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THE
group-which
in
turn
got
a
$300
billiontaxpayer
bailoutfrom
Paulson.There's
John
Thain,the
asshole
chief
of
MerrillLynchwhobought
an
$87,000
area
rugfoThisofficeas
his
company
was
imploding;a
formerGoIdm"nbanker,Thain
enjoyedamultibillion-dollar
handout
from
Paulwn,
who
used
billions
in
taxpayer
funds
tohelpBank
of
America
rescueThain's
sorry
compa
ny.
And
Robert
Steel,
the
former
Goldmanite
head
ofWachovia,scored
himselfandhis
fellowexecutives
$225
million
in
golden
parachute
payments
as
his
bank
was
self-destructing.There's
Joshua
Bolten,Bush's
chief
of
staffduring
the
bailout,
andMark
Patterson,
thecurrent
Treasury
chief
of
staff,
who
was
aGold
man
lobbyist
just
ayearago,
and
Ed
Liddy,
the
formerGoldman
director
whom
Paulson
put
in
charge
of
bailed-outinsurance
giant
AIG,wbichforkedover$13billion
to
Goldman
after
Liddy
came
on
board.
The
heads
of
theCanadianand
Italiannational
banks
are
Goldman
alums,as
is
the
head
ofthe
WorldBank,
the
head
of
the
New
YorkStockExchange.
the
last
two
heads
of
the
From
techstockstohighgasprices,
Goldman
Sachs
has
engineered
every
major
market
manipulationsince
the
Great
Depression
--
and
they'reabouttodoitagain
- ~ & ~ -
By
MATT
TAIBBI
fiEFIRST
THING
YOU
NEED
TOKNOW
about
GoldmanSachs
is
that
it's
every
where.
The
world's
most
powerful
investment
bank
isa
greatvampiresquid
wrappedaround
theface
of
humanity,
relentlessly
jamming
its
blood
funnelinto
anything
that
smells
l i ~ e
money.
Infact,
the
history
of
the
r e ~ ~ : ! t
financialcrisis,
which
doublesasa
history
of
the
rapid
decline
and
fall
of
the
suddenly
swindled-dryAmerican
empire,readslikeaWho's
Who
of
Goldman
Sachsgraduates.
By
now,
most
of
us
knowtbe
majorplayers.AsGeorgeBush's
last
Treasury
secretary,formerGoldmanCEOHenryPaulsonwas
thearchitect
of
the
bailout,asuspiciouslyself·serving
plan
to
funneltrillionsofYourDollars
to
a.
handful
ofbis
oldfriends
on
Wan
Street.
Robert
Rubin,BillClinton'sformerTreasurysecretary,
spent
26years
at
Goldman
beforebecoming
chairman
of
C i t i ~
ILLUSTRATIONS
BY
VICTOR
JUHASZ
S2·
ROLI.INGSTONll,JUI.Y
9-23.2009
 
THE
GREATDEPRESSION
G
OLDMAN
WASN'T
ALWAYS
A
TOO-BIG-TO-I'AIL
Wall
Street
behemoth,therulhlessface
of
kill
or-be-killed
capitalism
on
steroids
-
just
al
most
always.
The
bank
wasactually
foundedin1869
by
a
Germanimmigrant
named
Mar
cusGoldman,whobuilt
it
upwith
his
son-in-law
SamuelSachs.Theywerepioneers
in
lhe
use
of
commercialpaper,
IFAMERICA
IS
NOW
CIRCLING
THE
DRAIN,
GOLDMAN
SACHSHAS
FOUND
AWAY
TO
BE
THAT
DRAIN.
FederalReserveBank
of
New
York
-which,incidentally,
is
nowincharge
of
overseeingGoldman-not
to
mention
...
Eut
then,any
attempt
to
constructanarrativearoundall
the
formerGoldmanites
in
influentialpositionsquicklybecomes
an
absurd
and
pointlessexercise,liketryingtomakealist
of
everything.
What
youneedtoknow
is
the
bigpicture:
If
Americaiscirclingthedrain,GoldmanSachs
has
foundawaytobe
that
drain
-
an
extremelyunfortunateloopholein
tbe
system
of
Westerndemocraticcapitalism,whichneverforesaw
that
ina
So-
ciety
governedpassively
by
freemarkets
and
freeelections,
o r g a ~
nizedgreedalwaysdefeatsdisorganizeddemocracy.Thebank'sunprecedentedreach
and
powerhaveenabled
itto
turn
all
of
Americaintoa
giantpump-and-dump
scam,manipulatingwholeeconomicsectorsforyears
at
atime,moving
the
dicegameas
this
orthat
market
collapses,
and
all
the
timegorgingitselfon
the
unseencosts
that
are
breakingfamilieseverywhere-high
gas
prices,risingconsumer-creditrates,halfeatenpensionfunds,masslayoffs,futuretaxes
to
payoff
hailouts.All
that
money
that
you'relosing,it'sgoingsomewhere,
and
in
both
aliteral
and
afigurativesense.GoldmanSachsiswhereit'sgoing:
The
bank
isahuge,highlysophisticatedengineforconverting
the
useful,deployed
wealth
of
societyinto
the
leastuseful,mostwasteful
and
insolublesubstanceon
Earth
-pureprofitforrichindividuals.Theyachieve
thisusing
the
same
playbookover
and
overagain.TheCannula
is
relativelysimple:Goldmanpositionsitselfin
the
middle
of
a.
specula.tivebubble,selling
investments
theyknowarecrap.Thentheyhooverup
vastsums
from
themiddleand
lowedloorsofsocietywith
the
aid
ofa
crippled
and
cormptstate
that
allows
it
torewritetherulesinexchangefor
the
relativepennies
the
bank
throws
at
politicalpatronage.Finally,when
il
allgoesbust,leavingmillions
of
ordi
nary
citizensbroke
and
starving,theybegin
the
entireprocessoveragain,ridingin
to
rescueusallbylendingus
back
ourownmoney
at
interest,selIingthemselvesasmenabove
greed,just
abunch
of
really
smart
guyskeeping
the
wheelsgreased.They'vebeenpullingthissame
stunt
over
and
oversince
the
1920s-andnowthey'repreparingtodo
it
again,creating
whatmay
bethebiggestandmostaudaciousbubbleyet.
If
you
want
tounderstandhow
we
gotinto
this
financialcrisis,youhavetofirst
understand
whereallthemoney
went
-andinorder
to
understandthat,youneed
to
understandwhat
Gold
manhas
alreadygottenawaywith.
It
isahistoryexactly
five
bubbleslong-including
last
year'sstrange
and
seeminglyinexplicablespikein
the
price
of
oi!.Therewerealotoflosers
in
each
of
those
bubbles,
and
in
the
bailout
that
followed.ButGoldmanwasn'tone
of
them.
BUBBLE
#1
which
is
just
afancyway
of
sayingthey
made
moneylending
out
short-term
IOUstosmall-timevendorsindowntown
Manhattan.
You
can
probablyguess
the
basicplotline
of
Goldman'sfirst100yearsinbusiness:plucky,immigrant-ledinvestment
bank
beats
the
odds,pullsitselfup
by
itsbootstraps,makesshit10ads
of
money.
Inthat
ancienthistorythere'sreallyonlyoneepisode
that
bearsscrutinynow,inlightofmorerecentevents:Goldman'sdisastrousforayintothespeculative
mania
of
pre-crashWallStreetin
the
late19208,This
greatHindenburg
of
financial
history
has
afewfea
tures
that
mightsound
familiar.Eackthen,
the
mainfinancialtoolused
to
bilkinvestorswascalledan
~ i n v e s t m e n t
trust."Similartomodernmutualfunds,
the
truststook
the
cash
of
investorslarge
and
small
and
(theoretically,
at
least)invested
it
inasmorgasbord
of
WallStreetsecurities,thoughthesecuritiesandamountswereoftenkeptbiddenfrom
the
public.Soaregularguycouldinvest$10
or
$100ina
trust
and
feellikehewasabigplayer.Muchasinthe19905,whennewvehicleslikeday
tradingand
e-trading
attracted
reams
of
newsuckersfromthestickswho
wanted
tofeellikebigshots,investment
trusts
ropeda
new'
generation
of
regula.r-guyinvestorsinto
the
speculationgame.
Beginning
a
patternthat
would
repeatitself
over
and
overaga.in,
Goldman
gotinto
theinvestment
trust
gamelate,
then
jumped
in
withbothfeetandwenthog-wild.Thefirsteffortwas
the
GoldmanSachsTrad
ing
Corporation;
thebank
issuedamillionshares
at
$100apiece,boughtallthoseshares
with
itsownmoney
andthen
sold
go
percentofthemto
the
bungry
public
at
$104.
The
trading
corporation
then
relentlesslyboughtsharesinitself,bidding
the
priceup
furtherand
further.Eventually
it
dumped
part
of
itsholdings
and
sponsoredanew
trust,
the
S h e n a n ~
doahCorporation,issuingmillionsmoreinsharesin
that
fund-whichin
turn
sponsored
yetanother
trust
called
the
BlueRidgeCorporation.
In
this
way,eachinvest
ment
trust
servedasafrontfor
an
endlessinvestmentpyramid:Goldma.n
hiding
behind
Goldman
hiding
behind
Goldma.n.
Ofthe
7,250,000initialshares
of
ElueRidge,6,250,000wereactuallyowned
by
Shenandoah-which,ofcourse,wasinlarge
part
ownedbyGoldmanTrading.
The
endresult(askyourself
if
this
soundsfamiliar)was·adaisy
chain
of
borrowedmoney,oneexquisitelyvulnerabletoadeclinein
perfonnance
anywherealong
the
line.Thebasicideaisn't
hard
to
follow.
You
takeadollar
and
borrow
nine
againstit;
then
you
take
that
$10fund
and
borrow$90;
then
youtakeyour$100fundand,solongas
the
publicisstilllending,borrow
and
invest
$900.
If
thelastfundin
the
line
starts
tolosevalue,younolongerhavethemoneyto
pa.y
backyourinvestors,
and
everyonegetsmassacred.
In
achapterfrom
The
GreatCrash,
1929titled
~ I n
GoldmanSachsWe
T r u s t , ~
thefamedeconomistJobnKennethGalbraithheldup
the
BlueRidgeandShenandoah
trusts
asclassic
exam
ples
of
the
insanity
of
leverage-basedinvestment.
The
trusts,
he
wrote,wereamajorcause
of
the
market'shistoriccrash;intoday'sdollars,thelossesthe
hank
suffered
totaled
$475billion.
-It
isdifficult
not
tomarvel
at
theimaginationwhichwas
im
plicitinthisgargantuaninslUlity,"Galbraithobserved,soundinglikeKeithOlbermann
in
anascot.
-If
there
must
bemadness,somethingmaybesaidforhaving
it
on
aheroicscale,'"
64'
ROLLING
STONB,JULY
9-23,
1009
of 00

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