Wednesday, April 28, 2010

Goldman Sachs: The Next American Revolution

Allegations of fraud brought last week by the Securities and Exchange Commission is a shocking departure from the culture of collusion among the U.S. government and the nation's top banks. That despite the position of this publication and myriad others broadly categorized as "fringe" who have consistently and vociferously objected to the two or more standards applied to organizations and individuals by a corrupt legal system.

Throughout the 200 year-or-so history of linked financial markets, the name of J.P. Morgan has almost always been dominant. Goldman Sachs, though newer in terms of participatory history, has quickly risen to join J.P. Morgan at the forefront of the only industry that credibly dictates to government.

To many, the scandal surrounding Goldman Sachs apparent rigging of the craps tables in the house's favour comes as no surprise. The Gold Antitrust Action Committee has been stridently demanding an investigation into the concentrated short positions that plague the gold and silver markets to no avail. They've suffered from an absence of public concern or support for their position because the relationship between gold and silver markets and personal finance is not intellectually accessible for the majority of people. So the press, absent public interest, generally passes up GATA coverage, even though the implications for the citizens of the United States and the world include constitutioality and civil rights.

That may be changing.

The excesses of the personalities attracted to such an industry demands that episodes of gross rapaciousness should regularly come to light in the press, and such incidents are generally followed closely by censureship by government, a distancing between banking and government, vigorous regulation, and public revulsion.

Is it conceivable that an independent wind is blowing through the halls of justice? Or is this merely the set stage for the sacrifice of a few lambs to render complete the getaway of the real culprits higher up the food chain?

Speculation aside, one of the unavoidable results of this first volley across the hallowed bows of Big Banking is the focus that is now being directed to the futures and derivatives business, which is where the accumulated real losses of these institutions is perrenially stored as liabilities so they can be booked as profit on their balance sheets. The figure, according to the Commodities and Futures Trading Commission own numbers, of $600 trillion is the amount which lurks under the auspices of "notional" value in unwound transactions encumbering the heretofore dark and mostly unregulated market.

If the CFTC and SEC are genuinely determined to rectify the now public disgrace of such nepotistic administration, we could be on the verge of a major re-ordering of the financial industry landscape world wide.

The manipulation long present in this market according to the allegations of organizations such as the Gold Anti Trust Action Committee (GATA) has been responsible for the depressed price of precious metals, and outside of GATA, the super-inflated price of oil which peaked in July of 2008 at $148 a barrel.

Now they're coming out of the woodwork in Goldman's defense, thought the defenders are hardly credible and without bias. Warren Buffett today said he has "full confidence" in Goldman Sachs, while private equity firm Blackstone came out with a more forceful endorsement.

Blackstone CEO Stephen Schwarzman is quoted as saying, "We have been working with Goldman Sachs for the 25 years since Blackstone was formed and we never had any circumstance where there was any question about ethical character or behaviour. We are a major client of Goldman's and we will continue to remain a major client."

A week after the first allegations, we are now seeing the predictable flood of corrobaratory evidence unearthed by the press that suggests the moral decay among the foot soldiers now receiving blame originates at the top. (Emails show Goldman Sachs execs boasting about the profit they were making from horribly misappropriated lending.)

Goldman Sachs though isn't going to lay down like Lehman Brothers was forced to. The tentacles of the Goldman monster penetrate global governments on every level that matters, as many of the Treasury and Federal Reserve alumni identities prove. Goldman is certainly at the forefront of the "Too Big to Fail" propaganda, which is true only if caveated with "because that would bring down the government".

We reiterate the position "Too big to fail means too big too exist". If institutions that can deflect any responsibility for their actions to junior scapegoats are permitted to run amok with their massively influential capital concentrations, we are institutionalizing criminal destructive forces and protecting them. Its like breeding giant elephants in your living room. Sure, they're big and healthy, but look at the state of your house!

Among the many lessons we should be learning in this era of daylight robbery by our institutional and individual pillars of society is the obvious reality that people only aspire to be bankers because they feel entitled to a greater share of personal wealth, and not just despite the impoverishment of a broad social group to accommodate such plunder, but that is precisely how they demand it is done. This is morally reprehensible. In 200 years, if we survive, these bankers and that mentality will be deemed criminal, and those crooks will go to jail.

Through our evolution in the developed world over the last thousand years, there was a long-running battle between those who would let the church govern, and those who, successfully, argued for the separation of church and state. A democratic government is obliged to refrain from permitting special interest groups from influencing and especially infiltrating policy. The current practice of recruiting treasury and government financial advisors from the top personnel of banking is a despicable and blatant conflict of interest.

What these elitists perennially fail to recognize is it is precisely this smug refusal to eliinate such glaring abdications of government responsibility that incites riots and revolutions. When the financial misery inflicted by these institutions begins to affect even its middle and upper middle classes, rebellious organization and literature manifests.

At some point, the unemployed will see that there is an emergent moral obligation to correct such injustice, rather than seek employment or financial assitance. The United States is right now failing to make that distinction, and at its own peril.

I am Canadian with a long family history of intermarriage and American - Canadian residence and business. With a thoroughly bi-national perspective, it is now abundantly clear to me that one of the greatest distinctions between Canadians and Americans is that the Canadian business elite don't underestimate the importance of a more-or-less uniform standard of living for all citizens - even at their own expense. Consumer rights are defended, sure, but we don't have to worry about predatory lending by financial institutions against the credit-unworthy because it runs contrary to Canadian ethical thinking. Bad loans are bad business, and the integrity of the Canadian economy throughout the crisis is testimony to Canadian ethical and business fortitude.

This is why Goldman Sachs should be the first domino to fall. The United States government needs to stop shielding the super elite and thinking that they're getting away with it. They are not. There will be a day of comeuppance, and its likely not that far off.

The opportunity for President Barack Obama is to now demonstrate genuine leadership by attacking the corruption that continues to aid and abet the illegal manipulation of markets through excessivley large and influential institutions. Corporations can't go to jail, but their charters can be revoked for cause. If the government of the United States doesn't act decisively and meaningfully, the people eventually will.


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Tuesday, April 27, 2010

Blankfein Takes Heat From Congress

Goldman Sachs circus begins.