The Goldman Sachs Scandal – Negligence!

The culture of the commercial bank Goldman Sachs can be summed up in two words: totally flawed. This is the conclusion drawn by a vice-president of this finance giant in an article published yesterday in the New York Times, and it has had an impact in every corner of the world. Especially since, four years after the financial crisis struck, we see that Goldman Sachs and its associates remain free to feed into the chaos of any and every financier. Outrageous!

Until recently, Greg Smith, the article’s author, was the executive director overseeing funds in Europe, the Middle East and Africa. Though he was not a member of the inner circle led by Lloyd Blankfein, the bank’s president, he was still in a position strategic enough to observe the words and actions that would allow him to decode the culture designed and employed by Blankfein and his cronies. In short, Smith was an insider to the twisted actions carried out by the company at the expense of its clients.

The culture in question was and continues to be this: to pass on to their famous clients financial vehicles that the bank deems unprofitable and convince them to invest in stocks that don’t necessarily serve their interests, but rather the obviously financial interests of Goldman. What else? [It involved] “…sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.” All you have to do is take a look at the subprime mathematical formula to realize how this policy has deceived thousands of people and… nations.

In fact, in the days preceding Smith’s public statements, we learned, thanks to a long investigation conducted by two journalists from the Bloomberg agency, that the Greek government had been swindled. Thanks to the interviews conducted by these journalists, today we know that the senior officials in charge of managing Greek debt as well as their services “the country didn’t understand [its 2001 contract with Goldman Sachs] and was ill-equipped to judge the risks or costs.”

Putting it politely, something’s fishy, since if things today are as they were in the past, as if the financial crisis had been stored away alongside medieval legends, it is indeed because governments did nothing or very little. Had they promised a review of the remuneration policies in effect on Wall Street or in the city of London? The 26 percent drop in Goldman’s revenues during the last fiscal year makes no difference. $12 billion in bonuses was distributed while the tax on revenue went up 5 percent.

Nothing has changed on this front, since practically nothing has been done about the financial establishments supposedly “too big to fail.” In 2012, four years after the Lehman Brothers’ bankruptcy that symbolized all possible and imaginable derailments resulting from the most dramatic negligence, there is speculation about a possible separation of commercial banks and merchant banks. This is being voted on in the United States, but its application is being postponed indefinitely, as is the case in the United Kingdom.

On the eve of the decompartmentalization of financial institutions that was initiated in the mid 1980s, the market’s capitalization of these banks represented 25 percent of the total for public enterprise. Today, after unprecedented centralization, the banks have helped themselves to trusts, benefits and securities, and their capitalization is close to 45 percent. If we maintain this carelessness, we will bring about an awful contradiction: Stalinist capitalism.