Los Angeles Tech Writer

I received Bruce Wiseman's next installment on the global financial meltdown today, and you have got to read it. It goes like this:

Dear Friends,

The following is the first of two installments of an article exposing the activities of Goldman Sachs, the most powerful investment bank in the world.

All of the names of Goldman employees are linked to a chart which gives the overall picture of where these people are operating or have operated.

The second installment of the article will be sent in two days.

There will be a war. I’m certain of it.

No, not with Iran, though I’d like to introduce Mahmoud – I refuse to wear a neck tie under any circumstances – Ahmadinejad to a woman I met several years ago. She and her twin sister had been experimental subjects of Nazi madman, Dr. Joseph Mengele. Mengele had tried to change the color of their eyes with dye. The woman was blind. Her sister died at Auschwitz.

Mahmoud, who thinks the Holocaust was a hoax, forgot to pay his brain bill.

And they are a few clowns short of a circus in Pyongyang. Still, I don’t think the Chinese will let Kim Jon Il and his newly appointed secret police chief son, Kim Jon Un, drag the West into a military confrontation on the Korean peninsula. It’s a little too close to home and a Korean War II is not part of Beijing’s master plan. At least not yet.

No, this is a war brewing between two iconic American institutions that couldn’t be more different: the voice of America’s rock culture, Rolling Stone Magazine, and the country’s premier, Armani clad investment bank, Goldman Sachs.

Rolling Stone recently published an article called The Great American Bubble Machine, a masterful expose by Matt Taibbi revealing Goldman’s greed and corruption in the creation of several investment “bubbles” that have made the firm and its partners – the term “filthy rich” comes to mind – but that have been devastating to Americans and to the US economy.

I rarely use those two words together. I have no problem with people making money – barrels of the stuff. Boat loads. But this needs to be done with some sense of ethics. Some sense of morals. Some sense of responsibility toward one’s fellow man.

I was informed that Goldman is preparing a response. One wonders if the Wall Street veneer will crack: if they’ll come out with their pinstripes pressed or PR guns blazing trying to marginalize Taibbi.

As those of you who have followed my recent articles on the financial crisis know, I have pointed out the all too coincidental participation of Goldman executives in the creation of the financial crisis. Machiavelli himself would be proud of what has been nothing less than a coup d’etat of the planet’s financial systems. The Guys from Goldman have played their part.

While I have previously drawn attention to a few of the key figures, Taibbi has peeled the onion on several of the investment bank’s schemes and has also laid bare the army of Goldman alumni that have turned up at critical decision points in the universe of credit, investment and finance.

His orientation was such that he omitted a few that I will cover below. But the article is exhaustively researched and ties Goldman to everything from the Great Depression to speculation in oil futures before last year’s election that sent gas prices to $5.00 a gallon here in the land of many freeways. My focus, on the other hand, has been exposing the actual cause of the worldwide financial crisis. And our paths have crossed at a few key junctures.

Junctures that bring to mind the great Gordon Gekko - Michael Douglas’ character in Oliver Stone’s Wall Street. Preening in front of the Board of Directors and up and down the aisle among the shareholders of Teldar Paper, Douglas shares the philosophy of the successful investment banker as if handing down commandments from Mount Wall Street: “Greed is good. Greed is right. Greed works. Greed clarifies and cuts through and captures the essence of the evolutionary spirit.”

Yeah, Baby.

But is it more than greed? Are Goldman Sachs alumni part of a broader agenda that has not only lined their pockets with the spoils of corruption that Taibbi has exposed, but has also helped facilitate an international financial coup – a coup that has put the control of the planet’s financial affairs into the hands of small group of central bankers that hold secret meetings at what is nothing less than the Vatican of international finance – The Bank for International Settlements located in Basel, Switzerland?

If you’ve had a suspicion that bankers are running Washington, then hang on to your Calvins because while it starts in DC, this story is global in reach and is rolling out before your eyes – if you are willing to look.

ROBERT RUBIN

I could start this part of the story with Henry Fowler, who, after serving as the 35th Secretary of the Treasury, in 1969 became a partner at Goldman after leaving office. But that’s not how things worked in the nineties and beyond. Oh no. The current sequence is very different.

Pictures of Robert Rubin always remind me of the cartoon character, Droopy. He seems to be in a perpetual state of sad worry. Hard to know what he’s worried about, having received $50 million in compensation from his last employer (CitiBank). Perhaps it’s because the financial website Marketwatch recently named him as one of the "10 most unethical people in business."

More to the point of our story, having served 26 years with Goldman Sachs, ascending to the position of Co-Chairman, Rubin came to Washington with the Clinton Administration, as the Assistant to the President for Economic Policy. Bill must have dug the Wall Street touch, because in January of 1995, he appointed Rubin the 70th Secretary of the Treasury of the United States.

This could be called the start of the modern era of what the New York Times has referred to as the modern era of Government Sachs.

The hallmark of Rubin’s years in Washington was deregulation - specifically, deregulation of the financial industry. Turn the financial industry loose. Let the big dogs eat. Let them earn. They have Porsche payments to make.

Working with Greenspan, he kept interest rates implausibly low and ensured that regulatory safeguards were gunned down like victims in an LA drive-by shooting. The Glass-Steagall Act is a prime example. A piece of depression era legislation that kept investment banks and commercial banks from committing fiscal incest, it was repealed - charged with being out of touch with the global financial structure.

What it was out of touch with was an agenda to open the floodgates to unbridled speculation by banks that set the industry up for a financial Hiroshima.

It takes a great deal of power and influence to get a federal law repealed in this country – especially one that has served the country well for 70 years. But Rubin, with a little help from his friends – Larry Summers and Alan Greenspan – got it done.

These and other similar actions helped pave the way for an economic crisis that would soon engulf the entire planet.

“The housing bubble has burst. The financial services industry is a ward of the state. Insurance companies and automakers are tottering on the brink of bankruptcy. Consumer credit is drying up along with consumer confidence. Banks have stopped lending money, and big corporations have started laying workers off. The stock market is at a five-year low. But amid the greatest financial panic since the Great Depression, the market for one asset stubbornly resists correction: the immaculate reputation of Robert Rubin, former treasury secretary and pre-eminent economic wise man of the Democratic Party.….
But the financial deregulation that allowed markets to boil over began well before President George W. Bush took office. Three decisions relevant to the market meltdown…can be attributed to Rubin.” By Timothy Noah, Robert Rubin’s Free Ride. http://www.slate.com/

MEXICO

Let’s set aside for the moment that when Rubin was Co-Chairman of Goldman, the firm underwrote billions of dollars in bonds for the Mexican government. When the Mexican Peso tanked a few years later, Rubin, as Secretary of the Treasury arranged a multi-billion dollar taxpayer bailout which, according to reports, saved Goldman a cool $4 billion. Kind of a dress rehearsal for Hank Paulson’s trillion dollar raid on the US Treasury which channeled tens of billions into the womb from which he came – Mother Goldman. But we’ll get to that.

Rubin did more than pave the road to a financial Armageddon with Maestro Greenspan. His spawn have helped ensure that the crisis came off as planned and that it was solved with the creation of a global financial dictator, who – prepare to be shocked - is also a Goldman alum. But, again, I’m getting ahead of myself.

THE ACOLYTES

Summers
At Treasury, Rubin groomed two protégés that helped craft the multi-trillion dollar financial bailout and that are today in charge of US financial policy: Larry Summers and Timothy Geithner.

Summers, though not a formal Goldman alum, is a fully certified Rubin-deregulation clone. He was the Chief Economist for the World Bank in the early 90s and later served as Rubin’s Deputy Secretary of the Treasury. When the Rubin left, Summers took full control of Treasury for the last year and a half of the Clinton administration. Today, Summers is the Director of the National Economic Council, which means he is in the commanding position of being the senior advisor to President Obama on domestic and international economic policy.

Geithner
Geithner, like Summers, worked for Rubin at Treasury during the Clinton administration and was a Rubin favorite. He stayed on during Summers’ tenure and then snagged the powerful presidency of the New York Federal Reserve Bank. It was Rubin who got Geithner the gig at the New York Fed and it was Rubin who hooked him up with Obama, who appointed him as his Secretary of the Treasury.

In case there is any doubt about Geithner’s loyalties, it is widely known on Wall Street and inside the Beltway, that Goldman filed adoption papers on him years ago.

In an interview on July 3rd, 2009 the Former US Assistant Secretary of The Treasury, Dr. Paul Craig, was asked, "Does the US Secretary of the Treasury work for the people or does he work for the banking system on Wall Street?" to which he replied, "Geithner works for Goldman Sachs."
http://en.wikipedia.org/wiki/Goldman_Sachs#Former_U.S._Assistant_Secretary_of_Treasury_claims_Treasury_works_for_Goldman_Sachs

So, for those who thought that Rubin had left the stage of US economic policy, think again. Because not only has Rubin himself been named as an advisor to President Obama, but another of his groupies, Christina Romer has been named as the Chairman of the White House Council of Economic Advisors.

Even today then, Goldman’s former Co-Chairman is advising Obama behind the scenes and his acolytes are in charge of the US Treasury (Geithner), the White House Council of Economic Advisors and the National Economic Council. (The White House Council of Economic Advisors is made up of academicians who provide the President with economic statistics and other information on domestic and international financial matters [Romer]. The National Economic Council brings together key administration players and agency heads to coordinate and see to the implementation of the administration’s economic policy. The Chairman [Summers] is the President’s senior economic advisor. )

You’d think with this crew in place, Goldman would have had the White House covered. But Obama apparently went for their two-for-one sale. In addition to Rubin, another former Goldman Chairman, the controversial Jon Corzine, has been a top Obama economic advisor. In fact he was on the short list to become Secretary of the Treasury. But Rubin ruled and Geithner got the gig.

Given that Goldman employees gave more money to Obama ($994,000) than any other commercial enterprise in the United States, and that the White House is awash in Goldmanites, it is no surprise that 1600 Pennsylvania Avenue is viewed as one of the bank’s more important operating divisions.

PATTERSON

Even with the White House under control, Geithner beefed up his G-man staff at Treasury. He named yet another Goldmanite as his Chief of Staff. Mark Patterson was selected to help him run the government’s financial circus. Patterson gave up his plum position as the Vice President for Government Relations at Goldman -meaning he was the investment bank’s chief Lobbyist - to become the number two man at Treasury.

I know, I know. Obama said no lobbyists in his administration, but well, Mark is family. Sort of a fiscal fraternity brother – Alpha Delta Goldman.

PAULSON

But before Obama was Bush. And with oh-so-propitious timing, before the news of the financial crisis began to go mainline in 2007, a new Goldman CEO descended from his throne on Wall Street to come to Washington and help his government manage the nation’s financial affairs.

We love you, Hank.

Viewed from the boardrooms of Wall Street, Henry Paulson’s blitzkrieg of the nation’s capital was nothing short of stunning: A George Patton in pinstripes – except Patton was fighting a real enemy, not one that he, himself, had created.

LIAR, LIAR PANTS ON FIRE
At first, he used PR spin to calm the multitudes. As the crisis began to unravel, in August, 2007 Paulson assured the American people that the subprime mortgage problems were nothing to be concerned about, that they would remain contained due to the strong global economy.

Reuters - U.S. Treasury Secretary Henry Paulson said on Wednesday that the market impact of the U.S. subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades.

Not.

The stock market peaked two months later followed by a crash that wiped out trillions.

In July of 2008, after the fall of Indymac bank, Paulson told the public that the banking system was safe and sound and that the situation was very “manageable.” Twenty-five banks failed in 2008. Sixty-four have gone under in the first six and a half months of 2009. Another 309 are now listed as “problem banks.”

In fact, according to FDIC Chairman, Shelia Bair, in March, 2009, unless the FDIC gets more revenue, they themselves are going to be broke.

“Without additional revenue beyond the regular assessments, current projections indicate that the fund balance will approach zero."

In a television interview on Meet The Press on August 10, 2008, Paulson stated that he would not be putting any capital into Fannie Mae or Freddie Mac. Three weeks later, he took them over and committed $200 billion in bailout funds. $60 billion has already been spent.

When I was growing up, we’d call this kind of guy a “bullshit artist.” But that didn’t stop him from staging a raid on the US Treasury in broad daylight that would have made Dillinger weep with envy. This, while Congress – a Democratic Congress at that - stood around with their thumbs up their butts.

LIDDY

AIG

Perhaps nothing so demonstrated this scam as the government bailout of American International Group (AIG), the country’s largest insurance company. On September 16th, Paulson coughed up $85 billion of your tax dollars to take control of AIG. The $85 billion loan got the government 80% ownership of the insurance giant. Just what I always wanted from my government, a bankrupt insurance company.

It turns out the $85 billion wasn’t enough. AIG has continued to hemorrhage losses and Uncle has now poured a total of $182 billion into the insurance company.

Jefferson and Adams weep.

Sticky constitutional issues aside, many have found it more than curious that when the government granted the loan, AIG turned right around and paid it out to the investment banks to which it owed money. The bank that got the largest payout was… of course, Goldman Sachs – a cool $13 billion. The money simply passed from your paycheck to the US Treasury, from the Treasury to AIG and from AIG to Goldman (and other banks).

Of course, Paulson didn’t provide the loan without ensuring that Goldman and fellow banksters would be repaid in full. No, no. He made sure the transfers would occur without any objection from AIG or unseemly negotiations with the banks. To do this, he tapped Goldman Sachs board member, Ed Liddy to be the new CEO of AIG.

The goodhearted Mr. Liddy took the gig for a dollar a year in salary from AIG. But he held on to his $3 million in Goldman stock.

Cute, eh?

Goldman made billions from AIG earlier as well. AIG didn’t know this. Neither did Goldman’s clients. You see, despite the fact that they had collected enormous fees selling financial products which were “insured” by AIG, Goldman simultaneously sold AIG short. You get this? On the one hand, they sold financial instruments to their clients, which carried high investment ratings because AIG insured the buyer against loss. At the same time, they made investment “bets” for their own account against AIG. Estimates are that they made $4.7 billion betting against AIG while selling the AIG guaranteed products to their clients.

“Greed clarifies and cuts through and captures the essence of the evolutionary spirit.” --Gordon Gekko.

AIG behind him, Hammering Hank marched on.

LEHMAN BROTHERS
He had worked out strategies to have Bear Stearns purchased by JP Morgan in March of ’08 and had committed $200 billion to rescue Freddie and Fannie in early September, but when Goldman’s chief rival, Lehman Brothers, began to waver in mid Summer, he turned a blind eye. Lehman went bankrupt and sent the already declining stock market into a colossal rout. The next day, he helped arrange an $85 billion bailout for AIG.

Following Lehman’s collapse, Goldman and Morgan Stanley were the only remaining pure investment banks left on Wall Street.

THE BAILOUT
Congress was next.

The Four Horsemen of the Apocalypse have nothing on Paulson and his lap dog Bernanke’s assault on Congress. With threats of riots and martial law as they fear-mongered the Troubled Asset Relief Program (TARP) through the House and Senate - winding up with a cool trillion dollars to “save” the banks.

Congress’ actions remind me of a bad Godzilla movie with masses of panicked Japanese citizens fleeing the fire-breathing monster who is lumbering through the city toppling buildings and devouring cars.

The legislation drafted by our elected officials sounds like something issued to Stalin by the Politburo. They granted Paulson complete dictatorial powers over the bailout money. The TARP read in part:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Calling the multi-billion dollar bailout a “stimulus” program is but a cruel joke. This was nothing more complicated than a coup - a transfer of hundreds of billions of dollars from American taxpayers into the Armani clad arms of major Wall Street banks.

You won’t be surprised to learn, I’m sure, that Goldman Sachs got a cool $10 billion of TARP funds. And if you followed the billions pouring from your paychecks to Wall Street, you might remember that Bank of America at first received $25 billion. Then, in the midst of the chaos, they agreed to purchase Merrill Lynch. As it turned out, however, Merrill’s losses were $15 billion more than B of A had expected. This was due in part to $4 billion in bonuses paid out by Merrill’s CEO, John Thain, who pushed the bonuses through his books just before the Bank of America deal closed.

Bank of America was taken by surprise by the losses and the purchase of Merrill Lynch started to go shaky to which Comrade Paulson coughed up another $20 billion of your tax dollars.

You guys are so cool bailing out these banks. I mean it. It brings tears to my eyes.

Oh, I should mention that John Thain, the guy who pushed through the last minute billions in bonuses, had been the President and Co-chief Operating Officer at Goldman Sachs before becoming the President of Merrill Lynch.

ROBERT K STEEL

TREASURY TO WACHOVIA
Another Goldman alum to drive his bank headlong into the merger- mania chaos of the financial crisis was Robert Steel. Steel had worked with Paulson at Goldman for 30 years and eventually rose to the position of Vice Chairman of the firm.

He followed Paulson to the US Treasury in 2006 and became his top financial policy adviser. In July of 2008, he left the government and became the CEO of Wachovia bank, the sixth largest bank in the country.

How did he wind up at Wachovia? Three weeks earlier, Wachovia - who had paid Goldman Sachs $77 million in fees for financial advice - also sought their assistance in finding a new CEO.

Steel was the man. Three short months later, Steel struck a deal with Citibank to buy Wachovia – a deal that required hundreds of billions in loan guarantees from the government. Then he changed his mind and sold Wachovia to Wells Fargo without the government involved and became a member of the Wells Fargo Board of Directors.

According to Taibbi’s article:

“…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.”

Other articles claim that Steel himself did not take a bonus.

Regardless, you have Goldman getting millions in fees to advise Wachovia on, among other things, the selection of a new CEO, who, it turns out is a former Goldman Vice Chairman. Nothing illegal about it, but the financial incest begins to smell pornographic.

NEEL KASHKARI

TARP FRONT MAN
Paulson is nothing if not thorough. While he ultimately called the shots, he brought in someone else to oversee the allocation of the TARP funds and take the Congressional heat. This was thirty-five year old Goldman Vice President, Neel Kashkari who, as the head of the Office of Financial Stability at Treasury, was in control of the $700 billion in bailout funds. It was Kashkari who had to testify about the TARP to Congress - a hot seat whose temperature started to soar shortly after Paulson’s scam began to dawn on the legislators.

THE TAKEOVER
There were others. In fact, Paulson brought so many former Goldman executives to Treasury the New York Times noted the “…appearance that the Treasury Department has become a de facto Goldman division.”

These included:

Reuben Jeffrey, a former Managing Partner of Goldman’s European Financial Institutions Group in London;
Dan Jester, a former Goldman Vice President;
Steve Shafran, a long time Paulson associate at Goldman;
Kendrick Wilson III, a Managing Partner at Goldman in the Financial Institutions Group; and
Edward Forst, a former Executive Vice President and Chief Administrative Officer at Goldman

Current or veteran Goldman executives all, they worked on everything from the bailout of Fannie and Freddie to the capital restructuring of the nation’s banks.

All of which makes Andy Borowitz’s article in the Huffington Post this month all the more understandable. The lead reads:

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

No surprise that the first two people I showed the article to thought it was real.

JOSHUA BOLTON

THE WHITE HOUSE
Paulson and his Goldman gladiators also had air cover from the White House. George Bush’s Chief of Staff during the bailout blizzard was none other than Josh Bolton. Bolton had become Chief of Staff in April of 2006 and is credited with persuading the President to recruit Paulson as the Treasury Secretary.

No surprise since Bolton had been the Executive Director, Legal & Government Affairs for Goldman Sachs International before joining the Bush 2000 presidential campaign.

Powerful friends. Powerful places.

But the Goldman virus has not been confined to the White House and the Treasury, not by a long shot.

The second and final installment of the article will be sent in two days.

Best,
Bruce

Bruce Wiseman is financial consultant and writer living in Los Angeles. He can be contacted at the address below.
Bruce@brucewiseman.net
http://www.brucewiseman.net/
© 2009 Bruce Wiseman.
All rights reserved.