“Greenspan, Summers, Rubin and [SEC chief Arthur] Levitt want it stopped.”. (One of the truly comic moments in the history of America’s recent financial collapse came when Gov. You issued a letter? When no one was buying corn, the farmer could sell to a middleman known as a “traditional speculator,” who would store the grain and sell it later, when demand returned. Converting to a bank-holding company has other benefits as well: Goldman’s primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. “Oh, it’ll dwarf it,” says a former staffer on the House energy committee. Well, you might say, who cares? So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. 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. “If there must be madness, something may be said for having it on a heroic scale.”. “But they only push prices in one direction: up.”, Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. Victor Juhasz T he first thing you need to know about Goldman Sachs is that it’s everywhere. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. In it, Taibbi referred to Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. It will be rigged in advance. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. 'Everyone's a Nerd About Something': Inside the World of TV Superfandom, Supreme Court Shoots Down Texas Attempt to Overturn the Presidential Election, Taylor Swift Deepens Her Goth-Folk Vision on the Excellent ‘Evermore’, Courtney Love Responds to Miley Cyrus’ ‘Doll Parts’ Cover, Shares Nirvana Video, Pornhub Upended the Porn Industry. How the vampire squid is controlling our lives: They helped cause the crash. Its edge in the market has suddenly become an open declaration of supreme privilege. By now, most of us know the major players. There were a lot of losers in each of those bubbles, and in the bailout that followed. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops. GOLDMAN SACHS – once described as "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money" – has agreed to pay US$5.1 billion to settle a U.S. probe into allegations that it misled mortgage bond investors during the financial crisis, the U.S. Justice Department (DOJ) said Monday (11 April 2016). E. Gerald Corrigan served as the President of the New York Fed from 1985 to 1993. 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. Its Goldman Sachs Commodities Index — which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil — became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Ergo, no vampire squid would ever … You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. They achieve this using the same playbook over and over again. Despite Donald Trump’s first run for President on a populist platform of cleaning the swamp in Washington, a full month before he even took his seat in the Oval Office, he had nominated or appointed the following individuals to his administration: Steve Mnuchin, a former 17-year veteran of Goldman Sachs and a foreclosure king during the financial crisis to be his Treasury Secretary; Steve Bannon, who had previously worked in Mergers and Acquisitions at Goldman, was to become Trump’s Senior Counselor and Chief White House Strategist. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined. The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else’s Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. 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. Now New Changes Could Destroy Sex Workers’ Livelihoods, The Mother of Daisy Coleman From ‘Audrie & Daisy’ Has Died by Suicide. But Wall Street took these guidelines and threw them in the trash.” Goldman completed the snow job by pumping up the sham stocks: “Their analysts were out there saying Bullshit.com is worth $100 a share.”, The problem was, nobody told investors that the rules had changed. Robert Rubin was U.S. Treasury Secretary in the Bill Clinton presidency. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. In reality, 18 percent of the mortgages were in default within 18 months. The Fed Did a Lot of Talking Yesterday about a Big Bank Failure: Should We Worry? Mainstream Media Refused to Cover this Story in any Depth, Leaving the Heavy Lifting to Wall Street On Parade, Which Has Since that Time Written More than Ten Dozen Articles Chronicling this Fed Bailout. Goldman used two methods to hide the mess they were selling. 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 — not to mention …. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. (“Goldman’s superhero status was left intact,” says market analyst Eric Salzman, “and an investment banking competitor, Lehman, goes away.”) The very next day, Paulson green-lighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 11,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. The feature of this plan that has special appeal to speculators is that the “cap” on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. We want to hear from you! According to an email obtained by the Financial Crisis Inquiry Commission (FCIC) from Patrick M. Parkinson of the Federal Reserve to Steven Shafran (an official of the U.S. Treasury Department who had joined it in February 2008, also from Goldman Sachs to serve under Paulson), the Counterparty Risk Management Policy Group’s plan for dealing with a major defaulting counterparty was going to be relied upon. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? And maybe we can’t stop it, but we should at least know where it’s all going. Here’s how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. The world's most powerful investment bank is a great vampire squid … While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with. It was later revealed by the Government Accountability Office that Citigroup had also secretly received over $2.5 trillion in cumulative, below-market, loans from the New York Fed – a significant part of which were made against collateral of junk bonds and stocks, which were in freefall at the time the New York Fed accepted them as collateral. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets. That’s the last thing in the world I want. Take one $494 million issue that year, GSAMP Trust 2006S3. The world’s most powerful investment bank is a great vampire … Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. Goldman Sachs, the vampire squid, and its Wall Street cohorts see money everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming it’s blood funnel into anything that smells like money.” Matt Taibbi, Rolling Stone 2009 . Yet both of the major ratings agencies, Moody’s and Standard & Poor’s, rated 93 percent of the issue as investment grade. After it took a little-known company with weak financials called Yahoo! In March of that year, Bear Stearns had flamed out spectacularly and was absorbed by JPMorgan with billions of dollars in help from the New York Fed. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. But then, something happened. But the story didn’t end there. “Bob Rubin sure as hell knew what the underwriting standards were. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country’s wealthiest and most powerful corporations. You can’t really register the fact that you’re no longer a citizen of a thriving first-world democracy, that you’re no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there. As a Goldman spokesman explained, “We work very hard here.”. 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. All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. “The highest supply of oil in the last 20 years is now,” says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade. Which was all well and good, except for a couple of things. “The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits — an average of roughly $350,000 a year per employee. The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. 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While Goldman’s later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry’s standards of quality control. So instead of Bullshit.com opening at $20, the bank would approach the Bullshit.com CEO and offer him a million shares of his own company at $18 in exchange for future business — effectively robbing all of Bullshit’s new shareholders by diverting cash that should have gone to the company’s bottom line into the private bank account of the company’s CEO. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax collection scheme. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.). A Credit Card that Profits from the Rape of Children? That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. They’d been intact since the 1930s.”, Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. Shafran wrote as follows: “Tim [Geithner, President of the New York Fed] will ask Corrigan to accelerate formation of the private-sector default management group (DMG) that was proposed by CRMPG III. What’s in Your Wallet? “Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public,” says one prominent hedge-fund manager. 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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. The vampire squid goes cow town How Goldman Sachs milked Sacramento during the Kings arena negotiations. Goldman won’t even have to rig the game. Take a wild guess. Rumor No. How is this possible? 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. “Everything we did was legal and fair — but ‘long-term greedy’ said we didn’t want to make such a profit at the clients’ collective expense that we spoiled the marketplace.”. How the 'Vampire Squid' sucked the world dry: A damning indictment of Goldman Sachs. One year later, Corrigan was on the payroll of Goldman Sachs as a Managing Director. Matt Taibbi of Rolling Stone described Goldman Sachs (GS) like this; “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.” That’s why we call Goldman Sachs the vampire squid. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions. Goldman Sachs has been variously depicted as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” by Matt Taibbi of Rolling Stone; or the amoral investment bank that bundled mortgages it knew would fail and sold them to their clients as good investments so that it could make millions betting against them (shorting); or the place where greed became so over-the-top that a vice president, Greg Smith, resigned on the OpEd page of the New York Times, writing that his colleagues callously talked “about ripping their clients off.” Smith’s bosses were implicated as well: “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ ” wrote Smith. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind. New York state regulators are suing Goldman and 25 other underwriters for selling bundles of crappy Countrywide mortgages to city and state pension funds, which lost as much as $100 million in the investments. One day before the Lehman collapse, Merrill Lynch had collapsed into the arms of Bank of America. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. “The mortgage sector continues to be challenged,” David Viniar, the bank’s chief financial officer, boasted in 2007. Add articles to your saved list and come back to them any time. Once again the big losers were ordinary people. Their business? But that's all history. Here’s how it works: Say you’re Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. “With the right hand out begging for bailout money,” he said, “the left is hiding it offshore.”. In addition, the immediate past President of the Federal Reserve Bank of New York, William Dudley, which secretly sluiced over $29 trillion to bail out Wall Street banks during the financial crisis and has now opened its money spigot for trillions of dollars more, worked at Goldman Sachs for more than two decades, rising to the rank of partner and U.S. Chief Economist. It’s just asinine.”. The world's most powerful investment bank is a great vampire squid … Investing in carbon offsets. Save articles for later. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. The Fed’s Emergency Loan Operations to Wall Street’s Trading Firms Began on September 17, 2019 – Months Before the Coronavirus COVID-19 Had Emerged in China or Anywhere Else in the World. It’s not always easy to accept the reality of what we now routinely allow these people to get away with; there’s a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. At the time Goldman was heavily invested in oil through its commodities trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees’ Retirement System, had $1.1 billion in commodities when the crash came. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. 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 push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. And here’s the real punch line. But Goldman blew off those concerns, brazenly flaunting its insider status. the investment bank told — best defense against ahead of an investor not real asset in - InteractiveCrypto — been pro- cryptocurrency in Goldman Sachs Ignores Bitcoin appreciation is primarily dependent Sachs says Bitcoin is logic and reality. It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm’s mantra, “long-term greedy.” One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a long-term loser. Goldman Sachs Beats Another Fraud Rap: Can the Public Ever Get Justice in New York Courts? The head of the Federal Reserve Bank of Dallas (Robert S. Kaplan), the head of the Federal Reserve Bank of Minneapolis (Neel Kashkari), the Secretary of the U.S. Treasury (Steve Mnuchin), the President of the European Central Bank (Mario Draghi) and the head of the Bank of England (Mark Carney) all have two things in common: they sit atop vast amounts of money and they are all alums of Goldman Sachs. By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. In this game you were a winner only if you took your money out before the melon hit the pavement. Banks that engaged in spinning would then undervalue the initial offering price — ensuring that those “hot” opening-price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger first-day rewards for the chosen few. The collective message of all this — the AIG bailout, the swift approval for its bank holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn’t a free market at all. Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank’s environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. After landing at Goldman, Corrigan co-chaired a secretive group that was made up of the chief risk officers of the Wall Street banks. I ask the manager how it could be that selling something to customers that you’re actually betting against — particularly when you know more about the weaknesses of those products than the customer — doesn’t amount to securities fraud. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his son-in-law Samuel Sachs. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. “Demand is at a 10-year low.