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The New York Times' Timely Whitewash of Goldman Sachs

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At this critical moment, while the House and Senate are merging the final measure of the most significant changes to financial regulation since the Great Depression, Goldman Sachs is fighting tooth and nail to water down Congress' Financial Regulatory Reform Bill before it comes to a vote in the next days. It is a moment for the 'old boy' network to go into high gear.

Goldman's objective is to protect its massive proprietary trading desks, the source of much of its profits and the focus of the new bill. The bill reportedly incorporates a tough 'Volcker Rule' prohibiting banks engaged in commercial lending -- and thereby having access to federally insured deposits, access to myriad federal programs and bountiful Federal Reserve funds at the Fed window -- to engage in naked trading (placing bets on commodities and financial instruments in which they or their clients have no business interest, i.e. taking out fire insurance on someone elses house, as a grim hypothetical).

It is what Goldman, once having been a classic investment bank helping to finance businesses and grow the economy, now does most profitably. In other realms it's known as playing casino with the house's money, and the Volcker Rule would bring it to a stop. It would cause them to move their 'proprietary' trading activities to other entities where they no longer have preferred access to the banking system and implied federal guarantees, thereby placing the entire system at risk, as was the case with much of Wall Street during the recent meltdown.

So just this week, along comes a great whitewash orchestrated by the New York Times and their star financial reporter, Andrew Ross Sorkin, author of the best seller Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System -- and Themselves.

In a column published earlier this week in the New York Times, Mr. Sorkin begins "Despite all the bad headlines-..." and then goes on to regale us with all the big names singing hosannas to Goldman. "We trust them" rings forth from Jeffrey Immelt, the CEO of General Electric. "Goldman has been politicized, and its important to look beyond the demagogy..." Sorkin quotes the chief financial officer of Aetna, Joseph M. Zubretsky. Not left out is Warren Buffett "who has invested billions" in Goldman and has come to the defense of Goldman's actions in a curious application of 'caveat emptor,' as in the now infamous 'Abacus' deal. Here Buffet instructs us, in effect, that if Goldman was selling you a used car with faulty brakes under the banner of a 'Moody's Triple A' rating and the imprimatur of what once was one of the most hallowed names on Wall Street, it is the buyers fault if he/she didn't check out the brakes by examining the underside of the car before the smash up. Sadly, that is what much of Wall Street has come to.

And then Mr. Sorkin, treating us as though we were all sitting in the corner with a dunce cap on, tries to smooth over "accusations that Goldman sometimes wore multiple, seemingly conflicting hats." He cites Hyatt Hotels and its chairman Mr. Thomas J. Pritzker. It seems that when Goldman was advising Hyatt Hotels about selling a stake in its hotel chain and an investor dropped out, "Goldman's own private equity arm swooped in. Did Goldman profit? Probably. But Mr Prizker was just glad the deal got done." Sorkin thereby leaves us with the impression that Goldman's multi-tasking is just fine. This leaves the reader confused between Goldman's function as an investment banker and its proprietary trading, thereby bringing succor to those who would do away with the Volcker rule in the new financial reform legislation.

Oh yes, and by the way, Goldman Sachs advises the New York Times Company.