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How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps

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Goldman SachsInvestment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America.  The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything “illegal” about it (although they are now being investigated by the SEC among others). 

The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps….  

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses. 

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.   

Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.

So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?

You see, when you are talking about a financial giant the size of Goldman Sachs, the line between “betting that something will happen” and “making something happen” gets blurred very quickly.

Not that Goldman Sachs was the only one betting against the housing market.

According to the New York Times, firms like Deutsche Bank and Morgan Stanley also created mortgage-related securities and then bet that they would fail…..

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.

But certainly Goldman Sachs was the most prominent financial player involved in this type of activity.

In fact, without mentioning specifics, Goldman has even admitted publicly to wrongdoing.  On November 17th, 2008 Goldman Sachs CEO Lloyd Blankfein even issued a public apology….

“We participated in things that were clearly wrong and have reason to regret.”

But complicated financial transactions are something that most Americans simply do not understand, so the public outrage towards Goldman Sachs and others has been somewhat limited.  But that does not change the very serious nature of the activities that Goldman was involved in….

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, recently told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

But the sad thing is that many Americans do not even understand what Goldman Sachs is.  Goldman Sachs was founded in 1869 and has forged a reputation as one of the elite financial institutions in the entire world.  They only hire “the best and the brightest” and Ivy League graduates flock to the firm.  Of the five major investment banks that dominated Wall Street before the crash, only Goldman Sachs and Morgan Stanley have survived.  Merrill Lynch and Bear Stearns were severely damaged by the crash and ended up being purchased by retail banks and Lehman Brothers ended up folding. 

There are persistent rumors that Goldman played a major role in the collapse of Bear Stearns and that ex-Goldman CEO Hank Paulson could have done much more to bail out Lehman Brothers, but perhaps nobody will ever know the full truth.  All we do know is that at the end of the crash several of Goldman’s competitors were destroyed and Goldman found itself in a more dominant position than ever.

The truth is that Goldman is a financial shark and they do not apologize for it.

An article in Rolling Stone recently put it this way….

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.

So how did Goldman Sachs prosper so greatly in an environment that destroyed their competitors?

The following is an extended breakdown of just how Goldman Sachs was able to reap tens of billions of dollars in profits from the collapse of the U.S. housing market….

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

In late 2006, Goldman Sachs made some fundamental changes in the way that they were approaching the U.S. housing market.  According to a McClatchy report, Goldman spokesman Michael DuVally said that the firm decided at that time to reduce its mortgage risks by selling off subprime mortgage-related securities and by purchasing credit-default swaps to hedge against a serious downturn in the U.S. housing market.

The key moment came in December 2006.  After “10 straight days of losses” in Goldman’s mortgage business, Chief Financial Officer David Viniar called a meeting of key Goldman personnel.

Vanity Fair described the results of that meeting this way….

After a now famous meeting in David Viniar’s office on December 14, 2006, Goldman’s traders began to protect the firm against further declines in the market. Just as you can short the S&P 500, the traders took short positions in an index that tracked the price of mortgage-backed securities. They also either sold assets they owned to others at losses or dramatically marked down the price on their own books.  In the aftermath of the crisis, criticism erupted that Goldman had continued to sell mortgage-backed securities to its clients while betting against those very securities for its own account. Clearly, in the simplest terms possible, this is true: while Goldman was never the biggest underwriter of C.D.O.’s (collateralized debt obligations—Wall Street’s vehicle of choice for mortgage-backed securities), the firm did remain in the top five until the summer of 2007, when the market crashed to a halt.

So Goldman Sachs proceeded to sell approxmiately $39 billion of its own mortgage securities in 2006 and 2007 and they sold at least $17 billion more mortgage securities for others, but they never told the buyers of those securities that Goldman was secretly betting that a significant drop in U.S. housing prices would send the value of those mortgage securities plummeting.

These sales and the massive clandestine wagers placed by Goldman enabled the firm to pass most of its potential losses on to others prior to the collapse of the U.S. housing market.

But many of the investors who got the short end of the stick were not pleased.  When they discovered that what Goldman had promoted as triple-A rated investments were actually a bunch of garbage, many of them were absolutely furious.

“The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,” said Boston University economics professor Laurence Kotlikoff. “This is fraud and should be prosecuted.”

One of the victims of this fraud was the state of Mississippi….

Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman’s subprime mortgage-backed bonds in 2006, said the state’s funds are likely to lose “hundreds of millions of dollars” on those and similar bonds.

Another one of the victims of this fraud was California’s retirement system for public employees…. 

California’s huge public employees’ retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund’s holdings, in July CALPERS listed the bonds’ value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.

So who is left holding the bag in cases such as these?

The taxpayers.

And that is just fine with Goldman Sachs.  Just as long as they keep raking in huge profits.

Vanity Fair was even more blunt regarding this injustice….

“Goldman’s management team was almost flawless in its execution. But how many people needed government help because of the things Goldman sold them?”

The truth is that a lot of people needed help because of the things Goldman sold them, but up until now Goldman has completely gotten away with it.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses. 

Not only did Goldman sell mortgage-related securities that were absolute junk to investors at vastly overinflated prices, they also placed massive bets that the U.S. housing market would absolutely collapse.

The New York Times recently described how Goldman used a new index known as the ABX to make many of these bets….

A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.

Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.

These bets would only make money for Goldman Sachs if the U.S. housing market declined.

So if the biggest giant on Wall Street has a huge financial incentive to see the U.S. housing market fail, what do you think the odds are that they are going to do anything to support it?

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they could get paid. 

For years, Goldman Sachs has encouraged executives to serve in U.S. government positions.  Now they are world famous for the amount of influence their former employees have over government policy.

For example, according to the New York Times, Treasury Secretary Hank Paulson (also a former Goldman CEO) spoke with the current CEO of Goldman Sachs about two dozen times during the week of the bailout, although Paulson says that he obtained an “ethics waiver” before doing so.

So does an “ethics waiver” make everything okay?

But the sad thing is that is not an isolated example.

It turns out that Goldman benefited greatly from a number of decisions made by their former CEO while he was Treasury Secretary….

*Goldman greatly benefited when Paulson elected not to save rival Lehman Brothers from collapse.  Paulson certainly stepped in to help Fannie Mae, Freddie Mac and AIG, but apparently had no problem with letting Lehman Brothers fall apart.

*Under Paulson’s direction, Goldman ended up receiving bailout money (which they may or may not have needed) from the U.S. government and has since paid back much of that money with interest.  So why didn’t Bear Stearns or Lehman Brothers get the bailout funds that they needed? 

*Goldman greatly benefitted when Paulson organized a massive rescue of American International Group while in constant telephone contact with Goldman CEO Blankfein.  AIG ultimately ended up using $12.9 billion taxpayer dollars to pay off every single penny that it owed to Goldman.

But it is not just Paulson who has had significant influence in Washington.

On October 16th, Adam Storch, a Goldman Sachs vice president, was named managing executive of the SEC’s enforcement division.  What do you think the odds are that he will crack down hard on Goldman?

In addition, former Goldman Sachs lobbyist Mark Patterson is the chief of staff for current Treasury Secretary Timothy Geithner.

In fact, ex-Goldman employees are seemingly everywhere.  According to Vanity Fair,  at one  G-7 meeting an anonymous source identified at least 24 out of 32 finance officials in attendance as ex-Goldman employees.

The influence of Goldman Sachs even reaches to the White House.  Goldman was Barack Obama’s number one campaign donor, and its employees gave $981,000 to his campaign.

If you don’t think that kind of money does not buy influence then you are delusional.

Goldman used some of that powerful influence to get the U.S. government to bail out AIG so that AIG could pay off the bets that Goldman had made with them.  In a recent article, Vanity Fair described part of what went down….

After the government bailout of A.I.G., in order to end the collateral calls on the insurance giant, the New York Federal Reserve—whose chairman at the time was former Goldman chairman Steve Friedman—decided to purchase a slew of the securities that A.I.G. had insured, including $14 billion of those on which Goldman had purchased insurance. The government—meaning taxpayers—did so at full price, although according to a recent Bloomberg story, there had been negotiations with A.I.G. to do so at a 40 percent discount. Goldman says that the New York Fed broached the topic of a discount only once. The firm’s response: a flat no. While no one will ever know what would have happened had A.I.G. gone under, the essence of what did happen is perfectly clear. As a recent report by the Office of the Special Inspector General for tarpput it, the decision to pay full price “effectively transferred tens of billions of dollars of cash from the Government to A.I.G.’s counterparties.” Or to put it another way: because Goldman felt it was owed its billions by A.I.G., the firm took it from taxpayers instead.

So what about all of the thousands of small businesses that are failing and what about the millions of Americans that are losing their jobs and homes?

Do they get bailouts?

Of course not.

But the U.S. government definitely made sure that AIG and Goldman were taken care of.

Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.

Goldman Sachs ranks #1 in annual net income when compared with 86 peers in the investment services sector.  They are on course for their best year ever.

Yes, they are having a really good “crisis”.

Goldman Sachs is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.

20 billion just in bonuses?

That would mean that the average bonus for all Goldman employees would be over $700,000.

No wonder everyone wants to work for them.

It’s good to be on the winning side.

So just how are they making so much money?

In their recent article, Vanity Fair described it this way….

But because so many of Goldman’s competitors were gone or disabled, spreads—the difference between the price at which you sell and buy a variety of securities—were wider than they had been in years, meaning that Goldman could practically mint money. By acting at the moment it did, with Lehman out and Merrill Lynch down for the count, the government enabled this situation.

The other reason for Goldman’s profits is that the government has flooded the system with money, not just the money it used to rescue the financial system but hundreds of billions more in stimulus, in support of the housing market, and in the Federal Reserve’s purchases of securities.

But all of this success has not come without controversy.  In fact, Goldman executives are very much aware of the growing backlash against the firm.

Senior officials at Goldman Sachs have reportedly loaded up on firearms and are now equipped to defend themselves if there is a “populist uprising” against the bank.

In addition, Goldman Sachs employees are now not allowed to gather in groups of 12 or more outside the office.  The firm very much discouraged “holiday parties” as they most definitely did not want to be seen as celebrating the downfall of the U.S. economy.

But the truth is that Goldman Sachs won because so many others lost.

In his very revealing article on Goldman Sachs in Rolling Stone, Matt Taibbi described how Goldman keeps making money from the bursting of these economic bubbles….

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.

The truth is that in this latest economic collapse there were millions of losers and just a few winners.

Goldman Sachs was one of those winners.

So will they lose next time?

Not likely.

In their recent article, Vanity Fair quoted an anonymous source in the financial industry as saying the following….

“Are they the Yankees? No, the Yankees actually lose! Goldman never loses.”

  • Frankie

    It appears the next bubble they are creating in conjunction with other international bankers is the “Global Warming” scam or rather the newly named “Climate Change” since the planet is not warming up. This next scam is being played with bigger fish such as the IMF and World Bank to name a few. We all will be taxed based on Co2 a basic fundamental element which is a part of every aspect of life. “Cap and Trade” which is modeled after Ken Lay’s successful ENRON will now be coming to an IRS form near you. Stay tuned.

  • JT

    food, guns, gold…and of course land.

    Good luck to everyone who is finally opening their eyes. You still have time!

  • Melinda Curtis

    Two questions: When do they give the money back?
    When do they go to jail?

  • Myriam Koepcke

    Meanwhile homeowners associations have turned into mini-governments whose laws supercede city, state and federal law–most cities now require new developments to be governed by them. They pass rulings that force people out of their homes into massive numbers of foreclosures so that prices in the neighborhood drop, properties are purchased for pennies on the dollar, somebody profits… not the homeowner… Who could it be? All apparently legal.

    reference: “Privatopia: Homeowner Associations and the Rise of Residential Private Government” by Professor Evan McKenzie

  • WalterB

    The whole scheme very much resembles the 1980s Bush-fraud, during the Iran-Contra, Cocaine-trafficking and Savings&Loan Crash years, as detailed by ex-CIA Alexander Martin in his book ‘The Conspirators’. Only this time the fraud was much bigger.
    We find the same ingredients: a Bush-member as president, real-estate fraud (sub-prime), the sale of worthless equities, fraudulent bankrupties and insurance fraud (whereby the ‘friendly’ insurance company is covering the risks and consequently needs to be rescued by the taxpayers). In the 80s, the actors asked themselves if the size of the fraud would possibly jeopardize the ‘real economy’ in the US. It didn’t then, but this time they came very close.

  • Steve

    “not allowed to gather in groups of 12 or more outside the office” “have reportedly loaded up on firearms” “The firm very much discouraged “holiday parties”

    What price this greed.

  • WalterF

    This will all lead to total money meltdown. Theyre only fooling themselves, soon merchants will be throwing their gold and silver in the streets as it becomes worthless. Typical money making senerio, Create the problem then make money on the solution like-WWII Hitler funded by US(Weapons manufacturing)=Federal Reserve(US Soverenty lost to foriegn bankers)=Gold Standard gone=Wall Street Bailouts=Job Loss=Mortgage Crisis=911=Iraq WDM scare(Oil)= War on terror(oil)Afghanistan, there is no such thing as “War on Terror” its like saying “War on Fear”?=Swine Flue scare(money made on vaccines). And now the tree huggers are trying to get a piece of the pie by using the “Climate Change” bill, what a load of environmental CRAP, Cmon in 50 years the global temprature rises 1 degree!, How is money going to change the climate? have we been robbed blind. I wish this bubble would pop already!

  • Jerry

    It was the central banker Paul Warburg who said it best back in 1920…
    ‘The world lives in a fool’s paradise based upon fictitious wealth, rash promises, and mad illusions,’ he said. ‘We must beware of booms based upon false prosperity which has its roots in inflated credits and prices.’ Chernow

    90 years later and we still haven’t learned anything!!!
    What in the world was Goldman thinking?

    Cheers and a happy new year to all.

  • Jake

    ” WalterF
    December 31st, 2009 at 6:20 pm
    This will all lead to total money meltdown. Theyre only fooling themselves, soon merchants will be throwing their gold and silver in the streets as it becomes worthless.”

    WHEN HAS GOLD & SILVER BEEN EVER BEEN WORTHLESS!?!??? I’ll gladly pick it up if some fool throws it out…got any Walter you care to toss? Drop a line & address…I’ll save you (& anyone else) the trouble of manually moving that heavy “worthless” pile of metal to the curb.

  • shawn

    the thing is- with plutocracy- “like america is today”
    it dont last each new emperor-always
    executed all of his political and-oligarchy rivals
    the rise of-
    absolutitarianism-is on its way

    “the french revolution” “rise and fall of the roman empire”

    history does repeat itself

  • Moral of the story get your money out of the market fast, before it crashes.

  • EF

    So, Goldman continued to promote mortgage-backed securities while it privately bet, and believed, that they would decline in value. Deception appears to be central to its business model.

    Weigh this against recent reports that, among all those predicting treasury yields for 2010, Goldman’s predictions are the lowest. Assuming this is a deception, we can expect substantial increases in treasury yields this year. That means a much higher interest bill for the US to pay. Of course, that burden will eventually fall on us, the taxpayers.

  • Belle

    This is a very good summary of what was clearly a crime against us. Bankers committing fraud. Insurers committing fraud. Brokers committing fraud. The Fed, SEC and rest of the alphabet turning a blind eye. Television telling us that no one could have seen it coming, and excusing it all as the normal course of events.

    Through it all, the Department of Justice, whether under Holder or Gonzales is conspicuously missing in action. We do indeed have a class above the law, and they have brought the equivalent of an economic 9-11 against us.

  • Michael Fogg

    They are going to create a single currency — a global currency — to replace the Yankee Dollar. Then they will have a central world bank to control the issuing of the new currenc. All the individual currencies will have a fixed exchanged rate with the new global currency and then gradually they will be phased out.
    Next they will do away with paper and coins as money. The controllers of the world bank will make all transactions between banks in individual countrieres electronic. Even cheques will disappear. Then we will have a cashless society.
    People will be able to by or sell electronically, like topping up a mobile phone with credit, or like paying bills from a mobile phone’s credit.

    It will bring about the universal acceptance of the electronic buying and selling. If you are a criminal, they will be able to freeze your criminal assets. If they don’t like you discriminating against their laws they can lock you out of the world of buying and selling. They can have total control over you. They can build up a history of all your financial transactions.

    In the Apocalypse it says, concerning the end times and the coming of the Antichrist; “No one will be able to buy or sell unless he has the mark of the beast on the hand or on the forehead.”

  • This article is awesome. Who are you guys? I work with Ellen Brown, Stephen Zarlenga, Dennis Kucinich and others for political reform of banking. Our first best-bet is state-owned banks, and we’re also ready for national monetary reform. Contact me if you’d like to understand what we’re up to and consider working in synergy with us.

  • dogismyth

    hahaha….you forgot the one more powerful than Goldman…JP Morgan. They are in the background for a reason. The real perpetrator is always in the background. All the primary dealers to the federal reserve are evil, corrupt and do not care one iota about the general public. Someday someone will go ballistic on them, and many will applaud loudly or turn their backs on them. They have de-evolved the human race through their exotic financial dealings, and their secret ties with the gov, and the backlash to the taxpayer. It makes me sick that these people can get away with “fixing” things in their favor. Do not do any business we these primary dealers. THEY ARE BEHIND ALL THE CORRUPTION HERE AND ABROAD. DO NOT USE THEIR BANKS, CREDIT CARDS OR HAVE ANY FINANCIAL DEALINGS.

    YOU PEOPLE WANT TO STOP THEM, THEN TAKE AWAY THEIR FOOD…MONEY. You can stop them if you want. But the fact of the matter is that the more wealthy are the ones that have money in these organizations because they know these bankster gangsters will do anything to win in the capital markets….including criminal activities. Americans are more complicit to these crimes than the actual criminal. They silently condone this crap day after day. Oh well, I have enjoyed my life. Its up to the younger generation to get this under control…if they want to. I could care less at this point.

    List of the Primary Government Securities Dealers Reporting to the Government Securities Dealers Statistics Unit of the Federal Reserve Bank of New York

    BNP Paribas Securities Corp.
    Banc of America Securities LLC
    Barclays Capital Inc.
    Cantor Fitzgerald & Co.
    Citigroup Global Markets Inc.
    Credit Suisse Securities (USA) LLC
    Daiwa Securities America Inc.
    Deutsche Bank Securities Inc.
    Goldman, Sachs & Co.
    HSBC Securities (USA) Inc.
    Jefferies & Company, Inc.
    J. P. Morgan Securities Inc.
    Mizuho Securities USA Inc.
    Morgan Stanley & Co. Incorporated
    Nomura Securities International, Inc.
    RBC Capital Markets Corporation
    RBS Securities Inc.
    UBS Securities LLC.

  • Deborah

    This is the part where I say,”DAMN, I’m glad they service my 401K. We were practically guranteed a couple of years ago, that we would not lose money on our 401k, and they would be successful. I guess they knew what they were talking about.

  • WalterF

    Jake, Throwing Gold in the streets was a figure of speech, sorry for the confusion, I dont wish to impose religion on anyone but if your a believer then The Book of Relevations chapter 18 vs 17,18,19 would make sense to you. It speaks of the global economic collapse which is about happen. I believe it will happen by 2011. There are just too many signs out there pointing to this. The math proves that were at a point of no recovery, something major news networks will never admit. Wall Street will be shocked at the sudden destruction just like it happened over night 1929.

    REV 18: 17,18,19
    17 For in one hour so great riches is come to nought. And every shipmaster, and all the company in ships, and sailors, and as many as trade by sea, stood afar off,
    18 And cried when they saw the smoke of her burning, saying, What city is like unto this great city!
    19 And they cast dust on their heads, and cried, weeping and wailing, saying, Alas, alas, that great city, wherein were made rich all that had ships in the sea by reason of her costliness! for in one hour is she made desolate.

  • Marty

    Criminals who dress nicely and hold positions of authority reside both in the halls of Congress and Industry. Masquerading as honorable people these criminals steal, kill and destroy for power and profit. They rejoice in their profits now but in the end their rejoicing will be turned into mourning as The Judge of all rewards them all for all their filthy deeds.

    • plextt

      What a pathetic Trojan horse attempt. Please take you and your religion elsewhere.

  • Rose

    Will we ever quit blaming big business for making money. This is what business do make money if they found a loop hole in the law contact your elected officials and campaign to get the laws amended. Quit whining if you were making the money you would not be writing this garbage or reading it.

  • WalterF

    Inflation in the middle of a recession? Why does the media say we are continuing to recover when they see oil prices go up i.e. $75.00 a barrel? When you see unemployment skyrocketing and prices going up, that not a good sign. In the recession of 2001 oil was $25.00 a barrel.

  • Marked

    So how will people avoid the mark and pay for goods and serrvices?

    • joe

      Learn to grow food? Learn to steal food? Learn to be non corupt. Live by the sword die by the sword. So live the material life and the material will kill you. Be spiritual and turn your back on things of the flesh.

  • Rainey

    Wasn’t it Lenin who said, ‘capitalists will sell us the rope we hang them with.’ In the case of Goldman and financialization of the entire US economy courtesy of various movers and shakers .. goes back to the time of Nixon really when he took us off gold cause the world was beating on our door claiming gold rather than dollars. BUT I digress, trying to fight the Vietnam War AND paying for LBJ’s elaborate ‘war on poverty’ helped push the US system over the edge leading to double digit inflation and the powers that be making policy particularly under Carter. Deregulation didn’t begin under fact it went into high gear under Carter. One of the worst laws ever was passed in 1979, The Monetary Deregulation Act…all bets were off. We went from a pretty well balanced economy to one based on bubbles, corruption, cronyism, a horrific version of ‘free trade,’ the end of engineering America, actually making ‘stuff’ to sell to ourselves and the world, as foreign owners were allowed to buy out American companies, often run them into the ground while selling off lucrative parts. We saw Paul Volcker tell the world in 79 that the American standard of living would have to decrease so the rest of the world could increase. BOY did he every accomplish that deal. Now we have multibillion dollar trade deficit, a country that went from a producer saver nation to a maxed out, worn out, two jobs for two people, taxed and paying fees up the eye balls, regulated to death, while small and medium companies struggle with high taxes and over regulations .. and the BIG boys get off scot free in cahoots with BIG government. Goldman’s crony capitalism should come as no surprise, as profit became the ONLY value ahead of country or countrymen. The chickens will come home to roost..sooner or later Goldman and their minions in government, on K-Street will pay the price of betrayal of the nation-state called America, ethical capitalism, in fact the chickens are already coming home to China. A small Chinese company just refused to pay up $80million or some such to Goldman’s subsidiary in China..and the Chinese govt. is backing them up. Henry Paulson was known in most circles as China’s best representative in the US. You could add most politicians to that list from BOTH parties and their husbands, wives or close associates. American’s wages and salaries have been stagnant since 1979, from the time Volcker stated the desired policy of the powers that be..Americans became credit junkies cause that is HOW their standard of living, based on debt, rose at all. Goldman and JP Morgan, the central banks, AIG, Bank of America, Morgan Stanley, all the rest gave us casino economy and then bet against it and us. BUT the politicians who benefited…Obama received nearly a million dollars from Goldman employees, and since 1989 Christopher Dodd, chairman of the Senate Banking, received $43 million. Barney Frank, chairman of the House Financial Services Committee, got $7.8 million. The world and the US system changed decades ago, and not for the better. The powers that be that created the system didn’t give us free market capitalism, they gave us corporate state fascism as BIG govt. and BIG banks or commercial interests shacked up and screwed us. It will come crashing down, and that maybe why Goldman execs are advised to carry firearms and not gather in groups of 12 or more. Thing is those in the US congress and senate should be just as worried…they were in a position to stop the rape and pillage of the US economic and political system but a bunch of souless unethical sharks who thought they could get away with what is arguably the biggest destruction of the US system in our history.

  • Paul Blake

    “WALL STREET CONTROLS AMERICA”, “I’m shocked” as Claude Raines put it in “Casablanca”…..

  • JackieG

    Its relatively easy to screw up the likes of Goldman Sachs.
    It can be done one a unique individual basis.
    Just offer to pay the bank your mortgage loan is with.
    Just seek the banks assurance they will do a direct and immediate exchange for payment of the original instrument of indebtedness in its original unadulterated form.
    The bank is put in a spot known as between a rock and a hard spot.
    The bank will refuse to accept your payment.
    The bank will then turn to Goldman Sachs and demand reimbursement for their loss.
    You get to keep your home with no one to make payments to.

  • Voir Dire

    Thank you, blogmeister, for an extraordinary analysis/blog. I applaud you, Sir, as you are a patriot extraordinaire.

    The gloves continue to come off by those in the lamestream media (every aspect of the entire Western media resides in the hands of these same genetic kinsmen who’ve used their monetary machinations/manipulations to buy/control it ALL) who’ve had a nauseating bellyful of the blatant theft by these timeless Vampires. Modern-day muckrakers, who’ve quite possibly single-handedly restored respectability to the profession of objective journalism, are keeping a vigilant eye on our federal Leviathan and the dual-agent parasites infesting it. Do see the McClatchy paper’s outstanding series on Goldman’s epic fleecing:

    How Goldman secretly bet on the U.S. housing crash

    For the feds, some Wall Street firms are too big — to punish

    Why haven’t any Wall Street tycoons been sent to the slammer?

    How Moody’s sold its ratings – and sold out investors

    Why did Goldman stop scrutinizing loans it bought?

    Goldman Takes on a New Role – Taking People’s Homes

    For more damning indictments from the McClatchy stories, you can find those and other nuggets from the first link I posted including:

    Story | Goldman takes on new role: taking away people’s homes
    Story | Goldman left foreign investors holding the subprime bag
    Story | Why did blue-chip Goldman take a walk on subprime’s wild side?
    Story | Why did Goldman stop scrutinizing loans it bought?
    Story | Mortgage crisis shows why financial regulation is needed
    Story | How Moody’s sold its ratings – and sold out investors
    Graphic | Goldman’s revolving door with government
    Video | Goldman Sachs’ secret bets
    Video | One couple stands up to Goldman Sachs
    Video | McClatchy’s Goldman Sachs probe
    Video | Goldman’s changing role in subprime mortgages
    On the Web | State-by-state data on troubled mortgages
    On the Web | See our complete Goldman report

    Wide Awake & Fooled No More,


  • Randy

    This is silly, the real problem is that people aren’t calling an ace an ace, a spade a spade. Goldman is not a *bona fide* investment bank anymore. Investment banks specialize in underwriting securities vis-a-vis M&As. In fact, as a percentage of their total revenue, investment banking (IB) has been on a decline since the early 00s. And even after the collapse of Bear Stearns and Lehman, the IB revenue didn’t immediately spike up in Goldman’s coffers as one would expect. What Goldman is is a hedge fund which can take any position (short or long) it wants on any security, bond, currency &/o derivative, futures. The problem is that the hedge fund half commands 80+% of its revenue and thus, influences the IB research half to talk-up-the-markets. And in general, a leveraged hedge fund can make a fortune especially with inside information on market tops and bottoms.

  • ian

    Oh, just bottom line it. Goldman BOUGHT THE GOVERNMENT and then acted accordingly. It was the most profitable investment available.

    And it worked. Current policy is proof.

  • Let’s keep it simple. When you boil it all down, Fiat Money and Fractional Reserve banking are at the root of all this.

  • Mesohony4u

    I agree with much of this argument. The recent financial collapse involved many parties: subprime borrowers, lenders, securitizers, servicers, credit rating agencies, investors, and governments.

    When investment banks like Goldman Sachs market financial securities like credit based securities and derivatives they should be required to provide accurate and comprehensive information to their investor clients. However, investor clients must exercise responsibility using proper research, analysis, and judgement when making investment decisions.

    If the investment bank “short sells” the very same securities it markets to investor clients and benefits from the decline their value, then such outcomes involve questionable ethical behavior. Short selling is not unethical market behavior and assumes high risk for the short seller because if the price of the short sold product increases, then the short seller incurs the loss. If the risks of such investment products were not properly disclosed to investor clients; the investment bank benefits from the decline in their value; and the investment bank knew such products had risks that could cause harm to the investor clients then such activities could demonstrate fraud, deception, or misrepresentation depending on opinion and law.

    However, the U.S. federal government performed the most insidious actions during this financial crisis. By providing a myriad of assistances including direct payments, borrowing privileges, and guarantees using public funds, the financial institutions like Goldman Sachs enormously benefited though they were largely responsible for exacerbating if not creating this financial crisis. When economic conditions were favorable, they assumed greater and even excessive risks to maximize profits and compensation for themselves. But when economic conditions became less favorable, they recieved incredible assistance from the government using public funds when responsible economic actors did not cause or propogate such crisis and did not recieve the same level of assistance and therefore suffered.

    Furthermore, such assistance creates at least two additional problems for the economy. Since the federal government assistance to financial institutions involved borrowed funds, these funds will require higher level repayment due to interest costs. Though Goldman Sachs and some financial institutions repaid financial assistance to the federal government, others did not or most likely will not including AIG, GMAC, GM, Fannie Mae, Freddie Mac, etc. Such losses will be compensated for by the taxpayer resulting in social or foregone loss/cost.

    Some argue that if the government did not intervene to save such entities then the financial and economic system would be worse, but they provide no evidence to support such an argument. It is true, however, many individuals lost their jobs and businesses failed. If the financial system’s actors failed then they would be in the same condition as those individuals and businesses. The U.S. economy suffered through more difficult hardship in the Great Depression Era 1929-1940 but still managed to proceed and become the most successful economy in the world. This economic recession most likely would not have become as severe as the Great Depression assuming very low interest rates to stimulate increased investment and spending and bank deposit insurance to prevent acute withdrawal of funds resulting in financial collapse. The US recession in 1929-1930 became the Great Depression because of inadequate assurance of banking system deposits and improper monetary policies. In addition, this recession will not be as severe as the Great Depression because of the general higher standard of living in 2000s and beyond compared to the 1930s.

    The second problem is in the future. By providing failed economic actors with assistance, they develop a sense of entitlement, arrogance, denial, and riskier behaviors. Financial institutions like Goldman Sachs will most probably not learn from their mistakes that led to this financial crisis and will continue to assume greater risks in the future requiring unfortunate and sympathetic actors in government to provide assistance to prevent their failure. This should not be tolerated or supported by the public in general because it rewards failure and productive successful economies should reward those who create and add value and do not undermine or destroy it.

    To help prevent such a crisis from reocurrence, better risk controls must be formulated and implemented by the financial system and regulators including but not exclusively the following:

    1. Separate investment banks from commercial banks to prevent the aggregation of risk that increases the risk of systemic failure. Investment banks should not be subject to the following suggested regulations (see below 2 and 3) because they assume greater risks and do not maintain deposits like commercial banks. In addition, if investment banks do fail, they will not recieve any financial assistance from the public through any government entity.
    2. Maintain or increase capital requirements for commercial banks to 10 percent. This provides some limitation on the amount of borrowed capital to reduce credit risk in the financial system but is not such a difficult requirement resulting in less lending.
    3. Significantly increase FDIC insurance premiums for commercial banks based on the level of risk in the assets of a bank(s)to provide sufficient funds to indemnify individuals who lose funds in failed banks. This action also prevents large acute withdrawals of funds from the financial system and reduce the amount of risks banks assume in lending and investing.
    4. Create and monitor exchange(s) for derivatives and require 100 percent margin or collateral for the trading participants to eliminate or at least significantly reduce counterparty/default risk in the financial system.
    5. Withdraw and recover as much public assistance provided to the financial system as soon as possible.


    Why investigate Goldman Sachs at all? The insurance they took out rightfully belongs to the victims who bought their products. I think they did the decent thing in insuring themselves. They just need to be reminded that insuring yourself when you don’t stand to make a loss is a corrupt use of insurance.

  • Richard B

    What do you mean “TENS OF BILLIONS” ?

    Goldman was also provided with status as a Trading Bank. Under”Fiat Banking Rules” this provision allowed them to lend out (to themselves ?) and charge interest on TEN TIMES THE AMOUNT OF THEIR CASH HOLDINGS – A MAGNITUDE OF TEN. This has resulted in potentially hundreds of billions of dollars of potential ‘future gains’. Unless it is your intent to purposely mislead your readers, I think you need to give more thought to your your numbers.

  • taxee

    If we return to taxing extravagant income extravagantly we make it unprofitable to steal. Tax evasion is punishable by hard time. That is how you stop the mafia and pay off the debt.

  • John

    Rose is your typical dolt that votes against their best interests. Rose doesn’t understand how powerful the GS forces are and just how much destruction they cause in the name of free market profits. Go back to sleep Rose. Don’t attempt to keep up with the pack.

  • Problem-reaction-solution..Perfect!!

  • challie

    The sophistication of stealing has become so dressed in finery that the theft cannot be detected.

  • Its incredible that such a large institution like Goldman Sachs had to stoop so low and sell an investment product to consumers offering them high investment returns while the company itself was betting for the product to go bust and make money! Great way to bring value

  • Nic

    I only need to name 1 family that has been sitting behind this and many more for many years now: The Rothschilds.

    Their immediate partners in crime: Rockefellers, Du Ponts, Ruperts and the Oppenheimers.

    Go look where these names pop up throughout the last 200 years and what roles they played in subjects ranging from World Wars, Wall Street Crash, GM Foods, Pharmaceutical Industry, Banking, Oil etc.

  • deedeK

    this dirt of society /destroying America, the middle class/ I understand that this filth made 4 billion dollars last yr, just on our food…/trading commodities?../ sick…put this filth out of business

  • gingerbaker513

    Timely ideas ! I learned a lot from the analysis . Does someone know if I would be able to locate a template Calpers direct deposit form document to complete ?

  • Kirsten Greyford

    My assistant filled out a sample Calpers direct deposit form form with this link

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