protect against the activities Greg Smith sees as toxic were swept away in the 1980’s and 90’s, leading to the recession we are struggling to overcome. Bad idea? You bet! Once a bad idea, always a bad idea.

Just in Time for Christmas

As day after day of misery goes by in the lives of the little folks crushed by the financial crisis, one question lies in the back of their minds. Who did this to us? Who’s looking for them and when will they be punished? We have known the answer to the first question for some time. The Wall Street investment banks’ sophisticated (read Crappy) investment packages whipped up a perfect storm.

They sold this Crap (their term not ours) to people who should have known better based largely on stellar ratings from the agencies charged with vetting these investments. The ratings agencies were pushed by their customers (big banks)  and did not look – as hard as they should – at the packages.

And it turns out that the bailout bucks we knew about (TARP) were nothing when compared to the zero interest loans the Federal Reserve was handing out to keep the banks afloat, trillions in secret loans. Bloomberg Markets Magazine blew the lid off this program. It was ten times the size of TARP.  By far the biggest hunk of these bucks (63% of the daily average) went to the same gang that got us into this mess – six humongous banks.

How did these half-dozen too-big-to-fail banks position themselves to come out of any crisis they might create covered in gold? Over a couple of decades they conned Congress into repealing the laws designed to prevent things like the 2008 crash. They even got “The Fools on the Hill” (AKA the Congress) to exempt banks from State Lottery laws. Who helped this along?  Clinton’s Secretary of the Treasury, Robert Rubin, fresh from 26 years and the top job at Goldman Sachs.

When the house of cards collapsed, who came up with the plan to save the banks? Bush Secretary of the Treasury Hank Paulson, fresh from the top job at Goldman Sachs, led the charge to save his comrades.  It gets even better; in 2006 Goldman Sachs was able to foresee that the crap was really crappy and likely to crash. Did they sound the alarm? Of course not, that might have interfered with their efforts to sell crap to their customers. Instead they bet it would crash and reaped a huge profit.

What ties this all together? Two of the key players, Rubin and Paulson, both came from Goldman at just the right moment to get rid of the pesky banking laws. So in addition to the efforts of all the banking lobbyists, you might say it was an “Inside Job.”

However, our wait to make those responsible pay may be nearly over. The SEC has charged six former Fanny Mae and Freddy Mac executives. More important, New York State Attorney General Eric Schneiderman and other State AGs are looking at criminal and civil charges. It would be nice to see a few of the arrogant bankers on their way to jail?  When you think about it, what they did was harmful than Bernie Madoff’’s scams. “Pants-on-Fire” Goldman CEO, Lloyd Blankfein has another view; bankers, he says, are “doing God’s work.”