Some great cutaway quotes:
- Just under a year ago, when we published "The Great American Bubble Machine" [RS 1082/1083], accusing Goldman of betting against its clients at the end of the housing boom, virtually the entire smugtocracy of sneering Wall Street cognoscenti scoffed at the notion that the Street's leading investment bank could be guilty of such a thing. Attracting particular derision were the comments of one of my sources, a prominent hedge-fund chief, who said that when Goldman shorted the subprime-mortgage market at the same time it was selling subprime-backed products to its customers, the bait-and-switch maneuver constituted "the heart of securities fraud."
- Goldman isn't dead – far from it. But this new SEC suit officially places it at the center of a raging national discussion about the hopelessly (BLEEP!) state of American business ethics. As a halting, first-step attempt at financial regulatory reform makes its way toward a vote in the Senate, the government has finally thrown open the door and let a few of the rottener skeletons tumble out.
- On the surface, the failure-to-disclose rap being leveled at Goldman feels like a niggling technicality, the Wall Street equivalent of a tax-evasion charge against Al Capone. The bank will try and – who knows – might even succeed in defending itself in a court of law against these charges. But in the court of public opinion it was doomed the instant the SEC decided to put this ghastly black comedy of a fraud case on the street for everyone to see.
- In metaphorical terms, Paulson was choosing, as sexual partners for future visitors to the Goldman bordello, a gang of IV drug users, Haitians and hemophiliacs, then buying life-insurance policies on the whole orgy. Goldman then turned around and sold this poisonous stuff to its customers as good, healthy investments.
- These flighty Tourre e-mails boasting of cashing in on a disaster and chuckling over the "surreal" experience of power-lying right in the face of a business partner are Goldman's very own Ben Roethlisberger drunken (BLEEP!)-waving moment. It is hard to imagine any company from now on doing business with Goldman and not picturing its fruitcake executives text-boasting to each other about the pleasures of screwing over their own clients.
- So within the space of a few days, Goldman issued three different explanations, which progressed from (a) we absolutely, positively didn't do it, to (b) if we did do it, we didn't make any money doing it, and finally on to (c) if somebody did it, it was only that French cat Tourre, and here's his head if you want it. These guys couldn't find the truth if it was sitting in their lap playing the ukulele, and that's the basic problem that the entire financial-services sector – an industry that requires trust and confidence to thrive – is struggling to overcome.
And finally... and Matt should of added at the end ... "thankfully, you dear reader - at least if you are in the United States, have an explicit backstop of all this so the next time these bets go bad en masse.... we'll be needing your grandkids money, thanks! Until then Goldman will be able to fund themselves at below market rates aka Fannie, Freddie since everyone knows the government will protect them... heads they win, tails they still win. It's like your local gambling sharkie- fully backstopped by the United States of Oligarchy."
- In the year since – and this, to me, is the main lesson from the SEC case against Goldman – the public has quickly come to accept that when it comes to the once-great institutions of modern Wall Street, literally no deal that makes money is too low to be contemplated.
- There is more fraud out there, and everyone knows it: front-running, manipulation of the commodities markets, trading ahead of interest-rate moves, hidden losses, Enron-esque accounting, Ponzi schemes in the precious-metals markets, you name it. (no Matt - that's crazy talk! shhh! All that is happening is a few good hearted insitutions are "creating liquidity" - just ask them.) We gave these people nearly a trillion bailout dollars, and no one knows what service they actually provide beyond fraud, gross self-indulgence and the occasional transparently insincere public apology. (liquidity Matt!!)
- The Goldman case emerges as a symbol of all this brokenness, of a climate in which all financial actors are now supposed to expect to be burned and cheated, even by their own bankers, as a matter of course.
Old Taibbi stuff: