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Michael Winship - Goldman Sachs: What Hath Fraud Wrought?

(Photo by Robin Holland)

Below is an article by JOURNAL senior writer Michael Winship. We welcome your comments below.

"Goldman Sachs: What Hath Fraud Wrought?"
By Michael Winship

Goldman Sachs is the Blackwater of finance, the latest in a long line of companies you love to hate, like AIG and the Dallas Cowboys.

Or, as ROLLING STONE's Matt Taibbi infamously characterized it last year, the financial behemoth is "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Honestly, Matt has to cut down on his couch time watching The Discovery Channel.

Nevertheless, hit "refresh" on any financial news Web site and you're likely to get yet another revelation of the firm's colossal and impressively varied shenanigans. On Friday, Susan Pulliam reported on the front page of THE WALL STREET JOURNAL that, "A Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says."

As the JOURNAL notes, the Buffet deal came at a key point in the Wall Street collapse, restoring confidence in the markets and lifting Goldman's stock from a 40 percent slide to a 45 percent surge. The hedge-fund billionaire in question is Raj Rajaratnam, whose Galleon Group currently is embroiled in one of the biggest insider trading scandals in history: 21, including Rajaratnam, have been charged; 11 already have pled guilty.


The same day's FINANCIAL TIMES reports a potential conflict of interest surrounding Goldman's role in the refinancing of Lloyds Banking Group, 41 percent of which is owned by the British government - an arrangement made to rescue Lloyd's from the financial meltdown.

Goldman Sachs was both an investor and underwriter in the Lloyds refinancing. According to the FT's sources, Goldman got last minute changes made that increased interest on bonds being exchanged in the deal and was involved in discussions determining which bonds would receive highest priority in the exchange. Top ranked was a bond in which Goldman had invested, perhaps, one source said, buying as much as half of the issue. Goldman insisted its position was "not substantial."

All of this, of course, a week after the Securities and Exchange Commission charged Goldman Sachs with committing a highly sophisticated fraud, making big profits on the backs of struggling home owners, packaging their soaring mortgage debt as exotic investments some at Goldman knew would fail.

Already, foes of Wall Street reform are picking away at the SEC charges, and whether or not the accusations will ultimately stick remains to be seen - it's a very complex and nuanced case. The WASHINGTON POST reports that the two Republican members of the commission questioned the strength of the case and voted against bringing the complaint, expressing skepticism "that the evidence showed that Goldman had misled its clients because the investors were big, sophisticated firms who should have known what they were doing."

But the Democratic commissioners and SEC chair Mary Schapiro "argued that Goldman should not escape accountability simply because its clients were big firms. They said the evidence showed that Goldman did not give clients crucial information about the investment that likely would have made them think again about placing a bet."

Others claim that investments like the one in the Goldman case, a swirl of so-called "synthetic CDO's" (collateralized debt obligations) is so newfangled and complicated, very few of even the most knowledgeable financiers actually understand it. And those who do are not in a position to offer an objective opinion to investors because they're already working for companies like Goldman.

The GOP opposition to the SEC's complaint came just days before federal campaign finance filings were released on Tuesday. In March alone, Goldman Sach's political action committee donated $167,500 to Republican candidates and fundraising groups and $123,000 to the Democrats. As per the Web site Politico.com, "That March total alone - coming ahead of a major Wall Street reform bill - is more than the firm donated to political campaigns in the previous year."

A pox on all their houses. So thinks Bill Black, the one time federal regulator who cracked down on banking during the savings and loan crisis of the 1980's, pursuing the guilty with the tenacity of Inspector Javert in LES MISERABLES. He now teaches law and economics at the University of Missouri/Kansas City and wrote the book THE BEST WAY TO ROB A BANK IS TO OWN ONE.

Black spoke with my colleague Bill Moyers on the current edition of BILL MOYERS JOURNAL on PBS. He questions whether the SEC and the Obama White House - don't forget, Goldman Sachs was Obama's largest corporate campaign contributor -- will fully push for answers in the Goldman fraud case or any others. "Is this administration, which still has some Bush holdovers in it, and now has a lot of Goldman people in it, is this administration going to be able to pass judgment on Goldman Sachs?" he asked.

"... They haven't kicked into gear fully, or they'd be naming [Goldman CEO and Chairman Lloyd] Blankfein and other senior leaders of Goldman. And they've only gone after a junior person... If they were really in gear, there would be criminal charges here. And if they were really in gear, there'd be a broad investigation, not just of Goldman, but of all of these major entities."

But, he added, if you're sitting in Congress or the White House, "Do you want to look at these seemingly respectable, huge financial institutions, which are your leading political contributors, as crooks?"

If Black had his way, he'd enforce a three-strike policy. "Three strike laws, you go to prison for life, if you have three felonies," he said. "How many of these major corporations would still be allowed to exist, if we were to use the three strike laws, given what they've been convicted of in the past?"

That will never happen until the corporate clout of cash is removed from the American way of governance. Bill Black recalled a slogan he and his colleagues invoked during the savings and loan crisis: "The highest return on assets is always a political contribution."

Maybe that new $100 bill should read, "In Fraud We Trust."


Please note that the views and opinions expressed by Michael Winship are not necessarily the views and opinions held by Bill Moyers or BILL MOYERS JOURNAL.


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Comments

SIR I AM A AND AM NOT LOOKING FOR A JOB I Am 60 YEARS old i hve seen so many young vets cann't get a job at atlanta v a they hire their friends and not vet ! i'm talking about combat vets too!!

If Black had his way, he'd enforce a three-strike policy. "Three strike laws, you go to prison for life, if you have three felonies," he said. "How many of these major corporations would still be allowed to exist, if we were to use the three strike laws, given what they've been convicted of in the past?"
-------------------------
I tottaly agree with this part.

Kay Brown: Corporate Capitalism has run its course, inevitably to mercantilist fascism, and only dissolution of the entire financial system will suffice. Resetting the timeclock with wealth redistribution (or even the holy grail: campaign finance reform) would wear through like Kleenex pants considering the mis-socialization and misplaced values prevailing today. Luckily (as allenwrench/average airline pilot often observed) people today have become fatally dependent upon the system, and their values are malleable to what feeds their needs (sometimes perverted needs I concede). I think that if progressive activism, barter, Time Dollar Community Exchange trading of abilities, homegrown organics.... are filling the bill it is these things that will gain in public esteem. (When you do your shopping at Sears you are worshiping Searsism.) If you are curious about what I'm saying read the works of Ivan Illich (Esp. "Tools for Conviviality") He explained how a speed limit of 20 mph is necessary for human sanity and sustainable productivity. The choice to live simply and generously is the first impetus toward what is collectively best.There is a post-material technic in our organism that supercedes our profit driven self-negating technology. Fancier higher technology is pitiful against the nightmare its use has created. (No one ain't never gonna have the wealth or energy to clean up just that one Gulf wellhead spill. More jobs are lost to automation than to off-shoring.) Both corporate business organization and large self-maintaining bureaucracy must be abolished. I can't say how or what will come in its place, but it must be at a reasonable participatory scale. Let us build it together in consensus.

I will not try to recruit you or suggest a path but you will know our destiny when you see it.

Captcha: behavior Fremont-
Fremont is a northern Pueblan culture centered in southern Utah. They were the ones who left the pictograph "All-American Man"...

How do we re-form this downward spiral of financial morals and worship of "gaming the system" when the print media, commercial TV, and (future horrors) maybe even the internet are controlled by such a small number of corporations (4 or 6) in the U.S.?

Educating ourselves to know and investigate the sources, motives and connections of the InfoTainment helps. And to inform ourselves of the many, many ways world societies govern themselves. Try this - no more prisons (punishment does not work. Never has, never will.) Dispute Resolution(not arbitration or litigation),Restorative justice, hospitals, treatment centers and most of all PREVENTION of these sociopathic behaviors with early childhood education training parenting skills, preventative health care, community gardens, barter for tasks, and recognition of the arts. Guess this means a redistribution of the wealth. Why not - as it is only 1% of the population controls 90% of the wealth today. Ready?

Mr. Moyers,

I was incredibly saddened to learn of your impending retirement last year. As a belated viewer of the Journal (early 2009) such sadness is greatly tempered by the fact that there is still much of your fine work on the Journal and elsewhere that I have yet to experience.

Your retirement is well-deserved but significant. News and opinion journalism has coarsened and withered in the ironically monikered "information age" and the insatiable demands of the 24-hr news cycle, largely full of sound and fury, signifying nothing.

In a world where we all too often submit to the extremes of tone and rhetoric, moderate, nuanced voices of reason have become an endangered species. Farewell to one of the last great dinosaurs.

I am not as eloquent as some of the other writers but I certainly echo their thoughts. I am surely going to miss the thoughtful discussions on this program and I certainly hope PBS will come up with someone of Bill Moyer's caliber. I often think as I watch(especially April 23,2010) that it should be required viewing for the White House. Good luck to you Mr. Moyers.

Dear Bill Moyers,

I can only echo many of the previous comments. While I think you deserve a break, I feel a great loss that you won't be on the air after next week.

You have introduced me to people I would not otherwise have known, like Bill Black, Gretchen Morgensen and John Bogle and I am a better citizen for having heard what these wise and just people have had to say. I wouldn't know what is going on in politics if it weren't for your show directing me, through your guests, to websites and non-profits seeking to shed light on what corrupt people would keep hidden. I, like many others, feel a little scared that we will be travelling along these rough waters without you at the helm of our ship. But we will be OK. You have given us the tools to carry on.

I can only thank you for your service to our country. You have used your talents well and wisely and to the betterment of us all.

Valerie Long Tweedie

Nice article. It's hard to argue with the facts.

Maybe that new $100 bill should read, "In Fraud We Trust".
Wow! What a great comment!
Years ago, we heard about BCCI as Banks of Crooks and Criminal International.
Now we have Goldman Sachs.

Bill Black rightly said:
"How many of these major corporations would still be allowed to exist, if we were to use the three strike laws, given what they've been convicted of in the past?"

Politics plays a major role in all these financial institutions. It does not matter whether Democrats or Republicans, they both seem to have the same ingredients
Bill Black is right:
"The highest return on assets is always a political contribution."

Martha Stewart went to jail for her actions. What about these people from Goldman Sachs, Countrywide, and other Financial Institutions
They take a vacation? No Way

Is this Capitalism? No.
Is this Socialism? Yes, because the Taxpayers bail out these banks.

The question we should ask is:
Why should the Taxpayers pay for the mistakes of a few Financial Executives?

As SEC rightly put it:
Goldman Sachs committed a highly sophisticated fraud, making big profits on the backs of struggling home owners, packaging their soaring mortgage debt as exotic investments some at Goldman knew would fail.

The SEC and FDIC should investigate and hold these Executives from Countrywide and Goldman Sachs Accountable for they have done.

Nobody is above the Law.
Whether an employee or an executive, a crime is a crime no matter how sophisticated it is and how cleverly it is committed.

In March alone, Goldman Sach's political action committee donated $167,500 to Republican candidates and fundraising groups and $123,000 to the Democrats. As per the Web site Politico.com, "That March total alone - coming ahead of a major Wall Street reform bill - is more than the firm donated to political campaigns in the previous year."

And right on the heels of the Supreme Court's overturn of the limits on corporation campaign contribution limits.

Surprise?

Mr, Winship,spot on!
William Black, Michael Lewis & The Big Short", Simon Johnson with Michael Kwak,"13 Bankers", are informing Mainstreet through, The Web, that information re-enforcing the feeling of Financial FRAUD and Washington & Wall Street think time will dull Mainstreets' anger.

Voters have several tough years, at best, too recover form great pain while Washington & Wall Street seem to be on another planet!
This anger will be here well past the 2010 elections, and the internet helps Mainstreet feel the continuing pain of neighbors across this country.

The only thing that may go away soon is INCUMBENTS!

Billy Bob Florida

Your show is the calm deliberation in the storm of sound bites. We knew this time would come but it doesn't make it any easier. With the media powerhouses more concerned with profit than with most anything else, truer justice and dignity will continue to diminish with less chance of it becoming the dominant sentiment in America. Your show helped to counterbalance this trend. I purchase quite of few of your books in hardcover over the years as well as follow your career throughout. I know I may never meet you so let me just say, thanks for using your hard-earned efforts & talents to stand for basic human rights in this country and the world. If there is a heaven, I'm sure that you and others who place a deep value on the human spirit and always view the world around them with childlike awe, will be there. And I hope, Mr. Moyers, I can be there to thank you... in person.

Thanks for a job well done, Sir.

God Bless you.

Thank you Bill for your show last night 4/23/10 especially the interview with Bill Black. It was very timely
as well as 'brave'. I hope Bill Black is heard throught the nation with this so that we as Americans can expose these highly sophisticated criminal for wo they realy are and hopefully do something about it before it's too late...The TRUTH shall set us FREE. Thank's again Bill Moyer, You'll be sorely Missed.

Mr. Winship wrote, in part, "Or, as ROLLING STONE's Matt Taibbi infamously characterized it last year, the financial behemoth is "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Honestly, Matt has to cut down on his couch time watching The Discovery Channel."

And what is wrong with Matt watching The Discovery Channel...?

:-))

Someone got paid big to come up with that Wall Street symbol of a SPIDER for a trading company...which the adults in the room should have paid more attention to as a "symbol" for what they were doing - sucking everything into a web to devour it...

So all Matt did was "discover", via a biology documentary, another programed primitive life form without SOUL consciousness and used the cartoon visual to make HIS point about souless activity.

Philosophically, we all do struggle with explaining WHY "nature", itself, got so creative with vacuming up "waste" and re-cycling it back into the system.

There are LIMITS to what is possible to produce as PROFIT.

And there is a big difference between shrewdness and wisdom when it comes to "managing" the limits.

Dear Bill,

I am happy for you that you are moving on from a busy worklife to pursue other interests in your life - I know you deserve it and have worked so hard all your life. But let me say that is painful to see you moving off the air. You will be sorely and pointedly missed by me and my family.

I have watched your program assiduously in the last several years and have avidly watched your work on television for most of my life - I distinctly remember watching Bill Moyers Journal episodes as a teenager where you interviewed author James Dickey and another author, whose name escapes me, who wrote a book called "Hard Scrabble". I don't mean to go on, but I hope you can get the idea that your work always has been important and memorable.

I must say that your program is the only show I regularly watch on television, period. That's really the highest praise I can give you: in the vast wasteland that is broadcast television, your program stands out as the only one in my mind where intelligent, thoughtful, and concerned individuals actually discuss what is really going on in our country, its economy, political life, and culture. I owe you a profound debt of gratitude for that as do so many others.

So much is at stake at this time in our country: after a long period of corruption and abuse, do we have the will and energy to repair and renew our country? I can always count on you to at least ask the questions, frame the debate, and have the courage to look at and discuss the actual state of our country, the neglect of its people, and the many challenges it faces.

Thank you from the botton of my heart for a lifetime of service. Your courage, eloquence, and passion are unmatched!

Your friend and admirer,
James Brodie

Loved the program tonite. S/B
required listening for every
American. And yes, Ibelieve
we shold have some govt funding of journalism. While
there is some risk, we have a riskier situation NOW! I.e. corp funding! Heck they even OWN the major net-
works! And supply the advert-
ising that makes them profitable! At least we
can change the govt with our votes. Ever try to
change a corporation??

I have enjoyed Mr. Moyers performances as well as his guests. He asks straight forward questions of his questions of them. He doesnt invoke personal opinions or his political beliefs...instead he sums up his understanding of the subject and asks direct and meaningful questions of them. He is quick to grasp and follow the info shared w/him by the Interesting guests...great. He makes a wonderful insightful conclusion of the evenings topics at the end.

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