Yes, Goldman Sachs Rules the World

Alessio Rastani has said unbearably mean things without being, which is even more unpleasant, who we thought he was. But the four things he said are true.

1. Yes, a trader dreams of a catastrophe because a catastrophe can earn big money.

2. Yes, the big investment banks are wary of European rescue plans. What do the scary risk premiums mean if not that?

3. Yes, people’s savings are in the ball: When stocks fall, commodities and so on incessantly fall into political and financial uncertainty, and the only thing that invests in our world are U.S. Treasury bonds, a technically bankrupt institution. Can they say that the savings are pompous?

4. And yes, Goldman Sachs rules the world. A recent book by William Cohan shares this same title. Goldman Sachs means Wall Street and Wall Street, unlike other industries, will always be rescued. So even though Goldman isn’t in command, those that are will act accordingly on Goldman’s behalf.

Wall Street’s giants would not be in office today if the government had not rescued them. They would be shattered, like Lehman Brothers, who allowed themselves to fall so as to not risk anybody else.

Goldman, and possibly other investment banks, has a business model that is highly toxic because it has the government’s protection. In the year of the crisis’ outbreak, 2007, it saw gross revenues of $87 billion. Astronomical payments of more than a third of that money were distributed to their employees and executives; however, its shareholders, many thousands of people who own those shares in the stock market, were distributed dividends at a rate of at least thirty times less. Would you like to be a shareholder of a company that manages three of your friends, knowing that your friends shared almost four in every 10 euros admitted in bonuses and incentives for themselves, while you, the shareholder, are given 13 miserable cents?

When Goldman has bad debts, as it did in the year of the crisis (a hole of $68 billion), their books never record loss, because they enjoy a privileged access to credit, directly or indirectly from the government, which is something that is kept hidden.

Finally, Goldman’s top executives often end up working in the Treasury (and those from the Treasury often then end up with Goldman).

When the Federal Reserve was created some important men had a meeting to deicde how the institution would function. At the table was the son of the founder of Goldman. They designed a system whereby banks like Goldman could always go to the Federal Reserve and obtain, very quietly, the money that they lacked. A century later, this continues to happen; that is how the Federal Reserve saved Goldman. Between 2008 and 2009, the investment bank was one of the largest borrowers of money — a total of $1.2 billion — that the U.S. central bank gave the financial system to get the chestnuts out of the fire.

Only now, thanks to the fact that Bloomberg has taken its battle to the Supreme Court to discuss those details of those tiny loans and unsecured interest, we know everything. What did Goldman guarantee? Trashed papers that were at the heart of the problem — that is, almost nothing.

Nothing does more damage to the capitalist system, the most successful system known to humankind, than the feeling that the State exists to serve a financial elite that does not compete in the market because its life is guaranteed by the rest of society. No, our friend Rastani was not entirely misguided.