A massive blow to Goldman Sachs? We can only hope so. Rolling Stone's Matt Taibbi, interviewed below by Bloomberg, says—
This is a massive blow to Goldman Sachs because it's one thing to have some sort of left-leaning reporter [like himself] going after them, it's another thing to have people complaining that they're bilking the government out of money during the bailouts, but this is a story about Goldman ripping off their own clients, and this is going to resonate loud & clear across Wall Street, across its entire client base. I can't imagine how anybody would want to do business with this bank after they've learned about this story.
The potential business losses the Vampire Squid faces will hurt them far more than any puny fine they might pay to the SEC. One wonders why their clients didn't know that Goldman routinely bets against them. Echoing P.T. Barnum, Lloyd Blankfein has always known there's a sucker is born every minute.
Another aspect of this story is its timing. See Tech Ticker's The End of Government Sachs? Fraud Charge Builds Momentum for Financial Reform. As I reported earlier this week in The Derivatives Shell Game, we will be entering the crucial period for Financial "reform" legislation about a month from now. Unless I have not gauged Human Nature correctly, a month is a long time. Congressmen who have taken bribes (aka. campaign contributions) from Wall Street must be sweating bullets. The danger to these corrupt legislators is that voters might replace them with would-be corrupt legislators eager to learn the ways of Congressional depravity. These new candidates also hunger for Congress's Golden Parachute.
Given the appalling lack of transparency in the legislative process, I stick by my contention that the bill, which will be 17,000 pages long, will contain large swathes of text written by bank lobbyists. These passages will contain language defining loopholes that allow broker-dealers to get around rules mandating transparent derivatives trading.
As much as we might enjoy seeing the Giant Squid suffer, we must also remember that their demise is not imminent. I made my own position clear in Goldman Sachs Should Not Exist. Nor is the dishonest and destructive Wall Street culture in any immediate danger of disappearing. Here at DOTE we take the long view. Increasingly over the last 30 years, our economy has become dominated by the finance industry. Their influence on the federal government remains intact.
Mark Patterson, the man who worked behind the scenes for ex-Senate Majority Leader Tom Daschle (D-S.D.) and former Sen. Daniel Patrick Moynihan (D-N.Y.) suddenly finds himself center stage as chief of staff at the Obama Treasury Department. A former lobbyist for banking giant Goldman Sachs, Patterson came under fire as he was named to the post the same day Treasury Secretary Timothy Geithner outlined rules to keep lobbyists away from the decision process for the allocation of the rest of the bailout money, known as the Troubled Asset Relief Program (TARP).
Patterson was allowed to join the Treasury despite President Barack Obama’s executive order signed January 21, 2009, that bans the hiring of a lobbyist to work in an issue area in which they have lobbied over the past two years. Patterson was considered the best man for the job, and he’ll step away from government duties related to Goldman, a company that has received $10 billion in government bailout funds.
He joins the Treasury at a tumultuous time as the department is at the center of the administration’s efforts to stave off more job losses and rescue the U.S. economy. Geithner and Obama invested considerable political capital in passing the $787 billion economic stimulus bill in February 2009. They also introduced plans detailing the most efficient way to use the final $350 billion of the TARP fund that the Senate authorized in January 2009.
Mark Patterson is only the tip of the iceberg as far as Goldman's influence in the Executive Branch of government is concerned.
On balance, any time the Squid is accused of fraud is a better time than most. Here's the Bloomberg interview with Matt Taibbi.
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