Goldman Sachs was the biggest packager and seller of collateralized debt obligations (CDOs), packaging thousands of mortgages together, 75% subprime, yet passing them off as AAA paper. When the market deteriorated, Goldman then made profit by betting against them and selling them short.
And many retirees, mutual funds, and city governments who bought these bonds with assurances of quality from Goldman were badly hurt.Goldman Sachs also was a large purchaser of credit default swaps (CDSs) or insurance bets on these same mortgage bonds, many from AIG. Representatives from Goldman placed pressure on Secretary of Treasury Hank Paulson (former Goldman CEO) for government bailout funds for AIG. And where did billions of those bailout funds go? To pay off Goldman!
And we the taxpayers are picking up the tab.Goldman Sachs developed computer algorithms for high frequency trading. As such, they insert themselves in rising or falling stocks, buying and selling with lightning speed and making huge profits.
As a result, the individual investor buys these stocks at higher prices and sells them at lower prices. Goldman Sachs is profiting from the financial crisis recovery by taking the same huge risks with a bonus-driven culture that rewards short-term gains.
And they received capital for their high-risk investment strategy from us, the U.S. taxpayers: from the TARP bailout, from a federally guaranteed debt program, and from nearly interest-free money from the Federal Reserve. Goldman Sachs ships their revenues offshore and defers taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. After helping $5 trillion in wealth disappear from the stock market, pawning off thousands of toxic mortgages on pensioners and cities, and securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO (Hank Paulson, Secretary of Treasury), what did Goldman Sachs give back in taxes to the people of the United States in 2008?
$14 Million dollars (not BILLION, but MILLION).That is what the firm paid in taxes in 2008, an effective tax rate of 1%. In 2008, Goldman Sachs made a profit of more than $2 billion, paid out more than $10 billion in employee compensation and benefits, and paid its CEO more than 3 times its total taxes: $42.9 million.So, please tell me how Goldman Sachs’ business model benefits our society? What do they do that is valuable to other people? Does Goldman create real products that contribute to the growth of the American economy? Or does Goldman merely create financial gimmicks to make money for Goldman, leaving the crumbs for the rest of us? Because of lax regulatory laws for financial institutions like Goldman Sachs, we have a stock market with a casino mentality and a country run on gangster economics.
What do you think about this model?
Comments (10)
Moore outlines this in Capitalism (2009) rather nicely. It seems apparent that their activity was akin to pre-eruption volcanic activity. Perhaps about twenty years down the road, if the financial giants illogically relinquish control of our government back to the people; we may find out an accurate estimate of their contribution.
If they're able to do it, then they should do it. The free market knows best.
@SirNickDon@xanga - What is this belief based upon? Blind faith.
The lesson learned is it's "good" to be Goldman Sachs. What a racket - take wild risky bets and win- you makes tons of money. Make wild risky bets and lose- the government gives you tons of taxpayer money to engage in more wild risky betting and market manipulation.
Then you take all those excess profits and buy off more politicians through campaign contributions- wash, rinse, repeat, and exert ever increasing influence/control on the government over time.
Is it any wonder that the former Treasury Secretary Paulson was a Goldman Sachs alum or that new Treasury Secretary Geithner appointed a top lobbyist at Goldman as his Chief of Staff?
The problem is, Goldman has inside guys all over the government which means they can do whatever they want and there really isn't a whole lot we can do about it. They are like a cancer.
Matt Taibbi writes in The Rolling Stone:
“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 swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.”
Some of the major players: “As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a mult-ibillion dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And 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. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman” —
And the list goes on and on …
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