"It makes me ill how callously people still talk about ripping off clients," the Goldman Sachs whistleblower, Greg Smith, wrote in his March 14th public resignation letter. The 33-year-old executive who quit the company's London office where he ran its derivatives shop reinforces the public perception of Goldman Sachs less as a venerable Wall Street banking firm and more as an old-school mafia family. The amazing thing about Mr. Smith's decision to break the code of omertà at Goldman was the fact that an employee existed there at all who was still capable of making a moral or ethical judgment and could even express something resembling remorse.
Mr. Smith apparently could no longer bear the moral turpitude that each day's work required of him at Goldman. Unlike his co-workers, he began to have second thoughts. According to Smith, Goldman Sachs traders routinely baked into their financial "products" all manner of rents, hidden risks and time bombs with the aim of "gouging out the eyeballs" of their clients. No wonder there's been a mad dash by spokespeople for the .001 percent, like New York Mayor Michael Bloomberg, to try to smother Smith's embarrassing story.
The culture Mr. Smith exposed at Goldman Sachs signifies the Enronization of Wall Street. The nicknames that Goldman sharks tagged on their marks -- "muppets" and "hunting elephants" -- is reminiscent of Get Shorty and the Star Wars-themed nicknames that Enron crooks used as code for their swindles and "special purpose entities" (whose only "special purpose," it turned out, was to rip off employees, defraud investors and bilk consumers). Everything that Enron or Worldcom did, they did with the active assistance of big investment banks. Even when some executives go to jail, like Jeffrey Skilling or Bernie Ebbers, the bank mafiosi always get away scot-free.
Like some of the big-time mafia families of days gone by, these financial conglomerates are "too big to fail" primarily because they were allowed to merge into behemoths, outspend every other Washington special interest group in campaign and lobbying cash, buy off politicians, and capture federal regulatory bodies.
What's more, we got no Pecora Commission, only a toothless "investigation" run under former California state treasurer Phil Angelides. There were no concrete changes to the laws and regulations governing the kinds of abhorrent practices Mr. Smith exposed at Goldman Sachs. And you can forget about Dodd-Frank. That set of reforms was watered down before the ink was dry on Obama's signature. And the Wall Street lobby continues to spend millions to gut its key provisions, especially the Volcker Rule. Dodd-Frank isn't going to do a damn thing about "too big to fail," or bring down the hammer on the egregious practices Mr. Smith revealed. Underwater mortgage holders? They've been hung out to dry and the Obama Administration has shown it cares about as much about their plight has did the Bush Administration. Can't some prosecutor somewhere dust off the RICO statute and prosecute some of these wayward bankers like they did in the late-1980s with the Savings and Loan scandal?
Gretchen Morgenson of the New York Times (one of the few business reporters who's worth reading) points to Mr. Smith's resignation as "provid[ing] yet another reminder of why it is crucial that we remake our financial markets so that they are safe for investors and taxpayers." Yet that's easier said than done.
The high-profile Goldman defection, and the hostile response from representatives of the .001 percent, like Mayor Bloomberg, remind us that the desperately needed top-to-bottom overhaul of the corrupt oligopoly that dominates high finance in this country (and the world) has yet to take place. The totalitarian political clout of the big banks enables a relative handful of morally challenged cardsharps and grifters to strangle the "real" economy in a million different ways. When the nation's dominant "financial services" corporations grow accustomed to operating like a racket of an organized crime family we can count on more thievery, more bailouts, more austerity, and more conflict and pain for the rest of society.
One of the linkages that the elites want to paper over more than anything else is the fact that the austerity that is being shoved down our throats and across the globe is a direct consequence of the vast transfer of wealth from ordinary people to the investing class. The bailouts and legalized larceny, such as looting public pensions and wrecking the housing market, have continued unabated through both Republican and Democratic congresses and administrations. No matter how far the political winds shift, Goldman Sachs, Citigroup, JP Morgan Chase and the other members of the financial La Cosa Nostra always come out smelling like roses.
The legitimacy crisis continues unabated because these banks have not changed their ways. If anything, they're more corrupt today than they were at the time when the Congress bailed them out. They're certainly more concentrated and politically powerful, and still too big to fail. The only good news from the "Get-Out-Of-Jail-Free" card the banks hold is that it rubs most people the wrong way, tarnishing their "brand," and will serve to energize the Occupy Wall Street movement. Until there is a semblance of justice meted out to the kinds of bankers Mr. Smith describes the crisis will continue. They're like a fast food chain that serves tainted meat. They might be able to have their PR people spin it away the first time, but after the hundredth time, even the slickest liars can't put the toothpaste back into the tube.
"Fast Eddie" DeMarco, a Wall Street holdover from the Bush years who heads the Federal Housing Finance Agency, is doing everything in his power to make sure there is no substantive government relief for the millions of underwater mortgage holders. In part, this strategy is designed to try to reap maximum damage on the incumbent president. The foreclosure carnage promises to continue unabated wreaking havoc with the real economy while transferring more assets to banks like Goldman. Fewer and fewer people are going to be saying nice things about American capitalism if it is going to be abused in this way in behalf of the ever-shrinking super rich.
Greg Smith violated the ancient code of all mafia organizations: he spilled the game to the public. His former colleagues at Goldman Sachs no doubt now see him as a "rat." He better watch his back. He might awake in the middle of the night with a surprise in his bed.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more