Today, in my weekly column exposing corporate corruption and government misconduct wherever and whenever, I'm dredging through just a few of the dirty deeds of one of the modern day villains of Wall Street and global finance...
“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.
– Matt Taibbi
Founded in New York City in 1869 by Marcus Goldman, Goldman Sachs has grown to be one of the world’s largest investment banks by revenue. The bank has had a checkered history, going from one scandal to the next, so here are some of the most notable ones.
Goldman Sachs ended up paying $5 billion for its role in the 2008 financial crisis, having persuaded investors that the securities it sold were backed by sound mortgages.
Acting associate attorney general Stuart Delery said in a statement that:
“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when they knew they were full of mortgages that were likely to fail."
New Yorkers received about $670 million of the Goldman Sachs settlement, including $190 million in cash and $480 million in consumer relief such as mortgage assistance and principal forgiveness.
Carl Levin, Chairman of the Senate Permanent Subcommittee on Investigations said:
“Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities and sold them to investors, magnifying and spreading the risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients."
Millions of Americans lost their homes due to foreclosure during the crisis but the deal reached with Goldman Sachs did not however include any criminal sanctions or penalties and stirred additional criticism about the Justice Department’s inability to hold bank executives personally responsible for the financial meltdown.
2016 saw Goldman Sachs fined $120 million over attempted benchmark interest rate manipulation. The ISDAFIX, as it is known on Wall Street, is the global benchmark for interest rate products and is used to help value the cash settlement of options or interest rate swaps and other products. Pension funds and local governments often rely on products priced off the benchmark rate to help hedge against future interest rate changes.
The case was brought by the Commodity and Futures Trading Commission (CFTC) following an investigation of big banks suspected of manipulating global benchmark rates. Goldman Sachs was also accused of making false reports on the benchmark rate and settled the case without having to admit or deny the charges. The CFTC had managed to get hold of emails and audio recordings which revealed traders at Goldman discussing their plans to try to move the benchmark rate in directions that benefited their own positions. These traders discussed trades on the “jacked price” and not the “fair price” and they also traded various products at the 11am fixing time “in a manner deliberately designed” to influence the published rate, according to the CFTC.
Aitan Goelman, the CFTC’s Director of enforcement said:
“This matter relating to the ISDAFIX benchmark, demonstrates the breadth of this kind of misconduct across the industry, and within Goldman, the extent of the misconduct across trading desks and product lines. The Division will continue to be vigilant and aggressive in protecting the integrity of the ISDAFIX and other important benchmarks relied upon by the markets."
There is an alarming revolving door relationship between Goldman Sachs and the US Government as many of its employees and consultants have moved in and out of government positions with huge potential for conflicts of interest.
Trump’s promise to drain the swamp didn’t get very far when he nominated Goldman managing director James Donovan to the post of deputy Treasury Secretary to serve alongside the department’s Secretary, Steve Mnuchin, another one from the upper echelons of Goldman.
Those Presidents prior to Trump were not much better, with Barack Obama hiring Goldman lobbyist Mark A. Paterson who served as Chief of Staff to Treasury Secretary Timothy Geithner. Henry Paulson left his role as CEO at Goldman to serve as Treasury Secretary under George W. Bush whilst Bill Clinton took on Goldman’s co-chairman, Robert Rubin, to head his National Economic Council and then become Treasury Secretary.
These migrations to the public sector are a source of pride for Goldman. In his 2016 letter to shareholders CEO Lloyd Blankfein wrote:
“We are proud of our tradition of leadership and public service and believe it is a core part of our culture. That is why we will continue to encourage our people to contribute to government service if they are fortunate enough to be asked."
According to Paul S. Ryan, vice president of policy and litigation at Common Cause, the reliable hiring of Goldman alums to government positions is:
“a direct result of willingness and the ability of Goldman executives to raise money for candidates. This is a complete, classic back-scratching deal, where Goldman Sachs executives help finance presidential and other campaigns, and are then rewarded with government jobs.”
Goldman Sachs somehow managed to turn a blind eye whilst billions were looted from the sovereign wealth fund 1Malaysia Development Berhad (1MDB).. The Malaysian government reached a $3.9 billion settlement with Goldman Sachs in exchange for the country ending all criminal proceedings against the bank. Goldman’s role came under scrutiny over bond issues totaling $6.5 billion it helped to arrange for the investment vehicle, with Malaysia claiming large amounts were misappropriated during the process. The settlement comprised a cash payment of $2.5 billion to Malaysia and a guarantee that at least $1.4 billion in assets acquired with misappropriated funds would be recovered.
Finance Minister Tenghu Zafrul Abdul Aziz said:
“The settlement represents assets that rightfully belong to the Malaysian people. We are confident that we are securing more money from Goldman Sachs compared to previous attempts, which were far below expectations.”
The US Department of Justice is also still investigating the fraud as huge sums were allegedly laundered through the US financial system.
It would appear that there are attempts to make the punishment fit the crime...but when you have more money than Solomon, how much is enough?