The most powerful investment firm on planet Earth, Goldman Sachs, has been hit with civil charges by the Securities and Exchange Commission, involving allegations of serious fraud. The SEC alleges specifically that Goldman Sachs deliberately withheld information regarding subprime mortgage investments that it sold to clients, involving hedge fund and client Paulson & Co in selecting the makeup of those securitized investments. As it transpired, Paulson & Co and Goldman Sachs stood to profit in the event these subprime CDO investments tanked, which they did.
Up till now, Goldman Sachs has appeared untouchable. Its vast power is not only tabulated financially; it is a political behemoth in Washington DC and in other power centers across the globe. As the global economy disintegrated with the onset of the worldwide financial crisis, Goldman Sachs took in massive profits. To keep it afloat, the U.S. government infused the corpse of bankrupt insurance giant AIG with taxpayer money, of which nearly $13 billion was funnelled from AIG into the coffers of Goldman Sachs. Incidentally, the taxpayer money paid to Goldman Sachs through AIG almost matches the recent bonuses that Goldman Sachs senior executives decided to pay to themselves.
Lloyd Craig Blankfein, the current CEO of Goldman Sachs, claims his firm “does God’s work.” Perhaps the world will soon discover if fraud, chicanery and defrauding investors forms part of Blankfein’s definition of divine work.
Just over a year ago, simultaneously with the implosion of Lehman Brothers, the U.S. Federal Reserve and Treasury Department decided not to let American International Group fail, no matter the cost. That bill has been heavy; $182.3 billion of U.S. taxpayers money has been injected into AIG to ensure its survival amidst massive losses on its London-based credit default swap business. Each and every citizen of the United States has been billed more than $600 to cover AIG’s losses. In effect, the Fed and U.S. Treasury have used the zombie-like subsidized life support of AIG as a pass-though, transferring billions of dollars to investment and foreign banks. The largest recipient of American taxpayers money transferred through AIG was Goldman Sachs, which received a $12.9 billion payoff, which seems to have gone straight into bonuses for its senior executives. Was it mere coincidence that Goldman Sachs CEO Lloyd Blankfein sat in on a meeting with Ben Bernanke and Hank Paulson to decide on the scope of the taxpayer’s subsidy to AIG?
The Fed and Treasury, which decided on their own to effect a bailout of AIG without any input or sanction from Congress and the American people, have assured us that their infallible judgement can be relied on to make the correct decision for the U.S. taxpayers. Well, that “infallible” decision-making has left the American people tied ball and chain to a private corporate entity that is still losing vast amounts of money. AIG has recently reported its Q4 results: a loss of $8.9 billion. This may be a sign of more red ink to come, as the global economic recovery falters amid mounting concern over high unemployment and sovereign debt crises. AIG apparently is not done as a costly financial liability for the citizens of the United States, despite the fact that not a single one of them had the opportunity to vote in favor of this hideously expensive experiment in corporate socialism.