Goldman Sachs: ‘Bad, But Not the Worst’

Based on the drivel I’ve read the last six weeks, I’m convinced that if Matt Taibbi had chosen to rail against, say, the mayor of Sodom & Gomorrah — instead of Wall Street and its undisputed kingpin, Goldman Sachs — the same pack of apologists would have jumped to the mayor’s defense.

Who are these people? Seriously.

Consider the latest non-defense defense:

What about Taibbi’s charge that Goldman engaged in “laddering,” or promising shares of hot IPOs to insiders or “friends and family” who would buy more later? And “spinning,” or giving company executives super-cheap shares in exchange for the promise that they would buy more?

Yes, Goldman may have been involved in something like that. It helps, however, to point out that the class-action lawsuit on laddering included 55 underwriters as defendants. Including Goldman, yes, but also Morgan Stanley, Credit Suisse, Deutsche Bank, Salomon Brothers, Robertson Stephens, and literally every bank on Wall Street. The lawsuit — launched in 2001 –was just settled this year, and it was all of $586 million for all of the banks as well as 300 of the failed companies they took public. That was an amount those banks and companies earned before afternoon tea on tech stocks during the boom year. The whole point of the lawsuits, however, is that the banks and companies were in it together-at least 355 entities in all. To single out one bank of 355 as particularly rapacious is ridiculous. What were the other 354 doing, then?

–Heidi Moore, “Matt Taibbi is Just Plain Wrong“; The Big Money (8/6/09)

Where to start . . .

How about with, “Yes, Goldman may have been involved in something like that“??

There’s really no need to continue.

Just because Goldman wasn’t the ringleader, just because it didn’t invent the egregious practices described, isn’t really a defense. It’s an indictment of the entire Wall Street culture — one which, if you don’t recall, made billions off the Internet bubble before it blew up in investors’ faces and tanked the economy.

Sound familiar?

Which raises point #2: they got away with it.

Moore is certainly right about one thing: $586 million is a small amount to pay for the aforementioned misdeeds.

Hmm . . . huge profits, nominal civil fine imposed almost a decade later — “Let’s do it again!” And they did.

The only real difference I see is that the resulting conflagration grew so big that it consumed practically all of Wall Street.

Except for . . . you guessed it: Goldman Sachs.

Why? Because it effectively built itself a bomb shelter. Namely, it bet against the same toxic mortgage-backed securities that it sold its customers.

To Moore, this isn’t the height of deceit, or fraud, or breach of fiduciary duty, it’s . . . prudence.

In fact, we should be grateful that Goldman’s bets against their own customers paid off so prodigiously because if they hadn’t, U.S. taxpayers would have had to have given the firm an even bigger bailout.

Sadly, amazingly, infuratingly — she’s probably right.

So, there you have it: Goldman Sachs, looking out for the best interests of the U.S. taxpayer.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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