Greg Smith, a Goldman Sachs vice president, resigned his post Wednesday with a stinging public rebuke of the firm on the oped page of the New York Times -- accusing it of no longer putting its clients before its own pecuniary goals.
But if Mr. Smith believes his experience at Goldman is something new, he doesn't know history. In 1928, Goldman Sachs and Company created the Goldman Sachs Trading Corporation, which promptly went on a speculative binge, luring innocent investors along the way. In the Great Crash of 1929, Goldman's investors lost their shirts but Goldman kept its hefty fees.
If Mr. Smith believes such disregard of investors is unique to Goldman, he doesn't know the rest of Wall Street. In the late 1920s, National City Bank, which eventually would become Citigroup, repackaged bad Latin American debt as new securities which it then sold to investors no less gullible than Goldman Sachs's. After the Great Crash of 1929, National City's top executives helped themselves to the bank's remaining assets as interest-free loans while their investors and depositors were left with pieces of paper worth a tiny fraction of what they paid for them.
The problem isn't excessive greed. If you took the greed out of Wall Street all you'd have left is pavement. The problem is endemic abuse of power and trust. When bubbles are forming, all but the most sophisticated investors can be easily duped into thinking they'll get rich by putting their money into the hands of brand-named investment bankers.
Moreover, finance has become so complex that investors don't even know when they're being taken for a ride, and so can't possibly hold a brand-name bank responsible for their losses -- or for gains that are a fraction of what they might otherwise have been.
That's why we have regulations. After millions of investors lost everything in 1929, the federal government stepped into the breach with the Securities Acts of 1933 and 1934 and the Banking Act of 1933, sponsored by Senator Carter Glass and Congressman Henry Steagall.
But starting in the 1970s and 1980s, Wall Street made sure these and the regulations issued under them were steadily watered down -- which contributed to the junk-bond and insider trading scandals of the 1980s, the dot-com scams of the late 1990s and early 2000s, the Wall-Street enablers of Enron and other corporate looters, and the wild excesses that led to the crash of 2008.
Wall Street's shenanigans have convinced a large portion of America that the economic game is rigged. Yet capitalism depends on trust. Without trust, people avoid even sensible economic risks. And when they think the game is rigged, they're easy prey for political demagogues with fast tongues and dumb ideas.
The Street has only itself to blame. It should have welcomed new financial regulation as a means of restoring public trust. Instead, it lobbied intensely against the new Dodd-Frank Act and refused to resurrect Glass-Steagall.
The cost of such cynicism has leached deep into America, finding expression in Tea Partiers and Occupiers and millions of others who think the Street has sold us out.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Greg Smith's 'devastating' Goldman Sachs resignation rant - Yahoo ...
Goldman Sachs' Greg Smith: Idealist or Disgruntled? - ABC News
Why I Am Leaving Goldman Sachs - NYTimes.com
Colbert 'Disgusted' By Greg Smith, Ex-Goldman Sachs Employee ...
I know you get tired of writing the same things over and over again, but please keep doing it. This article is a perfect summary of the problems in the fincancial sector and how it affects us ordinary people.
Suggestion: Take this deeper, bring in data to support analysis, and point toward solutions.
Good first step would be to take a look at a current article on HuffPost (link below), which addresses "systemic" abuse of power and trust, vice the "endemic" variety you note. "Systemic" here refers to the Federal Reserve System:
"How the Fed Steals for the 1%" by Tom Mullen
http://www.huffingtonpost.com/tom-mullen/how-the-fed-steals-for-th_b_1343283.html
Make sure to look at the spreadsheet Tom provides, with data from the Fed. Fascinating.
Readers, how is it that intelligent people such as Tom -- without "economic guru" credentials -- see and explain what the high-and-mighty cannot? (Or, will not.)
Are such topics "taboo" for some reason? (Or, is the intent to not wake the "sleeping giant"? Lest he/she take away thy coveted seat?)
More great info at http://www.monetary.org
Thanks, and Enjoy.
http://www.webofdebt.com/
I liked it better (and I love her HuffPo articles) than Griffin's Jekyll Island
http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212 or William Greider's Secrets of the Temple http://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567
Greider writes for the Nation and he used to write for Rolling Stone, where Matt Taibbi writes some scathing and hilarious stuff.
Is that the best a “free market” can offer: “buyer beware”? Hasn’t it pretty much run its course as an expression of social consciousness? Should consumers be harmed using a product; such as cigarettes, the way designed, instead of risking addiction to a genetically ‘juiced’ weed and lung cancer?
Conservatives claim to be all about “personal responsibility” [read: “those on unemployment, looking for a job, MUST be drug tested”]. [Where, off-shore?].
What about those tanking the economy? When is their responsibility going to be tested – in a court of law?
Common law dicta; that “a person is responsible for the (natural) consequences of their actions” – is so for Wall Street financiers. If they’ve been caught again; promoting garbage as high quality investments, luring investors to financial ruin -- while making enormous profits from fees -- they must be held responsible for the foreseeable results of their conduct. They must be called to account and reimburse those defrauded – via civil or criminal litigation. I suggest prison for ‘em.
Under our laws, unless someone makes an “admission”, how is it we prove intent in a court of law? It is generally a matter of circumstantial evidence; but we look to the past and find a continuing or on-going course of conduct.
I’m still waiting for some meaningful perp walks, Mr. Holder!!!
"After millions of investors lost everything in 1929, the federal government stepped into the breach with the Securities Acts of 1933 and 1934 and the Banking Act of 1933, sponsored by Senator Carter Glass and Congressman Henry Steagall.
But starting in the 1970s and 1980s, Wall Street made sure these and the regulations issued under them were steadily watered down -- which contributed to the junk-bond and insider trading scandals of the 1980s, the dot-com scams of the late 1990s and early 2000s, the Wall-Street enablers of Enron and other corporate looters, and the wild excesses that led to the crash of 2008."
As important as Glass-Steagall was, this piece of legislative regulation was repealed by the Gramm–Leach–Bliley Act, also known as the Financial Services Modernization Act of 1999, or the Citigroup Relief Act. This removed barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. It created Too-Big-To-Fail.
If we were to reinstate Glass-Steagall & try & truly crack-down on Too-Big-To-Fail, the United States might face a penalty from the World Trade Organization.
Both Democrats & Republicans have been in on this deregulation neoliberal scheme for the past 30+ years. No one political party is to blame -- even though it's the GOP whose promotion of these policies is most explicit.
.what most people see as smaller government and fewer regulations, actually only helps wall street and big oil and ect. What it does not protect is the citizen from the averice of money and the 1%. The biggest lie fed to the american public was that these regulations needed to be removed as they were hurting the economy. The next lie was convincing the american putblic that the job creators needed to pay less taxes. The american public bought wholehearted into all the lies. Now, we are left with the task of reinstating those regulations and tax policys, and those in the 1% will fight dirty to keep us from doing this.
For decades, they've had their cake and eaten it too. They wanted de-regulation, lax standards, low taxes, and the "government out of their business." Yet, when their firms faltered because of their unethical (and in several instances - illegal) practices, they came to the government they demonized for hand-outs (a bailout that cost $2.7-trillion including guarantees, AIG, Fannie-Freddie, etc.).
The hypocrisy is astounding. They disdain government, yet want government (taxpayer's) guarantees they'll remain profitable, no matter how recklessly they behave, shielding themselves from the consequences of their own doing. They've turned our financial institutions into casinos. Even with the bail-out, most banks did not use OUR money for the purpose intended (to resume prudent lending, and improve their balance sheets). Rather, they took posh junkets, gave themselves obscene-undeserved bonuses, entered into mergers-acquisitions making "too-big-to-fail" institutions even larger. The rest they used for lobbyists-lawyers for yet more deregulation.
"Trust but verify." - Ronald Reagan