Volatility

April 28, 2010

Goldman Testifies: “We’re Not That Smart.” Jerks, too.

 

As I wrote a few days ago, I’m not concerned about whether or not Goldman actually did violate Wall Street’s own self-rigged law. So the technical strength of the SEC’s case is a side issue, at most a gauge of how far the law’s abdication has really progressed.
 
We should never fall into the trap of letting the enemy frame the issue according to their own corrupt measure of “law”. The dispute of whether or not something is technically illegal is always likely to help the banksters and not the people. We must always insist that these are crimes by any moral measure, crimes against humanity, and would be legalistic crimes in any human community which lived according to the rule of law. That there’s even a debate about the vast, systematic fraud of Wall Street, executive control fraud as the very basis of their business model, or about specific examples of patent fraud like the Abacus con, proves that we no longer have the rule of law in this country. At best law is something struggling to crawl back out from under the massive weight of poisoned mud under which Wall Street and Washington buried it alive.
 
As for their rigged laws today, the only reason we should look to where their crimes run afoul of even that corrupt measure is to taunt, “Even by their own rigged laws they’re guilty!” But that’s never our measure of the indictment. We know that just as nothing short of Nuremburg could deal with the magnitude of (mostly legalized) Nazi crime, so only a Second Nuremburg can deal with this, the same magnitude and quality of economic crime.
 
So with that in mind let’s look at yesterday’s spectacle. Its significance is political. Although it may affect the legalistic proceedings, the real value of it was to highlight before the eyes of the people the everyday criminal actions and unregenerate, clinically psychopathic mindset of these criminals. The more people see the gangsters squirm and stutter under the glare of such simple, morally common sense questions as “Do you think when you sell a security to an investor he has a right to believe you don’t think it’s going to fail?”, the more obvious it becomes that these are nothing at all but gutter con men, with their victim being no one less that America itself. (Although we also need to do more work from the other side of the issue: That they create nothing, perform no useful function. It’s true that “he only destroys” and “he produces nothing” are saying the same thing, but unfortunately many among the masses treat those as two distinct ideas.)
 
Let’s look at a few choice moments with Blankfein and Viniar. (The questioning of the peons was more of the same. It reinforces the ugly picture given by Blankfein and Viniar. We did learn that Tourre’s lawyers are really Goldman’s lawyers. So he’s either being set up to take the fall, or they already have a private deal worked out for him to willingly take the fall.)
 
It’s clear that they’re all incapable of anything but lame excuses and phony, truculent acquiescence when pressed about human issues like ethics or remorse. None of these thugs has a shred of those, or of any other human quality. They are in fact something alien to us, a species of vermin.
 
The only times they sound authentic are in their bursts of criminal defiance.
 
Perhaps my favorite moment was Viniar repeatedly saying he regrets that anyone wrote about Goldman’s crimes in an e-mail, and the vulgar tone of some of them, but not the crimes themselves.
 

Senator Levin is back to leading the questions, and his back and forth with Mr. Viniar has captivated the room.

He starts with a basic question, one he and other senators have asked so many others today: Do you think that a customer has a right to believe that you want securities that you sell to succeed?

Mr. Viniar, a numbers guy, stumbles: “I’m not sure what succeed actually means.”

Mr. Levin continues, asking if a customer has a right to believe that Goldman is selling something the firm believes is a solid security.

Mr. Viniar says that “when we sell securities to customers, we don’t necessarily have a view that they’re going to go up or down.”

Mr. Levin says that’s not what he meant. He means that customers do not think Goldman would sell something it thinks is junk, or the more vulgar word that the senator used. (Forgive him, though, he was citing Goldman employees in e-mails.). Mr. Levin says he sees a very clear conflict of interest that needs to be dealt with. He asks Mr. Viniar what he felt when he heard about the things Goldman employees had written about these deals, again using vulgar words.

Mr. Vinar replies, “I think that’s very unfortunate to have on e-mail.”

The room erupted in a gasp.

Mr. Viniar continues: “I think it’s very unfortunate for anyone to have said that in any form.”

The senator presses the chief financial officer, who adds, that he thnks it’s unfortunate in and of itself that his employees thought their deals were junk — or worse, as the words indicated.

Mr. Levin retorts, “That’s where you should have started.”

He then called a brief recess for the procedural vote on the financial bill.

[Then, after the recess:]

Mr. Viniar said Senator Levin was 100 percent correct in the statements he made before the procedural vote. Mr. Viniar said he felt he should have straight off expressed dismay at the vulgar expressions that some at Goldman believed described their own deals.

 
He was groping to say something like, “I regret that we had people with such an unprofessional, unethical attitude about our duties to our clients; this does not reflect the Goldman creed”, but try as he might he couldn’t find the words. It was like a scene in a movie where the character can’t help revealing what he really thinks even though he’s trying to conceal it. (After a break he tried again, and again could only say, “I regret the vulgarity”. How clueless, how unaware of one’s surroundings, can one get?)
 
We look here directly into the black abyss of these soul-dead criminals. They’re so committed to their crimes, so engrossed in them, that they’re incapable of any attitude other that open defiance or fumbling, incompetent spin. They’re such clinical psychopaths they’re no longer even capable of tactical lying where it comes to the politics of the situation. They have a disease. We should be grateful for it, since things would be worse if they were also good political liars.
 
And now we come to Blankfein, who reveals the same character. He started out lying again about the Bailout, that it was only $10 billion from the TARP and that Goldman paid it back (Goldman’s real cut of the loot so far is over $50 billion and counting).
 
In Blankfein’s exchange with Levin, you can look in vain for B himself to provide any evidence of any productive function Goldman performs, how it contributes to humanity in any way.
 
B himself says they do nothing but run a casino and place bets:
 

Senator Levin and Lloyd Blankfein just can’t agree.

Like the exchange played out between the senator and Goldman’s chief financial officer, Mr. Blankfein and Mr. Levin volleyed back and forth, with their views miles away from each other.

Mr. Levin asks the question he’s asked over and over again. Should Goldman be telling its clients about its own positions? Is Goldman mistreating its clients by betting against them? Do you think clients should know if Goldman thinks something is a piece of junk (or a word more vulgar)?

Mr. Blankfein insists that Goldman is a principal. “The act of selling something is what gives us the opposite position of what the client has. If the client asks us for a bid the next minute we own it, they don’t,” he says.

It is the nature of market-making, he says, that puts Goldman on the other side of its clients’ bets. “What clients are buying or customers are buying is they’re buying an exposure. They are not coming to us to represent what our views are,” Mr. Blankfein says.

But the senator presses on. He thinks clients should know when Goldman is betting against them.

“You say betting against,” Mr. Blankfein says almost incredulously.

 
Kaufmann catches up B on the question, when did you know the mortgage market was going to collapse? B says he never knew, and that he had nothing to do with Goldman’s shutting down the “CDO warehouses”. B ends up having to say, “I think we’re not that smart.” (Picture Salazzo in “The Godfather”: “You think too much of me, kid. I’m not that clever.”) It’s the same old heads-I-win-tails-you-lose. We’re always told the “bonuses” are justified because of how “talented” all these cadres are. And certainly nobody on Wall Street is more talented than Blankfein, who now suddenly says the talent hype was all a lie, that he’s “not that smart”. So which is it? If they’re now admitting they have no “talent”, aren’t that smart, didn’t know what they were doing, surely they’ll be giving back all the bonuses?
 
At any rate, we certainly shouldn’t listen to any objections the day we’re able to claw back all of it, correct? Blankfein himself says so: “We’re not that smart”.
 
Kaufmann missed a bet here:
 

As the exchange continues, Mr. Blankfein points out that many financial companies lost tens of billions of dollars because of the sharp decline of the housing market. (Think Citigroup, Merrill Lynch, UBS — the list goes on.)

 
He should have retorted, “You mean ‘would have lost’ if the taxpayer hadn’t bailed you out.”
 
There’s more back and forth with McCaskill and Tester about synthetic CDOs. It comes through loud and clear that these are worthless, unproductive criminal scams.
 
It’s odd how many commenters on the econoblogs, even among those unsympathetic to Goldman, who scoff at the “financial illiteracy” of the senators. Illiterate they may be by quant standards, but at least in this forum they seem to be as literate as anyone needs to be. The only ideas and words you really need to describe any of this are fraud, con, scam, crime.
 
Yesterday’s exercise provided a demonstration of the mindset of pure, incorrigible, irredeemable criminals. They cannot be rehabilitated. The rackets and their cadres cannot be “citizens”. Wall Street and America are antithetical. Both cannot exist. One must die.
 
The only question is whether we’ll have the triumph of America or of Bailout America; whether we’ll live as human beings, or according to the whims of fraud, theft, robbery, bribery, and extortion. That’s the way it is today. But they’re adding serfdom, and soon they’ll enforce enslavement.
 
Today is the crossroads. Whether or not there’s to be any future at all is the decision. Let’s make sure we seize every opportunity like yesterday’s testimony, to drive the right decision.

21 Comments

  1. The Mafia seems to both own and run the USA; the one of the questions which remains to be addressed is which is more criminal – the Sicilian Mafia (banksters) or the Russian Mafia (CIA-military-industrial complex controller/benefactors). The MSM (owned by both Mafia factions) actually seems to do an effective job (i.e., they keep a straight face) of keeping most American citizens distracted. I am currently revisiting Chalmers Johnson’s trilogy regarding the American Empire; these are several of the MUST READ background books which enable placement of today’s events in context. ‘Blowback. The costs and consequences of American Empire’ contains an excellent autobiographical sketch of Dr Johnson; if you haven’t yet, go read!

    Comment by William Wilson — April 28, 2010 @ 7:53 am

    • Hopefully the MSM Kool Aid is starting to wear off. Plummeting circulation and ad revenues indicate that, for one reason or another, the people find less and less value in it. (I haven’t seen polls gauging to what extent it’s because of the MSM’s corporate thralldom.)

      I’ve read some of Johnson’s pieces at Tom Dispatch and know of the trilogy though I haven’t read it. Thanks for recommending it.

      Comment by Russ — April 28, 2010 @ 9:34 am

  2. I appreciate your comments here and on blogs elsewhere. Just as I think; after years upon years of my own study and investigation; that I understand the depths, the complex mechanisms, the greed and power plays, I find myself yet aghast again.

    Yesterday I was STUNNED as congresscritters asked these Con men to help them with financial reform and what they would do. really..really and yet what will they do for Jack and Jill taxpayer who are asked to pay again and again for the misdeeds of the few while they are vastly rewarded for it with taxpayer dollars.

    Rather than regulation, as I have stated repeatedly restructuring is what is necessary..it requires international cooperation and putting these guys back in their own sandboxes and out of mine. In particular, completely restoration of Glass-Steagall, and total repeal of the CFMA. Of course it won’t happen but a girl can dream.

    Anyway, thank you for your thoughts which have assisted me over time to understand the biggest robbery in the history of man.

    Comment by NS — April 28, 2010 @ 8:07 am

    • You’re welcome, and thanks for the kind words.

      You’ve got the right idea that regulation of the rackets can’t change anything, and isn’t intended to.

      Radically changing the structure is the only way.

      Comment by Russ — April 28, 2010 @ 9:30 am

      • Ritholz I hope gets some bucks to run the commercial which is along the same lines.

        I go from utter despair to cynicism to depression to anger and back around again.

        Thanks for responding to me. I hope there are some heroes out there which will act but thus far, I’ve seen zero indication. Just more of the same and theater. Who ultimately will suffer as a result for lack of action is obvious. Its too late now anyway, I fear.

        Comment by NS — April 28, 2010 @ 9:46 am

      • I know how you feel. It’s hard to see any light behind the clouds.

        But let’s hope people start moving away from depression and cynicism, hold onto the anger, but render the anger constructive. There are possibilities for the future, and even now there’s stuff we can do. That’s what I try to write about around here, along with analysis of the problem.

        This criminal system is doomed. It can’t sustain itself and must destroy itself. That’s the first piece of good news we can carry in our hearts.

        The Ritholz commercial idea’s a good one. Just on the written page it sounds powerful. Here’s the link for anyone who didn’t see it.

        http://www.ritholtz.com/blog/2010/04/financial-reform-commercial/

        Comment by Russ — April 28, 2010 @ 9:56 am

  3. Yes, and I wish to thank you both, and Jake too.

    Goldman is in favor of regulation because they know from experience that regulatory capture is a slam- dunk.
    http://thehill.com/blogs/on-the-money/banking-financial-institutions/94735-blankfein-supports-financial-reform-legislation
    No wonder Goldman likes the Dodd bill. I read somewhere that Goldman favored capital and liquidity regs: again the “bigger than Bear” deal with regulators permitted them to exceed the 12/1 “rule” by a factor of 300%.(Only heaven knows the real factor.) Regulators make the rules and regulators bend them for political contributors. For the likes of Goldman, rules are mere obstacles around which to maneuver.
    While lawyers work “in the grey area” as someone pointed out here or on Baseline, clear cut laws like Glass-Steagall require an act of Congress to repeal. (Keep in mind, however, that the Financial Services “MODERNIZATION” Act was passed to protect/legalize Citigroup’s acquisition of Travelers Insurance Co. The final bill was passed with the near full support of both parties and signed by Pres. Clinton.) An Act of Congress is preferable to a wink and nod from a regulator any day. We do need to return to the “rule of law.” That said, the laws are “rigged,” as you say, deliberately. Congress, with a clear understanding of what it is doing, writes vague laws and leaves the details to regulators who write the regs to suit the likes of Goldman.

    Comment by Jessica — April 28, 2010 @ 10:10 am

    • Yes, even Krugman was right when he said we need “Roman” (i.e. clear-cut, corruption- and idiot-proof) laws rather that “Greek” (convoluted ones that depend upon intelligence and bravery from the regulator) ones. (The Roman vs. Greek comparison involved their different military tactics; the Roman was more robust, resilient, and idiot-proof.)

      (Of course his scam is that he said that while supporting the most Greek “reforms” imaginable, like the health racket bill and now “resolution authority”, both of which would require regulators to be a combination of hero and saint in order to work at all.)

      Well, I think it’s a moot point. They’ll never enact real reform laws with this system. The system itself must perish.

      Comment by Russ — April 28, 2010 @ 3:15 pm

  4. Thank you for your note of optimism Russ. I agree with you. Unfortunately the political climate seeks to obscure, channel anger into the wrong places. I can hope that given some time, those who have been manipulated will be faced with truths which can no longer be obscured and denied.

    My sincerest hope is people will unite and organize without pointing fingers at each other, casting their neighbors as their enemy. Constructive commonalities rather destructive rhetoric will evolve. I hope I live to see real human progress result.

    Thank you again for your contribution and discussion.

    Comment by NS — April 28, 2010 @ 10:15 am

    • You’re welcome again, and I share those goals as well.

      You’re right that a great challenge is to channel the people’s anger in the right direction, against the criminals, while the great danger is how the astroturfers will try to play the age old game of getting the people to fight among themselves, divide and conquer.

      Comment by Russ — April 28, 2010 @ 3:19 pm

  5. I’m in a much better frame of mind than this morning. I didn’t wimp out and watched the ENTIRE testimony yesterday. Yes, I am a masochist. 😉

    and now for something completely different! Check out Zero Hedge for the post about Bernie Sanders amendment (with bipartisan support no less) for a GAO audit of the Federal Reserve and naming *gasp* names in who received taxpayer/federal reserve support.

    Oh.what.fun…even if it goes no where (which is highly likely).

    Comment by NS — April 28, 2010 @ 3:37 pm

    • Well, they keep trying to gut that audit and haven’t been able to do it yet.

      But, yes, it has a long way to go….

      Comment by Russ — April 28, 2010 @ 5:03 pm

  6. “He should have retorted, “You mean ‘would have lost’ if the taxpayer hadn’t bailed you out.”

    That’s a point the political class doesn’t want to make because it reveals their culpability, Speaking of which, Carl Levin bears mucho culpability since he gave his full support to the repeal of Glass Steagall and its replacement with Gramm, Leach, Bliley. In politics the architects of disaster are almost always long gone when their handiwork does its worst.

    All this by way of saying that American politics needs to “restructured” first and foremost.

    Comment by Edwardo — April 28, 2010 @ 4:13 pm

    • He shilled for it, yes. I doubt there’s anyone except Kaufman who doesn’t have some atrocity on the record, and if that’s true in his case it’s only because he hasn’t been there very long.

      Kaptur sounds so good on the banks, but voted for the health racket bailout and IIRC for Patriot Act extensions. And of course Kucinich’s complete moral and spiritual meltdown. Does he even exist anymore, or is there just a trembling ghost under a rock somewhere? He can stay there.

      They’re all criminals one way or another. Everything always leads us back to the same conclusion – we need a clean sweep, a complete ethical cleansing.

      As a matter of both principle and sound policy, no one should vote for any Washington Party candidate for any federal office, and even at the state level or lower the strong bias should be for an alternative party candidate. If enough people would just stick with that it might accomplish something.

      Comment by Russ — April 28, 2010 @ 5:13 pm

  7. This is not directly related to Goldman, but to the Congress. Ignore the source: I know nothing about the source. Watch the video. Listen to Orszag. Remember Congress wrote the health care bill and according to Orszag, Congress was aware of the provision whereby they created another unfettered bureaucracy. Orszag is smug, gleeful, that Congress is relinquishing its power to a body of unelected apparatchiks who require a presidential veto to override their actions.
    http://politics.upnorthmommy.com/2010/04/peter-orzag-confirms-death-panels-in-obamacare/comment-page-1/#comment-3335

    Comment by Jessica — April 28, 2010 @ 6:42 pm

    • The whole bill is one big death panel, since it further entrenched the rackets’ stranglehold and therefore rations basic, decent care by ability to pay their extorted rents.

      The Obama/Bush Dem/Rep death panel has one stark question which they believe should decide your fate:

      Are you rich? If not, die.

      Comment by Russ — April 29, 2010 @ 2:10 am

      • Russ:

        http://economistsview.typepad.com/economistsview/2010/04/caveat-emptor-is-not-a-business-plan.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29

        This really gets to the heart of the matter, empirically and otherwise. Trust is EARNED and I might add we live in a TRUST NO ONE world. What a shame that honesty, integrity, prudence are harshly punishable offenses in our private lives and business lives.

        As we examine the economic imbalances that led up to this economic calamity (and are extending it), I think attention will increasingly be turned to basic social/human philosophical choices in conduct.

        One element I notice is that the likes of Goldman Sachs and (by extension) our government is lack of fear. The package is tied up. Without fear of consequences or retribution (they they themselves execute) nothing will change.

        Voters have few choices today as to launch a campaign requires vast sums of hard, cold CASH. So before even getting to the announcement, at least promises of funding have been made by those ‘special interests’ that work at cross purposes in our society.

        I think this is one reason we should challenge the recent Supreme Court decision to allow corporations more direct ability to affect elections. How that is done, I have no idea.

        Comment by NS — April 29, 2010 @ 6:23 am

      • That’s a good piece. It’s a measure of how far advanced kleptocracy has become that a legal defense is now seen as not just a business plan but a precept of this debased notion of “civilization” itself.

        Did you see my posts on the Citizens United decision?

        https://attempter.wordpress.com/2009/08/29/judicial-activism/

        https://attempter.wordpress.com/2010/01/23/judicial-abdication/

        I don’t know yet how to fight it, but I do think that in good “admitting we have a problem” fashion we must recognize the abdication of “the law” in general, for example where it comes to these rogue courts.

        The first step is the spread of the realization that a decision like this is not constitutional, is not authoritative, is not legitimate. That’s not sufficient, of course; for now might makes right still prevails.

        But without that realization there’s not even the mental foundation for action. People would remain in slumber.

        Comment by Russ — April 29, 2010 @ 8:46 am

  8. If it is true that “might makes right” then there is no better time than the present to come together so that all of our voices will be heard. If there is to be change, let it begin with me.

    Comment by oneserene — May 9, 2010 @ 9:40 am

    • Thanks, oneserene. That should be everyone’s credo.

      Comment by Russ — May 9, 2010 @ 9:59 am

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