Here is letter #5:
My name is Mike Eastwood, I’m just a 20-year-old kid from a small town in Oklahoma, but let me tell you my story. I come from a stable and mostly happy family life. I have two sisters (I’m a middle child) who graduated valedictorians of their high schools. I graduated with a 3.7 GPA from my 3A high school in 2009.
My older sister graduated in 2003 from a state college. She worked for the next five years but has been inconsistently employed and predominantly unemployed since 2008, when she moved to San Diego to join her husband who was stationed there by the Marines. All the while, she’s been trying to pay off the $90,000 in student loans she racked up while trying to get a degree in pharmaceuticals that she is not able to use.
I am still going through college, attempting a degree in history. I decided to go to a community college after high school to avoid debt. I’ve been attending classes that do not challenge me intellectually in any way because, frankly, I was and am too scared of the debt that comes from a decent school. I do this in hopes that I can someday be a teacher, though I know that is a career that will leave me in debt for the rest of my life, regardless of how hard I work. My younger sister just graduated (again, a valedictorian with a 4.0 GPA) and she chose not to go to college after seeing the debt involved in getting a degree, as well as numerous examples of people racking up debt for a degree that doesn’t help them move forward in life. Each of us attempted and qualified for many scholarships but none of us qualified for PELL Grants or FAFSA Student Aid. Our parents combined (my mother is a teacher, my father runs a collating machine) make about $65,000 a year, putting us just out of reach of any federal assistance.
Why do I mention this to you? Goldman Sachs doesn’t have anything to do with school directly and I can’t place the blame for our debts on the shoulders of your corporation, nor would I try to. I tell you this because I want to show the state and cost of education, even at a local level, and far more importantly, I want to bring to your awareness the lives of those people who seem to have slipped beyond the vision of you and your fellow executives. My sister, with $90,000 in total student loans and paying a bit above the minimum payment (minimum payment is $345 a month; she pays $400) and paying against an 8.9% annual interest rate, cannot successfully pay off that student loan during her lifetime, assuming she is forced to continue working for K-Mart. And to perhaps offer a bit more perspective on her situation, she works forty hours a week at the minimum wage of $7.25, which earns her roughly $780 a month. Just repaying her student loans costs her more than half of her total income and it’s a payment that will never end.
Again, this isn’t your fault. She didn’t make the job market for those entering the field of pharmaceuticals plummet. And again, I do not blame Goldman Sachs for these problems. Allow me to give another example. As I said before, I’m only 20 years old. I was diagnosed with juvenile diabetes in April of this year. Type-1 diabetes means I’ll have to take insulin shots for the rest of my life, avoid some foods, and remove other foods from my diet completely. I was diagnosed after attending a local soccer game where I fell unconscious while sitting and watching. My blood sugar had gotten so high that the fact I hadn’t had a stroke was a true miracle (1,115, in case you’re curious.) This serious medical problem and diagnosis cost me $2,470. I will also have to pay nearly $160 a month for all of my insulin and diabetes supplies. I don’t have health care myself, but fortunately, because I’m under 24 and thanks to the new laws passed in 2010, I can remain listed on my mother’s health insurance. Unfortunately, my mother is a teacher and her coverage is not all that great. On top of my now $15,000 in school debt and the $1,045 loan I took out last January to cover the cost of my and my fiancé’s bills for a month when she was out of work, I’m in a lot of debt for a kid who was only in high school two years ago, and it is especially high considering that I live in a one-bedroom apartment with my fiancé, I drive a beat-up Pontiac Sunbird, and try desperately not to exceed my means.
I want to stress that I don’t blame Goldman Sachs for these problems; I’m not trying to insinuate in any way that you are at fault for this debt or these problems in my life or my family’s lives. What I do want to show you is the gap between the lives of everyday Americans and the lives you all lead as the executives of such a prestigious operation. Between your lives and the lives of those of us who have had to struggle and fight for every bit of happiness we have.
You’ve influenced our government elections using more than $11,200,000 for the sake of your own interests, leaving the American people with no other alternative but to watch and pray it all gets better. Your profits in 2010 were about $21,700,000,000. My siblings and I made a combined $31,859 and, with my parents’ income, that’s $96,859. This is barely enough to pay back my older sister’s student loans. My family, with the possible exception of my father, is well-educated, hardworking, and politically involved, and yet there is no light at the end of the tunnel. “Work hard and you’ll have a good life” is a cruel axiom.
The reason I sent you this message is so that you might read it and understand that we are frustrated by our lives, by the fact that a huge portion or our incomes are taken away for the sake of supporting federal and state governments that ignore the people they are supposed to represent, and that ignore them because global business juggernauts have the ability to simply buy a vote. Your corporate tax breaks are ridiculous. Your unlimited access to involvement in the affairs of the politics that are supposed to allow the people to improve the quality of their own lives is cruel and unfair. Most of all, your ignorance of the trials and hardships of the average American is unforgivable.
Please understand why we stand in the streets with signs. It is not for handouts, it’s not to taunt or torment the rich, and it’s most certainly not because a bunch of lazy, uneducated hippies want to lay blame on the shoulders of giant corporations. It’s because our lives are in shambles and because you have taken from us our only outlet for change. So we forge a new outlet and we stand shoulder to shoulder in solidarity. Let us change, begin to change yourselves, so that we will again have the American Dream.
Michael EastwoodBartlesville, Oklahoma 74003
* Abby Joseph Cohen (born 1952 in Queens, New York) is an American economist and financial analyst on Wall Street. She is a partner and—as of March 2008—Senior U.S. investment strategist at Goldman Sachs responsible for leadership of the firm’s Global Markets Institute. Prior to that date, she was Chief Investment Strategist. In 2001 she was named one of the 30 most powerful women in America by Ladies Home Journal. (from Wikipedia)
Letter #4 to Goldman Sachs‘s Lloyd Blankfein
Posted: 25 Jun 2013 07:18 AM PDT
In this book of letters written by ordinary people affected by the fallout from the financial crisis is a chapter devoted to Goldman Sachs starting on page 91.
The fourth letter is from page 95 in The Trouble is the Banks: Letters to Wall Street, edited by Mark Greif, Dayna Tortorici, Kathleen French, Emma Janaskie and Nick Werle, printed in paperback edition by n +1 Research Branch Small Books Series #4, 2012, New York, NY.
Here is letter #4:
To: Lloyd C. Blankfein, Goldman Sachs
Dear Mr. Blankfein,
We are writing to you to interest you in a fantastic new opportunity for you and your loved ones. We are offering you the once in a lifetime opportunity to refinance all of your many homes and/or jets for the wealth–oops, did I say wealth–equity that you are holding in them.
Did you know that the property you bought for millions is actually worth gazillions of dollars under this plan? Yes! Gazillions! With our excellent and trustworthy panel of advisors we can help you truly capitalize on your investments and really make the most of what life has to offer.
What we do is: take the money you “earned” during those fantastic boom years, and invest it in schools, hospitals, housing and jobs for the poor, educate feed and clothe people before their brief yet worthy lives extinguish.
There really is nothing to lose from your side: just take the money backed by the assets of the houses, jets, boats and jewelry, sign your name, and we can provide you with short-term aspirations! It really is that simple. And don’t take our word for it, talk to many of our other customers in the 1% base range. Plenty of satisfaction all round!
With Such Sincerely Tepid Regards,
In this book of letters written by ordinary people affected by the fallout from the financial crisis is a chapter devoted to Goldman Sachs starting on page 91.
The third letter is from page 94 in The Trouble is the Banks: Letters to Wall Street, edited by Mark Greif, Dayna Tortorici, Kathleen French, Emma Janaskie and Nick Werle, printed in paperback edition by n +1 Research Branch Small Books Series #4, 2012, New York, NY.
Here is letter #3
Hello Edith–Wow, Now I Know a 1 Percenter!
To: Edith W. Cooper*, Goldman Sachs
I hope this message finds you well. Gosh, I am thrilled to meet you, even though we haven’t met face-to-face…yet!
I mean, wow, I actually know a 1 percenter now! How cool is this?
Of course, you probably don’t have much to worry about even if you’re not feeling well, because I trust that you have great health insurance–thanks to me helping pay for it.
Wow, Edith, how great is that! 🙂
Since I hope we get to know one another better, here’s a little bit of info about me: I have a degree in journalism and my hubby has a double Master’s in music, but since we’re over 50 years old, our premiums climbed, so we were faced with a slippery slope choice…Do we eat, or do we pay for health insurance? It was a toss-up, but we decided that food was more important.
Oh wait–you haven’t heard about our foreclosure? Law enforcement came to our door and gave us one hour to vacate! Oh, that morning was so much fun–I wish you could have been there! Yes, we were in that first wave in ’08, after putting down a down payment of…wait for it…$300,000.
We totally qualified, you see…hubby had a great business, until his clients could no longer pay him…Our lender told us “don’t worry, we want to work with you! We can see you have never been in trouble before!”–and well, it’s a long story.
I’ll save the rest of this story for next time, because I am so looking forward to writing back again..very, very soon.
Your new pen pal,
P.S. I can’t wait to hear about the beautiful clothes you must wear. I buy all of my clothes these days at thrift stores, but maybe we can compare notes?
*Edith W. Cooper is Executive Vice President and Global Head of Human Capital Management for Goldman Sachs
Before I get stuck in, I want to make it clear. it is not my intent to paint Depfa as angels and HRE as devils. Depfa did stupid things. Their funding problems were not so dissimilar to Northern Rock’s. But Depfa had far better assets. And therein is part of the story.
So what went wrong? And why did HRE buy Depfa when it was already going wrong?
The fact is HRE bought Depfa and did so after the debt wave had already curled and started to break. But then again why shouldn’t the Germans be as thick as the Brits at RBS who at almost the same time bought ABN Ambro?
The question that always circles however, is did Depfa knowingly lie to HRE about their problems? Did they somehow withhold ugly problems? Well according to one of the very senior bankers, who was there and had full and complete access to the deal, and who agreed to talk to me on condition of anonymity, it would have been very hard for Depfa to hide anything. Inside the bank there was a secure room where ALL the bank’s data, all its books and accounts were available to the two boards of Directors during the months the deal was being negotiated. This room was run and controlled by a senior German employee. According to my source the HRE people looked VERY carefully at EVERYTHING.
This still leaves the possibility that there was a board within the board at Depfa and this inner circle was somehow concealing things even from the rest of the bank and board. The stuff of conspiracy stories which I am not much given to. Could there have been a board within the board? I have evidence there was; first hand testimony from someone who was there.
Interestingly this person does not believe the purpose of an inner group was to hoodwink HRE. If anything it was to keep some of Depfa’s own board slightly out of the loop.
All in all it does not seem as if Depfa lied to HRE or concealed any hidden debts. So if HRE didn’t buy Depfa because they were sold a pup, why did they? And particularly why did they pay 2 billion over its book value!
Depfa’s collapse was due to being unable to find funding. In other words the same idiocy as killed Northern Rock. But it’s the differences from Northern Rock that are important. Let’s look at the time line. Northern Rock collapsed in September of 2007. It did so because it could not get the short term funding it relied upon to keep its loans rolling over. The wholesale funding market locked it out. Why? Because the lenders in the market, other banks, were worried that Northern Rock’s assets were so dodgy that their ability to repay became highly doubtful.
Note that at the time the HRE/Depfa deal was being signed Depfa was NOT locked out of the markets; it was a whole year later that Depfa found itself unable to get funding. This document by the huge law firm Herbert Smith (see p. 8), written just after the bail out in 08, makes it clear Depfa was having problems. They had about 35 billion euros of debt that needed funding in the markets and those markets were seizing up. Both Depfa and HRE knew about this funding need before the merger. But crucially Depfa was NOT locked out. It did not collapse in 2007 but was a going concern for another year. Why was that? What made them different from Norther Rock and others who did collapse in 2007?
The reason is simple, its funding worries were off-set by the fact that Depfa had some of the best, most solid gold assets of any bank. As noted in part one as many as 80% of their assets were rated higher than the bank itself or the banks lending to it. THAT is why HRE were so interested in Depfa and were even willing to buy it for 2 billion over book value.
HRE knew exactly how Depfa funded itself. There is NO WAY those details could have been hidden. We know that both banks were aware of funding problems. Let’s just note in passing that advising Depfa on the merger/sale was Goldman Sachs. So Goldman too would have known all there was to know about Depfa’s funding problems. Hang on to this.
It is worth pausing for a moment to understand how Depfa funded itself. It becomes important later. Depfa’s business was making large loans to cities and states for public works. 100% pure gold assets. Government backed all the way. It funded them by selling Pfandbrief and later ACS (the Irish version of the Pfandbrief called an Asset Covered Security) which the Landesbanks and others bit their hand off to get hold of. The Pfandbrief typically is a bond for 5-7 years. But Depfa, like Northern Rock and ALL the big banks, swapped this long dated debt funding for shorter debt/funding. The idea seems foolish now, and I think it is foolish, but the risk managers I have spoken to still adhere to the holy writ of relying on short term market funding. I’ll explore this piece of banking some other time. But what is important is that Depfa’s reliance on short term wholesale funding was nothing unusual. It was the norm rather than the exception.
Back to the story.
Unlike Depfa, HRE had a legacy of poor quality assets, which I wrote about in Dominoes falling from the East. HRE had also been aggressively expanding its business in Real Estate and we know from the subsequent bails of HRE’s own collapsed debts that, as this article written in 2009 makes clear,
In reality, HRE was a ticking time bomb and this is the reason it had run into liquidity problems (By the way, this is much the way I see Northern Rock – which was also nationalized by the UK government). The company has massive commercial property (CRE) exposure and the CRE market is imploding in financial centers like Frankfurt, London and Dublin and elsewhere. HRE is highly leveraged to these places.
So it’s not just me who is saying that Depfa may have triggered events but the main blast was from within HRE. HRE was a ticking bomb and HRE’s board thought buying Depfa was the way to diffuse it. HRE also relied on wholesale funding, but unlike Depfa, didn’t have great assets. It was therefore more like Northern Rock than Depfa. HRE’s poor assets would have also, and this is my speculation, have meant HRE would have started to have problems on the Repo market. Remember repo is the oxygen of overnight funding. It is also what destroyed Lehmans. Lehman’s assets became distrusted and eventually other banks would not accept them as collateral for repo funding.
I think this is what HRE were worried about and why they were so desperate to buy Depfa. Depfa had what HRE didn’t – assets for the all important repo market. That is what they were trying to buy. Remember, funding problems are a threat to survival like starvation. But being unable to repo is not being able to get just one more breath.
My source tells me that HRE thought that by buying Depfa’s absolutely top quality assets, HRE would be upgraded by the ratings agencies and be able to breath again on the repo market. But instead, as my source said, “The minute HRE bought Depfa, the rating agencies downgraded Depfa.”
The merger ended with the worst of both worlds. Where each bank had exposure to one kind of risk HRE to credit risk, Depfa to funding (though I think HRE actually had both) by coming together they united the nitro with the glycerin. Sheer banking genius. Depfa brought funding worries to the marriage, HRE brought credit rating downgrades. I love you too darling.
So why did the whole thing wait a year until Oct ’08 to collapse? And what finally brought it all down?
So now we come to the nub of it. We have created the bomb with equal parts funding crisis and credit risk but even so nothing exploded for a year. During that year other banks went down. So what was it that jolted the container and set it off?
Well we know that Depfa’s funding was the trigger. So what happened to it? Turns out, while other banks like Northern Rock collapsed Depfa didn’t, because it had a sugar daddy funder. A big funder who was always happy to take Depfa’s Pfandbrief long term debt and fund it with shorter term money. Depfa’s sugar daddy was AIG’s Paris subsidiary, Banque AIG.
That should give you a bad feeling. AIG’s problems started as far back as ’06. Certainly by the 1st quarter of ’07 AIG had had to write down a 20 billion dollar loss. But the Dow was still going up. So there was still plenty of money around. By the time HRE and Depfa had kissed and exchanged vows, AIG had been downgraded and faced the first of what would turn out to be many Collateral calls. This first one was for $14 billion. Oops.
It was at this point that Northern Rock found there was no more funding. But HRE/Depfa survived.
Banque AIG in Paris was still in business, still funding Depfa’s needs. Banque AIG was not a small affair. It was systemically important for many banking clients in Europe for swapping one short of funding for another, for hedging and for derivatives. But it was also getting itself into a bit of a funding pickle. In part this was just its share of the over all implosion AIG was undergoing world wide. In part, I think, it was Paris’s own problem.
Banque AIG in Paris was an essential part of AIG’s funding mechanism. It was part of what was called AIG Financial Products (AIG-FP) whose notorious central office was AIG in London. This is where all the ‘losses were made’ and where the obligatory ‘rogue’ trader-type villain, Mr Joseph “Iron Hand” Cassano was in charge. What is a little less well known is that most of, if not all of London’s deals were routed through Banque AIG in Paris, where the deals were all supposed to be ‘reviewed’. And we know that as far as Depfa was concerned their funding was from Banque AIG.
So why tell you this? Well, on 31st of August 2007 a new branch of AIG-FP was set up in Ireland, AIG-FP Matched Funding (Ireland) Plc. Why? And why then and not before? I can’t know of course. But this is how it smells to me.
Why did any of the banks in our story end up going to Ireland? For access to money that liked the lax and laid back, ‘we have neither teeth nor balls’ regulatory atmosphere. AIG had been getting funds just fine for years. Suddenly, when AIG is in all sorts of trouble and its own funding is starting to get dicey it suddenly opens a brand new branch – in Ireland.
In under a month, on 25th September 2007 to be precise, AIG-FP Ireland issued a funding prospectus for $20 billion. AIG was already beginning to feel the heat by now and wholesale funding had already locked out Northern Rock precipitating a bank run 11 days earlier.
To me, the fact that AIG-FP opened a branch in Ireland is a hint that its normal funding was, at the very least, in need of reinforcing, if not replacing with ‘other’ sources which could be best found in Dublin. So now Depfa’s sugar daddy funder was alongside it in Ireland looking for the SAME money as everyone else, such as HRE, for example. This situation does not fill me with confidence.
But would Depfa or HRE have known of this development at the time it was doing the deal with HRE? I doubt it. AIG would not share any plans with customers. Even ones to whom it was a sugar daddy. So did anyone know? Well it’s just a little footnote but it turns out that none other than Goldman Sachs was arranging and advising AIG-FP Ireland on its funding adventure.
No way would Goldman have told one client (Depfa) what another (AIG) was doing. So Depfa did not know from Goldman about any troubles at Banque AIG. But Goldman knew. Goldman was advising Depfa on merging/selling itself to HRE for 2 billion over its book value while it also knew that Depfa’s main funder was probably in more trouble than the rest of the market suspected.
I would love to know, but never will, if Goldman had any short position on the new HRE/Depfa bank it had helped broker?
In short what I hope to have shown is that Depfa did not ‘bring down’ HRE. HRE was going to collapse anyway. And buying Depfa was an ruinously ill-thought out attempt to solve HRE’s credit crisis. The plan back-fired and made every one’s position worse than it had been.
The entity which actually brought down HRE was AIG. It was their implosion along with the general shock of Lehmans which cut off Depfa from funding which had kept it alive for a year after other banks collapsed. So it was the Americans who brought down HRE not the Irish if you really want a scape goat.
And the only people who perhaps knew the whole HRE/Depfa deal was destined to end in disaster and bankruptcy, were Goldman. Goldman knew both how Depfa was funded an WHO was their lynch pin funder, while also knowing the true state of that funder (AIG-FP).
SO to circle back to where I started. It is NOT as simple case of a dodgy Irish bank bringing down a solid German one. If anything the opposite is just as true. And therefore it is NOT the case that Ireland has some moral debt it owes to ANYONE to bail them out.
The threats are already coming thick and fast. The Irish people MUST defend themselves, their children and their country. Their leaders haven’t and won’t.
We all now know that no executive of a bank will ever be investigated or prosecuted for the accounting control frauds he committed that resulted in the financial crisis of 2008. Human beings have a craving for justice to be rendered to those who commit fraud and especially to those who have become super-rich by poaching the savings and pensions of others. The human mind is fully capable of making up a recipe to remedy that injustice.
Take, for example, the story from Norse mythology about the father who decided to divide his sons’ shares of his inheritance by the amount of gold each son could hold in his mouth (from The Globe and Mail, Saturday, May 11, 2013, p. R12). Gold as a “mouth-tale” is an effective metaphor and suits our fantastical purposes.
We are often told by the world of commerce that we are all “consumers” no matter what we buy even if it is not digestible as food: we consume resources; we consume products; we consume wealth–all very involved with the mouth and its greedy ingestion of “things.”
What better way for the gods to reiterate their rating of Goldman’s value (long-term avoid) than by how much gold Blankfein can literally hold in his mouth and consume! What better way to depict the character of Blankfein than by his “consuming his own gold.”
A yearly salary of $21 million for 2012 is a lot of gold to “mouth!”
Thus the fantasy world, where there is justice, metes out the painful digestion of justice on those who deserve it.
Goldman Sachs is Ring-Fenced From Criminal Prosecution
An investment bank (Goldman Sachs) can commit fraud and the executives do not have to admit to wrongdoing;
An investment bank is allowed to forge foreclosure documents and the executives just have to promise not to do that again;
When an investment bank gets into trouble by taking huge risks, it becomes a commercial bank so that it can obtain liquidity from the Federal Reserve and the executives keep their lucrative positions;
When an investment banks commits fraud, it pays a fine;
When an investment bank commits criminal accounting control fraud, it pays a fine;
No matter what fraud, or unethical, or immoral action an investment bank commits, the executive compensation continues to increase year after year after year;
Investment banks are pathologically unable to see or understand the harm that their frauds cause even when pensions, wages and salaries, and savings of the middle- and working-classes are decimated because of the actions of investments banks like Goldman Sachs.
Goldman Sachs’s Alchemy
Goldman Sachs are alchemists who turn gold into base metals: they turn handshakes into corruption. Take the situation in the UK where Goldman Sachs shook hands with Dave Hartnett of the HMRC, to get a reduction in the taxes owed by Goldman. Goldman Sachs sought to cheat on taxes and the Head of Tax agrees. Then the exchequer secretary to Treasury seeks to discredit the whistleblower who exposes the deal that will cheat taxpayers of needed revenue and he assures others that he desires to protect the reputations of others and himself.
We are aware of the tenuous positions of whistleblowers who report on the nefarious actions of captured governments and rotten bankers who cheat the public with impunity. Then there is the media that can be co-opted by government or business to carry out such actions as the discrediting of whistleblowers. So individual whistleblowers are vulnerable to the corruption and might of the state’s structures. From government department to government department–Hartnett, Gauke, Haydon and Morse–few honest men can be found.
Only the whistleblower, Osita Mba, is shown in all his bravery while the cowards that cheat in government and in banking show themselves as undignified and base, the creations by the alchemy of Goldman Sachs.
NEW YORK (Reuters) – Goldman Sachs Group Inc must face fraud claims brought by CIFG Assurance North America over insurance it provided for $275 million (177 million pounds) in mortgage-backed securities, a New York state appeals court ruled on Tuesday.
CIFG claimed in a 2011 lawsuit that the investment bank fraudulently induced it to provide insurance for a portfolio of more than 6,000 subprime residential mortgages by concealing the shoddy quality of the loans.
A trial judge in Manhattan threw out that claim last year, ruling that CIFG would have uncovered the alleged misrepresentations had it performed proper due diligence.
The New York State Supreme Court‘s Appellate Division, First Department, reversed on Tuesday, finding that CIFG had done enough by having an outside consultant analyze the loans.
“There is a question of fact as to whether plaintiff reasonably relied on defendants’ representations,” a five-judge panel wrote in a unanimous decision.
Michael DuVally, a spokesman for Goldman, declined to comment.
The ruling also revived fraud claims against M&T Bank Corp , one of several originators that sold the loans to Goldman. An M&T Bank spokesman did not immediately respond to a request for comment.
The decision could have implications for similar lawsuits brought by monoline insurers against banks, including one filed by Assured Guaranty Ltd against JPMorgan Chase & Co in 2012.
In that case, JPMorgan had asked a New York judge to dismiss similar fraud claims but agreed to hold off until the First Department ruled in the CIFG case.
Other insurers, including Ambac Financial Group Inc and MBIA Inc , have also filed lawsuits claiming banks misled them into insuring toxic mortgage-backed securities before the housing market meltdown by concealing major risk in the underlying loans.
Tuesday’s ruling also let stand breach of contract claims against Goldman.
CIFG is seeking compensation for claims as well as buy-backs of defective loans.
“We’re very pleased with the decision, and we look forward to proving our case,” Michael Vogel, a lawyer for CIFG, said.
The case is CIFG Assurance North America, Inc., v. Goldman Sachs & Co., New York State Supreme Court, New York County, No. 652286/2011.
(Reporting by Joseph Ax; editing by Noeleen Walder and Alden Bentley)
Goldman Sachs Has Already Cannibalized the Economy
Two very different views of what Goldman Sachs stands for.
How Goldman Sachs sees itself as
–an “enduring brand;”
–the best investment company;
–“our clients’ interests always come first;”
–“a set of core values;”
–a match between cultures and behaviors;
–“greedy, but long-term greedy;”
–now “greedy, but short-term greedy” (i.e., greedy all the time!)
How we see Goldman Sachs
–too big to jail; too big to fail;
–screwer of public sector;
–funder of corporate raiders;
— supporter of takeover artists;
–a rip-off of the system
Goldman set the table by predicting a turn in gold prices back in December 2012, which no doubt contributed to the precious metal’s 5% decline in the first two months of the year.
At the end of February, Goldman issued a research report that said the big Wall Street bank had soured on the yellow metal, and dropped its three-month target for gold prices from $1,825 an ounce to $1,615, its six-month forecast from $1,805 to $1,600, and its one-year outlook from $1,800 to $1,550.
Then, just yesterday (Wednesday), Goldman doubled down on its negative outlook for gold prices.
The bank’s new targets for gold prices are $1,530 in three months, $1,490 in six months and $1,390 in one year.
The double whammy – two downgrades in two months – had its intended effect, as gold prices fell 2%, to $1,558.80, after Goldman released its report. It was the biggest single-day percentage drop for gold in nearly six months.
“If you’ve ever suspected gold prices are being manipulated, you’re not alone – and you’re right, they are,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald.
The proof is right in front of us.
How Goldman Uses its Forecasts to Manipulate Gold Prices
In addition to the lower targets, Goldman’s reports spell out why the bank thinks gold prices will decline, which are at least as important in the price manipulation strategy as the targets themselves.
Here’s what Goldman said in its February report:
“The decline in prices since last fall and our updated forecast [emphasis ours] suggests that the turn in the gold price cycle is likely already underway. As a result, although our U.S. economic forecasts point to modest near-term upside to gold prices, we believe that a sharp recovery in prices to our previous price forecast is unlikely.”
Goldman brazenly cites its own forecast as part of the evidence that the downward move in gold prices is happening. In other words, they’re practically bragging about their manipulation of gold prices.
Then Goldman applies a Jedi mind-control technique to remedy the inherent contradiction in its forecasts for the U.S. economy and its targets for gold prices: “These are not the forecasts you are looking for.”
Yesterday’s report again advised investors to ignore economic realities and trust in Goldman instead.
“Despite resurgence in euro-area risk aversion and disappointing U.S. economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning,” Goldman said in its research note.
Meanwhile, Fitz-Gerald said, the reasons gold is more likely to rise than fall – central bank money printing, central bank gold-buying, slowing production at gold mines, more Euro-zone troubles – haven’t changed.
How Goldman’s Gold Price Manipulation Works
The purpose behind all this, Fitz-Gerald explained, is to “get the weak money out, so they can accumulate more gold themselves.”
In fact, this is a widely used Wall Street strategy that dates back at least to the 1920s.
For that matter, there’s plenty of evidence Goldman uses this strategy to manipulate stocks and other commodities all the time.
Here’s how it’s done.
Often, the big banks are making subtle trades to help push the commodity – be it gold, a stock or anything else in the markets – in the direction they want it to go.
Issuing reports helps the cause by getting the media to transmit and amplify the message manipulators like Goldman are trying to send.
“Bigger firms like JPMorgan, Goldman Sachs, PIMCO or any of a dozen other behemoths simply release a “research report’ that is interpreted as gospel by the mainstream media and swallowed hook, line and sinker by millions of unsuspecting investors as a reason to buy or sell,” Fitz-Gerald said.
For example, the MarketWatch headline on its story about yesterday’s Goldman downgrades of gold prices proclaimed, “Another blow to gold – Goldman Sachs slashes 2013, 2014 forecast.”
That story noted that Deutsche Bank AG (NYSE: DB) also had lowered its forecast for gold prices just the day before.
In short, investors need to pay close attention to what the big banks say about stocks and commodities, because very often they are betting in the opposite direction. If you fall for the misinformation, you’ll end up on the wrong side of the trade – losing money while Wall Street operators like Goldman reap the big profits.
How to Deal With the Market Manipulators
Fitz-Gerald advised investors not to get frustrated and angry about Wall Street manipulation of stocks and gold prices, but rather to try to understand what’s going on and use it for their own benefit.
“Do what Wall Street does, not what it says,” Fitz-Gerald said.
That’s not as hard as one might think, he said, noting that retail investors don’t have the pressure to move around large amounts of money every day and don’t need to worry about major moves that could tip off their strategies to other big competitors.
“You can use tactics the big boys can’t,” Fitz-Gerald said.
One thing that retail investors can do to avoid becoming a Wall Street patsy, he said, is to dollar-cost average (buy a set dollar amount of an investment at regular intervals) into things like gold and stocks.
“Dollar-cost averaging forces you to buy more when the price is low and less when the price is high,” Fitz-Gerald said. “Maybe you can’t compete with the big banks, but you can beat them at their own game.”
Money Morning/The Money Map Report
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The current 250 year licence granted to the USA to use English as its official language is due to expire at the end of January 2014. The licence was originally granted by King George III and intended as a stop-gap till the colony (as it was then) decided on it’s own language between Arapahoe, French or Spanish.
The new House of Representatives is facing a difficult decision but will probably opt to move to Spanish in the near future. Already 26% of US citizens speak Spanish and California has already experimented with shop assistants pretending not to understand English speaking customers.
The probability is that illegal immigrants from Mexico will now be given teaching jobs to bring the remaining US citizens up to speed.
All official documents such as passports, drivers licenses and Costco membership cards will now need to be translated.
The President has assured the public than the language transition will run smoothly and that Goldman Sachs were organising a team to insure a smooth passage. GS has advised its clients to buy bonds in outsourced charter schools
Bank Depositor “Haircuts”: Grand “Financial Theft” is the Money Market’s “New Normal”
On March 29, Cyprus Mail said banks opened Thursday. They did so amid calm.
Long lines queued. People waited patiently. A feared stampede didn’t materialize. Whether it’s the calm before the storm remains to be seen.
Looting Cypriot bank accounts reflects the new normal. It set a precedent. It did so for Europe. More on that below.
Grand theft reflects official policy. Money is made the old-fashioned way. It’s stolen. Nothing’s done to stop it. Corrupt politicians and regulators permit it. They do so for benefits they derive.
Scamming investors is commonplace. Goldman Sachs derisively calls them “muppets.”
MF Global’s CEO Jon Corzine formerly headed Goldman Sachs. He looted customer accounts. He did so brazenly.
He used client money to speculate. More went for internal purposes. Much went to cover debt obligations and losses. Top firm executives made millions. They did so at customers’ expense.
Financial reform accomplished nothing. Grand theft is institutionalized. Europe’s no different from America. Anything goes is policy.
Banks deposits were considered safe. No longer. Eurocrats changed things. Euro Group head Jeroen Dijsselbloem explained.
Expect more wealth extracted from depositors. Cyprus established a template. Bank accounts in other troubled economies aren’t safe.
“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that,” he asked? “What can you do to recapitalize yourself?’ ”
“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.”
“The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take.”
In late February, ECB Executive Board member Benoit Coeure suggested raiding depositor accounts for bail-ins, saying:
“There needs to be an appropriate burden-sharing….because we need to achieve debt sustainability.”
At the time, he suggested not doing it across the board. Whether he meant it isn’t clear.
He added that he doesn’t “pre-judge any instruments because the vocabulary matters, and there are many ways to achieve burden-sharing.”
It bears repeating. Grand theft is official policy. Even bank accounts aren’t safe.
Market analyst Marc Faber believes “governments one day (will) take away 20 – 30% of (his) wealth.” There’s no place to hide.
German Finance Minister Wolfgang Schaeuble proposed a 40% haircut on all deposits. So does IMF head Christine Lagarde.
Cypriot Finance Minister Michalis Sarris said large uninsured Laiki Bank depositors could lose up to 80% of their money. Other European depositors race similar risks. So do people elsewhere.
Some may lose everything. It’s the new normal. Personal savings are up for grabs. Bank bailouts will be borne on the backs of ordinary people.
Think it can’t happen here? Think again. There’s no place to hide. Ellen Brown explained. Banks legally own depositor funds, she said.
“Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.”
Banks once repaid depositors on demand. A joint December 10, 2012 FDIC-Bank of England (BOE) paper changed things. Plans to loot customer accounts were made earlier.
The Bank for International Settlements originated them. It’s the privately owned central bank for central bankers. Major ones have final say.
Looting depositor accounts is policy. Cyprus isn’t a one-off. Guaranteed insured deposits don’t matter. They’re up for grabs like all others. It’ll be done clever ways or outright.
Brown said the FCIC-BOE plan involves converting deposits (IOU promises to pay) into bank equity. They get our money. We get bank stock.
Ready cash on demand is gone. Whether it’s ever returned, who knows. Take the money and run looks more than ever like policy. Depositors anywhere may be hung out to dry.
Even gold and silver in safety deposit boxes aren’t safe. Not in America. Homeland Security told banks in writing. It may inspect their contents on demand.
Under Patriot Act provisions, it may seize them with no warrant. It can do so anywhere. Banco de Mattress isn’t safe.
Investor Jim Rogers said “run for the hills now. I’m doing it.” Cyprus is no one-off.
“I want to make sure that I don’t get trapped,” he said. “Think of all the poor souls that just thought they had a simple bank account.”
“Now they find out that they are making a ‘contribution’ to the stability of Cyprus. The gall of these politicians.”
“If you’re going to listen to government, you’re going to go bankrupt very quickly.”
“I, for one, am making sure I don’t have too much money in any one specific bank account anywhere in the world, because now there is a precedent,”
“The IMF has said ‘sure, loot the bank accounts. The EU has said ‘loot the bank accounts, so you can be sure that other countries when problems come, are going to say, ‘Well, it’s condoned by the EU. It’s condoned by the IMF. So let’s do it too.’ ”
The Daily Bell asked “What Is The REAL Euro End Game? It is time to apply the free-market to bank depositors.”
Strategy involves shifting responsibility from taxpayers to depositors. Things ahead won’t be the same. Eurocrats’ policy is wrongheaded. They’re deepening crisis conditions, not alleviating them.
They believe achieving “full-on political union” depends on it. Their well-documented comments reflect it.
“….Cyprus shock and subsequent statements are not only deliberate, but have contributed to spreading uncertainty throughout Europe.”
“Now people no longer trust their banks, contributing to their destabilization.”
“If you have a bank crisis, the last thing you want to do is further destabilize trust and confidence in the system. But Brussels Eurocrats have done just that.”
“Don’t think it was a mistake. If one accepts that line of thinking, the ramifications are serious and deep from a sociopolitical, political and investment standpoint.”
The Economic Collapse blog said global elites plan to loot bank accounts. Don’t be surprised when they steal yours.
“They are already very clearly telling you that they are going to do it.” Your money is theirs. It’s up for grabs on demand.
People put money in banks for safety. Removing it “jeopardize(s) the entire system.” Cyprus is a tip of a giant iceberg. Major global banks are highly leveraged. Many are insolvent.
When their bets pay off, they win. When they don’t, we pay. Wealth confiscation is now policy. Commerzbank chief economist Joerg Kraemer urges a “tax rate of 15 percent on (Italian) financial assets.”
It’s “probably enough to push (government) debt below the critical level of 100 percent of gross domestic product,” he said.
New Zealand Finance Minister Bill English proposed across the board depositor “haircut(s)” in case of major bank failures.
Britain’s Daily Mail headlined “One of the nastiest and most immoral political acts in modern times,” saying:
“People who rob old ladies in the street, or hold up security vans, are branded as thieves.”
“Yet when Germany presides over a heist of billions of pounds from private savers’ Cyprus bank accounts, to ‘save the euro’ for the hundredth time, this is claimed as high statesmanship.”
“It is nothing of the sort….It has struck fear into the hearts of hundreds of millions of European citizens, because it establishes a dire precedent.
If Eurocrats can loot Cyprus, why not anywhere.
“This is the most brutal display since 2008 of how far the euro-committed nations are willing to go to save the tottering single currency.”
“It shows that the zone’s crisis will run and run to the grievous disadvantage” of most everyone.
“Surely the euro cannot long survive by such anti-democratic means. It certainly does not deserve to.”
Graham Summers says “Europe is out of options and out of money.” It’s “totally and completely bust.”
It’s banks are highly leveraged. They can’t raise capital “because no one in their right mind wants to invest in them….”
“European nations are bankrupt because AGAIN no one in their right mind wants to buy their bonds UNLESS they believe they can dump their investments on the ECB at a later date. Who is the greater fool there?”
Europe isn’t fixed because enough capital isn’t there to do it. “Europe and its alleged backstops are out of money. This includes Germany, the ECB, and the mega-bailout funds such as the ESM (European Stability Mechanism).”
The ECB is “chock full of garbage debts.” It’s insolvent. It can print money, “but once the BIG collateral call hits, (it’s) useless because (what’s needed) would implode the system.”
“What could go wrong?” Virtually anything. “It’s only a matter of time before (crisis conditions reach) hyperdrive, and we have an event even worse than 2008.”
Zero Hedge says Russia’s “next in line to restrict cash transactions. (They’re) taking a page from the Europeans’ book.”
Russia Beyond the Headlines said “Russia to ban cash transactions over $10,000.” It plans to “slash the amount of cash in domestic trade.”
It may do so by 2015. It’s “expected to boost” bank reserves “and put a damper on (its) shadow economy. However, the middle class will most likely end up having to pay the price for the scheme.”
According to Zero Hedge, leaders realize that “limits of fiscal and monetary policy have been reached.”
They’re “now changing rules, limiting freedom, and (instituting) outright confiscation (as) the only way to maintain a status quo.”
Doing so reflects predatory capitalism’s failure. It’s a house of cards. It’s heading perhaps for eventual collapse. At risk is whether it takes humanity with it when it does.
Stephen Lendman lives in Chicago. He can be reached at email@example.com.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
His new book is titled “How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War”