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Truthdig / Op-Ed
Published: Friday 16 March 2012
“Goldman’s executives could have been rounded up Wednesday morning on organized-crime charges.”
At Last, Some Decency on Wall Street
By the time you read this, the PR hacks of Goldman Sachs will be vigorously pressing their efforts to destroy the reputation of whistle-blower Greg Smith, a former Goldman executive director whose exposé in Wednesday’s New York Times Op-Ed page was so devastating that the 143-year-old firm might actually, finally, be held accountable.
Smith, a wunderkind who spent the 12 years after he graduated from Stanford University rising through the ranks at Goldman, has revealed the firm’s culture to be so fundamentally venal that were financial industry shenanigans not generally exempt from effective legal regulation, Goldman’s executives could have been rounded up Wednesday morning on organized-crime charges.
The law that exempted what would have been illegal trading in the murky derivatives that the Smith article denounced was the Commodity Futures Modernization Act, enthusiastically signed by Bill Clinton in the waning months of his administration. The legislation shielded from any regulatory law the very activities that led to the financial meltdown from which Americans are still reeling.
Back in the Clinton era, it fell to the president’s last press secretary, Jake Siewert, to justify the freeing of Wall Street investment houses to do their worst, and in one of those delicious ironies Siewert was appointed as a managing director and the global head of corporate communications for Goldman Sachs the day before the devastating Smith exposé broke.
Who better to hastily concoct a strategy of explaining away Goldman’s deceit in the sale of those derivatives? Predictably there was the quickly leaked memo by Goldman CEO Lloyd Blankfein shooting Smith, the previously highly valued young messenger, as a “disgruntled” employee for daring to describe the culture within Goldman “as toxic and destructive as I have ever seen it.”
Smith’s charge about Goldman “routinely ripping their clients off” resonated widely on the Internet because of prior exposures of suspect derivatives deals in which Goldman explicitly bet against the products it was selling. Slightly less than two years ago the Securities and Exchange Commission filed fraud charges against Goldman that resulted in a $550 million fine over such double-dealing.
But what is so damning in Wednesday’s article is Smith’s insistence that the culture of Goldman has only gotten worse since then: “Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.”
In addition to heading Goldman’s equity derivatives trading in Europe, the Middle East and Africa, Smith was involved in recruiting new talent for the company. It was his supervision over recruits being exposed to the increasingly corrupt Goldman culture—amid routine reference to clients as “muppets” and chortling about “ripping eyeballs out”—that finally turned him off.
At the heart of the rot were those derivatives, the collateralized debt obligations (CDO) and credit default swaps (CDS) that were made legal by the legislation Clinton signed and Siewert defended. In his piece, Smith referred to the selling of those designed-to-be-toxic products as the essential avenue of Goldman’s greed, saying you “find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.”
Contrast Smith, who announced his resignation from Goldman in the Op-Ed article, and Siewert, who has just joined up with the greed merchants after working in the administration that made that greed legal. Clearly, people like Siewert, comfortable in the Washington-Wall Street axis, have no sense of shame. They know all too well what Goldman and the other financial swindlers have been up to, causing so much misery for tens of millions throughout the world.
After a stint with Alcoa in the private sector, Siewert returned to government as a top aide to President Barack Obama’s treasury secretary, Timothy Geithner, who worked in the Clinton Treasury Department before becoming head of the New York Fed. Former Clinton Treasury Secretary and Goldman Sachs executive Robert Rubin recommended Geithner for that position. In his Fed job, Geithner choreographed the bailout of AIG, which compensated Goldman Sachs for its toxic derivatives.
Because Siewert is obviously without a moral compass, he can, as have so many in the elite from both parties, move easily without any hesitation through the platinum revolving door between Washington and Wall Street, becoming filthy rich in the process while betraying the public trust. Hail Greg Smith, and thank The New York Times, for his cri de coeur, a rare example that decency is not always for sale.
This article was originally posted on Truthdig.
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Robert Scheer, editor in chief of Truthdig, has built a reputation for strong social and political writing over his 30 years as a journalist. His columns appear in newspapers across the country, and his in-depth interviews have made headlines. He conducted the famous Playboy magazine interview in which Jimmy Carter confessed to the lust in his heart and he went on to do many interviews for the Los Angeles Times with Richard Nixon, Ronald Reagan, Bill Clinton and many other prominent political and cultural figures.
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By Ronnie Cummins
14 comments on "At Last, Some Decency on Wall Street"
March 17, 2012 6:43am
In 1933 Congress passed the Glass-Steagall Act to prevent a recurrence of the speculative investments that occurred in the late 1920's causing the Great Depression. This Act separated Banking from Investment Firms and kept us safe until Clinton’s repeal in 1999 which causing the massive recurrence of greed and speculation we just witnessed. No one has done more damage to America then Clinton, with this action, as well as with the passage of NAFTA, GATT and the establishment of the new WTO.
March 16, 2012 11:44pm
Good Article but that guy is MISSING THE POINT.
Bad people have wreck a good system
OR
A bad system has produced damaged, greedy, amoral people.
Speculative capitalism isn't an honourable and sustainable enterprise occasionally besmirched by greedy individuals. Speculative capitalism assumes that individuals are driven by greed and self-interest and turns those characteristics into the engines of economic growth. By legitimising selfishness (such as destroying a company's value overnight to enrich Goldman Sachs through short-selling - deliberately engineering panic-selling of its shares), Goldman Sachs and similar companies deliberately turn human failings into structural features of the economy.
What's missing from Greg Smith's mea culpa is any understanding of economies and human society as a structure. To him, individual motivations and behaviours significantly affect structures.
Structures dictate human behaviour, while economics is part of the underlying structure. His disgusting colleagues aren't bad apples: they're behaving rationally and logically within the paradigm of speculative capitalism. It might offend Smith's personal code of conduct, but for 12 years he has enthusiastically participated in an economic activity which has impoverished massive swathes of the planet's population.
He neither comprehends nor regrets this.
Instead, he's shifted attention to the attitudes and sharp practices of a few individuals within an inevitably corrupting system. Smith's a cog in a machine, and he has no critique at all of the mechanism - he's merely personally offended by local difficulties.
A careful reading reveals not a radical, but a conservative. He wants the system to survive. He wants Goldman Sachs, one of the most destructive and predatory corporations on the planet, to survive. He has no concept of speculative capitalism's destructive impact on the human condition.
Greg: yes, many of the trees are falling down, but you need to realise that the wood itself is rotten.
March 16, 2012 11:41pm
I'm deeply concerned about Obama's decision making skills! If I were him I would expose the oligarchy that are telling him what to do by publishing a list of names and recordings of them bullying him into submission. There is no doubt that this is going on.
All that rhetoric about the US being the greatest free country etc., etc., is based on its past glory. Presently it is a shameful inverted totalitarian state whose time, perhaps, has come.
March 16, 2012 6:18pm
The action that Smith took is, indeed, honorable, but let's not forget that it's after a dozen years of being the predator that he came to detest. A murderer who turns state's-witness is still a murderer.
Mr Smith is, without doubt, something of a hero. He is what we all fervently hope for-a WS 'insider' who finally sees the errors of his way. Unfortunately, he's a rare breed indeed, but is now on the outside. GS will villify & blackball him forever, because he called them out. While Mr Obama should be praising him as the symbol of what all WS Kool-aiders should be-he won't. Hes too deeply entrenched to grasp the same moral compass as Mr Smith and force desperately needed regulatory changes to protect the 99% from these avaricious bastards. So we remain only one bad market day from another horrific economic free fall where taxpayers who've suffered so much will be told once again that these companies are "to big to fail." Bull. The real fear is that all these leeches who have never made or produced anything usable might have to fend for themselves in a world where that is again the difference between success and failure. So we continue with them spinning roulette wheels with the full faith of the administration and our Treasury behind them. They consider that their savings plan.
March 16, 2012 5:05pm
"At the heart of the rot were those derivatives, the collateralized debt obligations (CDO) and credit default swaps (CDS) that were made legal by the legislation Clinton signed and Siewert defended. "
Clinton: This, NAFTA, CAFTA, Tech Bubble, Off Shore Jobs
This is how History will Remember him
He and Romney are like brothers
March 17, 2012 1:19pm
My memory of Clinton will always be that he was instrumental in promoting HIV/AIDS by selling tainted blood to Canada and other countries. As governor of Arkansas, he raised funds by selling off blood from his penitentiary inmates. How's that for "F*CK EVERYBODY, WE NEED MONEY"?
March 16, 2012 4:36pm
Holding someTHING like Goldman SUCKS accountable is easier said than done when they can buy and sell regulators like they did mortgage backed securities (JUNK). IF they are censured, it would be a slap on the wrest. AIPAC membership is likely to threaten politicos with cutting funds and with the Jewish media smear campaign. The power elite is too powerful to let go of the free flow of money and many of the clients of GS are members of the power elite. What happened to Corzine and his MF Global? Any news lately? Any bankster prosecuted? Any of the dotcom CEOs prosecuted? No.... DON'T hold your breath expecting .0005% is going to hold one of the dark knights of the square table accountable.
March 16, 2012 3:50pm
OOps. The next step will be to prosecute this whistleblower SOB under the 1911 espionage act, like the several others nailed to the wall by our own Obama guy for daring to reveal the truth!
Jeffrey Alexander Sterling, Thomas Andrews Drake, Stephen Jin-Woo Kim and one of my heroes, Bradley Manning.
March 16, 2012 3:14pm
I recently watched again the exceptional movie "Margin Call." IMHO EVERYONE should see it and take in the story it tells. When it first came out, one of the local critics here in Buffalo NY began his review by likening the film to the German "The Wandsee Conference" - in which the director recounts the meeting of top Nazis at which the "Final Solution" was set in motion. His point is, I believe, that just as the word "Jews" does not appear in the minutes, as it were, because all the people present know that that is what they are talking about, so in "Margin Call" the words "money" and "investors" are not heard. But the FACT is that the characters in "Margin Call" are also making calculated decisions, in the coldest of cold blood, that will destroy the lives of other people they have never known and will never meet.
A remarkable thing happened recently when Ross Douthat, arguably the most conservative columnist writing for the New York Times, deplored the fact that "Margin Call" did not receive a Best Picture nomination from the Academy. The good news is that its director (the son of a Wall Street veteran) did receive the "Independent Spirit" award for Best First Feature.
If a similar "independent spirit" could be manifested by more of the people whose actions have led to the ruination of so many lives, perhaps "financial services" would be seen as the horror-industry it surely is.
March 17, 2012 1:25pm
Margin Call should be mandatory watching for everyone in society who deals in money. They should be forced to watch it surrounded by working stiffs - if they can even find enough people with jobs to fill a movie hall.
March 16, 2012 3:11pm
Goldman Sachs CEO Lloyd Blankfein and the rest of Obama's thieving Wall Street "Savvy Businessmen" buddies should be doing "GOD's work" om the lifelong world prison tour.
March 16, 2012 2:30pm
Obama and the congress/ senate should embrace these folks and protect them , they are the root of communication and the protection of all free men.
March 16, 2012 2:26pm
Let us hope that this is the first of many who though reluctant, will "Do The Right Thing"! We should honor each as he or she comes forward because let's face it, just as other dangerous jobs, these folks are putting their future on the line for each and every one of us.