Goldman Sachs, a bank hated and adored at the same time, a CEO Lloyd Blankfein unsinkable in the various crises… here is in a few words what can characterize the establishment. A constant search for excellence and the best advice to the client. However, the various past crises have shown a different face of the bank, more greedy and more offensive in its perpetual quest for profit. The trial of Fabrice Tourre, who handed down his judgment at the beginning of August, still leaves a bitter taste as to the real implications of the bank and tends to validate the group’s excesses. Anyway, the SEC settled its dispute with the SEC by paying $550 million in 2010.
1. Strategic links in the latest major crises.
a. The “Subprime” crisis
In a context of unprecedented crisis, Goldman’s business intelligence is “terribly” present. The institution known as “The firm” is accused by many observers of using its powers of influence to promote its sole profit at the expense of all other economic stakeholders.
In April 2010, the SEC attacked Goldman Sachs for widespread fraud and conflicts of interest, the “Abacus” case. Indeed, the bank deliberately speculated downwards on mortgage securities while recommending them as much as possible to these clients. In addition, it would have favoured Hedge Fund Paulson & Co by illegally transmitting this strategic information so that John Paulson, manager of this fund, could sell these debt securities massively short.
The latter generated $1 billion in profits on this transaction. (John Paulson is known to be one of the first to speculate downward in the U.S. real estate market. In addition, he is one of the holders of the 360-day compensation record with a $3.7 billion bonus in 2007, the absolute record being $4 billion in 2009 for a hedge fund manager.) The case will be closed after Goldman pays $550 million to the SEC. In addition, many journalists agree that Goldman is the “big winner” of the 2008 crisis.
First, thanks to what has just been explained. Then thanks to the fall of Lehman Brothers, a formidable competitor. Finally, the “PAULSON Plan”, a plan to help the American economy initiated by the Secretary of State for the Treasury Henry Paulson, enabled Goldman Sachs to collect $13 billion in payments for CDS subscribed to by AIG, the world’s largest insurance company that failed and was bailed out by the American Treasury for $85 billion (of this amount from the taxpayer, 13 went into Goldman’s coffers). Analysts expected the bank to renounce a payment synonymous with solidarity in the face of the crisis, but in the end the contracts were honoured in their entirety between AIG and Goldman Sachs.
b. Goldman Sachs and the Greek Crisis.
In 2002, the country concerned about the country’s public accounts situation mandated Goldman Sachs Bank to provide advice to protect the country’s ability to finance its debt in the markets. In concrete terms, through specific entries in the balance sheet, which some will later call “falsification of accounts”, the bank is trying to reassure investors about the possible purchase of Greek sovereign bonds with a bearable interest rate. The main objective is to hide the country’s real debt in order to “stick” to the Maastricht Treaty in particular. However, Goldman, in the front line to get to know these strategic data, will retain this information and will certainly speculate downwards on Greek bonds a few years later, directly influencing interest rates.
2. Goldman Sachs, a unique government influence strategy in the world.
“After eliminating its main competitors (including Lehman), after taking advantage of these bankruptcies and receiving huge interest-free loans from the State, this more than 100-year-old institution is now making a fortune thanks to decisions taken by Geithner, Summers and the others, who everyone knows will one day join the firm, after leaving their positions” (Jacques Attali)
Goldman Sachs, commonly referred to as “Government Sachs” by its critics, has a formidable strategy of influencing and holding information. It is certainly the most representative financial actor in the definition of economic intelligence. Goldman Sachs’ goal is to extend its power of governmental influence in all the world’s major economic areas.
Regarding Europe, Mario Draghi, replaces Jean Claude Trichet as President of the European Central Bank, who was Vice-President of Goldman Sachs Europe from 2002 to 2005. In addition, Mario Monti, former President of the Italian Council, is also a former consultant for the “Firm”. Finally, Lucas Papadémos, former Greek Prime Minister, was Governor of the Greek Central Bank from 1994 to 2002 and played a major role in Goldman Sachs’ audit of Greece’s public accounts.
In the United States, the border with conflict of interest is very thin. The best example by far is that of Henry Paulson, former Secretary of State for the Treasury under the presidency of George Bush and former CEO of Goldman Sachs from 1999 to 2006, who, particularly at the initiative of the American stimulus plan, would have very clearly favoured Goldman Sachs, particularly in the rescue of AIG on the one hand and in the failure to rescue Lehman Brothers, Goldman Sachs’ formidable competitor on the other hand. In addition, a study by the New York Times shows that (the last weekend before the announcement of AIG’s federal assistance) it was much longer on the phone with Goldman Sachs CEO Lloyd Blankfein than with all the other major banks on Wall Street, to favor a CDS payment by AIG for Goldman Sachs, critics say. Goldman Sachs still has former employees in key positions such as Mark Carney, current Governor of the Bank of England (he was Governor of the Bank of Canada just a few months ago) or one of the Bank of England’s executives Ben Broadbent who is a former European Economic Director at Goldman Sachs.
What can we conclude about this vast game of chess where the goal is to place your pawns as well as possible? Goldman Sachs is a model of strategic intelligence since their main strategy of influence is to put in place people who can take sides with them at the right time, (Henry Paulson’s example is very realistic).