Rolling Stone’s Matt Taibbi has written a groundbreaking article on the involvement of Golden Sachs in every major economic bubble of the past century and its likely involvement in what Taibbi thinks will be the next bubble, tied to cap-and-trade:
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. …
But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere — high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth — pure profit for rich individuals.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.
He has followed up that article with this blog post, explaining how Goldman’s incredible 2Q profit of $3.44 billion, and its earmarking of $11 billion for employee compensation, wouldn’t exist without the enforced generosity of the American taxpayer.
That’s bad enough. What’s even worse is that the company is now taking more of the same kinds of lunatic risks that led to this financial collapse in the first place, as illustrated by this chart of Goldman’s daily Value at Risk. Note that the phrase “reduce its leverage” in the chart probably should be enclosed in irony quotes:
Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “[screw] you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.
This is the economic equivalent of war profiteering, but as Taibbi points out, given Goldman’s role in creating the financial crisis, it’s also as if Goldman started the war from which it is now profiteering.
These are your tax dollars at work, folks, and if you don’t raise holy hell with your congresscritters, you will never see them again.