Goldman Sachs and Justice Department Engaged

Goldman Sachs and the Justice Department Engaged

August 10, 2012


The Justice Department won’t be pursuing criminal charges against Goldman Sachs or its employees over its “big short” on the housing market several years ago.


The department’s investigation began last year after Senators Carl Levin of Michigan and Tom Coburn of Oklahoma, a Democrat and a Republican, released the findings of a two-year inquiry by the Senate Permanent Subcommittee on Investigations into Goldman’s sales and trading practices.
At a press conference last year, Levin said he wanted prosecutors to examine whether Goldman violated the law by putting customers into disastrous mortgage bonds that it was shorting — without telling the customers about its short positions. Levin also said prosecutors should review whether Goldman officials who testified before the panel committed perjury, including Goldman’s chief executive, Lloyd Blankfein.
As Levin, the Senate panel’s chairman, said in an interview last year, it “is not for Congress to determine whether or not a crime was committed.” Rather, “that is for the Justice Department and that is for the SEC to make those determinations.” Separately, Goldman said yesterday the SEC had decided against pursuing further claims against the bank over its sales of subprime mortgage bonds. The SEC extracted a $550 million settlement from Goldman in 2010 over a deal called Abacus, which had a prominent role in the Levin-Coburn report.
The Senate panel’s hearing on Goldman in April 2010 marked one of those rare moments when lawmakers conducted an important inquiry that genuinely was a bipartisan, nonpartisan effort. All of them, especially Levin and Coburn, should take a bow for a public service well done.
Here’s the statement that Levin released today:  August 10, 2012
Our investigation of the origins of the financial crisis revealed wrongdoing and failures among mortgage lenders, banking regulators, credit rating agencies and investment banks. One of those investment banks, Goldman Sachs, created complex securities that included `junk’ from its own inventory that it wanted to get rid of. It misled investors by claiming its interests in those securities were `aligned’ with theirs while at the same time it was betting heavily against those same securities, and therefore against its own clients, to its own substantial profit. Its actions did immense harm to its clients, and helped create the financial crisis that nearly plunged us into a second Great Depression.
Those are the facts the subcommittee found. Whether the decision by the Department of Justice is the product of weak laws or weak enforcement, Goldman Sachs’ actions were deceptive and immoral.
How convenient that Eileen Rominger, the former Goldman Sachs Group Inc. (GS) executive who joined the U.S. Securities and Exchange Commission last year, will step down next month as head of the agency’s investment management unit.  Rominger, who previously served as global chief investment officer for Goldman Sachs Asset Management, joined the SEC in February 2011 as one of the wealthiest people to ever work at the agency. She reported $57.5 million in income from Goldman Sachs in a disclosure form covering 2010 and 2011.
Perhaps she winds up some place that a subpoena can’t reach.  Not that a Justice Department headed by Eric Holder (whom no one in his department would bring charges of lying to Congress) would press charges anyway.
 


The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

 

 

By now, most of us know the major players.
As George Bush’s last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street.
Robert Rubin, Bill Clinton’s former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson.
There’s John Thain, the chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multi billion dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company.
And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden parachute payments as his bank was selfdestructing.
There’s Joshua Bolten, Bush’s chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board.
The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman.
But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump and dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer credit rates, half eaten pension funds, mass layoffs, future taxes to pay off bailouts.
All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage.
Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.
If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. It is a history exactly five bubbles long — including last year’s strange and seemingly inexplicable spike in the price of oil. There were a lot of losers in each of those bubbles, and in the bailout that followed. But Goldman wasn’t one of them.  Check out The Great American Bubble Machine by Matt Taibbi at http://peakwatch.typepad.com/goldman_taibbi.pdf
Brian


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