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Home  Vault  Misc  Contact                                                           c2003-09 Thomas Barnard

If Goldman Is Making Money, Who Is Losing It?

My pal, Jason Smith, and local bookseller has put me on to an article that I think all my readers would benefit from reading.  It is Matt Taibbi's article in Rolling Stone entitled, "The Great American Bubble Machine" (2 Jul 2009).  The title is disarming because the article is basically an indictment of one firm - Goldman Sachs.  I have hinted at this problematical firm in past issues of my newsletter, but Taibbi does a summing up that is worth your while to read.  His language is over-the-top, but over-the-top language is not sufficient to describe such a malign firm.

http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine

I think any observer has to wonder about those year end bonuses reported at Goldman year after year after year.  Certainly, I have.  They're not a contributor to the economy like a Microsoft or Intel.  The best you can hope from a financial firm is that they are providing liquidity for markets, but in Goldman's case they are blatant manipulators who unbalance the system in their promotion of bubbles.  Interesting facts:

Taibbi's thesis is that Goldman's modis operandi is to play whatever bubble is in progress.  Thus while Goldman is selling to the investment community worthless mortgages bundled as CDO's, they are meanwhile selling them short because they know they're worthless.

Rubin, a former Goldman co-CEO, undoes Glass Steagle so that Citibank can merge with Travelers.  Later, Rubin works for Citibank, making over a $100 million dollars in the ten year period leading up to the financial crisis.  Citibank got a $300 billion bailout from the government Treasury Secretary Hank Paulson, a former CEO of Goldman.

What can be done to reign in such a cunning pack of wolves?  You could try disbanding the firm, but I think the wolves would regroup under some new banner.  The only things that occur to me are the following:

1)  No special deals.

2)  Financial firms need to conform to their old stodgy traditional standards.  Things like 20% down, 30 year fixed.

3)  Regulation of derivatives.  Well, this is in the interest of the nation.

4)  It is in the interest of the country to keep such ultra-greedy firms in their judicial sights.

July 6, 2009 (Not distributed)