Mainstream Media Refused to Cover this Story in any Depth, Leaving the Heavy Lifting to Wall Street On Parade, Which Has Since that Time Written More than Ten Dozen Articles Chronicling this Fed Bailout. There’s John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multi-billion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. Henry (Hank) Paulson served as U.S. Treasury Secretary in the George W. Bush administration and was on hand to make sure Wall Street got its massive bailout in 2008 during the worst financial crash since the Great Depression. Cohn became a multi-millionaire from the business done in those years, earning $27.5 million in restricted stock and options just in the year 2006. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. Lehman Brothers filed bankruptcy on September 15, 2008 – just five weeks after a report from the group on managing risk was released. But Goldman wasn’t one of them. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con’s mortgage on its books, knowing how likely it was to fail. In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. The effects of the housing bubble are well known — it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. It’s hard to say what it was exactly; it might have been the fact that Goldman’s cochairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. According to an email obtained by the Financial Crisis Inquiry Commission (FCIC) from Patrick M. Parkinson of the Federal Reserve to Steven Shafran (an official of the U.S. Treasury Department who had joined it in February 2008, also from Goldman Sachs to serve under Paulson), the Counterparty Risk Management Policy Group’s plan for dealing with a major defaulting counterparty was going to be relied upon. It will be rigged in advance. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. Wall Street On Parade ® is registered in the U.S. Patent and Trademark Office. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. If you want to understand how we got into this financial crisis, you have to first understand where all the money went — and in order to understand that, you need to understand what Goldman has already gotten away with. There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn’t know when oil prices would fall until we knew “when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives.”. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an “oracle of oil” by The New York Times, predicted a “super spike” in oil prices, forecasting a rise to $200 a barrel. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. Does the world have a new vampire squid? FINANCIAL giant Goldman Sachs hits back at an article which called it "a great vampire squid wrapped around the face of humanity". By Nick Miller. The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. Mnuchin remains as U.S. Treasury Secretary. The world’s most powerful investment bank is a great vampire … Glass-Steagall had kept the U.S. financial system safe for 66 years by banning Wall Street’s trading houses from owning federally-insured, deposit-taking banks. Proof, as if we needed it, that Wall Street inhabits a parallel universe. By. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a “flight to commodities.” Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008. Rolling Stone's Matt Taibbi once famously described Goldman, Sachs as "a great vampire squid wrapped around the face of humanity, relentlessy … “Everyone on the inside knew,” the manager says. The new carbon credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. “They totally fueled the bubble. “It’s the heart of securities fraud.”. “They cooked those first quarter results six ways from Sunday,” says one hedge fund manager. Goldman wants this bill. Investing in carbon offsets. For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent —they were a joke. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. illustration by hayley doshay . First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. How did Goldman achieve such extraordinary results? What’s more, Section 7 of the 1936 commodities law gives Congress the right to any information it wants from the commission. Not that Goldman was personally at any risk. “They seemed to know everything that they needed to do before the stress test came out, unlike everyone else, who had to wait until after,” says Michael Hecht, a managing director of JMP Securities. It became almost a national clichè that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline The Committee To Save The World. But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million — about what the bank’s CDO division made in a day and a half during the real estate boom. Click on this Text to Read Our Full Series of Articles. the New Gold, a logic and reality. That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. In an excerpt from his new book on Goldman Sachs, entitled “Money and Power: How Goldman Sachs Came To Rule The World”, financial writer William D. Cohan explores Goldman… Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret. In the two years prior to the 2008 financial crash on Wall Street, Cohn was Co-President of Goldman. Goldman Sachs the Vampire Squid. Even worse, Goldman bragged about it in public. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined. Its edge in the market has suddenly become an open declaration of supreme privilege. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. It issued the bank a free pass, called the “Bona Fide Hedging” exemption, allowing Goldman’s subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. While this kind of behavior is good for a stock market, it’s terrible for commodities, because it continually forces prices upward. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. Andrew Clark. Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) This article originally appeared in the July 9-23, 2009 of Rolling Stone. Now freed to underwrite as many housing-based securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. The head of the Federal Reserve Bank of Dallas (Robert S. Kaplan), the head of the Federal Reserve Bank of Minneapolis (Neel Kashkari), the Secretary of the U.S. Treasury (Steve Mnuchin), the President of the European Central Bank (Mario Draghi) and the head of the Bank of England (Mark Carney) all have two things in common: they sit atop vast amounts of money and they are all alums of Goldman Sachs. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market — stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. Is Goldman Sachs a blood-sucking vampire squid? Is “vampire squid” Goldman Sachs sucking every last dollar out of “cow town” Sacramento on the latest Kings arena deal? Goldman angrily denounced the report as “an egregious distortion of the facts” — shortly before paying $110 million to settle an investigation into spinning and other manipulations launched by New York state regulators. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008? Not only was the short-term supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down. At the time Goldman was heavily invested in oil through its commodities trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Jamie Dimon Gets $31.5 Million Pay Despite Bank’s Criminal Charges as U.S. If there's one thing that must raise the hackles of Goldman Sachs CEO Lloyd Blankfein, it's the term "great vampire squid." As a Goldman spokesman explained, “We work very hard here.”. “Instead, it was an integral part of a fraudulent scheme to win new investment-banking business.”. Slides Below Uruguay on Corruption Index, Goldman Sachs: The Vampire Squid’s Alum Control Two Fed Banks, the U.S. Treasury, the European Central Bank and the Bank of England, now opened its money spigot for trillions, resigned on the OpEd page of the New York Times, periodically release erudite-sounding reports, behind-the-scenes enactment of legislation, effective takeover of the Presidential transition teams that pick the President’s cabinet, Dow Jones Industrial Average Intraday Trading Levels and Breaking Market News, Mission Creep or Creepy Mission: The New York Fed’s Trading Desk Has Ballooned to $6.59 Trillion Today from $576 Billion in 2008, The SEC Has a Graph of the Wall Street Short-Term Loan Market that Blew Up: It Needs a Surgeon General Warning Before Viewing, Watchdog Report: Fed’s Billions in Emergency Repo Loans to Wall Street Didn’t Go Away in June; They Just Went Dark, Bull Market? The article focused on the bank's tendency to participate in and profit from a host of economic bubbles, from the Great Depression to the tech bubble to, more famously, the housing boom. Taibblog: Commentary on Politics and the Economy by Matt Taibbi. You issued a letter? The real money was in betting against those same mortgages. Take a wild guess. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in.” In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. “It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity,” Galbraith observed, sounding like Keith Olbermann in an ascot. None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman — not to mention …. But the staffer’s request was about a letter that had been issued 17 years earlier. Published: 19:33 EST, 15 March 2012 | Updated: 09:16 EST, 16 March 2012 After landing at Goldman, Corrigan co-chaired a secretive group that was made up of the chief risk officers of the Wall Street banks. Save articles for later. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers — and that’s likely a conservative estimate. The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the shitty ones: The CDO, as a whole, was sound. “As a result, we took significant markdowns on our long inventory positions … However, our risk bias in that market was to be short, and that net short position was profitable.” In other words, the mortgages it was selling were for chumps. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Matt Taibbi’s great 2010 article for Rolling Stone described how Goldman Sachs manipulates our economy for the benefit of its executives and investors. AP Photo/Richard Drew, File (AP) "The great vampire squid”: Goldman Sachs' influence on America's future A cadre of former Goldman Sachs executives are … “I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC,” says Greenberger, “and neither of us knew this letter was out there.” In fact, the letters only came to light by accident. Here’s how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market — driven there by fear of the falling dollar and the housing crash — finally overwhelmed the real physical suppliers and consumers. From vampire squid to Wall St scrapper: the humbling of Goldman Sachs In the noughties, Goldman Sachs figured as the world’s most powerful investment bank. Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates. “If it’s going to be a tax, I would prefer that Washington set the tax and collect it,” says Michael Masters, the hedge fund director who spoke out against oil futures speculation. The first thing you need to know about Goldman Sachs is that it’s everywhere. And here’s the real punch line. Team Trump’s Troubling Tentacles: The Goldman Sachs Vampire Squid by William F. Jasper March 16, 2017 “I know the guys at Goldman Sachs,” Candidate Donald Trump … In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be “very helpful in the short term,” while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. “I think they just don’t understand the problem very well,” he says. Sometimes the revolving door swings the other way at Goldman Sachs. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet. Tue 14 Jul 2009 13.55 EDT . While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down — and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with. “If index speculators took short positions as well as long ones, you’d see them pushing prices both up and down,” says Michael Masters, a hedge fund manager who has helped expose the role of investment banks in the manipulation of oil prices. The terms junk bond, IPO, sub-prime mortgage and other once-hot financial fare were now firmly associated in the public’s mind with scams; the terms credit swaps and CDOs were about to join them. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected. “Demand is at a 10-year low. Representatives from banks like Lehman Brothers, Citigroup, Bear Stearns and Merrill Lynch sat on key committees of the Group and helped to formulate the “Guiding Principles” for Wall Street. As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. Why does this matter? The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. If the companies go over their allotment, they will be able to buy “allocations” or credits from other companies that have managed to produce fewer emissions. Nowhere was this truer than at Goldman. So what caused the huge spike in oil prices? Add articles to your saved list and come back to them any time. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.). In reality, 18 percent of the mortgages were in default within 18 months. Converting to a bank-holding company has other benefits as well: Goldman’s primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Goldman Sachs, the vampire squid, and its Wall Street cohorts see money everywhere. Eventually, lots of aggrieved investors agreed. In 2015 it came bottom in the yearly Harris … As it turns out, it had one ready, thanks in large part to Rubin. It’s up to engaged Americans to force the debate with letters to the editor and protests in front of newspaper offices across America. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees’ Retirement System, had $1.1 billion in commodities when the crash came. Fast-forward to today. “You can’t explain it in 30 seconds, so politicians ignore it.”. But it wasn’t the consumption of real oil that was driving up prices — it was the trade in paper oil. The "vampire squid" is what Rolling Stone polemicist Matt Taibbi dubbed the investment bank in … Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. But the real problem wasn’t the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade. “It’s exactly securities fraud,” he says. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle. But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. Also in 2008, Citigroup received the largest taxpayer bailout in U.S. history. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent. The world's most powerful investment bank is a great vampire squid … Mr. Martens' career spanned four decades in printing and publishing management. The Great American Bubble Machine begins, The first thing you need to know about Goldman Sachs is that it’s everywhere. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount. 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