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My Goldman Sachs confession

Let’s be honest: The Goldman schadenfreude that began erupting with news of the SEC’s fraud suit Friday has become as large a force, in its own way, as the volcanic ash over Europe. I’ll confess I’m not immune. Until the other day, the world of high finance was pretty much a standing rebuke to me. I write a lot about economics, hopefully with some insight. Yet if I’d figured out there was a major housing bubble, I would probably have tried to alert the authorities, whereas real men plainly use macro insights to make billions. After a while the fact that you are not John Paulson, when so many around you seem to be, can make a guy feel inadequate.

Unless, of course, the system is rigged. Which is what’s so striking about the change in the zeitgeist ushered in by the SEC. A credible allegation of fraud cuts through the complexity of CDOs and CDSes to simple questions of ethics. Now I can’t wait to open the papers or troll online to see what fresh shoe has dropped. Gordon Brown says Goldman seems “morally bankrupt”? More fraud charges on Wall Street look imminent? Some days it’s just good to be alive!

I’m not saying I’m proud of these feelings. But I suspect I’m not alone. And even if it turns out that Goldman’s shenanigans were legal, it won’t change the vise the firm is in. If Goldman eventually settles, it admits to fraud. If Goldman fights, its unsavory ways will be showcased in headlines for years. Who’da thunk it? A few government lawyers that Goldman’s wizards surely regard as inferior have somehow put the Wall Street titan in a heads-they-lose, tails-we-win situation -- a stunning reversal of the heads-I-win, tails-you-lose pattern by which traders made billions and left the rest of us holding the bag. Not bad for government work.

By Matt Miller  | April 20, 2010; 7:38 AM ET
Categories:  Miller  | Tags:  Matt Miller  
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Comments

For once I think a government worker deserves their $100,000 salary.

Posted by: cautious | April 20, 2010 8:21 AM | Report abuse

Well...apparently you are still a blind columnist....you severely underestimate Goldman...I am sure the sherlocks at GS will had already figured out something and I wouldn't be surprised if the whole thing is pitched with GSs permission to have their loonies in Govt look good for a while.

Posted by: reddy531 | April 20, 2010 8:44 AM | Report abuse

You are not alone. This didn't just happen. The question is what are we going to do about it. Too many middle class Americans worked hard their entire lives doing honest, something to show for it work to have their pockets picked this way, to say nothing of the future generation that has been slammed.

Posted by: SarahBB | April 20, 2010 8:46 AM | Report abuse

Well done Obama. After 20 years of Republicans Reagan and Bush and their de-regulation and no regulation of Wall Street to the point of destroying the economy so the rich could get richer, the government finally stood up.

Could it be that a Havard Law educated senator makes a better president than a movie actor or a failed rich mans son?

Posted by: chucky-el | April 20, 2010 9:01 AM | Report abuse

Well done Obama. After 20 years of Republicans Reagan and Bush and their de-regulation and no regulation of Wall Street to the point of destroying the economy so the rich could get richer, the government finally stood up.

Could it be that a Havard Law educated senator makes a better president than a movie actor or a failed rich mans son?

Posted by: chucky-el | April 20, 2010 9:02 AM | Report abuse

Schadenfreude indeed. Quick, the poppies are growing!

http://en.wikipedia.org/wiki/Tall_poppy_syndrome

Posted by: kemurph | April 20, 2010 9:22 AM | Report abuse

I agree with your article fully. However, I fear that Goldman & the other capitalist traitors own too many of the politicians in Washington... The most recent being the HalliBush, Inc. crowd, which fought regulation tooth & nail and championed deregulation.

Thing of it is, “Madison Avenue” has taught us to admire what our neighbor has instead of who he is...

Posted by: 4Jaxon | April 20, 2010 9:43 AM | Report abuse

During the Reagan years, many bankers endeed up in jail. Remember Ivan Boesky? Michael Milken? Dennis Levine? The government dismantled entire financial houses guilty of fraud.

Obama is Wall Street's figurehead in Washington. Obama's "Stimulus" was rich in federal money for Wall Street. Bankers took the money and, instead of pushing it into the economy, they pocketed it themselves.

Remember those AIG bonuses? Courtesy of Chris Dodd, Tim Geithner, and signed by Obama. Then Obama fiercely defended those bonuses.

Internationally, Obama and Geithner have fought AGAINST any form of financial regulation, while making the American people believe the opposite.

What a shame!!! The American people are fooled day after day, first by Banksters, now by Obama and the MSM.

Posted by: tropicalfolk | April 20, 2010 10:13 AM | Report abuse

The first thing that came to mind when I saw the SEC suit against Goldman was: the government will surely lose. There's no way the crack bankers and lawyers and accountants--the best in their respective fields--on the gilded Goldman payroll could make such an obvious mistake. They're too good and they've undoubtedly covered their tracks very well. And they will invert and twist the interpretation of the archaic laws that dictate such transactions from here to Sunday to get a good ruling.

But then I thought about it a little longer--why was the suit filed during the opening salvo of the financial reform bill engineered by the Obama Administration? And that's when it hit me: this is a shrewd P.R. move on the part of the government. Win or lose, it doesn't matter, the regulatory framework will change on the crest of the wave of indignation among the electorate as the case winds its way through the courts and opens up Goldman's dirty little closet of secrets. It concentrates the mainstream media on a tangible target with a simple storyline for mass consumption, the Republicans will be placed on the defensive, and the banks will cede, if only temporarily, the tactical high ground. So Goldman and its ilk lose either way. It's been a very long time since I've seen a good outcome coming out governmental action.

Posted by: t_lhrh | April 20, 2010 10:13 AM | Report abuse


Does this mean that Barack Obama will be returning the million dollar bribe that he received from Goldman Sachs?

http://images.opensecrets.org/obama_top_contribs.htm?cycle=2008&cid=N00009638

Posted by: Jerzy | April 20, 2010 10:14 AM | Report abuse

Well Miller maybe I should have your job...since me and alot of other "average" americans figured out that there was a housing bubble back in 2006. It wasn't the enigma you guys make it out to be...It was clear and obvious.

Americans are not stupid so stop treating us as if we are.

We also know that Goldaman Sacks and Paulson likley engaged in fraud.

"Behind every great fortune there is a great crime." Believe it!!!

Posted by: chynna12169 | April 20, 2010 10:18 AM | Report abuse

"Does this mean that Barack Obama will be returning the million dollar bribe that he received from Goldman Sachs?

http://images.opensecrets.org/obama_top_contribs.htm?cycle=2008&cid=N00009638"

Looks like that was a bad investment by Goldman. Go figure.

Posted by: mrsaun | April 20, 2010 10:23 AM | Report abuse

I don't understand why people keep saying people who occupy offices in companies like Enron, Goldman, etc. are said to be "the best and brightest."

It is CLEARLY written in Mr. "Fab" email he had absolutely NO IDEA what he was doing --- in terms of impact and future ramification --- when Egol and Tourre (Mr. Fab) were devising their schemes. Not just this particular "exotic"/synthetic CDO in question but a whole bunch of others, too.

Any average person, being surrounded by so much resources, could --- after a few years, once they learn the ropes --- SURELY come up with clever schemes in extremely gray areas to work on, that would make tons of cash.

This is especially true if you have the super computational machines Goldman uses, at your disposal... machines that run on algorithms that flah in quick succession, out executing, in either way, 99% other execution modalities.

Best and brightest? It's total nonsense to describe these as the best and brightest humans have produced.

Alan Turing, Jonas Salk, or Richard Feynman, yeah, the phrase "best and brightest" seems to work, to capture well.... But Mr. Fab and Mr. Egol and Mr. Paulson? Total nonsense....

Posted by: HerLao | April 20, 2010 10:28 AM | Report abuse

And when are government lawyers going to after the Federal Reserve and its post and present chairmen for stripping depositors of interest income and loaning the same money at the discount window for zip?

Why do you think banks and Goldman are reporting record profits? They borrow virtually for free because of the Federal Reserve's manipulation of the interest rate curve and money supply.

It's not hard to run a business if you don't have to pay for what you resell after leveraging it 30 times, while your debts are guaranteed by the government. Even a Fed economist can understand this business model.

Depositors of banks are being defrauded of their money.

Posted by: wesatch | April 20, 2010 10:36 AM | Report abuse

And when are government lawyers going to go after the Federal Reserve and its post and present chairmen for stripping depositors of interest income and loaning the same money at the discount window for zip?

Why do you think banks and Goldman are reporting record profits? They borrow virtually for free because of the Federal Reserve's manipulation of the interest rate curve and money supply.

It's not hard to run a business if you don't have to pay for what you resell after leveraging it 30 times, while your debts are guaranteed by the government. Even a Fed economist can understand this business model.

Depositors of banks are being defrauded of their money.

Posted by: wesatch | April 20, 2010 10:37 AM | Report abuse

The sheriff had been napping, with feet up on the desk and hat tilted forward, when the big bank heist went down.
Hearing the commotion, the sheriff sprang into action. With legal brief in hand, he rushed into court and slapped a suit on the robbers for a fraction of the lost loot.
"That'll teach 'em!" he told the cheering crowd.

Posted by: mtpeaks | April 20, 2010 10:41 AM | Report abuse

As one is beginning to see in the daily reports the issue of "fraud" in the Goldman/Abacus story is dubious at best. This will not prevent propagandists posturing as journalsits like P. Krugman from pretending otherwise, of course. Nor does it mean you should "like" Wall Street. I don't like Wall Street, not because they are criminals or frauds but because they have allowed simple but fundamental ethical standards to slip in pursuit of profit.

Investors in the Abacus securities were the most sophisticated in the world and undoubtedly knew there were people out there shorting the U.S. housing market. They wanted Abacus anyway because they thought they knew better than the short sellers.

Goldman's mistake was in making bets against their clients. Everyone knew they reserved the right to do that, but it was still "unethical" because when markerts collapsed it must inevitably breed resentment and distrust. Bad business and bad ethics. Wall Street needs to rediscover integrity more than it needs another layer of "regulation".

Posted by: Roytex | April 20, 2010 11:29 AM | Report abuse


The house of GS will survive and prosper because it is a pillar of the system...the corrupt system in which the major players have never played by the rules. It is naive to expect them to do so, especially when their Republican friends in Congress stand ever ready to lie and sabotage any meaningful measure for reform of Wall Street.

Posted by: probashi | April 20, 2010 11:39 AM | Report abuse

Can a leopard change its spots? Not if you're a banker. They were up to the same shenanigans 80 years ago:

http://www.sltrib.com/ci_14893253

Posted by: newsraptor | April 20, 2010 11:51 AM | Report abuse

This is more of an ethics violation than a legal one. I hope Goldman fights it. The Wall St. Journal is right. This a minor law argument. But it will expose how Goldman does business - as well as the other big firms. Goldman will make money any way it can. Just don't listen to their salesmen - especially if you run a pension fund. The more money you have, the more you can lose. BUYER BEWARE!

Posted by: melba1 | April 20, 2010 12:13 PM | Report abuse

It's like watching a train wreck, a truly fascinating sight. You can't avert your eyes even knowing that the end will be a bad one. Since Hank (not relation)Paulson sprang the bailout on Congress and the American people at the end of the Bush administration, it has been interesting to me to see how many of the recipients of bailout money were former GS employees. It seems to me that GS alums have supported each other and perhaps have caused allowed outsiders (non-alums) to fail as in the case of Lehman.
Do the GS execs realize how much damage these allegations will do to their company wheather GS is found guilty or is in the last exhonerated? A whole lot of dirty linen will be aired. This story will be the gift that keeps on giving.

Posted by: OhMy | April 20, 2010 12:14 PM | Report abuse

Goldman put their money where their mouth was (with the federal government, Fannie May, etc), and lost $90 million. Given this evidence, I doubt they were conspiring to build a house of cards. In fact, I think they were betting that the federal government would be strong enough to somehow keep the house of cards standing. They bet the wrong way and Paulson bet the right way. That's why one is supposed to only invest discretionary funds - it's not guaranteed! The federal government sometimes can - seemingly - temporarily suspend the laws of economics, but that is only TEMPORARY. Eventually, reality overpowers even the strength of the might U.S. Federal Government. So, the smart money is on building a capitalist system that is allowed to fail when participants build something that, according to economic laws, SHOULD fail.

Posted by: DoTheRightThing | April 20, 2010 12:42 PM | Report abuse

This was a nice move on the part of the Federal Government.

Often, financial fraud and misdeeds pay off, mostly because they are difficult to prosecute.

In this case, there is a clear ethical violation, even if Goldman technically protected itself. And I doubt their position in the financial mess is hidden enough to protect them.

Posted by: postfan1 | April 20, 2010 1:00 PM | Report abuse

"Yet if I’d figured out there was a major housing bubble, I would probably have tried to alert the authorities, whereas real men plainly use macro insights to make billions."

Dumbest statement I've seen in a long time.
The Government was one of the causes of the Housing bubble.
The Government had access to more information about the housing market than investors did.
The Government failed to act, because acting to gradually lower housing prices and limit access to credit would have been unpopular with voters. Government's failure wasn't the fault of investors.
The only thing certain is that bubbles always burst.
You can win or lose a large amont of money depending on how long it takes.
If the Government can prove that Goldman committed securities fraud by concealilng material facts, then Goldman should pay. If not, this after the after the fact moralizing not based on reality is destructive.

Posted by: jfv123 | April 20, 2010 1:21 PM | Report abuse

What so you all think to bonuses all round for the SEC if they bring in Goldman Sach's head on a platter?

What about tens of billions they got of US tax payers hidden in the AIG payout?

And what is it with the GOP still protecting the Welfare Queens of Wall Street?

Posted by: walker1 | April 20, 2010 1:34 PM | Report abuse

everyone hates politicians so let's now turn that anger on wall street. If you own a home,have a credit card,other small loans and bank account thank all those rip off artists who take your money because your at home with your feet up watching dancing with he stars.

It takes a lotta dirt to keep the wheels of the economy working. Pull back the covers and you'll find a lot not to like but not sure you'll find actual fraud.

Posted by: jdb70 | April 20, 2010 2:09 PM | Report abuse

When are the journalists going to look into the Gold bubble?

Posted by: walker1 | April 20, 2010 2:11 PM | Report abuse

Please see this: http://www.thesipa.com/blog/?p=186

Excerpt:
The fraud charges are comical at best due to the fact that one person from Goldman was named in the SEC indictment. A single, junior Vice President named Fabrice Tourre was named in the SEC complaint. …Seriously, where did they find this guy? A quick check of Goldman on broker check reveals he is not listed as a manager in any capacity with the firm. Where is the Compliance officer? Chief Legal Counsel? The President ? CEO? They had no idea what “Fabio” was doing?

This is once again why ‘regulatory reform’ is a joke and will accomplish nothing. The rules and regulations are already in place, yet nobody ever enforces them against the largest firm. Are we to believe A single Junior Vice president named “ Fabrice” was allowed to do these huge transactions and commit all these crimes without oversight and permission from the higher ups? A 31 year old kid was allowed to make hundred million dollar decisions with Goldman’s money without approval? What is even more interesting is the fact that of all the frauds committed by Goldman and its cartel, this is the one the SEC chooses to prosecute? As of today Goldman has over 170 formal regulatory actions filed against it. This does not include their other entities which are also marked up to the tune of 118 hits. The boys at Goldman have taken approximately 300 regulatory hits, yet to this date the top executives have never been named individually, instead some guy named “Fabio” is the fall guy who will be expelled from the industry as a sacrificial offering for public relations sake. The regulators in this country already have enough rules and regulations in place to get the bad guys however they are too afraid to go after them.

Posted by: RobLewis51 | April 21, 2010 2:56 PM | Report abuse

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