It was the Perry Mason moment in the unraveling of what was left of Goldman Sachs' reputation. Only in this case, it involved a grizzled former prosecutor, Sen. Carl Levin, rather than a genial defense attorney. The case was broken and the truth about the depth of Goldman's corruption revealed in his startling cross-examination of Goldman Chief Financial Officer David Viniar.
The Michigan Democrat, citing the language of the internal e-mails of Goldman traders concerning the deceptive products they were selling, asked: "And when you heard that your own employees in these e-mails are looking at these deals said `God what a shitty deal. God, what a piece of crap,' when you hear your own employees and read about those e-mails, do you feel anything?"
Viniar's answer told us all we need to know about the banal but profound immorality of Goldman's business culture: "I think that's very unfortunate to have on e-mail."
A flabbergasted Levin cut in with "On e-mail? How about feeling that way?" and Viniar, apparently moved by jeers of ridicule from the audience, conceded "I think it is very unfortunate for anyone to have said that in any form." Pressed further by Levin asking, "How about to believe that and sell them?" the CFO finally conceded, "I think that's unfortunate as well." To which Levin responded, "That's what you should have started with."
But Goldman's executives didn't start with any such moral qualms or end with them, as was made clear in the testimony of Goldman Chief Executive Officer Lloyd Blankfein that followed. Blankfein basically pleaded ignorance about the company's scams, making it clear that offering the details of such products was below his pay scale. That would be $68 million in 2007, the highest in Wall Street history, when Goldman's bets against its customers paid off so handsomely. What was clear is that his job was to ensure the company's immense year-end profitability with no questions asked about the methods used. "I did not know" he replied when asked about the details of the company's trades, and at another point he added, "We're not that smart." Then there was "I don't have any knowledge" on selling short, and finally, "We did not know what subsequently occurred in the housing market."
What he did know is that the scoundrels in his mortgage betting rooms were, as with that high-flying London operation that got AIG so much loot before it exploded, raking in enormous profits. Such ignorance is bliss for a Goldman CEO who apparently is rewarded in inverse proportion to what he doesn't know of the operation as long as he pays attention to the bottom line.
That was certainly the case for the man whom Blankfein succeeded the year before, Henry Paulson, when Paulson went off to serve as George W. Bush's treasury secretary. As Paulson admits in his memoir, he was unaware that suspect mortgages were at the heart of the banking meltdown, even though he was head of Goldman when those toxic mortgage securities were developed.
And then there is that other Goldman-honcho-turned-public-servant Robert Rubin, who was a Goldman vice chairman before serving as Bill Clinton's treasury secretary. In that Cabinet job, Rubin pushed through the Financial Services Modernization Act, which demolished the wall between investment and commercial banking. Ironically, that reversal of the New Deal regulations that had operated successfully for 60 years, the Glass-Steagall Act, was referenced by Blankfein in his Tuesday testimony explaining how Goldman and other firms spun out of control.
When asked by Sen. Ted Kaufman, D-Del., how Goldman had morphed from a traditional investment bank backing sound business ventures to a market gambler in fanciful products, Blankfein attributed it, somewhat forlornly, to "a change in the sociology of the business that took place over the last 15 to 20 years." He added, "I'm not sure that it was precipitated by the fall of Glass-Steagall or it caused Glass-Steagall to fall. ..."
Of course there was nothing inevitable about the fall of Glass-Steagall in 1999, since it was the result of decades of lobbying by the financial industry. That change was followed by the total deregulation of financial derivatives by the Commodity Futures Modernization Act, which Rubin had pushed and which President Clinton signed into law.
Clinton recently conceded that he got bad advice from Rubin on derivatives regulation, but he still holds to the notion that the reversal of Glass-Steagall was not harmful. No one listening carefully to the day of testimony by the various Goldman executives could accept the idea that these folks can function decently without strict boundaries.
That is why we have a free press.
The current analysis by "truthdig" is too little too late.
OK - Better Late Than Never.
"All right, gentlemen, you can have fun at my expense for one day, pretending to be Heap Big Man on Campus, BUT ... don't get too close. Because, if you do, I'm going to start reading a laundry list of just how much I paid each and every one of you, just this week. When I start doing that, my associates will be posting a full accounting of all your bribes on Facebook...."
Not a single "investigator" ever pulled a Perry Mason. And, not a single one ever will.
It is all about me, and because of that, I am going short on "we the people".
Hot air no progress no accountability. Are we all supposed to feel better because they got scolded??
What Goldman Sachs and many others did was not illegal (but then, lynching was legal at one time); all they did was short America’s future for massive personal gain now. That’s perfectly within the realm of fair and prudent business practice (if we concede openly honestly and often that dog-eat-dog is the driver of markets and fairness and value always take a back seat to chewing on another dog), and it seems the American people were ripe to be duped in this way because – let the buyer beware that the way things stand now, a firm has only limited disclosure responsibility or fiduciary responsibility to its clients where it concerns being short on something pushed by the same firm to long investors.
A question comes to mind yet again, financial instrument -- for what purpose, to what end, at what level of risk to the aggregate community of lives and families forming nation?
At the heart of the entire crisis is the question of value and no I do not mean mark to market valuation, I mean human valuation.
What those tripping over their tongue and getting their expensive clothing wet from the drool careening down from their greedy lips did is they placed zero or negative value on human life. Instead of firms (touting themselves as the gold standard of integrity) functioning as a market-based correcting mechanism for fraud (a corporate whistleblower) firms such as Goldman took the information it got from sharks about a feeding frenzy and decided to create a feeding frenzy on the feeding frenzy.
Ah... today GS stock-- up $2 ...LOL
They know that they can get away with anything. I will just sound like a badgering parent.
I should think you were fighting an uphill battle on the ethics front even before these people get off scot-free for scamming americans.
The people who bought the securities were very well versed in what they were buying..Goldman's opinion shouldn't matter, they were not serving these clients as an advisor....
This is akin to carmax employees selling all types of cars, but only driving hondas...Someone buys a Ford, it either serves them well or breaks down. IF it breaks down, the buyer comes back and says hey you sold me a Ford, but you don't like Ford's you only drive Hondas and you never told me? Does that make sense?
The interesting thing is the buyers in Goldman's case aren't even complaining..its the SEC...the people actually involved haven't said anything about being misled......
You must be thinking of Matlock.
That is a true statement, perhaps the clearest I've seen. Let's get on with it. In fact, putting aside the question of whether we can or should reasonably expect for-profit corporations to behave according to some moral standard beyond the profit motive, there is little use in blaming any of these titans of Wall Street for behaving in any way that the rules and the referees allow. If you're in the game, you play it to the boundaries or you lose. Let's fix the rule book and put the refs back in the game. If there was rule-breaking, prosecute. Don't get into moral lectures, that's not the game. Looking at it another way, it wasn't Sigfried & Roy's tiger's fault he mauled them - What did we expect would happen? There has never been a more obvious case made for why free markets need good regulation.