SEC vs. Goldman: A symbolic strike to press the fat cats (David Caploe)

Goldman Sachs (GS), one of the financial powerhouses of Wall Street and the City and an active shadow soft power around the globe, was accused this month of securities fraud in a civil suit filed by the Securities and Exchange Commission (SEC).

The alleged fraud was one of the financial vehicles created by GS so the bank and select top clients, like hedge funds managers, could bet against the housing market, capitalizing on its panic and collapse, against the very interests of GS customers that bought the mortgage investments. The code name was “Abacus 2007-AC”, a CDO (synthetic collateralized debt obligation) – a parcel of sub-prime mortgages. Fabrice Tourre, a French-born, vice–president of GS, was also suited as the 31-one-year old genius behind the financial trick. He was named “the fabulous Fab”.

We asked David Caploe, Chief Political Economist of EconomyWatch.com, a blog based in Singapore, to comment on this first move from American regulators against a Wall Street deal. His message is simple: the news about the fall of the House of GS probably are exaggerated, so far. May be this episode is basically a symbolic strike to press the “fat cats”, as president Obama recently named Wall Street bosses in his campaign for financial reform.

Fast Interview by Jorge Nascimento Rodrigues (c) 2010

Q: In the beginning of the financialization wave in the US we had J.P.Morgan himself as the “boss” and the House of JPMorgan later. Then in the 1970s and 1980s we had Citicorp (relabeled later Citigroup). After the financial innovation revolution it emerges Goldman Sachs (GS), and later in the 1990s and 2000s everybody talked about “government Sachs”. Do you think the SEC vs. GS Abacus fraud, after the Greek affair engineered by GS in Athens with the former Karamanlis government, can be the beginning of the end of this financial “empire”?

A: As you know from my two pieces this week, here, and here, I am EXTREMELY skeptical of what SEC v Goldman actually means.There are just too many unanswered questions and uncertainties about the whole situation, such as: 1) Why did the SEC bring a legal case that almost all observers agree is so weak ?; 2) Will the case actually even come to trial, given how long it takes for ANY legal proceeding to go through the US judicial system — or will, after a certain period of time, there be some kind of settlement that will enable all concerned to claim “victory” ?; 3) Did the fact that the US Senate is now considering a “financial reform” bill — which, as you know, we don’t think is very strong at all — have anything to do with the timing of the announcement ?; 4) If so, will the whole situation somehow “be resolved” once the legislation — in whatever form it finally takes — be passed ?; finally, 5) All during the Cheney / Bush years, the SEC was Wall Street’s lapdog. Admittedly, they are under “new management”, but will the new team actually follow through — or is this just a “symbolic” strike to “scare” Wall Street into acting a BIT more responsibly ? And these are only the most immediate questions / uncertainties surrounding the situation.

Q: But can we expect the fall of the House of GS?

A: It’s certainly true that GS was deeply involved in the disaster of Greece, and the looming problems in Italy – but I have no sense at all they are very worried by their past actions in Europe, all of which WERE, after all, “legal” in the most strict sense, no matter how problematic they were from an economic and ethical point of view. And, this case aside, GS’ stock price hasn’t gone down very far at all, at least so far, so I think we are a LONG way from seeing the collapse of the Goldman Sachs empire — let alone the collapse of the entire Wall Street empire. BOTH of them remain VERY strong financially — until, of course, they are forced to “mark to market” all their “toxic assets”. But their political power in Washington remains EQUALLY strong, especially given the insane US “Supreme” Court decision that allows corporations to spend an UNLIMITED amount of money to influence all kinds of political activity, not just elections but also legislation.

Q: Can we risk a tsunami at Wall Street? And at the City in London? Or it’s more of the same, more vaporware than real reengineering of the financial shadow system?

A: Well, again, I don’t think we’re near anything like a tsunami on either Wall Street OR the City — except, of course, the kind they inflicted on themselves and the rest of the world with their own irresponsible actions — eg, Lehman’s Repo 105 — that resulted first in the Black September meltdown, and then, when they wanted to make sure they were protected by taxpayers from their OWN mistakes, the ensuing LENDING FREEZE that has resulted in a recession first in the US, and then — because we have a US-centered global political economy — the rest of the world. The idea that the enforcement of serious regulation could cause the collapse of either Wall Street or the City is merely corporate propaganda — an attempt to limit their own responsibility. And, as George Soros pointed out recently in the Financial Times, even the RELATIVELY strong measure on derivatives recently passed by the US Senate Agriculture committee — don’t ask why they (Agriculture Depart !!) are in charge of the most important instrument of the “global shadow banking / financial system” — is FAR from a complete regulation of all the dangers that can flow from derivatives.

Q: Who can profit from an eventual fall of the House of GS?

A: Well, like I said, I really don’t think GS is anywhere CLOSE to falling, so I wouldn’t prepare any obituaries yet. As far as who would benefit from a diminution of GS’ power, I think we’ve seen from how THEY and the rest of the remaining TBTF (too big too fail)  banks carved up both Lehman Bros and Bear Stearns, that the IMMEDIATE beneficiaries of any such — again, most unlikely — happening are likely to be the REMAINING Wall Street firms. In the longer run, I think the beneficiaries of an ORDERLY and politically regulated diminution of both GS’ AND Wall Street’s power would be American taxpayers and everyone else in the world. But, again, I think we’re a LONG way from that happening.

2 Responses to “SEC vs. Goldman: A symbolic strike to press the fat cats (David Caploe)”

  1. An “octopus wrapped around the face of humanity” as one journalist put it; the New World Banking Order has arrived. In 2009 speculative, uncontrolled derivatives were the Worlds largest market at an estimated 600 Trillion. The Worlds total economic output was an estimated 58.07 Trillion and the total World bond market was an estimated 82.2 Trillion. Yet, there is no “crime” that the bankers can be charged with as they bankrupt citizens and Nations into the New World Order?
    The appropriate criminal charge should be Treason to the American People and our Democratic Republic and Constitution. The members of the Trilateral Commission and the Bilderberg Group in government and banking who conspired to overthrow our soverenity as an independent nation, who conspired to bankrupt our Treasury with unjust Wars (3) and multinational corporate bailouts, conspired to control mass media “free Press”, conspired and manipulated “financial crisis” for their own gain, conspired to “relocate” American industry and technology, conspired to offshore “American Income Tax”, and who have conspired to enslave American citizens with National debt (about $64,000 per citizen) and personal debt. Deserve the death sentence by firing squad for Treason.
    Obama, your New World Order is Totalitarian and we Patriots, American free citizens, will fight for our Democracy, Independence and Freedom.

  2. SEC vs. Goldman- 21st Century age of Enlightenment or Tyranny? Will bankers and big oil lead humanity into an enlightened 21st. Century of green energy and humanitarianism or will this be the century of World Totalitarianism of the New World Order? We know that “morality” is a “no” word for bankers, big oil and investors alike; yet they are leading us into the New World Order with their heartless and coldblooded culture of greed by the few. World conquest by tyranny is not new and it certainly is not orderly; it is chaos. Hitler already tried World domination by tyranny in the last century. The nations of Greece, Latvia, and Iceland have already fallen into “order” and Spain, France, Germany, Portugal, Ireland, Italy, United Kingdom and the United States of America are scheduled to fall into “order”. The American people do not want to lose our Democracy, Independence and Freedom; yet this World totalitarian agenda emanates from the United States of America and is lead by the Bush/Obama Administration in our name. The World is looking at the American people as their last resort for salvation and praying that the American people will stand up to this evil force and do the right thing. By saving ourselves, we will also save them. We are the only ones who can change the direction of our own country with what freedoms we have left.
    The SEC vs. Goldman is a test of strength between the American people and the World bankers, indeed, the New World Order. If the American people do not bring the bankers to Justice in our court system; the bankers will be free to dominate the World.
    The injunctions will lead to the White House and the Bush/Obama Administration which is dominated by Trilateral World bankers. Zbigniew Brzezinski is the designer and architect of the bankers Trilateral Commission and the New World Order; he is also Obama’s top advisor. Geithner, Volker, Greenspan, Bernanke, Summers, Corrigan and Peterson are all of the same banking family of World bankers (America is their host) Goldman Sachs, Morgan Stanley, Bank of America, JPMorgan Chase, Wells Fargo Federal Reserve, IMF, World Bank, BIS, etc; their tentacles reach into every economy in the World. The World total economic output in 2009 was 58.07 Trillion and the total World bond market was 82.2 Trillion. The largest market in the World is the Derivatives market at 600 Trillion and is used primarily by the bankers as a weapon of mass destruction of economies to bring them in line with the New World Order. Their modus operande is the same for American citizens as it is for Nations.(pt.1)
    The banker and oil dominated Trilateral Bush/Obama Administration has purposely driven the United States of America into debt under their expert banking management by the systematic pillaging of our Treasury. Our National debt interest is at 15% about the same as the United Kingdom according to Moody’s bond rating March 15. “the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA, Moody’s said.”
    http://www.bloomberg.com/apps/news?pid=20601068&sid=a0a8xAghPS8I
    In the financial world, loosing your AAA bond rating changes the banking agreement substantially (as every home owner knows) that is when the fine print kicks in and the spiral to the bottom begins. Look at Greece, Latvia, Iceland and now the UK. Germany, France and Spain AAA credit ratings are in danger as reported in the U.K Telegraph on March 15 (referring to Moody’s) “The US rating agency said the US, the UK, Germany, France, and Spain are walking a tightrope-“
    http://www.telegraph.co.uk/finance/economics/7450468/Moodys-fears-social-unrest-as-AAA-states-implement-austerity-plans.html
    To control and accelerate that rush to the bottom of Nations, major banks are frontloading the odds of default of a Nation down on Wall Street in a computer so they can control and manipulate trades with high-frequency trading in derivatives. High-frequency trading is how Goldman Sacks (U.S.A) makes at least 200 million a day in derivatives on Wall Street and accounts for most of the 3.3 billion profit and 5.5 billion in bonuses last quarter. This one example of Goldman Sachs (U.S.A) operations is but the tip of the arrow head and the shaft is sure to follow. By flying the United States of America’s economy and government into the ground the New World Order of Trilateral Traitor bankers become winners. Now, who is the terrorist?
    I hope Americans have empathy for the people of Greece and all the other people of Nations who face “Austerity measures” because their destiny will soon be our own fate. The bankers are brutal; the National financial burden is on the people with forced tax followed with the gutting of social services and privatization of National infrastructure and National Natural Resource for pennies on the dollar.
    If you can empathize with these people I suggest that you take action and button-hole your representatives in Congress today and tell them to make a stand for the American People against this takeover of our government by Trilateral bankers and the New World Order. Demand that they insist that ALL of the subversive Trilateral members in government to STAND DOWN. Insist that Treason charges be served on all who conspired to overthrow our American Independence, Democracy and Freedom (there are only about 1,500 Traitors). Insist that Free Press, the watch-dog of Democracy, be restored by breaking up the monopolies in the mass Media.
    Main Street Capitalism, Competitive Market, and Free Enterprise are America’s tried and true standard and our economy and government can recover from this treachery if we act now by getting back to our roots of industry, manufacturing and technology instead of being smothered by the Multinational Corporate Empire, by proxy, by our government. Our economy needs Fair Trade not (Free (sic) Trade and Free Enterprise and Competitive Market not controlled markets by the multinational corporate monopolies.

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