By the time you read this, the PR hacks of Goldman Sachs will be vigorously pressing their efforts to destroy the reputation of whistleblower Greg Smith, a former Goldman executive director whose exposé in Wednesday's New York Times op-ed page was so devastating that the 143-year-old firm might actually, finally, be held accountable.
Smith, a wunderkind who spent the 12 years after he graduated from Stanford University rising through the ranks at Goldman, has revealed the firm's culture to be so fundamentally venal that were financial industry shenanigans not generally exempt from effective legal regulation, Goldman's executives could have been rounded up Wednesday morning on organized-crime charges.
The law that exempted what would have been illegal trading in the murky derivatives that the Smith article denounced was the Commodity Futures Modernization Act, enthusiastically signed by Bill Clinton in the waning months of his administration. The legislation shielded from any regulatory law the very activities that led to the financial meltdown from which Americans are still reeling.
Back in the Clinton era, it fell to the president's last press secretary, Jake Siewert, to justify the freeing of Wall Street investment houses to do their worst, and in one of those delicious ironies Siewert was appointed as a managing director and the global head of corporate communications for Goldman Sachs the day before the devastating Smith exposé broke.
Who better to quickly concoct a strategy of explaining away Goldman's deceit in the sale of those derivatives? Predictably there was the quickly leaked memo by Goldman CEO Lloyd Blankfein shooting Smith, the previously highly valued young messenger, as a "disgruntled" employee for daring to describe the culture within Goldman "as toxic and destructive as I have ever seen it."
Smith's charge about Goldman "routinely ripping their clients off" resonated widely on the Internet because of prior exposures of suspect derivatives deals in which Goldman explicitly bet against the products it was selling. Slightly less than two years ago the Securities and Exchange Commission filed fraud charges against Goldman that resulted in a $550 million fine over such double-dealing.
But what is so damning in Wednesday's article is Smith's insistence that the culture of Goldman has only gotten worse since then: "Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence."
In addition to heading Goldman's equity derivatives trading in Europe, the Middle East and Africa, Smith was involved in recruiting new talent for the company. It was his supervision over recruits being exposed to the increasingly corrupt Goldman culture -- amid routine reference to clients as "muppets" and chortling about "ripping eyeballs out" -- that finally turned him off.
At the heart of the rot were those derivatives, the collateralized debt obligations [CDO] and credit default swaps [CDS] that were made legal by the legislation Clinton signed and Siewert defended. In his piece, Smith referred to the selling of those designed-to-be-toxic products as the essential avenue of Goldman's greed, saying you "find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym."
Contrast Smith, who announced his resignation from Goldman in the op-ed article, and Siewert, who has just joined up with the greed merchants after working in the administration that made that greed legal. Clearly, people like Siewert, comfortable in the Washington-Wall Street axis, have no sense of shame. They know all too well what Goldman and the other financial swindlers have been up to, causing so much misery for tens of millions throughout the world.
After a stint with Alcoa in the private sector, Siewert returned to government as a top aide to President Barack Obama's treasury secretary, Timothy Geithner, who worked in the Clinton Treasury Department before becoming head of the New York Fed. Former Clinton Treasury Secretary and Goldman Sachs executive Robert Rubin recommended Geithner for that position. In his Fed job, Geithner choreographed the bailout of AIG, which compensated Goldman Sachs for its toxic derivatives.
Because Siewert is obviously without a moral compass, he can, as have so many in the elite from both parties, move easily without any hesitation through the platinum revolving door between Washington and Wall Street, becoming filthy rich in the process while betraying the public trust. Hail Greg Smith, and thank the New York Times, for his cri de coeur, a rare example that decency is not always for sale.
Philip Jennings: Gullible Muppets and Goldman Sachs: What Does It Say to the 99%
Public Rebuke of Culture at Goldman Opens Debate - NYTimes.com
Reacting to Goldman Executive's Resignation Letter - NYTimes.com
Why I Am Leaving Goldman Sachs - NYTimes.com - New York Times
What a play it would be. Then I learned this Greg was quite shy and probably acted alone. Too bad. A purge would be good. If I were an outside director I don't think Blankfein's name adds value to my organization which means he must have Obama by the short hairs and he must be getting a LOT out of the relationship over the past three years.
Otherwise retaining Blankfein makes no sense. You can find truths in the shadows of logic sometimes.
Better learn to knit ...
Here is a link to a good site that discusses the memo's and gives a little side note info as well:
http://politicalgates.blogspot.com/2011/12/citigroup-plutonomy-memos-two-bombshell.html
Après moi, le déluge
Goldman Sachs was looking out only for their best interests??? Yawn...tell your story walking, St. Gregory of Goldman.
Dont let anyone confuse you readers, we are still neck deep in this economic mess and it isnt gonna clear up anytime soon.
Your posts are so serious and right-on, sometimes I'm a little scared to read 'em. But I'm always the better informed and feel that much better once I do.
I am glad he finially grew a consience, but he is not a hero.
This action by Mr. Smith is the only way to stop the this culture of creating wealth at all costs.
It will take more HONEST people to start rolling on thier less than honest coworkers and employers.
It will also take HONEST Congressmen and women to take up the challenge and roll back all the laws that were changed, creating the means for this outragous unbridled at all costs dealings of this immoral culture.
The largest problem at GS and MOST other "investement" houses is they now lack any honesty and integrity, something our financial instutions MUST have.
It's called GREED, lets stop it now.
If they received TARP monies, DO NOT DO BUSINESS WITH THEM, they are not honest and clearly lack any integrity.
WE NEED TO STOP ASSESSING FINES & PENALTIES TO CORPORATIONS
. . and begin assessing them to PEOPLE
PLUS regularly sending fraudsters to JAIL
THIS IS MESSY, COMPLEX, AND EXPENSIVE
but the amount of money at stake, will more than pay for itself
AND
Unlike assessing fines to the Corporations, THIS WILL ACTUALLY HAVE A GIANT DETERRENT EFFECT.
Assessing fines and penalties on the corporations only penalizes the Shareholders, who have no real ability to control the crooks running these firms.
***********
BUT - BUT - BUT, to do this, we need modifications@ the SEC
1) We need an army of Elliot Spitzers & Elizabeth Warrens to run the fraud division of the SEC
CONTRARY TO POPULAR OPINION, we don't need to pay these guys what their counterparts are making on WallStreet. There are many people who would love to do this work for patriotic reasons
2) WE NEED TO KILL ANY REVOLVING DOOR, people in this line of work need to make a choice whether they are going to be either [a] working for the government, or [b] working for industry. Allow a maximum of two changes per lifetime, with great separation. But no more constant back and forth playing both sides to the detriment of the citizens & investors
3) Make them self-funding with fees from WallStreet, and make them completely independent so that GOP Congress cannot 'de-fund' them, or use political influence to neuter them
. . You really don't get it, nor for the most part does almost anyone about the Financial meltdown
***
[QUOTE] "the very activities that led to the financial meltdown from which Americans are still reeling."
THE ONE SINGLE THING THAT LED TO THE MELTDOWN
. . . and without which would have absolutely prevented it was
THE CREDIT-RATING-AGENCIES SELLING THEIR OPINIONS ON JUNK-SECURITIES and claiming that they were of the Highest Rating Possible ! ! ! !
WITHOUT THIS ACTION, absolutely none of the rest of that stuff would have been POSSIBLE, and none of it would even have been started- since these fraudulent ratings were the the only reason it was possible to sell these Mortgage-Backed-Securities(MBS) / Collateralized-Debt-Obligations(CDO) in the first place.
FOR SOME STRANGE REASON, nobody ever talks about this
HOW IS IT POSSIBLE, that CDOs & MBSs
CONTAINING LIAR-LOANS, LOANS WITHOUT INCOME VERIFICATION, MORTGAGES WITHOUT DOWNPAYMENTS
Could be given the highest Ratings Possible ?????????????????
1) The agencies argue that they models were valid, but failed due to unusual, unforeseeable external circumstances?
LIE ! ! !
This argument might hold water if we were talking about the difference between, maybe a
"A" (single-A)
or
"BBB" (Triple-B)
Rating.
But giving these junk securities the highest possible rating is simply FRAUD.
They are now trying to defend themselves in court, claiming that what they issued were merely "OPINIONS".
AND, that their fraud is constitutionally protected FREE SPEECH