CONGRESS HAD BEST 'WAKE UP' AND STOP THE 'GRAVY TRAIN' WAY OF THINKING!

Submitted by: Donald Hank

Taipan Daily: Is Government Sachs in Big Trouble?
by Justice Litle, Editorial Director, Taipan Publishing Group

They don't call it "Government Sachs" for nothing.

Goldman Sachs, to use the proper name, is the most powerful investment bank on Wall Street. It is also a natural recruiting ground for high-level government officials, from the Secretary of the Treasury on down.

The ties date back more than 100 years, to the founding of today's financial system. Henry Goldman, the son of partner Marcus Goldman, even had a direct hand in the creation of the Federal Reserve banks.

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And those ties came in handy in the depths of the 2008 crisis, when Goldman became a major recipient of backdoor bailout cash. As the government pumped tens of billions into the collapsing insurance firm AIG, a large chunk got redistributed into Goldman Sachs' pockets.

Later on, when Goldman Sachs settled with the SEC for $550 million in 2010, Newsweek called it their "best trade ever" -- a mere slap on the wrist, or just a few trading sessions' worth of profits, in exchange for putting the mortgage mess behind them.

Now, though, Goldman is back in the dock. Their stock took a beating last week on the release of a 635-page Senate report, built via two years' worth of investigative work, detailing the sins and excesses of Wall Street.

Says Senator Carl Levin, a powerful Democrat and co-author of the report:

Using emails, memos and other internal documents, this report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses, and markets... High risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest, contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets. Using their own words in documents subpoenaed by the Subcommittee, the report discloses how financial firms deliberately took advantage of their clients and investors, how credit rating agencies assigned AAA ratings to high risk securities, and how regulators sat on their hands instead of reining in the unsafe and unsound practices all around them. Rampant conflicts of interest are the threads that run through every chapter of this sordid story.

Sound familiar? It's the same stuff Taipan Daily has been chronicling (in real time) since the financial crisis began.

"In my judgment, Goldman clearly misled their clients and they misled the congress," Senator Levin added at a press conference. A new threat of legal action now looms over Goldman's head.

And yet, how serious is that threat? Judging by investors' initial reaction, not very. Goldman's stock fell on the news, but less than 4%.

If Senators Levin and Coburn (the co-authors of the report) want to pursue Goldman, the challenge they will find is pursuing business as usual on Wall Street.

Take the charge of double-crossing clients, for example. Goldman, Deutsche Bank and others are accused of double-dealing by secretly shorting the same "crap" they sold to investors. But considered from the perspective of a gambling house, Goldman was simply acting as middleman. It is normal practice for bookies to "lay off the risk" of their clients' wagers -- what Goldman can claim it did by shorting.

Then there is the "sophisticated investor" issue. All the players caught up in this game (except the taxpayers) were supposed to be grownup boys and girls who knew how to assess their own risks. There is a reason why "ripping so and so's face off" is common lingo on i-bank trading desks (where so and so is always a client).

In more normal times, it would be easy to write off the Levin-Coburn report as all bark and little to no bite. Though the horror, theft and gross incompetency of the financial crisis is well known, prosecuting the key players on clear legal grounds is a devilishly hard trick to pull off.

The top banksters are much like mafia bosses: Protected by layer upon complex layer of plausible deniability and distance from the actual crimes.

As criminology professor Henry Pontell tells The New York Times, "When regulators don't believe in regulation and don't get what is going on at the companies they oversee, there can be no major white-collar crime prosecutions."

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There is still at least a modest risk to Goldman, though, mostly due to the fact that the government is getting desperate. As the NYT reports:

...several years after the financial crisis, which was caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the failure of many savings and loan institutions in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.

To put it bluntly, this looks very, very bad. It gives the appearance that the banksters have completely taken over Washington, that our elected leaders have no spines, and that the whole rotten system is manipulated to the core.

This is more or less true, of course. But it is important to maintain the fiction that some semblance of justice can be had. Even a completely mobbed-up courthouse has to throw a big fish in jail every once in a while, just to keep up appearances. And because Goldman Sachs is to the current administration as Halliburton was to the previous, Blankfein and other top execs may have at least a little reason to sweat.