May 12, 2010
Excuse me, Charlie Wilson, for parodying your 1955 line as chairman of General Motors that “What is good for General Motors is good for America.” Especially since 53 years later GM’s stock is at an all-time low with little prospect of zooming back up.
It seems that dinosaur GM helped extinct itself through a series of errors. They are well documented by financial trader Adam Hewison, co-founder of the MarketClub.com, in his linked article and DVD. The errors include developing an electric car in 1996 when gas was $1.28 a gallon, naming the battery powered car the EV1, then scrapping it in 2002 when prices were climbing to $4 a gallon. Oops!
GM killed the “Golden Goose” because the EV1 had few parts to fail, so parts’ sales and cash flow would tank for GM. The other part of their fuzzy thinking was that producing a car with zero emissions was admitting all other cars spewed out dirty emissions that polluted the planet. So, in this case they shorted their own long-range chances to corner the car market with short-term, short-sighted profit taking, which took a huge hit anyway.
Secondly, GM sold the advanced battery technology they bought from Ovinic’s NiMD battery. It produced a stronger, longer-lasting charge and was a perfect battery for the second generation of EV1 cars. Thirdly, GM sold this revolutionary battery technology along with the patent to Texaco, later swallowed by Chevron, which now owns both, duh! So, as easy as 1, 2, 3, GM put itself and America in the auto technology crapper.
Let this serve as a cautionary tale for Goldman Sachs as to how swiftly high and mighty (too big to fail) corporations can fall and fail through just plain stupid, heartless, not to mention greedy thinking. For example, GS has turned off investors mightily through copies of emails like the following, which were noted zinging around traders’ desks, quoted by Danny Schecter at BuzzFlash.com: “We are Wall Street. It’s our job to make money. Whether it’s a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn’t matter. We would trade baseball cards if it were profitable . . . Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours.”
How’s that for contrition? Here’s another beauty. “We aren’t dinosaurs. We are smarter and more vicious than that, and we are going to survive.” And survive (if you do) probably over a lot of dead bodies.
These statements were made in response to a recent 15,000-person march on Wall Street, specifically Goldman Sachs, to protest their illegal, immoral, and world-economy busting techniques. For instance, Goldman became a “bank holding company” overnight in 2008 to gobble up some of the bank bailout. Previous to that, GS was an investment bank whose assets ran in the trillions. They included many millions made with the ill-gotten “synthetic CDOs” (collateralized debt obligations) synthesized from the hand-picked, most bound to fail debt paper, then sold to clients as bona fide investment vehicles, all while Goldman was hedging (betting against) them to fail.
This sicced Congress on their tail. The mere mention of it led to a $21 billion loss in value of Goldman’s shares. Ironically, some analysts downgraded Goldman ratings the way they downgraded Greece’s earlier in the week.
Earlier in his article, Schechter mentions some relevant financial history, “Never mind that 1,000+ bankers went to prison after the S&L crisis. That was then, and this is now, nearly ten years after the financial services industry pulled off a costly legislative coup through lobbying and campaign contributions to erode regulations and decriminalize the playing field. With a major advertising campaign in a complicit media, they packaged their agendas in the language of modernization and innovation. They got laws gutted and prosecutors defunded.
“As their profits rose and the bubble boomed, they seemed to do no wrong until small blemishes like the Enron and WorldCom scandals tarnished their image.
“Over the years, Goldman was riding high, raking in major profits and paying themselves obscenely well. That is until the SEC filed a civil complaint alleging a fraudulent transaction that deceived investors. That was followed by turbulent hearings on the Hill where Senator Carl Levin kept repeating an internal reference to ‘shitty’ deals the firm is said to have peddled and then bet against.”
Make note that Schecter mentions yesterday’s “too big to fail” Enron which fell as fast as 9/11’s Tower Seven into its footprint. But Enron left thousands of its employees without their pensions and many of its top executives with long-term jail sentences, plus CEO Kenny Boy Lay with a casket (if he was really in it). At least he’s out of the way. One wonders if Goldman’s CEO Lloyd Blankfein ever imagines himself in a pine suit, a result of his own criminal cleverness.
Enron’s tumble also brought about the Sarbanes-Oxley Act, which made CEOs and other members of top management liable for the policies and actions of the companies they led. Yet there has been a significant amount of successful shoulder shrugging among top executives of the Big Six investment banks’ involvement in the 2008 financial collapse. And Michael Oxley has gone over to work for the other side. Perhaps the tide is changing and everything that rises on it falls on it.
Yet, Ellen Brown, writing in Stock Market Collapse: More Goldman Market Rigging provides some warnings, “Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called ‘synthetic CDOs.’ This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman’s fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.”
She concludes “Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union . . . Or are they?”
What follows is Goldman’s tale of short-selling in the Greek bond market, “following a highly suspicious” downgrading of Greek debt by Moody’s on Monday. The rating agencies have long been thought to be in the pocket of Wall Street and seemed tuned to jolt stocks or bonds to leap or stumble. Result: extreme market reactions. Also, the Greek downgrade came out of the blue because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid debt default in Greece.
Then markets were whipped more last Thursday with the US stock market suddenly spiking down 1,000 points, regaining all but 300 points by end of day. The finagling was so stark that Maria Bartiromo winced on CNBC, “That is ridiculous. This really sounds like market manipulation to me.”
Of course the one company that uses high-frequency trading programs to make up 70 percent of market trading is Goldman Sachs, the leader in the new casino game. Rolling Stone’s Matt Taibbi claims Goldman has been “engineering every market manipulation since the Great Depression.” Ellen Brown thinks that Goldman has to get its way or everyone else will pay in a flash market crash. There are ample automated market technologies to handle this “turbocharged market manipulation.”
This leaves “The Nuclear Option,” that is, the European Central Bank monetizing Greece and other EU countries’ debt by printing money, then buying the debt at very low interest rates. The upside is that it would blow up hedge funds and “electronic sharks” that Goldman runs, along with other Wall Street carnivores whose favorite dish is taking down corporations, even countries for their strategic and profit-pouring schemes.
The question is will the EU go through with this plan. If not, the larger question is when and how will Goldman Sachs get its true comeuppance. That is, before toppling the world economy one more time. Then like GM, will it come begging at the US taxpayers’ bank bailout window for more. And more for Goldman means less for the world economic system. And that means less for you and I and everyone else.
This article was posted: Wednesday, May 12, 2010 at 1:34 pm