01/13/2010 12:45 pm ET Updated May 25, 2011

Public Service Justifies Goldman Bonuses

To understand the financial crisis Phil Angelides and the Financial Crisis Inquiry Commission must dispense with the platitudes of the CEO's and question the traders in the trenches, for example Goldman Sachs partner Ron Rapacious.

ANGELIDES: Through September Goldman has set aside $16.7 billion to pay bonuses. How much do you expect to receive?

RAPACIOUS: Only $20 to $25 million. They will probably screw me again.

ANGELIDES: You deserve more?

RAPACIOUS: My department has already made $1.2 billion this year.

ANGELIDES: How do you do to make so much money?

RAPACIOUS: By serving the public interest and spurring the American economy.

ANGELIDES: How do you do that?

RAPACIOUS: By trading legal futures.

ANGELIDES: What are legal futures?

RAPACIOUS: With advances in systems biology, DNA analysis, microfluidics, blood diagnostics, and nanotechnology, some diseases are becoming predictable and preventable. Therefore whenever one gets sick, one should sue. Someone--a doctor, a technician, a drug manufacturer, a tarot card reader, a motorcycle mechanic-- should have predicted and prevented the disease.

Such lawsuits are enormously expensive, requiring reams of depositions and testimony from expert witnesses for-hire --systems biologists, DNA analysts, microfluidians, blood diagnosticians, nanotechnologists, and other professionals paid to lie.

To finance the lawsuits, lawyers sell off portions of the future settlement. Goldman Sachs buys, slices, dices, and leverages these future payment streams, mixing them in three types of publically traded derivates: CONS (Collateralized Obligation Notes), GYPS (Generalized Yearly Payment Securities), and SCAMS (Securitized Cumulatively Amortizing Monetized Securities).

ANGELIDES: So you structure and issue CONS, GYPS, and SCAMS?
RAPACIOUS: No. A six year old could do that. Nonetheless, my shameless partners get bigger bonuses that I do for underwriting this garbage. Is there no justice in the world?

ANGELIDES: Then what do you do?
RAPACIOUS: I trade GYPS, CONS, and SCAMS in the secondary market.
ANGELIDES: How does trading complex derivative securities on the secondary market help society?

RAPACIOUS: It provides liquidity for buyers and sellers. Liquid secondary markets for complex derivative securities are the bedrock of American freedom and prosperity.

ANGELIDES: How do you supply liquidity?

RAPACIOUS: Mostly I sell legal futures short. I bet that betting the price will go down and I can buy them back at a discount. Although being rated AAA, they are really trash. Thus far this year, we have made $700 million shorting legal futures.

ANGELIDES: One part of Goldman issues these securities and another part shorts them? Isn't this unethical?

RAPACIOUS: That not a word that we, at Goldman, understand. This is precisely what with did with subprime CMOs. We sold them to our valued clients, and then bought default swaps against them. This allowed us to escape the meltdown that killed Bear, Merrill, and Lehman.

ANGELIDES: Goldman sold subprime CMOs to their clients and then bet against them? Now you are selling CONS, SCAMS, and GYPS to your clients and making $700 million by shorting them. Doesn't this indicate that Goldman initially overcharged its clients?

RAPACIOUS: We should supply liquidity for free?

ANGELIDES: But what about the clients?

RAPACIOUS: At Goldman, the clients always come first. We pride ourselves on taking care of our valued clients. That's why we developed BOHICA, our new client service program. Whenever we think about the client, we think BOHICA.

ANGELIDES: What does BOHICA stand for?

RAPACIOUS: Bend Over Here I Come Again. In the old days after we screwed a client, they would go to Merrill and Merrill would screw them; then they would go to Lehman and Lehman would screw them; then they would go to Bear, and Bear and would screw them; finally they would return to Goldman and we would screw them again. Now there is nowhere else to go. It's BOHICA, BOHICA , BOHICA all day long.

ANGELIDES: So you make your money by screwing your clients?

RAPACIOUS: No. We make our money by assuring that markets are efficient, liquid, and transparent. Efficient, liquid, and transparent free markets are the bedrock of American freedom and prosperity.

ANGELIDES: If markets were efficient, liquid, and transparent, how could a trader make money?

RAPACIOUS: A trader couldn't. We trade only in markets where we have the edge, the inside track, the lock. Once we have squeezed all the profits out, the markets are again efficient. It is really a public service. Our way of giving something back.

ANGELIDES At the height of the financial crisis, Goldman became a bank so it could off load bad assets to the Fed. Now being a bank, is Goldman loaning money to American businesses to create jobs?

RAPACIOUS: Not directly. We're really not set up to do this nickel-dime stuff. However, by actively trading derivates in the secondary market, we are indirectly benefiting every small business in the nation.

ANGELIDES: Because actively traded derivative markets are the bedrock of American freedom and prosperity?

RAPACIOUS: How did you guess?

ANGELIDES: Goldman them accepted $10 billion of TARP investments. Do you think you owe the something to the taxpayers and the government?

RAPACIOUS: Absolutely. We are very public-spirited company. Think of the public service performed by Goldman partners such as Bob Rubin, Steve Friedman, and Henry Paulson.

ANGELIDES: Rubin and Freidman helped to deregulate financial markets and repeal the Glass-Steagall Act. Paulson not only loaned Goldman $10 billion. He loaned AIG $180 billion, knowing that if AIG went under, Goldman would go under.

RAPACIOUS: That demonstrates how public-spirited Goldman partners are. They weren't just looking out for themselves. They were looking out for the entire financial sector.

ANGELIDES: As top government policy makers should they have also been concerned about employment outside the financial sector?

RAPACIOUS: Yes. They should have helped remove government regulations that stifle job growth and full employment. For example, requiring honest citizens like me to pay social security for their nannies, yardmen, and cooks. We could have full employment by repealing the ban on indentured servitude

ANGELIDES: With a $20 million plus bonus, do you think you are overpaid?

RAPACIOUS: Overpaid? You want overpaid? Check out those suits in our M&A department. Overpaid? How about Alex Rodriguez. That steroid junkie makes $28 million a year. That's more than I make, and A-Rod would lose his ass trading legal futures.

ANGELIDES: So you think you are fairly paid?

RAPACIOUS: I don't think about it. Like all Goldman partners, I am not in this for the money. Public service is what motivates me. There are times I say, "The Hell with it. Let someone else trade legal futures. Let someone else make $20 million." But then I remember American freedom and prosperity depends on efficient markets for GYPS, SCAMS, and CONS, so I say "If not now, when? If not me, who? Certainly not those jerks on Goldman's currency desk who love to steal my business and my $20 million bonus."