Goldman Sachs: In the Service of Itself

This Tuesday’s hearing for the leaders of Goldman Sachs before the Senate subcommittee in Washington could very well turn into an amusing trial, akin to the old term “drole de guerre” (or “funny war”) — that precise moment in a conflict where too many declarations of intent paralyze the army’s movement. And in this case, the paralysis has been caused by the leaders of the prosecution, with overlapping conflicts of interest, contempt for clients, systematic priority given to the trading activities of clean accounts, the decisive role of Goldman Sachs in the crash of American mortgage companies, not to mention the insider-trading of its leaders … All this occurring in a culture where everything is permitted in order to make money, as demonstrated by the notorious invoice found in internal emails.

For if this is an indicator of the modus operandi of the largest hedge fund in the world, this superabundance, above all, risks blurring the real Goldman trial. In its own defense, Goldman does not shy from condemning its own employee and burying the true problems in specious arguments: all [accusations] are false, it says, since the collapse of the American housing market made it lose $1.7 billion in 2008. Understand: he who suffers losses is necessarily honest! Even if Goldman forgets to mention that it earned billions in the third trimester of 2007, thanks to the massive sale of mortgage derivatives …

But the strength of the defense is in creating subtle confusions (can we reproach a bank for having convictions about the market?) which make us forget the essential: This bank, with all of its financing and investments, has become a “hedge fund” so omnipresent and earning so much money compared to any other banking line of work, that all advising activity ends by being naturally subordinated to it. Now, the mixing of functions is no longer an exception, but proceeds from the bank’s very nature. For it cannot have but one real client: itself. That is the heart of the trial.

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