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Goldman Sachs = Enron x 10?

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Headlined to H1 4/26/10

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Remember Enron? Kenneth Lay, the CEO? As the fraud and deception of Enron began to unfold in the media--he stood before the public and his employees and continued to insist that all was fine. Now we have Lloyd Blankfein insisting to everyone that the SEC fraud investigation is nothing to worry about, they have no case.

But as Enron showed us, the smartest boys in the room can sometimes turn out to be not so smart after all. Many are beginning to realize, the Wall Street geniuses who created Hedge funds, Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO)--may turn out to be no brighter than the Enron boys. These investment instruments are so complex that actually no one understands them and are created through computer models gone awry. They have made vast fortunes for some--but they come with a huge dilemma. As the fraud investigation shows--these were rigged games that picked some investors pockets while lining others and few were privy to who knew what. Goldman Sachs may be at the center of it all--but they are not alone. Warren Buffett has called them "weapons of mass destruction"--but so far it's mostly Main Street that's been destroyed. Goldman Sachs posted another $3.5 billion first quarter profit--primarily through continuing to trade just as they were before the financial meltdown of 2008.

In a recent announcement, the German bank IBK announced it would no longer do business with Goldman Sachs. It was one of the banks that lost millions for investors while John Paulson's investment firm made a billion dollars on the duplicity of shorting a hand-picked CDO that it knew was going to fail. Great Britain too has filed suit against Goldman Sachs because the Royal Bank of Scotland--which was bailed out by Great Britain to avoid its collapse was intimately involved with Goldman Sachs. Just a few more major banks or countries standing up to Goldman Sachs and pulling out its funding and the once mighty could fall.

Now many will say that while the Enron collapse was terrible--it's not the same thing as Goldman Sachs going down. Because it is a huge bank, it must be kept operating--else, where will money come from? If they're gone "where will the loans come from--it remains too big to fail. But here's the thing--Goldman Sachs isn't lending money--it's not investing in real work and real output. Most of its profits right now stem from continuing these ruinous deals that benefit the few at the expense of the many. That giant sucking sound around the country of city, county and state deficits--with layoffs and economic contraction happening everywhere (the City of LA announced 700 city employees will be laid off by June) is a result of the fact that the Too Big to Fail banks aren't making loans for businesses and/or municipal entities. Instead, they're focused on cleaning up their books from the toxic assets that still remain--or in the case of Goldman Sachs-selling more Hedge funds, CDS and CDOs and posting huge profits.

So the loss of Goldman Sachs would not hurt Main Street since they're not lending to Main Street anyway. They should be lending--but they're not..and they're not going to any time soon. They have no need for pesky "real wealth" loans--heck why bother when you can make $3.5 billion without it! No, Main Street's problem will not be solved by Goldman Sachs--whether they live or die. Main Street is beginning to discover that it has some other options that will provide a much better revenue source to provide credit and loans for the nations' small businesses-- public State banks working in cooperation with small, local banks and credit unions.

So, Goldman Sachs goes the way of Enron? Who'd have thunk it! But then, as Enron showed us--sometimes the brightest boys in the room can get caught in their own net. Enron's debacle hurt many--and when it collapsed, many good, hard-working people in that organization and others that served Enron--Arthur Anderson accounting for example--went down too. But today, Goldman Sachs and all the TBTF banks have left wreckage across this country--of families destroyed, foreclosures, homelessness that will impact millions of children for the rest of their lives--the list goes on. They've done nothing to change their behavior and Main Street continues to suffer. Closing Goldman Sachs to prevent this continued recklessness may be the only option. There was life beyond Enron--there will be life beyond Goldman Sachs, too.

 

I'm a Licensed counselor working in OR. I teach clients to build lives based in self-responsibility using a universal model called the Life Puzzle. Its practical, tangible and fills in much of the missing information we never learn in schools. It is (more...)
 
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This may seem to be strange to some readers, but n... by MontgomeryScott on Tuesday, Apr 27, 2010 at 8:35:56 PM