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Surprise, Surprise...

In this month's issue of Rolling Stone, Matt Taibbi has a scathing piece on Goldman Sachs, in which he shows how the investment giant has contributed to and profited frominflating and deflating every major market bubble since the Great Depression. Now, the NY Times reports that Goldman Sachs, fueled by the recent bailout, just posted "surprising" second-quarter profits. But, Taibbi suggests that we shouldn't really be so shocked:

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindleddry American empire, reads like a Who's Who of Goldman Sachs graduates.


The bank's unprecedented reach and power have enabled it to turn all of America into a giant pumpanddump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere high gas prices, rising consumercredit rates, halfeaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth pure profit for rich individuals.They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. 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.

On how they're riding the bailout bronco:

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. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers one of Goldman's last real competitors collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investmentbanking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35yearold Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding most notably, lending from the discount window of the Federal Reserve. 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.

On what's to come...

Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs its employees paid some $981,000 to his campaign sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.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. (Gensler was the firm's cohead of finance.) 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.The new carboncredit 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. Goldman won't even have to rig the game. It will be rigged in advance.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. greenhouse gases) they can produce per year. 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. 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.

About the Author

Eric Bugyis teaches Religious StudiesĀ at the University of Washington Tacoma.



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This is a very serious expose and if true, Goldman Sachs has a lot of explaining to do. How will the spin doctors explain this. I do find it curious that the Democrats seem to be the bad guys in this debacle (for a moment it sounded like Newsmax and could Dick Morris be far behind) especially since they were not in power in the last eight years. So there are serious questions, all around. For Goldman Sachs and Rolling Stone.

Goldman Sachs employees are well paid but they live in fear. When you are laid off, three guys come to your office and give you 20 minutes to clear out (reduced to 10 minutes when there are lots of layoffs) -- your email is annulled and you are bundled out of the building before you can contact anyone. Is it the same in all big companies?

Those interested in a contrary view may want to view Megan McArdles critique: Matt Taibbi Gets His Sarah Palin On

McArdle does not exactly offer a contrary view. He is questioning the emphasis in the Rolling Stone article. In his conclusion he comes down harder on Goldman and Co. than does Taibbi: "Which is not to say that I disagree with Taibbi's project. Wall Street is an arrogant beast that more than held up its half of the devil's bargain which drove us into our current ugly straits. Bankers who thought they were geniuses were deceived by models that assumed away the possibility of a second great depression. They made a terrifying amount of money doing it. And now that the taxpayers have bailed them out at considerable expense, we don't even get a goddamn fruit basket. Instead they merrily go along paying themselves gigantic bonuses for the singular feat of not driving our economy entirely back to the stone age. I think some populist rage is more than warranted."

Sorry for the late reply --In the tech industry you get called to a conference room late in the day with everybody else they are laying off that day. Once the door is closed they pass out some kind of form for your signature then hand you a manila envelope with separation information and your final check. You are then notified that your systems accounts have already been cancelled, and you will be escorted, one by one, by security to your desk to pack up. Generally, everyone else has gone home early, so you can pack up without making a scene.Yep, pretty much the same, overall.

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